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EXHIBIT 99.1
POPULAR, INC.
P.O. BOX 362708
SAN JUAN, PUERTO RICO 00936-2708
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, APRIL 23, 2001
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To the Stockholders of Popular, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Popular, Inc. (the "Meeting") for the year 2001 will be held at 10:30 a.m. on
Monday, April 23, 2001, on the third floor of the Centro Europa Building, in
Santurce, Puerto Rico, to consider and act upon the following matters:
(1) To elect four (4) directors of Popular, Inc. (the
"Corporation") for a three-year term;
(2) To approve the Corporation's 2001 Stock Option Plan; and
(3) To transact any and all other business as may be properly
brought before the Meeting or any adjournments thereof. Management at
present knows of no other business to be brought before the Meeting.
Stockholders of record at the close of business on March 5, 2001, are
entitled to notice of and to vote at the Meeting.
You are cordially invited to attend the Meeting. Whether you plan to
attend or not, please sign and return the enclosed proxy so that the Corporation
may be assured of the presence of a quorum at the Meeting. A postage-paid
envelope is enclosed for your convenience. REMEMBER THAT YOU CAN VOTE BY
TELEPHONE OR BY INTERNET; FOR FURTHER DETAILS PLEASE REFER TO THE ENCLOSED PROXY
CARD.
San Juan, Puerto Rico, March 15, 2001.
By Order of the Board of Directors,
SAMUEL T. CESPEDES
Secretary
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POPULAR, INC.
P.O. BOX 362708
SAN JUAN, PUERTO RICO 00936-2708
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PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, APRIL 23, 2001
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This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Popular, Inc. (the "Corporation") of proxies to be
voted at the Annual Meeting of Stockholders (the "Meeting") to be held at 10:30
a.m. on Monday, April 23, 2001, on the third floor of the Centro Europa
Building, in Santurce, Puerto Rico, and any adjournments thereof. Enclosed with
this Proxy Statement is the Corporation's Annual Report (the "Annual Report"),
including the financial statements for the year ended December 31, 2000, duly
certified by PricewaterhouseCoopers LLP as independent public accountants. This
Proxy Statement, the enclosed Annual Report, the Notice of Annual Meeting of
Stockholders and the form of proxy are being sent to stockholders on or about
March 15, 2001. Shareholders are entitled to vote by telephone or by Internet
following the detailed instructions included in the Proxy Card, as authorized by
the Puerto Rico Corporation Law and the Bylaws of the Corporation.
Properly executed proxies received by the Secretary of the Corporation
will be voted at the Meeting in accordance with the instructions which appear
therein and for the purposes indicated on the Notice of Meeting. The Board of
Directors does not intend to present any business at the Meeting other than that
described in the Notice of Meeting. The Board of Directors at this time knows of
no other matters which may come before the Meeting. However, if any new matters
requiring the vote of the stockholders are properly presented before the
Meeting, proxies may be voted with respect thereto in accordance with the best
judgment of Proxyholders, under the discretionary power granted by stockholders
to their proxies in connection with general matters.
SOLICITATION OF PROXIES
In addition to solicitation by mail, management may participate in the
solicitation of Proxies by telephone, personal interviews or otherwise. The
Board of Directors has engaged the firm of Georgeson & Company Inc. to aid in
the solicitation of Proxies. The cost of solicitation will be borne by the
Corporation and is estimated at $6,500.
REVOCABILITY OF PROXY
Any stockholder giving a proxy has the power to revoke it before the
proxy is exercised. At the Meeting the grantor may revoke the proxy by
reclaiming the right to vote the shares of stock registered in the grantor's
name or by notice of revocation in writing to the President or Secretary of
Popular, Inc., P.O. Box 362708, San Juan, Puerto Rico 00936-2708, delivered
before the proxy is exercised.
VOTING SECURITIES
The only outstanding voting securities of the Corporation are its
shares of common stock (the "common stock"), each share of which entitles the
holder thereof to one vote. Only common stockholders of record at the close of
business on March 5, 2001 (the "Record Date"), will be entitled to vote at the
Meeting and any adjournments thereof. On the Record Date there were 136,111,025
shares of common stock of Popular, Inc. issued and outstanding. The shares
covered by any such proxy that is properly executed and received by management
before 10:30 a.m. on the day of the Meeting will be voted.
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The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of common stock of the Corporation is necessary to
constitute a quorum at the Meeting. Votes cast by proxy or in person at the
Meeting will be counted by the persons appointed by the Corporation as members
of the vote-counting committee for the Meeting. For purposes of determining a
quorum, the members of the vote-counting committee will treat abstentions and
brokers non-votes as shares that are present and entitled to vote. A broker
non-vote results when a broker or nominee has expressly indicated in the proxy
that it does not have discretionary authority to vote on a particular matter. As
to the election of Directors, the Proxy Card being provided by the Board of
Directors enables a stockholder to vote for the election of the nominees
proposed by the Board, or to withhold authority to vote for one or more of the
nominees being proposed. Directors will be elected by a majority of the votes
cast. Therefore, abstentions and broker non-votes will not have an effect on the
election of directors of the Corporation. The affirmative vote of the majority
of the votes present in person or by proxy by stockholders entitled to vote at
the Annual Meeting is required to approve the 2001 Stock Option Plan. Therefore,
abstentions shall have the effect of a vote against the proposal.
Broker-non-votes will have no effect on the proposal.
PRINCIPAL STOCKHOLDERS
Following is the information, to the extent known by the persons on
whose behalf this solicitation is made, with respect to any person (including
any "group" as that term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended) who is known to the Corporation to be the beneficial
owner of more than five percent (5%) of the Corporation's voting securities.
Amount and nature Percent
of beneficial of
Title of Class Name and address of beneficial owner ownership(1) Class(2)
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Common Banco Popular de Puerto Rico (the "Bank")
as Trustee for the Banco Popular de Puerto
Rico Retirement Plan 5,672,860
The Bank as Trustee for the Profit Sharing Plan
for the Employees of Banco Popular de Puerto
Rico (the "Profit Sharing Plan") 5,320,208
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10,993,068(3) 8.0765
Common State Farm Mutual Automobile Insurance
Company 8,764,924(4) 6.4395
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(1) As of February 28, 2001.
(2) Based on 136,111,025 shares of common stock outstanding.
(3) The Bank, as Trustee, of both Plans has sole voting and investment
power over the Common Stock held by the Plan. The Bank, as Plan
Administrator, administers the Plans through the Administrative
Committee.
(4) On February 14, 2001 State Farm Mutual Automobile Insurance Company
("State Farm") and affiliated entities filed a joint statement on
Schedule 13-G with the Securities and Exchange Commission reflecting
their holdings as of December 31, 2000. According to said statement,
State Farm and its affiliates might be deemed to constitute a "group"
within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934. State Farm and its affiliates could also be deemed to be the
beneficial owners of 8,764,924 shares of the Corporation. However,
State Farm and each such affiliate disclaim beneficial ownership as to
all shares as to which each such person has no right to receive the
proceeds of sale of the shares, and also disclaim that they constitute
a "group".
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SHARES BENEFICIALLY OWNED BY DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS OF THE CORPORATION AND ITS SUBSIDIARIES
Following is the information, as of February 28, 2001, as to equity
securities of the Corporation beneficially owned by all current directors,
nominees, the most highly compensated Executive Officers of the Corporation and
its subsidiaries who are not directors and the total owned by directors,
nominees and the Executive Officers of the Corporation and its subsidiaries as a
group:
COMMON STOCK
TITLE AMOUNT AND NATURE PERCENT OF
NAME OF CLASS OF BENEFICIAL OWNERSHIP CLASS(1)
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Juan J. Bermudez ............................ Common 466,373(3) .3426
Francisco J. Carreras ....................... Common 16,236 .0119
Jose B. Carrion Jr. ......................... Common 1,014,276(4) .7452
Richard L. Carrion .......................... Common 1,116,023(5) .8199
David Chafey Jr. ............................ Common 91,926 .0675
Antonio Luis Ferre. ......................... Common 2,916,429(6) 2.1427
Hector R. Gonzalez .......................... Common 635,451(7) .4669
Jorge A. Junquera ........................... Common 70,370(8) .0517
Manuel Morales Jr. .......................... Common 630,056(9) .4629
Alberto M. Paracchini ....................... Common 124,224(10) .0913
Francisco M. Rexach Jr. ..................... Common 202,588(11) .1488
Felix J. Serralles Jr. ...................... Common 429,660(12) .3157
Julio E. Vizcarrondo Jr. .................... Common 1,402,458(13) 1.0304
Maria Isabel P. de Burckhart ................ Common 65,977(14) .0485
Larry B. Kesler ............................. Common 45,879 .0337
Humberto Martin ............................. Common 75,931 .0558
Carlos J. Vazquez ........................... Common 105,777(15) .0777
Guillermo L. Martinez ....................... Common 2,205,475(16) 1.6204
Kenneth McGrath ............................. Common 6,541 .0048
Cameron E. Williams ......................... Common 483 .0004
All Directors and Executive Officers
of the Corporation and its subsidiaries
as a group ................................. Common 11,622,133 8.5387
PREFERRED STOCK
Title Amount and Nature Percent of
Name of Class of Beneficial Ownership Class (1)
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Alberto M. Paracchini ....................... Preferred 7,000 .1750
Carlos J. Vasquez ........................... Preferred 4,568(17) .1142
All Directors and Executive Officers
of the Corporation as a group .............. Preferred 11,568 .2892
(1) Based on 136,111,025 shares of common stock outstanding.
(2) Based on 4,000,000 shares of preferred stock outstanding.
(3) Excludes 12,443 shares owned by his wife, as to which Mr. Bermudez
disclaims beneficial ownership.
(4) Mr. Carrion Jr. owns 708,384 shares, has voting power over 487 shares
owned by his daughter and has voting and investment power over 292,606
shares owned by Collosa Corporation which he owns. Excludes 15,808
shares owned by his wife to which he disclaims beneficial ownership.
Junior Investment Corporation owns 4,413,399 shares of the Corporation.
Mr. Carrion, Jr. owns .29% of the shares of said corporation.
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(5) Mr. Carrion owns 301,844 shares and also has indirect investment power
over 24,622 shares owned by his children. Junior Investment Corporation
owns 4,413,399 shares of the Corporation. Mr. Carrion owns 17.89% of
the shares of said corporation.
(6) Mr. Ferre has direct or indirect investment and voting power over
2,916,429 shares of the Corporation. Mr. Ferre owns 3,367 shares and
has indirect investment and voting power over 3,200 shares owned by
South Management, Inc. and 400 shares owned by his wife. Mr. Ferre owns
51% of Ferre Investment Fund, Inc., which owns 1,464,750 shares of the
Corporation. Ferre Investment Fund, Inc. in turn owns 90% of El Dia,
Inc., which owns 1,444,712 shares of the Corporation.
(7) Mr. Gonzalez owns 606,099 shares and has voting and investment power
over 29,352 shares of the Corporation owned by Ventek Group, Inc. of
which he has control.
(8) Mr. Junquera owns 67,395 shares and has indirect investment power over
218 shares owned by his wife and over 2,757 shares owned by his son and
daughter.
(9) Mr. Morales owns 215,056 shares and has voting power over 415,000
shares owned by his parents, as their attorney-in-fact.
(10) Excludes 1,264 shares owned by his wife, as to which Mr. Paracchini
disclaims beneficial ownership.
(11) Mr. Rexach owns 87,788 shares and has indirect voting power over 95,800
shares owned by his mother, as her attorney-in-fact, and over 19,000
shares held by Capital Assets, Inc. as President and shareholder.
(12) Mr. Serralles owns 226,752 shares, and has indirect voting power over
10,292 shares owned by his wife. Mr. Serralles owns 100% of the shares
of Capitanejo, Inc. and Fao Investments, Inc., which own 117,020 and
5,596 shares, respectively, of the Corporation and has indirect
ownership of 70,000 shares owned by Destileria Serralles, Inc.
(13) Mr. Vizcarrondo owns 202,914 shares and has indirect voting power over
184,576 shares owned by his wife. Mr. Vizcarrondo's wife owns 18.18% of
the shares of Junior Investment Corporation, which owns 4,413,399
shares of the Corporation. Mr. Vizcarrondo has indirect voting and
investment power over 1,334 shares held in trust by Vicar Enterprises,
Inc. for the benefit of his children, for which he disclaims beneficial
ownership. Mr. Vizcarrondo also disclaims beneficial ownership over
131,278 shares owned by DMI Pension Trust, where he serves as trustee
and member of the investment committee. There are 120,000 shares
belonging to the estate of Mr. Julio Vizcarrondo, Sr., over which Mr.
Vizcarrondo, Jr. has investment power, but disclaims beneficial
ownership, except for 80,000 shares which Mr. Vizcarrondo, Jr. will
inherit once the estate is divided and distributed.
(14) Mrs. Burckhart owns 62,224 shares and has indirect voting power over
3,753 held by her husband as custodian for her daughters.
(15) Mr. Vazquez owns 12,047 shares and has investment authority over 93,730
shares held by various family members.
(16) Mr. Martinez owns 1,136,250 shares and has investment and voting power
over 1,069,225 shares owned by family members and various corporations.
(17) Mr. Vazquez has investment authority over 4,568 preferred shares held
by various family members.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's directors and executive officers to file with the
Securities and Exchange Commission (SEC) reports of ownership and changes in
ownership of common stock of the Corporation. Officers and directors are
required by SEC regulation to furnish the Corporation with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such reports furnished to the
Corporation or written representations that no other reports were required, the
Corporation believes that, with respect to 2000, all filing requirements
applicable to its officers and directors were complied with except for one
report, covering one transaction, filed late by Mr. Juan J. Bermudez, director
of the Corporation.
BOARD OF DIRECTORS AND COMMITTEES;
PROPOSAL 1: ELECTION OF DIRECTORS
The Certificate of Incorporation and the Bylaws of the Corporation
establish a classified Board of Directors pursuant to which the Board of
Directors is divided into three classes as nearly equal in number as possible,
with each class having at least three members and with the term of office of one
class expiring each year. Each director serves for a term ending on the date of
the third annual meeting of stockholders following the annual meeting at which
such director was elected or until his successor has been elected and qualified.
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At the Meeting, four (4) directors assigned to "Class 2" are to be
elected to serve until the 2004 Annual Meeting of Stockholders or until their
respective successors shall have been elected and qualified. The remaining nine
directors of the Corporation will serve as directors, as follows: until the 2002
Annual Meeting of Stockholders of the Corporation, in the case of those five
directors assigned to "Class 3", and until the 2003 Annual Meeting of
Stockholders, in the case of those four directors assigned to "Class 1", or in
each case until their successors are elected and qualified.
The people named as proxies in the accompanying Form of Proxy have
advised the Corporation that, unless otherwise instructed, they intend to vote
at the Meeting the shares covered by the proxies FOR the election of the four
nominees named below, and that if any one or more of such nominees should become
unavailable for election they intend to vote such shares FOR the election of
such substitute nominees as the Board of Directors may propose. The Corporation
has no knowledge that any nominee will become unavailable for election.
Information relating to principal occupation and business experience
during the past five (5) years (including position held with the Corporation or
the Bank), age and the period during which each director has served is set forth
below.
NOMINEES FOR ELECTION AS DIRECTORS
CLASS 2 DIRECTORS
(TERMS EXPIRING IN 2004)
JOSE B. CARRION JR: (64 years), Nominee. President of Collosa
Corporation. Member of the Board of Directors of Banco Popular de Puerto Rico
since April 2000. President and Chief Executive Officer ("CEO") of Barros &
Carrion from 1992 to 1999.
HECTOR R. GONZALEZ: (67 years), Director of the Corporation since 1984.
President and Chief Executive Officer of TPC Communications of PR, Inc., TPC
Cable Media, Inc., TelePonce Cable TV, Inc. and Telecell Systems, Inc. owner and
operator of cable television systems. General Partner of Ventek Group, Inc., and
investor in broadband and telecommunications related businesses. Director of the
Bank, Popular Finance, Inc., Popular Mortgage, Inc., Popular Leasing & Rental,
Inc. and Popular Securities, Inc.
MANUEL MORALES JR.: (55 years), Director of the Corporation since 1990.
President of Selarom Capital Group, Inc. President of Parkview Realty, Inc., the
Atrium Office Center, Inc., HQ Business Center P.R., Inc., ExecuTrain of Puerto
Rico and Office & Home, Inc. Honorary General Consul of Japan in San Juan,
Puerto Rico. Member of the Board of Trustees of Sacred Heart University in San
Juan, Puerto Rico, of the Caribbean Environmental Development Institute and of
Fundacion Angel Ramos, Inc. Member of the National Advisory Council-United
States Small Business Administration. Director of Casiano Communications, Inc.,
Rafael J. Nido, Inc. and Cortes Industrial Organization. Member of the Board of
Trustees of Fundacion Banco Popular, Inc. Chairman of the Audit Committee of the
Corporation and the Bank. Director of the Bank.
JULIO E. VIZCARRONDO JR.: (66 years), Director of the Corporation since
1990. Civil Engineer. President, Partner and Chief Executive Officer of
Desarrollos Metropolitanos, S.E., VMV Enterprises Corp., Resort Builders, S.E.,
Metropolitan Builders, S.E, Institutional Builders, S.E., Omega-Vistamar, S.E.
and MH Office Building Corp., corporations engaged in the development and
construction of residential, commercial, industrial and institutional projects
in Puerto Rico. Director of the Bank, Popular International Bank, Inc., Popular
North America, Inc., Banco Popular North America, Popular Cash Express, Inc. and
Equity One, Inc.
CLASS 1 DIRECTORS
(TERMS EXPIRING IN 2003)
JUAN J. BERMUDEZ: (63 years), Director of the Corporation since 1990.
Electrical Engineer. Partner of Bermudez and Longo, S.E., Desemcor, S.E.,
Unicenter, S.E., Unieast, S.E., Unigardens, S.E., Clearview, S.E., Placid Park,
S.E. and PCME Commercial, S.E. Principal Stockholder and Director of BL
Management, Corp., Paseomar Corp., PCME Development, Inc., G.S.P. Corp.,
Unimanagement Corp., Desemcor Management, Inc., LBB Properties, Inc. and Homes
Unlimited Corp. Director of the Bank, Popular Securities, Inc., Popular Leasing
& Rental, Inc., Popular Finance, Inc. and Popular Mortgage, Inc. Chairman of the
Trust Committee of the Bank.
RICHARD L. CARRION: (48 years), Director of the Corporation since 1990.
Chairman, President and Chief Executive Officer ("CEO") of the Corporation and
the Bank. Chairman of Popular International Bank, Inc., Popular North America,
Inc., Banco Popular North America, Popular Cash Express, Inc. and Banco Popular,
National Association. Chairman of the
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Board of Trustees of Fundacion Banco Popular, Inc. Director of Equity One, Inc.,
Popular Finance, Inc., Popular Leasing & Rental, Inc., Popular Mortgage, Inc.,
Popular Securities, Inc., Popular Insurance, Inc. and GM Group, Inc. Member of
the International Olympic Committee. President of the Puerto Rico Olympic Trust
and Member of the Puerto Rico Olympic Committee. Member of the Board of Trustees
of the Puerto Rico Committee for Economic Development. Member of the Board of
Directors and Benefits & Human Resources Committee of Verizon Communications (a
registered public company). Member of the Board of Director and Compensation and
Benefits Committee of American Home Products Corporation (a registered public
company). Former Chairman and President of Puerto Rico Investors Tax-Free Fund,
Inc. I, II, III, IV, V (1994 to December 1998) and of Puerto Rico Tax-Free
Target Maturity Fund, Inc. I (1996 to December 1998) and II (1997 to December
1998). Former Chairman and President of Puerto Rico Investors Flexible
Allocation Fund (December 1998 to January 1999). Former Member of the Board of
the National Museum of American History, Smithsonian Institution (November 1997
to December 1998). Member of the Board of Directors of Telecomunicaciones de
Puerto Rico, Inc. (TELPRI).
JORGE A. JUNQUERA: (52 years), Director of the Corporation since 1990.
Chief Financial Officer ("CFO") of the Corporation and the Bank. Supervisor of
the Financial Management Group, the U.S. Operations and the Caribbean and Latin
America Expansion Group since January 1996. Supervisor of the Bank's Retail
Banking Group until December 1995. Senior Executive Vice President since October
1995. President and Director of Popular International Bank, Inc. and Popular
North America, Inc. since January 1996. Director and President of Banco Popular
North America and Banco Popular, National Association. Director of Equity One,
Inc., ATH Dominicana, S.A., New America Alliance (a registered public company),
Virtual, Inc. (an internet company) and Popular Cash Express, Inc. Chairman of
the Board of Popular Securities, Inc. Director of Popular Mortgage, Inc.,
Popular Finance, Inc. and Popular Leasing & Rental, Inc. until December 1998 and
of Banco Popular de Puerto Rico until April 2000. President of Puerto Rico
Tourism Company until February 1997 and Director until April, 2000. President of
Hotel Development Co. until April, 2000. Director of YMCA until May, 2000 and of
PRISMA: El Exploratorio, Inc. until April, 2000.
FRANCISCO M. REXACH JR.: (63 years), Director of the Corporation since
1990. President of Ready Mix Concrete, Inc., a subsidiary of PRCC (a registered
public company) until September 1997. President of Capital Assets, Inc. and of
Rexach Consulting Group. Director of the Bank, Popular International Bank, Inc.,
Popular North America, Inc., Banco Popular North America, Popular Cash Express,
Inc. and Equity One, Inc. Chairman of the Human Resources and Compensation
Committee of the Bank.
CLASS 3 DIRECTORS
(TERMS EXPIRING IN 2002)
FRANCISCO J. CARRERAS: (68 years), Director of the Corporation since
1990. Former professor of the University of Puerto Rico. Former President of the
Catholic University of PR. Member of the Board of Trustees of Fundacion Banco
Popular, Inc. Executive Director of Fundacion Angel Ramos, Inc. Chairman of the
Community Reinvestment Committee of the Bank. Director of the Bank.
DAVID H. CHAFEY JR.: (47 years), Director of the Corporation since
1996. Supervisor of the Bank's Retail Banking Group since January 1996.
Supervisor of the Financial Management Group and U.S. Operations until December
1995. Senior Executive Vice President since October 1995. Chairman of Popular
Securities, Inc. until January 1996. Senior Executive Vice President of Popular
International Bank, Inc. and Popular North America, Inc. President of Popular
International Bank, Inc. and Popular North America, Inc. until December 1995.
Director of the Bank, Popular Mortgage, Inc., Popular Leasing & Rental, Inc., GM
Group, Inc., Banco Popular, National Association, Popular Insurance, Inc. and
Popular Securities, Inc. Director of Equity One, Inc. and Banco Popular North
America until December 1999. Chairman of the Board of Popular Finance, Inc.
Chairman of the Board of Puerto Rico Telephone Authority from 1993 thru 1997.
Chairman and President of Puerto Rico Investors Tax-Free Fund, Inc. I, II, III,
IV, V, VI, of Puerto Rico Tax-Free Target Maturity Fund, Inc. I and II and of
Puerto Rico Investors Flexible Allocation Fund since January 1999. Chairman of
the Board of Grupo Guayacan, Inc. President of the San Jorge Children's Research
Foundation, Inc. President of the Puerto Rico Bankers Association. Director of
Visa International for the Caribbean and Latin America.
ANTONIO LUIS FERRE: (67 years), Director of the Corporation since 1984.
Vice Chairman of the Board of Directors of the Corporation and the Bank.
Chairman of the Board of Puerto Rican Cement Co., Inc. (a registered public
company), manufacturers of cement and allied products. Chairman of the Board and
Editor of El Dia, Inc. and of Primera Hora, newspaper publishing companies.
President of Advanced Graphic Printing, a commercial printing company. Chairman
of the Board of Virtual, Inc., an internet company. Director of Metropolitan
Life Insurance Company (a registered company under the Investment Company Act of
1940) until December 1995.
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ALBERTO M. PARACCHINI: (68 years), Director of the Corporation since
1984. Former Chairman of the Board of Directors of the Corporation and the Bank.
Former Chairman of Popular North America, Inc., Equity One, Inc., Popular
Finance, Inc. and Popular Leasing & Rental, Inc. Member of the Board of Trustees
of Fundacion Banco Popular, Inc. Chairman of the Board of Trustees of Sacred
Heart University in San Juan, Puerto Rico. Director of Puerto Rican Cement Co.,
Inc. (a registered public company). Director of Equus Management Co., Inc.,
Managing General Partner of Equus Gaming Co., L.P. (a registered public
company). Director of Equus Entertainment Corporation, a subsidiary of Equus
Gaming Co., L.P. (registered public company) and of Venture Capital Fund, Inc.
Chairman of the Risk Management Committee of the Corporation. Director of the
Bank.
FELIX J. SERRALLES JR.: (66 years), Director of the Corporation since
1984. President and Chief Executive Officer of Destileria Serralles, Inc.,
manufacturers and distributors of distilled spirits, and of its affiliate
Mercedita Leasing, Inc. Director of the Bank, Popular International Bank, Inc.,
Popular North America, Inc., Banco Popular North America, Popular Cash Express,
Inc. and Equity One, Inc.
The Board of Directors of the Corporation met on a monthly basis during
2000. All directors except Mr. Antonio Luis Ferre attended to 75% or more to the
meetings of the Board of Directors and the committees of the Board of Directors
on which such directors served.
STANDING COMMITTEES
The Corporation's Board of Directors (the "Board") has standing Audit
and Risk Management Committees. The Board of Directors of the Bank, the
principal subsidiary of the Corporation, has a standing Human Resources and
Compensation Committee that may review compensation matters for the Corporation.
Nominations are made by the Board.
AUDIT COMMITTEE
The Audit Committee consists of the following members of the
Corporation's Board of Directors: Juan J. Bermudez, Hector R. Gonzalez, Manuel
Morales Jr., Alberto M. Paracchini, Francisco M. Rexach Jr. and Felix J.
Serralles Jr. The Board of Directors, in its business judgment, has determined
that each of the members of the Audit Committee is "independent" as required by
applicable listing rules of the National Association of Securities Dealers. The
Audit Committee held seven meetings during the fiscal year ended December 3l,
2000.
AUDIT COMMITTEE REPORT
The role of the Audit Committee is to assist the Board in its oversight
of the Corporation's financial reporting process. The Committee operates
pursuant to a Charter that was last amended and restated by the Board on March
7, 2001, a copy of which is attached to this Proxy Statement as Exhibit A.
In the performance of its oversight function, the Committee has
considered and discussed the audited financial statements of the Corporation for
the fiscal year ended December 31, 2000 with management and the independent
accountants. The Audit Committee has also discussed with the independent
accountants the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees), as currently modified or
supplemented. Finally, the Committee has received the written disclosures and
the letter from PricewaterhouseCoopers LLP required by Independence Standards
Board Standard No. 1 (Independence Discussion with Audit Committees), as
currently modified or supplemented, has considered whether the provision of
non-audit-services by the independent accountants to the Corporation is
compatible with maintaining the accountants' independence, and has discussed
with the independent accountants the accountants' independence from the
Corporation and its management. These considerations and discussions, however,
are not designed to provide any assurance that the audit of the Corporation's
financial statements has been carried out in accordance with generally accepted
auditing standards, that the financial statements are presented in accordance
with generally accepted accounting principles or that the Company's auditors are
in fact "independent."
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As set forth in the Charter, management of the Corporation is
responsible for the preparation, presentation and integrity of the Corporation's
financial statements, the Corporation's accounting and financial reporting
principles, and internal controls designed to achieve compliance with accounting
standards and applicable laws and regulations. PricewaterhouseCoopers LLP, the
Corporation's independent public accountants, are responsible for auditing the
Corporation's financial statements and expressing an opinion as to their
conformity with generally accepted accounting principles.
Also as required by the Charter, the members of the Audit Committee are
not engaged professionally in the practice of auditing or accounting, are not
experts in the fields of accounting or auditing, including matters relating to
the determination of the independence of outside auditors, and are not full-time
employees of the Corporation. The Corporation's management is responsible for
its accounting, financial management and internal controls. Moreover, the
Committee relies on and makes no independent verification of the facts presented
to it or representations made by management or the independent accountants.
Accordingly, the Audit Committee's oversight does not provide an independent
basis to determine that management has maintained appropriate accounting and
financial reporting principles and policies, or internal controls and
procedures, designed to achieve compliance with accounting standards and
applicable laws and regulations.
Based on the Audit Committee's consideration of the audited financial
statements and the discussions referred to above with management and the
independent accountants and subject to the limitations on the role and
responsibilities of the Audit Committee set forth in the Charter and those
discussed above, the Committee recommended to the Board that the Corporation's
audited financial statements be included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 2000 for filing with the SEC.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
The functions of the Human Resources and Compensation Committee include
reviewing the compensation and benefits of management and employees, reviewing
the policies related to the performance and compensation of management and
employees, and reviewing the long-range planning for executive development and
succession. The Committee held two meetings during the fiscal year ended
December 31, 2000.
The Committee members during 2000 were: Juan A. Albors, Francisco J.
Carreras, Maria Luisa Ferre, Hector R. Gonzalez, Alberto M. Paracchini and
Francisco M. Rexach Jr. None of the members of the Committee are officers or
employees of the Corporation or any of its subsidiaries.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Corporation and its subsidiaries
were entitled to a $12,000 annual retainer. The Board has a Stock Deferment
Plan, pursuant to which each outside director of the Corporation is given the
option to defer all or a portion of the $12,000 annual retainer. The deferred
portion, plus an additional amount of $0.25 for each dollar so deferred, is
applied toward the purchase in the open market of shares of the Corporation's
common stock on behalf of the director. The certificates representing such
shares are retained by the Corporation until the director's term in office as a
director of the Corporation (and the Bank) terminates. In addition, each
director has the right to vote and to receive any dividends payable on the
shares held for said director under the Plan, but no such shares may be sold,
transferred, assigned, pledged or in any other way encumbered by the director
until the certificates representing such shares are delivered to the director.
In the event that a director is duly removed from office for cause, said
director (1) shall be obliged to sell to the Corporation all of the shares
acquired with the deferred retainer amount at a price equal to the lower of (a)
the actual purchase price of said shares and (b) the market price of said shares
on the date the director was discharged, and (2) shall forfeit to the
Corporation any shares purchased with the Corporation's additional contribution.
In addition, directors receive $750 for attending each Board meeting
and $500 for attending each of the other committee meetings. Directors who are
employees do not receive fees for attending Board and committee meetings.
EXECUTIVE OFFICERS
The following information sets forth the names of the executive
officers (the "Executive Officers") of the Corporation including their age,
business experience during the past five (5) years and the period during which
each such person has served as an Executive Officer of the Corporation or the
Bank.
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RICHARD L. CARRION: (48 years), Chairman, President and CEO of the
Corporation. Executive Officer of the Corporation since 1990. For information
about principal occupation and business experience during the past five years
please refer to the Board of Directors section.
JORGE A. JUNQUERA: (52 years), Senior Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1990. For information
about principal occupation and business experience during the past five years
please refer to the Board of Directors section.
DAVID H. CHAFEY JR.: (47 years), Senior Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1990. For information
about principal occupation and business experience during the past five years
please refer to the Board of Directors section.
MARIA ISABEL P. DE BURCKHART: (52 years), Executive Vice President of
the Corporation. Executive Officer of the Corporation since 1990. Supervisor of
the Administration Group. Executive Vice President of the Bank since January
1990. Executive Vice President of Popular International Bank, Inc. and Popular
North America, Inc. Member of the Board of Trustees of Fundacion Banco Popular,
Inc. Member of the Board of Directors of Fundacion Ana G. Mendez and of Puerto
Rico Community Foundation. Member of the Board of Directors of the Puerto Rico
Convention Bureau from 1993 through October 1998. Secretary of the Board of
Directors of the Bankers Club since 1998.
ROBERTO R. HERENCIA: (41 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1997. Head of the
Corporation's U.S. business expansion. Executive Vice President of the Bank
since January 1997. Director of Popular International Bank, Inc., Popular North
America, Inc., Popular Cash Express, Inc., Banco Popular, National Association
and Equity One, Inc. Director and Chief Operations Officer of Banco Popular
North America. Senior Vice President from December 1991 to December 1996.
LARRY B. KESLER: (63 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1990. Supervisor of the
Consumer Credit Group and the Virgin Islands Region. Executive Vice President of
the Bank since January 1990. Chairman of the Board of Directors of Equity One,
Inc., Popular Leasing & Rental, Inc., Popular Mortgage, Inc. and Popular
Insurance, Inc. Executive Vice President of Popular International Bank, Inc. and
Popular North America, Inc. Director of Popular Finance, Inc. and Banco Popular,
National Association.
TERE LOUBRIEL: (48 years), Executive Vice President of the Corporation
since February 2001. General Auditor of the Bank from December 1989 to 1995.
Quality Office Manager of the Corporation from November 1995 to 1997. Year 2000
Office Manager of the Corporation from December 1997 to 2000. Director of Human
Resources since April 2000.
HUMBERTO MARTIN: (55 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1986. Supervisor of the
Operations Group. Director of ATH Dominicana, S.A. Executive Vice President of
the Bank since November 1986. Executive Vice President of Popular International
Bank, Inc. and Popular North America, Inc. Director of GM Group, Inc.
EMILIO E. PINERO: (52 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1990. Supervisor of the
Commercial Banking Group. Executive Vice President of the Bank since January
1990. Director of Popular Mortgage, Inc. and Popular Leasing & Rental, Inc.
Executive Vice President of Popular International Bank, Inc. and Popular North
America, Inc. Member of the Board of Trustees of American Red Cross, Fundacion
Luis Munoz Marin, Fundacion del Colegio de CPA de Puerto Rico and Jane Stern
Community Library Foundation.
BRUNILDA SANTOS DE ALVAREZ: (42 years), Executive Vice President of the
Corporation since February 2001. General Counsel of the Corporation since 1997.
Assistant Secretary of the Board of Directors of the Corporation and the Bank
since May 1994. Secretary of the Board of Directors of Popular International
Bank, Inc., Banco Popular North America, GM Group, Inc., Popular Cash Express,
Inc., Banco Popular, National Association and Popular Insurance, Inc. Assistant
Secretary of the Board of Directors of Equity One, Inc., Popular Leasing &
Rental, Inc., Popular Finance, Inc., Popular Mortgage, Inc. and Popular North
America, Inc. Secretary of the Board of Directors of Puerto Rico Investor Tax
Free Fund, Inc. I, II, III, IV, V, VI of Puerto Rico Tax Free Target Maturity
Fund, Inc. I and II, and of Puerto Rico Investors Flexible Allocation Fund, Inc.
Senior Vice President from March 1996 until January 2001.
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CARLOS J. VAZQUEZ: (42 years), Executive Vice President of the
Corporation. Executive Officer of the Corporation since 1997. Supervisor of the
Corporation's Risk Management Group. Executive Vice President of the Bank since
March 1997. Director of Popular Securities, Inc. Vice President of J.P. Morgan &
Co. Inc., Morgan Guaranty Trust Co. of N.Y., J.P. Morgan Securities Ltd. and
J.P. Morgan Securities, Inc. from 1982 to 1997. President of J.P. Morgan
Venezuela, S.A. from 1995 to 1997.
SAMUEL T. CESPEDES: (64 years), Secretary of the Board of Directors.
Attorney-at-Law. Proprietary partner of the law firm McConnell Valdes. Secretary
of the Board of Directors of the Corporation and the Bank since 1991. Secretary
of the Board of Directors of Popular North America, Inc., Popular Leasing &
Rental, Inc. and Popular Finance, Inc.
FAMILY RELATIONSHIPS
Mr. Richard L. Carrion, Chairman of the Board, President and CEO of
the Corporation and the Bank, is brother-in-law of Mr. Julio E. Vizcarrondo Jr.
and first cousin of Mr. Jose B. Carrion Jr., nominee.
OTHER RELATIONSHIPS, TRANSACTIONS AND EVENTS
During 2000 the Bank engaged the legal services of the law firm of
McConnell Valdes of which Mr. Samuel T. Cespedes, Secretary of the Board of
Directors of the Corporation and the Bank is a partner. The amount of fees paid
to McConnell Valdes did not exceed 5% of the law firms' revenues for its last
full fiscal year. The Corporation also engaged, in the ordinary course of
business the legal services of Pietrantoni, Mendez & Alvarez, LLP of which Mr.
Ignacio Alvarez and Mr. Antonio Santos, husband and brother, respectively, of
Mrs. Brunilda Santos de Alvarez, Executive Officer of the Corporation since
February 2001, are partners.
The Bank has had loan transactions with the Corporation's directors and
officers, and with their associates, and proposes to continue such transactions
in the ordinary course of its business, on substantially the same terms as those
prevailing for comparable loan transactions with other people and subject to the
provisions of the Banking Act of the Commonwealth of Puerto Rico and the
applicable federal laws and regulations. The extensions of credit have not
involved and do not currently involve more than normal risks of collectibility
or other unfavorable features.
PROPOSAL 2: APPROVAL OF THE 2001 STOCK OPTION PLAN
INTRODUCTION
Effective March 7, 2001, the Board of Directors adopted, subject to
shareholder approval, the 2001 Stock Option Plan (the "2001 Option Plan").
The principal features of the 2001 Option Plan are summarized below.
The summary is qualified by the complete text of the 2001 Option Plan, a copy of
which is attached as Exhibit B to this Proxy Statement.
PURPOSE
The 2001 Option Plan is intended to provide the Corporation and its
subsidiaries with an effective means to attract and retain highly qualified
personnel as well as to provide additional incentive to employees and directors
who provide services to the Corporation and its subsidiaries.
ADMINISTRATION OF PLAN
The 2001 Option Plan provides that unless the Board of Directors
appoints a committee to oversee the administration of the Plan (the
"Committee"), the Board of Directors shall have general authority to administer
the Plan, to grant options, make determinations under, interpretations of, and
to take such steps in connection with the Plan and the options granted
thereunder as it may deem necessary or advisable. If the Committee is appointed
by the Board of Directors to administer the Plan, the Committee will consist of
at least two directors appointed by the Board, each of whom is a "Non-Employee
Director" within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934. The Board of Directors or the Committee will have general
authority to administer the plan, including the authority to determine the form
of the option agreements to be used under the plan, and the terms and conditions
to be included in such option agreements, subject to the
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ratification of the Board of Directors if such limitation is imposed by the
Board of Directors.
NUMBER OF AUTHORIZED SHARES
Under the 2001 Option Plan, 5,000,000 shares of Common Stock, subject
to adjustment for stock splits, recapitalizations and similar events, will be
available for use. The shares are to be made available from authorized but
unissued shares of Common Stock or treasury stock. Based upon the closing sale
price of the Corporation's Common Stock on February 28, 2001, of $27.25 per
share, the aggregate market value of the 5,000,000 shares to be reserved under
the 2001 Option Plan is $136,250,000.
Previously owned shares that are tendered by an employee or
non-employee director to pay the exercise price of an option and shares used to
pay withholding taxes will not be counted towards the maximum number of shares
available for issuance under the 2001 Option Plan.
ELIGIBILITY
Any employee or director of the Corporation or of any of its
subsidiaries, is eligible to participate in the 2001 Option Plan. The selection
of individuals eligible to participate is within the discretion of the Board of
Directors, or the Committee. As of December 31, 2000, the approximate number of
directors and employees of the Corporation and its subsidiaries that are
eligible to participate in the 2001 Option Plan is 80. Since the selection of
participants and awards granted will be within the discretion of the Board of
Directors or the Committee, it is not possible to state the number of directors
and employees that will participate in the 2001 Option Plan or the amount and
value of awards to be granted to such persons under the 2001 Option Plan.
AWARDS UNDER PLAN
The 2001 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 (the "Puerto Rico
Code"), as "incentive stock options" ("ISOs") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") or "non-statutory stock options"
("NSOs"). At the time of original grant of NSO, the Board of Directors or the
Committee, may also authorize the grant of reload options, which shall be NSO's
for such number of shares of Common Stock as were used by the Participant to pay
the purchase price upon the exercise of previously granted options and the
withholding taxes applicable to a NSO exercise, but are still subject to other
terms set forth in the 2001 Option Plan.
The exercise price with respect to options to be granted under the 2001
Option Plan will be determined by the Board of Directors or the Committee at the
time of grant. Under the 2001 Option Plan, the option exercise price may not be
less than 100% of the fair market value of the Common Stock on the date of
grant. Fair market value is defined as the closing price of the Common Stock on
the date of grant as reported on the NASDAQ National market system or, if no
price is reported on such day, then on the next preceding day on which such
price was reported. Payments for shares upon exercise of stock options may be
made either by check, with the consent of the Board of Directors or the
Committee, by exchanging shares of Common Stock which have been held for at
least six months at their fair market value, if approved by the Board of
Directors or the Committee, by authorizing the Corporation, Popular Securities,
Inc. or any other broker-dealer approved by the Corporation to sell, on behalf
of the optionee, the appropriate number of shares otherwise issuable to the
optionee, upon exercise of an option, with the consent of the Board of Directors
or the Committee, and at the election of the optionee, by withholding from those
shares that would otherwise be obtained upon exercise of the option, or number
of shares having a fair market value equal to the option price or a combination
of these methods. The 2001 Option Plan does not permit the Board of Directors or
the Committee to reprice any previously granted options.
No person may receive an ISO if, at the time of grant, such person (a
"10% Holder") owns directly or indirectly more than 10% of the total combined
voting power of all classes of stock of the Corporation unless the option price
is at least 110% of the fair market value of the Common Stock and such option is
not exercisable more than five years after its date of grant. There is also a
$100,000 limit on the value of stock determined at the time of grant of a QSO or
an ISO that may become exercisable for the first time in any calendar year.
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The maximum option term is ten years from the date of grant, except for
10% Holders in the case of ISOs, in which case the maximum term is five years.
Unless an option agreement provides otherwise, all options granted are 20%
exercisable after the first year and an additional 20% is exercisable after each
subsequent year. No option may be granted more than 10 years after the effective
date of the 2001 Option Plan, which shall be March 7, 2001.
TERMINATION OF OPTIONS
Unless earlier terminated in accordance with its terms, a vested option
shall expire six months after any of the following: (i) voluntary termination of
employment by the employee, with or without the consent of the Corporation or
any Subsidiary for reasons other than disability or retirement under a
retirement plan of the Corporation or any subsidiary, or (ii) termination of
employment by the Corporation or any subsidiary, with or without cause, or (iii)
termination of employment because the employing subsidiary ceased to be a
subsidiary of the Corporation and the employee does not, prior thereto or
contemporaneously therewith, become an employee of the Corporation or of another
subsidiary.
Notwithstanding the foregoing provisions, the Committee may, in its
sole discretion, at the time of grant establish different terms and conditions
pertaining to the effect of an optionee's termination of employment on the
exercisability of options.
Unless earlier terminated in accordance with its terms, all options,
whether vested or not, awarded to an employee who terminates employment or is
discharged due with cause by appropriate corporate action or under authority of
law shall terminate immediately upon such termination of employment or
discharge.
Unless earlier expired in accordance with its terms, all options held
by an employee shall become vested immediately upon the employee's termination
of employment due to retirement under the terms of the retirement plan of the
Corporation or the subsidiary employing the employee or due to the employee's
disability. The employee so terminating employment due to retirement or
disability shall have until the option expiration date to exercise the options
awarded to him.
If the holder of an option shall die during the term of an option, the
option shall become immediately vested and the holder or the legal
representatives shall be entitled to exercise the option in whole or in part, to
the extent then unexercised, at any time within one year following the death of
the optionee, but in no event after the option expiration date.
If a nonemployee director shall terminate his service as a director for
reasons other than removal for cause by appropriate Corporate action or under
authority of law, all unexpired options held by the nonemployee director which
have not vested shall become vested immediately. The nonemployee director so
terminating his service as a director shall have until the option expiration
date to exercise the options awarded to him.
Unless earlier terminated in accordance with its terms, a vested option
awarded to a nonemployee director who terminates his service as a director due
to removal for cause by appropriate corporate action or under authority of law
shall terminate immediately upon terminate of service as a director.
CHANGE IN CONTROL
Under the 2001 Option Plan, upon the occurrence of certain "change of
control" transactions involving the Corporation, all options then outstanding
under the 2001 Option Plan become immediately exercisable.
AMENDMENTS AND TERMINATION
The Corporation's Board of Directors may suspend, amend, modify or
terminate the 2001 Option Plan, without shareholder approval except to the
extent required by the Puerto Rico Code or the Code to permit the granting of
QSOs or ISOs under the 2001 Option Plan or by the rules of any securities
exchanges or automated quotation system on which the shares of Common Stock of
the Corporation trade. If the Board of Directors voluntarily submits a proposed
amendment, supplement, modification or termination for stockholder approval,
such submission will not require any further amendments, supplements or
terminations (whether or not relating to the same provision or subject matter)
to be similarly submitted for stockholder approval.
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Unless previously terminated, the 2001 Option Plan will terminate on
March 7, 2011, the tenth anniversary of the effective date of the 2001 Option
Plan. Options may not be granted under the 2001 Option Plan after such date.
Awards granted prior to termination of the 2001 Option Plan shall continue in
accordance with their terms following such termination. No amendment,
suspension, modification or termination of the 2001 Option Plan shall adversely
affect the rights of an employee in awards previously granted without such
employee's consent.
TAX WITHHOLDING AND TAX OFFSET PAYMENTS
The Board of Directors or the Committee may require payment, or
withhold payments made by the 2001 Option Plan, in order to satisfy applicable
withholding tax requirements. The Board of Directors or the Committee may
authorize tax offset payments to assist employees or directors in paying income
taxes incurred as a result of their participation in the 2001 Option Plan. The
amount of the tax offset payments shall be determined by multiplying a
percentage (established by the Committee) by all or a portion of the taxable
income recognized by an employee upon: (i) the exercise of a NSO or (ii) the
disposition of shares received upon exercise of a QSO or an ISO.
INCOME TAX CONSEQUENCES
PUERTO RICO CODE. A recipient of a QSO does not recognize income at the
time of the grant of an option. In addition, no income is recognized at the time
a QSO is exercised. On a subsequent sale or exchange of the shares acquired
pursuant to the exercise of a QSO, the optionee may have taxable long-term or
short-term capital gain or loss, depending on whether the shares were held for
more than six months, measured by the difference between the amount realized on
the disposition of such shares and his or her tax basis in such shares. Tax
basis will, in general, be the amount paid for the shares. The Corporation or
the subsidiary employing the optionee will not be entitled to a business expense
deduction in respect of the grant of the option, the exercise thereof or the
disposition of the shares.
With respect to a NSO, a recipient of a NSO does not recognize income
at the time of grant of the NSO. The difference between the fair market value of
the shares of stock on the date of exercise and the stock option exercise price
generally will be treated as compensation income upon exercise, and the
Corporation or the subsidiary employing the optionee will be entitled to a
deduction in the amount of income so recognized by the optionee. Upon a
subsequent disposition of the shares, the difference between the amount received
by the optionee and the fair market value of the shares of stock on the option
exercise date will be treated as long or short-term capital gain or loss,
depending on whether the shares were held for more than six months.
FEDERAL INCOME TAX CONSEQUENCES. The Corporation is organized under the
laws of the Commonwealth of Puerto Rico and, at the present time, it is not
engaged in any trade or business in the United States. Accordingly, it is
subject generally to a flat 30% federal income tax on its fixed or determinable,
annual or periodic income, if any, from sources within the United States. The
Corporation would only be entitled to claim deductions in computing its U.S.
income tax liability to the extent such deductions were directly related to any
income effectively connected with the conduct of a trade or business in the
United States. For purposes of the discussion below, some of the QSOs granted
under the 2001 Option Plan may also be treated as ISOs for purposes of
Sections 421 and 422 of the Code.
RESIDENTS OF PUERTO RICO. Recipients of stock options who are residents
of Puerto Rico during the entire taxable year and perform services for the
Corporation or its subsidiaries in Puerto Rico, will not have any gross income
for federal income tax purposes in respect of the grant or the exercise of stock
options.
NON-RESIDENTS OF PUERTO RICO AND RESIDENTS OF PUERTO RICO WHO PERFORM
SERVICES OUTSIDE OF PUERTO RICO. In general, an optionee, who is a non-resident
of Puerto Rico or a resident of Puerto Rico who performs services outside Puerto
Rico, will not recognize taxable income upon grant or exercise of an ISO and the
Corporation and its subsidiaries will not be entitled to any business expense
deduction with respect to the grant or exercise of an ISO. However, upon the
exercise of an ISO, the excess of the fair market value on the date of exercise
of the shares received over the exercise price of the shares will be treated as
an adjustment to alternative minimum taxable income. In order for the exercise
of an ISO to qualify for the foregoing tax treatment, the optionee generally
must be an employee or director of the Corporation or its subsidiaries (within
the meaning of Section 422 of the Code) from the date the ISO is granted through
the date three months before the date of exercise.
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If the optionee has held the shares acquired upon exercise of an ISO
for at least two years after the date of grant and for at least one year after
the date of exercise, upon disposition of the shares by the optionee, the
difference, if any, between the sales price of the shares and the exercise price
of the option will be treated as long-term capital gain or loss. If the optionee
does not satisfy these holding period requirements, the optionee will recognize
ordinary income at the time of the disposition of the shares, generally in an
amount equal to excess of the fair market value of the shares at the time the
option was exercised over the exercise price of the option. The balance of the
gain realized, if any, will be long-term or short-term capital gain, depending
upon whether or not the shares were sold more than one year after the option was
exercised. If the optionee sells the shares prior to the satisfaction of the
holding period requirements but at a price below the fair market value of the
shares at the time the option was exercised, the amount of ordinary income will
be limited to the amount realized on the sale over the exercise price of the
option. Subject to any limitations imposed by Section 162(m) of the Code for
federal income tax purposes, the optionee including such compensation in income
and certain reporting requirements, the Corporation and its subsidiaries will be
allowed a business expense deduction to the extent the optionee recognized
ordinary income. Upon any subsequent sale of the shares, the optionee will have
taxable gain or loss, measured by the difference between the amount realized on
the disposition and the tax basis of the shares (generally, the amount paid for
the shares plus the amount treated as ordinary income at the time the option was
exercised).
In general, an optionee, who is a non-resident of Puerto Rico or a
resident of Puerto Rico who performs services outside of Puerto Rico, to whom an
NSO is granted will recognize no income at the time of the grant of the option.
Upon exercise of an NSO, an optionee will recognize ordinary income in an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option (or, if the optionee is subject
to restrictions imposed by Section 16(b) of the Securities Exchange Act of 1934,
upon the lapse of those restrictions, unless the optionee makes a special
election within 30 days after exercise to have income determined without regard
to the restrictions). Subject to any limitations imposed Section 162(m) of the
Code for federal income tax purpose, the director or employee including such
compensation in income and certain reporting requirements, the Corporation or
any of its subsidiaries will be entitled to a tax deduction in the same amount.
Upon a subsequent sale of the shares, the optionee will have taxable gain or
loss, measured by the difference between the amount realized on the disposition
and the tax basis of the shares (generally, the amount paid for the shares plus
the amount treated as ordinary income at the time the option was exercised).
Under the 2001 Option Plan, upon the occurrence of certain "change in
control" transactions involving the Corporation, all options then outstanding
under the 2001 Option Plan become immediately exercisable. Under certain
circumstances, compensation payments attributable to such options may be treated
as "parachute payments" under the Code, in which case a portion of such payments
may be nondeductible to the Corporation or its subsidiaries for federal income
tax purposes and the recipient, if a non-resident of Puerto Rico or a resident
of Puerto Rico who performs services outside of Puerto Rico, may be subject to a
20% excise tax under the Code.
The Board of Directors recommends that stockholders vote FOR the
approval of the 2001 Stock Option Plan.
EXECUTIVE COMPENSATION PROGRAM
REPORT OF THE BANKS HUMAN RESOURCES AND COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
OVERVIEW
The Bank's Human Resources and Compensation Committee (the "Human
Resources Committee") consists of six non-employee directors of the Bank. The
Committee endeavors to keep abreast of competitive compensation practices with
regard to salaries, incentive compensation and supplemental programs in order to
assist the Corporation in attracting and retaining the most qualified executive
officers whose contributions and experience help the Corporation sustain growth,
thereby enhancing shareholders value.
The Human Resources Committee evaluates and recommends to the Board the
Corporation's compensation policy for the Chairman of the Board, President and
CEO and the Executive Officers. The Human Resources Committee considers, among
other factors, competitive pay practices for developing a stronger relationship
between executive compensation and the Bank's long-term performance. It is kept
apprised of such competitive pay practices by an independent consultant who
conducts a periodic analysis of executive compensation of a peer group of
financial institutions similar in size, scope and business orientation (the
"Peer Group"). On an annual basis the banking Peer Group used by the Committee
for comparative purposes is reviewed in light of industry developments, and
significant mergers/acquisitions, in order to ensure that it remains consistent
with the Corporation's size and focus.
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The executive compensation program for principal officers of the
Corporation's subsidiaries is set according to the industry and geographical
area in which each operates and is approved by the Board of Directors of each
respective subsidiary.
CHAIRMAN OF THE BOARD, PRESIDENT AND CEO, MR. RICHARD L. CARRION
On an annual basis, Mr. Carrion submits to the Corporation's Executive
Committee a plan setting forth both quantitative and qualitative goals for the
fiscal year, and objectives for the medium and long-term. In evaluating and
setting compensation the Human Resources Committee considers the Corporation's
performance with respect to the goals set forth in the plan. Therefore, the
Executive Committee evaluates Mr. Carrion's performance by taking into
consideration the growth of the organization, implementation of a
diversification strategy, achievement of financial goals, improvements to the
product and service delivery system and development of human resources. The
weight and significance accorded to these factors is subjective in nature.
Mr. Carrion participates in an annual incentive program designed to
encourage the achievement of short-term financial goals and to increase
shareholder value. The first incentive component could represent 15% of base
salary, if the net income target is met, and if the net income target is
exceeded it could reach 25%. Although the threshold continues to be 100% of
target, the Human Resources Committee may recommend a discretionary bonus if
results obtained are at least 95% of the pre-established net income target. The
second component, which is based on return on equity (ROE) and is designed to
encourage an increase in shareholder value, could range from 5% to 30% of base
salary, depending on the ROE obtained. Additionally, the bonus award may be
increased by 25% when shareholder return exceeds 20% annually for a consecutive
three-year period. Total shareholder return is calculated by taking into account
the compounded annual yield of the stock, considering the market appreciation,
dividends received or dividend reinvestment. This third and last bonus component
recognizes consistent improvement in shareholder value. The maximum total
incentive bonus that may be awarded could be 68.75% of base salary if all
components of the bonus program are achieved. Beginning on 2001, the annual
incentive program has been revised to consider only the net income target.
Incentive bonus could represent 30% of base salary, if the net income target is
met, and if the net income target is exceeded up to 105% it could reach 55%. An
additional 4% bonus will be awarded for each percentage of the net income target
achieved over 105%.
For the year 2000 the financial results achieved represented 95% of the
pre-established target. Based on this result, the Human Resources Committee
recommended a discretionary incentive of 15% of Mr. Carrion's base salary. Mr.
Carrion recommended to the Committee that it consider the bonus on a future
date. This was accepted by all the members of the Committee.
EXECUTIVE OFFICERS
The group of Executive Officers is composed of two Senior Executive
Vice Presidents of the Corporation and eight Executive Vice Presidents of the
Corporation (the "Executive Officers") all of whom participate in the Profit
Sharing, Annual Incentive and Long-Term Incentive Plans of the Bank. The
President and CEO sets the salary increases and the bonuses to be awarded to the
Executive Officers pursuant to the incentive plans. In 2001, two other officers
were appointed Executive Vice President and Executive Officers of the
Corporation.
The salary increase program allows discretionary salary increases based
on individual performance to be twice the increases of the Executive Officers as
a group. It provides the CEO the opportunity to recognize changes in individual
responsibilities and performance levels.
Each Executive Officer participates in the Annual Incentive Plan. In
2000, a bonus of 15% of base salary was awarded to each Executive Officer. As
recommended by the Human Resources Committee, the bonus was based on the fact
that the Corporation's net income was 95% of target net income.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
Juan A. Albors Hector R. Gonzalez
Francisco J. Carreras Alberto M. Paracchini
Maria Luisa Ferre Francisco M. Rexach Jr.
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EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the
Corporation or its subsidiaries to the highest paid Executive Officers of the
Corporation and the most highly compensated principal officers of the
Corporation's subsidiaries.
SUMMARY COMPENSATION TABLE
LONG-TERM
FISCAL ANNUAL COMPENSATION ALL OTHER ANNUAL INCENTIVE PLAN
NAME AND PARTICIPANT POSITION YEAR SALARY(A) BONUS(B) COMPENSATION(C) PAYOUTS(D) TOTAL
----------------------------- ---- --------- -------- --------------- ---------- -----
Richard L. Carrion ...................... 2000 $540,000 $ 60,912 $42,069 -0- $ 642,981
Chairman, 1999 540,000 72,164 53,327 -0- 665,491
President and CEO 1998 526,667 262,552 46,134 $470,142 1,305,495
David H. Chafey Jr ...................... 2000 466,999 121,631 37,021 -0- 625,651
Senior Executive Vice President 1999 412,920 209,480 41,638 -0- 664,038
of the Corporation 1998 393,000 194,560 35,356 281,995 904,911
Jorge A. Junquera ....................... 2000 430,790 111,293 34,548 -0- 576,631
Senior Executive Vice President 1999 401,760 203,866 40,752 -0- 646,378
of the Corporation 1998 384,000 189,479 34,722 281,995 890,196
Carlos J. Vazquez ....................... 2000 342,514 88,833 27,713 N/A 459,060
Executive Vice President 1999 309,742 157,075 31,418 N/A 498,235
of the Corporation 1998 293,645 140,254 21,017 N/A 454,916
Larry B. Kesler ......................... 2000 304,575 79,239 24,643 -0- 408,457
Executive Vice President 1999 271,317 137,646 27,521 -0- 436,484
of the Corporation 1998 258,952 127,899 23,415 196,911 607,177
Maria Isabel P. de Burckhart ............ 2000 283,035 73,469 22,901 -0- 379,405
Executive Vice President 1999 255,954 129,860 25,963 -0- 411,777
of the Corporation 1998 244,288 120,664 22,089 190,731 577,772
Humberto Martin ......................... 2000 282,433 73,283 22,852 -0- 378,568
Executive Vice President 1999 255,409 129,554 25,907 -0- 410,870
of the Corporation 1998 244,633 120,448 22,120 188,811 576,012
Guillermo L. Martinez(e) ................ 2000 425,770 242,714 33,872 N/A 702,356
President of the Board of Directors
and Chief Executive Officer of
GM Group, Inc. (a wholly-owned
subsidiary of the Corporation)
Cameron E. Williams(e) .................. 2000 272,983 165,000 22,000 N/A 459,983
President of Equity One, Inc. 1999 250,000 150,000 62,000 N/A 462,000
(a wholly-owned subsidiary
of Popular North America, Inc.)
Kenneth McGrath ......................... 2000 188,333 140,200 81,815 N/A 410,348
President of Popular Securities, Inc. 1999 180,000 224,200 75,000 N/A 479,200
(a wholly-owned subsidiary 1998 175,000 165,200 59,000 N/A 399,200
of the Corporation)
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(a) Salaries before deductions.
(b) The bonus amount for the Bank's Executive Officers includes a Christmas
bonus, the bonus awarded under the Annual Management Incentive
Compensation Plan, and the cash portion payable under the Profit
Sharing Plan of the Bank. For the subsidiaries' presidents the amount
includes Christmas Bonus, (if any) and performance bonus.
(c) For the Bank's Executive Officers the amount includes deferred portion
awarded under the Profit Sharing Plan of the Bank, amounts accrued
under the Benefit Restoration Plan, the amount from the Profit Sharing
deferred and allocated
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to Stock Plan and the Bank's matching contribution to Stock Plan, which
are described on pages 19 through 21. For Mr. McGrath, amount includes
matching contribution to an 1165(e) plan and a deferred portion of the
performance bonus. For Mr. Williams, amount represents the contribution
of Equity One, Inc. pursuant to Section 401(k) matching and deferred
compensation under Supplementary Executive Retirement Plan. For Mr.
Martinez, amount includes matching contribution to an 1165(e) plan and
deferred compensation under Supplementary Executive Retirement Plan.
Amounts reported do not include the value of perquisites and other
personal benefits because the aggregate amount of such benefits does
not exceed the lesser of $50,000 or 10% of total amount of annual
salary and bonus of any named individual.
d) For the 1998-2000 Long-Term Incentive Plan, the performance of Popular,
Inc.'s stock during the three-year period did not equal or exceed the
three-year combined performance of the S&P 500 Index, the S&P
Financials Index and the S&P Banks Index. In addition, the three-year
average ROE target was not achieved, nor was the Peer Group three-year
average median ROE exceeded. Also, Popular, Inc.'s average ROE did not
represent an improvement over the base year ROE compared to the Peer
Group's median ROE. Therefore, none of the shares assigned at the
beginning of the plan were awarded.
e) Information presented for 2000, 1999 and 1998, except for Mr. Cameron
E. Williams who was appointed President of Equity One, Inc. in 1999 and
for Mr. Guillermo L. Martinez, President of the Board of Directors and
Chief Executive Officer of GM Group, Inc. a wholly-owned subsidiary
acquired by the Corporation during 1999.
LONG-TERM INCENTIVE PLAN
Since 1994, the Executive Officers participate in a Long-Term Incentive
Plan, the goal of which is to encourage long-term corporate performance and
objectives. This Plan divided the incentive payment as follows: 75% based on the
attainment of a pre-established three-year average return on equity ("ROE")
objective for the performance period and 25% based on the achievement of an
average ROE greater than the Peer Group's three-year average median ROE. If the
ROE for the Corporation does not equal or exceed the Peer three-year average
median ROE, the Human Resources Committee, at its own discretion, may recommend
the distribution of 25% of the targeted bonus if the average results attained
for the Plan year represent an improvement of no less than 25% over the base
year. The incentive percentage is established depending on the participant's
base salary at the beginning of the three-year period. The resulting dollar
amount is divided by the average closing price of the Corporation's common
stock.
On April 27, 1999, the Board approved an amendment to the Long-Term
Incentive Plan changing the calculation of the amount of the incentive awarded
to be based on the performance of the S&P 500 Index and the S&P Financial Index.
Beginning in 2000 the S&P Banks Index was also included in the calculation of
the Long-Term Incentive Plan. Therefore, the incentive is determined based on
the market performance of the Corporation's common stock as compared to the
combined performance of the S&P 500 Index, the S&P Financial Index and the S&P
Banks Index during the three-year period of the plan. The range to determine the
percentage of base salaries was also adjusted as follows:
Range
--------------------------
Score Incentive
------------ ---------
<100% 0%
100-109 15%
110-119 25%
120-129 50%
130-139 75%
140-149 100%
150 and over 110%
The score represents the relationship of the performance of the
Corporation's common stock during the three-year period, compared with the
average appreciation of the S&P 500 Index, the S&P Financials Index and the S&P
Banks Index. If the Corporation's target is met or exceeded, the share payments
corresponding to the Corporation's and Peer Group's goals may amount up to 110%
of the base salary of the participant at the end of the Plan year.
The three-year period for the 1999-2001 and 2000-2002 Long-Term
Incentive Plans had not concluded when the amendment became effective. A
transition rule was approved for these plans to allow a proportional calculation
based on the method used at the inception of each plan and the new method.
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The Plan's incentive payment shall be made in common stock of the
Corporation. All common stock to be awarded under this program is purchased in
the open market. The incentive payment could be deferred, at the option of the
participant, until his (her) retirement or it could be paid in common stock of
the Corporation. If the payment is made in common stock of the Corporation a
portion equal to the estimated tax due may be paid in cash.
For the 1998-2000 Long-Term Incentive Plan, the performance of Popular,
Inc.'s stock during the three-year period did not equal or exceeded the
three-year combined performance of the S&P 500 Index, the S&P Financials Index
and S&P Bank Index. In addition, the three-year average ROE target was not
achieved, nor was the Peer Group three-year average median ROE exceeded. Also,
the Corporation's average ROE did not represent an improvement over the base
year ROE compared to the Peer Group's median ROE. Therefore, the total shares
assigned at the beginning of the plan were not awarded.
If the proposed 2001 Stock Option Plan is approved, the Corporation
intends to terminate the 1998-2000 Long-Term Incentive and make no further
awards under this plan as well as to terminate any outstanding awards.
PROFIT SHARING PLAN OF THE BANK
All officers and regular monthly salaried employees of the Bank are
active participants in the Bank's Profit Sharing Plan, as of the first day of
the calendar month following the completion of one year of service. Beginning in
2001 participation starts after three months of service.
Under this plan, the Board of Directors of the Bank determines the
Bank's annual contribution based on the profits of the Bank for the year. The
amount allocated to each officer or employee is based on his or her earned
salary for the year. The total amount contributed for the year 2000 was
$18,538,982. Of the total awarded 40% is contributed to the Profit Sharing Plan,
10% to the Savings & Stock Plan and the remainder (50%) is paid in cash.
However, since 1998 each officer and employee may elect to increase his (her)
contribution to the Savings & Stock Plan up to 15%; as a result of this election
39% was contributed to the Profit Sharing Plan and 11% to the Savings & Stock
Plan.
Beginning on 2001 the vesting requirements for this plan were changed
providing participants with a 100% of vesting rights after five years, instead
of the seven years required before.
BENEFIT RESTORATION PLAN OF THE BANK
The Internal Revenue Service (IRS) set a limit of $170,000 as the
amount of compensation that may be considered in calculating future retirement
payments from qualified pension plans. This limit applies to the Bank's
Retirement Plan and Profit Sharing.
The Board of Directors has approved an unfunded nonqualified "Benefit
Restoration Plan" for those officers whose annual compensation is higher than
the established limit. This non-qualified plan will provide those benefits that
cannot be accrued under the Bank's qualified Retirement and Profit Sharing Plans
because of said compensation limit. The Corporation intends to establish during
2001 one or two qualified and funded retirement plans to provide the benefits
currently provided by the Benefit Restoration Plan to its employees who are
residents of Puerto Rico.
RETIREMENT PLAN OF THE BANK
Banco Popular de Puerto Rico has a non-contributory, defined benefit
Retirement Plan covering substantially all regular monthly employees. Monthly
salaried employees are eligible to participate in the Plan following the
completion of one year of service and 21 years of age. Pension costs are funded
in accordance with minimum funding standards under the Employee Retirement
Income Security Act ("ERISA").
The Retirement Plan formula is based on years of service and total cash
compensation received by the employee. Benefits are paid on the basis of a
straight life annuity plus supplemental death benefits and are not reduced
(offset) for Social Security or other payments received by the participants.
Normal retirement age at the Bank is the latter of (a) the
participant's 65(th) birthday or (b) the completion of five years of service.
Participants can enjoy unadjusted early retirement benefits at age 55 with 10
years of service. Participants can also enjoy actuarially adjusted early
retirement benefits after age 50, whenever the combination of age plus service
is equal or
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more than 75. Maximum retirement benefit obtainable under this plan is 40% of
participant's final average compensation as defined by the plan. This plan is
qualified under section 401(a) of the Internal Revenue Code and Section 1165(e)
of the Puerto Rico Internal Revenue Code.
The following table sets forth the estimated annual benefits that would
become payable under the Retirement Plan and the Benefit Restoration Plan based
upon certain assumptions as to total compensation levels and years of service.
The amounts shown in this table are not necessarily representative of amounts
that may actually become payable under the plans. The amounts represent the
benefits upon retirement on December 31, 2000, of a participant at age 65.
TOTAL
COMPENSATION ESTIMATED ANNUAL BENEFITS / YEARS OF SERVICE
------------------------------------------------------------------------------------------
15 20 25 30 35
-------- -------- -------- -------- --------
$1,400,000 $256,000 $357,000 $459,000 $560,000 $560,000
1,300,000 237,000 332,000 426,000 520,000 520,000
1,200,000 219,000 306,000 393,000 480,000 480,000
1,100,000 201,000 281,000 360,000 440,000 440,000
1,000,000 183,000 255,000 328,000 400,000 400,000
900,000 164,000 230,000 295,000 360,000 360,000
800,000 146,000 204,000 262,000 320,000 320,000
700,000 128,000 179,000 229,000 280,000 280,000
600,000 110,000 153,000 197,000 240,000 240,000
500,000 91,000 128,000 164,000 200,000 200,000
400,000 73,000 102,000 131,000 160,000 160,000
300,000 55,000 77,000 98,000 120,000 120,000
The 2000 total compensation and estimated years of service at age 65
for the highest paid key policy-making Executive Officers of the Corporation are
as follows.
ESTIMATED
2000 YEARS OF
TOTAL SERVICE
COMPENSATION AT AGE 65
------------ ---------
Richard L. Carrion ................... $ 643,000 41.6
David H. Chafey Jr ................... 626,000 39.8
Jorge A. Junquera .................... 577,000 41.5
Carlos J. Vazquez .................... 459,000 26.4
Larry B. Kesler ...................... 408,000 16.5
Maria Isabel P. de Burckhart ......... 379,000 33.7
Humberto Martin ...................... 379,000 40.1
BANCO POPULAR DE PUERTO RICO SAVINGS & STOCK PLAN
The Bank has adopted a Savings & Stock Plan covering employees of the
Bank in Puerto Rico. All regular salaried employees of the Bank are eligible to
participate in the Savings & Stock Plan following the completion of three months
of service.
The Bank may contribute a discretionary amount based on the profits of
the Bank for the year, which is allocated to each officer or employee based on
his or her basic salary for the year, as determined by the Board. The Savings &
Stock Plan allows employees to voluntarily elect to defer a predetermined
percentage not to exceed 10% of their pre-tax total compensation. Beginning in
2001 the Savings & Stock Plan also allows employees to voluntarily elect to
contribute a predetermined
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percentage not to exceed 10% of their after-tax total cash compensation. Both
contribution levels are subject to maximum contribution limits as determined by
applicable laws. In addition, employees will be (i) fully vested after five
years of service, (ii) allowed to make after-tax contributions and (iii)
provided with new investment alternatives.
The Bank will match 50% of the pre-tax amount contributed by the
participant and invested in the Corporation's common stock, up to a maximum
participant contribution determined by the Board each year. For the year 2000,
the maximum participant's contribution subject to employer match was 2% of
participant's annual base salary.
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
The Corporation adopted this Plan effective 1/1/2001 for the benefit of
all regular monthly salaried employees of the following subsidiaries of the
Corporation:
Popular Securities, Inc.
Popular Mortgage, Inc.
Popular Leasing & Rental, Inc.
Popular Finance, Inc.
GM Group, Inc.
Popular Insurance, Inc.
The aforementioned subsidiaries of the Corporation adopted this plan as
of 1/1/2001. All regular monthly salaried employees are eligible to participate
in the plan following the completion of one year of service and attainment of 21
years of age.
The Plan allows employees to voluntarily elect to defer a predetermined
percentage not to exceed 10% of their compensation. The Plan also allows
employees to voluntarily elect to contribute a predetermined percentage not to
exceed 10% of their after-tax compensation. Both contribution levels are subject
to maximum contribution limits as determined by applicable laws.
The corresponding subsidiaries match certain percentage of the pre-tax
amounts contributed by a participant up to a maximum as defined by each
subsidiary. Participants are allowed to receive in-service distributions based
only on economic hardship safe harbor rules.
DEFERRED COMPENSATION PLAN OF EQUITY ONE, INC.
Equity One, Inc. adopted a deferred compensation plan designed to
provide a post retirement benefit to several key executives. Equity One, Inc.
purchases flexible, variable life insurance policies for each participant and
names itself as beneficiary. The cash surrender values of the policies are
expected to pay benefits to the participants upon their retirement. Should the
participant terminate their employment prior to retirement, they are entitled to
their vested portion of their account.
EMPLOYEE BENEFIT PLAN OF EQUITY ONE, INC.
Equity One, Inc. sponsors a defined contribution plan (401(k) covering
all eligible employees. Contributions to this plan are in the form of employee
salary deferrals which are subject to an employer matching contribution up to a
specified limit at the discretion of Equity One, Inc.
POPULAR, INC.
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return during
the measurement period with the cumulative total return, assuming reinvestment
of dividends, of the National Association of Securities Dealers Automated
Quotation System (NASDAQ) Stock Market Index and the NASDAQ Bank Composite
Index.
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The cumulative total shareholder return was obtained by dividing (i) the
cumulative amount of dividends per share, assuming dividend reinvestment, since
the measurement point, December 31, 1995 plus (ii) the change in the per share
price since the measurement date, by the share price at the measurement date.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
TOTAL RETURN AS OF DECEMBER 31
(DECEMBER 31, 1995=100)
BASE
COMPANY/INDEX PERIOD 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
POPULAR, INC.** 9.6875 100.00 174.19 255.48 350.97 288.39 271.61
NASDAQ BANKS COMPOSITE 357.923 100.00 132.04 221.06 219.64 211.14 241.08
NASDAQ STOCK MARKET 345.574 100.00 123.04 150.69 212.51 394.92 237.62
- ---------------------------------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers LLP, the
Corporation's independent public accountants for the year ended December 31,
2000, for professional services rendered for the audit of the Corporation's
annual financial statements for that fiscal year and for the reviews of the
financial statements included in the Corporation's quarterly reports on Form
10-Q for that fiscal year were $941,652.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed to the Corporation for the year ended
December 31, 2000 by PricewaterhouseCoopers LLP for professional services
rendered for information technology services relating to financial information
systems design and implementation.
ALL OTHER FEES
The aggregate fees billed for services rendered to the Corporation by
PricewaterhouseCoopers LLP, other than the services described above under "Audit
Fees" and "Financial Information Systems Design and Implementation Fees," for
the year ended December 31, 2000 were $689,743.
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RETENTION OF INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR 2001
The Board intends to retain the services of PricewaterhouseCoopers LLP
as the independent public accountants of the Corporation for the year 2001.
PricewaterhouseCoopers LLP (former Price Waterhouse) served as independent
public accountants of the Bank since 1971 and of the Corporation since May 1991,
when it was appointed by the Board.
Representatives of PricewaterhouseCoopers LLP will attend the Meeting
and will be available to respond to any appropriate questions that may arise;
they will also have the opportunity to make a statement if they so desire.
PROPOSALS OF SECURITY HOLDERS TO BE PRESENTED AT THE 2002
ANNUAL MEETING OF STOCKHOLDERS
Stockholders' proposals intended to be presented at the 2002 Annual
Meeting of Stockholders must be received by the Corporation's Secretary, at its
principal executive offices, Popular Center Building, San Juan, Puerto Rico,
00918, not later than November 23, 2001 for inclusion in the Corporation's Proxy
Statement and Form of Proxy relating to the 2002 Annual Meeting of Stockholders.
OTHER MATTERS
Management does not know of any other matters to be brought before the
Meeting other than those described previously. Proxies in the accompanying form
will confer discretionary authority to the Proxyholders with respect to any such
other matters presented at the meeting.
To avoid delays in ballot taking and counting, and in order to assure
that your Proxy is voted in accordance with your wishes, compliance with the
following instructions is respectfully requested: upon signing a Proxy as
attorney, executor, administrator, trustee, guardian, authorized officer of a
corporation, or on behalf of a minor, please give full title. If shares are in
the name of more than one recordholder, all should sign.
Whether or not you plan to attend the Meeting, it is very important
that your shares be represented and voted in the Meeting. Accordingly, you are
urged to properly complete, sign, date and return your Proxy Card or vote by
telephone or by Internet.
San Juan, Puerto Rico, March 15, 2001
RICHARD L. CARRION SAMUEL T. CESPEDES
Chairman of the Board, President Secretary
and Chief Executive Officer
YOU MAY REQUEST A COPY OF THE REPORT ON FORM 10K FILED WITH THE SEC BY CALLING
(787) 765-9800 OR WRITING TO AMILCAR JORDAN, SENIOR VICE PRESIDENT, BANCO
POPULAR DE PUERTO RICO, P.O. BOX 362708, SAN JUAN, PR 00936-2708.
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EXHIBIT A
POPULAR, INC.
AUDIT COMMITTEE CHARTER
ARTICLE 1 - ORGANIZATION
The Board of Directors (the "Board") of Popular, Inc. (the
"Corporation") has established an Audit Committee to undertake the
responsibilities and perform the tasks set forth in this Charter.
ARTICLE 2 - COMPOSITION
The Audit Committee shall be comprised of at least three directors,
each of whom shall not be an officer or employee of the Corporation or its
subsidiaries, shall not have any relationship which, in the opinion of the
Board, would interfere with the exercise of independent judgment in carrying out
the responsibilities of a director and shall otherwise satisfy the applicable
membership requirements under the rules of the National Association of
Securities Dealers, Inc., as such requirements are interpreted by the Board in
its business judgment. The members of the Audit Committee shall be designated by
the Board.
The Board shall designate as president of the Audit Committee one of
its members, who shall preside over the meetings of the Committee and shall
inform the Board of the actions taken by the Committee. In the event of a
vacancy or an absence in the Audit Committee, the Board may designate any member
of the Board as substitute, provided such person complies with the requisites
established herein.
ARTICLE 3 - PURPOSE
The purpose of the Audit Committee is to assist the Board:
1. in its oversight of the Corporation's accounting and financial
reporting principles and policies, and internal audit controls
and procedures;
2. in its oversight of the Corporation's financial statements and
the independent audit thereof;
3. in nominating the outside auditors to be proposed for
shareholder approval in any proxy statement, evaluating and,
where deemed appropriate, replacing the outside auditors; and
4. in evaluating the independence of the outside auditors.
In fulfilling their responsibilities hereunder, it is recognized that
members of the Audit Committee are not employees of the Corporation and are not,
and do not represent themselves to be, accountants or auditors by profession or
experts in the fields of accounting or auditing, including matters relating to
the determination of the independence of the outside auditors. As such, it is
not the duty or responsibility of the Audit Committee or its members to conduct
"field work" or other types of auditing or accounting reviews or procedures or
to set auditor independence standards, and each member of the Audit Committee
shall be entitled to rely on (i) the integrity of those persons and
organizations within and outside the Corporation from which it receives
information, (ii) the accuracy of the financial and other information provided
to the Audit Committee by such persons or organizations absent actual knowledge
to the contrary (which shall be promptly reported to the Board) and
(iii) representations made by management as to any information technology,
internal audit and other non-audit services provided by the auditors to the
Corporation.
The function of the Audit Committee is to act in an oversight capacity.
The management of the Corporation is responsible for the preparation,
presentation and integrity of the Corporation's financial statements.
Furthermore, management is responsible for maintaining appropriate accounting
and financial reporting principles and policies, and internal
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controls and procedures designed to assure compliance with accounting standards
and applicable laws and regulations. The Internal Audit Division is responsible
for examining and evaluating the adequacy and effectiveness of the systems of
internal control of the Corporation and its subsidiaries to ensure (i) the
reliability and integrity of information; (ii) compliance with the Corporation's
policies, plans and procedures, as well as laws and regulations; (iii) the
safekeeping of assets; and (iv) the economical and efficient use of resources.
The outside auditors are responsible for planning and carrying out a proper
audit of the Corporation's annual financial statements, reviews of the
Corporation's quarterly financial statements prior to the filing of each
quarterly report on Form 10-Q, and other procedures.
The internal and outside auditors for the Corporation are ultimately
accountable to the Board (as assisted by the Audit Committee). The Board, with
the assistance of the Audit Committee, has the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the outside
auditors or to nominate the outside auditors to be proposed for shareholder
approval in the proxy statement.
The outside auditors shall annually submit to the Corporation a formal
written statement delineating all relationships between the outside auditors and
the Corporation ("Statement as to Independence"), addressing each non-audit
service provided to the Corporation and the matters set forth in Independence
Standards Board Standard No. 1.
The outside auditors shall annually submit to the Corporation a formal
written statement of the fees billed for each of the following categories of
services rendered by the outside auditors: (i) the audit of the Corporation's
annual financial statements for the most recent fiscal year and the reviews of
the financial statements included in the Corporation's Quarterly Reports on Form
10-Q for that fiscal year; (ii) information technology consulting services for
the most recent fiscal year, in the aggregate and by each service (and
separately identifying fees for such services relating to financial information
systems design and implementation); and (iii) all other services rendered by the
outside auditors for the most recent fiscal year, in the aggregate and by each
service.
ARTICLE 4 - DUTIES AND POWERS
To carry out its purposes, the Audit Committee shall have the following
duties and powers:
1. With respect to the outside auditor:
(i) to provide advice to the Board in selecting,
evaluating or replacing outside auditors;
(ii) to review the fees charged by the outside auditors
for audit and non-audit services;
(iii) to ensure that the outside auditors prepare and
deliver annually a Statement as to Independence (it
being understood that the outside auditors are
responsible for the accuracy and completeness of this
Statement), to discuss with the outside auditors any
relationships or services disclosed in this Statement
that may affect the objectivity and independence of
the Corporation's outside auditors and to recommend
that the Board take appropriate action in response to
this Statement to satisfy itself of the outside
auditors' independence;
(iv) if applicable, to consider whether the outside
auditors' provision of (a) information technology
consulting services relating to financial information
systems design and implementation and (b) other
non-audit services to the Corporation is compatible
with maintaining the independence of the outside
auditors; and
(v) to instruct the outside auditors that they are
ultimately accountable to the Board (as assisted by
the Audit Committee).
2. With respect to the Internal Audit Division:
(i) to review the appointment and replacement of the
General Auditor;
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(ii) to review and ratify the annual evaluation and salary
recommendation of the General Auditor as recommended
by the Head of Risk Management;
(iii) to advise the General Auditor that he or she is
expected to provide to the Audit Committee summaries
of and, as appropriate, the significant reports to
management prepared by the Internal Audit Division
and management's responses thereto; and
(iv) to instruct the internal auditors that they (in
conjunction with the outside auditors) are ultimately
accountable to the Board (as assisted by the Audit
Committee).
3. With respect to financial reporting principles and policies,
and internal audit controls and procedures:
(i) to advise management, the Internal Audit Division and
the outside auditors that they are expected to
provide to the Audit Committee a timely analysis of
significant financial reporting issues and practices;
(ii) to consider any reports or communications (and
management's and/or the Internal Audit Division's
responses thereto) submitted to the Audit Committee
by the outside auditors required by or referred to in
SAS 61 (as codified by AU Section 380), as may be
modified or supplemented, including reports and
communications related to:
- deficiencies noted in the audit in the
design or operation of internal controls;
- consideration of fraud in a financial
statement audit;
- detection of illegal acts;
- the outside auditor's responsibility under
generally accepted auditing standards;
- significant accounting policies;
- management judgments and accounting
estimates and assumptions;
- adjustments arising from the audit;
- the responsibility of the outside auditor
for other information in documents
containing audited financial statements;
- disagreements with management;
- consultation by management with other
accountants;
- major issues discussed with management prior
to retention of the outside auditor;
- difficulties encountered with management in
performing the audit;
- the outside auditor's judgments about the
quality of the entity's accounting
principles; and
- reviews of interim financial information
conducted by the outside auditor;
(iii) to meet with management, the General Auditor and/or
the outside auditors:
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- to discuss the scope of the annual audit;
- to discuss the audited financial statements;
- to discuss any significant matters arising
from any audit, report or communication
referred to in Article 4, items 2(iii) or
3(ii) of this charter, whether raised by
management, the Internal Audit Division or
the outside auditors, relating to the
Corporation's financial statements;
- to review the form of opinion the outside
auditors propose to render to the Board and
shareholders;
- to discuss significant changes to the
Corporation's auditing and accounting
principles, policies, controls, procedures
and practices proposed or contemplated by
the outside auditors, the Internal Audit
Division or management; and
- to inquire about significant risks and
exposures, if any, and the steps taken to
monitor and minimize such risks;
(iv) to obtain from the outside auditors assurance that
the audit was conducted in a manner consistent with
Section 10A of the Securities Exchange Act of 1934,
as amended, which sets forth certain procedures to be
followed in any audit of financial statements
required under the Securities Exchange Act of 1934;
and
(v) to discuss with the Corporation's General Counsel any
significant legal matters that may have a material
effect on the financial statements and the
Corporation's compliance policies, including material
notices to or inquiries received from governmental
agencies.
4. With respect to reporting and recommendations:
(i) to prepare any report or other disclosures, including
any recommendation of the Audit Committee, required
by the rules of the Securities and Exchange
Commission to be included in the Corporation's annual
proxy statement;
(ii) to review this Charter at least annually and
recommend any changes to the Board; and
(iii) to report its activities to the Board on a regular
basis and to make such recommendations with respect
to the above and other matters as the Audit Committee
may deem necessary or appropriate.
ARTICLE 5 - RESOURCES AND AUTHORITY OF THE AUDIT COMMITTEE
The Audit Committee shall have the resources and authority appropriate
to discharge its responsibilities, including the authority to engage outside
auditors for special audits, reviews and other procedures and to retain special
counsel and other experts or consultants.
ARTICLE 6 - TERM IN OFFICE
The members of the Committee shall hold office from the time of
designation until the next annual meeting of stockholders of the Corporation.
The Board may, however, extend such period for one or all designated members.
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ARTICLE 7 - MEETINGS
The Committee will meet at least one (1) time every three (3) months,
or more frequently if circumstances dictate, to discuss the matters set forth in
Article 4. In addition to such meetings, the Audit Committee should meet
separately at least annually with management, the General Auditor and the
outside auditors to discuss any matters that the Audit Committee or any of these
persons or firms believe should be discussed privately, including the annual
audited financial statements. The Audit Committee may request any officer or
employee of the Corporation or the Corporation's outside counsel or outside
auditors to attend a meeting of the Audit Committee or to meet with any members
of, or consultants to, the Audit Committee. Members of the Audit Committee may
participate in a meeting of the Audit Committee by means of a conference call or
similar communications equipment by means of which all persons participating in
the meeting can hear each other.
ARTICLE 8 - SECRETARY
The Committee will designate a Secretary among its members. The
Secretary may delegate his (her) functions to any officer of the Corporation
designated by the Secretary. The Secretary, or the person so designated, will
notify the members of the Committee of the place, date, and time of the meetings
of the Committee on a timely basis, as well as prepare and submit the agenda,
reports and documents required for each meeting of the Committee.
ARTICLE 9 - MINUTES OF THE MEETINGS
The Secretary or his (her) designee will prepare accurate minutes of
each meeting of the Committee, indicating which members of the Committee were
present, and summarizing the decisions, recommendations and agreements reached.
The President of the Committee will submit the minutes and the attachments
considered necessary to the Board at their next meeting for their review and
ratification.
ARTICLE 10 - QUORUM AND COMMITTEE DECISIONS
A quorum shall consist of the majority of the members of the Committee.
The decisions of the Committee shall be adopted by an affirmative vote of the
majority of the members present at the meeting in which the decision is
considered. In the event of a tie, the decision will be submitted to the Board
in their next meeting and no action will be taken until the Board makes a
decision.
ARTICLE 11 - AMENDMENTS
This Charter can be amended by means of an express resolution of the
Board.
ARTICLE 12 - EFFECTIVE DATE
This Charter will be effective immediately after its approval by the
Board. The Secretary of the Board will certify it with his (her) signature and
the Corporate seal, indicating the date it was approved.
CERTIFICATE OF RESOLUTION
The undersigned, as Secretary of the Board of Popular, Inc., does
hereby certify that this Audit Committee Charter was duly adopted at a meeting
of the Board of the Corporation held on March 7, 2001, at which a quorum was
present and acting throughout.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Corporation in San Juan, Puerto Rico this 7(th) day of March, 2001.
Juan J. Bermudez Alberto M. Paracchini
Hector R. Gonzalez Francisco M. Rexach Jr.
Manuel Morales Jr. Felix J. Serralles Jr.
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EXHIBIT B
POPULAR, INC.
2001 STOCK OPTION PLAN
EFFECTIVE MARCH 7, 2001
SECTION 1. INTRODUCTION
1.1 PURPOSE
The purpose of the Popular, Inc. 2001 Stock Option Plan (the
"Plan") is to provide Popular, Inc. (the "Corporation") and its subsidiaries
(the "Subsidiary") with an effective means to attract and retain highly
qualified personnel as well as to provide additional incentive to employees and
directors who provide services to the Corporation and the Subsidiary. The Plan
is expected to contribute to the attainment of these objectives by offering
selected employees and directors the opportunity to acquire stock ownership
interests in the Corporation.
1.2 CONSIDERATION TO CORPORATION FOR ISSUANCE OF OPTIONS:
AGREEMENTS BY EMPLOYEES.
Each Employee by signing and accepting an Option Contract
will, if the Committee so requires, agree to remain employed by the Corporation
or a Subsidiary for a specified period of time, and the consideration to the
Corporation for the issuance of Options will be any such employment agreements
as well as the benefits to the Corporation or the Subsidiary from the added
incentive to the Employee of increased proprietorship in the Corporation.
Nothing in the Plan or in any Option Contract shall confer on any individual any
right to continue employed by the Corporation or any Subsidiary or limit the
right of the Corporation or of any Subsidiary to terminate Employment of an
Employee at any time, with or without cause.
1.3 PLAN SUBJECT TO RATIFICATION BY SHAREHOLDERS.
The Plan shall become effective upon adoption by the Board of
Directors, provided that the Plan is approved, within one year following its
adoption by the Board of Directors, by a vote of the holders of a majority of
the shares of Common Stock entitled to vote and present in person or by proxy at
a duly held shareholders' meeting. No Option under the Plan may be granted more
than 10 years after the earlier of the date the Plan is adopted or the date the
Plan is approved by the shareholders of the Corporation, without further
approval by the shareholders of the Corporation.
1.4 LIMITATIONS ON NUMBER OF SHARES ISSUABLE UNDER THE PLAN.
Subject to the following provisions of this Section 1.4, the
aggregate number of shares of Common Stock which may be issued under the Plan
shall be limited to 5,000,000 shares. The shares of Common Stock for which
Options may be granted may consist of either authorized but unissued shares of
Common Stock or shares of Common Stock which have been issued and which shall
have been heretofore or hereafter reacquired by the Corporation. The total
number of shares subject to Options authorized under the Plan shall be subject
to increase or decrease in order to give effect to the adjustment provisions of
Section 3.2 hereof or any amendment adopted as provided in Section 4.2 hereof.
If any Option granted under the Plan is forfeited or otherwise expires,
terminates or is cancelled for any reason without having been exercised in full,
shares of Common Stock are surrendered or withheld from any Option to satisfy an
Optionee's income tax withholding obligations, or shares of Common Stock owned
by an Optionee are tendered to pay the exercise price of an Option, then the
shares covered by such forfeited, expired, terminated or cancelled Option or
which are equal to the number of shares surrendered, withheld or tendered, shall
again become available for purposes of the Plan.
1.5 DEFINITIONS.
The following terms shall have the meanings set forth below:
(a) Board or Board of Directors. The Board of Directors
of the Corporation.
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(b) Committee. The compensation committee or such other
committee or committees as may be appointed by the Board of Directors to
administer the Plan pursuant to the provisions of Section 4.2 hereof. At any
time the Plan is being administered by the Board of Directors pursuant to
Section 4.1, any reference to the Committee shall be deemed to refer to the
Board of Directors.
(c) Common Stock. The Corporation's presently authorized
common stock, par value $6.00 per share, except as this definition may be
modified pursuant to the provisions of Section 3.2 hereof.
(d) Disability. Complete and permanent inability by
reason of illness or accident to perform the duties of the occupation of the
Employee or Nonemployee Director for the Corporation or a Subsidiary when such
disability commenced.
(e) Employee. Any salaried officer or common law employee
of the Corporation or any Subsidiary, or both, including any salaried officer or
employee who is a member of the Board of Directors of the Corporation.
(f) Employment. The rendering of services by an Employee
for the Corporation, for any Subsidiary, or both. Whether military, government
or public service shall constitute termination of employment for purposes of
this Plan or any Option granted hereunder shall be determined in each case by
the Committee in its sole discretion.
(g) Fair Market Value. The closing price of the Common
Stock reported on the NASDAQ National Market system on the date as of which such
value is being determined or, if no price is reported on such day, then on the
next preceding day on which such price was reported, or, if at any time the
Common Stock shall not be reported on the NASDAQ National Market system, the
Committee shall determine the fair market value on the basis of available prices
for such Common Stock or in such manner as may be authorized by applicable
regulations under the PRC and the IRC.
(h) Incentive Stock Option. An option to purchase Common
Stock granted by the Committee under the Plan which satisfies the requirements
of Section 422 of the IRC.
(i) IRC. The United States Internal Revenue Code of 1986,
as amended.
(j) Nonemployee Director. Any director of the Corporation
or a Subsidiary who is not an Employee of the Corporation or any Subsidiary.
(k) Nonstatutory Stock Option. An option to purchase
Common Stock granted by the Committee under the Plan which does not satisfy the
requirements of Section 1046 of the PRC or Section 422 of the IRC.
(l) Option. A Qualified Stock Option, an Incentive Stock
Option or a Nonstatutory Stock Option.
(m) Optionee. A person to whom an Option has been granted
under the Plan.
(n) Option Expiration Date. The date on which an Option
becomes unexercisable by reason of the lapse of time or when a Nonstatutory
Stock Option otherwise becomes unexercisable.
(o) PRC. The Puerto Rico Internal Revenue Code of 1994,
as amended.
(p) Qualified Stock Option. An option to purchase Common
Stock granted by the Committee under the Plan which satisfies the requirements
of Section 1046 of the PRC.
(q) Reload Option. An option to purchase Common Stock
granted by the Committee under the Plan pursuant to Section 2.4.
(r) Subsidiary. Any corporation in an unbroken chain of
corporations beginning with the Corporation if, at the time an Option is
granted, each of the corporations other than the Corporation owns stock
possessing 50% or more of the total combined voting power of all classes of
stock of one of the other corporations in such chain.
The use of the singular shall also include within its meaning
the plural or vice versa.
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SECTION 2. STOCK OPTIONS
2.1 GRANT AND EXERCISE OF OPTIONS.
(a) Grant of Options to Employees. The Board of Directors
or the Committee on behalf of the Corporation may grant Options to purchase
Common Stock to Employees or Nonemployee Directors selected by it in its
discretion.
(b) Option Contracts. Options shall be evidenced by
agreements ("Option Contracts") in such form as the Board of Directors or
Committee shall approve (the Board of Directors in the case of Director Options)
containing such terms and conditions, including the period of their exercise,
whether in installments or otherwise, as shall be contained therein, which need
not be the same for all Options.
(c) Option Price. The purchase price per share of Common
Stock under each Option granted to an Employee or Nonemployee Director shall be
not less than 100 percent of the Fair Market Value per share of such Common
Stock on the date the Option is granted, as determined by the Committee. The
purchase price may be subject to adjustment in accordance with the provisions of
Section 3.2 hereof.
(d) Term of Option. The term during which each Option
granted to an Employee or Nonemployee Directors under the Plan may be exercised
shall not exceed a period of ten years from the date of its grant.
(e) Exercise of Options. Unless an Option Contract
provides otherwise or as provided in Section 3.1 below, each Option shall become
exercisable, on a cumulative basis, with respect to 20% of the shares of Common
Stock covered thereby on the first anniversary of the date of its grant and with
respect to an additional 20% of the shares covered thereby on each subsequent
anniversary. Any part of an Option that has become exercisable shall remain
exercisable until it has been exercised in full or it terminates or expires
pursuant to the terms of the Plan or the applicable Option Contract. Subsequent
to the grant of an Option which is not immediately exercisable in full, the
Board of Directors or the Committee, at any time before complete termination of
such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part.
(f) Options Nontransferable. Options granted under the
Plan shall by their terms be nontransferable otherwise than by will or the laws
of descent and distribution, and, during the lifetime of the Optionee, shall be
exercisable only by the Optionee. No transfer of an Option by an Optionee by
will or by the laws of descent and distribution shall be effective to bind the
Corporation unless the Corporation shall have been furnished with written notice
thereof and a copy of the will and/or such other evidence as the Board of
Directors or Committee may determine necessary to establish the validity of the
transfer.
(g) Payment of Exercise Price. Each Option shall be
exercised by delivery of a written notice to the Corporation stating the number
of whole shares of Common Stock as to which the Option is being exercised and
accompanied by payment therefor. No shares shall be issued on the exercise of
an Option unless paid for in full at the time of purchase. Payment for shares
purchased upon the exercise of an Option shall be made (i) by check payable to
the Corporation, (ii) with the approval of the Board of Directors or the
Committee, in Common Stock which has been held by the Optionee for at least six
months valued at the then Fair Market Value thereof as determined by the Board
of Directors or Committee, (iii) with the approval of the Board Directors or the
Committee, by authorizing the Corporation, Popular Securities, Inc. or a
broker-dealer approved by the Corporation, to sell, on behalf of Optionee, the
appropriate number of shares otherwise issuable to the Optionee upon exercise of
an Option, (iv) with the approval of the Board of Directors or the Committee and
at the election of the Participant, by withholding from those shares that would
otherwise be obtained upon exercise of the Option a number of shares having a
Fair Market Value equal to the Option Price, (v) by any combination of (i),
(ii), (iii), or (iv) above, or (vi) by other means that the Board of Directors
or the Committee deems appropriate. Neither the Corporation nor any Subsidiary
may directly or indirectly lend money to any individual for the purpose of
assisting such individual to acquire or to carry shares issued upon the exercise
of Options granted under the Plan. No Optionee shall have any rights as a
shareholder with respect to any share of Common Stock covered by an Option
unless and until such individual shall have become the holder of record of such
share, and except as otherwise permitted by Section 3.2 hereof, no adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property or distributions or other rights) in respect of
such share for which the record date is prior to the date on which such
individual shall have become the holder of record thereof.
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(h) Investment Purpose. At the time of any exercise of
any Option, the Corporation may, if it shall deem it necessary or desirable for
any reason, require the holder of the Option to represent in writing to the
Corporation that it is the intention of such holder to acquire the shares of
Common Stock for investment only and not with a view to the distribution
thereof. In such event no shares of Common Stock shall be issued to such holder
unless and until the Corporation is satisfied with the correctness of such
representation.
2.2 QUALIFIED STOCK OPTIONS AND INCENTIVE STOCK OPTIONS.
In addition to meeting the requirements of Section 2.1, each
Qualified Stock Option shall be subject to the requirements of (a) and each
Incentive Stock Option shall be subject to the requirements of (a), (b) and (c)
of this Section 2.2.
(a) Annual Limitation of Options Which May Be Considered
Qualified Stock Options and/or Incentive Stock Options. Anything else in the
Plan notwithstanding, if and to the extent that the provisions of Section 1046
of the PRC and/or Section 422 of the IRC shall so require, the aggregate Fair
Market Value (determined as of the time the Option is granted) of the shares
with respect to which Qualified Stock Options and/or Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year (under
the Plan and any other plans of the Corporation and its Subsidiaries) shall not
exceed $100,000.
(b) Incentive Stock Options Granted to Ten Percent
Shareholders. Notwithstanding anything to the contrary contained in this Plan,
an Incentive Stock Option may not be granted to an Optionee who owns, directly
or indirectly, stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Corporation or any Subsidiary
unless, at the time such Incentive Stock Option is granted, the exercise price
of such Incentive Stock Option is at least 110 percent of the Fair Market Value
of the Common Stock subject to the Incentive Stock Option, and such Incentive
Stock Option, by its terms, is not exercisable after the expiration of five (5)
years from the date of grant of such Incentive Stock Option.
(c) Notice. An Optionee shall give prompt (no more than
30 days) notice to the Corporation of any disposition of shares acquired upon
exercise of an Incentive Stock Option if such disposition occurs within either
two years after grant or one year after the receipt of such shares by the
Optionee.
2.3 VOLUNTARY SURRENDER AND CANCELLATION OF NONSTATUTORY STOCK
OPTIONS.
The Committee may grant to one or more holders of Nonstatutory
Stock Options, in exchange for the voluntary surrender and cancellation of such
Nonstatutory Stock Options, new Options having different Option prices than the
Nonstatutory Stock Option prices provided in the Nonstatutory Stock Options so
surrendered and cancelled and containing such other terms and conditions as the
Committee may deem appropriate.
2.4 RELOAD OPTIONS.
At the time a Nonstatutory Stock Option (the "Original
Option") is granted, the Committee may also authorize the grant of a Reload
Option subject to the following terms:
(a) The number of shares of Common Stock subject to the
Reload Option shall be the number of shares, if any, used by the Optionee to pay
the purchase price upon exercise of the Original Option, plus the number of
shares, if any, delivered by the Optionee to satisfy the tax withholding
requirement relating to such exercise.
(b) The Reload Option shall be a Nonstatutory Stock
Option.
(c) The grant of the Reload Option shall be effective
upon the date of exercise of the Original Option, and the term of the Reload
Option shall be the period, if any, remaining from that date to the date upon
which the Original Option would have expired.
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(d) The grant of the Reload Option shall not be effective
if, on the date of exercise of the Original Option, the Optionee is not employed
by the Corporation or a Subsidiary.
(e) The Reload Option shall have such other terms and
conditions as the Committee may, in its sole discretion consistent with this
Section, determine.
SECTION 3. PROVISIONS RELATING TO PLAN PARTICIPATION
3.1 TERMINATION OF EMPLOYMENT OR SERVICE AS A DIRECTOR
(a) Termination of Employment or Discharge. Unless
earlier terminated in accordance with its terms, an Option shall terminate six
months after any of the following:
(i) voluntary termination of Employment by the
Employee, with or without the consent of the Corporation or any Subsidiary for
reasons other than Disability or retirement under a retirement plan of the
Corporation or any Subsidiary, or
(ii) termination of Employment by the Corporation
or any Subsidiary, without cause, or
(iii) termination of Employment because the
employing Subsidiary ceased to be a Subsidiary of the Corporation and the
Employee does not, prior thereto or contemporaneously therewith, become an
Employee of the Corporation or of another Subsidiary.
Notwithstanding the foregoing provision, the Committee may, in
its sole discretion, at the time of grant establish different terms and
conditions pertaining to the effect of an Optionee's termination of employment
on the exercisability of Options.
(b) Termination of Employment or Discharge With Cause.
Unless earlier terminated in accordance with its terms, all Options, whether
vested or not, awarded to an Employee who terminates Employment or is discharged
due with cause by appropriate corporate action or under authority of law shall
terminate immediately upon such termination of Employment or discharge.
(c) Termination of Employment Upon Retirement or
Disability. Unless earlier expired in accordance with its terms, all Options
held by an Employee shall become vested immediately upon the Employee's
termination of Employment due to retirement under the terms of the retirement
plan of the Corporation or the Subsidiary employing the Employee or due to the
Employee's Disability. The Employee so terminating Employment due to retirement
or disability shall have until the Option Expiration Date to exercise the
Options awarded to him.
(d) Vesting and Exercise of Options After Death. If the
holder of an Option shall die during the term of an Option, the Option shall
become immediately vested and the holder or the legal representatives shall be
entitled to exercise the Option in whole or in part, to the extent then
unexercised, at any time within one year following the death of the Optionee,
but in no event after the Option Expiration Date.
(e) Termination of Service as a Director. If a
Nonemployee Director shall terminate his service as a director for reasons other
than removal for cause by appropriate Corporate action or under authority of
law, all unexpired Options held by the Nonemployee Director which have not
vested shall become vested immediately. The nonemployee Director so terminating
his service as a director shall have until the Option Expiration Date to
exercise the Options awarded to him.
Unless earlier terminated in accordance with its terms, a
vested Option awarded to a Nonemployee Director who terminates his service as a
director due to removal for cause by appropriate corporate action or under
authority of law shall terminate immediately upon such termination of service as
a director.
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3.2 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CHANGE OF CONTROL;
DISSOLUTION.
(a) Subject to any required action by the shareholders of
the Corporation, each of (i) the number of shares of Common Stock covered by
each outstanding Option, (ii) the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, (iii) the price per share of Common Stock covered by
each such outstanding Option, and (iv) the maximum number of shares with respect
to which Options may be granted to any Optionee, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split or the payment of a stock dividend with
respect to the Common Stock or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by the
Corporation; provided, however, that (a) each such adjustment with respect to an
Incentive Stock Option or Qualified Stock Option shall comply with the rules of
Section 424(a) of the IRC (or any successor provision) and an applicable
provision of the PRC, respectively, and (b) in no event shall any adjustment be
made which would render any Qualified Stock Option granted hereunder other than
a "qualified option" under Section 1046 of the PRC or any Incentive Stock
Options granted hereunder other than an "incentive stock option" as defined in
Section 422 of the IRC; and provided further, however, that conversion of any
convertible securities of the Corporation shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Corporation
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
(b) If: (1) any person (as defined for purposes of
Section 13(d) and 14(d) of the Exchange Act, but excluding the Corporation and
any of its wholly-owned subsidiaries) acquires direct or indirect ownership of
50% or more of the combined voting power of the then outstanding securities of
the Corporation as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise; or (2) the shareholders
of the Corporation approve (A) any consolidation or merger of the Corporation in
which the Corporation is not the surviving corporation (other than a merger of
the Corporation in which the holders of Common Stock immediately prior to the
merger have the same or substantially the same proportionate ownership of the
surviving corporation immediately after the merger), or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Corporation to
an entity which is not a wholly-owned subsidiary of the Corporation, then the
exercisability of each Option outstanding under the Plan shall be automatically
accelerated so that each Option shall, immediately prior to the specified
effective date of any of the foregoing transactions, become fully exercisable
with respect to the total number of shares subject to such Option and may be
exercisable for all or any portion of such shares. Upon the consummation of any
of such transactions, all outstanding Options under the Plan shall, to the
extent not previously exercised, terminate and cease to be outstanding.
(c) In the event of the proposed dissolution or
liquidation of the Corporation, all outstanding Options will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Committee.
SECTION 4. ADMINISTRATION
4.1 BOARD OF DIRECTORS TO ADMINISTER THE PLAN.
(a) Unless the Board of Directors appoints a Committee
pursuant to Section 4.2, the Board of Directors shall have, subject to the
express provisions of the Plan, general authority to administer the Plan to
Grant Options thereunder and to make determinations under, interpretations of,
and to take such other steps in connection with the Plan and the Options granted
thereunder as it may deem necessary or advisable.
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4.2 INDEPENDENT COMMITTEE TO ADMINISTER THE PLAN.
(a) Composition and Functions of the Committee. A
Committee consisting of at least two directors (who shall be Nonemployee
Directors as defined in Rule 16b-3 of the Securities and Exchange Commission)
may be appointed by the Board of Directors and will have, subject to the express
provisions of the Plan, general authority to administer the Plan, to grant
Options thereunder, subject to the ratification of the Board of Directors if
such limitation is imposed by the Board of Directors, and to perform such other
functions as may be assigned to it by the Board of Directors in connection with
the Plan, including, among other things, determining the form of Option
Contracts to be issued under the Plan and the terms and conditions to be
included in such Option Contracts and adopting from time to time such rules and
regulations as it may deem appropriate for the proper administration of the
Plan. The Committee may also make such determinations under, and such
interpretations of, and take such steps in connection with, the Plan, the rules
and regulations or Options granted thereunder as it may deem necessary or
advisable. The Committee may, in its discretion or in accordance with a
direction from the Board of Directors, waive any provisions of any Option
Contract, provided such waiver is not inconsistent with the terms of the Plan as
then in effect.
(b) Authorization of Actions Taken by the Committee and
Board of Directors. Vacancies in the Committee shall be filled by the Board of
Directors. The Committee may act by a majority of its members either at a
meeting or in writing without a meeting. All questions arising under the Plan or
under any rules and regulations adopted by the Board of Directors or the
Committee or under the Option Contracts, whether such questions involve
interpretation thereof or otherwise, shall be determined by the Committee and
its determination, unless disapproved by the Board of Directors, shall be
conclusive and binding in all cases. To the extent that any such action would
not adversely affect the status of Qualified Stock Options and Incentive Stock
Options under the PRC and IRC, respectively, all matters provided in the Plan,
in the Option Contracts, or in such rules and regulations to be determined or
performed by the Committee may be determined or performed by the entire Board of
Directors. No member of the Board of Directors or of the Committee shall be
liable for any action taken or any determination made in good faith with respect
to the Plan or any Option Contract.
(c) Findings of the Board of Directors and Committee Are
Conclusive. Each determination, interpretation, or other action made or taken
pursuant to the provisions of this Plan by the Board of Directors or the
Committee shall be final and shall be binding and conclusive for all purposes
and upon all persons, including, without limitation thereto, the Corporation,
the shareholders, the Committee and each of the members thereof, and all
Optionees, and their respective successors in interest.
4.3 AMENDMENT AND DISCONTINUANCE OF THE PLAN.
The Board of Directors may at any time amend, modify, suspend
or terminate the Plan, without shareholder approval, except to the extent
required by the PRC or the IRC to permit the granting of Qualified Stock Options
or Incentive Stock Options, or by the rules of any securities exchange or
automated quotation system on which the shares of Common Stock of the
Corporation trade at such time, provided, that no change shall be made which
will have a material adverse effect upon any Option previously granted unless
the consent of the affected Optionee is obtained.
4.4 COMPLIANCE WITH LAW AND OTHER CONDITIONS.
(a) Options. Any exercise by an Optionee of an Option
shall be made only in compliance with any applicable rule or regulation of the
Securities and Exchange Commission exempting such exercise from the operation of
Section 16(b) of the Securities Exchange Act of 1934 and any other applicable
law, rule, regulation or other provision that may hereafter relate to the
exercise and cash settlement rights of Options under the Federal securities
laws.
(b) Generally. No shares of Common Stock shall be issued
pursuant to the exercise of any Option granted under the Plan prior to the
compliance by the Corporation, to the satisfaction of its counsel, with any
applicable laws and with any applicable regulations of any securities exchange
on which such shares are listed.
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4.5 WITHHOLDING TAXES.
Whenever shares of Common Stock are to be issued pursuant to
the Plan, the Corporation shall have the right to require that there be remitted
to the Corporation an amount sufficient to satisfy all applicable federal,
state, commonwealth and local withholding tax requirements prior to the delivery
of any certificate or certificates for such shares. The Corporation reserves the
right to satisfy the applicable federal, state, commonwealth and local
withholding tax requirements through the retention of shares of Common Stock
otherwise transferable upon exercise of an Option. Such withheld amounts shall
meet the Federal securities laws requirements set forth in Section 4.3(a),
hereof. Whenever payments are to be made in cash, such payments shall be net of
an amount sufficient to satisfy federal, state and local withholding tax
requirements and authorized deductions.
4.6 TAX OFFSET PAYMENTS.
The Committee shall have the authority at the time of any
award under this Plan or anytime thereafter to make Tax Offset Payments to
assist Optionees in paying income taxes incurred as a result of their
participation in this Plan. The Tax Offset Payments shall be determined by
multiplying a percentage established by the Committee by all or a portion (as
the Board of Directors or the Committee shall determine) of the taxable income
recognized by an Optionee upon (i) the exercise of a Nonstatutory Stock Option,
or (ii) the disposition of shares received upon exercise of a Qualified Stock
Option or Incentive Stock Option. The percentage shall be established, from time
to time, by the Committee at that rate which the Committee, in its sole
discretion, determines to be appropriate and in the best interests of the
Corporation to assist Optionees in paying income taxes incurred as a result of
the events described in the preceding sentence. Tax Offset Payments shall be
subject to the restrictions on transferability applicable to Options set forth
in Section 2.1
4.7 USE OF PROCEEDS AND FUNDING.
(a) Use of Proceeds. The proceeds from the sale of Common
Stock pursuant to Options granted under the Plan shall constitute general funds
of the Corporation and may be used for its corporate purposes as the Corporation
may determine.
(b) Funding. No provision of the Plan shall require or
permit the Corporation, for the purpose of satisfying any obligations under the
Plan, to purchase assets or place any assets in a trust or other entity to which
contributions are made or otherwise to segregate any assets, nor shall the
Corporation maintain separate bank accounts, books, records or other evidence of
the existence of a segregated or separately maintained or administered fund for
such purposes. Employees shall have no rights under the Plan other than as
unsecured general creditors of the Corporation, except that insofar as they may
have become entitled to payment of additional compensation by performance of
services, they shall have the same rights as other employees under general law.
This Subsection shall not prevent the Corporation from purchasing its Common
Stock for the purpose of meeting its requirements to issue Common Stock pursuant
to the Plan.
4.8 OTHER.
To the extent applicable, this Plan is intended to permit the
issuance of Qualified Stock Options in accordance with the provisions of
Section 1046 of the PRC and Incentive Stock Options in accordance with Section
422 of the IRC. This Plan may be modified or amended at any time, both
prospectively and retroactively, and in such manner as to affect Qualified Stock
Options or Incentive Stock Options previously granted, if such amendment or
modification is necessary for this Plan and the Qualified Stock Options or
Incentive Stock Options granted hereunder to qualify under said provisions of
the PRC and the IRC.
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[POPULAR LOGO] IF YOU WISH TO VOTE BY TELEPHONE, INTERNET OR MAIL,
PLEASE READ THE INSTRUCTIONS BELOW.
c/o BANCO POPULAR de PUERTO RICO
TRUST DIVISION Popular, Inc. encourages you to take advantage of the
PO BOX 362708 convenient ways to vote your shares for matters to be
SAN JUAN PR 00936-2708 covered at the 2001 Annual Meeting of Stockholders.
Please take the opportunity to use one of the three
voting methods outlined below to cast your ballot.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to vote your proxy. Have
your proxy card in hand when you call. You will be
prompted to enter your 12-digit Control Number, which
is located below, and then follow the simple instructions
the Vote Voice provides you.
VOTE BY INTERNET WWW.PROXYVOTE.COM
Use the Internet to vote your proxy. Have your proxy
card in hand when you access the web site. You will be
prompted to enter your 12-digit Control Number, which
is located below, to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Please mark, sign, date and return this card promptly
using the enclosed postage prepaid envelope to: BANCO
POPULAR DE PUERTO RICO, TRUST DIVISION, PO BOX 362708,
SAN JUAN, PUERTO RICO 00936-2708. No postage is required
if mailed in the United States, Puerto Rico or the U.S.
Virgin Islands.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: POPULA KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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[POPULAR LOGO] PROXY
The Board recommends a vote for:
FOR WITHHOLD FOR ALL To withhold authority to vote, mark "For All Except"
1. ELECTION OF THE FOLLOWING NOMINEES: ALL ALL EXCEPT and write the nominee's number on the line below.
1) JOSE B. CARRION
2) HECTOR R. GONZALEZ [ ] [ ] [ ] -----------------------------------------------------
3) MANUEL MORALES JR.
4) JULIO E. VIZCARRONDO JR.
FOR AGAINST ABSTAIN
2. APPROVAL OF THE 2001 STOCK OPTION PLAN [ ] [ ] [ ]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Richard L. Carrion, Jorge A. Junquera and David H. Chafey Jr. or any one or more of them as
Proxies, each with the power to appoint his substitute, and authorizes them to represent and to vote as designated above all
the shares of common stock of Popular, Inc. held of record by the undersigned on March 5, 2001, at the Annual Meeting of
Shareholders to be held at the Centro Europa Building, 1492 Ponce de Leon Avenue, 3rd Floor, San Juan, Puerto Rico, on April
23, 2001, at 10:30 a.m. or at any adjournments thereof. The Proxies are further authorized to vote such shares upon any other
business that may properly come before the meeting or any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2 ABOVE.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
PLEASE SIGN AS YOUR NAME APPEARS ON THIS FORM. IF SHARES ARE HELD JOINTLY, ALL OWNERS SHOULD SIGN.
(VEA AL DORSO TEXTO EN ESPANOL)
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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