<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1994
REGISTRATION NO. 33-54299
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
BANPONCE CORPORATION
(Exact name of co-registrant as specified in its charter)
---------------------
<TABLE>
<S> <C>
PUERTO RICO 66-0416582
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
209 MUNOZ RIVERA AVENUE 00918
HATO REY, PUERTO RICO (Zip Code)
(Address of principal executive offices)
</TABLE>
(809) 765-9800
(Co-registrant's telephone number, including area code)
---------------------
POPULAR INTERNATIONAL BANK INC.
(Exact name of co-registrant as specified in its charter)
<TABLE>
<S> <C>
PUERTO RICO N/A
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
209 MUNOZ RIVERA AVENUE 00918
HATO REY, PUERTO RICO (Zip Code)
(Address of principal executive offices)
</TABLE>
(809) 765-9800
(Co-registrant's telephone number, including area code)
---------------------
BANPONCE FINANCIAL CORP.
(Exact name of co-registrant as specified in its charter)
---------------------
<TABLE>
<S> <C>
DELAWARE 66-0476353
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
C/O CT CORPORATION 19801
1209 ORANGE STREET (Zip Code)
WILMINGTON, DELAWARE
(Address of principal executive offices)
</TABLE>
(809) 765-9800
(Co-registrant's telephone number, including area code)
DAVID H. CHAFEY, JR.
209 MUNOZ RIVERA AVENUE
HATO REY, PUERTO RICO 00918
(809) 765-9800
(Name, address and telephone number, including area code, of agent for service)
<PAGE> 2
---------------------
COPIES TO:
DONALD J. TOUMEY
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined by
the Registrants on the basis of market conditions and other factors.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. /X/
- --------------------------------------------------------------------------------
<PAGE> 3
SUBJECT TO COMPLETION, DATED JULY 19, 1994
PROSPECTUS
- -----------------
DEBT SECURITIES
OF
BANPONCE CORPORATION
OR
POPULAR INTERNATIONAL BANK INC.
(UNCONDITIONALLY GUARANTEED
BY BANPONCE CORPORATION)
OR
BANPONCE FINANCIAL CORP.
(UNCONDITIONALLY GUARANTEED
BY BANPONCE CORPORATION)
PREFERRED STOCK
OF
BANPONCE CORPORATION
OR
POPULAR INTERNATIONAL BANK INC.
(UNCONDITIONALLY GUARANTEED
BY BANPONCE CORPORATION)
---------------------
BanPonce Corporation (the "Corporation") intends to issue from time to time
in one or more series its (i) unsecured debt securities, which may be either
senior or subordinated, and (ii) shares of preferred stock. BanPonce Financial
Corp. ("Financial") intends to issue from time to time in one or more series its
unsecured debt securities. Popular International Bank Inc. ("PIB") intends to
issue from time to time in one or more series its (i) unsecured debt securities,
which may be either senior or subordinated, and (ii) shares of preferred stock.
Unsecured debt securities issued by Financial or PIB will be unconditionally
guaranteed as to the payment of principal, premium, if any, and interest by the
Corporation. Shares of preferred stock issued by PIB will be guaranteed as to
the payment of dividends, redemption price, if any, and liquidation preference,
if any, by the Corporation. The foregoing debt securities and shares of
preferred stock are collectively referred to herein as the "Securities." The
Securities will be limited to an aggregate initial offering price not to exceed
$500,000,000 or, in the case of debt securities, the equivalent thereof in one
or more foreign currencies, including composite currencies. The Securities
offered may be offered, separately or together, in separate series, in amounts,
at prices and on terms to be determined at the time of sale and to be set forth
in a supplement to this Prospectus (a "Prospectus Supplement").
The subordinated debt securities when issued will be subordinated as
described herein under "Description of Debt Securities and Guarantees." Unless
otherwise indicated in the Prospectus Supplement, payment of the principal of
the subordinated debt securities may be accelerated only in the case of certain
events involving the bankruptcy, insolvency or reorganization of the Corporation
or PIB, as the case may be. There is no right of acceleration of payment of
subordinated debt securities in the case of a default in the performance of any
covenant of the Corporation or PIB, including the payment of principal or
interest.
The specific terms of the Securities in respect of which this Prospectus is
being delivered, including (i) in the case of debt securities, the issuer, the
specific designation, aggregate principal amount, denominations, maturity,
premium, if any, rate (which may be fixed or variable) and time of payment of
interest, if any, terms for redemption at the option of the Corporation,
Financial, PIB or the holder, if any, currency or currencies of denomination and
payment, if other than U.S. dollars, the terms, if any, for conversion into
other debt securities or preferred stock and any other terms in connection with
the offering and sale of the debt securities in respect of which this Prospectus
is being delivered, as well as the initial public offering price, and the
principal amounts, if any, to be purchased by underwriters and (ii) in the case
of preferred stock, the issuer, the specific title and stated value, number of
shares or fractional interests therein, any dividend, liquidation, redemption,
voting and other rights, the terms, if any, for conversion into other preferred
stock, the securities exchanges, if any, on which the preferred stock is to be
listed, the initial public offering price, and the number of shares, if any, to
be purchased by the underwriters, will be as set forth in the accompanying
Prospectus Supplement. All or a portion of the debt securities may be issued in
permanent global form.
The Securities may be sold to underwriters for public offering pursuant to
terms of offering fixed at the time of sale. In addition, the Securities may be
sold by the Corporation directly or through dealers or agents designated from
time to time, which agents may be affiliates of the Corporation. The Prospectus
Supplement will also set forth with respect to the sale of the Securities in
respect of which this Prospectus is being delivered the names of the
underwriters, dealers or agents, if any, together with the terms of offering,
the compensation of such underwriters and the net proceeds to the Corporation.
---------------------
THE SECURITIES WILL BE UNSECURED OBLIGATIONS OF THE CORPORATION AND WILL
NOT BE SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE SECURITIES OFFICE OF THE OFFICE OF THE COMMISSIONER
OF FINANCIAL INSTITUTIONS OF THE COMMONWEALTH OF PUERTO RICO OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION, SUCH SECURITIES OFFICE, OR ANY STATE SECURITIES
COMMISSION, PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1994
<PAGE> 4
***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
<PAGE> 5
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Corporation can be inspected and
copied at the Commission's office at 450 Fifth Street, N.W., Washington, D.C.
20549, and the Commission's Regional Offices in New York (7 World Trade Center,
New York, New York 10048) and Chicago (Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661). Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. This Prospectus does not contain
all of the information set forth in the Registration Statement which the
Corporation has filed with the Commission under the Securities Act of 1933 (the
"Act"), to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Corporation hereby incorporates by reference into this Prospectus the
following documents filed by the Corporation with the Commission:
1. The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1993, as amended by the Corporation's Amendment on Form
10-K/A, dated June 22, 1994, provided however, that the information
referred to in Item 402(a)(8) of Regulation S-K promulgated by the
Commission shall not be deemed to be specifically incorporated by reference
herein.
2. The Corporation's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994.
3. The Corporation's Current Report on Form 8-K, dated June 21, 1994.
4. The Corporation's Registration Statement on Form 8-A, dated August
18, 1988, filed pursuant to Section 12(g) of the Exchange Act, pursuant to
which the Corporation registered its Series A Participating Cumulative
Preferred Stock Purchase Rights.
5. The Corporation's Registration Statement on Form 8-A, dated June
17, 1994, as amended by the Corporation's Amendment on Form 8-A/A, dated
June 21, 1994, filed pursuant to Section 12(g) of the Exchange Act,
pursuant to which the Corporation registered its 8.35% Non-Cumulative
Monthly Income Preferred Stock, 1994 Series A.
All documents filed by the Corporation subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act shall be
deemed to be incorporated by reference into this Prospectus and to be a part
thereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus, including any beneficial
owner, may obtain without charge, upon oral or written request, a copy of any of
the documents incorporated by reference herein, except for the exhibits to such
documents. Written requests should be mailed to Mr. Orlando Berges, Senior Vice
President, BanPonce Corporation, P.O. Box 362708, San Juan, Puerto Rico
00936-2708. Telephone requests may be directed to (809) 765-9800.
2
<PAGE> 6
BANPONCE CORPORATION
The Corporation is a bank holding company registered under the Bank Holding
Company Act of 1956 and incorporated in 1984 under the laws of the Commonwealth
of Puerto Rico ("Puerto Rico"). The Corporation is the largest financial
institution in Puerto Rico, with consolidated assets of $11.5 billion, total
deposits of $8.5 billion and stockholders' equity of $834.2 million as of
December 31, 1993. Based on both total assets and total deposits at December 31,
1993, the Corporation was the 55th largest bank holding company in the United
States. The Corporation's principal executive offices are located at 209 Munoz
Rivera Avenue, Hato Rey, Puerto Rico 00918 and its telephone number is (809)
765-9800.
The Corporation's principal subsidiary, Banco Popular de Puerto Rico
("Banco Popular" or the "Bank"), was incorporated over 100 years ago in 1893 and
is Puerto Rico's largest bank with total assets of $11.0 billion, deposits of
$8.5 billion and stockholders' equity of $763.3 million at December 31, 1993.
The Bank accounted for 95% of the total consolidated assets of the Corporation
at December 31, 1993. A consumer-oriented bank, Banco Popular has the largest
retail franchise in Puerto Rico, operating 205 branches and 253 automated teller
machines. The Bank also has the largest trust operation in Puerto Rico and is a
leader in the mortgage banking business. In addition, it operates the largest
Hispanic bank branch network in the mainland United States with 30 branches in
New York, one branch in Chicago and one branch in Los Angeles. As of December
31, 1993, these branches had a total of approximately $1.4 billion in deposits.
The Bank also operates seven branches in the U.S. Virgin Islands and one branch
in the British Virgin Islands.
The Corporation has two other principal subsidiaries: Vehicle Equipment
Leasing Company, Inc. ("VELCO") and Financial. VELCO is engaged primarily in the
finance leasing of passenger vehicles and is the largest leasing company in
Puerto Rico. For additional information regarding Financial, see "BanPonce
Financial Corp."
POPULAR INTERNATIONAL BANK INC.
PIB is a wholly owned subsidiary of the Corporation organized in 1992 under
the laws of the Commonwealth of Puerto Rico and operating as an "international
banking entity" under the International Banking Center Regulatory Act of Puerto
Rico (the "IBC Act"). PIB owns all of the outstanding capital stock of
Financial. Summary consolidated financial statements of PIB are included in the
notes to the Corporation's consolidated financial statements.
BANPONCE FINANCIAL CORP.
Financial, a wholly owned subsidiary of PIB and an indirect, wholly owned
subsidiary of the Corporation, was organized in 1991 under the laws of the State
of Delaware. Financial acquired all of the common stock of Spring Financial
Services, Inc. ("Spring") on September 30, 1991. Spring is engaged in the
business of providing consumer and dealer finance loans and operates through 70
branches in 19 mid-Atlantic states. Prior to the acquisition of Spring,
Financial had no significant business operations.
On March 31, 1994, Financial acquired all of the common stock of Pioneer
Bancorp, Inc., a Delaware corporation, and the parent company of Pioneer Bank
and Trust Company ("Pioneer Bank"). Pioneer Bank is an Illinois bank with 2
branches in the Chicago area. It is expected that Pioneer Bank will acquire the
Bank's existing branch in Chicago.
Summary consolidated financial statements of Financial are included in the
notes to the Corporation's consolidated financial statements.
3
<PAGE> 7
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
OF THE CORPORATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
QUARTER ENDED ------------------------------------
MARCH 31, 1994 1993 1992 1991 1990 1989
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding Interest on Deposits................ 2.9 3.0 2.9 2.1 3.6 2.4
Including Interest on Deposits................ 1.5 1.5 1.3 1.2 1.3 1.2
Ratio of Earnings to Fixed Charges and Preferred
Stock Dividends
Excluding Interest on Deposits................ 2.8 3.0 2.9 2.0 3.6 2.4
Including Interest on Deposits................ 1.5 1.5 1.3 1.2 1.3 1.2
</TABLE>
For purposes of computing these consolidated ratios, earnings represent
income (loss) before income taxes, cumulative effect of a change in accounting
principles and equity in undistributed income of unconsolidated subsidiaries and
affiliates, plus fixed charges excluding capitalized interest. Fixed charges
represent all interest expense (ratios are presented both excluding and
including interest on deposits), the portion of net rental expense which is
deemed representative of the interest factor, the amortization of debt issuance
expense and capitalized interest.
USE OF PROCEEDS
The Corporation intends to use the net proceeds from the sale of the
Securities for general corporate purposes, including investments in, or
extensions of credit to, its existing and future subsidiaries, for the
acquisition of other banking and financial institutions and repayment of
outstanding borrowings. The Corporation does not at present have any plans to
use the proceeds from any offering for a material acquisition or to repay
outstanding borrowings. All or a substantial portion of the proceeds from the
sale of Securities issued by Financial will be lent by Financial to Spring or
used by Financial for general corporate purposes. The net proceeds from the sale
of Securities by PIB will be lent by PIB to its affiliates or used by PIB for
general corporate purposes. The precise amounts and timing of the application of
proceeds will depend on various factors existing at the time of offering of the
Securities, including the Corporation's subsidiaries' funding requirements and
the availability of other funds. Pending such use, the proceeds may be
temporarily invested in short-term obligations.
CERTAIN REGULATORY MATTERS
GENERAL
The Corporation is a bank holding company subject to supervision and
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") under the Bank Holding Company Act of 1956 (the "BHC Act"). As a
bank holding company, the Corporation's activities and those of its banking and
nonbanking subsidiaries are limited to the business of banking and activities
closely related or incidental to banking, and the Corporation may not directly
or indirectly acquire the ownership or control of more than 5% of any class of
voting shares or substantially all of the assets of any company in the United
States, including a bank, without the prior approval of the Federal Reserve
Board. In addition, bank holding companies are generally prohibited under the
BHC Act from engaging in nonbanking activities, subject to certain exceptions.
Banco Popular is considered a foreign bank for purposes of the
International Banking Act of 1978 (the "IBA"). Under the IBA and the BHC Act,
the Corporation and Banco Popular are not permitted to operate a branch or
agency, or acquire more than 5% of any class of the voting shares or
substantially all the assets of, or control of, an additional bank or bank
holding company that is located outside of their "home state," except that (i)
the Corporation may acquire control of a bank in a state if the laws of that
state explicitly authorize a bank holding company from such bank holding
company's home state to do so and (ii) Banco Popular may continue to operate a
"grandfathered" branch or agency. Puerto Rico is not considered a state for
purposes of these geographic limitations. Banco Popular has designated the state
of New York as its home state. In
4
<PAGE> 8
addition, some states have laws prohibiting or restricting foreign banks from
acquiring banks located in such states and treat Puerto Rico's banks and bank
holding companies as foreign banks for such purposes.
Banco Popular and Pioneer Bank are subject to supervision and examination
by applicable federal and state banking agencies including, in the case of Banco
Popular, the Federal Reserve Board and the Office of the Commissioner of
Financial Institutions of Puerto Rico and, in the case of Pioneer Bank, the
Federal Deposit Insurance Corporation (the "FDIC") and the Illinois Commissioner
of Banks and Trust Companies. Banco Popular and Pioneer Bank are subject to
requirements and restrictions under federal and state law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon, and limitations on the types of other investments that may be made and
the types of services that may be offered. Various consumer laws and regulations
also affect the operations of Banco Popular and Pioneer Bank. In addition to the
impact of regulation, commercial banks are affected significantly by the actions
of the Federal Reserve Board as it attempts to control the money supply and
credit availability in order to influence the economy.
HOLDING COMPANY STRUCTURE
Banco Popular and Pioneer Bank are subject to restrictions under federal
law that limit the transfer of funds by them to the Corporation, Financial, PIB
and the Corporation's other nonbanking subsidiaries, whether in the form of
loans, other extensions of credit, investments or asset purchases. Such
transfers by Banco Popular or Pioneer Bank to the Corporation or any one
nonbanking subsidiary are limited in amount to 10% of Banco Popular's or Pioneer
Bank's capital stock and surplus and, with respect to the Corporation and all
nonbanking subsidiaries, to an aggregate of 20% of Banco Popular's or Pioneer
Bank's capital stock and surplus. Furthermore, such loans and extensions of
credit are required to be secured in specified amounts.
Because the Corporation, PIB and Financial are holding companies, their
right to participate in the assets of any subsidiary upon the latter's
liquidation or reorganization will be subject to the prior claims of the
subsidiary's creditors (including depositors in the case of bank subsidiaries)
except to the extent that the Corporation, PIB or Financial, as the case may be,
may itself be a creditor with recognized claims against the subsidiary.
Under Federal Reserve Board policy, a bank holding company, such as the
Corporation, is expected to act as a source of financial strength to each of its
subsidiary banks and to commit resources to support each such subsidiary bank.
This support may be required at times when, absent such policy, the bank holding
company might not otherwise provide such support. In addition, any capital loans
by a bank holding company to any of its subsidiary banks are subordinate in
right of payment to deposits and to certain other indebtedness of such
subsidiary bank. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment. Banco Popular and Pioneer Bank
are currently the only subsidiary banks of the Corporation.
Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution (which term includes both banks and savings associations), the
deposits of which are insured by the FDIC, can be held liable for any loss
incurred by, or reasonably expected to be incurred by, the FDIC after August 9,
1989 in connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or a receiver
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance. Banco Popular and Pioneer Bank are currently the only
controlled FDIC-insured depository institutions of the Corporation.
CAPITAL ADEQUACY
Under the Federal Reserve Board's risk-based capital guidelines for bank
holding companies and member banks, the minimum guidelines for the ratio of
total capital ("Total capital") to risk-weighted assets (including certain
off-balance sheet items, such as standby letters of credit) is 8%. At least half
of the Total
5
<PAGE> 9
capital is to be comprised of common equity, retained earnings, minority
interests in unconsolidated subsidiaries, noncumulative perpetual preferred
stock and a limited amount of cumulative perpetual preferred stock, less
goodwill and certain other intangible assets discussed below ("Tier 1 capital").
The remainder may consist of a limited amount of subordinated debt, other
preferred stock, certain other instruments, and a limited amount of loan and
lease loss reserves ("Tier 2 capital").
Effective for periods ending on or after March 15, 1993, the Federal
Reserve Board adopted regulations that require most intangibles, including core
deposit intangibles, to be deducted from Tier 1 capital. The regulations,
however, permit the inclusion of a limited amount of intangibles related to
purchased mortgage servicing rights and purchased credit card relationships and
include a "grandfather" provision permitting the continued inclusion of certain
pre-existing intangibles.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies and member banks. These guidelines
provide for a minimum ratio of Tier 1 capital to total assets, less goodwill and
certain other intangible assets discussed below (the "leverage ratio") of 3% for
bank holding companies and member banks that meet certain specified criteria,
including that they have the highest regulatory rating. All other bank holding
companies and member banks will be required to maintain a leverage ratio of 3%
plus an additional cushion of at least 100 to 200 basis points. The guidelines
also provide that banking organizations experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels, without significant reliance on intangible
assets. Furthermore, the guidelines indicate that the Federal Reserve Board will
continue to consider a "tangible Tier 1 leverage ratio" (deducting all
intangibles) and other indicia of capital strength in evaluating proposals for
expansion or new activities. The tangible Tier 1 leverage ratio is the ratio of
a banking organization's Tier 1 capital, less all intangibles, to total assets,
less all intangibles.
Under the Federal Reserve Board's requirements, the Corporation's and Banco
Popular's capital ratios at December 31, 1993 are set forth below:
<TABLE>
<CAPTION>
CORPORATION BANCO POPULAR
----------- -------------
<S> <C> <C>
Tier 1 capital............................................. 12.29% 11.85%
Total capital.............................................. 13.95% 13.72%
Leverage ratio............................................. 6.95% 6.56%
</TABLE>
Pioneer Bank is subject to similar capital requirements adopted by the
FDIC.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described below
under "FDICIA."
Bank regulators have in the past indicated their desire to raise capital
requirements applicable to banking organizations beyond current levels. However,
management is unable to predict whether and when higher capital requirements
would be imposed and, if so, at what levels or on what schedule.
FDICIA
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") was enacted. FDICIA substantially revises the depository
institution regulatory and funding provisions of the FDIA and makes revisions to
several other federal banking statutes. Among other things, FDICIA requires the
federal banking regulators to take prompt corrective action in respect of
depository institutions that do not meet minimum capital requirements. FDICIA
and regulations thereunder establish five capital tiers: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized." A depository institution is deemed well
capitalized if it maintains a leverage ratio of at least 5%, a risk-based Tier 1
capital ratio of at least 6% and a risk-based Total capital ratio of at least
10% and is not subject to any written agreement or directive to meet a specific
capital level. A depository institution is deemed adequately capitalized if it
is not well capitalized but maintains a leverage ratio of at least 4% (or at
least 3% if given the highest regulatory rating and not experiencing or
anticipating
6
<PAGE> 10
significant growth), a risk-based Tier 1 capital ratio of at least 4% and a
risk-based Total capital ratio of at least 8%. A depository institution is
deemed undercapitalized if it fails to meet the standards for adequately
capitalized institutions (unless it is deemed significantly or critically
undercapitalized). An institution is deemed significantly undercapitalized if it
has a leverage ratio of less than 3%, a risk-based Tier 1 ratio of less than 3%
or a risk-based Total capital ratio of less than 6%. An institution is deemed
critically undercapitalized if it has tangible equity equal to 2% or less of
total assets. A depository institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital position if it
receives a less than satisfactory examination rating in any one of four
categories.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve System. In addition,
undercapitalized depository institutions are subject to growth limitations and
are required to submit capital restoration plans. A depository institution's
holding company must guarantee the capital plan, up to an amount equal to the
lesser of 5% of the depository institution's assets at the time it becomes
undercapitalized or the amount of the capital deficiency when the institution
fails to comply with the plan. The federal banking agencies may not accept a
capital plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the depository
institution's capital. If a depository institution fails to submit an acceptable
plan, it is treated as if it is significantly undercapitalized. Significantly
undercapitalized depository institutions may be subject to a number of
requirements and restrictions, including orders to sell sufficient voting stock
to become adequately capitalized, requirements to reduce total assets, and
cessation of receipt of deposits from correspondent banks. Critically
undercapitalized depository institutions are subject to appointment of a
receiver or conservator.
At March 31, 1994, Banco Popular was well capitalized.
Various other legislation, including proposals to revise the banking
regulatory system and to limit the investments that a depository institution may
make with insured funds, is from time to time introduced in Congress.
DIVIDEND RESTRICTIONS
The principal source of cash flow for the Corporation is dividends from
Banco Popular. Various statutory provisions limit the amount of dividends Banco
Popular can pay to the Corporation without regulatory approval. As a member bank
subject to the regulation of the Federal Reserve Board, Banco Popular must
obtain the approval of the Federal Reserve Board for any dividend if the total
of all dividends declared by the bank in any calendar year would exceed the
total of its net profits, as defined by the Federal Reserve Board, for that
year, combined with its retained net profits for the preceding two years. In
addition, a member bank may not pay a dividend in an amount greater than its
undivided profits then on hand after deducting its losses and bad debts. For
this purpose, bad debts are generally defined to include the principal amount of
loans that are in arrears with respect to interest by six months or more unless
such loans are fully secured and in the process of collection. Moreover, for
purposes of this limitation, a member bank is not permitted to add the balance
in its allowance for loan losses account to its undivided profits then on hand;
however, it may net the sum of its bad debts as so defined against the balance
in its allowance for loan losses account and deduct from undivided profits only
bad debts as so defined in excess of that account. At March 31, 1994, Banco
Popular could have declared a dividend of approximately $128.6 million without
such approval. Illinois law contains similar limitations on the amount of
dividends that Pioneer Bank can pay.
The payment of dividends by Banco Popular or Pioneer Bank may also be
affected by other regulatory requirements and policies, such as the maintenance
of adequate capital. If, in the opinion of the applicable regulatory authority,
a bank under its jurisdiction is engaged in, or is about to engage in, an unsafe
or unsound practice (that, depending on the financial condition of the bank,
could include the payment of dividends), such authority may require, after
notice and hearing, that such bank cease and desist from such practice. The
Federal Reserve Board has issued a policy statement that provides that insured
banks and bank holding
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companies should generally pay dividends only out of current operating earnings.
In addition, all insured depository institutions are subject to the
capital-based limitations described under "FDICIA."
See "Certain Regulatory Matters -- Puerto Rico Regulation" for a
description of certain restrictions on Banco Popular's ability to pay dividends
under Puerto Rico law.
FDIC INSURANCE ASSESSMENTS
Banco Popular and Pioneer Bank are subject to FDIC deposit insurance
assessments.
Pursuant to FDICIA, the FDIC adopted, effective January 1, 1994, a
risk-based assessment system, under which the assessment rate for an insured
depository institution varies according to the level of risk incurred in its
activities. An institution's risk category is based partly upon whether the
institution is well capitalized, adequately capitalized or less than adequately
capitalized. Each insured depository institution would also be assigned to one
of the following "supervisory subgroups": "A," "B" or "C". Group "A"
institutions are financially sound institutions with only a few minor
weaknesses; group "B" institutions are institutions that demonstrate weaknesses
which, if not corrected, could result in significant deterioration; and group
"C" institutions are institutions for which there is a substantial probability
that the FDIC will suffer a loss in connection with the institution unless
effective action is taken to correct the areas of weakness. Based on its capital
and supervisory subgroups, each Bank Insurance Fund member institution is
assigned an annual FDIC assessment rate varying between 0.23% and 0.31%. It
remains possible that assessments will be raised to higher levels in the future.
Any such increase would have an adverse effect upon the net earnings of Banco
Popular and Pioneer Bank and, therefore, the Corporation.
BROKERED DEPOSITS
FDIC regulations adopted under FDICIA govern the receipt of brokered
deposits. Under these regulations, a bank cannot accept, rollover or renew
brokered deposits (which term is defined also to include any deposit with an
interest rate more than 75 basis points above prevailing rates) unless (i) it is
well capitalized, or (ii) it is adequately capitalized and receives a waiver
from the FDIC. A bank that is adequately capitalized may not pay an interest
rate on any deposits in excess of 75 basis points over certain prevailing market
rates specified by regulation. There are no such restrictions on a bank that is
well capitalized. The Corporation does not believe the brokered deposits
regulation has had or will have a material effect on the funding or liquidity of
Banco Popular or Pioneer Bank.
PUERTO RICO REGULATION
General
As a commercial bank organized under the laws of the Commonwealth, Banco
Popular is subject to supervision, examination and regulation by the Office of
the Commissioner of Financial Institutions of the Commonwealth (the "Office of
the Commissioner"), pursuant to the Puerto Rico Banking Act of 1933, as amended
(the "Banking Law").
Section 27 of the Banking Law requires that at least ten percent (10%) of
the yearly net income of the Bank be credited annually to a reserve fund. This
apportionment shall be done every year until the reserve fund shall be equal to
ten percent (10%) of the total deposits or the total paid-in capital, whichever
is greater. At the end of its most recent fiscal year, Banco Popular had an
adequate reserve fund established.
Section 27 of the Banking Law also provides that when the expenditures of a
bank are greater than the receipts, the excess of the former over the latter
shall be charged against the undistributed profits of the bank, and the balance,
if any, shall be charged against the reserve fund, as a reduction thereof. If
there is no reserve fund sufficient to cover such balance in whole or in part,
the outstanding amount shall be charged against the capital account and no
dividend shall be declared until said capital has been restored to its original
amount and the reserve fund to 20% of the original capital.
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Section 16 of the Banking Law requires every bank to maintain a legal
reserve which shall not be less than 20% of its demand liabilities, except
government deposits (federal, state and municipal) which are secured by actual
collateral. However, if a bank becomes a member of the Federal Reserve System,
the 20% legal reserve shall not be effective and the reserve requirements
demanded by the Federal Reserve System shall be applicable. Pursuant to an order
of the Federal Reserve Board dated November 24, 1982, the Bank has been exempted
from such reserve requirements with respect to deposits payable in Puerto Rico.
Section 17 of the Banking Law permits the Bank to make loans to any one
person, firm, partnership or corporation, up to an aggregate amount of fifteen
percent (15%) of the paid-in capital and reserve fund of the Bank. As of
December 31, 1993, the legal lending limit for the Bank under this provision was
approximately $83 million. If such loans are secured by collateral worth at
least twenty-five percent (25%) more than the amount of the loan, the aggregate
maximum amount may reach one third of the paid-in capital of the Bank, plus its
reserve fund. There are no restrictions under Section 17 on the amount of loans
which are wholly secured by bonds, securities and other evidences of
indebtedness of the Government of the United States or the Commonwealth, or by
current debt bonds, not in default, of municipalities or instrumentalities of
the Commonwealth.
The Finance Board, which is a part of the Office of the Commissioner, but
also includes as its members the Secretary of the Treasury, the Secretary of
Commerce, the Secretary of Consumer Affairs, the President of the Planning
Board, and the President of the Government Development Bank for Puerto Rico, has
the authority to regulate the maximum interest rates and finance charges that
may be charged on loans to individuals and unincorporated businesses in the
Commonwealth. In February 1992, the Finance Board approved Regulation 26-A,
which provides that the applicable interest rate on loans to individuals and
unincorporated businesses (including real estate development loans but excluding
certain other personal and commercial loans secured by mortgages on real estate
properties) is to be determined by free competition. Prior to February 1992, the
applicable interest rate ceilings for consumer loans were set at 130% of the
average prime rate for the previous three months, and at rates ranging from the
prime rate to 3% above the prime rate (plus certain additional finance charges)
for loans to unincorporated businesses.
The Finance Board also has authority to regulate the maximum finance
charges on retail installment sales contracts (including credit card purchases),
which are currently set at 21%. There is no maximum rate set for installment
sales contracts involving motor vehicles, commercial, agricultural and
industrial equipment, commercial electric appliances and insurance premiums.
Section 14 of the Banking Law authorizes the Bank to conduct certain
financial and related activities directly or through subsidiaries, including
finance leasing of personal property and operating a small loan company. Banco
Popular engages in these activities through its wholly owned subsidiaries,
Popular Leasing & Rental, Inc. and Popular Consumer Services, Inc.,
respectively, both of which are organized and operate solely in Puerto Rico.
IBC Act
Under the IBC Act, without the prior approval of the Office of the
Commissioner, PIB may not amend its articles of incorporation or issue
additional shares of capital stock or other securities convertible into
additional shares of capital stock unless such shares are issued directly to the
shareholders of PIB previously identified in the application to organize the
international banking entity, in which case notification to the Office of the
Commissioner must be given within ten business days following the date of the
issue. Pursuant to the IBC Act, without the prior approval of the Office of the
Commissioner, PIB may not initiate the sale, encumbrance, assignment, merger or
other transfer of shares if by such transaction a person or persons acting in
concert could acquire direct or indirect control of 10% or more of any class of
the Company's stock. Such authorization must be requested at least 30 days prior
to the transaction.
PIB must submit to the Office of the Commissioner a report of its condition
and results of operation on a monthly basis and its annual audited financial
statement at the close of its fiscal year. Under the IBC Act, PIB may not deal
with domestic persons as such term is defined in the IBC Act. Also, it may only
engage in those activities authorized in the IBC Act, the regulations adopted
thereunder and its license.
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The IBC Act empowers the Office of the Commissioner to revoke or suspend,
after a hearing, the license of an international banking entity if, among other
things, it fails to comply with the IBC Act, regulations issued by the Office of
the Commissioner, or the terms of its license or if the Office of the
Commissioner finds that the business of the international banking entity is
conducted in a manner not consistent with the public interest.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
The Corporation's senior debt securities (the "Senior Debt Securities") may
be issued from time to time in one or more series under an Indenture (the
"Senior Indenture") between the Corporation and the trustee named in the
applicable Prospectus Supplement, as trustee (the "Senior Trustee"). The
Corporation's subordinated debt securities (the "Subordinated Debt Securities")
may be issued from time to time in one or more series under an Indenture (the
"Subordinated Indenture") between the Corporation and the trustee named in the
applicable Prospectus Supplement, as trustee (the "Subordinated Trustee"). PIB's
senior debt securities (the "PIB Senior Debt Securities") may be issued from
time to time in one or more series under an Indenture (the "PIB Senior
Indenture") among the Corporation, PIB and the trustee named in the applicable
Prospectus Supplement, as trustee (the "PIB Senior Trustee"). PIB's subordinated
debt securities ("PIB Subordinated Debt Securities") may be issued from time to
time in one or more series under an Indenture (the "PIB Subordinated Indenture")
among the Corporation, PIB and the trustee named in the applicable Prospectus
Supplement, as trustee (the "PIB Subordinated Trustee"). The senior debt
securities issued by Financial (the "Guaranteed Securities") may be issued from
time to time in one or more series under an Indenture (the "Guaranteed
Indenture") among the Corporation, Financial and the trustee named in the
applicable Prospectus Supplement, as trustee (the "Guaranteed Trustee"). The
Senior Debt Securities, the Subordinated Debt Securities, the PIB Senior Debt
Securities, the PIB Subordinated Debt Securities, and the Guaranteed Securities
are sometimes referred to collectively as the "Debt Securities." The Senior
Indenture, the Subordinated Indenture, the PIB Senior Indenture, the PIB
Subordinated Indenture and the Guaranteed Indenture are sometimes referred to
collectively as the "Indentures," and the Senior Trustee, the Subordinated
Trustee, the PIB Senior Trustee, the PIB Subordinated Trustee and the Guaranteed
Trustee are sometimes referred to collectively as the "Trustees." The statements
under this caption are brief summaries of material provisions contained in the
Indentures, do not purport to be complete and are qualified in their entirety by
reference to the Indentures, including the definition therein of certain terms,
copies of which are filed as exhibits to the Registration Statement of which
this Prospectus is a part.
GENERAL
Each Indenture provides for the issuance of debt securities in one or more
series, and does not limit the principal amount of debt securities which may be
issued thereunder.
Reference is made to the Prospectus Supplement for the following terms of
the Debt Securities being offered hereby: (1) the specific title of the Debt
Securities; (2) whether the Debt Securities are Senior Debt Securities,
Subordinated Debt Securities, PIB Senior Debt Securities, PIB Subordinated Debt
Securities or Guaranteed Securities; (3) the aggregate principal amount of the
Debt Securities; (4) the percentage of their principal amount at which the Debt
Securities will be issued; (5) the date or dates on which the Debt Securities
will mature; (6) the rate or rates (which may be fixed or variable) per annum or
the method for determining such rate or rates, if any, at which the Debt
Securities will bear interest; (7) the times, if any, at which any such interest
will be payable; (8) any provisions relating to optional or mandatory redemption
of the Debt Securities; (9) the denominations in which the Debt Securities are
authorized to be issued; (10) the extent to which Debt Securities will be
issuable in global form and, if so, the identity of the Depositary for such
global Debt Securities; (11) the currency or units of two or more currencies in
which the Debt Securities are denominated, if other than United States dollars,
and the currency in which interest is payable if other than the currency in
which the Debt Securities are denominated; (12) the place or places at which the
Corporation, PIB or Financial will make payments of principal (and premium, if
any) and interest, if any, and the method of such payment; (13) the Person to
whom any Debt Security of such series will be payable, if other than the Person
in whose name that Debt Security (or one or more Predecessor Debt Securities) is
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registered at the close of business on the Regular Record Date for such
interest; (14) whether the Debt Securities may be issued as Original Issue
Discount Securities; (15) whether the amount of payment of principal of or any
premium or interest on any Debt Security may be determined with reference to an
index, formula or other method and the manner in which such amount shall be
determined; (16) any additional covenants and Events of Default and the remedies
with respect thereto not currently set forth in the respective Indenture; and
(17) any other specific terms of Debt Securities.
One or more series of the Debt Securities may be issued as Discount
Securities. A "Discount Security" is a debt security, including any zero-coupon
security, which is issued at a price lower than the amount payable at the Stated
Maturity thereof and which provides that upon redemption or acceleration of the
Maturity thereof an amount less than the amount payable upon the Stated Maturity
thereof and determined in accordance with the terms thereof shall become due and
payable.
Unless otherwise indicated in the applicable Prospectus Supplement, the
covenants contained in the Indentures and the Debt Securities will not afford
holders of the Debt Securities protection in the event of a sudden decline in
credit rating that might result from a recapitalization, restructuring, or other
highly leveraged transaction.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable in certificated or global form.
Debt Securities in certificated form may be presented for registration of
transfer (with the form of transfer endorsed thereon duly executed), at the
office of the Security Registrar or at the office of any transfer agent
designated by the Corporation, PIB or Financial, as the case may be, for such
purpose with respect to any series of Debt Securities and referred to in an
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the relevant Indenture.
Such transfer or exchange will be effected upon the Security Registrar being
satisfied with the documents of title and identity of the Person making the
request. The Security Registrar with respect to the Debt Securities will be
designated in the applicable Prospectus Supplement. If a Prospectus Supplement
refers to any transfer agents (in addition to the Security Registrar) initially
designated by the Corporation, PIB or Financial with respect to any series of
Debt Securities, the Corporation, PIB or Financial, as the case may be, may at
any time rescind the designation of any such transfer agent or approve a change
in the location through which any such transfer agent acts, except that the
Corporation, PIB or Financial, as the case may be, will be required to maintain
a transfer agent in each Place of Payment for such series. The Corporation, PIB
or Financial, as the case may be, may at any time designate additional transfer
agents with respect to any series of Debt Securities.
In the event of any redemption in part, the Corporation, PIB or Financial,
as the case may be, shall not be required to (i) issue, register the transfer of
or exchange any Debt Security during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Debt Securities
of like tenor and of the series of which such Debt Security is a part and ending
at the close of business on the day of such mailing and (ii) register the
transfer of or exchange any Debt Security so selected for redemption, in whole
or in part, except the unredeemed portion of any Debt Security being redeemed in
part.
PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and premium (if any) on any Debt Security will be made only
against surrender to the Paying Agent of such Debt Security. Unless otherwise
indicated in an applicable Prospectus Supplement, principal of and any premium
and interest on the Debt Securities will be payable, subject to any applicable
laws and regulations, at the office of such Paying Agent or Paying Agents as the
Corporation, PIB or Financial, as the case may be, may designate from time to
time, except that at the option of the Corporation, PIB or Financial, as the
case may be, payment of any interest may be made by check mailed to the address
of the person entitled thereto as such address shall appear in the Security
Register with respect to such Debt Securities. Unless otherwise indicated in an
applicable Prospectus Supplement, payment of interest on a Debt Security on any
Interest Payment
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Date will be made to the Person in whose name such Debt Security (or Predecessor
Debt Security) is registered at the close of business on the Regular Record Date
for such interest.
The Paying Agent for payments with respect to Debt Securities of each
series will be specified in the applicable Prospectus Supplement. The
Corporation, PIB or Financial, as the case may be, may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that
the Corporation, PIB or Financial, as the case may be, will be required to
maintain a Paying Agent in each Place of Payment for each series of Debt
Securities.
All moneys paid by the Corporation, PIB or Financial, as the case may be,
to a Paying Agent for the payment of the principal of and any premium or
interest on any Debt Security which remain unclaimed at the end of two years
after such principal, premium or interest shall have become due and payable will
be repaid to the Corporation, PIB or Financial, as the case may be, and the
Holder of such Debt Security will thereafter look only to the Corporation, PIB
or Financial, as the case may be, for payment thereof.
CERTAIN COVENANTS
Each of the Senior Indenture, PIB Senior Indenture and the Guaranteed
Indenture provides that the Corporation, subject to the provisions described
under "Consolidation, Merger, Sale or Conveyance," will not sell, assign,
transfer, or otherwise dispose of, or permit Banco Popular to issue, sell,
assign, transfer or otherwise dispose of any shares of, or securities
convertible into or options to subscribe for, Voting Stock of Banco Popular
unless Banco Popular remains a Controlled Subsidiary (as defined below) of the
Corporation, and will not permit Banco Popular to merge or consolidate or
convey, transfer, lease or sell its properties substantially as an entirety,
unless the surviving corporation or transferee, as the case may be, is a
Controlled Subsidiary of the Corporation. There is no similar restriction in the
Subordinated Indenture or the PIB Subordinated Indenture.
Each of the Senior Indenture, PIB Senior Indenture and the Guaranteed
Indenture also provides that the Corporation will not, and it will not permit
any Material Banking Subsidiary (as defined below) at any time directly or
indirectly to, create, assume, incur or permit to exist any indebtedness for
borrowed money secured by a pledge, lien or other encumbrance on the Voting
Stock of any Material Banking Subsidiary without making effective provision
whereby the Debt Securities and the Guarantees (and, if the Corporation so
elects, any other indebtedness ranking on a parity with the Debt Securities and
the Guarantees) shall be secured equally and ratably with such secured
indebtedness so long as such other indebtedness shall be so secured; provided,
however, that the foregoing covenant shall not be applicable to liens for taxes
or assessments or governmental charges or levies not then due and delinquent or
the validity of which is being contested in good faith or which are less than
$10,000,000 in amount, liens created by or resulting from any litigation or
legal proceeding which is currently being contested in good faith by appropriate
proceedings or which involve claims of less than $10,000,000, or deposits to
secure (or in lieu of) surety, stay, appeal or customs bonds. There is no
similar restriction in the Subordinated Indenture or the PIB Subordinated
Indenture.
For the purpose of the foregoing provisions, "Material Banking Subsidiary"
means any Controlled Subsidiary chartered as a banking corporation under
federal, state or Puerto Rican law which is a significant subsidiary of the
Corporation as defined in Rule 1-02 of Regulation S-X of the Rules and
Regulations of the Commission. "Controlled Subsidiary" means any corporation
more than 80% of the outstanding Voting Stock of which is owned by the
Corporation. As of the date of this Prospectus, Banco Popular is the only
"Material Banking Subsidiary" of the Corporation.
REDEMPTION
General
If the Debt Securities of a series provide for mandatory redemption by the
Corporation, PIB or Financial, as the case may be, or redemption at the election
of the Corporation, PIB or Financial, as the case may be, unless otherwise
provided in the applicable Prospectus Supplement, such redemption shall be on
not less than 30 nor more than 60 days' notice and, in the event of redemption
of Debt Securities of a series of like tenor in
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part, the Debt Securities to be redeemed will be selected by the Trustee in such
usual manner as it shall deem fair and appropriate. Notice of such redemption
will be mailed to Holders of Debt Securities of such series to their last
addresses as they appear on the register of the Debt Securities of such series.
For Taxation
Should the Corporation or PIB, on the occasion of the next payment in
respect of any series of the Debt Securities, be obliged to pay any Additional
Amounts as are referenced in "Taxation by the Commonwealth of Puerto Rico"
below, due to a change in law, regulation or interpretation, the Corporation,
PIB or Financial, as the case may be, may, at its option, on the giving of not
less than 30 nor more than 60 days' notice to the Holders of the Debt Securities
of each series, redeem such series of the Debt Securities as a whole at a
redemption price of 100% of the principal amount thereof with the accrued
interest to the date fixed for redemption or such other redemption price as set
forth in the applicable Prospectus Supplement.
Global Securities
The Debt Securities may be issued in whole or in part in the form of one or
more Global Securities that will be deposited with, or on behalf of, a
depositary (the "Depositary") identified in the Prospectus Supplement relating
to such Debt Securities. Unless and until it is exchangeable in whole or in part
for Debt Securities in definitive form, a Global Security may not be transferred
except as a whole by the Depositary for such Global Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement, if any, with respect to a
series of Debt Securities will be described in the Prospectus Supplement
relating to such series. The Corporation, PIB and Financial anticipate that the
following provisions will apply to all depositary arrangements.
Ownership of beneficial interests in a Global Security will be limited to
persons that have accounts with the Depositary for such Global Security or its
nominee ("Participant") or persons that may hold interests through Participants.
Such accounts shall be designated by the underwriters or agents with respect to
the Debt Securities underwritten or solicited by them or by the Corporation, PIB
or Financial in the case of Debt Securities offered and sold directly by the
Corporation, PIB or Financial, as the case may be. The Corporation, PIB or
Financial, as the case may be, will obtain confirmation from the Depositary that
upon the issuance of a Global Security the Depositary for such Global Security
will credit, on its book-entry registration and transfer system, the
Participants' accounts with the respective principal amounts of the Debt
Securities represented by such Global Security. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of such
ownership interests will be effected only through, records maintained by the
Depositary (with respect to interests of Participants) and on the records of
Participants (with respect to interests of persons held through Participants).
The laws of some states may require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to own, transfer or pledge beneficial interests in a
Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Debt
Securities represented by such Global Security for all purposes under the
Indentures. Except as provided below, owners of beneficial interests in a Global
Security will not be entitled to have the Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of the Debt Securities in definitive form and will not
be considered the owners or Holders thereof under the Indentures. Accordingly,
each person owning a beneficial interest in such a Global Security must rely on
the procedures of the Depositary and, if such person is not a Participant, on
the procedures of the Participant through which such person owns its interests,
to exercise any rights of a Holder under the applicable Indenture. The
Corporation, PIB and Financial understand that under existing industry
practices, in the event that the Corporation, PIB or Financial, as the case may
be, requests any action of Holders or that an owner of a beneficial interest in
such a Global Security desires to give or take any action
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which a Holder is entitled to give or take under the applicable Indenture, the
Depositary would authorize the Participants holding the relevant beneficial
interests to give or take such action, and such Participants would authorize
beneficial owners owning through such Participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
Payment of principal of, and premium and interest, if any, on Debt
Securities registered in the name of a Depositary or its nominee will be made to
the Depositary or its nominee, as the case may be, as the registered owner of
the Global Security representing such Debt Securities. None of the Corporation,
Financial, the Trustee, any Paying Agent or any other agent of the Corporation,
PIB, Financial or the Trustee will have any responsibility or liability for any
aspect of the records relating to payments made on account of beneficial
ownership interests in the Global Security for such Debt Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Corporation, PIB or Financial, as the case may be, will obtain
confirmation from the Depositary that upon receipt of any payment of principal
of, or premium or interest on, a Global Security, the Depositary will
immediately credit Participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such Global
Security as shown on the records of the Depositary. Payments by Participants to
owners of beneficial interests in such Global Security held through such
Participants will be the responsibility of such Participants, as is now the case
with securities held for the accounts of customers registered in "street names."
If the Depositary for any Debt Securities represented by a Global Security
notifies the Corporation, PIB or Financial, as the case may be, that it is
unwilling or unable to continue as Depositary or ceases to be a clearing agency
registered under the Exchange Act and a successor Depositary is not appointed by
the Corporation, PIB or Financial, as the case may be, then within ninety days
after receiving such notice or becoming aware that Depositary is no longer so
registered, the Corporation, PIB or Financial, as the case may be, will issue
such Debt Securities in definitive form in exchange for such Global Security. In
addition, if an event of default, or an event which with notice or the lapse of
time or both would become an event of default, with respect to the Debt
Securities of a series has occurred and is continuing or either the Corporation,
PIB or Financial, as the case may be, at any time and in its sole discretion
determines not to have the Debt Securities represented by one or more Global
Securities, the Corporation, PIB or Financial, as the case may be, will issue
Debt Securities in definitive form in exchange for all of the Global Securities
representing such Debt Securities.
TAXATION BY THE COMMONWEALTH OF PUERTO RICO
All payments of, or in respect of, principal of, and any premium or
interest on, the Debt Securities and all payments pursuant to the Guarantees
will be made without withholding or deduction for, or on account of, any present
or future taxes, duties, assessments or governmental charges of whatever nature
imposed or levied by or on behalf of Puerto Rico or by or with any district,
municipality or other political subdivision thereof or authority therein having
power to tax unless such taxes, duties, assessments or governmental charges are
required by law to be withheld or deducted.
In the event that the Corporation or PIB is required by law to deduct or
withhold any amounts in respect of taxes, duties, assessments or governmental
charges, the Corporation or PIB, as the case may be, will pay such additional
amounts of, or in respect of, principal, premium and interest as will result
(after deduction of the said taxes, duties, assessments or governmental charges)
in the payment to the Holders of the Debt Securities, of the amounts which would
otherwise have been payable in respect to the Debt Securities in the absence of
such deduction or withholding ("Additional Amounts"), except that no such
Additional Amounts shall be payable:
(i) to any Holder of a Debt Security or any interest therein or rights
in respect thereof where such deduction or withholding is required by
reason of such Holder having some connection with Puerto Rico or any
political subdivision or taxing authority thereof or therein other than the
mere holding of and payment in respect of such Debt Security;
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(ii) in respect of any deduction or withholding that would not have
been required but for the presentation by the Holder of a Debt Security for
payment on a date more than 30 days after Maturity or the date on which
payment thereof is duly provided for, whichever occurs later; or
(iii) in respect of any deduction or withholding that would not have
been required but for the failure to comply with any certification,
identification or other reporting requirements concerning the nationality,
residence, identity or connection with Puerto Rico, or any political
subdivision or taxing authority thereof or therein, of the Holder of a Debt
Security or any interest therein or rights in respect thereof, if
compliance is required by Puerto Rico, or any political subdivision or
taxing authority thereof or therein, as a precondition to exemption from
such deduction or withholding.
GOVERNING LAW
The Indentures, the Debt Securities and the Guarantees will be governed by,
and construed in accordance with, the laws of the State of New York.
TERMS APPLICABLE TO THE SENIOR DEBT SECURITIES OR
SUBORDINATED DEBT SECURITIES
MODIFICATION OF THE SENIOR AND SUBORDINATED INDENTURES
The Senior and Subordinated Indentures contain provisions permitting the
Corporation and the respective Trustees, with the consent of Holders of not less
than a majority in principal amount of the Senior Debt Securities or
Subordinated Debt Securities which are affected by the modification, to modify
the particular Indenture or any supplemental indenture or the rights of the
Holders of the Senior Debt Securities or Subordinated Debt Securities issued
under such Indenture; provided that no such modification may, without the
consent of the Holder of each Outstanding Senior Debt Security or Subordinated
Debt Security affected thereby, (a) change the stated maturity date of the
principal of, or any installment of principal of or interest, if any, on, any
Senior Debt Security or Subordinated Debt Security, (b) reduce the principal
amount of, or premium or rate of interest, if any, on, any Senior Debt Security
or Subordinated Debt Security, (c) reduce the amount of principal of an Original
Issue Discount Security payable upon acceleration of the maturity thereof, (d)
change the place or coin or currency of payment of principal of, or premium or
interest, if any, on, any Senior Debt Security or Subordinated Debt Security,
(e) impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security or Subordinated Debt Security, (f)
reduce the percentage in principal amount of Outstanding Senior Debt Securities
or Subordinated Debt Securities of any series, the consent of whose Holders is
required for modification or amendment of the Indenture or for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults, (g) modify (with certain exceptions) any provision of the Indenture
which requires the consent of the Holder of each Outstanding Senior Debt
Security or Subordinated Debt Security affected thereby or (h) with respect to
the Subordinated Indenture, modify the subordination provisions in a manner
adverse to Holders of Outstanding Subordinated Debt Securities.
SUBORDINATION
Unless otherwise indicated in the applicable Prospectus Supplement, the
following provisions shall apply to the Subordinated Debt Securities.
The payment of the principal of, premium, if any, and interest on the
Subordinated Debt Securities will, to the extent set forth in the Subordinated
Indenture, be subordinated in right of payment to the prior payment in full of
all Senior Indebtedness (as defined below) of the Corporation. In certain events
of insolvency, the payment of the principal of, premium, if any, and interest on
the Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, also be effectively subordinated in right of payment to
the prior payment in full of all Other Financial Obligations (as defined below)
of the Corporation. As of March 31, 1994, $1,072.3 million aggregate principal
amount of Senior Indebtedness and no Other Financial Obligations of the
Corporation were outstanding. Upon any payment or distribution of assets to
creditors upon any
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liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Corporation, the holders of all Senior Indebtedness of the
Corporation will first be entitled to receive payment in full of all amounts due
or to become due thereon before the Holders of the Subordinated Debt Securities
will be entitled to receive any payment in respect of the principal of, premium,
if any, or interest on the Subordinated Debt Securities. If, upon any such
payment or distribution of assets to creditors, there remain, after giving
effect to such subordination provisions in favor of the holders of Senior
Indebtedness of the Corporation, any amounts of cash, property or securities
available for payment or distribution in respect of Subordinated Debt Securities
(as defined in the Subordinated Indenture, "Corporation Excess Proceeds") and
if, at such time, any person entitled to payment pursuant to the terms of Other
Financial Obligations of the Corporation has not received payment in full of all
amounts due or to become due on or in respect of such Other Financial
Obligations of the Corporation, then such Corporation Excess Proceeds shall
first be applied to pay or provide for the payment in full of such Other
Financial Obligations of the Corporation before any payment or distribution may
be made in respect of the Subordinated Debt Securities. In the event of the
acceleration of the maturity of any Subordinated Debt Securities, the holders of
all Senior Indebtedness of the Corporation will first be entitled to receive
payment in full of all amounts due or to become due thereon before the Holders
of the Subordinated Debt Securities will be entitled to receive any payment of
the principal of, premium, if any, or interest on the Subordinated Debt
Securities. Accordingly, in case of such an acceleration, all Senior
Indebtedness of the Corporation would have to be repaid before any payment could
be made in respect of the Subordinated Debt Securities. No payments on account
of principal, premium, if any, or interest in respect of the Subordinated Debt
Securities may be made if there shall have occurred and be continuing a default
in any payment with respect to any Senior Indebtedness of the Corporation, or an
event of default with respect to any Senior Indebtedness of the Corporation
permitting the holders thereof to accelerate the maturity thereof, or if any
judicial proceeding shall be pending with respect to any such default.
By reason of such subordination, in the event of the insolvency of the
Corporation, creditors of the Corporation who are not holders of Senior
Indebtedness of the Corporation or the Subordinated Debt Securities may recover
less, ratably, than holders of Senior Indebtedness of the Corporation and may
recover more, ratably, than Holders of the Subordinated Debt Securities.
"Senior Indebtedness" of the Corporation is defined in the Subordinated
Indenture to mean the principal of, premium, if any, and interest on (i) all
indebtedness of the Corporation for money borrowed (including indebtedness of
others guaranteed by the Corporation) other than the Subordinated Debt
Securities, whether outstanding on the date of the Subordinated Indenture or
thereafter created, assumed or incurred and (ii) any amendments, renewals,
extensions, modifications and refundings of any such indebtedness, unless in
either case in the instrument creating or evidencing any such indebtedness or
pursuant to which it is outstanding it is provided that such indebtedness is not
superior in right of payment to the Subordinated Debt Securities. For the
purposes of this definition, "indebtedness for money borrowed" is defined as (i)
any obligation of, or any obligation guaranteed by, the Corporation for the
repayment of borrowed money, whether or not evidenced by bonds, debentures,
notes or other written instruments, (ii) any deferred payment obligation of, or
any such obligation guaranteed by, the Corporation for the payment of the
purchase price of property or assets evidenced by a note or similar instrument,
and (iii) any obligation of, or any such obligation guaranteed by, the
Corporation for the payment of rent or other amounts under a lease of property
or assets which obligation is required to be classified and accounted for as a
capitalized lease on the balance sheet of the Corporation under generally
accepted accounting principles.
"Other Financial Obligations" of the Corporation is defined in the
Subordinated Indenture to mean all obligations of the Corporation to make
payment pursuant to the terms of financial instruments, such as (i) securities
contracts and foreign currency exchange contracts, (ii) derivative instruments,
such as swap agreements (including interest rate and currency and foreign
exchange rate swap agreements), cap agreements, floor agreements, collar
agreements, interest rate agreements, foreign exchange agreements, options,
commodity futures contracts, commodity options contracts and (iii) similar
financial instruments; provided that the term Other Financial Obligations shall
not include (x) obligations on account of Senior Indebtedness
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<PAGE> 20
of the Corporation and (y) obligations on account of indebtedness for money
borrowed ranking pari passu with or subordinate to the Subordinated Debt
Securities.
EVENTS OF DEFAULT
Senior Indenture
An Event of Default with respect to Senior Debt Securities of any series is
defined in the Senior Indenture as being: default for 30 days in payment of any
interest on Senior Debt Securities of such series; default in payment of
principal of, or premium, if any, any Senior Debt Securities of such series;
default in deposit of any mandatory sinking fund payment required by the Senior
Debt Securities of such series; default for 60 days after notice, in performance
or breach of any other covenant or warranty in the Senior Indenture (except for
a covenant expressly relating to a series of Senior Debt Securities other than
that series of Senior Debt Securities) or in the Senior Debt Securities of such
series; acceleration of the Senior Debt Securities of any other series or any
other indebtedness for borrowed money of the Corporation or any Material Banking
Subsidiary, in each case exceeding $10,000,000 in an aggregate principal amount,
as a result of a default under the terms of the instrument or instruments under
which such indebtedness is issued or secured, unless such acceleration is
annulled within 30 days after written notice as provided in the Indenture,
provided that if such default is remedied or cured by the Corporation or any
Material Banking Subsidiary or waived by holders of such indebtedness, the Event
of Default by reason thereof shall be deemed to have been thereupon remedied,
cured or waived; certain events of bankruptcy, insolvency or reorganization with
respect to the Corporation or any Material Banking Subsidiary; or any other
Event of Default specified in the applicable Prospectus Supplement. In case an
Event of Default with respect to Senior Debt Securities of any series shall
occur and be continuing, the Senior Trustee or the Holders of not less than 25%
in principal amount of the Senior Debt Securities of such series then
outstanding may declare the principal of all such Senior Debt Securities of such
series to be due and payable. The Corporation is required to furnish to the
Senior Trustee annually a statement as to the performance by the Corporation of
its obligations under the Senior Indenture and as to any default in such
performance. Under certain circumstances any declaration of acceleration with
respect to Senior Debt Securities of any series may be rescinded and past
defaults (except a default in the payment of principal of or interest on the
Senior Debt Securities) may be waived by the Holders of a majority in aggregate
principal amount of the Senior Debt Securities of such series then outstanding.
The Senior Indenture provides that the Senior Trustee may withhold notice to the
Holders of Senior Debt Securities of any series of any continuing default
(except in the payment of the principal of (or premium, if any) or interest on
any Senior Debt Securities of such series) if such Senior Trustee considers it
in the interest of Holders of such series of Senior Debt Securities to do so.
Subordinated Indenture
An Event of Default with respect to the Subordinated Debt Securities of any
series is defined in the Subordinated Indenture as being certain events
involving a bankruptcy, insolvency or reorganization of the Corporation. If an
Event of Default with respect to Subordinated Debt Securities of any series
shall have occurred and be continuing, either the Subordinated Trustee or the
Holders of not less than 25% in aggregate principal amount of the Subordinated
Debt Securities of such series then outstanding may declare the principal of the
Subordinated Debt Securities of such series to be due and payable immediately.
The Corporation is required to furnish to the Subordinated Trustee annually a
statement as to the performance by the Corporation of its obligations under the
Subordinated Indenture and as to any default in such performance. Under certain
circumstances, any declaration of acceleration with respect to Subordinated Debt
Securities of any series may be rescinded and past defaults (except a default in
the payment of principal of or interest on the Subordinated Debt Securities) may
be waived by the Holders of a majority in aggregate principal amount of the
Subordinated Debt Securities of such series then outstanding. The Subordinated
Indenture provides that the Subordinated Trustee may withhold notice to the
Holders of the Subordinated Debt Securities of any series of any continuing
default (except in the payment of the principal of (or premium, if any) or
interest on any Subordinated Debt Securities of such series) if the Subordinated
Trustee considers it in the interest of the Holders of such series of
Subordinated Debt Securities to do so.
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The Subordinated Indenture does not provide for any right of acceleration
of the payment of principal of a series of Subordinated Debt Securities upon a
default in the payment of principal or interest or in the performance of any
covenant or agreement in the Subordinated Debt Securities of the particular
series or in the Subordinated Indenture.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Corporation has covenanted in the Senior and Subordinated Indentures
that it will not merge or consolidate with any other corporation or sell,
convey, transfer or lease all or substantially all of its assets to any person,
firm or corporation unless the Corporation is the continuing corporation or the
successor corporation expressly assumes the obligations under any outstanding
Senior Debt Securities and Subordinated Debt Securities and the respective
Senior and Subordinated Indentures and the Corporation or such successor
corporation is not, immediately after such merger, consolidation, sale or
conveyance, in default in the performance of any of the covenants or conditions
of the respective Indenture. The Indentures do not contain any other covenant
which restricts the Corporation's ability to merge or consolidate with any other
corporation, sell, convey, transfer or lease all or substantially all of its
assets to any persons, firm or corporation or otherwise engage in restructuring
transactions.
TERMS APPLICABLE TO GUARANTEED SECURITIES
MODIFICATION OF THE INDENTURE
The Guaranteed Indenture contains provisions permitting Financial, the
Corporation and the Guaranteed Trustee, with the consent of Holders of not less
than a majority in principal amount of the Guaranteed Securities which are
affected by the modification, to modify the Guaranteed Indenture or any
supplemental indenture or the rights of the Holders of the Guaranteed Securities
issued under such Indenture, provided that no such modification may, without the
consent of the Holder of each Outstanding Guaranteed Security affected thereby,
(a) change the stated maturity date of the principal of, or any installment of
principal of or interest, if any, on, any Guaranteed Security, (b) reduce the
principal amount of, or premium or rate of interest, if any, on, any Guaranteed
Security, (c) reduce the amount of principal of an Original Issue Discount
Guaranteed Security payable upon acceleration of the maturity thereof, (d)
change the place or coin or currency of payment of principal of, or premium or
interest, if any, on, any Guaranteed Security, (e) impair the right to institute
suit for the enforcement of any payment on or with respect to any Guaranteed
Security, (f) modify or affect in any manner adverse to Holders the terms and
conditions of the obligations of the Guarantor in respect of the due and
punctual payment of principal or any premium and interest, sinking fund payment
or Additional Amounts in respect of the Guaranteed Securities, (g) reduce the
percentage in principal amount of Outstanding Guaranteed Securities of any
series the consent of whose Holders is required for modification or amendment of
the Guaranteed Indenture or for waiver of compliance with certain provisions of
the Guaranteed Indenture or for waiver of certain defaults, or (h) modify (with
certain exceptions) any provisions of the Guaranteed Indenture which require the
consent of the Holder of each Outstanding Guaranteed Security affected thereby.
EVENTS OF DEFAULT
An Event of Default with respect to Guaranteed Securities of any series is
defined in the Guaranteed Indenture as being: default for 30 days in payment of
any interest on Guaranteed Securities of such series; default in payment of
principal of (or premium, if any) on any Guaranteed Security of such series;
default in deposit of any mandatory sinking fund payment required by the
Guaranteed Securities of such series; default for 60 days, after notice, in
performance or breach of any other covenant or warranty in the Guaranteed
Indenture (except for a covenant expressly relating to a series of Guaranteed
Securities other than that series of Guaranteed Securities) or in the Guaranteed
Securities of such series; acceleration of the Guaranteed Securities of any
other series or any other indebtedness for borrowed money of the Corporation,
Financial or any Material Banking Subsidiary, in each case exceeding $10,000,000
in an aggregate principal amount, as a result of a default under the terms of
the instrument or instruments under which such indebtedness is issued or
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secured, unless such acceleration is annulled within 30 days after written
notice as provided in the Indenture, provided that if such default is remedied
or cured by the Corporation, Financial or any Material Banking Subsidiary or
waived by the holders of such indebtedness, the Event of Default by reason
thereof shall be deemed to have been thereupon remedied, cured or waived;
certain events of bankruptcy, insolvency or reorganization of the Corporation,
any Material Banking Subsidiary or Financial; or any other Event of Default
specified in the applicable Prospectus Supplement. In case an Event of Default
with respect to Guaranteed Securities of any series shall occur and be
continuing, the Guaranteed Trustee or the Holders of not less than 25% in
principal amount of the Guaranteed Securities of such series then outstanding
may declare the principal of all the Guaranteed Securities of such series to be
due and payable. Financial and the Corporation are required to furnish to the
Guaranteed Trustee annually a statement or statements as to the performance by
Financial and the Corporation of their respective obligations under the
Guaranteed Indenture of such series and as to any default in such performance.
Under certain circumstances any declaration of acceleration with respect to
Guaranteed Securities of any series may be rescinded and past defaults (except a
default in the payment of principal of or interest on the Guaranteed Securities)
may be waived by the Holders of a majority in aggregate principal amount of the
Guaranteed Securities of such series then outstanding. The Guaranteed Indenture
provides that the Guaranteed Trustee may withhold notice to the Holders of
Guaranteed Securities of any series of any continuing default (except in the
payment of the principal of (or premium, if any) or interest on any Guaranteed
Securities of such series) if such Guaranteed Trustee considers it in the
interest of Holders of such series of Guaranteed Securities to do so.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Each of the Corporation and Financial has covenanted in the Guaranteed
Indenture that it will not merge or consolidate with any other corporation or
sell, convey, transfer or lease all or substantially all of its assets to any
person, firm or corporation unless the Corporation or Financial, as the case may
be, is the continuing corporation or the successor corporation expressly
assumes, in the case of Financial, or guarantees, in the case of the
Corporation, the obligations under the Guaranteed Securities and the Guaranteed
Indenture and the Corporation or Financial, as the case may be, or such
successor corporation is not, immediately after such merger, consolidation, sale
or conveyance, in default in the performance of any of the covenants or
conditions of the Guaranteed Indenture. The Guaranteed Indenture does not
contain any other covenant which restricts the Corporation's or Financial's
ability to merge or consolidate with any other corporation, sell, convey,
transfer or lease all or substantially all of its assets to any person, firm or
corporation or otherwise engage in restructuring transactions.
GUARANTEE
The Corporation will guarantee the punctual payment of the principal of,
premium, if any, and interest on the Guaranteed Securities, when and as the same
are due and payable. The guarantee is absolute and unconditional, irrespective
of any circumstance that might otherwise constitute a legal or equitable
discharge of a surety or guarantor. To evidence the guarantee, a Guarantee,
executed by the Corporation, will be endorsed on each Guaranteed Security.
Holders of the Guaranteed Securities may proceed directly against the
Corporation in the event of default under the Guaranteed Securities without
first proceeding against Financial. The Guarantees will rank pari passu with all
other unsecured and unsubordinated obligations of the Corporation.
TERMS APPLICABLE TO THE PIB SENIOR DEBT SECURITIES
OR PIB SUBORDINATED DEBT SECURITIES
MODIFICATION OF THE PIB SENIOR AND PIB SUBORDINATED INDENTURES
The PIB Senior and PIB Subordinated Indentures contain provisions
permitting the Corporation, PIB and the respective PIB Trustees, with the
consent of Holders of not less than a majority in principal amount of the PIB
Senior Debt Securities or PIB Subordinated Debt Securities which are affected by
the modification, to modify the particular Indenture or any supplemental
indenture or the rights of the Holders of the PIB
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Senior Debt Securities or PIB Subordinated Debt Securities issued under such
Indenture; provided that no such modification may, without the consent of the
Holder of each outstanding PIB Senior Debt Security or PIB Subordinated Debt
Security affected thereby, (a) change the stated maturity date of the principal
of, or any installment of principal of or interest, if any, on, any PIB Senior
Debt Security or PIB Subordinated Debt Security, (b) reduce the principal amount
of, or premium or rate of interest, if any, on, any PIB Senior Debt Security or
PIB Subordinated Debt Security, (c) reduce the amount of principal of an
Original Issue Discount Security payable upon acceleration of the maturity
thereof, (d) change the place or coin or currency of payment of principal of, or
premium or interest, if any, on, any PIB Senior Debt Security or PIB
Subordinated Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any PIB Senior Debt Security or
PIB Subordinated Debt Security, (f) reduce the percentage in principal amount of
Outstanding PIB Senior Debt Security or PIB Subordinated Debt Securities of any
series, the consent of whose Holders is required for modification or amendment
of the Indenture or for waiver of compliance with certain provisions of the
Indenture or for waiver of certain defaults, (g) modify (with certain
exceptions) any provision of the Indenture which requires the consent of Holders
of each Outstanding PIB Senior Debt Security or PIB Subordinated Debt Security
affected thereby or (h) with respect to the PIB Subordinated Indenture, modify
the subordination provisions in a manner adverse to Holders of Outstanding PIB
Subordinated Debt Securities.
SUBORDINATION
Unless otherwise indicated in the applicable Prospectus Supplement, the
following provisions shall apply to the PIB Subordinated Debt Securities and the
guarantee of them by the Corporation.
The payment of the principal of, premium, if any, and interest on the PIB
Subordinated Debt Securities and the Corporation's Guarantees thereof (the
"Subordinated Guarantees") will, to the extent set forth in the PIB Subordinated
Indenture, be subordinated in right of payment to the prior payment in full of
all Senior Indebtedness (as defined below) of PIB or the Corporation, as the
case may be. In certain events of insolvency, the payment of the principal of,
premium, if any, and interest on the PIB Subordinated Debt Securities and any
payments with respect to the Subordinated Guarantees will, to the extent set
forth in the PIB Subordinated Indenture, also be effectively subordinated in
right of payment to the prior payment in full of all Other Financial Obligations
(as defined below) of PIB or the Corporation, as the case may be. As of May 31,
1994, no Senior Indebtedness and no Other Financial Obligations of PIB were
outstanding. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of PIB or the Corporation, the holders of all Senior Indebtedness
thereof will first be entitled to receive payment in full of all amounts due or
to become due thereon before the Holders of the PIB Subordinated Debt Securities
or the Subordinated Guarantees will be entitled to receive any payment in
respect of the principal of, premium, if any, or interest on the PIB
Subordinated Debt Securities or the Subordinated Guarantees, as the case may be.
If, upon any such payment or distribution of assets to creditors, there remain,
after giving effect to such subordination provisions in favor of the holders of
Senior Indebtedness of PIB and the Corporation, any amounts of cash, property or
securities available for payment or distribution in respect of PIB Subordinated
Debt Securities or the Subordinated Guarantees (as defined in the PIB
Subordinated Indenture, "PIB Excess Proceeds") and if, at such time, any person
entitled to payment pursuant to the terms of Other Financial Obligations of PIB
or the Corporation (as defined in the PIB Subordinated Indenture, "PIB Entitled
Person") has not received payment in full of all amounts due or to become due on
or in respect of such Other Financial Obligations of PIB or the Corporation,
then such PIB Excess Proceeds shall first be applied to pay or provide for the
payment in full of such Other Financial Obligations of PIB or the Corporation,
as the case may be, before any payment or distribution may be made in respect of
the PIB Subordinated Debt Securities or the Subordinated Guarantees. In the
event of the acceleration of the maturity of any PIB Subordinated Debt
Securities, the holders of all Senior Indebtedness of PIB or the Corporation, as
the case may be, will first be entitled to receive payment in full of all
amounts due or to become due thereon before the Holders of the PIB Subordinated
Debt Securities or the Subordinated Guarantees will be entitled to receive any
payment of the principal of, premium, if any, or interest on the PIB
Subordinated Debt Securities or the Subordinated Guarantees, as the case may be.
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<PAGE> 24
Accordingly, in case of such an acceleration, all Senior Indebtedness of PIB or
the Corporation would have to be repaid before any payment could be made in
respect of the PIB Subordinated Debt Securities or the Subordinated Guarantees,
as the case may be. No payments on account of principal, premium, if any, or
interest in respect of the PIB Subordinated Debt Securities or the Subordinated
Guarantees may be made if there shall have occurred and be continuing a default
in any payment with respect to any Senior Indebtedness of PIB or the
Corporation, an event of default with respect to any Senior Indebtedness of PIB
or the Corporation permitting the holders thereof to accelerate the maturity
thereof, or if any judicial proceeding shall be pending with respect to any such
default.
By reason of such subordination, in the event of the insolvency of PIB or
the Corporation, creditors of PIB or the Corporation who are not holders of
Senior Indebtedness, the PIB Subordinated Debt Securities or the Subordinated
Guarantees may recover less, ratably, than holders of Senior Indebtedness of PIB
or the Corporation, as the case may be, and may recover more, ratably, than
Holders of the PIB Subordinated Debt Securities or the Subordinated Guarantees.
"Senior Indebtedness" of PIB is defined in the PIB Subordinated Indenture
to mean the principal of, premium, if any, and interest on (i) all indebtedness
of PIB for money borrowed (including indebtedness of others guaranteed by PIB)
other than the PIB Subordinated Debt Securities, whether outstanding on the date
of the PIB Subordinated Indenture or thereafter created, assumed or incurred and
(ii) any amendments, renewals, extensions, modifications and refundings of any
such indebtedness, unless in either case in the instrument creating or
evidencing any such indebtedness or pursuant to which it is outstanding it is
provided that such indebtedness is not superior in right of payment to the PIB
Subordinated Debt Securities. For the purposes of this definition, "indebtedness
for money borrowed" is defined as (i) any obligation of, or any obligation
guaranteed by, PIB for the repayment of borrowed money, whether or not evidenced
by bonds, debentures, notes or other written instruments, (ii) any deferred
payment obligation of, or any such obligation guaranteed by, PIB for the payment
of the purchase price of property or assets evidenced by a note or similar
instrument, and (iii) any obligation of, or any such obligation guaranteed by,
PIB for the payment of rent or other amounts under a lease of property or assets
which obligation is required to be classified and accounted for as a capitalized
lease on the balance sheet of PIB under generally accepted accounting
principles.
"Other Financial Obligations" of PIB is defined in the PIB Subordinated
Indenture to mean all obligations of PIB to make payment pursuant to the terms
of financial instruments, such as (i) securities contracts and foreign currency
exchange contracts, (ii) derivative instruments, such as swap agreements
(including interest rate and currency and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange agreements, options, commodity futures contracts,
commodity options contracts and (iii) similar financial instruments; provided
that the term Other Financial Obligations shall not include (x) obligations on
account of Senior Indebtedness of PIB and (y) obligations on account of
indebtedness for money borrowed ranking pari passu with or subordinate to the
PIB Subordinated Debt Securities.
"Senior Indebtedness" of the Corporation is defined in the PIB Subordinated
Indenture to mean the principal of, premium, if any, and interest on (i) all
indebtedness of the Corporation for money borrowed (including indebtedness of
others guaranteed by the Corporation other than the Subordinated Guarantees),
whether outstanding on the date of the PIB Subordinated Indenture or thereafter
created, assumed or incurred and (ii) any amendments, renewals, extensions,
modifications and refundings of any such indebtedness, unless in either case in
the instrument creating or evidencing any such indebtedness or pursuant to which
it is outstanding it is provided that such indebtedness is not superior in right
of payment to the Subordinated Guarantees. For the purposes of this definition,
"indebtedness for money borrowed" is defined as (i) any obligation of, or any
obligation guaranteed by, the Corporation for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments, (ii) any deferred payment obligation of, or any such obligation
guaranteed by, the Corporation for the payment of the purchase price of property
or assets evidenced by a note or similar instrument, and (iii) any obligation
of, or any such obligation guaranteed by, the Corporation for the payment of
rent or other amounts under a lease of property or assets which obligation is
required to be classified and accounted for as a capitalized lease on the
balance sheet of the Corporation under generally accepted accounting principles.
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"Other Financial Obligations" of the Corporation is defined in the PIB
Subordinated Indenture to mean all obligations of the Corporation to make
payment pursuant to the terms of financial instruments, such as (i) securities
contracts and foreign currency exchange contracts, (ii) derivative instruments,
such as swap agreements (including interest rate and currency and foreign
exchange rate swap agreements), cap agreements, floor agreements, collar
agreements, interest rate agreements, foreign exchange agreements, options,
commodity futures contracts, commodity options contracts and (iii) similar
financial instruments; provided that the term Other Financial Obligations shall
not include (x) obligations on account of Senior Indebtedness and (y)
obligations on account of indebtedness for money borrowed ranking pari passu
with or subordinate to the Subordinated Guarantees.
EVENTS OF DEFAULT
PIB Senior Indenture
An Event of Default with respect to PIB Senior Debt Securities of any
series is defined in the PIB Senior Indenture as being: default for 30 days in
payment of any interest on PIB Senior Debt Securities of such series; default in
payment of principal of (or premium on, if any) any PIB Senior Debt Securities
of such series; default in deposit of any mandatory sinking fund payment
required by the PIB Senior Debt Securities of such series; default for 60 days,
after notice, in performance or breach of any other covenant or warranty in the
PIB Senior Indenture (except for a covenant expressly relating to a series of
PIB Senior Debt Securities other than that series of PIB Senior Debt Securities)
or in the PIB Senior Debt Securities of such series; acceleration of the PIB
Senior Debt Securities of any other series or any other indebtedness for
borrowed money, of the Corporation, PIB or any Material Banking Subsidiary, in
each case in an aggregate principal amount exceeding $10,000,000, as a result of
a default under the terms of the instrument or instruments under which such
indebtedness is issued or secured, unless such acceleration is annulled within
30 days after written notice as provided in the Indenture, provided that if such
default is remedied or cured by the Corporation, PIB or any Material Banking
Subsidiary or waived by holders of such indebtedness, the Event of Default by
reason thereof shall be deemed to have been thereupon remedied, cured or waived;
certain events of bankruptcy, insolvency or reorganization with respect to the
Corporation, PIB or any Material Banking Subsidiary; or any other Event of
Default specified in the applicable Prospectus Supplement. In case an Event of
Default with respect to PIB Senior Debt Securities of any series shall occur and
be continuing, the PIB Senior Trustee or the Holders of not less than 25% in
principal amount of the PIB Senior Debt Securities of such series then
outstanding may declare the principal of all the PIB Senior Debt Securities of
such series to be due and payable. The Corporation and PIB are required to
furnish to the PIB Senior Trustee annually a statement as to the performance by
the Corporation and PIB of their respective obligations under the PIB Senior
Indenture and as to any default in such performance. Under certain circumstances
any declaration of acceleration with respect to PIB Senior Debt Securities of
any series may be rescinded and past defaults (except a default in the payment
of principal of or interest on the PIB Senior Debt Securities) may be waived by
the Holders of a majority in aggregate principal amount of the PIB Senior Debt
Securities of such series then outstanding. The PIB Senior Indenture provides
that the PIB Senior Trustee may withhold notice to the Holders of PIB Senior
Debt Securities of any series of any continuing default (except in the payment
of the principal of (or premium, if any) or interest on any PIB Senior Debt
Securities of such series) if such PIB Senior Trustee considers it in the
interest of Holders of such series of PIB Senior Debt Securities to do so.
PIB Subordinated Indenture
An Event of Default with respect to the PIB Subordinated Debt Securities of
any series is defined in the PIB Subordinated Indenture as being certain events
involving a bankruptcy, insolvency or reorganization of the Corporation or PIB.
If an Event of Default with respect to PIB Subordinated Debt Securities of any
series shall have occurred and be continuing, either the PIB Subordinated
Trustee or the Holders of not less than 25% in aggregate principal amount of the
PIB Subordinated Debt Securities of such series then outstanding may declare the
principal of the PIB Subordinated Debt Securities of such series to be due and
payable immediately. The Corporation and PIB are required to furnish to the PIB
Subordinated Trustee annually a statement as to the performance by the
Corporation and PIB of their respective obligations under the PIB
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Subordinated Indenture and as to any default in such performance. Under certain
circumstances, any declaration of acceleration with respect to PIB Subordinated
Debt Securities of any series may be rescinded and past defaults (except a
default in the payment of principal of or interest on the PIB Subordinated Debt
Securities) may be waived by the Holders of a majority in aggregate principal
amount of the PIB Subordinated Debt Securities of such series then outstanding.
The PIB Subordinated Indenture provides that the PIB Subordinated Trustee may
withhold notice to the Holders of the PIB Subordinated Debt Securities of any
series of any continuing default (except in the payment of the principal of (or
premium, if any) or interest on any PIB Subordinated Debt Securities of such
series) if the PIB Subordinated Trustee considers it in the interest of the
Holders of such series of PIB Subordinated Debt Securities to do so.
The PIB Subordinated Indenture does not provide for any right of
acceleration of the payment of principal of a series of PIB Subordinated Debt
Securities upon a default in the payment of principal or interest or in the
performance of any covenant or agreement in the PIB Subordinated Debt Securities
of the particular series, in the PIB Subordinated Indenture or in the
Subordinated Guarantees.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Corporation and PIB have each covenanted in the PIB Senior and PIB
Subordinated Indentures that it will not merge or consolidate with any other
corporation or sell, convey, transfer or lease all or substantially all of its
assets to any person, firm or corporation unless the Corporation or PIB, as the
case may be, is the continuing corporation or the successor corporation
expressly assumes the obligations under any outstanding PIB Senior Debt
Securities and Subordinated Debt Securities and the Subordinated Guarantees and
the respective PIB Senior and PIB Subordinated Indentures and the Corporation,
or PIB, as the case may be, or such successor corporation is not, immediately
after such merger, consolidation, sale or conveyance, in default in the
performance of any of the covenants or conditions of the respective Indenture.
The Indentures do not contain any other covenant which restricts the
Corporation's or PIB's ability to merge or consolidate with any other
corporation, sell, convey, transfer or lease all or substantially all of its
assets to any persons, firm or corporation or otherwise engage in restructuring
transactions.
GUARANTEE
PIB Senior Debt Securities
The Corporation will guarantee the punctual payment of the principal of,
premium, if any, and interest on the PIB Senior Debt Securities, when and as the
same are due and payable. The guarantee is absolute and unconditional,
irrespective of any circumstance that might otherwise constitute a legal or
equitable discharge of a surety or guarantor. To evidence the guarantee, a
Guarantee, executed by the Corporation, will be endorsed on each PIB Senior Debt
Security. Holders of the PIB Senior Debt Securities may proceed directly against
the Corporation in the event of default under the PIB Senior Debt Securities
without first proceeding against PIB. The Guarantees will rank pari passu with
all other unsecured and unsubordinated obligations of the Corporation.
PIB Subordinated Debt Securities
The Corporation will guarantee the punctual payment of the principal of,
premium, if any, and interest on the PIB Subordinated Debt Securities, when and
as the same are due and payable. The guarantee is absolute and unconditional,
irrespective of any circumstance that might otherwise constitute a legal or
equitable discharge of a surety or guarantor. To evidence the guarantee, a
Guarantee, executed by the Corporation, will be endorsed on each PIB
Subordinated Debt Security. Holders of the PIB Subordinated Debt Securities may
proceed directly against the Corporation in the event of default under the PIB
Subordinated Debt Securities without first proceeding against PIB. The
Subordinated Guarantees will rank pari passu with all other unsecured and
subordinated obligations of the Corporation. See "Subordination."
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DESCRIPTION OF PREFERRED STOCK OF THE CORPORATION
The following summary contains a description of certain general terms of
the Corporation's preferred stock (the "Preferred Stock") to which any
Prospectus Supplement may relate. Certain terms of any series of the Preferred
Stock offered by any Prospectus Supplement will be described in the Prospectus
Supplement relating thereto. If so indicated in the Prospectus Supplement, the
terms of any series may differ from the terms set forth below. The description
of certain provisions of the Preferred Stock does not purport to be complete and
is subject to and qualified in its entirety by reference to the provisions of
the Corporation's Restated Certificate of Incorporation, as amended, the
Certificates of Designation describing the Corporation's 8.35% Non-Cumulative
Monthly Income Preferred Stock, 1994 Series A (the "Series A Preferred Stock")
and the Corporation's Series A Participating Preferred Stock (the "Series A
Participating Preferred Stock"), respectively, and the Certificate of Resolution
(the "Certificate of Resolution") relating to each particular series of the
Preferred Stock, each of which will be filed or incorporated by reference, as
the case may be, as an exhibit to the Registration Statement of which this
Prospectus is a part at or prior to the time of the issuance of such Preferred
Stock.
GENERAL
Under the Corporation's Restated Certificate of Incorporation, the Board of
Directors of the Corporation is authorized, without further stockholder action,
to provide for the issuance of up to 10,000,000 shares of preferred stock (of
which 4,000,000 shares have been designated and issued as Series A Preferred
Stock and 350,000 shares have been authorized and designated but not issued for
the Series A Participating Preferred Stock), without par value, in one or more
series, with such designations of titles; dividend rates; special or relative
rights in the event of a liquidation, distribution or sale of assets or
dissolution or winding up of the Corporation; sinking fund provisions;
redemption or purchase account provisions; conversion provisions; and voting
rights, as shall be set forth as and when established by the Board of Directors
of the Corporation. The shares of any series of Preferred Stock will be, when
issued, fully paid and non-assessable and holders thereof shall have no
preemptive rights in connection therewith.
The liquidation preference of any series of the Preferred Stock is not
necessarily indicative of the price at which shares of such series of Preferred
Stock will actually trade at or after the time of their issuance. The market
price of any series of Preferred Stock can be expected to fluctuate with changes
in market and economic conditions, the financial condition and prospects of the
Corporation and other factors that generally influence the market prices of
securities.
RANK
Any series of Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding up and dissolution rank (i) senior to all classes
of common stock of the Corporation and with all equity securities issued by the
Corporation the terms of which specifically provide that such equity securities
will rank junior to the Preferred Stock (collectively referred to as the "Junior
Securities"); (ii) on a parity with all equity securities issued by the
Corporation the terms of which specifically provide that such equity securities
will rank on a parity with the Preferred Stock (collectively referred to as the
"Parity Securities"); and (iii) junior to all equity securities issued by the
Corporation the terms of which specifically provide that such equity securities
will rank senior to the Preferred Stock. As used in any Certificate of
Resolution for these purposes, the term "equity securities" will not include
debt securities convertible into or exchangeable for equity securities.
DIVIDENDS
Holders of each series of Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors of the Corporation out of
funds legally available therefor, cash dividends at such rates and on such dates
as are set forth in the Prospectus Supplement relating to such series of
Preferred Stock. Dividends will be payable to holders of record of the Preferred
Stock as they appear on the books of the Corporation on such record dates as
shall be fixed by the Board of Directors. Dividends on any series of Preferred
Stock may be
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cumulative or non-cumulative. The Corporation's ability to pay dividends on its
Preferred Stock is subject to policies established by the Federal Reserve Board.
See "Certain Regulatory Matters -- Dividend Restrictions."
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Securities unless dividends shall have been
paid or set apart for such payment on the Preferred Stock. If full dividends are
not so paid, the Preferred Stock shall share dividends pro rata with the Parity
Securities.
The holders of any series of shares of Preferred Stock at the close of
business on a dividend payment record date will be entitled to receive the
dividend payable on such shares (except that holders of shares called for
redemption on a redemption date occurring between such record date and the
dividend payment date shall not be entitled to receive such dividend on such
dividend payment date but instead will receive accrued and unpaid dividends to
such redemption date) on the corresponding dividend payment date notwithstanding
the conversion thereof or the Corporation's default in payment of the dividend
due. Except as provided above, the Corporation will make no payment or allowance
for unpaid dividends, whether or not in arrears, on converted shares or for
dividends on the shares of preferred stock or issued upon conversion.
CONVERSION
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
another series of preferred stock of the Corporation.
For any series of Preferred Stock which is convertible, the Corporation
shall at all times reserve and keep available, out of the aggregate of its
authorized but unissued preferred stock or preferred stock held in its treasury
or both, for the purpose of effecting the conversion of the shares of such
series of Preferred Stock, the full number of shares of preferred stock then
deliverable upon the conversion of all outstanding shares of such series.
No fractional shares or scrip representing fractional shares of preferred
stock will be issued upon the conversion of shares of any series of convertible
Preferred Stock. Each holder to whom fractional shares would otherwise be issued
will instead be entitled to receive, at the Corporation's election, either (a) a
cash payment equal to the current market price of such holder's fractional
interest or (b) a cash payment equal to such holder's proportionate interest in
the net proceeds (following the deduction of applicable transaction costs) from
the sale promptly by an agent, on behalf of such holders, of shares of preferred
stock representing the aggregate of such fractional shares.
EXCHANGEABILITY
If so determined by the Board of Directors of the Corporation, the holders
of shares of Preferred Stock of any series may be obligated at any time or at
maturity to exchange such shares for preferred stock or debt securities of the
Corporation. The terms of any such exchange and any such preferred stock or debt
securities will be described in the Prospectus Supplement relating to such
series of Preferred Stock.
REDEMPTION
A series of Preferred Stock may be redeemable at any time, in whole or in
part, at the option of the Corporation or the holder thereof upon terms and at
the redemption prices set forth in the Prospectus Supplement relating to such
series.
In the event of partial redemptions of Preferred Stock, whether by
mandatory or optional redemption, the shares to be redeemed will be determined
by lot or pro rata, as may be determined by the Board of Directors of the
Corporation or by any other method determined to be equitable by the Board of
Directors.
On or after a redemption date, unless the Corporation defaults in the
payment of the redemption price, dividends will cease to accrue on shares of
Preferred Stock called for redemption and all rights of holders of such shares
will terminate except for the right to receive the redemption price.
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Under current regulations, bank holding companies may not exercise any
option to redeem shares of preferred stock included as Tier 1 capital, or
exchange such preferred stock for debt securities, without the prior approval of
the Federal Reserve Board. Ordinarily, the Federal Reserve Board would not
permit such a redemption unless (1) the shares are redeemed with the proceeds of
a sale by the bank holding company of common stock or perpetual preferred stock
or (2) the Federal Reserve Board determines that the bank holding company's
condition and circumstances warrant the reduction of a source of permanent
capital.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, holders of each series of Preferred Stock that ranks senior to
the Junior Securities will be entitled to receive out of assets of the
Corporation available for distribution to shareholders, before any distribution
is made on any Junior Securities, including Common Stock, distributions upon
liquidation in the amount set forth in the Prospectus Supplement relating to
such series of Preferred Stock, plus an amount equal to any accrued and unpaid
dividends. If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the amounts payable with respect to the Preferred
Stock of any series and any other Parity Securities are not paid in full, the
holders of the Preferred Stock of such series and the Parity Securities will
share ratably in any such distribution of assets of the Corporation in
proportion to the full liquidation preferences to which each is entitled. After
payment of the full amount of the liquidation preference to which they are
entitled, the holders of such series of Preferred Stock will not be entitled to
any further participation in any distribution of assets of the Corporation.
VOTING RIGHTS
Except as indicated in the Prospectus Supplement relating to a particular
series of Preferred Stock, or except as expressly required by applicable law,
the holders of the Preferred Stock will have no voting rights.
Under regulations adopted by the Federal Reserve Board, if the holders of
shares of any series of Preferred Stock of the Corporation became entitled to
vote for the election of directors, such series may then be deemed a "class of
voting securities" and a holder of 25% or more of such series (or a holder of 5%
if it otherwise exercises a "controlling influence" over the Corporation) may
then be subject to regulation as a bank holding company in accordance with the
BHC Act. In addition, at such time as such series is deemed a class of voting
securities, (i) any other bank holding company may be required to obtain the
approval of the Federal Reserve Board to acquire or retain 5% or more of such
series, and (ii) any person other than a bank holding company may be required to
file with the Federal Reserve Board under the Change in Bank Control Act to
acquire or retain 10% or more of such series.
Section 12 of the Banking Law requires the prior approval of the Office of
the Commissioner to obtain control of any bank organized under the Banking Law.
The Banking Law requires that in any transfer of voting and outstanding capital
stock of any bank organized under the laws of Puerto Rico to any person or
entity that, upon consummation of the transfer, will become the owner, directly
or indirectly, of more than 5% of the voting and outstanding capital stock of
said bank, the parties to the transfer shall inform the Office of the
Commissioner of the proposed transfer at least 60 days prior to the date such
transfer is to be effected. The Banking Law does not contain any provision
allowing for the extension of such 60-day time period. The transfer requires the
approval of the Office of the Commissioner if it results in a change of control
of the bank. For the purposes of Section 12 of the Banking Law, the term
"control" means the power to, directly or indirectly, direct or influence
decisively the administration or the norms of the bank. The Department of the
Treasury (predecessor to the Office of the Commissioner) made a determination
that the foregoing provisions of the Banking Law are applicable to a change in
control of the Corporation in a letter dated April 9, 1985.
Pursuant to Section 12(d) of the Banking Law, as soon as the Office of the
Commissioner receives notice of a proposed transaction that may result in the
control or in a change of control of a bank, the Office of the Commissioner
shall have the duty to make the necessary investigations. The Office of the
Commissioner shall issue authorization for the transfer of control of the bank
if the results of his investigations are in his judgment satisfactory. The
decision of the Office of the Commissioner is final and unreviewable.
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DESCRIPTION OF PREFERRED STOCK OF PIB
The following summary contains a description of certain general terms of
the PIB Preferred Stock to which any Prospectus Supplement may relate. Certain
terms of any series of the Preferred Stock offered by any Prospectus Supplement
will be described in the Prospectus Supplement relating thereto. If so indicated
in the Prospectus Supplement, the terms of any series may differ from the terms
set forth below. The description of certain provisions of the PIB Preferred
Stock does not purport to be complete and is subject to and qualified in its
entirety by reference to the provisions of the PIB's Certificate of
Incorporation, as amended, and the Certificate of Amendment relating to each
particular series of the PIB Preferred Stock, each of which will be filed or
incorporated by reference, as the case may be, as an exhibit to the Registration
Statement of which this Prospectus is a part at or prior to the time of the
issuance of such PIB Preferred Stock.
The authorized capital stock of PIB consists of 1,000,000 shares of Common
Stock, par value $5.00 per share, and 25,000,000 shares of preferred stock, par
value $25.00 per share. The preferred stock is issuable in one or more series,
with such terms, and at such times and for such consideration as the Board of
Directors of PIB determines. As of the date of this Prospectus, there were
issued and outstanding no shares of preferred stock. All of the common stock of
PIB is owned by the Corporation.
GENERAL
Under the PIB's Certificate of Incorporation, the Board of Directors of the
Corporation is authorized, without further stockholder action, to provide for
the issuance of up to 25,000,000 shares of preferred stock, par value $25.00 per
share, in one or more series, with such designations of titles; dividend rates;
special or relative rights in the event of a liquidation, distribution or sale
of assets or dissolution or winding up of PIB; sinking fund provisions; any
redemption or purchase account provisions; conversion provisions; and voting
rights, as shall be set forth as and when established by the Board of Directors
of PIB. The shares of any series of PIB Preferred Stock will be, when issued,
fully paid and nonassessable and holders thereof shall have no preemptive rights
in connection therewith.
The liquidation preference of any series of the PIB Preferred Stock is not
necessarily indicative of the price at which shares of such series of PIB
Preferred Stock will actually trade at or after the time of their issuance. The
market price of any series of PIB Preferred Stock can be expected to fluctuate
with changes in market and economic conditions, the financial condition and
prospects of the Corporation and other factors that generally influence the
market prices of securities.
RANK
Any series of PIB Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding up and dissolution, rank (i) senior to all
classes of common stock of PIB and with all equity securities issued by PIB the
terms of which specifically provide that such equity securities will rank junior
to the PIB Preferred Stock (collectively referred to as the "PIB Junior
Securities"); (ii) on a parity with all equity securities issued by PIB, the
terms of which specifically provide that such equity securities will rank on a
parity with the PIB Preferred Stock (collectively referred to as the "PIB Parity
Securities"); and (iii) junior to all equity securities issued by PIB, the terms
of which specifically provide that such equity securities will rank senior to
the PIB Preferred Stock (collectively referred to as the "PIB Senior
Securities"). As used in any Certificate of Amendment for these purposes, the
term "equity securities" will not include debt securities convertible into or
exchangeable for equity securities.
DIVIDENDS
Holders of each series of PIB Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors of PIB out of funds legally
available therefor, cash dividends at such rates and on such dates as are set
forth in the Prospectus Supplement relating to such series of the PIB Preferred
Stock. Dividends will be payable to holders of record of the PIB Preferred Stock
as they appear on the books of PIB on such record dates as shall be fixed by the
Board of Directors. Dividends on any series of PIB Preferred Stock may be
cumulative or non-cumulative. PIB's ability to pay dividends on its Preferred
Stock is subject to
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policies established by the Federal Reserve Board. See "Certain Regulatory
Matters -- Dividend Restrictions."
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any PIB Parity Securities unless dividends shall have
been paid or set apart for such payment on the PIB Preferred Stock. If full
dividends are not so paid, the PIB Preferred Stock shall share dividends pro
rata with the PIB Parity Securities.
The holders of any series of shares of PIB Preferred Stock at the close of
business on a dividend payment record date will be entitled to receive the
dividend payable on such shares (except that holders of shares called for
redemption on a redemption date occurring between such record date and the
dividend payment date shall not be entitled to receive such dividend on such
dividend payment date but instead will receive accrued and unpaid dividends to
such redemption date) on the corresponding dividend payment date notwithstanding
the conversion thereof or PIB's default in payment of the dividend due. Except
as provided above, PIB will make no payment or allowance for unpaid dividends,
whether or not in arrears, on converted shares or for dividends on the shares of
preferred stock issued upon conversion.
CONVERSION
The Prospectus Supplement for any series of the PIB Preferred Stock will
state the terms, if any, on which shares of that series are convertible into
shares of another series of preferred stock of PIB.
For any series of PIB Preferred Stock which is convertible, PIB shall at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued preferred stock or shares of preferred
stock held in its treasury or both, for the purpose of effecting the conversion
of the shares of such series of PIB Preferred Stock, the full number of shares
of preferred stock then deliverable upon the conversion of all outstanding
shares of such series.
No fractional shares or scrip representing fractional shares of preferred
stock will be issued upon the conversion of shares of any series of convertible
PIB Preferred Stock. Each holder to whom fractional shares would otherwise be
issued will instead be entitled to receive, at PIB's election, either (a) a cash
payment equal to the current market price of such holder's fractional interest
or (b) a cash payment equal to such holder's proportionate interest in the net
proceeds (following the deduction of applicable transaction costs) from the sale
promptly by an agent, on behalf of such holders, of shares of preferred stock
representing the aggregate of such fractional shares.
EXCHANGEABILITY
If so determined by the Board of Directors of PIB, the holders of shares of
PIB Preferred Stock of any series may be obligated at any time or at maturity to
exchange such shares for preferred stock or debt securities of PIB. The terms of
any such exchange and any such preferred stock or debt securities will be
described in the Prospectus Supplement relating to such series of PIB Preferred
Stock.
REDEMPTION
A series of PIB Preferred Stock may be redeemable at any time, in whole or
in part, at the option of PIB or the holder thereof upon terms and at the
redemption prices set forth in the Prospectus Supplement relating to such
series.
In the event of partial redemptions of PIB Preferred Stock, whether by
mandatory or optional redemption, the shares to be redeemed will be determined
by lot or pro rata, as may be determined by the Board of Directors of PIB or by
any other method determined to be equitable by the Board of Directors.
On or after a redemption date, unless PIB defaults in the payment of the
redemption price, dividends will cease to accrue on shares of PIB Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the redemption price.
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Under current regulations, bank holding companies may not exercise any
option to redeem shares of preferred stock included as Tier 1 capital, or
exchange such preferred stock for debt securities, without the prior approval of
the Federal Reserve Board. Ordinarily, the Federal Reserve Board would not
permit such a redemption unless (1) the shares are redeemed with the proceeds of
a sale by the bank holding company of common stock or perpetual preferred stock
or (2) the Federal Reserve Board determines that the bank holding company's
condition and circumstances warrant the reduction of a source of permanent
capital.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
PIB, holders of each series of PIB Preferred Stock that ranks senior to the PIB
Junior Securities will be entitled to receive out of assets of PIB available for
distribution to shareholders, before any distribution is made on any PIB Junior
Securities, including common stock, distributions upon liquidation in the amount
set forth in the Prospectus Supplement relating to such series of Preferred
Stock, plus an amount equal to any accrued and unpaid dividends. If upon any
voluntary or involuntary liquidation, dissolution or winding up of PIB the
amounts payable with respect to the PIB Preferred Stock of any series and any
other PIB Parity Securities are not paid in full, the holders of the PIB
Preferred Stock of such series and the PIB Parity Securities will share ratably
in any such distribution of assets of PIB in proportion to the full liquidation
preferences to which each is entitled. After payment of the full amount of the
liquidation preference to which they are entitled, the holders of such series of
PIB Preferred Stock will not be entitled to any further participation in any
distribution of assets of PIB.
VOTING RIGHTS
Except as indicated in the Prospectus Supplement relating to a particular
series of PIB Preferred Stock, or except as expressly required by applicable
law, the holders of the PIB Preferred Stock will have no voting rights.
GUARANTEE
Unless otherwise specified in the applicable Prospectus Supplement, the
Corporation will guarantee the punctual payment of (i) any accrued and unpaid
dividends, whether or not declared, on the PIB Preferred Stock of any series,
(ii) the redemption price for any shares of PIB Preferred Stock called or
redemption at the option of PIB or the holder thereof in accordance with the
terms of such series of PIB Preferred Stock, (iii) the liquidation preference of
PIB Preferred Stock and (iv) any additional amounts with respect to a series of
PIB Preferred Stock.
The Guarantee of the PIB Preferred Stock shall constitute an unsecured
obligation of the Corporation and will rank junior to all liabilities of the
Corporation. The Guarantee will rank senior to the Corporation's common stock
and shall have such rank relative to the preferred stock of the Corporation as
shall be specified in the applicable Prospectus Supplement.
VALIDITY OF OFFERED SECURITIES
The validity of the Preferred Stock and the PIB Preferred Stock will be
passed upon for the Corporation and PIB by Brunilda Santos de Alvarez, counsel
to the Corporation. The validity of the Senior Securities, the Subordinated
Securities, the PIB Senior Debt Securities, the PIB Subordinated Debt Securities
and the Guarantees will be passed upon for the Corporation and PIB by Ms.
Alvarez as to matters of the laws of the Commonwealth of Puerto Rico and by
Sullivan & Cromwell as to matters of New York law. The validity of the
Guaranteed Securities will be passed upon for Financial by Sullivan & Cromwell.
The validity of the Securities will be passed upon for any underwriters or
agents by counsel named in the Prospectus Supplement.
EXPERTS
The financial statements incorporated in this Prospectus by reference from
the Corporation's Annual Report on Form 10-K for the year ended December 31,
1993 have been so incorporated in reliance on the
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report of Price Waterhouse, independent public accountants, given upon the
authority of said firm as experts in auditing and accounting.
PLAN OF DISTRIBUTION
The Corporation, PIB or Financial, as the case may be, may sell Securities
to or through underwriting syndicates represented by managing underwriters, or
through one or more underwriters without a syndicate for public offering and
sale by them or may sell Securities to investors directly or through agents. Any
such underwriter or agent involved in the offer and sale of the Securities will
be named in the Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. In connection with the sale of the Securities, underwriters
may be deemed to have received compensation from the Corporation, PIB or
Financial, as the case may be, in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of the Securities
for whom they may act as agent. Underwriters may sell the Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agent.
Any compensation paid by the Corporation, PIB or Financial, as the case may
be, to underwriters or agents in connection with the offering of the Securities,
and any discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the Prospectus Supplement.
Underwriters, dealers and agents participating in the distribution of the
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Securities may
be deemed to be underwriting discounts and commissions under the Securities Act
of 1933. Underwriters, dealers and agents may be entitled, under agreements
entered into with Corporation, PIB or Financial, as the case may be, to
indemnification against certain civil liabilities, including liabilities under
the Securities Act of 1933.
All Securities will be a new issue of securities with no established
trading market. Any underwriters to whom Securities are sold by the Corporation,
PIB or Financial, as the case may be, for public offering and sale may make a
market in such Securities, but such underwriters will not be obligated to do so
and may discontinue any market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for any Securities.
Certain of the underwriters and their associates may be customers of,
engage in transactions with, and perform services for, the Corporation or its
subsidiaries in the ordinary course of business.
30
<PAGE> 34
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPRESSED OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities being registered are:
<TABLE>
<S> <C>
Registration Fee.......................................................... $172,415
Fees and Expenses of Accountants.......................................... 20,000
Fees and Expenses of Counsel.............................................. 100,000
Blue Sky Fees and Expenses................................................ 22,500
Printing and Engraving Expenses........................................... 16,000
Rating Agency Fees........................................................ 125,000
Trustee's Fees............................................................ 25,000
Miscellaneous............................................................. 10,085
--------
Total........................................................... $491,000
========
</TABLE>
- ---------------
* To be completed by Amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) The Corporation and PIB are Puerto Rico corporations.
(1) Article ELEVENTH of the Restated Certificate of Incorporation of the
Corporation provides the following:
(1) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right
of the Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at
the written request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
(2) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee or agent of the Corporation, or is or was
serving at the written request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such
II-1
<PAGE> 35
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem
proper.
(3) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in paragraph 1 or
2 of this Article ELEVENTH, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
(4) Any indemnification under paragraph 1 or 2 of this Article
ELEVENTH (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct
set forth therein. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (b) if such a
quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders.
(5) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is entitled
to be indemnified by the Corporation as authorized in this Article
ELEVENTH.
(6) The indemnification provided by this Article ELEVENTH shall not
be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
(7) By action of its Board of Directors, notwithstanding any
interest of the directors in the action, the Corporation may purchase
and maintain insurance, in such amounts as the Board of Directors deems
appropriate, on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the
written request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether
or not the Corporation would have the power or would be required to
indemnify him against such liability under the provisions of this
Article ELEVENTH or of the General Corporation Law of the Commonwealth
of Puerto Rico or of any other state of the United States or foreign
country as may be applicable.
(2) Article ELEVENTH of the Certificate of Incorporation of PIB
provides the following:
(1) PIB shall indemnify any person who was (or is a party or is
threatened to be made a party) to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, with the exception of an action brought by or in right of
PIB, by reason that such person is or was serving at the written request
of PIB as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of PIB, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
II-2
<PAGE> 36
did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of PIB and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(2) PIB shall indemnify any person who was or is a party (or is
threatened to be made a party) to any threatened, pending or completed
action or suit by or in the right of PIB to procure a judgment in its
favor by reason of the fact that said person is or was a director,
officer, employee or agent of PIB, or is or was serving at the written
request of PIB as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of PIB, except
that no indemnification shall be made in respect of any claim, issue or
manner as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to PIB unless
and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.
(3) To the extent that a director, officer, employee or agent of
PIB has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraph 1 or 2 of this
Article ELEVENTH, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(4) Any indemnification under paragraph 1 or 2 of this Article
ELEVENTH (unless ordered by a court) shall be made by PIB only as
authorized in the specific cases upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct
set forth therein. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (b) if such a
quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders.
(5) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by PIB in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors
in the specific case upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount unless it
shall ultimately be determined that he is entitled to be indemnified by
PIB as authorized in this Article ELEVENTH.
(6) The indemnification provided by this Article ELEVENTH shall not
be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
(7) By action of its Board of Directors, notwithstanding any
interest of the directors in the action, PIB may purchase and maintain
insurance, in such amounts as the Board of Directors deems appropriate,
on behalf of any person who is or was a director, officer, employee or
agent of PIB, or is or was serving at the written request of PIB as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not PIB would have the
power or would be required to indemnify him against such liability under
the provisions of this Article ELEVENTH or of the General Corporation
Law of the Commonwealth of Puerto Rico or of any other state of the
United States or foreign country as may be applicable.
II-3
<PAGE> 37
(b) Financial is a Delaware corporation.
(1) Section 102 of the Delaware General Corporation Law allows a
corporation to eliminate the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except in cases where the director breached
his duty of loyalty, failed to act in good faith, engaged in intentional
misconduct or knowing violation of law, authorized the unlawful payment of
a dividend or approved an unlawful stock repurchase or obtained an improper
personal benefit. Section 145 of the Delaware General Corporation Law, as
amended, provides that a corporation may indemnify any person who was or is
a party or is threatened to be a party to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in right of the
Corporation, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at its request in
such capacity in another corporation or business association against
expenses (including attorneys' fees), judgements, fines and amounts paid in
settlement, actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
(2) Section 6.4 of the By-laws of Financial provides the following:
Section 6.4. Indemnification of Directors, Officers and
Employees. The Corporation shall indemnify to the full extent permitted
by law any person made or threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person or such person's
testator or intestate is or was a director, officer or employee of the
Corporation or serves or served at the request of the Corporation any
other enterprise as a director, officer or employee. Expenses, including
attorneys' fees, incurred by any such person in defending any such
action, suit or proceeding shall be paid or reimbursed by the
Corporation promptly upon receipt by it of an undertaking of such person
to repay such expenses if it shall ultimately be determined that such
person is so entitled to be indemnified by the Corporation. The rights
provided to any person by this by-law shall be enforceable against the
Corporation by such person who shall be presumed to have relied upon it
in serving or continuing to serve as a director, officer or employee as
provided above. No amendment of this by-law shall impair the rights of
any person arising at any time with respect to events occurring prior to
such amendment. For purposes of this by-law, the term "Corporation"
shall include any predecessor of the Corporation and any constituent
corporation (including any constituent of a constituent) absorbed by the
Corporation in a consolidation or merger; the term "other enterprise"
shall include any corporation, partnership, joint venture, trust or
employee benefit plan; service "at the request of the Corporation" shall
include service as a director, officer or employee of the Corporation
which imposes duties on, or involves services by, such director, officer
or employee with respect to an employee benefit plan, its participants
or beneficiaries; any excise taxes assessed on a person with respect to
an employee benefit plan shall be deemed to be indemnifiable expenses;
and action by a person with respect to an employee benefit plan which
such person reasonably believes to be in the interest of the
participants and beneficiaries of such plan shall be deemed to be action
not opposed to the best interests of the Corporation.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C> <C>
(1) -- Form of Underwriting Agreement. (Incorporated by reference from Registration
Statement No. 33-57038)
(4)(a) -- Restated Certificate of Incorporation of BanPonce Corporation, as amended
(English translation)*
(4)(b) -- Certificate of Incorporation of Popular International Bank Inc. (English
translation)*
(4)(c) -- Form of Senior Indenture of BanPonce Corporation. (Incorporated by reference
from Registration Statement No. 33-41686)
</TABLE>
II-4
<PAGE> 38
<TABLE>
<S> <C> <C>
(4)(d) -- Form of Subordinated Indenture of BanPonce Corporation (Incorporated by
reference from Registration Statement No. 33-57038)
(4)(e) -- Form of Guaranteed Indenture of BanPonce Financial Corp. (Incorporated by
reference from Registration Statement No. 33-41686)
(4)(f) -- Form of Senior Indenture of Popular International Bank Inc. (Incorporated by
reference from Registration Statement No. 33-57038)
(4)(g) -- Form of Subordinated Indenture of Popular International Bank Inc.
(Incorporated by reference from Registration Statement No. 33-57038)
(4)(h) -- Rights Agreement, dated as of August 11, 1988, between BanPonce Corporation
and Manufacturers Hanover Trust Company (Incorporated by reference from
Registration Statement No. 33-39028)
(4)(i) -- Amendment to Rights Agreement, dated as of December 11, 1990, between BanPonce
Corporation and Manufacturers Hanover Trust Company (Incorporated by reference
from Registration Statement No. 33-39028)
(5)(a) -- Opinion of Brunilda Santos de Alvarez
(5)(b) -- Opinion of Sullivan & Cromwell
(12) -- Computation of Consolidated Ratios of Earnings to Fixed Charges and Earnings
to Fixed Charges and Preferred Stock Dividends*
(23)(a) -- Consent of Independent Auditors
(23)(b) -- Consent of Counsel (included in Exhibit(5)(a) and (b))
(24) -- Powers of attorney*
(25) -- Statement of Eligibility on Form T-1 of Citibank, N.A., as Guaranteed Trustee
for the Guaranteed Securities
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Co-registrants hereby undertake:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Co-registrants pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
<PAGE> 39
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Corporation's annual report
pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered therein and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by any Co-registrant pursuant to
Rule 424(b)(1) or (4) or Rule 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.
The Corporation and PIB hereby undertake to file an application for the
purpose of determining the eligibility of the Senior Trustee, Subordinated
Trustee, PIB Senior Trustee and PIB Subordinated Trustee to act under Subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of such Act.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Co-registrants pursuant to the provisions referred to in Item 15 of this
Registration Statement, or otherwise, the Co-registrants have been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Co-registrants of expenses incurred or paid by a
director, officer or controlling person of the Co-registrants in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Co-registrants will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be goverened by the final adjudication of such
issue.
II-6
<PAGE> 40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Co-registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
amendment to this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of San Juan, Commonwealth of
Puerto Rico, on the 19th day of July, 1994.
BANPONCE CORPORATION
(Registrant)
By /s/ DAVID H. CHAFEY, JR.
------------------------------------
Name: David H. Chafey, Jr.
Title: Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on July 19, 1994 by the following persons
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
* Chairman and President (Principal Executive
- --------------------------------------------- Officer)
Richard L. Carrion
* Director
- ---------------------------------------------
Alfonso F. Ballester
* Director
- ---------------------------------------------
Juan J. Bermudez
* Director
- ---------------------------------------------
Sila Maria Calderon
* Director
- ---------------------------------------------
Francisco J. Carreras
* Director
- ---------------------------------------------
Manuel Luis Del Valle
* Director
- ---------------------------------------------
Waldemar Del Valle
* Director
- ---------------------------------------------
Luis E. Dubon, Jr.
* Director
- ---------------------------------------------
Antonio Luis Ferre
* Director
- ---------------------------------------------
Hector R. Gonzalez
* Executive Vice President and Director
- ---------------------------------------------
Jorge A. Junquera
* Director
- ---------------------------------------------
Franklin A. Mathias
</TABLE>
II-7
<PAGE> 41
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
* Director
- ---------------------------------------------
Manuel Morales, Jr.
* Director
- ---------------------------------------------
Alberto M. Paracchini
* Director
- ---------------------------------------------
Francisco Perez, Jr.
* Director
- ---------------------------------------------
Francisco M. Rexach, Jr.
* Director
- ---------------------------------------------
Felix J. Serralles Nevares
* Director
- ---------------------------------------------
Julio E. Vizcarrondo, Jr.
/s/ DAVID H. CHAFEY, JR. Executive Vice President (Principal Financial
- --------------------------------------------- Officer)
David H. Chafey, Jr.
* Senior Vice President (Principal Accounting
- --------------------------------------------- Officer)
Orlando Berges
</TABLE>
*By: /s/ DAVID H. CHAFEY, JR.,
-----------------------------------------
David H. Chafey, Jr.,
as attorney-in-fact for each of
the persons indicated
II-8
<PAGE> 42
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Co-registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
amendment to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Juan, Commonwealth of
Puerto Rico, on the 19th day of July, 1994.
POPULAR INTERNATIONAL BANK INC.
By: /s/ DAVID H. CHAFEY, JR.
------------------------------------
Name: David H. Chafey, Jr.
Title: Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on July 19, 1994 by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
* Chairman and President (Principal Executive
- --------------------------------------------- Officer)
Richard L. Carrion
* Director
- ---------------------------------------------
Alfonso F. Ballester
/s/ DAVID H. CHAFEY, JR. Executive Vice President and Director
- --------------------------------------------- (Principal Financial Officer)
David H. Chafey, Jr.
* Director
- ---------------------------------------------
Manuel L. del Valle
* Executive Vice President and Director
- ---------------------------------------------
Jorge A. Junquera
* Senior Vice President (Principal Accounting
- --------------------------------------------- Officer)
Orlando Berges
</TABLE>
*By: /s/ DAVID H. CHAFEY, JR.
-----------------------------------------
David H. Chafey, Jr.,
as attorney-in-fact for each of
the persons indicated
II-9
<PAGE> 43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Co-registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
amendment to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Juan, Commonwealth of
Puerto Rico, on the 19th day of July, 1994.
BANPONCE FINANCIAL CORP.
By: /s/ DAVID H. CHAFEY, JR.
------------------------------------
Name: David H. Chafey, Jr.
Title: Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on July 19, 1994 by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
* Chairman and President (Principal Executive
- --------------------------------------------- Officer)
Richard L. Carrion
* Director
- ---------------------------------------------
Alfonso F. Ballester
/s/ DAVID H. CHAFEY, JR. Executive Vice President and Director
- --------------------------------------------- (Principal Financial Officer and Principal
David H. Chafey, Jr. Accounting Officer)
* Director
- ---------------------------------------------
Manuel L. del Valle
* Director
- ---------------------------------------------
Thomas J. Fitzpatrick
* Executive Vice President and
- --------------------------------------------- Director
Larry B. Kesler
* Senior Vice President and Director
- ---------------------------------------------
Roberto R. Herencia
</TABLE>
*By: /s/ DAVID H. CHAFEY, JR.
-----------------------------------------
David H. Chafey, Jr.,
as attorney-in-fact for each of
the persons indicated
II-10
<PAGE> 1
EXHIBIT 5(a)
July 19, 1994
The Board of Directors
BanPonce Corporation
209 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
The Board of Directors
Popular International Bank Inc.
c/o BanPonce Corporation
209 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
The Board of Directors
BanPonce Financial Corp.
c/o CT Corporation
1209 Orange Street
Wilmington, Delaware 19801
Ladies and Gentlemen:
This opinion is delivered in connection with the registration under
the Securities Act of 1933 (the "Act") of (i) senior debt securities (the
"BanPonce Senior Debt Securities"), subordinated debt securities (the "BanPonce
Subordinated Debt Securities") and preferred stock, without par value (the
"BanPonce Preferred Stock"), of BanPonce Corporation, a Puerto Rico corporation
(the "Corporation"), (ii) senior debt securities (the "BanPonce Financial Debt
Securities") of BanPonce Financial Corp. ("Financial"), a Delaware corporation,
bearing the unconditional guarantees (the "BanPonce Financial Guarantees") of
the Corporation, and (iii) senior debt securities (the "PIB Senior Debt
Securities") bearing the unconditional guarantees (the "PIB Senior Debt
Securities Guarantees") of the Corporation, subordinated debt securities (the
"PIB Subordinated Debt
<PAGE> 2
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -2-
Securities") bearing the unconditional guarantees (the "PIB Subordinated Debt
Securities Guarantees") of the Corporation and preferred stock, par value
$25.00 per share (the "PIB Preferred Stock"), bearing the unconditional
guarantees (the "PIB Preferred Stock Guarantees") of the Corporation, of
Popular International Bank Inc. ("PIB"), a Puerto Rico corporation (the
BanPonce Senior Debt Securities, the BanPonce Subordinated Debt Securities, the
BanPonce Financial Debt Securities, the PIB Senior Debt Securities and the PIB
Subordinated Debt Securities are sometimes collectively referred to herein as
the "Debt Securities", the BanPonce Financial Guarantees, the PIB Senior Debt
Securities Guarantees, the PIB Subordinated Debt Securities Guarantees and the
PIB Preferred Stock Guarantees are sometimes collectively referred to herein
as the "Guarantees", and the Debt Securities, the BanPonce Preferred Stock
and the PIB Preferred Stock are sometimes collectively referred to herein as
the "Securities"). The Securities are limited to an aggregate initial
offering price not to exceed $500,000,000. I, as Counsel to the Corporation,
have examined such corporate records, certificates and other documents, and
such questions of law, as I have considered necessary or appropriate for the
purposes of this opinion. On the basis of such examination, I advise you that,
in my opinion:
(i) Each of the Corporation and PIB has been duly incorporated and
is an existing corporation in good standing under the laws of the Commonwealth
of Puerto Rico.
(ii) When the registration statement relating to the Securities and
the Guarantees (the "Registration Statement") has become effective under the
Act, the indenture relating to the BanPonce Senior Debt Securities (the
"BanPonce Senior Indenture") has been duly executed and delivered, the terms of
the BanPonce Senior Debt Securities and of their issuance and sale have been
duly established in conformity with the BanPonce Senior Indenture so as not to
violate any applicable law or result in a default under or breach of any
agreement or instrument binding upon the Corporation and so as to comply with
any requirement or restriction imposed by any court or governmental body
having jurisdiction over the
<PAGE> 3
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -3-
Corporation, and the BanPonce Senior Debt Securities have been duly executed
and authenticated in accordance with the BanPonce Senior Indenture and issued
and sold as contemplated in the Registration Statement, the BanPonce Senior
Debt Securities will constitute valid and legally binding obligations of the
Corporation, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
(iii) When the Registration Statement has become effective under the
Act, the indenture relating to the BanPonce Subordinated Debt Securities (the
"BanPonce Subordinated Indenture") has been duly executed and delivered, the
terms of the BanPonce Subordinated Debt Securities and of their issuance and
sale have been duly established in conformity with the BanPonce Subordinated
Indenture so as not to violate any applicable law or result in a default under
or breach of any agreement or instrument binding upon the Corporation and so as
to comply with any requirement or restriction imposed by any court or
governmental body having jurisdiction over the Corporation, and the BanPonce
Subordinated Debt Securities have been duly executed and authenticated in
accordance with the BanPonce Subordinated Indenture and issued and sold as
contemplated in the Registration Statement, the BanPonce Subordinated Debt
Securities will constitute valid and legally binding obligations of the
Corporation, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
(iv) When the Registration Statement has become effective under
the Act, the indenture relating to the BanPonce Financial Debt Securities
(the "BanPonce Financial Indenture") has been duly executed and delivered, the
terms of the BanPonce Financial Debt Securities and of their issuance and sale
have been duly established in conformity with the BanPonce Financial Indenture
so as not to violate any applicable law or result in a default under or breach
of
<PAGE> 4
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -4-
any agreement or instrument binding upon Financial or the Corporation and so as
to comply with any requirement or restriction imposed by any court or
governmental body having jurisdiction over Financial or the Corporation, the
BanPonce Financial Debt Securities have been duly executed and authenticated,
and the BanPonce Financial Guarantees have been duly executed, each in
accordance with the BanPonce Financial Indenture, and the BanPonce Financial
Debt Securities have been issued and sold as contemplated in the Registration
Statement, the BanPonce Financial Debt Securities will constitute valid and
legally binding obligations of Financial and the BanPonce Financial Guarantees
will constitute valid and legally binding obligations of the Corporation, in
each case subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
(v) When the Registration Statement has become effective under the
Act, the indenture relating to the PIB Senior Debt Securities (the "PIB Senior
Indenture") has been duly executed and delivered, the terms of the PIB Senior
Debt Securities and of their issuance and sale have been duly established in
conformity with the PIB Senior Indenture so as not violate any applicable law
or result in a default under or breach of any agreement or instrument binding
upon PIB or the Corporation and so as to comply with any requirement or
restriction imposed by any court or governmental body having jurisdiction
over PIB or the Corporation, the PIB Senior Debt Securities have been duly
executed and authenticated and the PIB Senior Debt Securities Guarantees have
been duly executed, each in accordance with the PIB Senior Indenture, and the
PIB Senior Debt Securities have been issued and sold as contemplated in the
Registration Statement, the PIB Senior Debt Securities will constitute valid
and legally binding obligations of PIB and the PIB Senior Debt Securities
Guarantees will constitute valid and legally binding obligations of the
Corporation, in each case subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
<PAGE> 5
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -5-
applicability relating to or affecting creditors' rights and to general equity
principles.
(vi) When the Registration Statement has become effective under
the Act, the indenture relating to the PIB Subordinated Debt Securities
(the "PIB Subordinated Indenture") has been duly executed and delivered, the
terms of the PIB Subordinated Debt Securities and of their issuance and sale
have been duly established in conformity with the PIB Subordinated Indenture so
as not to violate any applicable law or result in a default under or breach of
any agreement or instrument binding upon PIB or the Corporation and so as to
comply with any requirement or restriction imposed by any court or governmental
body having jurisdiction over PIB or the Corporation, and the PIB Subordinated
Debt Securities have been duly executed and authenticated and the PIB
Subordinated Debt Securities Guarantees have been duly executed, each in
accordance with the PIB Subordinated Indenture, and the PIB Subordinated Debt
Securities have been issued and sold as contemplated in the Registration
Statement, the PIB Subordinated Debt Securities will constitute valid and
legally binding obligations of PIB and the PIB Subordinated Debt Securities
Guarantees will constitute valid and legally binding obligations of the
Corporation, in each case subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(vii) When the Registration Statement has become effective under the
Act, a certificate with respect to the BanPonce Preferred Stock has been duly
filed and recorded with the Department of State of the Commonwealth of Puerto
Rico as required by the General Corporation Law of the Commonwealth of Puerto
Rico, the terms of the BanPonce Preferred Stock and of its issue and sale have
been duly established in conformity with the Corporation's restated certificate
of incorporation so as not to violate any applicable law or result in a default
under or breach of any agreement or instrument binding upon the Corporation and
so as to comply with any requirement or restriction imposed by
<PAGE> 6
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp.
-6-
any court or governmental body having jurisdiction over the Corporation, all
regulatory consents or approvals for the issuance and sale of the BanPonce
Preferred Stock have been obtained and the BanPonce Preferred Stock has been
duly issued and sold as contemplated by the Registration Statement, the
BanPonce Preferred Stock will be validly issued, fully paid, and nonassessable.
(viii) When the Registration Statement has become effective under the
Act, a certificate with respect to the PIB Preferred Stock has been duly filed
and recorded with the Department of State of the Commonwealth of Puerto Rico as
required by the General Corporation Law of the Commonwealth of Puerto Rico, the
terms of the PIB Preferred Stock and of its issue and sale have been duly
established in conformity with PIB's certificate of incorporation so as not to
violate any applicable law or result in a default under or breach of any
agreement or instrument binding upon PIB or the Corporation and so as to comply
with any requirement or restriction imposed by any court or governmental body
having jurisdiction over PIB or the Corporation, all regulatory consents or
approvals for the issuance and sale of the PIB Preferred Stock and for the
issuance of the PIB Preferred Stock Guarantees have been obtained, and the PIB
Preferred Stock has been duly issued and sold as contemplated by the
Registration Statement, the PIB Preferred Stock will be validly issued, fully
paid and nonassessable, and when the PIB Preferred Stock Guarantees have been
duly executed, the PIB Preferred Stock Guarantees will constitute valid and
legally binding obligations of the Corporation, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
I note that, as of the date of this opinion, a judgment for money in
an action based on a Debt Security denominated in a foreign currency or
currency unit, or on a related Guarantee, in a Federal or state court in the
United States ordinarily would be enforced in the United States only in United
States dollars. The date used to determine the rate of conversion of the
foreign currency or currency unit in
<PAGE> 7
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp.
-7-
which a particular Debt Security is denominated into United States dollars will
depend on various factors, including which court renders the judgment. In the
case of a Debt Security denominated in a foreign currency, or a related
Guarantee, a state court in the State of New York rendering a judgment on a
Debt Security, or on a related Guarantee, would be required under Section 27 of
the New York Judiciary Law to render such judgment in the foreign currency in
which the Debt Security is denominated, and such judgement would be converted
into United States dollars at the exchange rate prevailing on the date of entry
of the judgment.
The foregoing opinion is limited to the Federal laws of the United
States, the General Corporation Law of the State of Delaware, the laws of the
State of New York and the Commonwealth of Puerto Rico, and I am expressing no
opinion as to the effect of the laws of any other jurisdiction. With respect
to all matters of the laws of the State of New York, I have relied upon the
opinion, dated the date hereof, of Sullivan & Cromwell, and my opinion is
subject to the same assumptions, qualifications and limitations with respect
to such matters as are contained in such opinion of Sullivan & Cromwell.
Also, I have relied as to certain matters on information obtained from
public officials, officers of the Corporation, Financial and PIB, and other
sources believed by me to be responsible.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the heading "Validity
of Offered Securities" in the Prospectus contained in the Registration
Statement. In
<PAGE> 8
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp.
-8-
giving such consent, I do not thereby admit that I am in the category of
persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ BRUNILDA SANTOS DE ALVAREZ
------------------------------
Brunilda Santos de Alvarez
<PAGE> 1
EXHIBIT 5(b)
July 19, 1994
BanPonce Corporation,
209 Munoz Rivera Avenue,
Hato Rey, Puerto Rico 00918.
Popular International Bank Inc.,
c/o BanPonce Corporation,
209 Munoz Rivera Avenue,
Hato Rey, Puerto Rico 00918.
BanPonce Financial Corp.,
c/o CT Corporation,
1209 Orange Street,
Wilmington, Delaware 19801.
Ladies and Gentlemen:
This opinion is delivered in connection with the registration under
the Securities Act of 1933 (the "Act") of (i) senior debt securities (the
"BanPonce Senior Debt Securities"), subordinated debt securities (the "BanPonce
Subordinated Debt Securities") and preferred stock, without par value (the
"BanPonce Preferred Stock"), of BanPonce Corporation, a Puerto Rico corporation
(the "Corporation"), (ii) senior debt securities (the "BanPonce Financial Debt
Securities") of BanPonce Financial Corp. ("Financial"), a
<PAGE> 2
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -2-
Delaware corporation, bearing the unconditional guarantees (the "BanPonce
Financial Guarantees") of the Corporation, and (iii) senior debt securities
(the "PIB Senior Debt Securities") bearing the unconditional guarantees (the
"PIB Senior Debt Securities Guarantees") of the Corporation, subordinated debt
securities (the "PIB Subordinated Debt Securities") bearing the unconditional
guarantees (the "PIB Subordinated Debt Securities Guarantees") of the
Corporation and preferred stock, par value $25.00 per share (the "PIB Preferred
Stock"), bearing the unconditional guarantees (the "PIB Preferred Stock
Guarantees") of the Corporation, of Popular Bank International Inc. ("PIB"), a
Puerto Rico corporation (the BanPonce Senior Debt Securities, the BanPonce
Subordinated Debt Securities, the BanPonce Financial Debt Securities, the PIB
Senior Debt Securities and the PIB Subordinated Debt Securities are sometimes
collectively referred to herein as the "Debt Securities"; the BanPonce
Financial Guarantees, the PIB Senior Debt Securities Guarantees, the PIB
Subordinated Debt Securities Guarantees and the PIB Preferred Stock Guarantees
are sometimes collectively referred to herein as the
<PAGE> 3
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -3-
"Guarantees"; and the Debt Securities, the BanPonce Preferred Stock and the PIB
Preferred Stock are sometimes collectively referred to herein as the
"Securities"). The Securities are limited to an aggregate initial offering
price not to exceed $500,000,000. We, as your counsel, have examined such
corporate records, certificates and other documents, and such questions of law,
as we have considered necessary or appropriate for the purposes of this
opinion. On the basis of such examination, we advise you that, in our opinion:
(i) When the registration statement relating to the Securities and
the Guarantees (the "Registration Statement") has become effective under the
Act, the indenture relating to the BanPonce Senior Debt Securities (the
"BanPonce Senior Indenture") has been duly executed and delivered, the terms of
the BanPonce Senior Debt Securities and of their issuance and sale have been
duly established in conformity with the BanPonce Senior Indenture so as not to
violate any applicable law or result in a default under or breach of any
agreement or instrument binding upon the Corporation and so as to comply with
any requirement or
<PAGE> 4
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -4-
restriction imposed by any court or governmental body having jurisdiction over
the Corporation, and the BanPonce Senior Debt Securities have been duly
executed and authenticated in accordance with the BanPonce Senior Indenture and
issued and sold as contemplated in the Registration Statement, the BanPonce
Senior Debt Securities will constitute valid and legally binding obligations of
the Corporation, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
(ii) When the Registration Statement has become effective under the
Act, the indenture relating to the BanPonce Subordinated Debt Securities (the
"BanPonce Subordinated Indenture") has been duly executed and delivered, the
terms of the BanPonce Subordinated Debt Securities and of their issuance and
sale have been duly established in conformity with the BanPonce Subordinated
Indenture so as not to violate any applicable law or result in a default under
or breach of any agreement or instrument binding upon the Corporation and so as
to comply with any requirement or
<PAGE> 5
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -5-
restriction imposed by any court or governmental body having jurisdiction over
the Corporation, and the BanPonce Subordinated Debt Securities have been duly
executed and authenticated in accordance with the BanPonce Subordinated
Indenture and issued and sold as contemplated in the Registration Statement,
the Banponce Subordinated Debt Securities will constitute valid and legally
binding obligations of the Corporation, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(iii) When the Registration Statement has become effective under the
Act, the indenture relating to the BanPonce Financial Debt Securities (the
"BanPonce Financial Indenture") has been duly executed and delivered, the terms
of the BanPonce Financial Debt Securities and of their issuance and sale have
been duly established in conformity with the BanPonce Financial Indenture so as
not to violate any applicable law or result in a default under or breach of any
agreement or instrument binding upon Financial or the
<PAGE> 6
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -6-
Corporation and so as to comply with any requirement or restriction imposed by
any court or governmental body having jurisdiction over Financial or the
Corporation, the BanPonce Financial Debt Securities have been duly executed and
authenticated, and the BanPonce Financial Guarantees have been duly executed,
each in accordance with the BanPonce Financial Indenture, and the BanPonce
Financial Debt Securities have been issued and sold as contemplated in the
Registration Statement, the BanPonce Financial Debt Securities will constitute
valid and legally binding obligations of Financial and the BanPonce Financial
Guarantees will constitute valid and legally binding obligations of the
Corporation, in each case subject to the bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(iv) When the Registration Statement has become effective under the
Act, the indenture relating to the PIB Senior Debt Securities (the "PIB Senior
Indenture") has been duly executed and delivered, the terms of the PIB Senior
<PAGE> 7
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -7-
Debt Securities and of their issuance and sale have been duly established in
conformity with the PIB Senior Indenture so as not to violate any applicable
law or result in a default under or breach of any agreement or instrument
binding upon PIB or the Corporation and so as to comply with any requirement or
restriction imposed by any court or governmental body having jurisdiction over
PIB or the Corporation, the PIB Senior Debt Securities have been duly executed
and authenticated and the PIB Senior Debt Securities Guarantees have been duly
executed, each in accordance with the PIB Senior Indenture, and the PIB Senior
Debt Securities have been issued and sold as contemplated in the Registration
Statement, the PIB Senior Debt Securities will constitute valid and legally
binding obligations of PIB and the PIB Senior Debt Securities Guarantees will
constitute valid and legally binding obligations of the Corporation, in each
case subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
<PAGE> 8
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -8-
(v) When the Registration Statement has become effective under the
Act, the indenture relating to the PIB Subordinated Debt Securities (the "PIB
Subordinated Indenture") has been duly executed and delivered, the terms of the
PIB Subordinated Debt Securities and of their issuance and sale have been duly
established in conformity with the PIB Subordinated Indenture so as not to
violate any applicable law or result in a default under or breach of any
agreement or instrument binding upon PIB or the Corporation and so as to comply
with any requirement or restriction imposed by any court or governmental body
having jurisdiction over PIB or the Corporation, the PIB Subordinated Debt
Securities have been duly executed and authenticated and the PIB Subordinated
Debt Securities Guarantees have been duly executed, each in accordance with the
PIB Subordinated Indenture, and the PIB Subordinated Debt Securities have been
issued and sold as contemplated in the Registration Statement, the PIB
Subordinated Debt Securities will constitute valid and legally binding
obligations of PIB and the PIB Subordinated Debt Securities Guarantees will
constitute valid and legally binding
<PAGE> 9
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -9-
obligations of the Corporation, in each case subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
We note that, as of the date of this opinion, a judgment for money in
an action based on a Debt Security denominated in a foreign currency or
currency unit, or on a related Guarantee, in a Federal or state court in the
United States ordinarily would be enforced in the United States only in United
States dollars. The date used to determine the rate of conversion of the
foreign currency or currency unit in which a particular Debt Security is
denominated into United States dollars will depend on various factors, including
which court renders the judgment. In the case of a Debt Security denominated
in a foreign currency, or a related Guarantee, a state court in the State of
New York rendering a judgment on a Debt Security, or on a related Guarantee,
would be required under Section 27 of the New York Judiciary Law to render such
judgment in the foreign currency in which the Debt Security is denominated, and
such
<PAGE> 10
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -10-
judgment would be converted into United States dollars at the exchange rate
prevailing on the date of entry of the judgment.
The foregoing opinion is limited to the Federal laws of the United
States, the laws of the State of New York and the Commonwealth of Puerto Rico,
and the General Corporation Law of the State of Delaware, and we are expressing
no opinion as to the effect of the laws of any other jurisdiction. With
respect to all matters of the laws of the Commonwealth of Puerto Rico, we have
relied upon the opinion, dated the date hereof, of Brunilda Santos de Alvarez,
Counsel to the Corporation, and our opinion is subject to the same assumptions,
qualifications and limitations with respect to such matters as are contained in
such opinion of Brunilda Santos de Alvarez.
Also, we have relied as to certain matters on information obtained
from public officials, officers of the Corporation, Financial and PIB, and
other sources believed by us to be responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the
<PAGE> 11
BanPonce Corporation
Popular International Bank Inc.
BanPonce Financial Corp. -11-
references to us under the heading "Validity of Offered Securities" in the
Prospectus contained in the Registration Statement. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act.
Very truly yours,
/s/ SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT (23)(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
BanPonce Corporation
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement No. 33-54299 on Form S-3 of
our report dated January 28, 1994 which appears on page 28 of the 1993 Annual
Report to Shareholders of BanPonce Corporation, which is incorporated by
reference in BanPonce Corporation's Annual Report on Form 10-K for the year
ended December 31, 1993. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE
- --------------------
Price Waterhouse
San Juan, Puerto Rico
July 15, 1994
<PAGE> 1
Securities Act of 1993 File No: 33-54299
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility of a Trustee pursuant to
Section 305(b)(2)_____
__________________________________
CITIBANK, N.A.
(Exact name of trustee as specified in its charter)
13-5266470
(I.R.S. employer
identification no.)
399 Park Avenue, New York, New York 10043
(Address of principal executive office) (Zip Code)
____________________________________
BANPONCE CORPORATION
(Exact name of obligor as specified in its charter)
Puerto Rico 66-0416582
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
209 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
(Address of Principal Executive Offices) (Zip Code)
BANPONCE FINANCIAL CORP.
(Exact name of obligor as specified in its charter)
Delaware 66-0476353
(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification no.)
c/o CT Corporation 19801
1209 Orange Street (Zip Code)
Wilmington, Delaware
(Address of principal executive office)
__________________________________
Guaranteed Securities
(Title of the indenture securities)
<PAGE> 2
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
<TABLE>
<CAPTION>
Name Address
----- -------
<S> <C>
Comptroller of the Currency Washington, D.C.
Federal Reserve Bank of New York New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None.
Item 16. List of Exhibits.
Exhibit 1 - Copy of Articles of Association of the Trustee, as
now in effect. (Exhibit 1 to T-1 to Registration Statement No.
2-79983)
Exhibit 2 - Copy of certificate of authority of the Trustee to
commence business. (Exhibit 2 to T-1 to Registration Statement
No. 2-29577).
Exhibit 3 - Copy of authorization of the Trustee to exercise
corporate trust powers. (Exhibit 3 to T-1 to Registration
Statement No. 2-55519)
Exhibit 4 - Copy of existing By-Laws of the Trustee. (Exhibit
4 to T-1 to Registration Statement No. 33-34988)
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the Trustee required by Section
321(b) of the Trust Indenture Act of 1939. (Exhibit 6 to T-1
to Registration Statement No. 33-19227.)
Exhibit 7 - Copy of the latest Report of Condition of Citibank,
N.A. (as of March 31, 1994 - attached)
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
__________________________
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Citibank, N.A., a national banking association organized and existing
under the laws of the United States of America, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York and State of New York, on the 13th day
of July, 1994.
CITIBANK, N.A.
By /s/ JOHN J. BYRNES
------------------
John J. Byrnes
Vice President
<PAGE> 3
EXHIBIT 7
Charter No. 1461
Comptroller of the Currency
Northeastern District
REPORT OF CONDITION
CONSOLIDATING
DOMESTIC AND FOREIGN
SUBSIDIARIES OF
CITIBANK, N.A.
of New York in the State of New York, at the close of business on March
31, 1994, published in response to call made by Comptroller of the Currency,
under Title 12. United States Code, Section 161. Charter Number 1461
Comptroller of the Currency Northeastern District.
ASSETS
Thousands
of Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin $ 6,452,000
Interest-bearing balances 7,339,000
Securities:
Held-to-maturity securities 3,923,000
Available-for-sale securities 9,604,000
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFs:
Federal funds sold 1,416,000
Securities purchased under agreements to resell 3,128,000
Loans and lease financing receivables:
Loans and leases, net of unearned income- $116,456,000
LESS: Allowance for loan and lease losses- 3,578,000
------------
Loans and leases, net of unearned income and allowance 112,878,000
Assets held in trading accounts 38,412,000
Premises and fixed assets (including capitalized leases) 3,107,000
Other real estate owned 3,170,000
Investments in unconsolidated subsidiaries and associated
companies 1,008,000
Customers' liability to this bank on acceptances outstanding 1,368,000
Intangible assets 15,000
Other assets 7,397,000
------------
TOTAL ASSETS $199,217,000
============
LIABILITIES
Deposits:
In domestic offices $ 34,936,000
Noninterest-bearing $12,668,000
Interest-bearing 22,268,000
-----------
In foreign offices, Edge and Agreement subsidiaries and IBFs 100,380,000
Noninterest-bearing 6,932,000
Interest-bearing 93,448,000
-----------
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased 2,556,000
Securities sold under agreements to repurchase 1,568,000
Trading liabilities 21,074,000
Other borrowed money:
With original maturity of one year or less 7,837,000
With original maturity of more than one year 3,844,000
Mortgage indebtedness and obligations under capitalized leases 220,000
Bank's liability on acceptances executed and outstanding 1,386,000
Notes and debentures subordinated to deposits 4,700,000
Other liabilities 9,121,000
------------
TOTAL LIALIBITIES $187,622,000
------------
EQUITY CAPITAL
Common stock $ 751,000
Surplus 5,928,000
Undivided profits and capital reserves 5,373,000
Net unrealized holding gains (losses) on available-for-sale
securities 191,000
Cumulative foreign currency translation adjustments (648,000)
------------
TOTAL EQUITY CAPITAL $ 11,595,000
------------
TOTAL LIABILITIES AND EQUITY CAPITAL $199,217,000
============
<PAGE> 4
I, Roger W. Trupin, Controller of the above-named bank do hereby
declare that this Report of Condition is true and correct to the best of my
knowledge and belief.
ROGER W. TRUPIN
We, the undersigned directors, attest to the correctness of this Report
of Condition. We declare that it has been examined by us, and to the best of
our knowledge and belief has been prepared in conformance with the instructions
and is true and correct.
PAUL J. COLLINS )
PEI-YUAN CHIA ) Directors
CHRISTOPHER J. STEFFEN )
