<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>
Doral Financial Corporation
- --------------------------------------------------------------------------------
(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
DORAL FINANCIAL CORPORATION
1159 F.D. Roosevelt Avenue
San Juan, Puerto Rico 00920
March 25, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Doral Financial Corporation. The meeting will be held at the Fifth Floor of the
Doral Building, 650 Munoz Rivera Avenue, San Juan, Puerto Rico on Thursday,
April 23, 1998. The meeting will begin promptly at 11:00 a.m., local time. We
urge you to attend. Doral Financial Corporation's management considers the
Annual Meeting an excellent opportunity to discuss your corporation's progress.
During the business part of the meeting, we will address (i) the election
of directors, (ii) the ratification of auditors for 1998, and (iii) such other
business as may properly come before the meeting or any adjournment thereof.
I look forward to talking with you about the results of Doral Financial
Corporation for 1997 and our plans for the future. As a stockholder, you will
have the opportunity to ask questions during the meeting.
We urge you to review the Proxy Statement and complete, sign and return
your proxy card in the envelope provided, even if you plan to attend the
meeting. Your vote is important, and the prompt return of your proxy card will
ensure that your vote is counted. The participation of the owners of the
business in its affairs is an essential ingredient of Doral Financial
Corporation's vitality. Please note that sending us your proxy will not prevent
you from voting in person at the meeting should you so desire.
We appreciate your interest and investment in Doral Financial Corporation,
and hope to see you at the Annual Meeting.
Sincerely,
/s/ SALOMON LEVIS
Salomon Levis
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
DORAL FINANCIAL CORPORATION
1159 F.D. Roosevelt Avenue
San Juan, Puerto Rico 00920
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Thursday, April 23, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Doral
Financial Corporation (the "Corporation") will be held at the Fifth Floor of The
Doral Building, 650 Munoz Rivera Avenue, San Juan, Puerto Rico on Thursday,
April 23, 1998, at 11:00 a.m., local time, to consider and act upon the
following proposals:
1. The election of eight directors of the Corporation;
2. The ratification of the selection of Price Waterhouse as the
Corporation's independent accountants for the fiscal year ending December 31,
1998; and
3. Such other business as may properly come before the meeting or any
adjournment thereof.
Only stockholders of record as of the close of business on March 16, 1998
are entitled to notice of, and to vote at, the Annual Meeting and any and all
adjournments thereof. A list of these stockholders will be available for
inspection for a period of 10 days prior to the Annual Meeting at the office of
the Corporation at 1159 F.D. Roosevelt Avenue, San Juan, Puerto Rico, and will
also be available for inspection at the meeting itself.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED STAMPED
ENVELOPE.
By order of the Board of Directors,
/s/ Richard F. Bonini
Richard F. Bonini
Senior Executive Vice President
and Secretary
Dated: March 25, 1998
<PAGE> 4
DORAL FINANCIAL CORPORATION
1159 F.D. Roosevelt Avenue
San Juan, Puerto Rico 00920
------------------------
PROXY STATEMENT
This Proxy Statement is furnished to the holders of the Common Stock, $1.00
par value (the "Common Stock") of Doral Financial Corporation, a Puerto Rico
corporation (the "Corporation"), in connection with the solicitation by and on
behalf of the Board of Directors of proxies for the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Thursday, April 23, 1998 and
at any adjournment thereof, for the purposes set forth in the accompanying
notice of meeting. It is anticipated that this Proxy Statement and the
accompanying form of proxy will be mailed to stockholders commencing on or about
March 25, 1998.
GENERAL
Each holder of a share of Common Stock of the Corporation will be entitled
to one vote for each share held of record by such person as of the close of
business on March 16, 1998, which is the record date fixed by the Board of
Directors for the determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting or any adjournment thereof. 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. On
the record date, the Corporation had 20,214,460 shares of Common Stock
outstanding and eligible to vote. The shares represented by each properly
executed proxy in the accompanying form received by the Board of Directors will
be voted at the Annual Meeting or any adjournment thereof in accordance with the
instructions specified therein. If no instructions are made, such shares will,
except as otherwise provided in the next succeeding paragraph, be voted (i) for
the election of the eight nominees for directors named in this Proxy Statement,
(ii) for the ratification of the selection of Price Waterhouse as the
independent accountants for the Corporation for the fiscal year ending December
31, 1998, and (iii) in the proxy holders' discretion on any other matters that
may properly come before the Annual Meeting. Each of the above proposals is an
independent proposal and is not contingent on the adoption of another proposal.
The Board of Directors knows of no additional matters that will be presented for
consideration at the Annual Meeting except for procedural matters incident to
the conduct of the meeting. Execution of a proxy, however, confers on the
designated proxy holder discretionary authority to vote the shares in accordance
with his or her best judgment on such other business, if any, that may properly
come before the Annual Meeting or any adjournment thereof. Any proxy received in
the accompanying form may be revoked by the person executing it at any time
before the authority thereby granted is exercised by giving written notice of
revocation to the Secretary of the Corporation, by giving a later-dated proxy at
any time before the voting or by voting by ballot in person at the Annual
Meeting. However, if you are a stockholder whose shares are not registered in
your own name, you will need appropriate documentation from your record holder
to vote personally at the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by the Corporation to act as inspectors of election for
the meeting. The inspectors of election will treat abstentions, including for
purposes of determining the presence of a quorum, as shares that are present and
entitled to vote at the Annual Meeting. Shares with respect to which a broker or
nominee has physically indicated on the proxy that it does not have
discretionary authority to vote on a particular matter ("broker non-votes"),
will not be considered as present and entitled to vote with respect to that
matter but will be considered as present and
<PAGE> 5
entitled to vote for purposes of determining the presence of a quorum.
Abstentions will have no legal effect on the election of directors. With respect
to the ratification of Price Waterhouse as the Corporation's independent
accountants, abstentions will have the same effect as a vote against such
ratification. Broker non-votes will have no legal effect with respect to any
matters to be voted upon by the stockholders.
The cost of soliciting proxies for the Annual Meeting will be borne by the
Corporation. In addition to the use of the mails, proxies may be solicited
personally or by telephone, by officers and employees of the Corporation who
will not receive any additional compensation for their services. Proxies and
proxy material will also be distributed at the expense of the Corporation by
brokers, nominees, custodians and other similar parties.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL HOLDERS
The following table sets forth as of March 13, 1998, certain information
with respect to the beneficial ownership of the Corporation's Common Stock for
each director (including David Levis, a director emeritus), nominee for
director, executive officer named in the Compensation Table and 5% shareholder
of the Corporation, for all directors and executive officers of the Corporation
as a group and for certain other investors. See "Certain Relationships and
Related Transactions."
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS
------------------------ -------------------------- --------
<S> <C> <C>
Management
- ------------------------------------------------------------
Salomon Levis(2)(3)......................................... 568,684 2.81%
Richard F. Bonini........................................... 231,420 1.14%
Mario S. Levis(2)(4)........................................ 311,206 1.54%
Zoila Levis(2).............................................. 181,472 0.9%
David Levis(5).............................................. 227,506 1.13%
Edison Velez................................................ -- --
Edgar M. Cullman, Jr.(6)(7)................................. 2,981,430 14.75%
Frederick M. Danziger(6)(7)................................. 2,981,430 14.75%
John L. Ernst(6)(7)......................................... 2,981,430 14.75%
A. Brean Murray............................................. -- --
Victor M. Pons, Jr.......................................... -- --
All directors, nominees and executive officers as a group,
consisting of 17 persons, including those named above..... 4,547,296 22.50%
Other Principal Holders
- ------------------------------------------------------------
Edgar M. Cullman(7)(8)...................................... 2,981,430 14.75%
387 Park Avenue South
New York, N.Y. 10016
Louise B. Cullman(7)(8)..................................... 2,981,430 14.75%
387 Park Avenue South
New York, N.Y. 10016
Susan B. Cullman(7)(8)...................................... 2,981,430 14.75%
387 Park Avenue South
New York, N.Y. 10016
Lucy C. Danziger(7)(8)...................................... 2,981,430 14.75%
2 East 73rd Street
New York, N.Y. 10021
Cullman and Ernst Group(9).................................. 2,981,430 14.75%
387 Park Avenue South
New York, N.Y. 10016
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS
------------------------ -------------------------- --------
<S> <C> <C>
Levis Family(2)............................................. 1,288,868 6.38%
1159 F.D. Roosevelt Avenue
San Juan, Puerto Rico
Mills Value Adviser, Inc.(10)............................... 1,676,783 8.29%
707 East Main Street
Richmond, Va. 23219
Wellington Management Company, LLP(11)...................... 1,000,200 4.95%
75 State Street
Boston, MA 02109
</TABLE>
- ---------------------
(1) The information contained in the table is based on share ownership as
of March 13, 1998. This information has been obtained from filings made with the
Securities and Exchange Commission (the "Commission") and information provided
by the persons named above and reflects the definition of beneficial ownership
adopted by the Commission except as noted below. Beneficial ownership and
percent of class shown is sole investment and voting power, except as reflected
in other footnotes hereto and except that (i) shares shown for Messrs. Cullman,
Jr., Danziger and Ernst under "Management" and for Edgar M. Cullman, Louise B.
Cullman, Susan R. Cullman and Lucy C. Danziger under "Other Principal Holders"
include all shares owned by the Cullman and Ernst Group, including shares with
respect to which the named person has no investment or voting power other than
the informal understanding referred to in the final sentence under footnote (9)
below and (ii) shares shown as owned by the Levis Family under "Other Principal
Holders" include all shares owned by Salomon Levis, Zoila Levis, David Levis,
and Mario S. Levis even though as stated in footnote (2) below each of such
persons disclaims any beneficial interest in the shares of Common Stock owned by
the others. Where more than one person shares investment and voting power in the
same shares or if such shares are owned by any member of the Cullman and Ernst
Group such shares are shown more than once. Such shares are reflected only once,
however, in the total for all directors and officers as a group.
(2) Salomon Levis, the current Chairman of the Board and Chief Executive
Officer of the Corporation, Zoila Levis, the President of the Corporation and
David Levis, a director emeritus of the Corporation and the former Chairman of
the Board and Chief Executive Officer of the Corporation, are siblings. Mario S.
Levis is the son of David Levis and the nephew of Salomon Levis and Zoila Levis.
As of March 13, 1998, Salomon Levis, Zoila Levis, David Levis and Mario S. Levis
owned an aggregate of 1,288,868 shares of Common Stock or approximately 6.38% of
the outstanding Common Stock of the Corporation. On October 5 1995, Salomon
Levis, Zoila Levis, Mario S. Levis and David Levis filed a Schedule 13D with the
Commission stating that there is no agreement or understanding among the members
of the Levis family regarding the holding or voting of the shares of Common
Stock held by them other than an informal understanding to consult with each
other regarding the voting and disposition of the shares of Common Stock owned
by each of them. The Schedule 13D disclaims that the persons filing the Schedule
13D constitute a group for purposes of the Securities Exchange Act of 1934 and
states that each such person has sole voting and investment power with respect
to the respective shares of Common Stock owned by them and each disclaims any
beneficial interest in the shares of Common Stock owned by the others.
(3) Includes 25,404 shares of Common Stock owned by Nancy Hernaendez, the
wife of Salomon Levis.
(4) Includes 300 shares of Common Stock owned by the spouse of Mario S.
Levis.
(5) David Levis is a director emeritus of the Corporation and is the former
Chairman of the Bond and Chief Executive Officer of the Corporation.
3
<PAGE> 7
(6) Included in the shares of Common Stock shown as beneficially owned by
Mr. Danziger are 206,136 shares in which he holds shared investment and/or
voting power, included in the shares of Common Stock shown as beneficially owned
by Mr. Cullman, Jr. are 1,240,392 shares in which he holds shared investment
and/or voting power and included in the shares of Common Stock shown as
beneficially owned by Mr. Ernst are 201,166 shares in which he holds shared
investment and/or voting power. Also included in the case of Messrs. Cullman,
Jr., Danziger and Ernst, respectively, are 1,624,998, 2,742,210 and 2,755,136
shares of Common Stock held by the Cullman and Ernst Group with respect to which
such person holds no investment or voting power other than the informal
understanding referred to in the final sentence under footnote (9) below. Voting
and investment power over certain of such shares is held by more than one such
person. Messrs. Ernst, Danziger and Cullman, Jr. disclaim beneficial ownership
of all shares over which there is shared investment and/or voting power and
Cullman and Ernst Group shares not owned by such person directly.
(7) Member of the Cullman and Ernst Group. Edgar M. Cullman is the father
of Edgar M. Cullman, Jr., Susan R. Cullman and Lucy C. Danziger, the husband of
Louise B. Cullman, and the uncle of John L. Ernst. Lucy C. Danziger is the wife
of Frederick M. Danziger.
(8) Included within the shares of Common Stock shown as beneficially owned
by Mr. Edgar M. Cullman, Mrs. Louise B. Cullman, Ms. Susan R. Cullman and Mrs.
Lucy C. Danziger are, respectively, 1,374,836, 1,094,044, 1,205,328 and
1,284,584 shares in which such person holds shared voting and/or investment
power. Also included in the shares of Common Stock as to each such person,
respectively, are 1,389,298, 1,680,566, 1,662,392 and 1,556,322 shares held by
the Cullman and Ernst Group with respect to which such person holds no
investment or voting power other than the informal understanding referred to in
the final sentence under footnote (9) below. Each such person disclaims
beneficial ownership of all shares not owned by such person directly.
(9) As of March 13, 1998, a group consisting of Edgar M. Cullman, his son
Edgar M. Cullman, Jr., a director of the corporation, direct members of their
families and trusts for their benefit, Mr. John L. Ernst, also a director of the
Corporation, his sister and direct members of their families and trusts for
their benefit own an aggregate of 2,981,430 shares of Common Stock or
approximately 14.75% of the outstanding Common Stock. Among others, Messrs.
Cullman and Cullman, Jr. and their wives, Mr. Ernst and to a lesser extent Mr.
Danziger (who is a member of the Cullman and Ernst Group and a director of the
Corporation), hold investment and voting power or shared investment and voting
power over such shares. Mr. Danziger is the brother-in-law of Mr. Edgar M.
Cullman, Jr. A Schedule 13D filed with the Commission on behalf of the Cullman
and Ernst Group states that there is no formal agreement governing the group's
holding and voting of such shares, but that there is an informal understanding
that the persons and entities included in the group will hold and vote together
the shares owned by each of them in each case subject to any applicable
fiduciary responsibilities.
(10) Based on information contained in a Schedule 13D filed with the
Commission by Mills Value Adviser ("Mills") Inc. and other supplemental
information provided to the Corporation by Mills. According to the Schedule 13D,
Mills as an investment advisory firm has purchased shares of Common Stock of the
Corporation for client accounts over which the Corporation has discretionary
investment authority.
(11) Based on information contained in a Schedule 13G filed with the
Commission by Wellington Management Company, LLP ("Wellington"). Wellington, in
its capacity as investment adviser, may be deemed to be the beneficial owner of
the shares reported on the Schedule 13G, which are owned by the investment
advisory clients of Wellington. While the Schedule 13G filed by Wellington
reported that Wellington beneficially owned 5.44% of the outstanding shares of
the Corporation's Common Stock, such percentage is actually 4.95% based on the
number of outstanding shares as of March 16, 1998.
4
<PAGE> 8
ELECTION OF DIRECTORS AND RELATED MATTERS
ELECTION OF DIRECTORS
At the Annual Meeting, eight directors comprising the entire Board of
Directors of the Corporation are to be elected. The Board of Directors has
proposed the nominees listed below for election as directors to serve until the
1999 Annual Meeting or until their successors are duly elected and qualified.
The directors must be elected by a majority of the votes cast in person or
by proxy by stockholders entitled to vote at the Annual Meeting. Therefore,
abstentions and broker non-votes will not have an effect on the election of
directors of the Corporation. Unless otherwise specified in the accompanying
form of proxy, proxies solicited hereby (other than proxies which reflect broker
non-votes) will be voted for the election of the nominees listed below, unless
for any reason not now known by the Corporation, any of such nominees should not
be able to serve, in which case the proxies shall be voted for a substitute
nominee or nominees who will be designated by the Board of Directors. If no
substitute nominees are available, the size of the Board of Directors will be
reduced.
Other than Mr. Bonini's employment agreement, which requires the Board of
Directors of the Corporation to nominate him for election as a director, there
are no arrangements or understandings between the Corporation and any person
pursuant to which such person has been elected a director.
The following table sets forth as of March 13, 1998, certain information
with respect to each nominee for director.
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION SINCE
- ---- ------------------------------------------ --------
<S> <C> <C>
Salomon Levis(1) Chairman of the Board and Chief Executive Officer of the 1988
Corporation since February 1990; Chairman of the Board and
Chief Executive Officer of Doral Bank, a wholly-owned
subsidiary of the Corporation; Chairman of the Board, Doral
Mortgage Corporation and Doral Securities, Inc., each a
wholly owned subsidiary of the Corporation; President and
Chief Executive Officer of the Corporation (1989-1991);
Chairman of the Board, Doral Mortgage Corporation, a
wholly-owned subsidiary of the Corporation (1988-1990);
President and Chief Operating Officer, Doral Mortgage
Corporation (1985-1988). Age 55.
Richard F. Bonini Senior Executive Vice President of the Corporation since 1976
1988; Chief Financial Officer of Corporation since April
1996 and Secretary of the Corporation since December 1991;
Director and Secretary of Doral Bank; Secretary of Doral
Mortgage Corporation for more than the past five years;
Consultant to Culbro Corporation (1989-1990); Senior Vice
President, Culbro Corporation and Vice President of the
Corporation (1976-1988); Director, Search Capital Group
(automobile financing) until February 1998. Search Capital
Group filed for relief from its creditors under Chapter 11
of the Federal Bankruptcy Code on March 6, 1998. Age 59.
Edgar M. Cullman, Jr.(2) President and Chief Executive Officer of General Cigar 1988
Holdings, Inc. since December 1996; Chief Executive Officer
Culbro Corporation from April 1996 to December 1996;
President, Culbro Corporation from 1984 to December 1996;
Executive Vice President, Culbro Corporation (1983-1984);
President, General Cigar & Tobacco Co. (1980-1983);
Director, General Cigar Holdings, Inc., Bloomingdale
Properties, Inc. (investments and real estate) and The Eli
Witt Company ("Eli Witt"). Eli Witt filed for relief from
its creditors under Chapter 11 of the Federal Bankruptcy
Code in November 1996. Age 52.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION SINCE
- ---- ------------------------------------------ --------
<S> <C> <C>
Frederick M. Danziger President of Griffin Land & Nurseries, Inc. from July 1, 1988
1997 to present; Of-Counsel, Latham & Watkins (attorneys)
from December 1995 to June 30, 1997; member, Mudge Rose
Guthrie Alexander & Ferdon (attorneys) from July 1974 to
September 30, 1995; Director, Griffin Land & Nurseries,
Inc., Monro Muffler/Brake, Inc., Ryan Instruments, L.P.
(general partner), Bloomingdale Properties, Inc.
(investments and real estate), and Centaur Communications
Ltd. Age 58.
John L. Ernst(2) Chairman of the Board of President of Bloomingdale 1989
Properties, Inc., since September 1984; Director, General
Cigar Holdings, Inc. and Griffin Land & Nurseries, Inc. Age
57.
Zoila Levis(1) President of the Corporation since August 12, 1991; Director 1991
of Doral Bank and Doral Securities, Inc.; Executive Vice
President of the Corporation from January 1, 1990 to August
11, 1991; President of Z. Levis Assoc. (real estate
development) from January 1, 1985 to December 31, 1989. Age
50.
A. Brean Murray Chairman of the Board and Chief Executive Officer of Brean 1994
Murray & Co., Inc., an investment banking firm for more than
the past five years; Director, American Asset Management
(money management), BMI Capital Corp. (asset management),
and Search Capital Group (automobile financing) until
February 1998. Search Capital Group filed for relief from
its creditors under Chapter 11 of the Federal Bankruptcy
Code on March 6, 1998. Age 60.
Victor M. Pons, Jr. Attorney in private practice since 1992; Chief Justice of 1994
the Supreme Court, Commonwealth of Puerto Rico (1985-1992).
Age 62.
</TABLE>
- ---------------------
(1) Zoila Levis is the sister of Salomon Levis.
(2) Edgar M. Cullman, Jr. and John L. Ernst are cousins. Frederick M.
Danziger is the brother-in-law of Edgar M. Cullman, Jr.
DIRECTORS' MEETINGS, COMMITTEES AND FEES
The Board of Directors held nine meetings during the year ended December
31, 1997. Each director except for Edgar Cullman, Jr. who was absent from three
meetings, attended at least 75% of the aggregate number of Board meetings and
meetings held by all committees on which he or she served during such period.
Members of the Board of Directors who are not employees of the Corporation
receive a fee of $10,000 per year plus $800 for each Board of Directors and
committee meeting attended. No separate fees are paid for committee meetings
attended on the same day as a Board meeting. The Corporation has obtained
directors and officers liability insurance for its directors and officers. The
Corporation's Restated Certificate of Incorporation contains a provision that
exempts directors from personal liability for monetary damages to the
Corporation or its shareholders for violations of the duty of care, to the
fullest extent permitted by the Puerto Rico General Corporation Law. The
Corporation has also agreed to indemnify its directors and officers for certain
liabilities to the fullest extent permitted by Puerto Rico law.
The Board of Directors has standing Audit and Compensation Committees. The
Audit Committee met once during 1997. The Compensation Committee held two
meetings during 1997. The Board does not have a standing nominating committee or
other committee performing a similar function.
The Audit Committee reviews audit reports and the scope of the audit by
both the Corporation's staff and its independent accountants and related matters
pertaining to the preparation and examination of the Corporation's financial
statements. The committee also makes recommendations to the Board of Directors
with respect to the
6
<PAGE> 10
foregoing matters as well as with respect to the appointment of the
Corporation's independent accountants. The members of the Audit Committee are
Messrs. Pons, and Cullman, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Danziger, Ernst and
Murray. None of such persons is or was during 1997 an executive officer of the
Corporation. Since January 1, 1997, none of the executive officers of the
Corporation has served as a director, executive officer or compensation
committee member of another entity which had an executive officer who served as
a compensation committee member or director of the Corporation.
Mr. Brean Murray, a nominee for director of the Corporation, is the
Chairman of the Board and Chief Executive Officer of Brean Murray & Co., Inc.,
an investment banking firm which in the past has rendered investment banking
services to the Corporation. Brean Murray & Co., Inc. acted as the managing
underwriter for a syndicate of underwriters in connection with a public offering
of shares of Common Stock of the Corporation that closed in February 1998. Brean
Murray & Co. received underwriting discounts and commissions in connection with
such public offering of approximately $1,799,570.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, Aidiliza Levis, the daughter of David Levis, the former
Chairman of the Board and a director emeritus of the Corporation, sister of
Mario S. Levis, an Executive Vice President and Treasurer of the Corporation,
and the niece of Salomon Levis and Zoila Levis, the Chairman of the Board and
President, respectively, of the Corporation, was employed as the President of
Centro Hipotecario, Inc., a wholly-owned subsidiary of the Corporation and
received compensation of $452,025 (including contributions to the Corporation's
Target Benefit Pension Plan).
See also "Compensation Committee Interlocks and Insider Participation" for
certain relationships involving A. Brean Murray, a nominee for director of the
Corporation.
Sana Mortgage Bankers, Inc., formerly Sana Investment, Inc. ("Sana"), a
mortgage banking firm wholly-owned by Nancy Hernaendez, the wife of Salomon
Levis and the former President of Doral Mortgage Corporation, referred mortgage
loans to the Corporation in its capacity as a mortgage broker during 1997.
Brokerage fees payable to Sana in connection with mortgage loans originated
through Sana and closed by the Corporation are payable by the customer and not
by the Corporation. The Corporation believes that all loans originated through
Sana were made in the ordinary course of business on substantially the same
terms, including interest rates and collateral, as those prevailing for
comparable transactions originated directly by the Corporation or referred to
the Corporation by other unrelated mortgage brokerage firms. Under the community
property laws of Puerto Rico, Salomon Levis is deemed to have a 50% interest in
all property owned by the conjugal partnership composed of Salomon Levis and
Nancy Hernandez, including her stock ownership in Sana. In February 1998, Sana
obtained a mortgage banking license that will permit it to originate mortgage
loans directly. The Corporation expects that as part of its mortgage banking
business it will purchase mortgage loans originated by Sana. All such purchasers
will be made in the ordinary course of business on substantially the same terms
and conditions as comparable purchases made by the Corporation from non-related
third parties.
From time to time, the Corporation makes mortgage loans to persons who
purchase homes in residential housing projects developed by Lema Development,
S.E. or other entities controlled by Arturo Madero, the spouse of Zoila Levis,
the President of the Corporation. All such loans have been made in the ordinary
course of business on substantially the same terms, including interest rates and
collateral, as those prevailing at the same
7
<PAGE> 11
time for comparable transactions for persons purchasing homes in projects
developed by unaffiliated persons and management believes that such loans do not
involve more than the normal risk of collectibility or present other unfavorable
features.
Puerto Rico Island Rental Limited Dividend Partnership, S.E., a Puerto Rico
partnership (the "Partnership") formed under a private syndication in which
members of management, including Mario S. Levis, Luis Alvarado, and Ernesto
Carattini, executive officers of the Corporation, and Edison Velez, the
President of Doral Mortgage, are investors, and the Board of Directors of its
general partner is composed of members management of the Corporation, owed the
Corporation approximately $3.5 million as of December 31, 1997, consisting of
$1.6 million in promissory notes and $1.9 million in accrued and unpaid interest
and advances made by the Corporation on behalf of the Partnership. The $1.6
million in notes represents the unpaid principal balance of promissory notes
issued by the Partnership in payment of approximately $4.7 million in real
estate owned ("REO") purchased by the Partnership from the Corporation in
December 1990. The purchase price consisted of $600,000 in cash and $4.1 million
in promissory notes. The notes bear interest payable monthly at the Citibank,
N.A. prime rate (with a maximum and minimum rate of 13.5% and 9%, respectively)
and mature on April 1, 2006. In addition to the $1.6 million in notes, as of
December 31, 1997, the Partnership also owed the Corporation approximately
$680,000, in past due interest and $1.3 million in advances made by the
Corporation on behalf of the Partnership. During the past five years, the
Corporation has charged approximately $1.9 million (of which $200,000 was
charged during 1997) against earnings to reserve against possible losses from
amounts due from the Partnership.
Doral Bank and Doral Securities, Inc. ("Doral Securities"), each a
wholly-owned subsidiary of the Corporation, have had, and expect to have in the
future, banking or securities transactions in the ordinary course of business
with directors and executive officers of the Corporation. All extensions of
credit to any of such persons by Doral Bank or Doral Securities have been made
in the ordinary course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and in the opinion of management of such
entities, do not involve more than the normal risk of collectibility or present
other unfavorable features.
The following table sets forth certain information with respect to mortgage
loans made by the Corporation or other wholly-owned mortgage banking
subsidiaries of the Corporation, to executive officers of the Corporation and to
certain related interests of directors and executive officers of the
Corporation, including the Partnership. The table does not include loans made
prior to January 1, 1997 that have been sold to investors and are, therefore, no
longer owned by the Corporation. Except for the loan to the Partnership, these
loans were made in the ordinary course of business on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with unaffiliated persons. Except for the loan to
the Partnership, management believes that such loans do not involve more than
the normal risk of collectibility or present other unfavorable features.
8
<PAGE> 12
<TABLE>
<CAPTION>
YEAR LOAN HIGHEST PRINCIPAL PRINCIPAL BALANCE INTEREST
NAME AND POSITION MADE AMOUNT DURING 1997 AS OF 12/31/97 RATE
----------------- --------- ------------------ ----------------- --------
<S> <C> <C> <C> <C>
Puerto Rico Island Rental Limited
Dividend Partnership, S.E.(2)............................. 1990 $1,800,000(1) $1,600,000 9.000%
Aidiliza Levis(3)........................................... 1996 $ 420,000(1) $ 416,130 7.500%
Zoila Levis(4).............................................. 1997 $ 326,000(1) $ 324,130 8.125%
Ernesto Carattini(5)........................................ 1997 $ 250,000(1) $ 249,155 7.875%
Edison Velez(6)............................................. 1997 $ 40,000(7) $ 40,000 9.500%
</TABLE>
- ---------------------
(1) First mortgage.
(2) Refer to information set forth above for information regarding this
transaction.
(3) Aidiliza Levis is the niece of Salomon Levis and Zoila Levis and the
sister of Mario S. Levis. She is also the President of Centro Hipotecario, Inc.,
a wholly-owned subsidiary of the Corporation.
(4) Zoila Levis is the President of the Corporation.
(5) Ernesto Carattini is the President of HF Mortgage Bankers Division.
(6) Edison Velez is the President of Doral Mortgage Corporation.
(7) Second Mortgage.
9
<PAGE> 13
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is supplied with respect to the 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
such executive officers was selected as an officer, except for their employment
agreements with the Corporation and none of such executive officers is related
to any other director or executive officer of the Corporation by blood, marriage
or adoption, except that Mario S. Levis is the nephew of Salomon Levis and Zoila
Levis.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME DURING THE PAST FIVE YEARS AGE
---- -------------------------- ---
<S> <C> <C>
Luis A. Alvarado Executive Vice President of the Corporation since 1985; 49
Director of Doral Bank; Chief Financial Officer of the
Corporation from 1985 to April 1996; President of Doral
Bank, a wholly-owned subsidiary of the Corporation from
September 1993 until April 1996; Senior Vice President and
Controller of the Corporation (1980-1985).
Ernesto Carattini President of HF Mortgage Bankers Division since September 50
1995; Executive Vice President of Doral Mortgage Corporation
for more than five years prior thereto.
Mario S. Levis Executive Vice President of the Corporation since September 34
1995: Treasurer of the Corporation since December 1991;
Director of Doral Securities, Inc.; Executive Vice President
of Doral Mortgage Corporation; Senior Executive Trader of
the Corporation from 1988 to December 1991. Trader, Merrill
Lynch Pierce Fenner & Smith Incorporated (1987-1988).
Ricardo Melendez Vice President and Chief Accounting Officer of the 39
Corporation since October 1995; Chief Financial Officer of
Doral Bank, a wholly-owned subsidiary of the Corporation
from September 1993 to July 1995; Senior Assistant to CEO
and CFO of the Corporation from May 1991 to September 1993;
Audit Manager and Senior Auditor, Price Waterhouse from July
1986 to May 1991.
Frederick C. Teed Executive Vice President -- Banking Operations since March 40
1, 1996; Federal Thrift Regulator, Office of Thrift
Supervision, Department of the Treasury, for more than five
years prior thereto.
Edison Velez President of Doral Mortgage Corporation since September 36
1995, Senior Vice President of Doral Mortgage Corporation
for more than five years prior thereto.
Jose G. Vigoreaux President of Doral Bank, a wholly-owned subsidiary of the 46
Corporation since April 1996; Director of Doral Bank, Vice
President and Chief Financial Officer, Doral Bank, July 1995
to March 1996, Vice President Operations September 1993 to
June 1995, President, Caribbean Federal Savings Bank from
August 1990 to August 1993.
Carlos Vina Corporate Controller since April 1997; Controller HF 31
Mortgage Bankers Division from November 1992 to April 1997;
audit senior Arthur Andersen & Co. from December 1988 to
November 1989.
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on reports filed with the Securities and Exchange Commission and
information obtained from the officers and directors of the Corporation, the
Corporation is not aware of any failure by the executive officers or directors
of the Corporation to file on a timely basis any reports required to be filed by
Section 16(a) of the Securities Exchange Act of 1934 with respect to beneficial
ownership of shares of the Corporation.
10
<PAGE> 14
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Policies. The compensation policy of the Corporation is to provide its
executive officers and management with a level of pay and benefits that will
assure the Corporation's competitiveness and continued growth, and allow the
Corporation to retain key executives critical to its long-term success and
attract and retain qualified personnel. As it operates in a financial services
business, the Corporation competes for talented executives in a market segment
where successful entrepreneurial executives are highly compensated. It also
competes for executives with a background in Puerto Rican financial services. As
a result, to obtain and retain highly qualified and motivated executives, the
Compensation Committee has deemed it desirable to structure employment
arrangements which compensate highly for high profitability and performance and
to enter into written employment agreements with its senior executive officers.
The Compensation Committee's responsibilities include overseeing the
Corporation's compensation policies, supervising compensation for management and
employee benefits and administering the Corporation's pension, restricted stock,
incentive compensation and other employee benefit plans. Two members of the
Compensation Committee also compose the Stock Option Committee that administers
the Corporation's 1997 Employees Stock Option Plan.
The Compensation Committee also develops and negotiates employment
agreements with key executive officers. These employment agreements have
normally included base salaries and incentive compensation arrangements designed
to reward management for achieving certain production or performance levels. The
Compensation Committee is also responsible for developing or reviewing incentive
compensation arrangements which the Corporation enters into with executive
officers and key individuals, other than those senior executives that have
written employment agreements. See "Executive Compensation -- Summary of
Compensation Plans -- Deferred Incentive Compensation Agreements." The deferred
incentive compensation agreements are designed to reward executive officers and
key employees for assisting the Corporation in achieving various income targets.
Based on the Compensation Committee's recommendations, the Corporation has in
the past also made grants of restricted stock to senior executives as an
important long-term retention device. See "Executive Compensation -- Summary of
Compensation Plans -- 1988 Restricted Stock Plan." Such awards were made as an
incentive for continued employment and future performance as well as a reward
for past performance.
In order to determine appropriate levels of executive compensation, the
Compensation Committee reviews various factors, including individual
performance, and evaluates the progress of the Corporation towards attaining its
long-term goals. Generally, as a person's level of responsibility increases,
greater portions of total compensation are based on performance (as opposed to
base salaries and benefits). Compensation packages for senior executive officers
have been structured to attempt to compensate them to a substantial extent on a
combination of the profitability of the Corporation as a whole or the
productivity of their particular divisions or subsidiaries.
Chief Executive Officer's Compensation. The Compensation Committee reviews
compensation arrangements for senior executives in companies highly successful
in the mortgage banking business and for investment banking executives in order
to formulate a level of base compensation and the returns on which Mr. Levis'
incentive compensation may be based. The Compensation Committee has determined
that return on equity is of material importance to the overall long-term growth
and profitability of the Corporation. Accordingly, the Compensation Committee
has sought to structure employment agreements for the Chief Executive Officer
that set high return standards as a base level (15% return on equity after
taxes) for the payment of incentive compensation on earnings. The Compensation
Committee's evaluation resulted in an employment agreement which became
effective on January 1, 1995 and expired on December 31, 1996 (the "1995
Employment
11
<PAGE> 15
Agreement"). Under the 1995 Employment Agreement, prior incentives for volume of
originations were eliminated because the Committee felt that these incentives
were less appropriate for a larger and more mature company such as the
Corporation. The 1995 Employment Agreement provided for a basic incentive bonus
($1 million) if a minimum level of profitability were attained (Adjusted Net
Income of at least $10 million). Increasing incentives were payable for
achieving higher levels of profitability but only to the extent such
profitability exceeded a minimum (15%) of return on stockholders' equity after
taxes. In addition, the 1995 Employment Agreement provided for a maximum amount
of salary and incentive compensation payable to Mr. Levis in any given year
($4.5 million) regardless of results to avoid possible distortions in
compensation as a result of unforeseen market trends. On May 1, 1997, the
Company entered into a new three year employment agreement, which became
effective retroactive to January 1, 1997 and expires on December 31, 1999 (the
"1997 Employment Agreement"). The 1997 Employment Agreement provides for an
increase in the basic annual salary from $1,000,000 to $1,500,000. It, however,
eliminates the incentive bonus for obtaining minimum levels of profitability
without regard to return on stockholders' equity and ties the incentive bonus to
a percentage (15%) of adjustable income over a minimum threshold of a 15% return
on stockholders' equity. The Committee felt it was more appropriate that all
incentive compensation be directly tied to the Corporation achieving a level of
profitability above a minimum threshold of return on stockholders' equity. As in
the case of the 1995 Employment Agreement, the Committee felt it was prudent to
establish a maximum aggregate amount ($4.5 million) that may be paid to Mr.
Levis in salary and incentive compensation to avoid possible distortions from
unforeseen market results. See "Employment Agreements and Other Compensation
Arrangements" for additional information regarding the 1997 Employment
Agreement.
Section 162(m) of the Internal Revenue Code. The Committee has considered
the impact of the provisions of Section 162(m) of the Internal Revenue Code of
1986 (the "Code") that provides that compensation paid to a corporation's chief
executive officer or its four other most highly compensated executive officers
may not be deducted for federal income tax purposes unless, in general, such
compensation is performance based, is established by an independent committee of
directors, is objective and the plan or agreement providing for such performance
based compensation has been approved in advance by stockholders. Because as a
Puerto Rico corporation, the Corporation is not required to pay federal income
taxes except for any income related to the conduct of a trade or business in the
United States, Section 162(m) should not limit the tax deductions available to
the Corporation for executive compensation in the near future.
Compensation Committee of the Board of
Directors
A. Brean Murray
Frederick M. Danziger
John L. Ernst
The Board Compensation Committee Report on Executive Compensation shall not
be deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that the
Corporation specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
EMPLOYMENT AGREEMENTS AND OTHER COMPENSATION ARRANGEMENTS
The Corporation has entered into an employment agreement with Salomon
Levis, which became effective as of January 1, 1997 and expires on December 31,
1999. Under the terms of the Agreement, Mr. Levis is entitled to receive
annually a base salary of $1,500,000 plus incentive compensation equal to 15% of
the amount of the
12
<PAGE> 16
Corporation's annual consolidated net income after taxes and after adding back
incentive compensation payable to executive officers of the Corporation
("Adjusted Net Income") in excess of an amount equal to a 15% return on
stockholders' equity. At the discretion of the Board of Directors, up to 50% of
the incentive compensation could be paid in Common Stock of the Corporation. Mr.
Levis' annual salary and incentive compensation is subject to a maximum of $4.5
million per year.
The Corporation entered into an employment agreement with Zoila Levis,
President of the Corporation, which became effective as of January 1, 1997 and
expires on December 31, 1999. Under the terms of the agreement, Zoila Levis is
entitled to receive annually a base salary of $500,000 plus incentive
compensation equal to the sum of the following: (i) $300,000 if the Corporation
earns at least $10.0 million of Adjusted Net Income; (ii) $300,000 of the
Corporation earns Adjusted Net Income up to $20 million; and (iii) 5% of
Adjusted Net Income in excess of $20 million, to the extent such Adjusted Net
Income exceeds an amount equal to a 15% return on stockholders' equity. At the
discretion of the Board of Directors, up to 50% of the incentive compensation
could be paid in Common Stock of the Corporation. Ms. Levis' annual salary and
incentive compensation is subject to a maximum of $1.7 million per year.
The Corporation has entered into an employment agreement with Richard F.
Bonini, Senior Executive Vice President and Chief Financial Officer which became
effective January 1, 1997 and expires on December 31, 1999. Pursuant to the
terms of the agreement, Mr. Bonini is entitled to receive annually a base salary
of $390,000 plus incentive compensation equal to 5% of Adjusted Net Income to
the extent such Adjusted Net Income exceeds an amount equal to a 15% return on
stockholders' equity. At the discretion of the Board of Directors, up to 50% of
the incentive compensation may be payable in the Common Stock of the
Corporation. Mr. Bonini's annual salary and incentive compensation is subject to
a maximum of $1.2 million per year.
Each of the Employment Agreements with Salomon Levis, Zoila Levis and
Richard F. Bonini provide that if such agreements are terminated following a
change of control of the Corporation, the named executive officer would be
entitled to receive all compensation due under the agreement for the calendar
year in which such termination occurs.
The Corporation entered into an Employment Agreement with Mario S. Levis,
Executive Vice President and Treasurer of the Corporation, which became
effective as of January 1, 1996 and expired on December 31, 1997. Pursuant to
the terms of the Agreement, Mr. Levis was entitled to base salary of $275,000
plus incentive compensations equal to the sum of the following: (i) $275,000 if
the Company earns at least $10.0 million of Adjusted Net Income; (ii) 2.5% of
the Company's Adjusted Net Income in excess of $10 million and up to $20.0
million to the extent such Adjusted Net Income exceeds an amount equal to a 15%
return on stockholders equity and (iii) 4% of the Company's Adjusted Net Income
in excess of $20 million to the extent such Adjusted Net Income exceeds on
amount equal to a 15% return on stockholders' equity. At the discretion of the
Board of Directors, up to 50% of the incentive compensation was payable in
Common Stock of the Corporation. Under the Agreement, Mr. Levis' annual salary
and incentive compensation was subject to a maximum of $1.2 million per year.
The Agreement provided that if it is terminated following a change of control of
the Corporation, Mr. Levis would be entitled to receive all compensation due
under the Agreement for the calendar year in which such termination occurs. The
Corporation and Mr. Levis are in the process of negotiating a new employment
agreement.
Although the Corporation's employment agreements with the executive
officers named above permit the Corporation to pay up to 50% of incentive
compensation in Common Stock of the Corporation, existing rules of the National
Association of Securities Dealers applicable to corporations whose shares trade
on the NASDAQ National Market System limit the ability of the Corporation to
issue shares of its Common Stock to executive officers without prior shareholder
approval and such approval has not been requested by the Corporation.
13
<PAGE> 17
Doral Mortgage Corporation ("Doral Mortgage") has entered into an
employment agreement with Edison Velez, the President of Doral Mortgage, dated
as of December 31, 1996, which became effective on January 1, 1997 and expires
on December 31, 1998. Pursuant to the terms of the agreement, Mr. Velez is
entitled to receive annually (i) a base salary equal to $240,000 and (ii) and an
incentive bonus equal to the lesser of (x) 200,000 and (y) 3% of the net income
of Doral Mortgage over and above $3 million derived from mortgage banking
activities. One-half of the incentive compensation is subject to a deferral
arrangement whereby Mr. Velez is not entitled to collect the deferred portion of
the incentive compensation until five years after the incentive compensation was
earned. Doral Mortgage's obligation to make the payment at the end of the
deferral period is unfunded. The deferred portion of the incentive compensation
earns interest at 1% below the prime rate of the Chase Manhattan Bank. The
Agreement provides that if it is terminated following a change of control of the
Corporation, Mr. Velez will be entitled to receive all compensation due under
the Agreement for the calendar year in which such termination occurs. While Mr.
Velez' employment agreement was not in effect for 1996, his salary and incentive
compensation for 1996 were determined on the same basis as set forth in his
employment agreement except that the incentive bonus for 1996 was payable in
full and not subject to deferral.
SUMMARY COMPENSATION TABLE
The following table includes information concerning the compensation of the
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Corporation, for services rendered in all capacities
during the fiscal years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS(2)
----------------------------------------- ------------
OTHER RESTRICTED
NAME AND ANNUAL STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(S) COMPENSATION
------------------ ---- ---------- ---------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Salomon Levis.................................. 1997 $1,500,000 $1,871,867 $-0- $-0- $ 18,701(3)
Chairman of the Board and 1996 700,000 2,989,826 -0- -0- 18,691(4)
Chief Executive Officer 1995 700,000 1,521,361 -0- -0- 18,430(5)
Zoila Levis.................................... 1997 $ 500,000 $1,200,000 $-0- $-0- $ 16,394(4)
President 1996 300,000 1,200,200 -0- -0- 28,953(5)
1995 300,000 586,438 -0- -0- 38,269(6)
Richard F. Bonini.............................. 1997 $ 390,000 $ 623,956 $-0- $-0- $ 30,000(3)
Senior Executive Vice 1996 240,000 810,263 -0- -0- 30,000(4)
President and Secretary 1995 240,000 323,183 -0- -0- 30,000(5)
Mario S. Levis................................. 1997 $ 275,000 $ 774,165 $-0- $-0- $ 8,066(3)
Executive Vice President 1996 275,000 804,058 -0- -0- 8,042(4)
and Treasurer 1995 45,514 421,651 -0- -0- 7,949(5)
Edison Velez................................... 1997 $ 240,000 $ 129,622 $-0- $-0- $106,866(3)
President, 1996 245,192 171,708 -0- -0- 6,667(4)
Doral Mortgage Corporation 1995 114,128 7,000 -0- -0- 4,664(5)
</TABLE>
- ---------------------
(1) Amounts shown do not include amounts expended by the Corporation
pursuant to plans (including group life and health) that do not discriminate in
scope, term or operation in favor of executive officers or directors of the
Corporation and that are generally available to all salaried employees. Amounts
shown also do not include amounts expended by the Corporation which may have a
value as a personal benefit to the named individual. The value of perquisites
and such other personal benefits did not exceed the lesser of either $50,000 or
10% of the total annual salary and bonus reported for any individual named.
14
<PAGE> 18
(2) The Corporation did not grant any options or stock appreciation rights
under the Corporation's 1997 Employee Stock Option Plan during 1997.
(3) The amounts shown for Salomon Levis, Zoila Levis, Mario S. Levis and
Edison Velez, include the Corporation's contribution to the Corporation's Target
Benefit Pension Plan, a defined contribution pension plan in the amounts of
$18,701, $16,394, $8,066 and $6,866, respectively. The amount shown for Mr.
Bonini includes a lump sum payment of $30,000 in lieu of Mr. Bonini's
participation in the Corporation's Target Benefit Plan. The amount shown for
Edison Velez includes $100,000 of incentive compensation deferred pursuant to
the terms of his Employment Agreement.
(4) The amounts shown for Salomon Levis, Zoila Levis, Mario S. Levis and
Edison Velez, include the Corporation's contribution to the Corporation's Target
Benefit Pension Plan, a defined contribution pension plan, in the amounts of
$18,691, $16,380, $8,042 and $6,667, respectively. The amount shown for Mr.
Bonini includes a lump sum payment in the amount of $30,000 in lieu of Mr.
Bonini's participation in the Corporation's Target Benefit Pension Plan. The
amount shown for Zoila Levis includes $12,573 representing dividends received on
restricted stock during 1996. Dividends are paid on shares of restricted stock
to the same extent dividends are declared and paid on the Corporation's Common
Stock.
(5) The amounts shown for Salomon Levis, Zoila Levis, Mario S. Levis and
Edison Velez, include the Corporation's contribution to the Corporation's Target
Benefit Pension Plan, a defined contribution pension plan, in the amounts of
$18,430, $16,171, $7,949 and $4,664, respectively. The amount shown for Mr.
Bonini includes a lump sum payment in the amount of $30,000 in lieu of Mr.
Bonini's participation in the Corporation's Target Benefit Pension Plan. The
amounts shown for Zoila Levis includes $22,098 representing dividends received
on restricted stock during 1995.
SUMMARY OF COMPENSATION PLANS
1997 Employee Stock Option Plan. On March 7, 1997, the Corporation
approved the adoption of the Corporation's 1997 Employee Stock Option Plan (the
"1997 Option Plan"). The 1997 Option Plan is administered by the Stock Option
Committee of the Board of Directors (the "Committee"), none of whose members may
hold options. The Committee determines the form of the option agreements to be
used under the 1997 Option Plan, and the terms and conditions to be included in
such option agreements. Under the 1997 Option Plan, an aggregate of 1,000,000
shares of Common Stock have been authorized for issuance upon exercise of
options, subject to adjustment for stock splits, recapitalizations and similar
events. Options may be granted under the 1997 Option Plan at prices equal to
100% of the fair market value of Common Stock on the date of grant.
The 1997 Option Plan provides for the grant of stock options that are
intended to qualify as "qualified stock options" ("QSOs") under Section 1046 of
the Puerto Rico Internal Revenue Code of 1994, as amended, as "incentive stock
options" under Section 422 of the U.S. Internal Revenue Code ("ISOs") or
"non-statutory stock options" ("NSOs"). Unless an option agreement provides
otherwise, all options granted are 50% exercisable after one year and 100%
exercisable after two years, with all such options terminating no later than ten
years from the date of grant, except for ISOs granted to a 10% shareholder, in
which case the maximum term is five years. The 1997 Option Plan permits the
delivery, with the consent of the Committee, of previously-owned Common Stock in
payment of shares purchased upon exercise of the option. The 1997 Option Plan
also contains a limitation on the dollar amount of QSOs or ISOs which may be
granted to any employee and additional restrictions pertaining to any grant to a
10% shareholder. No options may be granted under the 1997 Option Plan after
March 7, 2007.
15
<PAGE> 19
The 1997 Option Plan permits the granting of stock appreciation rights
("SARs") in tandem with the granting of stock options. Such SAR entitles the
holder to receive in cash upon exercise the difference between the option
exercise price and the market value of Common Stock in lieu of exercising the
related option.
Options and SARs granted under the 1997 Option Plan are not transferrable,
except by will or applicable laws of descent and distribution. Under the 1997
Option Plan, upon the occurrence of certain "change of control" transactions
involving the Corporation all options then outstanding under the 1997 Option
Plan become immediately exercisable. No options were granted under the 1997
Option Plan during 1997.
1988 Restricted Stock Plan. The Corporation has in effect the Restricted
Stock Plan of Doral Financial Corporation (the "Restricted Stock Plan"). The
Restricted Stock Plan is administered by the Compensation Committee, none of
whose members is eligible to be awarded Restricted Stock. The Restricted Stock
Plan permits the Compensation Committee to award up to a total of 250,000 shares
of Common Stock to key employees, including officers of the Corporation and its
subsidiaries. As of March 3, 1997, 72,194, shares were available for issuance
under the Restricted Stock Plan. The Restricted Stock Award (the "Award") is
awarded at such times and in such number of shares as the Compensation Committee
determines. The Corporation may grant a portion of the shares awarded in
installments over a period of one to five years. No monetary consideration is
paid by an employee for the Award or for the grant of the shares thereunder.
Under the Restricted Stock Plan, the shares issued are subject to restrictions
on sale and must be returned if the recipient leaves the Corporation's employ
prior to the expiration of a stated period of time. Such restrictions generally
lapse within five years from the date of the Award or earlier termination of
employment by reason of death or disability.
Retirement Plan. The Corporation maintains a Target Benefit Pension Plan
(the "Retirement Plan") for the benefit of all eligible employees. The
Retirement Plan covers all full time employees of the Corporation who have
completed one year of service and have attained age 21. Under the Retirement
Plan, the Corporation contributes annually the funding amount which is projected
to be necessary to fund the target benefit. The target benefit is based on years
of service and the employee's compensation, as defined in the Retirement Plan.
The Corporation has the right to terminate the Retirement Plan at any time. Upon
termination, all amounts credited to the participant's accounts will become 100%
vested. Contributions to the Retirement Plan during the year ended December 31,
1997 amounted to approximately $730,000.
The estimated annual benefits payable under the Retirement Plan as a life
annuity on retirement at normal retirement age, which assumes service will
continue until age 65 at 1997 base salaries, for Salomon Levis, Zoila Levis,
Mario S. Levis and Edison Velez were $6,607, $6,142, $8,838 and $5,731,
respectively. Mr. Bonini does not participate in the Retirement Plan.
Deferred Incentive Compensation Agreements. The Corporation has entered
into deferred incentive compensation arrangements with certain key employees of
the Corporation and its subsidiaries. Such employees are eligible to defer the
receipt of incentive compensation. The amount of incentive compensation is
credited annually based on a specified percentage of the net income of the
Corporation, its subsidiaries or divisions. The Corporation's obligation to make
the payments at the end of the deferral period is unfunded, and all such
payments are to be made out of the general assets of the Corporation. The
Corporation is not required to establish any special or separate fund or to make
any other segregation of assets to assure the payment of any deferral amount.
The Corporation accrued $305,000 as deferred compensation for 1997.
16
<PAGE> 20
PERFORMANCE GRAPH
The following Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934 (the "Exchange Act"), except to the extent that the
Corporation specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
The Performance Graph compares the yearly percentage change in the
Corporation's cumulative total stockholder return on its Common Stock to that of
the Center for Research in Securities Prices ("CRSP") NASDAQ Stock Market Index
(U.S. Companies) and the CRSP Index for NASDAQ Financial Stocks (SIC 6000-6799
US & Foreign). The Performance Graph assumes that $100 was invested on December
31, 1992 in each of the Corporation's Common Stock, the CRSP NASDAQ Stock Market
Index (U.S. Companies) and the CRSP Index for NASDAQ Financial Stocks (SIC
6000-6799 US & Foreign).
17
<PAGE> 21
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
DORAL FINANCIAL CORPORATION
Prepared by the Center for Research in Security Prices
LEGEND
<TABLE>
<CAPTION>
SYMBOL CRSP TOTAL RETURN INDEX FOR: 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
- ------ ---------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
______ [ ] Doral Financial Corporation 100.00 155.6 110.9 188.7 287.7 538.9
..__.. * NASDAQ Stock Market (US Companies) 100.00 114.8 112.2 158.7 195.2 239.5
- ------ + 100.0 NASDAQ Financial Stocks 100.00 116.2 116.5 169.7 217.5 333.8
SIC 6000-6799 US & Foreign
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day.
the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/31/92.
18
<PAGE> 22
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the firm of Price Waterhouse as
independent accountants to audit the financial statements of the Corporation for
the fiscal year ending December 31, 1998. This selection was recommended by the
Audit Committee of the Board of Directors. Price Waterhouse has served as the
Corporation's independent public accountants since 1977. During the year ended
December 31, 1997, Price Waterhouse received fees of approximately $453,000 for
all services rendered to the Corporation.
The submission of this proposal to a vote of shareholders is not legally
required. If the selection of Price Waterhouse is not approved, the Board of
Directors will reconsider its selection. The affirmative vote of a majority of
the shares of Common Stock represented, in person or by proxy, at the Annual
Meeting is required to adopt this proposal. Abstentions will have the effect of
a vote against the proposal. Broker non-votes will have no legal effect on the
proposal.
A representative of Price Waterhouse is expected to be present at the
Annual Meeting and will be given an opportunity to make a statement if so
desired and to respond to appropriate questions.
VOTE RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION
OF THE SELECTION OF PRICE WATERHOUSE AS THE CORPORATION'S INDEPENDENT
ACCOUNTANTS.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders to be held in April 1999 must be received by the
Corporation at its principal executive office by the close of business on
November 25, 1998. Proposals should be directed to the attention of the
Secretary.
ANNUAL REPORT
A copy of the Corporation's Annual Report to Shareholders containing the
consolidated financial statements of the Corporation for the fiscal year ended
December 31, 1997 accompanies this Proxy Statement. Such Annual Report is not
part of the proxy solicitation materials.
Upon receipt of a written or oral request, the Corporation will furnish to
any stockholder without charge, a copy of the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1997, without the accompanying
exhibits. A list of exhibits is included in the Form 10-K and exhibits are
available from the Corporation upon the payment to the Corporation of the costs
of furnishing them. Such written or oral request should be directed to:
Secretary, Doral Financial Corporation, 1159 F.D. Roosevelt Avenue, San Juan,
Puerto Rico 00920, telephone number (787) 749-7100.
OTHER MATTERS
Management knows of no matters which may be brought before the Annual
Meeting or any adjournment thereof other than those described in the
accompanying notice of meeting and routine matters incidental to the conduct of
the meeting. If any other matter should come before the Annual Meeting or any
adjournment thereof, it is the intention of the persons named in the
accompanying form of proxy or their substitutes to vote the proxies in
accordance with their judgment on such matters.
19
<PAGE> 23
The above Notice of Meeting and Proxy Statement are sent by order of the
Board of Directors of Doral Financial Corporation.
/s/ Richard F. Bonini
Richard F. Bonini
Senior Executive Vice President
and Secretary
Dated: March 25, 1998
20
<PAGE> 24
[Doral Financial Corporation Logo]
<PAGE> 25
APPENDIX
DORAL FINANCIAL CORPORATION
1159 F.D. ROOSEVELT AVE.
SAN JUAN, PUERTO RICO 00920
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned holder of Common Stock of Doral Financial Corporation (the
"Corporation") hereby authorizes and appoints Salomon Levis, Zoila Levis and
Richard F. Bonini, or any one or more of them, as proxies with full power of
substitution in each, to represent the undersigned at the Annual Meeting of
Shareholders of the Corporation to be held at The Doral Building, Fifth Floor,
650 Munoz Rivera Avenue, San Juan, Puerto Rico at 11:00 a.m., local time, on
Thursday, April 23, 1998 and any adjournment or adjournments of said meeting and
thereat to vote and act with respect to all the shares of Common Stock of the
Corporation that the undersigned would be entitled to vote if then personally
present in accordance with the instructions listed on the reverse hereof.
Such proxies may vote in their discretion upon such other business as may
properly be brought before the meeting or any adjournment thereof.
Receipt of the Notice of Meeting and the related Proxy Statement is hereby
acknowledged.
(Continues and to be signed on other side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
-- FOLD AND DETACH HERE --
<PAGE> 26
<TABLE>
<CAPTION>
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2. Please mark
your votes as X
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
<S> <C> <C>
NO. 1 - Election Directors: FOR WITHHELD
Nominees are Richard F. Bonini, Edgar M. Cullman, Jr., Frederick M. Danziger, ALL LISTED AS TO ALL
John L. Ernst, Salomon Levis, Zoila Levis, A. Brean Murray and Victor M. Pons, Jr. NOMINEES NOMINEES
(To withhold authority to vote for any individual nominee, write that nominee's
name in the space provided below.)
- ---------------------------------------------------------------------------------------------
NO. 2 - Appointment of Price Waterhouse as independent Accountants. To vote in accordance with the Board of
Director's recommendation, just sign
FOR AGAINST ABSTAIN below. No boxes need to be checked.
Dated: , 1998
--------------------------
Signature:
----------------------------
Signature:
----------------------------
Please mark, date and sign as your name
appears to the left and return in the
enclosed envelope. If acting as executor,
administrator, trustee, guardian, etc.,
you should so indicate when signing. If
the signer is a corporation, please sign
the full corporate name by a duly
authorized officer. If shares are held
jointly, each shareholder named should
sign.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- FOLD AND DETACH HERE -
