<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1999
REGISTRATION NO. 333-82507
REGISTRATION NO. 333-82507-01
REGISTRATION NO. 333-82507-02
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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POPULAR, INC.
(Exact name of 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 No.)
209 MUNOZ RIVERA AVENUE (787) 765-9800
HATO REY, PUERTO RICO 00918 (Registrant's telephone number, including area code)
(Address of principal executive offices)
</TABLE>
POPULAR INTERNATIONAL BANK, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
PUERTO RICO 66-0489108
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
209 MUNOZ RIVERA AVENUE (787) 765-9800
HATO REY, PUERTO RICO 00918 (Registrant's telephone number, including area code)
(Address of principal executive offices)
</TABLE>
POPULAR NORTH AMERICA, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 66-0476353
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
521 FELLOWSHIP ROAD (787) 765-9800
MT. LAUREL, NEW JERSEY 08054 (Registrant's telephone number, including area code)
(Address of principal executive office)
</TABLE>
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JORGE A. JUNQUERA
209 MUNOZ RIVERA AVENUE
HATO REY, PUERTO RICO 00918
(787) 765-9800
(Name, address, and telephone number, including area code, of agent for service)
COPIES TO:
<TABLE>
<S> <C>
Donald J. Toumey, Esq. Norman Slonaker, Esq.
Sullivan & Cromwell Brown & Wood LLP
125 Broad Street One World Trade Center
New York, New York 10004 New York, New York 10004
</TABLE>
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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 being 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]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TO BE OFFERING PRICE AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1)(2) PER UNIT(3) OFFERING PRICE(3)
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<S> <C> <C> <C>
Debt Securities and Preferred Stock......... $1,500,000,000 100% $1,500,000,000
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Guarantees.................................. (5) (5) (5)
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<CAPTION>
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AMOUNT OF
REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED FEE(4)
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<S> <C>
Debt Securities and Preferred Stock......... $417,000
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Guarantees.................................. (5)
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</TABLE>
(1) This registration statement also covers an undeterminable amount of the
Securities that may be reoffered and resold on an ongoing basis after their
initial sale in market-making transactions by affiliates of the Registrants.
(2) The amount to be registered equals the aggregate principal amount of the
Securities. If any Debt Securities are issued at an original issue discount
or with a principal amount that cannot be determined at issuance or is
denominated in a foreign currency or currency unit, the aggregate principal
amount of the Securities will be an amount that results in an aggregate
initial offering price for the Securities equivalent to U.S. $1,500,000,000.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(4) Previously paid.
(5) No additional consideration will be received for the Guarantees.
----------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This registration statement contains:
- a prospectus, consisting of a cover page and numbered pages 1 through 31
relating to debt securities and preferred stock of Popular, Inc., Popular
International Bank, Inc. or Popular North America, Inc. having an
aggregate initial public offering price or purchase price of up to U.S.
$1,500,000,000 or the equivalent thereof in one or more foreign
currencies or composite currencies;
- a form of prospectus supplement, consisting of a cover page, numbered
pages S-2 through S-32 and a back cover page, relating to the possible
offering by Popular, Inc., after the effectiveness of this registration
statement, of such debt securities as Medium-Term Notes having an
aggregate initial public offering price or purchase price of up to U.S.
$1,500,000,000 or the equivalent thereof in one or more foreign
currencies or composite currencies; and
- a form of prospectus supplement, consisting of a cover page, numbered
pages S-2 through S-34 and a back cover page, relating to the possible
offering by Popular North America, Inc., after the effectiveness of this
registration statement, of such debt securities as Medium-Term Notes
having an aggregate initial public offering price or purchase price of up
to U.S. $1,500,000,000 or the equivalent thereof in one or more foreign
currencies or composite currencies.
The prospectus contained in this registration statement relates to both of
the following:
- the offering of newly issued Medium-Term Notes of Popular, Inc. or
Popular North America, Inc. on an ongoing basis at an aggregate
initial public offering price of up to $1,500,000,000; and
- market-making transactions that may occur on an ongoing basis in
notes that have been previously issued in the offering described
above.
When the prospectus is delivered to an investor in the initial public
offering described above, the investor will be informed of that fact in the
confirmation of sale. When the prospectus is delivered to an investor who is not
so informed, it is delivered in a market-making transaction.
Popular, Inc., Popular International Bank, Inc. or Popular North America,
Inc. may also offer additional debt securities of another series or preferred
stock pursuant to the prospectus contained in this registration statement. Upon
any public offering and sale of any such other series of debt securities or
preferred stock covered by the prospectus, a prospectus supplement or prospectus
supplements describing such series of debt securities or preferred stock and the
particular terms of such offers or sales will be filed in accordance with the
rules and regulations of the Securities and Exchange Commission.
-i-
<PAGE> 3
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED AUGUST , 1999.
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST , 1999)
$1,500,000,000
POPULAR, INC.
MEDIUM-TERM NOTES, SERIES 4
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
----------------------
THE COMPANY: Popular, Inc. Our principal executive office is located at
Popular Center, 209 Munoz Rivera Avenue, Fifth Floor, Hato Rey, Puerto Rico
00918, and our telephone number is (787) 765-9800.
TERMS: We plan to offer and sell notes with various terms, including the
following:
- Ranking as senior or subordinated indebtedness of Popular
- Stated maturities of 9 months or more from date of issue
- Redemption and/or repayment provisions, if applicable, whether mandatory or
at the option of Popular or holders of the notes
- Payments in U.S. dollars or one or more foreign currencies
- Minimum denomination of $100,000, increasing in integral multiples of $1,000
or other specified denominations for foreign currencies
- Book-entry (through The Depository Trust Company) or certificated form
- Interest at fixed or floating rates, or no interest at all. The floating
interest rate may be based on one or more of the following indices plus or
minus a spread and/or multiplied by a spread multiplier:
- commercial paper rate
- prime rate
- LIBOR
- treasury rate
- CMT rate
- CD rate
- federal funds rate
- 11th district cost of funds rate
- Interest payments on fixed rate notes on each June 15 and December 15
- Interest payments on floating rate notes on a monthly, quarterly, semiannual
or annual basis
We will specify the final terms for each note, which may be different from
the terms described in this prospectus supplement, in the applicable pricing
supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS OR ANY PRICING SUPPLEMENT IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The notes will be unsecured obligations of Popular and will not be savings
accounts, deposits or other obligations of any bank or nonbank subsidiary of the
corporation and are not insured by the Federal Deposit Insurance Corporation,
the Bank Insurance Fund or any other government agency.
<TABLE>
<CAPTION>
AGENT'S DISCOUNT AND
PUBLIC OFFERING PRICE COMMISSIONS PROCEEDS TO POPULAR
<S> <C> <C> <C>
Per note............. 100% .125% - .750% 99.875% - 99.250%
Total(1)............. $1,500,000,000 $ 1,875,000- $11,250,000 $ 1,498,125,000- $1,488,750,000
</TABLE>
(1) Or the equivalent of this amount in one or more foreign or composite
currencies.
We may sell notes to the agents referred to below as principal for resale at
varying or fixed offering prices or through the agents as agent using their
reasonable efforts on our behalf. We may also sell notes without the assistance
of the agents, whether acting as principal or as agent.
If we or Popular International Bank, Inc. or Popular North America, Inc.
sells securities referred to in the accompanying prospectus other than pursuant
to this prospectus supplement, the aggregate initial offering price of notes
that we may offer and sell under this prospectus supplement will be reduced.
----------------------
MERRILL LYNCH & CO. CREDIT SUISSE FIRST BOSTON CHASE SECURITIES INC. POPULAR
SECURITIES, INC.
----------------------
The date of this Prospectus Supplement is August , 1999.
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE> 4
DESCRIPTION OF NOTES WE MAY OFFER
This description of the terms of the notes supplements the description of
the general terms and provisions of the notes and replaces any inconsistent
terms and provisions contained in "Description of Debt Securities We May Offer"
in the prospectus. Each pricing supplement will describe the particular terms of
the notes it offers. Unless the pricing supplement applicable to a note provides
otherwise, however, each note will have the following terms. In this prospectus
supplement, WE means Popular.
Popular will issue the notes under the Popular senior indenture, which is
described in the prospectus. The following description of some provisions of the
Popular senior indenture and the notes is only a summary and is qualified by
reference to the provisions of the Popular senior indenture and the notes. The
terms and conditions below will apply to each note unless the applicable pricing
supplement or foreign currency, multi-currency and indexed note supplement to
the applicable pricing supplement specifies otherwise.
Under the Popular senior indenture, Popular may issue any amount of debt
securities in one or more series. From time to time, Popular may, without the
consent of the holders, issue debt securities (including medium-term notes)
under the Popular senior indenture in addition to the $1,500,000,000 principal
amount of notes to which this prospectus supplement relates. The notes will be
denominated in and payable in United States dollars unless the applicable
pricing supplement provides otherwise.
The applicable pricing supplement will specify the interest rate or
interest rate formula and other variable terms of each note. Popular may change
interest rates and interest rate formulae, but no change will affect any note
already issued or for which Popular has accepted an offer to purchase. Unless
the applicable pricing supplement indicates otherwise, FIXED RATE NOTES will
bear interest at fixed rates and FLOATING RATE NOTES will bear interest at
floating rates determined by reference to one or more BASE RATES adjusted by any
SPREAD and/or SPREAD MULTIPLIER applicable to these notes. These terms are
defined below in "Interest Rates -- Floating Rate Notes". Original issue
discount notes may be issued at significant discounts from their principal
amount payable at maturity, and some original issue discount notes may not bear
interest.
Popular may offer interest rates on notes that differ depending upon, among
other factors, the principal amount of notes purchased in any single
transaction. Popular may also offer notes with variable terms other than
interest rates concurrently to different investors. Popular may change the terms
of notes from time to time, but no change will affect any note that has been
issued or as to which Popular has accepted an offer to purchase.
Each interest payment will equal the amount of interest that accrues from
and includes the next preceding interest payment date on which interest has been
paid (or from and including the date the note was issued, if no interest has
been paid since then) up to and excluding the applicable interest payment date
or at maturity.
Unless otherwise indicated in a pricing supplement, the notes will be
issued in book-entry, i.e., global, form or fully registered certificated form.
"Description of Debt Securities We May Offer -- Legal Ownership of Securities"
and "-- Special Considerations for Global Debt Securities" in the prospectus
describe the procedures for transferring or exchanging book-entry notes. No
service charge will be made for the registration of transfer or exchange of
notes issued in certificated form, but Popular may require the holder to pay any
tax or other governmental charge in connection with a transfer or exchange.
INFORMATION IN THE PRICING SUPPLEMENT
Your pricing supplement will describe one or more of the following terms of
your note:
- the stated maturity;
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<PAGE> 5
- the specified currency or currencies for principal and interest, if not
U.S. dollars;
- the price at which we originally issue your note, expressed as a
percentage of the principal amount, and the original issue date;
- whether your note is a fixed rate note, a floating rate note or an
indexed note and also whether it is an original issue discount note;
- if your note is a fixed rate note, the yearly rate at which your note
will bear interest, if any, and the interest payment dates, if different
from those stated below under "-- Interest Rates -- Fixed Rate Notes";
- if your note is a floating rate note, the interest rate basis, which may
be one of the eight base rates described in "-- Interest
Rates -- Floating Rate Notes" below; any applicable index currency or
maturity, spread or spread multiplier or initial, maximum or minimum
rate; the interest reset, determination, calculation and payment dates;
and the calculation agent, all of which we describe under "-- Interest
Rates -- Floating Rate Notes" below;
- if your note is an original issue discount note, the yield to maturity;
- if your note is an indexed note, the principal amount, if any, we will
pay you at maturity, the amount of interest, if any, we will pay you on
an interest payment date or the formula we will use to calculate these
amounts, if any, and whether your note will be exchangeable for or
payable in stock of an issuer other than us or other property;
- whether your note may be redeemed at our option or repaid at your option
before the stated maturity and, if so, other relevant terms such as the
redemption commencement date, repayment date(s), redemption price(s) and
redemption period(s), all of which we describe under "-- Redemption and
Repayment" below;
- whether we will issue or make available your note in non-book-entry form;
and
- any other terms of your note that are consistent with the provisions of
the indenture, which other terms could be different from those described
in this prospectus supplement.
Your pricing supplement will summarize specific financial and other terms
of your note, while this prospectus supplement describes terms that apply
generally to the notes as a series. Consequently, the terms described in your
pricing supplement will supplement those described in this prospectus supplement
and, if the terms described there are inconsistent with those described here,
the terms described there will be controlling. The terms used in your pricing
supplement have the meaning described in this prospectus supplement, unless
otherwise specified.
PAYMENT MECHANICS
WHO RECEIVES PAYMENT?
If interest is due on a note on an interest payment date, we will pay the
interest to the person or entity in whose name the note is registered at the
close of business on the regular record date relating to the interest payment
date. See "-- Regular Record Dates for Interest" below for more information
about the regular record dates. If interest is due at the maturity but on a day
that is not an interest payment date, we will pay the interest to the person or
entity entitled to receive the principal of the note. If principal or another
amount besides interest is payable on a note at the maturity, we will pay the
amount to the holder of the note against surrender of the note at the CORPORATE
TRUST OFFICE of the paying agent in the Borough of Manhattan, New York City,
which is located at 14 Wall Street, Eighth Floor, New York, New York 10005,
Attention: Corporate Trust Services, or, in the case of a global note,
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<PAGE> 6
in accordance with the applicable policies of the depositary.
REGULAR RECORD DATES FOR INTEREST
Unless we specify otherwise in the applicable prospectus supplement, the
regular record date relating to an interest payment date for any fixed rate note
will be the June 1 or December 1 next preceding that interest payment date, and
for any floating rate note will be the 15th calendar day before that interest
payment date, in each case whether or not the record date is a business day. For
the purpose of determining the holder at the close of business on a regular
record date when business is not being conducted, the close of business will
mean 5:00 P.M., New York City time, on that day.
HOW WE WILL MAKE PAYMENTS DUE IN U.S. DOLLARS
We will follow the practice described in this subsection when paying
amounts payable in U.S. dollars. Payments of amounts payable in other currencies
will be made as described in the next subsection.
PAYMENTS ON GLOBAL NOTES
We will make payments on a global note in accordance with the applicable
policies of the depositary as in effect from time to time. Under those policies,
we will pay directly to the depositary, or its nominee, and not to any indirect
holders who own beneficial interests in the global note. An indirect holder's
right to receive those payments will be governed by the rules and practices of
the depositary and its participants, as described in the prospectus under
"-- What Is a Global Debt Security?".
PAYMENTS ON NON-GLOBAL NOTES
We will make payments on a note in non-global form as follows.
- We will pay interest that is due on an interest payment date by check
mailed on the interest payment date to the holder at his or her address
shown on the trustee's records as of the close of business on the regular
record date.
- We will make all other payments by check at the paying agent described
below, against surrender of the note.
All payments by check will be made in "next-day" funds -- i.e., funds that
become available on the day after the check is cashed.
A holder of notes in certificated form with a principal amount of
$10,000,000 or more may ask the paying agent in writing before a regular record
date to pay interest due on the next interest payment date by transferring
immediately available funds to an account at any bank in New York City or, with
Popular's approval, to another bank. The holder must file this request with The
First National Bank of Chicago, the paying agent, at its corporate trust office.
Unless the paying agent receives written notice that the holder is revoking
these wire transfer instructions on or before the regular record date
immediately preceding an interest payment date or the fifteenth day before
maturity, these instructions will apply to any further payment to the holder.
HOW WE WILL MAKE PAYMENTS DUE IN OTHER CURRENCIES
We will follow the practice described in this subsection when paying
amounts that are payable in a specified currency other than U.S. dollars.
PAYMENTS ON GLOBAL NOTES
We will make payments on global notes in accordance with the applicable
policies of the depositary as in effect from time to time. We understand that
these policies, as currently in effect at DTC, are as follows.
S-4
<PAGE> 7
Unless otherwise indicated in your pricing supplement, if you are an
indirect holder of global notes denominated in a specified currency other than
U.S. dollars and if you elect to receive payments in a specified currency other
than U.S. dollars, you must notify the participant through which your interest
in the global note is held of your election:
- on or before the applicable regular record date, in the case of a payment
of interest; or
- on or before the 16th day before the stated maturity, or any redemption
or repayment date, in the case of a payment of principal or any premium.
You may elect to receive all or only a portion of any interest, principal
or premium payment in a specified currency other than U.S. dollars.
Your participant must, in turn, notify DTC of your election on or before
the third DTC business day after that regular record date, in the case of a
payment of interest, and on or before the 12th business day before stated
maturity, or on the redemption or repayment date if your note is redeemed or
repaid earlier, in the case of a payment of principal or any premium.
DTC, in turn, will notify the paying agent of your election in accordance
with DTC's procedures.
If complete instructions are received by the participant and forwarded by
the participant to DTC, and by DTC to the paying agent, on or before the dates
noted above, the paying agent, in accordance with DTC's instructions, will make
the payments to you or your participant by wire transfer of immediately
available funds to an account maintained by the payee with a bank located in the
country issuing the specified currency or in another jurisdiction outside the
United States acceptable to us and the paying agent.
If the steps described above are not properly completed, you will receive
payments in U.S. dollars.
Indirect holders of a global note denominated in a currency other than U.S.
dollars should consult their banks or brokers for information on how to request
payment in the specified currency.
PAYMENTS ON NON-GLOBAL NOTES
Except as described in the last paragraph under this heading, we will make
payments on notes in non-global form in the applicable specified currency. We
will make these payments by wire transfer of immediately available funds to any
account requested by the holder, provided the account is at a bank located in
the country issuing the specified currency or is in another jurisdiction outside
the United States acceptable to us and the trustee. To designate an account for
wire payment, the holder must give the paying agent appropriate wire
instructions at least five business days before the requested wire payment is
due. In the case of any interest payment due on an interest payment date, the
instructions must be given by the person or entity who is the holder on the
regular record date. In the case of any other payment, the payment will be made
only after the notes are surrendered to the paying agent. Any instructions, once
properly given, will remain in effect unless and until new instructions are
properly given in the manner described above.
If a holder fails to give instructions as described above, we will notify
the holder at the address in the trustee's records and will make the payment
within five business days after the holder provides appropriate instructions.
Any late payment made in these circumstances will be treated under the indenture
as if made on the due date, and no interest will accrue on the late payment from
the due date to the date paid.
Although a payment on a note in non-global form may be due in a specified
currency other than U.S. dollars, we will make the payment in U.S. dollars if
the holder asks us to do so. To request U.S. dollar payment, the
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<PAGE> 8
holder must provide appropriate written notice to the trustee at least five
business days before the next due date for which payment in U.S. dollars is
requested. In the case of any interest payment due on an interest payment date,
the request must be made by the person or entity who is the holder on the
regular record date. Any request, once properly made, will remain in effect
unless and until revoked by notice properly given in the manner described above.
Book-entry and other indirect holders of a note with a specified currency
other than U.S. dollars should contact their banks or brokers for information
about how to receive payments in the specified currency or in U.S. dollars.
CONVERSION TO U.S. DOLLARS
When we are asked by a holder to make payments in U.S. dollars of an amount
due in another currency, either on a global note or a non-global note as
described above, we will determine the U.S. dollar amount the holder receives as
follows. The exchange rate agent described below will request currency bid
quotations expressed in U.S. dollars from three or, if three are not available,
then two, recognized foreign exchange dealers in New York City, any of which may
be the exchange rate agent, as of 11:00 A.M., New York City time, on the second
business day before the payment date. Currency bid quotations will be requested
on an aggregate basis, for all holders of notes and other debt securities, if
any, requesting U.S. dollar payments of amounts due on the same date in the same
specified currency. The U.S. dollar amount the holder receives will be based on
the highest acceptable currency bid quotation received by the exchange rate
agent. If the exchange rate agent determines that at least two acceptable
currency bid quotations are not available on that second business day, the
payment will be made in the specified currency.
To be acceptable, a quotation must be given as of 11:00 A.M., New York City
time, on the second business day before the due date and the quoting dealer must
commit to execute a contract at the quotation. If some but not all of the
relevant notes are LIBOR notes, the second preceding business day will be
determined for this purpose as if none of those notes were LIBOR notes.
A holder that requests payment in U.S. dollars will bear all associated
currency exchange costs, which will be deducted from the payment.
WHEN THE SPECIFIED CURRENCY IS NOT AVAILABLE
If we are obligated to make any payment in a specified currency other than
U.S. dollars, and the specified currency or any successor currency is not
available to us due to circumstances beyond our control -- such as the
imposition of exchange controls or a disruption in the currency markets -- we
will be entitled to satisfy our obligation to make the payment in that specified
currency by making the payment in U.S. dollars, on the basis of the most
recently available exchange rate.
For a specified currency other than U.S. dollars, the exchange rate will be
the noon buying rate for cable transfers of the specified currency in New York
City as quoted by the Federal Reserve Bank of New York on the then most recent
day on which that bank has quoted that rate.
The procedures described above will apply to any note, whether in global or
non-global form, and to any payment, including a payment at maturity. Any
payment made under the circumstances and in a manner described above will not
result in a default under any note or the indenture.
EXCHANGE RATE AGENT
If we issue a note in a specified currency other than U.S. dollars, we will
appoint a financial institution to act as the exchange rate agent and will name
the institution initially appointed when the note is originally issued in the
applicable pricing supplement. We may select one of our affiliates or one of the
agents or their affiliates to perform this role. We may
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<PAGE> 9
change the exchange rate agent from time to time after the original issue date
of the note without your consent and without notifying you of this change.
All determinations made by the exchange rate agent will be at its sole
discretion unless we state in the applicable pricing supplement that any
determination requires our approval. In the absence of manifest error, those
determinations will be conclusive for all purposes and binding on you and us,
without any liability on the part of the exchange rate agent.
DENOMINATION OF NOTES
Unless we specify differently in the pricing supplement relating to your
note, the denomination of your note will be $100,000 or integral multiples of
$1,000 above that. If your note is denominated in a specified currency other
than U.S. dollars, the denomination of the note will be in an amount of the
specified currency for the note equivalent to $100,000 and integral multiples of
$1,000 above that, using an exchange rate equal to the noon buying rate in New
York City for cable transfers for the specified currency on the first business
day immediately before the date on which we accept the offer to buy the note.
INTEREST RATES
FIXED RATE NOTES
Each fixed rate note, except any zero coupon note, will bear interest from
its original issue date or from the most recent date to which interest on the
note has been paid or made available for payment. Interest will accrue on the
principal of a fixed rate note at the fixed yearly rate stated in the applicable
pricing supplement, until the principal is paid or made available for payment.
Unless otherwise specified in the applicable pricing supplement, interest on a
fixed rate note will be payable semiannually each June 15 and December 15, which
will be the interest payment dates for a fixed rate note, and at maturity. Each
payment of interest due on an interest payment date or the date of maturity will
include interest accrued from and including the last date to which interest has
been paid or made available for payment, or from the issue date if none has been
paid or made available for payment, to but excluding the interest payment date
or the date of maturity. We will compute interest on fixed rate notes on the
basis of a 360-day year of twelve 30-day months. We will pay interest on each
interest payment date and at maturity as described above under "-- Payment
Mechanics". If the original issue date of a note is between a regular record
date and the corresponding interest payment date, the initial interest payment
will be made to the holder of record on the next interest payment date after the
next regular record date.
FLOATING RATE NOTES
In this subsection, we use several specialized terms relating to the manner
in which floating interest rates are calculated. These terms appear in BOLD,
ITALICIZED type the first time they appear, and we define these terms in
"-- Special Rate Calculation Terms" at the end of this subsection.
Also, please remember that the specific terms of your note as described in
your pricing supplement will supplement and may modify or replace the general
terms regarding the floating rates of interest described in this subsection. The
statements we make in this subsection may not apply to your note.
Each floating rate note will bear interest from its original issue date or
from the most recent date to which interest on the note has been paid or made
available for payment. Interest will accrue on the principal of a floating rate
note at the yearly rate determined according to the interest rate formula stated
in the applicable pricing supplement, until the principal is paid or made
available for pay-ment. We will pay interest on each interest payment date and
at maturity as described above under "-- Payment Mechanics".
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BASE RATES
We currently expect to issue floating rate notes that bear interest at
rates based on one or more of the following base rates:
- commercial paper rate;
- prime rate;
- LIBOR;
- treasury rate;
- CMT rate;
- CD rate;
- federal funds rate; and/or
- 11th district rate.
We describe each of these base rates in further detail below in this subsection.
Your pricing supplement may designate other base rates. If you purchase a
floating rate note, your pricing supplement will specify the type of base rate
that applies to your note.
INITIAL BASE RATE
For any floating rate note, the base rate in effect from the original issue
date to the first interest reset date will be the initial base rate. We will
specify the initial base rate in the applicable pricing supplement.
SPREAD OR SPREAD MULTIPLIER
In some cases, the base rate for a floating rate note may be adjusted:
- by adding or subtracting a specified number of basis points, called the
spread, with one basis point being 0.01%; or
- by multiplying the base rate by a specified percentage, called the spread
multiplier.
If you purchase a floating rate note, your pricing supplement will specify
whether a spread or spread multiplier will apply to your note and, if so, the
amount of the spread or spread multiplier. We may change the spread, spread
multiplier, INDEX MATURITY and other variable terms of the floating rate notes
from time to time, but no change will affect any floating rate note previously
issued or as to which we have accepted an offer.
MAXIMUM AND MINIMUM RATES
The actual interest rate, after being adjusted by the spread or spread
multiplier, may also be subject to either or both of the following limits:
- a maximum rate -- i.e., a specified upper limit that the actual interest
rate in effect at any time may not exceed; and/or
- a minimum rate -- i.e., a specified lower limit that the actual interest
rate in effect at any time may not fall below.
If you purchase a floating rate note, your pricing supplement will specify
whether a maximum rate and/or minimum rate will apply to your note and, if so,
what those rates are.
Whether or not a maximum rate applies, the interest rate on a floating rate
note will in no event be higher than the maximum rate permitted by New York law,
as it may be modified by U.S. law of general application. Under current New York
law, the maximum rate of interest, with some exceptions, for any loan in an
amount less than $250,000 is 16% and for any loan in the amount of $250,000 or
more but less than $2,500,000 is 25% per year on a simple interest basis. These
limits do not apply to loans of $2,500,000 or more.
The rest of this subsection describes how the interest rate and the
interest payment dates will be determined, and how interest will be calculated,
on a floating rate note.
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INTEREST RESET DATES
The rate of interest on a floating rate note will be reset, by the
calculation agent described below, daily, weekly, monthly, quarterly, semi-
annually or annually. The date on which the interest rate resets and the reset
rate becomes effective is called the interest reset date. Except as otherwise
specified in the applicable pricing supplement, the interest reset date will be
as follows:
- for floating rate notes that reset daily, each BUSINESS DAY;
- for floating rate notes that reset weekly and are not treasury rate
notes, the Wednesday of each week;
- for treasury rate notes that reset weekly, the Tuesday of each week,
except as otherwise described in the next to last paragraph under
"-- Interest Determination Dates" below;
- for floating rate notes that reset monthly, the third Wednesday of each
month;
- for floating rate notes that reset quar-terly, the third Wednesday of
March, June, September and December of each year;
- for floating rate notes that reset semi-annually, the third Wednesday of
each of two months of each year as specified in the applicable pricing
supplement; and
- for floating rate notes that reset annually, the third Wednesday of one
month of each year as specified in the applicable pricing supplement.
For a floating rate note, the interest rate in effect on any particular day will
be the interest rate determined with respect to the latest interest reset date
that occurs on or before that day.
There are several exceptions, however, to the reset provisions described
above. The base rate in effect from the original issue date to the first
interest reset date will be the initial base rate. For floating rate notes that
reset daily or weekly, the base rate in effect for each day following the second
business day before an interest payment date to, but excluding, the interest
payment date, and for each day following the second business day before the
maturity to, but excluding, the maturity, will be the base rate in effect on
that second business day.
If any interest reset date for a floating rate note would otherwise be a
day that is not a business day, the interest reset date will be postponed to the
next day that is a business day. For a LIBOR note, however, if that business day
is in the next succeeding calendar month, the interest reset date will be the
immediately preceding business day.
INTEREST DETERMINATION DATES
The interest rate that takes effect on an interest reset date will be
determined by the calculation agent by reference to a particular date called an
interest determination date. Except as otherwise specified in the applicable
pricing supplement:
- For all floating rate notes other than LIBOR notes, treasury rate notes
and 11th district rate notes, the interest determination date relating to
a particular interest reset date will be the second business day before
that interest reset date.
- For LIBOR notes, the interest determi-nation date relating to a
particular interest reset date will be the second LONDON BUSINESS DAY
preceding the interest reset date, unless the INDEX CURRENCY is pounds
sterling, in which case the interest determination date will be the
interest reset date. We refer to an interest determination date for a
LIBOR note as a LIBOR interest determination date.
- For treasury rate notes, the interest determination date relating to a
particular interest reset date, which we refer
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to as a treasury interest determination date, will be the day of the
week in which the interest reset date falls on which treasury bills --
i.e., direct obligations of the U.S. government -- would normally be
auctioned. Treasury bills are usually sold at auction on the Monday of
each week, unless that day is a legal holiday, in which case the auction
is usually held on the following Tuesday, except that the auction may be
held on the preceding Friday. If as the result of a legal holiday an
auction is held on the preceding Friday, that Friday will be the
treasury interest determination date relating to the interest reset date
occurring in the next succeeding week. If the auction is held on a day
that would otherwise be an interest reset date, then the interest reset
date will instead be the first business day following the auction date.
- For 11th district rate notes, the interest determination date relating to
a particular interest reset date will be the last working day in San
Francisco, in the first calendar month before that interest reset date,
on which the Federal Home Loan Bank of San Francisco publishes the
monthly average cost of funds paid by member institutions of the Eleventh
Federal Home Loan Bank District for the second calendar month before that
interest reset date. We refer to an interest determination date for an
11th district rate note as an 11th district interest determination date.
INTEREST CALCULATION DATES
As described above, the interest rate that takes effect on a particular
interest reset date will be determined by reference to the corresponding
interest determination date. Except for LIBOR notes, however, the determination
of the rate will actually be made on the corresponding interest calculation
date. The interest calculation date will be the earlier of the following:
- the tenth calendar day after the interest determination date or, if that
tenth calendar day is not a business day, the next succeeding business
day; and
- the business day immediately preceding the interest payment date or the
maturity, whichever is the day on which the next payment of interest will
be due.
INTEREST PAYMENT DATES
The interest payment dates for a floating rate note will depend on when the
interest rate is reset and, unless we specify otherwise in the applicable
pricing supplement, will be as follows:
- for floating rate notes that reset daily, weekly or monthly, the third
Wednesday of each month or the third Wednesday of March, June, September
and December of each year, as specified in the applicable pricing
supplement;
- for floating rate notes that reset quarterly, the third Wednesday of
March, June, September and December of each year;
- for floating rate notes that reset semi-annually, the third Wednesday of
the two months of each year specified in the applicable pricing
supplement; or
- for floating rate notes that reset annually, the third Wednesday of the
month specified in the applicable pricing supplement; and
- for all floating rate notes, at maturity.
Regardless of these rules, if a note is originally issued after the regular
record date and before the date that would otherwise be the first interest
payment date, the first interest payment date will be the date that would
otherwise be the second interest payment date.
In addition, the following special provision will apply to a floating rate
note with regard to any interest payment date other than one that
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falls on the maturity. If the interest payment date would otherwise fall on a
day that is not a business day, then the interest payment date will be the next
day that is a business day. However, if the floating rate note is a LIBOR note
and the next business day falls in the next calendar month, then the interest
payment date will be advanced to the next preceding day that is a business day.
In all cases, an interest payment date that falls on the maturity will not be
changed.
CALCULATION OF INTEREST
Calculations relating to floating rate notes will be made by the
calculation agent, an institution that we appoint as our agent for this purpose.
Unless the applicable pricing supplement provides otherwise, The First National
Bank of Chicago will be the calculation agent for the floating rate notes. We
may appoint a different institution to serve as calculation agent from time to
time after the original issue date of a note without your consent and without
notifying you of the change.
For each floating rate note, the calculation agent will determine, on the
corresponding interest calculation or determination date, as applicable, the
interest rate that takes effect on each interest reset date. In addition, the
calculation agent will calculate the amount of interest that has accrued during
each interest period -- i.e., the period from and including the original issue
date, or the last date to which interest has been paid or made available for
payment, to but excluding the payment date. For each interest period, the
calculation agent will calculate the amount of accrued interest by multiplying
the face amount of the floating rate note by an accrued interest factor for the
interest period. This factor will equal the sum of the interest factors
calculated for each day during the interest period. The interest factor for each
day will be expressed as a decimal and will be calculated by dividing the
interest rate (also expressed as a decimal) applicable to that day:
- by 360, in the case of commercial paper rate notes, prime rate notes,
LIBOR notes, CD rate notes, federal funds rate notes and 11th district
rate notes; or
- by the actual number of days in the year, in the case of treasury rate
notes and CMT rate notes.
Upon the request of the holder of any floating rate note, the calculation
agent will provide for that note the interest rate then in effect and, if
determined, the interest rate that will become effective on the next interest
reset date. The calculation agent's determination of any interest rate, and its
calculation of the amount of interest for any interest period, will be final and
binding in the absence of manifest error.
All percentages resulting from any calculation relating to a note will be
rounded upward or downward, as appropriate, to the next higher or lower one
hundred-thousandth of a percentage point (e.g., 9.876541% (or .09876541) being
rounded down to 9.87654% (or .0987654) and 9.876545% (or .09876545) being
rounded up to 9.87655% (or .0987655)). All amounts used in or resulting from any
calculation relating to a floating rate note will be rounded upward or downward,
as appropriate, to the nearest cent, in the case of U.S. dollars, or to the
nearest corresponding hundredth of a unit, in the case of a currency other than
U.S. dollars, with one-half cent or one-half of a corresponding hundredth of a
unit or more being rounded upward.
In determining the base rate that applies to a floating rate note during a
particular interest period, the calculation agent may obtain rate quotes from
various banks or dealers active in the relevant market, as described in the
following subsections. Those reference banks and dealers may include the
calculation agent itself and its affiliates, as well as any agent and its
affiliates, and they may include our affiliates.
COMMERCIAL PAPER RATE NOTES
If you purchase a commercial paper rate note, your note will bear interest
at a base rate equal to the commercial paper rate and
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adjusted by the spread or spread multiplier, if any, specified in your pricing
supplement.
The commercial paper rate will be the MONEY MARKET YIELD of the rate, for
the relevant interest determination date, for commercial paper having the INDEX
MATURITY specified in your pricing supplement, as published in H.15 (519) under
the heading "Commercial Paper -- Non-financial". If the commercial paper rate
cannot be determined as described above, the following procedures will apply:
- If the rate described above is not published in H.15 (519) by 3:00 P.M.,
New York City time, on the relevant interest calculation date, then the
commercial paper rate will be the rate, for the relevant interest
determination date, for commercial paper having the index maturity
specified in your pricing supplement, as published in H.15 DAILY UPDATE
or any other recognized electronic source used for displaying that rate,
under the heading "Commercial Paper -- Non-financial".
- If the rate described above is not published in H.15 (519), H.15 daily
update or another recognized electronic source by 3:00 P.M., New York
City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the commercial paper rate will be the money market
yield of the arithmetic mean of the following offered rates for U.S.
dollar commercial paper that has the relevant index maturity and is
placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency: the rates offered
as of 11:00 A.M., New York City time, on the relevant interest
determination date, by three leading U.S. dollar commercial paper dealers
in New York City selected by the calculation agent.
- If fewer than three dealers selected by the calculation agent are quoting
as described above, the commercial paper rate for the new interest period
will be the commercial paper rate in effect for the prior interest
period. If the initial base rate has been in effect for the prior
interest period, however, it will remain in effect for the new interest
period.
PRIME RATE NOTES
If you purchase a prime rate note, your note will bear interest at a base
rate equal to the prime rate and adjusted by the spread or spread multiplier, if
any, specified in your pricing supplement.
The prime rate will be the rate, for the relevant interest determination
date, published in H.15 (519) under the heading "Bank Prime Loan". If the prime
rate cannot be determined as described above, the following procedures will
apply.
- If the rate described above is not published in H.15 (519) by 3:00 P.M.,
New York City time, on the relevant interest calculation date, then the
prime rate will be the rate, for the relevant interest determination
date, as published in H.15 daily update or another recognized electronic
source used for the purpose of displaying that rate, under the heading
"Bank Prime Loan".
- If the rate described above is not published in H.15(519), H.15 daily
update or another recognized electronic source by 3:00 P.M., New York
City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), then the prime rate will be the arithmetic mean of
the following rates as they appear on the REUTERS SCREEN US PRIME 1 PAGE-
the rate of interest publicly announced by each bank appearing on that
page as that bank's prime rate or base lending rate, as of 11:00 A.M.,
New York City time, on the relevant interest determination date.
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- If fewer than four of these rates appear on the Reuters screen US PRIME 1
page, the prime rate will be the arithmetic mean of the prime rates or
base lending rates, as of the close of business on the relevant interest
determination date, of three major banks in New York City selected by the
calculation agent. For this purpose, the calculation agent will use rates
quoted on the basis of the actual number of days in the year divided by a
360-day year.
- If fewer than three banks selected by the calculation agent are quoting
as described above, the prime rate for the new interest period will be
the prime rate in effect for the prior interest period. If the initial
base rate has been in effect for the prior interest period, however, it
will remain in effect for the new interest period.
LIBOR NOTES
If you purchase a LIBOR note, your note will bear interest at a base rate
equal to LIBOR, which means the London interbank offered rate for deposits in
U.S. dollars or any other index currency, as specified in your pricing
supplement. In addition, the applicable LIBOR base rate will be adjusted by the
spread or spread multiplier, if any, specified in your pricing supplement. LIBOR
will be determined in the following manner:
- LIBOR will be either:
-- the offered rate appearing on the TELERATE LIBOR PAGE; or
-- the arithmetic mean of the offered rates appearing on the REUTERS
SCREEN LIBOR PAGE unless that page by its terms cites only one rate,
in which case that rate;
in either case, as of 11:00 A.M., London time, on the relevant LIBOR interest
determination date, for deposits of the relevant index currency having the
relevant index maturity beginning on the relevant interest reset date. Your
pricing supplement will indicate the index currency, the index maturity and the
reference page that apply to your LIBOR note. If no reference page is specified
in your pricing supplement, the Telerate LIBOR page will apply to your LIBOR
note.
- If the Telerate LIBOR page applies and the rate described above does not
appear on that page, or if the Reuters screen LIBOR page applies and
fewer than two of the rates described above appear on that page or no
rate appears on any page on which only one rate normally appears, then
LIBOR will be determined on the basis of the rates, at approximately
11:00 A.M., London time, on the relevant LIBOR interest determination
date, at which deposits of the following kind are offered to prime banks
in the London interbank market by four major banks in that market
selected by the calculation agent: deposits of the index currency having
the relevant index maturity beginning on the relevant interest reset
date, and in a REPRESENTATIVE AMOUNT. The calculation agent will request
the principal London office of each of these banks to provide a quotation
of its rate. If at least two quotations are provided, LIBOR for the
relevant LIBOR interest determination date will be the arithmetic mean of
the quotations.
- If fewer than two quotations are provided as described above, LIBOR for
the relevant LIBOR interest determination date will be the arithmetic
mean of the rates for loans of the following kind to leading European
banks quoted, at approximately 11:00 A.M., in the principal financial
center for the country of the index currency, on that LIBOR interest
determination date, by three major banks in that financial center
selected by the calculation agent: loans of the index currency having the
relevant index maturity, beginning on the relevant interest reset date,
and in a representative amount.
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- If fewer than three banks selected by the calculation agent are quoting
as described above, LIBOR for the new interest period will be LIBOR in
effect for the prior interest period. If the initial base rate has been
in effect for the prior interest period, however, it will remain in
effect for the new interest period.
TREASURY RATE NOTES
If you purchase a treasury rate note, your note will bear interest at a
base rate equal to the treasury rate and adjusted by the spread or spread
multiplier, if any, specified in your pricing supplement.
The treasury rate will be the rate for the auction, on the relevant
treasury interest determination date, of treasury bills having the index
maturity specified in your pricing supplement, as that rate appears on TELERATE
PAGE 56 or 57 under the heading "Investment Rate". If the treasury rate cannot
be determined in this manner, the following procedures will apply.
- If the rate described above does not appear on either page at 3:00 P.M.,
New York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from that source at
that time), the treasury rate will be the BOND EQUIVALENT YIELD of the
rate, for the relevant interest determination date, for the type of
treasury bill described above, as published in H.15 daily update, or
another recognized electronic source used for displaying that rate, under
the heading "U.S. Government Securities/Treasury Bills/Auction High".
- If the rate described in the prior para-graph does not appear in H.15
daily update or another recognized electronic source by 3:00 P.M., New
York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the treasury rate will be the bond equivalent
yield of the auction rate, for the relevant treasury interest
determination date and for treasury bills of the kind described above, as
announced by the U.S. Department of the Treasury.
- If the auction rate described in the prior paragraph is not so announced
by 3:00 P.M., New York City time, on the relevant interest calculation
date, or if no such auction is held for the relevant week, then the
treasury rate will be the bond equivalent yield of the rate, for the
relevant treasury interest determination date and for treasury bills of
the kind described above, as published in H.15 (519) under the heading
"U.S. Government Securities/Treasury Bills/Secondary Market".
- If the rate described in the prior paragraph is not published in H.15
(519) by 3:00 P.M., New York City time, on the relevant interest
calculation date, then the treasury rate will be the rate, for the
relevant treasury interest determination date and for treasury bills of
the kind described above, as published in H.15 daily update, or another
recognized electronic source used for displaying that rate, under the
heading "U.S. Government Securities/Treasury Bills/Secondary Market".
- If the rate described in the prior paragraph is not published in H.15
daily update or another recognized electronic source by 3:00 P.M., New
York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the treasury rate will be the bond equivalent
yield of the arithmetic mean of the following secondary market bid rates
for the issue of treasury bills with a remain-ing maturity closest to the
specified index maturity: the rates bid as of approximately 3:30 P.M.,
New York
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City time, on the relevant treasury interest determination date, by three
primary U.S. government securities dealers in New York City selected by
the calculation agent.
- If fewer than three dealers selected by the calculation agent are quoting
as described in the prior paragraph, the treasury rate in effect for the
new interest period will be the treasury rate in effect for the prior
interest period. If the initial base rate has been in effect for the
prior interest period, however, it will remain in effect for the new
interest period.
CMT RATE NOTES
If you purchase a CMT rate note, your note will bear interest at a base
rate equal to the CMT rate and adjusted by the spread or spread multiplier, if
any, specified in your pricing supplement.
The CMT rate will be the following rate displayed on the DESIGNATED CMT
TELERATE PAGE under the heading ". . . Treasury Constant Maturities . . .
Federal Reserve Board Release H.15 . . . Mondays Approximately 3:45 P.M.", under
the column for the DESIGNATED CMT INDEX MATURITY:
- if the designated CMT Telerate page is Telerate page 7051, the rate for
the relevant interest determination date; or
- if the designated CMT Telerate page is Telerate page 7052, the weekly or
monthly average, as specified in your pricing supplement, for the week
that ends immediately before the week in which the relevant interest
determination date falls, or for the month that ends immediately before
the month in which the relevant interest determination date falls, as
applicable.
If the CMT rate cannot be determined in this manner, the following procedures
will apply.
- If the applicable rate described above is not displayed on the relevant
designated CMT Telerate page at 3:00 P.M., New York City time, on the
relevant interest calculation date (unless the calculation is made
earlier and the rate is available from one of those sources at that
time), then the CMT rate will be the applicable treasury constant
maturity rate described above -- i.e., for the designated CMT index
maturity and for either the relevant interest determination date or the
weekly or monthly average, as applicable -- as published in H.15 (519).
- If the applicable rate described above is not published in H.15 (519) by
3:00 P.M., New York City time, on the relevant interest calculation date,
then the CMT rate will be the treasury constant maturity rate, or other
U.S. treasury rate, for the designated CMT index maturity and with
reference to the relevant interest determination date, that:
-- is published by the Board of Governors of the Federal Reserve System,
or the U.S. Department of the Treasury; and
-- is determined by the calculation agent to be comparable to the
applicable rate formerly displayed on the designated CMT Telerate page
and published in H.15 (519).
- If the rate described in the prior paragraph is not published by 3:00
P.M., New York City time, on the relevant interest calculation date, then
the CMT rate will be the yield to maturity of the arithmetic mean of the
following secondary market offered rates for the most recently issued
treasury notes having an original maturity of approximately the
designated CMT index maturity and a remaining term to maturity of not
less than the designated CMT index maturity minus one year and in a
representative amount: the offered rates, as of approximately 3:30 P.M.,
New York City time, on the
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relevant interest determination date, of three primary U.S. government
securities dealers in New York City selected by the calculation agent. In
selecting these offered rates, the calculation agent will request
quotations from five of these primary dealers and will disregard the
highest quotation -- or, if there is equality, one of the highest -- and
the lowest quotation -- or, if there is equality, one of the lowest.
Treasury notes are direct, non-callable, fixed rate obligations of the
U.S. government.
- If the calculation agent is unable to obtain three quotations of the kind
described in the prior paragraph, the CMT rate will be the yield to
maturity of the arithmetic mean of the following secondary market offered
rates for treasury notes with an original maturity longer than the
designated CMT index maturity, with a remaining term to maturity closest
to the designated CMT index maturity and in a representative amount: the
offered rates, as of approximately 3:30 P.M., New York City time, on the
relevant interest determination date, of three primary U.S. government
securities dealers in New York City selected by the calculation agent. In
selecting these offered rates, the calculation agent will request
quotations from five of these primary dealers and will disregard the
highest quotation -- or, if there is equality, one of the highest -- and
the lowest quotation -- or, if there is equality, one of the lowest. If
two treasury notes with an original maturity longer than the designated
CMT index maturity have remaining terms to maturity that are equally
close to the designated CMT index maturity, the calculation agent will
obtain quotations for the treasury note with the shorter remaining term
to maturity.
- If fewer than five but more than two of these primary dealers are quoting
as described in the prior paragraph, then the CMT rate for the relevant
interest determination date will be based on the arithmetic mean of the
offered rates so obtained, and neither the highest nor the lowest of
those quotations will be disregarded.
- If two or fewer primary dealers selected by the calculation agent are
quoting as described above, the CMT rate in effect for the new interest
period will be the CMT rate in effect for the prior interest period. If
the initial base rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
CD RATE NOTES
If you purchase a CD rate note, your note will bear interest at a base rate
equal to the CD rate and adjusted by the spread or spread multiplier, if any,
specified in your pricing supplement.
The CD rate will be the rate, on the relevant interest determination date,
for negotiable U.S. dollar certificates of deposit having the index maturity
specified in your pricing supplement, as published in H.15 (519) under the
heading "CDs (Secondary Market)". If the CD rate cannot be determined in this
manner, the following procedures will apply.
- If the rate described above is not published in H.15 (519) by 3:00 P.M.,
New York City time, on the relevant interest calculation date, then the
CD rate will be the rate, for the relevant interest determination date,
described above as published in H.15 daily update, or another recognized
electronic source used for displaying that rate, under the heading "CDs
(Secondary Market)".
- If the rate described above is not published in H.15 (519), H.15 daily
update or another recognized electronic source by 3:00 P.M., New York
City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from
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one of those sources at that time), the CD rate will be the arithmetic
mean of the following secondary market offered rates for negotiable U.S.
dollar certificates of deposit of major U.S. money center banks with a
remaining maturity closest to the specified index maturity, and in a
representative amount: the rates offered as of 10:00 A.M., New York City
time, on the relevant interest determination date, by three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in New
York City, as selected by the calculation agent.
- If fewer than three dealers selected by the calculation agent are quoting
as described above, the CD rate in effect for the new interest period
will be the CD rate in effect for the prior interest period. If the
initial base rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
FEDERAL FUNDS RATE NOTES
If you purchase a federal funds rate note, your note will bear interest at
a base rate equal to the federal funds rate and adjusted by the spread or spread
multiplier, if any, specified in your pricing supplement.
The federal funds rate will be the rate for U.S. dollar federal funds on
the relevant interest determination date, as published in H.15 (519) under the
heading "Federal Funds (Effective)", as that rate is displayed on Telerate page
120. If the federal funds rate cannot be determined in this manner, the
following procedures will apply.
- If the rate described above is not displayed on Telerate page 120 at 3:00
P.M., New York City time, on the relevant interest calculation date
(unless the calculation is made earlier and the rate is available from
that source at that time), then the federal funds rate will be the rate,
for the relevant interest determination date, described above as
published in H.15 daily update, or another recognized electronic source
used for displaying that rate, under the heading "Federal Funds
(Effective)".
- If the rate described above is not displayed on Telerate page 120 and is
not published in H.15 (519), H.15 daily update or another recognized
electronic source by 3:00 P.M., New York City time, on the relevant
interest calculation date (unless the calculation is made earlier and the
rate is available from one of those sources at that time), the federal
funds rate will be the arithmetic mean of the rates for the last
transaction in overnight, U.S. dollar federal funds arranged, before 9:00
A.M., New York City time, on the relevant interest determination date, by
three leading brokers of U.S. dollar federal funds transactions in New
York City selected by the calculation agent.
- If fewer than three brokers selected by the calculation agent are quoting
as described above, the federal funds rate in effect for the new interest
period will be the federal funds rate in effect for the prior interest
period. If the initial base rate has been in effect for the prior
interest period, however, it will remain in effect for the new interest
period.
11TH DISTRICT RATE NOTES
If you purchase an 11th district rate note, your note will bear interest at
a base rate equal to the 11th district rate and adjusted by the spread or spread
multiplier, if any, specified in your pricing supplement.
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<PAGE> 20
The 11th district rate will be the rate equal to the monthly weighted
average cost of funds for the calendar month immediately before the relevant
11th district interest determination date, as displayed on Telerate page 7058
under the heading "11th District" as of 11:00 A.M., San Francisco time, on that
date. If the 11th district rate cannot be determined in this manner, the
following procedures will apply.
- If the rate described above does not appear on Telerate page 7058 on the
relevant 11th district interest deter-mination date, then the 11th
district rate for that date will be the monthly weighted average cost of
funds paid by institutions that are members of the Eleventh Federal Home
Loan Bank District for the calendar month immediately before the relevant
11th district interest determination date, as most recently announced by
the Federal Home Loan Bank of San Francisco as that cost of funds.
- If the Federal Home Loan Bank of San Francisco fails to announce the cost
of funds described in the prior paragraph on or before the relevant 11th
district interest determination date, the 11th district rate in effect
for the new interest period will be the 11th district rate in effect for
the prior interest period. If the initial base rate has been in effect
for the prior interest period, however, it will remain in effect for the
new interest period.
SPECIAL RATE CALCULATION TERMS
In this subsection entitled "-- Interest Rates", we use several terms that
have special meanings relevant to calculating floating interest rates. We define
these terms as follows:
"BOND EQUIVALENT YIELD" means a yield expressed as a percentage and
calculated in accordance with the following formula:
<TABLE>
<S> <C> <C>
bond equivalent
yield = D X N X 100
---------------
360 - (D X M)
</TABLE>
where
- "D" means the annual rate for treasury bills quoted on a bank discount
basis and expressed as a decimal;
- "N" means 365 or 366, as the case may be; and
- "M" means the actual number of days in the applicable interest reset
period.
"BUSINESS DAY" means, for any note, a day that meets all the following
applicable requirements:
- for all notes, is a Monday, Tuesday, Wednesday, Thursday or Friday that
is not a day on which banking institutions in New York City generally are
authorized or obligated by law, regulation or executive order to close;
- if the note is a LIBOR note, is also a London business day; and
- if the note has a specified currency other than U.S. dollars, is also a
day on which banking institutions are not authorized or obligated by law,
regulation or executive order to close in the principal financial center
of the country issuing the specified currency.
"DESIGNATED CMT INDEX MATURITY" means the index maturity for a CMT rate
note and will be the original period to maturity of a U.S. treasury
security -- either 1, 2, 3, 5, 7, 10, 20 or 30 years -- specified in the
applicable pricing supplement. If no such original maturity period is so
specified, the designated CMT index maturity will be 2 years.
"DESIGNATED CMT TELERATE PAGE" means the Telerate page specified in the
applicable pricing supplement that displays treasury constant maturities as
reported in H.15 (519). If no Telerate page is so specified, then the applicable
page will be Telerate page 7052. If Telerate Page 7052 applies but the
applicable pricing supplement does not specify whether the weekly or monthly
average applies, the weekly average will apply.
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<PAGE> 21
"H.15 (519)" means the weekly statistical release entitled "Statistical
Release H.15 (519)", or any successor publication, published by the Board of
Governors of the Federal Reserve System.
"H.15 DAILY UPDATE" means the daily update of H.15 (519) available through
the worldwide-web site of the Board of Governors of the Federal Reserve System,
at http: //www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
"INDEX CURRENCY" means, with respect to a LIBOR note, the currency
specified as such in the applicable pricing supplement. The index currency may
be U.S. dollars or any other currency, and will be U.S. dollars unless another
currency is specified in the applicable pricing supplement.
"INDEX MATURITY" means, with respect to a floating rate note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as specified in the applicable pricing supplement.
"LONDON BUSINESS DAY" means any day on which dealings in the relevant index
currency are transacted in the London interbank market.
"MONEY MARKET YIELD" means a yield expressed as a percentage and calculated
in accordance with the following formula:
<TABLE>
<S> <C> <C>
money market yield = D X 360 X 100
---------------
360 - (D X M)
</TABLE>
where
- "D" means the annual rate for commercial paper quoted on a bank discount
basis and expressed as a decimal; and
- "M" means the actual number of days in the relevant interest reset
period.
"REPRESENTATIVE AMOUNT" means an amount that, in the calculation agent's
judgment, is representative of a single transaction in the relevant market at
the relevant time.
"REUTERS SCREEN LIBOR PAGE" means the display on the Reuters Monitor Money
Rates Service, or any successor service, on the page designated as "LIBO" or any
replacement page or pages on which London interbank rates of major banks for the
relevant index currency are displayed.
"REUTERS SCREEN US PRIME 1 PAGE" means the display on the "US PRIME 1" page
on the Reuters Monitor Money Rates Service, or any successor service, or any
replacement page or pages on that service, for the purpose of displaying prime
rates or base lending rates of major U.S. banks.
"TELERATE LIBOR PAGE" means Telerate page 3750 or any replacement page or
pages on which London interbank rates of major banks for the relevant index
currency are displayed.
"TELERATE PAGE" means the display on Bridge Telerate Inc., or any successor
service, on the page or pages specified in this prospectus supplement or the
applicable pricing supplement, or any replacement page or pages on that service.
If, when we use the terms designated CMT Telerate page, H.15 (519), H.15
daily update, Reuters screen LIBOR page, Reuters screen US PRIME 1 page,
Telerate LIBOR page or Telerate page, we refer to a particular heading or
headings on any of those pages, those references include any successor or
replacement heading or headings as determined by the calculation agent.
ORIGINAL ISSUE DISCOUNT NOTES
We may issue notes at a price lower than their stated principal amount
which may or may not bear interest. These notes are called original issue
discount notes. If original issue discount notes are redeemed before the stated
maturity or their maturity is accelerated, the holder will be entitled to
receive less than the principal amount of the notes that it holds. In addition,
original issue discount notes may be considered "discount notes" for U.S.
federal income tax purposes, as "United States Taxation -- Original Issue
Discount" describes later in this prospectus supplement. The pricing supplement
may describe other considerations that apply only to original issue discount
notes.
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<PAGE> 22
AMORTIZING NOTES
We will make payments on amortized notes at intervals specified in the
pricing supplement and at maturity. Unless the applicable pricing supplement
specifies otherwise, interest on an amortizing note will be computed on the
basis of a 360-day year of twelve 30-day months. Payments on amortizing notes
will count towards interest first and then to the reduction of the unpaid
principal amount. The applicable pricing supplement and note each will provide
information regarding repayment and other matters.
FOREIGN CURRENCY NOTES, MULTI-CURRENCY
NOTES AND INDEXED NOTES
A foreign currency or indexed currency supplement in the applicable pricing
supplement will establish provisions that apply to notes denominated in a
currency other than U.S. dollars. This currency supplement will specify the
following information:
- the currency or currencies, including composite currencies, of payments
on the note;
- tax considerations;
- method for determining the principal amount due at maturity;
- risks associated with this type of note;
- whether the principal amount at maturity will be determined by reference
to the exchange rate of a currency other than U.S. dollars to an indexed
currency or other index. Indexed notes' principal amount due at maturity
may be greater or less than the face amount of the note depending upon
the relative value of the non-U.S. currency and the indexed currency; and
- any other terms relating to the denomination in a currency other than
U.S. dollars.
REDEMPTION AND REPAYMENT
Unless otherwise indicated in your pricing supplement, your note will not
be entitled to the benefit of any sinking fund -- that is, we will not deposit
money on a regular basis into any separate custodial account to repay your
notes. We will be entitled to redeem your notes in the circumstances described
in the accompanying prospectus under "Description of Debt Securities We May
Offer -- Redemption and Repayment". Except as described in the accompanying
prospectus, we will not be entitled to redeem your note before its stated
maturity unless your pricing supplement specifies a redemption commencement
date. You will not be entitled to require us to buy your note from you before
its stated maturity unless your pricing supplement specifies one or more
repayment dates.
If your pricing supplement specifies a redemption commencement date or a
repayment date, it will also specify one or more redemption prices, which will
be expressed as a percentage of the principal amount of your note. It may also
specify one or more redemption periods during which the redemption prices
relating to a redemption of notes during those periods will apply.
If your pricing supplement specifies a redemption commencement date, your
note will be redeemable at our option at any time on or after that date. If we
redeem your note, we will do so at the specified redemption price, together with
interest accrued to the redemption date. If different prices are specified for
different redemption periods, the price we pay will be the price that applies to
the redemption period during which your note is redeemed.
If your pricing supplement specifies a repayment date, your note will be
repayable at your option on the specified repayment date at the specified
repayment price, together with interest accrued to the repayment date.
If we exercise an option to redeem any note, we will give to the trustee
and the holder written notice of the principal amount of the note to be
redeemed, not less than 30 days nor
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<PAGE> 23
more than 60 days before the applicable redemption date. We will give the notice
in the manner described in the prospectus under "Description of Debt Securities
We May Offer -- Notices".
If a note represented by a global note is repayable at the holder's option,
DTC or its nominee, as the holder, will be the only person that can exercise the
right to repayment. Any indirect holders who own beneficial interests in the
global note and wish to exercise a repayment right must give proper and timely
instructions to their banks or brokers through which they hold their interest,
requesting that they notify DTC to exercise the repayment right on their behalf.
Different firms have different deadlines for accepting instructions from their
customers, and you should take care to act promptly enough to ensure that your
request is given effect by DTC before the applicable deadline for exercise.
Street name and other indirect holders should contact their banks or
brokers for information about how to exercise a repayment right in a timely
manner.
If the option of the holder to elect repayment as described above is deemed
to be a "tender offer" within the meaning of Rule 14e-1 under the Securities
Exchange Act of 1934, we will comply with Rule 14e-1 as then in effect to the
extent applicable.
We or our affiliates may purchase notes from investors who are willing to
sell from time to time, either in the open market at prevailing prices or in
private transactions at negotiated prices. Notes that we or they purchase may,
at our discretion, be held, resold or canceled.
UNITED STATES TAXATION
This section describes the principal United States federal income tax
consequences of owning the notes we are offering. It is the opinion of Sullivan
& Cromwell, counsel to Popular. It applies to you only if you are an initial
purchaser of notes and you own your notes as capital assets for tax purposes.
This section does not apply to you if you are a member of a class of holders
subject to special rules, such as:
- a dealer in securities or currencies;
- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings;
- a bank;
- a life insurance company;
- a tax-exempt organization;
- a person that actually or constructively owns 10 percent or more of the
total combined voting power of all classes of stock of Popular entitled
to vote;
- a person that is not a United States holder, as defined below;
- a person that owns notes that are a hedge or that are hedged against
interest rate or currency risks;
- a person that owns notes as part of a straddle or conversion transaction
for tax purposes; or
- a person whose functional currency for tax purposes is not the U.S.
dollar.
This section deals only with notes that are due to mature 30 years or less from
the date on which they are issued. The United States federal income tax
consequences of owning notes that are due to mature more than 30 years from
their date of issue will be discussed in an applicable pricing supplement. This
section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in effect.
These laws may change, possibly on a retroactive basis.
S-21
<PAGE> 24
Please consult your own tax advisor concerning the consequences of owning
these notes in your particular circumstances under the Internal Revenue Code and
the laws of any other taxing jurisdiction.
UNITED STATES HOLDERS
This section describes the tax consequences to a United States holder. You
are a United States holder if you are a beneficial owner of a note and you are:
- a citizen or resident of the United States;
- a domestic corporation;
- an estate whose income is subject to United States federal income tax
regardless of its source; or
- a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
If you are not a United States holder this section does not apply to you
and you should refer to "-- Non-United States Holders" below.
PAYMENTS OF INTEREST
Except as described below in the case of interest on a discount note that
is not qualified stated interest (each as defined below under "-- Original Issue
Discount"), you will be taxed on any interest on your note (including any
additional amounts paid with respect to withholding tax on the notes), whether
payable in U.S. dollars or a currency, composite currency or basket of
currencies other than U.S. dollars, which we call a "foreign currency", as
ordinary income at the time you receive the interest or it accrues, depending on
your method of accounting for tax purposes. You must include any tax withheld
from the interest payment as ordinary income even though you do not in fact
receive it. You may be entitled to deduct or credit this tax, subject to
applicable limits. Interest paid by Popular on the notes and original issue
discount, if any, accrued with respect to the notes (as described below under
"-- Original Issue Discount") constitutes income from sources outside the United
States, but, with some exceptions, will be "passive" or "financial services"
income, which is treated separately from other types of income for purposes of
computing the foreign tax credit allowable to a United States holder. The rules
governing foreign tax credits are complex and you should consult your tax
advisor regarding the availability of the foreign tax credit in your situation.
CASH BASIS TAXPAYERS. If you are a taxpayer that uses the cash receipts
and disbursements method of accounting for tax purposes and you receive an
interest payment that is denominated in, or determined by reference to, a
foreign currency, you must recognize income equal to the U.S. dollar value of
the interest payment, based on the exchange rate in effect on the date of
receipt, regardless of whether you actually convert the payment into U.S.
dollars.
ACCRUAL BASIS TAXPAYERS. If you are a taxpayer that uses an accrual method
of accounting for tax purposes, you may determine the amount of income that you
recognize with respect to an interest payment denominated in, or determined by
reference to, a foreign currency by using one of two methods. Under the first
method, you will determine the amount of income accrued based on the average
exchange rate in effect during the interest accrual period (or, with respect to
an accrual period that spans two taxable years, that part of the period within
the taxable year).
If you elect the second method, you would determine the amount of income
accrued on the basis of the exchange rate in effect on the last day of the
accrual period (or, in the case of an accrual period that spans two taxable
years, the exchange rate in effect on the last day of the part of the period
within the taxable year). Additionally, under this second method, if you receive
a payment of interest within five business days of the last day of your accrual
period
S-22
<PAGE> 25
or taxable year, you may instead translate the interest accrued into U.S.
dollars at the exchange rate in effect on the day that you actually receive the
interest payment. If you elect the second method it will apply to all debt
instruments that you own at the beginning of the first taxable year to which the
election applies and to all debt instruments that you acquire after that time.
You may not revoke this election without the consent of the Internal Revenue
Service.
When you actually receive an interest payment (including a payment
attributable to accrued but unpaid interest upon the sale or retirement of your
note) denominated in, or determined by reference to, a foreign currency for
which you accrued an amount of income, you will recognize ordinary income or
loss measured by the difference, if any, between the exchange rate that you used
to accrue interest income and the exchange rate in effect on the date of
receipt, regardless of whether you actually convert the payment into U.S.
dollars.
ORIGINAL ISSUE DISCOUNT
If you own a note, other than a note with a term of one year or less (a
short-term note), it will be treated as issued at an original issue discount (a
discount note) if the amount by which the note's "stated redemption price at
maturity" exceeds its "issue price" is more than a "de minimis amount". All
three terms are defined below. Generally, a note's issue price will be the first
price at which a substantial amount of notes included in the issue of which the
note is a part are sold to persons other than bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement
agents, or wholesalers. A note's stated redemption price at maturity is the
total of all payments provided by the note that are not payments of qualified
stated interest. Generally, an interest payment on a note is qualified stated
interest if it is one of a series of stated interest payments on a note that are
unconditionally payable at least annually at a single fixed rate (with some
exceptions for lower rates paid during some periods) applied to the outstanding
principal amount of the note. There are special rules for variable rate notes
that we discuss below under "-- Variable Rate Notes".
In general, your note is not a discount note if the amount by which its
stated redemption price at maturity exceeds its issue price is less than 1/4 of
1 percent of its stated redemption price at maturity multiplied by the number of
complete years to its maturity (the de minimis amount). Your note will have de
minimis original issue discount if the amount of the excess is less than the de
minimis amount. If, however, the amount of original issue discount on your note
is more than the de minimis amount as otherwise determined, and all stated
interest provided for in your note would be qualified stated interest except
that for one or more accrual periods the interest rate is below the rate
applicable for the remainder of your note's term, then for purposes of
determining whether your note has de minimis original issue discount your note's
stated redemption price at maturity is treated as equal to the note's issue
price plus the greater of the amount of foregone interest or the excess (if any)
of the instrument's stated principal amount over its issue price. The amount of
foregone interest is the amount of additional stated interest that would be
required to be payable on your note during the period of the interest shortfall
so that all stated interest would be qualified stated interest. If your note has
de minimis original issue discount, you must include the de minimis amount in
income as stated principal payments are made on the note, unless you make the
election described below under "-- Election to Treat All Interest as Original
Issue Discount". You can determine the includible amount with respect to each
such payment by multiplying the total amount of your note's de minimis original
issue discount by a fraction equal to:
- the amount of the principal payment made divided by
- the stated principal amount of the note.
INCLUSION OF ORIGINAL ISSUE DISCOUNT IN INCOME. Generally, if your
discount note matures more than one year from its date of issue, you must
include original issue discount,
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<PAGE> 26
which we call "OID", in income before you receive cash attributable to that
income. The amount of OID that you must include in income is calculated using a
constant-yield method, and generally you will include increasing amounts of OID
in income over the life of your discount note. More specifically, you can
calculate the amount of OID that you must include in income by adding the daily
portions of OID with respect to your discount note for each day during the
taxable year or portion of the taxable year that you own your discount note
(accrued OID). You can determine the daily portion by allocating to each day in
any accrual period a pro rata portion of the OID allocable to that accrual
period. You may select an accrual period of any length with respect to your
discount note and you may vary the length of each accrual period over the term
of your discount note. However, no accrual period may be longer than one year
and each scheduled payment of interest or principal on your discount note must
occur on either the first or final day of an accrual period.
You can determine the amount of OID allocable to an accrual period by:
- multiplying your discount note's adjusted issue price at the beginning of
the accrual period by your note's yield to maturity, and then
- subtracting from this figure the sum of the payments of qualified stated
interest on your note allocable to the accrual period.
You must determine the discount note's yield to maturity on the basis of
compounding at the close of each accrual period and adjusting for the length of
each accrual period. Further, you determine your discount note's adjusted issue
price at the beginning of any accrual period by:
- adding your discount note's issue price and any accrued OID for each
prior accrual period, and then
- subtracting any payments previously made on your discount note that were
not qualified stated interest payments.
If an interval between payments of qualified stated interest on your
discount note contains more than one accrual period, then, when you determine
the amount of OID allocable to an accrual period, you must allocate the amount
of qualified stated interest payable at the end of the interval, including any
qualified stated interest that is payable on the first day of the accrual period
immediately following the interval, pro rata to each accrual period in the
interval based on their relative lengths. In addition, you must increase the
adjusted issue price at the beginning of each accrual period in the interval by
the amount of any qualified stated interest that has accrued before the first
day of the accrual period but that is not payable until the end of the interval.
You may compute the amount of OID allocable to an initial short accrual period
by using any reasonable method if all other accrual periods, other than a final
short accrual period, are of equal length.
The amount of OID allocable to the final accrual period is equal to the
difference between:
- the amount payable at the maturity of your note other than any payment of
qualified stated interest, and
- your note's adjusted issue price as of the beginning of the final accrual
period.
ACQUISITION PREMIUM. If you purchase your note for an amount that is less
than or equal to the sum of all amounts, other than qualified stated interest,
payable on your note after the purchase date but is greater than the amount of
your note's adjusted issue price (determined as described above under
"-- Original Issue Discount" on page S-23), the excess is acquisition premium.
If you do not make the election described below under "-- Election to Treat All
Interest as Original Issue Discount", then you must reduce the daily portions of
OID by an amount equal to:
- the excess of your adjusted basis in the note immediately after purchase
over
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<PAGE> 27
the adjusted issue price of your note, divided by
- the excess of the sum of all amounts payable, other than qualified stated
interest, on your note after the purchase date over your note's adjusted
issue price.
MARKET DISCOUNT. You will be treated as if you purchased your note, other
than a short-term note, at a market discount and your note will be a market
discount note if:
- you purchase your note for less than its issue price (determined as
described above under "-- Original Issue Discount" on page S-23); and
- your note's stated redemption price at maturity or, in the case of a
discount note, the note's revised issue price, exceeds the price you paid
for your note by at least 1/4 of 1 percent of your note's stated
redemption price at maturity or the revised issue price, multiplied by
the number of complete years to the note's maturity.
To determine the revised issue price of your note for these purposes, you
generally add any OID that has accrued on your note to its issue price.
If your note's stated redemption price at maturity or, in the case of a
discount note, its revised issue price, does not exceed the price you paid for
the note by 1/4 of 1 percent multiplied by the number of complete years to the
note's maturity, the excess constitutes de minimis market discount, and the
rules that we discuss below are not applicable to you.
If you recognize gain on the maturity or disposition of your market
discount note, you must treat it as ordinary income to the extent of the accrued
market discount on your note. Alternatively, you may elect to include market
discount in income currently over the life of your note. If you make this
election, it will apply to all debt instruments with market discount that you
acquire on or after the first day of the first taxable year to which the
election applies. You may not revoke this election without the consent of the
Internal Revenue Service.
You will accrue market discount on your market discount note on a
straight-line basis unless you elect to accrue market discount using a
constant-yield method. If you elect to accrue market discount using a
constant-yield method, this method will apply only to the note with respect to
which it is made and you may not revoke this election.
If you own a market discount note and do not elect to include market
discount in income currently, you will generally be required to defer deductions
for interest on borrowings allocable to your note in an amount not exceeding the
accrued market discount on your note until the maturity or disposition of your
note.
PRE-ISSUANCE ACCRUED INTEREST. An election can be made to decrease the
issue price of your note by the amount of pre-issuance accrued interest if:
- a portion of the initial purchase price of your note is attributable to
pre-issuance accrued interest;
- the first stated interest payment on your note is to be made within one
year of your note's issue date; and
- the payment will equal or exceed the amount of pre-issuance accrued
interest.
If this election is made, a portion of the first stated interest payment will be
treated as a return of the excluded pre-issuance accrued interest and not as an
amount payable on your note.
NOTES SUBJECT TO CONTINGENCIES INCLUDING OPTIONAL REDEMPTION. Your note is
subject to a contingency if it provides for an alternative payment schedule or
schedules applicable upon the occurrence of a contingency or contingencies,
other than a remote or incidental contingency, whether this contingency relates
to payments of interest or of principal. In this case, you must determine the
yield and maturity of your note by assuming that the
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<PAGE> 28
payments will be made according to the payment schedule most likely to occur if:
- the timing and amounts of the payments that comprise each payment
schedule are known as of the issue date; and
- one of these schedules is significantly more likely than not to occur.
If there is no single payment schedule that is significantly more likely than
not to occur, other than because of a mandatory sinking fund, you must include
income on your note in accordance with the general rules that govern contingent
payment obligations. These rules will be discussed in the applicable pricing
supplement.
Notwithstanding the general rules for determining yield and maturity, if
your note is subject to contingencies, and either you or Popular has an
unconditional option or options that, if exercised, would require payments to be
made on the note under an alternative payment schedule or schedules, then:
- in the case of an option or options that Popular may exercise, Popular
will be deemed to exercise or not exercise an option or combination of
options in the manner that minimizes the yield on your note; and
- in the case of an option or options that you may exercise, you will be
deemed to exercise or not exercise an option or combination of options in
the manner that maximizes the yield on your note.
If both you and Popular hold options described in the preceding sentence, those
rules will apply to each option in the order in which they may be exercised. You
may determine the yield on your note for the purposes of those calculations by
using any date on which your note may be redeemed or repurchased as the maturity
date and the amount payable on the date that you chose in accordance with the
terms of your note as the principal amount payable at maturity.
If a contingency, including the exercise of an option, actually occurs or
does not occur contrary to an assumption made according to the above rules then,
except to the extent that a portion of your note is repaid as a result of this
change in circumstances and solely to determine the amount and accrual of OID,
you must redetermine the yield and maturity of your note by treating your note
as having been retired and reissued on the date of the change in circumstances
for an amount equal to your note's adjusted issue price on that date.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. You may elect
to include in gross income all interest that accrues on your note using the
constant-yield method described above under the heading "-- Inclusion of
Original Issue Discount in Income", with the modifications described below. For
purposes of this election, interest will include stated interest, OID, de
minimis original issue discount, market discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium (described below
under "-- Notes Purchased at a Premium") or acquisition premium.
If you make this election for your note, then, when you apply the
constant-yield method:
- the issue price of your note will equal your cost;
- the issue date of your note will be the date you acquired it; and
- no payments on your note will be treated as payments of qualified stated
interest.
Generally, this election will apply only to the note for which you make it
unless the note has amortizable bond premium or market discount. If the note has
amortizable bond premium, you will be deemed to have elected to apply
amortizable bond premium against interest for all debt instruments with
amortizable bond premium, other than debt instruments the interest on which is
excludible from gross income, that you own as of the beginning of the taxable
year to which the election applies or any taxable year after that year.
Additionally, if
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you make this election for a market discount note, you will be treated as having
made the election discussed above under "-- Market Discount" to include market
discount in income currently over the life of all debt instruments that you
currently own or later acquire. You may not revoke any election to apply the
constant-yield method to all interest on a note or the deemed elections with
respect to amortizable bond premium or market discount notes without the consent
of the Internal Revenue Service.
VARIABLE RATE NOTES. Your note will be a variable rate note if:
- your note's issue price does not exceed the total noncontingent principal
payments by more than the lesser of:
c .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the issue
date; or
c 15 percent of the total noncontingent principal payments; and
- your note provides for stated interest (compounded or paid at least
annually) only at:
c one or more qualified floating rates;
c a single fixed rate and one or more qualified floating rates;
c a single objective rate; or
c a single fixed rate and a single objective rate that is a qualified
inverse floating rate.
Your note will have a variable rate that is a qualified floating rate if:
- variations in the value of the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the
currency in which your note is denominated; or
- the rate is equal to this kind of rate multiplied by either:
c a fixed multiple that is greater than 0.65 but not more than 1.35; or
c a fixed multiple greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate; and
- the value of the rate on any date during the term of your note is set no
earlier than three months before the first day on which that value is in
effect and no later than one year following that first day.
If your note provides for two or more qualified floating rates that are
within 0.25 percentage points of each other on the issue date or can reasonably
be expected to have approximately the same values throughout the term of the
note, the qualified floating rates together constitute a single qualified
floating rate.
Your note will not have a qualified floating rate, however, if the rate is
subject to some restrictions (including caps, floors, governors, or other
similar restrictions) unless these restrictions are fixed throughout the term of
the note or are not reasonably expected to significantly affect the yield on the
note.
Your note will have a variable rate that is a single objective rate if:
- the rate is not a qualified floating rate;
- the rate is determined using a single, fixed formula that is based on
objective financial or economic information that is not within the
control of or unique to the circumstances of the issuer or a related
party; and
- the value of the rate on any date during the term of your note is set no
earlier than three months before the first day on which that value is in
effect and no later than one year following that first day.
Your note will not have a variable rate that is an objective rate, however,
if it is reasonably expected that the average value of the rate during the first
half of your note's term will be
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<PAGE> 30
either significantly less than or significantly greater than the average value
of the rate during the final half of your note's term.
An objective rate as described above is a qualified inverse floating rate
if:
- the rate is equal to a fixed rate minus a qualified floating rate; and
- the variations in the rate can reasonably be expected to inversely
reflect contemporaneous variations in the cost of newly borrowed funds.
Your note will also have a single qualified floating rate or an objective
rate if interest on your note is stated at a fixed rate for an initial period of
one year or less followed by either a qualified floating rate or an objective
rate for a subsequent period, and either:
- the fixed rate and the qualified floating rate or objective rate have
values on the issue date of the note that do not differ by more than 0.25
percentage points; or
- the value of the qualified floating rate or objective rate is intended to
approximate the fixed rate.
Commercial paper rate notes, prime rate notes, LIBOR notes, treasury rate
notes, CMT rate notes, CD rate notes, 11th district rate notes, and federal
funds rate notes generally will be treated as variable rate notes under these
rules.
In general, if your variable rate note provides for stated interest at a
single qualified floating rate or objective rate (or one of those rates after a
single fixed rate for an initial period), all stated interest on your note is
qualified stated interest. In this case, the amount of OID, if any, is
determined by using, in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date of the qualified floating
rate or qualified inverse floating rate, or, in the case of any other objective
rate, a fixed rate that reflects the yield reasonably expected for your note.
If your variable rate note does not provide for stated interest at a single
qualified floating rate or a single objective rate, and also does not provide
for interest payable at a fixed rate, other than at a single fixed rate for an
initial period, you generally must determine the interest and OID accruals on
your note by:
- determining a fixed rate substitute for each variable rate provided under
your variable rate note;
- constructing the equivalent fixed rate debt instrument (using the fixed
rate substitute described above);
- determining the amount of qualified stated interest and OID with respect
to the equivalent fixed rate debt instrument; and
- adjusting for actual variable rates during the applicable accrual period.
When you determine the fixed rate substitute for each variable rate provided
under the variable rate note, you generally will use the value of each variable
rate as of the issue date or, for an objective rate that is not a qualified
inverse floating rate, a rate that reflects the reasonably expected yield on
your note.
If your variable rate note provides for stated interest either at one or
more qualified floating rates or at a qualified inverse floating rate, and also
provides for stated interest at a single fixed rate, other than at a single
fixed rate for an initial period, you generally must determine interest and OID
accruals by using the method described in the previous paragraph. However, your
variable rate note will be treated, for purposes of the first three steps of the
determination, as if your note had provided for a qualified floating rate, or a
qualified inverse floating rate, rather than the fixed rate. The qualified
floating rate, or qualified inverse floating rate, that replaces the fixed rate
must be such that the fair market value of your variable rate note as of the
issue date approximates the fair market value of an otherwise identical debt
instrument that provides for the
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<PAGE> 31
qualified floating rate, or qualified inverse floating rate, rather than the
fixed rate.
SHORT-TERM NOTES. In general, if you are an individual or other cash basis
United States holder of a short-term note, you are not required to accrue OID,
as specially defined below for the purposes of this paragraph, for United States
federal income tax purposes unless you elect to do so. However, you may be
required to include any stated interest in income as you receive it. If you are
an accrual basis taxpayer, a taxpayer in a special class, including, but not
limited to, a regulated investment company, common trust fund, or a particular
type of pass-through entity, or a cash basis taxpayer who so elects, you will be
required to accrue OID on short-term notes on either a straight-line basis or
under the constant-yield method, based on daily compounding. If you are not
required and do not elect to include OID in income currently, any gain you
realize on the sale or retirement of your short-term note will be ordinary
income to the extent of the OID accrued on a straight-line basis, unless you
make an election to accrue the OID under the constant-yield method, through the
date of sale or retirement. However, if you are not required and do not elect to
accrue OID on your short-term notes, you will be required to defer deductions
for interest on borrowings allocable to your short-term notes in an amount not
exceeding the deferred income until the deferred income is realized.
When you determine the amount of OID subject to these rules, you must
include all interest payments on your short-term note, including stated
interest, in your short-term note's stated redemption price at maturity.
FOREIGN CURRENCY DISCOUNT NOTES. If your discount note is denominated in,
or determined by reference to, a foreign currency, you must determine OID for
any accrual period on your discount note in the foreign currency and then
translate the amount of OID into U.S. dollars in the same manner as stated
interest accrued by an accrual basis United States holder, as described under
"-- Payments of Interest -- Accrual Basis Taxpayers" above. You may recognize
ordinary income or loss when you receive an amount attributable to OID in
connection with a payment of interest or the sale or retirement of your note.
NOTES PURCHASED AT A PREMIUM
If you purchase your note for an amount in excess of its principal amount,
you may elect to treat the excess as amortizable bond premium. If you make this
election, you will reduce the amount required to be included in your income each
year with respect to interest on your note by the amount of amortizable bond
premium allocable, based on your note's yield to maturity, to that year. If your
note is denominated in, or determined by reference to, a foreign currency, you
will compute your amortizable bond premium in units of the foreign currency and
your amortizable bond premium will reduce your interest income in units of the
foreign currency. Gain or loss recognized that is attributable to changes in
exchange rates between the time your amortized bond premium offsets interest
income and the time of the acquisition of your note is generally taxable as
ordinary income or loss. If you make an election to amortize bond premium, the
election will apply to all debt instruments (other than debt instruments, the
interest on which is excludible from gross income) that you own at the beginning
of the first taxable year to which the election applies, and to all debt
instruments that you acquire after that time, and you may not revoke it without
the consent of the Internal Revenue Service. See also "-- Original Issue
Discount -- Election to Treat All Interest as Original Issue Discount" for more
information about the consequences of an election to amortize bond premium.
PURCHASE, SALE AND RETIREMENT OF THE
NOTES
Your tax basis in your note will generally be the U.S. dollar cost (as
defined below) of your note, adjusted by:
- adding any OID or market discount, de minimis original issue discount and
de minimis market discount previously
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<PAGE> 32
included in income with respect to your note; and then
- subtracting the amount of any payments on your note that are not
qualified stated interest payments and the amount of any amortizable bond
premium applied to reduce interest on your note.
If you purchase your note with foreign currency, the U.S. dollar cost of your
note will generally be the U.S. dollar value of the purchase price on the date
of purchase. However, if you are a cash basis taxpayer, or an accrual basis
taxpayer if you so elect, and your note is traded on an established securities
market, as defined in the applicable Treasury regulations, the U.S. dollar cost
of your note will be the U.S. dollar value of the purchase price on the
settlement date of your purchase.
You will generally recognize gain or loss on the sale or retirement of your
note equal to the difference between the amount you realize on the sale or
retirement and your tax basis in your note. If your note is sold or retired for
an amount in foreign currency, the amount you realize will be the U.S. dollar
value of this amount on:
- the date payment is received, if you are a cash basis taxpayer and the
notes are not traded on an established securities market, as defined in
the applicable Treasury regulations;
- the date of disposition, if you are an accrual basis taxpayer; or
- the settlement date for the sale, if you are a cash basis taxpayer, or an
accrual basis taxpayer that so elects, and the notes are traded on an
established securities market, as defined in the applicable Treasury
regulations.
You will recognize capital gain or loss when you sell or retire your note,
except to the extent:
- described above under "-- Original Issue Discount -- Short-Term Notes" or
"-- Original Issue Discount Market Discount";
- attributable to accrued but unpaid interest;
- the rules governing contingent payment obligations apply; or
- attributable to changes in exchange rates as described below.
Capital gain of a noncorporate United States holder is generally taxed at a
maximum rate of 20% for property held more than one year.
You must treat any portion of the gain or loss that you recognize on the
sale or retirement of a note as ordinary income or loss to the extent
attributable to changes in exchange rates. However, you take exchange gain or
loss into account only to the extent of the total gain or loss you realize on
the transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
If you receive foreign currency as interest on your note or on the sale or
retirement of your note, your tax basis in the foreign currency will equal its
U.S. dollar value when the interest is received or at the time of the sale or
retirement. If you purchase foreign currency, you generally will have a tax
basis equal to the U.S. dollar value of the foreign currency on the date of your
purchase. If you sell or dispose of a foreign currency, including if you use it
to purchase notes or exchange it for U.S. dollars, any gain or loss recognized
generally will be ordinary income or loss.
INDEXED NOTES AND RENEWABLE, EXTENDIBLE AND AMORTIZING NOTES
The applicable pricing supplement will discuss any special United States
federal income tax rules (a) with respect to notes the payments on which are
determined by reference to any index and other notes that are subject to the
rules governing contingent payment obligations which are not subject to the
rules governing variable rate notes, (b) with respect
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<PAGE> 33
to any renewable and extendible notes and (c) with respect to any notes
providing for the periodic payment of principal over the life of the note.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, if you are a noncorporate United States holder, Popular and
other payors are required to report to the Internal Revenue Service all payments
of principal, any premium and interest on your note, and the accrual of OID on a
discount note. In addition, the proceeds of the sale of your note before
maturity will be reported to the Internal Revenue Service. Additionally, backup
withholding at a rate of 31% will apply to any payments, including payments of
OID, if you fail to provide an accurate taxpayer identification number, or you
are notified by the Internal Revenue Service that you have failed to report all
interest and dividends required to be shown on your federal income tax returns.
NON-UNITED STATES HOLDERS
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect to a Note and payments made upon the sale of a
Note to non-United States Holders who fail to provide certain identifying
information. Certification of the registered owner's non-U.S. status would be
made normally on an IRS Form W-8 under penalties of perjury, although in certain
cases it may be possible to submit other documentary evidence. Any amounts
withheld under the backup withholding rules from a payment to a beneficial owner
would be allowed as a refund or a credit against such beneficial owner's United
States federal income tax provided the required information is furnished to the
IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Popular is offering the notes on a continuous basis through the agents,
each of which has agreed to use its reasonable efforts to solicit offers to
purchase the notes. In addition, the notes may also be sold to an agent, as
principal, for resale to investors or other purchasers. The notes are a new
issue of securities with no established trading market and will not be listed on
any securities exchange. Investors have no assurance that the notes offered by
this prospectus supplement will be sold or that there will be a secondary market
for the notes. Popular reserves the right to withdraw, cancel or modify this
offer without notice. Popular or any agent may reject any offer to purchase the
notes in whole or in part.
Unless the applicable pricing supplement specifies otherwise, Popular will
sell notes to an agent at a price equal to 100% of the notes' principal amount
less the commission applicable to an agency sale of a note of identical
maturity. Popular and an agent may agree that the agent may utilize its
reasonable efforts as an agent to solicit offers to purchase notes at 100% of
their principal amount, unless the applicable pricing supplement specifies
otherwise. Depending upon the maturity of the note, Popular will pay a
commission to each agent ranging from .125% to .750% of the principal amount of
any note sold through that agent. Popular and the agents will negotiate the
commissions payable on the sale of notes with stated maturities in excess of 30
years. Popular may also sell notes directly to investors on its own behalf, in
which case no commission will be payable.
In addition, the agents may offer the notes they have purchased as
principal to other dealers. The agents may sell notes to any dealer at a
discount which, unless the applicable pricing supplement specifies otherwise,
will not be in excess of the discount the agent receives from Popular. If all
the notes are not sold at the initial offering price, Popular or the agents may
change the offering price and the other selling terms.
Popular has reserved the right to accept offers to purchase notes through
additional
S-31
<PAGE> 34
distributors on substantially the same terms and conditions (including
commission rates) as would apply to purchases of notes by the agents. In
addition, Popular has reserved the right to appoint additional agents for the
purpose of soliciting offers to purchase notes. The applicable pricing
supplement will provide the names of any additional distributors or agents.
Popular reserves the right to withdraw, cancel or modify the offer made by
this prospectus supplement without notice and may reject all or part of any
orders whether the orders are placed directly with Popular or through an agent.
Each agent will have the right in its reasonable discretion to reject all or
part of any offer to purchase notes that it receives.
Unless otherwise provided in a pricing supplement relating to foreign
currency, multi-currency or indexed notes, purchasers must pay the purchase
price of the notes in immediately available funds in New York City on the
settlement date.
Popular has agreed to indemnify the agents against and to make
contributions relating to some civil liabilities, including liabilities under
the Securities Act of 1933. The agents may be deemed to be "underwriters" within
the meaning of this Act. Popular has also agreed to reimburse the agents for
some of their expenses.
Popular Securities, Inc., a wholly owned subsidiary of Popular, Inc., is a
member of the National Association of Securities Dealers, Inc. and is
participating in the distribution of this offering as an agent. The offering is
therefore being made in compliance with the applicable provisions of NASD
Conduct Rule 2720. No NASD member may sell the securities to a discretionary
account without the prior specific written approval of the customer.
Each agent who purchases notes as principal on a fixed price basis in
connection with an offering of notes may engage in transactions that stabilize
the price of notes in the offering. These transactions may consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
notes. If an agent creates a short position in the notes, i.e., if it sells
notes in an aggregate principal amount exceeding that stated in the applicable
pricing supplement, that agent may reduce that short position by purchasing
notes in the open market. In general, purchases of notes for the purpose of
stabilization or to reduce a short position could cause the price of notes to be
higher than it might be in the absence of these purchases.
None of Popular or any of the agents makes any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the notes. In addition, none of Popular or any of
the agents make any representation that the agents will engage in these
transactions or that the transactions, once commenced, will not be discontinued
without notice.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for Popular by Sullivan &
Cromwell, New York, New York, and for the agents by Brown & Wood LLP, New York,
New York. Brunilda Santos de Alvarez, Esq., counsel to Popular, will pass upon
the validity of the notes as to matters of Puerto Rico law for Popular. Sullivan
& Cromwell and Brown & Wood LLP will rely as to all matters of the laws of the
Commonwealth of Puerto Rico upon the opinion of Brunilda Santos de Alvarez, Esq.
The opinions of Sullivan & Cromwell, Brunilda Santos de Alvarez, Esq., and Brown
& Wood LLP will be conditioned upon and subject to assumptions regarding future
action required to be taken by Popular and the trustee in connection with the
issuance and sale of any particular note, the specific terms of the notes and
other matters which may affect the validity of the notes but which cannot be
ascertained on the date of their opinions.
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<PAGE> 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IT
DESCRIBES, BUT ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL
TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS
DATE.
------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement
Description of Notes We May Offer........................... S-2
United States Taxation...................................... S-21
Supplemental Plan of Distribution........................... S-31
Validity of the Notes....................................... S-32
Prospectus
Popular, Inc................................................ 2
Popular International Bank, Inc............................. 3
Popular North America, Inc.................................. 3
Consolidated Ratios of Earnings to Fixed Charges of
Popular................................................... 4
Holding Company Structure................................... 4
Use of Proceeds............................................. 7
Description of Debt Securities We May Offer................. 8
Description of Preferred Stock.............................. 24
Validity of Offered Securities.............................. 28
Experts..................................................... 29
Plan of Distribution........................................ 29
Where You Can Find More Information......................... 30
Incorporation of Information We File with the SEC........... 31
</TABLE>
<PAGE> 36
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED AUGUST , 1999
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST , 1999)
$1,500,000,000
POPULAR NORTH AMERICA, INC.
MEDIUM-TERM NOTES, SERIES E
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF
PRINCIPAL, PREMIUM, IF ANY, AND INTEREST BY
POPULAR, INC.
----------------------
THE COMPANY: Popular North America, Inc. Our principal executive office is
located at 521 Fellowship Road, Mt. Laurel, New Jersey 08054, and our telephone
number is (787) 765-9800.
TERMS: We plan to offer and sell notes with various terms, including the
following:
- Ranking as senior or subordinated indebtedness of Popular North America
- Stated maturities of 9 months or more from date of issue
- Redemption and/or repayment provisions, if applicable, whether mandatory or
at the option of Popular North America or holders of the notes
- Payments in U.S. dollars or one or more foreign currencies
- Minimum denomination of $100,000, increasing in integral multiples of
$1,000, or other specified denominations for foreign currencies
- Book-entry (through The Depository Trust Company) or certificated form
- Interest at fixed or floating rates, or no interest at all. The floating
interest rate may be based on one or more of the following indices plus or
minus a spread and/or multiplied by a spread multiplier:
- commercial paper rate
- prime rate
- LIBOR
- treasury rate
- CMT rate
- CD rate
- federal funds rate
- 11th district cost of funds rate
- Interest payments on fixed rate notes on each June 15 and December 15
- Interest payments on floating rate notes on a monthly, quarterly, semiannual
or annual basis
The notes will be unconditionally guaranteed as to payment of principal,
premium, if any, and interest by Popular. We will specify the final terms for
each note, which may be different from the terms described in this prospectus
supplement, in the applicable pricing supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS OR ANY PRICING SUPPLEMENT IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The notes will be unsecured obligations of Popular North America and the
guarantor and will not be savings accounts, deposits or other obligations of any
bank or nonbank subsidiary of Popular North America or the guarantor and are not
insured by the Federal Deposit Insurance Corporation, the Bank Insurance Fund or
any other government agency.
<TABLE>
<CAPTION>
AGENT'S DISCOUNT AND PROCEEDS TO
PUBLIC OFFERING PRICE COMMISSIONS POPULAR NORTH AMERICA
<S> <C> <C> <C>
Per note............................. 100% .125% - .750% 99.875% - 99.250%
Total(1)............................. $1,500,000,000 $1,875,000 - $11,250,000 $1,498,125,000 - $1,488,750,000
</TABLE>
- ----------------------
(1) Or the equivalent of this amount in one or more foreign or composite
currencies.
We may sell notes to the agents referred to below as principal for resale at
varying or fixed offering prices or through the agents as agent using their
reasonable efforts on our behalf. We may also sell notes without the assistance
of the agents, whether acting as principal or as agent.
If we or Popular, Inc. or Popular International Bank, Inc. sells our
securities referred to in the accompanying prospectus other than pursuant to
this prospectus supplement, the aggregate initial offering price of notes that
we may offer and sell under this prospectus supplement will be reduced.
----------------------
MERRILL LYNCH & CO. CREDIT SUISSE FIRST BOSTON CHASE SECURITIES INC. POPULAR
SECURITIES, INC.
----------------------
The date of this Prospectus Supplement is August , 1999.
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE> 37
DESCRIPTION OF NOTES WE MAY OFFER
This description of the terms of the notes supplements the description of
the general terms and provisions of the notes and replaces any inconsistent
terms and provisions contained in "Description of Debt Securities We May Offer"
in the prospectus. Each pricing supplement will describe the particular terms of
the notes it offers. Unless the pricing supplement applicable to a note provides
otherwise, however, each note will have the following terms. In this prospectus
supplement, WE means Popular North America, Inc.
Popular North America will issue the notes under the Popular North America
senior indenture, which is described in the prospectus. The following
description of some provisions of the Popular North America senior indenture and
the notes is only a summary and is qualified by reference to the provisions of
the Popular North America senior indenture and the notes. The terms and
conditions below will apply to each note unless the applicable pricing
supplement or foreign currency, multi-currency and indexed note supplement to
the applicable pricing supplement specifies otherwise.
Under the Popular North America senior indenture, Popular North America may
issue any amount of debt securities in one or more series. From time to time,
Popular North America may, without the consent of the holders, issue debt
securities, including medium-term notes, under the Popular North America senior
indenture in addition to the $1,500,000,000 principal amount of notes to which
this prospectus supplement relates. The notes will be denominated in and payable
in United States dollars unless the applicable pricing supplement provides
otherwise.
The notes will be unconditionally guaranteed as to payment of principal,
premium, if any, and interest by Popular, as described in the accompanying
prospectus under "Description of Debt Securities We May Offer -- Popular's
Guarantee".
The applicable pricing supplement will specify the interest rate or
interest rate formula and other variable terms of each note. Popular North
America may change interest rates and interest rate formulae, but no change will
affect any note already issued or for which Popular North America has accepted
an offer to purchase. Unless the applicable pricing supplement indicates
otherwise, FIXED RATE NOTES will bear interest at fixed rates and FLOATING RATE
NOTES will bear interest at floating rates determined by reference to one or
more BASE RATES adjusted by any SPREAD and/or SPREAD MULTIPLIER applicable to
these notes. These terms are defined below in "Interest Rates -- Floating Rate
Notes". Original issue discount notes may be issued at significant discounts
from their principal amount payable at maturity, and some original issue
discount notes may not bear interest.
Popular North America may offer interest rates on notes that differ
depending upon, among other factors, the principal amount of notes purchased in
any single transaction. Popular North America may also offer notes with variable
terms other than interest rates concurrently to different investors. Popular
North America may change the terms of notes from time to time, but no change
will affect any note that has been issued or as to which Popular North America
has accepted an offer to purchase.
Each interest payment will equal the amount of interest that accrues from
and includes the next preceding interest payment date on which interest has been
paid (or from and including the date the note was issued, if no interest has
been paid since then) up to and excluding the applicable interest payment date
or at maturity.
Unless otherwise indicated in a pricing supplement, the notes will be
issued in book-entry, i.e., global, form or fully registered certificated form.
"Description of Debt Securities We May Offer -- Legal Ownership of Securities"
and "-- Special Considerations for Global Debt Securities" in the prospectus
describe the procedures for transferring or exchanging book-entry notes. No
service charge
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will be made for the registration of transfer or exchange of notes issued in
certificated form, but Popular North America may require the holder to pay any
tax or other governmental charge in connection with a transfer or exchange.
INFORMATION IN THE PRICING SUPPLEMENT
Your pricing supplement will describe one or more of the following terms of
your note:
- the stated maturity;
- the specified currency or currencies for principal and interest, if not
U.S. dollars;
- the price at which we originally issue your note, expressed as a
percentage of the principal amount, and the original issue date;
- whether your note is a fixed rate note, a floating rate note or an
indexed note and also whether it is an original issue discount note;
- if your note is a fixed rate note, the yearly rate at which your note
will bear interest, if any, and the interest payment dates, if different
from those stated below under "-- Interest Rates -- Fixed Rate Notes";
- if your note is a floating rate note, the interest rate basis, which may
be one of the eight base rates described in "-- Interest
Rates -- Floating Rate Notes" below; any applicable index currency or
maturity, spread or spread multiplier or initial, maximum or minimum
rate; the interest reset, determination, calculation and payment dates;
and the calculation agent, all of which we describe under "-- Interest
Rates -- Floating Rate Notes" below;
- if your note is an original issue discount note, the yield to maturity;
- if your note is an indexed note, the principal amount, if any, we will
pay you at maturity, the amount of interest, if any, we will pay you on
an interest payment date or the formula we will use to calculate these
amounts, if any, and whether your note will be exchangeable for or
payable in stock of an issuer other than us or other property;
- whether your note may be redeemed at our option or repaid at your option
before the stated maturity and, if so, other relevant terms such as the
redemption commencement date, repayment date(s), redemption price(s) and
redemption period(s), all of which we describe under "-- Redemption and
Repayment" below;
- whether we will issue or make available your note in non-book-entry form;
and
- any other terms of your note that are consistent with the provisions of
the indenture, which other terms could be different from those described
in this prospectus supplement.
Your pricing supplement will summarize specific financial and other terms
of your note, while this prospectus supplement describes terms that apply
generally to the notes as a series. Consequently, the terms described in your
pricing supplement will supplement those described in this prospectus supplement
and, if the terms described there are inconsistent with those described here,
the terms described there will be controlling. The terms used in your pricing
supplement have the meaning described in this prospectus supplement, unless
otherwise specified.
PAYMENT MECHANICS
WHO RECEIVES PAYMENT?
If interest is due on a note on an interest payment date, we will pay the
interest to the person or entity in whose name the note is registered at the
close of business on the regular record date relating to the interest payment
date. See "-- Regular Record Dates for
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Interest" below for more information about the regular record dates. If interest
is due at the maturity but on a day that is not an interest payment date, we
will pay the interest to the person or entity entitled to receive the principal
of the note. If principal or another amount besides interest is payable on a
note at the maturity, we will pay the amount to the holder of the note against
surrender of the note at the CORPORATE TRUST OFFICE of the paying agent in the
Borough of Manhattan, New York City, which is located at 14 Wall Street, Eighth
Floor, New York, New York 10005, Attention: Corporate Trust Services, or, in the
case of a global note, in accordance with the applicable policies of the
depositary.
REGULAR RECORD DATES FOR INTEREST
Unless we specify otherwise in the applicable prospectus supplement, the
regular record date relating to an interest payment date for any fixed rate note
will be the June 1 or December 1 next preceding that interest payment date, and
for any floating rate note will be the 15th calendar day before that interest
payment date, in each case whether or not the record date is a business day. For
the purpose of determining the holder at the close of business on a regular
record date when business is not being conducted, the close of business will
mean 5:00 P.M., New York City time, on that day.
HOW WE WILL MAKE PAYMENTS DUE IN U.S. DOLLARS
We will follow the practice described in this subsection when paying
amounts payable in U.S. dollars. Payments of amounts payable in other currencies
will be made as described in the next subsection.
PAYMENTS ON GLOBAL NOTES
We will make payments on a global note in accordance with the applicable
policies of the depositary as in effect from time to time. Under those policies,
we will pay directly to the depositary, or its nominee, and not to any indirect
holders who own beneficial interests in the global note. An indirect holder's
right to receive those payments will be governed by the rules and practices of
the depositary and its participants, as described in the prospectus under
"-- What Is a Global Debt Security?".
PAYMENTS ON NON-GLOBAL NOTES
We will make payments on a note in non-global form as follows.
- We will pay interest that is due on an interest payment date by check
mailed on the interest payment date to the holder at his or her address
shown on the trustee's records as of the close of business on the regular
record date.
- We will make all other payments by check at the paying agent described
below, against surrender of the note.
All payments by check will be made in "next-day" funds -- i.e., funds that
become available on the day after the check is cashed.
A holder of notes in certificated form with a principal amount of
$10,000,000 or more may ask the paying agent in writing before a regular record
date to pay interest due on the next interest payment date by transferring
immediately available funds to an account at any bank in New York City or, with
Popular North America's approval, to another bank. The holder must file this
request with The First National Bank of Chicago, the paying agent, at its
corporate trust office. Unless the paying agent receives written notice that the
holder is revoking these wire transfer instructions on or before the regular
record date immediately preceding an interest payment date or the fifteenth day
before maturity, these instructions will apply to any further payment to the
holder.
HOW WE WILL MAKE PAYMENTS DUE IN OTHER CURRENCIES
We will follow the practice described in this subsection when paying
amounts that are payable in a specified currency other than U.S. dollars.
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PAYMENTS ON GLOBAL NOTES
We will make payments on global notes in accordance with the applicable
policies of the depository as in effect from time to time. We understand that
these policies, as currently in effect at DTC, are as follows.
Unless otherwise indicated in your pricing supplement, if you are an
indirect holder of global notes denominated in a specified currency other than
U.S. dollars and if you elect to receive payments in a specified currency other
than U.S. dollars, you must notify the participant through which your interest
in the global note is held of your election:
- on or before the applicable regular record date, in the case of a payment
of interest; or
- on or before the 16th day before the stated maturity, or any redemption
or repayment date, in the case of a payment of principal or any premium.
You may elect to receive all or only a portion of any interest, principal
or premium payment in a specified currency other than U.S. dollars.
Your participant must, in turn, notify DTC of your election on or before
the third DTC business day after that regular record date, in the case of a
payment of interest, and on or before the 12th business day before stated
maturity, or on the redemption or repayment date if your note is redeemed or
repaid earlier, in the case of a payment of principal or any premium.
DTC, in turn, will notify the paying agent of your election in accordance
with DTC's procedures.
If complete instructions are received by the participant and forwarded by
the participant to DTC, and by DTC to the paying agent, on or before the dates
noted above, the paying agent, in accordance with DTC's instructions, will make
the payments to you or your participant by wire transfer of immediately
available funds to an account maintained by the payee with a bank located in the
country issuing the specified currency or in another jurisdiction outside the
United States acceptable to us and the paying agent.
If the steps described above are not properly completed, you will receive
payments in U.S. dollars.
Indirect holders of a global note denominated in a currency other than U.S.
dollars should consult their banks or brokers for information on how to request
payment in the specified currency.
PAYMENTS ON NON-GLOBAL NOTES
Except as described in the last paragraph under this heading, we will make
payments on notes in non-global form in the applicable specified currency. We
will make these payments by wire transfer of immediately available funds to any
account requested by the holder, provided the account is at a bank located in
the country issuing the specified currency or is in another jurisdiction outside
the United States acceptable to us and the trustee. To designate an account for
wire payment, the holder must give the paying agent appropriate wire
instructions at least five business days before the requested wire payment is
due. In the case of any interest payment due on an interest payment date, the
instructions must be given by the person or entity who is the holder on the
regular record date. In the case of any other payment, the payment will be made
only after the notes are surrendered to the paying agent. Any instructions, once
properly given, will remain in effect unless and until new instructions are
properly given in the manner described above.
If a holder fails to give instructions as described above, we will notify
the holder at the address in the trustee's records and will make the payment
within five business days after the holder provides appropriate instructions.
Any late payment made in these circumstances will be treated under the indenture
as if made on the due date, and no interest will accrue on the
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late payment from the due date to the date paid.
Although a payment on a note in non-global form may be due in a specified
currency other than U.S. dollars, we will make the payment in U.S. dollars if
the holder asks us to do so. To request U.S. dollar payment, the holder must
provide appropriate written notice to the trustee at least five business days
before the next due date for which payment in U.S. dollars is requested. In the
case of any interest payment due on an interest payment date, the request must
be made by the person or entity who is the holder on the regular record date.
Any request, once properly made, will remain in effect unless and until revoked
by notice properly given in the manner described above.
Book-entry and other indirect holders of a note with a specified currency
other than U.S. dollars should contact their banks or brokers for information
about how to receive payments in the specified currency or in U.S. dollars.
CONVERSION TO U.S. DOLLARS
When we are asked by a holder to make payments in U.S. dollars of an amount
due in another currency, either on a global note or a non-global note as
described above, we will determine the U.S. dollar amount the holder receives as
follows. The exchange rate agent described below will request currency bid
quotations expressed in U.S. dollars from three or, if three are not available,
then two, recognized foreign exchange dealers in New York City, any of which may
be the exchange rate agent, as of 11:00 A.M., New York City time, on the second
business day before the payment date. Currency bid quotations will be requested
on an aggregate basis, for all holders of notes and other debt securities, if
any, requesting U.S. dollar payments of amounts due on the same date in the same
specified currency. The U.S. dollar amount the holder receives will be based on
the highest acceptable currency bid quotation received by the exchange rate
agent. If the exchange rate agent determines that at least two acceptable
currency bid quotations are not available on that second business day, the
payment will be made in the specified currency.
To be acceptable, a quotation must be given as of 11:00 A.M., New York City
time, on the second business day before the due date and the quoting dealer must
commit to execute a contract at the quotation. If some but not all of the
relevant notes are LIBOR notes, the second preceding business day will be
determined for this purpose as if none of those notes were LIBOR notes.
A holder that requests payment in U.S. dollars will bear all associated
currency exchange costs, which will be deducted from the payment.
WHEN THE SPECIFIED CURRENCY IS NOT
AVAILABLE
If we are obligated to make any payment in a specified currency other than
U.S. dollars, and the specified currency or any successor currency is not
available to us due to circumstances beyond our control -- such as the
imposition of exchange controls or a disruption in the currency markets -- we
will be entitled to satisfy our obligation to make the payment in that specified
currency by making the payment in U.S. dollars, on the basis of the most
recently available exchange rate.
For a specified currency other than U.S. dollars, the exchange rate will be
the noon buying rate for cable transfers of the specified currency in New York
City as quoted by the Federal Reserve Bank of New York on the then most recent
day on which that bank has quoted that rate.
The procedures described above will apply to any note, whether in global or
non-global form, and to any payment, including a payment at maturity. Any
payment made under the circumstances and in a manner described above will not
result in a default under any note or the indenture.
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EXCHANGE RATE AGENT
If we issue a note in a specified currency other than U.S. dollars, we will
appoint a financial institution to act as the exchange rate agent and will name
the institution initially appointed when the note is originally issued in the
applicable pricing supplement. We may select one of our affiliates or one of the
agents or their affiliates to perform this role. We may change the exchange rate
agent from time to time after the original issue date of the note without your
consent and without notifying you of this change.
All determinations made by the exchange rate agent will be at its sole
discretion unless we state in the applicable pricing supplement that any
determination requires our approval. In the absence of manifest error, those
determinations will be conclusive for all purposes and binding on you and us,
without any liability on the part of the exchange rate agent.
DENOMINATION OF NOTES
Unless we specify differently in the pricing supplement relating to your
note, the denomination of your note will be $100,000 or integral multiples of
$1,000 above that. If your note is denominated in a specified currency other
than U.S. dollars, the denomination of the note will be in an amount of the
specified currency for the note equivalent to $100,000 and integral multiples of
$1,000 above that, using an exchange rate equal to the noon buying rate in New
York City for cable transfers for the specified currency on the first business
day immediately before the date on which we accept the offer to buy the note.
INTEREST RATES
FIXED RATE NOTES
Each fixed rate note, except any zero coupon note, will bear interest from
its original issue date or from the most recent date to which interest on the
note has been paid or made available for payment. Interest will accrue on the
principal of a fixed rate note at the fixed yearly rate stated in the applicable
pricing supplement, until the principal is paid or made available for payment.
Unless otherwise specified in the applicable pricing supplement, interest on a
fixed rate note will be payable semiannually each June 15 and December 15, which
will be the interest payment dates for a fixed rate note, and at maturity. Each
payment of interest due on an interest payment date or the date of maturity will
include interest accrued from and including the last date to which interest has
been paid or made available for payment, or from the issue date if none has been
paid or made available for payment, to but excluding the interest payment date
or the date of maturity. We will compute interest on fixed rate notes on the
basis of a 360-day year of twelve 30-day months. We will pay interest on each
interest payment date and at maturity as described above under "-- Payment
Mechanics". If the original issue date of a note is between a regular record
date and the corresponding interest payment date, the initial interest payment
will be made to the holder of record on the interest payment date after the next
regular record date.
FLOATING RATE NOTES
In this subsection, we use several specialized terms relating to the manner
in which floating interest rates are calculated. These terms appear in BOLD,
ITALICIZED type the first time they appear, and we define these terms in
"-- Special Rate Calculation Terms" at the end of this subsection.
Also, please remember that the specific terms of your note as described in
your pricing supplement will supplement and may modify or replace the general
terms regarding the floating rates of interest described in this subsection. The
statements we make in this subsection may not apply to your note.
Each floating rate note will bear interest from its original issue date or
from the most recent date to which interest on the note has
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been paid or made available for payment. Interest will accrue on the principal
of a floating rate note at the yearly rate determined according to the interest
rate formula stated in the applicable pricing supplement, until the principal is
paid or made available for pay-ment. We will pay interest on each interest
payment date and at maturity as described above under "-- Payment Mechanics".
BASE RATES
We currently expect to issue floating rate notes that bear interest at
rates based on one or more of the following base rates:
- commercial paper rate;
- prime rate;
- LIBOR;
- treasury rate;
- CMT rate;
- CD rate;
- federal funds rate; and/or
- 11th district rate.
We describe each of these base rates in further detail below in this subsection.
Your pricing supplement may designate other base rates. If you purchase a
floating rate note, your pricing supplement will specify the type of base rate
that applies to your note.
INITIAL BASE RATE
For any floating rate note, the base rate in effect from the original issue
date to the first interest reset date will be the initial base rate. We will
specify the initial base rate in the applicable pricing supplement.
SPREAD OR SPREAD MULTIPLIER
In some cases, the base rate for a floating rate note may be adjusted:
- by adding or subtracting a specified number of basis points, called the
spread, with one basis point being 0.01%; or
- by multiplying the base rate by a specified percentage, called the spread
multiplier.
If you purchase a floating rate note, your pricing supplement will specify
whether a spread or spread multiplier will apply to your note and, if so, the
amount of the spread or spread multiplier. We may change the spread, spread
multiplier, INDEX MATURITY and other variable terms of the floating rate notes
from time to time, but no change will affect any floating rate note previously
issued or as to which we have accepted an offer.
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MAXIMUM AND MINIMUM RATES
The actual interest rate, after being adjusted by the spread or spread
multiplier, may also be subject to either or both of the following limits:
- a maximum rate -- i.e., a specified upper limit that the actual interest
rate in effect at any time may not exceed; and/or
- a minimum rate -- i.e., a specified lower limit that the actual interest
rate in effect at any time may not fall below.
If you purchase a floating rate note, your pricing supplement will specify
whether a maximum rate and/or minimum rate will apply to your note and, if so,
what those rates are.
Whether or not a maximum rate applies, the interest rate on a floating rate
note will in no event be higher than the maximum rate permitted by New York law,
as it may be modified by U.S. law of general application. Under current New York
law, the maximum rate of interest, with some exceptions, for any loan in an
amount less than $250,000 is 16% and for any loan in the amount of $250,000 or
more but less than $2,500,000 is 25% per year on a simple interest basis. These
limits do not apply to loans of $2,500,000 or more.
The rest of this subsection describes how the interest rate and the
interest payment dates will be determined, and how interest will be calculated,
on a floating rate note.
INTEREST RESET DATES
The rate of interest on a floating rate note will be reset, by the
calculation agent described below, daily, weekly, monthly, quarterly, semi-
annually or annually. The date on which the interest rate resets and the reset
rate becomes effective is called the interest reset date. Except as otherwise
specified in the applicable pricing supplement, the interest reset date will be
as follows:
- for floating rate notes that reset daily, each BUSINESS DAY;
- for floating rate notes that reset weekly and are not treasury rate
notes, the Wednesday of each week;
- for treasury rate notes that reset weekly, the Tuesday of each week,
except as otherwise described in the next to last paragraph under
"-- Interest Determination Dates" below;
- for floating rate notes that reset monthly, the third Wednesday of each
month;
- for floating rate notes that reset quar-terly, the third Wednesday of
March, June, September and December of each year;
- for floating rate notes that reset semi-annually, the third Wednesday of
each of two months of each year, as specified in the applicable pricing
supplement; and
- for floating rate notes that reset annually, the third Wednesday of one
month of each year, as specified in the applicable pricing supplement.
For a floating rate note, the interest rate in effect on any particular day will
be the interest rate determined with respect to the latest interest reset date
that occurs on or before that day.
There are several exceptions, however, to the reset provisions described
above. The base rate in effect from the original issue date to the first
interest reset date will be the initial base rate. For floating rate notes that
reset daily or weekly, the base rate in effect for each day following the second
business day before an interest payment date to, but excluding, the interest
payment date, and for each day following the second business day before the
maturity to, but excluding, the maturity, will be the base rate in effect on
that second business day.
If any interest reset date for a floating rate note would otherwise be a
day that is not a business day, the interest reset date will be
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postponed to the next day that is a business
day. For a LIBOR note, however, if that business day is in the next succeeding
calendar month, the interest reset date will be the immediately preceding
business day.
INTEREST DETERMINATION DATES
The interest rate that takes effect on an interest reset date will be
determined by the calculation agent by reference to a particular date called an
interest determination date. Except as otherwise specified in the applicable
pricing supplement:
- For all floating rate notes other than LIBOR notes, treasury rate notes
and 11th district rate notes, the interest determination date relating to
a particular interest reset date will be the second business day before
that interest reset date.
- For LIBOR notes, the interest determination date relating to a
particular interest reset date will be the second LONDON BUSINESS DAY
preceding the interest reset date, unless the INDEX CURRENCY is pounds
sterling, in which case the interest determination date will be the
interest reset date. We refer to an interest determination date for a
LIBOR note as a LIBOR interest determination date.
- For treasury rate notes, the interest determination date relating to a
particular interest reset date, which we refer to as a treasury interest
determination date, will be the day of the week in which the interest
reset date falls on which treasury bills -- i.e., direct obligations of
the U.S. government -- would normally be auctioned. Treasury bills are
usually sold at auction on the Monday of each week, unless that day is a
legal holiday, in which case the auction is usually held on the following
Tuesday, except that the auction may be held on the preceding Friday. If
as the result of a legal holiday an auction is held on the preceding
Friday, that Friday will be the treasury interest determination date
relating to the interest reset date occurring in the next succeeding
week. If the auction is held on a day that would otherwise be an interest
reset date, then the interest reset date will instead be the first
business day following the auction date.
- For 11th district rate notes, the interest determination date relating to
a particular interest reset date will be the last working day in San
Francisco, in the first calendar month before that interest reset date,
on which the Federal Home Loan Bank of San Francisco publishes the
monthly average cost of funds paid by member institutions of the Eleventh
Federal Home Loan Bank District for the second calendar month before that
interest reset date. We refer to an interest determination date for an
11th district rate note as an 11th district interest determination date.
INTEREST CALCULATION DATES
As described above, the interest rate that takes effect on a particular
interest reset date will be determined by reference to the corresponding
interest determination date. Except for LIBOR notes, however, the determination
of the rate will actually be made on the corresponding interest calculation
date. The interest calculation date will be the earlier of the following:
- the tenth calendar day after the interest determination date or, if that
tenth calendar day is not a business day, the next succeeding business
day; and
- the business day immediately preceding the interest payment date or the
maturity, whichever is the day on which the next payment of interest will
be due.
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INTEREST PAYMENT DATES
The interest payment dates for a floating rate note will depend on when the
interest rate is reset and, unless we specify otherwise in the applicable
pricing supplement, will be as follows:
- for floating rate notes that reset daily, weekly or monthly, the third
Wednesday of each month or the third Wednesday of March, June, September
and December of each year, as specified in the applicable pricing
supplement;
- for floating rate notes that reset quarterly, the third Wednesday of
March, June, September and December of each year;
- for floating rate notes that reset semi-annually, the third Wednesday of
the two months of each year specified in the applicable pricing
supplement; and
- for floating rate notes that reset annually, the third Wednesday of the
month specified in the applicable pricing supplement; and
- for all floating rate notes, at maturity.
Regardless of these rules, if a note is originally issued after the regular
record date and before the date that would otherwise be the first interest
payment date, the first interest payment date will be the date that would
otherwise be the second interest payment date.
In addition, the following special provision will apply to a floating rate
note with regard to any interest payment date other than one that falls on the
maturity. If the interest payment date would otherwise fall on a day that is not
a business day, then the interest payment date will be the next day that is a
business day. However, if the floating rate note is a LIBOR note and the next
business day falls in the next calendar month, then the interest payment date
will be advanced to the next preceding day that is a business day. In all cases,
an interest payment date that falls on the maturity will not be changed.
CALCULATION OF INTEREST
Calculations relating to floating rate notes will be made by the
calculation agent, an institution that we appoint as our agent for this purpose.
Unless the applicable pricing supplement provides otherwise, The First National
Bank of Chicago will be the calculation agent for the floating rate notes. We
may appoint a different institution to serve as calculation agent from time to
time after the original issue date of a note without your consent and without
notifying you of the change.
For each floating rate note, the calculation agent will determine, on the
corresponding interest calculation or determination date, as applicable, the
interest rate that takes effect on each interest reset date. In addition, the
calculation agent will calculate the amount of interest that has accrued during
each interest period -- i.e., the period from and including the original issue
date, or the last date to which interest has been paid or made available for
payment, to but excluding the payment date. For each interest period, the
calculation agent will calculate the amount of accrued interest by multiplying
the face amount of the floating rate note by an accrued interest factor for the
interest period. This factor will equal the sum of the interest factors
calculated for each day during the interest period. The interest factor for each
day will be expressed as a decimal and will be calculated by dividing the
interest rate (also expressed as a decimal) applicable to that day:
- by 360, in the case of commercial paper rate notes, prime rate notes,
LIBOR notes, CD rate notes, federal funds rate notes and 11th district
rate notes; or
- by the actual number of days in the year, in the case of treasury rate
notes and CMT rate notes.
Upon the request of the holder of any floating rate note, the calculation
agent will provide for that note the interest rate then in effect and, if
determined, the interest rate that will become effective on the next interest
reset date. The calculation agent's determination of
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any interest rate, and its calculation of the amount of interest for any
interest period, will be final and binding in the absence of manifest error.
All percentages resulting from any calculation relating to a note will be
rounded upward or downward, as appropriate, to the next higher or lower one
hundred-thousandth of a percentage point (e.g., 9.876541% (or .09876541) being
rounded down to 9.87654% (or .0987654) and 9.876545% (or .09876545) being
rounded up to 9.87655% (or .0987655)). All amounts used in or resulting from any
calculation relating to a floating rate note will be rounded upward or downward,
as appropriate, to the nearest cent, in the case of U.S. dollars, or to the
nearest corresponding hundredth of a unit, in the case of a currency other than
U.S. dollars, with one-half cent or one-half of a corresponding hundredth of a
unit or more being rounded upward.
In determining the base rate that applies to a floating rate note during a
particular interest period, the calculation agent may obtain rate quotes from
various banks or dealers active in the relevant market, as described in the
following subsections. Those reference banks and dealers may include the
calculation agent itself and its affiliates, as well as any agent and its
affiliates, and they may include our affiliates.
COMMERCIAL PAPER RATE NOTES
If you purchase a commercial paper rate note, your note will bear interest
at a base rate equal to the commercial paper rate and adjusted by the spread or
spread multiplier, if any, specified in your pricing supplement.
The commercial paper rate will be the MONEY MARKET YIELD of the rate, for
the relevant interest determination date, for commercial paper having the INDEX
MATURITY specified in your pricing supplement, as published in H.15 (519) under
the heading "Commercial Paper -- Non-financial". If the commercial paper rate
cannot be determined as described above, the following procedures will apply:
- If the rate described above is not published in H.15 (519) by 3:00 P.M.,
New York City time, on the relevant interest calculation date, then the
commercial paper rate will be the rate, for the relevant interest
determination date, for commercial paper having the index maturity
specified in your pricing supplement, as published in H.15 DAILY UPDATE
or any other recognized elec-tronic source used for displaying that rate,
under the heading "Commercial Paper -- Non-financial".
- If the rate described above is not published in H.15 (519), H.15 daily
update or another recognized electronic source by 3:00 P.M., New York
City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the commercial paper rate will be the money market
yield of the arithmetic mean of the following offered rates for U.S.
dollar commercial paper that has the relevant index maturity and is
placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency: the rates offered
as of 11:00 A.M., New York City time, on the relevant interest
determination date, by three leading U.S. dollar commercial paper dealers
in New York City selected by the calculation agent.
- If fewer than three dealers selected by the calculation agent are quoting
as described above, the commercial paper rate for the new interest period
will be the commercial paper rate in effect for the prior interest
period. If the initial base rate has been in effect for the prior
interest period, however, it will remain in effect for the new interest
period.
PRIME RATE NOTES
If you purchase a prime rate note, your note will bear interest at a base
rate equal to
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<PAGE> 48
the prime rate and adjusted by the spread or spread multiplier, if any,
specified in your pricing supplement.
The prime rate will be the rate, for the relevant interest determination
date, published in H.15 (519) under the heading "Bank Prime Loan". If the prime
rate cannot be determined as described above, the following procedures will
apply.
- If the rate described above is not published in H.15 (519) by 3:00 P.M.,
New York City time, on the relevant interest calculation date, then the
prime rate will be the rate, for the relevant interest determination
date, as published in H.15 daily update or another recognized electronic
source used for the purpose of displaying that rate, under the heading
"Bank Prime Loan".
- If the rate described above is not published in H.15(519), H.15 daily
update or another recognized electronic source by 3:00 P.M., New York
City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), then the prime rate will be the arithmetic mean of
the following rates as they appear on the REUTERS SCREEN US PRIME 1 PAGE-
the rate of interest publicly announced by each bank appearing on that
page as that bank's prime rate or base lending rate, as of 11:00 A.M.,
New York City time, on the relevant interest determination date.
- If fewer than four of these rates appear on the Reuters screen US PRIME 1
page, the prime rate will be the arith-metic mean of the prime rates or
base lending rates, as of the close of business on the relevant interest
determination date, of three major banks in New York City selected by the
calculation agent. For this purpose, the calculation agent will use rates
quoted on the basis of the actual number of days in the year divided by a
360-day year.
- If fewer than three banks selected by the calculation agent are quoting
as described above, the prime rate for the new interest period will be
the prime rate in effect for the prior interest period. If the initial
base rate has been in effect for the prior interest period, however, it
will remain in effect for the new interest period.
LIBOR NOTES
If you purchase a LIBOR note, your note will bear interest at a base rate
equal to LIBOR, which means the London interbank offered rate for deposits in
U.S. dollars or any other index currency, as specified in your pricing
supplement. In addition, the applicable LIBOR base rate will be adjusted by the
spread or spread multiplier, if any, specified in your pricing supplement. LIBOR
will be determined in the following manner:
- LIBOR will be either:
-- the offered rate appearing on the TELERATE LIBOR PAGE; or
-- the arithmetic mean of the offered rates appearing on the REUTERS
SCREEN LIBOR PAGE unless that page by its terms cites only one rate,
in which case that rate;
in either case, as of 11:00 A.M., London time, on the relevant LIBOR interest
determination date, for deposits of the relevant index currency having the
relevant index maturity beginning on the relevant interest reset date. Your
pricing supplement will indicate the index currency, the index maturity and the
reference page that apply to your LIBOR note. If no reference page is specified
in your pricing supplement, the Telerate LIBOR page will apply to your LIBOR
note.
- If the Telerate LIBOR page applies and the rate described above does not
appear on that page, or if the Reuters screen LIBOR page applies and
fewer than two of the rates described above appear on that page or no
rate appears
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on any page on which only one rate normally appears, then LIBOR will be
determined on the basis of the rates, at approximately 11:00 A.M., London
time, on the relevant LIBOR interest determination date, at which
deposits of the following kind are offered to prime banks in the London
interbank market by four major banks in that market selected by the
calculation agent: deposits of the index currency having the relevant
index maturity beginning on the relevant interest reset date, and in a
REPRESENTATIVE AMOUNT. The calculation agent will request the principal
London office of each of these banks to provide a quotation of its rate.
If at least two quotations are provided, LIBOR for the relevant LIBOR
interest determination date will be the arithmetic mean of the
quotations.
- If fewer than two quotations are provided as described above, LIBOR for
the relevant LIBOR interest determination date will be the arithmetic
mean of the rates for loans of the following kind to leading European
banks quoted, at approximately 11:00 A.M., in the principal financial
center for the country of the index currency, on that LIBOR interest
determination date, by three major banks in that financial center
selected by the calculation agent: loans of the index currency having the
relevant index maturity, beginning on the relevant interest reset date,
and in a representative amount.
- If fewer than three banks selected by the calculation agent are quoting
as described above, LIBOR for the new interest period will be LIBOR in
effect for the prior interest period. If the initial base rate has been
in effect for the prior interest period, however, it will remain in
effect for the new interest period.
TREASURY RATE NOTES
If you purchase a treasury rate note, your note will bear interest at a
base rate equal to the treasury rate and adjusted by the spread or spread
multiplier, if any, specified in your pricing supplement.
The treasury rate will be the rate for the auction, on the relevant
treasury interest determination date, of treasury bills having the index
maturity specified in your pricing supplement, as that rate appears on TELERATE
PAGE 56 or 57 under the heading "Investment Rate". If the treasury rate cannot
be determined in this manner, the following procedures will apply.
- If the rate described above does not appear on either page at 3:00 P.M.,
New York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from that source at
that time), the treasury rate will be the BOND EQUIVALENT YIELD of the
rate, for the relevant interest determination date, for the type of
treasury bill described above, as published in H.15 daily update, or
another recognized electronic source used for displaying that rate, under
the heading "U.S. Government Securities/Treasury Bills/Auction High".
- If the rate described in the prior paragraph does not appear in H.15
daily update or another recognized electronic source by 3:00 P.M., New
York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the treasury rate will be the bond equivalent
yield of the auction rate, for the relevant treasury interest
determination date and for treasury bills of the kind described above, as
announced by the U.S. Department of the Treasury.
- If the auction rate described in the prior paragraph is not so announced
by 3:00 P.M., New York City time, on the
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<PAGE> 50
relevant interest calculation date, or if no such auction is held for the
relevant week, then the treasury rate will be the bond equivalent yield
of the rate, for the relevant treasury interest determination date and
for treasury bills of the kind described above, as published in H.15
(519) under the heading "U.S. Government Securities/Treasury
Bills/Secondary Market".
- If the rate described in the prior paragraph is not published in H.15
(519) by 3:00 P.M., New York City time, on the relevant interest
calculation date, then the treasury rate will be the rate, for the
relevant treasury interest determination date and for treasury bills of
the kind described above, as published in H.15 daily update, or another
recognized electronic source used for displaying that rate, under the
heading "U.S. Government Securities/Treasury Bills/Secondary Market".
- If the rate described in the prior paragraph is not published in H.15
daily update or another recognized electronic source by 3:00 P.M., New
York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the treasury rate will be the bond equivalent
yield of the arithmetic mean of the following secondary market bid rates
for the issue of treasury bills with a remaining maturity closest to the
specified index maturity: the rates bid as of approximately 3:30 P.M.,
New York City time, on the relevant treasury interest determination date,
by three primary U.S. government securities dealers in New York City
selected by the calculation agent.
- If fewer than three dealers selected by the calculation agent are quoting
as described in the prior paragraph, the treasury rate in effect for the
new interest period will be the treasury rate in effect for the prior
interest period. If the initial base rate has been in effect for the
prior interest period, however, it will remain in effect for the new
interest period.
CMT RATE NOTES
If you purchase a CMT rate note, your note will bear interest at a base
rate equal to the CMT rate and adjusted by the spread or spread multiplier, if
any, specified in your pricing supplement.
The CMT rate will be the following rate displayed on the DESIGNATED CMT
TELERATE PAGE under the heading ". . . Treasury Constant Maturities . . .
Federal Reserve Board Release H.15 . . . Mondays Approximately 3:45 P.M.", under
the column for the DESIGNATED CMT INDEX MATURITY:
- if the designated CMT Telerate page is Telerate page 7051, the rate for
the relevant interest determination date; or
- if the designated CMT Telerate page is Telerate page 7052, the weekly or
monthly average, as specified in your pricing supplement, for the week
that ends immediately before the week in which the relevant interest
determina-tion date falls, or for the month that ends immediately before
the month in which the relevant interest determination date falls, as
applicable.
If the CMT rate cannot be determined in this manner, the following procedures
will apply.
- If the applicable rate described above is not displayed on the relevant
designated CMT Telerate page at 3:00 P.M., New York City time, on the
relevant interest calculation date (unless the calculation is made
earlier and the rate is available from one of those sources at that
time), then the CMT rate will be the applicable treasury constant
maturity rate described above -- i.e., for the designated CMT index
maturity and for either the relevant interest determina-
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<PAGE> 51
tion date or the weekly or monthly average, as applicable -- as published
in H.15 (519).
- If the applicable rate described above is not published in H.15 (519) by
3:00 P.M., New York City time, on the relevant interest calculation date,
then the CMT rate will be the treasury constant maturity rate, or other
U.S. treasury rate, for the designated CMT index maturity and with
reference to the relevant interest determination date, that:
-- is published by the Board of Governors of the Federal Reserve System,
or the U.S. Department of the Treasury; and
-- is determined by the calculation agent to be comparable to the
applicable rate formerly displayed on the designated CMT Telerate page
and published in H.15 (519).
- If the rate described in the prior paragraph is not published by 3:00
P.M., New York City time, on the relevant interest calculation date, then
the CMT rate will be the yield to maturity of the arithmetic mean of the
following secondary market offered rates for the most recently issued
treasury notes having an original maturity of approximately the
designated CMT index maturity and a remaining term to maturity of not
less than the designated CMT index maturity minus one year and in a
representative amount: the offered rates, as of approximately 3:30 P.M.,
New York City time, on the relevant interest determination date, of three
primary U.S. government securi-ties dealers in New York City selected by
the calculation agent. In selecting these offered rates, the calculation
agent will request quotations from five of these primary dealers and will
disregard the highest quotation -- or, if there is equality, one of the
highest -- and the lowest quotation -- or, if there is equality, one of
the lowest. Treasury notes are direct, non-callable, fixed rate
obligations of the U.S. government.
- If the calculation agent is unable to obtain three quotations of the kind
described in the prior paragraph, the CMT rate will be the yield to
maturity of the arithmetic mean of the following secondary market offered
rates for treasury notes with an original maturity longer than the
designated CMT index maturity, with a remaining term to maturity closest
to the designated CMT index maturity and in a representative amount: the
offered rates, as of approximately 3:30 P.M., New York City time, on the
relevant interest determination date, of three primary U.S. government
securities dealers in New York City selected by the calculation agent. In
selecting these offered rates, the calculation agent will request
quotations from five of these primary dealers and will disregard the
highest quotation -- or, if there is equality, one of the highest -- and
the lowest quotation -- or, if there is equality, one of the lowest. If
two treasury notes with an original maturity longer than the designated
CMT index maturity have remaining terms to maturity that are equally
close to the designated CMT index maturity, the calculation agent will
obtain quotations for the treasury note with the shorter remaining term
to maturity.
- If fewer than five but more than two of these primary dealers are quoting
as de-scribed in the prior paragraph, then the CMT rate for the relevant
interest determination date will be based on the arithmetic mean of the
offered rates so obtained, and neither the highest nor the lowest of
those quotations will be disregarded.
- If two or fewer primary dealers selected by the calculation agent are
quoting as described above, the CMT rate in effect for the new interest
period will be the
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CMT rate in effect for the prior interest period. If the initial base
rate has been in effect for the prior interest period, however, it will
remain in effect for the new interest period.
CD RATE NOTES
If you purchase a CD rate note, your note will bear interest at a base rate
equal to the CD rate and adjusted by the spread or spread multiplier, if any,
specified in your pricing supplement.
The CD rate will be the rate, on the relevant interest determination date,
for negotiable U.S. dollar certificates of deposit having the index maturity
specified in your pricing supplement, as published in H.15 (519) under the
heading "CDs (Secondary Market)". If the CD rate cannot be determined in this
manner, the following procedures will apply.
- If the rate described above is not published in H.15 (519) by 3:00 P.M.,
New York City time, on the relevant interest calculation date, then the
CD rate will be the rate, for the relevant interest determination date,
described above as published in H.15 daily update, or another recognized
electronic source used for displaying that rate, under the heading "CDs
(Secondary Market)".
- If the rate described above is not published in H.15 (519), H.15 daily
update or another recognized electronic source by 3:00 P.M., New York
City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from one of those
sources at that time), the CD rate will be the arithmetic mean of the
following secondary market offered rates for negotiable U.S. dollar
certificates of deposit of major U.S. money center banks with a remaining
maturity closest to the specified index maturity, and in a representative
amount: the rates offered as of 10:00 A.M., New York City time, on the
relevant interest determination date, by three leading nonbank dealers in
negotiable U.S. dollar certificates of deposit in New York City, as
selected by the calculation agent.
- If fewer than three dealers selected by the calculation agent are quoting
as described above, the CD rate in effect for the new interest period
will be the CD rate in effect for the prior interest period. If the
initial base rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
FEDERAL FUNDS RATE NOTES
If you purchase a federal funds rate note, your note will bear interest at
a base rate equal to the federal funds rate and adjusted by the spread or spread
multiplier, if any, specified in your pricing supplement.
The federal funds rate will be the rate for U.S. dollar federal funds on
the relevant interest determination date, as published in H.15 (519) under the
heading "Federal Funds (Effective)", as that rate is displayed on Telerate page
120. If the federal funds rate cannot be determined in this manner, the
following procedures will apply.
- If the rate described above is not displayed on Telerate page 120 at 3:00
P.M., New York City time, on the relevant interest calculation date
(unless the calculation is made earlier and the rate is available from
that source at that time), then the federal funds rate will be the rate,
for the relevant interest determination date, described above as
published in H.15 daily update, or another recognized electronic source
used for displaying that rate, under the heading "Federal Funds
(Effective)".
- If the rate described above is not displayed on Telerate page 120 and is
not published in H.15 (519), H.15 daily update or another recognized
electronic
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<PAGE> 53
source by 3:00 P.M., New York City time, on the relevant interest
calculation date (unless the calculation is made earlier and the rate is
available from one of those sources at that time), the federal funds rate
will be the arithmetic mean of the rates for the last transaction in
overnight, U.S. dollar federal funds arranged, before 9:00 A.M., New York
City time, on the relevant interest determination date, by three leading
brokers of U.S. dollar federal funds transactions in New York City
selected by the calculation agent.
- If fewer than three brokers selected by the calculation agent are quoting
as described above, the federal funds rate in effect for the new interest
period will be the federal funds rate in effect for the prior interest
period. If the initial base rate has been in effect for the prior
interest period, however, it will remain in effect for the new interest
period.
11TH DISTRICT RATE NOTES
If you purchase an 11th district rate note, your note will bear interest at
a base rate equal to the 11th district rate and adjusted by the spread or spread
multiplier, if any, specified in your pricing supplement.
The 11th district rate will be the rate equal to the monthly weighted
average cost of funds for the calendar month immediately before the relevant
11th district interest determination date, as displayed on Telerate page 7058
under the heading "11th District" as of 11:00 A.M., San Francisco time, on that
date. If the 11th district rate cannot be determined in this manner, the
following procedures will apply.
- If the rate described above does not appear on Telerate page 7058 on the
relevant 11th district interest determination date, then the 11th
district rate for that date will be the monthly weighted average cost of
funds paid by institutions that are members of the Eleventh Federal Home
Loan Bank District for the calendar month immediately before the relevant
11th district interest determination date, as most recently announced by
the Federal Home Loan Bank of San Francisco as that cost of funds.
- If the Federal Home Loan Bank of San Francisco fails to announce the cost
of funds described in the prior paragraph on or before the relevant 11th
district interest determination date, the 11th district rate in effect
for the new interest period will be the 11th district rate in effect for
the prior interest period. If the initial base rate has been in effect
for the prior interest period, however, it will remain in effect for the
new interest period.
SPECIAL RATE CALCULATION TERMS
In this subsection entitled "-- Interest Rates", we use several terms that
have special meanings relevant to calculating floating interest rates. We define
these terms as follows:
"BOND EQUIVALENT YIELD" means a yield expressed as a percentage and
calculated in accordance with the following formula:
<TABLE>
<S> <C> <C>
bond equivalent
yield = D X N X 100
---------------
360 - (D X M)
</TABLE>
where
- "D" means the annual rate for treasury bills quoted on a bank discount
basis and expressed as a decimal;
- "N" means 365 or 366, as the case may be; and
- "M" means the actual number of days in the applicable interest reset
period.
"BUSINESS DAY" means, for any note, a day that meets all the following
applicable requirements:
- for all notes, is a Monday, Tuesday, Wednesday, Thursday or Friday that
is not a day on which banking institutions in New York City generally are
autho-
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<PAGE> 54
rized or obligated by law, regulation or executive order to close;
- if the note is a LIBOR note, is also a London business day; and
- if the note has a specified currency other than U.S. dollars, is also a
day on which banking institutions are not authorized or obligated by law,
regulation or executive order to close in the principal financial center
of the country issuing the specified currency.
"DESIGNATED CMT INDEX MATURITY" means the index maturity for a CMT rate
note and will be the original period to maturity of a U.S. treasury
security -- either 1, 2, 3, 5, 7, 10, 20 or 30 years -- specified in the
applicable pricing supplement. If no such original maturity period is so
specified, the designated CMT index maturity will be 2 years.
"DESIGNATED CMT TELERATE PAGE" means the Telerate page specified in the
applicable pricing supplement that displays treasury constant maturities as
reported in H.15 (519). If no Telerate page is so specified, then the applicable
page will be Telerate page 7052. If Telerate Page 7052 applies but the
applicable pricing supplement does not specify whether the weekly or monthly
average applies, the weekly average will apply.
"H.15 (519)" means the weekly statistical release entitled "Statistical
Release H.15 (519)", or any successor publication, published by the Board of
Governors of the Federal Reserve System.
"H.15 DAILY UPDATE" means the daily update of H.15 (519) available through
the worldwide-web site of the Board of Governors of the Federal Reserve System,
at http: //www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
"INDEX CURRENCY" means, with respect to a LIBOR note, the currency
specified as such in the applicable pricing supplement. The index currency may
be U.S. dollars or any other currency, and will be U.S. dollars unless another
currency is specified in the applicable pricing supplement.
"INDEX MATURITY" means, with respect to a floating rate note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as specified in the applicable pricing supplement.
"LONDON BUSINESS DAY" means any day on which dealings in the relevant index
currency are transacted in the London interbank market.
"MONEY MARKET YIELD" means a yield expressed as a percentage and calculated
in accordance with the following formula:
<TABLE>
<S> <C> <C>
money market yield = D X 360 X 100
---------------
360 - (D X M)
</TABLE>
where
- "D" means the annual rate for commercial paper quoted on a bank discount
basis and expressed as a decimal; and
- "M" means the actual number of days in the relevant interest reset
period.
"REPRESENTATIVE AMOUNT" means an amount that, in the calculation agent's
judgment, is representative of a single transaction in the relevant market at
the relevant time.
"REUTERS SCREEN LIBOR PAGE" means the display on the Reuters Monitor Money
Rates Service, or any successor service, on the page designated as "LIBO" or any
replacement page or pages on which London interbank rates of major banks for the
relevant index currency are displayed.
"REUTERS SCREEN US PRIME 1 PAGE" means the display on the "US PRIME 1" page
on the Reuters Monitor Money Rates Service, or any successor service, or any
replacement page or pages on that service, for the purpose of displaying prime
rates or base lending rates of major U.S. banks.
"TELERATE LIBOR PAGE" means Telerate page 3750 or any replacement page or
pages on which London interbank rates of major banks for the relevant index
currency are displayed.
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"TELERATE PAGE" means the display on Bridge Telerate Inc., or any successor
service, on the page or pages specified in this prospectus supplement or the
applicable pricing supplement, or any replacement page or pages on that service.
If, when we use the terms designated CMT Telerate page, H.15 (519), H.15
daily update, Reuters screen LIBOR page, Reuters screen US PRIME 1 page,
Telerate LIBOR page or Telerate page, we refer to a particular heading or
headings on any of those pages, those references include any successor or
replacement heading or headings as determined by the calculation agent.
ORIGINAL ISSUE DISCOUNT NOTES
We may issue notes at a price lower than their stated principal amount
which may or may not bear interest. These notes are called original issue
discount notes. If original issue discount notes are redeemed before the stated
maturity or their maturity is accelerated, the holder will be entitled to
receive less than the principal amount of the notes that it holds. In addition,
original issue discount notes may be considered "discount notes" for U.S.
federal income tax purposes, as "United States Taxation -- Original Issue
Discount" describes later in this prospectus supplement. The pricing supplement
may describe other considerations that apply only to original issue discount
notes.
AMORTIZING NOTES
We will make payments on amortized notes at intervals specified in the
pricing supplement and at maturity. Unless the applicable pricing supplement
specifies otherwise, interest on an amortizing note will be computed on the
basis of a 360-day year of twelve 30-day months. Payments on amortizing notes
will count towards interest first and then to the reduction of the unpaid
principal amount. The applicable pricing supplement and note each will provide
information regarding repayment and other matters.
FOREIGN CURRENCY NOTES, MULTI-CURRENCY
NOTES AND INDEXED NOTES
A foreign currency or indexed currency supplement in the applicable pricing
supplement will establish provisions that apply to notes denominated in a
currency other than U.S. dollars. This currency supplement will specify the
following information:
- the currency or currencies, including composite currencies, of payments
on the note;
- tax considerations;
- method for determining the principal amount due at maturity;
- risks associated with this type of note;
- whether the principal amount at maturity will be determined by reference
to the exchange rate of a currency other than U.S. dollars to an indexed
currency or other index. Indexed notes' principal amount due at maturity
may be greater or less than the face amount of the note depending upon
the relative value of the non-U.S. currency and the indexed currency; and
- any other terms relating to the denomination in a currency other than
U.S. dollars.
REDEMPTION AND REPAYMENT
Unless otherwise indicated in your pricing supplement, your note will not
be entitled to the benefit of any sinking fund -- that is, we will not deposit
money on a regular basis into any separate custodial account to repay your
notes. We will be entitled to redeem your notes in the circumstances described
in the accompanying prospectus under "Description of Debt Securities We May
Offer -- Redemption and Repayment". Except as described in the accompanying
prospectus, we will not be entitled to redeem your note before its stated
maturity unless your pricing supplement specifies a redemption commencement
date. You will not be entitled to require us to buy your note from you before
its stated maturity unless
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your pricing supplement specifies one or more repayment dates.
If your pricing supplement specifies a redemption commencement date or a
repayment date, it will also specify one or more redemption prices, which will
be expressed as a percentage of the principal amount of your note. It may also
specify one or more redemption periods during which the redemption prices
relating to a redemption of notes during those periods will apply.
If your pricing supplement specifies a redemption commencement date, your
note will be redeemable at our option at any time on or after that date. If we
redeem your note, we will do so at the specified redemption price, together with
interest accrued to the redemption date. If different prices are specified for
different redemption periods, the price we pay will be the price that applies to
the redemption period during which your note is redeemed.
If your pricing supplement specifies a repayment date, your note will be
repayable at your option on the specified repayment date at the specified
repayment price, together with interest accrued to the repayment date.
If we exercise an option to redeem any note, we will give to the trustee
and the holder written notice of the principal amount of the note to be
redeemed, not less than 30 days nor more than 60 days before the applicable
redemption date. We will give the notice in the manner described in the
prospectus under "Description of Debt Securities We May Offer -- Notices".
If a note represented by a global note is repayable at the holder's option,
DTC or its nominee, as the holder, will be the only person that can exercise the
right to repayment. Any indirect holders who own beneficial interests in the
global note and wish to exercise a repayment right must give proper and timely
instructions to their banks or brokers through which they hold their interest,
requesting that they notify DTC to exercise the repayment right on their behalf.
Different firms have different deadlines for accepting instructions from their
customers, and you should take care to act promptly enough to ensure that your
request is given effect by DTC before the applicable deadline for exercise.
Street name and other indirect holders should contact their banks or
brokers for information about how to exercise a repayment right in a timely
manner.
If the option of the holder to elect repayment as described above is deemed
to be a "tender offer" within the meaning of Rule 14e-1 under the Securities
Exchange Act of 1934, we will comply with Rule 14e-1 as then in effect to the
extent applicable.
We or our affiliates may purchase notes from investors who are willing to
sell from time to time, either in the open market at prevailing prices or in
private transactions at negotiated prices. Notes that we or they purchase may,
at our discretion, be held, resold or canceled.
UNITED STATES TAXATION
This section describes the principal United States federal income tax
consequences of owning the notes we are offering. It is the opinion of Sullivan
& Cromwell, counsel to Popular North America. It applies to you only if you are
an initial purchaser of notes and you own your notes as capital assets for tax
purposes. This section does not apply to you if you are a member of a class of
holders subject to special rules, such as:
- a dealer in securities or currencies;
- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings;
- a bank;
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<PAGE> 57
- a life insurance company;
- a tax-exempt organization;
- a person that owns notes that are a hedge or that are hedged against
interest rate or currency risks;
- a person that owns notes as part of a straddle or conversion transaction
for tax purposes; or
- a person whose functional currency for tax purposes is not the U.S.
dollar.
This section deals only with notes that are due to mature 30 years or less from
the date on which they are issued. The United States federal income tax
consequences of owning notes that are due to mature more than 30 years from
their date of issue will be discussed in an applicable pricing supplement. This
section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in effect.
These laws may change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning
these notes in your particular circumstances under the Internal Revenue Code and
the laws of any other taxing jurisdiction.
UNITED STATES HOLDERS
This section describes the tax consequences to a United States holder. You
are a United States holder if you are a beneficial owner of a note and you are:
- a citizen or resident of the United States;
- a domestic corporation;
- an estate whose income is subject to United States federal income tax
regardless of its source; or
- a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
If you are not a United States holder, this section does not apply to you and
you should refer to "-- United States Alien Holders" below.
PAYMENTS OF INTEREST
Except as described below in the case of interest on a discount note that
is not qualified stated interest (each as defined below under "-- Original Issue
Discount"), you will be taxed on any interest on your note, whether payable in
U.S. dollars or a currency, composite currency or basket of currencies other
than U.S. dollars, which we call a "foreign currency", as ordinary income at the
time you receive the interest or it accrues, depending on your method of
accounting for tax purposes.
CASH BASIS TAXPAYERS. If you are a taxpayer that uses the cash receipts
and disbursements method of accounting for tax purposes and you receive an
interest payment that is denominated in, or determined by reference to, a
foreign currency, you must recognize income equal to the U.S. dollar value of
the interest payment, based on the exchange rate in effect on the date of
receipt, regardless of whether you actually convert the payment into U.S.
dollars.
ACCRUAL BASIS TAXPAYERS. If you are a taxpayer that uses an accrual method
of accounting for tax purposes, you may determine the amount of income that you
recognize with respect to an interest payment denominated in, or determined by
reference to, a foreign currency by using one of two methods. Under the first
method, you will determine the amount of income accrued based on the average
exchange rate in effect during the interest accrual period (or, with respect to
an accrual period that spans two taxable years, that part of the period within
the taxable year).
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If you elect the second method, you would determine the amount of income
accrued on the basis of the exchange rate in effect on the last day of the
accrual period (or, in the case of an accrual period that spans two taxable
years, the exchange rate in effect on the last day of the part of the period
within the taxable year). Additionally, under this second method, if you receive
a payment of interest within five business days of the last day of your accrual
period or taxable year, you may instead translate the interest accrued into U.S.
dollars at the exchange rate in effect on the day that you actually receive the
interest payment. If you elect the second method it will apply to all debt
instruments that you own at the beginning of the first taxable year to which the
election applies and to all debt instruments that you acquire after that time.
You may not revoke this election without the consent of the Internal Revenue
Service.
When you actually receive an interest payment (including a payment
attributable to accrued but unpaid interest upon the sale or retirement of your
note) denominated in, or determined by reference to, a foreign currency for
which you accrued an amount of income, you will recognize ordinary income or
loss measured by the difference, if any, between the exchange rate that you used
to accrue interest income and the exchange rate in effect on the date of
receipt, regardless of whether you actually convert the payment into U.S.
dollars.
ORIGINAL ISSUE DISCOUNT
If you own a note, other than a note with a term of one year or less (a
short-term note), it will be treated as issued at an original issue discount (a
discount note) if the amount by which the note's "stated redemption price at
maturity" exceeds its "issue price" is more than a "de minimis amount". All
three terms are defined below. Generally, a note's issue price will be the first
price at which a substantial amount of notes included in the issue of which the
note is a part are sold to persons other than bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement
agents, or wholesalers. A note's stated redemption price at maturity is the
total of all payments provided by the note that are not payments of qualified
stated interest. Generally, an interest payment on a note is qualified stated
interest if it is one of a series of stated interest payments on a note that are
unconditionally payable at least annually at a single fixed rate (with some
exceptions for lower rates paid during some periods) applied to the outstanding
principal amount of the note. There are special rules for variable rate notes
that we discuss below under "-- Variable Rate Notes".
In general, your note is not a discount note if the amount by which its
stated redemption price at maturity exceeds its issue price is less than 1/4 of
1 percent of its stated redemption price at maturity multiplied by the number of
complete years to its maturity (the de minimis amount). Your note will have de
minimis original issue discount if the amount of the excess is less than the de
minimis amount. If, however, the amount of original issue discount on your note
is more than the de minimis amount as otherwise determined, and all stated
interest provided for in your note would be qualified stated interest except
that for one or more accrual periods the interest rate is below the rate
applicable for the remainder of your note's term, then for purposes of
determining whether your note has de minimis original issue discount your note's
stated redemption price at maturity is treated as equal to the note's issue
price plus the greater of the amount of foregone interest or the excess (if any)
of the instrument's stated principal amount over its issue price. The amount of
foregone interest is the amount of additional stated interest that would be
required to be payable on your note during the period of the interest shortfall
so that all stated interest would be qualified stated interest. If your note has
de minimis original issue discount, you must include the de minimis amount in
income as stated principal payments are made on the note, unless you make the
election described below under "-- Election to Treat All Interest as Original
Issue Discount". You can determine the includible amount with respect to each
such payment by multiplying
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the total amount of your note's de minimis original issue discount by a fraction
equal to:
- the amount of the principal payment made divided by
- the stated principal amount of the note.
INCLUSION OF ORIGINAL ISSUE DISCOUNT IN INCOME. Generally, if your
discount note matures more than one year from its date of issue, you must
include original issue discount, which we call "OID", in income before you
receive cash attributable to that income. The amount of OID that you must
include in income is calculated using a constant-yield method, and generally you
will include increasing amounts of OID in income over the life of your discount
note. More specifically, you can calculate the amount of OID that you must
include in income by adding the daily portions of OID with respect to your
discount note for each day during the taxable year or portion of the taxable
year that you own your discount note (accrued OID). You can determine the daily
portion by allocating to each day in any accrual period a pro rata portion of
the OID allocable to that accrual period. You may select an accrual period of
any length with respect to your discount note and you may vary the length of
each accrual period over the term of your discount note. However, no accrual
period may be longer than one year and each scheduled payment of interest or
principal on your discount note must occur on either the first or final day of
an accrual period.
You can determine the amount of OID allocable to an accrual period by:
- multiplying your discount note's adjusted issue price at the beginning of
the accrual period by your note's yield to maturity, and then
- subtracting from this figure the sum of the payments of qualified stated
interest on your note allocable to the accrual period.
You must determine the discount note's yield to maturity on the basis of
compounding at the close of each accrual period and adjusting for the length of
each accrual period. Further, you determine your discount note's adjusted issue
price at the beginning of any accrual period by:
- adding your discount note's issue price and any accrued OID for each
prior accrual period, and then
- subtracting any payments previously made on your discount note that were
not qualified stated interest payments.
If an interval between payments of qualified stated interest on your
discount note contains more than one accrual period, then, when you determine
the amount of OID allocable to an accrual period, you must allocate the amount
of qualified stated interest payable at the end of the interval, including any
qualified stated interest that is payable on the first day of the accrual period
immediately following the interval, pro rata to each accrual period in the
interval based on their relative lengths. In addition, you must increase the
adjusted issue price at the beginning of each accrual period in the interval by
the amount of any qualified stated interest that has accrued before the first
day of the accrual period but that is not payable until the end of the interval.
You may compute the amount of OID allocable to an initial short accrual period
by using any reasonable method if all other accrual periods, other than a final
short accrual period, are of equal length.
The amount of OID allocable to the final accrual period is equal to the
difference between:
- the amount payable at the maturity of your note other than any payment of
qualified stated interest, and
- your note's adjusted issue price as of the beginning of the final accrual
period.
ACQUISITION PREMIUM. If you purchase your note for an amount that is less
than or equal to the sum of all amounts, other than
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qualified stated interest, payable on your note after the purchase date but is
greater than the amount of your note's adjusted issue price (determined as
described above under "-- Original Issue Discount" on page S-23), the excess is
acquisition premium. If you do not make the election described below under
"-- Election to Treat All Interest as Original Issue Discount", then you must
reduce the daily portions of OID by an amount equal to:
- the excess of your adjusted basis in the note immediately after purchase
over the adjusted issue price of your note, divided by
- the excess of the sum of all amounts payable, other than qualified stated
interest, on your note after the purchase date over your note's adjusted
issue price.
MARKET DISCOUNT. You will be treated as if you purchased your note, other
than a short-term note, at a market discount and your note will be a market
discount note if:
- you purchase your note for less than its issue price (determined as
described above under "-- Original Issue Discount" on page S-23); and
- your note's stated redemption price at maturity or, in the case of a
discount note, the note's revised issue price, exceeds the price you paid
for your note by at least 1/4 of 1 percent of your note's stated
redemption price at maturity or the revised issue price, multiplied by
the number of complete years to the note's maturity.
To determine the revised issue price of your note for these purposes, you
generally add any OID that has accrued on your note to its issue price.
If your note's stated redemption price at maturity or, in the case of a
discount note, its revised issue price, does not exceed the price you paid for
the note by 1/4 of 1 percent multiplied by the number of complete years to the
note's maturity, the excess constitutes de minimis market discount, and the
rules that we discuss below are not applicable to you.
If you recognize gain on the maturity or disposition of your market
discount note, you must treat it as ordinary income to the extent of the accrued
market discount on your note. Alternatively, you may elect to include market
discount in income currently over the life of your note. If you make this
election, it will apply to all debt instruments with market discount that you
acquire on or after the first day of the first taxable year to which the
election applies. You may not revoke this election without the consent of the
Internal Revenue Service.
You will accrue market discount on your market discount note on a
straight-line basis unless you elect to accrue market discount using a
constant-yield method. If you elect to accrue market discount using a
constant-yield method, this method will apply only to the note with respect to
which it is made and you may not revoke this election.
If you own a market discount note and do not elect to include market
discount in income currently, you will generally be required to defer deductions
for interest on borrowings allocable to your note in an amount not exceeding the
accrued market discount on your note until the maturity or disposition of your
note.
PRE-ISSUANCE ACCRUED INTEREST. An election can be made to decrease the
issue price of your note by the amount of pre-issuance accrued interest if:
- a portion of the initial purchase price of your note is attributable to
pre-issuance accrued interest;
- the first stated interest payment on your note is to be made within one
year of your note's issue date; and
- the payment will equal or exceed the amount of pre-issuance accrued
interest.
If this election is made, a portion of the first stated interest payment will be
treated as a return of the excluded pre-issuance accrued
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interest and not as an amount payable on your note.
NOTES SUBJECT TO CONTINGENCIES INCLUDING OPTIONAL REDEMPTION. Your note
is subject to a contingency if it provides for an alternative payment schedule
or schedules applicable upon the occurrence of a contingency or contingencies,
other than a remote or incidental contingency, whether this contingency relates
to payments of interest or of principal. In this case, you must determine the
yield and maturity of your note by assuming that the payments will be made
according to the payment schedule most likely to occur if:
- the timing and amounts of the payments that comprise each payment
schedule are known as of the issue date; and
- one of these schedules is significantly more likely than not to occur.
If there is no single payment schedule that is significantly more likely than
not to occur, other than because of a mandatory sinking fund, you must include
income on your note in accordance with the general rules that govern contingent
payment obligations. These rules will be discussed in the applicable pricing
supplement.
Notwithstanding the general rules for determining yield and maturity, if
your note is subject to contingencies, and either you or Popular North America
has an unconditional option or options that, if exercised, would require
payments to be made on the note under an alternative payment schedule or
schedules, then:
- in the case of an option or options that Popular North America may
exercise, Popular North America will be deemed to exercise or not
exercise an option or combination of options in the manner that minimizes
the yield on your note; and
- in the case of an option or options that you may exercise, you will be
deemed to exercise or not exercise an option or combination of options in
the manner that maximizes the yield on your note.
If both you and Popular North America hold options described in the preceding
sentence, those rules will apply to each option in the order in which they may
be exercised. You may determine the yield on your note for the purposes of those
calculations by using any date on which your note may be redeemed or repurchased
as the maturity date and the amount payable on the date that you chose in
accordance with the terms of your note as the principal amount payable at
maturity.
If a contingency, including the exercise of an option, actually occurs or
does not occur contrary to an assumption made according to the above rules then,
except to the extent that a portion of your note is repaid as a result of this
change in circumstances and solely to determine the amount and accrual of OID,
you must redetermine the yield and maturity of your note by treating your note
as having been retired and reissued on the date of the change in circumstances
for an amount equal to your note's adjusted issue price on that date.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. You may elect
to include in gross income all interest that accrues on your note using the
constant-yield method described above under the heading "-- Inclusion of
Original Issue Discount in Income", with the modifications described below. For
purposes of this election, interest will include stated interest, OID, de
minimis original issue discount, market discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium (described below
under "-- Notes Purchased at a Premium") or acquisition premium.
If you make this election for your note, then, when you apply the
constant-yield method:
- the issue price of your note will equal your cost;
- the issue date of your note will be the date you acquired it; and
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- no payments on your note will be treated as payments of qualified stated
interest.
Generally, this election will apply only to the note for which you make it
unless the note has amortizable bond premium or market discount. If the note has
amortizable bond premium, you will be deemed to have elected to apply
amortizable bond premium against interest for all debt instruments with
amortizable bond premium, other than debt instruments the interest on which is
excludible from gross income, that you own as of the beginning of the taxable
year to which the election applies or any taxable year after that year.
Additionally, if you make this election for a market discount note, you will be
treated as having made the election discussed above under "-- Market Discount"
to include market discount in income currently over the life of all debt
instruments that you currently own or later acquire. You may not revoke any
election to apply the constant-yield method to all interest on a note or the
deemed elections with respect to amortizable bond premium or market discount
notes without the consent of the Internal Revenue Service.
VARIABLE RATE NOTES. Your note will be a variable rate note if:
- your note's issue price does not exceed the total noncontingent principal
payments by more than the lesser of:
- .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the issue
date; or
- 15 percent of the total noncontingent principal payments; and
- your note provides for stated interest (compounded or paid at least
annually) only at:
- one or more qualified floating rates;
- a single fixed rate and one or more qualified floating rates;
- a single objective rate; or
- a single fixed rate and a single objective rate that is a qualified
inverse floating rate.
Your note will have a variable rate that is a qualified floating rate if:
- variations in the value of the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the
currency in which your note is denominated; or
- the rate is equal to this kind of rate multiplied by either:
- a fixed multiple that is greater than 0.65 but not more than 1.35; or
- a fixed multiple greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate; and
- the value of the rate on any date during the term of your note is set no
earlier than three months before the first day on which that value is in
effect and no later than one year following that first day.
If your note provides for two or more qualified floating rates that are
within 0.25 percentage points of each other on the issue date or can reasonably
be expected to have approximately the same values throughout the term of the
note, the qualified floating rates together constitute a single qualified
floating rate.
Your note will not have a qualified floating rate, however, if the rate is
subject to some restrictions (including caps, floors, governors, or other
similar restrictions) unless these restrictions are fixed throughout the term of
the note or are not reasonably expected to significantly affect the yield on the
note.
Your note will have a variable rate that is a single objective rate if:
- the rate is not a qualified floating rate;
- the rate is determined using a single, fixed formula that is based on
objective
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financial or economic information that is not within the control of or
unique to the circumstances of the issuer or a related party; and
- the value of the rate on any date during the term of your note is set no
earlier than three months before the first day on which that value is in
effect and no later than one year following that first day.
Your note will not have a variable rate that is an objective rate, however,
if it is reasonably expected that the average value of the rate during the first
half of your note's term will be either significantly less than or significantly
greater than the average value of the rate during the final half of your note's
term.
An objective rate as described above is a qualified inverse floating rate
if:
- the rate is equal to a fixed rate minus a qualified floating rate; and
- the variations in the rate can reasonably be expected to inversely
reflect contemporaneous variations in the cost of newly borrowed funds.
Your note will also have a single qualified floating rate or an objective
rate if interest on your note is stated at a fixed rate for an initial period of
one year or less followed by either a qualified floating rate or an objective
rate for a subsequent period, and either:
- the fixed rate and the qualified floating rate or objective rate have
values on the issue date of the note that do not differ by more than 0.25
percentage points; or
- the value of the qualified floating rate or objective rate is intended to
approximate the fixed rate.
Commercial paper rate notes, prime rate notes, LIBOR notes, treasury rate
notes, CMT rate notes, CD rate notes, 11th district rate notes, and federal
funds rate notes generally will be treated as variable rate notes under these
rules.
In general, if your variable rate note provides for stated interest at a
single qualified floating rate or objective rate (or one of those rates after a
single fixed rate for an initial period), all stated interest on your note is
qualified stated interest. In this case, the amount of OID, if any, is
determined by using, in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date of the qualified floating
rate or qualified inverse floating rate, or, in the case of any other objective
rate, a fixed rate that reflects the yield reasonably expected for your note.
If your variable rate note does not provide for stated interest at a single
qualified floating rate or a single objective rate, and also does not provide
for interest payable at a fixed rate, other than at a single fixed rate for an
initial period, you generally must determine the interest and OID accruals on
your note by:
- determining a fixed rate substitute for each variable rate provided under
your variable rate note;
- constructing the equivalent fixed rate debt instrument (using the fixed
rate substitute described above);
- determining the amount of qualified stated interest and OID with respect
to the equivalent fixed rate debt instrument; and
- adjusting for actual variable rates during the applicable accrual period.
When you determine the fixed rate substitute for each variable rate provided
under the variable rate note, you generally will use the value of each variable
rate as of the issue date or, for an objective rate that is not a qualified
inverse floating rate, a rate that reflects the reasonably expected yield on
your note.
If your variable rate note provides for stated interest either at one or
more qualified floating rates or at a qualified inverse floating rate, and also
provides for stated interest at a single fixed rate, other than at a single
fixed rate for an initial period, you generally must
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determine interest and OID accruals by using the method described in the
previous paragraph. However, your variable rate note will be treated, for
purposes of the first three steps of the determination, as if your note had
provided for a qualified floating rate, or a qualified inverse floating rate,
rather than the fixed rate. The qualified floating rate, or qualified inverse
floating rate, that replaces the fixed rate must be such that the fair market
value of your variable rate note as of the issue date approximates the fair
market value of an otherwise identical debt instrument that provides for the
qualified floating rate, or qualified inverse floating rate, rather than the
fixed rate.
SHORT-TERM NOTES. In general, if you are an individual or other cash basis
United States holder of a short-term note, you are not required to accrue OID,
as specially defined below for the purposes of this paragraph, for United States
federal income tax purposes unless you elect to do so. However, you may be
required to include any stated interest in income as you receive it. If you are
an accrual basis taxpayer, a taxpayer in a special class, including, but not
limited to, a regulated investment company, common trust fund, or a particular
type of pass-through entity, or a cash basis taxpayer who so elects, you will be
required to accrue OID on short-term notes on either a straight-line basis or
under the constant-yield method, based on daily compounding. If you are not
required and do not elect to include OID in income currently, any gain you
realize on the sale or retirement of your short-term note will be ordinary
income to the extent of the OID accrued on a straight-line basis, unless you
make an election to accrue the OID under the constant-yield method, through the
date of sale or retirement. However, if you are not required and do not elect to
accrue OID on your short-term notes, you will be required to defer deductions
for interest on borrowings allocable to your short-term notes in an amount not
exceeding the deferred income until the deferred income is realized.
When you determine the amount of OID subject to these rules, you must
include all interest payments on your short-term note, including stated
interest, in your short-term note's stated redemption price at maturity.
FOREIGN CURRENCY DISCOUNT NOTES. If your discount note is denominated in,
or determined by reference to, a foreign currency, you must determine OID for
any accrual period on your discount note in the foreign currency and then
translate the amount of OID into U.S. dollars in the same manner as stated
interest accrued by an accrual basis United States holder, as described under
"-- Payments of Interest -- Accrual Basis Taxpayers" above. You may recognize
ordinary income or loss when you receive an amount attributable to OID in
connection with a payment of interest or the sale or retirement of your note.
NOTES PURCHASED AT A PREMIUM
If you purchase your note for an amount in excess of its principal amount,
you may elect to treat the excess as amortizable bond premium. If you make this
election, you will reduce the amount required to be included in your income each
year with respect to interest on your note by the amount of amortizable bond
premium allocable, based on your note's yield to maturity, to that year. If your
note is denominated in, or determined by reference to, a foreign currency, you
will compute your amortizable bond premium in units of the foreign currency and
your amortizable bond premium will reduce your interest income in units of the
foreign currency. Gain or loss recognized that is attributable to changes in
exchange rates between the time your amortized bond premium offsets interest
income and the time of the acquisition of your note is generally taxable as
ordinary income or loss. If you make an election to amortize bond premium, the
election will apply to all debt instruments (other than debt instruments, the
interest on which is excludible from gross income) that you own at the beginning
of the first taxable year to which the election applies, and to all debt
instruments that you acquire after that time, and you may not revoke it without
the consent of the Internal Revenue Service. See also "-- Original Issue
Discount -- Election to Treat All Interest as Original Issue Discount" for more
information
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about the consequences of an election to amortize bond premium.
PURCHASE, SALE AND RETIREMENT OF THE
NOTES
Your tax basis in your note will generally be the U.S. dollar cost (as
defined below) of your note, adjusted by:
- adding any OID or market discount, de minimis original issue discount and
de minimis market discount previously included in income with respect to
your note; and then
- subtracting the amount of any payments on your note that are not
qualified stated interest payments and the amount of any amortizable bond
premium applied to reduce interest on your note.
If you purchase your note with foreign currency, the U.S. dollar cost of your
note will generally be the U.S. dollar value of the purchase price on the date
of purchase. However, if you are a cash basis taxpayer, or an accrual basis
taxpayer if you so elect, and your note is traded on an established securities
market, as defined in the applicable Treasury regulations, the U.S. dollar cost
of your note will be the U.S. dollar value of the purchase price on the
settlement date of your purchase.
You will generally recognize gain or loss on the sale or retirement of your
note equal to the difference between the amount you realize on the sale or
retirement and your tax basis in your note. If your note is sold or retired for
an amount in foreign currency, the amount you realize will be the U.S. dollar
value of this amount on:
- the date payment is received, if you are a cash basis taxpayer and the
notes are not traded on an established securities market, as defined in
the applicable Treasury regulations;
- the date of disposition, if you are an accrual basis taxpayer; or
- the settlement date for the sale, if you are a cash basis taxpayer, or an
accrual basis taxpayer that so elects, and the notes are traded on an
established securities market, as defined in the applicable Treasury
regulations.
You will recognize capital gain or loss when you sell or retire your note,
except to the extent:
- described above under "-- Original Issue Discount -- Short-Term Notes" or
"-- Original Issue Discount -- Market Discount";
- attributable to accrued but unpaid interest;
- the rules governing contingent payment obligations apply; or
- attributable to changes in exchange rates as described below.
Capital gain of a noncorporate United States holder is generally taxed at a
maximum rate of 20% for property held more than one year.
You must treat any portion of the gain or loss that you recognize on the
sale or retirement of a note as ordinary income or loss to the extent
attributable to changes in exchange rates. However, you take exchange gain or
loss into account only to the extent of the total gain or loss you realize on
the transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
If you receive foreign currency as interest on your note or on the sale or
retirement of your note, your tax basis in the foreign currency will equal its
U.S. dollar value when the interest is received or at the time of the sale or
retirement. If you purchase foreign currency, you generally will have a tax
basis equal to the U.S. dollar value of the foreign currency on the date of your
purchase. If you sell or dispose of a foreign currency, including if you use it
to purchase notes or exchange it for U.S. dollars, any gain or loss recognized
generally will be ordinary income or loss.
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INDEXED NOTES AND RENEWABLE, EXTENDIBLE AND AMORTIZING NOTES
The applicable pricing supplement will discuss any special United States
federal income tax rules (a) with respect to notes the payments on which are
determined by reference to any index and other notes that are subject to the
rules governing contingent payment obligations which are not subject to the
rules governing variable rate notes, (b) with respect to any renewable and
extendible notes and (c) with respect to any notes providing for the periodic
payment of principal over the life of the note.
UNITED STATES ALIEN HOLDERS
This section describes the tax consequences to a United States alien
holder. You are a United States alien holder if you are the beneficial owner of
a note and are, for United States federal income tax purposes:
- a nonresident alien individual;
- a foreign corporation;
- a foreign partnership; or
- an estate or trust that is not subject to United States federal income
tax on a net income basis on income or gain from a note.
If you are a United States holder, this section does not apply to you.
This discussion assumes that the note is not subject to the rules of
Section 871(h)(4)(A) of the Internal Revenue Code, relating to interest payments
that are determined by reference to the income, profits, changes in the value of
property or other attributes of the debtor or a related party.
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below, if you are a United States alien
holder of a note:
- Popular North America and its paying agents will not be required to
deduct United States withholding tax from payments of principal, premium,
if any, and interest, including OID, to you if, in the case of interest:
- you do not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Popular North America
entitled to vote;
- you are not a controlled foreign corporation that is related to Popular
North America through stock ownership; and
- you certify to Popular North America or a U.S. payor, under penalties
of perjury, that you are not a United States holder and provide your
name and address; or
- a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business and holds the note certifies to Popular North America or a
U.S. payor under penalties of perjury that a similar statement has been
received from you by it or by a similar financial institution between
it and you and furnishes the payor with a copy of the statement; and
- no deduction for any United States federal withholding tax will be made
from any gain that you realize on the sale or exchange of your note.
Further, a note held by an individual, who at death is not a citizen or resident
of the United States will not be includible in the individual's gross estate for
United States federal estate tax purposes if:
- the decedent did not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of Popular North
America entitled to vote at the time of death; and
S-31
<PAGE> 67
- the income on the note would not have been effectively connected with a
United States trade or business of the decedent at the same time.
If you receive a payment after December 31, 2000, recently finalized
Treasury regulations will apply. Under these regulations, after December 31,
2000, you may use an alternative method to satisfy the certification requirement
described above. Additionally, if you are a partner in a foreign partnership,
after December 31, 2000, you (in addition to the foreign partnership) must
provide the certification described above, and the partnership must provide
other information, including a United States taxpayer identification number. The
Internal Revenue Service will apply a look-through rule in the case of tiered
partnerships.
BACKUP WITHHOLDING AND
INFORMATION REPORTING
UNITED STATES HOLDERS
In general, if you are a noncorporate United States holder, Popular North
America and other payors are required to report to the Internal Revenue Service
all payments of principal, any premium and interest on your note, and the
accrual of OID on a discount note. In addition, the proceeds of the sale of your
note before maturity will be reported to the Internal Revenue Service.
Additionally, backup withholding at a rate of 31% will apply to any payments,
including payments of OID, if you fail to provide an accurate taxpayer
identification number, or you are notified by the Internal Revenue Service that
you have failed to report all interest and dividends required to be shown on
your federal income tax returns.
UNITED STATES ALIEN HOLDERS
You are generally exempt from backup withholding and information reporting
with respect to any payments of principal, premium or interest, including OID,
made by us and other payors, provided that you provide the certification
described under "-- United States Alien Holders" on page S-31, and provided
further that the payor does not have actual knowledge that you are a United
States person. See "-- United States Alien Holders" above for a discussion of
the rules under the final withholding regulations. We and other payors, however,
may report payments of interest on your notes on Internal Revenue Service Form
1042-S.
In general, payment of the proceeds from the sale of notes to or through a
United States office of a broker is subject to both United States backup
withholding and information reporting. If, however, you are a United States
alien holder, you will not be subject to information reporting and backup
withholding if you certify as to your non-United States status, under penalties
of perjury, or otherwise establish an exemption. Payments of the proceeds from
the sale by a United States alien holder of a note made to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding. However, information reporting, but not backup withholding, may
apply to a payment made outside the United States of the proceeds of a sale of a
note through an office outside the United States if the broker is:
- a United States person;
- a controlled foreign corporation for United States tax purposes;
- a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified
three-year period; or
- with respect to payments made after December 31, 2000, a foreign
partnership, if at any time during its tax year:
- one or more of its partners are "U.S. persons", as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of the
income or capital interest in the partnership; or
- the foreign partnership is engaged in a United States trade or business
S-32
<PAGE> 68
unless the broker has documentary evidence in its records that you are a
non-U.S. person and does not have actual knowledge that you are a U.S. person,
or you otherwise establish an exemption.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Popular North America is offering the notes on a continuous basis through
the agents, each of which has agreed to use its reasonable efforts to solicit
offers to purchase the notes. In addition, the notes may also be sold to an
agent, as principal, for resale to investors or other purchasers. The notes are
a new issue of securities with no established trading market and will not be
listed on any securities exchange. Investors have no assurance that the notes
offered by this prospectus supplement will be sold or that there will be a
secondary market for the notes. Popular North America reserves the right to
withdraw, cancel or modify this offer without notice. Popular North America or
any agent may reject any offer to purchase the notes in whole or in part.
Unless the applicable pricing supplement specifies otherwise, Popular North
America will sell notes to an agent at a price equal to 100% of the notes'
principal amount less the commission applicable to an agency sale of a note of
identical maturity. Popular North America and an agent may agree that the agent
may utilize its reasonable efforts as an agent to solicit offers to purchase
notes at 100% of their principal amount, unless the applicable pricing
supplement specifies otherwise. Depending upon the maturity of the note, Popular
North America will pay a commission to each agent ranging from .125% to .750% of
the principal amount of any note sold through that agent. Popular North America
and the agents will negotiate the commissions payable on the sale of notes with
stated maturities in excess of 30 years. Popular North America may also sell
notes directly to investors on its own behalf, in which case no commission will
be payable.
In addition, the agents may offer the notes they have purchased as
principal to other dealers. The agents may sell notes to any dealer at a
discount which, unless the applicable pricing supplement specifies otherwise,
will not be in excess of the discount the agent receives from Popular North
America. If all the notes are not sold at the initial offering price, Popular
North America or the agents may change the offering price and the other selling
terms.
Popular North America has reserved the right to accept offers to purchase
notes through additional distributors on substantially the same terms and
conditions (including commission rates) as would apply to purchases of notes by
the agents. In addition, Popular North America has reserved the right to appoint
additional agents for the purpose of soliciting offers to purchase notes. The
applicable pricing supplement will provide the names of any additional
distributors or agents.
Popular North America reserves the right to withdraw, cancel or modify the
offer made by this prospectus supplement without notice and may reject all or
part of any orders whether the orders are placed directly with Popular North
America or through an agent. Each agent will have the right in its reasonable
discretion to reject all or part of any offer to purchase notes that it
receives.
Unless otherwise provided in a pricing supplement relating to foreign
currency, multi-currency or indexed notes, purchasers must pay the purchase
price of the notes in immediately available funds in New York City on the
settlement date.
Popular North America and Popular have agreed to indemnify the agents
against and to make contributions relating to some civil liabilities, including
liabilities under the Securities Act of 1933. The agents may be deemed to be
"underwriters" within the meaning of this Act. Popular North America and Popular
have also agreed to reimburse the agents for some of their expenses.
S-33
<PAGE> 69
Popular Securities, Inc., a wholly owned subsidiary of Popular, is a member
of the National Association of Securities Dealers, Inc. and is participating in
the distribution of this offering as an agent. The offering is therefore being
made in compliance with the applicable provisions of NASD Conduct Rule 2720. No
NASD member may sell the securities to a discretionary account without the prior
specific written approval of the customer.
Each agent who purchases notes as principal on a fixed price basis in
connection with an offering of notes may engage in transactions that stabilize
the price of notes in the offering. These transactions may consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
notes. If an agent creates a short position in the notes, i.e., if it sells
notes in an aggregate principal amount exceeding that stated in the applicable
pricing supplement, that agent may reduce that short position by purchasing
notes in the open market. In general, purchases of notes for the purpose of
stabilization or to reduce a short position could cause the price of notes to be
higher than it might be in the absence of these purchases.
None of Popular North America, Popular or any of the agents makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the notes. In
addition, none of Popular North America, Popular or any of the agents make any
representation that the agents will engage in these transactions or that the
transactions, once commenced, will not be discontinued without notice.
VALIDITY OF THE NOTES
The validity of the notes and guarantees will be passed upon for Popular
North America by Sullivan & Cromwell, New York, New York, and for the agents by
Brown & Wood LLP, New York, New York. Brunilda Santos de Alvarez, Esq., counsel
to Popular, will pass upon the validity of the guarantees as to matters of
Puerto Rico law for Popular. Sullivan & Cromwell and Brown & Wood LLP will rely
as to all matters of the laws of the Commonwealth of Puerto Rico upon the
opinion of Brunilda Santos de Alvarez, Esq. The opinions of Sullivan & Cromwell,
Brunilda Santos de Alvarez, Esq., and Brown & Wood LLP will be conditioned upon
and subject to assumptions regarding future action required to be taken by
Popular North America and the trustee in connection with the issuance and sale
of any particular note, the specific terms of the notes and other matters which
may affect the validity of the notes but which cannot be ascertained on the date
of their opinions.
S-34
<PAGE> 70
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IT
DESCRIBES, BUT ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL
TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS
DATE.
------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement
Description of Notes We May Offer........................... S-2
United States Taxation...................................... S-21
Supplemental Plan of Distribution........................... S-33
Validity of the Notes....................................... S-34
Prospectus
Popular, Inc................................................ 2
Popular International Bank, Inc............................. 3
Popular North America, Inc.................................. 3
Consolidated Ratios of Earnings to Fixed Charges of
Popular................................................... 4
Holding Company Structure................................... 4
Use of Proceeds............................................. 7
Description of Debt Securities We May Offer................. 8
Description of Preferred Stock.............................. 24
Validity of Offered Securities.............................. 28
Experts..................................................... 29
Plan of Distribution........................................ 29
Where You Can Find More Information......................... 30
Incorporation of Information We File with the SEC........... 31
</TABLE>
<PAGE> 71
SUBJECT TO COMPLETION.
PRELIMINARY PROSPECTUS DATED AUGUST , 1999.
PROSPECTUS
POPULAR, INC.
OR
POPULAR INTERNATIONAL BANK, INC.
OR
POPULAR NORTH AMERICA, INC.
DEBT SECURITIES AND PREFERRED STOCK
- - By this prospectus, we may offer from time to time up to $1,500,000,000 of
our:
- debt securities and
- preferred stock
- - Popular will unconditionally and absolutely guarantee all debt securities and
preferred stock offered by Popular International Bank or Popular North
America.
- - When we offer debt securities or preferred stock, we will provide you with a
prospectus supplement or a term sheet describing the terms of the specific
issue of debt securities or preferred stock, including the offering price.
- - You should read this prospectus and the prospectus supplement or the term
sheet relating to the specific issue of debt securities or preferred stock
carefully before you invest.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
We may sell the debt securities or preferred stock directly or through one
or more agents or dealers. The agents are not required to sell any specific
number or amount of the debt securities or preferred stock.
We may use this prospectus in the initial sale of any security. In
addition, we or affiliates may use this prospectus in a market-making
transaction in any security after its initial sale. UNLESS WE OR OUR AGENT
INFORMS THE PURCHASER OTHERWISE, THIS PROSPECTUS IS BEING USED IN A
MARKET-MAKING TRANSACTION.
When we define a specialized term, it appears in BOLD, ITALICIZED type. We
refer to the debt securities and preferred stock issued under the terms of this
prospectus as the SECURITIES and to Popular's guarantee of securities offered by
Popular International Bank or Popular North America as the GUARANTEES.
The date of this prospectus is August , 1999.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 72
POPULAR, INC.
Popular is a diversified bank holding company (formerly BanPonce
Corporation). As a bank holding company, Popular is registered under the Bank
Holding Company Act of 1956 and is subject to the supervision and regulation of
the Board of Governors of the Federal Reserve System. Popular was incorporated
in 1984 under the laws of the Commonwealth of Puerto Rico and has developed into
the largest financial institution in Puerto Rico. On March 31, 1999, Popular
ranked as the 36th largest bank holding company in the United States in terms of
total assets. At June 30, 1999, Popular's consolidated assets totaled $23.7
billion, its aggregate deposits were $13.9 billion, and its stockholders' equity
amounted to $1.7 billion.
In 1998, Popular commenced a program to reorganize and streamline its
operations in the mainland United States. The reorganization allows Popular to
take advantage of recent changes in U.S. federal banking laws involving branch
banking across state lines. The reorganization was largely completed on January
1, 1999.
Popular's principal subsidiary, Banco Popular de Puerto Rico, which we
refer to as BANCO POPULAR, was incorporated over 100 years ago in 1893 and is
Puerto Rico's largest bank. At June 30, 1999, Banco Popular had consolidated
total assets of $17.1 billion, deposits of $10.3 billion and stockholder's
equity of $1.1 billion. Banco Popular accounted for 72% of the total
consolidated assets of Popular at June 30, 1999. A consumer-oriented bank, Banco
Popular has the largest retail franchise in Puerto Rico, operating 199 branches
and 426 automated teller machines. Banco Popular also has the largest trust
operation in Puerto Rico.
Banco Popular also operates seven branches in the U.S. Virgin Islands and
one branch in the British Virgin Islands.
Banco Popular's deposits are insured under the Bank Insurance Fund of the
Federal Deposit Insurance Corporation.
In addition to its branch banking network, Banco Popular offers more
specialized services through three subsidiaries:
- Popular Leasing & Rental, Inc., Puerto Rico's largest vehicle leasing and
daily rental company;
- Popular Finance, Inc., a small-loan and secondary mortgage company with
50 offices in Puerto Rico; and
- Popular Mortgage, Inc., a mortgage bank with eleven offices in Puerto
Rico.
Popular has two other principal subsidiaries:
- Popular Securities, Inc., a securities broker-dealer in Puerto Rico with
brokerage, financial advisory and investment operations for institutional
and retail customers; and
- Popular International Bank, Inc.
Popular International Bank owns all of the outstanding stock of Popular
North America and ATH Costa Rica, which provides ATM switching and driving
services in San Jose, Costa Rica. In addition, Popular International Bank has an
investment in 57% of the outstanding stock of Banco Fiduciario S.A., a
commercial bank in the Dominican Republic with total assets of $441.3 million as
of June 30, 1999.
More information regarding Popular North America and Popular International
Bank is provided below under "Popular International Bank, Inc." and "Popular
North America, Inc."
Popular's principal executive offices are located at 209 Munoz Rivera
Avenue, Hato Rey, Puerto Rico 00918, and its telephone number is (787) 765-9800.
2
<PAGE> 73
POPULAR INTERNATIONAL BANK, INC.
Popular International Bank, a wholly owned subsidiary of Popular, was
organized in 1992 under the laws of the Commonwealth of Puerto Rico. Popular
International Bank operates as an international banking entity under the
International Banking Center Regulatory Act of Puerto Rico and is a registered
bank holding company under the Bank Holding Company Act. Popular International
Bank owns all of the outstanding capital stock of Popular North America. Popular
International Bank is principally engaged in providing managerial services to
its subsidiaries. Summary consolidated financial statements of Popular
International Bank are included in the notes to Popular's consolidated financial
statements that are incorporated by reference.
POPULAR NORTH AMERICA, INC.
Popular North America (formerly BanPonce Financial Corp.), a wholly owned
subsidiary of Popular International Bank and an indirectly wholly owned
subsidiary of Popular, was organized in 1991 under the laws of the State of
Delaware.
Popular North America functions as a holding company for Popular's mainland
U.S. operations. It does not engage directly in any operational activities other
than providing managerial services to and raising funds for Popular's mainland
U.S. operations. As a bank holding company, Popular North America is registered
under the Bank Holding Company Act.
Following the reorganization referred to above under "Popular, Inc.",
Popular's banking operations in the mainland U.S. are principally carried out
through Banco Popular North America. Popular's banking operations in Texas are
presently carried out through Banco Popular, N.A. (Texas), which is expected to
be merged with and into Banco Popular North America in 1999. We have focused our
activities in the mainland United States on a number of selected states:
- In New York, Banco Popular North America operates 31 branches. As of June
30, 1999, our New York branches accounted for aggregate assets of $2.1
billion and total deposits of $1.6 billion.
- In Illinois, Banco Popular North America operates 19 branches with total
assets of $1.3 billion and deposits of $945.5 million as of June 30,
1999.
- In California Banco Popular North America operates 15 branches with total
assets of $425 million and deposits of $312.6 million as of June 30,
1999.
- Banco Popular North America operates 10 branches in New Jersey with total
assets of $424.4 million and deposits of $313.4 million as of June 30,
1999.
- Banco Popular North America operates eight branches in Florida. As of
June 30, 1999, our Florida branches accounted for aggregate assets of
$387.1 million and total deposits of $114.1 million.
- In Texas, Banco Popular North America maintains five branches of Banco
Popular, N.A. (Texas). As of June 30, 1999, the Texas branches accounted
for aggregate assets of $142.8 million and deposits of $72.9 million.
Other operations of Popular North America are carried out through the
following subsidiaries:
- Popular Cash Express is a retail financial services company offering
services such as check cashing, money transfers to other countries, money
order sales and processing of payments through 48 outlets and 32 mobile
check cashing units in four states in the United States.
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<PAGE> 74
- Equity One is a diversified consumer finance company engaged in the
business of making personal and mortgage loans and providing dealer
financing through 125 offices in 35 states with total assets of $1.4
billion as of June 30, 1999.
Summary consolidated financial statements of Popular North America are
included in the notes to Popular's consolidated financial statements that are
incorporated by reference.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of Information
We File with the SEC" in this prospectus.
In this prospectus, references to "we", "us" and "our" refer to Popular,
Popular International Bank and Popular North America collectively and do not
include any consolidated subsidiaries. When we refer to "your security" and
"your prospectus supplement", we mean the security you have purchased and the
prospectus supplement describing the specific terms of your security. When we
refer to the "issuers", we mean Popular, Popular International Bank and Popular
North America.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES OF POPULAR
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED --------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding Interest on Deposits........... 1.8 1.8 1.8 2.0 2.0 2.6
Including Interest on Deposits........... 1.4 1.4 1.4 1.4 1.4 1.5
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends:
Excluding Interest on Deposits........... 1.8 1.8 1.8 2.0 2.0 2.5
Including Interest on Deposits........... 1.4 1.4 1.4 1.4 1.4 1.5
</TABLE>
For purposes of computing these consolidated ratios, earnings represents
income before income taxes plus fixed charges. Fixed charges represents 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.
HOLDING COMPANY STRUCTURE
Banco Popular and Banco Popular North America are subject to restrictions
under federal law that limit the transfer of funds from either of the two to any
of Popular, Popular International Bank, Popular North America or Popular
Holdings USA, Inc., a wholly owned subsidiary of Popular North America, and
other non-banking affiliates of Banco Popular and Banco Popular North America.
Popular Holdings USA is registered as a bank holding company under the Bank
Holding Company Act.
A transfer to any non-banking affiliate is limited in amount to 10% of the
transferring institution's capital stock and surplus, and transfers in the
aggregate to all of the non-banking affiliates are limited to an aggregate of
20% of the transferring institution's capital stock and surplus. These
restrictions apply regardless of whether the transfers were in the form of
loans, other extensions of credit, investments or asset purchases. For these
purposes, capital stock and surplus includes the institution's total risk-based
capital plus the balance of its allowance for loan
4
<PAGE> 75
losses not included in risk-based capital. Furthermore, these loans and
extensions of credit are required to be secured in specified amounts.
Under the Federal Reserve Board policy, a bank holding company like
Popular, Popular International Bank, Popular North America or Popular Holdings
USA is expected to act as a source of financial strength to each of its
subsidiary banks and to commit resources to support each subsidiary bank. This
support may be required at times when, absent this policy, the bank holding
company might not otherwise provide support. In addition, capital loans by a
bank holding company to its subsidiary depository institutions are subordinated
in right of payment to deposits and to certain other indebtedness of the
subsidiary depository institution. In the event of a bank holding company's
bankruptcy, a commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary depository institution
will be assumed by the bankruptcy trustee and entitled to a priority of payment.
Banco Popular, Banco Popular North America and Banco Popular, N.A. (Texas) are
currently the only depository institutions of Popular, Popular North America,
Popular International Bank and Popular Holdings USA.
The principal source of cash flow for Popular is dividends from Banco
Popular. The principal source of cash flow for Popular International Bank is
Popular North America. The principal source of cash flow for Popular North
America is Banco Popular North America. Various statutory provisions limit the
amount of dividends Banco Popular and Banco Popular North America can pay
without regulatory approval. As member banks subject to the regulation of the
Federal Reserve Board, Banco Popular and Banco Popular North America must obtain
the approval of the Federal Reserve Board for any dividend if the total of all
dividends declared by it 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 past due
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. A member bank
may, however, 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 June 30, 1999, Banco Popular
could have declared a dividend of approximately $105.7 million without the
approval of the Federal Reserve Board. New York law and the National Bank Act
contain similar limitations on the amount of dividends that a bank subsidiary
can pay to its holding company.
The payment of dividends by Banco Popular, Banco Popular North America and
Banco Popular, N.A. (Texas) may also be affected by other regulatory
requirements and policies, such as the maintenance of adequate capital. If the
applicable regulatory authority believes that a depository institution 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 depository
institution, could include the payment of dividends), the regulatory authority
may require, after notice and hearing, that the depository institution cease and
desist from that practice. The Federal Reserve Board has issued a policy
statement that provides that insured banks and bank holding companies should
generally pay dividends only out of current operating earnings. In addition, all
insured depository institutions are subject to the capital-based limitations
required by the Federal Deposit Insurance Act, which we refer to as the FDIA.
As a commercial bank organized under the laws of Puerto Rico, Banco Popular
is subject to supervision, examination and regulation by the Office of the
Commissioner of Financial
5
<PAGE> 76
Institutions of Puerto Rico, which we refer to as
the Office of the Commissioner, pursuant to the Puerto Rico Banking Act of 1933,
as amended, which we refer to as the Banking Law.
Section 27 of the Banking Law requires that at least 10% of the yearly net
income of Banco Popular be credited annually to a reserve fund. This
apportionment shall be done every year until the reserve fund shall be equal to
the total of paid-in capital on common and preferred stock. At the end of its
most recent fiscal year, Banco Popular had a fund established in compliance with
these requirements.
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
must be charged against the undistributed profits of the bank, and the balance,
if any, must be charged against the reserve fund, as a reduction. If the reserve
fund does not sufficiently cover the balance in whole or in part, the
outstanding amount must be charged against the capital account and no dividend
can be declared until the capital has been restored to its original amount and
the reserve fund to 20% of the original capital.
Section 16 of the Banking Law requires every bank to maintain a legal
reserve that, except as otherwise provided by the Office of the Commissioner,
cannot be less than 20% of its demand liabilities, excluding government deposits
(federal, state and municipal) which are secured by actual collateral. If a bank
becomes a member of the Federal Reserve System, the 20% reserve requirement of
Section 16 does not apply and the reserve requirements of the Federal Reserve
System shall be applicable. However, Banco Popular has been exempted from the
reserve requirements of the Federal Reserve System, with respect to deposits
payable in Puerto Rico, pursuant to an order of the Board of Governors of the
Federal Reserve System dated November 24, 1982. Thus, the reserve requirements
of Section 16 apply to those deposits.
Because Popular, Popular International Bank, Popular North America and
Popular Holdings USA are holding companies, their right to participate in the
assets of any subsidiary upon the subsidiary's liquidation or reorganization
will be subject to the prior claims of the subsidiary's creditors, including
depositors in the case of subsidiary depository institutions, except to the
extent that Popular, Popular International Bank, Popular North America or
Popular Holdings USA, may itself be a creditor with recognized claims against
the subsidiary.
Under the FDIA, a depository institution, 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 in connection with
- the default of a commonly controlled FDIC-insured depository institution
or
- 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. In some circumstances (depending upon the amount of
the loss or anticipated loss suffered by the FDIC), cross-guarantee liability
may result in the ultimate failure or insolvency of one or more insured
depository institutions in a holding company structure. Any obligation or
liability owed by a subsidiary depository institution to its parent company is
subordinated to the subsidiary bank's cross-guarantee liability with respect to
commonly controlled insured depository institutions.
6
<PAGE> 77
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities for
- general corporate purposes, including investments in, or extensions of
credit to, existing and future subsidiaries,
- the acquisition of other banking and financial institutions and
- repayment of outstanding borrowings.
We do 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
Popular North America will be loaned by Popular North America to its direct or
indirect subsidiaries, including Equity One, or used by Popular North America
for general corporate purposes. The net proceeds from the sale of securities by
Popular International Bank will be loaned by Popular International Bank to its
affiliates or used by Popular International Bank 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
Popular's subsidiaries' funding requirements and the availability of other
funds. Until used, the proceeds may be temporarily invested in short-term
obligations.
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DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
INFORMATION ABOUT OUR DEBT SECURITIES
Three different issuers may offer debt securities using this prospectus:
Popular, Popular International Bank and Popular North America. In this section,
we use "we" when referring to the issuers collectively and "the issuer" when
referring to the particular company that issues a particular debt security or
series of debt securities.
As required by U.S. federal law for all debt securities of companies that
are publicly offered, the debt securities issued under this prospectus are
governed by documents called indentures. The indentures are contracts between us
and The First National Bank of Chicago, which currently acts as trustee under
each of the indentures. The trustee has two main roles:
- First, the trustee can enforce your rights against us if we default.
There are some limitations on the extent to which the trustee acts on
your behalf, described later under "-- Default and Remedies"; and
- Second, the trustee performs administrative duties for us, such as
sending you interest payments, transferring your debt security to a new
buyer if you sell and sending you notices.
The indentures permit us to issue different series of debt securities from
time to time. We may issue debt securities in such amounts, at such times and on
such terms as we wish. The debt securities will differ from one another in their
terms.
Popular may issue senior debt securities under an indenture dated as of
February 15, 1995, as supplemented by the First Supplemental Indenture dated as
of May 8, 1997 and as will be further supplemented by a Second Supplemental
Indenture, a form of which has been filed with the SEC, in each case between
Popular and the trustee. Popular may issue subordinated debt securities under an
indenture dated as of November 30, 1995 between Popular and the trustee. Popular
North America may issue senior debt securities under an indenture dated as of
October 1, 1991, as supplemented by the First Supplemental Indenture dated as of
February 28, 1995 and the Second Supplemental Indenture dated as of May 8, 1997
and as will be further supplemented by a Third Supplemental Indenture, a form of
which has been filed with the SEC, in each case among Popular, Popular North
America and the trustee. If Popular International Bank issues either senior or
subordinated debt securities or if Popular North America issues subordinated
debt securities, it will enter into an appropriate indenture with a trustee.
The indentures mentioned in the previous paragraph are referred to
collectively as the indentures. The debt securities issued under the indentures
referred to in the previous paragraph are referred to collectively as the debt
securities. The senior debt securities of Popular, Popular International Bank
and Popular North America are referred to collectively as the senior debt
securities and the subordinated debt securities of Popular, Popular
International Bank and Popular North America are referred to collectively as the
subordinated debt securities. A copy or form of each indenture is filed as an
exhibit to the registration statement relating to the debt securities.
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.
This section summarizes the material terms that will apply generally to a
series of debt securities. Each particular debt security will have financial and
other terms specific to it, and the specific terms of each debt security will be
described in a prospectus supplement attached to the front of this prospectus.
Those terms may vary from the terms described here. As you read this section,
therefore, please remember that the specific terms of your debt security as
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described in your prospectus supplement will supplement and, if applicable, may
modify or replace the general terms described in this section. The statements we
make in this section may not apply to your debt security.
AMOUNTS THAT WE MAY ISSUE
The indentures do not limit the aggregate amount of debt securities that we
may issue, nor do they limit the aggregate amount of any particular series. We
have initially authorized the issuance of debt securities and preferred stock
having an initial offering price no greater than $1,500,000,000, or an
equivalent amount in any other currencies or currency units. We may, however,
increase this authorized amount at any time without your consent.
The indentures and the debt securities do not limit our ability to incur
other indebtedness or to issue other securities. Also, we are not subject to
financial or similar restrictions by the terms of the debt securities, except as
described under "-- Restrictive Covenants" below.
HOW THE DEBT SECURITIES RANK AGAINST OTHER DEBT
Unless otherwise specified in the prospectus supplement, the debt
securities will not be secured by any property or assets of the issuers. Thus,
by owning a debt security, you are one of the unsecured creditors of the issuer
of your debt security. The senior debt securities will not be subordinated to
any of our other debt obligations. This means that, in a bankruptcy or
liquidation proceeding against the issuer the senior debt securities would rank
equally in right of payment with all other unsecured and unsubordinated
indebtedness of the issuer of the debt security. The subordinated debt
securities may be subordinated to any of our other debt obligations as described
in "-- Special Terms Relating to the Subordinated Debt Securities" below.
THIS SECTION IS ONLY A SUMMARY
The indentures and their associated documents, including your debt
security, contain the full legal text of the matters described in this section
and your prospectus supplement. The indentures and the debt securities are
governed by New York law. A copy of each indenture or form of indenture has been
filed with the SEC as part of our registration statement. See "-- Where You Can
Find More Information" below for information on how to obtain a copy.
Because this section and your prospectus supplement provide only a summary,
they do not describe every aspect of the indentures and your debt security. This
summary is subject to and qualified in its entirety by reference to all the
provisions of the indentures, including definitions of certain terms used in the
indentures. For example, in this section and your prospectus supplement, we use
terms that have been given special meaning in the indentures. In this section,
however, we describe the meaning for only the more important of those terms.
FEATURES COMMON TO ALL DEBT SECURITIES
STATED MATURITY AND MATURITY
The day on which the principal amount of your debt security is scheduled to
become due and payable is called the stated maturity of the principal and is
specified in your prospectus supplement. The principal may become due sooner, by
reason of redemption or acceleration after a default. The day on which the
principal actually becomes due, whether at the stated maturity or earlier, is
called the maturity of the principal.
We also use the terms "stated maturity" and "maturity" to refer to the
dates when other payments become due. For example, we may refer to a regular
interest payment date when an installment of interest is scheduled to become due
as the "stated maturity" of that installment. When we refer to the "stated
maturity" or the "maturity" of a debt security without specifying a particular
payment, we mean the stated maturity or maturity, as the case may be, of the
principal.
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CURRENCY OF DEBT SECURITIES
Amounts that become due and payable on your debt security will be payable
in a currency, composite currency or basket of currencies specified in your
prospectus supplement.
We call this currency, composite currency or basket of currencies a
specified currency. The specified currency for your debt security will be U.S.
dollars unless your prospectus supplement states otherwise. A specified currency
may include the euro. Some debt securities may have different specified
currencies for principal and interest.
You will have to pay for your debt securities by delivering the requisite
amount of the specified currency for the principal to the dealer or dealers that
we name in your prospectus supplement, unless other arrangements have been made
between you and us or between you and that dealer or dealers. We will make
payments on your debt securities in the specified currency, except as otherwise
described in your prospectus supplement.
TYPES OF DEBT SECURITIES
We may issue the following types of debt securities:
- FIXED RATE DEBT SECURITIES. A debt security of this type will bear
interest at a fixed rate described in the applicable prospectus
supplement. This type includes zero coupon debt securities, which bear no
interest and are instead issued at a price lower than the principal
amount.
- FLOATING RATE DEBT SECURITIES. A debt security of this type will bear
interest at rates that are determined by reference to an interest rate
formula. In some cases, the rates may also be adjusted by adding or
subtracting a spread or multiplying by a spread multiplier and may be
subject to a minimum rate or a maximum rate. If your debt security is a
floating rate debt security, the formula and any adjustments that apply
to the interest rate will be described in your prospectus supplement.
- INDEXED DEBT SECURITIES. A debt security of this type provides that the
principal amount payable at its maturity, and/or the amount of interest
payable on an interest payment date, will be determined by reference to
one or more currencies, commodities or stocks, including baskets of
stocks and stock indices, or to any other index described in the
applicable prospectus supplement. If you are a holder of an indexed debt
security, you may receive a principal amount at maturity that is greater
than or less than the face amount of your debt security depending upon
the value of the applicable index at maturity. That value may fluctuate
over time. Some indexed debt securities may also be exchangeable, at the
option of the holder or the applicable issuer, into stock of an issuer
other than the issuer of the indexed debt securities. If you purchase an
indexed debt security, your prospectus supplement will include
information about the relevant index and about how amounts that are to
become payable will be determined by reference to that index. If you
purchase a security exchangeable into stock of an issuer other than the
issuer of the indexed debt securities, your prospectus supplement will
include information about the issuer and may also tell you where
additional information about the issuer is available. Before you purchase
any indexed debt security, you should read carefully the section of your
prospectus supplement entitled "Risks Relating to Indexed Debt
Securities".
A fixed rate debt security, a floating rate debt security or an indexed
debt security may be an original issue discount debt security. A debt security
of this type is issued at a price lower than its principal amount and provides
that, upon redemption or acceleration of its maturity, an amount less than its
principal amount will be payable. A debt security issued
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at a discount to its principal may, for U.S.
federal income tax purposes, be considered an original issue discount debt
security, regardless of the amount payable upon redemption or acceleration of
maturity.
INFORMATION IN THE PROSPECTUS SUPPLEMENT
Your prospectus supplement will describe one or more of the following terms
of your debt security:
- the issuer of the series of debt securities
- the title of the series of debt securities;
- the stated maturity;
- whether your debt security is a senior or subordinated debt security;
- the specified currency or currencies for principal and interest, if not
U.S. dollars;
- the price at which we originally issue your debt security, expressed as a
percentage of the principal amount, and the original issue date;
-- If you purchase your note in a market-making transaction, you will
receive information about the price you pay and your trade and
settlement dates in a separate confirmation of sale. A MARKET-MAKING
TRANSACTION is one in which Popular Securities or another of our
affiliates resells a note that it has previously acquired from another
holder. A market-making transaction in a particular note occurs after
the original issuance and sale of the note.
- whether your debt security is a fixed rate debt security, a floating rate
debt security or an indexed debt security, and also whether it is an
original issue discount debt security;
- if your debt security is a fixed rate debt security, the rate at which
your debt security will bear interest, if any, the regular record dates
and the interest payment dates;
- if your debt security is a floating rate debt security, the interest rate
basis; any applicable index, currency or maturity, spread or spread
multiplier or initial, maximum or minimum rate; the interest reset,
determination, calculation and payment dates; and the calculation agent;
- if your debt security is an original issue discount debt security, the
yield to maturity;
- if your debt security is an indexed debt security, the principal amount
the issuer will pay you at maturity, the amount of interest, if any, the
issuer will pay you on an interest payment date or the formula the issuer
will use to calculate these amounts, if any, and whether your debt
security will be exchangeable for or payable in stock of an issuer other
than the issuer of the indexed debt security or other property;
- whether your debt security may be redeemed or repaid by the issuer at our
or the holder's option before the stated maturity and, if so, other
relevant terms such as the redemption commencement date, repayment
date(s), redemption price(s) and redemption period(s), all of which we
describe under "-- Redemption and Repayment" below;
- whether we will issue or make available your debt security in
non-book-entry form;
- the denominations in which securities will be issued (if other than
integral multiples of U.S. $1,000); and
- any other terms of your debt security that are consistent with the
provisions of the indentures.
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LEGAL OWNERSHIP OF SECURITIES
Please note that in this prospectus, the term "HOLDERS" means those who own
securities registered in their own names on the books that we or the trustee
maintain for this purpose and not those who own beneficial interests in
securities registered in "street name" or in securities issued in book-entry
form through The Depository Trust Company.
We refer to those who have securities registered in their own names, on the
books that we or the trustee maintain for this purpose, as the holders of those
securities. These persons are the legal holders of the securities. We refer to
those who, indirectly through others, own beneficial interests in securities
that are not registered in their own names as indirect holders of those
securities. As we discuss below, indirect holders are not legal holders, and
investors in securities issued in book-entry form or in street name will be
indirect holders.
BOOK-ENTRY HOLDERS
Securities represented by one or more global securities are registered in
the name of a financial institution that holds them as depositary on behalf of
other financial institutions that participate in the depositary's book-entry
system. These participating institutions, in turn, hold beneficial interests in
the securities on behalf of themselves or their customers.
Under the indentures, only the person in whose name a security is
registered is recognized as the holder of that security. Consequently, for
securities issued in global form, we will recognize only the depositary as the
holder of the securities, and we will make all payments on the securities to the
depositary. The depositary passes along the payments it receives to its
participants, which in turn pass the payments along to their customers who are
the beneficial owners. The depositary and its participants make these payments
under agreements they have made with one another or with their customers; they
are not obligated to do so under the terms of the securities.
As a result, investors in global securities will not own debt securities
directly. Instead, they will own beneficial interests in a global security,
through a bank, broker or other financial institution that participates in the
depositary's book-entry system or holds an interest through a participant. As
long as debt securities are issued in global form, investors will be indirect
holders, and not holders, of the securities.
STREET NAME HOLDERS
We may terminate a global security or issue securities initially in
non-global form. In these cases, investors may choose to hold their securities
in their own names or in "street name". Securities held by an investor in street
name would be registered in the name of a bank, broker or other financial
institution that the investor chooses, and the investor would hold only a
beneficial interest in those securities through an account he or she maintains
at that institution.
For securities held in street name, we will recognize only the intermediary
banks, brokers and other financial institutions in whose names the securities
are registered as the holders of those securities, and we will make all payments
on those securities to them. These institutions pass along the payments they
receive to their customers who are the beneficial owners, but only because they
agree to do so in their customer agreements or because they are legally required
to do so. Investors who hold securities in street name will be indirect holders,
not holders, of those securities.
If you hold debt securities through a bank, broker or other financial
institution, either in book-entry form or in street name, you should check with
your own institution to find out:
- how it handles securities payments and notices;
- whether it imposes fees or charges;
- how it would handle a request for the holder's consent, if ever required;
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- whether and how you can instruct it to send you debt securities
registered in your own name so you can be a holder, if that is permitted
in the future;
- how it would exercise rights under the debt securities if there were a
default or other event triggering the need for holders to act to protect
their interests; and
- if the debt securities are in book-entry form, how the depositary's rules
and procedures will affect these matters.
LEGAL HOLDERS
Our obligations, as well as the obligations of the trustee and those of any
third parties employed by us or the trustee, run only to the holders of
securities. We do not have obligations to investors who hold beneficial
interests in street name, in global securities or by any other indirect means.
This will be the case whether an investor chooses to be an indirect holder of a
security or has no choice because we issue the securities only in global form.
For example, once we make payment or give a notice to the holder, we have
no further responsibility for that payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect holders but does not do so. Similarly, if we
want to obtain the approval of the holders for any purpose -- e.g., to amend the
indentures or to relieve us of the consequences of a default or of our
obligation to comply with a particular provision of the indenture -- we would
seek the approval only from the holders, and not the indirect holders, of the
securities. Whether and how the holders contact the indirect holders is up to
the holders.
WHAT IS A GLOBAL DEBT SECURITY?
We may issue each debt security only in book-entry form. Each debt security
issued in book-entry form will be represented by a global debt security that we
will deposit with and register in the name of a financial institution or its
nominee, that we select. The financial institution that we select for this
purpose is called the depositary. Unless we say otherwise in the applicable
prospectus supplement, The Depository Trust Company, New York, New York, known
as DTC, will be the depositary for all debt securities issued in book-entry
form.
A global debt security may represent one or any other number of individual
debt securities. Generally, all debt securities represented by the same global
debt security will have the same terms. We may, however, issue a global debt
security that represents multiple debt securities that have different terms and
are issued at different times. We call this kind of global debt security a
master global debt security.
A global debt security may not be transferred to or registered in the name
of anyone other than the depositary or its nominee, unless special termination
situations arise. We describe those situations below under "-- Special
Considerations for Global Debt Securities -- Special Situations When a Global
Debt Security Will Be Terminated". As a result of these arrangements, the
depositary, or its nominee, will be the sole registered owner and holder of all
debt securities represented by a global debt security, and investors will be
permitted to own only beneficial interests in a global debt security. Beneficial
interests must be held by means of an account with a broker, bank or other
financial institution that in turn has an account with the depositary or with
another institution that does. Thus, an investor whose debt security is
represented by a global debt security will not be a legal holder of the debt
security, but only an indirect holder of a beneficial interest in the global
debt security.
If the prospectus supplement for a particular debt security indicates that
the debt security will be issued in "global form only", then the debt security
will be represented by a global debt security at all times unless and until the
global debt security is terminated under one of the special situations described
below under "-- Special Considerations for Global Debt Securities -- Special
Situations When a Global
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Debt Security Will Be Terminated". The global debt security may be a master
global debt security, although your prospectus supplement will not indicate
whether it is a master global debt security.
SPECIAL CONSIDERATIONS FOR
GLOBAL DEBT SECURITIES
As an indirect holder, an investor's rights relating to a global debt
security will be governed by the account rules of the investor's financial
institution and of the depositary, as well as general laws relating to
securities transfers. We do not recognize this type of investor as a legal
holder of debt securities and instead deal only with the depositary that holds
the global debt security.
If debt securities are issued only in the form of a global debt security,
an investor should be aware of the following:
- An investor cannot get the debt securities registered in his or her own
name and cannot get non-global certificates for his or her interest in
the debt securities, except in the special situations we describe below;
- An investor will be an indirect holder and must look to his or her own
bank or broker for payments on the debt securities and protection of his
or her legal rights relating to the debt securities, as we describe under
"-- Legal Ownership of Securities" above;
- An investor may not be able to sell interests in the debt securities to
some insurance companies and other institutions that are required by law
to own their securities in non-book-entry form;
- The depositary's policies, which may change from time to time, will
govern payments, transfers, exchanges and other matters relating to the
investor's interest in a global debt security. We and the trustee have no
responsibility for any aspect of the depositary's actions or for its
records of ownership interests in a global debt security. We and the
trustee also do not supervise the depositary in any way;
- The depositary may require that those who purchase and sell interests in
a global debt security within its book-entry system use immediately
available funds, and your broker or bank may require you to do so as
well; and
- Financial institutions that participate in the depositary's book-entry
system, and through which an investor holds its interest in the global
debt securities, may also have their own policies affecting payments,
notices and other matters relating to the debt securities. There may be
more than one financial intermediary in the chain of ownership for an
investor. We do not monitor and are not responsible for the actions of
any of those intermediaries.
SPECIAL SITUATIONS WHEN A GLOBAL DEBT
SECURITY WILL BE TERMINATED
In a few special situations described below, a global debt security will be
terminated and interests in it will be exchanged for certificates in non-global
form representing the debt securities it represented. After that exchange, the
choice of whether to hold the debt securities directly or in street name will be
up to the investor. Investors must consult their own banks or brokers to find
out how to have their interests in a global debt security transferred on
termination to their own names, so that they will be legal holders. We have
described the rights of holders and street name investors above under "-- Legal
Ownership of Securities".
The special situations for termination of a global debt security are:
- when the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary for that global debt security and we
do not appoint another institution to act as depositary within 60 days;
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- when we notify the trustee that we wish to terminate that global debt
security; or
- when an event of default has occurred with regard to debt securities
represented by that global debt security and has not been cured or
waived; we discuss defaults below under "-- Default and Remedies".
When a global debt security is terminated, only the depositary, and not we
or the trustee, is responsible for deciding the names of the institutions in
whose names the debt securities represented by the global debt security will be
registered and, therefore, who will be the holders of those debt securities.
NOTICES
Notices to be given to holders of a global note will be given only to the
depositary, in accordance with its applicable policies as in effect from time to
time. Notices to be given to holders of notes not in global form will be sent by
mail to the respective addresses of the holders as they appear in the trustee's
records, and will be deemed given when mailed. Neither the failure to give any
notice to a particular holder, nor any defect in a notice given to a particular
holder, will affect the sufficiency of any notice given to another holder.
IN THE REMAINDER OF THIS DESCRIPTION "YOU" MEANS DIRECT HOLDERS AND NOT
BOOK ENTRY, STREET NAME OR OTHER INDIRECT HOLDERS OF DEBT SECURITIES.
FORM, EXCHANGE,
REGISTRATION AND TRANSFER
Debt securities may be issued:
- only in fully registered form; and
- without interest coupons.
Holders may exchange their non-global debt securities for debt securities
of smaller denominations or combined into fewer debt securities of larger
denominations, as long as the total principal amount is not changed. This is
called an "exchange".
Holders may exchange or transfer their certificated debt securities at the
office of the trustee. We will initially appoint the trustee to act as our agent
for registering debt securities in the names of holders and transferring debt
securities. We may appoint another entity to perform these functions or perform
them ourselves. The entity performing the role of maintaining the list of
registered holders is called the security registrar. It will also perform
transfers.
Holders will not be required to pay a service charge to transfer or
exchange their debt securities, but they may be required to pay for any tax or
other governmental charge associated with the exchange or transfer. The transfer
or exchange will be made only if our transfer agent is satisfied with the
holder's proof of legal ownership.
If we have designated additional transfer agents for your debt security,
they will be named in your prospectus supplement. We may appoint additional
transfer agents or cancel the appointment of any particular transfer agent. We
may also approve a change in the office through which any transfer agent acts.
If any debt securities are redeemable and we redeem less than all those
debt securities, we may prohibit the transfer or exchange of those debt
securities during the period beginning 15 days before the day we mail the notice
of redemption and ending on the day of that mailing, in order to freeze the list
of holders to prepare the mailing. We may also refuse to register transfers or
exchanges of any debt security selected for redemption, except that we will
continue to permit transfers and exchanges of the unredeemed portion of any debt
security being partially redeemed.
If a debt security is issued as a global debt security, only the depositary
will be entitled to transfer and exchange the debt security as described in this
subsection since it will be the sole holder of the debt security.
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PAYMENT AND PAYING AGENT
The issuer will only be required to make payment of the principal on a debt
security if you surrender the debt security to the paying agent for that debt
security. The issuer will only be required to make payment of principal and
interest at the office of the paying agent, except that at its option, it may
pay interest by mailing a check to the holder. Unless we indicate otherwise in
the applicable prospectus supplement, the issuer will pay interest to the person
who is the holder at the close of business on the record date for that interest
payment, even if that person no longer owns the debt security on the interest
payment date.
We will specify in the applicable prospectus supplement the regular
record date relating to an interest payment date for any fixed rate debt
security and for any floating rate debt security.
PAYMENT WHEN OFFICES ARE CLOSED
If any payment is due on a debt security on a day that is not a business
day, we will make the payment on the next day that is a business day. Payments
postponed to the next business day in this situation will be treated under the
indentures as if they were made on the original due date. Postponement of this
kind will not result in a default under any debt security or indenture, and no
interest will accrue on the postponed amount from the original due date to the
next day that is a business day unless the applicable prospectus supplement
specifies otherwise.
PAYING AGENT
We will specify the paying agent for payments with respect to debt
securities of each series of debt securities in the applicable prospectus
supplement. We may at any time designate additional paying agents, rescind the
designation of any paying agent or approve a change in the office through which
any paying agent acts, except that we must maintain a paying agent in each place
of payment for each series of debt securities.
UNCLAIMED PAYMENTS
Regardless of who acts as paying agent, all money paid by us to a paying
agent that remains unclaimed at the end of two years after the amount is due to
a holder will be repaid to us. After that two-year period, the holder may look
only to the issuer (or any guarantor) for payment and not to the trustee, any
other paying agent or anyone else.
REDEMPTION AND REPAYMENT
Unless otherwise indicated in your prospectus supplement, your debt
security will not be entitled to the benefit of any sinking fund -- that is, we
will not deposit money on a regular basis into any separate custodial account to
repay your debt securities. In addition, except as described below, we will not
be entitled to redeem your debt security before its stated maturity unless your
prospectus supplement specifies a redemption commencement date. You will not be
entitled to require us to buy your debt security from you, before its stated
maturity, unless your prospectus supplement specifies one or more repayment
dates.
If your prospectus supplement specifies a redemption commencement date or a
repayment date, it will also specify one or more redemption prices or repayment
prices, which will be expressed as a percentage of the principal amount of your
debt security. It may also specify one or more redemption periods during which
the redemption prices relating to a redemption of debt securities will apply.
If your prospectus supplement specifies a redemption commencement date,
your debt security will be redeemable at our option at any time on or after that
date. If we redeem your debt security, we will do so at the specified redemption
price, together with interest accrued to the redemption date. If different
prices are specified for different redemption periods, the price we pay will be
the price that applies to the redemption period during which your debt security
is redeemed.
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If your prospectus supplement specifies a repayment date, your debt
security will be repayable at your option on the specified repayment date at the
specified repayment price, together with interest accrued to the repayment date.
In the event that we exercise an option to redeem any debt security, we
will give to the trustee and the holder written notice of the principal amount
of the debt security to be redeemed, not less than 30 days nor more than 60 days
before the applicable redemption date. Notice of this redemption will be mailed
to holders at the address that appears on the register of the redeemed debt
securities.
If a debt security represented by a global debt security is repayable at
the holder's option, the depositary or its nominee, as the holder, will be the
only person that can exercise the rights to repayment. Any indirect holders who
own beneficial interests in the global debt security and wish to exercise a
repayment right must give proper and timely instructions to their banks or
brokers through which they hold their interests, requesting that they notify the
depositary to exercise the repayment right on their behalf. Different firms have
different deadlines for accepting instructions from their customers, and you
should take care to act promptly enough to ensure that your request is given
effect by the depositary before the applicable deadline for exercise.
Street name and other indirect holders should contact their banks or
brokers for information about how to exercise a repayment right in a timely
manner.
If the option of the holder to elect repayment as described above is deemed
to be a "tender offer" within the meaning of Rule 14e-1 under the Securities
Exchange Act of 1934, we will comply with Rule 14e-1 as then in effect to the
extent applicable.
We or our affiliates may purchase debt securities from investors who are
willing to sell from time to time, either in the open market at prevailing
prices or in private transactions at negotiated prices. Debt securities that we
or they purchase may, at our discretion, be held, resold or canceled.
A change in law, regulation or interpretation could oblige Popular or
Popular International Bank to pay the additional amounts that are discussed in
"-- Taxation by the Commonwealth of Puerto Rico" below. If this happens, we will
have the option of redeeming or repaying an entire series of the debt securities
at our discretion after giving between 30 and 60 days' notice to the holders at
a redemption price of 100% of the principal amount of the notes with the accrued
interest to the redemption date, or another redemption price specified in the
applicable prospectus supplement.
MERGERS AND SIMILAR TRANSACTIONS
Each issuer is generally permitted to merge or consolidate with another
entity. Each issuer is also permitted to sell its assets substantially as an
entirety to another firm. An issuer may not take any of these actions, however,
unless all the following conditions are met:
- If the successor firm in the transaction is not the applicable issuer,
the successor firm must expressly assume that issuer's obligations under
the debt securities, the guarantees and the indentures.
- Immediately after the transaction, no default under the indentures or
debt securities of that issuer has occurred and is continuing. For this
purpose, "default under the indentures or debt securities" means an event
of default or any event that would be an event of default if the
requirements for giving us default notice and for the issuer's default
having to continue for a specific period of time were disregarded. We
describe these matters below under "-- Default and Remedies".
These conditions will apply only if an issuer wishes to merge, consolidate
or sell its assets substantially as an entirety. An issuer will not need to
satisfy these conditions if it enters
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into other types of transactions, including any
transaction in which it acquires the stock or assets of another firm, any
transaction that involves a change of control of it but in which it does not
merge or consolidate and any asset sale that does not constitute a sale of its
assets substantially as an entirety.
The meaning of the phrase "substantially as an entirety" as used above will
be interpreted in connection with the facts and circumstances of the subject
transaction and is subject to judicial interpretation. Accordingly, in certain
circumstances, there may be a degree of uncertainty in ascertaining whether a
particular transaction would involve a disposition of the assets of the issuer
substantially as an entirety.
RESTRICTIVE COVENANTS
In the senior indentures, Popular promises not to sell, transfer or
otherwise dispose of any voting stock of Banco Popular or permit Banco Popular
to issue, sell or otherwise dispose of any of its voting stock, unless, after
giving effect to the transaction, Banco Popular remains a controlled subsidiary
(as defined below), except as provided above under "-- Mergers and Similar
Transactions".
In addition, Popular may not permit Banco Popular to:
- merge or consolidate, unless the survivor is a controlled subsidiary, or
- convey or transfer its properties and assets substantially as an
entirety, except to a controlled subsidiary.
The senior indentures define "voting stock" as the stock of the class or
classes having general voting power under ordinary circumstances to elect a
majority of the board of directors, managers or trustees of a corporation. Stock
that may vote only if an event occurs that is beyond the control of its holders
is not considered voting stock under the senior indentures, whether or not the
event has happened. "Controlled subsidiary" means any corporation of which an
issuer owns more than 80% of the outstanding voting stock.
Popular also promises in the senior indentures not to, nor to permit any
material banking subsidiary to, create, incur or permit to exist any
indebtedness for borrowed money secured by a lien or other encumbrance on the
voting stock of any material banking subsidiary unless Popular's senior debt
securities, Popular's guarantees of Popular North America's senior debt
securities and, at Popular's discretion, any other indebtedness with a right of
payment equal to Popular's senior debt securities and Popular's guarantees of
Popular North America's senior debt securities are secured on an equal basis.
"Material banking subsidiary" means any controlled subsidiary chartered as a
banking corporation under federal, state or Puerto Rico law that is a
significant subsidiary of Popular as defined in Rule 1-02 of Regulation S-X of
the SEC. As of the date of this prospectus, Banco Popular and Banco Popular
North America are the only material banking subsidiaries of Popular.
Liens imposed to secure taxes, assessments or governmental charges or
levies are not restricted, however, provided they are:
- not then due or delinquent;
- being contested in good faith;
- are less than $10,000,000 in amount;
- the result of any litigation or legal proceeding which is currently being
contested in good faith or which involves claims of less than
$10,000,000; or
- deposits to secure surety, stay, appeal or customs bonds.
The subordinated indentures do not contain similar restrictions.
DEFAULT AND REMEDIES
Every year each issuer is required to send the trustee for its debt
securities a report on its
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performance of its obligations under the senior indentures and the subordinated
indentures and on any default. You will have special rights if an event of
default with respect to your senior debt security occurs and is not cured, as
described in this subsection.
EVENTS OF DEFAULT
SENIOR INDENTURES. With respect to your senior debt security, the term
"event of default" means any of the following:
- The issuer does not pay the principal or any premium on any senior debt
security of that issuer on its due date;
- The issuer does not pay interest on any senior debt security of that
issuer within 30 days after its due date;
- The issuer does not deposit a sinking fund payment with regard to any
senior debt security of that issuer on its due date, but only if the
payment is required in the applicable prospectus supplement;
- The issuer remains in breach of its covenants described under
"-- Restrictive Covenants" above, or any other covenant it makes in the
senior indentures for the benefit of the debt securities of that issuer,
for 60 days after it receives a notice of default stating that it is in
breach. However, the breach of a covenant that the senior indentures
expressly impose only on a different series of senior debt securities
than the series of which your senior debt security is a part will not be
an event of default with respect to your senior debt security;
- The issuer, the guarantor (when other than the issuer) or any material
banking subsidiary of the issuer defaults under borrowed money debt (see
below) totaling in excess of $10,000,000, its obligation to repay that
debt is accelerated by our lenders and its repayment obligation remains
accelerated, unless the debt is paid, the default is cured or waived or
the acceleration is rescinded within 30 days after it receives a notice
of default;
- The issuer, the guarantor (when other than the issuer) or any material
banking subsidiary of the issuer files for bankruptcy, or other events of
bankruptcy, insolvency or reorganization relating to an issuer, the
guarantor (when other than the issuer) or material banking subsidiary of
the issuer occur; or
- If your prospectus supplement states that any additional event of default
applies to your senior debt security, that event of default occurs.
However, a notice of default as described in the fourth and fifth bullet
points above must be sent by the trustee or the holders of at least 25% of the
principal amount of senior debt securities of the series for those events to be
events of default.
"Borrowed money debt" means any of the issuer's indebtedness for borrowed
money or the indebtedness of a material banking subsidiary of the issuer, other
than the series of which your senior debt security is a part.
The trustee shall give notice of any default, but notice of a default with
respect to a covenant as described in the fourth bullet point above will not be
given until at least 30 days after it occurs.
SUBORDINATED INDENTURES. With respect to your subordinated debt security,
the term "event of default" means that a filing for bankruptcy or other events
of bankruptcy, insolvency or reorganization relating to the issuer occurs. The
subordinated indentures do not provide for any right of acceleration of the
payment of principal upon a default in the payment of principal or interest or
in the performance of any covenant or agreement on a series of subordinated debt
securities or on the subordinated indentures.
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REMEDIES IF AN EVENT OF DEFAULT OCCURS
Under certain circumstances, the holders of not less than a majority in
principal amount of the debt securities of any series may waive a default for
all the debt securities of that series. If this happens, the default will be
treated as if it had not occurred.
SENIOR INDENTURES. If an event of default on the senior debt securities of
any series has occurred and has not been cured or waived, the trustee or the
holders of at least 25% in principal amount of the outstanding senior debt
securities of that series may declare the entire principal amount of the senior
debt securities of that series to be due immediately.
This situation is called an "acceleration of the maturity" of the senior
debt securities. If the maturity of any senior debt securities of any series is
accelerated, the holders of a majority in principal amount of the senior debt
securities of that series affected by the acceleration may cancel the
acceleration for all of those senior debt securities if the issuer has paid all
amounts due with respect to those securities, other than amounts due because of
the acceleration of the maturity, and all events of default, other than
nonpayment of their accelerated principal, have been cured or waived.
SUBORDINATED INDENTURES. If an event of default on the subordinated debt
securities of any series has occurred and has not been cured or waived, the
trustee or the holders of at least 25% in principal amount of the outstanding
subordinated debt securities of that series may declare the entire principal
amount of that series of subordinated debt securities to be due immediately.
This situation is called an acceleration of the maturity of those subordinated
debt securities. If the maturity of any subordinated debt securities of any
series is accelerated, the holders of at least a majority in principal amount of
the subordinated debt securities of that series affected by the acceleration may
cancel the acceleration for all the affected subordinated debt securities.
TRUSTEE'S INDEMNITY
If an event of default on any series of debt securities occurs, the trustee
for those securities will have special duties. In that situation, the trustee
will be obligated to use those of its rights and powers under the indenture, and
to use the same degree of care and skill in doing so, that a prudent person
would use in that situation in conducting his or her own affairs.
Except as described in the prior paragraph, the trustee is not required to
take any action under any of the indentures at the request of any holders unless
the holders of that series offer the trustee reasonable protection from expenses
and liability. This is called an "indemnity". If reasonable indemnity is
provided, the holders of a majority in principal amount of all of the
outstanding debt securities of that series may direct the time, method and place
of conducting any lawsuit or other formal legal action seeking any remedy
available to the trustee. These majority holders of that series may also direct
the trustee in performing any other action under the indenture with respect to
the debt securities of that series.
Before you can bypass the trustee and bring your own lawsuit or other
formal legal action or take other steps to enforce your rights or protect your
interests relating to your debt securities, the following must occur:
- You must give the trustee written notice that an event of default has
occurred, and the event of default must not have been cured or waived;
- The holders of not less than 25% in principal amount of all debt
securities of that series must make a written request that the trustee
take action because of the default, and they or you must offer reasonable
indemnity to the trustee against the cost and other liabilities of taking
that action;
- The trustee must not have taken action for 60 days after receipt of the
above notice and offer of indemnity; and
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- During those 60 days, the holders of a majority in principal amount of
the debt securities of that series must not have given the trustee
directions that are inconsistent with the written request of the holders
of not less than 25% in principal amount of the debt securities of that
series.
You are, however, entitled at any time to bring a lawsuit for the payment
of money due on your debt security on or after its due date.
Book-entry, street name and other indirect holders should consult their
banks or brokers for information on how to give notice or direction to or make a
request of the trustee and how to declare or cancel an acceleration of the
maturity.
MODIFICATION AND WAIVER
OF THE INDENTURES
There are three types of changes we can make to the indentures and the debt
securities.
CHANGES REQUIRING YOUR APPROVAL
First, there are changes that cannot be made without the approval of each
holder of a debt security affected by the change. Here is a list of this type of
change:
- change the stated maturity for any principal or interest on a debt
security;
- reduce the principal amount, the amount of principal of an original issue
discount security payable on acceleration of the maturity after a
default, the interest rate or the redemption price of a debt security;
- change the currency of any payment on a debt security;
- change the place of payment on a debt security;
- impair a holder's right to sue for payment of any amount due on its debt
security;
- reduce the percentage in principal amount of the debt securities of any
series of debt securities, the approval of whose holders is needed to
change the indentures;
- reduce the percentage in principal amount of the debt securities of any
series, the consent of whose holders is needed to modify or amend the
indenture or waive an issuer's compliance with the indenture or to waive
defaults;
- modify the subordination provision of the subordinated indentures, unless
the change would not adversely affect the interests of the holders of
that series of debt securities; and
- in the case of Popular North America's and Popular International Bank's
indentures, modify the terms and conditions of the guarantor's
obligations regarding the due and punctual payment of principal or any
premium, interest, additional amounts we describe below under
"-- Taxation by the Commonwealth of Puerto Rico" or sinking fund payment.
CHANGES NOT REQUIRING APPROVAL
The second type of change does not require any approval by holders of debt
securities. This type is limited to clarifications and changes that would not
adversely affect the interests of the holders of the debt securities in any
material respect. Nor do we need your consent to make changes that affect only
other debt securities to be issued after the changes take effect.
We may also make changes or obtain waivers that do not adversely affect a
particular debt security, even if they affect other debt securities or series of
debt securities. In those cases, we do not need to obtain the approval of the
holder of that debt security; we need only obtain any required approvals from
the holders of the affected debt securities or other debt securities.
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CHANGES REQUIRING MAJORITY APPROVAL
Any other changes to the indentures and the debt securities would require
the following approval:
- If the change affects only one series of debt securities, it must be
approved by the holders of at least a majority in principal amount of
that series.
- If the change affects more than one series of debt securities, it must be
approved by the holders of at least a majority in principal amount of
each series of the particular issuer's debt securities affected by the
change.
In each case, the required approval must be given by written consent.
The approval of at least a majority in principal amount of the debt
securities of each affected series of an issuer would be required for the issuer
to obtain a waiver of any of its covenants in the indentures. The covenants
include the promises about merging and putting liens on the issuer's interests,
which we describe above under "-- Mergers and Similar Transactions" and
"-- Restrictive Covenants". If the required holders approve a waiver of a
covenant, we will not have to comply with it. The holders, however, cannot
approve a waiver of any provision in a particular debt security, or in the
indenture as it affects that debt security, that we cannot change without the
approval of the holder of that debt security as described above in "-- Changes
Requiring Your Approval", unless that holder approves the waiver.
Book-entry, street name and other indirect holders should consult their
banks or brokers for information on how approval may be granted or denied if we
seek to change the indentures or the debt securities or request a waiver.
FURTHER DETAILS CONCERNING VOTING
When taking a vote, we will use the following rules to decide how much
principal amount to attribute to a debt security:
- For original issue discount securities, we will use the principal amount
that would be due and payable on the voting date if the maturity of those
debt securities were accelerated to that date because of a default.
- For debt securities whose principal amount is not known, for example,
because it is based on an index, we will use a special rule for that debt
security determined by our board of directors or described in the
prospectus supplement.
- For debt securities denominated in one or more foreign currencies or
currency units, we will use the U.S. dollar equivalent.
Debt securities will not be considered outstanding, and therefore will not
be eligible to vote, if we have deposited or set aside in trust for you money
for their payment or redemption.
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding debt securities that are
entitled to vote or take other action under the indenture.
TAXATION BY THE COMMONWEALTH
OF PUERTO RICO
We will not withhold or deduct any present or future taxes, duties,
assessments or governmental charges that are imposed or levied by or on behalf
of Puerto Rico or by or with any district, municipality or other political
subdivision of Puerto Rico from payments to holders of the debt securities and
all payments made under the guarantees unless the law requires us to withhold or
deduct these taxes, duties, assessments or governmental charges.
In the event that law requires the issuer to deduct or withhold any amounts
in respect of taxes, duties, assessments or governmental charges, the issuer
will pay these additional amounts of principal, premium and interest (after
deduction of these taxes, duties, assessments or governmental charges) in the
payment to the holders of the debt securities, of the
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amounts which we would otherwise have paid in respect to the debt securities in
the absence of deductions or withholding, which we refer to as additional
amounts, except that we will not pay any additional amounts:
- to a holder of a debt security or an interest in or rights in a debt
security where deduction or withholding is required because the holder
has some connection with Puerto Rico or any political subdivision or
taxing authority of Puerto Rico or any political subdivision other than
the mere holding of and payment in respect of the debt security;
- to a holder of a debt security when any deduction or withholding would
not have been required but for the holder's presentation for payment on a
date more than 30 days after maturity or the date on which payment is
duly provided for, whichever occurs later; or
- to a holder when any deduction or withholding would not have been
required but for the holder's 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 of Puerto Rico if law requires
compliance as a precondition to exemption from deduction or withholding.
SPECIAL TERMS RELATING TO THE
SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the applicable prospectus supplement, the
following provisions apply to the subordinated debt securities and Popular's
guarantees of the subordinated debt securities of Popular International Bank and
Popular North America.
The right of a holder of subordinated debt securities to payment from any
distribution of an issuer's assets resulting from any dissolution, winding up,
liquidation, bankruptcy or reorganization of the issuer are subordinated to the
prior right to payment in full of all of that issuer's senior indebtedness (as
defined later in this section). The issuer's obligation to make payments on the
subordinated debt securities will not otherwise be affected. No payment on the
issuer's subordinated debt securities may be made during a default on any senior
indebtedness of the issuer. Because the subordinated debt securities are
subordinated in right of payment to any senior indebtedness of the issuer, in
the event of a distribution of assets upon insolvency, some of the issuer's
creditors may recover more, ratably, than holders of subordinated debt
securities of the issuer.
In addition, any amounts of cash, property or securities available after
satisfaction of the rights to payment of senior indebtedness will be applied
first to pay for the full payment of the issuer's other financial obligations
(as defined below) before any payment will be made to holders of the
subordinated debt securities. If the maturity of any subordinated debt
securities is accelerated, all senior indebtedness of the issuer would have to
be repaid before any payment could be made to holders of the issuer's
subordinated debt securities. Because of this subordination, if an issuer
becomes insolvent, its creditors who are not holders of senior indebtedness or
subordinated debt securities may recover ratably less than holders of its senior
indebtedness and may recover ratably more than holders of its subordinated debt
securities.
"Senior indebtedness" of an issuer means an issuer's indebtedness for money
borrowed, except indebtedness that by its terms is not superior in right of
payment to the subordinated debt securities.
"Other financial obligations" of an issuer are defined in the subordinated
indenture of that issuer to mean obligations of that issuer to make payment
pursuant to the terms of financial instruments, such as:
- securities contracts and foreign currency exchange contracts,
- derivative instruments or
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- similar financial instruments.
Other financial obligations shall not include:
- obligations on account of an issuer's senior indebtedness and
- obligations on account of indebtedness for money borrowed ranking equally
in their priority of claim to payment with or subordinate to the claim of
subordinated debt securities.
As of June 30, 1999, Popular had $2.1 billion principal amount of senior
indebtedness, which includes $1.2 billion in senior indebtedness of Popular
North America that is guaranteed by Popular, and no other financial obligations,
Popular International Bank had $14.5 million principal amount of senior
indebtedness and no other financial obligations, and Popular North America had
$1.3 billion principal amount of senior indebtedness and $70 million of other
financial obligations.
POPULAR'S GUARANTEE
Popular will guarantee punctual payment on the Popular International Bank
and Popular North America senior debt securities, when and as payments are due
and payable. Popular's guarantee is absolute and unconditional, without regard
for any circumstance that might otherwise constitute a legal or equitable
discharge of a surety or guarantor. A guarantee executed by Popular will
evidence the guarantee and will appear on each Popular International Bank and
Popular North America senior debt security. Holders of the Popular International
Bank and Popular North America senior debt securities may proceed directly
against Popular in the event of default under the Popular International Bank and
Popular North America senior debt securities without first proceeding against
Popular International Bank or Popular North America. The guarantees will rank
equally in right of payment with all other unsecured and unsubordinated
obligations of Popular.
Popular will guarantee the punctual payment of rights of payment under the
Popular International Bank and Popular North America subordinated debt
securities on a subordinated basis and otherwise on the same terms as the
Popular International Bank and Popular North America senior debt securities.
OUR RELATIONSHIP WITH THE TRUSTEE
The First National Bank of Chicago is the trustee under all of the
indentures that have been signed, and we currently expect it will be the trustee
under the indentures that have not been signed. In addition, it is the trustee
for Popular North America's February 5, 1997 junior subordinated indenture.
If an event of default (or an event that would be an event of default if
the requirements for giving the issuer default notice or the default having to
exist for a specific period of time were disregarded) occurs under any of the
debt securities of an issuer, the trustee may be considered to have a
conflicting interest in respect to the debt securities or one of the other
indentures for purposes of the Trust Indenture Act of 1939. In that case the
trustee may be required to resign under one or more indentures and we would be
required to appoint a successor trustee. The trustee provides us with banking
and other services in the normal course of business.
DESCRIPTION OF PREFERRED STOCK
This section summarizes the material terms that will apply generally to the
preferred stock we may issue under this prospectus, which is referred to as the
"preferred stock".
Each series of preferred stock will have financial and other terms specific
to it, and the specific terms of each preferred stock will be described in a
prospectus supplement attached
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to the front of this prospectus. Those terms may vary from the terms described
here. As you read this section, therefore, please remember that the specific
terms of your preferred stock as described in your prospectus supplement will
supplement and, if applicable, may modify or replace the general terms described
in this section. The statements we make in this section may not apply to your
preferred stock.
The description of the preferred stock that is set forth below and in any
prospectus supplement is only a summary and is qualified by reference to the
documents that govern each issuer's preferred stock, which include:
For Popular --
- Restated Certificate of Incorporation, as amended;
- Certificates of Designation describing Popular's 8.35% Non-Cumulative
Monthly Income Preferred Stock;
- 1994 Series A Preferred Stock;
- Series A Participating Preferred Stock; and
- Certificate of Designation relating to each series of Popular's preferred
stock to which this prospectus relates.
For Popular International Bank and Popular North America --
- Certificate of Incorporation, as amended; and
- Certificate of Designation relating to each series of preferred stock to
which this prospectus relates.
These documents will be filed as exhibits to the registration statement
relating to the preferred stock at or prior to the time of issuance of preferred
stock.
AUTHORITY TO ISSUE PREFERRED STOCK
The Articles of Incorporation of Popular authorizes its board of directors
to issue without the approval of the stockholders up to 10,000,000 shares of
authorized preferred stock with no par value. Popular has designated and issued
4,000,000 shares of Series A Preferred Stock, designated 1,400,000 shares of
Series A Participating Cumulative Preferred Stock and has 4,600,000 shares of
Preferred Stock available to issue.
Popular International Bank's Certificate of Incorporation authorizes its
board of directors to issue 25,000,000 shares of preferred stock with a par
value of $25.00 per share. Popular North America's Certificate of Incorporation
authorizes its board of directors to issue 10,000,000 shares of preferred stock
with a par value of $.10 per share.
As of the date of this prospectus, Popular International Bank and Popular
North America had no shares of preferred stock outstanding; Popular owned all of
Popular International Bank's common stock; and Popular International Bank owned
all of Popular North America's common stock.
Each issuer's board of directors has the right to designate, for each
series of preferred stock:
- the title;
- dividend rates;
- special or relative rights in the event of a liquidation, distribution or
sale of assets or dissolution or winding up;
- provisions for a sinking fund;
- provisions for redemption or purchase;
- provisions for conversion;
- voting rights;
- the offering price or prices;
- whether the preferred stock will be in certificated or book-entry form;
- whether the preferred stock will be listed on a national securities
exchange; and
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- any rights, preferences, privileges, limitations and restrictions which
are not inconsistent with the provisions of Popular's Restated
Certificate of Incorporation or Popular International Bank's or Popular
North America's Certificate of Incorporation.
GENERAL TERMS OF THE PREFERRED STOCK
Banco Popular's Trust Division will be the transfer agent, dividend
disbursing agent and registrar for the preferred stock unless otherwise
specified in the prospectus supplement. The issuers are holding companies, so
their rights and the rights of holders of preferred stock to participate in the
distribution of assets of any of their subsidiaries upon their liquidation or
recapitalization separately or together will be subject to the prior claims of
the subsidiary's creditors and preferred stockholders, except to the extent the
issuers may be creditors with recognized claims against the subsidiary or
holders of preferred stock of the subsidiary.
The preferred stock will be fully paid and non-assessable when issued and
will provide holders with no rights to acquire securities, including preferred
stock, that may be issued after you purchase preferred stock. The shares of any
series of preferred stock may not trade at the liquidation preference for that
series. With regard to payment of dividends, except for the cumulation of
dividends, and rights on liquidation, dissolution or winding up of the issuer,
the preferred stock will rank senior to the equity securities of the issuer
expressly made junior to it and the issuers' common stock, equally with other
outstanding series of preferred stock expressly made equal to the preferred
stock and junior to all equity securities expressly made senior to the preferred
stock of the issuer. The term "equity securities" in a certificate of amendment
will not include debt securities convertible into or exchangeable for equity
securities.
DIVIDENDS AND DISTRIBUTIONS
At their discretion, the board of directors of each issuer may declare cash
dividends on the preferred stock of the issuer that are payable out of funds
legally available for that purpose. The rate or formula to determine the rate
used to calculate the dividends is set forth in the prospectus supplement for
each series of preferred stock. The dividends may be cumulative or
non-cumulative as provided in the applicable prospectus supplement and will be
payable to the holders of record on the record dates fixed by the board of
directors. The issuers' ability to pay dividends is subject to policies of the
Federal Reserve Board.
No dividends may be declared or paid or funds set apart for the payment of
dividends on any equity securities of an issuer with equal or lesser rights to
the payment of dividends unless dividends are paid or set apart for such payment
on the preferred stock of the issuer. If an issuer does not fully pay dividends
on its preferred stock, holders of the preferred stock of that issuer will share
dividends pro rata with equity securities of the issuer with equal rights to the
payment of dividends.
CONVERSION
The prospectus supplement for any series of preferred stock will state any
terms on which shares of that series are convertible into shares of another
series of preferred stock.
We will reserve and keep available the full number of shares of the
additional preferred stock deliverable upon the conversion of all outstanding
shares of any convertible series of preferred stock. The issuer will keep these
reserved shares of preferred stock free from preemptive rights.
No fractional shares or scrip representing fractional shares of preferred
stock will be issued on the conversion of any convertible preferred stock. At
our election, each holder who would otherwise receive fractional shares will
instead be entitled to receive a cash payment equal to either the current market
price of the fractional interest or the proportionate interest in the net
proceeds from the sale of shares of preferred stock representing the aggregate
of such fractional shares.
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EXCHANGE
If so determined by the board of directors of an issuer, the holders of
preferred stock of any series may be obligated to exchange their shares for
other preferred stock or debt securities. The terms of any exchange and any
replacement preferred stock or debt securities will be described in the
applicable prospectus supplement.
REDEMPTION
We may issue a series of preferred stock of which we can redeem all or part
at any time upon terms and at the redemption prices set forth in the applicable
prospectus supplement.
If any issuer redeems part of a series of preferred stock, that issuer will
determine which shares to redeem by lot or pro rata or by any other method
determined to be equitable by each issuer's board of directors.
Unless we fail to pay the redemption price, dividends will cease to accrue
on preferred stock called for redemption on or after a redemption date, and the
holders' rights will terminate, except for the right to receive the redemption
price.
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
- the shares are redeemed with the proceeds of a sale by the bank holding
company of common stock or perpetual preferred stock; or
- the Federal Reserve Board determines that the bank holding company's
condition and circumstances warrant the reduction of a source of
permanent capital.
PREFERENCES IN LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of an issuer, the holders of preferred stock of that issuer will have
preference and priority over any class of equity securities that ranks junior to
their preferred stock upon liquidation, dissolution or winding up. This priority
will extend to payments in the amount set forth in the applicable prospectus
supplement plus all accrued and unpaid dividends to the date of final
distribution to the holders. These payments may be made from capital or surplus
using the assets of the relevant issuer or proceeds from any liquidation. If
these assets or proceeds are insufficient to satisfy fully all claims with an
equal priority of payment, then the assets and proceeds will be distributed
ratably among the holders of preferred stock of that issuer. If you own
non-cumulative preferred stock, you will not be entitled to receive payment for
unpaid dividends from prior dividend periods. After you are paid the full amount
of the liquidation preference to which you are entitled, you will not be
entitled to participate in any further distribution of assets of the issuer of
your preferred stock.
VOTING RIGHTS
The term "Banking Law" refers to a Puerto Rico law and the term "Office of
the Commissioner" refers to the Puerto Rico Office of Financial Institutions, a
regulator. The definitions of these terms are incorporated in this subsection by
reference to the Annual Report on Form 10-K of Popular for the year ended
December 31, 1998.
Except as indicated in the applicable prospectus supplement or as expressly
required by applicable law, you will have no voting rights.
Under regulations adopted by the Federal Reserve Board, any series of
preferred stock whose holders become entitled to vote for the election of
directors may be deemed a "class of voting securities". A holder of 25% or more
of such series (or a holder of 5% if it otherwise
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exercises a "controlling influence" over the relevant issuer) may then be
subject to regulation as a bank holding company in accordance with the Bank
Holding Company Act. In addition, when a series is deemed a class of voting
securities,
- 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 that series,
and
- 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 that series.
Section 12 of the Banking Law requires prior approval of the Office of the
Commissioner to obtain control of any bank organized under the Banking Law. The
Banking Law requires that both parties involved in a transfer of voting and
outstanding capital stock of any bank organized under the laws of Puerto Rico to
any person or entity that will become directly or indirectly the owner after the
transfer of more than 5% of the voting and outstanding capital stock of that
bank shall inform the Office of the Commissioner of the proposed transfer at
least 60 days prior to the date the 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 normal operation 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 Popular 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.
POPULAR'S GUARANTEE
Popular will fully and unconditionally guarantee the punctual payment of:
- any accrued and unpaid dividends, whether or not declared, on any series
of Popular International Bank and Popular North America preferred stock;
- the redemption price for any shares of Popular International Bank and
Popular North America preferred stock called or redeemed at the option of
Popular International Bank and Popular North America or the holder;
- the liquidation preference of Popular International Bank and Popular
North America preferred stock; and
- any additional amounts with respect to a series of Popular International
Bank and Popular North America preferred stock.
The guarantee of the Popular International Bank and Popular North America
preferred stock shall constitute an unsecured obligation of Popular and will
rank junior to all of its liabilities. The guarantee will rank senior to
Popular's common stock. The guarantee's rank relative to the preferred stock of
Popular will be specified in the applicable prospectus supplement.
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VALIDITY OF OFFERED SECURITIES
Brunilda Santos de Alvarez, Esq., counsel to Popular, will pass upon the
validity of the preferred stock of Popular and Popular International Bank for
Popular and Popular International Bank. The validity of the senior debt
securities and subordinated debt securities of Popular and Popular International
Bank and the guarantees by Popular of the senior debt securities and
subordinated debt securities of Popular International Bank and Popular North
America will be passed upon for Popular and Popular International Bank by
Brunilda Santos de Alvarez, Esq., as to matters of the laws of the Commonwealth
of Puerto Rico and by Sullivan & Cromwell as to matters of New York law.
Sullivan & Cromwell will pass upon the validity of the securities of Popular
North America. 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 to
Popular's Annual Report on Form 10-K for the year ended December 31, 1998 have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION FOR THE INITIAL
OFFERING AND SALE OF SECURITIES
We may sell securities:
- to or through underwriting syndicates represented by managing
underwriters;
- through one or more underwriters without a syndicate for them to sell to
the public; and
- to investors directly or through agents.
Any underwriter or agent involved in the sale of any series of the
securities will be named in the applicable prospectus supplement.
The prospectus supplement for each series of securities will describe:
- the terms of the offering of these securities, including the name of the
agent or the name or names of any underwriters;
- the public offering or purchase price;
- any discounts and commissions to be allowed or paid to the agent or
underwriters and all other items constituting underwriting compensation;
- any discounts and commissions to be allowed or paid to dealers; and
- any exchanges on which the securities will be listed.
Only the agents or underwriters named in a prospectus supplement are agents
or underwriters in connection with the securities being offered by that
prospectus supplement. Under certain circumstances, we may repurchase securities
and reoffer them to the public as set forth above and arrange for repurchases
and resales of the securities by dealers as described below.
We may agree to indemnify the agents and the several underwriters against
certain civil liabilities, including liabilities under the Securities Act or
contribute to payments the agents or the underwriters may be required to make.
All securities will be a new issue of securities with no established
trading market. Any underwriters to whom securities are sold by us for public
offering and sale may make a market in such securities, but they will not be
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obligated to do so and may discontinue any market making at any time without
notice. No one associated with any offering of securities can assure the
liquidity of the trading market for any securities.
The underwriters and their associates may be customers of, lenders to,
engage in transactions with, and perform services for, Popular or its
subsidiaries in the ordinary course of business.
Popular Securities, Inc. may participate as an agent or an underwriter in
offerings of securities. Popular Securities is a wholly owned subsidiary of
Popular and a member of the NASD. Because of the relationship between Popular
Securities and Popular, Popular North America and Popular International Bank,
offerings of securities in which Popular Securities participates will be
conducted in accordance with NASD Rule 2720.
PLAN OF DISTRIBUTION FOR MARKET-MAKING
RESALES BY AFFILIATES
This prospectus may be used by the agents or underwriters named in the
applicable prospectus supplement which are affiliates of the issuer in
connection with offers and sales of the securities in market-making
transactions. In a market-making transaction, the affiliated agents or
underwriters may resell a security they acquire from other holders after the
original offering and sale of the securities. Resales of this kind may occur in
the open market or may be privately negotiated, at prices related to prevailing
market prices at the time of resale or at negotiated prices. In these
transactions, the affiliated agents or underwriters may act as principal or
agent, including as agent for the counterparty in a transaction in which the
agents or underwriters act as principal or as agent for both counterparties in a
transaction in which the agents or underwriters do not act as principal. The
agents or underwriters may receive compensation in the form of discounts and
commissions, including from both counterparties in some cases. Other affiliates
of Popular may also engage in transactions of this kind and may use this
prospectus for this purpose.
Popular does not expect to receive any proceeds from market-making
transactions. Popular does not expect that the agents or underwriters or any
other affiliates that engage in these transactions will pay any proceeds from
its making resales to Popular.
A market-making transaction will have a settlement date later than the
original issue date of the securities. Information about the trade and
settlement dates, as well as the purchase price, for a market-making transaction
will be provided to the purchaser in a separate confirmation of sale.
The agents or underwriters do not expect the amount of the securities held
as a result of market-making resales by accounts over which it exercises
discretionary authority to exceed, at any time, five percent of the aggregate
initial offering price of the securities.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. Our
SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov or at our web site at http://www.popularinc.com. You may also
read and copy any document we file by visiting the SEC's public reference rooms
in Washington, D.C., New York, New York, and Chicago, Illinois. Please call the
SEC at 1-800-SEC-0330 for further information about the public reference rooms.
We filed a registration statement on Form S-3 with the SEC relating to the
securities. This prospectus is a part of the registration statement and does not
contain all of the information in the registration statement. Whenever a
reference is made in this prospectus to a contract or other document, please be
aware that the reference is only a summary and that you should refer to the
exhibits that are part of the registration statement for a copy of the contract
or other document.
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INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file with
them, which means:
- incorporated documents are considered part of the prospectus;
- we can disclose important information to you by referring you to those
documents; and
- information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed
with the SEC under the Securities Exchange Act:
1. The Annual Report on Form 10-K for the year ended December 31, 1998,
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 in this prospectus.
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
3. Current Reports on Form 8-K, dated January 11, 1999, April 9, 1999, July 8,
1999 and August 3, 1999, and on Form 8-K/A, dated July 16, 1999.
4. Registration Statement on Form 8-A, dated August 28, 1998, filed pursuant to
Section 12(g) of the Exchange Act, by which Popular registered its Series A
Participating Cumulative Preferred Stock Purchase Rights.
5. Registration Statement on Form 8-A, dated June 17, 1994, as amended by
Popular's Amendment on Form 8-A/A, dated June 21, 1994, filed pursuant to
Section 12(g) of the Exchange Act, by which Popular registered its 8.35%
Non-Cumulative Monthly Income Preferred Stock, 1994 Series A.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus until this offering is
completed or after the date of this initial registration statement and before
effectiveness of the registration statement:
- reports filed under Sections 13(a) and (c) of the Exchange Act;
- definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders' meeting; and
- any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by reference
in this prospectus. We have not, and the agents and dealers have not, authorized
any other person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. We
are not, and the agents and dealers are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Amilcar
Jordan, Senior Vice President, Popular, Inc., P.O. Box 362708, San Juan, Puerto
Rico 00936-2708. Telephone requests may be directed to (787) 765-9800. You may
also access this information at our website at http://www.popularinc.com.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES 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............................................ $ 417,000
Fees and Expenses of Accountants............................ 30,000
Fees and Expenses of Counsel................................ 150,000
Blue Sky Fees and Expenses.................................. 25,000
NASD Filing Fee............................................. 30,500
Printing and Engraving Expenses............................. 25,000
Rating Agency Fees.......................................... 398,000
Trustee's Fees.............................................. 12,000
Miscellaneous............................................... 25,500
----------
Total............................................. $1,113,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Popular and Popular International Bank are Puerto Rico corporations.
(i) Article ELEVENTH of the Restated Certificate of Incorporation of
Popular provides the following:
(1) Popular 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 Popular) by
reason of the fact that he is or was a director, officer, employee or agent
of Popular, or is or was serving at the written request of Popular 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 Popular, 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
Popular and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(2) Popular 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 Popular to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee
or agent of Popular, or is or was serving at the written request of Popular
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 Popular, except that no indemnification
shall be made in respect of any claim, issue or matter as to which
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such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to Popular 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
Popular 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 Popular 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 Popular 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 Popular
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, Popular 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 Popular, or is or was serving at the written request of Popular 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 Popular 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) Article ELEVENTH of the Certificate of Incorporation of Popular
International Bank provides the following:
(1) Popular International Bank 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
Popular International Bank) by reason of the fact that he is or was a
director,
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officer, employee or agent of Popular International Bank, or is or was
serving at the written request of Popular International Bank 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 Popular International
Bank, 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 Popular International Bank and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(2) Popular International Bank 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 Popular International
Bank to procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of Popular International Bank,
or is or was serving at the written request of Popular International Bank
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 Popular International Bank, 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 Popular International Bank
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
Popular International Bank 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 Popular International
Bank 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 Popular International Bank 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 Popular International Bank as authorized in this Article
ELEVENTH.
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(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, Popular International Bank 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 Popular International Bank, or is or was serving at
the written request of Popular International Bank 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 Popular International Bank 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.
(b) Popular North America is a Delaware corporation.
(i) Section 102 of the Delaware General Corporation Law allows a
corporation to eliminate the personal liability of a director to Popular 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, by reason of the fact that he is or
was a director, officer, employee or agent of Popular or is or was serving at
its request in such capacity in another corporation or business association
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 Popular
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful.
(ii) Section 6.4 of the By-laws of Popular North America provides the
following:
Section 6.4. Indemnification of Directors, Officers and
Employees. Popular 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 Popular or serves or served at
the request of Popular 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 Popular 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 not entitled to be indemnified by Popular. The rights
provided to any person by this by-law shall be enforceable against Popular
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
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this by-law, the term "Corporation" shall include any predecessor of
Popular and any constituent corporation (including any constituent of a
constituent) absorbed by Popular 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
Popular" shall include service as a director, officer or employee of
Popular 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 Popular.
(c) Popular, Popular International Bank and Popular North America maintain
directors' and officers' liability insurance policies.
(d) Reference is made to the indemnity provisions in the Underwriting
Agreement, which is incorporated by reference as Exhibit 1 to this Registration
Statement from Registration Statement No. 33-57038.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S> <C> <C>
(1) (a) -- Form of Underwriting Agreement. (Incorporated by reference
from Registration Statement No. 33-57038)
(4) (a) -- Restated Articles of Incorporation of Popular, Inc., as
amended (English translation). (Incorporated by reference
from Registration Statement No. 333-26941)
(4) (b) -- Certificate of Incorporation of Popular International Bank,
Inc. (English translation). (Incorporated by reference from
Registration Statement No. 33-54299)
(4) (c) -- Amended and Restated Certificate of Incorporation of Popular
North America, Inc., as amended. (Incorporated by reference
from Registration Statement No. 333-26941)
(4) (d) -- Copy of Senior Indenture of Popular, Inc., dated as of
February 15, 1995, as supplemented by the First Supplemental
Indenture thereto, dated as of May 8, 1997, each between
Popular, Inc. and The First National Bank of Chicago, as
trustee. (Incorporated by reference from Registration
Statement No. 333-26941)
(4) (e) -- Form of Second Supplemental Indenture of Popular, Inc.,
dated as of , , between Popular, Inc. and The
First National Bank of Chicago, as trustee.
(4) (f) -- Copy of Subordinated Indenture of Popular, Inc., dated as of
November 30, 1995, between Popular, Inc. and The First
National Bank of Chicago, as trustee. (Incorporated by
reference from Registration Statement No. 333-26941)
(4) (g) -- Copy of Senior Indenture of Popular North America, Inc.,
dated as of October 1, 1991, as supplemented by the First
Supplemental Indenture thereto, dated as of February 28,
1995, and by the Second Supplemental Indenture thereto,
dated as of May 8, 1997, each among Popular North America,
Inc., Popular, Inc., as guarantor, and The First National
Bank of Chicago, as trustee. (Incorporated by reference from
Registration Statement No. 333-26941)
(4) (h) -- Form of Third Supplemental Indenture of Popular North
America, Inc., dated as of , , among Popular
North America, Inc., Popular, Inc., as guarantor, and The
First National Bank of Chicago, as trustee.
(4) (i) -- Form of Subordinated Indenture of Popular North America,
Inc. (Incorporated by reference from Registration Statement
No. 33-61601)
(4) (j) -- Form of Senior Indenture of Popular International Bank, Inc.
(Incorporated by reference from Registration Statement No.
333-26941)
</TABLE>
II-5
<PAGE> 107
<TABLE>
<C> <S> <C> <C>
(4) (k) -- Form of Subordinated Indenture of Popular International
Bank, Inc. (Incorporated by reference from Registration
Statement No. 33-57038)
(4) (l) -- Rights Agreement, dated as of August 28, 1998, between
Popular, Inc. and Banco Popular de Puerto Rico, as Rights
Agent. (Incorporated by reference from Registration
Statement No. 000-13818)
(4) (m) -- Form of Certificate of 8.35% non-cumulative monthly
Preferred Stock, 1994 Series A (Liquidation Preference
$25.00 per share). (Incorporated by reference to Exhibit 4.7
of 1994 Form 10-K)
(4) (n) -- Certificate of Designation, Preferences and Rights of Series
A Participating Cumulative Preferred Stock
(5) (a) -- Opinion of Brunilda Santos de Alvarez, Esq.*
(5) (b) -- Opinion of Sullivan & Cromwell.*
(8) -- Opinion of Sullivan & Cromwell, United States tax counsel to
Popular, Inc., Popular International Bank, Inc. and Popular
North America, Inc., re tax matters.
(12) -- Computation of Consolidated Ratios of Earnings to Fixed
Charges and Earnings to Fixed Charges and Preferred Stock
Dividends.
(23) (a) -- Consent of Independent Accountants.
(23) (b) -- Consent of Brunilda Santos de Alvarez, Esq. (included in
Exhibit (5)(a))*
(23) (c) -- Consent of Sullivan & Cromwell. (included in Exhibit
(5)(b))*
(24) -- Powers of attorney.*
(25) (a) -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The First National Bank of Chicago, as
Trustee under indenture of Popular, Inc.*
(25) (b) -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The First National Bank of Chicago, as
Trustee under indenture of Popular International Bank, Inc.*
(25) (c) -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The First National Bank of Chicago, as
Trustee under indenture of Popular North America, Inc.*
</TABLE>
- ----------------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned 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 the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
II-6
<PAGE> 108
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
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.
(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 Popular'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.
The undersigned Registrants hereby undertake to file an application for the
purpose of determining the eligibility of the Trustee under any Indenture to act
under Subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Securities and Exchange
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
Registrants pursuant to the provisions referred to in Item 15 of this
Registration Statement, or otherwise, the Registrants have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification by the
Registrants against such liabilities (other than the payment by the Registrants
of expenses incurred or paid by a director, officer or controlling person of the
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 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
them is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-7
<PAGE> 109
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
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
No. 1 to the Registration Statement (333-82507) to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of San Juan,
Commonwealth of Puerto Rico, on the 4th day of August, 1999.
POPULAR, INC.
(Registrant)
By: /s/ JORGE A. JUNQUERA
------------------------------------
Jorge A. Junquera
Senior Executive Vice President
and Director
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman, President and Chief Executive August 4, 1999
------------------------------------------ Officer (Principal Executive Officer)
Richard L. Carrion
* Director August 4, 1999
------------------------------------------
Alfonso F. Ballester
* Director August 4, 1999
------------------------------------------
Juan J. Bermudez
* Director August 4, 1999
------------------------------------------
Francisco J. Carreras
* Senior Executive Vice President August 4, 1999
------------------------------------------ and Director
David H. Chafey, Jr.
Director August 4, 1999
------------------------------------------
Louis E. Dubon, Jr.
* Director August 4, 1999
------------------------------------------
Antonio Luis Ferre
* Director August 4, 1999
------------------------------------------
Hector R. Gonzales
/s/ JORGE A. JUNQUERA Senior Executive Vice President and August 4, 1999
------------------------------------------ Director (Principal Financial Officer)
Jorge A. Junquera
* Director August 4, 1999
------------------------------------------
Manuel Morales, Jr.
* Director August 4, 1999
------------------------------------------
Alberto M. Paracchini
* Director August 4, 1999
------------------------------------------
Francisco M. Rexach, Jr.
</TABLE>
II-8
<PAGE> 110
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director August 4, 1999
------------------------------------------
Felix J. Serralles Nevares
* Director August 4, 1999
------------------------------------------
Julio E. Vizcarrondo, Jr.
* Senior Vice President (Principal August 4, 1999
------------------------------------------ Accounting Officer)
Amilcar Jordan
* Director August 4, 1999
------------------------------------------
J. Adalberto Roig, Jr.
*By: /s/ JORGE A. JUNQUERA
- -----------------------------------------
Name: Jorge A. Junquera
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 111
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
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
No. 1 to the Registration Statement (333-82507) to be signed on its behalf by
the undersigned thereunto duly authorized, in the City of San Juan, Commonwealth
of Puerto Rico, on the 4th day of August, 1999.
POPULAR INTERNATIONAL BANK, INC.
(Registrant)
By /s/ JORGE A. JUNQUERA
------------------------------------
Jorge A. Junquera
Chairman of the Board
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and Director August 4, 1999
------------------------------------------
Richard L. Carrion
* Director August 4, 1999
------------------------------------------
Alfonso F. Ballester
/s/ JORGE A. JUNQUERA President and Director August 4, 1999
------------------------------------------
Jorge A. Junquera
Director August 4, 1999
------------------------------------------
Roberto R. Herencia
* Director August 4, 1999
------------------------------------------
Francisco Rexach, Jr.
* Director August 4, 1999
------------------------------------------
Felix J. Seralles
Director August 4, 1999
------------------------------------------
Richard Speer
* Director August 4, 1999
------------------------------------------
Julio E. Vizcarrondo
* Senior Vice President August 4, 1999
------------------------------------------ (Principal Accounting Officer)
Amilcar Jordan
</TABLE>
* By: /s/ JORGE A. JUNQUERA
---------------------------------
Name: Jorge A. Junquera
Attorney-in-Fact
II-10
<PAGE> 112
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the 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 No. 1 to
the Registration Statement (333-82507) to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of San Juan, Commonwealth of
Puerto Rico, on the 4th day of August, 1999.
POPULAR NORTH AMERICA, INC.
(Registrant)
By /s/ JORGE A. JUNQUERA
------------------------------------
Jorge A. Junquera
Chairman of the Board
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman (Principal Executive Officer) August 4, 1999
------------------------------------------
Richard L. Carrion
* Director August 4, 1999
------------------------------------------
Alfonso F. Ballester
/s/ JORGE A. JUNQUERA President and Director (Principal Financial August 4, 1999
------------------------------------------ Officer)
Jorge A. Junquera
Senior Vice President and Director August 4, 1999
------------------------------------------
Roberto R. Herencia
* Director August 4, 1999
------------------------------------------
Francisco Rexach, Jr.
* Director August 4, 1999
------------------------------------------
Felix J. Seralles
Director August 4, 1999
------------------------------------------
Richard Speer
* Director August 4, 1999
------------------------------------------
Julio E. Vizcarrondo
* Senior Vice President August 4, 1999
------------------------------------------ (Principal Accounting Officer)
Amilcar Jordan
</TABLE>
* By: /s/ JORGE A. JUNQUERA
---------------------------------
Name: Jorge A. Junquera
Attorney-in-Fact
II-11
<PAGE> 113
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<S> <C> <C> <C>
(4)(e) -- Form of Second Supplemental Indenture of Popular, Inc.,
dated as of , , between Popular, Inc. and
The First National Bank of Chicago, as trustee..............
(4)(h) -- Form of Third Supplemental Indenture of Popular North
America, Inc., dated as of , , among
Popular North America, Inc., Popular, Inc., as guarantor,
and The First National Bank of Chicago, as trustee..........
(4)(n) -- Certificate of Designation, Preferences and Rights of Series
A Participating Cumulative Preferred Stock..................
(5)(a) -- Opinion of Brunilda Santos de Alvarez, Esq. ................ *
(5)(b) -- Opinion of Sullivan & Cromwell.............................. *
(8) -- Opinion of Sullivan & Cromwell, United States tax counsel to
Popular, Inc., Popular International Bank, Inc. and Popular
North America, Inc., re tax matters.........................
(12) -- Computation of Consolidated Ratios of Earnings to Fixed
Charges and Earnings to Fixed Charges and Preferred Stock
Dividends...................................................
(23)(a) -- Consent of Independent Accountants..........................
(23)(b) -- Consent of Brunilda Santos de Alvarez, Esq. (included in
Exhibit (5)(a))............................................. *
(23)(c) -- Consent of Sullivan & Cromwell (included in Exhibit
(5)(b))..................................................... *
(24) -- Powers of attorney.......................................... *
(25)(a) -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The First National Bank of Chicago, as
Trustee under Indenture of Popular, Inc. ................... *
(25)(b) -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The First National Bank of Chicago, as
Trustee under Indenture of Popular International Bank,
Inc. ....................................................... *
(25)(c) -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The First National Bank of Chicago, as
Trustee under Indenture of Popular North America, Inc. ..... *
</TABLE>
- ----------------------
* Previously filed.
<PAGE> 1
EXHIBIT 4(e)
================================================================================
POPULAR, INC.,
Issuer
TO
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
----------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of ______ __, ____
to Indenture dated as of February 15, 1995
----------------
================================================================================
<PAGE> 2
THIRD SUPPLEMENTAL INDENTURE, dated as of August , 1999 among
Popular North America, Inc. (formerly BanPonce Financial Corp.), a Delaware
corporation (the "Company"), Popular, Inc. (formerly BanPonce Corporation), a
Puerto Rico corporation (the "Guarantor"), and THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association, as Trustee (the "Trustee").
RECITALS
The Company, the Guarantor and the Trustee, as successor
Trustee, are parties to an Indenture, dated as of October 1, 1991 (the "Original
Indenture"), which provides for the issuance from time to time of unsecured debt
securities of the Company, unconditionally guaranteed as to the payment of
principal, premium (if any) and interest by the Guarantor, and are parties to a
First Supplemental Indenture thereto, dated as of February 28, 1995 and a Second
Supplemental Indenture thereto, dated as of May 8, 1997.
Section 901(5) of the Original Indenture provides that without
the consent of any Holders, the Company and the Guarantor, when authorized by
Board Resolutions, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental to the Original Indenture, in form
satisfactory to the Trustee, to add to, change or eliminate any of the
provisions of the Original Indenture in respect of one or more series of
Securities, provided that any such addition, change or elimination (i) shall
neither (A) apply to any Security of any series created prior to the execution
of such supplemental indenture and entitled to the benefit of such provision nor
(B) modify the rights of the Holder of any such Security with respect to such
provision or (ii) shall become effective only when there is no such Security
Outstanding.
The Company and the Guarantor believe that Section 1013 of the
Original Indenture should be amended and restated in its entirety, with effect
only as to Securities of any Series created after the execution of this Third
Supplemental Indenture.
The respective Boards of Directors of the Company and the
Guarantor have duly authorized the execution and delivery by the Company and the
Guarantor, respectively, of this Third Supplemental Indenture.
<PAGE> 3
NOW, THEREFORE, THIS
THIRD SUPPLEMENTAL INDENTURE
WITNESSETH:
For and in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company, the Guarantor and the Trustee mutually agree as
follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
Except as otherwise expressly provided or unless context
otherwise requires, all terms used in this Third Supplemental Indenture shall
have the meanings ascribed to them by the Original Indenture.
Section 102. Effect of Headings.
The Article and Section headings herein are for convenience
only and shall not affect the construction hereof.
Section 103. Successors and Assigns.
All covenants and agreements in this Third Supplemental
Indenture by the parties hereto shall bind their respective successors and
assigns, whether so expressed or not.
Section 104. Separability Clause.
In case any provision in this Third Supplemental Indenture
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 105. Benefits of Instrument.
Nothing in this Third Supplemental Indenture, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Third Supplemental Indenture or the Original
Indenture.
-2-
<PAGE> 4
Section 106. Governing Law.
This Third Supplemental Indenture shall be governed by and
construed in accordance with the laws of the State of New York.
ARTICLE TWO
Amendment of the Original Indenture
Section 201. Amendment of Section 1013.
Section 1013 of the Original Indenture is hereby amended and
restated in its entirety as follows:
"The Company and the Guarantor may omit in any particular
instance to comply with any term, provision or condition set
forth in Sections 1006, 1007 and 1009 to 1011, inclusive, with
respect to the Securities of any series if before the time for
such compliance the Holders of at least a majority in
principal amount of the Outstanding Securities of such series
shall, by Act of such Holders, either waive such compliance in
such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or
affect such term, provision or condition except to the extent
so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the Guarantor
and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect."
Section 202. Effectiveness of Section 201.
Section 201 of this Third Supplemental Indenture shall neither
(i) apply to any Security of a series created prior to the execution of this
Third Supplemental Indenture and entitled to the benefit of Section 1013 of the
Original Indenture nor (ii) modify the rights of the Holder of any such Security
with respect to Section 1013 of the Original Indenture.
Section 203. Reaffirmation of Original Indenture.
Each of the Company, the Guarantor and the Trustee hereby
confirms, reaffirms and agrees to the Original Indenture in every particular, as
amended by this Third Supplemental Indenture.
-3-
<PAGE> 5
Section 204. Trust Indenture Act.
If any provision of this Third Supplemental Indenture limits,
qualifies or conflicts with a provision of the Trust Indenture Act of 1939, as
it may be amended from time to time, that is required under such Act to be a
part of and govern this Third Supplemental Indenture, the latter provision shall
control. If any provision hereof modifies or excludes any provision of such Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Third Supplemental Indenture as so modified or excluded, as the
case may be.
* * *
This Third Supplemental Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
-4-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
POPULAR NORTH AMERICA, INC.
By:
------------------------------------
Jorge A. Junquera
President
By:
------------------------------------
Amilcar Jordan
Senior Vice President
Attest:
- ---------------------------------
Assistant Secretary
Affidavit No. ___
Subscribed to before me by Jorge A. Junquera of legal age,
married and resident of San Juan, Puerto Rico, as Senior Executive Vice
President of Popular North America, Inc. and Amilcar Jordan, of legal age,
married and resident of San Juan, Puerto Rico as Senior Vice President of
Popular North America, Inc. and who are personally known to me, in San Juan,
Puerto Rico, this day of August, 1999.
[SEAL]
------------------------------------------
Notary Public
-5-
<PAGE> 7
POPULAR, INC.
By:
------------------------------------
Jorge A. Junquera
Senior Executive Vice President
By:
------------------------------------
Amilcar Jordan
Senior Vice President
Attest:
- ------------------------------------
Assistant Secretary
Affidavit No. ___
Subscribed to before me by Jorge A. Junquera of legal age,
married and resident of San Juan, Puerto Rico, as Senior Executive Vice
President of Popular, Inc. and Amilcar Jordan, of legal age, married and
resident of San Juan, Puerto Rico as Senior Vice President of Popular, Inc. and
who are personally known to me, in San Juan, Puerto Rico, this
day of August, 1999.
[SEAL]
------------------------------------
Notary Public
-6-
<PAGE> 8
THE FIRST NATIONAL BANK OF CHICAGO
By:
---------------------------------
Name:
Title:
Attest:
- ------------------
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ______ day of August, 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is a _____________ of The First National Bank of Chicago, one of
the corporations described in and which executed the foregoing instrument; that
he/she knows the seal of said national banking association; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he/she signed
his/her name thereto by like authority.
[SEAL]
---------------------------------
Notary Public
-7-
<PAGE> 1
EXHIBIT 4(h)
================================================================================
POPULAR NORTH AMERICA, INC.,
Issuer
and
POPULAR, INC.,
Guarantor
TO
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
----------------
THIRD SUPPLEMENTAL INDENTURE
Dated as of _______ __, ____
to Indenture dated as of October 1, 1991
----------------
================================================================================
<PAGE> 2
SECOND SUPPLEMENTAL INDENTURE, dated as of August __, 1999
between Popular, Inc. (formerly BanPonce Corporation), a Puerto Rico corporation
(the "Company") and THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association, as Trustee (the "Trustee").
RECITALS
The Company and the Trustee, as Trustee, are parties to an
Indenture, dated as of February 15, 1995 (the "Original Indenture"), which
provides for the issuance from time to time of unsecured debt securities of the
Company.
Section 901(5) of the Original Indenture provides that without
the consent of any Holders, the Company, when authorized by a Board Resolution,
and the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental to the Original Indenture, in form satisfactory to the
Trustee, to add to, change or eliminate any of the provisions of the Original
Indenture in respect of one or more series of Securities, provided that any such
addition, change or elimination (i) shall neither (A) apply to any Security of
any series created prior to the execution of such supplemental indenture and
entitled to the benefit of such provision nor (B) modify the rights of the
Holder of any such Security with respect to such provision or (ii) shall become
effective only when there is no such Security Outstanding.
The Company believes that Section 1011 of the Original
Indenture should be amended and restated in its entirety, with effect only as to
Securities of any series created after the execution of this Second Supplemental
Indenture.
The Board of Directors of the Company has duly authorized the
execution and delivery by the Company of this Second Supplemental Indenture.
NOW, THEREFORE, THIS
SECOND SUPPLEMENTAL INDENTURE
WITNESSETH:
For and in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Trustee mutually agree as follows:
<PAGE> 3
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
Except as otherwise expressly provided or unless context
otherwise requires, all terms used in this Second Supplemental Indenture shall
have the meanings ascribed to them by the Original Indenture, as amended.
Section 102. Effect of Headings.
The Article and Section headings herein are for convenience
only and shall not affect the construction hereof.
Section 103. Successors and Assigns.
All covenants and agreements in this Second Supplemental
Indenture by the parties hereto shall bind their respective successors and
assigns, whether so expressed or not.
Section 104. Separability Clause.
In case any provision in this Second Supplemental Indenture
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 105. Benefits of Instrument.
Nothing in this Second Supplemental Indenture, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Second Supplemental Indenture or the Original
Indenture.
Section 106. Governing Law.
This Second Supplemental Indenture shall be governed by and
construed in accordance with the laws of the State of New York.
-2-
<PAGE> 4
ARTICLE TWO
Amendment of the Original Indenture
Section 201. Amendment of Section 1011.
Section 1011 of the Original Indenture is hereby amended and
restated in its entirety as follows:
"The Company may omit in any particular instance to comply
with any term, provision or condition set forth in Sections
1006 to 1009, inclusive, with respect to the Securities of any
series if before the time for such compliance the Holders of
at least a majority in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders,
either waive such compliance in such instance or generally
waive compliance with such term, provision or condition, but
no such waiver shall extend to or affect such term, provision
or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of
the Company and the duties of the Trustee in respect of any
such term, provision or condition shall remain in full force
and effect."
Section 202. Effectiveness of Section 201.
Section 201 of this Second Supplemental Indenture shall
neither (i) apply to any Security of any series created prior to the execution
of this Second Supplemental Indenture and entitled to the benefit of Section
1011 of the Original Indenture nor (ii) modify the rights of the Holder of any
such Security with respect to Section 1011 of the Original Indenture.
Section 203. Reaffirmation of Original Indenture.
Each of the Company and the Trustee hereby confirms, reaffirms
and agrees to the Original Indenture in every particular, as amended by this
Second Supplemental Indenture.
Section 204. Trust Indenture Act.
If any provision of this Second Supplemental Indenture limits,
qualifies or conflicts with a provision of the Trust Indenture Act of 1939, as
it may be amended from time to time, that is required under such Act to be a
part of and govern this Second Supplemental Indenture, the latter
-3-
<PAGE> 5
provision shall control. If any provision hereof modifies or excludes any
provision of such Act that may be so modified or excluded, the latter provision
shall be deemed to apply to this Second Supplemental Indenture as so modified or
excluded, as the case may be.
* * *
This Second Supplemental Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
-4-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
POPULAR, INC.
By:
--------------------------------------
Jorge A. Junquera
Senior Executive Vice President
By:
--------------------------------------
Amilcar Jordan
Senior Vice President
Attest:
- ----------------------------------
Assistant Secretary
Affidavit No. ___
Subscribed to before me by Jorge A. Junquera of legal age,
married and resident of San Juan, Puerto Rico, as Senior Executive Vice
President of Popular, Inc. and Amilcar Jordan, of legal age, married and
resident of San Juan, Puerto Rico as Senior Vice President of Popular, Inc. and
who are personally known to me, in San Juan, Puerto Rico, this day of August,
1999.
[SEAL]
--------------------------------------
Notary Public
-5-
<PAGE> 7
THE FIRST NATIONAL BANK OF CHICAGO
By:
--------------------------------------
Name:
Title:
Attest:
- ------------------
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the _____ day of August, 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is a _____________ of The First National Bank of Chicago, one of
the corporations described in and which executed the foregoing instrument; that
he/she knows the seal of said national banking association; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he/she signed
his/her name thereto by like authority.
[SEAL]
--------------------------------------
Notary Public
-6-
<PAGE> 1
EXHIBIT 4(n)
ASSISTANT SECRETARY'S
CERTIFICATE
I, Jorge A. Junquera, Senior Executive Vice President of Popular, Inc.,
and I, Ramon D. Lloveras San Miguel, Assistant Secretary of the Board of
Directors of Popular, Inc., a duly organized and existing corporation under the
laws of the Commonwealth of Puerto Rico, by this certification certify that
pursuant to the authority granted to the Board of Directors by the Certificate
of Incorporation of such Corporation, said Board of Directors on July 10, 1997
adopted the following resolutions increasing the series of preferred stock
designated as Series A Participating Cumulative Preferred Stock from 700,000
shares to 1,400,000 shares.
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Stock of the
Corporation was created pursuant to a resolution adopted by the Board
of Directors on August 11, 1988, as amended on November 8, 1990, on
November 12, 1992, and April 26, 1996, and the number of shares
constituting said series shall be and is hereby increased to 1,400,000
shares.
RESOLVED FURTHER, that the directors have determined that the
preferences and relative, participating, optional or other special
rights of the shares of such series, and the qualifications,
limitations or restrictions thereof, as stated and expressed herein,
are under the circumstances prevailing on the date hereof fair and
equitable to all the existing stockholders of the Corporation.
RESOLVED FURTHER, that the designation and amount of such series and
the voting powers, preferences and relative, participating, optional or
other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Participating Cumulative Preferred Stock (no
par value)" and the number of shares constituting such series is hereby
increased from 700,000 to 1,400,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and
superior to the Series A Participating Cumulative Preferred
Stock with respect to dividends, the holders of shares of
Series A Participating Cumulative Preferred Stock, in
preference to the shares of Common Stock, par value $6 per
share, of the Corporation (the "Common Stock") and any other
stock of the Corporation junior to the Series A Participating
Cumulative Preferred Stock with respect to dividends, shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds legally
<PAGE> 2
available for the purpose, quarterly dividends payable in cash
on March 15, June 15, September 15 and December 31 of each
year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the issuance of a share or
fraction of a share of Series A Participating Cumulative
Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject
to the provision for adjustment hereinafter set forth, 100
times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification of
otherwise), declared on the Common Stock, since the
immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share
of Series A Participating Cumulative Preferred Stock. In the
event the Corporation shall at any time after August 31, 1988
(the "Rights Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each
such case the amount to which holders of shares of Series A
Participating Cumulative Preferred Stock were entitled
immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Participating Cumulative Preferred Stock as
provided in paragraph (A) above immediately after it declares
a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly
Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Series A
Participating Cumulative Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Participating Cumulative
Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A
Participating Cumulative Preferred Stock, unless the date of
issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of
such shares, unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the
determination of holders of shares of Series A Participating
Cumulative Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Participating
Cumulative Preferred Stock in an
<PAGE> 3
amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series A
Participating Cumulative Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which
record date shall be no more than 50 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. In addition to any other voting rights
required by law, the holders of shares of Series A Participating
Cumulative Preferred Stock shall have only the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Participating Cumulative
Preferred Stock shall entitle the holder thereof to one vote
on all matters submitted to a vote of the stockholders of the
Corporation.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Participating Cumulative Preferred Stock
and the holders of shares of Common Stock shall vote together
as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Participating
Cumulative Preferred Stock shall be in arrears in an amount
equal to six quarterly dividends thereon, the occurrence of
such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly
dividend period on all shares of Series A Participating
Cumulative Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each
default period, all holders of Preferred Stock (including
holders of Series A Participating Cumulative Preferred Stock)
with dividends in arrears in an amount equal to six quarterly
dividends thereon, voting as a class, irrespective of series,
shall have the right to elect two Directors.
(ii) During any default period, such voting right of the
holders of Series A Participating Cumulative Preferred Stock
may be exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such voting
right nor the right of the holders of any other series of
Preferred Stock, if any, to increase, in certain cases, the
authorized number of Directors shall be exercised unless the
holders of ten percent in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The
absence of a quorum of the holders of Common Stock shall not
affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred
Stock shall exercise such voting right initially during an
existing default period, they shall have the right, voting as
a class, to elect Directors to fill such vacancies, if any, in
the Board of Directors as may then exist up to two Directors
or, if such right is exercised at an annual meeting, to elect
two Directors. If the number which may be so elected at any
special meeting does not amount to the required number, the
holders of the Preferred Stock shall have the right to make
such increase in the
<PAGE> 4
number of Directors as shall be necessary to permit the
election by them of the required number. After the holders of
the Preferred Stock shall have exercised their right to elect
Directors in any default period and during the continuance of
such period, the number of Directors shall not be increased or
decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A
Participating Cumulative Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right
to elect Directors, the Board of Directors may order, or any
stockholder or stockholders owning in aggregate not less than
ten percent of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the calling
of a special meeting of the holders of Preferred Stock which
meeting shall thereupon be called by the President, a
Vice-President or the Secretary of the Corporation. Notice of
such meeting and of any annual meeting at which holders of
Preferred Stock are entitled to vote pursuant to this
paragraph (C) (iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him at his
last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not
earlier than 20 days and not later than 50 days after such
order or request or in default of the calling of such meeting
within 50 days after such order or request, such meeting may
be called on similar notice by any stockholder or stockholders
owning in the aggregate not less than ten percent of the total
number of shares of Cumulative Preference Stock outstanding.
Notwithstanding the provisions of this paragraph (C) (iii), no
such special meeting shall be called during the period within
50 days immediately preceding the date fixed for the next
annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall
continue to be entitled to elect the whole number of Directors
until the holders of Preferred Stock shall have exercised
their right to elect two (2) Directors voting as a class,
after the exercise of which right (x) the Directors so elected
by the holders of Preferred Stock shall continue in office
until their successors shall have been elected by such holders
or until the expiration of the default period, and (y) any
vacancy in the Board of Directors may (except as provided in
paragraph (C) (ii) of this Section 3) be filled by vote of a
majority of the remaining Directors theretofore elected the
Director whose office shall have become vacant. References in
this paragraph (C) to Directors elected by the holders of a
particular class of stock shall include Directors elected by
such Directors to fill vacancies as provided in clause (y) of
the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to
elect Directors shall cease, (y) the term of any Directors
elected by the holders of Preferred Stock as a class shall
terminate, and (z) the number of Directors shall be such
number as may be provided for in the certificate of
incorporation of by-laws irrespective of any increase made
pursuant to the provisions of paragraph (C) (ii) of this
Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the
<PAGE> 5
certificate of incorporation of by-laws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y)
and (x) in the preceding sentence may be filled by a majority
of the remaining Directors.
(D) Unless the vote or consent of the holders of a greater
number of shares of Preferred Stock (including shares of the
Series A Participating Cumulative Preferred Stock) shall then
be required by law, the consent of the holders of at least a
majority of all shares of Preferred Stock (including shares of
the Series A Participating Cumulative Preferred Stock) at the
time outstanding, given in person or by proxy, either in
writing or by a vote at a meeting called for such purpose in
accordance with the provisions of subparagraph (iii) of
Section 3(C) (as if a default period had occurred and was
continuing) at which the holders of all shares of Preferred
Stock shall vote together as a class without regard to series,
shall be necessary for authorizing, effecting or validating
(i) the merger or consolidation of the Corporation into or
with any other corporation, if such merger or consolidation
would adversely affect the powers, preferences or rights of
any shares of any series of Preferred Stock or (ii) the
amendment, alteration or repeal of any of the provisions of
the Certificate of Incorporation or of any amendment thereof
or supplement thereto (including any Certificate of
Designation, Preferences and Rights or any similar document
relating to any series of Preferred Stock) so as to affect
adversely the powers, preferences, or rights, of any series of
Preferred Stock. The increase of the authorized amount of the
Preferred Stock, or the creation, authorization or issuance of
any shares of any other class of stock of the Corporation
ranking prior to or on a parity with the shares of any series
of Preferred Stock as to dividends or upon liquidation, or the
reclassification of any authorized or outstanding stock of the
Corporation into any such prior or parity shares, or the
creation, authorization or issuance of any obligation or
security convertible into or evidencing the right to purchase
any such prior or parity shares shall not be deemed to affect
adversely the powers, preferences or rights of any series of
Preferred Stock.
(E) Except as set forth herein, holders of Series A
Participating Cumulative Preferred Stock shall have no special
voting rights and their consent shall not be required (except
to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Cumulative
Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A
Participating Cumulative Preferred Stock outstanding shall
have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Series A Participating Cumulative Preferred Stock;
<PAGE> 6
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Participating Cumulative
Preferred Stock, except dividends paid ratably on the Series A
Participating Cumulative Preferred Stock and all such parity
stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding
up) with the Series A Participating Cumulative Preferred
Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution,
liquidation or winding up) with the Series A Participating
Cumulative Preferred Stock, or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Participating Cumulative Preferred
Stock, or any shares of stock ranking on a parity with the
Series A Participating Cumulative Preferred Stock, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Participating
Cumulative Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock to
be created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth in the
Certificate of Incorporation.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Participating Cumulative Preferred Stock
unless, prior thereto, the holders of shares of Series A Participating
Cumulative Preferred Stock shall have received $100.00 per share, plus
an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided
that the holders of shares Series A Participating Cumulative Preferred
Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders
of stock ranking on a Stock, or (2) to the holders of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A
<PAGE> 7
Participating Cumulative Preferred Stock, except distributions made
ratably on the Series A Participating Cumulative Preferred Stock and
all other such parity stock in proportion to the total amounts to which
the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any
time after the Rights Declaration Date declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Participating Cumulative Preferred Stock
were entitled immediately prior to such event under the provision in
clause (1) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property, then in any
such case the shares of Series A Participating Cumulative Preferred
Stock shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment hereinafter
set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of
shares of Series A Participating Cumulative Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Participating
Cumulative Preferred Stock shall not be redeemable.
Section 9. Rank. The Series A Participating Cumulative Preferred Stock
shall rank junior with respect to payment of dividends and on
liquidation to all other series of the Corporation's preferred stock
outstanding on the date hereof and to all such other series that
specifically provide that they shall rank senior to the Series A
Participating Cumulative Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series
A Participating Cumulative Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority or
more of the outstanding shares, if any, of Series A Participating
Cumulative Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Participating Cumulative
Preferred Stock may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares,
to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of
Series A Participating Cumulative Preferred Stock.
<PAGE> 8
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and sealed it with the seal of the Corporation in San Juan, Puerto Rico,
Associated Free State of Puerto Rico, this 3rd day of August, 1999.
/s/ JORGE A. JUNQUERA
-----------------------------------------
Jorge A. Junquera
Senior Executive Vice President
/s/ RAMON D. LLOVERAS SAN MIGUEL
-----------------------------------------
Ramon D. Lloveras San Miguel
Assistant Secretary
<PAGE> 9
Affidavit No. 1184
----
Sworn and subscribed to before me by Jorge A. Junquera of legal age, married and
resident of Guaynabo, PR, in his capacity of Senior Executive Vice President of
Popular, Inc. and Ramon D. Lloveras San Miguel of legal age, married and
resident of Guaynabo, Puerto Rico, in his capacity of Assistant Secretary of
Popular, Inc. who are personally known to me, in San Juan, Puerto Rico, on this
3rd day of August, 1999.
/s/ ESTELA MARTINEZ
--------------------------------
Notary Public
<PAGE> 1
EXHIBIT 8
Sullivan & Cromwell
New York Telephone: (212) 558-4000
Telex: 62694 (International) 127816
(Domestic)
Cable Address: Ladycourt, New York
Facsimile: (212) 558-3588
125 Broad Street, New York 10004-2498
1701 Pennsylvania Ave, N.W. Washington, D.C. 20006-5805
1888 Century Park East, Los Angeles 90071-2901
8, Place Vendome, 75001 Paris
St. Olave's House, 9a Ironmonger Lane, London EC2V 8EY
101 Collins Street, Melbourne 3000
2-1, Marunouchi I-Chome, Chiyoda-Ku, Tokyo 100
Nine Queen's Road, Central, Hong Kong
Oberlindau 54-56, 60323 Frankfurt Am Main
August 4, 1999
Popular, Inc.
Popular International Bank, Inc.
Popular North America, Inc.
c/o Popular, Inc.
209 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
Ladies and Gentlemen:
As counsel to Popular, Inc., Popular International Bank, Inc. and Popular
North America, Inc. (the "Registrants") in connection with the registration of
$1,500,000,000 aggregate principal amount of Debt Securities, we hereby confirm
to you our opinions set forth under the headings "United States Taxation" in
the Prospectus Supplements each of which forms a part of the Registration
Statement of the Registrants to which this opinion is filed as an exhibit
subject to the limitations set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "United
States Taxation" in the Prospectus. 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 Securities Act of 1933.
Very truly yours,
/s/ SULLIVAN & CROMWELL
<PAGE> 1
Exhibit 12
POPULAR, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(Dollars in thousands)
<TABLE>
<CAPTION>
Period ended
June 30, Year Ended December 31,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes 170,377 307,019 284,026 256,027 206,130 175,177
Fixed charges:
Interest expense 422,506 778,691 707,348 591,540 521,624 351,633
Estimated interest component
of net rental payments 4,409 8,817 7,779 7,065 6,012 5,568
Total fixed charges including
interest on deposits 426,915 787,508 715,127 598,605 527,636 357,201
Less: Interest on deposits 220,970 411,492 366,528 350,221 329,783 247,726
Total fixed charges excluding
interest on deposits 205,945 376,016 348,599 248,384 197,853 109,475
Income before income taxes and fixed
charges (including interest on deposits) $597,292 $1,094,527 $999,153 $854,632 $733,766 $532,378
Income before income taxes and fixed
charges (excluding interest on deposits) $376,322 $ 683,035 $632,625 $504,411 $403,983 $284,652
Preferred stock dividends 4,175 8,350 8,350 8,350 8,350 4,630
Ratios of earnings to fixed charges
Including interest on Deposits 1.4 1.4 1.4 1.4 1.4 1.5
Excluding interest on Deposits 1.8 1.8 1.8 2.0 2.0 2.6
Ratio of earnings to fixed charges &
Preferred Stock Dividends
Including interest on Deposits 1.4 1.4 1.4 1.4 1.4 1.5
Excluding interest on Deposits 1.8 1.8 1.8 2.0 2.0 2.5
Preferred Stock Dividends 4,175 8,350 8,350 8,350 8,350 4,630
Rental expense 13,226 26,451 23,336 21,196 18,037 16,705
</TABLE>
<PAGE> 1
Consent of Independent Accountants
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 5, 1999 relating to the
financial statements, which appears on page F-29 of the 1998 Annual Report to
Shareholders of Popular, Inc., which is incorporated by reference in Popular,
Inc.'s Annual Report on Form 10K for the year ended December 31, 1998. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
PRICEWATERHOUSECOOPERS LLP
San Juan, Puerto Rico
August 3, 1999
