The Board has determined that the following directors have no material relationship with the Corporation and are independent under the director independence standards of The Nasdaq Stock Market, Inc. (“Nasdaq”).
The Corporation has a majority of independent directors. During 2007,2008, the independent directors met in executive or private sessions without the Corporation’s management after every regularly scheduled Board meeting. Currently, the independent directors have not appointed a lead director. Instead, the independent directors designate, on a rotational basis, who will preside at each executive session.
STOCKHOLDERS COMMUNICATION WITH THE BOARD OF DIRECTORS
Any stockholder who desires to contact the Board or any of its members may do so by writing to: Popular, Inc., Board of Directors (751), P.O. Box 362708, San Juan, PR00936-2708. Alternatively, a stockholder may contact the Corporation’s Audit Committee or any of its members telephonically by calling the toll-free number(866) 737-6813 or electronically throughwww.popular.com/ethicspoint-en. Communications received by the Audit Committee that are not related to accounting or auditing matters, may in theirits discretion be forwarded by the Audit Committee or any of its members, to other committees of the Board or the Corporation’s management for review.
STANDING COMMITTEES
The Board has standing Audit, Risk Management, Corporate Governance and Nominating, and Compensation committeesCommittees, all of which operate under a written charter.
Audit Committee
The Audit Committee consists of three or more members of the Board. The members of the Audit Committee each have been determined by the Board to be independent as required by the director independence rules of Nasdaq.
11 POPULAR, INC. 2008 PROXY STATEMENT
Currently, the Audit Committee is comprised of four outsidenon-employee directors, all of whom are independent. The Audit Committee held 11eleven meetings during 2007.2008. Earnings releases,Form 10-K andForm 10-Q filings were discussed in eight of such meetings.
The Audit Committee’s primary purpose is to assist the Board in its oversight of the accounting and financial reporting processes of the Corporation. The Audit Committee operates pursuant to a charter that was last amended and restated by the Board on December 19, 2007 and is included as Annex A.2007.
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Audit Committee Financial Experts
The Board has determined that Frederic V. Salerno and William J. Teuber Jr. are financial experts as defined by Item 407(d)(5) ofRegulation S-K under the 1934 Act, and are independent within the meaning of Item 7(d)(3)(iv) of Schedule 14A of the 1934 Act. For a brief listing of Messrs. Salerno’s and Teuber’s relevant experience, please refer to the Board of Directors section.
Risk Management Committee
The Risk Management Committee consists of three or more members of the Board. The Risk Management Committee held 11nine meetings during 2007.2008. The purpose of the Risk Management Committee is to assist the Board in the monitoring of policies and procedures that measure, limit and manage the Corporation’s risks while seeking to maintain the effectiveness and efficiency of the operating and businesses processes. It also assists the Board in the review and approval of the Corporation’s risk management policies and processes.
Compensation Committee
The Compensation Committee consists of three or more members of the Board, each of whom the Board has determined has no material relationship with the Corporation and each of whom is otherwise independent under the Nasdaq’s director independence rules. The Compensation Committee held five meetings during 2007.2008. The purpose of the Compensation Committee is to discharge the Board’s responsibilities (subject to review by the full Board) relating to compensation of the Corporation’s NEOs and to produce an annual report on executive compensation for inclusion in the Corporation’s proxy statement, in accordance with the rules and regulations of the SEC.
In addition, since 2008 the Compensation Committee reviews and assesses incentive compensation arrangements to ensure that they do not encourage senior executive officers to take unnecessary and excessive risks that may threaten the value of the Corporation.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is or has been an officer or employee of the Corporation. No NEO of the Corporation served on any board of directors’ compensation committee of any other company for which any of the directors of the Corporation served as NEO at any time during 2007.2008. Other than disclosed in the Other Relationships, Transactions and Events section, none of the members of the Compensation Committee had any relationship with the Corporation requiring disclosure under Item 404 of the SECRegulation S-K.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee consists of three or more members of the Board, each of whom the Board has determined has no material relationship with the Corporation and each of whom is otherwise independent under Nasdaq’s director independence rules. The Corporate Governance and Nominating Committee held five meetings during 2007.2008.
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The purpose of the Corporate Governance and Nominating Committee is as follows:
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| | • | | identify and recommend individuals to the Board for nomination as members of the Board and its committees; |
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| | • | | identify and recommend individuals to the Board for nomination as CEO of the Corporation; |
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| | • | | identify and recommend individuals to the Board for nomination as Chairman of the Corporation; |
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| | • | | promote the effective functioning of the Board and its committees; and |
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| | • | | develop and recommend to the Board a set of corporate governance principles applicable to the Corporation, and review these principles at least once a year. |
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NOMINATION OF DIRECTORS
Under the Corporation’s Corporate Governance Guidelines, the Board should, based on the recommendations of the Corporate Governance and Nominating Committee, select new nominees for the position of independent director considering the following criteria:
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| | • | | personal qualities and characteristics, accomplishments and reputation in the business community; |
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| | • | | current knowledge and contacts in the communities in which the Corporation does business and in the Corporation’s industry or other industries relevant to the Corporation’s business; |
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| | • | | ability and willingness to commit adequate time to Board and committeecommittees matters; |
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| | • | | the fit of the individual’s skills and personality with those of other directors and potential directors in building a Board that is effective, collegial and responsive to the needs of the Corporation; and |
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| | • | | diversity of viewpoints, background, experience and other demographics factors. |
The Corporate Governance and Nominating Committee will consider nominees recommended by stockholders. There are no differences in the manner in which the Corporate Governance and Nominating Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder. The Corporate Governance and Nominating Committee did not receive any recommendation for nomination from stockholders for the Meeting.
Stockholders who wish to submit nominees for director for consideration by the Corporate Governance and Nominating Committee for election at the Corporation’s 20092010 annual meeting of stockholders may do so by submitting in writing prioradvance notice to November 13, 2008,the Corporation of nominations not more than 180 days nor less than 90 days in advance of the anniversary date of the preceding year’s annual meeting. In the case of a special meeting or in the event that the date of the annual meeting is more than 30 days before or after such anniversary date, notice by the stockholder must be delivered not earlier than the 15th day following the day on which notice is mailed, or a public announcement is first made by the Corporation of the date of such meeting. Under the Corporation’s Amended and Restated By-Laws, stockholder’s nomination must be accompanied by certain information, including the nominees’ names and a brief description of the nominees’ judgment, skills, diversity, and experience with businesses and other organizations,organizations. Such information must be addressed to the Secretary of the Board of Directors (751) at Popular, Inc., 209 Muñoz Rivera Avenue, Hato Rey, Puerto Rico, 00918.
At its February 2,December 16, 2008 meeting, the Corporate Governance and Nominating Committee approved the nominations of María Luisa Ferré, Frederic V. Salerno,Juan J. Bermúdez, Richard L. Carrión, and William J. TeuberFrancisco M. Rexach, Jr., as Class 31 directors for election at the Meeting.
CODE OF ETHICS
The Board has adopted a Code of Ethics (the “Code”) to be followed by the Corporation’s employees, officers (including the CEO, Chief Financial Officer and Corporate Comptroller) and directors to achieve conduct that reflects the Corporation’s ethical principles. Certain portions of the Code deal with activities of directors, particularly with respect to transactions in the securities of the Corporation and potential conflicts of interest. Directors, NEOs, executive officers and employees are required to be familiar with and comply with the Code. The
13 POPULAR, INC. 2008 PROXY STATEMENT
Code provides that any waivers for NEOs, executive officers, or directors may be made only by the independent members of the Board and must be promptly disclosed to the stockholders. During 2007,2008, the Corporation did not receive nor grant any request from directors, NEOs, or executive officers for waivers under the provisions of the Code. The Code was last amended on August 15, 2007September 10, 2008 and is available on the Corporation’s website,www.popular.com.We will post on our website any amendments to the Code or any waivers to the Chief Executive Officer, Chief Financial Officer, Corporate Comptroller or directors.
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15 POPULAR, INC. 2009 PROXY STATEMENT
NAMED EXECUTIVE OFFICERS
The following information sets forth the names of the NEOsexecutive officers of the Corporation as of January 9, 2009, including their age, business experience and directorships during the past five years, and the period during which each such person has served as NEOexecutive officers of the Corporation. For additional information relating to the composition of the executive group, see the caption “Reorganization” under the “Executive Compensation Program” section of this Proxy.
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  | | Richard L. Carrión,age 55
Chairman President, andof the Board since 1993. CEO of the Corporation since 1990.1991, and President from 1991 to January 2009. For additional information, please refer to the Nominees“Nominees for Election as Directors and other Directors section. |
| Directors” section of this Proxy Statement. |
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David H. Chafey Jr.,age 54 |
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55  | | Senior Executive Vice President and Chief Operating Officer of the Corporation since 1997.January 2009. President of the Bank since 2004. Supervisor of the Bank’s Retail Banking Group from 1996 through 2004. Senior Executive Vice President of Popular International Bank, Inc. since 1999 and Popular North America, Inc. since 2000, directlydirect and indirectlyindirect wholly-owned subsidiaries of the Corporation. Director of the Bank and other directlydirect or indirectlyindirect wholly-owned subsidiaries of the Corporation. 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 1999. Member of the San Jorge Children’s Foundation, Inc. since 1998. Director of Visa International since 2004 and of Visa International for the Caribbean and Latin America since 1999. Member of the Advisory Committee of Colegio San Ignacio since 2005. Member of the Board of Trustees of Fairfield University since 2006. |
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| | | Jorge A. Junquera,age 59 |
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Senior Executive Vice President of the Corporation since 1997. Chief Financial Officer of the Corporation and the Bank and Supervisor of the Financial Management Group of the Corporation since 1996. President and Director of Popular International Bank, Inc., a direct wholly-owned subsidiary of the Corporation, since 1996. Director, Inc. of the Bank until 2000 and from 2001 to present. President of Banco Popular, National Association since 2001. Director of Popular North America, Inc. since 1996 and of other indirectlyindirect wholly-owned subsidiaries of the Corporation. Director of YMCA since 1988. Director of La Familia Católica por la Familia en las Américas since 2001. Director of Kings College since 2003. |
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16 POPULAR, INC. 20082009 PROXY STATEMENT
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| | | Roberto R. Herencia,age 48 |
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| | Executive Vice President of the Corporation since 1997. President and Director of Banco Popular North America since 2001. President and Director of Popular North America, Inc. since 2007 and 2000, respectively. Director of Banco Popular Foundation, Inc. since 2005. Trustee of the Museum of Science and Industry (Chicago, Illinois) since 2002 and Le Moyne College (Syracuse, New York) since 2002. Director of Junior Achievement of Chicago since 2003, Operation HOPE, Inc. in Los Angeles, California, since 2004, The Economic Club of Chicago since 2005, The Executive Club of Chicago since 2006 and New America Alliance since 2004. Member of De Paul University’s College of Commerce Advisory Council since 2003. |
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| | | Amílcar L. Jordán,age 46 |
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| | Executive Vice President of the Corporation since 2004. Supervisor in charge of the Corporate Risk Management Group since 2004. Senior Vice President and Comptroller of the Corporation from 1995 to 2004. Director of March of Dimes, Puerto Rico Chapter, since 2005. |
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| | Tere Loubriel,age 55 |
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| | Executive Vice President of the Corporation since 2001. Supervisor in charge of the Corporate People, Communications and Planning Group since 2004. Director of Banco Popular Foundation, Inc. since 2005. Member of the Board of Trustees of Fundación Banco Popular, Inc. since 2006. Supervisor of Human Resources from 2000 through 2004. |
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| | Brunilda Santos de Álvarez,
age 49 |
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Executive Vice President of the Corporation since 2001. Chief Legal Officer of the Corporation since 1997. Secretary of the Board of Directors of Popular North America, Inc., and other directlydirect or indirectlyindirect wholly-owned subsidiaries of the Corporation. Secretary of the Board of Directors 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, Inc. Assistant Secretary of the Board of Directors of the Corporation and the Bank since May 1994. Member of the Board of Regents and of the Board of Directors of Colegio Puertorriqueño de Niñas since 2005 and 2002, respectively. Member of the Board of Governors of Georgetown University Alumni Association since 2007. |
15 POPULAR, INC. 2008 PROXY STATEMENT
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| | Félix M. Villamil,age 46 |
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President and Director of EVERTEC, Inc. since 2004. Executive Vice President of the Corporation since 2002. Supervisor of the Bank’s Operations Group from 2002 through 2004. President Member of the Board of Big Brothers Big Sisters ofMuseo de Arte de Puerto Rico since 2003. |
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| | Samuel T. Céspedes,age 71 |
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| | Secretary of the Board of Directors of the Corporation and the Bank since 1991. Senior Counsel of the law firm McConnell Valdés since 2003. Sole stockholder of Samuel T. Céspedes P.S.C. since 2005. Director and stockholder of Comunicaciones Troncalizadas de Costa Rica, S.A. since 1998. Secretary of the Board of Trustees and Counsel to the Puerto Rico Olympic Trust since 1992.2008. |
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16 POPULAR, INC. 2008 PROXY STATEMENT
FAMILY RELATIONSHIPS
Mr. Richard L. Carrión, Chairman of the Board President and CEO of the Corporation, is the uncle of Mr. José R. Vizcarrondo, a director of the Corporation.
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OTHER RELATIONSHIPS, TRANSACTIONS AND EVENTS
During 2007,2008, the Corporation engaged, in the ordinary course of business, the legal services of the law firm McConnell Valdés LLC, of which Mr. Samuel T. Céspedes, Secretary of the Board of Directors of the Corporation and the Bank, is a Senior Counsel. The fees paid to McConnell Valdés LLC for fiscal year 20072008 amounted to approximately $719,000,$1,004,746, which include approximately $78,000$49,197 paid by the Corporation’s clients in connection with commercial loan transactions. During 20072008, the Corporation also engaged, in the ordinary course of business, the legal services of Pietrantoni Méndez & Álvarez LLP, of which Mr. Ignacio Álvarez and Mr. Antonio Santos, husband and brother, respectively, of Mrs.Ms. Brunilda Santos de Álvarez, Executive Vice President & Chief Legal Officer of the Corporation, are partners. The fees paid to Pietrantoni, Méndez & Álvarez LLP for fiscal year 20072008 amounted to approximately $1,284,000,$1,348,954, which include $429,000$140,441 paid by the Corporation’s clients in connection with commercial loan transactions and $50,000$26,830 paid by investment companies managed by the Bank. In addition, Pietrantoni Méndez & Álvarez LLP leases office space in the Corporation’s headquarters building, which is owned by the Bank, and engages Banco Popular de Puerto Ricothe Bank as trustee of its retirement plan. During 2007,2008, Pietrantoni Méndez & Álvarez LLP made lease payments to the Bank of approximately $889,000$703,790 and paid the Bank approximately $50,000$64,028 for its services as trustee. The engagement of the aforementioned law firms was approved by the Audit Committee, as required by the Policypolicy regarding the Approval Process forProcedural Guidelines with Respect to Related PartyPerson Transactions adopted by the Audit Committee of the Corporation on May 7, 2004 and amended on December 12, 200616, 2008 (the “Related Party Transactions Policy”).
In December 2005, the Bank entered into a commitment to contribute a total of $500,000 to the Fundación Luis A. Ferré during a period of five years in connection with the remodeling of the Ponce Museum of Art premises. The secondthird payment in the amount of $100,000 was made in December 2007.2008. María Luisa Ferré, a director of the Corporation, is the President and a Trustee of the foundation. During 2007,2008, the Bank also made a contribution of $50,000 to the Fundación Luis A. Ferré in connection with the sponsorship of the Ponce Museum of Art Benefit Gala. These contributions were approved by the Audit Committee as required by the Related Party Transactions Policy.
In 2007,2008, the Bank and EVERTEC, Inc. made contributions of $700,000 and $300,000, respectively, to Fundación Banco Popular, Inc. (the “Fundación”), a Puerto Rico not-for-profit corporation created to improve quality of life in Puerto Rico. Furthermore, during 2007 the Bank,2008, the Corporation and EVERTEC, Inc.its subsidiaries contributed approximately $632,000$669,360 to the Fundación in connection with the matching of employee contributions. The Fundación is the Bank’s philanthropic arm and provides a scholarship fund for employees’ children, and supports education and community development projects. Richard L. Carrión (Chairman CEO and PresidentCEO of the Corporation), David H. Chafey Jr. (NEO of the Corporation), Tere LoubrielEduardo J. Negrón (NEO of the Corporation), and Manuel Morales Jr. (Director(director of the Corporation) are members of the Fundación’s Board of Trustees. The Bank appoints five of the nine members of the Board of Trustees. The remaining four trustees are appointed by the Fundación. The Bank also provides significant human and operational resources, including free use of office space, to support the activities of the Fundación. The Bank and the Puerto Rico employees of the Corporation (through voluntary personal donations) are the main source of funds of the Fundación.
17 POPULAR, INC. 2009 PROXY STATEMENT
During 2004, the Banco Popular Foundation, Inc. (“Banco Popular Foundation”), an Illinois not-for-profit corporation, was created to strengthen the social and economic well-being of the communities served by Banco Popular North America. The Banco Popular Foundation is Banco Popular North America’s philanthropic arm and provides support to charitable organizations for community development and education. During 2007,2008, Banco Popular North America made a contribution to the Banco Popular Foundation of $62,478 and contributed $252,190$104,437 in connection with the matching of employee contributions. Richard L. Carrión (Chairman CEO and PresidentCEO of the Corporation), David Chafey Jr., Eduardo J. Negrón and Roberto R. Herencia and Tere Loubriel (both NEOs)(until his resignation on December 31, 2008) (NEOs of the Corporation) are members of the board of directors of the Banco
17 POPULAR, INC. 2008 PROXY STATEMENT
Popular Foundation. In addition, Messrs. Carrión and Herencia are officers of the Banco Popular Foundation. Banco Popular North America provides significant human and operational resources to support the activities of the Banco Popular Foundation.
Certain directors and NEOs have immediate family members who are employed by subsidiaries of the Corporation. The compensation of these family members is established in accordance with the pertinent subsidiary’s employment and compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions. Set forth below is information on those family members of directors and NEOs of the Corporation who are employed by the Corporation’s subsidiaries and received a total compensation in excess of $120,000 during 2007.2008.
Two sons and a daughter in lawdaughter-in-law of Francisco M. Rexach Jr., a director of the Corporation, are employed as Vice President of the Business Banking DivisionConstruction Loans Administration of the Bank, Project Coordinator of the Product Development area in the Card ProductsIndividual Lending Service Division of the Bank, and as an Assistant Vice President of the Trust Division of the Bank, respectively, and received compensation during 2007 in2008 of approximately the aggregate amount of $195,000.$223,000. The son of Manuel Morales Jr., a director of the Corporation, is employed as Senior Vice President of the Ticketpop NetworksSystem Development Division of EVERTEC, Inc. He received compensation in the amount of approximately $255,000$196,422 during 2007.2008. A brother of José R. Vizcarrondo, a director of the Corporation, and nephew of Mr. Richard L. Carrión, is employed as a Vice President in the Merchant Business Administration Division of the Bank and received compensation of approximately $198,000$200,322 during 2007.2008. The son of Jorge A. Junquera, Senior Executive Vice President and Chief Financial Officer of the Corporation, iswas employed until January 2009 as an Assistant Vice President in the Corporate Finance and Advisory Services Division of the Bank and received compensation of approximately $172,000$192,022 during 2007.2008. The disclosed amounts include payments of salary, bonus, incentives, and the cash portion of the profit sharing plan. Otherplan and other benefits and payments, such as the employer matching contribution under savings plans,plans. The total amount did not exceed $13,000.$821,766.
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, including interest rates and collateral, as those prevailing for comparable loan transactions with other people.third parties. The extensions of credit have not involved and do not currently involve more than normal risks of collection or present other unfavorable features.
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PROPOSAL 2: AMENDMENT TO ARTICLE FIFTH OF THE RESTATED ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board recommends the approval by stockholders of the proposal to amend Article Fifth of the Corporation’s Restated Articles of Incorporation to increase the number of authorized shares of Common Stock of the Corporation. The proposed Amendment to Article Fifth would increase the number of authorized shares of the Corporation’s Common Stock from 470,000,000 shares to 700,000,000 shares. This change would be effective upon filing of the amendment to the Restated Articles of Incorporation with the Department of State of the Commonwealth of Puerto Rico. The text of the proposed amendment is set forth in Annex A to this Proxy Statement. Although the text in Annex A assumes the approval of the proposal to reduce the par value (see “Proposal 3: Amendment to Article Fifth of the Certificate of Incorporation to Decrease the Par Value of the Common Stock”), the amendment to increase the number of authorized shares of Common Stock, if approved by stockholders, will become effective, even if the proposal to reduce the par value is not approved.
The Board believes that it is in the best interest of the Corporation and its stockholders that the Corporation have a sufficient number of authorized but unissued shares of Common Stock available for possible use in future acquisitions and expansion opportunities that may arise, for general corporate needs such as future stock dividends or stock splits, and for other proper purposes within the limitations of the law, as determined by the Board. The Corporation has no current plans to use its authorized but unissued shares of Common Stock for any particular purpose. Such shares would be available for issuance without further action by the stockholders, except as otherwise limited by applicable law.
18 POPULAR, INC. 2009 PROXY STATEMENT
If additional shares of Common Stock are issued by the Corporation, it may potentially have an anti-takeover effect by making it more difficult to obtain stockholders’ approval of certain actions, such as a merger. Also, the issuance of additional shares of Common Stock may have a dilutive effect on earnings per share and equity, and may have a dilutive effect on the voting power of existing stockholders if the preferential rights provided in Article Sixth of the Corporation’s Restated Articles of Incorporation are not applicable. The terms of any Common Stock issuance will be determined by the Board and depend upon the purpose for the issuance, market conditions and other factors existing at the time. The increase in authorized shares of Common Stock has not been proposed in connection with any anti-takeover related purpose and the Board and management have no knowledge of any current efforts by anyone to obtain control of the Corporation or to effect large accumulations of the Corporation’s Common Stock.
The resolutions attached to this proxy as Annex A will be submitted for approval by stockholders at the Meeting. The affirmative vote of two thirds of the holders of shares of Common Stock of the Corporation is necessary to adopt the proposed amendment in accordance with the terms of Article Tenth of the Restated Articles of Incorporation. Proxies will be voted FOR the resolutions unless otherwise instructed by the stockholders. Broker non-votes and abstentions will have the same effect as votes cast against the proposed amendment. The Board has declared the desirability of the adoption of this amendment and recommends a vote FOR the resolutions.
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PROPOSAL 3: AMENDMENT TO ARTICLE FIFTH OF THE RESTATED ARTICLES OF INCORPORATION TO DECREASE THE PAR VALUE OF THE COMMON STOCK
The Board recommends the amendment of Article Fifth of the Corporation’s Restated Articles of Incorporation to decrease the par value of the Corporation’s Common Stock. The proposed text of Article Fifth set forth in Annex A assumes stockholder approval of this proposal and the proposal to increase the number of authorized shares of Common Stock. The proposed amendment to Article Fifth would reduce the par value of the Corporation’s Common Stock from $6 per share to $0.01 per share. This change would be effective upon the date of filing the Amendment to the Restated Articles of Incorporation with the Department of State of the Commonwealth of Puerto Rico. The text of the proposed amendment is set forth in Annex A to this Proxy Statement. Although the text in Annex A assumes the approval of the increase the number of authorized shares of Common Stock (see “Proposal 2: Amendment to Article Fifth of the Certificate of Incorporation to Increase the Number of Authorized Shares of Common Stock”), the amendment to decrease the par value of the Common Stock, if approved by stockholders, will become effective, even if the proposal to increase the number of authorized shares of Common Stock is not approved.
The Board believes that it is in the best interest of the Corporation and its stockholders to decrease the par value of the share of Common Stock because the concept of par value was originally conceived as a manner to protect stockholders from being unfairly diluted by establishing a minimum price at which stock of a company could legally be issued or sold has changed. Today, the concept of par value is generally considered anachronistic for public companies, like the Corporation, whose securities are traded on securities exchanges where the market sets the price at which securities may be issued or otherwise sold.
For the reasons stated above, under modern corporation law, the importance of par value has decreased. In Puerto Rico, where the Corporation is organized, as in many other jurisdictions of the United States, the corporate law does not require a specific minimum par value. The Corporation’s Board believes that, in keeping with modern corporate usage, the par value of the Corporation’s Common Stock should be decreased to $0.01 per share, a level commonly used by other companies. The Board also believes that the decrease will make it easier to effect various corporate transactions in the future, including issuances of common stock, in public or private offerings, or through the Corporation’s Dividend Reinvestment and Stock Purchase Plan, and stock splits.
Furthermore, at various times during 2008 and the first quarter of 2009, the Corporation’s Common Stock has traded below the existing $6.00 per share par value. Since under Puerto Rico corporate law shares cannot be sold below their par value, the Corporation would have been prevented at such times from issuing shares of Common Stock even if the Board determined that such issuance would be in the best interest of the Corporation and its stockholders. With the current par value of $6.00 per share, it is also more difficult to split the Corporation’s Common Stock because when effecting a stock split in the form of a stock dividend, the Corporation would be required to transfer a larger amount of additional paid-in capital or retained earnings to the Common Stock account to effect the split. In addition, the reduction in par value would substantially increase the Corporation’s legal surplus available for dividends under the Puerto Rico corporate law. Surplus for corporate law purposes is the difference between stockholders’ equity and legal capital, which generally is equivalent to the aggregate par value of all issued and outstanding shares of capital stock.
19 POPULAR, INC. 2009 PROXY STATEMENT
The proposed decrease in the par value of the Corporation’s Common Stock will have no effect on the total dollar value of the Corporation’s stockholders’ equity. The par value of the Corporation’s Common Stock is reflected in its financial statements by an amount equal to the number of shares of Common Stock issued and outstanding multiplied by the par value of $6.00. Upon the approval by the Corporation’s stockholders to decrease the par value of the Common Stock from $6.00 per share to $0.01 par value per share, for accounting purposes, the Corporation will transfer an amount equal to the product of the number of shares issued and outstanding and $5.99 (the difference between the old and new par values), from the Common Stock account to the additional paid-in capital account. The amounts reflected in these accounts as a result of the decrease in the par value of the Corporation’s Common Stock will be restated for all periods presented in future filings. There will be no other effect on the Corporation’s financial statements.
The resolutions attached to this proxy as Annex A will be submitted for approval at the Meeting. The affirmative vote of two thirds of the holders of shares of Common Stock of the Corporation is necessary to adopt the proposed amendment in accordance with the terms of Article Tenth of the Restated Articles of Incorporation. Proxies will be voted FOR the resolutions unless otherwise instructed by the stockholders. Broker non-votes and abstentions will have the same effect as votes cast against the proposed amendment. The Board has declared the desirability of the adoption of this amendment and recommends a vote FOR the resolutions.
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PROPOSAL 4: ADVISORY VOTE RELATED TO EXECUTIVE COMPENSATION
In February 2009, Congress enacted the American Recovery and Reinvestment Act of 2009 (the “ARRA”). The ARRA imposes a number of requirements on financial institutions, such as the Corporation, that received an investment under the Capital Purchase Program of the United States Treasury’s Troubled Asset Relief Program (“TARP”). One of the requirements is that at each annual meeting of stockholders during the period in which any obligation arising from TARP financial assistance remains outstanding, TARP recipients must allow a separate nonbinding “say on pay” stockholder vote to approve the compensation of executives.
Our overall executive compensation policies and procedures are described in the Compensation Discussion and Analysis and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement. These compensation policies and procedures promote a performance-based culture by providing for higher pay for superior performance, and align the interests of shareholders and executives by linking a substantial portion of compensation to the Corporation’s performance, without encouraging executives to take unnecessary and excessive risks.
These policies and procedures are also designed to attract and to retain highly-talented executives who are critical to the successful implementation of the Corporation’s strategic business plan. The Corporation feels this compensation program, as described in the Compensation Discussion and Analysis of this Proxy Statement, is consistent with the goal of building long-term value for stockholders.
The Compensation Committee, which is comprised entirely of independent directors under the Nasdaq’s director independence rules, oversees our executive compensation program and monitors our policies so they continue to emphasizepay-for-performance and incentive programs that reward executives for results that are consistent with stockholder interests.
This proposal gives you as a stockholder the opportunity to endorse or not endorse our executive pay policies and procedures through the following resolution:
“RESOLVED, that the stockholders approve the overall executive compensation policies and procedures employed by the Corporation, as described in the Compensation Discussion and Analysis and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.“
Because your vote is advisory, it will not be binding upon the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee may take into account the outcome of the vote when considering future executive compensation arrangements.
The Board unanimously recommends a vote FOR approval of the compensation policies and procedures employed by the Corporation as described in this Proxy Statement.
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20 POPULAR, INC. 2009 PROXY STATEMENT
PROPOSAL 5: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board intends to retain the services of PricewaterhouseCoopers LLP as the independent public auditors of the Corporation for the year 2008.2009. PricewaterhouseCoopers LLP has served as independent public auditors of the Bank since 1971 and of the Corporation since May 1991.
Neither the Corporation’s Certificate of Incorporation nor its By-Laws require that the shareholdersstockholders ratify the selection of PricewaterhouseCoopers LLP as the Corporation’s independent auditors. If the shareholders do not ratify the selection, the Board and the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP, but may nonetheless retain such independent auditors. Even if the selection is ratified, the Board and the Audit Committee, in their discretion, may change the appointment at any time during the year if they determine that such change would be in the best interest of the Corporation and its shareholders.stockholders.
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.
The ratification of the selection of PricewaterhouseCoopers LLP as the Corporation’s auditors requires the affirmative vote of the holders of a majority of shares represented in person or by proxy and entitled to vote on that matter.
The Board recommends that you vote FOR the ratification of PricewaterhouseCoopers LLP as the Corporation’s independent registered public accounting firm for 2008.2009.
18 POPULAR, INC. 2008 PROXY STATEMENT
DISCLOSURE OF AUDITORS’ FEES
The following is a description of the fees billed to the Corporation by PricewaterhouseCoopers LLP for the years ended December 31, 20072008 and 2006:2007:
| | | | | | | | | |
| | | December 31, | |
| | | | | | | |
| | | 2007 | | | 2006 | |
| Audit Fees | | $ | 4,462,593 | | | $ | 3,486,500 | |
| | | | | | | | | |
| Audit-Related Fees | | | 1,094,753 | (a) | | | 754,000 | (a) |
| | | | | | | | | |
| Tax Fees | | | 150,000 | (b) | | | 150,000 | (b) |
| | | | | | | | | |
| All Other Fees | | | 56,000 | (c) | | | 56,000 | (c) |
| | | | | | | |
| | | | | | | | | |
| | | $ | 5,763,346 | | | $ | 4,446,500 | |
| | | | | | | |
| | | | | | | | | |
| | | December 31, 2008 | | | December 31, 2007 | |
| |
| Audit Fees | | $ | 4,563,000 | | | $ | 4,462,593 | |
Audit-Related Fees(a) | | | 1,533,500 | | | | 1,280,792 | |
Tax Fees(b) | | | 66,000 | | | | 150,000 | |
All Other Fees(c) | | | 56,000 | | | | 56,000 | |
| | | | | | | | | |
| | | $ | 6,218,500 | | | $ | 5,949,385 | |
| | | | | | | | | |
(a) Includes fees for assurance services such as audits of pension plans, compliance relatedcompliance-related audits, accounting consultations and SAS 70 reports.
(b) Includes fees associated with tax return preparation and tax consulting services.
(c) Includes software license fees.
The Audit Committee has established controls and procedures that require the pre-approval of all audit and permissible non-audit services provided by PricewaterhouseCoopers LLP or another firm. The Audit Committee may delegate to one or more of its members the authority to pre-approve any audit or permissible non-audit services. Under the pre-approval controls and procedures, audit services for the Corporation are negotiated annually. In the event that any additional audit services not included in the annual negotiation or permissible
non-audit services are required by the Corporation, a proposed engagement letter is obtained from the auditor and evaluated by the Audit Committee or the member(s) of the Audit Committee with authority to pre-approve auditor services. Any decisions to pre-approve such audit and non-audit services and fees are to be reported to the full Audit Committee at its next regular meeting. The Audit Committee has considered that the provision of the services covered by this paragraph is compatible with maintaining the independence of the independent registered public accounting firm of the Corporation. During 2007,2008, all auditor fees were pre-approved by the Audit Committee.
AUDIT COMMITTEE REPORT
In the performance of its oversight function, the Audit Committee has considered and discussed the audited financial statements of the Corporation for the fiscal year ended December 31, 20072008 with management and PricewaterhouseCoopers LLP, the Corporation’s independent registered public accounting firm. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, “Communication
21 POPULAR, INC. 2009 PROXY STATEMENT
“Communication with Audit Committees.” Finally, the Audit Committee has received the written disclosures and the letter from PricewaterhouseCoopers LLP required by Independence Standards Board Standard No. 1, as amended, “Independence Discussion with Audit Committees”, has considered whether the provision of non-audit services by the independent registered public accounting firm to the Corporation is compatible with maintaining the auditors’ independence, and has discussed with the independent registered public accounting firm its independence from the Corporation and its management. These considerations and discussions, however, do not assure that the audit of the Corporation’s financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”), that the financial statements are presented in accordance with Generally Accepted Accounting Principles (“GAAP”) or that the Corporation’s registered public accountants are in fact “independent.”
19 POPULAR, INC. 2008 PROXY STATEMENT
As set forth in the Audit Committee Charter, the management of the Corporation is responsible for the preparation, presentation and integrity of the Corporation’s financial statements. Furthermore, management and the Internal Audit Division are responsible for maintaining appropriate accounting and financial reporting principles and policies, and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. PricewaterhouseCoopers LLP is responsible for auditing the Corporation’s financial statements and expressing an opinion as to their conformity with GAAP in the United States of America.
The members of the Audit Committee are not engaged professionally in the practice of auditing or accounting and are not employees of the Corporation. The Corporation’s management is responsible for its accounting, financial management and internal controls. 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 to set auditor independence standards.
Based on the Audit Committee’s consideration of the audited financial statements and the discussions referred to above with management and the independent registered public accounting firm, and subject to the limitations on the role and responsibilities of the Audit Committee set forth in the Charter and those discussed above, the Audit Committee recommended to the Board that the Corporation’s audited financial statements be included in the Corporation’s Annual Report onForm 10-K for the year ended December 31, 20072008 for filing with the SEC.
Submitted by:
Frederic V. Salerno (Chairman)
Juan J. Bermúdez
Francisco M. Rexach Jr.
William J. Teuber Jr.
* * *
EXECUTIVE COMPENSATION PROGRAM
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with management and, based on thesuch review and discussions, the Committee recommended to the Board that this CD&A be included in this Proxy Statement.
In accordance with the requirements related to the Corporation’s participation in the TARP, the Compensation Committee certifies that it has reviewed with the Corporation’s Senior Risk Officer the 2008 Senior Executive Officer (“SEO”) incentive compensation arrangements and has made reasonable efforts to ensure that such arrangements do not encourage SEOs to take unnecessary and excessive risks that may threaten the value of the Corporation. Several plan characteristics which reward performance while mitigating against unnecessary or excessive risks include: a balance between cash-based short-term incentives and stock-based long-term incentives; caps to limit payouts in any given year; mix of financial and non-financial components; use of restricted stock with long vesting periods; and competitive base pay practices. In making this certification, the Compensation Committee reviewed the incentive compensation arrangements in effect for 2008. The Compensation Committee will similarly review 2009 incentive compensation arrangements as such arrangements are established.
In addition, the ARRA includes various provisions related to compensation arrangements at financial institutions participating in TARP. The Committee will review the Corporation’s compensation program to determine what steps should
22 POPULAR, INC. 2009 PROXY STATEMENT
be taken to comply with this new legislation. As part of this review, the Committee may also take into consideration the outcome of the advisory vote related to executive compensation as described in Proposal 4 to this Proxy Statement.
Furthermore, in response to the continued decline in financial markets and the adverse impact of the deteriorating economic conditions on the Corporation’s financial performance, on February 19, 2009 the Corporation adopted a series of compensation-related actions which will generate significant cost savings for the Corporation. The measures, which in total will result in annual savings of approximately $34 million, include the following:
| |
| • | reduction in executive salaries ranging from 5% to 10%, affecting 79 executives, and elimination of certain executive perquisites such as country club memberships; |
|
| • | suspension of the Corporation’s matching contributions to the Puerto Rico and United States pre-tax defined contribution savings plans; |
|
| • | suspension of additional benefit accruals in the Banco Popular de Puerto Rico Retirement Plans and the Benefit Restoration Plan. |
The Corporation took the above steps after detailed consideration, recognizing that, in aggregate, they impact the vast majority of the Corporation’s employees; they will be reviewed annually. Nevertheless, in today’s highly uncertain and volatile environment, they are necessary to mitigate the impact of the economic crisis and position the Corporation for future growth.
Submitted by:
Francisco M. Rexach Jr. (Chairman)
Juan J. Bermúdez
María Luisa Ferré
Manuel Morales Jr.
William J. Teuber Jr.
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee
Members and Role
The Compensation Committee establishes the Corporation’s general compensation philosophy and oversees the compensation program for the Corporation’s executive officers, including the NEOs. The Compensation Committee has fourfive members, each of whom:whom during 2008:
has no material relationship with the Corporation or any of its subsidiaries;
20 POPULAR, INC. 2008 PROXY STATEMENT
| |
| • | had no material relationship with the Corporation or any of its subsidiaries; |
|
| • | was otherwise an “outside director” under Section 162(m) of the U.S. Internal Revenue Code; |
|
| • | was otherwise independent under the director independence rules of Nasdaq; and |
|
| • | was not an officer or employee of the Corporation or any of its subsidiaries. |
is otherwise independent under the director independence rules of Nasdaq; and
is not an officer or employee of the Corporation or any of its subsidiaries.
The Compensation Committee acts pursuant to a written charter adopted on November 12, 2003, which is available on the Corporation’s website atwww.popular.com. Under its charter, the Compensation Committee:
| |
| • | reviews and approves the corporate goals and objectives related to the CEO’s compensation; |
|
| • | conducts the CEO’s annual performance review; |
|
| • | establishes the CEO’s compensation based on the annual performance review; |
|
| • | annually reviews with the CEO the performance of other NEOs; |
|
| • | reviews and approves NEOs’ compensation programs; |
23 POPULAR, INC. 2009 PROXY STATEMENT
conducts the CEO’s annual performance review;
establishes the CEO’s compensation based on the annual performance review;
| |
| • | recommends to the Board incentive compensation plans and equity-based plans in which NEOs participate; and |
|
| • | reviews and approves any severance or similar termination payments proposed to be made to any of the NEOs. |
annually reviews the performance of other NEOs with the CEO;
reviews and approves NEOs’ compensation programs;
recommends to the Board incentive compensation plans and equity-based plans in which NEOs participate; and
reviews and approves any severance or similar termination payments proposed to be made to any of the NEOs.
Meetings
Each Compensation Committee meeting has an agenda established agenda and the topics discussed followin accordance with an annual calendar set by the Compensation Committee Chair, after consultation with management. Additional discussion topics related to external or internal events are added to the agenda as they arise. The Compensation Committee receives and reviews materials in advance of each of its meetings, including information on management’s analyses and recommendations. Depending on the meeting’s agenda, those materials may include:
| |
| • | financial reports on year-to-date performance versus budget and comparisons to prior year performance; |
|
| • | calculations and reports on levels of achievement of individual and corporate performance objectives; |
|
| • | reports on the Corporation’s strategic objectives and budget for future periods; |
|
| • | information on the NEOs’ stock ownership and option holdings; |
|
| • | tally sheets setting forth the NEOs’ total compensation, including base salary, cash incentives and equity awards; |
|
| • | information regarding compensation programs and compensation levels at peer groups of companies; |
|
| • | information on succession for key executive positions, including NEOs; and |
|
| • | reports on human resources matters such as workforce composition, turnover, total compensation, and training and development. |
financial reports on year-to-date performance versus budget and comparisons to prior year performance;
calculations and reports on levels of achievement of individual and corporate performance objectives;
reports on the Corporation’s strategic objectives and budget for future periods;
information on the NEOs’ stock ownership and option holdings;
tally sheets setting forth the NEOs’ total compensation, including base salary, cash incentives and equity awards;
information regarding compensation programs and compensation levels at peer groups of companies;
information on succession for key executive positions, including NEOs; and
reports on human resources matters such as workforce compositions, turnover, total compensation, and training and development.
During 2007,2008, the Compensation Committee met on five occasions.times. The CEO and members of the Corporate People Division attended portions of the meetings, where they presented background information, reports and proposals supporting the Corporation’s strategic objectives, and answered questions posed by the Compensation Committee members. All discussions on decisions involving CEO compensation were made in executive session.session without the participation of the CEO or other members of management.
Process
21 POPULAR, INC. 2008 PROXY STATEMENT
Process
In approving the compensation program for NEOs, the Compensation Committee considers pay levels and programs at comparable financial institutions, the Corporation’s short and long-term financial performance, and the means available means to continue developingdevelop a strong relationship among executive performance, compensation and shareholder returns.
Although the Compensation Committee exercises its independent judgment in reaching compensation decisions, it utilizes the advice provided by the Corporate People Division, the Chief Legal Officer, the Corporate Comptroller, the Corporation’s Senior Risk Officer and the CEO in assessing, designing and recommending compensation programs, plans and awards for NEOs. In particular,particular:
| |
| • | the Corporate People Division, with guidance and advice from external consultants, proposes the design and modifications to the NEO compensation programs, plans and awards; |
|
| • | the Chief Legal Officer counsels on legal matters regarding compensation programs; |
|
| • | the Corporate Comptroller evaluates and advises on the programs’ accounting and tax implications; |
|
| • | the Corporation’s Senior Risk Officer meets with the Compensation Committee to review all risk-related aspects of the NEO incentive plans; and |
|
| • | the CEO works with the Compensation Committee in establishing individual and corporate performance objectives and targets for NEOs, and in reviewing the appropriateness of the financial measures used in incentive plans and the degree of difficulty in achieving specific performance targets. |
24 POPULAR, INC. 2009 PROXY STATEMENT
the Chief Legal Officer counsels on legal matters regarding compensation programs;
the Corporate Comptroller evaluates and advises on the programs’ accounting and tax implications; and
the CEO works with the Compensation Committee in establishing individual and corporate performance objectives and targets for NEOs, and in reviewing the appropriateness of the financial measures used in incentive plans and the degree of difficulty in achieving specific performance targets.
The CEO and the Compensation Committee also review the compensation programs to seeensure that they are aligned with the Corporation’s strategic objectives and diversification strategies.
Benchmarking
The Corporation periodically assesses the competitiveness of its pay practices for NEOs through internal staff research and external studies conducted by executive compensation consultants. Internal staff analyzes publicly available information (e.g., proxies and executive compensation data provided by sources such as SNL Financial, Watson Wyatt, Hewitt Associates and Hay Group)Towers Perrin). The Corporation also takes into consideration executive compensation information from leadingthe largest financial institutions in its headquarters market of Puerto Rico. The Corporation, however, uses this information to obtain a general understanding of current compensation practices of similarly situated companies and not as part of a formal benchmarking process.
In addition, the
The Corporation compares itselfthe main elements of its base and variable compensation against a peer group of publicly-traded regional banks of comparable asset size, and scope of financial services. Thisservices, geographic dispersion and loan-to-deposit ratio. For 2008, this peer group includesincluded the following companies: Comerica Incorporated, M&T Bank Corporation, Marshall & Ilsley Corporation, Union BanCal Corporation, Zions Bancorporation, Huntington Bancshares, Inc. and Synovus Financial Corp. As of December 31, 2006, those institutions had year-end median assets of $50 billion and net income of $684 million, return on average assets of 1.51% and return on average equity of 15.04%. During that period, the Corporation had year-end median assets of $47 billion and net income of $358 million, return on average assets of 0.74% and return on average equity of 9.56%.
| | |
| • | Comerica Incorporated |
| • | Huntington Bancshares |
| • | M&T Bank Corporation |
| • | Marshall & Ilsley Corporation |
| • | Synovus Financial Corp. |
| • | Union BanCal, acquired by Mitsubishi UFJ Financial Group, Inc. in November 2008 |
| • | Zions Bancorporation |
The Corporation uses peer group information as a point of reference in assessingto assess the competitiveness of the executive compensation program. This means that theThe Compensation Committee sets compensation levels so that NEO compensation falls generally within the desired range of comparative pay of the peer group companies when the Corporation achieves the targeted performance levels. An individual’s relative compensation with respect to the peer group may vary according to a number of circumstances, including the Corporation’s financial performance and such individual’s qualifications and performance as assessed by the Compensation Committee. Peer group financial performance is also considered when establishing the return on equity goals in the performance share component of the Corporation’s long-term incentive program, each described below.program.
22 POPULAR, INC. 2008 PROXY STATEMENT
Objectives of the Executive Compensation Program
The Corporation’s long-standing total compensation philosophy is designed to provide higher pay for superior performance, which the Corporation feels is consistent with the goal of building long-term value for shareholders.shareholders, without encouraging executives to take unnecessary and excessive risks. The compensation program’s goals are to:
| | |
| • | motivate high levels of individual performance, coupled with increased shareholder returns; |
|
| • | attract and retain seasoned executives at competitive pay levels; |
|
| • | reward contributions and results in attaining key operating objectives over which the executives have control or influence; and |
|
| • | promote teamwork and collaboration among the executive team. |
motivate high levels of individual performance, coupled with increased shareholder returns;
attract and retain seasoned executives at competitive pay levels;
reward contributions and results in attaining key operating objectives over which the executives have control or influence; and
promote teamwork and collaboration among the executive team.
The compensation analysis begins with a review of the Corporation’s strategic objectives and business plans, followed by an analysis of each NEO’s scope of responsibility, market competitive assessments of comparable positions at the peer companies,institutions, and the relationship between pay and performance (i.e., degree of achievement of the Corporation’s short-term results and long-term growth objectives). The Corporation evaluates whether its compensation programs meet the Corporation’s goals by monitoring engagement and retention of executives, and by assessing the relationship between company and individual performance and actual payouts.
25 POPULAR, INC. 2009 PROXY STATEMENT
Elements of Incentive Compensation
The compensation program for the Corporation’s NEOs consists of base salary and performance-based incentive compensation in the form of cash incentives, as well as grants of restricted stock and performance shares. The program balances short-term and long-term considerations. The short-term incentive rewards objectives that are critical for success over the ensuing twelve months, whereas the long-term incentive promotes sustainable results and value creation over time.
Base Salary
Base salaries are generally designed to be competitive with comparable positions in peer group companies in order to attract and retain executives. Base salaries vary based on the Compensation Committee’s assessment of the NEO’s qualifications, experience, responsibilities, leadership potential, individual goals, performance and competitive pay practices. Base salaries are reviewed annually, but are not necessarily increased.
In an effort to underscore the Corporation’s cost reduction and efficiency initiatives and objectives, in 2005 the Compensation Committee supported the CEO’s request to reduce his base salary by 10% effective September 2005. The CEO’s base salary was not increased in 2006 or 2007 and will remain unchanged in 2008. Also, in support of these initiatives and objectives, effective January 2006, Mr. Chafey accepted a 10% base salary reduction and all other NEOs accepted a 5% base salary reduction. Their base salaries remained unchanged in 2007 for the reasons stated above.
In January 2008, the Compensation Committee reviewed NEO base salaries and establishedincreased the base salary increases forsalaries of NEOs, other than the CEO, (shownas shown in the table below).below. The CEO’s base salary was not increased. The Compensation Committee determined that such increases were warranted in order to remain market-competitivecompetitive and recognize the evolution of certainthe leadership roles in recent years.
While market survey data indicatesshowed that since 2005 top executive base pay has increased an average of approximately 5% annually, since 2005, the Corporation’s NEOs have remained at reduced salary levels for an extended periodas a result of time as described above.a base salary reduction that they accepted in 2006 which remained unchanged in 2007. The 2008 base pay adjustments granted by the Compensation Committee to the NEOs, exceptother than the CEO, seeksought to restore the reductions that havehad been in effect since January 2006.
23 POPULAR, INC. 2008 PROXY STATEMENT
In addition, in the case of Mr. Jordán and Ms. Santos de Álvarez, the Compensation Committee incorporated a base pay adjustment to maintain base pay competitivecompetitiveness with comparable positions at the Corporation’s peer institutions, as identified in the previous section titled Benchmarking.institutions. In approving the base pay increases, the Committee also took into consideration the evolution of their roles during the past five years in terms of increasing scope,responsibility, complexity and regulatory impact. Mr. Villamil’s base pay adjustment recognized the increase in size, scope and profitability of EVERTEC since its inception in 2004. Mr. Negrón assumed his current position effective April 1, 2008 and his compensation was set as described below.
The 2008 increased base pay approved by
As an important part of the actions taken in February 2009 to generate cost savings due to the deteriorating economic crisis and the Corporation’s financial results, the Compensation Committee is:approved a 10% reduction in base salary for Mr. Chafey (Chief Operating Officer) and a 7.5% reduction in base salary for the other NEOs, effective March 2009. A base salary reduction of 10% for Mr. Carrión has been in effect since 2005. Base pay reductions were also implemented for 73 other executives of the Corporation.
| | | | | |
| Jorge A. Junquera | | $ | 565,950 | |
| | | | | |
| David H. Chafey Jr. | | | 767,250 | |
| | | | | |
| Roberto R. Herencia | | | 514,500 | |
| | | | | |
| Félix M. Villamil | | | 400,000 | |
| | | | | |
| Amílcar L. Jordán | | | 400,000 | |
| | | | | |
| Brunilda Santos de Álvarez | | | 400,000 | |
No base pay increase was approved for Ms. Loubriel since she is retiring in March 2008.The following table illustrates these changes:
| | | | | | | | | | | |
| | | 2008 | | | 2009 | | | |
| |
| David H. Chafey Jr. | | | 767,250 | | | | 690,525 | | | |
| | | | | | | | | | | |
| Jorge A. Junquera | | $ | 565,950 | | | $ | 523,500 | | | |
| | | | | | | | | | | |
| Félix M. Villamil | | | 400,000 | | | | 370,000 | | | |
| | | | | | | | | | | |
| Amilcar L. Jordán | | | 400,000 | | | | 370,000 | | | |
| | | | | | | | | | | |
| Brunilda Santos de Álvarez | | | 400,000 | | | | 370,000 | | | |
| | | | | | | | | | | |
| Eduardo J. Negrón | | | 325,000 | | | | 300,625 | | | |
Performance-based Incentive Compensation
NEOs may qualify for short and long-term incentives if they meet the individual and business performance objectives and targets set at the beginning of each year by the Compensation Committee. The Compensation Committee considers the Corporation’s strategic objectives, and diversification strategies, and sets the threshold, target and maximum performance levels such that the relative difficulty of achieving the target level is consistent from year to year. Performance levels are defined as follows:
Threshold –
| |
| • | Threshold - performance improvement that is likely to be achieved; |
26 POPULAR, INC. 2009 PROXY STATEMENT
| |
| • | Target - significant incremental performance improvement that has a reasonable likelihood of being achieved; and |
|
| • | Maximum - superior performance which significantly exceeds expectations and may be considered industry-leading. |
Since 2006, the Corporation has operated in an extremely volatile economic environment in most of its markets, beginning with subprime mortgage segments on the U.S. mainland and subsequently expanding to be achieved
Target – significant incremental performance improvement that has a reasonable likelihood of being achieved
Maximum – superior performance which significantly exceeds expectations and may be considered industry-leading
Inbroader credit segments. While between 2006 and 20072008 certain businesses achieved the Corporationpre-established threshold performance, the Corporation’s financial performance as a whole did not reach the pre-established threshold performance level. Betweenfor incentive compensation based on overall corporate results. Previously, between 2002 and 2005, the Corporation achieved the maximum performance level on one occasion, while in the other three years the results ranged between 101% and 103% of target.
Short-Term Incentive
The short-term cash incentive is designed to reward achievement of annual profit goals.goals, as well as strategic and personal objectives. The Corporation measures actual after-tax net income performance (excluding extraordinary items) against goals established by the Compensation Committee at the beginning of the fiscal year. The short-term cash incentive reflects the financial performance goals according to each NEO’s degree of control or influence over the Corporation’s and individual business unit results, as well asresults; in addition, strategic and personal objectives include leading indicators of future financial success such as detailed in the tables below.critical product or technology infrastructure development, managerial and operational process improvement, achievement of business reorganization, employee engagement and community involvement. Management and the Compensation Committee believe that the established framework leads executives to focus appropriately on the achievement of both quantitative and qualitative goals.
24 POPULAR, INC. 2008 PROXY STATEMENT
For the 20072008 short-term cash incentive, the CEO had a threshold opportunity of 40% of base salary if the Corporation met at least 90% of its net income goal, a target of 100% of salary withif the Corporation reached its net income goal and a maximum of 150%, provided all objectives were met, if the Corporation achieved 110% or more of its net income goal, as outlined in the following table:
| | | | | | |
Net Income
| | Incentive as % of Base |
Goal/Achievement
| | Pay |
| | | | | |
Goal/Achievement | | Incentive as % of Base Pay | | | |
|
| Corporate Net Income | | | | | | |
| | | | | | |
| < Threshold | | | 0 | % | | |
| | | | | | |
Threshold (90%)(90)% | | | 40 | % | | |
| | | | | | |
Target (100%)(100)% | | | 85 | % | | |
| | | | | | |
| Maximum (110% +) | | | 135 | % | | |
| | | | | | |
Strategic and Personal | | | 15 | % | | |
| | | | | | | |
Total (Target) | | | 100 | % | | |
The other NEOs had a target short-term cash incentive for 2007 of 100% of base pay with a maximum of 140%, provided all objectives were met, as outlined in the following table:
| | | | | | | | | |
| | | Business Unit Leaders | | Corporate Area Leaders |
| Net Income Goal/Achievement | | (David H. Chafey Jr., | | (Jorge A. Junquera, Tere Loubriel, |
| | | Roberto R. Herencia, | | Amílcar L. Jordán, Brunilda |
| | | Félix M. Villamil) | | Santos de Álvarez) |
| | | | | | | | | |
Corporate Net Income | | | | | | | | |
| | | | | | | | | |
| < Threshold | | | 0 | % | | | 0 | % |
| | | | | | | | | |
| Threshold (90%) | | | 20 | % | | | 35 | % |
| | | | | | | | | |
| Target (100%) | | | 40 | % | | | 70 | % |
| | | | | | | | | |
| Maximum (110% +) | | | 60 | % | | | 110 | % |
| | | | | | | | | |
Business Unit Net Income | | | | | | | | |
| < Threshold | | | 0 | % | | | - | |
| | | | | | | | | |
| Threshold (90%) | | | 20 | % | | | - | |
| | | | | | | | | |
| Target (100%) | | | 40 | % | | | - | |
| | | | | | | | | |
| Maximum (110% +) | | | 60 | % | | | - | |
| | | | | | | | | |
Strategic and Personal | | | 20 | % | | | 30 | % |
| | | | | | | | | |
Total (Target) | | | 100 | % | | | 100 | % |
As noted, the CEO’s short-term incentive is primarily driven by the Corporation’s financial results, with additional strategic and personal components that are approved by the Compensation Committee. However, 2007 wasDuring 2008, the Corporation incurred a very difficult yearconsolidated loss of $1.2 billion and did not meet the $312 million net income incentive threshold. The Corporation’s 2008 financial results were mainly impacted by an increase in the provision for loan losses due to rapidly deteriorating economic conditions both in the United States and Puerto Rico, and charges related to actions taken to discontinue and sell non-strategic businesses in the United States. In particular, the sale of loan and servicing assets of the Corporation’s businessmortgage subsidiary in the United States, Popular North America, Inc., and its results of operations for 2007 was considerably below the pre-established threshold. This was mainly due to losses suffered as a result of extremely difficult mortgage and credit markets, Popular Financial Holdings Inc. restructuring plans and loan recharacterization transaction and the restructuring plan at E-LOAN, Inc. which led to goodwill and trademark impairments. Popular North America’s financial difficulties had(PFH), resulted in a significant impact on the Corporation’s results of operations. The Corporation experienced a 2007 net loss of approximately $64.5$450 million. The sale included approximately $1.17 billion in loans and mortgage servicing assets, significantly reducing Popular’s subprime assets, and provided more than $700 million and, therefore, did not reachin additional liquidity, which placed the minimum performance thresholdCorporation in a stronger position during the 2008 liquidity crisis. The Corporation also registered a $652 million loss related to the valuation of approximately $344 million of net profit.deferred tax assets in its U.S. operations. The Compensation Committee did not award a short-term incentive to the CEO.
The other NEOs had a 2008 threshold short-term cash incentive opportunity of 40% of base salary if the Corporation and its business units met at least 90% of their net income goal, a target of 100% if they reached their net income goal, and a maximum of 140% if they reached 110% or more of their net income goal. For Messrs. Chafey, Villamil and Herencia, the business unit component relates to their respective businesses. For the other NEOs, the business unit component relates
25
27 POPULAR, INC. 20082009 PROXY STATEMENT
to the average results of the Corporation’s business units. The short-term incentive opportunities are illustrated in the following table:
| | | | | | |
| Net Income Goal/Achievement | | Incentive as % of Base Pay | | | |
| | | | | | |
| Corporate Net Income | | | | | | |
| | | | | | |
| < Threshold | | | 0 | % | | |
| | | | | | |
| Threshold (90%) | | | 20 | % | | |
| | | | | | |
| Target (100%) | | | 40 | % | | |
| | | | | | |
| Maximum (110% +) | | | 60 | % | | |
| | | | | | |
| Business Unit Net Income | | | | | | |
| | | | | | |
| < Threshold | | | 0 | % | | |
| | | | | | |
| Threshold (90%) | | | 20 | % | | |
| | | | | | |
| Target (100%) | | | 40 | % | | |
| | | | | | |
| Maximum (110% +) | | | 60 | % | | |
| | | | | | |
| Strategic and Personal | | | 20 | % | | |
| | | | | | |
| Total (Target) | | | 100 | % | | |
28 POPULAR, INC. 2009 PROXY STATEMENT
The short-term incentive for the other NEOs is primarily driven by financial results of the Corporation and if applicable, their respectivethe various business units. There is a strategic and personal portioncomponent recommended by the CEO and approved by the Compensation Committee, correspondingwhich may amount to a maximum of 20% of base pay. Although some NEOs would have received awards for business unit leadersperformance and 30%all of them achieved many of their strategic and personal goals, they were not granted short-term incentives for corporate area leaders.2008 in light of the Corporation’s 2008 consolidated net loss. Potential and actual awards to NEOs, other than the CEO, are summarized on the following table:
Performance goals in $ thousands of net income
awards expressed as % of base pay
| | | | | | | | | | | | | | | | | |
Performance goals in $ thousands of net income
awards expressed as % of base pay | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | David H.
Chafey Jr. | | Félix M.
Villamil | | Roberto R.
Herencia | | Jorge A.
Junquera | | Eduardo J.
Negrón | | Amílcar L.
Jordán | | Brunilda
Santos de
Álvarez | | |
| | | | | | | | | | | | | | | | | |
| | | BPPR and
Subsidiaries | | EVERTEC | | Popular North
America | | Popular, Inc.’s
CFO | | Popular, Inc.’s
EVP People,
Comm. and
Planning | | Popular, Inc.’s
EVP Risk
Management | | Popular, Inc.’s
Chief Legal
Officer | | |
| | | | | | | | | | | | | | | | | |
Corporate
Performance | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Threshold | | $312,053 | | $312,053 | | $312,053 | | $312,053 | | $312,053 | | $312,053 | | $312,053 | | |
| | | | | | | | | | | | | | | | | |
| Target | | $346,726 | | $346,726 | | $346,726 | | $346,726 | | $346,726 | | $346,726 | | $346,726 | | |
| | | | | | | | | | | | | | | | | |
| Actual | | $(1,243,903) | | $(1,243,903) | | $(1,243,903) | | $(1,243,903) | | $(1,243,903) | | $(1,243,903) | | $(1,243,903) | | |
| | | | | | | | | | | | | | | | | |
| Award | | 0% | | 0% | | 0% | | 0% | | 0% | | 0% | | 0% | | |
Business Unit
Performance | | |
| | | | | | | | | | | | | | | | | |
| Threshold | | $294,152 | | $31,846 | | $28,892 | | $312,053 | | $312,053 | | $312,053 | | $312,053 | | |
| | | | | | | | | | | | | | | | | |
| Target | | $326,836 | | $35,384 | | $32,102 | | $346,726 | | $346,726 | | $346,726 | | $346,726 | | |
| | | | | | | | | | | | | | | | | |
| Actual | | $239,128 | | $36,538 | | $(1,405,038) | | $(1,243,903) | | $(1,243,903) | | $(1,243,903) | | $(1,243,903) | | |
| | | | | | | | | | | | | | | | | |
| Award | | 0% | | 0% | | 0% | | 0% | | 0% | | 0% | | 0% | | |
| | | |
Strategic &
Personal | | |
| | | | | | | | | | | | | | | | | |
Maximum
Opportunity | | 20% | | 20% | | 20% | | 20% | | 20% | | 20% | | 20% | | |
| | | | | | | | | | | | | | | | | |
| Award | | 0% | | 0% | | 0% | | 0% | | 0% | | 0% | | 0% | | |
Total Short-
Term Incentive | | |
| | | | | | | | | | | | | | | | | |
| | | 0% | | 0% | | 0% | | 0% | | 0% | | 0% | | 0% | | |
| | | | | | | | | | | | | | | | | |
| | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Brunilda |
| | | David H. | | Félix M. | | Roberto R. | | Jorge A. | | Tere Loubriel | | Amílcar L. | | Santos de |
| | | Chafey Jr. | | Villamil | | Herencia | | Junquera | | | | | | Jordán | | Álvarez |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Popular, Inc.’s | | | | |
| | | | | | | | | | | | | | | | | | | EVP People, | | Popular, Inc.’s | | Popular, Inc.’s |
| | | BPPR and | | | | | | Popular North | | Popular, Inc.’s | | Comm. and | | EVP Risk | | Chief Legal |
| | | Subsidiaries | | EVERTEC | | America | | CFO | | Planning | | Management | | Officer |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate Performance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Threshold | | $ | 344,018 | | | $ | 344,018 | | | $ | 344,018 | | | $ | 344,018 | | | $ | 344,018 | | | $ | 344,018 | | | $ | 344,018 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Target | | $ | 382,242 | | | $ | 382,242 | | | $ | 382,242 | | | $ | 382,242 | | | $ | 382,242 | | | $ | 382,242 | | | $ | 382,242 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | $ | (64,493 | ) | | $ | (64,493 | ) | | $ | (64,493 | ) | | $ | (64,493 | ) | | $ | (64,493 | ) | | $ | (64,493 | ) | | $ | (64,493 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Award | | | 0% | | | | 0% | | | | 0% | | | | 0% | | | | 0% | | | | 0% | | | | 0% | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Business Unit Performance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Threshold | | $ | 310,485 | | | $ | 29,005 | | | $ | 52,934 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Target | | $ | 344,984 | | | $ | 32,228 | | | $ | 58,816 | | ---------- Not Applicable ---------- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | $ | 327,282 | | | $ | 31,284 | | | $ | (467,758 | ) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Award | | | 30% | | | | 34% | | | | 0% | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Strategic & Personal | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Maximum Opportunity | | | 20% | | | | 20% | | | | 20% | | | | 30% | | | | 30% | | | | 30% | | | | 30% | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Award | | | 20% | | | | 18% | | | | 10% | | | | 25% | | | | 25% | | | | 25% | | | | 25% | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Short-Term Incentive | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 50% | | | | 52% | | | | 10% | | | | 25% | | | | 25% | | | | 25% | | | | 25% | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 346,870 | | | $ | 153,326 | | | $ | 49,000 | | | $ | 134,750 | | | $ | 79,625 | | | $ | 73,500 | | | $ | 73,500 | |
The Compensation Committee based the achievement of strategic and personal goals for the NEOs, other than the CEO, on the following considerations:
• | | Mr. Chafey was granted 20% (out of 20%) for achieving in Banco Popular de Puerto Rico and its subsidiaries, under a difficult economic environment, increases in 8 out of 9 market share categories; utilizing effective cost efficiency measures to counteract the negative income impact of increases in the loan loss provision; increasing employee engagement; increasing community involvement; and, in general, demonstrating excellent leadership practices. |
|
• | | Mr. Villamil was granted 18% (out of 20%) because, under his leadership, EVERTEC, Inc. increased revenues, net income and transaction volume despite a recession in its main market (Puerto Rico) and an increase in |
26 POPULAR, INC. 2008 PROXY STATEMENT
| | competitive pressures in all regions. EVERTEC also achieved outstanding community involvement with the highest participation rate in the Fundación Banco Popular, Inc. and in several community activities. |
|
• | | Mr. Herencia was granted 10% (out of 20%) for integrating Banco Popular North America, Popular Financial Holdings and E-LOAN into one management entity, Popular North America, and executing several difficult strategic initiatives aimed at improving the deteriorating profitability resulting from the subprime crisis, the ongoing decline in the real estate market and the credit liquidity crisis. |
|
• | | Mr. Junquera, Ms. Loubriel, Ms. Santos de Álvarez and Mr. Jordán were granted 25% (out of 30%) for their significant contributions in their specific areas of expertise (Finance, People and Communications, Legal and Risk Management, respectively) to the numerous complex strategic initiatives and restructurings that took place during 2007. Community involvement in all their groups was strong. |
Long-Term Incentive
Restricted Stock
The Corporation’s Long-Term Incentivelong-term incentive program seeks to align executive performance with the Corporation’s long-term profitability and maximization of the use of shareholder capital. Service-vested restricted stock is used to promote continuity and retention of key talent over time, whereas performance shares are used to reward sustained improvements in the Corporation’s use of capital and long-term value creation.
Restricted stock awards are funded based on the Corporation’s achievement of annual net income goals. The CEO’s target for restricted stock was a grant with an amount equal to 100% of base salary with a maximum of 125%. The other NEOs had a target grant with an amount equal to 50% of base salary with a maximum of 65%. Neither the CEO nor any other NEO
29 POPULAR, INC. 2009 PROXY STATEMENT
received restricted stock awards for 20072008 performance since the Corporation’s after-tax net income goal of $312 million was significantly below the threshold of $344 million.not achieved.
In January 2007 the Compensation Committee approved, based on recommendations by executive compensation consultant Hewitt Associates (“Hewitt”), an increased performance-based focus for the long-term incentive that reflects practices at leading U.S. financial institutions and strengthens the link between NEO performance and shareholder returns.
Performance shares substituted approximately one-half of the value that was formerly delivered entirely in service-vested restricted stock. AwardsShares
Performance share awards are contingent upon the achievement of future financial goals, namely the Corporation’s average three-year return on equity (“ROE”). Performance is measured over a period of three consecutive years. The use of performance shares strengthens the link between NEO performance and shareholder returns, and is consistent with long-term incentive compensation practices at leading U.S. financial institutions.
The first performance cycle is 2007-2009, with possible
Possible awards rangingrange from 50% to 200% of each NEO’s target award (set forth in the Grants of Plan-Based Awards Table), based on the Corporation’s average three-year ROE performance. The Corporation setDuring 2008, two performance share awards were outstanding corresponding to the average 2007-2009 and2008-2010 performance periods (with ROE target attargets of 14% and 10%, respectively). At each grant date, ROE targets were approved by the Compensation Committee taking into consideration the Corporation’s projected financial performance as well asand the ROE of peer financial institutions.
Based on the Corporation’s negative ROE in 2007 it is not anticipated thatand 2008, the Corporation will not achieve the three-year average ROE threshold for this awardeither of the two outstanding awards and, accordingly, it is not accruing compensation costs for this incentive component. While performance shares remain part of the Corporation’s portfolio of available long-term incentive vehicles, it is anticipated that the Corporation’s 2009 long-term incentive will focus on restricted stock to promote the retention of executive talent during the Corporation’s business recovery. Performance shares are not considered effective in the current extremely volatile environment in which specific long-term financial goals are difficult to determine and manage.
Personal Benefits and Perquisites
Personal benefits and perquisites do not constitute a significant portion of the NEOs’ compensation.total compensation package. Such benefits are periodically reviewed based on market trends and regulatory developments. Perquisites,During 2008, perquisites, such as the use of company-owned automobiles, club memberships, periodic comprehensive medical examinations and personal tickets to events sponsored by the Corporation or its subsidiaries, arewere offered on a limited basis to NEOs. Club memberships were eliminated as part of the executive compensation reductions approved in February 2009.
In addition, the
The Corporation owns a corporate aircraft, which iswas used by the CEO primarily for business purposes. The CEO’s use of the corporate aircraft provides several business benefits to the Corporation, as it ensures thehis personal safety and accessibility, of the CEO and maximizes his availability for the Corporation’s business. Nevertheless, the aircraft was used on an increasingly limited basis during 2008 as a measure to manage corporate expenses. Also, the Corporation has been seeking buyers for the aircraft since October 2008.
27 POPULAR, INC. 2008 PROXY STATEMENT
The Corporation also owns an apartment in New York City, which is used by the CEO primarily for business purposes during his frequent visits to New York for company-related affairs.
For detailed information about the personal benefits and perquisites refer to the Summary Compensation Table.
Tax Deductibility of Executive Compensation
As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the U.S. Internal Revenue Code, as amended by Section 302 of the Emergency Economic Stabilization Act of 2008, which provides that the Corporation may not deduct compensation of more than $1,000,000$500,000 that is paid to certain individuals. However, the Section 162(m) limitation does not apply to compensation that qualifies as “performance-based” under U.S. federal tax law.CEO, CFO or the three other most highly compensated executive officers. It is the Committee’s intention to have applicable compensation payable to our NEOs generally qualify as
performance-based and to be deductible for U.S. federal income tax purposes, unless there are valid compensatory reasons for paying non-deductible amounts in order to ensure competitive levels of total compensation.
In addition, for NEOs resident in Puerto Rico, compensation is deductible for income tax purposes if it is reasonable in the view of the Corporation. It is the Compensation Committee’s intention to have compensation paid to our NEOs resident in Puerto Rico be deductible, unless there are valid compensatory reasons for paying non-deductible amounts in order to ensure competitive levels of total compensation.
30 POPULAR, INC. 2009 PROXY STATEMENT
Stock Ownership/Retention Requirements
The Corporation has stock ownership requirements that apply to NEOs, which have been in effect since January 1, 2005. The CEO is required to own thea number of shares of Common Stock amountingwith an aggregate value equal to at least five times his base salary. Other NEOs are required to own Common Stock amounting to at least three times their base salary. For purposes of determining stock ownership under the guidelines, ownership shares are made up of shares purchased in the open market; shares jointly owned with or separately by spouseand/or children; shares held in the Savings and Investment Plan (401(k) or 1165(e) Plans); shares purchased through the 2001 Stock Option Plan; NEOs non-qualified deferred share awards; vested restricted stock; and shares of the Corporation’s Common Stock held in a trust established for estateand/or tax planning purposes that is revocable by the NEOsand/or the NEOs’ spouse.
NEOs who have worked for the Corporation for more than five years must comply with their stock ownership requirements within three years of the first day of the year following their appointment to a position subject to the requirements. Those who have worked for the Corporation for less than five years must achieve compliance within five years of the first day of the year following their appointment to a position subject to the requirements. If an NEO’s requirement changes because of a promotion, a three-year period is granted to achieve the new requirement. Once the requirement is achieved, the corresponding ownership level must be maintained for as long as the NEO is subject to the stock ownership requirements.
Failure to meet the stock ownership requirements within the appropriate timeframe (three or five years, depending on the NEO’s years of service with the Corporation) may result in the payment of future short-term incentive awards in the form of stock rather than cash. The stock ownership requirements are revised every five years.
As of December 31, 2007,2008, all NEOs are in compliance with the Corporation’s stock ownership requirements.
EXECUTIVESUMMARY COMPENSATION TABLE
The Corporation’s net income decreased from $540.7 million in 2005 to a net loss of $64.5 million in 2007. During that same period, the sum of cash compensation and long-term incentives granted to the NEOs (excluding termination-related payments) declined by 63%.
The following Summary Compensation Table outlines cash compensation awarded, together with the accounting cost to the Corporation of previously granted equity awards, accrued pension benefits and other non-cash compensation. It is followed by an Earned Compensation tableTable which details the cash compensation and long-term incentives actually granted for performance from 20052006 through 2007.2008.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Non-Equity
| | | Change in
| | | | | | | |
| | | | | | | | | | | | Stock
| | | Option
| | | Incentive Plan
| | | Pension
| | | All Other
| | | | |
Name and Principal
| | | | | Salary
| | | Bonus
| | | Awards ($)
| | | Awards ($)
| | | Compensation
| | | Value
| | | Compensation
| | | Total
| |
| Position | | Year | | | ($)(a) | | | ($)(b) | | | (c) | | | (d) | | | ($)(e) | | | ($)(f) | | | ($)(g) | | | ($) | |
| | |
| |
| Richard L. Carrión | | | 2008 | | | $ | 741,600 | | | $ | 31,060 | | | | — | | | | — | | | | — | | | $ | 318,816 | | | $ | 304,146 | | | $ | 1,395,622 | |
| Chairman and CEO | | | 2007 | | | | 741,600 | | | | 31,055 | | | | 951,337 | | | | — | | | | 25,779 | | | | 465,180 | | | | 260,677 | | | | 2,475,628 | |
| | | | 2006 | | | | 741,600 | | | | 31,050 | | | | 951,336 | | | | — | | | | 178,139 | | | | 1,124,121 | | | | 267,960 | | | | 3,294,206 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jorge A. Junquera | | | 2008 | | | | 563,876 | | | | 23,766 | | | | — | | | | — | | | | 84,893 | | | | 72,718 | | | | 55,979 | | | | 801,232 | |
| Senior Executive | | | 2007 | | | | 539,000 | | | | 22,638 | | | | — | | | | — | | | | 153,487 | | | | — | | | | 55,096 | | | | 770,221 | |
| Vice President & CFO | | | 2006 | | | | 539,000 | | | | 22,633 | | | | 7,510 | | | | — | | | | 156,423 | | | | 439,466 | | | | 74,266 | | | | 1,239,298 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| David H. Chafey Jr.* | | | 2008 | | | | 761,885 | | | | 32,109 | | | | 359,411 | | | | — | | | | — | | | | 911,342 | | | | 97,556 | | | | 2,162,303 | |
| President & Chief | | | 2007 | | | | 697,500 | | | | 29,198 | | | | 359,411 | | | | — | | | | 374,694 | | | | 757,508 | | | | 81,197 | | | | 2,299,508 | |
| Operating Officer | | | 2006 | | | | 697,500 | | | | 29,193 | | | | 359,411 | | | | 468,002 | | | | 434,474 | | | | 1,089,836 | | | | 93,249 | | | | 3,171,665 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amílcar L. Jordán | | | 2008 | | | | 391,846 | | | | 16,777 | | | | 75,538 | | | | 14,985 | | | | — | | | | 293,631 | | | | 26,579 | | | | 819,356 | |
| Executive Vice President | | | 2007 | | | | 294,000 | | | | 12,355 | | | | 75,538 | | | | 27,991 | | | | 83,720 | | | | 97,144 | | | | 22,550 | | | | 613,298 | |
| | | | 2006 | | | | 294,000 | | | | 12,350 | | | | 75,537 | | | | 42,044 | | | | 95,986 | | | | 208,810 | | | | 27,269 | | | | 755,996 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Brunilda Santos de Álvarez | | | 2008 | | | | 391,846 | | | | 16,752 | | | | 80,656 | | | | 40,180 | | | | — | | | | 199,286 | | | | 19,205 | | | | 747,925 | |
| Executive Vice President | | | 2007 | | | | 294,000 | | | | 12,330 | | | | 80,656 | | | | 74,565 | | | | 83,720 | | | | 16,211 | | | | 19,609 | | | | 581,091 | |
| | | | 2006 | | | | 294,000 | | | | 12,325 | | | | 80,654 | | | | 81,286 | | | | 95,986 | | | | 170,515 | | | | 36,827 | | | | 771,461 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Félix M. Villamil | | | 2008 | | | | 391,846 | | | | 16,752 | | | | 68,064 | | | | 49,111 | | | | — | | | | 179,652 | | | | 24,719 | | | | 730,144 | |
| Executive Vice President | | | 2007 | | | | 294,000 | | | | 12,330 | | | | 68,064 | | | | 75,090 | | | | 165,054 | | | | 77,944 | | | | 25,103 | | | | 717,585 | |
| | | | 2006 | | | | 294,000 | | | | 12,325 | | | | 68,633 | | | | 87,978 | | | | 189,442 | | | | 127,366 | | | | 40,664 | | | | 820,408 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Eduardo J. Negrón | | | 2008 | | | | 319,231 | | | | 13,582 | | | | 11,939 | | | | 27,089 | | | | — | | | | 11,798 | | | | 17,487 | | | | 401,126 | |
| Executive Vice President | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Former Executive Officer : | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Roberto R. Herencia | | | 2008 | | | | 512,615 | | | | 21,523 | | | | 880,004 | | | | 71,432 | | | | — | | | | — | | | | 3,559,383 | | | | 5,044,957 | |
| Executive Vice President ** | | | 2007 | | | | 490,000 | | | | 20,697 | | | | 141,378 | | | | 132,560 | | | | 68,547 | | | | 190,349 | | | | 46,352 | | | | 1,089,883 | |
| | | | 2006 | | | | 490,000 | | | | 20,491 | | | | 134,434 | | | | 156,840 | | | | 257,160 | | | | 346,300 | | | | 40,224 | | | | 1,445,449 | |
28* On January 9, 2009, Mr. Chafey was appointed President and Chief Operating Officer of the Corporation. During 2008, he served as a Senior Executive Vice President.
31 POPULAR, INC. 20082009 PROXY STATEMENT
SUMMARY COMPENSATION TABLE
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Change | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Non-Equity | | in | | | | | | | | |
| Name and | | | | | | | | | | | | | | Stock | | Option | | Incentive Plan | | Pension | | All Other | | | | | | |
| Principal | | | | | | Salary | | Bonus | | Awards | | Awards | | Compensation | | Value | | Compensation | | Total | | | | |
| Position | | Year | | ($) (a) | | ($) (b) | | ($) (c ) | | ($) (d) | | ($) (e) | | ($) (f) | | ($) (g) | | ($) | | | | |
| | | | | |
| Richard L. Carrión | | | 2007 | | | $ | 741,600 | | | $ | 31,055 | | | $ | 951,337 | | | | - | | | $ | 25,779 | | | $ | 465,180 | | | $ | 260,677 | | | $ | 2,475,628 | | | | | |
| Chairman, | | | 2006 | | | | 741,600 | | | | 31,050 | | | | 951,336 | | | | - | | | | 178,139 | | | | 1,124,121 | | | | 267,960 | | | | 3,294,206 | | | | | |
| President and CEO | | | 2005 | | | | 776,667 | | | | 30,145 | | | | 941,503 | | | | - | | | | 754,593 | | | | 639,554 | | | | 350,986 | | | | 3,493,448 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jorge A. Junquera | | | 2007 | | | | 539,000 | | | | 22,638 | | | | - | | | | - | | | | 153,487 | | | | (67,588 | ) | | | 55,096 | | | | 702,633 | | | | | |
| Senior Executive | | | 2006 | | | | 539,000 | | | | 22,633 | | | | 7,510 | | | | - | | | | 156,423 | | | | 439,466 | | | | 74,266 | | | | 1,239,298 | | | | | |
| Vice President and CFO | | | 2005 | | | | 550,000 | | | | 23,087 | | | | 567,593 | | | $ | 590,919 | | | | 612,087 | | | | 645,440 | | | | 74,007 | | | | 3,063,133 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| David H. Chafey Jr. | | | 2007 | | | | 697,500 | | | | 29,198 | | | | 359,411 | | | | - | | | | 374,694 | | | | 757,508 | | | | 81,197 | | | | 2,299,508 | | | | | |
| Senior Executive | | | 2006 | | | | 697,500 | | | | 29,193 | | | | 359,411 | | | | 468,002 | | | | 434,474 | | | | 1,089,836 | | | | 93,249 | | | | 3,171,665 | | | | | |
| Vice President | | | 2005 | | | | 750,000 | | | | 31,375 | | | | 355,997 | | | | 203,493 | | | | 851,851 | | | | 1,204,097 | | | | 93,061 | | | | 3,489,874 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| C.E. (Bill) Williams† | | | 2007 | | | | 110,255 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,239,838 | | | | 1,350,093 | | | | | |
| Executive Vice | | | 2006 | | | | 403,750 | | | | - | | | | 5,804 | | | | - | | | | - | | | | - | | | | 70,900 | | | | 480,454 | | | | | |
| President | | | 2005 | | | | 425,000 | | | | - | | | | 424,999 | | | | - | | | | - | | | | - | | | | 70,900 | | | | 920,899 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Roberto R. Herencia | | | 2007 | | | | 490,000 | | | | 20,697 | | | | 141,378 | | | | 132,560 | | | | 68,547 | | | | 190,349 | | | | 46,352 | | | | 1,089,883 | | | | | |
| Executive Vice | | | 2006 | | | | 490,000 | | | | 20,491 | | | | 134,434 | | | | 156,840 | | | | 257,160 | | | | 346,300 | | | | 40,224 | | | | 1,445,449 | | | | | |
| President | | | 2005 | | | | 500,000 | | | | 20,905 | | | | 70,170 | | | | 162,794 | | | | 549,311 | | | | 463,374 | | | | 70,886 | | | | 1,837,440 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tere Loubriel | | | 2007 | | | | 318,500 | | | | 13,416 | | | | 207,074 | | | | - | | | | 90,697 | | | | 175,138 | | | | 24,804 | | | | 829,629 | | | | | |
| Executive Vice | | | 2006 | | | | 318,500 | | | | 13,411 | | | | 207,074 | | | | 151,905 | | | | 88,060 | | | | 593,176 | | | | 28,442 | | | | 1,400,568 | | | | | |
| President | | | 2005 | | | | 325,000 | | | | 13,677 | | | | 204,856 | | | | 150,267 | | | | 361,688 | | | | 694,115 | | | | 31,277 | | | | 1,780,880 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Félix M. Viliamil | | | 2007 | | | | 294,000 | | | | 12,330 | | | | 68,064 | | | | 75,090 | | | | 165,054 | | | | 77,944 | | | | 25,103 | | | | 717,585 | | | | | |
| Executive Vice | | | 2006 | | | | 294,000 | | | | 12,325 | | | | 68,633 | | | | 87,978 | | | | 189,442 | | | | 127,366 | | | | 40,664 | | | | 820,408 | | | | | |
| President | | | 2005 | | | | 300,000 | | | | 12,570 | | | | 34,609 | | | | 84,988 | | | | 359,769 | | | | 124,935 | | | | 34,521 | | | | 951,392 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amílcar L. Jordán | | | 2007 | | | | 294,000 | | | | 12,355 | | | | 75,538 | | | | 27,991 | | | | 83,720 | | | | 97,144 | | | | 22,550 | | | | 613,298 | | | | | |
| Executive Vice | | | 2006 | | | | 294,000 | | | | 12,350 | | | | 75,537 | | | | 42,044 | | | | 95,986 | | | | 208,810 | | | | 27,269 | | | | 755,996 | | | | | |
| President | | | 2005 | | | | 300,000 | | | | 12,595 | | | | 37,791 | | | | 39,962 | | | | 333,866 | | | | 239,265 | | | | 27,762 | | | | 991,241 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Brunilda Santos de | | | 2007 | | | | 294,000 | | | | 12,330 | | | | 80,656 | | | | 74,565 | | | | 83,720 | | | | 16,211 | | | | 19,609 | | | | 581,091 | | | | | |
| Álvarez | | | 2006 | | | | 294,000 | | | | 12,325 | | | | 80,654 | | | | 95,854 | | | | 81,286 | | | | 170,515 | | | | 36,827 | | | | 771,461 | | | | | |
| Executive Vice President | | | 2005 | | | | 300,000 | | | | 12,570 | | | | 51,805 | | | | 91,571 | | | | 333,866 | | | | 231,820 | | | | 30,364 | | | | 1,051,996 | | | | | |
†** Pursuant to the terms of the “Resignation, Retirementa Resignation and Transition Agreement”Agreement dated January 9, 2007,November 6, 2008, Mr. Williams terminatedHerencia’s employment with Popularthe Corporation terminated on MarchDecember 31, 2007. Compensation2008. The compensation shown in this table reflects payments for months worked, 401(k) match, and termination relatedincludes termination-related payments.
Ms. Tere Loubriel was an NEO of the Corporation until her scheduled retirement on March 31, 2008. Her compensation information was excluded from the Summary Compensation Table pursuant to the SEC proxy statement rules.
(a) Includes salaries before deductionsdeductions.
(b) Includes Christmas bonus, which is equal to 4.2% of base pay in accordance with the general practice applicable to employees of the Corporation’s Puerto Rico companies.
(c) For each of the years in the period from 2006 and 2007,through 2008, the threshold performance criteria established in the Corporation’s incentive compensation plan werewas not met; therefore, no restricted stock awards were made for those years. The values shown in the table reflect the accounting compensation cost incurred during 2007each year in accordance with accounting standard SFAS 123(R) for equity awards earned in prior years. Since a portion of the equity awards vests upon termination of employment on or after attaining age 55 and 10 years of service (eligibility for unreduced benefits under the defined benefit plan), the costs are influenced by each NEO’s proximity to being eligible for retirement.
For all restricted stock awards to Mr. Carrión and the 2004 performancerestricted stock award for other NEOs, the restrictions lapse upon termination of employment on or after attaining age 55 and 10 years of service. Restrictions on the 2005 award for all NEOs, except Mr. Carrión, are as follows: 40% lapse upon termination of employment on or after attaining age 55 and 10 years of service, and the restrictions on the remaining 60% lapse in equal installments during the 5 years subsequent to the grant.
29 POPULAR, INC. 2008 PROXY STATEMENT
For Mr. Herencia the figure also represents the benefit resulting from the acceleration of his equity awards as explained hereunder. Performance shares were awarded in January 2007.2007 and 2008. However, because it is currently unlikely that the three-year threshold performance will not be achieved, no costs have been accrued in accordance with SFAS 123(R).
(d) Stock options were granted to some executives between 2002 and 2004. The amounts in column (d) reflect the 2007
SFAS 123(R) accounting cost of these awards.
(e) Non-equity compensation includes the cash profit sharing and short-term cash incentive. The cash profit sharing is based on the achievement of return on equity goals. The short-term cash incentive is determined as a percentage of base pay using net income as the metric against which performance is measured. The details of the short-term cash incentive design are included in the Compensation DiscussionCD&A. Although certain NEOs would have received awards for business unit performance and Analysis.all of them achieved many of their strategic and personal goals, they were not granted short-term cash incentives in light of the Corporation’s consolidated net loss.
(f)Present values for changes in pension value were determined using year-end Statement of Financial Accounting Standard No. 87 “Employers’ Accounting for Pensions” (“SFAS 87”) assumptions with the following exception: payments are assumed to begin at the earliest possible retirement date at which benefits are unreduced. These vary for NEOs depending on their initial employment date. For Mr. Villamil and Mrs.Ms. Santos de Álvarez, their earliest possible retirement age with unreduced benefits is the age of 60,60; for all other NEONEOs, the age to receive retirement benefits with no reductions is 55. Also, each NEO is assumed to continue employment until that NEO’shis or her retirement date.date, except for Mr. Herencia. Due to Mr. Herencia’s termination of employment prior to eligibility for unreduced early retirement benefits, his pension value was adjusted accordingly by the plan actuaries and is shown as zero for 2008 in the Summary Compensation Table.
(g) All Other Compensation includes the Corporation’s match to savings plans for all executives,NEOs, the change in value of retiree medical insurance coverage for executives with that future benefitcertain NEOs and the value of all perquisites if thetheir aggregate value exceeds $10,000. The following table identifies the perks received by those NEOs, whose perks exceeded thewith an aggregate value ofexceeding $10,000:
| | | | | | | | | | | | | | | | | | | | |
| | | Richard L.
| | | Jorge A.
| | | David H.
| | C.E. (Bill) | | Roberto R.
| |
| Types of Perquisites Received | | Carrión | | | Junquera | | | Chafey Jr. | | Williams | Herencia | |
Herencia | |
| |
| Non Work-related Security | | | x | | | | | | | | | | | | | | | | | |
|
Company-Owned Vehicles | | | x | Vehicle | | | x | | | | x | | | | x | | | | x | |
|
Country Club MembershipsMembership | | | x | | | | x | | | | x | | | | | | | | | |
| |
| Tickets to Sponsored Events | | | x | | | | x | | | | x | | | | | | | | | |
|
| Executive Physical Exam | | | | | | | x | | | | x | | | | | | | | | |
The incremental cost to the Corporation for Mr. Carriónn’s personal security was $145,350.$189,239.
The incremental cost to the Corporation for the use of company-owned vehicles for Mr.by Messrs. Carrión, Mr. Junquera, Mr. Chafey Mr. Williams, and Mr. Herencia was $60,880, $16,216, $27,870, $24,178$64,527, $19,290, $35,701 and $36,000, respectively.
The Board has made it a requirement for Mr. Carrión to use the corporate aircraft even when traveling on personal business. The aggregate incremental cost to the Corporation for such use during 2007 was $54,104. This amount is fully reimbursed by Mr. Carrión to the Corporation so it was not included in the All Other Compensation figure.
32 POPULAR, INC. 2009 PROXY STATEMENT
Mr. Carrión’s responsibilities as CEO require frequent travel to New York City. For this purpose, the Corporation has had an apartment since 1987 that Mr. Carrión uses for business relatedbusiness-related trips. The cost of the apartment to the Corporation during 20072008 was approximately $38,000.$32,500. Since this apartment is primarily used for business purposes, this amount is not included as additional compensation.
Mr. Herencia’s other compensation includes a transition payment of $3,289,432, in addition to the cost of continued medical benefits, accelerated vesting of certain equity awards and performance of transition-related services in January 2009.
The following table shows the Corporation’s match under the Puerto Rico Savings and Investment Plan and the USA 401(k) Savings and Investment Plan of Popular companies in the United States described in the Post-Termination Compensation section:
| | | | | |
| Corporation’s Match to Savings Plan ($) | |
| |
| Richard L. Carrión | | $ | 31,938 | |
| Jorge A. Junquera | | | 30,645 | |
| David H. Chafey Jr. | | | 47,747 | |
| Amílcar L. Jordán | | | 19,694 | |
| Brunilda Santos de Álvarez | | | 13,869 | |
| Félix M. Villamil | | | 19,562 | |
| Eduardo J. Negrón | | | 17,487 | |
Former Executive Officer: | | | | |
| Roberto R. Herencia | | | 9,200 | |
30 POPULAR, INC. 2008 PROXY STATEMENT
| | | | | | |
| Corporation’s Match to Savings Plan ($) |
| |
| | | | |
| Richard L. Carrión | | | $ | 34,497 | |
| Jorge A. Junquera | | | | 28,377 | |
| David H. Chafey Jr. | | | | 41,603 | |
| C.E. (Bill) Williams | | | | 4,410 | |
| Roberto R. Herencia | | | | 9,000 | |
| Tere Loubriel | | | | 16,770 | |
| Félix M. Villamil | | | | 19,193 | |
| Amílcar L. Jordán | | | | 16,067 | |
| Brunilda Santos de Álvarez | | | | 15,478 | |
EARNED COMPENSATION TABLE
In order to illustrate the link between NEO pay and the negative trend in the Corporation’s 2005-20072006-2008 performance, the following table presents the cash compensation and long-term incentives actually granted (at market value on date of grant) for performance during that period. For those NEOs employed during the entire2006-2008 period, there was an aggregate 20.4% reduction in total pay received, and total pay was significantly below target.
| | | | | | | | | | | | | | | | | | | | | |
| Name | | Year | | | Salary &
Bonus ($) | | | Performance
Incentives ($) | | | Stock Awards ($) | | | Total ($) | |
| |
| Richard L. Carrión | | | 2007 | | | $ | 772,655 | | | $ | 25,779 | | | | – | | | $ | 798,434 | |
| | | | 2006 | | | | 772,650 | | | | 178,139 | | | | – | | | | 950,789 | |
| | | | 2005 | | | | 806,812 | | | | 754,593 | | | $ | 1,459,666 | | | | 3,021,071 | |
| | | | | | | | | | | | | | | | | | | | | |
| Jorge A. Junquera | | | 2007 | | | | 561,638 | | | | 153,487 | | | | – | | | | 715,125 | |
| | | | 2006 | | | | 561,633 | | | | 156,423 | | | | – | | | | 718,056 | |
| | | | 2005 | | | | 573,087 | | | | 612,087 | | | | 557,511 | | | | 1,742,685 | |
| | | | | | | | | | | | | | | | | | | | | |
| David H. Chafey Jr. | | | 2007 | | | | 726,698 | | | | 374,694 | | | | – | | | | 1,101,392 | |
| | | | 2006 | | | | 726,693 | | | | 434,474 | | | | – | | | | 1,161,167 | |
| | | | 2005 | | | | 781,375 | | | | 851,851 | | | | 760,243 | | | | 2,393,469 | |
| | | | | | | | | | | | | | | | | | | | | |
C.E. (Bill) Williams(1) | | | 2007 | | | | 110,255 | | | | – | | | | – | | | | 110,255 | |
| | | | 2006 | | | | 403,750 | | | | – | | | | – | | | | 403,750 | |
| | | | 2005 | | | | 425,000 | | | | – | | | | 430,804 | | | | 855,804 | |
| | | | | | | | | | | | | | | | | | | | | |
| Roberto R. Herencia | | | 2007 | | | | 510,697 | | | | 68,547 | | | | – | | | | 579,244 | |
| | | | 2006 | | | | 510,491 | | | | 257,160 | | | | – | | | | 767,651 | |
| | | | 2005 | | | | 520,905 | | | | 549,311 | | | | 506,829 | | | | 1,577,045 | |
| | | | | | | | | | | | | | | | | | | | | |
| Tere Loubriel | | | 2007 | | | | 331,916 | | | | 90,697 | | | | – | | | | 422,613 | |
| | | | 2006 | | | | 331,911 | | | | 88,060 | | | | – | | | | 419,971 | |
| | | | 2005 | | | | 338,677 | | | | 361,688 | | | | 329,439 | | | | 1,029,804 | |
| | | | | | | | | | | | | | | | | | | | | |
| Félix M. Villamil | | | 2007 | | | | 306,330 | | | | 165,054 | | | | – | | | | 471,384 | |
| | | | 2006 | | | | 306,325 | | | | 189,442 | | | | – | | | | 495,767 | |
| | | | 2005 | | | | 312,570 | | | | 359,769 | | | | 304,097 | | | | 976,436 | |
| | | | | | | | | | | | | | | | | | | | | |
| Amílcar L. Jordán | | | 2007 | | | | 306,355 | | | | 83,720 | | | | – | | | | 390,075 | |
| | | | 2006 | | | | 306,350 | | | | 95,986 | | | | – | | | | 402,336 | |
| | | | 2005 | | | | 312,595 | | | | 333,866 | | | | 304,097 | | | | 950,558 | |
| | | | | | | | | | | | | | | | | | | | | |
| Brunilda Santos de Álvarez | | | 2007 | | | | 306,330 | | | | 83,720 | | | | – | | | | 390,050 | |
| | | | 2006 | | | | 306,325 | | | | 81,286 | | | | – | | | | 387,611 | |
| | | | 2005 | | | | 312,570 | | | | 333,866 | | | | 304,097 | | | | 950,533 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | Total Earned
| |
| | | | | | Salary &
| | | Performance
| | | Stock
| | | Total
| | | Target
| | | as % of
| |
| Name | | Year | | | Bonus ($) | | | Incentives ($) | | | Awards ($) | | | Earned ($) | | | Pay ($) | | | Target | |
| | |
| Richard L. Carrión | | | 2008 | | | $ | 772,660 | | | | - | | | | - | | | $ | 772,660 | | | $ | 2,966,400 | | | | 26 | % |
| | | | 2007 | | | | 772,655 | | | | 25,779 | | | | - | | | | 798,434 | | | | 2,966,400 | | | | 27 | % |
| | | | 2006 | | | | 772,650 | | | | 178,139 | | | | - | | | | 950,789 | | | | 2,224,800 | | | | 43 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jorge A. Junquera | | | 2008 | | | | 562,766 | | | | - | | | | - | | | | 562,766 | | | | 1,670,900 | | | | 34 | % |
| | | | 2007 | | | | 561,638 | | | | 153,487 | | | | - | | | | 715,125 | | | | 1,617,000 | | | | 44 | % |
| | | | 2006 | | | | 561,633 | | | | 156,423 | | | | - | | | | 718,056 | | | | 1,617,000 | | | | 44 | % |
| David H. Chafey Jr. | | | 2008 | | | | 793,994 | | | | - | | | | - | | | | 793,994 | | | | 2,301,750 | | | | 34 | % |
| | | | 2007 | | | | 726,698 | | | | 374,694 | | | | - | | | | 1,101,392 | | | | 2,092,500 | | | | 53 | % |
| | | | 2006 | | | | 726,693 | | | | 434,474 | | | | - | | | | 1,161,167 | | | | 2,092,500 | | | | 55 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amílcar L. Jordán | | | 2008 | | | | 408,623 | | | | - | | | | - | | | | 408,623 | | | | 1,200,000 | | | | 34 | % |
| | | | 2007 | | | | 306,355 | | | | 83,720 | | | | - | | | | 390,075 | | | | 882,000 | | | | 44 | % |
| | | | 2006 | | | | 306,350 | | | | 95,986 | | | | - | | | | 402,336 | | | | 882,000 | | | | 46 | % |
| Brunilda Santos de | | | 2008 | | | | 408,598 | | | | - | | | | - | | | | 408,598 | | | | 1,200,000 | | | | 34 | % |
| Álvarez | | | 2007 | | | | 306,330 | | | | 83,720 | | | | - | | | | 390,050 | | | | 882,000 | | | | 44 | % |
| | | | 2006 | | | | 306,325 | | | | 81,286 | | | | - | | | | 387,611 | | | | 882,000 | | | | 44 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Félix M. Villamil | | | 2008 | | | | 408,598 | | | | - | | | | - | | | | 408,598 | | | | 1,200,000 | | | | 34 | % |
| | | | 2007 | | | | 306,330 | | | | 165,054 | | | | - | | | | 471,384 | | | | 882,000 | | | | 53 | % |
| | | | 2006 | | | | 306,325 | | | | 189,442 | | | | - | | | | 495,767 | | | | 882,000 | | | | 56 | % |
Former Executive Officer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Roberto R. Herencia(1) | | | 2008 | | | | 534,138 | | | | - | | | | - | | | | 534,138 | | | | 1,543,500 | | | | 35 | % |
| | | | 2007 | | | | 510,697 | | | | 68,547 | | | | - | | | | 579,244 | | | | 1,470,000 | | | | 39 | % |
| | | | 2006 | | | | 510,491 | | | | 257,160 | | | | - | | | | 767,651 | | | | 1,470,000 | | | | 52 | % |
(1) Excludes the $1,211,250 termination related$3,289,432 transition payment per the “Resignation, Retirementunder Mr. Herencia’s Resignation and Transition Agreement.”Agreement, dated November 6, 2008.
31
33 POPULAR, INC. 20082009 PROXY STATEMENT
GRANTS OF PLAN-BASED AWARDS
The following table outlines the non-equity and equity incentive awardsaward opportunities in effect during the fiscal year 2007.2008.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Estimated Future Payouts Under Non- | | Estimated Future Payouts Under Equity | | All Other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Equity Incentive Plan Awards(1)(2) | | Incentive Plan Awards(3) | | Stock | | All Other | | | | | | | | | | | | | | | | | | | | | All Other
| | All Other
| | | | | |
| | | Awards: | | Option | | Exercise | | | | | | | | | | | | | | | | | | | Stock
| | Option
| | | | | |
| | | Number | | Awards: | | or Base | | Grant Date | | | | | | | | | | | | | | | | | Awards:
| | Awards:
| | Exercise or
| | Grant Date
| |
| | | of Shares | | Number of | | Price of | | Fair Value | | | | | | | | | | | | | | | | | Number of
| | Number of
| | Base Price
| | Fair Value of
| |
| | | of Stock | | Securities | | Options | | of Stock | | | | | Estimated Future Payouts Under Non-Equity
| | Estimated Future Payouts Under Equity
| | Shares of
| | Securities
| | of Options
| | Stock and
| |
| | | Threshold | | Target | | Maximum | | of Units | | Underlying | | Awards | | and Option | | | | | Incentive Plan Awards(1) | | Incentive Plan Awards(2) | | Stock or
| | Underlying
| | Awards
| | Option
| |
| Name | | Grant Date | | ($) | | ($) | | ($) | | Threshold | | Target | | Maximum | | (#) | | Options (#) | | ($/SH) | | Awards | | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold | | Target | | Maximum | | Units (#) | | Options (#) | | ($/SH) | | Awards | |
| | | | |
| | |
| | | |
| Richard L. Carrión | | | | | $111,240 | | | $741,600 | | | $1,112,400 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Restricted Stock ($) | | 24-Jan-07 | | | $370,800 | | | $741,600 | | | $927,000 | | | | 21-Feb-08 | | | $ | 296,640 | | | $ | 741,600 | | | $ | 1,112,400 | | | $ | 370,800 | | | $ | 741,600 | | | $ | 927,000 | | | | | | | | | | | | | | | | | |
| | | |
| Performance Shares | | 24-Jan-07 | | | | 21-Feb-08 | | | | | | | | | | | | | | | | 31,344 | | | | 62,688 | | | | 125,376 | | | | | | | | | | | | | | | | | |
| (units) | | | | 20,762 | | 41,523 | | 83,046 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Jorge A. Junquera | | | | 161,700 | | 539,000 | | 754,600 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Restricted Stock ($) | | 24-Jan-07 | | | $134,750 | | | $269,500 | | | $350,350 | | | | 21-Feb-08 | | | | 226,380 | | | | 565,950 | | | | 792,330 | | | $ | 141,488 | | | $ | 269,500 | | | $ | 350,350 | | | | | | | | | | | | | | | | | |
| | | |
| Performance Shares | | 24-Jan-07 | | | | 21-Feb-08 | | | | | | | | | | | | | | | | 11,391 | | | | 22,781 | | | | 45,562 | | | | | | | | | | | | | | | | | |
| (units) | | | | 7,545 | | 15,090 | | 30,180 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| David H. Chafey Jr. | | | | 139,500 | | 697,500 | | 976,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Restricted Stock ($) | | 24-Jan-07 | | | $174,375 | | | $348,750 | | | $453,375 | | | | 21-Feb-08 | | | | 306,900 | | | | 767,250 | | | | 1,074,150 | | | $ | 191,813 | | | $ | 383,625 | | | $ | 498,713 | | | | | | | | | | | | | | | | | |
| | | |
| Performance Shares | | 24-Jan-07 | | | | 21-Feb-08 | | | | | | | | | | | | | | | | 14,740 | | | | 29,480 | | | | 58,960 | | | | | | | | | | | | | | | | | |
| (units) | | | | 9,764 | | 19,527 | | 39,054 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Roberto R. Herencia | | | | 98,000 | | 490,000 | | 686,000 | | |
| Amílcar L. Jordán | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Restricted Stock ($) | | 24-Jan-07 | | | $122,500 | | | $245,000 | | | $318,500 | | | | 21-Feb-08 | | | | 160,000 | | | | 400,000 | | | | 560,000 | | | $ | 100,000 | | | $ | 200,000 | | | $ | 260,000 | | | | | | | | | | | | | | | | | |
| | | |
| Performance Shares | | 24-Jan-07 | | | | 21-Feb-08 | | | | | | | | | | | | | | | | 6,213 | | | | 12,426 | | | | 24,852 | | | | | | | | | | | | | | | | | |
| (units) | | | | 6,859 | | 13,718 | | 27,436 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Tere Loubriel | | | | 95,550 | | 318,500 | | 445,900 | | |
| Brunilda Santos de | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Álvarez | | | | | | | | 160,000 | | | | 400,000 | | | | 560,000 | | | $ | 100,000 | | | $ | 200,000 | | | $ | 260,000 | | | | | | | | | | | | | | | | | |
| | | |
| Restricted Stock ($) | | 24-Jan-07 | | | $79,625 | | | $159,250 | | | $207,025 | | | | 21-Feb-08 | | | | | | | | | | | | | | | | 6,213 | | | | 12,426 | | | | 24,852 | | | | | | | | | | | | | | | | | |
| | | |
| Performance Shares | | 24-Jan-07 | | | | 21-Feb-08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (units) | | | | 4,459 | | 8,917 | | 17,834 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Félix M. Villamil | | | | 58,800 | | 294,000 | | 411,600 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Restricted Stock ($) | | 24-Jan-07 | | | $73,500 | | | $147,000 | | | $191,100 | | | | 21-Feb-08 | | | | 160,000 | | | | 400,000 | | | | 560,000 | | | $ | 100,000 | | | $ | 200,000 | | | $ | 260,000 | | | | | | | | | | | | | | | | | |
| | | |
| Performance Shares | | 24-Jan-07 | | | | 21-Feb-08 | | | | | | | | | | | | | | | | 6,213 | | | | 12,426 | | | | 24,852 | | | | | | | | | | | | | | | | | |
| (units) | | | | 4,116 | | 8,231 | | 16,462 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Amílcar L. Jordán | | | | 88,200 | | 294,000 | | 411,600 | | |
| Eduardo Negrón | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Restricted Stock ($) | | 24-Jan-07 | | | $73,500 | | | $147,000 | | | $191,100 | | | | 21-Feb-08 | | | | 130,000 | | | | 325,000 | | | | 455,000 | | | $ | 81,250 | | | $ | 162,500 | | | $ | 211,250 | | | | | | | | | | | | | | | | | |
| | | |
| Performance Shares | | 24-Jan-07 | | | | 21-Feb-08 | | | | | | | | | | | | | | | | 5,283 | | | | 10,566 | | | | 21,132 | | | | | | | | | | | | | | | | | |
| (units) | | | | 4,116 | | 8,231 | | 16,462 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Brunilda Santos de | | | | 88,200 | | 294,000 | | 411,600 | | |
| Álvarez | | | | |
Former Executive Officer: | | Former Executive Officer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Roberto R. Herencia | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Restricted Stock ($) | | 24-Jan-07 | | | $73,500 | | | $147,000 | | | $191,100 | | | | 21-Feb-08 | | | | 205,800 | | | | 514,500 | | | | 720,300 | | | $ | 128,625 | | | $ | 257,250 | | | $ | 334,425 | | | | | | | | | | | | | | | | | |
| | | |
| Performance Shares | | 24-Jan-07 | | | | 21-Feb-08 | | | | | | | | | | | | | | | | 10,355 | | | | 20,710 | | | | 41,420 | | | | | | | | | | | | | | | | | |
| (units) | | | | 4,116 | | 8,231 | | 16,462 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) On January 24, 2007 the Compensation Committee established target awards expressed as a percentage of each NEO’s 2007 base salary and Corporation performance measures for the purpose of determining the amount payable for the year ended December 31, 2007. The amounts shown in the “Threshold” column assume that neither the Corporation nor the Business Units meet performance threshold, but the NEOs are awarded the maximum level for the strategic and personal portion of the incentive. However, this portion is not guaranteed as reflected in the awards paid in 2008 for 2007 performance.
(2) The actual short-term annual incentive awards for 2007 performance were as follows:
| | |
| (1) | | On February 21, 2008, the Compensation Committee established target awards expressed as a percentage of each NEO’s 2008 base salary and Corporation performance measures for the purpose of determining the amount payable for the year ended December 31, 2008. The amounts shown in the “Threshold” column assume that the Corporation and the Business Units meet the minimum financial performance threshold, whereas no award is earned for the strategic and personal component. |
|
| (2) | | Given the Corporation’s below-threshold performance for 2008, no restricted stock awards were granted to NEOs. The performance share grant in the above table represents possible payouts based on the Corporation’s return on equity performance during a three-year period(2008-2010). However, because the three-year threshold performance will not be achieved, no costs have been accrued pursuant to SFAS 123(R). |
| | | | | |
| Short-Term Annual Incentive ($) |
| |
| Richard L. Carrión | | | - | |
| Jorge A. Junquera | | $ | 134,750 | |
| David H. Chafey Jr. | | | 346,870 | |
| Roberto R. Herencia | | | 49,000 | |
| Tere Loubriel | | | 79,625 | |
| Félix M. Villamil | | | 153,326 | |
| Amílcar L. Jordán | | | 73,500 | |
| Brunilda Santos de Álvarez | | | 73,500 | |
3234 POPULAR, INC. 20082009 PROXY STATEMENT
(3) Given the Corporation’s below-threshold performance for 2007, no restricted stock awards were granted to NEOs. The performance share grant in the above table represents possible payouts based on the Corporation’s performance during a three-year period (2007-2009). However, because it is currently unlikely that the three-year threshold performance will be achieved, no costs have been accrued pursuant to SFAS 123(R).
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table sets forth certain information with respect to the value of all unexercised options and restricted stock previously awarded to the NEOs (based on the Corporation’s Common Stock price of $10.60$5.16 as of December 31, 2007)2008).
| | | | | | | | | | |
| | Option Awards | | | | | | Stock Awards | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | | Stock Awards | |
| | | | | | | | | Equity
| | | | | | | | | | | | | | | Equity
| | | Equity Incentive
| |
| | | | | | | | | Incentive Plan
| | | | | | | | | | | | | | | Incentive Plan
| | | Plan Awards:
| |
| | | | | | | | | Awards:
| | | | | | | | | | | | | | | Awards:
| | | Market or Payout
| |
| | | Number of
| | | Number of
| | | Number of
| | | | | | | | | | | | | | | Number of
| | | Value of
| |
| | | Securities
| | | Securities
| | | Securities
| | | | | | | | | Number of
| | | | | | Unearned
| | | Unearned
| |
| | | Underlying
| | | Underlying
| | | Underlying
| | | Option
| | | | | | Shares or
| | | Market Value of
| | | Shares, Units
| | | Shares, Units or
| |
| | | Unexercised
| | | Unexercised
| | | Unexercised
| | | Exercise
| | | Option
| | | Units of Stock
| | | Shares or Units of
| | | or Other Rights
| | | Other Rights
| |
| | | Options
| | | Options
| | | Unearned
| | | Price
| | | Expiration
| | | That Have Not
| | | Stock That Have
| | | That Have Not
| | | That Have Not
| |
| Name | | (#) Exercisable | | | (#) Unexercisable | | | Options (#) | | | ($) | | | Date | | | Vested (#) | | | Not Vested ($) | | | Vested (#) | | | Vested ($) | |
| | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Richard L. Carrión(1) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 129,997 | | | $ | 670,784 | | | | 52,106 | | | $ | 268,867 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jorge A. Junquera | | | 44,530 | | | | - | | | | | | | $ | 14.42 | | | | 2/14/2012 | | | | 40,470 | | | | 208,824 | | | | 18,936 | | | | 97,710 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 68,812 | | | | - | | | | - | | | | 16.75 | | | | 3/13/2013 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 54,426 | | | | 13,606 | | | | - | | | | 24.05 | | | | 1/16/2014 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| David H. Chafey Jr. | | | 50,602 | | | | - | | | | - | | | | 14.42 | | | | 2/14/2012 | | | | 55,186 | | | | 284,760 | | | | 24,504 | | | | 126,441 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 78,196 | | | | - | | | | - | | | | 16.75 | | | | 3/13/2013 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 61,846 | | | | 15,462 | | | | - | | | | 24.05 | | | | 1/16/2014 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amílcar L. Jordán | | | 12,531 | | | | - | | | | - | | | | 14.42 | | | | 2/14/2012 | | | | 22,074 | | | | 113,904 | | | | 10,329 | | | | 53,298 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 13,310 | | | | - | | | | - | | | | 16.75 | | | | 3/13/2013 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 10,379 | | | | 2,595 | | | | - | | | | 24.05 | | | | 1/16/2014 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Brunilda Santos de Álvarez | | | 22,771 | | | | - | | | | - | | | | 14.42 | | | | 2/14/2012 | | | | 22,074 | | | | 113,904 | | | | 10,329 | | | | 53,298 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 35,188 | | | | - | | | | - | | | | 16.75 | | | | 3/13/2013 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 27,830 | | | | 6,958 | | | | - | | | | 24.05 | | | | 1/16/2014 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Félix M. Villamil | | | 13,786 | | | | - | | | | | | | | 14.42 | | | | 2/14/2012 | | | | 22,074 | | | | 113,904 | | | | 10,329 | | | | 53,298 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 26,586 | | | | - | | | | - | | | | 16.75 | | | | 3/13/2013 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 34,016 | | | | 8,504 | | | | - | | | | 24.05 | | | | 1/16/2014 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Eduardo J. Negrón | | | 7,470 | | | | - | | | | | | | | 14.42 | | | | 2/14/2012 | | | | 2,351 | | | | 12,132 | | | | 6,265 | | | | 32,327 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 11,313 | | | | - | | | | - | | | | 16.75 | | | | 3/13/2013 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 9,065 | | | | 2,266 | | | | - | | | | 24.05 | | | | 1/16/2014 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 7,054 | | | | 4,703 | | | | - | | | | 27.20 | | | | 2/16/2015 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity | |
| | | | | | | | | | | | | | | | | | | | | | | | | Equity | | | Incentive Plan | |
| | | | | | | | | Equity | | | | | | | | | | | | | | | | Incentive | | | Awards: | |
| | | | | | | | | Incentive | | | | | | | | | | | | | | | | Plan Awards: | | | Market or | |
| | | | | | | | | Plan Awards: | | | | | | | | | | | | | | | | Number of | | | Payout Value | |
| | | Number of | | Number of | | | Number of | | | | | | | | Number of | | | | | | | Unearned | | | of Unearned | |
| | | Securities | | Securities | | | Securities | | | | | | | | Shares or | | | Market Value of | | | Shares, Units | | | Shares, Units | |
| | | Underlying | | Underlying | | | Underlying | | | | | | | | Units of | | | Shares or Units | | | or Other | | | or Other | |
| | | Unexercised | | Unexercised | | | Unexercised | | Option | | | | | Stock That | | | of Stock That | | | Rights That | | | Rights That | |
| | | Options | | Options | | | Unearned | | Exercise | | | Option | | Have Not | | | Have Not Vested | | | have Not | | | Have Not | |
| Name | | (#) Exercisable | | (#) Unexercisable | | | Options (#) | | Price ($) | | | Expiration Date | | Vested (#) | | | ($) | | | Vested (#) | | | Vested ($) | |
| |
| Richard L. | | - | | | - | | | - | | | - | | | - | | | 129,997 | | | | $1,377,967 | | | | 20,762 | | | | $220,077 | |
Carrión(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jorge A. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Junquera | | 44,530 | | | - | | | - | | | $14.42 | | | 2/14/2012 | | | 43,646 | | | | 462,652 | | | | 7,545 | | | | 79,977 | |
| | | 55,050 | | | 13,762 | | | - | | | 16.75 | | | 3/13/2013 | | | - | | | | - | | | | - | | | | - | |
| | | 40,819 | | | 27,213 | | | - | | | 24.05 | | | 1/16/2014 | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| David H. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Chafey Jr. | | 50,602 | | | - | | | - | | | 14.42 | | | 2/14/2012 | | | 59,518 | | | | 630,889 | | | | 9,764 | | | | 103,498 | |
| | | 62,557 | | | 15,639 | | | - | | | 16.75 | | | 3/13/2013 | | | - | | | | - | | | | - | | | | - | |
| | | 46,385 | | | 30,923 | | | - | | | 24.05 | | | 1/16/2014 | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Roberto R. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Herencia | | 40,482 | | | - | | | - | | | 14.42 | | | 2/14/2012 | | | 39,679 | | | | 420,593 | | | | 6,859 | | | | 72,705 | |
| | | 50,045 | | | 12,511 | | | - | | | 16.75 | | | 3/13/2013 | | | - | | | | - | | | | - | | | | - | |
| | | 37,108 | | | 24,738 | | | - | | | 24.05 | | | 1/16/2014 | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tere Loubriel | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 22,771 | | | - | | | - | | | 14.42 | | | 2/14/2012 | | | 25,791 | | | | 273,386 | | | | 4,459 | | | | 47,265 | |
| | | 28,150 | | | 7,038 | | | - | | | 16.75 | | | 3/13/2013 | | | - | | | | - | | | | - | | | | - | |
| | | 20,873 | | | 13,915 | | | - | | | 24.05 | | | 1/16/2014 | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Félix M. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Villamil | | 13,786 | | | - | | | - | | | 14.42 | | | 2/14/2012 | | | 23,807 | | | | 252,355 | | | | 4,116 | | | | 43,630 | |
| | | 21,269 | | | 5,317 | | | - | | | 16.75 | | | 3/13/2013 | | | - | | | | - | | | | - | | | | - | |
| | | 25,512 | | | 17,008 | | | - | | | 24.05 | | | 1/16/2014 | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amílcar L. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jordán | | 15,031 | | | - | | | - | | | 14.42 | | | 2/14/2012 | | | 23,807 | | | | 252,356 | | | | 4,116 | | | | 43,630 | |
| | | 10,648 | | | 2,662 | | | - | | | 16.75 | | | 3/13/2013 | | | - | | | | - | | | | - | | | | - | |
| | | 7,784 | | | 5,190 | | | - | | | 24.05 | | | 1/16/2014 | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Brunilda | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Santos de | | 22,771 | | | - | | | - | | | 14.42 | | | 2/14/2012 | | | 23,807 | | | | 252,356 | | | | 4,116 | | | | 43,630 | |
| Álvarez | | 28,150 | | | 7,038 | | | - | | | 16.75 | | | 3/13/2013 | | | - | | | | - | | | | - | | | | - | |
| | | 20,873 | | | 13,915 | | | - | | | 24.05 | | | 1/16/2014 | | | - | | | | - | | | | - | | | | - | |
(1) Mr. Carrión has not received stock option awards.
33 POPULAR, INC. 2008 PROXY STATEMENT
OPTION EXERCISES AND STOCK VESTED TABLE FOR 20072008
The following table includes certain information with respect to the options exercised by the NEOs and the vesting of stock awards during 2007.2008. No stock options were exercised by any of the Corporation’s NEOs during 2007.2008.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards | | | Option Awards
| | Stock Awards
| |
| | | Number of Shares | | | | | | | | | Number of Shares
| | | | | | | |
| | | Acquired through | | Value Realized on | | Number of Shares | | Value Realized on | | | Acquired through
| | Value Realized on
| | Number of Shares
| | Value Realized on
| |
| Name | | Exercise (#) | | Exercise ($) | | Acquired on Vesting (#) | | Vesting ($)(1) | | | Exercise (#) | | Exercise ($) | | Acquired on Vesting (#) | | Vesting ($)(1) | |
| | |
| Richard L. Carrión | | - | | - | | - | | - | | | | - | | | | - | | | | - | | | | - | |
| Jorge A. Junquera | | - | | - | | 3,177 | | | $56,766 | | | | - | | | | - | | | | 3,177 | | | $ | 28,272 | |
| David H. Chafey Jr. | | - | | - | | 4,332 | | 77,408 | | | | - | | | | - | | | | 4,332 | | | | 38,552 | |
| C.E. (Bill) Williams | | - | | - | | 2,455 | | 43,865 | | |
| Roberto R. Herencia | | - | | - | | 2,888 | | 51,606 | | |
| Tere Loubriel | | - | | - | | 1,877 | | 33,544 | | |
| Félix M. Villamil | | - | | - | | 1,733 | | 30,963 | | |
| Amílcar L. Jordán | | - | | - | | 1,733 | | 30,963 | | | | - | | | | - | | | | 1,733 | | | | 15,421 | |
| Brunilda Santos de Álvarez | | - | | - | | 1,733 | | 30,963 | | | | - | | | | - | | | | 1,733 | | | | 15,421 | |
| Félix M. Villamil | | | | - | | | | - | | | | 1,733 | | | | 15,421 | |
| Eduardo J. Negrón | | | | - | | | | - | | | | 553 | | | | 4,923 | |
Former Executive Officer: | | | | | | | | | | | | | | | | | |
Roberto R. Herencia(2) | | | | - | | | | - | | | | 47,064 | | | | 253,649 | |
(1) Stock price used for vesting calculation was $17.87 (price$8.90 (closing price of the Corporation’s Common Stock on January 22, 2007,18, 2008 vesting date).
35 POPULAR, INC. 2009 PROXY STATEMENT
(2) The stock price used for vesting calculation was $8.90 (closing price of the Corporation’s Common Stock on January 18, 2008 vesting date) for 2,888 shares. In addition, 44,176 shares were calculated at $5.16 (closing price of the Corporation’s Common Stock on December 31, 2008) per the terms of the Resignation and Transition Agreement.
POST-TERMINATION COMPENSATION
The Corporation offers comprehensive retirement benefits to all eligible employees, including NEOs. These retirement benefits are summarized below.
Puerto Rico
Retirement Plan
The
In February 2009, the Bank’s non-contributory, defined benefit retirement plan (“Retirement Plan”) is currentlywas frozen with regards to all future benefit accruals after April 30, 2009. This action was taken by the Corporation to generate significant cost savings in light of the severe economic downturn and decline in the Corporation’s financial performance; this measure will be reviewed periodically as economic conditions and the Corporation’s financial situation improve.
The Retirement Plan had previously been closed to new hires and to employees whowas frozen as of December 31, 2005 to employees who were under 30 years of age or were credited with less than 10 years of benefit service (approximately 60% of plan participants). Inasmuch as by December 31, 2005 all NEOs were over 30 years of age and had more than 10 years of service withparticipants at the Corporation, they still participate in the Retirement Plan. time).
The Retirement Plan’s benefit formula is based on a percentage of average final compensation and years of service. Normal retirement age under the Retirement Plan is age 65 with five years of service and, in general, benefits are paid onfor life in the basisform of a straightsingle life annuity plus supplemental death benefits, and are not reduced for Social Security or other payments received by the participants. Pension costs are funded in accordance with minimum funding standards under the Employee Retirement Income Security Act of 1974 (“ERISA”). Benefits under theThe Retirement Plan are subject tois qualified in accordance with the U.S. Internal Revenue Code, which establishes limits on compensation and benefits.
Benefits under
Benefit restoration plans are not qualified in accordance with the U.S. Internal Revenue Code and are designed to restore benefits to select employees that are limitedwould otherwise have been received by an eligible employee under the Retirement Plan due tobut for the limitations imposed by the U.S. Internal Revenue Code limits and a compensation definition that excludes amounts deferred pursuant to nonqualified arrangements.Code. The Corporation has adopted two such Benefit Restoration Plans (“Restoration Plans”), whose benefits are equal to the amountdifference between the benefits that when addedan eligible employee would be entitled to the benefitsreceive under the Retirement Plan would be provided under the Retirement Plan hadbut for such IRS limits or exclusions from compensation not been in effect.and the benefits actually received under the Retirement Plan. The Restoration Plans do not offer credit for years of service not actually worked, preferential benefit formulas or accelerated vesting of pension benefits, beyond the provisions of the Retirement Plan. The restoration benefits of
34 POPULAR, INC. 2008 PROXY STATEMENT
employees who are residents of Puerto Rico are funded through one irrevocable trust.an ERISA pension trust that is tax qualified in accordance with the Puerto Rico Income Tax Act. In addition, the Bank is contributingcontributes to an irrevocable trust to maintain a source of funds for payment of benefit restoration liabilities to all non-Puerto Rico resident participants.
The aforementioned Retirement Plan freeze apply to the respective Restoration Plans as well.
36 POPULAR, INC. 2009 PROXY STATEMENT
Pension Benefits
The following table sets forth certain information with respect to the value of retirement payments under the Corporation’s retirement plans.
| | | | | | | | | | |
| | | | | | Present Value of | | | |
| | | | Number of Years of | | Accumulated | | | Payments During |
Name | | Plan Name | | Credited Service | | Benefit ($)(a) | | | Last Fiscal Year ($) |
|
Richard L. Carrión | | Retirement Pension Plan | | | | | $1,099,441 | | | - |
| | | | 31.583 | | | | | | |
| | Benefit Restoration Plan | | | | | 4,753,824 | | | - |
| | | | | | | | | | |
Jorge A. Junquera | | Retirement Pension Plan | | | | | 1,041,709 | | | - |
| | | | 36.500 | | | | | | |
| | Benefit Restoration Plan | | | | | 4,262,855 | | | - |
| | | | | | | | | | |
David H. Chafey Jr. | | Retirement Pension Plan | | | | | 924,877 | | | - |
| | | | 27.333 | | | | | | |
| | Benefit Restoration Plan | | | | | 5,267,006 | | | - |
| | | | | | | | | | |
Roberto R. Herencia | | Retirement Pension Plan | | | | | 368,376 | | | - |
| | | | 16.667 | | | | | | |
| | Benefit Restoration Plan | | | | | 1,703,115 | | | - |
| | | | | | | | | | |
Tere Loubriel | | Retirement Pension Plan | | | | | 1,114,841 | | | - |
| | | | 29.750 | | | | | | |
| | Benefit Restoration Plan | | | | | 2,031,073 | | | - |
| | | | | | | | | | |
Félix M. Villamil | | Retirement Pension Plan | | | | | 249,002 | | | - |
| | | | 18.417 | | | | | | |
| | Benefit Restoration Plan | | | | | 394,736 | | | - |
| | | | | | | | | | |
Amílcar L. Jordán | | Retirement Pension Plan | | | | | 444,336 | | | - |
| | | | 21.083 | | | | | | |
| | Benefit Restoration Plan | | | | | 542,407 | | | - |
| | | | | | | | | | |
Brunilda Santos de | | Retirement Pension Plan | | | | | 399,537 | | | - |
Álvarez | | | | 22.333 | | | | | | |
| | Benefit Restoration Plan | | | | | 546,852 | | | - |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | Present Value of
| | | | |
| | | | | | Number of Years of
| | | Accumulated
| | | Payments During Last
| |
| Name | | Plan Name | | | Credited Service | | | Benefit ($)(a) | | | Fiscal Year ($) | |
| Richard L. Carrión | | | Retirement Pension Plan | | | | 32.583 | | | $ | 1,152,069 | | | | - | |
| | | | Benefit Restoration Plan | | | | | | | | 5,020,012 | | | | - | |
| Jorge A. Junquera | | | Retirement Pension Plan | | | | 37.500 | | | | 1,085,876 | | | | - | |
| | | | Benefit Restoration Plan | | | | | | | | 4,291,406 | | | | - | |
| David H. Chafey Jr. | | | Retirement Pension Plan | | | | 28.333 | | | | 1,086,563 | | | | - | |
| | | | Benefit Restoration Plan | | | | | | | | 6,016,662 | | | | - | |
| Amílcar L. Jordán | | | Retirement Pension Plan | | | | 22.083 | | | | 539,555 | | | | - | |
| | | | Benefit Restoration Plan | | | | | | | | 740,819 | | | | - | |
| Brunilda Santos de Álvarez | | | Retirement Pension Plan | | | | 23.333 | | | | 485,673 | | | | - | |
| | | | Benefit Restoration Plan | | | | | | | | 660,000 | | | | - | |
| Félix M. Villamil | | | Retirement Pension Plan | | | | 19.417 | | | | 309,184 | | | | - | |
| | | | Benefit Restoration Plan | | | | | | | | 514,206 | | | | - | |
| Eduardo J. Negrón | | | Retirement Pension Plan | | | | 5.167 | | | | 79,155 | | | | - | |
| | | | Benefit Restoration Plan | | | | | | | | 22,209 | | | | - | |
Former Executive Officer: | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Roberto R. Herencia | | | Retirement Pension Plan | | | | 17.667 | | | | 228,146 | | | | - | |
| | | | Benefit Restoration Plan | | | | | | | | 1,019,479 | | | | - | |
(a) Present values of pension benefits were determined using year-end SFAS 87 assumptions with the following exception: payments are assumed to begin at the earliest possible retirement date at which benefits are unreduced. These vary for NEOs, depending on their initial employment situation. For Mr. Villamil and Mrs.Ms. Santos de Álvarez, their earliest possible retirement age with unreduced benefits is the age of 60, while for all other NEOs the age to receive retirement benefits with nowithout reductions is 55. Also, each NEO is assumed to continue employment until such retirement date.
Puerto Rico Savings and Investment Plan
The Popular, Inc. Puerto Rico Savings and Investment Plan allows Puerto Rico-based employees of the Corporation and its subsidiaries who have completed 30 days of service to voluntarily elect to defer up to 10%70% of their pre-tax total annual cash compensation on a pre-tax basis and to contribute up to 10% of their after-tax total annual cash compensation.compensation on an after-tax basis. Both contribution levels are subject to maximum contribution limits as determined by applicable laws. Employees become vested 20% per year during the first five years of service. The Corporation matches 100% of the first three percent of total cash compensation contributed on a pre-tax basis by the participant, plus 50% of the next two percent contributed. Employees become vested in the company match 20% per year during the first five years of service.
The Corporation suspended its matching contributions to the Puerto Rico Savings and Investment plan as part of the February 2009 actions taken to control costs during the economic crisis. This decision will be reviewed periodically as economic conditions and the Corporation’s financial situation improve.
35 POPULAR, INC. 2008 PROXY STATEMENT
United States
United States
Retirement Plan of Banco Popular North America
Effective April 1,December 31, 2007, the Corporation frozeterminated its non-contributory, defined benefit retirement plan, which covered substantially all salaried employees of Banco Popular North America (“BPNA”) hired before June 30, 2004. The Plan is in the process of termination. These actions were also applicable to the related plan that restored benefits to select employees that were limited under the retirement plan due to U.S. Internal Revenue Code limits and a compensation definition that excludes amounts deferred to nonqualified arrangements.benefit restoration plan.
37 POPULAR, INC. 2009 PROXY STATEMENT
Savings Plan of Popular Companies in the United States
All regularU.S.-based employees of the Corporation’s subsidiaries are eligible to participate in a 401(k) plan upon completion of 30 days of service. Participants may defer up to the maximum amount permitted by applicable tax laws. The Corporation matches 100% of employee contributionpre-tax contributions up to four percent of the participant’s annual compensation.
The Corporation suspended its matching contributions to the United States 401(k) plan as part of the February 2009 actions taken to control costs during the economic crisis. This decision will be reviewed periodically as economic conditions and the Corporation’s financial situation improve.
Non-Qualified Deferred Compensation
The following table shows non-qualified deferred compensation activity and balances related to plans in which certain NEOs participate:
| | | | | | | | | | | | | | | | | | | | | |
| | | Executive | | | Registrant | | | Aggregate | | | Aggregate | | | Aggregate | |
| | | Contribution in | | | Contribution in | | | Earnings in | | | Withdrawals/ | | | Balance at | |
| Name | | Last FY | | | Last FY | | | Last FY | | | Distributions | | | Last FYE | |
| |
C.E. (Bill) Williams(a) | | $ | - | | | $ | - | | | $ | (28,421 | ) | | | $401,757 | | | | - | |
| |
Roberto R. Herencia(b) | | | - | | | | - | | | | 3,773 | | | | - | | | | $110,679 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Executive
| | Registrant
| | | | Aggregate
| | |
| | | Contribution
| | Contribution
| | Aggregate Earnings
| | Withdrawals/
| | Aggregate Balance
|
| Name | | In Last FY | | in Last FY | | in Last FY | | Distributions | | at Last FYE |
| Former Executive Officer: | | | | | | | | | | | | | | | | | | | | |
Roberto R. Herencia(a) | | | - | | | | - | | | $ | (42,596 | ) | | | - | | | $ | 68,084 | |
(a) Activity in the Supplemental Employee Retirement Plan (“SERP”) and the Voluntary Deferral Plan sponsored by Popular Financial Holdings.
(b)(a) Balances in the Restoration Plan covering deferred profit sharing. Balances are credited according to the performance of the S&P 500 Index. The balance will be distributed to Mr. Herencia on June 30, 2009, six months after his resignation.
Employment andChange-in-Control Agreements
The Corporation typically does not utilizehave employment agreements orchange-in-control agreements. agreements with its CEO and other NEOs. Nevertheless, the Corporation’s 2004 Omnibus Plan provides that in the event of a change of control of the Corporation, all outstanding options and stock appreciation rights become fully exercisable, and restrictions on outstanding restricted stock and restricted units lapse. In addition, outstanding long-term performance unit awards and performance share awards will be paid in full at target within 30 days of the change of control. Participants may opt to receive such payments in cash. The Compensation Committee may, in its discretion, provide for cancellation of each option, stock appreciation rights, restricted stock and restricted stock unit in exchange for a cash payment per share based upon the change of control price, which is the highest share price offered in conjunction with any transaction resulting in a change of control (or, if there is no such price, the highest trading price during the 30 days preceding the change of control event). Notwithstanding the foregoing, no acceleration of vesting or exercisability, cancellation, cash payment or other settlement occurs with respect to any option, stock appreciation rights, restricted stock, restricted unit, long-term performance unit award or performance share award if the Compensation Committee reasonably determines in good faith prior to the change of control that such awards will be honored or assumed or if equitable replacement awards will be made by a successor employer immediately following the change of control and that such awards will vest and payments will be made if a participant is involuntarily terminated without cause.
36 POPULAR, INC. 2008 PROXY STATEMENT
For purposes of the 2004 Omnibus Plan, “change of control” occurs in general if: (i) any “person” (within the meaning of Section 3(a)(9) of the 1934 Act and excluding the Corporation, its subsidiaries or any employee benefit plan sponsored or maintained by the Corporation or its 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 (ii) the stockholders 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.
38 POPULAR, INC. 2009 PROXY STATEMENT
Payments Made Upon Termination of Employment
Roberto R. Herencia
Effective December 31, 2008, Mr. Herencia resigned as Executive Vice President of the Corporation and President of Banco Popular North America. On November 6, 2008, the Board of Directors of the Corporation approved the principal terms of a Resignation and Transition Agreement with Mr. Herencia. Under the agreement, Mr. Herencia received a severance payment equal to $3,289,432, of which 85% was paid on November 12, 2008 and the remainder was paid on February 6, 2009. In addition, he received $42,875 corresponding to transition-related services performed during January 2009.
Under the terms of the agreement, all restricted stock awards previously granted to Mr. Herencia vested immediately upon his resignation and all stock options exercisable as of December 31, 2008 remain exercisable through the earlier of (1) their expiration date or (2) June 30, 2009, in the case of stock options issued under the Corporation’s 2001 Stock Option Plan or (3) March 31, 2009, for stock options issued under the Corporation’s 2004 Omnibus Incentive Plan. With respect to performance share awards, Mr. Herencia is entitled to a payment in the form of Common Stock of the applicable target award pro-rated for the period of time employed during the performance cycle. In addition, Mr. Herencia will receive continuation of certain medical benefits through December 31, 2009, as well as continued participation in Banco Popular North America’s preferred mortgage loan interest rate program for employees. The aggregate value of payments and benefits related to Mr. Herencia’s resignation and transition do not exceed 2.99 times his average annual compensation over the past five years. Mr. Herencia will receive these benefits in consideration for agreeing to certain covenants in the Agreement, including non-solicitation, non-disparagement, cooperation and confidentiality covenants for the benefit of the Corporation, as well as a general release of claims.
General
Regardless of the circumstances pursuant to which NEOs terminate their employment with the Corporation, they are entitled to receive certain amounts earned during their employment. Such amounts include:
• | |
| • | Amounts contributed to the Corporation’s Savings and Investment Plan, including the vested portion of the employer-sourced funds. |
| |
| • | | Benefits accumulated under the Retirement Plan, including retiree medical and the Retirement Restoration Plan. |
| |
| • | | Awards under the Senior Executive Long-Term Incentive Plan granted in years 1997 — 19991997-1999 in the form of deferred stock. |
Additional payments may be made if the termination is due to retirement:
• | |
| • | Non-equity compensation awards earned for the time worked. |
| |
| • | | All restricted stock and stock options become fully vested at the time of retirement. Retirement is defined as termination of employment on or after attaining age 55 and completing 10 years of service except when termination is for cause. |
| |
| • | | For performance shares, based on the Corporation’s results during the performance cycle, a payment will be made at the end of the performance cycle. |
| |
| • | | All balances in the non-qualified deferred compensation plans. |
If termination is due to resignation:
| |
| • | Vested stock options under the 2001 Stock Option Plan can be exercised for a period of 6 months after termination of employment. However, stock options, restricted stock and performance shares granted under the 2004 Omnibus Incentive Plan are forfeited upon termination of employment. |
Vested stock options under the 2001 Stock Option Plan can be exercised for a period of 6 months after termination of employment. However, stock options, restricted stock, and performance shares granted under the 2004 Omnibus Incentive Plan are forfeited upon termination of employment.
39 POPULAR, INC. 2009 PROXY STATEMENT
If termination is without cause:
Vested stock options under the 2001 Stock Option Plan can be exercised for a period of 6 months after termination of employment. Stock options granted under the 2004 Omnibus Incentive Plan may be exercised at any time prior to the expiration of the term of the option or the 90th day following termination of employment, whichever period is shorter.
| |
| • | Vested stock options under the 2001 Stock Option Plan can be exercised for a period of 6 months after termination of employment. Stock options granted under the 2004 Omnibus Incentive Plan may be exercised at any time prior to the expiration of the term of the option or the 90th day following termination of employment, whichever period is shorter. |
|
| • | Restricted stock will be pro-rated for the period of active service in the applicable vesting period. Performance shares will be pro-rated for the period of active service in the applicable performance cycle, calculated as if the target number of performance shares had been earned. |
37 POPULAR, INC. 2008 PROXY STATEMENT
Restricted stock will be pro-rated for the period of active service in the applicable vesting period. Performance shares will be pro-rated for the period of active service in the applicable performance cycle, calculated as if the target number of performance shares had been earned.
The following table details the compensation that each executive would receive upon termination of employment.
Post-Termination Compensation Table as of December 31, 20072008
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Non-Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Cash Incentive ($)(a) | | Restricted Stock ($)(b) | | Performance Shares ($)(c) | | | Non-Equity
| | | | | |
| | | | | | | | | | Cash Incentive($)(a)
| | Restricted Stock($)(b)
| | Performance Shares ($)(c)
| |
| | | Retirement, | | Resignation, | | Retirement, | | | | | | | | | Retirement,
| | | | Retirement,
| | | | | | | | | | | | | |
| | | Death, | | Termination | | Death, | | Death, | | | | | | | Death,
| | Resignation,
| | Death,
| | | | | | | | Death,
| | | | | |
| | | Disability or | | With Cause or | | Disability or | | Resignation or | | Termination | | Disability or | | Resignation or | | Termination | | | Disability or
| | Termination
| | Disability or
| | Resignation or
| | | | | | Disability or
| | Resignation or
| | Termination
| |
| | | Change in | | Without | | Change in | | Termination | | Without | | Change in | | Termination | | Without | | | Change in
| | With Cause or
| | Change in
| | Termination
| | Termination
| | | | Change in
| | Termination
| | Without
| |
| Name | | Control | | Cause | | Control | | With Cause | | Cause | | Retirement | | Control | | With Cause | | Cause | | | Control | | Without Cause | | Control | | With Cause | | Without Cause | | Retirement | | Control | | With Cause | | Cause | |
| | |
| Richard L. Carrión | | $ | 25,779 | | $ | - | | $ | 1,377,967 | | $ | - | | $ | 1,377,967 | | $ | 220,077 | | $ | 440,144 | | $ | - | | $ | 146,715 | | | $ | - | | | $ | - | | | $ | 670,784 | | | $ | - | | | $ | 670,784 | | | $ | 268,867 | | | $ | 537,729 | | | $ | - | | | $ | 250,662 | |
| | | | | | | | | |
| Jorge A. Junquera | | 153,487 | | - | | 462,652 | | - | | 462,652 | | 79,977 | | 159,954 | | - | | 53,318 | | | | - | | | | - | | | | 208,824 | | | | - | | | | 241,607 | | | | 97,710 | | | | 195,414 | | | | - | | | | 91,095 | |
| | | | | | | | | |
| David H. Chafey Jr. | | 374,694 | | - | | 630,889 | | - | | 435,687 | | 103,498 | | 206,986 | | - | | 68,995 | | | | - | | | | - | | | | 284,760 | | | | - | | | | 271,851 | | | | 126,441 | | | | 252,876 | | | | - | | | | 117,880 | |
| | | | | | | | | |
| Roberto R. Herencia | | 68,547 | | - | | 420,593 | | - | | 155,397 | | 72,705 | | 145,411 | | - | | 48,474 | | |
| | | | | | | | | |
| Tere Loubriel | | 90,697 | | - | | 273,386 | | - | | 273,386 | | 47,265 | | 94,520 | | - | | 31,503 | | |
| | | | | | | | | |
| Amílcar L. Jordán | | | | - | | | | - | | | | 113,904 | | | | - | | | | 48,849 | | | | 53,298 | | | | 106,590 | | | | - | | | | 49,686 | |
| Brunilda Santos de Álvarez | | | | - | | | | - | | | | 113,904 | | | | - | | | | 58,027 | | | | 53,298 | | | | 106,590 | | | | - | | | | 49,686 | |
| Félix M. Villamil | | 165,054 | | - | | 252,355 | | - | | 84,364 | | 43,630 | | 87,249 | | - | | 29,086 | | | | - | | | | - | | | | 113,904 | | | | - | | | | 46,965 | | | | 53,298 | | | | 106,590 | | | | - | | | | 49,686 | |
| | | | | | | | | |
| Amílcar L. Jordán | | 83,720 | | - | | 252,356 | | - | | 87,131 | | 43,630 | | 87,249 | | - | | 29,086 | | |
| | | | | | | | | |
| Brunilda Santos de Álvarez | | 83,720 | | - | | 252,356 | | - | | 100,634 | | 43,630 | | 87,249 | | - | | 29,086 | | |
| Eduardo J. Negrón | | | | - | | | | - | | | | 12,132 | | | | - | | | | 4,619 | | | | 32,327 | | | | 64,655 | | | | - | | | | 24,928 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Retirement Plan (Pension) | | | | | | | |
| | | | | | | | | | | and Retirement Restoration | | | Defined Contribution | | | | |
| | | Stock Options ($)(d) | | | Long Term Incentive ($)(e) | | | Plan ($)(f) | | | Plan ($)(g) | | | Non-qualified Plans ($)(h) | |
| | | | | | | | | | | | | | | | | | |
| | | Retirement, Death, | | | | | | | | | | | | | |
| | | Disability, Change in | | | Retirement, Death, Disability, | | | Retirement, Death, Disability, | | | Retirement, Death, Disability, | | | Retirement, Death, Disability, | |
| | | Control, Resignation, | | | Change in Control, Resignation, | | | Change in Control, Resignation, | | | Change in Control, | | | Change in Control, | |
| | | Termination With Cause | | | Termination With Cause or | | | Termination With Cause or | | | Resignation, Termination | | | Resignation, Termination | |
| Name | | or Without Cause | | | Without Cause | | | Without Cause | | | With Cause or Without Cause | | | With Cause or Without Cause | |
| |
| Richard L. Carrión | | $ | - | | | $ | 530,760 | | | $ | 5,853,265 | | | $ | 2,447,274 | | | | - | |
| | | | | | | | | | | | | | | | | | |
| Jorge A. Junquera | | | - | | | | 332,711 | | | | 5,304,564 | | | | 2,289,359 | | | | - | |
| | | | | | | | | | | | | | | | | | |
| David H. Chafey Jr. | | | - | | | | 330,151 | | | | 6,505,543 | | | | 1,775,790 | | | | - | |
| | | | | | | | | | | | | | | | | | |
| Roberto R. Herencia | | | - | | | | - | | | | - | | | | 497,636 | | | | $110,679 | |
| | | | | | | | | | | | | | | | | | |
| Tere Loubriel | | | - | | | | - | | | | 3,145,914 | | | | 1,618,591 | | | | - | |
| | | | | | | | | | | | | | | | | | |
| Félix M. Villamil | | | - | | | | - | | | | - | | | | 424,623 | | | | - | |
| | | | | | | | | | | | | | | | | | |
| Amílcar L. Jordan | | | - | | | | - | | | | - | | | | 519,135 | | | | - | |
| | | | | | | | | | | | | | | | | | |
| Brunilda Santos de Álvarez | | | - | | | | - | | | | - | | | | 373,605 | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Retirement Plan (Pension) and
| | �� | Defined Contribution
| | | | |
| | | Stock Options ($)(d)
| | | Long Term Incentive ($)(e)
| | | Retirement Restoration Plan ($)(f)
| | | ($)Plan(g)
| | | Non-qualified Plans ($)(h)
| |
| | | Retirement, Death,
| | | | | | | | | | | | | |
| | | Disability, Change in
| | | | | | | | | | | | | |
| | | Control, Resignation,
| | | Retirement, Death, Disability,
| | | Retirement, Death, Disability,
| | | Retirement, Death, Disability,
| | | Retirement, Death, Disability,
| |
| | | Termination
| | | Change in Control, Resignation,
| | | Change in Control, Resignation,
| | | Change in Control,
| | | Change in Control,
| |
| | | With Cause
| | | Termination With Cause
| | | Termination With Cause
| | | Resignation, Termination
| | | Resignation, Termination With
| |
| Name | | or Without Cause | | | or Without Cause | | | or Without Cause | | | With Cause or Without Cause | | | Cause or Without Cause | |
| | | | | | | | | | | | | | | | | | | | | |
| Richard L. Carrión | | $ | - | | | $ | 273,358 | | | $ | 6,172,081 | | | $ | 1,518,844 | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Jorge A. Junquera | | | - | | | | 171,358 | | | | 5,377,282 | | | | 1,595,774 | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| David H. Chafey Jr. | | | - | | | | 170,042 | | | | 7,103,225 | | | | 1,210,124 | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Amílcar L. Jordán, | | | - | | | | - | | | | 1,280,374 | | | | 338,684 | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Brunilda Santos de Álvarez | | | - | | | | - | | | | 1,145,673 | | | | 252,122 | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Félix M. Villamil | | | - | | | | - | | | | 823,390 | | | | 295,370 | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Eduardo J. Negrón | | | - | | | | - | | | | 101,364 | | | | 171,573 | | | | - | |
(a) Non-equity cash award was not paid to NEOs during January 2009 for 2008 for 2007 performance. It includesperformance related to the performance awardshort-term incentive and the profit sharing cash portion.plan.
The non-equity cash award is not guaranteed. Therefore, if resignation, termination without cause or termination with cause takes place before the date the award is paid, the NEO would not be entitled to receive the award.
(b) All restricted stock would vest immediately upon termination of employment due to retirement, death, disability or change in control. These calculations use the closing price of the Popular, Inc. Common Stock as of December 31, 20072008 ($10.60)5.16).
38 POPULAR, INC. 2008 PROXY STATEMENT
All unvested restricted stock would be forfeited upon resignation or termination with cause. In the event of termination without cause, all unvested restricted stock will be vested on a pro-rata basis for the period of active service in the applicable vesting period.
(c) The performance shares award is based on the Corporation’s three-year average return on equity during the performance cycle. The award is paid at the end of the performance cycle.
| | |
| | • | | In the event of termination of employment due to death, disability or change in control, the award is based on the achievement of target performance goals. |
40 POPULAR, INC. 2009 PROXY STATEMENT
| | |
| | • | | In the event of termination of employment due to retirement, the award is based on the Corporation’s average return on equity during the corresponding three-year performance cycle. The award shown in this table is based on the achievement of threshold performance goals. |
| |
| | • | | Upon termination of employment without cause, the performance shares award will be pro-rated for the period of active service in the applicable performance cycle calculated as if the target number of performance shares had been earned. |
| |
| | • | | Any unearned award opportunity will be forfeited upon termination of employment due to cause or resignation. |
(d) All unvested stock options would vest immediately if the executive’sNEO’s employment is terminated due to retirement, death, disability or change in control. These figures include the unvested options in-the-money as of December 31, 2007,2008, and the dollar value is the gain the executives would receive if they exercised all these options on December 31, 20072008 using the strike price of each option award.
All vested and unvested stock options would be forfeited the date of termination of employment, if termination is with cause. In the event of termination without cause, all vested stock options may be exercised prior to the expiration of the options or the 90th day following termination of employment, whichever period is shorter.
All unvested stock options would be forfeited upon termination of employment without cause.
(e) The Senior Executive Long-Term Incentive Plan was a performance-based plan with a three-year performance period. Awards were made under the plan in 1997, 1998 and 1999 based on the Corporation’s performance during the respective preceding three-year performance periods. The plan had financial targets such as return on equity and stock appreciation. The plan gave NEOs the choice of receiving the incentive in cash or Common Stock. If they chose Common Stock, the compensation was deferred in the form of Common Stock until termination of employment. These are dollar values using the number of shares awarded at the time, the dividends (in shares) received multiplied by the closing price of Common Stock on December 31, 20072008 ($10.60)5.16).
(f) This is the present value of the immediate benefit for those executivesNEOs who already qualify for such benefit. These calculations use the same assumptions as the Pension Benefits table.
(g) The defined contribution is the balance as of December 31, 20072008 for each NEO. It includes the NEO’s contributions and the employer match. It also includes, where applicable, the amount accumulated in the Deferred Profit Sharing Plan. The Deferred Profit Sharing Plan was frozen on December 31, 2005 and balances were subsequently transferred to the NEOs’ respective Savings and Investment Plans.
(h) For Mr. Herencia, payments include balances under the Restoration Plan related to deferred profit sharing.
REORGANIZATION
39
On January 9, 2009, the Corporation appointed Mr. Chafey as President and Chief Operating Officer of the Corporation, effective immediately, and all the Corporation’s operating units in the U.S. mainland and Puerto Rico will report to him. Pursuant to this change, Mr. Villamil, Mr. Jordán and Mr. Negrón will report to Mr. Chafey. Mr. Chafey will report to Mr. Carrión, the Corporation’s Chief Executive Officer and Chairman of the Board of Directors. In addition, Mr. Junquera and Ms. Santos de Álvarez, as well as Corporate Communications, Strategic Planning and the Puerto Rico and U.S. Foundations, report directly to Mr. Carrión. The Corporation expects that Mr. Chafey’s appointment as its President and Chief Operating Officer will serve to further the integration of the Corporation’s U.S. mainland and Puerto Rico operations, and result in synergies in control and operations.
* * *
41 POPULAR, INC. 20082009 PROXY STATEMENT
PROPOSALS OF STOCKHOLDERS TO BE PRESENTED AT THE 20092010 ANNUAL
MEETING OF STOCKHOLDERS
Stockholders’ proposals intended
Under the Corporation’s Amended and Restated By-Laws, no business may be brought before the 2010 annual meeting of stockholders of the Corporation unless it is specified in a notice of meeting or brought by a shareholder who has delivered written notice (containing certain information specified in the Amended and Restated By-Laws about the shareholder and the proposed action) to be presentedthe Corporate Secretary at the 2009 Annual Meeting of Stockholders must be received by the Board’s Secretary, at itsCorporation’s principal executive offices, 209 Muñoz Rivera Ave., San Juan, Puerto Rico, 00918, no laternot more than November 13, 2008 for inclusion180 days nor less than 90 days in advance of the anniversary date of the preceding year’s annual meeting. In the case of a special meeting or in the event that the date of the 2010 annual meeting is more than 30 days before the anniversary date, notice by a stockholder must be delivered not earlier than the 15th day following the day on which notice is mailed, or a public announcement is first made by the Corporation of the date of such meeting, whichever occurs first. Shareholders may obtain a copy of the Corporation’s Amended and RestatedBy-laws by writing to the Corporate Secretary at the address set forth above.
The requirements set forth in the preceding paragraph are separate from and in addition to the SEC’s requirements that a shareholder must meet in order to have a shareholder proposal included in the Corporation’s proxy statement and proxy card relatingProxy Statement. Shareholder requests to have a proposal included in the Corporation’s Proxy Statement should be directed to the 2009 Annualattention of the Corporation’s Chief Legal Officer at the address of the Corporation set forth on the cover page of this Proxy Statement.
The above Notice of Meeting and Proxy Statement are sent by order if the Board of Stockholders.Directors of Popular, Inc.
In San Juan, Puerto Rico, March 12, 2008.9, 2009.
| | | |
  | |   |
| RICHARD L. CARRIÓN | | SAMUEL T. CÉSPEDES |
| | |
Chairman of the Board, President,
and Chief Executive Officer | | Secretary |
and Chief Executive Officer | | |
YOU MAY REQUEST A COPY, FREE OF CHARGE, OF THE CORPORATION’S ANNUAL REPORT ONFORM 10-K FOR THE YEAR ENDED DECEMBER 31, 20072008 AS FILED WITH THE SEC THROUGH OUR WEBSITE, www.popular.com, OR BY CALLING(787) 765-9800 OR WRITING TO MS. ILEANA GONZÁLEZ, SENIOR VICE PRESIDENT, POPULAR, INC., P.O. BOX 362708, SAN JUAN, PR00936-2708.
42 POPULAR, INC. 2009 PROXY STATEMENT
ANNEX A
PROPOSED AMENDMENTS TO ARTICLE FIFTH OF THE RESTATED ARTICLES OF INCORPORATION
RESOLVED, that Article Fifth of the Restated Articles of Incorporation of the Corporation be, and it hereby is, amended in its entirety to read as follows:
“FIFTH: The minimum amount of capital with which the Corporation shall commence business shall be $1,000.
The total number of shares of all classes of capital stock that the Corporation shall have authority to issue, upon resolutions approved by the Board of Directors from time to time, is seven hundred thirty million shares (730,000,000), of which seven hundred million shares (700,000,000) shall be shares of Common Stock of the par value of $0.01, per share (hereinafter called “Common Stock”), and thirty million (30,000,000) shall be shares of Preferred Stock without par value (hereinafter called “Preferred Stock”).
The amount of the authorized capital stock of any class or classes of stock may be increased or decreased by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote.
The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of the Preferred Stock shall be as follows:
(1) The Board of Directors is expressly authorized at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, and with such voting powers, full or limited but not to exceed one vote per share, or without voting powers, and with such designations, preferences, and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be expressed in the resolution or resolutions providing for the issue thereof adopted by the Board of Directors and as are not otherwise expressed in this Certificate of Incorporation or any amendment thereto, including (but without limiting the generality of the foregoing) the following:
(a) the designation of such series;
(b) the purchase price that the Corporation shall receive for each share of such series;
(c) the dividend rate of such series, the conditions and dates upon which such dividends shall be payable, the preference or relation that such dividends shall bear to the dividends payable on any other class or classes or on any other series of any class or classes of capital stock of the Corporation, and whether such dividends shall be cumulative or noncumulative;
(d) whether the shares of such series shall be subject to redemption by the Corporation, and, if made subject to such redemption, the times, prices and other terms and conditions of such redemption;
(e) the terms and amounts of any sinking fund provided for the purchase or redemption of the shares of such series;
(f) whether the shares of such series shall be convertible into or exchangeable for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation, and, if provision be made for conversion or exchange, the times, prices, rates, adjustments and other terms and conditions of such conversion or exchange;
(g) the extent, if any, to which the holders of the shares of such series shall be entitled to vote as a class or otherwise with respect to the election of directors or otherwise;
(h) the restrictions and conditions, if any, upon the reissue of any additional Preferred Stock ranking on a parity with or prior to such shares as to dividends or upon dissolution;
(i) the rights of the holders of the shares of such series upon the dissolution of, or upon the distribution of assets of, the Corporation, which rights may be different in the case of a voluntary dissolution than in the case of an involuntary dissolution.
(2) Except as otherwise required by law and except for such voting powers with respect to the election of directors or other matters as may be stated in the resolutions of the Board of Directors creating any series of Preferred Stock, the holders of any such series shall have no voting power whatsoever.”
RESOLVED FURTHER, that the proper officers of the Corporation be, and hereby are, authorized and directed to take all actions, execute all instruments, and make all payments that are necessary or desirable, at their discretion, to make effective the foregoing amendment to the Restated Articles of Incorporation of the Corporation, including without limitation on filing a certificate of such amendment with the Secretary of State of the Commonwealth of Puerto Rico.”
43 POPULAR, INC. 2009 PROXY STATEMENT
40 POPULAR, INC. 2008 PROXY STATEMENT
ANNEX 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: (i) is “independent” under Section 10A(m) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), any rules and regulations promulgated thereunder by the Securities and Exchange Commission (“SEC”), and the rules of The NASDAQ Stock Market, Inc. (“NASDAQ”), (ii) does not accept any consulting, advisory or other compensatory fee from the Corporation or its subsidiaries other than in his or her capacity as a member of the Board or any committee of the Board, and (iii) is not an “affiliate” of the Corporation or any subsidiary of the Corporation, as such term is defined in Rule 10A-3 under the Exchange Act. The Board shall also determine that each member of the Audit Committee is able to read and understand financial statements at the time of the member’s appointment to the Audit Committee and that at least one member of the Audit Committee has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background which results in the member’s financial sophistication.
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 (a) to assist the Board in its oversight of:
| 1. | | accounting and financial reporting principles and policies and internal audit controls and procedures of the Corporation and its subsidiaries; |
|
| 2. | | financial statements of the Corporation and its subsidiaries and the independent audit thereof; |
|
| 3. | | outside auditors’ qualifications, independence and performance; and |
|
| 4. | | compliance with legal and regulatory requirements of the Corporation and its subsidiaries in relation to the accounting and financial reporting processes of the Corporation and the audits of the financial statements of the Corporation and its subsidiaries; |
and (b) to prepare the report required to be prepared by the Audit Committee pursuant to the rules of the SEC for inclusion in the Corporation’s annual report.
In fulfilling their responsibilities hereunder, it is recognized that members of the Audit Committee are not employees of the Corporation or any of its subsidiaries and are not, and do not represent themselves to be, performing the functions of accountants or 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.
The function of the Audit Committee is to act in an oversight capacity on behalf of the Board of Directors. The management of the Corporation and its subsidiaries is responsible for the preparation, presentation and integrity of the financial statements of the Corporation and its subsidiaries, and for the effectiveness of internal control over financial reporting. Furthermore, management and the Internal Audit Division are responsible for maintaining appropriate accounting and financial reporting principles and policies, and internal controls and procedures that
41 POPULAR, INC. 2008 PROXY STATEMENT
provide for compliance with accounting standards and applicable laws and regulations. Management and the Internal Audit Division are 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, integrity and reporting of information; (ii) compliance with the policies, plans and procedures of the Corporation and its subsidiaries, 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 annual financial statements of the Corporation and its subsidiaries, reviewing the Corporation’s quarterly financial statements prior to the filing of each quarterly report on Form 10-Q, annually auditing management’s assessment of the effectiveness of internal control over financial reporting, and other procedures.
The outside auditors shall annually submit to the Audit Committee a formal written statement of the fees billed in each of the following categories of services rendered by the outside auditors: (i) audit fees for the audit of the annual financial statements of the Corporation and its subsidiaries and the review of the financial statements included in the Corporation’s quarterly reports on Form 10-Q; or services that are normally provided by the outside auditors in connection with statutory and regulatory filings or engagements; (ii) audit-related fees for assurance and related services not included in clause (i) that are reasonably related to the performance of the audit or review of the Corporation’s financial statements, in aggregate and by each service; (iii) tax fees for professional services rendered for tax compliance, tax advice and tax planning, in the aggregate and by each service; and (iv) all other fees for products and services rendered by the outside auditors, other than those described in clauses (i), (ii) and (iii) above, in the aggregate and by each service.
ARTICLE 4 -DUTIES AND RESPONSIBILITIES
To carry out its purposes, the Audit Committee shall have the following duties and responsibilities:
| 1. | | With respect to the outside auditors: |
| (i) | | to annually appoint - or replace if necessary - compensate, retain and oversee the work of any outside auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest service for the Corporation or any of its subsidiaries, including sole authority to approve all audit fees and terms; |
|
| (ii) | | to resolve disagreements between management and the outside auditors regarding financial reporting; |
|
| (iii) | | to determine the fees to be paid to the outside auditors for audit and non-audit services; |
|
| (iv) | | to ensure that the outside auditors prepare and deliver annually a Statement as to Independence, including all relationships between the outside auditors and the Corporations consistent with Independence Standards Board No. 1 (it being understood that the outside auditors are responsible for the accuracy and completeness of that Statement); and to discuss with the outside auditors any relationships or services disclosed in that Statement that may affect the quality of audit services or the objectivity and independence of the outside auditors, and to recommend that the Board take appropriate action in response to that Statement to satisfy itself as to the outside auditors’ independence; |
|
| (v) | | to pre-approve, or adopt procedures to pre-approve, all auditing and non-auditing services to be provided by the outside auditors and to consider whether the outside auditors’ provision of non-audit services to the Corporation and its subsidiaries is compatible with maintaining the independence of the outside auditors. The Audit Committee may, in its discretion, delegate to one or more of its members the authority to pre-approve any audit or non-audit services to be performed by the outside auditors, provided that any such approvals are presented to the Audit Committee at its next scheduled meeting; |
|
| (vi) | | to obtain from the outside auditors in connection with any audit a timely report relating to the annual audited financial statements of the Corporation and its subsidiaries describing (i) all critical accounting policies and practices to be used; (ii) all alternative |
42 POPULAR, INC. 2008 PROXY STATEMENT
| | | treatments of financial information within GAAP that have been discussed with management officials of the Corporation and its subsidiaries, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the outside auditors and management; and (iii) any other material written communications between the outside auditors and the management of the Corporation and its subsidiaries, such as any “management” letter or schedule of unadjusted differences; |
|
| (vii) | | to review and evaluate the qualifications, performance and independence of the lead partner of the outside auditors; |
|
| (viii) | | to discuss with management the timing and process for implementing the rotation of the lead audit partner, the concurring partner, and any other active audit engagement team partner, and consider whether there should be a regular rotation of the audit firm itself; |
|
| (ix) | | to take into account the opinions of management and the Internal Audit Division in assessing the outside auditors’ qualifications, performance and independence; and |
|
| (x) | | to instruct the outside auditors that they must report directly to the Audit Committee. |
| 2. | | With respect to the Internal Audit Division: |
| (i) | | to review the appointment and replacement of the General Auditor; |
|
| (ii) | | to review and ratify the annual evaluation and salary recommendation of the General Auditor as recommended by the Director 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 Corporate Auditing Division and management’s responses thereto, for the purpose of reviewing the effectiveness of the Corporation’s internal control structure and the Corporation’s procedures for financial reporting; and |
|
| (iv) | | to instruct the General Auditor that he must report directly to the Audit Committee. |
| 3. | | With respect to accounting principles and policies, financial reporting and internal control over financial reporting: |
| (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 issues and practices relating to accounting principles and policies, financial reporting and internal control over financial reporting; |
|
| (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 it may be modified or supplemented, including reports and communications related to: |
| § | | deficiencies, including significant deficiencies or material weaknesses, in internal control identified during the audit or other matters relating to internal control over financial reporting; |
|
| § | | consideration of fraud in a financial statement audit; |
|
| § | | detection of illegal acts; |
|
| § | | the outside auditor’s responsibility under generally accepted auditing standards; |
|
| § | | any restrictions on audit scope; |
|
| § | | significant accounting policies; |
|
| § | | significant issues discussed by the outside auditors with the national office respecting auditing or accounting issues presented by the engagement; |
|
| § | | management judgments and accounting estimates and assumptions; |
|
| § | | any accounting adjustments arising from the audit including those that were noted or proposed by the outside auditor but were “passed” (as immaterial or otherwise); |
|
| § | | the responsibility of the outside auditor for other information in documents containing audited financial statements; |
|
| § | | disagreements with management; |
43 POPULAR, INC. 2008 PROXY STATEMENT
| § | | 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, including the quarterly financial statements, conducted by the outside auditor; |
| (iii) | | to establish procedures for: |
| § | | the receipt, retention, and treatment of complaints received by the Corporation or any of its subsidiaries regarding accounting, internal accounting controls, or auditing matters; and |
|
| § | | the confidential, anonymous submission by employees of the Corporation or any of its subsidiaries of concerns regarding questionable accounting or auditing matters. |
| (iv) | | to review periodic summary reports of complaints and other submission regarding questionable accounting or auditing practices; |
|
| (v) | | to meet with management, the General Auditor and the outside auditors: |
| § | | to discuss the scope of the annual audit; |
|
| § | | to discuss the audited financial statements and quarterly financial statements, including the Corporation’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; |
|
| § | | to discuss any significant matters arising from any audit, report or communication referred to in this Charter, whether raised by management, the Internal Audit Division or the outside auditors, relating to the financial statements of the Corporation and its subsidiaries. |
|
| § | | to review the form of opinion the outside auditors propose to render to the Board and shareholders; |
|
| § | | to discuss, as appropriate: (a) any major issues regarding accounting principles and financial statement presentations, including any significant changes in the selection or application of accounting principles, and major issues as to the adequacy of internal controls and any special audit steps adopted in light of material control deficiencies; (b) analyses prepared by management or the outside auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; and (c) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Corporation or its subsidiaries; |
|
| § | | to inquire whether the financial statements fairly present, in all material respects, the financial condition, results of operations and cash flows of the Corporation or its subsidiaries as of and for the periods presented; |
|
| § | | discuss significant changes to auditing and accounting principles, policies, controls, procedures and practices proposed or contemplated by the outside auditors, the Internal Audit Division or management; and |
|
| § | | inquire about significant risks and exposures, if any, and the steps taken to monitor and minimize such risks; |
| (vi) | | to inquire of the Corporation’s chief executive officer and chief financial officer as to the existence of any significant deficiencies in the design or operation of internal controls that could adversely affect the ability of the Corporation and its subsidiaries to record, process, summarize and report financial data, any material weaknesses in internal |
44 POPULAR, INC. 2008 PROXY STATEMENT
| | | controls, and any fraud, whether or not material, that involves management or other employees who have a significant role in the internal controls; |
|
| (vii) | | 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; |
|
| (viii) | | approve all related party transactions (as defined in applicable rules and regulations); |
|
| (ix) | | to discuss with the Corporation’s any significant legal matters that may have a material effect on the financial statements and the compliance policies of the Corporation and its subsidiaries, including material notices to or inquiries received from governmental agencies; and |
|
| (x) | | to review and discuss any reports concerning material violations submitted to it by attorneys of the Corporation and its subsidiaries or outside counsel pursuant to the SEC attorney professional responsibility rules (17 C.F.R. Part 205) or otherwise. |
| 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 engage in an annual self-assessment of its performance; |
|
| (iii) | | to review and reassess the adequacy of this Charter at least annually and recommend any changes to the Board; and |
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| (iv) | | 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 independent counsel and other experts or consultants, without seeking approval of the Board or management, and to determine the compensation to be paid by the Corporation and its subsidiaries to such auditors, counsel, experts or consultants.
The Corporation shall provide for appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the Board, for payment of:
| a. | | Compensation to the outside auditors and any other public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation and its subsidiaries; |
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| b. | | Compensation of any advisers employed by the Audit Committee; and |
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| c. | | Ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties. |
ARTICLE 6 -TERM IN OFFICE
The members of the Audit Committee shall be appointed by the Board based on nominations recommended by the Corporation’s Corporate Governance and Nominating Committee, and 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.
ARTICLE 7 -MEETINGS
The Committee will meet at least one (1) time every three (3) months, or more frequently if circumstances dictate, to discuss any or all the matters set forth in Article 4, or any other topics deemed necessary or appropriate. In
45 POPULAR, INC. 2008 PROXY STATEMENT
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 its subsidiaries 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.
The Committee shall set the agenda of items to be addressed at each meeting. At the end of the fiscal year, the Chairman of the Audit Committee, in consultation with the other members of the Audit Committee, shall determine the list of items to be addressed by the Audit Committee during the coming year.
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 Chairman of the Committee will submit the minutes and the attachments considered necessary to the Board 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.
46 POPULAR, INC. 2008 PROXY STATEMENT
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| | IF YOU WISH TO VOTE BY TELEPHONE, INTERNET OR MAIL, PLEASE READ THE INSTRUCTIONS BELOW.
Popular, Inc. encourages you to take advantage of the convenientC/O PROXY SERVICESways to vote for matters to be covered at the 20082009. Annual Meeting of Stockholders. Please take the opportunity to use one of theP.O. BOX 9112three voting methods outlineoutlined below to cast your ballot.
FARMINGDALE, NY 11735-9544VOTE BY PHONE -— 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m.P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and follow the simple instructions the Vote Voice provides you. |
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| | VOTE BY INTERNET -www.proxyvote.htm— www.proxyvote.com |
| | Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. |
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| | VOTE BY MAIL |
| | Please mark, sign, date and return this card promptly using the enclosed postage prepaid envelope. No postage is required if mailed in the United States, Puerto Rico or the U.S. Virgin Islands. |
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE. | |
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| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | POPLR1 | | KEEP THIS PORTION FOR YOUR RECORDS |
| | | | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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| | NOTICE OF ANNUAL MEETING OFSTOCKHOLDERS
To Be Held on Friday, April 25, 2008May 1, 2009 | | | | | | | | | | |
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| | To the Stockholders of Popular, Inc.: | | For
All | | Withhold
All | | For All
Except | | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. |
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| | NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Popular, Inc. (the "Meeting"“Corporation”) for the year 20082009 will be held at9:00 a.m., local time, on Friday, April 25, 2008,May 1, 2009, on the third floor of the Centro Europa Building, 1492 Ponce de León Avenue, in San Juan, PuertoRico (the “Meeting”), to consider and act upon the following matters: | | o | | o | | o | | | | |
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| | (1) | To elect three (3) directors of Popular, Inc. (the “Corporation”)the Corporation for a three-year term: | | | | | | | | | | |
| | | 1) María Luisa Ferré | | | | | | | | |
| | | For Against For Against Abstain (2) Frederic V. Salerno | | | | | | | | |
| | | To amend Article Fifth of the Restated Articles of 1a. Juan J. Bermúdez Incorporation of the Corporation to increase the0 0authorized number of shares of common stock, par0 0 0value $6 per share (“Common Stock”), from 1b. Richard L. Carrión 470,000,000 to 700,000,000;0 0 (3) William J. TeuberTo amend Article Fifth of the Restated Articles of Incorporation of the Corporation to decrease the par 1c. Francisco M. Rexach Jr. | | | | | | | | | |
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(2) | | 0 0value of the Common Stock of the Corporation from0 0 0$6 per share to $0.01 per share; (4) To provide an advisory vote related to the0 0 0Corporation’s executive compensation program. (5) To ratify the selection of PricewaterhouseCoopers0 0 0LLP as the Corporation's independent registered public accounting firm of the Corporation for 2008. | | o | | o | | o |
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Stockholders of record at the close of business on February 25, 2008, are entitled to notice of and to vote at the Meeting. |
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2009.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" ITEM 1 AND 2“FOR” ALL ITEMS IDENTIFIED ABOVE. | | | | |
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| | PLEASE SIGN AS YOUR NAME APPEARS ON THIS FORM. IF SHARES ARE HELD JOINTLY, ALL OWNERS SHOULD SIGN. CORPORATION PROXIES SHOULD BE SIGNED BY AN AUTHORIZED OFFICER. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC. SHOULD SO INDICATE WHEN SIGNING. | | |
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| | MATERIALS ELECTION
As of July 1, 2007, SEC rules permit companies to send you a notice that proxy information is available on the Internet, instead of mailing you a complete set of materials. Check the box to the right if you want to receive a complete set of future proxy materials by mail, at no cost to you. If you do not take action you may receive only a notice.
| o | | | NOTE: Please see the back of this form for important information. | |
| | | ELECTRONIC DELIVERY
You may consent to receive proxy information via Internet. You many sign up for this service after voting on the Internet at www.proxyvote.com.
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| Signature [PLEASE SIGN WITHIN BOX] | Date | | | | | | Signature (Joint Owners) | Date | | |
Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:The 2008 Notice and Proxy Statement and the 2007 Annual Report are available at www.proxyvote.com.
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 on the reverse side all the shares of common stock of Popular, Inc. held of record by the undersigned on February 25, 2008, at the Annual Meeting of Stockholders to be held at the Centro Europa Building, 1492 Ponce de León Avenue, Third Floor, San Juan, Puerto Rico, on April 25, 2008, at 9:00 a.m., local time, 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.
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| Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:The 2008 Notice and Proxy Statement, 10K/Annual Report Wrap and Letter are available at www.proxyvote.com.This Proxy is Solicited on Behalf of the Board of Directors.The undersigned hereby appoints Richard L. Carrión, 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 on the reverse side all the shares of common stock ofPopular, Inc. held of record by the undersigned on March 2, 2009, at the Annual Meeting of Stockholdersto be held at the Centro Europa Building, 1492 Ponce de León Avenue, Third Floor, San Juan, Puerto Rico, on May 1, 2009, at 9:00 a.m., local time, 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. |
Financial
