SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
POPULAR INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
POPULAR, INC.
P.O. BOX 362708
SAN JUAN, PUERTO RICO 00936-2708
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, APRIL 30, 2003
--------------------
To the Stockholders of Popular, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Popular, Inc. (the "Meeting") for the year 2003 will be held at 9:00 a.m. on
Wednesday, April 30, 2003, on the third floor of the Centro Europa Building, in
Santurce, Puerto Rico, to consider and act upon the following matters:
(1) To elect five (5) directors of Popular, Inc. (the "Corporation" )
for a three-year term,
(2) To ratify the selection of the Corporation's independent auditors
for 2003;
(3) To transact any and all other business as may be properly brought
before the Meeting or any adjournments thereof. Management at
present knows of no other business to be brought before the
Meeting.
Stockholders of record at the close of business on March 11, 2003, are
entitled to notice of and to vote at the Meeting.
You are cordially invited to attend the Meeting. Whether you plan to
attend or not, please sign and return the enclosed proxy so that the Corporation
may be assured of the presence of a quorum at the Meeting. A postage-paid
envelope is enclosed for your convenience. REMEMBER THAT YOU CAN VOTE BY
TELEPHONE OR BY INTERNET; FOR FURTHER DETAILS PLEASE REFER TO THE ENCLOSED PROXY
CARD.
San Juan, Puerto Rico, March 20, 2003.
By Order of the Board of Directors,
SAMUEL T. CESPEDES
Secretary
CONTENTS
About the Meeting 3
Principal Stockholders 4
Shares Beneficially Owned by Directors and
Executive Officers of the Corporation 5
Section 16 (a) Beneficial Ownership Reporting Compliance 6
Board of Directors and Committees 6
Proposal 1: Election of Directors 6
Nominees for Election as Directors 7
Standing Committees 10
Audit Committee Report 12
Compensation of Directors 13
Executive Officers 13
Family Relationships 16
Proposal 2: Ratification of Selection of Auditors 16
Executive Compensation Program- Report of the Bank's Human
Resources and Compensation Committee on Executive Compensation 17
Executive Compensation 18
Summary Compensation Table 18
Stock Option Plan 19
Profit Sharing, Benefit Restoration, Deferred Compensation
and Retirement Plans 21
Popular, Inc. Performance Graph 23
Proposal of Security Holders to be Presented at the 2004 Annual
Meeting of Stockholders 24
Exhibit A 25
Exhibit B 31
2
ABOUT THE MEETING
WHO IS SOLICITING MY VOTE?
The board of directors of the Corporation is soliciting your vote at the 2003
annual meeting of Popular, Inc.'s stockholders.
WHAT WILL I BE VOTING ON?
o Election of directors (see page 6)
o Ratification of PricewaterhouseCoopers LLP as the Corporation's
auditors for 2003 (see page 16)
HOW MANY VOTES DO I HAVE?
You will have one vote for every share of the Corporation common stock (the
"common stock") you owned on March 11 , 2003 (the record date).
HOW MANY VOTES CAN ALL STOCKHOLDERS CAST?
One vote for each of Popular, Inc. 132,576,590 shares of common stock that were
outstanding on the record date. The shares covered by any proxy that is properly
executed and received by management before 9:00 a.m. on the day of the Meeting
will be voted.
HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?
A majority of the votes that can be cast. Votes cast by proxy or in person at
the meeting will be counted by the persons appointed by the Corporation as
members of the vote-counting committee for the meeting. We urge you to vote by
proxy even if you plan to attend the annual meeting, so that we will know as
soon as possible that enough votes will be present for us to hold the meeting.
HOW DO I VOTE?
You can vote either in person at the meeting or by proxy without attending the
annual meeting.
To vote by proxy, you must either
o Fill out the enclosed proxy card, date and sign it, and return it in
the enclosed postage-paid envelope,
o Vote by telephone (instructions are on the Proxy Card, as authorized
by the Puerto Rico Corporation Law and the Bylaws of the Corporation),
or
o Vote by Internet (instructions are on the Proxy Card, as authorized by
the Puerto Rico Corporation Law and the Bylaws of the Corporation).
If you want to vote in person at the annual meeting, and you hold your common
stock through a securities broker (that is, in street name), you must obtain a
proxy from your broker and bring that proxy to the meeting.
In addition to solicitation by mail, management may participate in the
solicitation of Proxies by telephone, personal interviews or otherwise. The
Board of Directors has engaged the firm of Georgeson & Company Inc. to aid in
the solicitation of Proxies. The cost of solicitation will be borne by the
Corporation and is estimated at $6,500.
To avoid delays in ballot taking and counting, and in order to assure that your
Proxy is voted in accordance with your wishes, compliance with the following
instructions is respectfully requested: upon signing a Proxy as attorney,
executor, administrator, trustee, guardian, authorized officer of a corporation,
or on behalf of a minor, please give full title. If shares are in the names of
more than one recordholder, all should sign.
CAN I CHANGE MY VOTE?
Yes. Just send in a new proxy card with a later date, or cast a new vote by
telephone or Internet, or send a written notice of revocation to the President
or Secretary of Popular, Inc., P.O. Box 362708, San Juan, Puerto Rico
00936-2708, delivered before the proxy is exercised. If you attend the annual
meeting and want to vote in person, you can request that your previously
submitted proxy not be used.
HOW WILL ABSTENTIONS AND BROKER NON-VOTES BE TREATED?
For purposes of determining a quorum, the members of the vote-counting committee
will treat abstentions and brokers non-votes as shares that are present and
entitled to vote. A broker non-vote results when a broker or nominee has
expressly indicated in the proxy that it does not have discretionary authority
to vote on a particular matter. As to the election of directors, the Proxy Card
being provided by the Board of Directors enables a stockholders to vote for the
election of the nominees proposed by the Board, or to withhold authority to vote
for one or more of the nominees being proposed. The election of directors and
the ratification of independent auditors will be acted upon a majority of the
votes cast. Therefore, abstentions and brokers non-votes will not have an effect
on the election of directors of the Corporation, neither on the ratification of
independent auditors.
3
COULD OTHER MATTERS BE DECIDED AT THE ANNUAL MEETING?
The Board of Directors does not intend to present any business at the Meeting
other than that described in the Notice of Meeting. The Board of Directors at
this time knows of no other matters, which may come before the Meeting. However,
if any new matter requiring the vote of the stockholders are properly presented
before the Meeting, proxies may be voted with respect thereto in accordance with
the best judgment of Proxyholders, under the discretionary power granted by
stockholders to their proxies in connection with general matters.
WHAT HAPPENS IF THE MEETING IS POSTPONED OR ADJOURNED?
Your proxy will still be good and may be voted at the postponed or adjourned
meeting. You will still be able to change or revoke your proxy until it is
voted.
WHAT SHOULD I RECEIVE?
By now you should have received the Corporation's Annual Report, including the
financial statements for the year ended December 31, 2002, duly certified by
PricewaterhouseCoopers LLP as independent public accountants. The Proxy
Statement, the enclosed Annual Report, the Notice of Annual Meeting of
Stockholders and the form of proxy are being sent to stockholders on or about
March 20, 2003.
* * *
PRINCIPAL STOCKHOLDERS
Following is the information, to the extent known by the persons on whose
behalf this solicitation is made, with respect to any person (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended) who is known to the Corporation to be the beneficial owner
of more than five percent (5%) of the Corporation's voting securities.
Amount and nature Percent
of beneficial of
Title of Class Name and address of beneficial owner ownership (1) Class (2)
-------------- ------------------------------------ ----------------- ---------
Common State Farm Mutual Automobile Insurance
Company 8,790,024 (3) 6.6301
(1) As of February 28, 2003.
(2) Based on 132,576,590 shares of common stock outstanding.
(3) On January 22, 2003 State Farm Mutual Automobile Insurance Company ("State
Farm") and affiliated entities filed a joint statement on Schedule 13-G
with the Securities and Exchange Commission reflecting their holdings as of
December 31, 2002. According to said statement, State Farm and its
affiliates might be deemed to constitute a "group" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934. State Farm and its
affiliates could also be deemed to be the beneficial owners of 8,790,024
shares of the Corporation. However, State Farm and each such affiliate
disclaim beneficial ownership as to all shares as to which each such person
has no right to receive the proceeds of sale of the shares, and also
disclaim that they constitute a "group".
4
SHARES BENEFICIALLY OWNED BY DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
The following table sets forth information concerning the beneficial
ownership of the Corporation's common and preferred stock as of February 28,
2003 for each director of the Corporation and each named executive officer
listed in the Summary Compensation Table and the number of shares beneficially
owned by all directors and executive officers of the Corporation as a group:
COMMON STOCK
TITLE AMOUNT AND NATURE OPTIONS PERCENT OF
NAME OF CLASS OF BENEFICIAL OWNERSHIP GRANTED CLASS (1)
---- -------- ----------------------- ------- ---------
Juan J. Bermudez Common 574,520 (3) 5,032 .4356
Jose B. Carrion Jr Common 1,014,500 (4) 5,032 .7664
Richard L. Carrion Common 1,120,747 (5) (a) .8424
David H. Chafey Jr. Common 98,331 25,301 .0929
Antonio Luis Ferre Common 2,916,941 (6) 4,833 2.1962
Hector R. Gonzalez Common 959,844 5,032 .7253
Jorge A. Junquera Common 84,528 (7) 22,265 .0803
Manuel Morales Jr. Common 550,694 (8) 5,032 .4177
Francisco M. Rexach Jr Common 217,203 (9) 5,032 .1670
Felix J. Serralles Jr Common 429,660 (10) 5,032 .3267
Julio E. Vizcarrondo Jr. Common 1,289,908 (11) 5,032 .9734
Maria I. Burckhart Common 69,594 (12) 14,078 .0629
Roberto R. Herencia Common 19,261 20,241 .0297
Larry B. Kesler Common 23,394 20,241 .0328
Tere Loubriel Common 11,996 11,386 .0176
Emilio Pinero Common 39,751 12,941 .0396
Brunilda Santos Common 6,331 11,386 .0133
Carlos J. Vazquez Common 107,720 (13) 18,976 .0952
Felix M.Villamil Common 4,124 6,893 .0083
All Directors and Executive Officers
of the Corporation and its subsidiaries
as a group (19 persons) Common 9,539,047 203,765 7.3235
PREFERRED STOCK
TITLE AMOUNT AND NATURE PERCENT OF
NAME OF CLASS OF BENEFICIAL OWNERSHIP CLASS (2)
---- -------- ----------------------- -------
Hector R. Gonzalez Preferred 40,000 .0062
Richard L. Carrion Preferred 7,156 (14) .0011
Manuel Morales Jr. Preferred 6,000 (15) .0009
Julio E. Vizcarrondo Jr. Preferred 7,272 (16) .0011
All Directors and Executive Officers of
the Corporation as a group (5 persons) Preferred 60,544 .0093
(1) For purposes of this table, "beneficial ownership" is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
pursuant to which a person or group of persons is deemed to have
"beneficial ownership" of a security if that person has the right to
acquire beneficial ownership of such security within 60 days. As of
February 28, 2003, there were 132,576,590 shares of common stock
outstanding and 458,579 common shares issuable upon the exercise of
currently exercisable, but unexercised stock options, held by directors and
executive officers.
(2) Based on 6,500,000 shares of preferred stock outstanding.
(3) Excludes 15,603 shares owned by his wife, as to which Mr. Bermudez
disclaims beneficial ownership.
(4) Mr. Carrion Jr. owns 708,542 shares, has voting power over 514 shares owned
by his daughter and has voting and investment power over 292,606 shares
owned by Collosa Corporation which he owns. Excludes 15,808 shares owned by
his wife to which he disclaims beneficial ownership. Junior Investment
Corporation owns 4,426,846 shares of the Corporation. Mr. Carrion Jr. owns
.29% of the shares of said corporation.
(5) Mr. Carrion owns 303,706 shares and also has indirect investment power over
25,078 shares owned by his children. Junior Investment Corporation owns
4,426,846 shares of the Corporation. Mr. Carrion owns 17.89% of the shares
of said corporation.
5
(6) Mr. Ferre has direct or indirect investment and voting power over 2,916,941
shares of the Corporation. Mr. Ferre owns 3,879 shares and has indirect
investment and voting power over 3,200 shares owned by South Management,
Inc. and 400 shares owned by his wife. Mr. Ferre owns 51% of Ferre
Investment Fund, Inc., which owns 1,477,854 shares of the Corporation.
Ferre Investment Fund, Inc. in turn owns 90% of El Dia, Inc., which owns
1,431,608 shares of the Corporation.
(7) Mr. Junquera owns 79,570 shares and has indirect investment power over
4,958 shares owned by his son and daughter.
(8) Mr. Morales owns 125,694 shares and has voting power over 425,000 shares
owned by his parents, as their attorney-in-fact.
(9) Mr. Rexach owns 102,403 shares and has indirect voting power over 95,800
shares owned by his mother, as her attorney-in-fact, and over 19,000 shares
held by Capital Assets, Inc. as President and shareholder.
(10) Mr. Serralles owns 226,752 shares, and has indirect voting power over
10,292 shares owned by his wife. Mr. Serralles owns 100% of the shares of
Capitanejo, Inc. and Fao Investments, Inc., which own 117,020 and 5,596
shares, respectively, of the Corporation and has indirect ownership of
70,000 shares owned by Destileria Serralles, Inc.
(11) Mr. Vizcarrondo owns 214,284 shares and has indirect voting power over
190,823 shares owned by his wife. Mr. Vizcarrondo's wife owns 18.18% of the
shares of Junior Investment Corporation, which owns 4,426,846 shares of the
Corporation. Mr. Vizcarrondo has indirect voting and investment power over
1,444 shares held in trust by Vicar Enterprises, Inc. for the benefit of
his children, for which he disclaims beneficial ownership. Mr. Vizcarrondo
also disclaims beneficial ownership over 143,503 shares owned by DMI
Pension Trust, where he serves as trustee and member of the investment
committee. There are 120,000 shares belonging to the estate of Mr. Julio
Vizcarrondo, Sr., over which Mr. Vizcarrondo Jr. has investment power, but
disclaims beneficial ownership, except for 80,000 shares which Mr.
Vizcarrondo Jr. will inherit once the estate is divided and distributed.
(12) Mrs. Burckhart owns 66,376 shares and has investment and voting power over
3,218 held by her husband as custodian for her daughters.
(13) Mr. Vazquez owns 13,921 shares and has investment authority over 93,799
shares held by various family members.
(14) Junior Investment Corporation owns 40,000 preferred shares of the
Corporation. Mr. Carrion owns 17.89% of the shares of said corporation.
(15) Mr. Morales owns 4,000 preferred shares and has investment authority over
2,000 preferred shares owned by his wife.
(16) Mr. Vizcarrondo's wife owns 18.18% of the shares of Junior Investment
Corporation, which owns 40,000 preferred shares of the Corporation. Mr.
Vizcarrondo disclaims beneficial ownership over 8,000 preferred shares of
the Corporation owned by DMI Pension Trust, where he serves as trustee and
member of the investment committee.
(a) See note (d) on page 19.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's directors and executive officers to file with the Securities
and Exchange Commission (SEC) reports of ownership and changes in ownership of
common stock of the Corporation. Officers and directors are required by SEC
regulation to furnish the Corporation with copies of all Section 16(a) forms
they file.
Based solely on a review of the copies of such reports furnished to the
Corporation or written representations that no other reports were required, the
Corporation believes that, with respect to 2002, all filing requirements
applicable to its officers and directors were complied with except for one
report, covering one transaction, filed late by Messrs. Juan J. Bermudez and
Antonio Luis Ferre, directors of the Corporation.
BOARD OF DIRECTORS AND COMMITTEES;
PROPOSAL 1: ELECTION OF DIRECTORS
The Certificate of Incorporation and the Bylaws of the Corporation
establish a classified Board of Directors pursuant to which the Board of
Directors is divided into three classes as nearly equal in number as possible,
with each class having at least three members and with the term of office of one
class expiring each year. Each director serves for a term ending on the date of
the third annual meeting of stockholders following the annual meeting at which
such director was elected or until his successor has been elected and qualified.
At the Meeting, five (5) directors assigned to "Class 1" are to be elected
to serve until the 2006 Annual Meeting of Stockholders or until their respective
successors shall have been elected and qualified. The remaining seven directors
of the Corporation will serve as directors, as follows: until the 2004 Annual
Meeting of Stockholders of the Corporation, in
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the case of those four directors assigned to "Class 2", and until the 2005
Annual Meeting of Stockholders, in the case of those three directors assigned to
"Class 3", or in each case until their successors are elected and qualified.
The people named as proxies in the accompanying Form of Proxy have advised
the Corporation that, unless otherwise instructed, they intend to vote at the
Meeting the shares covered by the proxies FOR the election of the five nominees
named below, and that if any one or more of such nominees should become
unavailable for election they intend to vote such shares FOR the election of
such substitute nominees as the Board of Directors may propose. The Corporation
has no knowledge that any nominee will become unavailable for election.
Information relating to principal occupation, business experience and
directorship during the past five (5) years (including position held with the
Corporation or Banco Popular de Puerto Rico (the "Bank")), age and the period
during which each director has served is set forth below.
The Board of Directors of the Corporation met on a monthly basis during
2002. All directors except Messrs. Antonio Luis Ferre and Felix J. Serralles Jr.
attended 75% or more to the meetings of the Board of Directors and the
committees of the Board of Directors on which such directors served.
NOMINEES FOR ELECTION AS DIRECTORS
CLASS 1 DIRECTORS
(TERMS EXPIRING IN 2006)
PRINCIPAL OCCUPATION, BUSINESS
NAME AND AGE EXPERIENCE AND DIRECTORSHIPS
------------ ----------------------------------------
JUAN J. BERMUDEZ: (65 YEARS)
o Electrical Engineer.
o Partner of Bermudez and Longo, S.E.,
Decemcor, S.E., Unicenter, S.E.,
Unigardens, S.E. and PCME Commercial,
S.E.
o Principal Stockholder and Director of
BL Management, Corp., PCME Develop-
ment, Corp., G.S.P. Corp.,
Unimanagement Corp., LBB Properties,
Inc., Homes Unlimited Corp.,
Desarrollos Inmobiliarios de Hato
Tejas, Inc. and PS4 Corp.
o Chairman of the Trust Committee of
the Bank.
o Director of the Bank, Popular
Securities, Inc., Popular Auto, Inc.,
Popular Finance, Inc. and Popular
Mortgage, Inc.
o Director of the Corporation since
1990.
RICHARD L. CARRION: (50 YEARS)
o Chairman, President and Chief
Executive Officer (CEO) of the
Corporation and the Bank.
o Chairman of Popular International
Bank, Inc., Popular North America,
Inc., Banco Popular North America,
Popular Cash Express, Inc., Banco
Popular, National Association and
Popular FS, LLC.
o Chairman of the Board of Trustees of
Fundacion Banco Popular, Inc.
o Member of the International Olympic
Committee, the Finance Commission and
the TV & Internet Rights Commission
since January 2002.
o President of the Puerto Rico Olympic
Trust and Member of the Puerto Rico
Olympic Committee.
o Member of the Board of Trustees of
the Puerto Rico Committee for
Economic Development.
o Member of the Board of Directors, the
Benefits & Human Resources Committee
and the Public Policy Committee of
Verizon Communications (a registered
public company).
o Member of the Board of Directors and
Compensation and Benefits Committee
of American Home Products Corporation
(a registered public company).
o Member of the Board of Directors of
Telecomunicaciones de Puerto Rico,
Inc.(TELPRI)
o Member of the Board of Directors and
Compensation and Benefits Committee
of Wyeth (a registered public
company) since August 2002.
7
PRINCIPAL OCCUPATION, BUSINESS
(CONT.) NAME AND AGE EXPERIENCE AND DIRECTORSHIPS
-------------------- ----------------------------------------
RICHARD L. CARRION: (50 YEARS)
o Former Chairman and President of
Puerto Rico Investors Tax-Free Fund,
Inc. I, II, III, IV, V (1994 to
December 1998) and of Puerto Rico
Tax-Free Target. Maturity Fund, Inc.
I (1996 to December 1998) and II
(1997 to December 1998).
o Former Chairman and President of
Puerto Rico Investors Flexible
Allocation Fund (December 1998 to
January 1999).
o Former Member of the Board of the
National Museum of American History,
Smithsonian Institution (November
1997 to December 1998).
o Director of Equity One, Inc., Popular
Finance, Inc., Popular Auto, Inc.,
Popular Mortgage, Inc., Popular
Securities, Inc., Popular Insurance,
Inc. and GM Group, Inc.
o Director of the Corporation since
1990.
JORGE A. JUNQUERA: (54 YEARS)
o Chief Financial Officer of the
Corporation and the Bank.
o Supervisor of the Financial
Management Group.
o Supervisor of the U.S. Operations
from January 1996 to December 2001.
Supervisor of the Caribbean and Latin
America Expansion Group since January
1996.
o Senior Executive Vice President since
October 1995.
o President and Director of Popular
International Bank, Inc. and Popular
North America, Inc. since January
1996.
o Chairman of the Board of Popular
Securities, Inc.
o Director of Popular Mortgage, Inc.,
Popular Finance, Inc. and Popular
Auto, Inc. until December 1998
o Director of the Bank until April 2000
and from 2001 to present.
o President of Banco Popular North
America until December 2001.
o Director of Puerto Rico Tourism
Company until April 2000.
o President of Hotel Development Co.
until April 2000.
o Director of PRISMA: El Exploratorio
Inc. until April 2000.
o Director of YMCA since 1988.
o President of Banco Popular, National
Association.
o Director of Equity One, Inc., Popular
Cash Express, Inc., Popular FS, LLC,
Popular Leasing USA, Inc. and of
Banco Popular North America.
o Director of Banco Hipotecario
Dominicano and Contado, S.A.
o Director of New America Alliance (a
registered public company) and
Virtual, Inc. (an internet company)
o Director of La Familia Catolica por
la Familia en las Americas since
2001.
o Director of the Corporation since
1990.
FRANCISCO M. REXACH JR.: (65 YEARS)
o President of Capital Assets, Inc. and
of Rexach Consulting Group.
o Chairman of Chamaleon Fitness
Systems, Inc.
o Chairman of the Human Resources and
Compensation Committee of the Bank.
o Director of the Bank, Popular
International Bank, Inc., Popular
North America, Inc., Banco Popular
North America, Popular Cash Express,
Inc. and Equity One, Inc.
o Director of the Corporation since
1990.
FREDERIC V. SALERNO: (59 YEARS)
o Vice Chairman and Chief Financial
Officer of Verizon Communications,
Inc. until September 2002.
o Vice Chairman-Finance and Business
Development of NYNEX from March 1994
through August 1997.
o Director of Avnet, Inc., Akamai
Technologies, Inc., Bear Stearns &
Co., Inc., Consolidated Edison, Inc.,
Dunn & Bradstreet Corporation, Lynch
Interactive Corporation and Viacom,
Inc. (registered public companies).
8
PRINCIPAL OCCUPATION, BUSINESS
NAME AND AGE EXPERIENCE AND DIRECTORSHIPS
------------ ----------------------------------------
CLASS 3 DIRECTORS
(TERMS EXPIRING IN 2005)
DAVID H. CHAFEY JR.: (49 YEARS)
o Supervisor of the Bank's Retail
Banking Group since January 1996.
o Senior Executive Vice President since
October 1995.
o Senior Executive Vice President of
Popular International Bank, Inc. and
Popular North America, Inc.
o Chairman of the Board of Popular
Finance, Inc.
o Chairman and President of Puerto Rico
Investors Tax-Free Fund, Inc. I, II,
III, IV, V, VI, of Puerto Rico
Tax-Free Target Maturity Fund, Inc. I
and II and of Puerto Rico Investors
Flexible Allocation Fund since
January 1999.
o Member of the San Jorge Children's
Research Foundation, Inc.
o President of the Puerto Rico Bankers
Association until October 2002.
o Director of Visa International for
the Caribbean and Latin America.
o Director of Equity One, Inc. and
Banco Popular North America until
December 1999.
o Director of Grupo Guayacan, Inc.
o Director of the Bank, Popular
Mortgage, Inc., Popular Auto, Inc.,
GM Group, Inc., Banco Popular,
National Association, Popular
Insurance, Inc. and Popular
Securities, Inc.
o Director of the Corporation since
1996.
ANTONIO LUIS FERRE: (69 YEARS)
o Chairman of the Board of Puerto Rican
Cement Co., Inc. (a registered public
company), manufacturers of cement and
allied products, until June 2002.
o Chairman of the Board and Editor of
El Dia, Inc. and of Editorial Primera
Hora, Inc., newspaper publishing
companies.
o Chairman of the Board of Ferre
Investment Fund, Inc.
o Vice Chairman of the Board of
Directors of the Corporation.
o Vice Chairman of the Board of
Directors of the Bank from 1991 to
2001.
o Director of the Corporation since
1984.
FELIX J. SERRALLES JR.: (68 YEARS)
o President and Chief Executive Officer
of Destileria Serralles, Inc.,
manufacturers and distributors of
distilled spirits, and of its
affiliate Mercedita Leasing, Inc.
o Director of the Bank, Popular
International Bank, Inc., Popular
North America, Inc., Banco Popular
North America, Popular Cash Express,
Inc. and Equity One, Inc.
o Director of the Corporation since
1984.
CLASS 2 DIRECTORS
(TERMS EXPIRING IN 2004)
JOSE B. CARRION JR.: (66 YEARS)
o President of Collosa Corporation.
o Former President and Chief Executive
Officer ("CEO") of Barros & Carrion
from 1992 to 1999.
o Director of the Bank since April
2000.
o Director of the Corporation since
2001.
9
PRINCIPAL OCCUPATION, BUSINESS
NAME AND AGE EXPERIENCE AND DIRECTORSHIPS
------------ ----------------------------------------
HECTOR R. GONZALEZ: (69 YEARS)
o President and Chief Executive Officer
of Ventek Group, Inc., and investor
in broadband and information
technology businesses.
o Director of the Bank, Popular
Finance, Inc., Popular Mortgage,
Inc., Popular Auto, Inc. and Popular
Securities, Inc.
o Director of the Corporation since
1984.
MANUEL MORALES JR.: (57 YEARS)
o President of Parkview Realty, Inc.,
the Atrium Office Center, Inc., HQ
Business Center P.R., Inc. and
ExecuTrain of Puerto Rico.
o Honorary General Consul of Japan in
San Juan, Puerto Rico.
o Member of the Board of Trustees of
Sacred Heart University in San Juan,
Puerto Rico, of the Caribbean
Environmental Development Institute
and of Fundacion Angel Ramos, Inc.
o Member of the National Advisory
Council-United States Small Business
Administration.
o Member of the Board of Directors of
Consular Corps College of the USA.
o Member of the Board of Trustees of
Fundacion Banco Popular, Inc.
o Chairman of the Audit Committee of
the Corporation and the Bank.
o Director of the Bank.
o Director of the Corporation since
1990.
JULIO E. VIZCARRONDO JR.: (68 YEARS)
o Civil Engineer.
o President, Partner and Chief
Executive Officer of Desarrollos
Metropolitanos, S.E., VMV Enterprises
Corp., Resort Builders, S.E.,
Metropolitan Builders, S.E,
Institutional Builders, S.E.,
Omega-Vistamar, S.E. and MH Office
Building Corp., corporations engaged
in the development and construction
of residential, commercial,
industrial and institutional projects
in Puerto Rico.
o Chairman of the Commercial Credit
Committee of the Bank.
o Director of the Bank, Popular
International Bank, Inc., Popular
North America, Inc., Banco Popular
North America, Popular Cash Express,
Inc. and Equity One, Inc.
o Director of the Corporation since
1990.
STANDING COMMITTEES
The Corporation's Board of Directors (the "Board") has standing Audit, Risk
Management, Corporate Governance and Nominating, and Compensation Committees.
The Corporate Governance and Nominating and Compensation Committees were
approved by the Board on December 11, 2002 and will hold their first meeting on
April 2003. The Board of Directors of the Bank, the principal subsidiary of the
Corporation, has a standing Human Resources and Compensation Committee. The
Human Resources and Compensation Committee will review compensation matters for
the Corporation until the first meeting of the Compensation Committee on April
2003. Nominations will be made by an Ad Hoc Corporate Governance Committee ("Ad
Hoc Committee") and approved by the Board until the first meeting of the
Corporate Governance and Nominating Committee on April 2003. The Ad Hoc
Committee is composed of the outside directors Messrs. Francisco M. Rexach Jr.,
Felix J. Serralles Jr., Jose B. Carrion Jr., Julio E. Vizcarrondo Jr.; one
retired outside director Alfonso Ballester; and an inside director, the CEO and
President Richard L. Carrion.
10
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 rules of the
National Association of Securities Dealers. The Compensation Committee will meet
at least three times a year. In April 2003, the Board will appoint the members
of the Compensation Committee. 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 senior executives 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 Securities
and Exchange Commission.
The duties and responsibilities of the Compensation Committee include, among
other the following:
o consult with senior management, to establish the Corporation's general
compensation philosophy, and oversee the development and implementation of
compensation programs;
o review and approve the corporate goals and objectives relevant to the
compensation of the CEO;
o evaluate the performance of the CEO in light of those goals and
objectives;
o set the CEO's compensation level based on this evaluation;
o review and approve compensation programs applicable to executive officers
of the Corporation;
o and make recommendations to the Board with respect to the Corporation's
incentive compensation plans and equity-based plans, oversee the activities of
the individuals and committees responsible for administering these plans and
discharge any responsibilities imposed on the Committees by any of these plans.
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 will determine has no material
relationship with the Corporation and each of whom is otherwise "independent"
under the rules of the National Association of Securities Dealers. The Corporate
Governance and Nominating Committee will meet at least four times a year. In
April 2003, the Board will appoint the members of the Corporate Governance and
Nominating Committee. The purpose of the Corporate Governance and Nominating
Committee is as follows:
o identify and recommend individuals to the Board for nomination as members
of the Board and its committees;
o identify and recommend individuals to the Board for nomination as CEO and
Chairman of the Corporation;
o promote the effective functioning of the Board and its committees;
o and develop and recommend to the Board a set of corporate governance
principles applicable to the Corporation.
The Corporate Governance and Nominating Committee will consider nominees
recommended by shareholders. Shareholders who wish to submit nominees for
director for consideration by the Corporate Governance and Nominating Committee
for election at the Corporation's 2004 annual meeting of shareholders may do so
by submitting in writing such nominees' names and a brief description of the
nominees' judgment, skills, diversity, and experiences with businesses and other
organizations to the Secretary of the Board of Directors at Popular, Inc., 209
Munoz Rivera Avenue, Hato Rey, Puerto Rico, 00918 between December 1, 2002 and
November 29, 2003.
The Board has approved Corporate Governance Guidelines which are included
in this document as Exhibit B.
11
AUDIT COMMITTEE REPORT
AUDIT COMMITTEE
The Audit Committee shall consist of at least three members of the Board.
The members of the Audit Committee shall each have been determined by the Board
to be "independent" under the standards of the National Association of
Securities Dealers. Currently, the Audit Committee is comprised of five outside
directors. The Audit Committee held seven meetings during the fiscal year ended
December 31, 2002.
The Audit Committee is responsible for assisting the Board in its oversight
of the accounting and financial reporting processes of the Corporation, as well
as the oversight of the audits of the financial statements of the Corporation.
The Committee operates pursuant to a Charter that was last amended and restated
by the Board on January 16, 2003 and included in this document as Exhibit A.
In the performance of its oversight function, the Committee has considered
and discussed the audited financial statements of the Corporation for the fiscal
year ended December 31, 2002 with management and PricewaterhouseCoopers LLP, the
Corporation's independent accountants. The Audit Committee has also discussed
with the independent accountants the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees), as
currently in effect. Finally, the Committee has received the written disclosures
and the letter from PricewaterhouseCoopers LLP required by Independence
Standards Board Standard No. 1 (Independence Discussion with Audit Committees),
as currently in effect, has considered whether the provision of non-audit
services by the independent accountants to the Corporation is compatible with
maintaining the accountants' independence, and has discussed with the
independent accountants the accountants' independence from the Corporation and
its management. These considerations and discussions, however, do not assure
that the audit of the Corporation's financial statements has been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that the Company's auditors are in fact "independent."
As set forth in the 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, the Corporation's independent public accountants,
are responsible for auditing the Corporation's financial statements and
expressing an opinion as to their conformity with generally accepted accounting
principles 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. Moreover, the Committee relies on and makes no independent
verification of the facts presented to it and representations made by management
and the independent accountants. Accordingly, the Audit Committee's oversight
does not provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles and
policies or internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations.
Based on the Audit Committee's consideration of the audited financial
statements and the discussions referred to above with management and the
independent accountants, and subject to the limitations on the role and
responsibilities of the Audit Committee set forth in the Charter and those
discussed above, the Committee recommended to the Board that the Corporation's
audited financial statements be included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 2002 for filing with the SEC.
Submitted by:
Juan J. Bermudez Francisco M. Rexach Jr.
Hector R. Gonzalez Felix J. Serralles Jr.
Manuel Morales Jr. (Chairman)
Alberto M. Paracchini *
* A member until April 30, 2002.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
The functions of the Human Resources and Compensation Committee include
reviewing the compensation and benefits of management and employees, reviewing
the policies related to the performance and compensation of management and
employees, and reviewing the long-range planning for executive development and
succession. The Committee held three meetings during the fiscal year ended
December 31, 2002.
The Committee members during 2002 were: Francisco J. Carreras, Maria Luisa
Ferre, Hector R. Gonzalez, Alberto M. Paracchini, Francisco M. Rexach Jr. and
Juan J. Bermudez. Also, J. Adalberto Roig Jr. was member of the Committee until
April 30, 2002. None of the members of the Committee are officers or employees
of the Corporation or any of its subsidiaries.
COMPENSATION OF DIRECTORS
On February 15, 2001 the Corporation suspended the Stock Deferment Plan it
had maintained for directors who are not employees of the Corporation. In lieu
thereof, on March 7, 2001 outside directors of the Corporation and the Bank
became eligible to receive stock options pursuant to the 2001 Stock Option Plan
(the "2001 Option Plan"). The 2001 Option Plan award is made quarterly on
February, May, August and November of each year. The amount of stock options
granted is equal to the quotient (rounded to the nearest whole share) of (x)
6,250 and (y) the value of the option based on the closing price of the common
stock of the Corporation of the date granted. Option values on the grant dates
were determined by using the Black-Scholes Option Valuation Model. Each director
has been granted options to purchase the shares of stock of the Corporation.
Grants are made quarterly. The options granted shall, subject to early vesting
provision of the Plan, become exercisable, with respect to 20% of the shares on
each anniversary of the date of grant and remain exercisable until the 10th
anniversary of the grant.
In addition, directors receive $1,000 for attending each Board meeting and
$500 for attending each committee meeting. Directors who are employees of the
Corporation do not receive fees for attending Board and committee meetings.
EXECUTIVE OFFICERS
The following information sets forth the names of the executive officers
(the "Executive Officers") of the Corporation including their age, business
experience and directorships during the past five (5) years and the period
during which each such person has served as an Executive Officer of the
Corporation or the Bank.
BUSINESS EXPERIENCE
NAME AND AGE AND DIRECTORSHIPS
------------------- -----------------
RICHARD L. CARRION: (50 YEARS)
o Chairman, President and CEO of the
Corporation.
o Executive Officer of the Corporation
since 1990.
o For information about principal
occupation, business experience and
directorships during the past five
years please refer to the Board of
Directors section.
JORGE A. JUNQUERA: (54 YEARS)
o Senior Executive Vice President of
the Corporation.
o Executive Officer of the Corporation
since 1990.
o For information about principal
occupation, business experience and
directorships during the past five
years please refer to the Board of
Directors section.
DAVID H. CHAFEY JR.: (49 YEARS)
o Senior Executive Vice President of
the Corporation.
o Executive Officer of the Corporation
since 1990.
o For information about principal
occupation, business experience and
directorships during the past five
years please refer to the Board of
Directors section.
BUSINESS EXPERIENCE
NAME AND AGE AND DIRECTORSHIPS
------------ -----------------
MARIA I. BURCKHART: (54 YEARS)
o Executive Vice President of the Corporation.
o Executive Officer of the Corporation since 1990.
o Supervisor of the Administration Group.
o Executive Vice President of the Bank since January
1990.
o Executive Vice President of Popular International
Bank, Inc. and Popular North America, Inc.
o Member of the Board of Trustees of Fundacion Banco
Popular, Inc.
o Member of the Board of Directors of Fundacion Ana
G. Mendez and of Puerto Rico Community Foundation.
o Secretary of the Board of Directors of the Bankers
Club since 1998.
o Member of the Board of Directors of the Puerto Rico
Convention Bureau from 1993 through October 1998.
CARLOS COLINO MARTINEZ: (56 YEARS)
o Executive Vice President of the Corporation since
August 2002.
o Chairman and Chief Executive Officer of GM Group,
Inc. since August 2002.
o Chief Executive Officer of E-Global, provider of
payment system and electronic banking, from
February 1998 through July 2002.
ROBERTO R. HERENCIA: (43 YEARS)
o Executive Vice President of the Corporation.
o Executive Officer of the Corporation since 1997.
o Head of the Corporation's U.S. business expansion.
o President and Director of Banco Popular North
America.
o Executive Vice President of the Bank since January
1997.
o Director of Popular International Bank, Inc.,
Popular North America, Inc., Popular Cash Express,
Inc., Banco Popular, National Association, Equity
One, Inc., Popular Leasing USA, Inc. and Popular
FS, LLC.
o Chairman of the Board of Directors of Popular
Insurance Agency USA, Inc.
o Member of the Board of Directors of the
ServiceMaster Company (a registered public company)
LARRY B. KESLER: (65 YEARS)
o Executive Vice President of the Corporation.
o Executive Officer of the Corporation since 1990.
o Supervisor of the Consumer Credit Group and the
Virgin Islands Region.
o Executive Vice President of the Bank since January
1990.
o Chairman of the Board of Directors of Equity One,
Inc., Popular Auto, Inc., Popular Mortgage, Inc.
and Popular Insurance, Inc.
o Executive Vice President of Popular International
Bank, Inc. and Popular North America, Inc.
o Director of Popular Finance, Inc., Banco Popular,
National Association and Popular FS, LLC.
o Mr. Larry B. Kesler retired on December 31, 2002.
TERE LOUBRIEL: (50 YEARS)
o Executive Vice President of the Corporation since
February 2001.
o Director of Human Resources since April 2000.
o Year 2000 Office Manager of the Corporation from
December 1997 to 2000.
14
BUSINESS EXPERIENCE
NAME AND AGE AND DIRECTORSHIPS
------------ -----------------
EMILIO E. PINERO: (54 YEARS)
o Executive Vice President of the Corporation.
o Executive Officer of the Corporation since 1990.
o Supervisor of the Commercial Banking Group.
o Executive Vice President of the Bank since January
1990.
o Director of Popular Mortgage, Inc. and Popular
Auto, Inc.
o Executive Vice President of Popular International
Bank, Inc. and Popular North America, Inc.
o Member of the Board of Trustees Fundacion Luis
Munoz Marin and Fundacion del Colegio de CPA de
Puerto Rico.
o Member of the Board of Directors of Consejo de
Desarrollo Ocupacional y Recursos Humanos.
BRUNILDA SANTOS DE ALVAREZ: (44 YEARS)
o Executive Vice President of the Corporation since
February 2001.
o Senior Vice President from March 1996 until January
2001.
o General Counsel of the Corporation since 1997.
o Secretary of the Board of Directors of Popular
International Bank, Inc., Banco Popular North
America, GM Group, Inc., Popular Cash Express,
Inc., Banco Popular, National Association, Popular
Insurance, Inc., Popular Securities, Inc., Levitt
Mortgage Corporation, Popular Insurance Agency USA,
Inc., Popular Mortgage, Inc. and Popular North
America, Inc.
o Secretary of the Board of Directors of Puerto Rico
Investor Tax Free Fund, Inc. I, II, III, IV, V, VI,
of Puerto Rico Tax Free Target Maturity Fund,
Inc. I and II, and of Puerto Rico Investors
Flexible Allocation Fund, Inc.
o Assistant Secretary of the Board of Directors of
the Corporation and the Bank since May 1994.
o Assistant Secretary of the Board of Directors of
Equity One, Inc., Popular Auto, Inc. and Popular
Finance, Inc.
o Member of the Board of Regents, Colegio
Puertorriqueno de Ninas, since June 2002.
CARLOS J. VAZQUEZ: (44 YEARS)
o Executive Vice President of the Corporation.
o Executive Officer of the Corporation since 1997.
o Supervisor of the Corporation's Risk Management
Group.
o Executive Vice President of the Bank since March
1997.
o Director of Popular Securities, Inc.
FELIX M. VILLAMIL: (41 YEARS)
o Executive Vice President of the Corporation since
April 2002.
o Supervisor of the Operations Group since April
2002.
o Supervisor of the Bank's Ponce Region from April
2001 until December 2001.
o Supervisor of the Credit Risk Management Division
of the Bank from 1997 through March 2001.
15
BUSINESS EXPERIENCE
NAME AND AGE AND DIRECTORSHIPS
------------ -----------------
SAMUEL T. CESPEDES: (66 YEARS)
o Secretary of the Board of Directors.
o Attorney-at-Law.
o Proprietary partner of the law firm McConnell
Valdes.
o Secretary of the Board of Directors of the
Corporation and the Bank since 1991.
o Secretary of the Board of Directors of Popular
Auto, Inc. and Popular Finance, Inc.
***
FAMILY RELATIONSHIPS
Mr. Richard L. Carrion, Chairman of the Board, President and CEO of the
Corporation and the Bank, is brother-in-law of Mr. Julio E. Vizcarrondo Jr.
OTHER RELATIONSHIPS, TRANSACTIONS AND EVENTS
During 2002 the Bank engaged the legal services of the law firm of
McConnell Valdes of which Mr. Samuel T. Cespedes, Secretary of the Board of
Directors of the Corporation and the Bank is a partner. The amount of fees paid
to McConnell Valdes for fiscal year 2002 amounted to $638,000. The Corporation
also engaged, in the ordinary course of business, the legal services of
Pietrantoni, Mendez & Alvarez, LLP of which Mr. Ignacio Alvarez and Mr. Antonio
Santos, husband and brother, respectively, of Mrs. Brunilda Santos de Alvarez,
Executive Officer of the Corporation since February 2001, are partners. The
amount of fees paid to Pietrantoni, Mendez & Alvarez for fiscal year 2002
amounted to $634,000.
The Bank has had loan transactions with the Corporation's directors and
officers, and with their associates, and proposes to continue such transactions
in the ordinary course of its business, on substantially the same terms as those
prevailing for comparable loan transactions with other people and subject to the
provisions of the Banking Act of the Commonwealth of Puerto Rico and the
applicable federal laws and regulations. The extensions of credit have not
involved and do not currently involve more than normal risks of collectibility
or other unfavorable features.
***
PROPOSAL 2: RATIFICATION OF SELECTION OF AUDITORS
The Board intends to retain the services of PricewaterhouseCoopers LLP as
the independent public accountants of the Corporation for the year 2003.
PricewaterhouseCoopers LLP served as independent public accountants of the Bank
since 1971 and of the Corporation since May 1991, when it was appointed by the
Board.
Neither our certificate of incorporation nor by-laws requires that the
shareholders ratify the selection of PricewaterhouseCoopers LLP as our
independent auditors. We are doing so because we believe it is a matter of good
corporate practice. If the shareholders do not ratify the selection, the Board
of Directors and the Audit Committee will reconsider whether or not to retain
PricewaterhouseCoopers LLP, but may retain such independent auditors. Even if
the selection is ratified, the Board of Directors 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 interests of the Corporation and
its shareholders.
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 selection of PricewaterhouseCoopers LLP as the Corporation's auditors
must be ratified by a majority of the votes cast at the Meeting.
The Board recommends that you vote FOR ratification of
PricewaterhouseCoopers LLP as the Corporation's independent auditors for 2003.
DISCLOSURE OF AUDITORS' FEES
The following is a description of the fees billed to the Corporation by
PricewaterhouseCoopers LLP during the year ended December 31, 2002:
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers LLP, for the year ended
December 31, 2002, for professional services
16
rendered for the audit of the Corporation's annual financial statements for that
fiscal year and for the reviews of the financial statements included in the
Corporation's quarterly reports on Form 10-Q for that fiscal year were
$1,190,490.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed to the Corporation for the year ended December
31, 2002 by PricewaterhouseCoopers LLP for professional services rendered for
information technology services relating to financial information systems design
and implementation.
ALL OTHER FEES
The aggregate fees billed for services rendered to the Corporation by
PricewaterhouseCoopers LLP, other than the services described above under "Audit
Fees" and "Financial Information Systems Design and Implementation Fees," for
the year ended December 31, 2002 were $972,626. This amount includes other
audits and assurance services fees of $435,569, tax related services of $455,557
and $81,500 in other services. The Audit Committee has considered that the
provision of the services covered by this paragraph is compatible with
maintaining the independence of the independent public accountants of the
Corporation.
***
EXECUTIVE COMPENSATION PROGRAM
REPORT OF THE BANK'S HUMAN RESOURCES AND COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
OVERVIEW
The Bank's Human Resources and Compensation Committee (the "Human Resources
Committee") consists of six non-employee directors of the Bank. The Committee
endeavors to keep abreast of competitive compensation practices with regard to
salaries, incentive compensation and supplemental programs in order to assist
the Corporation in attracting and retaining the most qualified executive
officers whose contributions and experience help the Corporation sustain growth,
thereby enhancing shareholders' value. They also oversee the general human
resources and compensation practices of the Corporation.
The Human Resources Committee evaluates and recommends to the Board the
Corporation's compensation policy for the Chairman of the Board, President and
CEO and the Executive Officers. They consider, among other factors, competitive
pay practices for developing a stronger relationship between executive
compensation and the Bank's long-term performance. The executive compensation
program for principal officers of the Corporation's subsidiaries is set
according to the industry and geographical area in which each operates and is
approved by the Board of Directors of each respective subsidiary.
CHAIRMAN OF THE BOARD, PRESIDENT AND CEO AND EXECUTIVE OFFICERS
On an annual basis, Mr. Carrion submits to the Human Resources Committee a
plan setting forth both quantitative and qualitative goals for the fiscal year,
and objectives for the medium and long-term. In evaluating and setting
compensation, the Human Resources Committee considers the Corporation's
performance with respect to the goals set forth in the plan. Therefore, the
Human Resources Committee evaluates Mr.Carrion's performance by taking into
consideration the growth of the organization, implementation of a
diversification strategy, achievement of financial goals, improvements to the
product and service delivery system and development of human resources.The
weight and significance accorded to these factors is subjective in nature.
The group of Executive Officers is composed of two Senior Executive Vice
Presidents of the Corporation and nine Executive Vice Presidents of the
Corporation (the "Executive Officers") all of whom participate in an Annual and
Long-Term Incentive Plan.The President and CEO sets the salary increases and the
bonuses to be awarded to the Executive Officers pursuant to the incentive plans.
Mr. Carrion and the Executive Officers participate in an annual incentive
program based on financial results of the Corporation, individual business
results, service quality and individual performance. The Plan is designed to
encourage the achievement of short-term financial goals and to increase
shareholder value. The first incentive component is a cash bonus. The second
component is a deferred long-term incentive awarded in stock options of the
Corporation.
Mr. Carrion recommended to the Human Resources Committee that it consider
both his short-term and long-term incentive on a future date (See Note (d) of
the Summary Compensation Table). All members of the Human Resources Committee
accepted this proposal.
HUMAN RESOURCES AND COMPENSATION
COMMITTEE
Francisco M. Rexach Jr (Chairman)
Francisco J. Carreras
Maria Luisa Ferre
Hector R. Gonzalez
Alberto M. Paracchini
Juan J. Bermudez *
*A member since April 2002.
17
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the
Corporation to the Executive Officers of the Corporation.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION INCENTIVE
--------------------------------------- LONG-TERM
PAYMENTS ALL COMPENSATION
FISCAL AND OTHER ANNUAL STOCK OPTIONS
NAME AND PARTICIPANT POSITION YEAR SALARY(a) BONUS(b) COMPENSATION(c) TOTAL GRANTED #(g)
----------------------------- ---- --------- -------- ------------ ----- ------------
Richard L. Carrion..................... 2002 $540,000(d) $62,170(d) $43,540 $645,710 - (d)
Chairman, 2001 540,000(d) 53,824(d) 35,199 629,023 - (d)
President and CEO 2000 540,000(d) 60,912(d) 42,069 642,981 -
David H. Chafey Jr..................... 2002 500,000 678,054 40,611 1,218,665 39,098
Senior Executive Vice President 2001 493,550 236,254 32,515 762,319 25,301
of the Corporation 2000 466,999 121,631 37,021 625,651 -
Jorge A. Junquera...................... 2002 440,000 614,346 36,218 1,090,564 34,406
Senior Executive Vice President 2001 436,754 208,101 29,234 674,089 22,265
of the Corporation 2000 430,790 111,293 34,548 576,631 -
Maria I. Burckhart..................... 2002 278,213 363,400 23,153 664,766 21,755
Executive Vice President 2001 278,213 131,687 18,856 428,756 14,078
of the Corporation 2000 283,035 73,469 22,901 379,405 -
Carlos Colino Martinez(f).............. 2002 187,500 9,375 42,860 239,735 -
Executive Vice President
of the Corporation
Roberto R. Herencia.................... 2002 400,000 566,411 31,289 997,700 31,278
Executive Vice President 2001 400,000 203,170 27,110 630,280 20,241
of the Corporation 2000 258,484 67,745 20,029 346,258 -
Larry B. Kesler(e)..................... 2002 400,000 548,435 33,289 981,724 31,278
Executive Vice President 2001 383,396 188,333 25,985 597,714 20,241
of the Corporation 2000 304,575 79,239 24,643 408,457 -
Tere Loubriel (f)...................... 2002 225,000 300,695 18,725 544,420 17,594
Executive Vice President 2001 214,842 105,963 14,561 335,366 11,386
of the Corporation
Emilio Pinero.......................... 2002 255,736 339,237 21,389 616,362 19,997
Executive Vice President 2001 255,736 121,129 17,333 394,198 12,941
of the Corporation 2000 260,169 67,615 21,050 348,834 -
Brunilda Santos de Alvarez (f)......... 2002 225,000 318,630 18,725 562,355 17,594
Executive Vice President 2001 211,837 105,724 14,357 331,918 11,386
of the Corporation
Carlos J. Vazquez...................... 2002 375,000 519,733 31,208 925,941 29,323
Executive Vice President 2001 368,613 177,042 24,983 570,638 18,976
of the Corporation 2000 342,514 88,833 27,713 459,060 -
Felix M.Villamil(f).................... 2002 170,000 225,456 14,148 409,604 13,293
Executive Vice President
of the Corporation
18
(a) Salaries before deductions.
(b) For the Senior Management Committee these payments include a Christmas
bonus, the cash portion payable under the Profit Sharing Plan of the Bank
and the amount awarded under the Annual Management Incentive Compensation
Plan.
(c) For the Executive Officers of Popular, Inc. the amount includes the
deferred portion under the Profit Sharing Plan of the Bank, amounts accrued
under the Benefit Restoration Plan, the amount from the Profit Sharing
deferred and allocated to Savings and Stock Plan and the Bank's matching
contribution to Savings and Stock Plan.
(d) Mr. Carrion has declined salary increases, incentive payments and stock
options while the Bank was operating under a Written Agreement with the
Federal Reserve Bank of New York, which Agreement was terminated on January
16, 2003. He has also declined salary increases, incentive payments and
stock options during the one year term of the Deferred Prosecution
Agreement entered into with the Department of Justice on January 16, 2003.
(e) Mr. Larry B. Kesler retired on December 31, 2002.
(f) Mrs. Loubriel and Mrs. Santos were appointed Executive Officers of the
Corporation in February 2001 and Mr. Villamil and Mr. Colino were appointed
Executive Officers in March and August 2002, respectively.
(g) Includes options granted on March 13, 2003 for fiscal 2002 performance.
The following table sets forth information as of December 31, 2002 regarding
securities issued to directors and eligible employees under the 2001 Option
Plan.
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE EQUITY COMPENSATION
BE ISSUED UPON EXERCISE EXERCISE PRICE OF PLANS (EXCLUDING SECURITIES
PLAN CATEGORY OF OUTSTANDING OPTIONS OUTSTANDING OPTIONS REFLECTED IN FIRST COLUMN)
------------- ---------------------- ------------------- --------------------------
Equity compensation
plans approved
by security holders 445,075 $29.25 4,554,925
Equity compensation
plans not approved by
security holders None - None
------- ------ ---------
Total 445,075 $29.25 4,554,925
======= ====== =========
***
STOCK OPTION PLAN
The 2001 Option Plan is intended to provide the Corporation and its
subsidiaries with an effective means to attract and retain highly qualified
personnel as well as to provide additional incentive to employees and directors
who provide services to the Corporation and its subsidiaries.
Any employee or director of the Corporation or of any of its subsidiaries,
is eligible to participate in the 2001 Option Plan. The selection of individuals
eligible to participate is within the discretion of the Board of Directors, or
the Human Resources Committee.
The 2001 Option Plan provides for the grant of stock options that are
intended to qualify as "qualified stock options"("QSOs") under Section 1046 of
the Puerto Rico Internal Revenue Code of 1994, as amended (the "Puerto Rico
Code"), as "incentive stock options" ("ISOs") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") or "non-statutory stock options"
("NSOs"). At the time of the original grant of NSOs, the Board of Directors or
the Committee, may also authorize the grant of reload options, which shall be
NSOs for such number of shares of common stock as were used by the Participant
to pay the purchase price upon the exercise of previously granted options, and
the withholding taxes applicable to NSOs exercises, but are still subject to
other terms set forth in the 2001 Option Plan. All options granted by the
Corporation were QSOs.
STOCK OPTION GRANT TABLE
The following table shows options grants to the covered executives, based
on 2002 performance. All 2002 stock option grants were made under the 2001
Option Plan. The value of
19
the stock options depends upon a long-term increase in the market price of the
common stock. A benefit is perceived only if the stock price does increase.
Options vest in cumulative installments of 20% per year over a five-year period
and remain exercisable until the 10th anniversary of the grant.
Option values on the grant dates were determined by using the Black-Scholes
Option Valuation Model. The model assumes that future dividends increase at a
rate equal to the historical compound average growth rate during the past six
years, the stock price volatility, and the exercise of all options on the final
day of their 10 year terms.
PERCENT OF TOTAL GRANT
OPTIONS EXERCISE DATE
OPTIONS GRANTED PRICE EXPIRATION PRESENT
NAME GRANTED(a) TO EMPLOYEES ($ PER SHARE) DATE VALUE (b)
---- ---------- ------------ ------------- ---- ---------
David H. Chafey Jr .......... 39,098 8.88% $ 33.50 3/12/2013 $352,500
Jorge A. Junquera ........... 34,406 7.82% 33.50 3/12/2013 310,200
Maria I. Burckhart .......... 21,755 4.94% 33.50 3/12/2013 196,140
Roberto R. Herencia ......... 31,278 7.11% 33.50 3/12/2013 282,000
Larry B. Kesler ............. 31,278 7.11% 33.50 3/12/2013 282,000
Tere Loubriel ............... 17,594 4.00% 33.50 3/12/2013 158,625
Emilio Pinero ............... 19,997 4.54% 33.50 3/12/2013 180,294
Brunilda Santos ............. 17,594 4.00% 33.50 3/12/2013 158,625
Carlos J. Vazquez ........... 29,323 6.66% 33.50 3/12/2013 264,375
Felix M. Villamil ........... 13,293 3.02% 33.50 3/12/2013 119,850
(a) Represents options granted on March 13, 2003 for fiscal 2002 performance.
(b) The estimates were calculated in accordance with the regulations of the
Securities and Exchange Commission, which are not intended to predict the
Corporation's common stock price.
***
The following table sets forth certain information regarding individual
exercises of stock options during 2002 by each of the named Executive Officers.
FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END
------------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
David H. Chafey Jr ......... -- 25,301 -- $266,672
Jorge A. Junquera .......... -- 22,265 -- 234,673
Maria I. Burckhart ......... -- 14,078 -- 148,382
Roberto R. Herencia ........ -- 20,241 -- 213,340
Larry B. Kesler ............ 20,241 -- $213,340 --
Tere Loubriel .............. -- 11,386 -- 120,009
Emilio Pinero .............. -- 12,941 -- 136,399
Brunilda Santos ............ -- 11,386 -- 120,009
Carlos J. Vazquez .......... -- 18,976 -- 200,007
Felix M. Villamil .......... -- 6,893 -- 72,653
20
PROFIT SHARING PLAN OF THE BANK
All officers and regular monthly salaried employees of the Bank are active
participants in the Bank's Profit Sharing Plan, as of the first day of the
calendar month following the completion of three months of service.
Under this plan, the Board of Directors determines the Bank's annual
contribution based on the profits of the Bank for the year. The amount allocated
to each officer or employee is based on his or her earned salary for the year.
The total amount contributed for the year 2002 was $21,335,450. Of the total
awarded 40% is deferred under the Profit Sharing Plan, 10% under the Savings &
Stock Plan and the remainder 50% is paid in cash. However, since 1998 each
officer and employee may elect to increase his (her) contribution to the Savings
& Stock Plan up to 15%; as a result of this election 40% was deferred under the
Profit Sharing Plan and 10% under the Savings & Stock Plan.
BENEFIT RESTORATION PLAN OF THE BANK
The Internal Revenue Service (IRS) set a limit of $200,000 as the amount of
compensation that may be considered in calculating future retirement payments
from tax qualified retirement plans. This limit applies to the Bank's Retirement
Plan and Profit Sharing.
The Board of Directors has adopted three "Benefit Restoration Plans" for
those employees whose annual compensation is higher than the established limit.
These plans will provide those benefits that cannot be accrued under the Bank's
Retirement and Profit Sharing Plan, which are qualified plans under the Employee
Retirement Income Security Act ("ERISA"). Benefits under the Benefit Restoration
Plans shall be equal to the account balance that would be provided under the
Profit Sharing Plan and to the benefits that would have been accrued under the
Retirement Plan. The restoration benefits of employees who are residents of
Puerto Rico are funded through two irrevocable trusts, while the restoration
benefits of all other employees are unfunded.
RETIREMENT PLAN OF THE BANK
The Bank has a non-contributory, defined benefit Retirement Plan covering
substantially all regular monthly employees. Monthly salaried employees are
eligible to participate in the Plan following the completion of one year of
service and 21 years of age. Pension costs are funded in accordance with minimum
funding standards under ERISA.
The basis for the Retirement Plan formula is total compensation, which
includes Christmas bonus, incentives, overtime, differentials, profit sharing
cash bonuses and any other compensation received by the employees. Benefits are
paid on the basis of a straight life annuity plus supplemental death benefits
and are not reduced for Social Security or other payments received by the
participants.
Normal retirement age at the Bank is a combination of years of age and
completed years of service totaling 75. Early retirement is at 55 years of age
with 10 years of service. Employees with 30 years of service or more are
provided with a retirement benefit of 40% of total compensation. Benefits are
reduced only if the employees retire before age 55. Benefits are subject to the
U.S. Internal Revenue Code limits on compensation and benefits.
The following table sets forth the estimated annual benefits that would
become payable under the Retirement Plan and the Benefit Restoration Plan based
upon certain assumptions as to total compensation levels and years of service.
21
The amounts shown in this table are not necessarily representative of
amounts that may actually become payable under the plans. The amounts represent
the benefits upon retirement on December 31, 2002, of a participant at age 65.
TOTAL
COMPENSATION ESTIMATED ANNUAL BENEFITS / YEARS OF SERVICE
------------ --------------------------------------------
15 20 25 30 35
-- -- -- -- --
$ 1,300,000 $ 237,000 $ 332,000 $ 426,000 $ 520,000 $ 520,000
1,200,000 219,000 306,000 393,000 480,000 480,000
1,100,000 201,000 281,000 360,000 440,000 440,000
1,000,000 183,000 255,000 328,000 400,000 400,000
900,000 164,000 230,000 295,000 360,000 360,000
800,000 146,000 204,000 262,000 320,000 320,000
700,000 128,000 179,000 229,000 280,000 280,000
600,000 110,000 153,000 197,000 240,000 240,000
500,000 91,000 128,000 164,000 200,000 200,000
400,000 73,000 102,000 131,000 160,000 160,000
300,000 55,000 77,000 98,000 120,000 120,000
The 2002 total compensation and estimated years of service at age 65 for
the policy-making Executive Officers of the Corporation are as follows:
ESTIMATED
2002 YEARS OF
TOTAL SERVICE
COMPENSATION AT AGE 65
------------ ---------
Richard L. Carrion ......................... $ 646,000 41.5
David H. Chafey Jr ......................... 1,219,000 38.5
Jorge A. Junquera .......................... 1,091,000 42.3
Maria I. Burckhart ......................... 665,000 33.7
Roberto R. Herencia ........................ 998,000 33.7
Larry B. Kesler ............................ 982,000 16.5
Tere Loubriel .............................. 544,000 39.8
Emilio Pinero .............................. 616,000 43.2
Brunilda Santos ............................ 562,000 32.8
Carlos J. Vazquez .......................... 926,000 26.5
Felix M. Villamil .......................... 410,000 36.2
DEFERRED COMPENSATION PLAN OF POPULAR SECURITIES, INC.
Popular Securities, Inc. maintains a non-qualified deferred compensation
plan under which a selected group of highly compensated employees of Popular
Securities, Inc. are required to defer a portion of their incentive performance
bonus. The amount deferred and interest credits are paid to participants as
follows: (a) 50% on or before January 31 of the second fiscal year following the
fiscal year for which such amounts were contributed and (b) 50% on or before
January 31 of the third fiscal year following the fiscal year for which such
amounts were contributed.
RETIREMENT PLAN OF BANCO POPULAR NORTH AMERICA
Banco Popular North America has a non-contributory, defined benefit
Retirement Plan covering substantially all regular monthly employees. Monthly
salaried employees are eligible to participate in the plan following the
completion of one year of service and attained 21 years of age. Pension costs
are funded in accordance with minimum funding standards under ERISA.
The bases for the Retirement Plan formula are years of service and average
final compensation. Benefits are paid on the basis of a single life annuity and
are not reduced (offset) for Social Security or other payments received by the
participants.
22
Normal retirement is when the participant reaches age 65 and has five years
of credited service. Participants can enjoy actuarially adjusted early
retirement benefits at age 55 with 10 years of service. This plan is qualified
under section 401(a) of the Internal Revenue Code.
DEFERRED COMPENSATION PLAN OF EQUITY ONE, INC.
Equity One, Inc. adopted a deferred compensation plan designed to provide a
post retirement benefit to several key executives. Equity One, Inc. purchases
flexible, variable life insurance policies for each participant and names itself
as beneficiary. The cash surrender values of the policies are expected to pay
benefits to the participants upon their retirement. Should the participant
terminate their employment prior to retirement, they are entitled to their
vested portion of their account.
+++
POPULAR, INC.
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return during the
measurement period with the cumulative total return, assuming reinvestment of
dividends, of the National Association of Securities Dealers Automated Quotation
System (NASDAQ) Stock Market Index and the NASDAQ Bank Composite Index.
The cumulative total shareholder return was obtained by dividing (i) the
cumulative amount of dividends per share, assuming dividend reinvestment, since
the measurement point, December 31, 1997 plus (ii) the change in the per share
price since the measurement date, by the share price at the measurement date.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
TOTAL RETURN AS OF DECEMBER 31
(DECEMBER 31, 1997=100)
(PERFORMANCE GRAPH)
COMPANY/INDEX
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------
POPULAR, INC 67.43 100.00 139.27 116.82 112.69 127.81 152.07
NASDAQ BANKS COMPOSITE 793.656 100.00 99.36 95.51 108.95 117.97 120.61
NASDAQ STOCK MARKET 521.35 100.00 140.99 261.48 157.42 124.89 86.33
23
PROPOSALS OF SECURITY HOLDERS TO BE PRESENTED AT THE 2004 ANNUAL MEETING OF
STOCKHOLDERS
Stockholders' proposals intended to be presented at the 2004 Annual Meeting
of Stockholders must be received by the Corporation's Secretary , at its
principal executive offices, Popular Center Building, San Juan, Puerto Rico,
00918, not later than November 29, 2003 for inclusion in the Corporation's Proxy
Statement and Form of Proxy relating to the 2004 Annual Meeting of Stockholders.
San Juan, Puerto Rico, March 20, 2003
RICHARD L. CARRION SAMUEL T. CESPEDES
Chairman of the Board, President Secretary
and Chief Executive Officer
YOU MAY REQUEST A COPY OF THE REPORT ON FORM 10K FILED WITH THE SEC THROUGH OUR
WEBSITE, www.popularinc.com, OR BY CALLING (787) 765-9800 OR WRITING TO AMILCAR
JORDAN, ESQ., SENIOR VICE PRESIDENT, BANCO POPULAR DE PUERTO RICO, PO BOX
362708, SAN JUAN, PR 00936-2708.
24
EXHIBIT A
POPULAR, INC.
AUDIT COMMITTEE CHARTER
ARTICLE 1 - ORGANIZATION
The Board of Directors (the "Board") of Popular, Inc. (the
"Corporation") has established an Audit Committee to undertake the
responsibilities and perform the tasks set forth in this Charter.
ARTICLE 2 - COMPOSITION
The Audit Committee shall be comprised of at least three directors,
each of whom is "independent" under the Sarbanes-Oxley Act of 2002 (the "2002
Act") and the rules of The NASDAQ Stock Market, Inc. ("NASDAQ"). 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 is a
"financial expert" as defined in the rules of the Securities and Exchange
Commission ("SEC") under the 2002 Act.
No member of the Audit Committee may receive any compensation from the
Corporation other than (i) director's fees, which may be received in cash,
stock options or other in-kind consideration ordinarily available to directors;
(ii) a pension or other deferred compensation for prior service that is not
contingent on future service; and (iii) any other regular benefits that other
directors receive.
Members shall be appointed by the Board based on nominations
recommended by the Corporation's Corporate Governance and Nominating Committee,
and shall serve for such term or terms as the Board may determine.
The Board shall designate as president of the Audit Committee one of
its members, who shall preside over the meetings of the Committee and shall
inform the Board of the actions taken by the Committee. In the event of a
vacancy or an absence in the Audit Committee, the Board may designate any
member of the Board as substitute, provided such person complies with the
requisites established herein.
ARTICLE 3 - PURPOSE
The purpose of the Audit Committee is to assist the Board in its
oversight of:
1. the Corporation's accounting and financial reporting
principles and policies, and internal audit controls and
procedures;
2. the Corporation's financial statements and the independent
audit thereof; and
3. the outside auditors' qualifications, independence and
performance.
In fulfilling their responsibilities hereunder, it is recognized that
members of the Audit Committee are not employees of the Corporation and are
not, and do not represent themselves to be, accountants or auditors by
profession. 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. 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
25
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
Corporation's policies, plans and procedures, as well as laws and regulations;
(iii) the safekeeping of assets; and (iv) the economical and efficient use of
resources. The outside auditors are responsible for planning and carrying out a
proper audit of the Corporation's annual financial statements, reviewing the
Corporation's quarterly financial statements prior to the filing of each
quarterly report on Form 10-Q, and other procedures.
The Audit Committee, in its capacity as a Committee of the Board of
Directors, shall be directly responsible for the outside auditors, who in turn
shall be accountable to the Audit Committee. The outside auditors shall
annually submit to the Audit Committee a formal written statement of the fees
billed for each of the following categories of services rendered by the outside
auditors: (i) the audit of the Corporation's annual financial statements for
the most recent fiscal year and the reviews of the financial statements
included in the Corporation's Quarterly Reports on Form 10-Q for that fiscal
year; and (ii) all other permitted non-audit services rendered by the outside
auditors for the most recent fiscal year, in the aggregate and by each service.
ARTICLE 4 - DUTIES AND POWERS
To carry out its purposes, the Audit Committee shall have the
following duties and powers:
1. With respect to the outside auditor:
(i) to annually appoint, evaluate and, if necessary,
replace the outside auditors, including sole
authority to approve all audit engagement 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 (it
being understood that the outside auditors are
responsible for the accuracy and completeness of
this Statement) addressing each non-audit service
provided to the Corporation and the matters set
forth in Independence Standards Board Standard No.
1., to discuss with the outside auditors any
relationships or services disclosed in this
Statement that may affect the quality of audit
services or the objectivity and independence of the
Corporation's outside auditors;
(v) to instruct the outside auditors that they are
directly accountable to the Audit Committee;
(vi) to pre-approve all auditing services, including
comfort letters in connection with securities
underwriting, and all non-audit services authorized
by law or regulation, to be provided to the
Corporation by the outside auditor and to consider
whether the outside auditors' provision of non-audit
services to the Corporation 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;
(vii) to obtain from the outside auditors in connection
with any audit a timely report relating to the
Corporation's annual audited financial statements
describing (i) all critical accounting policies and
practices to be used; (ii) all alternative
treatments of financial information within GAAP that
have been discussed with management officials of the
Corporation, ramifications of the use of such
alternative disclosures and treatments, and the
treatment preferred by the outside auditors; and
(iii) any other material written communications
between the outside auditors and the management of
the Corporation, such as any management letter or
schedule of unadjusted differences;
(viii) to review and evaluate the qualifications,
performance and independence of the lead partner of
the outside auditors;
(ix) to discuss with management the timing and process
for implementing the rotation of the lead audit
partner and the reviewing partner, which rotation
must occur not less than once every five years, and
consider whether there should be a regular rotation
of the audit firm itself; and
(x) to take into account the opinions of management and
the Internal Audit Division in assessing the outside
auditors' qualifications, performance and
independence.
26
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 Internal Audit Division
and management's responses thereto; and
(iv) to instruct the internal auditors that they (in
conjunction with the outside auditors) are
ultimately accountable to the Audit Committee.
3. With respect to financial reporting principles and policies,
and internal audit controls and procedures:
(i) to advise management, the Internal Audit Division
and the outside auditors that they are expected to
provide to the Audit Committee a timely analysis of
significant financial reporting issues and
practices;
(ii) to consider any reports or communications (and
management's and/or the Internal Audit Division's
responses thereto) submitted to the Audit Committee
by the outside auditors required by or referred to
in SAS 61 (as codified by AU Section 380), as may be
modified or supplemented, including reports and
communications related to:
- deficiencies noted in the audit in the
design or operation of internal controls;
- consideration of fraud in a financial
statement audit;
- detection of illegal acts;
- the outside auditor's responsibility under
generally accepted auditing standards;
- any restrictions on audit scope;
- significant accounting policies;
- significant issues discussed with the
national office;
- management judgments and accounting
estimates and assumptions;
- 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;
- 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;
27
- 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 as defined in the rules of
the SEC under the 2002 Act for:
- the receipt, retention, and treatment of
complaints received by the Corporation
regarding accounting, internal accounting
controls, or auditing matters; and
- the confidential, anonymous submission by
employees of the Corporation of concerns
regarding questionable accounting or
auditing matters.
(iv) 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
Corporation's financial statements;
- to review the form of opinion the outside
auditors propose to render to the Board and
shareholders;
- to discuss significant changes to the
Corporation's auditing and accounting
principles, policies, controls, procedures
and practices proposed or contemplated by
the outside auditors, the Internal Audit
Division or management;
- to discuss, as appropriate: (a) any major
issues regarding accounting principles and
financial statement presentations,
including any significant changes in the
Corporation's selection or application of
accounting principles, and major issues as
to the adequacy of the Corporation's
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;
- to inquire about significant risks and
exposures, if any, and the steps taken to
monitor and minimize such risks; and
- to inquire whether the financial statements
fairly present, in all material respects,
the financial condition, results of
operations and cash flows of the
Corporation as of and for the periods
presented;
(v) 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 Corporation's ability to
record, process, summarize and report financial
data, any material weaknesses in internal controls,
and any fraud, whether or not material, that
involves management or other employees who have a
significant role in the Corporation's internal
controls;
28
(vi) to obtain from the outside auditors assurance that
the audit was conducted in a manner consistent with
Section 10A of the Securities Exchange Act of 1934,
as amended, which sets forth certain procedures to
be followed in any audit of financial statements
required under the Securities Exchange Act of 1934;
and,
(vii) to discuss with the Corporation's General Counsel
any significant legal matters that may have a
material effect on the financial statements and the
Corporation's compliance policies, including
material notices to or inquiries received from
governmental agencies.
4. With respect to reporting and recommendations:
(i) to prepare any report or other disclosures,
including any recommendation of the Audit Commit-
tee, required by the rules of the Securities and
Exchange Commission to be included in the
Corporation's annual proxy statement;
(ii) to review this Charter at least annually and
recommend any changes to the Board; and
(iii) to report its activities to the Board on a regular
basis and to make such recommendations with respect
to the above and other matters as the Audit
Committee may deem necessary or appropriate.
ARTICLE 5 - RESOURCES AND AUTHORITY OF THE AUDIT COMMITTEE
The Audit Committee shall have the resources and authority appropriate
to discharge its responsibilities, including the authority to engage outside
auditors for special audits, reviews and other procedures and to retain
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 to such auditors, counsel, experts or consultants.
ARTICLE 6 - TERM IN OFFICE
The members of the Committee shall hold office from the time of
designation until the next annual meeting of stockholders of the Corporation.
The Board may, however, extend such period for one or all designated members.
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. In addition to
such meetings, the Audit Committee should meet separately at least annually
with management, the General Auditor and the outside auditors to discuss any
matters that the Audit Committee or any of these persons or firms believe
should be discussed privately, including the annual audited financial
statements. The Audit Committee may request any officer or employee of the
Corporation or the Corporation's outside counsel or outside auditors to attend
a meeting of the Audit Committee or to meet with any members of, or consultants
to, the Audit Committee. Members of the Audit Committee may participate in a
meeting of the Audit Committee by means of a conference call or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
ARTICLE 8 - SECRETARY
The Committee will designate a Secretary among its members. The
Secretary may delegate his (her) functions to any officer of the Corporation
sole 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
29
President of the Committee will submit the minutes and the attachments
considered necessary to the Board at their next meeting for their review and
ratification.
ARTICLE 10 - QUORUM AND COMMITTEE DECISIONS
A quorum shall consist of the majority of the members of the
Committee. The decisions of the Committee shall be adopted by an affirmative
vote of the majority of the members present at the meeting in which the
decision is considered. In the event of a tie, the decision will be submitted
to the Board in their next meeting and no action will be taken until the Board
makes a decision.
ARTICLE 11 - AMENDMENTS
This Charter can be amended by means of an express resolution of the
Board.
ARTICLE 12 - EFFECTIVE DATE
This Charter will be effective immediately after its approval by the
Board. The Secretary of the Board will certify it with his (her) signature and
the Corporate seal, indicating the date it was approved.
CERTIFICATE OF RESOLUTION
The undersigned, as Secretary of the Board of Popular, Inc., does
hereby certify that this Audit Committee Charter was duly adopted at a meeting
of the Board of the Corporation held on January 16, 2003, at which a quorum was
present and acting throughout.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Corporation in San Juan, Puerto Rico this 16th day of January, 2003.
Juan J. Bermudez Francisco M. Rexach Jr.
Hector R. Gonzalez Felix J. Serralles Jr.
Manuel Morales Jr.
30
EXHIBIT B
POPULAR, INC.
CORPORATE GOVERNANCE GUIDELINES(1)
I. INTRODUCTION
The Board of Directors of Popular, Inc. ("Popular"), acting on the
recommendation of its Corporate Governance and Nominating Committee, has
developed and adopted this set of corporate governance principles (the
"Guidelines") to promote the functioning of the Board and its committees, to
protect and enhance stockholder value and to set forth a common set of
expectations as to how the Board, its various committees, individual directors
and management should perform their functions. These Guidelines are designed
with Popular's current business operations, ownership, capital structure and
economic conditions in mind and will continue to evolve with changing
circumstances.
II. ROLES OF BOARD AND MANAGEMENT
The roles of the Board and management are related, but distinct.
Management proposes Popular's strategy to the Board for approval. Management
also implements Popular's strategy in the day-to-day operation of its business,
reporting regularly to the Board on significant events, issues and risks that
may materially affect Popular's business or financial performance.
The Board's function is oversight. The Board oversees, directly or
through committees, the performance of Popular's business and management. The
Board reviews and approves Popular's business strategy and oversees
management's implementation of that strategy.
III. BOARD COMPOSITION
The composition of the Board should balance the following goals:
- The size of the Board should facilitate substantive
discussions of the whole Board in which each director can
participate meaningfully;
- The composition of the Board should encompass a broad range
of skills, expertise, industry knowledge, diversity of
opinion and contacts relevant to Popular's business;
- A majority of the Board will consist of directors who the
Board has determined have no material relationship with
Popular and who are otherwise "independent" under the rules
of The NASDAQ Stock Market, Inc.
IV. SELECTION OF CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
The Board should be free to select its Chairman and Popular's Chief
Executive Officer in the manner it considers in the best interests of Popular
at any given point in time. Therefore, the Board does not have a policy on
whether the roles of Chairman and CEO should be separate or combined and, if
they are to be separate, whether the Chairman should be selected from the
non-executive directors or be an employee.
(1) These guidelines have been drafted to comply with current NASDAQ
corporate governance proposals. Changes to these guidelines will likely be
necessary once final rules are approved by the SEC.
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V. SELECTION OF DIRECTORS
A. NOMINATIONS. The Board is responsible for selecting the
nominees for election to Popular's Board of Directors by the stockholders.
Popular's Corporate Governance and Nominating Committee is responsible for
recommending to the Board a slate of directors or one or more nominees to fill
vacancies occurring between annual meetings of stockholders.
B. CRITERIA. 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:
- Personal qualities and characteristics,
accomplishments and reputation in the business
community;
- Current knowledge and contacts in the communities in
which Popular does business and in Popular's
industry or other industries relevant to Popular's
business;
- Ability and willingness to commit adequate time to
Board and committee matters;
- 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 Popular;
and
- Diversity of viewpoints, background, experience and
other demographics.
C. INVITATION. The invitation to join the Board should be
extended by the Board via the Chairman of the Board and CEO of Popular,
together with an independent director, when deemed appropriate.
D. ORIENTATION AND CONTINUING EDUCATION. Management, working
with the Board, will provide an orientation process for new directors,
including background material on Popular, its business plan and its risk
profile, and meetings with senior management. Periodically, management will
prepare additional educational sessions for all directors on matters relevant
to Popular, its business plan and risk profile in accordance with applicable
rules of The NASDAQ Stock Market, Inc.
VI. ELECTION TERM
The Board does not believe it should establish term limits.
VII. RETIREMENT OF DIRECTORS
A director who would attain age 72 at the time of the election or
during the term to be served may not stand for re-election.
VIII. BOARD MEETINGS
The Board currently plans [at least eight] meetings, with further
meetings to occur (or action to be taken by unanimous written consent) at the
discretion of the Board. The meetings may consist of committee meetings and the
Board meeting.
The agenda for each Board meeting will be prepared by the Office of
the Corporate Secretary. Any director is free to offer agenda items for
consideration by the Board. Management will seek to provide to all directors an
agenda and appropriate materials approximately one week in advance of meetings,
although the Board recognizes that this timing will not always be consistent
with the timing of transactions and the operations of the business and that in
certain cases it may not be practicable.
Materials presented to the Board or its committees should be as
concise as possible, while still providing the desired information needed for
the directors to make an informed judgment. As a general rule, presentations on
specific subjects should be sent to the Board members in advance so that Board
meeting time may be conserved and discussion time focused on questions that the
Board has about the material. As the need arises, presentations may be made
orally at meetings.
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IX. EXECUTIVE SESSIONS
To ensure free and open discussion and communication among the
independent directors, the independent directors will meet regularly in
executive sessions, with no members of management present. These executive
sessions should be held with sufficient regularity that no negative inference
attaches to the calling of an executive session. The independent directors will
designate the independent director who will preside at executive sessions, and
those designations should be rotated. There should be no lead director.
X. THE COMMITTEES OF THE BOARD
Popular will have at least the following committees: Audit Committee,
Risk Management Committee, Compensation Committee and the Corporate Governance
and Nominating Committee. Each of the Audit, Compensation and Corporate
Governance and Nominating Committees must have a written charter in accordance
with the rules of The Stock Market, Inc.
All directors, whether members of a committee or not, are invited to
make suggestions to a committee chair for additions to the agenda of the
chair's committee or to request that an item from a committee agenda be
considered by the Board. The chair of each committee will give a periodic
report of the committee's activities to the Board.
Each of the Corporate Governance and Nominating Committee, the Audit
Committee and the Compensation Committee will be composed of at least three
directors who the Board has determined have no material relationship with
Popular and who are otherwise "independent" under the rules of The NASDAQ Stock
Market, Inc., applicable law and SEC rules. The required qualifications for the
members of each committee are specified in the committee's charter. A director
may serve on more than one committee for which the director qualifies.
XI. BOARD RESPONSIBILITIES
A. STRATEGY. The Board reviews and approves management's
proposed strategy for Popular and monitors implementation of Popular's
strategic plans on an ongoing basis.
B. OPERATING PLANS AND BUDGETS. The Board oversees Popular's
annual operating plans, reviews the annual budgets presented by management and
monitors the implementation of the annual plans.
C. SELF-EVALUATLON. The Board evaluates its own performance
annually, as described below under "Evaluating Board Performance," based on the
report and recommendations of its Corporate Governance and Nominating
Committee. In connection with this evaluation, the Board should actively seek
means of improving its performance. Each committee should also evaluate its
performance annually.
D. MANAGEMENT SUCCESSION. At least annually, the Board will
review and concur in a management succession plan, developed by the CEO, to
ensure that future selections are appropriately considered. The principal
components of this plan, which the CEO will report at least annually to the
Board, are (1) a proposed plan for emergency CEO succession (2) a proposed plan
for CEO succession in the ordinary course of business and (3) the CEO's plan
for management succession for the other policy-making Officers of Popular. The
succession plan should include an assessment of the experience, performance,
skills and planned career paths for possible candidates within the senior
management team.
E. EVALUATING AND APPROVING SALARY FOR THE CEO. The Board,
acting through the Compensation Committee, evaluates the performance of the CEO
and Popular against Popular's strategic and financial goals, and approves the
compensation level of the CEO.
F. EVALUATING AND APPROVING THE COMPENSATION OF MANAGEMENT. The
Board, acting through the Compensation Committee, evaluates and approves the
proposals of the CEO for overall compensation policies applicable to executive
officers.
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G. BOARD COMPENSATION. The Board will conduct a review at least
once every three years of the components and amount of Board compensation in
relation to other similarly situated companies. As part of a director's total
compensation and to create a direct linkage with corporate performance, the
Board believes that a meaningful portion of a director's compensation should be
provided and held in stock options or other equity-based compensation. Board
compensation should be consistent with market practices but should not be set
at a level that would call into question the Board's objectivity.
H. REVIEWING AND APPROVING SIGNIFICANT TRANSACTIONS. Board
approval of a particular transaction may be appropriate because of several
factors, including:
- Legal or regulatory requirements;
- The materiality of the transaction to Popular's
financial performance, risk profile or businesses;
- The terms of the transaction;
- Other factors, such as entry into a new business or
a variation from Popular's strategic plan.
Whenever Board approval is not required, the CEO will review and
approve those transactions or, where appropriate, delegate the review and
approval of those transactions that implement Popular's strategic plan in the
day-to-day operation of its business, reporting regularly to the Board or its
committees on significant events, issues and risks that may materially affect
Popular's financial performance or risk profile.
XII. EXPECTATIONS OF DIRECTORS
The business and affairs of Popular are managed by or under the
direction of the Board in accordance with all applicable laws. In performing
their duties, the primary responsibility of the directors is to exercise their
business judgment in the best interests of all stockholders of Popular. The
Board has developed a number of specific expectations of directors to promote
the discharge of this responsibility and the efficient conduct of the Board's
business.
A. COMMITMENT AND ATTENDANCE. The SEC requires disclosure of the
failure of any director to attend 75% of the meetings of the Board and the
committees on which the director serves. All directors should make every effort
to attend meetings of the Board and meetings of committees of which they are
members. Members may occasionally attend by telephone or videoconference to
mitigate unavoidable scheduling conflicts.
B. PARTICIPATION IN MEETINGS. Each director should be
sufficiently familiar with the business of Popular, including its financial
statements, capital structure, risks and the competition it faces, to
facilitate active and effective participation in the deliberations of the Board
and of each committee on which the director serves. Upon request, management
will make appropriate personnel available to answer any questions a director
may have about any aspect Popular's business. Directors should also review the
materials provided by management and advisors in advance of the meetings of the
Board and its committees and should arrive prepared to discuss the issues
presented. Directors are entitled to rely on the work of management and
professional advisors as discussed below under "Reliance on Management and
Outside Advice".
C. LOYALTY AND ETHICS. In their roles as directors, all
directors owe their primary duty of loyalty to Popular and its stockholders.
This duty of loyalty mandates that the best interests of Popular take
precedence over any interests possessed by a director. To prevent inadvertent
conflicts of interest or even the appearance of a conflict of interest,
directors should disclose all other business relationships with Popular and
should excuse themselves from discussions and decisions affecting those
relationships.
Popular intends to conduct its business in accordance with the highest
legal and ethical standards and has adopted a Code of Business Conduct and
Ethics (the "Code"). Certain portions of the Code deal with activities of
directors, particularly with respect to transactions in the securities of
Popular and potential conflicts of interest. Directors should be familiar with
the Code and should consult with Popular's General Counsel in the event of any
issues.
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D. CHANGES IN RESPONSIBILITY. Directors whose employment or
other outside responsibilities change substantially from those held when they
were elected to the Board should inform the Board, providing an opportunity to
consider the desirability of their continued service on the Board.
E. OTHER DIRECTORSHIPS. Popular values the experience directors
bring from other boards on which they serve, but recognizes that those boards
may also present demand on a director's time and availability and may present
conflicts or legal issues. Directors should advise the chair of the Corporate
Governance and Nominating Committee and the CEO before accepting membership on
other boards of directors or other significant commitments involving
affiliation with other businesses or governmental units.
F. CONTACT WITH MANAGEMENT. All directors are invited to contact
the CEO at any time to discuss any aspect of Popular's business. Directors also
have complete access to other members of management. The Board expects that
there will be frequent opportunities for directors to meet with the CEO and
other members of management in Board and committee meetings and in other formal
or informal settings.
Further, the Board encourages management to, from time to time, bring
managers into Board meetings who: (a) can provide additional insight into the
items being discussed because of personal involvement and substantial knowledge
in those areas, and/or (b) are managers with future potential that the senior
management believes should be given exposure to the Board.
G. CONTACT WITH OTHER CONSTITUENCIES. It is important that
Popular speak to constituencies other than management and the Board with a
single voice, and that management serve as the primary spokesperson. If a
situation arises in which it seems necessary for an individual director to make
or participate in communications to one of these constituencies, the director
should consult with the CEO.
H. CONFIDENTIALITY. The proceedings and deliberations of the
Board and its committees are strictly CEO confidential. Each director has a
fiduciary obligation to maintain the confidentiality of all information
received in connection with his or her service as a director.
I. CONTACT ABOUT STRATEGIC TRANSACTIONS. It is important for
Popular to have the opportunity to evaluate and communicate in an orderly way
with respect to any potential strategic transaction. Therefore, any director
who is approached by a third party about such a transaction should refrain from
discussing it and refer the contact promptly to the CEO.
XIII. EVALUATING BOARD PERFORMANCE
The Board, acting through the Corporate Governance and Nominating
Committee, should conduct a self-evaluation at least annually to determine
whether it is functioning effectively. The Corporate Governance and Nominating
Committee should periodically consider the mix of skills and experience that
directors bring to the Board to assess whether the Board has the necessary
tools to perform its oversight function effectively.
Each committee of the Board should conduct a self-evaluation at least
annually and report the results to the Board, acting through the Corporate
Governance and Nominating Committee. Each committee's evaluation must compare
the performance of the Committee with the requirements of its written charter,
if any.
XIV. RELIANCE ON MANAGEMENT AND OUTSIDE ADVICE
In performing its functions, the Board is entitled to rely on the
advice, reports and opinions management, counsel, accountants, auditors and
other expert advisors. The Board has the authority to retain and approve the
fees and retention terms of its outside advisors.
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[POPULAR, INC. LOGO]
(POPULAR, INC. LOGO) IF YOU WISH TO VOTE BY TELEPHONE, INTERNET OR MAIL,
PLEASE READ THE INSTRUCTIONS BELOW.
C/O BANCO POPULAR
TRUST DIVISION Popular, Inc. encourages you to take advantage of the
P.O. BOX 362708 convenient ways to vote your shares for matters to be covered
SAN JUAN, PR 00936-2708 at the 2003 Annual Meeting of Stockholders. Please take the
opportunity to use one of the three voting methods outlined
below to cast your ballot.
VOTE BY PHONE -- 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day before
the meeting date. Have your proxy card in hand when you
call. You will be prompted to enter your 12-digit Control Number
which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY INTERNET -- www.proxyvote.com
Use the Internet to 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. You will be prompted
to enter your 12-digit Control Number which is located below
to obtain your records and to create an electronic voting
instruction form.
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.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X
POPULAR KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
PROXY DETACH AND RETURN THIS PORTION ONLY
(POPULAR, INC. LOGO)
The Board recommends a vote for:
1. Election of the following nominees:
1) Juan J. Bermudez For Withhold For All To withhold authority to vote, mark "For All Except"
2) Richard L. Carrion All All Except and write the nominee's number on the line below.
3) Jorge A. Junquera
4) Francisco M. Rexach Jr. [ ] [ ] [ ] -----------------------------------------------------
5) Frederic V. Salerno
2. To ratify the selection of the For Against Abstain
Corporation's Independent auditors for [ ] [ ] [ ]
2003
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Richard L. Carrion, Jorge A. Junquera and
David H. Chafey Jr. or any one or more of them as Proxies, each with the
power to appoint his substitute, and authorizes them to represent and to vote as
designated above all the shares of common stock of Popular, Inc. held of record
by the undersigned on March 11, 2003, at the Annual Meeting of Stockholders to
be held at the Centro Europe Building, 1492 Ponce de Leon Avenue, 3rd Floor,
San Juan, Puerto Rico, on April 30, 2003, at 9:00 a.m. or at any adjournments
thereof. The Proxies are further authorized to vote such shares upon any other
business that may properly come before the meeting or any adjournments thereof.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ITEMS 1 AND 2 ABOVE.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
PLEASE SIGN AS YOUR NAME APPEARS ON THIS FORM.
IF SHARES ARE HELD JOINTLY, ALL OWNERS SHOULD SIGN.
(Vea al dorso texto en espanol)
[ ] [ ]
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date