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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-30897
PROSPECTUS
POPULAR, INC.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
COMMON STOCK, PAR VALUE $6 PER SHARE
This Prospectus describes the Popular, Inc. Dividend Reinvestment and Stock
Purchase Plan. Popular wanted to amend its currently existing Dividend
Reinvestment and Stock Purchase Plan to provide certain new features. This
prospectus describes the Plan as amended. The Plan promotes long-term ownership
in Popular by offering:
- A simple, cost-effective method for you to purchase shares of common
stock of Popular, without payment of brokerage commissions, fees or
service charges;
- A way to increase your Popular holdings by reinvesting your cash
dividends; and
- The opportunity for you to purchase additional shares of Popular common
stock by making optional cash payments.
You no longer have to be a current Popular shareholder to participate in the
Plan. You can purchase your first shares of Popular common stock through the
Plan by making an initial investment of not less than $100 or more than $10,000.
If you currently participate in the Plan, you will continue to participate in
the Plan automatically.
Popular's principal executive offices are located at 209 Munoz Rivera Avenue,
Hato Rey, Puerto Rico 00918, Telephone number (787) 765-9800.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY COMMONWEALTH OF PUERTO
RICO OR STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES
OR HAS DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
SECURITIES PURCHASED OR HELD UNDER THE TERMS OF THE PLAN ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS OF ANY BANK OR SAVINGS ASSOCIATION, ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENTAL AGENCY AND MAY LOSE VALUE. THERE IS NO BANK
GUARANTEE ATTACHED TO SUCH SECURITIES.
The date of this Prospectus is December 14, 1998.
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TABLE OF CONTENTS
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PAGE
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The Company........................ 3
Use of Proceeds.................... 3
Description of the Plan............ 3
Purpose.......................... 3
Advantages and Disadvantages of
Participation in Plan......... 3
Participation.................... 4
Purchases Under the Plan......... 6
Optional Cash Payments........... 7
Costs............................ 8
Administration................... 8
Reports to Participants.......... 9
Certificates for Shares.......... 9
Withdrawals, Sale of Shares and
Termination................... 9
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<TABLE>
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PAGE
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Certain Tax Consequences of
Participation in the Plan..... 10
General Tax Consequences......... 10
Puerto Rico Income Tax
Consequences.................. 11
Federal Income Tax
Consequences.................. 13
Other Information................ 13
Description of Capital Stock....... 15
Common Stock..................... 16
Stockholder Rights Plan.......... 17
Preferred Stock.................. 17
Incorporation of Certain Documents
by Reference..................... 19
Available Information.............. 19
Forward Looking Statements......... 20
Legal Opinion...................... 20
Experts............................ 20
</TABLE>
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Throughout this prospectus, we refer to Popular, Inc., as either "Popular"
or the "Company", to "Banco Popular de Puerto Rico" as "Banco Popular" or the
"Bank" and to the Popular, Inc. Dividend Reinvestment and Stock Purchase Plan as
the "Plan".
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You should rely only on the information incorporated by reference or
contained in this prospectus. No one is authorized to provide prospective
investors with information different from that incorporated by reference or
contained in this prospectus. This prospectus is not an offer to sell nor is it
seeking an offer to buy these securities in any jurisdiction where the offer or
sale is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date of this prospectus.
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THE COMPANY
The Company is a diversified financial services company headquartered in
San Juan, Puerto Rico. It is the largest financial institution headquartered in
Puerto Rico. The Company is a bank holding company and is subject to supervision
and regulation by the Board of Governors of the Federal Reserve System.
The Company provides a wide variety of financial services through its
banking and non-banking subsidiaries. Banco Popular de Puerto Rico, the largest
commercial bank in Puerto Rico, is its principal banking subsidiary. Banco
Popular was established in 1893 and is a consumer oriented bank that provides a
broad array of banking and trust services to consumer and small business as well
as to corporations and institutions. Banco Popular also engages in the vehicle
leasing, small-loan and mortgage banking business through operating
subsidiaries. The Company through Banco Popular and other banking subsidiaries
also maintains the largest Hispanic owned bank branch network in the United
States.
The Company is also engaged in the securities business in Puerto Rico
through Popular Securities, Inc., a subsidiary of the Company. Popular
Securities provides retail and institutional brokerage, financial advisory and
investment banking services.
The Company's principal executive offices are located at 209 Munoz Rivera
Avenue, Hato Rey, Puerto Rico and its telephone number is (787) 765-9800.
USE OF PROCEEDS
The net proceeds from the purchase of shares of Common Stock directly from
the Company will be used for the Company's general corporate purposes including
investments in, or extensions of credit to, the Company's banking and
non-banking subsidiaries. The Company has no basis for determining the number of
shares of Common Stock that will ultimately be sold pursuant to the Plan or the
prices at which such shares will be sold.
DESCRIPTION OF THE PLAN
The following is a statement of the provisions of the Plan in question and
answer form.
PURPOSE
1. WHAT IS THE PURPOSE OF THE PLAN?
The Plan was adopted by the Board of Directors of the Company on
February 12, 1991. The primary purpose of the Plan, as amended, is to
provide Company shareholders and other investors with a simple, economical
and convenient method of investing cash dividends and optional cash
payments in shares of Common Stock without payment of brokerage
commissions, service charges or other fees. When such additional shares are
purchased directly from the Company, the Company will receive additional
funds for general corporate purposes.
The Plan is intended for the benefit of long-term investors, and not
for the benefit of individuals or institutions who engage in short-term
trading activities which cause aberrations in the composite trading volume
of Common Stock.
ADVANTAGES AND DISADVANTAGES OF PARTICIPATION IN PLAN
2. WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE PLAN?
Advantages
- Participants in the Plan ("participants") may have cash dividends on all
or part of their shares of Common Stock automatically reinvested in
additional shares at 95% of the Average Market Price (as defined in
Question 10).
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- Participants may make optional cash payments of at least $25 and not more
than $10,000 per calendar month for investment in additional shares of
Common Stock. Participants who are residents of Puerto Rico may make
optional cash payments by authorizing the Plan Administrator to debit
their accounts at Banco Popular or using the telephone payment service
known as "Telebanco Popular."
- Persons not presently shareholders of the Company may become participants
by making an initial cash investment of not less than $100 and not more
than $10,000 to purchase shares of Common Stock under the Plan.
- Participants will not pay any brokerage commissions, service charges or
other fees in connection with the purchase of shares of Common Stock
under the Plan.
- Participants' funds will be fully invested because the Plan permits
fractions of shares to be credited to a participant's account.
- Participants that are registered holders may direct the Plan
Administrator to sell all or a portion of their shares held in the Plan.
- Participants will avoid record keeping costs and the need for safekeeping
of stock certificates for shares credited to their Plan account through
the free reporting and custodial services provided under the Plan.
Disadvantages
- Participants will not be able to precisely time their purchases through
the Plan and will bear the market risk associated with the fluctuations
in the price of the Common Stock pending investment of funds under the
Plan. See Question 11 regarding the timing of the purchase of shares.
- Execution of sales of shares held in the Plan may be subject to delay.
Participants will bear the market risk associated with the fluctuations
in the price of the Common Stock pending the sale of shares pursuant to
the Plan. See Question 18.
- No interest will be paid on funds held by the Plan Administrator pending
investment of optional cash payments. See Questions 11.
- Shares deposited in a Plan account may not be pledged until the shares
are withdrawn from the Plan. See Question 21.
PARTICIPATION
3. WHO IS ELIGIBLE TO PARTICIPATE?
A "registered holder" (which means a shareholder whose shares of
Common Stock are registered in the stock transfer books of the Company in
his or her name) or a "beneficial owner" (which means a shareholder whose
shares of Common Stock are registered in a name other than his or her name,
for example, in the name of a broker, bank or other nominee), may
participate in the Plan. A registered holder may participate in the Plan
directly; a beneficial owner must either become a registered holder by
having such shares transferred into his or her name or by making
arrangements with his or her broker, bank or other nominee to participate
in the Plan on the participant's behalf. In addition, an interested
investor that is not a shareholder may participate in the Plan by mailing
an initial optional cash investment in Common Stock of not less than $100
or more than $10,000.
The right to participate in the Plan is not transferable to another
person apart from a transfer of the underlying shares of Common Stock. The
Company reserves the right to exclude from participation in the Plan
persons who utilize the Plan to engage in short-term trading activities
that cause aberrations in the trading volume of the Company's Common Stock.
Participants residing in jurisdictions in which their participation in
the Plan would be unlawful will not be eligible to participate in the Plan.
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4. HOW DOES AN ELIGIBLE SHAREHOLDER PARTICIPATE?
An eligible registered holder may join the Plan by completing and
signing the Authorization Form accompanying this Prospectus and returning
it to Banco Popular, which is the Plan Administrator. See Question 15. A
return envelope is provided for this purpose. Where the stock is registered
in more than one name (for example, joint owners) all registered holders
must sign exactly as their names appear on the account registration.
Eligible beneficial owners who wish to participate in the Plan must
instruct their broker, bank or other nominee to complete and sign the
Authorization Form and return it to the Plan Administrator. In certain
situations where the broker, bank or other nominee holds shares of a
beneficial owner in the name of a major securities depository, a Broker and
Nominee Form may also be required to participate in the Plan. An interested
investor that is not presently a shareholder of the Company, but desires to
become a participant by making an initial investment in shares of Common
Stock, may join the Plan by signing an Authorization Form and forwarding
it, together with such initial investment to the Plan Administrator at the
address set forth in Question 15.
Authorization Forms, Broker and Nominee Forms and additional copies of this
Prospectus may be obtained by contacting the Plan Administrator at: Banco
Popular de Puerto Rico, PO Box 362708, San Juan, Puerto Rico 00936-2708,
Attention: Popular, Inc. Dividend Reinvestment and Stock Purchase Plan (725),
Telephone No. (787) 764-1893 or (787) 765-9800 (Exts. 6108 or 6112).
The Company may appoint from time to time one or more information
agents (the "Information Agent") for the Plan. The Company will pay the
fees and expenses of the Information Agent and may agree to indemnify the
Information Agent for certain liabilities which it may incur in connection
with the rendering of its services for the Plan.
5. WHAT DOES THE AUTHORIZATION FORM PROVIDE?
The Authorization Form provides for the purchase of additional shares
of the Company's Common Stock through the following investment options:
"FULL DIVIDEND REINVESTMENT" directs the Plan Administrator to
invest all cash dividends on all of the shares of Common Stock then or
subsequently registered in a participant's name, together with any
optional cash payments, in the purchase of additional shares in
accordance with the Plan.
"PARTIAL DIVIDEND REINVESTMENT" directs the Plan Administrator to
invest all cash dividends on only that number of shares of Common Stock
registered in a participant's name that is specified in the appropriate
space on the Authorization Form, together with any optional cash
payments, in the purchase of additional shares in accordance with the
Plan.
"OPTIONAL CASH PAYMENTS ONLY" permits a participant to make
optional cash payments for the purchase of additional shares of Common
Stock in accordance with the Plan, while continuing to receive cash
dividends on shares registered in his or her name in the usual manner.
You may select either one of the dividend reinvestment alternatives or the
optional cash purchase alternative. If you sign and return an Authorization Form
with no investment alternative designated, you will be enrolled in the Full
Dividend Reinvestment option.
Cash dividends on all shares of Common Stock held in a participant's
account under the Plan will be reinvested in accordance with the Plan, including
dividends on shares purchased with optional cash payments, unless the
participant specifies otherwise by written notice to the Plan Administrator or
terminates participation in the Plan.
6. MAY A PARTICIPANT CHANGE INVESTMENT OPTIONS AFTER ENROLLMENT IN THE
PLAN?
Yes. A participant may change his or her investment option or the
number of participating shares at any time by completing a new
Authorization Form and returning it to the Plan Administrator at the
address specified in Question 15.
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7. WHEN MAY AN ELIGIBLE SHAREHOLDER OR OTHER INVESTOR JOIN THE PLAN?
Eligible shareholders and other interested investors may join the Plan
at any time. If an Authorization Form requesting reinvestment of dividends
is received by the Plan Administrator on or prior to the record date
established for a particular dividend, reinvestment will commence with that
dividend. It is anticipated that the dividend record dates will normally
precede the dividend payment dates by approximately two weeks. If the
Authorization Form is received after the record date established for a
particular dividend, then the reinvestment of dividends will not begin
until the dividend payment date following the next record date.
See Questions 12 and 13 to determine when persons who select the
Optional Cash Payments Only option will begin to participate in the Plan.
PURCHASES UNDER THE PLAN
8. WHAT IS THE SOURCE OF SHARES PURCHASED UNDER THE PLAN?
Shares of Common Stock purchased with reinvested dividends will be
purchased from the Company. Shares purchased with optional cash payments
will be purchased on the open market or in negotiated transactions. All
shares purchased on the open market or in negotiated transactions will be
purchased by Smith, Jacobs & Company, Inc., as agent for the participants
or any other independent broker-dealer that may be appointed by the Company
from time to time to act as agent for the participants (the "Agent").
Purchases of shares in the open market may be made in the over-the-counter
market or on any securities exchange where the Common Stock may be traded.
9. HOW MANY SHARES WILL BE PURCHASED FOR PARTICIPANTS?
A participant's account will be credited with the number of shares,
including fractions computed to four decimal places, equal to the total
amount to be invested by the participant less any taxes required to be
withheld (see Question 20) divided by the purchase price per share.
10. WHAT WILL BE THE PRICE OF SHARES PURCHASED UNDER THE PLAN?
The price of shares purchased with reinvested dividends under the Plan
will be 95% of the average of the daily high and low sales prices of the
Common Stock on the NASDAQ National Market System, as reported in The Wall
Street Journal, for the period of the last five reported trading days
immediately preceding the relevant Investment Date (the "Average Market
Price"). See Question 11 for the definition of Investment Date. The price
of shares purchased in the open market or in negotiated transactions with
optional cash payments will be the weighted average price paid for all
shares of Common Stock purchased by the Agent for the relevant Investment
Date.
If there is no trading in the Common Stock for a substantial amount of
time immediately preceding a dividend payment date, the price per share
shall be determined by the Plan Administrator on the basis of such market
quotations as it deems appropriate. No shares will be sold to participants
in the Plan at less than the par value ($6 per share) of such shares.
11. WHEN WILL SHARES BE PURCHASED UNDER THE PLAN?
Shares of Common Stock will be purchased for participants on the
relevant Investment Dates. The Investment Dates for purchases of shares
with reinvested dividends will be the Common Stock dividend payment dates.
The Investment Dates for optional cash payments are the dates on which
the Agent purchases shares in the open market or in negotiated
transactions. Such purchases will be made by the Agent on the business day
following the 15th calendar day of each month or as soon as practicable
thereafter. Shares of Common Stock purchased with optional cash payments
will be credited to a participant's account as of the Investment Date in
which they are purchased.
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Subject to any limitations imposed by federal or state securities
laws, the Agent will have full discretion as to all matters relating to
open market purchases, including determination of the number of shares, if
any, to be purchased on any day or at any time of day, the price paid for
such shares, the markets on which such shares are to be purchased
(including on any securities exchange, in the over-the-counter market or in
negotiated transactions) and the persons (including other brokers and
dealers) from or through whom such purchases are made. Under certain
circumstances, observance of the rules and regulations of the Securities
and Exchange Commission, including Regulation M under the Securities
Exchange Act of 1934, may require temporary suspension of such purchases by
the Agent or may require that purchases be spread over a longer period than
indicated in Questions 11 and 12, in which event such purchases will be
made or resumed as or when permitted by such rules and regulations. The
Company, the Plan Administrator, and the Agent will not be liable when
conditions prevent the purchase of shares or interfere with the timing of
purchases.
OPTIONAL CASH PAYMENTS
12. HOW DO OPTIONAL CASH PAYMENTS WORK?
Participants may make optional cash payments for the purchase of
additional shares of Common Stock at any time subject to the limitations
described below and in Question 13. Checks and money orders must clear
prior to the fifteenth day of a month in which the investment is to be
made. Checks and money orders that have not cleared prior to the fifteenth
day of the month will be retained by the Bank and applied to the purchase
of shares on the next Investment Date. No interest will be paid on optional
cash payments held pending investment. Participants are strongly urged to
make their optional cash payments as shortly as possible before the
fifteenth day of the month but allowing sufficient time to ensure that
their payment clears prior to such day. Optional cash payments received
prior to the thirtieth day preceding the Investment Date on which they
would be invested will be returned to the participant.
The minimum optional cash payment per month is $25 and the total
optional cash payments by a participant may not exceed $10,000 per month
except that non-shareholders who wish to participate must make an initial
investment of at least $100. The same amount of money need not be sent each
month, and there is never any obligation to make an optional cash payment.
Optional cash payments will be refunded if a written request for a refund
is received by the Plan Administrator at least forty-eight (48) hours prior
to the day when such investment is to be made. Optional cash payments of
less than $25 and that portion of any optional cash payment which exceeds
$10,000 will be returned to the participant without interest.
13. HOW MAY OPTIONAL CASH PAYMENTS BE MADE?
A registered holder of the Company's Common Stock may make an optional
cash payment when enrolling in the Plan by enclosing a check or money order
made payable to "Banco Popular de Puerto Rico" with the Authorization Form.
Thereafter, a registered holder may make optional cash payments at any time
subject to the limitations discussed in Question 12 by using the cash
payment forms which will be attached to each participant's statement of
account. A broker, bank or other nominee, as holder on behalf of a
beneficial owner, may also utilize the Authorization Form for optional cash
payments, unless it holds the shares in the name of a major securities
depository.
In the event a broker, bank or other nominee holds shares of a
beneficial owner in the name of a major securities depository, optional
cash payments must be made on the Broker and Nominee Form (the "B&N Form").
The B&N Form provides the sole means whereby a broker, bank or other
nominee holding shares of a beneficial owner in the name of a major
securities depository may invest optional cash payments on behalf of such
beneficial owner. In such case, the broker, bank or other nominee must use
the B&N Form for transmitting optional cash payments on behalf of the
beneficial owner. A B&N Form must be delivered to the Plan Administrator
each time that such broker, bank or other nominee transmits optional cash
payments on behalf of a beneficial owner. B&N Forms will be furnished at
any time upon request to
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the Plan Administrator or the Information Agent at the respective address
or telephone number specified in Question 15.
Other interested investors that are not shareholders of the Company,
but have submitted Authorization Forms, are also eligible to make an
initial investment in Common Stock through an optional cash payment.
Participants who are residents of Puerto Rico and maintain a savings
or checking account at Banco Popular may make optional cash payments by
executing a form authorizing the Plan Administrator to debit their accounts
at the Bank for the purchase of shares under the Plan or by using the
Bank's telephone payment service known as "Telebanco Popular."
COSTS
14. ARE THERE ANY EXPENSES TO PARTICIPANTS IN CONNECTION WITH PURCHASES
UNDER THE PLAN?
No. All costs of administration of the Plan are paid by the Company.
Participants will not incur any brokerage commissions, service charges or
fees for shares purchased under the Plan. As discussed in Question 18,
however, if a participant withdraws shares from the Plan and requests the
Plan Administrator to sell the shares, the participant will be charged for
any related brokerage commissions and applicable transfer taxes on the
sale, if any.
ADMINISTRATION
15. WHO ADMINISTERS THE PLAN?
Banco Popular, a wholly-owned banking subsidiary of the Company, as
Plan Administrator, administers the Plan for participants by acquiring
newly issued shares with reinvested dividends, keeping records, sending
statements of account to each participant and performing other duties
related to the Plan. Shares purchased in the open market are purchased by
the Agent and delivered to Banco Popular, which holds shares of all
participants together in its name or in the name of its nominee.
Banco Popular also acts as dividend disbursing and transfer agent for
the Company's Common Stock.
All questions and communications regarding the administration of the
Plan, requests for additional copies of this Prospectus, the B&N Forms or
the Authorization Forms should be addressed to the Bank at the following
address and telephone number:
Banco Popular de Puerto Rico
PO Box 362708
San Juan, Puerto Rico 00936-2708
Attention: Popular, Inc.
Dividend Reinvestment and
Stock Purchase Plan (725)
Telephone: (787) 764-1893
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REPORTS TO PARTICIPANTS
16. WHAT KIND OF ACCOUNTS ARE MAINTAINED FOR PARTICIPANTS AND WHAT REPORTS
ON THESE ACCOUNTS WILL BE SENT TO PARTICIPANTS IN THE PLAN?
The Plan Administrator maintains a separate account for each
participant. All shares of Common Stock purchased for a participant under
the Plan will be credited to the participant's account. As soon as
practicable after each purchase of shares, the Plan Administrator will mail
to each participant a statement of account. The statement will summarize
the year-to-date transactions in the participant's account, and will
indicate the number of shares purchased under the Plan, the price per share
paid and will include any applicable tax information. Participants will
also receive quarterly statements of account and an annual statement
showing the amount of reinvested dividends as well as other transactions
under the Plan. These statements by participants should be retained by
participants for his or her own records. A participant may be required to
pay a fee for copies of previous statements. In addition, each participant
will receive copies of the Company's annual and quarterly reports to
shareholders, proxy statements and information for income tax reporting
purposes.
CERTIFICATES FOR SHARES
17. WILL CERTIFICATES BE ISSUED FOR SHARES OF COMMON STOCK PURCHASED?
Shares of Common Stock purchased for participants under the Plan will
credited to a participant's account in book entry form. Certificates for
shares of Common Stock purchased under the Plan will not be issued to
participants unless requested. This service protects against loss, theft or
destruction of stock certificates. The number of shares credited to a
participant's account under the Plan will be shown on the participant's
statement of account.
Certificates for any number of whole shares credited to a
participant's account under the Plan will be issued to a participant
without charge upon the participant's written request. Until a participant
sells such shares or changes the number of participating shares, dividends
on all such shares will continue to be invested under the Plan even though
certificates are held by the participant. Certificates for fractional
shares will not be issued under any circumstances.
Shares credited to a participant's account under the Plan may not be
pledged, sold or transferred unless the participant has withdrawn such
shares from the Plan by requesting and receiving certificates for such
shares registered in the participant's name. Each account under the Plan is
maintained in the name in which a participant's shares are registered at
the time the participant enters the Plan.
WITHDRAWALS, SALE OF SHARES AND TERMINATION
18. HOW MAY A PARTICIPANT WITHDRAW SHARES FROM THE PLAN?
A participant may withdraw any or all full shares credited to his or
her Plan account at any time, by notifying the Plan Administrator in
writing and specifying the number of shares to be withdrawn. Certificates
for whole shares of Common Stock so withdrawn will be issued to and
registered in the name of the participant. If a participant requests, the
Plan Administrator will sell all or a portion of the withdrawn shares and
remit the proceeds, less any related brokerage commissions and applicable
withholding or transfer taxes, if any, to the participant. The Plan
Administrator will instruct the Agent to sell the shares in the open market
at the prevailing market price within ten (10) business days after receipt
of the request or as soon as otherwise practicable. Any notice of
withdrawal received after a dividend record date will not be effective
until dividends paid for such record date have been reinvested and the
shares purchased have been credited to a participant's account.
Participants will not have the power to control the timing or price of
the shares being sold. Accordingly, participants will not be able to
precisely time sales and will bear the market risk associated with
fluctuations in the price of the Company's Common Stock. In other words, if
a participant sends a request to sell shares it is possible that the market
price of the Company's Common Stock could go up or down before the Agent
sells the shares on behalf of the participant.
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Should a participant withdraw all shares from the Plan thereby
terminating its participation in the Plan, the Plan Administrator may sell
the participant's interest in any remaining fractional share and close the
participant's account. The net proceeds from such sale will be mailed to
the participant.
19. HOW AND WHEN MAY A PARTICIPANT TERMINATE PARTICIPATION IN THE PLAN?
A participant may terminate participation in the Plan at any time by
written notice to the Plan Administrator. As soon as practicable following
termination, the Plan Administrator will send the participant a certificate
for the number of whole shares in the participant's account and a check in
an amount equal to the value of any fractional share based upon the average
of the daily high and low sales prices of the Common Stock as reported on
the NASDAQ National Market System for the date of termination as set forth
in the statement sent to the participant by the Plan Administrator. If the
participant requests, the Plan Administrator will sell all of the shares
held in the participant's account in the manner described in Question 18
and send the participant a check for the proceeds from the sale, less any
related brokerage commissions and applicable withholding or transfer taxes,
if any.
If a participant's request to terminate participation in the Plan is
received on or after the record date for a dividend, cash dividends paid
with respect to that record date will be reinvested in shares of Common
Stock for the participant's account. Any optional cash payments sent to the
Plan Administrator prior to the request for termination will be invested
unless return of the amount is expressly requested in the request for
termination and the request is received at least two (2) business days
prior to the time when such amount would otherwise be applied to purchase
shares. If dividends or optional cash payments are invested after the Plan
Administrator has received a request to terminate Plan participation, the
request will be processed as promptly as possible.
Participation in the Plan will also be terminated if the Plan
Administrator receives written notice of the death or adjudicated
incompetency of a participant. Upon termination by reason of notice of
death or adjudicated incompetency, no purchase of shares of Common Stock
will be made for the participant's account and the participant's shares,
any cash dividends paid thereon and any other unapplied funds will be
retained by the Plan Administrator until such time as such participant's
legal representative has been appointed and has furnished proof
satisfactory to the Plan Administrator of the legal representative's right
to receive payment.
After termination of Plan participation, all cash dividends will be
paid to the shareholder in cash unless the shareholder rejoins the Plan,
which he or she may do at any time by completing and returning to the Plan
Administrator an Authorization Form as described in Question 4.
CERTAIN TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN
20. WHAT ARE THE PUERTO RICO AND FEDERAL INCOME TAX CONSEQUENCES OF
PARTICIPATION IN THE PLAN?
The following statements, which are based upon existing tax laws,
regulations and rulings on the date of this Prospectus, are intended to be
a general outline of the likely Puerto Rico and federal income tax
consequences to an individual or corporate participant in the Plan. The
Company has been advised with regard to such statements by Pietrantoni
Mendez & Alvarez, San Juan, Puerto Rico.
The information herein provided is a summary and does not purport to
be a complete description of the income tax consequences to any participant
in the Plan. In particular, it does not address the income tax consequences
to an individual participant who is a non-resident alien. Participants
should consult their own tax advisors for further information concerning
the tax consequences of participation in the Plan.
GENERAL TAX CONSEQUENCES
(a) In the case of shares of Common Stock purchased from the Company at a
discount with cash dividends, the fair market value on the dividend payment date
of the shares purchased, plus the amount of any tax withheld, will constitute
dividend income to the participant. The participant's tax basis in such shares
will be the fair market value of the shares on the dividend payment date.
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(b) A participant acquiring shares of Common Stock through optional cash
payments under the Plan will not realize taxable income on the purchase of
shares for his or her account, except that the participant will have dividend
income in the amount of any brokerage commissions or service fees paid by the
Company, if any. The tax basis of shares of Common Stock purchased for a
participant's Plan account with optional cash payments will be the amount of the
optional cash payments plus an allocable share of any brokerage commissions paid
by the Company, if any.
(c) A participant's holding period for shares of Common Stock acquired
pursuant to the Plan will begin on the day following the date the shares of
Common Stock are credited to the participant's account.
(d) A participant will not realize taxable income when he or she receives
certificates for whole shares of Common Stock credited to the participant's
account, either upon the participant's request for such certificates or upon
termination of the Plan or termination of his or her participation in the Plan.
(e) A participant will realize gain or loss when the shares of Common Stock
are sold or exchanged, and in the case of a fractional share, when the
participant receives a cash payment for a fraction of a share credited to the
participant's account upon termination of participation in or termination of the
Plan. The amount of such gain or loss will be the difference between the amount
which the participant receives for the shares or fraction of a share and the tax
basis thereof.
(f) In the case of holders of Common Stock whose dividends are subject to
Puerto Rico income tax withholding, the Company will withhold the tax from the
cash dividends and invest the balance in shares of Common Stock. Based on a
private letter ruling issued by the Puerto Rico Department of the Treasury, the
Company will not withhold taxes on the additional dividend resulting from the
discount in the purchase of shares and any brokerage commissions or service fees
paid by the Company under the Plan. The Company will report the amount of such
additional dividend to the Puerto Rico Department of the Treasury and to
participants at the end of each calendar year. In addition, the Company will
send participants a letter advising them of their obligation to file Puerto Rico
income tax returns and to pay the tax due on the portion of the dividend
attributable to the amount of the discount and the brokerage commissions or
service fees. In the case of participants who qualify for the special tax of ten
percent (10%) on dividends, such special rate will apply to the additional
dividend. The statements confirming purchases made for such participants will
indicate the amount of tax withheld and the amount of discount received.
PUERTO RICO INCOME TAX CONSEQUENCES
Individuals
(a) An individual participant in the Plan, whether a resident of Puerto
Rico or a U.S. citizen who is not a resident of Puerto Rico (a "non-resident"
U.S. citizen), will be subject to a special tax equal to ten percent (10%) of
the total amount of each cash dividend distribution. This special tax will be
automatically deducted and withheld by the Company unless the participant has in
effect on the date of the distribution an election not to have the special
dividend tax withheld. If such election is made the dividend will be subject to
the ordinary tax rates.
(b) An individual participant who is a non-resident U.S. citizen will be
subject to a ten percent (10%) income tax withholding at source on the gross
amount of cash dividends, unless, in addition to the election not to have the
special dividend tax withheld, he has filed with the Plan Administrator a
Withholding Exemption Certificate for exemption from the ten percent (10%)
withholding tax. In this case, the maximum amount of Puerto Rico source gross
income (including the dividends distributed by the Company and any gain from the
sale in Puerto Rico of common stock) that the non-resident U.S. citizen will
receive exempt from withholding is $1,300 if single, or $3,000 if married and
living with spouse. The Company will withhold a ten percent (10%) income tax on
the non-resident U.S. citizen's dividend distribution in excess of the above
specified amounts.
Furthermore, a non-resident U.S. citizen will be required to file a Puerto
Rico income tax return and will be subject to tax at the same tax rates as
Puerto Rico residents if his Puerto Rico source gross income exceeds the $1,300
and $3,000 limits. The tax withheld by the Company may be credited in the return
against the
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resulting Puerto Rico tax liability, if any, or refunded to the individual as
the case may be. Even though the non-resident U.S. citizen may be required to
file a Puerto Rico income tax return, he will not be subject to any Puerto Rico
income tax liability if his gross income from Puerto Rico sources is $3,300 or
less, if single, or $6,000 or less, if married and living with spouse. However,
a non-resident U.S. citizen will not be required to file a Puerto Rico income
tax return if such participant's gross income from sources within Puerto Rico
consists only of cash dividends on Common Stock and such dividends are subject
to the special 10% tax to be withheld at source.
(c) In the case of the sale or exchange of Common Stock held as a capital
asset for more than six months, an individual who is a Puerto Rico resident has
the option to have his net long term capital gain taxed at a special twenty
percent (20%) rate or to include it in his gross income and be subject to the
normal tax rates.
(d) An individual participant who is a non-resident U.S. citizen will not
be subject to Puerto Rico income tax on the sale or exchange of Common Stock if
the sale or exchange is effected outside Puerto Rico. If the sale takes place in
Puerto Rico, the gain will be subject to the same capital gain provisions
applicable to a Puerto Rico resident and the buyer is required to withhold
twenty percent (20%) from the sales price.
Corporations
(a) In the case of participant corporations, the special ten percent (10%)
tax on dividends and 20% tax on capital gains discussed above will not apply.
(b) In the case of participant corporations organized in Puerto Rico
("domestic corporations") and participant corporations organized outside Puerto
Rico but that are engaged in trade or business in Puerto Rico ("resident foreign
corporations"), the full amount of dividend income will be eligible for the
eighty-five percent (85%) dividends received deduction provided the dividend
deduction does not exceed eighty-five percent (85%) of the corporate taxpayer's
net taxable income reported in Puerto Rico.
(c) In the case of participant corporations organized outside Puerto Rico
and not engaged in trade or business in Puerto Rico ("non-resident foreign
corporations"), the full amount of dividend income will be subject to a ten
percent (10%) withholding tax at source. On the sale or exchange of Common
Stock, these non-resident foreign corporations will be subject to a twenty-five
percent (25%) income tax withholding on the gross amount received to the extent
said amount constitutes income from sources within Puerto Rico. However, the tax
withheld will be credited against the Puerto Rico income tax liability reported
by the corporation on its Puerto Rico return, which would be twenty-nine percent
(29%) of the excess capital gains over capital losses from Puerto Rico sources.
(d) For Puerto Rico tax purposes, the gain from the sale of stock is
considered derived from the place where all rights, title and interest on the
stock pass from seller to purchaser. In the case of foreign corporations,
whether resident or nonresident, if the sale is effected outside Puerto Rico,
the gain will not be subject to Puerto Rico income taxes except for certain
resident foreign corporations engaged in a financial business or in the business
of trading in securities.
(e) In the case of a domestic corporation holding the Common Stock as a
capital asset for more than six months, gain from the sale or exchange of Common
Stock will be subject to a twenty-five percent (25%) maximum tax on the capital
gain irrespective of where the sale is effected. To the extent the gain
constitutes income from sources within Puerto Rico or otherwise constitutes
income effectively connected with a Puerto Rico business, a resident foreign
corporation holding the Common Stock as a capital asset for more than six months
will also be subject to this maximum twenty-five percent (25%) tax rate.
Institutional Investors
Dividends paid to certain institutional investors such as life insurance
companies may or may not be subject to Puerto Rico income tax. Participants
should contact their own tax advisors as to the applicability of this exemption.
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FEDERAL INCOME TAX CONSEQUENCES
(a) In the case of a participant who is a U.S. citizen not a resident of
Puerto Rico, dividend distributions from the Company and gain from the sale of
Common Stock will have to be included in full in his or her federal income tax
return. However, Puerto Rico taxes paid may generally be taken as a foreign tax
credit against the United States income tax liability, or in the alternative, as
an itemized deduction.
(b) In the case of a participant who is a U.S. citizen and a bona fide
resident of Puerto Rico for the entire taxable year, dividend distributions from
the Company and gain from the sale of Common Stock are excludable from the
federal return.
(c) In the case of a participant which is a United States corporation, the
full amount of dividends distributed will be included in gross income, but will
not be eligible for the dividends received deduction. However, taxes paid in
Puerto Rico may generally be taken as a foreign tax credit or as a deduction in
the federal income tax return.
OTHER INFORMATION
21. MAY SHARES CREDITED TO A PARTICIPANT'S ACCOUNT BE SOLD, PLEDGED OR
TRANSFERRED?
Shares credited to a participant's account may not be sold, pledged or
transferred unless the participant has requested and received certificates
for such shares registered in the participant's name or in the case of
sales, the participant requests the Plan Administrator to sell shares on
his behalf as described in Question 18.
22. WHAT HAPPENS IF A PARTICIPANT SELLS OR TRANSFERS SOME OR ALL OF THE
SHARES REGISTERED IN THE PARTICIPANT'S NAME?
If a participant sells or transfers all shares registered in the
participant's name, dividends on shares credited to the participant's
account under the Plan will, unless the participant also withdraws all
shares held in his account, continue to be reinvested, except that if the
participant has only a fractional share of Common Stock credited to his
account under the Plan, the Plan Administrator may close the participant's
account and sell the fractional share. In such event, the participant will
receive a check for the net proceeds from the sale of the fractional share.
If a participant sells or transfers a portion of the shares registered
in the participant's name and the participant has chosen the Full Dividend
Reinvestment option, dividends on all shares remaining registered in the
participant's name will continue to be reinvested. If the participant has
chosen the Partial Dividend Reinvestment option, dividends on a number of
shares remaining registered in the participant's name up to the number of
shares originally authorized will continue to be reinvested.
23. IF THE COMPANY HAS A RIGHTS OFFERING, HOW WILL THE RIGHTS ON PLAN
SHARES BE HANDLED?
A rights offering takes place when the Company issues to existing
shareholders the right to purchase additional shares of Common Stock in
proportion to the shares they already own. A participant's entitlement in a
rights offering will be based upon his or her total holdings. Rights will
be issued for the number of whole shares only.
A rights offering such as the one referred to in this Question 23 is
not related to the Preferred Rights (as defined below) attached to the
shares of Common Stock. See "DESCRIPTION OF CAPITAL STOCK -- Stockholder
Rights Plan" herein.
24. WHAT HAPPENS IF THE COMPANY ISSUES A DIVIDEND PAYABLE IN STOCK OR
DECLARES A STOCK SPLIT?
Any stock dividends or split shares distributed by the Company on
shares registered in a participant's name or credited to a participant's
Plan account will be added to the participant's Plan account and reflected
in the statement described in Question 16.
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25. HOW WILL PLAN PARTICIPANTS' SHARES BE VOTED AT SHAREHOLDERS' MEETINGS?
Shares credited to a participant's Plan account will be voted as the
participant directs. A proxy card will be sent to each participant in
connection with all annual and special meetings of shareholders. This proxy
will apply to all whole shares registered in a participant's name, if any,
as well as to all shares credited to a participant's account under the Plan
and, if properly signed, will be voted in accordance with the instructions
given by the participant on the proxy card. If a proxy card is returned
properly signed, but without indicating instructions as to the manner
shares are to be voted with respect to any item thereon, the shares covered
will be voted in accordance with the recommendations of the Company's
management. If the proxy card is not returned, or it is returned unexecuted
or improperly executed, the shares of Common Stock covered will not be
voted unless the participant or the participant's duly appointed
representative votes in person at the meeting.
26. WHAT ARE THE RESPONSIBILITIES OF THE COMPANY, THE PLAN ADMINISTRATOR,
THE AGENT AND THE INFORMATION AGENT UNDER THE PLAN?
The Company, the Plan Administrator, the Agent and any Information
Agent will not be liable under the Plan for any act done in good faith or
for any good faith omission to act, including, without limitation, any
claim of liability arising out of failure to terminate a participant's
account upon the participant's death, the prices at which shares are
purchased or sold for a participant's account, the times when purchases or
sales are made, or fluctuations in the market value of the Company's Common
Stock. PARTICIPANTS SHOULD RECOGNIZE THAT THE COMPANY, THE PLAN
ADMINISTRATOR, THE AGENT AND ANY INFORMATION AGENT CANNOT PROVIDE ANY
ASSURANCE OF A PROFIT OR PROTECTION AGAINST A LOSS ON THE SHARES OF COMMON
STOCK PURCHASED OR HELD UNDER THE PLAN. The Company, the Plan
Administrator, the Agent and any Information Agent and their agents will
not have any responsibility beyond the exercise of ordinary care for any
action taken or omitted to be taken in connection with the Plan, nor do
they have any duties, responsibilities or liabilities other than those
expressly set forth in the Plan.
Stockholders should be aware and are cautioned that this Prospectus
does not represent a change in the Company's dividend policy nor a
guarantee of future dividends, which will continue to depend upon the
Company's earnings, financial requirements, governmental regulations and
other factors.
27. WHAT HAPPENS IF PURCHASES CANNOT BE MADE IN THE OPEN MARKET?
If the Company determines not to make newly issued shares of Common
Stock available for purchase pursuant to the Plan and in the event that
applicable law or the closing of securities' markets requires the temporary
curtailment or suspension of open market purchases of shares under the
Plan, the Agent will not be accountable for its inability to make purchases
at such times. If shares of Common Stock are not available for purchase for
a period longer than thirty-five days, the Plan Administrator will promptly
mail to the participant a check payable to the participant's order in the
amount of any unapplied funds in the participant's account.
28. MAY THE TERMS OF THE PLAN BE CHANGED OR THE PLAN SUSPENDED OR
DISCONTINUED?
Yes. The Company reserves the right to modify the terms of the Plan at
any time and from time to time, and the Company may suspend or terminate
the Plan at any time, including the period between a record date and a
dividend payment date, in each case in its sole discretion. Notice of any
material amendment or modification, or of any suspension or termination,
will be mailed to all participants.
Upon termination of the Plan, any uninvested optional cash payments
will be returned, a certificate for whole shares of Common Stock credited
to a participant's Plan account will be issued, and a cash payment will be
made for the net proceeds from the sale of any fractional share credited to
a participant's account.
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29. CAN SUCCESSOR PLAN ADMINISTRATORS OR AGENTS BE NAMED?
The Company may from time to time designate a bank, trust company,
brokerage firm or other financial institution as successor Plan
Administrator or Agent under the Plan.
30. CAN THE COMPANY OR THE PLAN ADMINISTRATOR TERMINATE A PARTICIPANT'S
INTEREST IN THE PLAN?
The Company or the Plan Administrator may terminate any participant's
participation in the Plan at any time for any reason, including, without
limitation, arbitrage-related activities or transactional profit
activities, by notice in writing mailed to the participant. In such event
the Plan Administrator will follow the procedures for termination set forth
in Question 19.
31. MAY A PARTICIPANT ADD SHARES OF COMMON STOCK TO HIS OR HER ACCOUNT BY
TRANSFERRING STOCK CERTIFICATES THAT THE PARTICIPANT POSSESSES?
Yes. A participant may increase the number of shares of Common Stock
held in his or her account by depositing certificates representing shares
of Common Stock with the Plan Administrator. Such certificates must be
presented in transferable form and must be accompanied by a written request
that the shares of Common Stock evidenced thereby be added to the
participant's account.
32. MAY A SHAREHOLDER THAT DOES NOT PARTICIPATE IN OTHER FEATURES OF THE
PLAN DEPOSIT CERTIFICATES WITH THE PLAN ADMINISTRATOR FOR SAFEKEEPING?
Yes. Shareholders, whether or not they participate in other features
of the Plan, may deposit some or all of their certificates of Common Stock
with the Plan Administrator for safekeeping. Shares deposited will be
credited to the individual's account maintained by the Plan Administrator.
There is no cost for this service. To use this service, participants should
send their certificates to the Plan Administrator by registered mail with
written instructions to deposit them in safekeeping. Unless the shareholder
has elected to have his or her dividends reinvested in accordance with the
terms of the Plan, dividends on all the shares deposited for safekeeping
will be paid in cash.
33. WHAT IS SUFFICIENT NOTICE TO A PARTICIPANT?
Any notice or certificate which by any provision of the Plan is
required to be given by the Plan Administrator to a participant shall be in
writing and shall be deemed to have been sufficiently given for all
purposes by being deposited postage prepaid in a post office letter box
addressed to the participant at the participant's address as it shall last
appear on the Plan Administrator's records.
34. WHO INTERPRETS THE PLAN AND WHAT LAW GOVERNS?
Any question of interpretation under the Plan will be determined by
the Company under the laws of the Commonwealth of Puerto Rico, and any such
determination will be final.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 180,000,000 shares
of Common Stock, par value $6 per share, and 10,000,000 shares of Preferred
Stock. 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 the
Company determines. As of November 23, 1998, there were issued and outstanding
4,000,000 shares of 8.35% Series A Preferred Stock and there were 137,614,927
shares of Common Stock issued (of which 135,637,327 shares were outstanding and
1,977,600 shares were held in treasury). The Common Stock is traded in the
over-the-counter market on the NASDAQ National Market System.
The following description summarizes the material provisions of the Common
Stock. It does not purport to be complete and is subject in all respects to the
applicable provisions of the General Corporation Law of Puerto Rico, the
Company's Restated Certificate of Incorporation (the "Certificate"), the Rights
Agreement
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(defined below), the Certificate of Designation describing the Series A
Participating Preferred Stock and the Plan.
COMMON STOCK
Subject to the rights of holders of any Preferred Stock outstanding,
holders of Common Stock are entitled to receive ratably such dividends, if any,
as the Board of Directors may in its discretion declare out of legally available
funds.
The holders of the Common Stock are entitled to one vote per share on all
matters brought before the stockholders. The holders of the Common Stock do not
have the right to cumulate their shares of Common Stock in the election of
directors. The Certificate provides that the approval of a merger,
reorganization, or consolidation of the Company or the sale of substantially all
of the assets of the Company or the approval or voluntary dissolution of the
Company requires the vote of the holders of 75% of the total number of
outstanding shares of the Company.
In the event of liquidation, holders of the Common Stock will be entitled
to receive pro rata any assets distributable to shareholders with respect to the
shares held by them, after payment of indebtedness and such preferential amounts
as may be required to be paid to the holders of any Preferred Stock hereafter
issued by the Company.
The Certificate provides that the members of the Board of Directors are
divided into three classes as nearly equal as possible. Each class is elected
for a three-year term. At each annual meeting of shareholders, one-third of the
members of the Board of Directors will be elected for a three-year term, and the
other directors will remain in office until their three-year terms expire.
Therefore, control of the Board of Directors cannot be changed in one year, and
at least two annual meetings must be held before a majority of the members of
the Board of Directors can be changed.
The Certificate provides that a director, or the entire Board of Directors,
may be removed by the shareholders only for cause. The Certificate and Bylaws of
the Company also provide that the affirmative vote of the holders of at least
two-thirds of the combined voting power of the outstanding capital stock
entitled to vote for the election of directors is required to remove a director
or the entire Board of Directors from office. Certain portions of the
Certificate of the Company described in certain of the preceding paragraphs,
including those related to business combinations and the classified Board of
Directors, may be amended only by the affirmative vote of the holders of
two-thirds of the total number of outstanding shares of the Company.
Certain of the provisions contained in the Certificate have the effect of
making it more difficult to change the Board of Directors, and may make the
Board of Directors less responsive to shareholder control. These provisions also
may tend to discourage attempts by third parties to acquire the Company because
of the additional time and expense involved and a greater possibility of
failure, and, as a result, may adversely affect the price that a potential
purchaser would be willing to pay for the capital stock of the Company, thereby
reducing the amount a shareholder might realize in, for example, a tender offer
for the capital stock of the Company.
Pursuant to the Certificate, holders of the Common Stock and only the
Common Stock are entitled to preferential rights to purchase or subscribe for
newly issued shares of Common Stock on a pro rata basis unless, in approving the
issuance of Common Stock, or any transaction resulting in the issuance of any
Common Stock of the Company, the Board of Directors of the Company unanimously
resolves otherwise. The shareholders have no preference to subscribe therefor in
the event of new issues of shares of stock which may be authorized pursuant to
any dividend reinvestment and stock purchase plan of the Company or which may be
authorized in order to exchange such new shares of stock for property which the
Board of Directors may consider convenient or necessary for the Company to
acquire, nor shall the shareholders have any right of preference therefor in the
event of new issues of stock in payment of services rendered to the Company, or
of shares of stock to be issued to officers or employees, on the basis of
options, as an incentive either to commence or to continue rendering services
for the Company. There are no redemption or call provisions applicable to shares
of Common Stock.
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The outstanding shares of Common Stock are, and shares of Common Stock
offered hereby upon their due issuance, delivery and the receipt of payment
therefor will be fully paid and nonassessable.
The Registrar and Transfer Agent for the Common Stock of the Company is
Banco Popular de Puerto Rico.
STOCKHOLDER RIGHTS PLAN
Pursuant to a Stockholder Protection Rights Agreement, dated as of August
13, 1998, (the "Rights Agreement"), between the Company and Banco Popular de
Puerto Rico, as Rights Agent, holders of shares of Common Stock outstanding at
the close of business on August 28, 1998 received the right (the "Preferred
Rights") to purchase one one-hundredth of a share of Series A Participating
Cumulative Preferred Stock of the Company ("Series A Participating Preferred
Stock") on the terms set forth in the Rights Agreement. There is one Preferred
Right attached to each share of Common Stock outstanding. In addition, as long
as the Preferred Rights are attached to the Common Stock, one Preferred Right
will be issued with each new share of Common Stock issued. At the time the
Preferred Rights become exercisable, separate certificates will be issued and
the Preferred Rights could begin to trade separately from the Common Stock.
Preferred Rights become exercisable upon the earlier to occur (i) on the first
day, or such later date as the Board of Directors of the Company may from time
to time fix, on which the Company publicly announces that any person or group
(subject to certain exceptions, an "Acquiring Person") has acquired 10% or more
of the shares of the Common Stock then outstanding (the "Flip-in Date"), or (ii)
on the close of business on the tenth business day (or such later date as the
Board of Directors of the Company may from time to time fix) after the
commencement of a tender or exchange offer which, if consummated, would result
in such person becoming an Acquiring Person. On and after a Flip-in Date, the
Company shall take such action as shall be necessary so that each Preferred
Right (other than Rights beneficially owned by any Acquiring Person, which
Rights shall become void) shall constitute the right to purchase from the
Company that number of shares of Common Stock of the Company having an aggregate
price equal to twice the Exercise Price (currently $140) for an amount in cash
equal to the then current Exercise Price. The rights are subject to redemption
and exchange for shares of Common Stock at the option of the Company, on the
terms set forth in the Rights Agreement. The Preferred Rights may be deemed to
have an anti-takeover effect and generally may cause substantial dilution to a
person or group that attempts to acquire the Company under circumstances not
approved by the Company's Board of Directors.
PREFERRED STOCK
The Board of Directors of the Company is authorized to provide for the
issuance of shares of the Company's Preferred Stock in one or more series, with
such voting powers, full or limited, or without voting powers, and with such
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions providing for the issuance
thereof to be adopted by the Board of Directors, except as otherwise provided in
the Certificate or any amendment thereto. The issuance of shares of Preferred
Stock could make it more difficult and more expensive for another person or
entity to obtain control of the Company in a merger, tender offer, proxy fight
or similar transaction. The ability of the Board of Directors to issue shares of
Preferred Stock in such a situation could have the effect of discouraging a
potential acquiror and may have an adverse effect on shareholders wishing to
participate in a merger, tender offer or proxy fight. The Company's management
is not aware of any person or entity currently seeking control of the Company.
The 8.35% Series A Preferred Stock entitle the holders thereof to receive,
when, as and if declared by the Board of Directors of the Company's, out of
funds legally available therefor, cash dividends at the annual rate per share of
8.35% of the liquidation preference of $25 per share, or $0.173958 per share per
month, accruing from the date of original issuance and payable monthly in
arrears in United States dollars on the last day of each calendar month
thereafter.
Dividends on the 8.35% Series A Preferred Stock are non-cumulative. To the
extent that funds are not legally available for the payment of such dividends
for any monthly dividend period or that such dividends are
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not declared with respect to any monthly dividend period, then the holders of
the 8.35% Series A Preferred Stock have no right to receive a dividend in
respect of such monthly dividend period. The Company may not pay dividends on or
acquire shares of Common Stock of the Company or other class of stock of the
Company ranking junior to the 8.35% Series A Preferred Stock unless all accrued
and unpaid dividends on the 8.35% Series A Preferred Stock for the twelve
monthly dividend periods ending on the immediately preceding dividend payment
date shall have been paid or are paid contemporaneously and the full monthly
dividend on the 8.35% Series A Preferred Stock for the then current month has
been or is contemporaneously declared and paid or declared and set apart for
payment.
The 8.35% Series A Preferred Stock is redeemable on and after June 30,
1998, at the option of the Company, in whole or in part from time to time. The
redemption price per share is $26.25 from June 30, 1998 through June 29, 1999,
$26.00 from June 30, 1999 through June 29, 2000, $25.75 from June 30, 2000
through June 29, 2001, $25.50 from June 30, 2001 through June 29, 2002, and
$25.00 from June 30, 2002 and thereafter, plus accrued and unpaid dividends for
the then current monthly dividend period to the date fixed for redemption. Under
current regulations, the Company is not permitted to exercise any option to
redeem shares of 8.35% Series A Preferred Stock without the prior approval of
the Federal Reserve Board.
The 8.35% Series A Preferred Stock is not convertible into or exchangeable
for any other securities of the Company. Holders of shares of 8.35% Series A
Preferred Stock have no right to require the Company to redeem or repurchase any
such shares, and such shares are not subject to any sinking fund or similar
obligation.
In the event of the liquidation, dissolution or winding up of the Company,
holders of the 8.35% Series A Preferred Stock will be entitled to receive a
liquidation preference of $25 for each share, plus accrued and unpaid dividends
for the then current monthly dividend period to the date of payment.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission (the "SEC") allows the Company to
"incorporate by reference" "the information it files with them, which means the
Company can disclose important information to you by referring to these
documents. The information included in the following documents is incorporated
by reference and is considered a part of this prospectus. The most recent
information that the Company files with the SEC automatically updates and
supersedes more dated information. The Company has previously filed the
following documents with the SEC and is incorporating them by reference into
this prospectus:
(i) Annual Report on Form 10-K for the year ended December 31, 1997;
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998;
(iii) Current Reports on Form 8-K dated January 9, 1998, April 7,
1998, April 23, 1998, July 9, 1998, August 13, 1998 and October 7, 1998;
(iv) Registration Statement on Form 8-A, filed with the SEC on August
18, 1988, filed pursuant to Section 12(g) of the Exchange Act (as defined
below) relating to the Company's Common Stock; and
(v) Registration Statement on Form 8-A filed with the SEC on August
28, 1998, filed pursuant to Section 12(g) of the Exchange Act pursuant to
which the Company registered its Series A Participating Cumulative
Preferred Stock Purchase Rights.
The Company also incorporates by reference all documents filed by it
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), after the date of this prospectus and
until all the shares being offered by this prospectus are sold.
The Company will provide, at no cost, to each person, including a
beneficial owner, to whom this prospectus is delivered, upon written or oral
request of any such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents unless such exhibits
are specifically incorporated by reference into such documents). Requests for
such copies should be directed to Popular, Inc., Attention: Amilcar Jordan,
Senior Vice President, 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918,
telephone: (787) 764-1893.
AVAILABLE INFORMATION
The Company files annual, quarterly and current reports, proxy statements
and other information with the SEC. The Company has also filed with the SEC a
Registration Statement on Form S-3, to register the Common Stock being offered
in this prospectus. This prospectus, which forms part of the Registration
Statement, does not contain all of the information included in the registration
statement. For further information about the Company and the shares of Common
Stock offered in this prospectus, you should refer to the Registration Statement
and its exhibits.
You may read and copy any document filed by the Company with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the Public Reference Room. The Company files its SEC materials electronically
with the SEC, so you can also review the Company's filings by accessing the web
site maintained by the SEC at http://www.sec.gov. This site contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the SEC. You can also obtain more information about the
Company by visiting our web site at http://www.popularinc.com.
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FORWARD LOOKING STATEMENTS
Information incorporated in this prospectus by reference, contains certain
"forward-looking statements" concerning Popular's operations, performance and
financial condition, including its future economic performance, plans and
objectives and the likelihood of success in developing and expanding its
business. Please keep in mind that these statements are based upon a number of
assumptions and estimates which are subject to significant uncertainties, many
of which are beyond the control of Popular. The words "may," "would," "could,"
"will," "expect," "anticipate," "believe," "intend," "plan," "estimate" and
similar expressions are meant to identify such forward-looking statements.
Actual results may differ materially from those expressed or implied by such
forward-looking statements.
LEGAL OPINION
The validity of the Common Stock to be issued pursuant to the Plan has been
passed upon for the Company by Pietrantoni Mendez & Alvarez, San Juan, Puerto
Rico, special counsel to the Company. As of November 23, 1998, partners and
associates of Pietrantoni Mendez & Alvarez owned, in the aggregate,
approximately 18,029 shares of Common Stock.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority of
said firm as experts in auditing and accounting.
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POPULAR, INC.
DIVIDEND REINVESTMENT
AND
STOCK PURCHASE PLAN
