<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Popular, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
POPULAR, INC.
P.O. BOX 362708
SAN JUAN, PUERTO RICO 00936-2708
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, APRIL 27, 1999
--------------------
To the Stockholders of Popular, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Popular, Inc. (the "Meeting") for the year 1999 will be held at 10:00 a.m. on
Tuesday, April 27, 1999, on the third floor of the Centro Europa Building, in
Santurce, Puerto Rico, to consider and act upon the following matters:
(1) To elect seven (7) directors of Popular, Inc. (the
"Corporation") for a three-year term; and
(2) To transact any and all other business as may be properly
brought before the Meeting or any adjournments thereof. Management at
present knows of no other business to be brought before the Meeting.
Stockholders of record at the close of business on March 8, 1999, are
entitled to notice of and vote at the Meeting.
You are cordially invited to attend the Meeting. Whether you plan to
attend or not, please sign and return the enclosed proxy so that the
Corporation may be assured of the presence of a Quorum at the Meeting. A
postage-paid envelope is enclosed for your convenience. FOR THE FIRST TIME THIS
YEAR YOU CAN VOTE BY TELEPHONE OR BY INTERNET, FOR FURTHER DETAILS PLEASE REFER
TO THE ENCLOSED PROXY CARD.
San Juan, Puerto Rico, March 22, 1999.
By Order of the Board of Directors,
SAMUEL T. CESPEDES
Secretary
<PAGE> 3
POPULAR, INC.
P.O. BOX 362708
SAN JUAN, PUERTO RICO 00936-2708
-----------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY APRIL 27, 1999
-----------------
This Proxy statement is furnished in connection with the solicitation
by the Board of Directors of Popular, Inc. (the "Corporation") of Proxies to be
voted at the Annual Meeting of Stockholders (the "Meeting") to be held at 10:00
a.m. on Tuesday, April 27, 1999, on the third floor of the Centro Europa
Building, in Santurce, Puerto Rico, and any adjournments thereof. Enclosed with
this Proxy Statement is the Annual Report, including the financial statements
for the year ended December 31, 1998, duly certified by PricewaterhouseCoopers
as independent public accountants. This Proxy Statement, the enclosed Annual
Report, the Notice of Annual Meeting of Stockholders and the form of proxy are
being sent to stockholders on or about March 22, 1999.
Properly executed proxies received by the Secretary of the Corporation
will be voted at the Meeting in accordance with the instructions which appear
therein and for the purposes indicated on the Notice of Meeting. The Board of
Directors does not intend to present any business at the Meeting other than
those included in the Notice of Meeting. The Board of Directors at this time
knows of no other matters which may come before the Meeting. However, if any
new matters requiring the vote of the stockholders properly come before the
Meeting, proxies may be voted with respect thereto in accordance with the best
judgement of Proxyholders, under the discretionary power granted by
stockholders to their proxies in connection with general matters.
SOLICITATION OF PROXIES
In addition to solicitation by mail, management may participate in the
solicitation of Proxies by telephone, personal interviews or otherwise. The
Board of Directors has engaged the firm of Georgeson & Company Inc. to aid in
the solicitation of Proxies. The cost of solicitation will be borne by the
Corporation and is estimated at $6,500.
REVOCABILITY OF PROXY
Any stockholder giving a proxy has the power to revoke it before the
proxy is exercised. The grantor may revoke the proxy by claiming at the Meeting
the right to vote by himself the shares of stock registered in his name or by
notice of revocation in writing to the President or Secretary of Popular, Inc.,
P.O. Box 362708, San Juan, Puerto Rico 00936-2708, delivered before the proxy
is exercised.
VOTING SECURITIES
The only outstanding voting securities of the Corporation are its
shares of common stock, each share of which entitles the holder thereof to one
vote. Only common stockholders of record at the close of business on March 8,
1999 (the "Record Date"), will be entitled to vote at the Meeting and any
adjournments thereof. On the Record Date there were 135,709,287 shares of
common stock of Popular, Inc. outstanding. The shares covered by any such proxy
that are properly executed and received by management before 10:00 a.m. on the
day of the Meeting will be voted.
2
<PAGE> 4
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of common stock of the Corporation is necessary to
constitute a quorum at the Meeting. Votes cast by proxy or in person at the
Meeting will be counted by the persons appointed by the Corporation as members
of the vote-counting committee for the Meeting. For purposes of determining
quorum, the members of the vote-counting committee will treat abstentions and
brokers non-votes as shares that are present and entitled to vote. A broker
non-vote results when a broker or nominee has expressly indicated in the proxy
that it does not have discretionary authority to vote on a particular matter.
As to the election of Directors, the Proxy Card being provided by the Board of
Directors enables a stockholder to vote for the election of the nominees
proposed by the Board, or to withhold authority to vote for one or more of the
nominees being proposed. Directors will be elected by a majority of the votes
cast. Therefore, abstention and broker non-votes will not have an effect on the
election of directors of the Corporation.
PRINCIPAL STOCKHOLDERS
Following is the information, to the extent known by the persons on
whose behalf this solicitation is made, with respect to any person (including
any "group" as that term is used in Section 13(d)(3) of the Securities and
Exchange Act of 1934, as amended) who is known to the Corporation to be the
beneficial owner of more than 5 percent of the Corporation's voting securities.
<TABLE>
<CAPTION>
Amount and nature Percent
of beneficial of
Title of Class Name and address of beneficial owner ownership (1) Class(2)
- -------------- ------------------------------------ ------------- --------
<S> <C> <C> <C>
Common Banco Popular de Puerto Rico (the "Bank")
As Trustee for Banco Popular de Puerto
Rico Retirement Plan 5,672,860
The Bank as Trustee for the Profit Sharing Plan
for the Employees of Banco Popular de Puerto
Rico 5,320,208
----------
10,993,068 (3) 8.1005
Common State Farm Mutual Automobile Insurance
Company 6,836,524 (4) 5.0376
</TABLE>
- -------------
(1) As of February 26, 1999.
(2) Based on 135,709,287 shares of common stock outstanding.
(3) The Bank, as Trustee, administers both Plans through their
Administrative Committees, with sole voting and investment power.
(4) On January 29, 1999 State Farm Mutual Automobile Insurance Company
("State Farm") and affiliated entities filed a joint statement on
Schedule 13-G with the Securities and Exchange Commission reflecting
its holdings as of December 31, 1998. According to said statement,
State Farm and its affiliates might be deemed to constitute a "group"
within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934. State Farm and its affiliates could also be deemed to be the
beneficial owners of 6,836,524 shares of Popular, Inc. However, State
Farm and each such affiliate disclaim beneficial ownership as to all
shares as to which each such person has no right to receive the
proceeds of sale of the shares, and also disclaim that they constitute
a "group".
3
<PAGE> 5
SHARES BENEFICIALLY OWNED BY DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS OF THE CORPORATION
Following is the information, as of February 26, 1999, as to equity
securities of the Corporation beneficially owned by all current directors,
nominees, the most highly compensated Executive Officers of the Corporation who
are not directors and the total owned by directors, nominees and all Executive
Officers of the Corporation as a group:
COMMON STOCK
<TABLE>
<CAPTION>
Title Amount and Nature Percent of
Name of class of Beneficial Ownership class (1)
---- -------- ------------------------ ----------
<S> <C> <C> <C>
Alfonso F. Ballester .......... Common 1,379,536 (3) 1.0165
Juan J. Bermudez .............. Common 370,595 (4) .2731
Francisco J. Carreras ......... Common 14,757 .0109
Richard L. Carrion ............ Common 1,054,937 (5) .7774
David H. Chafey Jr ........... Common 80,198 (6) .0591
Luis E. Dubon Jr .............. Common 1,510,453 (7) 1.1130
Antonio Luis Ferre ............ Common 2,915,159 (8) 2.1481
Hector R. Gonzalez ............ Common 584,858 (9) .4310
Jorge A. Junquera ............. Common 48,903 (10) .0360
Manuel Morales Jr ............. Common 719,293 (11) .5300
Alberto M. Paracchini ......... Common 112,953 (12) .0832
Francisco M. Rexach Jr ........ Common 153,526 (13) .1131
J. Adalberto Roig Jr .......... Common 476,221 (14) .3509
Felix J. Serralles Jr ......... Common 359,660 (15) .2650
Julio E. Vizcarrondo Jr ....... Common 1,144,449 (16) .8433
Maria Isabel P. de Burckhart... Common 57,105 .0421
Roberto R. Herencia ........... Common 12,334 .0091
Larry B. Kesler ............... Common 40,213 .0296
Humberto Martin ............... Common 67,752 .0499
Emilio E. Pinero .............. Common 32,445 .0239
Carlos Rom Jr ................. Common 23,875 (17) .0176
Carlos J. Vazquez ............. Common 100,129 (18) .0738
All Directors and Executive
Officers of the Corporation
as a group................. Common 11,259,351 8.2967
</TABLE>
PREFERRED STOCK
<TABLE>
Title Amount and Nature Percent of
Name of class of Beneficial Ownership class (2)
------ -------- ----------------------- ----------
<S> <C> <C> <C>
Luis E. Dubon Jr ........... Preferred 7,825(19) .1956
Alberto M. Paracchini ...... Preferred 7,000 .1750
Carlos J. Vazquez .......... Preferred 4,568(20) .1142
All Directors and Executive
Officers of the Corporation
as a group ............... Preferred 19,393 .4848
</TABLE>
4
<PAGE> 6
(1) Based on 135,709,287 shares of common stock outstanding.
(2) Based on 4,000,000 shares of preferred stock outstanding.
(3) Mr. Ballester owns 1,375,536 shares and has indirect investment power
over 4,000 shares owned by his wife. Excludes 1,187,988 shares owned
by his sister, as to all of which shares Mr. Ballester disclaims
indirect voting power.
(4) Excludes 12,443 shares owned by his wife, as to which Mr. Bermudez
disclaims indirect voting power.
(5) Mr. Carrion owns 283,245 shares and also has indirect investment power
over 24,268 shares owned by his children. Junior Investment
Corporation owns 4,288,150 shares of the Corporation. Mr. Carrion owns
17.43% of the shares of said corporation.
(6) Mr. Dubon owns 82,560 shares and has a power of attorney over 115,816
shares owned by his wife, over 76,263 shares held in trust for his
children and 1,235,814 shares owned by various corporations and members
of his family in which Mr. Dubon has direct or indirect ownership.
(7) Mr. Ferre has indirect investment and voting power and claims
beneficial ownership of 2,915,159 shares of the Corporation. Mr. Ferre
owns 2,097 shares and has indirect investment and voting power over
513,880 shares owned by Alfra Investment Corp., 3,200 shares owned by
South Management, Inc. and 400 shares owned by his wife. Mr. Ferre
owns 85.12% of Ferre Investment Fund, Inc., which owns 950,870 shares
of the Corporation. Mr. Ferre also owns 64.39% of the shares of El
Dia, Inc., and has indirect voting power over Alfra Investment Corp.,
which owns 19.10% of El Dia, Inc., which owns in turn 1,444,712 shares
of the Corporation.
(8) Mr. Gonzalez owns 555,506 shares and has voting and investment power
over 29,352 shares of the Corporation owned by TPC Financial Services,
Inc. of which he is President and Chief Executive Officer.
(9) Mr. Junquera owns 48,206 shares and has indirect investment power over
207 shares owned by his wife and over 490 shares owned by his
daughter.
(10) Mr. Morales owns 319,185 shares and has voting power over 400,108
shares owned by his parents, as their attorney-in-fact.
(11) Excludes 1,264 shares owned by his wife, as to which Mr. Paracchini
disclaims beneficial ownership.
(12) Mr. Rexach owns 76,526 shares and has indirect voting power over
63,000 shares owned by his mother, as her attorney-in-fact, and over
14,000 shares held by Capital Assets, Inc. as President and
shareholder.
(13) Mr. Roig owns 451,033 shares and has indirect voting power over 25,188
shares owned by his wife.
(14) Mr. Serralles owns 226,752 shares, and has indirect voting power over
10,292 shares owned by his wife. Mr. Serralles owns 100% of the shares
of each of Capitanejo, Inc. and Fao Investments, Inc., which own
117,020 and 5,596 shares, respectively, of the Corporation.
(15) Mr. Vizcarrondo owns 201,627 shares and has indirect voting power over
183,391 shares owned by his wife. Mr. Vizcarrondo's wife owns 17.71%
of the shares of Junior Investment Corporation, which owns 4,288,150
shares of the Corporation. Mr. Vizcarrondo has indirect voting and
investment power over 920 shares held in trust by Vicar Enterprises,
Inc. for the benefit of his children, for which he disclaims
beneficial ownership. Mr. Vizcarrondo also disclaims beneficial
ownership over 129,214 shares owned by DMI Pension Trust, where he
serves as trustee and member of the investment committee. Excluded
also are 11,882 shares owned by Mr. Vizcarrondo as trustee of the
Suarez Toro Trust, which owns said shares of the Corporation, of which
he disclaims beneficial ownership.
(16) Mrs. Burckhart owns 54,174 shares and has indirect voting power over
2,931 held by her husband as custodian for her daughters.
(17) Mr. Rom owns 23,254 shares and has indirect voting power over 142
shares owned by his wife and 479 shares held by him as custodian for
various members of his family.
(18) Mr. Vazquez owns 7,469 shares and has investment authority over 92,660
shares held by various family members.
(19) Mr. Dubon owns 1,450 preferred shares, and has indirect voting power
over 5,875 preferred shares held in trust by Mr. Luis E. Dubon Jr. for
several persons. Mr. Dubon also has indirect ownership over 500
preferred shares owned by Fundacion Gogui, Inc.
(20) Mr. Vazquez has investment authority over 4,568 preferred shares held
by various family members.
5
<PAGE> 7
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's directors and named executive officers to file with
the Securities and Exchange Commission (SEC) reports of ownership and changes
in ownership of common stock of the Corporation. Officers and directors are
required by SEC regulation to furnish the Corporation with copies of all
Section 16(a) forms they file.
Based solely on review of the copies of such reports furnished to the
Corporation or written representations that no other reports were required, the
Corporation believes that, during the 1998 year, all filing requirements
applicable to its officers and directors were complied with except for one
report, covering one transaction, which was filed late by Salustiano Alvarez
Mendez, Director and by Carlos Rom, Jr., Executive Vice President of the
Corporation, respectively.
BOARD OF DIRECTORS AND COMMITTEES
ELECTION OF DIRECTORS
The Certificate of Incorporation and the Bylaws of the Corporation
establish a classified Board of Directors pursuant to which the Board of
Directors is divided into three classes as nearly equal in number as possible,
with each class having at least three members and with the term of office of
one class expiring each year. Each director serves for a term ending on the
date of the third annual meeting of stockholders following the annual meeting
at which such director was elected.
At the Meeting, seven (7) directors assigned to "Class 3" are to be
elected until the 2002 Annual Meeting of Stockholders or until their respective
successors shall have been elected and qualified. The remaining eight directors
of the Corporation will serve as directors, as follows: until the 2000 Annual
Meeting of Stockholders of the Corporation, in the case of those three
directors assigned to "Class 1", and until the 2001 Annual Meeting of
Stockholders, in the case of those five directors assigned to "Class 2", or in
each case until their successors are duly elected and qualified.
Mr. Salustiano Alvarez Mendez resigned to the Board of Directors
of the Corporation as of April 23, 1998 and rejoined the Board of Directors of
the Bank as of the same date. Mr. Alvarez decision is not due to disagreement
with the Corporation or with any matter relating to the Corporation's
operation.
The people named as proxies in the accompanying Form of Proxy have
advised the Corporation that, unless otherwise instructed, they intend to vote
at the meeting the shares covered by the proxies FOR the election of the seven
nominees named below, and that if any one or more of such nominees should
become unavailable for election they intend to vote such shares FOR the
election of such substitute nominees as the Board of Directors may propose. The
Corporation has no knowledge that any nominee will become unavailable for
election.
Information relating to principal occupation and business experience
during the past five (5) years (including position held with the Corporation or
the Bank), age and the period during which each director has served is set
forth below.
6
<PAGE> 8
NOMINEES FOR ELECTION AS DIRECTORS
CLASS 3 DIRECTORS
(TERMS EXPIRING IN 2002)
Juan J. Bermudez: (61 years), Director of the Corporation since 1990.
Electrical Engineer. Partner of Bermudez and Longo, S.E., Decemcor, S.E.,
Unicenter, S.E., Unieast, S.E., Unigardens, S.E., Baldwin Development, S.E.,
Tivoli, S.E., Clearview, S.E., Placid Park, S.E. and PCME Commercial, S.E.
Principal Stockholder and Director of BL Management, Corp., Paseomar Corp.,
PCME Development, Inc., G.S.P. Corp., Unimanagement Corp., LBB Properties, Inc.
and Homes Unlimited Corp. Chairman of the Trust Committee of the Bank. Director
of the Bank since 1985.
Francisco J. Carreras: (66 years), Director of the Corporation since
1990. Former professor of the University of Puerto Rico. Former President of
the Catholic University of P.R. Member of the Board of Trustees of Fundacion
Banco Popular, Inc. Executive Director of Fundacion Angel Ramos, Inc. Chairman
of the Community Reinvestment Committee of the Bank. Director of the Bank since
1979.
Richard L. Carrion: (46 years), Director of the Corporation since
1990. Chairman, President and Chief Executive Officer ("CEO") of the
Corporation, and the Bank. Chairman of Popular International Bank, Inc.,
Popular North America, Inc. and Banco Popular North America. Chairman of the
Board of Trustees of Fundacion Banco Popular, Inc. Director of Equity One,
Inc., Popular Finance, Inc., Popular Leasing & Rental, Inc., Popular Mortgage,
Inc. and Popular Securities Incorporated. Member of the International Olympic
Committee. President of the Puerto Rico Olympic Trust and Member of the Puerto
Rico Olympic Committee. Member of the Board of Directors of the Federal Reserve
Bank of New York, of Bell Atlantic Corporation (a registered public company)
and member of the Benefits & Human Resources Committee of Bell Atlantic
Corporation. Member of the Board of Trustees of the Puerto Rico Committees for
Economic Development. Member of Board of Directors and Compensation Committee
of Pueblo Xtra International, Inc. until March 31, 1995. Former Chairman and
President of Puerto Rico Investors Tax-Free Fund, Inc. I, II, III, IV, V (1994
to December 1998) and of Puerto Rico Tax-Free Target Maturity Fund, Inc. I
(1996 to December 1998) and II (1997 to December 1998). Former Chairman and
President of Puerto Rico Investors Flexible Allocation Fund (December 1998 to
January 1999). Former Member of the Board of the National Museum of American
History, Smithsonian Institution (November 1997 to December 1998). Chairman of
the Executive Committee of the Corporation. Director of the Bank since 1982.
David H. Chafey Jr.: (45 years), Director of the Corporation since
1996. Supervisor of Bank's Retail Banking Group since January 1996. Supervisor
of the Financial Management Group and U.S. Operations until December 1995.
Senior Executive Vice President since October 1995. Chairman of Popular
Securities Incorporated until January 1996. Executive Vice President and
Director of Popular International Bank, Inc. and Popular North America, Inc.
President of Popular International Bank, Inc. and Popular North America, Inc.
until December 1995. Director of Equity One, Inc., Popular Mortgage, Inc.,
Popular Leasing & Rental, Inc., Popular Securities Incorporated and Banco
Popular North America. Chairman of the Board of Popular Finance, Inc. Chairman
of the Board of Puerto Rico Telephone Authority from 1993 thru 1997. Chairman
and President of Puerto Rico Investors Tax-Free Fund, Inc. I, II, III, IV, V,
of Puerto Rico Tax-Free Target Maturity Fund, Inc. I and II and of Puerto Rico
Investors Flexible Allocation Fund since January 1999. Chairman of the Board of
Grupo Guayacan, Inc. President of the San Jorge Children's Research Foundation,
Inc. Member of the Board of United Way of Puerto Rico, National Parks
Conservation Trust of Puerto Rico, of Governor's Economic Council on
Productivity and the Steering Committee of Private Capital of Puerto Rico.
Member of the Finance Committee of Colegio San Ignacio and Vice President of
the Puerto Rico Bankers Association. Director of the Bank since 1994.
Antonio Luis Ferre: (65 years), Director of the Corporation since
1984. Vice Chairman of the Board of Directors of the Corporation and the Bank.
Chairman of the Board of Puerto Rican Cement Co., Inc. (a registered public
company), manufacturers of cement and allied products. President and Editor of
El Dia, Inc., a newspaper publishing company. Director of Metropolitan Life
Insurance Company (a registered company under the Investment Company Act of
1940) until December 1995. Director of Pueblo Xtra International, Inc. until
March 1995. Director of Pueblo Xtra Supermarkets until 1995. Director of
American Airlines until 1994. Director of Banco de Ponce from 1959 to 1990.
Director of the Bank since 1990.
7
<PAGE> 9
Alberto M. Paracchini: (66 years), Director of the Corporation since
1984. Former Chairman of the Board of Directors of the Corporation and the
Bank. Former Chairman of Popular North America, Inc., Equity One, Inc., Popular
Finance, Inc. and Popular Leasing & Rental, Inc. Member of the Board of
Trustees of Fundacion Banco Popular, Inc. Chairman of the Board of Trustees,
Sacred Heart University in San Juan, Puerto Rico. Director of Puerto Rican
Cement Co., Inc. (a registered public company). Director of HDA Management
Associates. Director of Equus Management Co., Inc. and Managing General Partner
of Equus Gaming Co., L.P. (a registered public company). Director of Equus
Entertainment Corporation, a subsidiary of Equus Gaming Co., L.P. (registered
public company) and of Venture Capital Fund, Inc. Executive Officer of the
Corporation from 1984 to April 1993. Director of Banco de Ponce from 1959 to
1990. Director of the Bank since 1990.
Felix J. Serralles Jr.: (64 years), Director of the Corporation since
1984. President and Chief Executive Officer of Destileria Serralles, Inc.,
manufacturers and distributors of distilled spirits, and of its affiliate
Mercedita Leasing, Inc. Director of Banco de Ponce from 1966 to 1990. Director
of the Bank since 1990.
CLASS 2 DIRECTORS
(TERMS EXPIRING IN 2001)
Luis E. Dubon Jr.: (64 years), Director of the Corporation since 1984.
Attorney-at-Law and Investor. Partner of the law firm Dubon & Dubon. Director
and stockholder of D Group Capital Corporation, TL Group Corporation, Delta
Maintenance Services Inc. Director and partner of D Group Equity Holding
Associates, S. en C. por A., S.E., and D Group Commercial Equities Associates
S. en C. por A., S.E. Director of American Investment Corp., Fundacion Gogui,
Inc., Carite Resorts Associates, S.en C. por A., S.E., Carite Resorts GP, Inc.,
Carolina Developers Associates, S.en C. por A., S.E., Contorno Developers
Associates, S. en C. por A., S.E., Contorno Developers GP, Inc., D Group
Commercial Equities GP, Inc., D Group Equities Management Services, Inc., D
Group Equity Holding GP, Inc., D Group Realty Services, Inc., Delta Engineering
Services, Inc., Delta Parking System Corporation, Dubon Corporation, Executive
Habitats, Inc., Galeria del Condado Associates, S.en C. por A., S.E., Galeria
del Condado GP, Inc., Imporexco, Inc., Lujoma Corporation, Marina Developers
(Carolina) GP, Inc., Mercantil Caguax Associates, S. en C. por A., S.E.,
Mercantil Caguax GP, Inc., Mercantil Mayaguez Associates, S. en C. por A.,
S.E., Mercantil Mayaguez GP, Inc., Mercantil Pinero Associates, S. en C. por
A., S.E., Mercantil Pinero GP, Inc., Mercantil San Patricio Associates, S. en
C. por A., S.E., Mercantil San Patricio GP, Inc., Metro Center Associates, S.
en C. por A., S.E., Metro Center GP Corporation, Plaza Bellas Artes GP, Inc.,
Plaza Bellas Artes Associates Uno S. en C. por A., S.E., Plaza Bellas Artes GP,
Inc. Uno, Plaza Bellas Artes Associates Dos S. en C. por A., S.E., Plaza Bellas
Artes Associates Tres S. en C. por A., S.E., Plaza Bellas Artes Associates IV,
S. en C. por A., S.E., Plaza del Condado Associates, S. en C. por A., S.E.,
Plaza del Condado GP, Inc., Portilla Corporation, Puerta del Condado
Associates, S. en C. por A., S.E., Puerta del Condado GP, Inc., Resort Equities
Developers GP, Inc., San Jose Building Associates, S. en C. por A., S.E., San
Jose Building GP, Inc., Title & Corporate Services Corporation and San Jose
Development, Inc. Director of Banco de Ponce from 1973 to 1990. Director of the
Bank since 1990.
Hector R. Gonzalez: (65 years), Director of the Corporation since
1984. President and Chief Executive Officer of TPC Communications of PR, Inc.,
owner and operator of cable television systems. President and Chief Executive
Officer of TPC Financial Services, Inc., TPC Cable Media, TelePonce Cable TV
and Telecell Systems. Director of Damas Foundation, Inc. Director of Popular
Finance, Inc. and Popular Mortgage, Inc. Director of Banco de Ponce from 1973
to 1990. Director of the Bank since 1995.
Manuel Morales Jr.: (53 years), Director of the Corporation since
1990. President of Selarom Capital Group, Inc. President of Parkview Realty,
Inc., of the Atrium Office Center, Inc., of HQ Business Center P.R., Inc., of
Executrain of Puerto Rico and of Office & Home, Inc. Honorary General Consul of
Japan in San Juan, Puerto Rico. Trustee of Sacred Heart University in San Juan,
Puerto Rico, of the Caribbean Environmental Development Institute and of
Fundacion Angel Ramos, Inc. Member of the Board of Directors of Better Business
Bureau. Member of the National Advisory Council-United States Small Business
Administration. Member of the Board of Trustees of Fundacion Banco Popular,
Inc. Chairman of the Audit Committee of the Corporation and the Bank. Director
of the Bank since 1978.
Francisco M. Rexach Jr.: (61 years), Director of the Corporation since
1990. President of Ready Mix Concrete, Inc. a subsidiary of PRCC (a registered
public company) until September 1997. President of Capital Assets, Inc. and of
Rexach Consulting Group. Director of Popular Leasing & Rental, Inc., Banco
Popular North America and Banco Gerencial y Fiduciario Dominicano, S.A.
Chairman of the Human Resources and Compensation Committee of the Bank and of
Banco Gerencial y Fiduciario Dominicano, S.A. Director of the Bank since 1984.
8
<PAGE> 10
Julio E. Vizcarrondo Jr.: (64 years), Director of the Corporation
since 1990. Civil Engineer. President, Partner and Chief Executive Officer of
Desarrollos Metropolitanos, S.E., VMV Enterprises Corp., Resort Builders, S.E.,
Metropolitan Builders, S.E., Institutional Builders, S.E., corporations engaged
in the development and construction of residential, commercial, industrial and
institutional projects in Puerto Rico. Director of the Bank since 1984.
CLASS 1 DIRECTORS
(TERMS EXPIRING IN 2000)
Alfonso F. Ballester: (69 years), Director of the Corporation since
1990. Vice Chairman of the Board of Directors of the Corporation and the Bank.
President of Ballester Hermanos, Inc. (Wholesale of provisions and liquors).
Director of Popular International Bank, Inc., Popular North America, Inc.,
Banco Popular North America, Equity One, Inc., Popular Securities Incorporated
and Popular Leasing & Rental, Inc. Chairman of the Commercial Credit Committee
of the Bank. Director of the Bank since 1975.
Jorge A. Junquera: (50 years), Director of the Corporation since 1990.
Supervisor of the Financial Management Group, the U.S. Operations and the
Caribbean and Latin America Expansion Group since January 1996. Supervisor of
the Bank's Retail Banking Group until December 1995. Senior Executive Vice
President since October 1995. President and Director of Popular International
Bank, Inc. and Popular North America, Inc. since January 1996. Director of
Banco Gerencial y Fiduciario Dominicano, S.A. Director and President of Banco
Popular North America. Director of Equity One, Inc., Popular Finance, Inc.,
Banco Popular, N.A. (Texas), Popular Mortgage, Inc. and Popular Leasing &
Rental, Inc. Chairman of the Board of Popular Securities Incorporated.
President of Puerto Rico Tourism Company until February 1997 and President of
Hotel Development Co. Director of YMCA. Director of the Bank since 1990.
J. Adalberto Roig Jr.: (68 years), Director of the Corporation since
1997. Chairman of the Board of Antonio Roig Sucesores, Inc., Desarrollos
Agricolas del Este, S.E., Desarrollos Roig, S.E. and El Ejemplo, S.E. President
of Jarofe Investment, Inc., Ferrocarriles del Este and of East Porto Rico Sugar
Co. Chairman of the Investment Committee of the Bank. Chairman of the Board and
President of Roig Commercial Bank until June 1997.
STANDING COMMITTEES
The Board of Directors of the Corporation met on a monthly basis
during 1998. All directors except Antonio Luis Ferre attended 75% or more of
the meetings of the Board of Directors and the committees of the Board of
Directors on which such directors served.
The Corporation's Board of Directors has a standing Audit and
Executive Committee. The Board of Directors of the Bank, the principal
subsidiary of the Corporation, has a standing Human Resources and Compensation
Committee that may review compensation matters for the Corporation. There is no
standing Nominating Committee but the Executive Committee charter provides that
said Executive Committee may exercise the power to nominate directors. However,
in the past the Executive Committee has not exercised such function and
nominations have been made by the Board of Directors. Information regarding the
Audit and Human Resources Committees follows:
9
<PAGE> 11
AUDIT COMMITTEE
The functions of the Audit Committee include reviewing the accounting
principles and practices employed by the Corporation, and compliance with
applicable laws and regulations. The Committee meets with the Corporation's
independent external auditors to review their audit procedures, the report on
their examination of the Corporation's financial statements, and their comments
on the system of internal controls. Also, the Committee oversees the internal
audit function and reviews the reports prepared by the Auditing Division on
their examinations of the operating and business units and for any other
special examinations that may be required. The Committee held four meetings
during the fiscal year ended December 31, 1998.
The Committee members during 1998 were: Juan J. Bermudez, Francisco
J. Carreras, Luis E. Dubon Jr., Manuel Morales Jr., Alberto M. Paracchini and
Julio E. Vizcarrondo Jr. None of the members of the committee are officers or
employees of the Corporation or any of its subsidiaries.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
The functions of the Human Resources and Compensation Committee
include reviewing the compensation and benefits of management and employees,
reviewing the policies related to the performance and compensation of
management and employees, and reviewing the long-range planning for executive
development and succession. The Committee held one meeting during the fiscal
year ended December 31, 1998.
The Committee members during 1998 were: Juan A. Albors, Salustiano
Alvarez Mendez, Esteban D. Bird, Hector R. Gonzalez, Alberto M. Paracchini and
Francisco M. Rexach Jr. None of the members of the Committee are officers or
employees of the Corporation or any of its subsidiaries.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Corporation and its
subsidiaries were entitled to a $12,000 annual retainer. The Board of Directors
of the Corporation has a Stock Deferment Plan, pursuant to which each outside
director of the Corporation is given the option to defer all or a portion of
the $12,000 annual retainer. The deferred portion, plus an additional amount of
$0.25 for each dollar so deferred, being applied toward the purchase in the
open market of shares of the Corporation's common stock on behalf of the
director, with the certificates representing such shares to be retained by the
Corporation until the director's term in every Board terminates. In addition,
each director shall have the right to vote and to receive any dividends payable
on the shares held for said director under the Plan, but no such shares shall
be sold, transferred, assigned, pledged or in any other way encumbered by the
director until the certificates representing such shares are delivered to the
director. In the event that a director is removed for cause from office by
appropriate corporate action or under authority of law, said director (1) shall
be obligated to sell to the Corporation all of the shares acquired with the
deferred retainer amount at a price equal to the lower of (a) the actual cost
of the purchase of said shares and (b) the market price of said shares on the
date the director was discharged, and (2) shall forfeit to the Corporation all
of the shares purchased with any additional contribution. In addition directors
receive $750 for attending each Board of Directors' meeting, $1,000 for
attending each Executive Committee meeting and $500 for attending each of the
other committee meetings. Directors who are employees do not receive fees for
attending Board of Directors and committee meetings.
EXECUTIVE OFFICERS
The following table sets forth the names of the executive officers
(the "Executive Officers") of the Corporation including their age, business
experience during the past five (5) years and the period during which each such
person has served as an Executive Officer of the Corporation or the Bank.
Richard L. Carrion: (46 years), Chairman, President and CEO of the
Corporation. Executive Officer of the Corporation since 1990. For information
about principal occupation and business experience during the past five years
please refer to the Board of Director's section.
10
<PAGE> 12
Jorge A. Junquera: (50 years), Senior Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1990. For information
about principal occupation and business experience during the past five years
please refer to the Board of Director's section.
David H. Chafey, Jr.: (45 years), Senior Executive Vice President of
the Corporation. Executive Officer of the Corporation since 1990. For
information about principal occupation and business experience during the past
five years please refer to the Board of Director's section.
Maria Isabel P. de Burckhart: (50 years), Executive Vice President of
the Corporation. Executive Officer of the Corporation since 1990. Supervisor of
the Administration Group. Executive Vice President of the Bank since January
1990. Executive Vice President of Popular North America, Inc. Member of the
Board of Trustees of Fundacion Banco Popular, Inc. Member of the Board of
Directors of Fundacion Ana G. Mendez and of Puerto Rico Community Foundation.
Member of the Board of Directors of the Puerto Rico Convention Bureau from 1993
through October 1998.
Roberto R. Herencia: (39 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1997. Head of the
Corporation's U.S. business expansion. Executive Vice President since January
1997. Director of Popular North America, Inc., Equity One, Inc. and Banco
Popular, N.A. (Texas). Director and Chief Operations Officer of Banco Popular
North America. Senior Vice President from December 1991 to December 1996.
Larry B. Kesler: (61 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1990. Supervisor of the
Individual Credit Group and the Virgin Islands Region. Executive Vice President
of the Bank since January 1990. Chairman of the Board of Directors of Equity
One, Inc., Popular Leasing & Rental, Inc. and Popular Mortgage, Inc. Director
of Popular Finance, Inc.
Humberto Martin: (53 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1986. Supervisor of the
Operations Group. Director of ATH Dominicana, S.A. Executive Vice President of
the Bank since November 1986. Executive Vice President of Popular North
America, Inc.
Emilio E. Pinero: (50 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1990. Supervisor of the
Commercial Banking Group. Executive Vice President of the Bank since January
1990. Director of Popular Mortgage, Inc. and of Popular Leasing & Rental, Inc.
Executive Vice President of Popular North America, Inc. Member of the Board of
Trustees of American Red Cross. Member of the Board of Trustees of Fundacion
Felisa Rincon de Gautier and of Jane Stern Community Library Foundation.
Carlos Rom Jr.: (42 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1997. Head of the
Corporation's Caribbean and Latin America business expansion. Executive Vice
President since January 1997. Director of ATH Dominicana, S.A. and of Banco
Gerencial y Fiduciario Dominicano, S.A. Chairman of the Board of Directors of
ATH Costa Rica, S.A. Senior Vice President from September 1995 to December
1996. Director of Marchand-ICS Group, Inc. and of McConnell Consulting. Vice
President and General Manager of Pizza Hut, a division of Pepsi Co., Inc. from
July 1994 to September 1995.
Carlos J. Vazquez: (40 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1997. Supervisor of the
Corporation's Risk Management Group. Executive Vice President since March 1997.
Director of Equity One, Inc., Popular Securities Incorporated and Popular North
America, Inc. Vice President of J.P. Morgan & Co. Incorporated, of Morgan
Guaranty Trust Co. of N.Y., of J.P. Morgan Securities Ltd., of J.P. Morgan
Securities, Inc. and of J.P. Morgan Venezuela, S.A. from 1982 to 1997.
Samuel T. Cespedes: (62 years), Secretary of the Board of Directors.
Attorney-at-Law. Proprietary partner of the law firm McConnell, Valdes.
Secretary of the Board of Directors of the Corporation and the Bank since 1991.
Secretary of the Board of Directors of Popular North America, Inc., Equity One,
Inc., Popular Leasing & Rental, Inc. and Popular Finance, Inc.
11
<PAGE> 13
FAMILY RELATIONSHIPS
Mr. Richard L. Carrion, Chairman of the Board, President and CEO of
the Corporation and the Bank, is brother-in-law of Mr. Julio E. Vizcarrondo
Jr., Director. Mr. Alfonso F. Ballester, Director, is brother-in-law of Mr.
Hector R. Gonzalez, Director. Mr. J. Adalberto Roig Jr., Director, is first
cousin of Mr. Antonio Luis Ferre, Director.
OTHER RELATIONSHIPS, TRANSACTIONS AND EVENTS
During 1998 the Bank engaged the legal services of the law firm of
Dubon & Dubon of which director Luis E. Dubon Jr. is a partner and of
McConnell, Valdes of which Mr. Samuel T. Cespedes, Secretary of the Board of
Directors of the Corporation and the Bank is a partner. The amount of fees paid
to Dubon & Dubon by the Corporation and its subsidiaries during 1998 fiscal
year was $189,488. The amount of fees paid to McConnell Valdes did not exceed
5% of the law firm revenues for its last full fiscal year.
The Bank has had loan transactions with the Corporation's directors
and officers, and with their associates, and proposes to continue such
transactions in the ordinary course of its business, on substantially the same
terms as those prevailing for comparable loan transactions with other people
and subject to the provisions of the Banking Act of the Commonwealth of Puerto
Rico and the applicable federal laws and regulations. The extensions of credit
have not involved nor presently involve more than normal risks of
collectibility or other unfavorable features.
On February 19, 1999 Mr. Luis E. Dubon, Jr., was indicted by a Federal
Grand Jury on charges of conspiracy to use the funds of Advanced Community
Health Services, Inc. and Instituto del SIDA de San Juan for unauthorized
personal benefits and for the unauthorized benefits of others, through a
pattern of deceptive practices designed to create the appearance that the
transactions were legitimate. Mr. Dubon asserts his innocence and requested a
leave of absence from the Board of Directors of the Corporation and the Bank
until such time as the matter is resolved. The Board has agreed to Mr. Dubon's
request for a leave of absence.
EXECUTIVE COMPENSATION PROGRAM
REPORT OF THE BANK'S HUMAN RESOURCES AND COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
OVERVIEW
The Bank's Human Resources and Compensation Committee ("The Human
Resources Committee") consists of six non-employee directors. The Committee
endeavors to keep abreast of competitive compensation practices in regard to
salaries, incentive compensation and supplemental programs, that will retain
top quality executive officers who will enhance shareholder value through
sustained growth.
The Human Resources Committee evaluates and recommends to the Board of
Directors the Corporation's compensation policy for the Chairman of the Board,
President and CEO, and Executive Officers. The Human Resources Committee
considers among other factors, competitive pay practices for developing a
stronger relationship between executive compensation and the Bank's long-term
performance. It is kept appraised of such competitive pay practices by an
independent consultant who conducts a periodical analysis of executive
compensation of a peer group of financial institutions similar in size, scope
and business orientation (the "Peer Group"). On an annual basis the banking
peer group used by the Human Resources Committee for comparison purposes is
reviewed in light of industry developments, and significant
mergers/acquisitions, to ensure that it is consistent with the Corporation's
size and focus. The Peer Group currently consists of twelve regional banking
organizations with a retail banking emphasis.
The Executive Compensation Program for principal officers of the
Corporation's subsidiaries is set according to the industry and geographical
area in which they operate, and is approved by the Board of Directors of each
entity.
12
<PAGE> 14
CHAIRMAN OF THE BOARD, PRESIDENT AND CEO, MR. RICHARD L. CARRION
On an annual basis Mr. Carrion submits to the Corporation's Executive
Committee a plan setting forth both quantitative and intangible goals
applicable to each year and long-term goals. Evaluations will be made against
the goals set forth in the plan.
Therefore, the Executive Committee evaluates Mr. Carrion's performance
by taking into consideration the growth of the organization, implementation of
a diversification strategy, achievement of financial goals, improvements to the
product and service delivery system and development of human resources. The
weight and significance accorded to these factors is subjective in nature and
the weight assigned to each factor in determining compensation adjustments
cannot be quantified.
Mr. Carrion participates in an annual incentive program designed to
enhance achievement of short-term financial goals and to increase shareholder
value. The first incentive component could represent 15% of base salary, if the
net income target is met, and if the net income target is exceeded it could
reach 25%. Although the threshold continues to be 100% of target, the Human
Resources Committee may recommend a discretionary bonus if results obtained are
at least 95% of the pre-established net income target. The second component,
which is based on return on equity (ROE) and is designed to enhance an increase
in shareholder value, could range from 5% to 30% of base salary, depending on
the ROE obtained. Additionally, the bonus award may be increased by 25% when
shareholder return exceeds 20% annually on a consecutive three year period.
Total shareholder return is calculated by taking into account the compounded
annual yield of the stock, considering the market appreciation, dividends
received and dividend reinvestment. This third and last bonus component
recognizes consistent improvement in shareholder value. The maximum total
incentive bonus that may be awarded could be 68.75% of base salary if all
components of the bonus program are achieved.
For 1998, this incentive bonus was 36.59% of base salary. The first
objective of net income after tax was 100% of target net income. The ROE
obtained was 15.41% compared to a minimum of 15% required. Total shareholder
return which was to exceed 20% annually on a consecutive three-year period, was
54.44% for the three-year period ended December 31, 1998.
EXECUTIVE OFFICERS
The group of Executive Officers is composed of two Senior Executive
Vice Presidents and seven Executive Vice Presidents, all of whom participate in
the Profit Sharing, Annual Incentive and Long-Term Incentive Plans. The
President and CEO sets the salary increases and the bonuses to be awarded to
the Executive Officers pursuant to the incentive plans.
The salary increase program allows discretionary salary increases
based on individual performance to be twice than that based on team increases.
It provides the CEO the opportunity to recognize changes in individual
responsibilities and performance levels.
Each Executive Officer participates in the Annual Incentive Plan. In
1998 a bonus of 36.59% of base salary was awarded to them. The net income after
tax was 100% of target net income. The ROE obtained was 15.41% compared to a
minimum of 15% required and total shareholder return which was to exceed 20%
annually on a consecutive three year period, was 54.44% for the three-year
period ended December 31, 1998.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
<TABLE>
<S> <C>
Juan A. Albors Hector R. Gonzalez
Salustiano Alvarez Mendez Alberto M. Paracchini
Esteban D. Bird Francisco M. Rexach Jr.
</TABLE>
13
<PAGE> 15
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the
Corporation or its subsidiaries to the ten highest paid Executive Officers of
the Corporation and the two most highly compensated principal officers of the
Corporation's subsidiaries for 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
FISCAL ------------------- ALL OTHER INCENTIVE PLAN
YEAR SALARY(a) BONUS(b) COMPENSATION(c) PAYOUTS(d) TOTAL
----- --------- -------- --------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Richard L. Carrion...................... 1998 $526,667 $262,552 $ 46,134 $470,142 $1,305,495
Chairman, 1997 500,000 275,942 62,181 91,195 929,318
President and CEO 1996 475,000 399,889 56,558 55,535 986,982
David H. Chafey Jr...................... 1998 393,000 194,560 35,356 281,995 904,911
Senior Executive Vice President 1997 350,000 197,909 44,401 63,240 655,550
of the Corporation 1996 290,451 240,357 35,196 35,660 601,664
Jorge A. Junquera....................... 1998 384,000 189,479 34,722 281,995 890,196
Senior Executive Vice President 1997 350,000 197,954 44,401 64,646 657,001
of the Corporation 1996 291,351 240,468 35,305 36,449 603,573
Larry B. Kesler......................... 1998 258,952 127,899 23,415 196,911 607,177
Executive Vice President 1997 235,648 132,537 29,895 51,488 449,568
of the Corporation 1996 207,488 168,163 25,143 29,023 429,817
Maria Isabel P. de Burckhart............ 1998 244,288 120,664 22,089 190,731 577,772
Executive Vice President 1997 223,187 125,109 28,314 50,349 426,959
of the Corporation 1996 201,285 162,919 24,391 28,377 416,972
Humberto Martin......................... 1998 244,633 120,448 22,120 188,811 576,012
Executive Vice President 1997 225,978 127,075 28,668 48,462 430,183
of the Corporation 1996 198,391 161,198 24,039 27,337 410,965
Emilio E. Pinero........................ 1998 224,552 110,996 20,305 178,512 534,365
Executive Vice President 1997 205,720 115,125 25,927 47,576 394,348
of the Corporation 1996 188,677 152,579 22,863 26,835 390,954
Carlos J. Vazquez (e) ................ 1998 293,645 140,254 21,017 -0- 454,916
Executive Vice President 1997 207,308 179,286 1,770 -0- 388,364
of the Corporation
Roberto R. Herencia..................... 1998 226,600 112,292 19,824 -0- 358,716
Executive Vice President 1997 201,667 112,248 25,584 -0- 339,499
of the Corporation 1996 180,000 88,366 21,782 -0- 290,148
Carlos Rom Jr........................... 1998 201,083 99,045 18,183 -0- 318,311
Executive Vice President 1997 184,500 104,400 23,406 -0- 312,306
of the Corporation 1996 155,100 74,562 18,794 -0- 248,456
Thomas J. Fitzpatrick................... 1998 301,141 925,304 75,985 -0- 1,302,430
Former President of Equity One, Inc. 1997 300,000 867,500 79,209 -0- 1,246,709
(a wholly-owned subsidiary of 1996 275,000 156,000 72,288 -0- 503,288
Popular North America, Inc.)
Kenneth McGrath......................... 1998 175,000 165,200 59,000 -0- 399,200
President of Popular Securities 1997 170,833 194,410 39,750 -0- 404,993
Incorporated (a wholly-owned subsidiary 1996 150,000 188,200 65,750 -0- 403,950
of the Corporation)
</TABLE>
14
<PAGE> 16
- -----------------
(a) Salaries before deductions.
(b) For the Bank's Executive Officers the bonus amount includes Christmas
bonus, the bonus awarded under the Annual Management Incentive
Compensation Plan and the cash portion payable under the Profit Sharing
Plan of the Bank, except in 1997 for Mr. Vazquez's bonus, which does
not includes a Profit Sharing bonus but rather a special bonus of
$49,000 paid with the Corporation's common stock purchased in the open
market. For Mr. Fitzpatrick, the amount includes the annual performance
bonus and a three year long-term incentive bonus payable under his
employment agreement. Mr. Fitzpatrick resigned effective October 30,
1998. For Mr. McGrath, the amount includes Christmas and performance
bonus.
(c) For the Bank's Executive Officers, except for Mr. Vazquez in 1997,
amount includes deferred portion awarded under the Profit Sharing Plan
of the Bank, amounts accrued under the Benefit Restoration Plan, the
amount from the Profit Sharing deferred and allocated to stock Plan and
the Bank's matching contribution to Stock Plan, which are described on
page 17 and 18. In the case of Mr. Vazquez the amount for 1997 only
includes the Bank's matching contribution to Stock Plan. For Mr.
McGrath, amount includes matching contribution to 1165(e) plan and a
deferred portion of the performance bonus. For Mr. Fitzpatrick, these
amounts represent the contribution of Equity One, Inc. pursuant to
Section 401(k) matching and deferred compensation under Supplementary
Executive Retirement Plan. As mentioned above, Mr. Fitzpatrick resigned
effective October 30, 1998. All other compensation does not include the
value of perquisites and other personal benefits because the aggregate
amount of such benefits does not exceed lesser of $50,000 or 10% of
total amount of annual salary and bonus of any named individual.
(d) For the Plan Year ended December 31, 1998, the three year average ROE
target was not achieved, nor the Peer Group three year average median
ROE was exceeded. However, since Popular, Inc.'s average ROE
represented an improvement of 81.76% over the base year ROE compared to
Peer's median ROE, the Human Resources and Compensation Committee
approved a discretionary bonus of 25% of the total stock awarded at the
beginning of the Plan Year, including dividends and adjusted for the
stock splits. On March 11 and 12 of 1999, 48,988 common shares were
purchased in the open market at an average price of $34.91. All
Executive Officers selected to defer the incentive payment, except Mr.
Larry B. Kesler. The alternative to defer is an amendment to the
original Plan that was approved by the Board of Directors in December
1996.
(e) Information presented for 1998, 1997 and 1996, except for Mr. Carlos J.
Vazquez who was appointed Executive Officer in 1997. No disclosure for
1996 is required with respect to this officer.
LONG-TERM INCENTIVE PLAN
The Board of Directors approved in 1994 the Senior Executive Long-Term
Incentive Plan to encourage long-term corporate performance and objectives. A
set percentage of the base salary of each participant at the beginning of each
Plan Year, is used to determine the dollar amount to be divided by an average
closing price of the Corporation's common stock for the Incentive Payment. The
incentive payment shall be made in common stock of the Corporation. All common
stock to be awarded under this program is purchased in the open market.
This Long-Term Incentive Plan divides the incentive payment as
follows: 75% based on the attainment of a pre-established three-year average
ROE objective for the performance period and 25% based on the achievement of an
average ROE greater than the Peer Group's three-year average median ROE.
15
<PAGE> 17
Since 1996 up to 1998, awards of performance shares under the Long-Term
Incentive Plan were granted to the Executive Officers as set forth below:
LONG-TERM INCENTIVE AWARDS
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
NON-STOCK PRICE BASED PLANS
NUMBER OF SHARES
NUMBER PERFORMANCE ----------------
OF PERIOD
NAME YEAR SHARES(a) UNTIL PAYOUT THRESHOLD TARGET MAXIMUM
- ---- ---- --------- ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Carrion.......... 1998 10,093.14 1/1/98-12/31/00 -- 10,093.14 20,186.28
1997 15,391.20 1/1/97-12/31/99 -- 15,391.20 30,782.40
1996 12,634.56 1/1/96-12/31/98 -- 12,634.56 25,269.12
David H. Chafey Jr. ........ 1998 8,066.44 1/1/98-12/31/00 -- 8,066.44 16,132.88
1997 11,081.70 1/1/97-12/31/99 -- 11,081.70 22,163.40
1996 7,580.74 1/1/96-12/31/98 -- 7,580.74 15,161.48
Jorge A. Junquera........... 1998 7,848.42 1/1/98-12/31/00 -- 7,848.42 15,696.84
1997 11,081.70 1/1/97-12/31/99 -- 11,081.70 22,163.40
1996 7,580.74 1/1/96-12/31/98 -- 7,580.74 15,161.48
Carlos J. Vazquez .......... 1998 6,050.84 1/1/98-12/31/00 -- 6,050.84 12,101.68
Larry B. Kesler............. 1998 5,300.22 1/1/98-12/31/00 -- 5,300.22 10,600.44
1997 7,415.04 1/1/97-12/31/99 -- 7,415.04 14,830.08
1996 5,292.98 1/1/96-12/31/98 -- 5,292.98 10,585.96
Maria Isabel P. ............ 1998 5,000.08 1/1/98-12/31/00 -- 5,000.08 10,000.16
de Burckhart 1997 6,995.16 1/1/97-12/31/99 -- 6,995.16 13,990.32
1996 5,127.00 1/1/96-12/31/98 -- 5,127.00 10,254.00
Humberto Martin............. 1998 4,989.44 1/1/98-12/31/00 -- 4,989.44 9,978.88
1997 7,110.76 1/1/97-12/31/99 -- 7,110.76 14,221.52
1996 5,075.84 1/1/96-12/31/98 -- 5,075.84 10,151.68
Roberto R. Herencia......... 1998 4,657.38 1/1/98-12/31/00 -- 4,657.38 9,314.76
1997 6,341.20 1/1/97-12/31/99 -- 6,341.20 12,682.40
Emilio E. Pinero............ 1998 4,596.12 1/1/98-12/31/00 -- 4,596.12 9,192.24
1997 6,430.00 1/1/97-12/31/99 -- 6,430.00 12,860.00
1996 4,798.46 1/1/96-12/31/98 -- 4,798.46 9,596.92
Carlos Rom Jr. ............. 1998 4,103.88 1/1/98-12/31/00 -- 4,103.88 8,207.76
1997 5,848.68 1/1/97-12/31/99 -- 5,848.68 11,697.36
</TABLE>
(a) The number of shares have been adjusted to reflect the stock splits of one
share for each share outstanding effected in a form of a dividend, effective
July 1, 1996 and 1998, as applicable.
The share awards shown above are payable at the end of each three-year
performance period if objectives are attained. Dividends that would be payable
on the shares of stock, if they were held by the Executive Officers, will be
credited and become part of the Incentive Payment. At the option of the
participant, a portion equal to the estimated tax due with respect to the
incentive payments of the awards may be paid in cash.
If the Corporation's target is met or exceeded, the share payments
corresponding to the Corporation's and Peer Group's goals are increased
separately by a leverage factor that cannot exceed two times the target share
amounts.
Even if the ROE for the Corporation does not equal or exceed the Peer
three-year average median ROE, the Human Resources and Compensation Committee,
at its own discretion, may recommend the distribution of 25% of the targeted
bonus if the results attained for the Plan Year average represent an
improvement of no less than 25% over the base year.
For the Plan Year ended December 31, 1998, the three year average ROE
target was not achieved, nor the Peer Group three year average median ROE was
exceeded. However, since Popular, Inc.'s average ROE represented an improvement
of
16
<PAGE> 18
81.76% over the base year ROE compared to Peer's median ROE, the Human Resources
and Compensation Committee approved a discretionary bonus of 25% of the total
stock awarded at the beginning of the Plan Year, including dividends and
adjusted for the stock splits. On March 11 and 12 of 1999, 48,988 common shares
were purchased in the open market at an average price of $34.91. All Executive
Officers selected to defer the incentive payment, except Mr. Larry Kesler. This
alternative is an amendment to the original Plan that was approved by the Board
of Directors in December 1996.
OTHER INCENTIVE COMPENSATION PLANS
The Bank has an Annual Management Incentive Plan for different
management levels. Under this Plan, incentive bonuses are based on individual
performance as well as the Corporation or Bank's performance, measured by net
income and ROE. The weight assigned to the Corporation or the Bank's
performance objectives varies according to management level, but the weight of
individual performance applies equally to all managers participating.
The Bank also has an Excellence in Performance Program in which all
employees participate. This program rewards employees for extraordinary
personal contributions that are nonrecurring in nature, typically not
recognizable through merit or promotional salary action, and clearly recognized
as such by management and peers alike.
Additionally, the Bank has several functional incentive programs that
reward employees' productivity in specific areas.
PROFIT SHARING PLAN OF THE BANK
All officers and regular monthly salaried employees of the Bank as of
January 1, 1976, or hired after that date, are active participants in the
Bank's operating earnings under the yearly Profit Sharing Plan, as of the first
day of the calendar month following completion of one year of service.
Under this plan the Bank's annual contribution is determined by the
Board of Directors based on the profits of the Bank for the year. The amount
allocated to each officer or employee is based on his or her earned salary for
the year. The total amount contributed for the year 1998 was $22,992,801. The
total awarded is 40% contributed to the Profit Sharing Plan, 10% to the Stock
Plan and the remainder 50% is paid in cash. However, this year the officers and
employees could elect to increase his (her) contribution to the Stock Plan up
to 15%, as a result of this election 38% was contributed to the Profit Sharing
Plan and 12% to the Stock Plan.
BENEFIT RESTORATION PLAN OF THE BANK
The Internal Revenue Service (IRS) set a limit of $160,000 as the
amount of compensation that may be considered in calculating future retirement
payments from qualified pension plans. This limit applies to the Bank's
Retirement Plan, Profit Sharing and Stock Plan.
The Board of Directors has approved a "Benefit Restoration Plan" for
those officers whose annual compensation is higher than the established limit.
This non-qualified plan will provide those benefits that cannot be accrued
under the Bank's Retirement and Profit Sharing Plan, which are qualified plans.
Benefits under the Benefit Restoration Plan shall be equal to the account
balance that would be provided under the Profit Sharing Plan and equal to the
benefits that would have been accrued under the Retirement Plan. The Plan is
unfunded.
RETIREMENT PLAN OF THE BANK
The Bank has a noncontributory, defined benefit Retirement Plan
covering substantially all regular monthly employees. Monthly salaried
employees are eligible to participate in the Plan following the completion of
one year of service and 21 years of age. Pension costs are funded in accordance
with the minimum funding standards under the Employee Retirement Income
Security Act ("ERISA").
The basis for the Retirement Plan formula is Total Compensation, which
includes Christmas Bonus, incentives, overtime, differentials, Profit Sharing
cash bonuses and any other compensation received by the employees. Benefits are
paid on the basis of a straight life annuity plus supplemental death benefits
and are not reduced for Social Security or other payments received by
participants.
17
<PAGE> 19
Normal retirement age at the Bank is a combination of years of age and
completed years of service totalling 75. Early retirement is at 55 years of age
with 10 years of service. Employees with 30 years of service or more are
provided with a retirement benefit of 40% of Total Compensation. Benefits are
reduced only if the employee retires before age 55. Benefits are subject to the
U.S. Internal Revenue Code limits on compensation and benefits.
The following table sets forth the estimated annual benefits that
would become payable under the Retirement Plan and the Benefit Restoration Plan
based upon certain assumptions as to total compensation levels and years of
service. The amounts payable in this table are not necessarily representative
of amounts that may actually become payable under the plans. The amounts
represent the benefits upon retirement on December 31, 1998, of a participant
at age 65.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION ESTIMATED ANNUAL BENEFITS / YEARS OF SERVICE
- --------------------------------------------------------------------------------------------------------
15 20 25 30 35
--- --- --- --- ---
<S> <C> <C> <C> <C> <C>
$1,400,000 $256,000 $357,000 $459,000 $560,000 $560,000
1,300,000 237,000 332,000 426,000 520,000 520,000
1,200,000 219,000 306,000 393,000 480,000 480,000
1,100,000 201,000 281,000 360,000 440,000 440,000
1,000,000 183,000 255,000 328,000 400,000 400,000
900,000 164,000 230,000 295,000 360,000 360,000
800,000 146,000 204,000 262,000 320,000 320,000
700,000 128,000 179,000 229,000 280,000 280,000
600,000 110,000 153,000 197,000 240,000 240,000
500,000 91,000 128,000 164,000 200,000 200,000
400,000 73,000 102,000 131,000 160,000 160,000
300,000 55,000 77,000 98,000 120,000 120,000
</TABLE>
The 1998 total compensation and estimated years of service at age 65
for the ten highest paid key policy-making Executive Officers of the
Corporation are as follows.
<TABLE>
<CAPTION>
ESTIMATED
1998 YEARS OF
TOTAL SERVICE
COMPENSATION AT AGE 65
------------ ---------
<S> <C> <C>
Richard L. Carrion $1,305,000 41.6
David H. Chafey Jr 905,000 38.6
Jorge A. Junquera 890,000 41.5
Larry B. Kesler 607,000 16.5
Maria Isabel P. de Burckhart 578,000 28.3
Humberto Martin 576,000 40.1
Emilio E. Pinero 534,000 43.2
Carlos J. Vazquez 455,000 26.4
Roberto R. Herencia 359,000 31.7
Carlos Rom Jr 318,000 35.2
</TABLE>
STOCK PLAN OF THE BANK
The Bank has adopted two Stock Plans, one covering employees of the
Bank in Puerto Rico and another covering employees of the Bank in the U.S., and
the British and U.S. Virgin Islands. All regular monthly salaried employees are
eligible to participate in the Stock Plans following the completion of
three-months of service.
The Bank may contribute a discretionary amount based on the profits of
the Bank for the year, which is allocated to each officer or employee based on
his or her basic salary for the year, as determined by the Board of Directors.
The Stock Plans also allow employees to voluntarily elect to defer a
predetermined percentage not to exceed 10% of their pre-tax base compensation
(after tax in the British Virgin Islands) up to a maximum amount as determined
by the applicable tax laws.
18
<PAGE> 20
The Bank will match 50% of the amount contributed by a participant up to a
maximum of 2% of the participant's annual base salary.
All contributions to the Stock Plans will be invested in shares of
common stock of the Corporation which are purchased in the open market.
POPULAR, INC.
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return
during the measurement period with the cumulative total return, assuming
reinvestment of dividends, of the National Association of Securities Dealers
Automated Quotation (NASDAQ) Stock Market Index and the NASDAQ Bank Composite
Index.
The cumulative total shareholder return was obtained by dividing (i)
the cumulative amount of dividends per share, assuming dividend reinvestment,
since the measurement point, December 31, 1993 plus (ii) the change in the per
share price since the measurement date, by the share price at the measurement
date.
Comparison of Five Year Cumulative Total Return
Total Return as of December 31,
(December 31, 1993 = 100)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
COMPANY/INDEX BASE INDEXED RETURNS ADJUSTED TO BASE PERIOD
PERIOD 12/31/93 12/21/94 12/31/95 12/31/96 12/31/97 12/31/98
POPULAR, INC.** 7.875 100 92.4404 131.2681 231.6418 345.232 481.2323
NASDAQ BANKS COMPOSITE 241.193 100 99.63598 148.3832 195.9083 328.0178 324.902
NASDAQ STOCK MARKET 249.861 100 97.75195 138.2561 170.0149 208.5796 293.209
</TABLE>
19
<PAGE> 21
INDEPENDENT PUBLIC ACCOUNTANTS
On July 1, 1998 Price Waterhouse merged with and into Coopers &
Lybrand. The name of the resulting public accountants firm is
PricewaterhouseCoopers.
The Board of Directors intends to retain the services of
PricewaterhouseCoopers as the independent auditors of the Corporation for the
year 1999. Price Waterhouse had served as independent auditors of the Bank
since 1971 and of the Corporation since May 1991, when it was appointed by the
Board of Directors.
Representatives of PricewaterhouseCoopers will attend the Stockholders
Meeting and will be available to answer any questions that may arise; they will
also have the opportunity to make a statement if they so desire.
INCORPORATION BY REFERENCE
The audited financial statements, certain supplemental financial
information and the Management Discussion and Analysis of Financial Condition
and Results of Operations included in the Corporation's Annual Report to
Stockholders for the year ended December 31, 1998, which accompany this Proxy
Statement are hereby incorporated by reference herein. In addition, all
documents filed by the Corporation pursuant to Section 13(a) of the Securities
Exchange Act of 1934 subsequent to the date of this Proxy Statement and prior
to the Annual Meeting shall be deemed to be incorporated by reference herein.
PROPOSALS OF SECURITY HOLDERS TO BE PRESENTED AT THE 2000
ANNUAL MEETING OF STOCKHOLDERS
Stockholders' proposals intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Corporate Secretary, at its
principal executive offices, Popular Center Building, San Juan, Puerto Rico,
00918, not later than November 24, 1999 for inclusion in the Corporation's
Proxy Statement and Form of Proxy relating to the 2000 Annual Meeting of
Stockholders.
OTHER MATTERS
Management does not know of any other matters to be brought before the
Meeting other than those described previously. Proxies in the accompanying form
will confer discretionary authority to Management with respect to any such
other matters presented at the meeting.
To avoid delays in ballot taking and counting, and in order to assure
that your Proxy is voted in accordance with your wishes, compliance with the
following instructions is respectfully requested: upon signing a Proxy as
attorney, executor, administrator, trustee, guardian, authorized officer of a
corporation, or on behalf of a minor, please give full title. If shares are in
the name of more than one recordholder, all should sign.
Whether or not you plan to attend the Meeting, it is very important
that your shares be represented and voted in the Meeting. Accordingly, you are
urged to properly complete, sign, date and return your Proxy Card or vote by
telephone or by Internet.
San Juan, Puerto Rico, March 22, 1999
RICHARD L. CARRION SAMUEL T. CESPEDES
Chairman of the Board, President Secretary
and Chief Executive Officer
YOU MAY REQUEST A COPY OF THE FORM 10K ANNUAL REPORT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION BY CALLING (787) 765-9800 OR WRITING TO AMILCAR JORDAN,
SENIOR VICE PRESIDENT, BANCO POPULAR DE PUERTO RICO, PO BOX 362708, SAN JUAN,
PR 00936-2708.
20
<PAGE> 22
<TABLE>
<CAPTION>
<S> <C>
[POPULAR, INC LOGO] IF YOU WISH TO VOTE BY TELEPHONE, INTERNET OR
MAIL, PLEASE READ THE INSTRUCTIONS BELOW
c/o BANCO POPULAR de PUERTO RICO Popular, Inc. encourages you to take advantage of new and
TRUST DIVISION convenient ways to vote your shares for matters to be covered at
PO BOX 362708 the 1999 Annual Meeting of Stockholders. Please take the
SAN JUAN, PR 00936-2708 opportunity to use one of the three voting methods outlined below
to cast your ballot. We've made it easier than ever.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to vote your proxy. Have your proxy
card in hand when you call. You will be prompted to enter your
12-digit Control Number, which is located above, and then follow
the simple instructions the Vote Voice provides you.
VOTE BY INTERNET WWW.PROXYVOTE.COM
Use the Internet to vote your proxy. Have your proxy card in hand
when you access the web site. You will be prompted to enter
your 12-digit Control Number, which is located above, to obtain
your records and create an electronic ballot.
VOTE BY MAIL
Please mark, sign, date and return this card promptly using the
enclosed postage pre-paid envelope to: Banco Popular de Puerto
Rico, Trust Division, P.O. Box 362708, San Juan, Puerto Rico 00936-2708.
No postage is required if mailed in the United States, Puerto Rico
or the U.S. Virgin Islands.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS; POPULA KEEP THIS PORTION FOR YOUR RECORDS
- -----------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
- -----------------------------------------------------------------------------------------------------------------------------------
[POPULAR, INC. LOGO] PROXY
The Board recommends a vote for For Withhold For All To withhold authority to vote, mark "For All Except"
the nominees listed below: All All Except and write the nominee's number on the line below.
ELECTION OF DIRECTORS - Nominees:
1) Juan J. Bermudez, 2) Francisee J. Carroras,
2) Richard L. Carrion, 4) David H. Chafey Jr., [ ] [ ] [ ] ---------------------------------------------------
5) Antonio Luts Ferre, 6) Alberto M. Paracchini,
7) Felix J. Serralles, Jr.
This proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Richard L. Carrion, Jorge A. Junquera and David H. Chafey Jr. or any or more of them as Proxies,
each with the power to appoint his substitute, and authorizes them to represent and to vote as designated above all the shares of
common stock of Popular, Inc. held of record by the undersigned on March 8, 1999, at the Annual Meeting of Shareholders to be held
at the Centro Europe Building, 1492 Ponce de Leon Avenue, 3rd Floor, San Juan, Puerto Rico, on April 27, 1999, at 10:00 a.m. or at
any adjournments thereof. The Proxies are further authorized to vote such shares upon any other business that may properly come
before the meeting or any adjournments thereof.
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL THE NOMINEES LISTED ABOVE.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES, PUERTO RICO OR THE U.S. VIRGIN ISLANDS. PLEASE SIGN AS YOUR
NAMES APPEAR ON THIS FORM. IF SHARES ARE HELD JOINTLY, ALL OWNERS SHOULD SIGN.
(VEA AL DORSO TEXTO EN ESPANOL)
- ------------------------------------------- ------------------------------------------
- ------------------------------------------- ------------------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
