<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>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] 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 22, 1999
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Doral Financial Corporation. The meeting will be held at the El Morro Room,
Ritz-Carlton San Juan Hotel & Casino, 6961 Los Gobernadores Avenue, Isla Verde,
Puerto Rico on Thursday, April 22, 1999. The meeting will begin promptly at
11:00 a.m., local time.
Doral Financial Corporation's management considers the annual meeting an
excellent opportunity to discuss your corporation's progress. We urge you to
attend. Stockholders will have the opportunity to ask questions during the
meeting.
We also urge you to review the enclosed 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. Your participation in its affairs of the
Company 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 Lewis
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 22, 1999
The annual meeting of stockholders of Doral Financial Corporation (the
"Corporation") will be held at the El Morro Room, Ritz-Carlton San Juan Hotel &
Casino, 6961 Los Gobernadores Avenue, Isla Verde, Puerto Rico on Thursday, April
22, 1999, beginning at 11:00 a.m., local time. At the meeting, stockholders will
consider and act upon the following proposals:
1. The election of eight directors of the Corporation;
2. A proposal to amend the Corporation's Restated Certificate of
Incorporation to increase the number of authorized shares of common stock from
50,000,000 to 200,000,000 shares;
3. A proposal to amend the Corporation's Restated Certificate of
Incorporation to increase the number of authorized shares of serial preferred
stock from 2,000,000 to 10,000,000 shares;
4. The ratification of the selection of PricewaterhouseCoopers LLP as
the Corporation's independent accountants for the fiscal year ending December
31, 1999; and
5. 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 15, 1999
are entitled to notice of, and to vote at, the annual meeting or any
adjournments. 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 22, 1999
<PAGE> 4
DORAL FINANCIAL CORPORATION
1159 F.D. Roosevelt Avenue
San Juan, Puerto Rico 00920
------------------------
PROXY STATEMENT
This proxy statement contains information related to the annual meeting of
stockholders of Doral Financial Corporation to be held on Thursday, April 22,
1999, beginning at 11:00 a.m., local time, at the El Morro Room, Ritz-Carlton
San Juan Hotel & Casino, 6961 Los Gobernadores Avenue, Isla Verde, Puerto Rico,
and at any postponements or adjournments thereof.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Corporation's annual meeting, stockholders will act upon the matters
outlined in the accompanying notice of meeting, including the election of
directors, proposals to increase the number of authorized shares of common stock
and serial preferred stock and the ratification of the Corporation's independent
auditors. In addition, the Corporation's management will report on the
performance of the Corporation during 1998 and respond to questions from
stockholders.
WHO IS ENTITLED TO VOTE?
Only stockholders of record at the close of business on the record date,
March 15, 1999, are entitled to receive notice of the annual meeting and to vote
the shares of common stock that they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon.
Please note that if you hold your shares in "street name" (that is, through
a broker or other nominee), you will need to bring appropriate documentation
from your broker or nominee to personally vote at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 40,428,920 shares of common stock of the Corporation were
outstanding. Proxies received but marked as abstentions and broker non-votes
will be included in the calculation of the number of shares considered to be
present at the meeting for purposes of determining the presence of a quorum. A
"broker non-vote" occurs when a broker or other nominee indicates on the proxy
card that it does not have discretionary authority to vote on a particular
matter.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to the Corporation, it will be voted as you direct. If you are a registered
stockholder and attend the meeting, you may deliver your completed
<PAGE> 5
proxy card in person. "Street name" stockholders who wish to vote at the meeting
will need to obtain a proxy from the institution that holds their shares.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of the
Corporation either a notice of revocation or a duly executed proxy, bearing a
later date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors. The Board's recommendation is set forth together with
the description of each item in this proxy statement. In summary, the Board
recommends a vote:
- for election of the nominated slate of eight directors (see page 6);
- for the increase in the number of authorized shares of common stock from
50,000,000 to 200,000,000 shares (see page 21);
- for the increase in the number of authorized shares of serial preferred
stock from 2,000,000 to 10,000,000 shares (see page 22); and
- for ratification of the appointment of PricewaterhouseCoopers LLP as the
Corporation's independent auditors (see page 24).
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
Election of Directors. The affirmative vote of a majority of the votes
cast at the meeting is required for the election of directors. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of one
or more directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether there
is a quorum. Abstentions and broker non-votes will have no legal effect on the
election of directors.
Increase in number of Authorized Shares of Common Stock and Serial
Preferred Stock. The affirmative vote of a majority of the outstanding shares
of common stock is required for the proposed amendments to the Corporation's
Certificate of Incorporation to increase the number of authorized shares of
common stock and serial preferred stock. Since abstentions and broker non-votes
will not be voted for these proposals, they will have the same legal effect as a
negative vote.
Ratification of Independent Auditors and Other Items. For the ratification
of the Corporation's independent auditors and any other item voted upon at the
annual meeting, the affirmative vote of the holders of a majority of the shares
represented in person or by proxy and entitled to vote on the item will be
required for approval. Abstentions and broker non-votes will not be voted for
any such matter. Accordingly, abstentions and broker non-votes will have the
same legal effect as a negative vote.
2
<PAGE> 6
WHO WILL BEAR THE COSTS OF SOLICITING PROXIES FOR THE ANNUAL MEETING?
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 shows, as of March 1, 1999, the amount of the
Corporation's common stock beneficially owned (unless otherwise indicated in the
footnotes) by each director, nominee for director, executive officer named in
the Cash Compensation Table and 5% shareholder of the Corporation, and by all
directors and executive officers of the Corporation as a group. The information
is based on reports filed with the SEC and information provided by the persons
named below. In addition, as of March 1, 1999, Luis Alvarado, an Executive Vice
President of the Corporation, beneficially owned 1,500 shares of the
Corporation's 7% Noncumulative Monthly Income Preferred Stock Series A, which
represents approximately 1/10 of 1% of the total number of outstanding shares of
such series of preferred stock. No other director, nominee or executive officer
owned shares of preferred stock of the Corporation as of such date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1)(2) OF CLASS
------------------------ ----------------------------- --------
<S> <C> <C>
Management
- ------------------------------------------------------------
Salomon Levis(3)............................................ 569,684 1.4%
Richard F. Bonini........................................... 465,840 1.2%
Mario S. Levis(3)(4)........................................ 633,712 1.6%
Zoila Levis(3).............................................. 385,044 1.0%
David Levis(3)(5)........................................... 455,012 1.1%
Edison Velez................................................ 1,000 *
Edgar M. Cullman, Jr.(6).................................... 5,878,851 14.5%
John L. Ernst(6)............................................ 5,878,851 14.5%
Efraim Kier................................................. 5,500 *
A. Brean Murray............................................. -- --
Victor M. Pons, Jr.......................................... 520 *
All directors, nominees and executive officers as a group,
consisting of 16 persons, including those named above..... 8,499,839 21.0%
Other Principal Holders
- ------------------------------------------------------------
Edgar M. Cullman(6)......................................... 5,878,851 14.5%
387 Park Avenue South
New York, N.Y. 10016
Louise B. Cullman(6)........................................ 5,878,851 14.5%
387 Park Avenue South
New York, N.Y. 10016
Susan R. Cullman(6)......................................... 5,878,851 14.5%
387 Park Avenue South
New York, N.Y. 10016
Frederick M. Danziger....................................... 5,878,851 14.5%
2 East 73rd Street
New York, N.Y. 10021
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1)(2) OF CLASS
------------------------ ----------------------------- --------
<S> <C> <C>
Lucy C. Danziger(6)......................................... 5,878,851 14.5%
2 East 73rd Street
New York, N.Y. 10021
Cullman and Ernst Group(7).................................. 5,878,851 14.5%
387 Park Avenue South
New York, N.Y. 10016
Levis Family(3)............................................. 2,043,452 5.1%
1159 F.D. Roosevelt Avenue
San Juan, Puerto Rico
Fidelity Management Research Company(8)..................... 2,226,750 5.5%
FMR Corp
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ---------------------
* Represents less than 1% of the Corporation's outstanding Common Stock.
(1) Except as noted in the footnotes below, the information is based on the
SEC's definition of "beneficial ownership", which is broader than ownership in
the usual sense. For example, under SEC rules you beneficially own stock not
only if you hold it directly, but also if you indirectly (through a
relationship, a position as a director or trustee or a contract or an
understanding) have or share the power to vote the stock or to sell it, or if
you have the right to acquire it within 60 days. 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.
Certain of the persons named in the table disclaim beneficial ownership of
some of the shares included in the table as follows:
- Salomon Levis, Zoila Levis, David Levis and Mario S. Levis, each disclaim
beneficial ownership of all shares reflected as owned by the Levis Family
that are not owned by them directly.
- Edgar Cullman, Jr. -- 2,480,784 shares in which he holds shared
investment and/or voting power and 3,249,996 shares in which he holds no
investment or voting power other than the understanding referred to in
footnote(7).
- John Ernst -- 347,525 shares in which he holds shared investment and/or
voting power and 5,454,350 shares in which he holds no investment or
voting power other than the understanding referred to in footnote(7).
- Edgar M. Cullman -- 2,668,184 shares in which he holds shared investment
and/or voting power and 2,907,676 shares in which he holds no investment
and/or voting power other than the understanding referred to in
footnote(7).
- Louise B. Cullman -- 2,144,672 shares in which she holds shared
investment and/or voting power and 3,491,549 in which she holds no
investment or voting power other than the understanding referred to in
footnote(7).
- Susan R. Cullman -- 2,389,338 shares in which she holds shared investment
and/or voting power and 3,303,797 in which she holds no investment or
voting power other than the understanding referred to in footnote(7).
4
<PAGE> 8
- Frederick M. Danziger -- 412,272 shares in which he holds shared
investment and/or voting power and 5,410,411 shares in which he holds no
investment or voting power other than the understanding referred to in
footnote(7).
- Lucy C. Danziger -- 2,534,362 shares over which she holds shared voting
and/or investment power and 3,123,411 shares over which she has no
investment or voting power other than the understanding referred to in
footnote(7).
(2) Includes the number of shares that could be purchased by exercise of
stock options exercisable at March 1, 1999 or within 60 days after that date
under the Corporation's stock option plan as follows: Salomon Levis -- 1,000
shares, Zoila Levis -- 500 shares, Richard F. Bonini -- 1,000 shares, Mario S.
Levis -- 500 shares, Edison Velez -- 1,000 shares, all directors, nominees and
executive officers as a group -- 8,000 shares.
(3) 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 1, 1999, Salomon Levis, Zoila Levis, David Levis and Mario S. Levis
owned an aggregate of 2,043,452 shares (including 2,000 shares subject to stock
options exercisable on April 1, 1999) of common stock or approximately 5.1% of
the outstanding common stock of the Corporation. On October 1, 1995, Salomon
Levis, Zoila Levis, Mario S. Levis and David Levis filed a Schedule 13D with the
SEC 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 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.
(4) Includes 900 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 Board and Chief Executive Officer of the Corporation.
(6) 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.
(7) As of March 1, 1999, 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 5,878,851 shares of Common Stock or
approximately 14.5% 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), 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. and a former
director of the Corporation. A Schedule 13D filed with the SEC 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 trusts 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.
(8) Based on information contained in a Schedule 13G filed with the SEC
jointly by EMR Corp., Fidelity Management & Research Company, Edward C. Johnson
and Abigail P. Johnson. EMR is the parent corporation
5
<PAGE> 9
of Fidelity Management & Research Company and members of the Johnson family and
trusts for their benefit are the predominate owners of the voting stock of EMR.
Edward C. Johnson and Abigail P. Johnson are also directors of EMR. According to
the Schedule 13G, Fidelity Management & Research Company, an investment advisory
firm, has purchased shares of common stock of the Corporation for client
accounts over which the Corporation has discretionary investment authority.
According to the Schedule 13G, no single client owns more than 5% of the
outstanding common stock of the Corporation.
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
2000 annual meeting or until their successors are duly elected and qualified.
Mr. Efraim Kier was appointed to the Board of Directors on August 12, 1998, to
fill the vacancy created by the resignation of Frederick M. Danziger.
Accordingly, Mr. Kier is standing for election for the first time.
Unless otherwise specified in the accompanying form of proxy, proxies
solicited hereby will be voted for the election of the nominees listed below.
Each of the nominees has agreed to serve for a one year term. If any of them
should become unable to serve as a director, the Board of Directors may
designate a substitute nominee. In that case, the proxies shall be voted for a
substitute nominee or nominees to 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 1, 1999, 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 Doral Securities, Inc., and Doral
Money, Inc. each a wholly-owned subsidiary of the Corpora-
tion; 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); President
of RSC Corp. a wholly-owned subsidiary of the Corporation
(1979-1988). Age 56.
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; President of Doral
Money, Inc., Secretary of Doral Mortgage Corporation;
Consultant to Culbro Corporation (1989-1990); Senior Vice
President, Culbro Corporation and Vice President of the
Corporation (1976-1988); Mr. Bonini was formerly a director
of Search Capital Group (automobile financing), which filed
for relief from its creditors under Chapter 11 of the
Federal Bankruptcy Code in February 1998. Age 60.
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION SINCE
- ---- ------------------------------------------ --------
<S> <C> <C>
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., and Bloomingdale
Properties, Inc. (investments and real estate). Formerly a
director of The Eli Witt Company, which filed for relief
from its creditors under Chapter 11 of the Federal
Bankruptcy Code in November 1996. Age 52.
John L. Ernst(2) Chairman of the Board and President of Bloomingdale 1989
Properties, Inc., since September 1984; Director, General
Cigar Holdings, Inc. Director, Griffin Land & Nurseries,
Inc. Age 58.
Efraim Kier President and Chief Executive Officer of A&M Contractors, 1998
San Juan, Puerto Rico (real estate development and
management) since 1978. Age 69.
Zoila Levis(1) President of the Corporation since August 1991; Director of 1991
Doral Bank and Doral Securities, Inc.; Executive Vice
President of the Corporation from January 1990 to August
1991; President of Z. Levis Assoc. (real estate development)
from January 1985 to December 1989. Age 51.
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 Blyth Holdings Inc. (money management); formerly a
director of Search Capital Group (automobile financing),
which filed for relief from its creditors under Chapter 11
of the Federal Bankruptcy Code in February 1998. Age 61.
Victor M. Pons, Jr. Attorney in private practice since 1992; Chief Justice of 1994
the Supreme Court, Commonwealth of Puerto Rico (1985-1992).
Age 63.
</TABLE>
- ---------------------
(1) Zoila Levis is the sister of Salomon Levis.
(2) Edgar M. Cullman, Jr. and John L. Ernst are cousins.
DIRECTORS' MEETINGS
The Board of Directors held seven meetings during the year ended December
31, 1998. Each director except for John Ernst, who was absent from three
meetings, attended at least 75% of the total number of meetings of the Board and
of all committees on which he or she served during such period.
BOARD COMPENSATION
Each member of the Board of Directors who is not an employee of the
Corporation receives an annual stipend of $18,000 payable monthly plus $1,000
for each committee meeting attended, including committee meeting held on the
same day as a regular Board meeting.
INDEMNIFICATION OF DIRECTORS
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.
7
<PAGE> 11
BOARD COMMITTEES
The Board of Directors has standing Audit and Compensation Committees. The
Audit and Corporation Committees each met twice during 1998. 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 those 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 Murray.
The Compensation Committee is charged with reviewing the Corporation's
general compensation strategy, reviewing benefit programs, administering the
Corporation's stock option plan, approving the compensation of the Chief
Executive Officer and approving certain other employment contracts for senior
executive officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Cullman, Jr., Ernst
and Kier. None of such persons is or was during 1997 an executive officer of the
Corporation. Since January 1, 1998, 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. A. 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
this public offering of approximately $1,799,570.
Salomon Levis owns 50% of the shares of Sana Mortgage Bankers, Inc.
("Sana"), a mortgage banking firm that is run by Ms. Hernandez, his former
spouse. During 1998, the Corporation purchased $88.2 million in mortgage loans
originated by Sana. During 1998, Sana also referred mortgage loans to the
Corporation in its capacity as a mortgage broker. Brokerage fees payable to Sana
in connection with mortgage loans originated through Sana and closed by the
Corporation are payable by the borrower and not by the Corporation. The
Corporation believes that these transactions with 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 or mortgage banking firms.
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. Mr. Madero is 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 time for
comparable transactions for persons purchasing homes in projects developed by
8
<PAGE> 12
unaffiliated persons. Management believes that such loans do not involve more
than the normal risk of collectibility or present other unfavorable features.
During 1998, 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. During
1998, she received compensation of $582,364 (including contributions to the
Corporation's Target Benefit Pension Plan).
During 1998, David R. Levis, the son of David Levis, the brother of Mario
S. Levis, and the nephew of Salomon Levis and Zoila Levis was employed by the
Corporation and received compensation of $54,412. During 1998, Samuel Levis, the
son of Salomon Levis and the nephew of Zoila Levis and David Levis, was employed
by Doral Mortgage Corporation and received compensation of $56,938 (including
contributions to the Corporation's Target Benefit Pension Plan). During 1998,
Joviana Ramos, the spouse of Mario S. Levis was employed by the Corporation and
received compensation of $47,155.
Puerto Rico Island Rental Limited Dividend Partnership, S.E., a Puerto Rico
partnership (the "Partnership"), owed the Corporation $3.4 million as of
December 31, 1998. The Partnership was formed in 1990 under a private
syndication in which members of management were investors. As of March 1, 1999,
Mario S. Levis, Luis Alvarado, and Ernesto Carattini, each an executive officer
of the Corporation, and Edison Velez, the President of Doral Mortgage were
investors in the Partnership. The board of directors of the Partnership's
general partner is also composed of members of management of the Corporation.
The amount owed by the Partnership consists of $1.0 million in promissory notes
and $2.4 million in accrued and unpaid interest and advances made by the
Corporation on behalf of the Partnership. The $1.0 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 $1.0 million in notes, as of December 31, 1998, the Partnership
also owed the Corporation approximately $771,000, in past due interest and $1.6
million in advances made by the Corporation on behalf of the Partnership. During
the past five years, the Corporation has charged approximately $2.4 million
against earnings to reserve against possible losses from amounts due from the
Partnership. Of this amount, $500,000, was charged off during 1998.
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 these 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. In the opinion of management, these
transactions do not involve more than the normal risk of collectibility or
present other unfavorable features.
The following table shows 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, 1998 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
9
<PAGE> 13
prevailing at the time for comparable transactions with unaffiliated persons.
Except for the loan to the Partnership, management believes that these loans do
not involve more than the normal risk of collectibility or present other
unfavorable features.
<TABLE>
<CAPTION>
YEAR LOAN HIGHEST PRINCIPAL PRINCIPAL BALANCE INTEREST
NAME AND POSITION MADE AMOUNT DURING 1998(1) AT 12/31/98 RATE
----------------- --------- --------------------- ----------------- --------
<S> <C> <C> <C> <C>
Puerto Rico Island Rental Limited Dividend Partnership,
S.E.(2)................................................. 1990 $1,600,000 $1,011,000 9.000%
Victor M. Pons(3)......................................... 1998 $ 250,000 $ 248,000 7.25%
Victor M. Pons(3)......................................... 1998 $ 200,000 $ 200,000 7.50%
Aidiliza Levis(4)......................................... 1996 $ 416,130 $ 411,000 7.50%
Mario S. Levis(5)......................................... 1998 $ 460,000 $ 458,000 7.00%
Ricardo L. Melendez(6).................................... 1998 $ 227,150 $ 225,000 7.375%
Zoila Levis(7)............................................ 1998 $ 138,520 $ 137,600 6.375%
Zoila Levis(7)............................................ 1998 $ 108,500 $ 105,400 7.625%
Edison Velez(8)........................................... 1998 $ 140,800 $ 140,000 8.95%
Edison Velez(8)........................................... 1998 $ 268,000 $ 267,800 7.375%
</TABLE>
- ---------------------
(1) All loans shown for individuals are secured by mortgages on residential
properties.
(2) Refer to information shown above for information regarding this
transaction.
(3) Victor M. Pons is a director of the Corporation.
(4) 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.
(5) Mario S. Levis is an Executive Vice President and Treasurer of the
Corporation.
(6) Ricardo Melendez is a Vice President and Chief Accounting Officer of
the Corporation.
(7) Zoila Levis is the President and a director of the Corporation.
(8) Edison Velez is the President of Doral Mortgage Corporation.
10
<PAGE> 14
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
these executive officers were selected as an officer, except for their
employment agreements with the Corporation. None of the executive officers shown
below 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; 50
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 51
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 35
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 40
Corporation since July 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.
Francisco Rivero Executive Vice President -- Administration and New Business 39
Development since 1998; Regional Vice President and Puerto
Rico General Manager of Hamilton Bank, NA (commercial bank)
from 1997 to 1998; President of Economic Development Bank
for Puerto Rico from 1993 to 1997.
Frederick C. Teed Executive Vice President -- Banking Operations since March 41
1, 1996; Federal Thrift Regulator, Office of Thrift
Supervision. Department of the U.S. Treasury, for more than
five years prior thereto.
Edison Velez President of Doral Mortgage Corporation since September 37
1995, Senior Vice President of Doral Mortgage Corporation
for more than five years prior thereto.
Carlos Vina Corporate Controller since April 1997; Controller H.F. 32
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 SEC and information obtained from officers
and directors of the Corporation, the Corporation is not aware of any failure by
the executive offices or directors of the Corporation to file on a timely basis
any reports required to be filed by Section 16(a) of Securities Exchange Act of
1934 with respect to beneficial ownership of shares of the Corporation except:
one late report filed by Ricardo Melendez relating to the purchase of 1,000
shares, one late report filed by Efraim Kier relating to his initial appointment
as a director and seven late reports by Ernesto Carattini relating to the
purchase of 8,000 shares.
11
<PAGE> 15
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Policies. The compensation policy of the Corporation is to provide its
executive officers and managers with a level of pay and benefits that will
assure the Corporation's competitiveness and continued growth. This policy is
designed to retain key executives critical to the Corporation's long-term
success and attract and retain qualified personnel. The Corporation competes for
talented executives in the highly competitive financial services market and
where successful entrepreneurial executives are highly compensated. The
Corporation also competes for executives with a background in Puerto Rican
financial services. To obtain and retain highly qualified and motivated
executives, the Compensation Committee believes it is advisable to enter into
employment agreements with senior executive officers that contain incentive
arrangements which compensate highly for profitability and performance.
The Compensation Committee's responsibilities include overseeing the
Corporation's compensation policies, supervising compensation for management and
employee benefits and administering the Corporation's restricted stock, stock
incentive compensation and other employee benefit plans.
The Compensation Committee develops and negotiates employment agreements
with certain key executive officers. These employment agreements normally
include base salaries and incentive compensation arrangements designed to reward
management for achieving certain performance levels. In order to determine
appropriate levels of executive compensation, the Compensation Committee
considers 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 of 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.
The Compensation Committee is also responsible for developing or reviewing
incentive compensation arrangements which the Corporation enters into with
officers and key individuals who do not 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 targets.
Based on the Compensation Committee's recommendations, the Corporation has
in the past also made grants of restricted stock to senior executives. See
"Executive Compensation -- Summary of Compensation Plans -- 1988 Restricted
Stock Plan." Such awards were made both as an incentive for continued employment
and future performance as well as a reward for past performance. The
Compensation Committee also administers the Corporation's 1997 Employee Stock
Option Plan. Under this plan, options may be granted to any employees of the
Company, including executive officers. Options are designed primarily as a
retention device for employees and generally vest over two years.
Chief Executive Officer's Compensation. The Compensation Committee reviews
compensation arrangement 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 a high return on equity as a base level (15% return on equity after
taxes) for the payment of incentive compensation. On May 1, 1997, the Company
entered into a new three year employment agreement with
12
<PAGE> 16
Mr. Levis that expires on December 31, 1999 (the "1997 Employment Agreement").
The 1997 Employment Agreement provides for a basic annual salary of $1,500,000.
The 1997 Employment Agreement also contains an incentive bonus tied to a
percentage (15%) of adjustable net income over a minimum threshold of a 15%
return on stockholders' equity. The Committee felt it was 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 Mr. Levis' prior 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
Edgar Cullman, Jr., Chairman
John L. Ernst
Efraim Kier
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 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 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 can 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, but only to the extent such
Adjusted Net Income exceeds an amount equal to a
13
<PAGE> 17
15% return on stockholders' equity. At the discretion of the Board of Directors,
up to 50% of the incentive compensation can 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 entered into an employment agreement with Richard F.
Bonini, Senior Executive Vice President and Chief Financial Officer which became
effective as of 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 paid 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.
The Corporation entered into an Employment Agreement, dated December 1,
1998, with Mario S. Levis, Executive Vice President and Treasurer of the
Corporation, which expires on December 31, 2000. Pursuant to the terms of the
Agreement, Mr. Levis is entitled to 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 paid in the common stock of the Corporation. Mr. Levis' 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, Mario S.
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. For purposes of computing the
incentive compensation under each of the employment agreements with Salomon
Levis, Zoila Levis, Mario S. Levis and Richard F. Bonini, shares of
nonconvertible preferred stock are not treated as stockholder's equity and the
dividends payable on such preferred stock is treated as interest that reduces
Adjusted Net Income.
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.
Doral Mortgage Corporation ("Doral Mortgage") 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 expired on
December 31, 1998. Pursuant to the terms of the agreement, Mr. Velez was
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. During 1998, the cap on the incentive bonus was increased to
$300,000. 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 provided 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 the 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
14
<PAGE> 18
the incentive bonus for 1996 was payable in full and not subject to deferral.
Doral Mortgage and Mr. Velez are in the process of negotiating a new employment
agreement.
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, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------------------ NUMBER OF
OTHER STOCK
NAME AND ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTED(2) COMPENSATION(3)
------------------ ---- ---------- ---------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Salomon Levis............................ 1998 $1,500,000 $3,000,000 $ -0- 2,000 $ 19,088
Chairman of the Board and 1997 1,500,000 1,871,867 -0- -0- 18,701
Chief Executive Officer 1996 700,000 2,989,826 -0- -0- 18,691
Zoila Levis.............................. 1998 $ 500,000 $1,200,000 $ -0- 1,000 $ 16,691
President 1997 500,000 1,200,000 -0- -0- 16,394
1996 300,000 1,200,200 -0- -0- 28,953
Richard F. Bonini........................ 1998 $ 390,000 $ 810,000 $ -0- 2,000 $ 30,000
Senior Executive Vice 1997 390,000 623,956 -0- -0- 30,000
President and Secretary 1996 240,000 810,263 -0- -0- 30,000
Mario S. Levis........................... 1998 $ 390,000 $ 810,000 $ -0- 1,000 $ 8,177
Executive Vice President 1997 275,000 774,165 -0- -0- 8,066
and Treasurer 1996 275,000 804,058 -0- -0- 8,042
Edison Velez............................. 1998 $ 240,000 $ 150,000 $ -0- 2,000 $155,386
President, 1997 240,000 129,622 -0- -0- 106,866
Doral Mortgage Corporation 1996 245,192 171,708 -0- -0- 6,667
</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 name 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.
(2) Adjusted to reflect the Corporation's two-for-one stock split effected
May 20, 1998.
(3) The amounts shown, include the Corporation's contribution to
Corporation's Target Benefit Pension Plan, a defined contribution pension plan
as follows:
<TABLE>
<CAPTION>
SALOMON LEVIS ZOILA LEVIS MARIO S. LEVIS EDISON VELEZ
------------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
1998..................................... $19,088 $16,691 $8,177 $5,386
1997..................................... 18,701 16,394 8,066 6,866
1998..................................... 18,691 16,380 8,042 6,667
</TABLE>
15
<PAGE> 19
In each of the three years, the amount for Mr. Bonini, includes a lump sum
payment of $30,000 in lieu of his participation in the Target Benefit Plan. The
amounts shown for Mr. Velez includes $150,000 in 1998 and $100,000 in 1997, of
incentive compensation deferred pursuant to his Employment Agreement.
The amount shown for Zoila Levis in 1996, includes $72,573 representing
dividends received on restricted stock during 1996. Dividends are paid on shares
of restricted stock to the same extent that dividends are paid on unrestricted
shares of the Corporation's common stock.
OPTIONS GRANTED DURING 1998
The table below shows the following information with respect to options
granted during 1998 to the Corporation's Chief Executive Officer and to the
other executive officers named in Cash Compensation Table:
- the number of shares of common stock underlying options granted during
the year;
- the percentage that such options represent of all options granted to
employees during the year;
- the exercise price;
- the expiration date; and
- the hypothetical present value, as of the grant date, of the options
under the option pricing model discussed below.
The hypothetical value of the options as of their date of grant has been
calculated below, using the Black-Scholes option pricing model, as permitted by
SEC rules, based upon a set of assumptions set forth in the footnote to the
table. It should be noted that this model is only one method of valuing options,
and the Corporation's use of the model should not be interpreted as an
endorsement of its accuracy. The actual value of the options may be
significantly different, and the value actually realized, if any, will depend
upon the excess of the market value of the common stock over the option exercise
price at the time of exercise.
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS
NUMBER OF GRANTED TO EXERCISE HYPOTHETICAL
OPTIONS EMPLOYEES IN PRICE EXPIRATION VALUE AT
NAME GRANTED(1) FISCAL YEAR ($/SHARE)(1) DATE GRANT DATE(2)
- ---- ---------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Salomon Levis....................................... 2,000 * $15 7/32 4/1/08 $9,840
Zoila Levis......................................... 1,000 * 15 7/32 4/1/08 4,920
Richard F. Bonini................................... 2,000 * 15 7/32 4/1/08 9,840
Mario S. Levis...................................... 1,000 * 15 7/32 4/1/08 4,920
Edison Velez........................................ 2,000 * 15 7/32 4/1/08 9,840
</TABLE>
- ---------------------
* Represents less than 1%
(1) Adjusted for two-for-one stock split effective May 20, 1998.
(2) The estimated present value at grant date of options granted during
1998 has been calculated using the Black-Scholes option pricing model, based
upon the following assumptions: estimated time until exercise of four years; a
risk-free interest of 5.62%, representing the interest rate on a U.S. Government
zero-coupon bond on the date of grant with a maturity corresponding to the
estimated time until exercise; a volatility rate of 36%; and a dividend yield of
1.58%, representing the current $0.24 per share annualized dividends divided by
the fair market value of the common stock on the date of grant. The approach
used in developing the assumptions upon which
16
<PAGE> 20
the Black-Scholes valuation was done is consistent with the requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
OPTIONS EXERCISES AND VALUES FOR 1998
The table below sets forth the following information with respect to the
status of the options of each of the persons named in the Cash Compensation
Table at December 31, 1998:
- the total number of exercisable and non-exercisable stock options held at
December 31, 1998, and
- the aggregate dollar value of in-the-money exercisable and unexercisable
options at December 31, 1998
No options were exercised by any of the named executive officers during the
year ended December 31, 1998.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT 12/31/98 12/31/98(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Salomon Levis............................................... -- 2,000 -- $13,800
Zoila Levis................................................. -- 1,000 -- 6,900
Richard F. Bonini........................................... -- 2,000 -- 13,800
Mario S. Levis.............................................. -- 1,000 -- 6,900
Edison Velez................................................ -- 2,000 -- 13,800
</TABLE>
- ---------------------
(1) In accordance with SEC rules, values are calculated by subtracting the
exercise price from the fair market value of the underlying common stock. For
purposes of this table, fair market value is deemed to be $ , the last
sales price reported for the common stock for NASDAQ National Market
transactions on December 31, 1998.
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 Compensation
Committee of the Board of Directors (the "Committee"), none of whose members may
receive 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 2,000,000
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 the 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
17
<PAGE> 21
restrictions pertaining to any grant to a 10% shareholder. No options may be
granted under the 1997 Option Plan after March 7, 2007.
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.
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 500,000 shares
of common stock to key employees, including officers of the Corporation and its
subsidiaries. As of March 1, 1999, 288,776, 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,
1998 amounted to approximately $998,000.
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 1998 base salaries, for Salomon Levis, Zoila Levis,
Mario S. Levis and Edison Velez were $4,459, $6,351, $10,533 and $7,743,
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 $975,000 as deferred compensation for 1998.
18
<PAGE> 22
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 these 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, 1993 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).
19
<PAGE> 23
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
DORAL FINANCIAL CORPORATION
Prepared by the Center for Research in Security Prices
[CRC]
LEGEND
<TABLE>
<CAPTION>
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 12/1993 12/1994 12/1995 12/1996 12/1997 12/1998
- ------ ----------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
__________ [ ] Doral Financial Corporation 100.00 71.3 121.3 184.9 346.4 611.5
.......... * NASDAQ Stock Market (US Companies) 100.00 97.8 138.3 170.0 208.3 293.5
- ---------- # NASDAQ Financial Stocks 100.00 100.2 146.0 187.1 285.9 276.3
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 12/31/1993.
20
<PAGE> 24
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has declared advisable and directed that there be
submitted to the stockholders at the annual meeting a proposed amendment to
Article Fourth of the Corporation's Restated Certificate of Incorporation that
would increase the number of authorized shares of common stock of the
Corporation from 50,000,000 shares to 200,000,000 shares. The text of the
proposed amendment to Article Fourth of the Corporation's Restated Certificate
of Incorporation is set forth in Exhibit A attached hereto.
PURPOSE AND EFFECTS OF THE PROPOSED AMENDMENT
As of the close of business on March 15, 1999 there were 40,428,920 shares
of the Corporation's common stock issued and outstanding. As of this date, there
were 1,933,714 shares of authorized and unissued shares of common stock reserved
for issuance upon conversion of the Corporation's outstanding 8% Convertible
Cumulative Preferred Stock and an additional 800,000 shares were reserved for
issuance upon the exercise of certain purchase rights (the "Rights") granted to
Popular, Inc. under an Exchange Agreement between the Corporation and Popular,
Inc. In addition as of such date, there were 2,000,000 shares reserved for
issuance pursuant to the 1997 Option Plan and 288,766 shares reserved for use in
connection with the Restricted Stock Plan.
After giving effect to the shares that are outstanding or reserved for
future issuance as described above, there are only 1,933,714 shares of
authorized and unissued and 56,000 shares of treasury stock available to the
Corporation. Management believes that the amount of available shares of common
stock is not sufficient to meet the Corporation's future needs. Approval of this
proposal should provide the Corporation with sufficient common stock to meet its
needs for the foreseeable future.
The principal purpose of the proposed amendment is to increase the number
of shares of common stock available for possible future financing and
acquisition transactions, stock dividends or distributions, stock splits in the
form of stock dividends, employee and officer compensation plans and other
general corporate purposes. In addition, from time to time, the Corporation
engages in discussions concerning possible acquisitions that could involve the
issuance of securities by the Corporation. There are, however, no currently
existing agreements or agreements in principle which call for the issuance by
the Corporation of shares of common stock in connection with any proposed
acquisition. The Corporation has no present plans to issue shares of common
stock in connection with any acquisition or financing transaction other than
upon conversion of the outstanding shares of the Corporation's 8% Convertible
Cumulative Preferred Stock. Favorable market conditions, changes in the
Corporation's financial condition or other circumstances could, however, result
in a determination by the Corporation to issue additional equity or other
securities convertible into shares of common stock.
In addition, if approved, the increased number of authorized shares of
common stock will be available for issuance from time to time for such purposes
and considerations as the Board of Directors may approve. No further vote of
shareholders of the Corporation will be required for the issuance of these
shares of common stock, except as provided under the law of the Commonwealth of
Puerto Rico or the rules of any national securities exchange or automated
quotation system on which the common stock of the Corporation may be listed or
quoted. The Corporation does not intend to solicit stockholders for any further
authorization for the issuance of the additionally authorized shares of common
stock. The availability of additional shares for issuance, without the delay and
expense of obtaining the approval of stockholders at a special meeting, will
afford the Corporation greater flexibility in acting upon proposed transactions.
The additional shares of common stock would be identical in terms to the shares
of common stock of the Corporation currently authorized under the Corporation's
Restated
21
<PAGE> 25
Certificate of Incorporation. Holders of common stock do not have preemptive
rights to purchase shares of common stock.
The sale of any additional authorized shares will reduce the percentage of
the total number of outstanding shares held by any stockholder. Such a sale
should not, however, have a dilutive effect on the market price of the common
stock unless the additional shares are sold for less than the then fair market
value of the common stock. The Board of Directors does not anticipate issuing
shares of common stock for less than fair market value except upon the
conversion of the currently outstanding 8% Convertible Cumulative Preferred
Stock.
Substantial amounts of the additional authorized common stock could be
issued to delay or defeat a change in control of the Corporation and,
accordingly, under certain circumstances, could discourage transactions that
might otherwise have a favorable effect on the price of the common stock. The
Corporation does not currently expect to use unissued common stock for this
purpose. The Board of Directors is not aware of any proposal to effect a change
in control or takeover of the Corporation.
VOTE REQUIRED AND RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding shares
of common stock is required to authorize the proposed amendment to increase in
the number of authorized shares of common stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE ADOPTION OF THE PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF SERIAL PREFERRED STOCK
The Board of Directors has declared advisable and directed that there be
submitted to the stockholders at the annual meeting a proposed amendment to the
Corporation's Restated Certificate of Incorporation that would increase the
number of authorized shares of serial preferred stock, $1.00 par value per
share, from 2,000,000 shares to 10,000,000 shares. The text of Article Fourth as
it is proposed to be revised, assuming stockholder approval of this proposal and
the proposal to increase the number of authorized shares of common stock, is set
forth in Exhibit A attached hereto.
PURPOSE AND EFFECTS OF PROPOSED AMENDMENT
Under the Corporation's current Restated Certificate of Incorporation, the
Corporation has a total of 2,000,000 authorized shares of serial preferred
stock. After giving effect to a public offering of 1,495,000 shares of serial
preferred stock on February 22, 1999 and to the designated shares of the
Corporation's 8% Convertible Cumulative Preferred Stock, there were only 485,000
shares of serial preferred stock available for issuance.
The Board of Directors believes that the proposed increase in the number of
authorized shares of serial preferred stock is necessary to maintain a balanced
capital structure for the Corporation as it continues to grow. The shares of
serial preferred stock will be available for issuance from time to time for such
corporate purposes and consideration as the Board of Directors may approve, and
no further vote of stockholders of the Corporation will be required, except as
provided by the applicable law of Puerto Rico or by any rule of a securities
exchange or automated quotation system applicable to the Corporation. The
Corporation does not intend to solicit stockholders for any further
authorization for the issuance of the additionally authorized shares of serial
preferred stock. The purposes for which serial preferred stock can be issued
include, among other things, issuance in public or private sales for cash to
obtain capital for use in the Corporation's business or operations, issuance in
22
<PAGE> 26
connection with the acquisition of other businesses or properties by the
Corporation or issuance in connection with stock splits or dividends. The
availability of the shares of serial preferred stock for issuance, without the
delay and expense of obtaining the approval of stockholders at a special
meeting, will afford the Corporation greater flexibility and efficiency in
acting upon proposed transactions. The Corporation has no plans to issue
additional shares of serial preferred stock in the immediate future.
The shares of serial preferred stock may be issued in one or more series.
The Board of Directors or a committee thereof will have broad discretion with
respect to designating and establishing the terms of each series of serial
preferred stock prior to its issuance. The Board of Directors may fix for each
series:
- the number of shares constituting the series,
- the rate or rates (which may be floating, variable or adjustable) or the
method of determining such rate or rates and the time and manner of
payment of dividends, if any (and whether such payment should be in cash
or securities),
- whether shares may be redeemed or repurchased, in whole or in part, at
the option of the holder or the Corporation and, if so, the price or
prices and the terms and conditions of such redemption or purchase, the
amount payable upon shares in the event of voluntary or involuntary
liquidation, dissolution or other winding up of the Corporation,
- sinking fund provisions, if any, for the redemption or purchase of
shares,
- the terms and conditions, if any, on which shares may be converted into
or exchanged for shares of common stock or other capital stock or
securities of the Corporation,
- voting rights, if any, and
- any other rights and preferences of the shares, to the full extent now or
hereafter permitted by the laws of the Commonwealth of Puerto Rico.
All shares of serial preferred stock which may be redeemed or retired by
sinking fund payment, repurchased by the Corporation or converted into common
stock, shall have the status of authorized and unissued shares of serial
preferred stock and may be reissued by the Board of Directors as shares of the
same or any other series, unless otherwise provided with respect to any series
in the resolution of the Board of Directors creating such series.
Ownership of shares of serial preferred stock will not entitle the holder
thereof to any preemptive rights to subscribe for or purchase any additional
securities issued by the Corporation.
Upon the issuance of any series of any series of serial preferred stock,
the holders of shares of such series will have certain preferences over the
holders of outstanding shares of common stock, depending upon the specific terms
of such series designated by the Board. For example, the provisions of a
particular series of serial preferred stock could prohibit the declaration and
payment of dividends on the common stock until full dividends on all outstanding
shares of such series for all past periods and for the current dividend period
shall have been declared and paid by the Corporation or the Corporation shall
have set apart a sum sufficient for such payment. In addition, to the extent
that serial preferred stock is made convertible into common stock, such
conversion would result in dilution of the voting power and equity interest of
holders of common stock.
In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of each series of the
then outstanding serial preferred stock will be entitled to receive the amount
fixed for such purpose by the Board of Directors together with all accumulated
and unpaid dividends. Depending upon the consideration paid for any series of
serial preferred stock and the liquidation preference of
23
<PAGE> 27
such series, the issuance thereof could result in a reduction in the assets
available for distribution to the holders of common stock in the event of the
liquidation of the Corporation.
The outstanding shares of any series of serial preferred stock, or any part
thereof, which is by its terms redeemable, may be redeemed at any time at the
option of the Corporation, subject to and in accordance with such terms and
conditions as may be designated by the Board of Directors in creating such
series. The amount payable by the Corporation upon redemption of the serial
preferred stock will be the redemption price fixed for the shares of each series
by the Board of Directors together with all accumulated and unpaid dividends, if
any. Subject to the terms and conditions established by the Board of Directors
in creating the various series of serial preferred stock, the Corporation may
redeem all or any part of the shares of any serial preferred stock without
redeeming all or any part of the shares of any other series.
The Board of Directors is authorized to determine the terms and conditions
on which shares of any series of the serial preferred stock may be converted
into or exchanged for any other shares of capital stock or securities of the
Corporation, if the shares of such series are issued with the privilege of
conversion or exchange.
Serial preferred stock could be issued to delay or defeat a change in
control of the Corporation and, accordingly, under certain circumstances, could
discourage transactions that might otherwise have a favorable effect on the
price of the common stock. The Corporation does not currently expect to use the
serial preferred stock for this purpose. The Board of Directors is not aware of
any proposal to effect a change in control of the Corporation.
VOTE REQUIRED AND RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding shares
of common stock is required to authorize the proposed amendment to increase
number of authorized shares of serial preferred stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" OF THE PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF SERIAL PREFERRED STOCK.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of PricewaterhouseCoopers LLP
as the Corporation's independent accountants to audit its financial statements
for the year ending December 31, 1999. This selection was recommended by the
Audit Committee of the Board of Directors. PricewaterhouseCoopers LLP has served
as the Corporation's independent public accountants since 1977. During the year
ended December 31, 1998, PricewaterhouseCoopers LLP received fees of
approximately $417,775 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 PricewaterhouseCoopers LLP 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.
A representative of PricewaterhouseCoopers LLP 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.
24
<PAGE> 28
VOTE RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP 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 2000 must be received by the
Corporation at its principal executive office by the close of business on
November 22, 1999. 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 statement of the Corporation for the fiscal year ended
December 31, 1998 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, 1998, 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.
The above Notice of Meeting and Proxy Statement arc 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 22, 1999
25
<PAGE> 29
EXHIBIT A
PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
AND OF SERIAL PREFERRED STOCK
The first paragraph of Article FOURTH of the Corporation's Restated
Certificate of Incorporation shall be amended to read as follows:
'FOURTH: The total number of shares of all classes of stock which the
Corporation is authorized to issue is [210,000,000] (1) shares, consisting
of [200,000,000] (2) shares of Common Stock, $1.00 par value, and
[10,000,000] (3) shares of Serial Preferred Stock, $1.00 par value.'
- ---------------
(1) Assumes approval of proposed amendment to increase both the number of
authorized shares of Common Stock and serial preferred stock.
(2) If the proposal to increase the number of authorized shares of Common Stock
from 50,000,000 to 200,000,000 shares is adopted.
(3) If the proposal to increase the number of authorized shares of serial
preferred stock from 2,000,000 to 10,000,000 shares is adopted.
26
<PAGE> 30
(Doral Financial Corporation Logo)
<PAGE> 31
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 El Morro Room, Ritz-Carlton
Hotel & Casino, 6961 Los Gobernadores Avenue, Isla Verde, Puerto Rico at 11:00
a.m., local time, on Thursday, April 22, 1999 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> 32
IF NO DIRECTION IS GIVEN, THIS PROXY WILL Please mark
BE VOTED FOR ITEMS 1, 2, 3 AND 4 your votes as X
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4
<TABLE>
<CAPTION>
<S> <C> <C> <C>
No. 1 - Election Directors: FOR WITHHELD
Nominees are Richard F. Bonini, Edgar M. Cullman, Jr., John L. Ernst, all listed as to all
Efraim Kier, Salomon Levis, Zolla Levis, A. Brean Murray and Victor M. nominees nominees
Pons, Jr.
(To withhold authority to vote for any individual nominee, write that nominee's name in the space provided below)
- --------------------------------------------------------------------------------------------------------------------------
No. 2 - Amendment to Restated Certificate of Incorporation
to increase number of authorized shares of Common Stock.
FOR AGAINST ABSTAIN To vote in accordance with the Board of Directors
recommendation, just sign below. No boxes need to
[ ] [ ] [ ] be checked.
No. 3 - Amendment to restated to increase number of authorized Dated , 1999
shares of Serial Preferred Stock. --------------------------------------
FOR AGAINST ABSTAIN Signature:
---------------------------------------
[ ] [ ] [ ]
No. 4 - Appointment of PricewaterhouseCoopers LLP as Signature:
Independent Accountants. ---------------------------------------
FOR AGAINST ABSTAIN 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 duly authorized officer. If shares are held
jointly, each shareholder named should sign.
</TABLE>
- FOLD AND DETACH HERE -
