AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 2001
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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)
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)
POPULAR INTERNATIONAL BANK, INC.
(Exact name of Registrant as specified in its charter)
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)
POPULAR NORTH AMERICA, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 66-0476353
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
MARLTON CROSSING OFFICE PARK (787) 765-9800
400 LIPPINCOTT DRIVE
MARLTON, NEW JERSEY 08053 (Registrant's telephone number, including area code)
(Address of principal executive office)
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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:
Donald J. Toumey, Esq. Edward F. Petrosky, Esq.
Sullivan & Cromwell Sidley Austin Brown & Wood LLP
125 Broad Street 875 Third Avenue
New York, New York 10004 New York, New York 10022
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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
===================================================================================================================
AMOUNT PROPOSED PROPOSED
TO BE MAXIMUM MAXIMUM AMOUNT OF
REGISTERED OFFERING AGGREGATE REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE (1)(2)(3)(4) PRICE OFFERING PRICE FEE (3)
REGISTERED PER UNIT (5) (6)
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Debt Securities and Preferred Stock......... $1,990,000,000 100% $1,990,000,000 $497,500
Guarantees.................................. (7) (7) (7) (7)
===================================================================================================================
(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 (or
initial offering price) 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. $1,990,000,000.
(3) Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
filed as part of this registration statement also relates to (a)
$10,000,000 aggregate principal amount (or initial offering price) of
the registrants' debt securities and preferred stock and the related
guarantees that were previously registered pursuant to Registration
Statement Nos. 333-82507, 333-82507-01 and 333-82507-02 and have not
yet been issued and sold and (b) an undeterminable amount of the
registrants' debt securities and preferred stock and the related
guarantees that were previously registered and may be reoffered or
resold on an ongoing basis after their initial sale in market-making
transactions by affiliates of the registrants. The securities described
in (b) include those described in (a). A filing fee of $417,000 was
paid with respect to the $1,500,000,000 aggregate principal amount (or
initial public offering price) of securities registered pursuant to
Registration Statement Nos. 333-82507, 333-82507-01 and 333-82507-02.
(4) Includes such indeterminate amounts of debt securities and preferred
stock of each registrant as may be issued upon conversion or exchange
of any preferred stock of such registrant that provides for such
issuance.
(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act.
(6) Separate consideration may not be received for registered securities of
each registrant that are issuable on conversion or exchange of other
securities.
(7) No additional consideration will be received for the guarantees.
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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.
EXPLANATORY NOTE
This registration statement contains:
- a prospectus, consisting of a cover page and numbered pages 2
through 28 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. $2,000,000,000
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-30 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.
$2,000,000,000 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-32 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. $2,000,000,000 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
$2,000,000,000; 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-
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED NOVEMBER 13, 2001
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 2001)
$2,000,000,000
POPULAR, INC.
MEDIUM-TERM NOTES, SERIES 4
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
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THE COMPANY: Popular, Inc. Our principal executive office is located at Popular
Center, 209 Munoz Rivera Avenue, 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 $1,000, 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
- any other base rate or interest rate formula as may be
specified in your pricing supplement
- 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
Popular and are not insured by the Federal Deposit Insurance Corporation, the
Bank Insurance Fund or any other government agency.
AGENTS' DISCOUNTS AND
PUBLIC OFFERING PRICE COMMISSIONS PROCEEDS TO POPULAR
Per note........ 100% .125% - .750% 99.250% - 99.875%
Total (1)....... $2,000,000,000 $2,500,000- $15,000,000 $1,985,000,000-
$1,997,500,000
(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.
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CREDIT SUISSE FIRST BOSTON JPMORGAN MERRILL LYNCH & CO. POPULAR SECURITIES, INC.
---------------
The date of this Prospectus Supplement is , 2001.
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.
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
accompanying 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 accompanying prospectus. The Popular senior indenture is
subject to, and governed by, the Trust Indenture Act of 1939, as amended. 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 $2,000,000,000 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. Book-entry
notes may be transferred or exchanged through the depositary. "Description of
Debt Securities We May Offer -- Legal Ownership of Securities" and "-- Special
Considerations for Global Debt Securities" in the accompanying 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;
- 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;
S-2
- 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 or more of the 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, if any;
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, we will pay
the interest to the person or entity entitled to receive the principal of the
note. If principal or another amount 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 153 West 51st Street, 5th Floor, New York, New
York 10019, 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 pricing 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.
S-3
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
owners who own beneficial interests in the global note. An indirect owner's
right to receive those payments will be governed by the rules and practices of
the depositary and its participants, as described in the accompanying prospectus
under "Description of Debt Securities We May Offer -- 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 Bank One, NA, 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.
Unless otherwise indicated in your pricing supplement, if you are an indirect
owner 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 the 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
S-4
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 owners 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 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 owners 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.
S-5
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 exchange rate, computed
by the exchange rate agent, on the second business day before the particular
payment or, if that rate is not then available, on the basis of the most
recently available market 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 The City of
New York as certified for customs purposes (or, if not certified, as otherwise
determined) by the Federal Reserve Bank of New York.
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 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 $1,000 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 $1,000 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. If, however, an interest payment date or the maturity
date of a fixed rate note falls on a day that is not a business day, we will
make the required payment of principal, premium, if any, and/or interest on the
next succeeding business day, and no additional interest will accrue with
respect to the payment made on that next succeeding business day. 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.
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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 payment. 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;
- 11th district rate; and/or
- any other base rate or interest rate formula as may be specified in your
pricing supplement.
If you purchase a floating rate note, your pricing supplement will specify the
type or types of base rates applicable 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
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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.
Your pricing supplement will also specify whether the floating rate note is a
regular floating rate note, a floating rate/fixed rate note or an inverse
floating rate note. Unless you purchase a floating rate note that is designated
a floating rate/fixed rate note or an inverse floating rate note, your
particular floating rate note will be a regular floating rate note. A regular
floating rate note will bear interest at a rate determined by reference to the
applicable rate as specified in your pricing supplement and as adjusted by the
spread and/or spread multiplier, if applicable. Commencing on the first interest
reset date, the rate at which interest on a regular floating rate note is
payable will be reset as of each interest reset date. The interest rate in
effect for the period, if any, from the date of issue to the first interest
reset date will be the initial interest rate.
A floating rate/fixed rate note will bear interest at a rate determined by
reference to the applicable rate as specified in your pricing supplement and as
adjusted by the spread and/or spread multiplier, if applicable. Commencing on
the first interest reset date, the rate at which interest on a floating
rate/fixed rate note is payable will be reset as of each interest reset date.
The interest rate in effect for the period, if any, from the date of issue to
the first interest reset date will be the initial interest rate, and the
interest rate in effect commencing on the fixed rate commencement date will be
the fixed interest rate, if specified in your pricing supplement, or, if not so
specified, the interest rate in effect on the day immediately preceding the
fixed rate commencement date.
An inverse floating rate note will bear interest at a fixed rate minus the
applicable interest rate as specified in your pricing supplement and as adjusted
by the spread and/or spread multiplier, if applicable, provided, however, that
interest on an inverse floating rate note will not be less than zero. Commencing
on the first interest reset date, the rate at which interest on an inverse
floating rate note is payable will be reset as of each interest reset date. The
interest rate in effect for the period, if any, from the date of issue to the
first interest reset date will be the initial interest rate.
Your pricing supplement will also specify, if applicable, the fixed rate
commencement date and the fixed interest rate, as those rates may apply to some
floating rate notes.
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, or ceiling, that the
actual interest rate in effect at any time may not exceed; and/or
- a minimum rate-- i.e., a specified lower limit, or floor, 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:
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- 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 and are not 11th district
rate notes, the third Wednesday of each month;
- for 11th district rate notes that reset monthly, the first calendar day
of the month;
- 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
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. If an interest reset date falls on a day that
is not a business day, that interest reset date will be postponed to the next
succeeding business day, except where LIBOR is applicable, and that business day
falls in the next succeeding calendar month, the particular interest reset date
will be the immediately preceding business day. Also, where a treasury rate is
applicable, if the interest determination date would otherwise fall on an
interest reset date, that interest reset date will be postponed to the next
succeeding business 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.
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 federal funds rate notes and prime rate notes, the interest
determination date relating to a particular interest reset date will be
the business day immediately preceding that interest reset date;
- for CD rate notes, CMT rate notes and commercial paper rate notes, the
interest determination date relating to a particular interest reset date
will be the second business day preceding that interest reset date;
- for LIBOR notes, the interest determination date relating to a
particular interest reset date will be the second LONDON BANKING DAY
preceding 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;
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- 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; and
- for notes with interest rates based on two or more rates, the interest
determination date will be the second business day preceding the
particular interest reset 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 and 11th district rate notes,
however, the determination of the rate will actually be made by a calculation
agent 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; or
- 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;
- 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.
If, however, an interest payment date or the maturity date of a floating rate
note falls on a day that is not a business day, we will make the required
payment of principal, premium, if any, and/or interest on the next succeeding
business day, and no additional interest will accrue with respect to the payment
made on that next succeeding business day.
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, Bank One, NA 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
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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.
The interest factor for notes as to which the interest rate is based on two or
more rates will be calculated in each interest period as if only the applicable
rate specified in your pricing supplement applied.
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 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 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"; or
- If the rate described in the prior paragraph 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 The City of New York (which may include the agents or
their affiliates) selected by the calculation agent; or
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- 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 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"; or
- If the rate described in the prior paragraph 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; or
- 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 The City of New York
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; or
- 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
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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; or
- 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; or
- 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"; or
- 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; or
- 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"; or
- 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"; or
- 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 The City of
New York selected by the calculation agent; or
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- 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", 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; or
- 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);
or
- if the applicable 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 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); or
- 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 securities dealers in The City of New York
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; or
- 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; or
- if fewer than three of these primary dealers are quoting as described
in the paragraph preceding 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 The City of New York
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
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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; or
- 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 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; or
- if fewer than three primary dealers selected by the calculation agent
are quoting as described in the paragraph preceding the prior paragraph,
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 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)"; or
- If the rate described in the prior paragraph 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 The
City of New York (which may include the agents or their affiliates), as
selected by the calculation agent; or
- If the dealers selected by the calculation agent are not 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 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)"; or
- If the rate described in the prior paragraph 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 The City of New York (which may include the agents
or their affiliates) selected by the calculation agent; or
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- If the brokers selected by the calculation agent are not 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 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; or
- 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:
bond equivalent yield = D X N
------------------------
360 -- (D X M) X 100
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 neither a legal holiday nor a day on which banking institutions
generally are authorized or obligated by law, regulation or executive
order to close in The City of New York;
- if the note is a LIBOR note, is also a London banking 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. If the specified
currency is euro, the day must also be a day on which the Trans-European
Automated Real-Time Gross Settlement Express Transfer System is open.
The term "principal financial center" refers to the capital city of the
country issuing the specified currency or the capital city of the
country to which the LIBOR currency relates. However, with
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respect to United States dollars, Australian dollars, Canadian dollars,
Deutsche marks, Dutch guilders, Italian lire, South African rand and
Swiss francs, the term "principal financial center" refers to The City
of New York, Sydney, and (solely in the case of specified currency)
Melbourne, Toronto, Frankfurt, Amsterdam, Milan, Johannesburg and
Zurich, respectively.
"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 designated as "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 BANKING 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:
money market yield = D X 360 X 100
-------------
360-- (D X M)
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.
INDEXED NOTES
We may issue notes with the amount of principal, premium and/or interest payable
in respect of the notes to be determined with reference to the price or prices
of specified commodities or stocks, to the exchange rate of one or more
designated currencies relative to an indexed currency or to other items, which
we will specify, if applicable, in your pricing supplement. In certain cases,
holders of indexed notes may receive a principal payment on the maturity date
that is greater than or less than the principal amount of the indexed notes
depending upon the relative value on the maturity date of the specified indexed
item. Information as to the method for determining the amount of principal,
premium, if any, and/or interest, if any, payable in respect of indexed notes,
certain historical information with respect to the specified indexed item and
any material tax considerations associated with an investment in indexed notes
will be specified in your pricing supplement.
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.
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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 more than 60 days before the applicable redemption date.
We will give the notice in the manner described in the accompanying 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 owners 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 owners 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. This section represents 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;
- an individual that is a bona fide resident of Puerto Rico during the
entire taxable year;
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- 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 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 corporation created or organized under the laws of the United States,
any state thereof, or the District of Columbia;
- 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.
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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 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.
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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 hold 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"), 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:
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- you purchase your note for less than its issue price (determined as
described above under "--Original Issue Discount"); and
- the difference between the note's stated redemption price at maturity
or, in the case of a discount note, the note's revised issue price, and
the price you paid for your note is equal to or greater than 1/4 of 1
percent of your note's stated redemption price at maturity or the
revised issue price, respectively, 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. If you own a market discount note and do not make this election, 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.
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.
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 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
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- 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 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:
1. .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the
issue date; or
2. 15 percent of the total noncontingent principal payments; and
- your note provides for stated interest (compounded or paid at least
annually) only at:
1. one or more qualified floating rates;
2. a single fixed rate and one or more qualified floating rates;
3. a single objective rate; or
4. a single fixed rate and a single objective rate that is a qualified
inverse floating rate.
S-24
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:
1. a fixed multiple that is greater than 0.65 but not more than 1.35;
or
2. 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 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.
S-25
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 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 certain 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.
S-26
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 hold 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 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, and 18% where the
property is held for more than five years.
S-27
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 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
If you are a noncorporate United States holder, information reporting
requirements, on Internal Revenue Service Form 1099, generally will apply to:
- payments of principal and interest on a note within the United States,
including payments made by wire transfer from outside the United States
to an account you maintain in the United States, and
- the payment of the proceeds from the sale of a note effected at a United
States office of a broker.
Additionally, backup withholding will apply to those payments if you are a
noncorporate United States holder that:
- fails to provide an accurate taxpayer identification number,
- is 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, or
- in certain circumstances, fails to comply with applicable certification
requirements.
NON-UNITED STATES HOLDERS
If you are a United States Holder, this section does not apply to you and you
should refer to "--United States Holders" above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
If you are a beneficial owner of a note and you are not a United States person
for U.S. federal income tax purposes, you are generally exempt from backup
withholding and information reporting requirements with respect to:
- payments of principal and interest on a note made to you outside the
United States by Popular or another non-United States payor, and
- other payments of principal and interest on a note and the payment of
the proceeds from the sale of a note effected at a United States office
of a broker, as long as the income associated with those payments is
otherwise exempt from United States federal income tax, and:
1. the payor or broker does not have actual knowledge or reason to know
that you are a United States person and you have furnished to the
payor or broker:
S-28
- an Internal Revenue Service Form W-8BEN or an acceptable
substitute form upon which you certify, under penalties of
perjury, that you are a non-United States person, or
- other documentation upon which it may rely to treat the
payments as made to a non-United States person in
accordance with U.S. Treasury regulations, or
2. you otherwise establish an exemption.
In general, payment of the proceeds from the sale of notes effected at a foreign
office of a broker will not be subject to information reporting or backup
withholding. However, a sale effected at a foreign office of a broker will be
subject to information reporting and backup withholding if:
- the proceeds are transferred to an account maintained by you in the
United States,
- the payment of proceeds or the confirmation of the sale is mailed to you
at a United States address, or
- the sale has some other specified connection with the United States as
provided in the U.S. Treasury regulations,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above are
met or you otherwise establish an exemption.
In addition, payment of the proceeds from the sale of notes effected at a
foreign office of a broker will be subject to information reporting 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 the conduct of a United States trade or business for a
specified three-year period, or
- a foreign partnership, if at any time during its tax year:
1. 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
2. the foreign partnership is engaged in the conduct of a United States
trade or business,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above
(relating to a sale of notes effected at a foreign office of a broker) are met
or you otherwise establish an exemption. Backup withholding will apply if the
sale is subject to information reporting and the broker has actual knowledge
that you are a United States person.
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
S-29
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 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 Sidley Austin 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 Sidley Austin 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 Sidley Austin 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. Brunilda Santos de Alvarez, Esq. owns, directly or indirectly,
5,325 shares of common stock of Popular, Inc. pursuant to Popular, Inc.'s
employee stock ownership plan and otherwise. The employee stock ownership plan
is open to all employees of Popular, Inc.
S-30
- --------------------------------------------------------------------------------
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
PAGE
Prospectus Supplement
Description of Notes We May Offer........................ S-2
United States Taxation................................... S-19
Supplemental Plan of Distribution........................ S-29
Validity of the Notes.................................... S-30
Prospectus
Popular, Inc............................................. 2
Popular International Bank, Inc.......................... 2
Popular North America, Inc............................... 2
Consolidated Ratio of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges and Preferred
Stock Dividends of Popular, Inc........................ 3
Use of Proceeds.......................................... 3
Description of Debt Securities We May Offer ............. 5
Description of Preferred Stock........................... 21
Validity of Offered Securities........................... 25
Experts.................................................. 25
Plan of Distribution..................................... 25
Where You Can Find More Information...................... 27
Incorporation of Information We File With the SEC........ 27
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT
DATED NOVEMBER 13, 2001
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 2001)
$2,000,000,000
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 Marlton Crossing Office Park, 400 Lippincott Drive, Marlton, New
Jersey 08053, 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, Inc.
- 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, Inc. or
holders of the notes
- Payments in U.S. dollars or one or more foreign currencies
- Minimum denomination of $1,000, 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
- any other base rate or interest rate formula as may
be specified in your pricing supplement
- 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, Inc.. 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, Inc. and the
guarantor and will not be savings accounts, deposits or other obligations of any
bank or nonbank subsidiary of Popular North America, Inc. or the guarantor and
are not insured by the Federal Deposit Insurance Corporation, the Bank Insurance
Fund or any other government agency.
PUBLIC OFFERING AGENTS' DISCOUNTS AND PROCEEDS TO
PRICE COMMISSIONS POPULAR NORTH AMERICA, INC.
Per note....... 100% .125% -- .750% 99.250%-- 99.875%
Total(1)....... $2,000,000,000 $2,500,000-- $15,000,000 $1,985,000,000-- $1,997,000,000
- ---------------
(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.
---------------
CREDIT SUISSE FIRST BOSTON JPMORGAN MERRILL LYNCH & CO. POPULAR SECURITIES, INC.
---------------
The date of this Prospectus Supplement is , 2001.
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.
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
accompanying 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, Inc. will issue the notes under the Popular North America
senior indenture, which is described in the accompanying prospectus. The Popular
North America senior indenture is subject to, and governed by, the Trust
Indenture Act of 1939, as amended. 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, Inc.
may issue any amount of debt securities in one or more series. From time to
time, Popular North America, Inc. 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 $2,000,000,000 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, Inc., as described in the accompanying
prospectus under "Description of Debt Securities We May Offer -- Popular, Inc.'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, Inc. 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, Inc. 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, Inc. may also offer notes with
variable terms other than interest rates concurrently to different investors.
Popular North America, Inc. 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, Inc. 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. Book-entry
notes may be transferred or exchanged through the depositary. "Description of
Debt Securities We May Offer -- Legal Ownership of Securities" and "-- Special
Considerations for Global Debt Securities" in the accompanying 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 North America, Inc. 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;
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- 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 or more of the 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, if any; 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, we will pay
the interest to the person or entity entitled to receive the principal of the
note. If principal or another amount 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 153 West 51st Street, 5th Floor, New York, New
York 10019, 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 pricing 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.
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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
owners who own beneficial interests in the global note. An indirect owner's
right to receive those payments will be governed by the rules and practices of
the depositary and its participants, as described in the accompanying prospectus
under "Description of Debt Securities We May Offer -- 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 The City of New York or, with
Popular North America, Inc.'s approval, to another bank. The holder must file
this request with Bank One, NA, 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 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
owner 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.
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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 owners 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 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 owners 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.
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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 exchange rate, computed
by the exchange rate agent, on the second business day before the particular
payment or, if that rate is not then available, on the basis of the most
recently available market 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 The City of
New York as certified for customs purposes (or, if not certified, as otherwise
determined) by the Federal Reserve Bank of New York.
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 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. If, however, an interest payment date or the maturity
date of a fixed rate note falls on a day that is not a business day, we will
make the required payment of principal, premium, if any, and/or interest on the
next succeeding business
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day, and no additional interest will accrue with respect to the payment made on
that next succeeding business day. 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 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 payment. 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;
- 11th district rate; and/or
- any other base rate or interest rate formula as may be
specified in your pricing supplement.
If you purchase a floating rate note, your pricing supplement will specify the
type or types of base rates applicable 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
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- 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.
Your pricing supplement will also specify whether the floating rate note is a
regular floating rate note, a floating rate/fixed rate note or an inverse
floating rate note. Unless you purchase a floating rate note that is designated
a floating rate/fixed rate note or an inverse floating rate note, your
particular floating rate note will be a regular floating rate note. A regular
floating rate note will bear interest at a rate determined by reference to the
applicable rate as specified in your pricing supplement and as adjusted by the
spread and/or spread multiplier, if applicable. Commencing on the first interest
reset date, the rate at which interest on a regular floating rate note is
payable will be reset as of each interest reset date. The interest rate in
effect for the period, if any, from the date of issue to the first interest
reset date will be the initial interest rate.
A floating rate/fixed rate note will bear interest at a rate determined by
reference to the applicable rate as specified in your pricing supplement and as
adjusted by the spread and/or spread multiplier, if applicable. Commencing on
the first interest reset date, the rate at which interest on a floating
rate/fixed rate note is payable will be reset as of each interest reset date.
The interest rate in effect for the period, if any, from the date of issue to
the first interest reset date will be the initial interest rate, and the
interest rate in effect commencing on the fixed rate commencement date will be
the fixed interest rate, if specified in your pricing supplement, or, if not so
specified, the interest rate in effect on the day immediately preceding the
fixed rate commencement date.
An inverse floating rate note will bear interest at a fixed rate minus the
applicable interest rate as specified in your pricing supplement and as adjusted
by the spread and/or spread multiplier, if applicable, provided, however, that
interest on an inverse floating rate note will not be less than zero. Commencing
on the first interest reset date, the rate at which interest on an inverse
floating rate note is payable will be reset as of each interest reset date. The
interest rate in effect for the period, if any, from the date of issue to the
first interest reset date will be the initial interest rate.
Your pricing supplement will also specify, if applicable, the fixed rate
commencement date and the fixed interest rate, as those rates may apply to
some floating rate notes.
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, or ceiling,
that the actual interest rate in effect at any time may not
exceed; and/or
- a minimum rate-- i.e., a specified lower limit, or floor, 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 and are not 11th
district rate notes, the third Wednesday of each month;
- for 11th district rate notes that reset monthly, the first
calendar day of the month;
- 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 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. If an interest reset date falls on a day that
is not a business day, that interest reset date will be postponed to the next
succeeding business day, except where LIBOR is applicable and that business day
falls in the next succeeding calendar month, the particular interest reset date
will be the immediately preceding business day. Also, where a treasury rate is
applicable, if the interest determination date would otherwise fall on an
interest reset date, that interest reset date will be postponed to the next
succeeding business 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.
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 federal funds rate notes and prime rate notes, the
interest determination date relating to a particular interest
reset date will be the business day immediately preceding that
interest reset date.
- For CD rate notes, CMT rate notes and commercial paper rate
notes, the interest determination date relating to a
particular interest reset date will be the second business day
preceding that interest reset date.
- For LIBOR notes, the interest determination date relating to a
particular interest reset date will be the second LONDON
BANKING DAY preceding 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.,
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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.
- For notes with interest rates based on two or more rates, the
interest determination date will be the second business day
preceding the particular interest reset 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 and 11th district rate notes,
however, the determination of the rate will actually be made by a calculation
agent 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; or
- 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;
- 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.
If, however, an interest payment date or the maturity date of a floating rate
note falls on a day that is not a business day, we will make the required
payment of principal, premium, if any, and/or interest on the next succeeding
business day, and no additional interest will accrue with respect to the payment
made on that next succeeding business day.
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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, Bank One, NA 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.
The interest factor for notes as to which the interest rate is based on two or
more rates will be calculated in each interest period as if only the applicable
rate specified in your pricing supplement applied.
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 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 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";
or
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- If the rate described in the prior paragraph 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 The City of New York (which may include the
agents or their affiliates) selected by the calculation agent;
or
- 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 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"; or
- If the rate described in the prior paragraph 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; or
- 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 The City of New York 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; or
- 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;
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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; or
- 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; or
- 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"; or
- 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; or
- 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";
or
- 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
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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"; or
- 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 The City of New York selected
by the calculation agent; or
- 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", 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;
or
- 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);
or
- if the applicable 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 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); or
- 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
securities dealers in The City of New York 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; or
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- 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 fewer than three of these primary dealers are quoting as
described in the paragraph preceding 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 The
City of New York 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; or
- if fewer than three primary dealers selected by the
calculation agent are quoting as described in the paragraph
preceding the prior paragraph, 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 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)"; or
- If the rate described in the prior paragraph 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 The City of
New York (which may include the agents or their affiliates),
as selected by the calculation agent; or
- If the dealers selected by the calculation agent are not
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.
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- 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)"; or
- If the rate described in the prior paragraph 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 The City of New
York selected by the calculation agent; or
- If the brokers selected by the calculation agent are not
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 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; or
- 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:
bond equivalent yield = D X N X 100
-------------------
360-- (D X M)
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:
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- for all notes, is a Monday, Tuesday, Wednesday, Thursday or
Friday that is neither a legal holiday nor a day on which
banking institutions generally are authorized or obligated by
law, regulation or executive order to close in The City of New
York;
- if the note is a LIBOR note, is also a London banking 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. If the specified currency is euro, the day
must also be a day on which the Trans-European Automated
Real-Time Gross Settlement Express Transfer System is open.
The term "principal financial center" refers to the capital
city of the country issuing the specified currency or the
capital city of the country to which the LIBOR currency
relates. However, with respect to United States dollars,
Australian dollars, Canadian dollars, Deutsche marks, Dutch
guilders, Italian lire, South African rand and Swiss francs,
the term "principal financial center" refers to The City of
New York, Sydney, and (solely in the case of specified
currency) Melbourne, Toronto, Frankfurt, Amsterdam, Milan,
Johannesburg and Zurich, respectively.
"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 designated as "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 BANKING 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:
money market yield = D X 360 X 100
-------------------
360-- (D X M)
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.
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"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.
INDEXED NOTES
We may issue notes with the amount of principal, premium and/or interest payable
in respect of the notes to be determined with reference to the price or prices
of specified commodities or stocks, to the exchange rate of one or more
designated currencies relative to an indexed currency or to other items, which
we will specify, if applicable, in your pricing supplement. In certain cases,
holders of indexed notes may receive a principal payment on the maturity date
that is greater than or less than the principal amount of the indexed notes
depending upon the relative value on the maturity date of the specified indexed
item. Information as to the method for determining the amount of principal,
premium, if any, and/or interest, if any, payable in respect of indexed notes,
certain historical information with respect to the specified indexed item and
any material tax considerations associated with an investment in indexed notes
will be specified in your pricing supplement.
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 as provided in the applicable
pricing supplement. 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;
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- 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 more than 60 days before the applicable redemption date.
We will give the notice in the manner described in the accompanying 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 owners 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 owners 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.
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UNITED STATES TAXATION
This section describes the principal United States federal income tax
consequences of owning the notes we are offering. This section represents the
opinion of Sullivan & Cromwell, counsel to Popular North America, Inc. 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;
- an individual that is a bona fide resident of Puerto Rico
during the entire taxable year;
- a bank;
- 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 corporation created or organized under the laws of the
United States, any state thereof, or the District of Columbia;
- 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,
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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).
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 the total amount of your note's de minimis original
issue discount by a fraction equal to:
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- 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 hold 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"), 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.
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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"); and
- the difference between the note's stated redemption price at
maturity or, in the case of a discount note, the note's
revised issue price, and the price you paid for your note is
equal to or greater than 1/4 of 1 percent of your note's
stated redemption price at maturity or the revised issue
price, respectively, 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. If you own a market discount note and do not make this election, 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.
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.
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 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, Inc.
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:
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- in the case of an option or options that Popular North
America, Inc. may exercise, Popular North America, Inc. 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, Inc. 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 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:
1. .015 multiplied by the product of the total
noncontingent principal payments and the number of
complete years to maturity from the issue date; or
2. 15 percent of the total noncontingent principal
payments; and
- your note provides for stated interest (compounded or paid at
least annually) only at:
1. one or more qualified floating rates;
2. a single fixed rate and one or more qualified
floating rates;
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3. a single objective rate; or
4. 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:
1. a fixed multiple that is greater than 0.65 but not
more than 1.35; or
2. 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 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.
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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 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 certain 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.
S-26
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 hold 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 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, and 18% where the
property is held for more than five years.
S-27
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 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, Inc. 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:
1. 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, Inc. entitled to
vote;
2. you are not a controlled foreign corporation that is
related to Popular North America, Inc. through actual
or constructive stock ownership; and
3. the U.S. payor does not have actual knowledge or
reason to know that you are a United States person
and:
a. you have furnished to the U.S. payor an
Internal Revenue Service Form W-8BEN or an
acceptable substitute form upon which you
certify, under penalties of perjury, that
you are a non-United States person,
S-28
b. in the case of payments made outside the
United States to you at an offshore account
(generally, an account maintained by you at
a bank or other financial institution at any
location outside the United States), you
have furnished to the U.S. payor
documentation that establishes your identity
and your status as a non-United States
person,
c. the U.S. payor has received a withholding
certificate (furnished on an appropriate
Internal Revenue Service Form W-8 or an
acceptable substitute form) from a person
claiming to be:
i. a withholding foreign partnership
(generally a foreign partnership
that has entered into an agreement
with the Internal Revenue Service
to assume primary withholding
responsibility with respect to
distributions and guaranteed
payments it makes to its partners),
ii. a qualified intermediary (generally
a non-United States financial
institution or clearing
organization or a non-United States
branch or office of a United States
financial institution or clearing
organization that is a party to a
withholding agreement with the
Internal Revenue Service), or
iii. a U.S. branch of a non-United
States bank or of a non-United
States insurance company,
and the withholding foreign partnership,
qualified intermediary or U.S. branch has
received documentation upon which it may
rely to treat the payment as made to a
non-United States person in accordance with
U.S. Treasury regulations (or, in the case
of a qualified intermediary, in accordance
with its agreement with the Internal Revenue
Service),
d. the U.S. payor receives a statement from a
securities clearing organization, bank or
other financial institution that holds
customers' securities in the ordinary course
of its trade or business,
i. certifying to the U.S. payor under
penalties of perjury that an
Internal Revenue Service Form
W-8BEN or an acceptable substitute
form has been received from you by
it or by a similar financial
institution between it and you, and
ii. to which is attached a copy of the
Internal Revenue Service Form
W-8BEN or acceptable substitute
form, or
e. the U.S. payor otherwise possesses
documentation upon which it may rely to
treat the payment as made to a non-United
States person in accordance with U.S.
Treasury regulations; 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, Inc. entitled to vote at the
time of death; and
- 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.
BACKUP WITHHOLDING AND
INFORMATION REPORTING
UNITED STATES HOLDERS
In general, if you are a noncorporate United States holder, Popular North
America, Inc. 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, Popular North America, Inc.
and other payors are required to report to the Internal Revenue Service any
payment of proceeds of the sale of your note before maturity within the United
States. Additionally, backup withholding 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
S-29
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
In general, if you are a United States alien holder, payments of principal,
premium or interest, including OID, made by Popular North America, Inc. and
other payors to you will not be subject to backup withholding and information
reporting, providing that the certification requirements described above under
"--United States Alien Holders" are satisfied or you otherwise establish an
exemption. However, Popular North America, Inc. and other payors are required to
report payments of interest on your notes on Internal Revenue Service Form
1042-S even if the payments are not otherwise subject to information reporting
requirements. In addition, payment of the proceeds from the sale of notes
effected at a United States office of a broker will not be subject to backup
withholding and information reporting provided that:
- the broker does not have actual knowledge or reason to know
that you are a United States person and you have furnished to
the broker:
1. an appropriate Internal Revenue Service Form W-8 or
an acceptable substitute form upon which you certify,
under penalties of perjury, that you are not a United
States person, or
2. other documentation upon which it may rely to treat
the payment as made to a non-United States person in
accordance with U.S. Treasury regulations, or
- you otherwise establish an exemption.
If you fail to establish an exemption and the broker does not possess adequate
documentation of your status as a non-United States person, the payments may be
subject to information reporting and backup withholding. However, backup
withholding will not apply with respect to payments made to an offshore account
maintained by you unless the broker has actual knowledge that you are a United
States person.
In general, payment of the proceeds from the sale of notes effected at a foreign
office of a broker will not be subject to information reporting or backup
withholding. However, a sale effected at a foreign office of a broker will be
subject to information reporting and backup withholding if:
- the proceeds are transferred to an account maintained by you
in the United States,
- the payment of proceeds or the confirmation of the sale is
mailed to you at a United States address, or
- the sale has some other specified connection with the United
States as provided in U.S. Treasury regulations,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above
(relating to a sale of notes effected at a United States office of a broker) are
met or you otherwise establish an exemption.
In addition, payment of the proceeds from the sale of notes effected at a
foreign office of a broker will be subject to information reporting 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 the conduct of a United States
trade or business for a specified three-year period, or
- a foreign partnership, if at any time during its tax year:
1. 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
S-30
2. the foreign partnership is engaged in the conduct of
a United States trade or business,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above
(relating to a sale of notes effected at a United States office of a broker) are
met or you otherwise establish an exemption. Backup withholding will apply if
the sale is subject to information reporting and the broker has actual knowledge
that you are a United States person.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Popular North America, Inc. 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, Inc. reserves the right
to withdraw, cancel or modify this offer without notice. Popular North America,
Inc. 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, Inc. 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, Inc. 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, Inc. 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, Inc. and the agents will negotiate the commissions payable on the sale
of notes with stated maturities in excess of 30 years. Popular North America,
Inc. 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, Inc.. If
all the notes are not sold at the initial offering price, Popular North America,
Inc. or the agents may change the offering price and the other selling terms.
Popular North America, Inc. 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, Inc. 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, Inc. 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, Inc. 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, Inc. and Popular, Inc. 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, Inc.
and Popular, Inc. have 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
S-31
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, Inc., Popular, Inc. 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, Inc., Popular, Inc. 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, Inc. by Sullivan & Cromwell, New York, New York, and for the agents by
Sidley Austin Brown & Wood LLP, New York, New York. Brunilda Santos de Alvarez,
Esq., counsel to Popular, Inc., will pass upon the validity of the guarantees as
to matters of Puerto Rico law for Popular, Inc. Sullivan & Cromwell and Sidley
Austin 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
Sidley Austin Brown & Wood LLP will be conditioned upon and subject to
assumptions regarding future action required to be taken by Popular North
America, Inc. 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. Brunilda Santos de Alvarez, Esq. owns, directly or indirectly,
5,325 shares of common stock of Popular, Inc. pursuant to Popular, Inc.'s
employee stock ownership plan and otherwise. The employee stock ownership plan
is open to all employees of Popular, Inc.
S-32
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
PAGE
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Prospectus Supplement
Description of Notes We May Offer........................ S-2
United States Taxation................................... S-20
Supplemental Plan of Distribution........................ S-31
Validity of the Notes.................................... S-32
Prospectus
Popular, Inc............................................. 2
Popular International Bank, Inc.......................... 2
Popular North America, Inc............................... 2
Consolidated Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Fixed Charges and Preferred
Stock Dividends of Popular, Inc........................ 3
Use of Proceeds.......................................... 3
Description of Debt Securities We May Offer.............. 5
Description of Preferred Stock........................... 21
Validity of Offered Securities........................... 25
Experts.................................................. 25
Plan of Distribution..................................... 25
Where You Can Find More Information...................... 27
Incorporation of Information We File With the SEC........ 27
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 13, 2001
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
$2,000,000,000 of our:
- debt securities and
- preferred stock
- Popular, Inc. will unconditionally and absolutely guarantee all
debt securities and preferred stock offered by Popular
International Bank, Inc. or Popular North America, Inc.
- 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, Inc.'s guarantee of securities
offered by Popular International Bank, Inc. or Popular North America, Inc. as
the GUARANTEES.
The date of this prospectus is , 2001.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT IS 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.
POPULAR, INC.
Popular, Inc. is a diversified, publicly owned bank holding company, registered
under the Bank Holding Company Act of 1956, as amended and, accordingly, subject
to the supervision and regulation of the Board of Governors of the Federal
Reserve System. Popular, Inc. was incorporated in 1984 under the laws of the
Commonwealth of Puerto Rico and is the largest financial institution in Puerto
Rico.
Popular, Inc.'s principal subsidiary, Banco Popular de Puerto Rico, was
incorporated in 1893 and is Puerto Rico's largest bank. A consumer-oriented
bank, Banco Popular de Puerto Rico has the largest retail franchise and the
largest trust operation in Puerto Rico. Banco Popular de Puerto Rico also
operates one or more branches in the U.S. Virgin Islands, the British Virgin
Islands and New York. Banco Popular de Puerto Rico's deposits are insured under
the Bank Insurance Fund of the Federal Deposit Insurance Corporation.
Banco Popular de Puerto Rico has three subsidiaries: Popular Auto, Inc., Puerto
Rico's largest vehicle financing, leasing and daily rental company; Popular
Finance, Inc., a small-loan and second mortgage company in Puerto Rico; and
Popular Mortgage, Inc., a mortgage loan company in Puerto Rico.
Popular, Inc. has three other principal subsidiaries: Popular Securities, Inc.,
Popular International Bank, Inc. and GM Group, Inc. Popular Securities, Inc. is
a securities broker-dealer in Puerto Rico with financial advisory, investment
and security brokerage operations for institutional and retail customers and may
be an underwriter of the securities. More information regarding Popular
International Bank, Inc. and its subsidiary Popular North America, Inc., Inc. is
presented below under "Popular International Bank, Inc." and "Popular North
America, Inc." GM Group, Inc. provides electronic data processing and consulting
services, sale and rental of electronic data processing equipment, and sale and
maintenance of computer software to clients in the United States, the Caribbean
and Latin America through offices in Puerto Rico, Miami, Venezuela and the
Dominican Republic.
In addition, Popular, Inc. has an 85% investment in Newco Mortgage Holding
Corporation, a mortgage banking organization with operations in Puerto Rico that
does business as Levitt Mortgage.
Popular, Inc.'s principal executive offices are located at 209 Munoz Rivera
Avenue, Hato Rey, Puerto Rico 00918, and its telephone number is (787) 765-9800.
POPULAR INTERNATIONAL BANK, INC.
Popular International Bank, Inc., a wholly owned subsidiary of Popular, Inc.,
was organized in 1992 under the laws of the Commonwealth of Puerto Rico. Popular
International Bank, Inc. 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, Inc. owns the outstanding stock of Popular North America, Inc., ATH Costa
Rica and CreST, S.A. Effective May 30, 2001, Popular International Bank, Inc.
exercised its option to acquire 19.99% of Centro Financiero BHD, S.A., a
diversified financial company in the Dominican Republic. Popular International
Bank, Inc. is principally engaged in providing managerial services to its
subsidiaries.
Condensed consolidating financial information of Popular, Inc. with separate
columns for the parent company, Popular International Bank, Inc., other
subsidiaries of Popular, Inc. on a combined basis, consolidating adjustments and
the total consolidated amounts are included in the notes to Popular, Inc.'s
consolidated financial statements that are incorporated by reference.
Popular International Bank, Inc.'s principal executive offices are located at
209 Munoz Rivera Avenue, Hato & Rey, Puerto Rico 00918, and its telephone number
is (787) 765-9800.
POPULAR NORTH AMERICA, INC.
Popular North America, Inc., a wholly-owned subsidiary of Popular International
Bank, Inc. and an indirect wholly-owned subsidiary of Popular, Inc., was
organized in 1991 under the laws of the State of Delaware and is a registered
bank holding company under the Bank Holding Company Act. Popular North America,
Inc. functions as a holding company for Popular, Inc.'s mainland U.S.
operations. Popular North America, Inc. has five wholly owned direct
subsidiaries: Banco Popular North America, Inc., a full service commercial bank
incorporated in New York State; Equity One, Inc., a diversified consumer finance
company; Popular Cash Express, Inc., a retail financial services company;
BanPonce Trust I, a statutory business trust; and Banco Popular, National
Association, chartered in Orlando, Florida. Banco Popular, National Association
commenced operations as a full service commercial bank on July 1, 2000. Popular
Insurance, Inc., a wholly owned non-bank subsidiary of Banco Popular, National
Association and an indirect
2
subsidiary of Popular North America, Inc., also commenced operations on July 1,
2000. Popular Insurance, Inc. is a general insurance agency that offers
insurance products in Puerto Rico.
Banco Popular North America, Inc. conducts banking operations in the mainland
United States. The deposits of Banco Popular North America, Inc. are insured
under the Bank Insurance Fund of the FDIC.
In addition, Banco Popular North America, Inc. owns all of the outstanding stock
of Popular Leasing, USA, a non-banking subsidiary that offers small ticket
equipment leasing in the mainland United States.
Equity One, Inc., a wholly owned subsidiary of Popular North America, Inc., is
engaged in the business of granting personal and mortgage loans and providing
dealer financing in the mainland United States. Popular Cash Express, Inc., a
wholly owned subsidiary of Popular North America, Inc., offers services such as
check cashing, money transfers to other countries, money order sales and
processing of payments through offices and mobile check cashing units in the
mainland United States.
Condensed consolidating financial information of Popular, Inc. with separate
columns for the parent company, Popular North America, Inc., other subsidiaries
of Popular, Inc. on a combined basis, consolidating adjustments and the total
consolidated amounts are included in the notes to Popular, Inc.'s consolidated
financial statements that are incorporated by reference.
Popular North America, Inc.'s principal executive offices are located at
Marlton Crossing Office Park, 400 Lippincott Drive, Marlton, New Jersey 08053,
and its telephone number is (787) 765-9800.
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, Inc.,
Popular International Bank, Inc. and Popular North America, Inc. 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, Inc., Popular
International Bank, Inc. and Popular North America, Inc.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS OF POPULAR, INC.
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------------------
SEPTEMBER 30,
2001 2000 1999 1998 1997 1996
------------ ---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges:
Excluding Interest on Deposits ............ 1.8 1.6 1.7 1.8 1.8 2.0
Including Interest on Deposits ............ 1.4 1.3 1.4 1.4 1.4 1.4
Ratio of Earnings to Fixed Charges
and
Preferred Stock Dividends:
Excluding Interest on Deposits ............ 1.7 1.6 1.7 1.8 1.8 2.0
Including Interest on Deposits ............ 1.4 1.3 1.4 1.4 1.4 1.4
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.
USE OF PROCEEDS
We may 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.
3
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, Inc. will be loaned by Popular North America, Inc. to its direct or
indirect subsidiaries, including Equity One, or used by Popular North America,
Inc. for general corporate purposes. The net proceeds from the sale of
securities by Popular International Bank, Inc. will be loaned by Popular
International Bank, Inc. to its affiliates or used by Popular International
Bank, Inc. 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, Inc.'s subsidiaries' funding
requirements and the availability of other funds. Until used, the proceeds may
be temporarily invested in short-term obligations.
4
DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
INFORMATION ABOUT OUR DEBT SECURITIES
Three different issuers may offer debt securities using this prospectus:
Popular, Inc., Popular International Bank, Inc. and Popular North America, Inc.
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 Bank
One, NA, 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, Inc. 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 further supplemented by the Second Supplemental Indenture
dated as of August 5, 1999, in each case between Popular, Inc. and the trustee.
Popular, Inc. may issue subordinated debt securities under an indenture dated as
of November 30, 1995 between Popular, Inc. and the trustee. Popular North
America, Inc. 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, the Second Supplemental Indenture dated as of May 8, 1997 and
the Third Supplemental Indenture dated as of August 5, 1999, in each case among
Popular, Inc., Popular North America, Inc. and the trustee. If Popular
International Bank, Inc. issues either senior or subordinated debt securities or
if Popular North America, Inc. 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, Inc., Popular International Bank, Inc.
and Popular North America, Inc. are referred to collectively as the senior debt
securities and the subordinated debt securities of Popular, Inc., Popular
International Bank, Inc. and Popular North America, Inc. 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
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
5
greater than $2,000,000,000, 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.
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
6
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 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
7
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.
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 owners of those
securities. As we discuss below, indirect owners are not legal holders, and
investors in securities issued in book-entry form, which we refer to as
book-entry securities, or in street name will be indirect owners.
BOOK-ENTRY OWNERS
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 book-entry
securities, 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.
8
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
owners, and not holders, of the securities. More information regarding the
depositary, participants and indirect owners is described under "-- Special
Considerations for Global Debt Securities -- Information Relating to DTC".
STREET NAME OWNERS
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 owners,
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;
- 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 owner 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 owners 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 owners, of the
securities. Whether and how the holders contact the indirect owners 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
9
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 owner 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 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.
10
SPECIAL CONSIDERATIONS FOR
GLOBAL DEBT SECURITIES
As an indirect owner, 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.
INFORMATION RELATING TO DTC
DTC will act as securities depository for the book-entry securities. The
book-entry securities will be issued as fully registered securities registered
in the name of Cede & Co. (DTC's partnership nominee). One fully registered
global debt security will be issued for each issue of book-entry securities,
each in the aggregate principal amount of that issue, and will be deposited with
DTC. If, however, the aggregate principal amount of any issue exceeds
$400,000,000, one global debt security will be issued with respect to each
$400,000,000 of principal amount and an additional global debt security will be
issued with respect to any remaining principal amount of that issue.
DTC is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered under the provisions of Section 17A of the Exchange Act. DTC holds
securities that its participants deposit with DTC. DTC also facilitates the
settlement among participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct participants of DTC include
securities brokers and dealers (including the agents), banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a number
of its direct participants and by the New York Stock Exchange, Inc., the
American Stock Exchange LLC, and the National Association of Securities Dealers,
Inc. Access to DTC's system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a direct participant, either directly or indirectly.
The rules applicable to DTC and its participants are on file with the Securities
and Exchange Commission.
Purchases of book-entry securities under DTC's system must be made by or through
direct participants, which will receive a credit for the book-entry securities
on DTC's records. The ownership interest of each actual purchaser of each
book-entry note represented by a global debt security, which we refer to as an
indirect owner, is in turn to be recorded on the records of direct participants
and indirect participants. Indirect owners will not receive written confirmation
from DTC of their purchase, but they are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct participants or indirect
participants through which such indirect owners entered into the transaction.
Transfers of ownership interests in a global debt security representing
book-entry securities are to be accomplished by entries made on the books of
participants acting on behalf of indirect owners. Indirect owners of a global
debt security representing book-entry securities will not receive non-global
certificates representing their ownership interests in the book-entry
securities, except if use of the book-entry system for the book-entry securities
is discontinued.
To facilitate subsequent transfers, all global debt securities representing
book-entry securities which are deposited with, or on behalf of, DTC are
registered in the name of DTC's nominee, Cede & Co. The deposit of global debt
securities with, or on behalf of, DTC and their registration in the name of Cede
& Co. effect no change in beneficial ownership. DTC has no knowledge of the
actual indirect owners of the global debt securities representing the book-entry
securities; DTC's records reflect only the identity of the direct participants
to whose accounts the book-entry securities are credited, which may or may not
be the indirect owners. The participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct participants, by
direct participants to indirect participants, and by direct participants and
indirect participants to indirect owners will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the global debt
securities representing the book-entry securities. Under its usual procedures,
DTC mails an omnibus proxy to a company as soon as possible after the applicable
record date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights
to those direct participants to whose accounts the book-entry securities are
credited on the applicable record date (identified in a listing attached to the
omnibus proxy).
Principal, premium, if any, and/or interest, if any, payments on the global debt
securities representing the book-entry securities will be made in immediately
available funds to DTC. DTC's practice is to credit direct participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on that date. Payments by participants to indirect owners
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of those
participants and not of DTC, the trustee or us, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal, premium, if any, and/or interest, if any, to DTC is the
responsibility of the issuer and the trustee, disbursement of the payments to
direct participants will be the responsibility of DTC, and disbursement of such
payments to the indirect owners will be the responsibility of direct
participants and indirect participants.
If applicable, redemption notices will be sent to Cede & Co. If less than all of
the book-entry securities of like tenor and terms are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each direct
participant in the issue to be redeemed.
An indirect owner will give notice of any option to elect to have its book-entry
securities repaid by us, through its participant, to the trustee, and will
effect delivery of the book-entry securities by causing the direct participant
to transfer the participant's interest in the global debt security or securities
representing the book-entry securities, on DTC's records, to the trustee. The
requirement for physical delivery of book-entry securities in connection with a
demand for repayment will be deemed satisfied when the ownership rights in the
global debt security or securities representing the book-entry securities are
transferred by direct participants on DTC's records.
DTC may discontinue providing its services as securities depository with respect
to the book-entry securities at any time by giving reasonable notice to us or
the trustee. Under these circumstances, if a successor securities depository is
not obtained, non-global certificates are required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers through
DTC (or a successor securities depository). In that event, non-global
certificates will be printed and delivered.
The information in this section concerning DTC and DTC's system has been
obtained from sources that we believe to be reliable, but neither we nor any
agent takes any responsibility for the accuracy of this information.
If debt securities are issued only in the form of a global debt security, an
investor should be aware of the following:
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- 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 owner 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;
- 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 OWNERS OF DEBT SECURITIES.
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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 because it will be the sole holder of the debt security.
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.
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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.
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 owners 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 owners 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.
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A change in law, regulation or interpretation could oblige Popular, Inc. or
Popular International Bank, Inc. 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 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, Inc. 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, Inc. remains a controlled
subsidiary (as defined below), except as provided above under "-- Mergers and
Similar Transactions".
In addition, Popular, Inc. 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, Inc. 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, Inc.'s senior
debt securities, Popular, Inc.'s guarantees of Popular North America, Inc.'s
senior debt securities and, at Popular, Inc.'s discretion, any other
indebtedness with a right of payment equal to Popular, Inc.'s senior debt
securities and Popular, Inc.'s guarantees of Popular North America, Inc.'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
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law that is a significant subsidiary of Popular, Inc. as defined in Rule 1-02 of
Regulation S-X of the SEC. As of the date of this prospectus, Banco Popular,
Inc. and Banco Popular North America, Inc. are the only material banking
subsidiaries of Popular, Inc..
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 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, if any, 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.
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"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.
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;
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- The trustee must not have taken action for 60 days after receipt of
the above notice and offer of indemnity; and
- 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 owners 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, Inc.'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 owners 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 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:
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- 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,
Inc.'s guarantees of the subordinated debt securities of Popular International
Bank, Inc. and Popular North America, Inc.
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 below). 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
- 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.
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As of September 30, 2001, Popular, Inc. (on a consolidated basis) had $2.6
billion principal amount of senior indebtedness, which includes $759 million in
senior indebtedness of Popular North America, Inc. that is guaranteed by
Popular, Inc. and no senior indebtedness of Popular International Bank, Inc. and
$7.1 billion of other financial obligations. Popular International Bank, Inc.
had no senior indebtedness and had $4 million in other financial obligations,
and Popular North America, Inc. had $918 million principal amount of senior
indebtedness and $1.8 billion of other financial obligations.
POPULAR, INC.'S GUARANTEE
Popular, Inc. will guarantee punctual payment on the Popular International Bank,
Inc. and Popular North America, Inc. senior debt securities, when and as
payments are due and payable. Popular, Inc.'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, Inc. will evidence the guarantee and will appear on each
Popular International Bank, Inc. and Popular North America senior debt security.
Holders of the Popular International Bank, Inc. and Popular North America senior
debt securities may proceed directly against Popular, Inc. in the event of
default under the Popular International Bank, Inc. and Popular North America
senior debt securities without first proceeding against Popular International
Bank, Inc. or Popular North America, Inc. The guarantees will rank equally in
right of payment with all other unsecured and unsubordinated obligations of
Popular, Inc.
Popular, Inc. will guarantee the punctual payment of rights of payment under the
Popular International Bank, Inc. and Popular North America subordinated debt
securities on a subordinated basis and otherwise on the same terms as the
Popular International Bank, Inc. and Popular North America senior debt
securities.
OUR RELATIONSHIP WITH THE TRUSTEE
Bank One, NA 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,
Inc.'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 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, Inc.:
- Restated Certificate of Incorporation, as amended;
- Certificates of Designation describing Popular, Inc.'s 8.35%
Non-Cumulative Monthly Income Preferred Stock;
- 1994 Series A Preferred Stock;
- Series A Participating Preferred Stock; and
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- Certificate of Designation relating to each series of Popular, Inc.'s
preferred stock to which this prospectus relates.
For Popular International Bank, Inc. and Popular North America, Inc.--
- 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, Inc. 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, Inc. has designated and
issued 4,000,000 shares of 8.35% Non-Cumulative Monthly Income Preferred Stock,
1994 Series A, has 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, Inc.'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, Inc.'s Certificate of
Incorporation authorizes its board of directors to issue 1,000 shares of
preferred stock with a par value of $.01 per share.
As of the date of this prospectus, Popular International Bank, Inc. and Popular
North America, Inc. had no shares of preferred stock outstanding; Popular, Inc.
owned all of Popular International Bank, Inc.'s common stock; and Popular
International Bank, Inc. owned all of Popular North America, Inc.'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
- any rights, preferences, privileges, limitations and restrictions
which are not inconsistent with the provisions of Popular, Inc.'s
Restated Certificate of Incorporation or Popular International Bank,
Inc.'s or Popular North America, Inc.'s Certificate of Incorporation.
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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
applicable 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.
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.
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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, Inc. for the year ended
December 31, 2000.
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 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
24
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, Inc. 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, INC.'S GUARANTEE
Popular, Inc. 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, Inc. and Popular North America
preferred stock;
- the redemption price for any shares of Popular International Bank,
Inc. and Popular North America preferred stock called or redeemed at
the option of Popular International Bank, Inc. and Popular North
America, Inc. or the holder;
- the liquidation preference of Popular International Bank, Inc. and
Popular North America preferred stock; and
- any additional amounts with respect to a series of Popular
International Bank, Inc. and Popular North America preferred stock.
The guarantee of the Popular International Bank, Inc. and Popular North America
preferred stock shall constitute an unsecured obligation of Popular, Inc. and
will rank junior to all of its liabilities. The guarantee will rank senior to
Popular, Inc.'s common stock. The guarantee's rank relative to the preferred
stock of Popular, Inc. will be specified in the applicable prospectus
supplement.
VALIDITY OF OFFERED SECURITIES
Brunilda Santos de Alvarez, Esq., counsel to Popular, Inc., will pass upon the
validity of the preferred stock of Popular, Inc. and Popular International Bank,
Inc. for Popular, Inc. and Popular International Bank, Inc. The validity of the
senior debt securities and subordinated debt securities of Popular, Inc. and
Popular International Bank, Inc. and the guarantees by Popular, Inc. of the
senior debt securities and subordinated debt securities of Popular International
Bank, Inc. and Popular North America, Inc. will be passed upon for Popular, Inc.
and Popular International Bank, Inc. 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, Inc. The validity of the
securities will be passed upon for any underwriters or agents by counsel named
in the applicable prospectus supplement. Brunilda Santos de Alvarez, Esq. owns,
directly or indirectly, 5,325 shares of common stock of Popular, Inc. pursuant
to Popular, Inc.'s employee stock ownership plan and otherwise. The employee
stock ownership plan is open to all employees of Popular, Inc.
EXPERTS
The financial statements incorporated in this prospectus by reference to
Popular, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000
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
25
- 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 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, Inc. 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, Inc. and a member of the NASD. Because of the relationship between
Popular Securities and Popular, Inc., Popular North America, Inc. and Popular
International Bank, Inc., 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, Inc. may also engage in transactions of this kind and may use this
prospectus for this purpose.
Popular, Inc. does not expect to receive any proceeds from market-making
transactions. Popular, Inc. 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, Inc.
26
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.bancopopular.com. You may
also read and copy any document we file by visiting the SEC's public reference
rooms. 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.
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 Popular, Inc.
filed with the SEC under the Securities Exchange Act:
1. The Annual Report on Form 10-K for the year ended December 31, 2000,
provided, however, that the information referred to in Item 402(a)(8) of
Regulation S-K promulgated by the SEC shall not be deemed to be specifically
incorporated by reference in this prospectus.
2. The Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and
June 30, 2001.
3. The Current Reports on Form 8-K dated January 16, 2001, April 12, 2001, July
13, 2001 and October 10, 2001.
We also incorporate by reference each of the following documents that Popular,
Inc. will file with the SEC after the date of this prospectus until this
offering is completed or after the date of the 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.
27
You may request a copy of any filings referred to above (excluding exhibits,
other than exhibits that are specifically incorporated by reference in those
filings), 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.bancopopular.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:
Registration Fee...................... $ 497,500
Fees and Expenses of Accountants...... $ 45,000
Fees and Expenses of Counsel.......... $ 225,000
Blue Sky Fees and Expenses............ $ 37,500
NASD Filing Fee....................... $ 30,500
Printing and Engraving Expenses....... $ 37,500
Rating Agency Fees.................... $ 597,000
Trustee's Fees........................ $ 18,000
Miscellaneous......................... $ 37,500
----------
Total....................... $ 1,525,500
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Popular, Inc. and Popular International Bank, Inc. are Puerto
Rico corporations.
(i) Article ELEVENTH of the Restated Certificate of Incorporation
of Popular, Inc. 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 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.
II-1
(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, Inc. 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, 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.
II-2
(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.
(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, Inc. 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, Inc.
or its stockholders for monetary damages for breach of fiduciary duty as a
director,
II-3
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, Inc. 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,
Inc. 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, Inc.
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
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, Inc., Popular International Bank, Inc. and Popular
North America, Inc. 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.
(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
II-4
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) -- Second Supplemental Indenture of Popular, Inc., dated as of August 5, 1999,
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) -- Third Supplemental Indenture of Popular North
America, Inc., dated as of August 5, 1999, 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)
(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 (Incorporated by
reference from Pre-Effective Amendment No. 1 to Registration
Statement Nos. 333-82507, 333-82507-01 and 333-82507-02)
(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. 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) -- Consents of Sullivan & Cromwell (included in Exhibits
(5)(b) and (8))
II-5
(24) -- Powers of attorney (included in pages II-9 to II-14).
(25) (a) -- Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of Bank One, NA, as Trustee under indenture of Popular, Inc.
(25) (b) -- Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of Bank One, NA, 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 Bank One, NA, as Trustee under indenture of
Popular North America, Inc.
- ---------------
II-6
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 this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. 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 end 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 this 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 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, Inc.'s annual report pursuant to Section 13(a)
or Section 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.
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
II-7
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-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Co-registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Juan, Commonwealth of Puerto Rico, on the
7th day of November, 2001.
POPULAR, INC.
(Co-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.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and/or
officers of POPULAR, INC. (the "Corporation") hereby constitutes and appoints
Jorge A. Junquera the true and lawful agent and attorney-in-fact of the
undersigned with full power of substitution and resubstitution and with full
power and authority in said agent and attorney-in-fact to sign for each of the
undersigned and in his name, place or stead in any and all capacities indicated
below, a Registration Statement on Form S-3 to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, relating to
the registration of up to $1,990,000,000 aggregate initial offering price of
debt securities, preferred stock and guarantees, and to sign any and all
pre-effective amendments or post-effective amendments to such Registration
Statement and to file the same, with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said agent and attorney-in-fact full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said agent and
attorney-in-fact, or his substitute, may lawfully do or cause to be done by
virtue thereof.
II-9
Signature Title Date
--------- ----- ----
/s/ Richard L. Carrion Chairman, President and Chief Executive November 7, 2001
- ------------------------------------------------ Officer (Principal Executive Officer)
Richard L. Carrion
/s/ Jose B. Carrion Jr. Director November 7, 2001
- ------------------------------------------------
Jose B. Carrion Jr.
/s/ Juan J. Bermudez Director November 7, 2001
- ------------------------------------------------
Juan J. Bermudez
/s/ Francisco J. Carreras Director November 7, 2001
- ------------------------------------------------
Francisco J. Carreras
/s/ David H. Chafey, Jr. Senior Executive Vice President and November 7, 2001
- ------------------------------------------------ Director
David H. Chafey, Jr.
/s/ Antonio Luis Ferre Director November 7, 2001
- ------------------------------------------------
Antonio Luis Ferre
/s/ Hector R. Gonzalez Director November 7, 2001
- ------------------------------------------------
Hector R. Gonzalez
/s/ Jorge A. Junquera Senior Executive Vice President and November 7, 2001
- ------------------------------------------------ Director (Principal Financial Officer)
Jorge A. Junquera
/s/ Manuel Morales, Jr. Director November 7, 2001
- ------------------------------------------------
Manuel Morales, Jr.
/s/ Alberto M. Paracchini Director November 7, 2001
- ------------------------------------------------
Alberto M. Paracchini
/s/ Francisco M. Rexach, Jr. Director November 7, 2001
- ------------------------------------------------
Francisco M. Rexach, Jr.
/s/ Felix J. Serralles, Jr. Director November 7, 2001
- ------------------------------------------------
Felix J. Serralles, Jr.
/s/ Julio E. Vizcarrondo, Jr. Director November 7, 2001
- ------------------------------------------------
Julio E. Vizcarrondo, Jr.
/s/ Amilcar Jordan Senior Vice President (Principal November 7, 2001
- ------------------------------------------------ Accounting Officer)
Amilcar Jordan
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Co-registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of San Juan, Commonwealth of Puerto Rico, on the
7th day of November, 2001.
POPULAR INTERNATIONAL BANK, INC.
(Co-registrant)
By /s/ Jorge A. Junquera
------------------------------------------
Jorge A. Junquera
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.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and/or
officers of POPULAR INTERNATIONAL BANK, INC. (the "Corporation") hereby
constitutes and appoints Richard L. Carrion, Jorge A. Junquera, Richard Barrios
and Amilcar Jordan, and each of them singly, the true and lawful agents and
attorneys-in-fact of the undersigned with full power of substitution and
resubstitution and with full power and authority in said agents and
attorneys-in-fact, and in any one of them, to sign for each of the undersigned
and in his name, place or stead in any and all capacities indicated below, a
Registration Statement on Form S-3 to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, relating to the
registration of up to $1,990,000,000 aggregate initial offering price of debt
securities, preferred stock and guarantees, and to sign any and all
pre-effective amendments or post-effective amendments to such Registration
Statement and to file the same, with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said agents and attorneys-in-fact, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said agents and
attorneys-in-fact or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue thereof.
II-11
Signature Title Date
--------- ----- ----
/s/ Richard L. Carrion Chairman of the Board November 7, 2001
- ---------------------------------------------- (Principal Executive Officer)
Richard L. Carrion
/s/ Jorge A. Junquera President and Director November 7, 2001
- ----------------------------------------------
Jorge A. Junquera
/s/ Alfonso Ballester Director November 7, 2001
- ----------------------------------------------
Alfonso Ballester
/s/ Roberto R. Herencia Senior Vice President and Director November 7, 2001
- ----------------------------------------------
Roberto R. Herencia
/s/ Francisco M. Rexach, Jr. Director November 7, 2001
- ----------------------------------------------
Francisco M. Rexach, Jr.
/s/ Felix J. Seralles, Jr. Director November 7, 2001
- ----------------------------------------------
Felix J. Seralles, Jr.
/s/ Richard Speer Director November 7, 2001
- ----------------------------------------------
Richard Speer
/s/ Julio E. Vizcarrondo, Jr. Director November 7, 2001
- ----------------------------------------------
Julio E. Vizcarrondo, Jr.
/s/ Amilcar Jordan Senior Vice President (Principal November 7, 2001
- ---------------------------------------------- Accounting Officer)
Amilcar Jordan
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of San Juan, Commonwealth of Puerto Rico, on the 7th
day of November, 2001.
POPULAR NORTH AMERICA, INC.
(Co-registrant)
By /s/ Jorge A. Junquera
--------------------------------------
Jorge A. Junquera
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.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and/or
officers of POPULAR NORTH AMERICA, INC. (the "Corporation") hereby constitutes
and appoints Richard L. Carrion, David H. Chafey, Jr., Jorge A. Junquera,
Richard Barrios and Amilcar Jordan, and each of them singly, the true and lawful
agents and attorneys-in-fact of the undersigned with full power of substitution
and resubstitution and with full power and authority in said agents and
attorneys-in-fact, and in any one of them, to sign for each of the undersigned
and in his name, place or stead in any and all capacities indicated below, a
Registration Statement on Form S-3 to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, relating to the
registration of up to $1,990,000,000 aggregate initial offering price of debt
securities, preferred stock and guarantees, and to sign any and all
pre-effective amendments or post-effective amendments to such Registration
Statement and to file the same, with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said agents and attorneys-in-fact, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said agents and
attorneys-in-fact or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue thereof.
II-13
Signatures Title Date
---------- ----- ----
/s/ Richard L. Carrion Chairman (Principal Executive Officer) November 7, 2001
- ---------------------------------------------
Richard L. Carrion
/s/ Jorge A. Junquera President and Director (Principal Financial November 7, 2001
- --------------------------------------------- Officer)
Jorge A. Junquera
/s/ Alfonso Ballester Director November 7, 2001
- ---------------------------------------------
Alfonso Ballester
/s/ Roberto R. Herencia Senior Vice President and Director November 7, 2001
- ---------------------------------------------
Roberto R. Herencia
/s/ Francisco M. Rexach, Jr. Director November 7, 2001
- ---------------------------------------------
Francisco M. Rexach, Jr.
/s/ Felix J. Seralles Jr. Director November 7, 2001
- ---------------------------------------------
Felix J. Seralles Jr.
/s/ Richard Speer Director November 7, 2001
- ---------------------------------------------
Richard Speer
/s/ Julio E. Vizcarrondo, Jr. Director November 7, 2001
- ---------------------------------------------
Julio E. Vizcarrondo, Jr.
/s/ Amilcar Jordan Senior Vice President November 7, 2001
- --------------------------------------------- (Principal Accounting Officer)
Amilcar Jordan
</Table>
II-14
EXHIBIT INDEX
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ -------------
(4) (e) -- Second Supplemental Indenture of Popular, Inc.,
dated as of August 5, 1999, between Popular, Inc. and
The First National Bank of Chicago, as trustee...................
(4) (h) -- Third Supplemental Indenture of Popular North
America, Inc., dated as of August 5, 1999, among
Popular North America, Inc., Popular, Inc., as guarantor,
and The First National Bank of Chicago, as trustee...............
(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. 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 Exhibits
(5)(b) and (8))..................................................
(24) -- Powers of attorney (included in pages II-9 to II-14).............
(25) (a) -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of Bank One, NA, as
Trustee under Indenture of Popular, Inc. ........................
(25) (b) -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of Bank One, NA, 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 Bank One, NA, as
Trustee under Indenture of Popular North America, Inc............
II-15