-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SfGjkX3YyW++n8mKsj84LQ0/iuzVnFSU9039cLCpAO6DnBnpLN8I7oAeLrrdD8kH JFB/T2912jdinxUUq7mNyA== 0000950144-98-013804.txt : 19981215 0000950144-98-013804.hdr.sgml : 19981215 ACCESSION NUMBER: 0000950144-98-013804 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19981214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POPULAR INC CENTRAL INDEX KEY: 0000763901 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 660416582 STATE OF INCORPORATION: PR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-30897 FILM NUMBER: 98768938 BUSINESS ADDRESS: STREET 1: 209 MUNOZ RIVERA AVE STREET 2: POPULAR CENTER BUILDING CITY: HATO REY STATE: PR ZIP: 00918 BUSINESS PHONE: 7877659800 MAIL ADDRESS: STREET 1: P.O. BOX 362708 CITY: SAN JUAN STATE: PR ZIP: 00936-2708 FORMER COMPANY: FORMER CONFORMED NAME: BANPONCE CORP DATE OF NAME CHANGE: 19920703 424B3 1 POPULAR INC 1 Filed Pursuant to Rule 424(b)(3) Registration No. 333-30897 PROSPECTUS POPULAR, INC. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN COMMON STOCK, PAR VALUE $6 PER SHARE This Prospectus describes the Popular, Inc. Dividend Reinvestment and Stock Purchase Plan. Popular wanted to amend its currently existing Dividend Reinvestment and Stock Purchase Plan to provide certain new features. This prospectus describes the Plan as amended. The Plan promotes long-term ownership in Popular by offering: - A simple, cost-effective method for you to purchase shares of common stock of Popular, without payment of brokerage commissions, fees or service charges; - A way to increase your Popular holdings by reinvesting your cash dividends; and - The opportunity for you to purchase additional shares of Popular common stock by making optional cash payments. You no longer have to be a current Popular shareholder to participate in the Plan. You can purchase your first shares of Popular common stock through the Plan by making an initial investment of not less than $100 or more than $10,000. If you currently participate in the Plan, you will continue to participate in the Plan automatically. Popular's principal executive offices are located at 209 Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918, Telephone number (787) 765-9800. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY COMMONWEALTH OF PUERTO RICO OR STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR HAS DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SECURITIES PURCHASED OR HELD UNDER THE TERMS OF THE PLAN ARE NOT SAVINGS ACCOUNTS OR DEPOSITS OF ANY BANK OR SAVINGS ASSOCIATION, ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY AND MAY LOSE VALUE. THERE IS NO BANK GUARANTEE ATTACHED TO SUCH SECURITIES. The date of this Prospectus is December 14, 1998. 2 TABLE OF CONTENTS
PAGE ---- The Company........................ 3 Use of Proceeds.................... 3 Description of the Plan............ 3 Purpose.......................... 3 Advantages and Disadvantages of Participation in Plan......... 3 Participation.................... 4 Purchases Under the Plan......... 6 Optional Cash Payments........... 7 Costs............................ 8 Administration................... 8 Reports to Participants.......... 9 Certificates for Shares.......... 9 Withdrawals, Sale of Shares and Termination................... 9
PAGE ---- Certain Tax Consequences of Participation in the Plan..... 10 General Tax Consequences......... 10 Puerto Rico Income Tax Consequences.................. 11 Federal Income Tax Consequences.................. 13 Other Information................ 13 Description of Capital Stock....... 15 Common Stock..................... 16 Stockholder Rights Plan.......... 17 Preferred Stock.................. 17 Incorporation of Certain Documents by Reference..................... 19 Available Information.............. 19 Forward Looking Statements......... 20 Legal Opinion...................... 20 Experts............................ 20
------------------------- Throughout this prospectus, we refer to Popular, Inc., as either "Popular" or the "Company", to "Banco Popular de Puerto Rico" as "Banco Popular" or the "Bank" and to the Popular, Inc. Dividend Reinvestment and Stock Purchase Plan as the "Plan". ------------------------- You should rely only on the information incorporated by reference or contained in this prospectus. No one is authorized to provide prospective investors with information different from that incorporated by reference or contained in this prospectus. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date of this prospectus. ------------------------- 2 3 THE COMPANY The Company is a diversified financial services company headquartered in San Juan, Puerto Rico. It is the largest financial institution headquartered in Puerto Rico. The Company is a bank holding company and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System. The Company provides a wide variety of financial services through its banking and non-banking subsidiaries. Banco Popular de Puerto Rico, the largest commercial bank in Puerto Rico, is its principal banking subsidiary. Banco Popular was established in 1893 and is a consumer oriented bank that provides a broad array of banking and trust services to consumer and small business as well as to corporations and institutions. Banco Popular also engages in the vehicle leasing, small-loan and mortgage banking business through operating subsidiaries. The Company through Banco Popular and other banking subsidiaries also maintains the largest Hispanic owned bank branch network in the United States. The Company is also engaged in the securities business in Puerto Rico through Popular Securities, Inc., a subsidiary of the Company. Popular Securities provides retail and institutional brokerage, financial advisory and investment banking services. The Company's principal executive offices are located at 209 Munoz Rivera Avenue, Hato Rey, Puerto Rico and its telephone number is (787) 765-9800. USE OF PROCEEDS The net proceeds from the purchase of shares of Common Stock directly from the Company will be used for the Company's general corporate purposes including investments in, or extensions of credit to, the Company's banking and non-banking subsidiaries. The Company has no basis for determining the number of shares of Common Stock that will ultimately be sold pursuant to the Plan or the prices at which such shares will be sold. DESCRIPTION OF THE PLAN The following is a statement of the provisions of the Plan in question and answer form. PURPOSE 1. WHAT IS THE PURPOSE OF THE PLAN? The Plan was adopted by the Board of Directors of the Company on February 12, 1991. The primary purpose of the Plan, as amended, is to provide Company shareholders and other investors with a simple, economical and convenient method of investing cash dividends and optional cash payments in shares of Common Stock without payment of brokerage commissions, service charges or other fees. When such additional shares are purchased directly from the Company, the Company will receive additional funds for general corporate purposes. The Plan is intended for the benefit of long-term investors, and not for the benefit of individuals or institutions who engage in short-term trading activities which cause aberrations in the composite trading volume of Common Stock. ADVANTAGES AND DISADVANTAGES OF PARTICIPATION IN PLAN 2. WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE PLAN? Advantages - Participants in the Plan ("participants") may have cash dividends on all or part of their shares of Common Stock automatically reinvested in additional shares at 95% of the Average Market Price (as defined in Question 10). 3 4 - Participants may make optional cash payments of at least $25 and not more than $10,000 per calendar month for investment in additional shares of Common Stock. Participants who are residents of Puerto Rico may make optional cash payments by authorizing the Plan Administrator to debit their accounts at Banco Popular or using the telephone payment service known as "Telebanco Popular." - Persons not presently shareholders of the Company may become participants by making an initial cash investment of not less than $100 and not more than $10,000 to purchase shares of Common Stock under the Plan. - Participants will not pay any brokerage commissions, service charges or other fees in connection with the purchase of shares of Common Stock under the Plan. - Participants' funds will be fully invested because the Plan permits fractions of shares to be credited to a participant's account. - Participants that are registered holders may direct the Plan Administrator to sell all or a portion of their shares held in the Plan. - Participants will avoid record keeping costs and the need for safekeeping of stock certificates for shares credited to their Plan account through the free reporting and custodial services provided under the Plan. Disadvantages - Participants will not be able to precisely time their purchases through the Plan and will bear the market risk associated with the fluctuations in the price of the Common Stock pending investment of funds under the Plan. See Question 11 regarding the timing of the purchase of shares. - Execution of sales of shares held in the Plan may be subject to delay. Participants will bear the market risk associated with the fluctuations in the price of the Common Stock pending the sale of shares pursuant to the Plan. See Question 18. - No interest will be paid on funds held by the Plan Administrator pending investment of optional cash payments. See Questions 11. - Shares deposited in a Plan account may not be pledged until the shares are withdrawn from the Plan. See Question 21. PARTICIPATION 3. WHO IS ELIGIBLE TO PARTICIPATE? A "registered holder" (which means a shareholder whose shares of Common Stock are registered in the stock transfer books of the Company in his or her name) or a "beneficial owner" (which means a shareholder whose shares of Common Stock are registered in a name other than his or her name, for example, in the name of a broker, bank or other nominee), may participate in the Plan. A registered holder may participate in the Plan directly; a beneficial owner must either become a registered holder by having such shares transferred into his or her name or by making arrangements with his or her broker, bank or other nominee to participate in the Plan on the participant's behalf. In addition, an interested investor that is not a shareholder may participate in the Plan by mailing an initial optional cash investment in Common Stock of not less than $100 or more than $10,000. The right to participate in the Plan is not transferable to another person apart from a transfer of the underlying shares of Common Stock. The Company reserves the right to exclude from participation in the Plan persons who utilize the Plan to engage in short-term trading activities that cause aberrations in the trading volume of the Company's Common Stock. Participants residing in jurisdictions in which their participation in the Plan would be unlawful will not be eligible to participate in the Plan. 4 5 4. HOW DOES AN ELIGIBLE SHAREHOLDER PARTICIPATE? An eligible registered holder may join the Plan by completing and signing the Authorization Form accompanying this Prospectus and returning it to Banco Popular, which is the Plan Administrator. See Question 15. A return envelope is provided for this purpose. Where the stock is registered in more than one name (for example, joint owners) all registered holders must sign exactly as their names appear on the account registration. Eligible beneficial owners who wish to participate in the Plan must instruct their broker, bank or other nominee to complete and sign the Authorization Form and return it to the Plan Administrator. In certain situations where the broker, bank or other nominee holds shares of a beneficial owner in the name of a major securities depository, a Broker and Nominee Form may also be required to participate in the Plan. An interested investor that is not presently a shareholder of the Company, but desires to become a participant by making an initial investment in shares of Common Stock, may join the Plan by signing an Authorization Form and forwarding it, together with such initial investment to the Plan Administrator at the address set forth in Question 15. Authorization Forms, Broker and Nominee Forms and additional copies of this Prospectus may be obtained by contacting the Plan Administrator at: Banco Popular de Puerto Rico, PO Box 362708, San Juan, Puerto Rico 00936-2708, Attention: Popular, Inc. Dividend Reinvestment and Stock Purchase Plan (725), Telephone No. (787) 764-1893 or (787) 765-9800 (Exts. 6108 or 6112). The Company may appoint from time to time one or more information agents (the "Information Agent") for the Plan. The Company will pay the fees and expenses of the Information Agent and may agree to indemnify the Information Agent for certain liabilities which it may incur in connection with the rendering of its services for the Plan. 5. WHAT DOES THE AUTHORIZATION FORM PROVIDE? The Authorization Form provides for the purchase of additional shares of the Company's Common Stock through the following investment options: "FULL DIVIDEND REINVESTMENT" directs the Plan Administrator to invest all cash dividends on all of the shares of Common Stock then or subsequently registered in a participant's name, together with any optional cash payments, in the purchase of additional shares in accordance with the Plan. "PARTIAL DIVIDEND REINVESTMENT" directs the Plan Administrator to invest all cash dividends on only that number of shares of Common Stock registered in a participant's name that is specified in the appropriate space on the Authorization Form, together with any optional cash payments, in the purchase of additional shares in accordance with the Plan. "OPTIONAL CASH PAYMENTS ONLY" permits a participant to make optional cash payments for the purchase of additional shares of Common Stock in accordance with the Plan, while continuing to receive cash dividends on shares registered in his or her name in the usual manner. You may select either one of the dividend reinvestment alternatives or the optional cash purchase alternative. If you sign and return an Authorization Form with no investment alternative designated, you will be enrolled in the Full Dividend Reinvestment option. Cash dividends on all shares of Common Stock held in a participant's account under the Plan will be reinvested in accordance with the Plan, including dividends on shares purchased with optional cash payments, unless the participant specifies otherwise by written notice to the Plan Administrator or terminates participation in the Plan. 6. MAY A PARTICIPANT CHANGE INVESTMENT OPTIONS AFTER ENROLLMENT IN THE PLAN? Yes. A participant may change his or her investment option or the number of participating shares at any time by completing a new Authorization Form and returning it to the Plan Administrator at the address specified in Question 15. 5 6 7. WHEN MAY AN ELIGIBLE SHAREHOLDER OR OTHER INVESTOR JOIN THE PLAN? Eligible shareholders and other interested investors may join the Plan at any time. If an Authorization Form requesting reinvestment of dividends is received by the Plan Administrator on or prior to the record date established for a particular dividend, reinvestment will commence with that dividend. It is anticipated that the dividend record dates will normally precede the dividend payment dates by approximately two weeks. If the Authorization Form is received after the record date established for a particular dividend, then the reinvestment of dividends will not begin until the dividend payment date following the next record date. See Questions 12 and 13 to determine when persons who select the Optional Cash Payments Only option will begin to participate in the Plan. PURCHASES UNDER THE PLAN 8. WHAT IS THE SOURCE OF SHARES PURCHASED UNDER THE PLAN? Shares of Common Stock purchased with reinvested dividends will be purchased from the Company. Shares purchased with optional cash payments will be purchased on the open market or in negotiated transactions. All shares purchased on the open market or in negotiated transactions will be purchased by Smith, Jacobs & Company, Inc., as agent for the participants or any other independent broker-dealer that may be appointed by the Company from time to time to act as agent for the participants (the "Agent"). Purchases of shares in the open market may be made in the over-the-counter market or on any securities exchange where the Common Stock may be traded. 9. HOW MANY SHARES WILL BE PURCHASED FOR PARTICIPANTS? A participant's account will be credited with the number of shares, including fractions computed to four decimal places, equal to the total amount to be invested by the participant less any taxes required to be withheld (see Question 20) divided by the purchase price per share. 10. WHAT WILL BE THE PRICE OF SHARES PURCHASED UNDER THE PLAN? The price of shares purchased with reinvested dividends under the Plan will be 95% of the average of the daily high and low sales prices of the Common Stock on the NASDAQ National Market System, as reported in The Wall Street Journal, for the period of the last five reported trading days immediately preceding the relevant Investment Date (the "Average Market Price"). See Question 11 for the definition of Investment Date. The price of shares purchased in the open market or in negotiated transactions with optional cash payments will be the weighted average price paid for all shares of Common Stock purchased by the Agent for the relevant Investment Date. If there is no trading in the Common Stock for a substantial amount of time immediately preceding a dividend payment date, the price per share shall be determined by the Plan Administrator on the basis of such market quotations as it deems appropriate. No shares will be sold to participants in the Plan at less than the par value ($6 per share) of such shares. 11. WHEN WILL SHARES BE PURCHASED UNDER THE PLAN? Shares of Common Stock will be purchased for participants on the relevant Investment Dates. The Investment Dates for purchases of shares with reinvested dividends will be the Common Stock dividend payment dates. The Investment Dates for optional cash payments are the dates on which the Agent purchases shares in the open market or in negotiated transactions. Such purchases will be made by the Agent on the business day following the 15th calendar day of each month or as soon as practicable thereafter. Shares of Common Stock purchased with optional cash payments will be credited to a participant's account as of the Investment Date in which they are purchased. 6 7 Subject to any limitations imposed by federal or state securities laws, the Agent will have full discretion as to all matters relating to open market purchases, including determination of the number of shares, if any, to be purchased on any day or at any time of day, the price paid for such shares, the markets on which such shares are to be purchased (including on any securities exchange, in the over-the-counter market or in negotiated transactions) and the persons (including other brokers and dealers) from or through whom such purchases are made. Under certain circumstances, observance of the rules and regulations of the Securities and Exchange Commission, including Regulation M under the Securities Exchange Act of 1934, may require temporary suspension of such purchases by the Agent or may require that purchases be spread over a longer period than indicated in Questions 11 and 12, in which event such purchases will be made or resumed as or when permitted by such rules and regulations. The Company, the Plan Administrator, and the Agent will not be liable when conditions prevent the purchase of shares or interfere with the timing of purchases. OPTIONAL CASH PAYMENTS 12. HOW DO OPTIONAL CASH PAYMENTS WORK? Participants may make optional cash payments for the purchase of additional shares of Common Stock at any time subject to the limitations described below and in Question 13. Checks and money orders must clear prior to the fifteenth day of a month in which the investment is to be made. Checks and money orders that have not cleared prior to the fifteenth day of the month will be retained by the Bank and applied to the purchase of shares on the next Investment Date. No interest will be paid on optional cash payments held pending investment. Participants are strongly urged to make their optional cash payments as shortly as possible before the fifteenth day of the month but allowing sufficient time to ensure that their payment clears prior to such day. Optional cash payments received prior to the thirtieth day preceding the Investment Date on which they would be invested will be returned to the participant. The minimum optional cash payment per month is $25 and the total optional cash payments by a participant may not exceed $10,000 per month except that non-shareholders who wish to participate must make an initial investment of at least $100. The same amount of money need not be sent each month, and there is never any obligation to make an optional cash payment. Optional cash payments will be refunded if a written request for a refund is received by the Plan Administrator at least forty-eight (48) hours prior to the day when such investment is to be made. Optional cash payments of less than $25 and that portion of any optional cash payment which exceeds $10,000 will be returned to the participant without interest. 13. HOW MAY OPTIONAL CASH PAYMENTS BE MADE? A registered holder of the Company's Common Stock may make an optional cash payment when enrolling in the Plan by enclosing a check or money order made payable to "Banco Popular de Puerto Rico" with the Authorization Form. Thereafter, a registered holder may make optional cash payments at any time subject to the limitations discussed in Question 12 by using the cash payment forms which will be attached to each participant's statement of account. A broker, bank or other nominee, as holder on behalf of a beneficial owner, may also utilize the Authorization Form for optional cash payments, unless it holds the shares in the name of a major securities depository. In the event a broker, bank or other nominee holds shares of a beneficial owner in the name of a major securities depository, optional cash payments must be made on the Broker and Nominee Form (the "B&N Form"). The B&N Form provides the sole means whereby a broker, bank or other nominee holding shares of a beneficial owner in the name of a major securities depository may invest optional cash payments on behalf of such beneficial owner. In such case, the broker, bank or other nominee must use the B&N Form for transmitting optional cash payments on behalf of the beneficial owner. A B&N Form must be delivered to the Plan Administrator each time that such broker, bank or other nominee transmits optional cash payments on behalf of a beneficial owner. B&N Forms will be furnished at any time upon request to 7 8 the Plan Administrator or the Information Agent at the respective address or telephone number specified in Question 15. Other interested investors that are not shareholders of the Company, but have submitted Authorization Forms, are also eligible to make an initial investment in Common Stock through an optional cash payment. Participants who are residents of Puerto Rico and maintain a savings or checking account at Banco Popular may make optional cash payments by executing a form authorizing the Plan Administrator to debit their accounts at the Bank for the purchase of shares under the Plan or by using the Bank's telephone payment service known as "Telebanco Popular." COSTS 14. ARE THERE ANY EXPENSES TO PARTICIPANTS IN CONNECTION WITH PURCHASES UNDER THE PLAN? No. All costs of administration of the Plan are paid by the Company. Participants will not incur any brokerage commissions, service charges or fees for shares purchased under the Plan. As discussed in Question 18, however, if a participant withdraws shares from the Plan and requests the Plan Administrator to sell the shares, the participant will be charged for any related brokerage commissions and applicable transfer taxes on the sale, if any. ADMINISTRATION 15. WHO ADMINISTERS THE PLAN? Banco Popular, a wholly-owned banking subsidiary of the Company, as Plan Administrator, administers the Plan for participants by acquiring newly issued shares with reinvested dividends, keeping records, sending statements of account to each participant and performing other duties related to the Plan. Shares purchased in the open market are purchased by the Agent and delivered to Banco Popular, which holds shares of all participants together in its name or in the name of its nominee. Banco Popular also acts as dividend disbursing and transfer agent for the Company's Common Stock. All questions and communications regarding the administration of the Plan, requests for additional copies of this Prospectus, the B&N Forms or the Authorization Forms should be addressed to the Bank at the following address and telephone number: Banco Popular de Puerto Rico PO Box 362708 San Juan, Puerto Rico 00936-2708 Attention: Popular, Inc. Dividend Reinvestment and Stock Purchase Plan (725) Telephone: (787) 764-1893 8 9 REPORTS TO PARTICIPANTS 16. WHAT KIND OF ACCOUNTS ARE MAINTAINED FOR PARTICIPANTS AND WHAT REPORTS ON THESE ACCOUNTS WILL BE SENT TO PARTICIPANTS IN THE PLAN? The Plan Administrator maintains a separate account for each participant. All shares of Common Stock purchased for a participant under the Plan will be credited to the participant's account. As soon as practicable after each purchase of shares, the Plan Administrator will mail to each participant a statement of account. The statement will summarize the year-to-date transactions in the participant's account, and will indicate the number of shares purchased under the Plan, the price per share paid and will include any applicable tax information. Participants will also receive quarterly statements of account and an annual statement showing the amount of reinvested dividends as well as other transactions under the Plan. These statements by participants should be retained by participants for his or her own records. A participant may be required to pay a fee for copies of previous statements. In addition, each participant will receive copies of the Company's annual and quarterly reports to shareholders, proxy statements and information for income tax reporting purposes. CERTIFICATES FOR SHARES 17. WILL CERTIFICATES BE ISSUED FOR SHARES OF COMMON STOCK PURCHASED? Shares of Common Stock purchased for participants under the Plan will credited to a participant's account in book entry form. Certificates for shares of Common Stock purchased under the Plan will not be issued to participants unless requested. This service protects against loss, theft or destruction of stock certificates. The number of shares credited to a participant's account under the Plan will be shown on the participant's statement of account. Certificates for any number of whole shares credited to a participant's account under the Plan will be issued to a participant without charge upon the participant's written request. Until a participant sells such shares or changes the number of participating shares, dividends on all such shares will continue to be invested under the Plan even though certificates are held by the participant. Certificates for fractional shares will not be issued under any circumstances. Shares credited to a participant's account under the Plan may not be pledged, sold or transferred unless the participant has withdrawn such shares from the Plan by requesting and receiving certificates for such shares registered in the participant's name. Each account under the Plan is maintained in the name in which a participant's shares are registered at the time the participant enters the Plan. WITHDRAWALS, SALE OF SHARES AND TERMINATION 18. HOW MAY A PARTICIPANT WITHDRAW SHARES FROM THE PLAN? A participant may withdraw any or all full shares credited to his or her Plan account at any time, by notifying the Plan Administrator in writing and specifying the number of shares to be withdrawn. Certificates for whole shares of Common Stock so withdrawn will be issued to and registered in the name of the participant. If a participant requests, the Plan Administrator will sell all or a portion of the withdrawn shares and remit the proceeds, less any related brokerage commissions and applicable withholding or transfer taxes, if any, to the participant. The Plan Administrator will instruct the Agent to sell the shares in the open market at the prevailing market price within ten (10) business days after receipt of the request or as soon as otherwise practicable. Any notice of withdrawal received after a dividend record date will not be effective until dividends paid for such record date have been reinvested and the shares purchased have been credited to a participant's account. Participants will not have the power to control the timing or price of the shares being sold. Accordingly, participants will not be able to precisely time sales and will bear the market risk associated with fluctuations in the price of the Company's Common Stock. In other words, if a participant sends a request to sell shares it is possible that the market price of the Company's Common Stock could go up or down before the Agent sells the shares on behalf of the participant. 9 10 Should a participant withdraw all shares from the Plan thereby terminating its participation in the Plan, the Plan Administrator may sell the participant's interest in any remaining fractional share and close the participant's account. The net proceeds from such sale will be mailed to the participant. 19. HOW AND WHEN MAY A PARTICIPANT TERMINATE PARTICIPATION IN THE PLAN? A participant may terminate participation in the Plan at any time by written notice to the Plan Administrator. As soon as practicable following termination, the Plan Administrator will send the participant a certificate for the number of whole shares in the participant's account and a check in an amount equal to the value of any fractional share based upon the average of the daily high and low sales prices of the Common Stock as reported on the NASDAQ National Market System for the date of termination as set forth in the statement sent to the participant by the Plan Administrator. If the participant requests, the Plan Administrator will sell all of the shares held in the participant's account in the manner described in Question 18 and send the participant a check for the proceeds from the sale, less any related brokerage commissions and applicable withholding or transfer taxes, if any. If a participant's request to terminate participation in the Plan is received on or after the record date for a dividend, cash dividends paid with respect to that record date will be reinvested in shares of Common Stock for the participant's account. Any optional cash payments sent to the Plan Administrator prior to the request for termination will be invested unless return of the amount is expressly requested in the request for termination and the request is received at least two (2) business days prior to the time when such amount would otherwise be applied to purchase shares. If dividends or optional cash payments are invested after the Plan Administrator has received a request to terminate Plan participation, the request will be processed as promptly as possible. Participation in the Plan will also be terminated if the Plan Administrator receives written notice of the death or adjudicated incompetency of a participant. Upon termination by reason of notice of death or adjudicated incompetency, no purchase of shares of Common Stock will be made for the participant's account and the participant's shares, any cash dividends paid thereon and any other unapplied funds will be retained by the Plan Administrator until such time as such participant's legal representative has been appointed and has furnished proof satisfactory to the Plan Administrator of the legal representative's right to receive payment. After termination of Plan participation, all cash dividends will be paid to the shareholder in cash unless the shareholder rejoins the Plan, which he or she may do at any time by completing and returning to the Plan Administrator an Authorization Form as described in Question 4. CERTAIN TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN 20. WHAT ARE THE PUERTO RICO AND FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN? The following statements, which are based upon existing tax laws, regulations and rulings on the date of this Prospectus, are intended to be a general outline of the likely Puerto Rico and federal income tax consequences to an individual or corporate participant in the Plan. The Company has been advised with regard to such statements by Pietrantoni Mendez & Alvarez, San Juan, Puerto Rico. The information herein provided is a summary and does not purport to be a complete description of the income tax consequences to any participant in the Plan. In particular, it does not address the income tax consequences to an individual participant who is a non-resident alien. Participants should consult their own tax advisors for further information concerning the tax consequences of participation in the Plan. GENERAL TAX CONSEQUENCES (a) In the case of shares of Common Stock purchased from the Company at a discount with cash dividends, the fair market value on the dividend payment date of the shares purchased, plus the amount of any tax withheld, will constitute dividend income to the participant. The participant's tax basis in such shares will be the fair market value of the shares on the dividend payment date. 10 11 (b) A participant acquiring shares of Common Stock through optional cash payments under the Plan will not realize taxable income on the purchase of shares for his or her account, except that the participant will have dividend income in the amount of any brokerage commissions or service fees paid by the Company, if any. The tax basis of shares of Common Stock purchased for a participant's Plan account with optional cash payments will be the amount of the optional cash payments plus an allocable share of any brokerage commissions paid by the Company, if any. (c) A participant's holding period for shares of Common Stock acquired pursuant to the Plan will begin on the day following the date the shares of Common Stock are credited to the participant's account. (d) A participant will not realize taxable income when he or she receives certificates for whole shares of Common Stock credited to the participant's account, either upon the participant's request for such certificates or upon termination of the Plan or termination of his or her participation in the Plan. (e) A participant will realize gain or loss when the shares of Common Stock are sold or exchanged, and in the case of a fractional share, when the participant receives a cash payment for a fraction of a share credited to the participant's account upon termination of participation in or termination of the Plan. The amount of such gain or loss will be the difference between the amount which the participant receives for the shares or fraction of a share and the tax basis thereof. (f) In the case of holders of Common Stock whose dividends are subject to Puerto Rico income tax withholding, the Company will withhold the tax from the cash dividends and invest the balance in shares of Common Stock. Based on a private letter ruling issued by the Puerto Rico Department of the Treasury, the Company will not withhold taxes on the additional dividend resulting from the discount in the purchase of shares and any brokerage commissions or service fees paid by the Company under the Plan. The Company will report the amount of such additional dividend to the Puerto Rico Department of the Treasury and to participants at the end of each calendar year. In addition, the Company will send participants a letter advising them of their obligation to file Puerto Rico income tax returns and to pay the tax due on the portion of the dividend attributable to the amount of the discount and the brokerage commissions or service fees. In the case of participants who qualify for the special tax of ten percent (10%) on dividends, such special rate will apply to the additional dividend. The statements confirming purchases made for such participants will indicate the amount of tax withheld and the amount of discount received. PUERTO RICO INCOME TAX CONSEQUENCES Individuals (a) An individual participant in the Plan, whether a resident of Puerto Rico or a U.S. citizen who is not a resident of Puerto Rico (a "non-resident" U.S. citizen), will be subject to a special tax equal to ten percent (10%) of the total amount of each cash dividend distribution. This special tax will be automatically deducted and withheld by the Company unless the participant has in effect on the date of the distribution an election not to have the special dividend tax withheld. If such election is made the dividend will be subject to the ordinary tax rates. (b) An individual participant who is a non-resident U.S. citizen will be subject to a ten percent (10%) income tax withholding at source on the gross amount of cash dividends, unless, in addition to the election not to have the special dividend tax withheld, he has filed with the Plan Administrator a Withholding Exemption Certificate for exemption from the ten percent (10%) withholding tax. In this case, the maximum amount of Puerto Rico source gross income (including the dividends distributed by the Company and any gain from the sale in Puerto Rico of common stock) that the non-resident U.S. citizen will receive exempt from withholding is $1,300 if single, or $3,000 if married and living with spouse. The Company will withhold a ten percent (10%) income tax on the non-resident U.S. citizen's dividend distribution in excess of the above specified amounts. Furthermore, a non-resident U.S. citizen will be required to file a Puerto Rico income tax return and will be subject to tax at the same tax rates as Puerto Rico residents if his Puerto Rico source gross income exceeds the $1,300 and $3,000 limits. The tax withheld by the Company may be credited in the return against the 11 12 resulting Puerto Rico tax liability, if any, or refunded to the individual as the case may be. Even though the non-resident U.S. citizen may be required to file a Puerto Rico income tax return, he will not be subject to any Puerto Rico income tax liability if his gross income from Puerto Rico sources is $3,300 or less, if single, or $6,000 or less, if married and living with spouse. However, a non-resident U.S. citizen will not be required to file a Puerto Rico income tax return if such participant's gross income from sources within Puerto Rico consists only of cash dividends on Common Stock and such dividends are subject to the special 10% tax to be withheld at source. (c) In the case of the sale or exchange of Common Stock held as a capital asset for more than six months, an individual who is a Puerto Rico resident has the option to have his net long term capital gain taxed at a special twenty percent (20%) rate or to include it in his gross income and be subject to the normal tax rates. (d) An individual participant who is a non-resident U.S. citizen will not be subject to Puerto Rico income tax on the sale or exchange of Common Stock if the sale or exchange is effected outside Puerto Rico. If the sale takes place in Puerto Rico, the gain will be subject to the same capital gain provisions applicable to a Puerto Rico resident and the buyer is required to withhold twenty percent (20%) from the sales price. Corporations (a) In the case of participant corporations, the special ten percent (10%) tax on dividends and 20% tax on capital gains discussed above will not apply. (b) In the case of participant corporations organized in Puerto Rico ("domestic corporations") and participant corporations organized outside Puerto Rico but that are engaged in trade or business in Puerto Rico ("resident foreign corporations"), the full amount of dividend income will be eligible for the eighty-five percent (85%) dividends received deduction provided the dividend deduction does not exceed eighty-five percent (85%) of the corporate taxpayer's net taxable income reported in Puerto Rico. (c) In the case of participant corporations organized outside Puerto Rico and not engaged in trade or business in Puerto Rico ("non-resident foreign corporations"), the full amount of dividend income will be subject to a ten percent (10%) withholding tax at source. On the sale or exchange of Common Stock, these non-resident foreign corporations will be subject to a twenty-five percent (25%) income tax withholding on the gross amount received to the extent said amount constitutes income from sources within Puerto Rico. However, the tax withheld will be credited against the Puerto Rico income tax liability reported by the corporation on its Puerto Rico return, which would be twenty-nine percent (29%) of the excess capital gains over capital losses from Puerto Rico sources. (d) For Puerto Rico tax purposes, the gain from the sale of stock is considered derived from the place where all rights, title and interest on the stock pass from seller to purchaser. In the case of foreign corporations, whether resident or nonresident, if the sale is effected outside Puerto Rico, the gain will not be subject to Puerto Rico income taxes except for certain resident foreign corporations engaged in a financial business or in the business of trading in securities. (e) In the case of a domestic corporation holding the Common Stock as a capital asset for more than six months, gain from the sale or exchange of Common Stock will be subject to a twenty-five percent (25%) maximum tax on the capital gain irrespective of where the sale is effected. To the extent the gain constitutes income from sources within Puerto Rico or otherwise constitutes income effectively connected with a Puerto Rico business, a resident foreign corporation holding the Common Stock as a capital asset for more than six months will also be subject to this maximum twenty-five percent (25%) tax rate. Institutional Investors Dividends paid to certain institutional investors such as life insurance companies may or may not be subject to Puerto Rico income tax. Participants should contact their own tax advisors as to the applicability of this exemption. 12 13 FEDERAL INCOME TAX CONSEQUENCES (a) In the case of a participant who is a U.S. citizen not a resident of Puerto Rico, dividend distributions from the Company and gain from the sale of Common Stock will have to be included in full in his or her federal income tax return. However, Puerto Rico taxes paid may generally be taken as a foreign tax credit against the United States income tax liability, or in the alternative, as an itemized deduction. (b) In the case of a participant who is a U.S. citizen and a bona fide resident of Puerto Rico for the entire taxable year, dividend distributions from the Company and gain from the sale of Common Stock are excludable from the federal return. (c) In the case of a participant which is a United States corporation, the full amount of dividends distributed will be included in gross income, but will not be eligible for the dividends received deduction. However, taxes paid in Puerto Rico may generally be taken as a foreign tax credit or as a deduction in the federal income tax return. OTHER INFORMATION 21. MAY SHARES CREDITED TO A PARTICIPANT'S ACCOUNT BE SOLD, PLEDGED OR TRANSFERRED? Shares credited to a participant's account may not be sold, pledged or transferred unless the participant has requested and received certificates for such shares registered in the participant's name or in the case of sales, the participant requests the Plan Administrator to sell shares on his behalf as described in Question 18. 22. WHAT HAPPENS IF A PARTICIPANT SELLS OR TRANSFERS SOME OR ALL OF THE SHARES REGISTERED IN THE PARTICIPANT'S NAME? If a participant sells or transfers all shares registered in the participant's name, dividends on shares credited to the participant's account under the Plan will, unless the participant also withdraws all shares held in his account, continue to be reinvested, except that if the participant has only a fractional share of Common Stock credited to his account under the Plan, the Plan Administrator may close the participant's account and sell the fractional share. In such event, the participant will receive a check for the net proceeds from the sale of the fractional share. If a participant sells or transfers a portion of the shares registered in the participant's name and the participant has chosen the Full Dividend Reinvestment option, dividends on all shares remaining registered in the participant's name will continue to be reinvested. If the participant has chosen the Partial Dividend Reinvestment option, dividends on a number of shares remaining registered in the participant's name up to the number of shares originally authorized will continue to be reinvested. 23. IF THE COMPANY HAS A RIGHTS OFFERING, HOW WILL THE RIGHTS ON PLAN SHARES BE HANDLED? A rights offering takes place when the Company issues to existing shareholders the right to purchase additional shares of Common Stock in proportion to the shares they already own. A participant's entitlement in a rights offering will be based upon his or her total holdings. Rights will be issued for the number of whole shares only. A rights offering such as the one referred to in this Question 23 is not related to the Preferred Rights (as defined below) attached to the shares of Common Stock. See "DESCRIPTION OF CAPITAL STOCK -- Stockholder Rights Plan" herein. 24. WHAT HAPPENS IF THE COMPANY ISSUES A DIVIDEND PAYABLE IN STOCK OR DECLARES A STOCK SPLIT? Any stock dividends or split shares distributed by the Company on shares registered in a participant's name or credited to a participant's Plan account will be added to the participant's Plan account and reflected in the statement described in Question 16. 13 14 25. HOW WILL PLAN PARTICIPANTS' SHARES BE VOTED AT SHAREHOLDERS' MEETINGS? Shares credited to a participant's Plan account will be voted as the participant directs. A proxy card will be sent to each participant in connection with all annual and special meetings of shareholders. This proxy will apply to all whole shares registered in a participant's name, if any, as well as to all shares credited to a participant's account under the Plan and, if properly signed, will be voted in accordance with the instructions given by the participant on the proxy card. If a proxy card is returned properly signed, but without indicating instructions as to the manner shares are to be voted with respect to any item thereon, the shares covered will be voted in accordance with the recommendations of the Company's management. If the proxy card is not returned, or it is returned unexecuted or improperly executed, the shares of Common Stock covered will not be voted unless the participant or the participant's duly appointed representative votes in person at the meeting. 26. WHAT ARE THE RESPONSIBILITIES OF THE COMPANY, THE PLAN ADMINISTRATOR, THE AGENT AND THE INFORMATION AGENT UNDER THE PLAN? The Company, the Plan Administrator, the Agent and any Information Agent will not be liable under the Plan for any act done in good faith or for any good faith omission to act, including, without limitation, any claim of liability arising out of failure to terminate a participant's account upon the participant's death, the prices at which shares are purchased or sold for a participant's account, the times when purchases or sales are made, or fluctuations in the market value of the Company's Common Stock. PARTICIPANTS SHOULD RECOGNIZE THAT THE COMPANY, THE PLAN ADMINISTRATOR, THE AGENT AND ANY INFORMATION AGENT CANNOT PROVIDE ANY ASSURANCE OF A PROFIT OR PROTECTION AGAINST A LOSS ON THE SHARES OF COMMON STOCK PURCHASED OR HELD UNDER THE PLAN. The Company, the Plan Administrator, the Agent and any Information Agent and their agents will not have any responsibility beyond the exercise of ordinary care for any action taken or omitted to be taken in connection with the Plan, nor do they have any duties, responsibilities or liabilities other than those expressly set forth in the Plan. Stockholders should be aware and are cautioned that this Prospectus does not represent a change in the Company's dividend policy nor a guarantee of future dividends, which will continue to depend upon the Company's earnings, financial requirements, governmental regulations and other factors. 27. WHAT HAPPENS IF PURCHASES CANNOT BE MADE IN THE OPEN MARKET? If the Company determines not to make newly issued shares of Common Stock available for purchase pursuant to the Plan and in the event that applicable law or the closing of securities' markets requires the temporary curtailment or suspension of open market purchases of shares under the Plan, the Agent will not be accountable for its inability to make purchases at such times. If shares of Common Stock are not available for purchase for a period longer than thirty-five days, the Plan Administrator will promptly mail to the participant a check payable to the participant's order in the amount of any unapplied funds in the participant's account. 28. MAY THE TERMS OF THE PLAN BE CHANGED OR THE PLAN SUSPENDED OR DISCONTINUED? Yes. The Company reserves the right to modify the terms of the Plan at any time and from time to time, and the Company may suspend or terminate the Plan at any time, including the period between a record date and a dividend payment date, in each case in its sole discretion. Notice of any material amendment or modification, or of any suspension or termination, will be mailed to all participants. Upon termination of the Plan, any uninvested optional cash payments will be returned, a certificate for whole shares of Common Stock credited to a participant's Plan account will be issued, and a cash payment will be made for the net proceeds from the sale of any fractional share credited to a participant's account. 14 15 29. CAN SUCCESSOR PLAN ADMINISTRATORS OR AGENTS BE NAMED? The Company may from time to time designate a bank, trust company, brokerage firm or other financial institution as successor Plan Administrator or Agent under the Plan. 30. CAN THE COMPANY OR THE PLAN ADMINISTRATOR TERMINATE A PARTICIPANT'S INTEREST IN THE PLAN? The Company or the Plan Administrator may terminate any participant's participation in the Plan at any time for any reason, including, without limitation, arbitrage-related activities or transactional profit activities, by notice in writing mailed to the participant. In such event the Plan Administrator will follow the procedures for termination set forth in Question 19. 31. MAY A PARTICIPANT ADD SHARES OF COMMON STOCK TO HIS OR HER ACCOUNT BY TRANSFERRING STOCK CERTIFICATES THAT THE PARTICIPANT POSSESSES? Yes. A participant may increase the number of shares of Common Stock held in his or her account by depositing certificates representing shares of Common Stock with the Plan Administrator. Such certificates must be presented in transferable form and must be accompanied by a written request that the shares of Common Stock evidenced thereby be added to the participant's account. 32. MAY A SHAREHOLDER THAT DOES NOT PARTICIPATE IN OTHER FEATURES OF THE PLAN DEPOSIT CERTIFICATES WITH THE PLAN ADMINISTRATOR FOR SAFEKEEPING? Yes. Shareholders, whether or not they participate in other features of the Plan, may deposit some or all of their certificates of Common Stock with the Plan Administrator for safekeeping. Shares deposited will be credited to the individual's account maintained by the Plan Administrator. There is no cost for this service. To use this service, participants should send their certificates to the Plan Administrator by registered mail with written instructions to deposit them in safekeeping. Unless the shareholder has elected to have his or her dividends reinvested in accordance with the terms of the Plan, dividends on all the shares deposited for safekeeping will be paid in cash. 33. WHAT IS SUFFICIENT NOTICE TO A PARTICIPANT? Any notice or certificate which by any provision of the Plan is required to be given by the Plan Administrator to a participant shall be in writing and shall be deemed to have been sufficiently given for all purposes by being deposited postage prepaid in a post office letter box addressed to the participant at the participant's address as it shall last appear on the Plan Administrator's records. 34. WHO INTERPRETS THE PLAN AND WHAT LAW GOVERNS? Any question of interpretation under the Plan will be determined by the Company under the laws of the Commonwealth of Puerto Rico, and any such determination will be final. DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company consists of 180,000,000 shares of Common Stock, par value $6 per share, and 10,000,000 shares of Preferred Stock. The Preferred Stock is issuable in one or more series, with such terms, and at such times and for such consideration as the Board of Directors of the Company determines. As of November 23, 1998, there were issued and outstanding 4,000,000 shares of 8.35% Series A Preferred Stock and there were 137,614,927 shares of Common Stock issued (of which 135,637,327 shares were outstanding and 1,977,600 shares were held in treasury). The Common Stock is traded in the over-the-counter market on the NASDAQ National Market System. The following description summarizes the material provisions of the Common Stock. It does not purport to be complete and is subject in all respects to the applicable provisions of the General Corporation Law of Puerto Rico, the Company's Restated Certificate of Incorporation (the "Certificate"), the Rights Agreement 15 16 (defined below), the Certificate of Designation describing the Series A Participating Preferred Stock and the Plan. COMMON STOCK Subject to the rights of holders of any Preferred Stock outstanding, holders of Common Stock are entitled to receive ratably such dividends, if any, as the Board of Directors may in its discretion declare out of legally available funds. The holders of the Common Stock are entitled to one vote per share on all matters brought before the stockholders. The holders of the Common Stock do not have the right to cumulate their shares of Common Stock in the election of directors. The Certificate provides that the approval of a merger, reorganization, or consolidation of the Company or the sale of substantially all of the assets of the Company or the approval or voluntary dissolution of the Company requires the vote of the holders of 75% of the total number of outstanding shares of the Company. In the event of liquidation, holders of the Common Stock will be entitled to receive pro rata any assets distributable to shareholders with respect to the shares held by them, after payment of indebtedness and such preferential amounts as may be required to be paid to the holders of any Preferred Stock hereafter issued by the Company. The Certificate provides that the members of the Board of Directors are divided into three classes as nearly equal as possible. Each class is elected for a three-year term. At each annual meeting of shareholders, one-third of the members of the Board of Directors will be elected for a three-year term, and the other directors will remain in office until their three-year terms expire. Therefore, control of the Board of Directors cannot be changed in one year, and at least two annual meetings must be held before a majority of the members of the Board of Directors can be changed. The Certificate provides that a director, or the entire Board of Directors, may be removed by the shareholders only for cause. The Certificate and Bylaws of the Company also provide that the affirmative vote of the holders of at least two-thirds of the combined voting power of the outstanding capital stock entitled to vote for the election of directors is required to remove a director or the entire Board of Directors from office. Certain portions of the Certificate of the Company described in certain of the preceding paragraphs, including those related to business combinations and the classified Board of Directors, may be amended only by the affirmative vote of the holders of two-thirds of the total number of outstanding shares of the Company. Certain of the provisions contained in the Certificate have the effect of making it more difficult to change the Board of Directors, and may make the Board of Directors less responsive to shareholder control. These provisions also may tend to discourage attempts by third parties to acquire the Company because of the additional time and expense involved and a greater possibility of failure, and, as a result, may adversely affect the price that a potential purchaser would be willing to pay for the capital stock of the Company, thereby reducing the amount a shareholder might realize in, for example, a tender offer for the capital stock of the Company. Pursuant to the Certificate, holders of the Common Stock and only the Common Stock are entitled to preferential rights to purchase or subscribe for newly issued shares of Common Stock on a pro rata basis unless, in approving the issuance of Common Stock, or any transaction resulting in the issuance of any Common Stock of the Company, the Board of Directors of the Company unanimously resolves otherwise. The shareholders have no preference to subscribe therefor in the event of new issues of shares of stock which may be authorized pursuant to any dividend reinvestment and stock purchase plan of the Company or which may be authorized in order to exchange such new shares of stock for property which the Board of Directors may consider convenient or necessary for the Company to acquire, nor shall the shareholders have any right of preference therefor in the event of new issues of stock in payment of services rendered to the Company, or of shares of stock to be issued to officers or employees, on the basis of options, as an incentive either to commence or to continue rendering services for the Company. There are no redemption or call provisions applicable to shares of Common Stock. 16 17 The outstanding shares of Common Stock are, and shares of Common Stock offered hereby upon their due issuance, delivery and the receipt of payment therefor will be fully paid and nonassessable. The Registrar and Transfer Agent for the Common Stock of the Company is Banco Popular de Puerto Rico. STOCKHOLDER RIGHTS PLAN Pursuant to a Stockholder Protection Rights Agreement, dated as of August 13, 1998, (the "Rights Agreement"), between the Company and Banco Popular de Puerto Rico, as Rights Agent, holders of shares of Common Stock outstanding at the close of business on August 28, 1998 received the right (the "Preferred Rights") to purchase one one-hundredth of a share of Series A Participating Cumulative Preferred Stock of the Company ("Series A Participating Preferred Stock") on the terms set forth in the Rights Agreement. There is one Preferred Right attached to each share of Common Stock outstanding. In addition, as long as the Preferred Rights are attached to the Common Stock, one Preferred Right will be issued with each new share of Common Stock issued. At the time the Preferred Rights become exercisable, separate certificates will be issued and the Preferred Rights could begin to trade separately from the Common Stock. Preferred Rights become exercisable upon the earlier to occur (i) on the first day, or such later date as the Board of Directors of the Company may from time to time fix, on which the Company publicly announces that any person or group (subject to certain exceptions, an "Acquiring Person") has acquired 10% or more of the shares of the Common Stock then outstanding (the "Flip-in Date"), or (ii) on the close of business on the tenth business day (or such later date as the Board of Directors of the Company may from time to time fix) after the commencement of a tender or exchange offer which, if consummated, would result in such person becoming an Acquiring Person. On and after a Flip-in Date, the Company shall take such action as shall be necessary so that each Preferred Right (other than Rights beneficially owned by any Acquiring Person, which Rights shall become void) shall constitute the right to purchase from the Company that number of shares of Common Stock of the Company having an aggregate price equal to twice the Exercise Price (currently $140) for an amount in cash equal to the then current Exercise Price. The rights are subject to redemption and exchange for shares of Common Stock at the option of the Company, on the terms set forth in the Rights Agreement. The Preferred Rights may be deemed to have an anti-takeover effect and generally may cause substantial dilution to a person or group that attempts to acquire the Company under circumstances not approved by the Company's Board of Directors. PREFERRED STOCK The Board of Directors of the Company is authorized to provide for the issuance of shares of the Company's Preferred Stock in one or more series, with such voting powers, full or limited, or without voting powers, and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issuance thereof to be adopted by the Board of Directors, except as otherwise provided in the Certificate or any amendment thereto. The issuance of shares of Preferred Stock could make it more difficult and more expensive for another person or entity to obtain control of the Company in a merger, tender offer, proxy fight or similar transaction. The ability of the Board of Directors to issue shares of Preferred Stock in such a situation could have the effect of discouraging a potential acquiror and may have an adverse effect on shareholders wishing to participate in a merger, tender offer or proxy fight. The Company's management is not aware of any person or entity currently seeking control of the Company. The 8.35% Series A Preferred Stock entitle the holders thereof to receive, when, as and if declared by the Board of Directors of the Company's, out of funds legally available therefor, cash dividends at the annual rate per share of 8.35% of the liquidation preference of $25 per share, or $0.173958 per share per month, accruing from the date of original issuance and payable monthly in arrears in United States dollars on the last day of each calendar month thereafter. Dividends on the 8.35% Series A Preferred Stock are non-cumulative. To the extent that funds are not legally available for the payment of such dividends for any monthly dividend period or that such dividends are 17 18 not declared with respect to any monthly dividend period, then the holders of the 8.35% Series A Preferred Stock have no right to receive a dividend in respect of such monthly dividend period. The Company may not pay dividends on or acquire shares of Common Stock of the Company or other class of stock of the Company ranking junior to the 8.35% Series A Preferred Stock unless all accrued and unpaid dividends on the 8.35% Series A Preferred Stock for the twelve monthly dividend periods ending on the immediately preceding dividend payment date shall have been paid or are paid contemporaneously and the full monthly dividend on the 8.35% Series A Preferred Stock for the then current month has been or is contemporaneously declared and paid or declared and set apart for payment. The 8.35% Series A Preferred Stock is redeemable on and after June 30, 1998, at the option of the Company, in whole or in part from time to time. The redemption price per share is $26.25 from June 30, 1998 through June 29, 1999, $26.00 from June 30, 1999 through June 29, 2000, $25.75 from June 30, 2000 through June 29, 2001, $25.50 from June 30, 2001 through June 29, 2002, and $25.00 from June 30, 2002 and thereafter, plus accrued and unpaid dividends for the then current monthly dividend period to the date fixed for redemption. Under current regulations, the Company is not permitted to exercise any option to redeem shares of 8.35% Series A Preferred Stock without the prior approval of the Federal Reserve Board. The 8.35% Series A Preferred Stock is not convertible into or exchangeable for any other securities of the Company. Holders of shares of 8.35% Series A Preferred Stock have no right to require the Company to redeem or repurchase any such shares, and such shares are not subject to any sinking fund or similar obligation. In the event of the liquidation, dissolution or winding up of the Company, holders of the 8.35% Series A Preferred Stock will be entitled to receive a liquidation preference of $25 for each share, plus accrued and unpaid dividends for the then current monthly dividend period to the date of payment. 18 19 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Securities and Exchange Commission (the "SEC") allows the Company to "incorporate by reference" "the information it files with them, which means the Company can disclose important information to you by referring to these documents. The information included in the following documents is incorporated by reference and is considered a part of this prospectus. The most recent information that the Company files with the SEC automatically updates and supersedes more dated information. The Company has previously filed the following documents with the SEC and is incorporating them by reference into this prospectus: (i) Annual Report on Form 10-K for the year ended December 31, 1997; (ii) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998; (iii) Current Reports on Form 8-K dated January 9, 1998, April 7, 1998, April 23, 1998, July 9, 1998, August 13, 1998 and October 7, 1998; (iv) Registration Statement on Form 8-A, filed with the SEC on August 18, 1988, filed pursuant to Section 12(g) of the Exchange Act (as defined below) relating to the Company's Common Stock; and (v) Registration Statement on Form 8-A filed with the SEC on August 28, 1998, filed pursuant to Section 12(g) of the Exchange Act pursuant to which the Company registered its Series A Participating Cumulative Preferred Stock Purchase Rights. The Company also incorporates by reference all documents filed by it pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the date of this prospectus and until all the shares being offered by this prospectus are sold. The Company will provide, at no cost, to each person, including a beneficial owner, to whom this prospectus is delivered, upon written or oral request of any such person, a copy of any or all of the documents incorporated herein by reference (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents). Requests for such copies should be directed to Popular, Inc., Attention: Amilcar Jordan, Senior Vice President, 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, telephone: (787) 764-1893. AVAILABLE INFORMATION The Company files annual, quarterly and current reports, proxy statements and other information with the SEC. The Company has also filed with the SEC a Registration Statement on Form S-3, to register the Common Stock being offered in this prospectus. This prospectus, which forms part of the Registration Statement, does not contain all of the information included in the registration statement. For further information about the Company and the shares of Common Stock offered in this prospectus, you should refer to the Registration Statement and its exhibits. You may read and copy any document filed by the Company with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The Company files its SEC materials electronically with the SEC, so you can also review the Company's filings by accessing the web site maintained by the SEC at http://www.sec.gov. This site contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You can also obtain more information about the Company by visiting our web site at http://www.popularinc.com. 19 20 FORWARD LOOKING STATEMENTS Information incorporated in this prospectus by reference, contains certain "forward-looking statements" concerning Popular's operations, performance and financial condition, including its future economic performance, plans and objectives and the likelihood of success in developing and expanding its business. Please keep in mind that these statements are based upon a number of assumptions and estimates which are subject to significant uncertainties, many of which are beyond the control of Popular. The words "may," "would," "could," "will," "expect," "anticipate," "believe," "intend," "plan," "estimate" and similar expressions are meant to identify such forward-looking statements. Actual results may differ materially from those expressed or implied by such forward-looking statements. LEGAL OPINION The validity of the Common Stock to be issued pursuant to the Plan has been passed upon for the Company by Pietrantoni Mendez & Alvarez, San Juan, Puerto Rico, special counsel to the Company. As of November 23, 1998, partners and associates of Pietrantoni Mendez & Alvarez owned, in the aggregate, approximately 18,029 shares of Common Stock. EXPERTS The consolidated financial statements incorporated in this Prospectus by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1997, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given upon the authority of said firm as experts in auditing and accounting. 20 21 POPULAR, INC. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN -----END PRIVACY-ENHANCED MESSAGE-----