POPULAR, INC.

/s/ Ileana González*

Ileana González

Senior Vice President
(Principal Accounting Officer)

September 9, 2004

/s/ Jorge A. Junquera

Jorge A. Junquera
Attorney-in-Fact

-----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, MSQlBRNM3EIVY1mbsY5MOWeOatWCY4I+c+SFRHGuR3YGJw6N2Do/GnDPuAyRCOKR RRZpLfZ3/ojGghJaSk0SyA== 0000950144-04-008980.txt : 20040909 0000950144-04-008980.hdr.sgml : 20040909 20040909105435 ACCESSION NUMBER: 0000950144-04-008980 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20040909 DATE AS OF CHANGE: 20040909 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: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-118197 FILM NUMBER: 041021841 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POPULAR NORTH AMERICA INC CENTRAL INDEX KEY: 0000877337 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 660476353 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-118197-02 FILM NUMBER: 041021843 BUSINESS ADDRESS: STREET 1: C/O CT 1209 ORANGE ST CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: 8097659800 MAIL ADDRESS: STREET 1: C/O SULLIVAN & CROMWELL STREET 2: 125 BROAD ST CITY: NEW YORK STATE: NY ZIP: 10004 FORMER COMPANY: FORMER CONFORMED NAME: BANPONCE FINANCIAL CORP DATE OF NAME CHANGE: 19930520 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Popular North America Capital Trust I CENTRAL INDEX KEY: 0001300425 IRS NUMBER: 666025389 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-118197-01 FILM NUMBER: 041021842 BUSINESS ADDRESS: STREET 1: 209 MUNOZ RIVERA AVE STREET 2: PO BOX 362708 CITY: SAN JUAN STATE: PR ZIP: 00918-2708 BUSINESS PHONE: 787-765-9800 MAIL ADDRESS: STREET 1: 209 MUNOZ RIVERA AVE STREET 2: PO BOX 362708 CITY: SAN JUAN STATE: PR ZIP: 00918-2708 S-3/A 1 g90482a2sv3za.htm POPULAR, INC. POPULAR, INC.

As filed with the Securities and Exchange Commission on September 9, 2004

Registration No. 333-118197,

333-118197-01,

333-118197-02

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2 to

Form S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Popular, Inc.

(Exact name of registrant as specified in its charter)


Puerto Rico		66-0416582
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
209 Muñoz Rivera Avenue San Juan, Puerto Rico 00918 (Address of principal executive offices)		(787) 765-9800 (Registrant’s telephone number, including area code)

Popular North America, Inc.

(Exact name of registrant as specified in its charter)


Delaware		66-0476353
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
209 Muñoz Rivera Avenue San Juan, Puerto Rico 00918 (Address of principal executive offices)		(787) 765-9800 (Registrant’s telephone number, including area code)

Popular North America Capital Trust I

(Exact name of registrant as specified in its trust agreement)


Delaware		66-6025389
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
c/o Popular North America, Inc. 209 Muñoz Rivera Avenue San Juan, Puerto Rico 00918 (Address of principal executive offices)		(787) 765-9800 (Registrant’s telephone number, including area code)

Jorge Junquera

209 Muñoz Rivera Avenue

San Juan, Puerto Rico 00918

(787) 765-9800

(Name, address, and telephone number, including area code, of agent for service)

Copies to:


Donald J. Toumey Robert W. Downes Sullivan & Cromwell LLP 125 Broad Street New York, New York 10004		Edward F. Petrosky Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. o

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. o

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. o

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. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

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.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell, nor does it seek an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION

Preliminary Prospectus Dated September 9, 2004

$250,000,000

Popular North America Capital Trust I

% Capital Securities

(Liquidation Amount $1,000 Per Capital Security)

Fully, irrevocably and unconditionally guaranteed

on a subordinated basis, as described in this prospectus, by

Popular North America, Inc.

and

(POPULAR LOGO)

Popular North America Capital Trust I is offering preferred securities, which we refer to in this prospectus as “capital securities,” that Popular North America, Inc. and Popular, Inc. will fully and unconditionally guarantee, based on their combined obligations under a trust agreement, a junior subordinated indenture, a capital securities guarantee agreement, a debenture guarantee and an expense agreement.

The capital securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity on , 2034 or their earlier redemption. The junior subordinated debentures are redeemable prior to maturity, (i) in whole at any time or in part from time to time, at the option of Popular North America at a redemption price calculated pursuant to the formula specified in this prospectus, which includes the accrued and unpaid interest on the junior subordinated debentures so redeemed or (ii) in whole but not in part, if an event occurs that results in an adverse consequence for the tax or regulatory capital treatment of the capital securities or for the investment company status of the trust at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon. See “Description of Junior Subordinated Debentures — Redemption.” We have committed to the Federal Reserve Board that Popular North America will not exercise its rights to cause redemption of the junior subordinated debentures or the capital securities prior to maturity without having received the prior approval of the Federal Reserve Board to do so, if required under applicable Federal Reserve Board capital guidelines or policies.

The capital securities are not deposits or other obligations of a depository institution and are not insured by the Federal Deposit Insurance Corporation, the Bank Insurance Fund or any other governmental agency and may lose value.

Investing in the capital securities involves risks. See “Risk Factors” beginning on page 7.

Proceeds to

Underwriting

Popular

Price to

Discounts and

North America

Public

Commissions(1)

Capital Trust I(1)

Per Capital Security

Total

(1) Because Popular North America Capital Trust I will use all of the proceeds from the sale of the capital securities and its common securities to purchase junior subordinated debentures of Popular North America, Inc., Popular North America, Inc. will pay all underwriting discounts and commissions.

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.

The underwriters expect to deliver the capital securities in book-entry only form through the facilities of The Depository Trust Company and its participants, including Euroclear Bank S.A./N.V., as operator of the Euroclear System, and Clearstream Banking, société anonyme, on or about , 2004.

Joint Book-Running Managers

Credit Suisse First Boston JPMorgan

Popular Securities, Inc.

The date of this prospectus is , 2004.

TABLE OF CONTENTS


Summary			1
Risk Factors			7
Forward-Looking Statements			12
Use of Proceeds			12
Ratios of Earnings to Fixed Charges and to Fixed Charges and Preferred Stock Dividends of Popular			13
Earnings Per Common Share			13
Description of the Trust			13
Accounting Treatment; Regulatory Capital			15
Description of Capital Securities			15
Description of Junior Subordinated Debentures			33
Description of Debenture Guarantees			44
Description of Capital Securities Guarantees			45
Relationship Among the Capital Securities, the Junior Subordinated Debentures, the Expense Agreement and the Guarantees			48
Certain Federal Income Tax Considerations			51
Certain ERISA Considerations			56
Underwriters			57
Validity of Securities			61
Experts			61
Where You Can Find More Information			61
EX-1(A) FORM OF UNDERWRITING AGREEMENT
EX-4(A) FORM OF JUNIOR SUBORDINATED INDENTURE
EX-4(B) CERTIFICATE OF TRUST
EX-4(C) TRUST AGREEMENT
EX-4(D) FORM OF AMENDED AND RESTATED TRUST AGREEMENT
EX-4(F) FORM OF GUARANTEE AGREEMENT
EX-5(A) OPINION OF BRUNILDA SANTOS DE ALVAREZ, ESQ.
EX-5.(B) Opinion of Sullivan and Cromwell LLP
EX-5(C) OPINION OF RICHARDS, LAYTON & FINGER
EX-8 OPINION OF SULLIVAN & CROMWELL LLP, TAX MATTERS
EX-23(A) CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCCOUNTING FIRM

You should rely only on the information contained or incorporated by reference in this prospectus. The trust, Popular North America and Popular have not authorized anyone to provide you with information other than that contained or incorporated by reference in this prospectus. The information in this prospectus may only be accurate as of its date.

The trust is offering to sell the capital securities, and is seeking offers to buy the capital securities, only in jurisdictions where offers and sales are permitted. The distribution of this prospectus and the offering of the capital securities in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the capital securities and the distribution of this prospectus outside the United States. This prospectus does not constitute, and may not be used in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

SUMMARY

The following summary highlights information contained elsewhere in the prospectus. You should read this entire prospectus, including “Risk Factors” herein and our consolidated financial statements and notes thereto incorporated by reference in this prospectus, before deciding to invest in the capital securities.

When we refer to “Popular North America,” “we,” “our” and “us” in this prospectus under the heading “Summary — Popular North America, Inc.,” we mean Popular North America, Inc. and our subsidiaries unless the context indicates otherwise. When such terms are used elsewhere in this prospectus, we refer only to Popular North America, Inc. unless the context indicates otherwise. When we refer to “Popular” in this prospectus under the heading “Summary — Popular, Inc.,” we mean Popular, Inc. and its subsidiaries unless the context indicates otherwise. When “Popular” is used elsewhere in this prospectus, we refer only to Popular, Inc. unless the context indicates otherwise. When we refer to the “trust” in this prospectus, we mean Popular North America Capital Trust I.

Popular North America, Inc.

We are a wholly-owned subsidiary of Popular International Bank, Inc. and an indirect wholly-owned subsidiary of Popular, Inc. We were organized in 1991 under the laws of the State of Delaware. We are a registered bank holding company under the Bank Holding Company Act, as amended by the Gramm-Leach-Bliley Act, and are subject to supervision and regulation by the Board of Governors of the Federal Reserve System. We function as a holding company for Popular’s mainland U.S. operations. We own subsidiaries engaged in banking and a variety of financial services.

We are a separate and distinct legal entity from our banking and other subsidiaries. Our principal source of funds to pay our obligations, including debt service, is dividends from our subsidiaries. Various federal and state statutes and regulations limit the amount of dividends that our banking and other subsidiaries may pay to us without regulatory approval.

Our principal executive offices are located at Popular Center Building, 209 Muñoz Rivera Avenue, San Juan, Puerto Rico 00918, and our telephone number is (787) 765-9800.

Popular, Inc.

Popular is a diversified, financial services company and the largest locally based financial institution in the Commonwealth of Puerto Rico (“Puerto Rico”). It was incorporated in 1984 under the laws of Puerto Rico. It is registered as a financial holding company and bank holding company under the Bank Holding Company Act, as amended by the Gramm-Leach-Bliley Act, and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System. As a diversified financial services institution, it owns subsidiaries engaged in banking and a variety of financial services. Its subsidiaries provide banking, insurance, mortgage, auto, consumer finance, investment and electronic payment processing services through retail branches, the internet and other distribution channels throughout Puerto Rico, the mainland United States, and to a lesser extent, the Caribbean and Central America. Its principal subsidiary, Banco Popular de Puerto Rico, was incorporated in 1893 and is Puerto Rico’s largest bank.

Popular is a separate and distinct legal entity from its banking and other subsidiaries. Its principal source of funds to pay its obligations, including debt service, is dividends from its subsidiaries. Various federal, Puerto Rico and state statutes and regulations limit the amount of dividends that its banking and other subsidiaries may pay to it without regulatory approval.

Popular’s principal executive offices are located at Popular Center Building, 209 Muñoz Rivera Avenue, San Juan, Puerto Rico 00918, and its telephone number is (787) 765-9800.

Popular North America Capital Trust I

The trust is a Delaware statutory trust. The trust exists solely to:

• issue and sell its common securities to Popular North America;

• issue and sell its capital securities to the public;

• use the proceeds from the sale of its common securities and capital securities to purchase junior subordinated debentures from Popular North America; and

• engage in other activities that are necessary, convenient or incidental to these purposes.

J.P. Morgan Trust Company, National Association will act as the property trustee of the trust and Chase Manhattan Bank USA, National Association will act as Delaware trustee of the trust. Two officers of Popular North America or its subsidiaries will act as administrative trustees of the trust. The principal office of the trust is c/o Popular North America, Inc., Popular Center Building, 209 Muñoz Rivera Avenue, San Juan, Puerto Rico 00918, and its telephone number is (787) 765-9800.

The Offering


Issuer		Popular North America Capital Trust I

Securities		250,000 % capital securities, which represent undivided preferred beneficial interests in the assets of the trust.

Trust Assets		The assets of the trust will consist solely of the % junior subordinated debentures of Popular North America.

Initial Public Offering Price		$1,000 per capital security.

Distributions		You will be entitled to receive cumulative cash distributions at an annual rate of $ per capital security, which represents % of the liquidation amount of $1,000 per capital security. Distributions will accumulate from the date the trust issues the capital securities and are payable semi-annually in arrears on the day of each and , beginning , 2005. The record date for distributions on the capital securities will be the fifteenth day preceding the distribution date. We may defer payment of cash distributions as described below.

Redemption		The capital securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity on , 2034 or their earlier redemption.

		Popular North America may redeem the junior subordinated debentures prior to maturity, (i) in whole at any time or in part from time to time, at a redemption price calculated pursuant to the formula specified in this prospectus, which includes the accrued and unpaid interest on the junior subordinated debentures so redeemed or (ii) in whole but not in part, if an event occurs that results in an adverse consequence for the tax or regulatory capital treatment of the capital securities or for the investment company status of the trust at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon. See “Description of Junior Subordinated Debentures — Redemption.”


		We have committed to the Federal Reserve Board that Popular North America will not exercise its rights to cause redemption of the junior subordinated debentures or the capital securities prior to maturity without having received the prior approval of the Federal Reserve Board to do so, if required under applicable Federal Reserve Board capital guidelines or policies.

Deferral of Distributions		Subject to certain exceptions, Popular North America may defer interest payments on the junior subordinated debentures during any period of up to 10 consecutive semi-annual periods, but not beyond their maturity date or any redemption date.

		If Popular North America defers interest payments on the junior subordinated debentures:

		• the trust will defer distributions on the capital securities;

		• during any deferral period, distributions will continue to accumulate on the capital securities at an annual rate of % of the liquidation amount of each capital security; and

		• the deferred distributions will accrue additional distributions, as permitted by applicable law, at an annual rate of % of the liquidation amount of each capital security, compounded semi-annually, until paid.


		If Popular North America exercises its right to defer payments of interest on the junior subordinated debentures, holders of the capital securities will be required to accrue interest income on the deferred interest allocable to the capital securities for United States federal income tax purposes. See “Risk Factors — Distributions on the capital securities could be deferred; you may have to include interest in your taxable income before you receive cash.”


		At the end of the deferral period, Popular North America will be required to pay to the trust all accrued and unpaid interest under the junior subordinated debentures. Upon receipt, the trust will then pay all accumulated and unpaid distributions to the holders of the capital securities.

Guarantee of the Capital Securities		The obligations of Popular and Popular North America described in this prospectus, in the aggregate, constitute a full, irrevocable and unconditional guarantee by Popular North America and Popular, on a subordinated basis, of the obligations of the trust under the capital securities. Popular has guaranteed the payment of the principal, premium, if any, and interest on the junior subordinated debentures. Popular North America has guaranteed that the trust will use its available funds to pay the distributions on, and the redemption price for, the capital securities and the amounts payable upon liquidation of the trust. The obligations of Popular North America under its guarantee agreement are in turn guaranteed by Popular. However, the guarantees, other than Popular’s guarantee of payments on the junior subordinated debentures, do not apply when the trust does not have sufficient funds to make the payments. If Popular North America does not make payments on the junior subordinated debentures and


		Popular fails to make those payments under the related guarantees, the trust will not have sufficient funds to make payments on the capital securities and you will not receive such payments. In this event, your remedy is to institute a legal proceeding directly against Popular North America or Popular for enforcement of payments under the junior subordinated debentures or the related guarantees.

Distribution of the Junior Subordinated Debentures		Popular North America has the right to terminate the trust at any time unless such termination or resulting distribution of junior subordinated debentures described below would result in a taxable event to holders of the capital securities. If Popular North America decides to exercise its right to terminate the trust, the trust will distribute, after satisfaction of liabilities to creditors, the junior subordinated debentures to holders of the capital securities and common securities on a pro rata basis based on their relative liquidation amounts. Any distributions of the junior subordinated debentures may require approval of the Federal Reserve Board.

Ranking		The capital securities will generally rank equally with the common securities in priority of payment. The trust will make payments on the capital securities and the common securities based on a proportionate allocation of the payments it receives on the junior subordinated debentures. However, the capital securities will rank prior to the common securities during the occurrence and continuance of a trust event of default relating to a debenture default under the junior subordinated indenture. For a more detailed explanation, see “Description of Capital Securities — Ranking of Trust Securities” in this prospectus.

		The junior subordinated debentures and the guarantee from Popular North America will be unsecured and will rank subordinate and junior in right of payment to all of Popular North America’s current and future Senior Debt, as defined in this prospectus, which includes subordinated debt of Popular North America other than debt related to preferred securities comparable to the capital securities, and to its secured debt. The guarantees from Popular of the capital securities and the junior subordinated debentures will be unsecured and will rank subordinate and junior in right of payment to all of Popular’s current and future Senior Debt, which includes subordinated debt of Popular other than debt related to preferred securities comparable to the capital securities, and to its secured debt. For a more detailed explanation, see “Description of Junior Subordinated Debentures — Subordination” and “Description of Capital Securities Guarantees — Status of the Capital Securities Guarantees” in this prospectus.


Voting Rights		If you purchase the capital securities, you will have limited voting rights. You will be entitled to vote on the following matters:

		• removal of the property trustee or the Delaware trustee when there is a debenture default under the junior subordinated indenture,

		• certain modifications to the terms of the capital securities, the junior subordinated debentures and the guarantees, and

		• the exercise of the trust’s rights as holder of the junior subordinated debentures.

		A more detailed description of your voting rights is contained under “Description of Capital Securities — Removal of Trustees,” “— Voting Rights; Amendment of the Trust Agreement” and “Description of Capital Securities Guarantees — Amendments and Assignment” in this prospectus.

Certain ERISA Considerations		If you are a fiduciary of a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, or section 4975 of the Internal Revenue Code of 1986, you should consider the requirements of ERISA and the Code in the context of the plan’s particular circumstances and ensure the availability of an applicable exemption before authorizing an investment in the capital securities. See “Certain ERISA Considerations” in this prospectus.

Use of Proceeds		The trust will use all of the proceeds from the sale of the capital securities to investors and the sale of the common securities to Popular North America, or one of its affiliates, to purchase the junior subordinated debentures. Popular North America intends to use the net proceeds from the sale of the junior subordinated debentures to the trust for general corporate purposes and to provide Tier 1 capitalization for it and Popular.

Trustee and Paying Agent		J.P. Morgan Trust Company, National Association will act as the property trustee and Chase Manhattan Bank USA, National Association will act as Delaware trustee of the trust.

Form of Capital Securities		The capital securities will be represented by one or more global securities that will be deposited with, or on behalf of, and registered in the name of a nominee of The Depository Trust Company (“DTC”) for the accounts of its participants, including Euroclear Bank S.A./ N.V. (“Euroclear”), as operator of the Euroclear System (the “Euroclear Operator”), and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”). This means that you will not receive a certificate for your capital securities and the capital securities will not be registered in your name. Rather, your broker or other direct or indirect participant of DTC will maintain your position in the capital securities.

Risk Factors

Your investment in the capital securities will involve risks. You should carefully consider the discussion of risks that follows below in the section entitled “Risk Factors,” and the other information in this prospectus, before deciding whether an investment in the capital securities is suitable for you.

RISK FACTORS

An investment in the capital securities involves a number of risks. You should carefully review the information contained in the other sections of this prospectus and should particularly consider the following matters before purchasing any capital securities.

Because the trust will rely on the payments it receives on the junior subordinated debentures to fund all payments on the capital securities, and because the trust may distribute the junior subordinated debentures in exchange for the capital securities, you are making an investment decision with regard to the junior subordinated debentures as well as the capital securities. You should carefully review the information in this prospectus about both of these securities and the guarantees.

Holders of the Senior Debt of Popular North America and Popular will get paid before you will get paid.

Popular North America’s obligations under the junior subordinated debentures and the guarantee it issues and Popular’s obligations under the guarantees it issues, respectively, are unsecured and will rank junior in priority of payment to all of our and its respective current and future Senior Debt, as defined in this prospectus, which includes subordinated debt of Popular North America and Popular, as the case may be, other than debt related to preferred securities comparable to the capital securities, and our and its secured debt to the extent of the collateral securing such debt. This means that payments may not be made under the junior subordinated debentures or the guarantees if there is a payment default on the Senior Debt of Popular North America or Popular, as applicable, or the maturity of such Senior Debt may be accelerated, or there is a judicial proceeding relating to the same, or Popular North America or Popular, as applicable, is subject to bankruptcy, insolvency or similar proceedings, unless all of our or its respective Senior Debt has been paid in full.

As of June 30, 2004, on a consolidated basis, Popular had $7.8 billion of outstanding Senior Debt, and Popular North America, on a consolidated basis, had $6.9 billion of outstanding Senior Debt (which is included in Popular’s outstanding Senior Debt). Included in the Senior Debt, at June 30, 2004, Popular had $3.9 billion of outstanding secured debt and Popular North America had $216 million of outstanding secured debt. The outstanding Senior Debt and secured debt exclude obligations under letters of credit, guarantees, foreign exchange contracts and interest swap contracts. In addition, Popular North America and Popular were obligated on such date under letters of credit, guarantees, foreign exchange contracts and interest rate swap contracts to which the junior subordinated debentures and the guarantees will be subordinated.

Popular North America’s obligations under the junior subordinated debentures and the guarantee it issues and Popular’s obligations under the guarantees it issues, respectively, will also be effectively subordinated to all current and future indebtedness and other liabilities and preferred equity, if any, of their respective subsidiaries. See “Description of Junior Subordinated Debentures — General” and “Business— Regulation and Supervision” in Popular’s Annual Report on Form 10-K for the year ended December 31, 2003.

The capital securities, the junior subordinated debentures and the guarantees do not limit the ability of Popular North America, Popular or any of their respective subsidiaries to incur additional indebtedness and other liabilities and preferred equity, including secured debt, Senior Debt and indebtedness and other liabilities and preferred equity, if any, that rank effectively senior to the junior subordinated debentures and the guarantees. For more information on the ranking of Popular North America’s obligations under the junior subordinated debentures and the guarantee it issues and Popular’s obligations under the guarantees it issues, respectively, see “Description of Junior Subordinated Debentures — Subordination” and “Description of Capital Securities Guarantees — Status of the Capital Securities Guarantees.”

If Popular North America does not make payments on the junior subordinated debentures, the trust will not be able to pay distributions on the capital securities, and the guarantees other than Popular’s guarantees of the junior subordinated debentures will not apply.

The ability of the trust to timely pay distributions on, and any applicable redemption price for, the capital securities and amounts payable upon liquidation of the trust depends solely upon Popular North America’s making the related payments on the junior subordinated debentures when due or Popular’s making such payments under the related guarantees. If Popular North America defaults on its obligation to pay the principal of or any premium or interest on the junior subordinated debentures and Popular fails to make those payments under the related guarantees, the trust will not have sufficient funds to pay distributions on, or the applicable redemption price for, the capital securities or amounts payable upon the liquidation of the trust, as the case may be. In that case, you will not be able to rely upon any guarantee of Popular North America or the guarantee of such guarantee by Popular for payment of these amounts because each such guarantee only applies if Popular North America makes the corresponding payment on the junior subordinated debentures. Instead, you or the property trustee will have to bring a legal action against Popular North America or Popular for payment under the junior subordinated debentures or the related guarantees, respectively.

You will not be able to enforce your rights directly against Popular North America if a debenture default not relating to a payment default occurs.

You will not be able to enforce your rights directly against Popular North America if a debenture default not relating to a payment default occurs.

If a debenture default under the junior subordinated indenture occurs and is continuing, that event will also be an event of default under the capital securities. In that case, you may have to rely on the property trustee, as the holder of the junior subordinated debentures, to enforce your rights against Popular North America. However, you may bring a legal action directly against Popular North America if an event of default under the trust agreement occurs because of Popular North America’s failure to make a required payment under the junior subordinated debentures.

See “Description of Junior Subordinated Debentures — Events of Default, Debenture Defaults and the Rights of Capital Securities Holders to Take Action Against Popular North America” herein.

Distributions on the capital securities could be deferred; if so, you would have to include interest in your taxable income before you receive cash.

Subject to certain exceptions, Popular North America may defer interest payments on the junior subordinated debentures one or more times. Each deferral period may last for up to 10 consecutive semi-annual periods, but not beyond the maturity date or any redemption date of the junior subordinated debentures. During a deferral period, the trust would also defer distributions on the capital securities.

If Popular North America defers interest payments on the junior subordinated debentures and the trust defers distributions on the capital securities, holders of the capital securities will be required to accrue interest income for United States federal income tax purposes on their proportionate share of the deferred interest on the junior subordinated debentures held by the trust. As a result, you will have to include that accrued interest in your gross income for United States federal income tax purposes before you actually receive any cash attributable to that income. You will also not receive the cash distribution related to any accrued and unpaid interest from the trust if you sell the capital securities before the record date for any deferred distributions, even if you held the capital securities on the date that the payments would normally have been paid.

Popular North America has no current intention of exercising its right to defer payments of interest on the junior subordinated debentures. However, if Popular North America exercises this right, the market price of the capital securities may be adversely affected and may not fully reflect the value of accrued and unpaid interest on the junior subordinated debentures. If you sell your capital securities when distributions

are being deferred, you may not receive the same return on investment as someone who continues to hold the capital securities. In addition, because of Popular’s right to defer interest payments, the market price of the capital securities may be more volatile than the market prices of other securities that are not subject to interest deferrals.

See “Description of Capital Securities — Deferral of Distributions,” “Description of Junior Subordinated Debentures — Option to Extend Interest Payment Period” and “Certain Federal Income Tax Considerations — Interest Income and Original Issue Discount” for more information regarding the interest payment deferral option.

The capital securities may be redeemed prior to the maturity date of the junior subordinated debentures, such redemption may be a taxable event to you and you may not be able to reinvest the proceeds in a comparable security at the same or a higher rate of return.

Popular North America has the right at any time to redeem the junior subordinated debentures, in whole or in part, prior to their maturity date on , 2034 and thereby cause a mandatory redemption of the capital securities, subject to any required prior approval from the Federal Reserve Board. In addition, if adverse changes in the tax laws or investment company laws or in the capital treatment of the capital securities discussed below occur and are continuing, Popular North America may redeem the junior subordinated debentures in whole, but not in part, within 90 days following the occurrence of the event, subject to any required prior approval from the Federal Reserve Board.

If the junior subordinated debentures are redeemed, the capital securities will be redeemed at a redemption price equal to $1,000 per capital security plus accumulated and unpaid distributions to the redemption date and any applicable premium. Under current United States federal income tax law, the redemption of the capital securities would be a taxable event to you. See “Certain Federal Income Tax Considerations” herein.

In addition, you may not be able to reinvest the money you receive upon redemption in a comparable security at a rate that is equal to or higher than the rate of return you receive on the capital securities.

See “Description of Junior Subordinated Debentures — Redemption,” “Description of Capital Securities — Redemption” and “— Liquidation Distribution Upon Dissolution” herein for more information on redemption of the junior subordinated debentures.

Your capital securities may be redeemed if a tax event, a capital treatment event or an investment company event occurs.

If a Tax Event, a Capital Treatment Event or an Investment Company Event occurs, we have the right to redeem the junior subordinated debentures in whole (but not in part) within 90 days following the occurrence of the Tax Event, Capital Treatment Event or Investment Company Event and thereby cause a mandatory redemption of the capital securities. We have committed that we will not cause any such redemption without having received the prior approval of the Federal Reserve Board to do so, if then required under applicable Federal Reserve Board capital guidelines or policies. The redemption price will be $1,000 per capital security plus any accumulated and unpaid distributions to the date of redemption.

“Tax Event,” with respect to the junior subordinated debentures held by the trust, means that the trust has received an opinion of counsel experienced in such matters to the effect that, as a result of any:

• amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority of or in the United States; or

• official or administrative pronouncement or judicial decision interpreting or applying such laws or regulations,

which amendment or change is effective or which proposed change, pronouncement or decision is announced on or after the date of original issuance of the capital securities, there is more than an insubstantial risk that:

• the trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the junior subordinated debentures;

• interest payable by Popular North America on the junior subordinated debentures is not, or within 90 days of the date of such opinion, will not be, deductible by Popular North America, in whole or in part, for United States federal income tax purposes; or

• the trust is, or will be within 90 days of the date of such opinion, subject to more than a minimal amount of taxes, duties or other governmental charges.

With respect to junior subordinated debentures that are no longer held by the trust, “Tax Event” means the receipt by Popular North America of an opinion of counsel experienced in such matters to the effect that, as a result of any:

which amendment or change is effective or which proposed change, pronouncement or decision is announced on or after the date of original issuance of the junior subordinated debentures under the indenture, there is more than an insubstantial risk that interest payable by Popular North America on the junior subordinated debentures is not, or within 90 days of the date of such opinion will not be, deductible by Popular North America, in whole or in part, for United States federal income tax purposes.

A “Capital Treatment Event,” with respect to the trust, means our reasonable determination, based on an opinion of counsel experienced in such matters (who may be an employee of Popular of any of its affiliates) to the effect that, as a result of any:

• amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision of or in the United States; or

• official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations,

which amendment or change is effective or such prospective change, pronouncement, action or decision is announced on or after the date of original issuance of the capital securities, there is more than an insubstantial risk that Popular will not be entitled to treat the capital securities as Tier 1 capital (or the then equivalent thereof) for purposes of the capital adequacy guidelines of the Federal Reserve Board, as then in effect and applicable to Popular North America and Popular.

Notwithstanding the foregoing, a Capital Treatment Event shall not be deemed to have occurred as a result of the adoption by the Federal Reserve Board of final rules pursuant to its notice of proposed rulemaking dated May 6, 2004 relating, in part, to the implementation of stricter quantitative limits and qualitative standards for trust preferred securities to be treated as “Tier 1” regulatory capital.

An “Investment Company Event” means that the trust has received an opinion of counsel experienced in such matters to the effect that, as a result of any:

• amendment to, or change (including any announced proposed change) in, the applicable laws (or any regulations thereunder) of the United States or any political subdivision or other governmental agency or regulatory authority of or in the United States; or

• official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations,

which amendment or change is effective or which proposed change, pronouncement, action or decision is announced on or after the date of original issuance of the capital securities, there is more than an insubstantial risk that the trust is or will be considered an “investment company” that is required to be registered under the Investment Company Act of 1940.

The trust may distribute the junior subordinated debentures to the holders of the capital securities and the junior subordinated debentures may trade at a price that is lower than the price you paid for the capital securities.

Popular North America may terminate the trust before the maturity date of the junior subordinated debentures if such termination and the resulting distribution of junior subordinated debentures would not result in a taxable event for United States federal income tax purposes to holders of the capital securities. Upon such termination, the property trustee will distribute the junior subordinated debentures to the holders of the capital securities and the common securities in exchange for their securities in liquidation of the trust after satisfaction of liabilities to creditors.

No one can accurately predict the market prices for the junior subordinated debentures that may be distributed. Accordingly, the junior subordinated debentures that you receive upon a distribution, or the capital securities you hold pending the distribution, may trade at a lower price than what you paid to purchase the capital securities.

Under current United States federal income tax law, the distribution of junior subordinated debentures upon the termination of the trust would generally not be taxable to you. If, however, despite the delivery of an opinion of counsel that the termination and resulting distribution of junior subordinated debentures would not result in a taxable event to holders of the capital securities, the trust is characterized for United States federal income tax purposes as an association taxable as a corporation at the time of the liquidation, the distribution of the junior subordinated debentures would be taxable to you.

Because you may receive junior subordinated debentures, you should make an investment decision with regard to the junior subordinated debentures, as well as the capital securities. You should carefully review all the information regarding the junior subordinated debentures contained in this prospectus.

See “Description of the Capital Securities — Liquidation Distribution Upon Dissolution” herein for more information.

The trading prices of your capital securities may not reflect the value of accrued and unpaid interest, but you will have to include such amounts in your taxable income.

The capital securities may trade at prices, and holders may receive sales proceeds, that do not fully reflect the value of accrued and unpaid interest on the junior subordinated debentures. However, if you use the accrual method of accounting for tax purposes and you sell your capital securities between semi-annual distributions, you will be required to include accrued and unpaid interest as ordinary income for United States federal income tax purposes and to add such amounts to your adjusted basis in the capital securities being sold. In addition, your adjusted tax basis in the capital securities being sold will include any original issue discount that has accrued to the date of sale, regardless of your regular method of accounting for tax purposes. The sale of your capital securities will give rise to a loss if the amount you receive is less than your adjusted tax basis in the capital securities.

See “Certain Federal Income Tax Considerations — Interest Income and Original Issue Discount” herein for more information.

Popular North America generally will control the trust because your voting rights are very limited; your interests may not be the same as Popular North America’s interests.

You will have limited voting rights. For example, you may not elect or remove the property trustee or the Delaware trustee, except for cause or when there is a debenture default under the junior subordinated

indenture. In addition, only the holders of the common securities of the trust can replace or remove any of the administrative trustees of the trust.

Popular North America and the administrative trustees of the trust, who are officers of Popular North America or its subsidiaries, may amend the trust agreement in certain circumstances without the consent of holders of capital securities as described under “Description of the Capital Securities — Voting Rights; Amendment of the Trust Agreement” herein.

An active trading market for the capital securities may not develop.

The capital securities constitute a new issue of securities with no established trading market. The underwriters have advised the trust that they presently intend to make a market in the capital securities, but the underwriters are not obligated to do so, and may discontinue market making activities at any time without notice. Accordingly, a trading market for the capital securities may not develop or, if one develops, may not be maintained or be liquid. If a market for the capital securities were to develop, the capital securities could trade at prices that may be higher or lower than the initial offering price depending upon many factors, including prevailing interest rates, our operating results and the markets for similar securities.

FORWARD-LOOKING STATEMENTS

The matters discussed or incorporated by reference in this prospectus that are not historical facts include forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “project” and similar expressions are intended to identify forward-looking statements. These statements are based on the current expectations of Popular and Popular North America and involve numerous risks and uncertainties. Some of these risks and uncertainties are factors that affect all businesses, while some are specific to us and the financial services sector. Many factors could affect the actual results of Popular and Popular North America, causing results to differ, and possibly differ materially, from those expressed in any such forward-looking statements. These factors include, but are not limited to:

• changes in interest rates;

• regional and national economic conditions;

• the impact of new competitors or competitive products;

• regulatory or legislative changes;

• natural disasters affecting Puerto Rico, our primary market; and

• other factors described in this prospectus or in our other filings with the SEC.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. Neither Popular North America nor Popular undertakes any obligation to publicly update or revise any of the forward-looking statements.

USE OF PROCEEDS

The trust will use all of the proceeds from the sale of the capital securities to investors and the sale of common securities to Popular North America, or one of its affiliates, to purchase the junior subordinated debentures. Popular North America intends to use the net proceeds from the sale of the junior subordinated debentures to the trust for general corporate purposes and to provide Tier 1 capitalization for it or Popular.

RATIOS OF EARNINGS TO FIXED CHARGES AND TO FIXED CHARGES

AND PREFERRED STOCK DIVIDENDS OF POPULAR

The table below sets forth Popular’s ratios of earnings to fixed charges and to fixed charges and dividends on its preferred stock.

Six Months

Ended June 30,

Fiscal Year Ended December 31,

2004

2003

2002

2001

2000

1999

Ratio of Earnings to Fixed Charges:

Excluding interest on deposits

2.4

2.0

1.8

1.6

1.7x

Including interest on deposits

1.8

1.5

1.4

1.3

1.4x

Ratio of Earnings to Fixed Charges and Preferred Stock Dividends:

Excluding interest on deposits

2.3

2.0

1.7

1.5

1.7x

Including interest on deposits

1.8

1.7

1.8

1.5

1.4

1.3

1.4x

For purposes of these consolidated ratios, earnings consist of pre-tax income plus fixed charges. Fixed charges represent all interest expense (ratios are presented both excluding and including interest on deposits), the portion of net rental expense which is deemed representative of the interest factor and the amortization of debt issuance expense and capitalized interest.

The term “preferred stock dividends” is the amount of pre-tax earnings that is required to pay dividends on Popular’s outstanding preferred stock.

EARNINGS PER COMMON SHARE

The table below presents relevant per share information presented in Popular’s 2003 Form 10-K and the March 31, 2004 Form 10-Q adjusted to reflect the two-for-one stock split effected in the form of a stock dividend. The new shares were distributed on July 8, 2004 to shareholders of record as of June 18, 2004.

Quarter Ended

March 31,

2004 2003

PER COMMON SHARE DATA

Net Income (basic and diluted) (before and after cumulative effect of accounting changes)
$ 0.43 $ 0.37

Dividends declared
0.14 0.10

Book Value
10.39 9.38

Market Price
21.55 17.00

Outstanding shares:

Average
265,997,350 265,153,178

End of period
265,920,898 265,104,578

[Additional columns below]

[Continued from above table, first column(s) repeated]

Year Ended December 31,

2003 2002 2001 2000 1999 1998 1997 1996 1995 1994

PER COMMON SHARE DATA

Net Income (basic and diluted) (before and after cumulative effect of accounting changes)
$ 1.74 $ 1.31 $ 1.09 $ 0.99 $ 0.92 $ 0.83 $ 0.75 $ 0.67 $ 0.53 $ 0.46

Dividends declared
0.51 0.40 0.38 0.32 0.30 0.25 0.20 0.18 0.15 0.13

Book Value
9.66 9.10 7.97 6.96 5.76 5.93 5.19 4.40 3.96 3.44

Market Price
22.43 16.90 14.54 13.16 13.97 17.00 12.38 8.44 4.85 3.52

Outstanding shares:

Average
265,481,840 267,830,165 272,476,576 271,814,952 271,171,268 271,064,172 268,073,928 264,089,248 263,265,200 262,385,944

End of period
265,783,892 264,878,094 272,724,728 271,997,234 271,308,584 271,274,654 270,730,816 264,354,024 263,589,088 262,705,024

DESCRIPTION OF THE TRUST

The trust is a statutory trust formed under Delaware law by:

• the execution of a certificate of trust and trust agreement by Popular North America, as depositor, Popular, as guarantor, and certain of the trustees of the trust, and

• the filing of a certificate of trust with the Secretary of State of the State of Delaware.

The trust agreement will be amended and restated in its entirety before the issuance of capital securities by the trust. We will refer to such trust agreement, as so amended and restated, as the “trust agreement.” The trust agreement will be qualified as an indenture under the Trust Indenture Act of 1939.

The trust exists for the exclusive purposes of:

• issuing the capital securities and common securities, or the “trust securities,” representing undivided beneficial interests in the assets of the trust;

• investing the gross proceeds of the capital securities and the common securities in an equivalent principal amount of junior subordinated debentures; and

• engaging in only those activities convenient, necessary or incidental thereto.

The capital securities offered hereby will constitute all of the capital securities of the trust. Popular North America, or one of its affiliates, will acquire all of the common securities of the trust. The common securities of the trust will have an aggregate liquidation amount equal to $7,732,000.

The common securities of the trust rank equally with the capital securities of the trust and the trust will make payment on its trust securities pro rata, except that upon an event of default under the trust agreement relating to a debenture default under the junior subordinated indenture, the rights of the holders of the common securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the capital securities.

The trust’s business and affairs will be conducted by its trustees, each appointed by Popular North America as depositor of the trust. The trustees will be Chase Manhattan Bank USA, National Association, which is referred to as the “Delaware trustee,” two individual trustees, who are referred to as the “administrative trustees” and who are employees or officers of or affiliated with Popular North America, and J.P. Morgan Trust Company, National Association, which is referred to as the “property trustee.” The property trustee will act as sole trustee under the trust agreement for purposes of compliance with the Trust Indenture Act and will also act as “guarantee trustee” under the guarantees and “indenture trustee” under the junior subordinated indenture. See “Description of Capital Securities Guarantees.”

Unless a debenture default under the junior subordinated indenture has occurred and is continuing, the holders of the common securities will be entitled to appoint, remove or replace the property trustee and the Delaware trustee. The holders of a majority in liquidation amount of capital securities of the trust will be entitled to appoint, remove or replace the property trustee and the Delaware trustee for cause or if a debenture default under the junior subordinated indenture has occurred and is continuing. The right to vote to appoint, remove or replace the administrative trustees is vested exclusively in the holders of the common securities, and in no event will the holders of capital securities have such right. All of the common securities will be directly or indirectly owned by Popular North America.

No separate financial statements of the trust are included in this prospectus. Popular, Popular North America and the trust do not consider that such financial statements would be material to holders of capital securities because the trust is a special purpose entity, has no operating history or independent operations and is not engaged in and does not propose to engage in any activity other than holding as trust assets the junior subordinated debentures of Popular North America and issuing the trust securities. Furthermore, taken together, the respective obligations of Popular North America and Popular under the junior subordinated debentures, the junior subordinated indenture pursuant to which the junior subordinated debentures will be issued, the trust agreement, the guarantees and the expense agreement provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of distributions and other amounts due on the capital securities of the trust. For a more detailed discussion see “Description of Capital Securities,” “Description of Junior Subordinated Debentures,” “Description of Capital Securities Guarantees” and “Relationship Among the Capital Securities, the Junior Subordinated Debentures, the Expense Agreement and the Guarantees.” In addition, we do not expect that the trust will be filing reports with the SEC under the Securities Exchange Act of 1934.

The trust has a term of approximately 35 years, but may be terminated earlier as provided in the trust agreement.

Popular North America has agreed to pay all fees and expenses related to the trust and the offering of the common securities and the capital securities, not including the fees and expenses of counsel to the underwriters (which will be paid by the underwriters).

The principal office of the trust is c/o Popular North America, Inc., Popular Center Building, 209 Muñoz Rivera Avenue, San Juan, Puerto Rico 00918, and its telephone number (787) 765-9800.

ACCOUNTING TREATMENT; REGULATORY CAPITAL

The trust will not be consolidated on our balance sheet as a result of recent accounting changes reflected in FASB Interpretation No. 46, Consolidation of Variable Interest Entities, as revised in December 2003. Accordingly, for balance sheet purposes we will recognize the $257,732,000 aggregate principal amount of the junior subordinated debentures we issue to the trust as a liability (under the line item “notes payable”) and the $7,732,000 we invest in the trust’s common securities as an asset (under the line item “other investment securities, at cost”). The interest paid on the junior subordinated debentures will be recorded as interest expense on our income statement.

On May 19, 2004, the Federal Reserve Board published in the Federal Register proposed amendments to its risk-based capital guidelines. Among other things, the proposal, if adopted, would confirm the continuing inclusion of outstanding and prospective issuances of trust preferred securities in the Tier 1 capital of bank holding companies, but would make the qualitative requirements for trust preferred securities issued after May 31, 2004 more restrictive in certain respects and make the quantitative limits applicable to the aggregate amount of trust preferred securities and other restricted core capital elements that may be included in Tier 1 capital of bank holding companies more restrictive. If the Federal Reserve amends its proposed risk-based capital guidelines as proposed, we expect that the capital securities will qualify as Tier 1 capital.

As of June 30, 2004, on a pro forma basis, after giving effect to this offering, Popular North America will have $273 million in outstanding trust preferred securities that it treats as Tier 1 capital for bank regulatory purposes and Popular will have $694 million in outstanding trust preferred securities that it treats as Tier 1 capital for bank regulatory purposes.

DESCRIPTION OF CAPITAL SECURITIES

The following is a description of the material terms of the capital securities. You should also read the trust agreement, the Delaware Statutory Trust Act and the Trust Indenture Act. The form of the trust agreement is on file with the SEC as an exhibit to the registration statement pertaining to this prospectus.

The trust will issue the capital securities under the terms of the trust agreement. The trust agreement is qualified under the Trust Indenture Act. J.P. Morgan Trust Company, National Association will act as the property trustee for purposes of complying with the Trust Indenture Act. The terms of the capital securities will include those stated in the trust agreement and the Delaware Statutory Trust Act and those made part of the trust agreement by the Trust Indenture Act.

General

The capital securities will be limited to $250,000,000 aggregate liquidation amount. The capital securities will rank equal to, and payments will be made on the capital securities on a proportional basis with, the common securities. However, the capital securities will rank prior to the common securities during the continuance of a debenture default under the junior subordinated indenture as described under “— Ranking of Trust Securities.” The trust agreement does not permit the trust to issue any securities other than the common securities and the capital securities or to incur any indebtedness.

Distributions

Distributions on the capital securities will be fixed at an annual rate of % of the liquidation amount of $1,000 per capital security, payable semi-annually in arrears on the day of each and , beginning , 2005. If the trust is terminated and its assets distributed, for each capital security you own, you are entitled to receive a like principal amount of junior subordinated debentures or the liquidation amount of $1,000 plus accumulated but unpaid distributions from the assets of the trust available for distribution, after it has paid liabilities owed to its creditors, subject to any rights of the holders of the common securities to receive a pro rata distribution. Distributions to which holders of the capital securities are entitled and that are past due will accumulate additional distributions to the extent permitted by applicable law at an annual rate of % of the unpaid distributions, compounded semi-annually. The term “distribution” includes any additional distributions payable unless otherwise stated.

The amount of distributions payable for any period less than a full distribution period will be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in a partial month in that period. The amount of distributions payable for any full distribution period will be computed by dividing the distribution rate per annum by two.

Distributions on the capital securities:

• will be cumulative;

• will accrue from the date of original issuance of the capital securities; and

• will be payable semi-annually in arrears on the day of each and and will be payable to the holders of record, as described below.

Funds available for distribution to holders of the capital securities will be limited to payments received from Popular North America on the junior subordinated debentures or Popular on its related guarantees.

Payment of Distributions

DTC will act as the initial clearing agency. The trust will pay distributions on the capital securities to DTC, which will credit the relevant participant accounts at DTC on the applicable payment dates, or if the securities certificate for the capital securities is not then held by or on behalf of DTC, the trust will make the payments by check mailed to the addresses of the holders as such addresses appear on the books and records of the trust on the relevant record dates. However, a holder of $1 million or more in aggregate liquidation amount of capital securities may receive distribution payments, other than distributions payable upon redemption (which will be payable upon surrender of the capital securities), by wire transfer of immediately available funds upon written request to the trust not later than 15 calendar days prior to the date on which the distribution is payable. The record date for distributions on the capital securities will be the fifteenth day next preceding the distribution date, whether or not a business day.

The trust will pay distributions through the property trustee. The property trustee will hold amounts received from the junior subordinated debentures in the payment account for the benefit of the holders of the capital securities and the common securities.

If a distribution is payable on a day that is not a business day, then that distribution will be paid on the next day that is a business day, and without any interest or other payment for any delay with the same force and effect as if made on the payment date. Each date on which distributions are payable in accordance with the foregoing is referred to as a “distribution date.”

A business day is a day other than a Saturday, a Sunday or any other day on which banking institutions in New York, New York, San Juan, Puerto Rico or Wilmington, Delaware are authorized or required by law, regulation or executive order to remain closed or are customarily closed.

Deferral of Distributions

Subject to certain exceptions, Popular North America has the right to defer payments of interest on the junior subordinated debentures at any time and from time to time by extending the interest payment period for a period (an “extension period”) of up to 10 consecutive semi-annual periods, provided that no extension period may end on a date other than an interest payment date or extend beyond the maturity date or any redemption date of the junior subordinated debentures. There is no limitation on the number of times that we may elect to begin an extension period.

As a consequence, during an extension period, the trust will defer payment of the semi-annual distributions on the capital securities. The accumulated but unpaid distributions will continue to accumulate additional distributions, as permitted by applicable law, at an annual rate of %, compounded semi-annually during the extension period.

If we exercise our deferral right, then during any extension period, we may not:

• make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities issued by us that rank equally with or junior to the junior subordinated debentures or our guarantees of the capital securities;

• make any payment on guarantees issued by us that rank equally with or junior to the junior subordinated debentures or our guarantees of the capital securities; or

• declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of our capital stock, other than:

• any repurchase, redemption or other acquisition of shares of our capital stock (1) in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors, consultants or independent contractors, (2) in connection with a dividend reinvestment or stockholder stock purchase plan or (3) in connection with the issuance of our capital stock, or securities convertible into or exercisable for such capital stock, as consideration in an acquisition transaction entered into before the applicable extension period;

• any exchange or conversion of any class or series of our capital stock, or any capital stock of one of our subsidiaries, for any other class or series of our capital stock, or of any class or series of our indebtedness for any class or series of our capital stock;

• any purchase of fractional interests in shares of our capital stock pursuant to the conversion or exchange provisions of such capital stock or the securities being converted or exchanged;

• any declaration of a dividend in connection with any rights plan, or the issuance of rights, stock or other property under any rights plan, or the redemption or repurchase of rights pursuant thereto;

• any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equally with or junior to such stock.

In addition, if we exercise our deferral right, then during any extension period, Popular may not:

• make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities issued by it that rank equally with or junior to its guarantees of the junior subordinated debentures or the capital securities;

• make any payment on guarantees issued by it that rank equally with or junior to its guarantees of the junior subordinated debentures or the capital securities;

• declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of its capital stock, other than:

• any repurchase, redemption or other acquisition of shares of its capital stock (1) in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors, consultants or independent contractors, (2) in connection with a dividend reinvestment or stockholder stock purchase plan or (3) in connection with the issuance of its capital stock, or securities convertible into or exercisable for such capital stock, as consideration in an acquisition transaction entered into before the applicable extension period;

• any exchange or conversion of any class or series of its capital stock, or any capital stock of one of its subsidiaries, for any other class or series of its capital stock, or of any class or series of its indebtedness for any class or series of its capital stock;

• any purchase of fractional interests in shares of its capital stock pursuant to the conversion or exchange provisions of such capital stock or the securities being converted or exchanged;

• any declaration of a dividend in connection with any rights plan, or the issuance of rights, stock or other property under any rights plan, or the redemption or repurchase of rights pursuant thereto; or

• any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equally with or junior to such stock.

If the trust defers distributions, the deferred distributions, including accumulated additional distributions, must be paid on the distribution date that concludes the extension period to the holders on the record date for that distribution date. Upon termination of an extension period and payment of all amounts due on the capital securities, Popular North America may elect to begin a new extension period, subject to the above conditions.

Popular North America has no current intention of deferring payments of interest by extending the interest payment period on the junior subordinated debentures.

Redemption

When Popular North America repays or redeems the junior subordinated debentures, whether on the maturity date of , 2034 or upon earlier redemption, the property trustee will apply the proceeds from the repayment or redemption to redeem capital securities and common securities having an aggregate liquidation amount equal to that portion of the principal amount of junior subordinated debentures being repaid or redeemed. The redemption price per security will equal the $1,000 liquidation amount, plus accumulated but unpaid distributions to the redemption date and any applicable premium. See “Description of Junior Subordinated Debentures — Redemption” herein.

If less than all of the junior subordinated debentures are to be repaid or redeemed, then the aggregate liquidation amount of the capital securities and the common securities to be redeemed will be allocated on a pro rata basis in relation to their relative liquidation amounts, except in the case of a debenture default under the junior subordinated indenture. See “— Ranking of Trust Securities” herein.

Popular North America will have the right, subject to any required prior approval of the Federal Reserve Board, to redeem the junior subordinated debentures at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of redemption (and any applicable premium in the case of the first bullet below):

• in whole or in part, on one or more occasions, at any time; and

• in whole, but not in part, at any time within 90 days following the occurrence and continuation of a Tax Event, an Investment Company Event or a Capital Treatment Event, each as defined below.

The redemption price in the case of a redemption under the first bullet above will be equal to the greater of (a) 100% of the principal amount of the junior subordinated debentures being redeemed or (b) as determined by a Quotation Agent (as defined below), the sum of the present values of scheduled payments of principal and interest from the redemption date through , 2034 (the “Remaining Life”) on the junior subordinated debentures being redeemed, discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Rate plus %, plus, in the case of either (a) or (b), accrued and unpaid interest on those junior subordinated debentures to the redemption date.

A “Capital Treatment Event,” with respect to the trust, means our reasonable determination, based on an opinion of counsel experienced in such matters (who may be an employee of Popular or any of its affiliates) to the effect that, as a result of any:

• amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision of or in the United States, or

• official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations,

An “Investment Company Event” means that the trust has received an opinion of counsel experienced in such matters to the effect that, as a result of any:

“Comparable Treasury Issue” means, with respect to any redemption date, the United States Treasury security selected by the Quotation Agents as having a maturity comparable to the Remaining Life that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the Remaining Life. If no United States Treasury security has a maturity which is within a period from three months before to three months after , 2034, the two most closely corresponding United States Treasury securities shall be used as the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or extrapolated on a straight-line basis, rounding to the nearest month using such securities.

“Comparable Treasury Price” means (a) if the indenture trustee obtains five Reference Treasury Dealer Quotations, the average of three Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations obtained, or (b) if the indenture trustee obtains fewer than five Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.

“Quotation Agents” means each of Credit Suisse First Boston LLC and J.P. Morgan Securities Inc. and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary United States Government securities dealer in New York City (a “Primary Treasury Dealer”), Popular North America will substitute another Primary Treasury Dealer.

“Reference Treasury Dealer” means (i) the Quotation Agents and (ii) any other Primary Treasury Dealers selected by the indenture trustee after consultation with Popular North America.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the indenture trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the indenture trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding the redemption date.

“Treasury Rate” means (i) the yield, under the heading which represents the average for the week immediately prior to the date of calculation, appearing in the most recently published statistical release designated H.15(519) or any successor publication which is published weekly by the Federal Reserve and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Remaining Life (if no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Remaining Life shall be determined and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that redemption date. The Treasury Rate shall be calculated on the third business day preceding the redemption date.

Redemption Procedures

The trust may redeem capital securities only in an amount equal to the funds it has on hand and legally available to pay the redemption price.

The property trustee will mail written notice of the redemption of the capital securities to the holders at least 30 but not more than 60 days before the date fixed for redemption. If the trust gives a notice of redemption, then, by 12:00 noon, New York City time, on the date of redemption, if the funds are available for payment, the property trustee will, for capital securities held in book-entry form:

• irrevocably deposit with DTC funds sufficient to pay the applicable redemption price; and

• give DTC irrevocable instructions and authority to pay the redemption price to the beneficial owners of the capital securities.

With respect to the capital securities not held in book-entry form, if the funds are available for payment, the property trustee will:

• irrevocably deposit with the paying agent funds sufficient to pay the applicable redemption price; and

• give the paying agent irrevocable instructions and authority to pay the redemption price to the holders of capital securities upon surrender of their certificates evidencing the capital securities.

Notwithstanding the above, distributions payable on any distribution date on or prior to the date of redemption for any capital securities called for redemption will be payable to the holders of the capital securities on the relevant record dates.

Once notice of redemption is given and funds are deposited, then all rights of the holders of the capital securities called for redemption will terminate, except the right to receive the redemption price, but without any interest or other payment for any delay in receiving it. If notice of redemption is given and funds deposited as required, the capital securities then will cease to be outstanding.

If any date fixed for redemption is not a business day, then payment of the redemption price will be made on the next day that is a business day, without any interest or other payment for the delay.

If payment of the redemption price for the capital securities called for redemption is improperly withheld or refused and not paid by the trust, by Popular North America under its guarantee or by Popular under its guarantees, then distributions on those capital securities will continue to accumulate at the then-applicable rate from the date of redemption to the date of actual payment. In this case, the actual payment date will be the date fixed for redemption for purposes of calculating the redemption price.

Subject to the above and applicable law and regulations, including United States federal securities laws and banking laws and regulations, Popular North America or Popular or any of their respective

affiliates may at any time and from time to time purchase outstanding capital securities by tender, in the open market or by private agreement, and may resell capital securities.

If less than all the capital securities and common securities are redeemed, then the aggregate liquidation amount of the capital securities and the common securities to be redeemed will be allocated pro rata based on their relative liquidation amounts. However, if a debenture default under the junior subordinated indenture has occurred and is continuing, holders of the capital securities must be paid in full before any payments are made to holders of the common securities. See “— Ranking of Trust Securities” for a more complete discussion. The property trustee will select the particular capital securities to be redeemed on the pro rata basis described above not more than 60 days before the date of redemption by any method the property trustee deems fair and appropriate or, if the capital securities are then held in book-entry form, in accordance with DTC’s customary procedures.

Liquidation Distribution Upon Dissolution

The amount payable on the capital securities in the event of any liquidation of the trust is the liquidation amount of $1,000 per capital security plus accumulated but unpaid distributions, subject to certain exceptions, which may be paid in the form of a distribution of junior subordinated debentures.

The holders of common securities can at any time dissolve the trust if such dissolution and the resulting distribution of junior subordinated debentures would not result in a taxable event for United States federal income tax purposes to holders of the capital securities. If the trust dissolves and it has paid the liabilities owed to its creditors, the junior subordinated debentures will be distributed to the holders of the capital securities and common securities in exchange for their securities.

Any distributions of the junior subordinated debentures may require approval of the Federal Reserve Board.

The trust agreement states that the trust will dissolve automatically on , 2039 or earlier upon:

      (1) the bankruptcy, dissolution or liquidation of Popular North America or Popular;

      (2) the distribution of junior subordinated debentures to the holders of the capital securities and the common securities, if the holders of common securities have delivered an opinion of counsel that holders of capital securities will not recognize income or loss for United States federal income tax purposes as a result and have given written direction to the property trustee to dissolve the trust, which direction, subject to the foregoing restrictions, is optional and wholly within the discretion of the holders of common securities;

      (3) the redemption of all the capital securities in connection with the maturity or redemption of the junior subordinated debentures; or

      (4) the entry of an order for the dissolution of the trust by a court of competent jurisdiction.

If the trust dissolves as described in clauses (1), (2) or (4) in the preceding paragraph, after the trust pays all amounts owed to creditors, holders of the capital securities and the common securities will be entitled to receive junior subordinated debentures having a principal amount equal to the liquidation amount of the capital securities and the common securities unless such distribution is not practical, in which case such holders shall be entitled to the liquidation distribution referred to above in cash.

The holders of the common securities will be entitled to receive distributions upon any liquidation on a pro rata basis with the holders of the capital securities, except that if a debenture default under the junior subordinated indenture has occurred and is continuing, the trust will pay the total amounts due on the capital securities before making any distribution on the common securities. See “— Ranking of Trust Securities.”

After the liquidation date is fixed for any distribution of junior subordinated debentures, upon dissolution of the trust:

• the capital securities and the common securities will no longer be deemed to be outstanding;

• DTC or its nominee, as the registered holder of capital securities, will receive a registered global certificate or certificates representing the junior subordinated debentures to be delivered upon distribution with respect to capital securities held by DTC or its nominee; and

• any certificates representing capital securities will be deemed to represent the junior subordinated debentures having an aggregate principal amount equal to the liquidation amount of the capital securities, and bearing accrued but unpaid interest equal to accumulated but unpaid distributions on the capital securities, until the holder of those certificates presents them to the security registrar for the capital securities for transfer or reissuance.

The trust cannot assure you as to the market prices of the capital securities or the junior subordinated debentures that may be distributed in exchange for capital securities if a dissolution or liquidation of the trust were to occur. Accordingly, the capital securities that you purchase, or the junior subordinated debentures that you may receive on dissolution or liquidation of the trust, may trade at a discount to the price that you paid to purchase the capital securities.

Ranking of Trust Securities

Payment of distributions on, and the redemption price of and the liquidation distribution in respect of, capital securities and common securities, as applicable, shall be made pro rata based on the relative liquidation amount of such capital securities and common securities, except that upon a trust event of default resulting from a debenture default under the junior subordinated indenture, the rights of the holders of the common securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the capital securities.

In the case of any trust event of default resulting from a debenture default under the junior subordinated indenture, we, as holder of the trust’s common securities, will be deemed to have waived any right to act with respect to any such trust event of default until all such trust events of default have been cured, waived or otherwise eliminated. Until all such trust events of default under the trust agreement have been so cured, waived or otherwise eliminated, the property trustee shall act solely on behalf of the holders of the capital securities and not on our behalf, and only the holders of the capital securities will have the right to direct the property trustee to act on their behalf.

Events of Default; Notice

Any one of the following events constitutes an event of default under the trust agreement, or a “trust event of default,” regardless of the reason for such event of default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:

• the occurrence of a debenture default under the junior subordinated indenture with respect to the junior subordinated debentures held by the trust (see “Description of Junior Subordinated Debentures — Events of Default and the Rights of Capital Security Holders to Take Action Against Popular North America”); or

• the default by the trust in the payment of any distribution on any trust security of the trust when such distribution becomes due and payable, and continuation of such default for a period of 30 days; or

• the default by the trust in the payment of any redemption price of any trust security of the trust when such redemption price becomes due and payable; or

• the default by the trust in the payment of the liquidation distribution or distribution of trust property when the same becomes due and payable; or

• the failure to perform or the breach, in any material respect, of any other covenant or warranty of the trustees in the trust agreement for 90 days after the defaulting trustee or trustees have received written notice by holders of at least 25% in aggregate liquidation amount of the outstanding capital securities of the failure to perform or breach of warranty in the manner specified in the trust agreement; or

• the occurrence of certain events of bankruptcy or insolvency with respect to the property trustee and our failure to appoint a successor property trustee within 90 days.

Within five days after any trust event of default actually known to the property trustee occurs, the property trustee will transmit notice of such trust event of default to the holders of the trust securities, administrative trustees and us, unless such trust event of default shall have been cured or waived. We, as depositor, and Popular, as guarantor, and the administrative trustees are required to file annually with the property trustee a certificate as to whether or not we or they are in compliance with all the conditions and covenants applicable to us and to them under the trust agreement.

The existence of a trust event of default, in and of itself, does not entitle the holders of the capital securities to accelerate the maturity of such capital securities or the junior subordinated debentures unless such trust event of default results from a debenture event of default under the junior subordinated indenture.

Removal of Trustees

Unless a debenture default under the junior subordinated indenture has occurred and is continuing, the property trustee and the Delaware trustee of the trust may be removed at any time by the holders of the common securities of the trust. The property trustee and the Delaware trustee may be removed by the holders of a majority in liquidation amount of the outstanding capital securities of the trust for cause or if a debenture default under the junior subordinated indenture has occurred and is continuing. In no event will the holders of such capital securities have the right to vote to appoint, remove or replace the administrative trustees, which voting rights are vested exclusively in the holders of the common securities. No resignation or removal of a trustee and no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the trust agreement.

Co-Trustees and Separate Property Trustee

Unless a trust event of default shall have occurred and be continuing, at any time or from time to time, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the trust property may at the time be located, the holders of the common securities and the administrative trustees shall have the power to appoint one or more persons either to act as a co-trustee, jointly with the property trustee, of all or any part of the trust property, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such person or persons in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of the trust agreement. If a trust event of default has occurred and is continuing, the property trustee alone shall have power to make such appointment.

Merger or Consolidation of Trustees

Any person into which the property trustee or the Delaware trustee, if not a natural person, may be merged or converted or with which it may be consolidated, or any person resulting from any merger, conversion or consolidation to which the trustee shall be a party, or any person succeeding to all or substantially all the corporate trust business of the trustee, shall be the successor of such trustee under the trust agreement, provided such person shall be otherwise qualified and eligible.

Mergers, Consolidations, Amalgamations or Replacements of the Trust

The trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to us or any other person, except as described below. The trust may, at the request of the holders of the common securities, with the consent of the administrative trustees but without the consent of the holders of the capital securities, the property trustee or the Delaware trustee, merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, a trust organized as such under the laws of the United States, any state or the District of Columbia if:

• the trust is not the surviving entity, then such successor entity either:

• expressly assumes all of the obligations of the trust with respect to the capital securities, or

• substitutes for the capital securities other securities having substantially the same terms as the capital securities (the “successor securities”) so long as the successor securities rank the same as the capital securities in priority with respect to distributions and payments upon liquidation, redemption and otherwise;

• we expressly appoint a trustee of such successor entity possessing the same powers and duties as the property trustee as the holder of the junior subordinated debentures;

• such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the rating of the capital securities, including any successor securities, to be downgraded or withdrawn by any nationally recognized statistical rating organization;

• the successor securities are listed, or any successor securities will be listed upon notice of issuance, on the national securities exchange, interdealer quotation system or self regulatory organization as the capital securities are then listed, if any;

• such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the capital securities, including any successor securities, in any material respect;

• after giving effect to the transaction, no debenture default and no event which, after notice or lapse of time, or both, would become a debenture default, has occurred and is continuing under the junior subordinated indenture;

• such successor entity has a purpose substantially identical to that of the trust;

• prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, we have received an opinion from independent counsel to the trust to the effect that:

• such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the capital securities, including any successor securities, in any material respect,

• the trust continues to be, and the successor entity will be, a grantor trust for United States federal income tax purposes; and

• following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the trust nor such successor entity will be required to register as an investment company under the Investment Company Act; and

• we or any permitted successor or assignee own all of the common securities of such successor entity and guarantees the obligations of such successor entity under the successor securities at least to the extent provided by the applicable guarantee.

Notwithstanding the foregoing, the trust may not, except with the consent of holders of all its capital securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to

consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the trust or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes or required to be registered as an “investment company” under the Investment Company Act.

Voting Rights; Amendment of the Trust Agreement

Except as provided below and under “Description of Capital Securities Guarantees — Amendments and Assignment” and as otherwise required by law and the trust agreement, the holders of capital securities will have no voting rights.

We, Popular, the property trustee, the Delaware trustee and the administrative trustees may amend the trust agreement without the consent of the holders of its capital securities, unless such amendment will materially and adversely affect the interests of any holder of capital securities, to:

• cure any ambiguity, correct or supplement any provisions in the trust agreement that may be inconsistent with any other provisions, or to make any other provisions with respect to matters or questions arising under the trust agreement, which will not be inconsistent with the other provisions of the trust agreement; or

• modify, eliminate or add to any provisions of the trust agreement to such extent as shall be necessary to ensure that the trust will be classified for United States federal income tax purposes as a grantor trust at all times that any trust securities are outstanding or to ensure that the trust will not be required to register as an “investment company” under the Investment Company Act.

We, Popular, the administrative trustees, the Delaware trustee and the property trustee may generally amend the trust agreement with:

• the consent of holders of a majority in liquidation amount of the outstanding capital securities.

• receipt by the trustees of an opinion of counsel to the effect that such amendment or the exercise of any power granted to the trustees in accordance with such amendment will not affect the trust’s status as a grantor trust for United States federal income tax purposes or the trust’s exemption from status as an “investment company” under the Investment Company Act.

However, without the consent of each holder of trust securities, the trust agreement may not be amended to:

• change the amount or timing of any distribution required to be made in respect of the trust securities;

• change the redemption dates, events or prices, the liquidation distribution amounts or event, or events that would cause liquidation or dissolution of the trust; and

• restrict the right of a holder of the trust securities to institute a suit for the enforcement of any payment on or after the specified date.

So long as the property trustee of the trust holds any junior subordinated debentures, the trustees may not, without obtaining the prior approval of the holders of a majority in aggregate liquidation amount of all outstanding capital securities of the trust:

• direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee, or executing any trust or power conferred on the indenture trustee with respect to such junior subordinated debentures;

• waive any past default that is waivable under the junior subordinated indenture;

• exercise any right to rescind or annul a declaration that the maturity of the principal of all the junior subordinated debentures is due and payable; or

• consent to any amendment, modification or termination of the junior subordinated indenture or such junior subordinated debentures where such consent shall be required.

Notwithstanding the foregoing, if a consent under the junior subordinated indenture would require the consent of each holder of junior subordinated debentures affected thereby, no such consent may be given by the property trustee without the prior consent of each holder of the capital securities of the trust. The property trustee may not revoke any action previously authorized or approved by a vote of the holders of the capital securities except by subsequent vote of the holders of the capital securities. The property trustee will notify each holder of the capital securities of any notice of default with respect to the junior subordinated debentures. In addition to obtaining the foregoing approvals of the holders of the capital securities, before taking any of the foregoing actions, the trustees will obtain an opinion of counsel experienced in such matters to the effect that such action would not cause the trust to be classified as other than a grantor trust for United States federal income tax purposes or required to be registered as an “investment company” under the Investment Company Act.

Any required approval of holders of capital securities may be given at a meeting of holders of capital securities convened for such purpose or pursuant to written consent. The property trustee will cause a notice of any meeting at which holders of capital securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be given to each holder of record of capital securities in the manner set forth in the trust agreement.

No vote or consent of the holders of capital securities will be required for the trust to redeem and cancel its capital securities in accordance with the trust agreement.

Notwithstanding that holders of capital securities are entitled to vote or consent under any of the circumstances described above, any of the capital securities that are owned by us or our affiliates or the trustees or any of their affiliates, shall, for purposes of such vote or consent, be treated as if they were not outstanding.

Payment and Paying Agent

Payments on the capital securities shall be made to the depositary, which shall credit the relevant accounts at the depositary on the applicable distribution dates. If any capital securities are not held by the depositary, such payments shall be made by check mailed to the address of the holder as such address shall appear on the register.

The paying agent shall initially be JPMorgan Chase Bank. The paying agent shall be permitted to resign as paying agent upon 30 days’ written notice to the administrative trustees and to the property trustee. In the event that JPMorgan Chase Bank shall no longer be the paying agent, the administrative trustees will appoint a successor to act as paying agent, which will be a bank or trust company.

Registrar and Transfer Agent

JPMorgan Chase Bank will act as registrar and transfer agent for the capital securities.

Registration of transfers of capital securities will be effected without charge by or on behalf of the trust, but upon payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange. The Registrar will not be required to register or cause to be registered the transfer of its capital securities after such capital securities have been called for redemption.

Information Concerning the Property Trustee

Other than during the occurrence and continuance of a trust event of default under the trust agreement, the property trustee undertakes to perform only the duties that are specifically set forth in the trust agreement. If no trust event of default under the trust agreement has occurred and is continuing and the property trustee is required to decide between alternative courses of action, construe ambiguous provisions in the trust agreement or is unsure of the application of any provision of the trust agreement,

and the matter is not one upon which holders of capital securities are entitled under the trust agreement to vote, then the property trustee will take any action that we direct. If we do not provide direction, the property trustee may take any action that it deems advisable and in the best interests of the holders of the trust securities and will have no liability except for its own bad faith, negligence or willful misconduct. After a trust event of default, the property trustee must exercise the same degree of care and skill as a prudent individual would exercise or use in the conduct of his or her own affairs. Subject to this provision, the property trustee is under no obligation to exercise any of the powers vested in it by the trust agreement at the request of any holder of capital securities unless it is offered indemnity reasonably satisfactory to it by such holder against the costs, expenses and liabilities that might be incurred.

From time to time, Popular North America and Popular and certain of their respective subsidiaries have maintained and may maintain deposit accounts and conduct other banking transactions, including lending transactions, with the property trustee in the ordinary course of business.

Trust Expenses

Pursuant to the expense agreement for the junior subordinated debentures, we, as depositor, and Popular, jointly and severally will irrevocably and unconditionally agree to pay to the trust and reimburse the trust for:

• all debts and other obligations of the trust (other than with respect to the trust securities);

• all costs and expenses of the trust, including costs and expenses relating to the organization of the trust, the fees and expenses of the trustees and the cost and expenses relating to the operation of the trust; and

• any and all taxes and costs and expenses with respect thereto to which the trust might become subject.

Our obligations will include any such costs, expenses or liabilities of the trust that are required by applicable law to be satisfied in connection with a termination of such trust.

Governing Law

The trust agreement will be governed by and construed in accordance with the laws of the State of Delaware.

Miscellaneous

The administrative trustees are authorized and directed to conduct the affairs of and to operate the trust in such a way that it will not be required to register as an “investment company” under the Investment Company Act or characterized as other than a grantor trust for United States federal income tax purposes. The administrative trustees are authorized and directed to conduct their affairs so that the junior subordinated debentures will be treated as indebtedness of Popular North America for United States federal income tax purposes.

In this regard, we and the administrative trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust of the trust or the trust agreement, that we and the administrative trustees determine to be necessary or desirable to achieve such end, as long as such action does not materially and adversely affect the interests of the holders of the capital securities.

Holders of the capital securities have no preemptive or similar rights.

The trust may not borrow money or issue debt or mortgage or pledge any of its assets.

Book-Entry Only Issuance

The trust, Popular North America and Popular have obtained the information in this section concerning DTC, Euroclear and Clearstream, Luxembourg and the book-entry system and procedures from

sources that they believe to be reliable, but neither they nor any underwriter takes any responsibility for the accuracy of this information.

The capital securities will be issued as fully registered global securities certificates which will be deposited with, or on behalf of, DTC, and registered, at the request of DTC, in the name of Cede & Co. Beneficial interests in the global securities certificates will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct or indirect participants in DTC, including Euroclear and Clearstream, Luxembourg. Investors may hold their interests in the global securities certificates directly through DTC if they are participants of DTC, or indirectly through organizations that are participants of DTC. Beneficial interests in the global securities certificates will be held in denominations of $1,000 and integral multiples of $1,000. The global securities certificates may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. The trust will not issue certificates to you for the capital securities that you purchase unless DTC’s services are discontinued as described below. Accordingly, you must rely on the procedures of DTC and its participants to exercise any rights under the capital securities. So long as DTC or its nominee is the registered holder of a global securities certificate, DTC or its nominee will be considered the sole owner and holder of the capital securities represented by that global securities certificate for all purposes under the trust agreement.

Purchasers of capital securities can hold interests in the global securities through Clearstream, Luxembourg or through Euroclear, only if they are participants in these systems or indirectly through organizations that are participants in these systems. Because DTC will be the only registered holder of the global securities certificates, Clearstream, Luxembourg and Euroclear will hold positions through their respective U.S. depositaries, which in turn will hold positions on the books of DTC. Citibank, N.A. will act as U.S. depositary for Clearstream, Luxembourg and J.P. Morgan Trust Company, National Association will act as U.S. depositary for Euroclear.


	*DTC*

DTC has provided the trust, Popular North America, Popular and the underwriters with the following information: 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 Securities Exchange Act of 1934 (the “Exchange Act”). DTC holds securities that its participants (“Direct Participants”) deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Direct Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of the Depository Trust & Clearing Corporation, or DTCC. DTCC, in turn, is owned by a number of DTC’s Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. (the “NASD”). Access to the DTC 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 (“Indirect Participants”). The rules applicable to DTC and its Direct and Indirect Participants are on file with the SEC.

When you purchase capital securities within the DTC system, the purchase must be made by or through a Direct Participant. The Direct Participant will receive a credit for the capital securities on DTC’s records. You, as the actual owner of the capital securities, are the “beneficial owner.” Your beneficial ownership interest will be recorded on the Direct and Indirect Participants’ records, but DTC will have no knowledge of your individual ownership. DTC’s records reflect only the identity of the Direct Participants to whose accounts capital securities are credited.

You will not receive written confirmation from DTC of your purchase. The Direct or Indirect Participants through whom you purchased the capital securities should send you written confirmations providing details of your transactions, as well as periodic statements of your holdings. The Direct and Indirect Participants are responsible for keeping accurate account of the holdings of their customers.

Transfers of ownership interests held through Direct and Indirect Participants will be accomplished by entries on the books of Direct and Indirect Participants acting on behalf of the beneficial owners.

The laws of some states may require that specified purchasers of securities take physical delivery of the capital securities in definitive form. These laws may impair the ability to transfer beneficial interests in the global securities certificate representing the capital securities. Book-entry capital securities may be more difficult to pledge because of the lack of a physical certificate.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct and Indirect Participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

The trust, Popular North America and Popular understand that, under DTC’s existing practices, if the trust or Popular North America requests any action of holders, or an owner of a beneficial interest in a global security such as you desires to take any action which a holder is entitled to take under the trust agreement or the junior subordinated debentures, DTC would authorize the Direct Participants holding the relevant beneficial interests to take such action, and those Direct Participants and any Indirect Participants would authorize beneficial owners owning through those Direct and Indirect Participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them.

The property trustee, on behalf of the trust, will send redemption notices to Cede & Co. If less than all of the capital securities are being redeemed, DTC will reduce its Direct Participants’ holdings of capital securities in accordance with its procedures.

In those instances where a vote is required, neither DTC nor Cede & Co. itself will consent or vote with respect to capital securities. Under its usual procedures, DTC would mail an omnibus proxy to the trust as soon as possible after the record date. The omnibus proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the capital securities are credited on the record date, which are identified in a listing attached to the omnibus proxy.

The property trustee, on behalf of the trust, will pay distributions and other amounts on the capital securities directly, or indirectly through a paying agent, to DTC. DTC’s practice is to credit participants’ accounts on the relevant 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 payment date. The underwriters will initially designate the accounts to be credited. Beneficial owners may experience delays in receiving payments of distributions and other amounts on their capital securities since such payments will initially be made to DTC and they must be transferred through the chain of intermediaries to the beneficial owner’s account.

Payments by Direct and Indirect Participants to beneficial owners such as you 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.” Payments to beneficial owners will be the responsibility of Direct and Indirect Participants and not of DTC, Popular North America, Popular, the trust, the trustees, the paying agent or any other agent of Popular North America, Popular or the trust.

Accordingly, Popular North America, Popular, the trust, the trustees and any paying agent will have no responsibility or liability for:

• any aspect of DTC’s records relating to, or payments made on account of, beneficial ownership interests in capital securities represented by a global securities certificate;

• any other aspect of the relationship between DTC and its Direct and Indirect Participants or the relationship between those Participants and the beneficial owners of the global securities certificate held through those Participants; or

• the maintenance, supervision or review of any of DTC’s records relating to beneficial ownership interests in a global securities certificate.

DTC may discontinue providing its services as securities depositary with respect to the capital securities at any time by giving reasonable notice to the trust. Additionally, the trust may decide to discontinue the book-entry only system of transfers with respect to the capital securities. In that event, the trust will print and deliver certificates for the capital securities. If DTC notifies the trust that it is unwilling to continue as securities depositary, or if it is unable to continue or ceases to be a clearing agency registered under the Exchange Act and a successor depositary is not appointed by the trust within 90 days after receiving such notice or becoming aware that DTC is no longer so registered, the trust will issue the capital securities in definitive form, at its expense, upon registration of transfer of, or in exchange for, such global security. If a trust event of default has occurred and is continuing, the trust is required to print and deliver certificates for the capital securities. Any certificates delivered by the trust will be registered in the names of the beneficial owners of the global securities certificates as directed by DTC.

According to DTC, the foregoing information with respect to DTC has been provided to the financial community for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any kind.


	*Clearstream, Luxembourg*

Clearstream, Luxembourg is incorporated under the laws of Luxembourg as a professional depositary. Clearstream, Luxembourg holds securities for its customers and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg customers through electronic book-entry changes in accounts of Clearstream, Luxembourg customers, thus eliminating the need for physical movement of certificates. Clearstream, Luxembourg provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream, Luxembourg interfaces with domestic markets in a number of countries. Clearstream, Luxembourg has established an electronic bridge with the Euroclear Operator to facilitate settlement of trades between Clearstream, Luxembourg and Euroclear.

As a professional depositary, Clearstream, Luxembourg is subject to regulation by the Luxembourg Monetary Institute. Clearstream, Luxembourg customers are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. In the United States, Clearstream, Luxembourg customers are limited to securities brokers and dealers and banks. Clearstream, Luxembourg customers may include the underwriters or their affiliates. Other institutions that maintain a custodial relationship with a Clearstream, Luxembourg customer may obtain indirect access to Clearstream, Luxembourg. Clearstream, Luxembourg is an indirect participant in DTC.

Distributions with respect to the capital securities held beneficially through Clearstream, Luxembourg will be credited to cash accounts of Clearstream, Luxembourg customers in accordance with its rules and procedures, to the extent received by Clearstream, Luxembourg.

The Euroclear System

The Euroclear System was created in 1968 to hold securities for participants of the Euroclear System and to clear and settle transactions between Euroclear participants through simultaneous electronic book-entry delivery against payment, thus eliminating the need for physical movement of certificates and risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in many currencies, including U.S. dollars and Euros. The Euroclear System provides various other services, including securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described below.

The Euroclear System is operated by Euroclear under contract with Euroclear Clearance System, S.C., a Belgian cooperative corporation (the “Cooperative”). The Euroclear Operator conducts all operations and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator not the Cooperative. The Cooperative establishes policy for the Euroclear System on behalf of Euroclear participants. Euroclear participants include banks (including central banks),

securities brokers and dealers and other professional financial intermediaries and may include the underwriters. Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly. Euroclear is an indirect participant in DTC.

The Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgian law govern securities clearance accounts and cash accounts with the Euroclear Operator. Specifically, these terms and conditions govern:

• transfers of securities and cash within the Euroclear System;

• withdrawal of securities and cash from the Euroclear System; and

• receipts of payments with respect to securities in the Euroclear System.

All securities in the Euroclear System are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the terms and conditions only on behalf of Euroclear participants and has no record of or relationship with persons holding securities through Euroclear participants.

Distributions with respect to capital securities held beneficially through Euroclear will be credited to the cash accounts of Euroclear participants in accordance with the Euroclear Terms and Conditions, to the extent received by the Euroclear Operator and by Euroclear.


	*Global Clearance and Settlement Procedures*

Initial settlement for the capital securities will be made in immediately available funds. Secondary market trading between DTC participants will occur in the ordinary way, in accordance with DTC’s rules, and will be settled in immediately available funds using DTC’s same-day funds settlement system. Secondary market trading between Clearstream, Luxembourg participants and/or Euroclear participants will occur in the ordinary way, in accordance with the applicable rules and operating procedures of Clearstream, Luxembourg and Euroclear, and will be settled using the procedures applicable to conventional eurobonds in immediate available funds.

Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream, Luxembourg or Euroclear participants, on the other, will be effected through DTC, in accordance with DTC’s rules, on behalf of Euroclear or Clearstream, Luxembourg, as the case may be, by its respective depository. However, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, Luxembourg, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depository to take action to effect final settlement on its behalf by delivering or receiving capital securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream, Luxembourg participants and Euroclear participants may not deliver instructions directly to DTC.

Because of time-zone differences, credits of capital securities received in Clearstream, Luxembourg or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and will be credited the business day following the DTC settlement date. These credits or any transactions in such capital securities settled during such processing will be reported to the relevant Euroclear participant or Clearstream, Luxembourg participant on that business day. Cash received in Clearstream, Luxembourg or Euroclear as a result of sales of capital securities by or through a Clearstream, Luxembourg participant or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date, but will be available in the relevant Clearstream, Luxembourg or Euroclear cash account only as of the business day following settlement in DTC.

Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of capital securities among participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no obligation to perform or continue to perform these procedures, and these procedures may be discontinued at any time. None of the trust, Popular North America, Popular, the trustees, the paying agent or any of the underwriters will have any responsibility for the performance by DTC, Euroclear or Clearstream, Luxembourg or their respective participants of their respective obligations under the rules and procedures governing their operations.

DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES

The following describes the material terms of the junior subordinated debentures. You should also read the junior subordinated indenture, dated as of , 2004, between Popular North America, Popular and J.P. Morgan Trust Company, National Association, as indenture trustee, which is the junior subordinated indenture described in this prospectus, and the Trust Indenture Act.

Popular North America will register the junior subordinated debentures in the name of the property trustee on behalf of Popular North America Capital Trust I. The property trustee will hold the junior subordinated debentures in trust for the benefit of the holders of the capital securities and the common securities. Under certain circumstances involving the dissolution of the trust, the trust may distribute the junior subordinated debentures to the holders of the capital securities and the common securities in liquidation of the trust. See “Description of Capital Securities — Liquidation Distribution Upon Dissolution” herein.

General

The junior subordinated debentures are unsecured, junior subordinated obligations of Popular North America. The junior subordinated debentures will be limited in aggregate principal amount to $257,732,000, which represents the sum of:

• the aggregate liquidation amount of the capital securities; and

• the amount of capital contributed by Popular North America in exchange for the common securities.

Our assets consist primarily of equity in our subsidiaries. As a result, our ability to make payments on our junior subordinated debentures depends on our receipt of dividends, loan payments and other funds from our subsidiaries. In addition, if any of our subsidiaries becomes insolvent, the direct creditors and preferred equity holders of that subsidiary will have a prior claim on its assets. Our rights and the rights of our creditors will be subject to that prior claim, unless we are also recognized as a direct creditor of that subsidiary. This subordination of a parent company and its creditors to prior claims of creditors and preferred equity holders of its subsidiaries is commonly referred to as structural subordination.

The entire principal amount of the junior subordinated debentures will become due and payable, with any accrued and unpaid interest thereon, on , 2034, unless redeemed prior to that date as described below under “— Redemption.” There is no sinking fund for the junior subordinated debentures.

Subordination

The junior subordinated debentures will be subordinated to all of our and Popular’s existing and future Senior Debt, as defined below, and secured debt to the extent of the collateral securing the same. “Senior Debt,” in respect of either Popular North America or Popular, as the case may be, includes senior debt securities and subordinated debt securities other than those related to preferred securities comparable to

the capital securities and means any obligation to creditors, whether now outstanding or subsequently incurred. “Senior Debt” does not include:

• the capital securities or other similar preferred securities;

• trade accounts payable and accrued liabilities arising in the ordinary course of business; and

• any obligation to creditors, whether now outstanding or subsequently incurred, where the instrument creating or evidencing the obligation or pursuant to which the obligation is outstanding provides that it is on a parity with or subordinate and junior to the junior subordinated debentures.

The junior subordinated debentures will rank on a parity with obligations evidenced by any debt securities, and guarantees in respect of those debt securities, initially issued to any trust, partnership or other entity affiliated with us or Popular, that is, directly or indirectly, our or Popular’s financing vehicle in connection with the issuance by such entity of capital securities or other similar securities.

If certain events relating to our or Popular’s bankruptcy, insolvency or reorganization occur, any default in the payment of principal, premium or interest on its Senior Debt beyond any applicable grace period occurs and is continuing, any event of default with respect to its Senior Debt permitting the holders of that Senior Debt (or a trustee) to accelerate the maturity of that Senior Debt, whether or not the maturity is in fact accelerated occurs and is continuing (unless the payment default or event of default has been cured or waived or ceased to exist and any related acceleration has been rescinded) or any judicial proceeding is pending with respect to a payment default or event of default, we or Popular, as the case may be, will be required to first pay all our or its Senior Debt, as the case may be, including any interest accrued after the events occur, in full before any payment or distribution, whether in cash, securities or other property, is made on account of the principal of or premium, if any, or interest on the junior subordinated debentures or the guarantees. In such an event, we or it will pay or deliver directly to the holders of our or its Senior Debt any payment or distribution otherwise payable or deliverable in respect of the junior subordinated debentures. We or it will make the payments to the holders of our or its Senior Debt according to priorities existing among those holders until we have paid all our or its Senior Debt, as the case may be, including accrued interest, in full. Notwithstanding the subordination provisions discussed in this paragraph, we or Popular may make payments or distributions in respect of the junior subordinated debentures so long as:

• the payments or distributions consist of securities issued by us, Popular or another company in connection with a plan of reorganization or readjustment; and

• payment on those securities is subordinate to our or Popular’s outstanding Senior Debt, as the case may be, and any securities issued with respect to our or its Senior Debt under such plan of reorganization or readjustment at least to the same extent provided in the subordination provisions of the junior subordinated debentures or the guarantees.

If such events relating to a bankruptcy, insolvency or reorganization occur, default in the payment of principal, premium or interest on its Senior Debt beyond any applicable grace period occurs and is continuing, event of default with respect to its Senior Debt permitting the holders of that Senior Debt (or a trustee) to accelerate the maturity of that Senior Debt, whether or not the maturity is in fact accelerated occurs and is continuing (unless the payment default or event of default has been cured or waived or ceased to exist and any related acceleration has been rescinded) or judicial proceeding is pending with respect to any such payment default or event of default, after we or Popular have paid in full all amounts owed on our or its Senior Debt, as the case may be, the holders of junior subordinated debentures and those entitled to the benefits of a guarantee, together with the holders of any of our or its other obligations ranking equal with those junior subordinated debentures, will be entitled to receive from our or its remaining assets any principal, premium or interest due at that time in respect of the junior subordinated debentures and such other obligations before we or Popular make any payment or other distribution on account of any of our or its capital stock or obligations ranking junior to those junior subordinated debentures.

If we or Popular violate the junior subordinated indenture by making a payment or distribution to holders of the junior subordinated debentures or those entitled to the benefits of a guarantee before all our or its Senior Debt is paid in full, as the case may be, then such payments or distributions will be deemed to have been received in trust for the benefit of, and must be remitted to, the holders of our or its Senior Debt outstanding at the time, as the case may be. The payment or transfer to the holders of our Senior Debt will be made according to the priorities existing among those holders. Notwithstanding the subordination provisions discussed in this paragraph, holders of junior subordinated debentures or those entitled to the benefits of a guarantee will not be required to pay, or transfer payments or distributions to, holders of our or Popular’s Senior Debt so long as:

Because of the subordination provisions described herein, if we or Popular become insolvent, holders of our or its Senior Debt, as the case may be, may receive more, ratably, and holders of the junior subordinated debentures may receive less, ratably, than our or Popular’s other creditors. This type of subordination will not prevent an event of default from occurring under the junior subordinated indenture in connection with the junior subordinated debentures.

We may modify or amend the junior subordinated indenture as provided under “— Modification of Indenture” below.

The junior subordinated indenture places no limitation on the amount of Senior Debt or secured debt that we or Popular may incur. We and Popular each expect from time to time to incur additional indebtedness and other obligations constituting Senior Debt, as well as secured debt.

Interest

The junior subordinated debentures will bear interest at an annual rate of %, from and including their date of original issuance until the principal becomes due and payable. Interest is payable semi-annually in arrears on the day of each and , beginning , 2005. Interest payments not paid when due will accrue, as permitted by applicable law, additional interest, compounded semi-annually, at the annual rate of %. Popular North America will pay interest on the junior subordinated debentures on an interest payment date to the holders of record on the relevant record date. The record date for interest payments on the junior subordinated debentures will be the fifteenth day preceding the interest payment date, whether or not a business day. The term “interest” as used in this prospectus includes semi-annual interest payments, interest on semi-annual interest payments not paid when due and additional sums, as applicable.

The amount of interest payable for any period less than a full interest period will be computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in that period. The amount of interest payable for any full interest period will be computed by dividing the annual interest rate by two.

If any date on which interest is payable on the junior subordinated debentures is not a business day, then payment of the interest payable on that date will be made on the next succeeding day that is a business day, without any interest or other payment in respect of the delay, with the same force and effect as if made on the date that payment was originally payable.

The interest payment provisions for the junior subordinated debentures correspond to the distribution provisions for the capital securities. See “Description of Capital Securities — Payment of Distributions” in this prospectus.

Option to Extend Interest Payment Period

As long as no debenture event of default has occurred and is continuing, Popular North America has the right, at any time and from time to time, to defer payments of interest for a period (an “extension period”), of up to 10 consecutive semi-annual periods, provided that no extension period may end on a date other than an interest payment date or extend beyond the maturity date or any redemption date of the junior subordinated debentures. Interest (other than additional sums) will not be payable during an extension period, but instead will be payable only at the end of the extension period. During an extension period, interest will continue to accrue and holders of junior subordinated debentures or holders of capital securities will be required to accrue interest income for income tax purposes. See “Certain Federal Income Tax Considerations — Interest Income and Original Issue Discount” herein for further information on United States federal income tax consequences. On the interest payment date that concludes any extension period, Popular North America must pay all interest then accrued and unpaid, together with additional interest on the accrued and unpaid interest as permitted by law (“compounded interest”), compounded semi-annually, at the annual rate of % plus any unpaid additional sums, as described below.

Before termination of any extension period, Popular North America may further extend the deferral of interest payments. However, no extension period, including all previous and further extensions, may exceed 10 consecutive semi-annual periods, end on a date other than an interest payment date or extend beyond the maturity date or any redemption date of the junior subordinated debentures. After the termination of any extension period and the payment of all amounts due, Popular North America may begin a new extension period, as described above. There is no limitation on the number of times Popular North America may elect to begin an extension period.

If the property trustee is the sole holder of the junior subordinated debentures, Popular North America will give the property trustee and the Delaware trustee written notice of its election of an extension period at least one business day before the earlier of:

• the next succeeding date on which the distributions on the capital securities are payable; and

• the date the property trustee is required to give notice to holders of the capital securities of the record or payment date for the related distribution.

The property trustee will give written notice of Popular North America’s election to begin or extend an extension period to the holders of the capital securities within five days of receipt.

If the property trustee is not the sole holder, or is not itself the holder, of the junior subordinated debentures, Popular North America will give the holders of the junior subordinated debentures and the indenture trustee written notice of its election to begin or extend an extension period at least one business day before the record date for the next interest payment date.

Popular North America has no present intention of exercising its right to defer payments of interest by extending the interest payment period on the junior subordinated debentures.

Additional Sums

If, at any time while the property trustee is the holder of the junior subordinated debentures, the trust is required to pay any additional taxes (including withholding taxes), duties or other governmental charges as a result of a Tax Event, Popular North America will pay as additional interest on the junior subordinated debentures any additional amounts (“Additional Sums”) that are required so that the distributions paid by the trust will not be reduced as a result of any of those taxes, duties or governmental charges.

Redemption

Popular North America has the right, subject to any required prior approval from the Federal Reserve Board, to redeem the junior subordinated debentures at a redemption price equal to 100% of the principal

amount, plus accrued and unpaid interest to the date of redemption (and any applicable premium in the case of the first bullet below):

• in whole or in part, on one or more occasions, at any time; or

• in whole, but not in part, at any time within 90 days (the “90-day period”) following the occurrence and during the continuation of a Tax Event, an Investment Company Event or a Capital Treatment Event, each as defined and described under “Description of Capital Securities — Redemption” herein.

The redemption price in the case of a redemption under the first bullet above will be equal to the greater of (a) 100% of the principal amount of the junior subordinated debentures being redeemed or (b) as determined by a Quotation Agent, the sum of the present values of scheduled payments of principal and interest for the Remaining Life of the junior subordinated debentures being redeemed, discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Rate plus %, plus, in the case of either (a) or (b), accrued and unpaid interest on those junior subordinated debentures to the redemption date. For defined terms, see “Description of Capital Securities — Redemption.”

Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of junior subordinated debentures to be redeemed at its registered address. However, if the debt securities are held by the trust, notice shall be given at least 45 days but not more than 75 days before the redemption date. Unless we default in payment of the redemption price, on and after the redemption date, interest will cease to accrue on such junior subordinated debentures or portions thereof called for redemption and such junior subordinated debentures shall no longer be deemed to be outstanding.

Restrictions on Certain Payments; Certain Covenants of Popular North America and Popular

Popular North America will not:

• declare or pay any dividends or distributions, or redeem, purchase, acquire, or make a liquidation payment on any of our capital stock;

• make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any of our debt securities that rank equal or junior to the junior subordinated debentures; or

• make any guarantee payments with respect to any guarantee by us of the debt securities of any subsidiary if such guarantee ranks equal or junior to the junior subordinated debentures or our guarantee of the capital securities,

if at such time:

• there has occurred any event that constitutes a debenture default under the junior subordinated indenture;

• the junior subordinated debentures are held by the trust and we are in default with respect to our payment of any obligations under our guarantee of the capital securities; or

• we have given notice of our election to begin an extension period and have not rescinded this notice, and the extension period, or any extension thereof, is continuing.

The restrictions listed above do not apply to:

• repurchases, redemptions or other acquisitions of shares of our capital stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors, consultants or independent contractors, (2) a dividend reinvestment or stockholder stock purchase plan, or (3) the issuance of our capital stock, or securities convertible into or exercisable for such capital stock, as consideration in an acquisition transaction entered into prior to the extension period;

• an exchange or conversion of any class or series of our capital stock, or any capital stock of any of our subsidiaries, for any other class or series of our capital stock, or of any class or series of our indebtedness for any class or series of our capital stock;

• the purchase of fractional interests in shares of our capital stock under the conversion or exchange provisions of the capital stock or the security being converted or exchanged;

• any declaration of a dividend in connection with any stockholder’s rights plan, or the issuance of rights, stock or other property under any stockholder’s rights plan, or the redemption or repurchase of rights pursuant to the plan; or

• any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.

In addition, as long as the trust holds any of the junior subordinated debentures, we agree:

• to continue to hold, directly or indirectly, 100% of the common securities, provided that successors that are permitted under the junior subordinated indenture may succeed to our ownership of the common securities;

• as holder of the common securities, not to voluntarily dissolve, windup or liquidate the trust, other than (a) as part of the distribution of the junior subordinated debentures to the holders of the capital securities in accordance with the terms of the capital securities or (b) as part of a merger, consolidation or amalgamation which is permitted under the trust agreement; and

• to use our reasonable efforts, consistent with the terms and provisions of the trust agreement, to cause the trust to be characterized as a grantor trust for United States federal income tax purposes and to not be required to register as an “investment company” under the Investment Company Act.

The junior subordinated indenture does not contain restrictions on our ability to:

• incur, assume or become liable for any type of debt or other obligation;

• create liens on our property for any purpose; or

• pay dividends or make distributions on our capital stock or repurchase or redeem our capital stock, except as set forth above.

Popular will not:

• declare or pay any dividends or distributions, or redeem, purchase, acquire, or make a liquidation payment on any of its capital stock;

• make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem its debt securities that rank equal or junior to its guarantees of the junior subordinated debentures and the capital securities; or

• make any guarantee payments with respect to any guarantee that ranks equal or junior to its guarantees of the junior subordinated debentures and the capital securities,

if at such time:

• there has occurred any event that constitutes a debenture default under the junior subordinated indenture or related guarantees;

• Popular is in default with respect to its payment of any obligations under its guarantees of the junior subordinated debentures or, if the junior subordinated debentures are held by the trust, its guarantee the capital securities; or

• Popular North America has given notice of its election to begin an extension period and has not rescinded this notice, and the extension period, or any extension thereof, is continuing.

The restrictions listed above do not apply to:

• repurchases, redemptions or other acquisitions of shares of its capital stock in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors, consultants or independent contractors, (2) a dividend reinvestment or stockholder stock purchase plan, or (3) the issuance of its capital stock, or securities convertible into or exercisable for such capital stock, as consideration in an acquisition transaction entered into prior to the extension period;

• an exchange or conversion of any class or series of its capital stock, or any capital stock of a subsidiary of Popular, for any other class or series of its capital stock, or of any class or series of its indebtedness for any class or series of its capital stock;

• the purchase of fractional interests in shares of its capital stock under the conversion or exchange provisions of the capital stock or the security being converted or exchanged;

• any declaration of a dividend in connection with any stockholder’s rights plan, or the issuance of rights, stock or other property under any stockholder’s rights plan, or the redemption or repurchase of rights pursuant to the plan; or

• any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal or junior to that stock.

There are no restrictions on Popular’s ability to:

• incur, assume or become liable for any type of debt or other obligation;

• create liens on its property for any purpose; or

• pay dividends or make distributions on its capital stock or repurchase or redeem our capital stock, except as set forth above.

The junior subordinated indenture does not require us or Popular to maintain any financial ratios or specified levels of net worth or liquidity. In addition, the junior subordinated indenture does not contain any provisions which would require us or Popular to repurchase or redeem or modify the terms of any of the junior subordinated debentures, or which would otherwise provide holders of the junior subordinated debentures protection upon a change of control or other event involving us or Popular which may adversely affect the creditworthiness of such junior subordinated debentures.

Registration, Denomination and Transfer

Popular North America will register the junior subordinated debentures in the name of the property trustee on behalf of the trust. The property trustee will hold the junior subordinated debentures in trust for the benefit of the holders of the capital securities and the common securities. The junior subordinated debentures will be issued in denominations of $1,000 and integral multiples of $1,000.

If the junior subordinated debentures are distributed to holders of capital securities, it is anticipated that DTC will act as securities depositary for the junior subordinated debentures and that the provisions relating to purchases of, transfers of, notices concerning, and payments on, the capital securities described under “Description of Capital Securities — Book-Entry Only Issuance” herein will be applicable to the junior subordinated debentures.

If the junior subordinated debentures are issued in definitive form, payments of principal, premium, if any, and interest will be payable, the transfer of the junior subordinated debentures will be registrable, and junior subordinated debentures will be exchangeable for junior subordinated debentures of other authorized denominations of a like aggregate principal amount.

Payment of interest may also be made at the option of Popular North America by check mailed to the address of the holder entitled to the payment. Upon written request to the paying agent not less than

15 calendar days prior to the date on which interest is payable, a holder of $1,000,000 or more in aggregate principal amount of junior subordinated debentures may receive payment of interest, other than payments of interest payable at maturity, by wire transfer of immediately available funds.

Junior subordinated debentures may be presented for registration of transfer or exchange with an endorsed form of transfer, or a duly executed and satisfactory written instrument of transfer, at the indenture trustee’s office or the office of any transfer agent selected by Popular North America without service charge and upon payment of any taxes and other governmental charges as described in the junior subordinated indenture. Popular North America has appointed J.P. Morgan Trust Company, National Association as transfer agent and security registrar under the junior subordinated indenture. Popular North America may at any time designate additional transfer agents with respect to the junior subordinated debentures.

In the event of any redemption, Popular North America and the indenture trustee will not be required to:

• issue, register the transfer of or exchange junior subordinated debentures during a period beginning 15 calendar days before the first mailing of the notice of redemption; or

• register the transfer of or exchange any junior subordinated debentures selected for redemption, except, in the case of any junior subordinated debentures being redeemed in part, any portion not to be redeemed.

At the request of Popular North America, funds deposited with the indenture trustee or any paying agent held for Popular North America for the payment of principal of and interest and premium, if any, on any junior subordinated debenture which remain unclaimed for two years after the principal, interest, and premium, if any, has become payable will be repaid to Popular North America and the holder of the junior subordinated debenture will, as a general unsecured creditor, look only to Popular North America for payment thereof.

Modification of Indenture

Under the junior subordinated indenture, certain of our rights and obligations and certain of the rights of holders of the junior subordinated debentures may be modified or amended with the consent of the holders of a majority of the aggregate principal amount of the outstanding junior subordinated debentures. However, the following modifications and amendments will not be effective against any holder without such holder’s consent:

• a change in the maturity date or any interest payment date of the junior subordinated debentures;

• a reduction in the principal amount of, or interest rate on, the junior subordinated debentures;

• a change in the redemption dates, events or prices;

• a change in the place of payment or currency in which any payment on the junior subordinated debentures is payable;

• a limitation of a holder’s right to sue us for the enforcement of any payment due on the junior subordinated debentures;

• a reduction in the percentage of outstanding junior subordinated debentures required to consent to a modification or amendment of the junior subordinated indenture or required to consent to a waiver of compliance with certain provisions of such indenture or certain defaults under such indenture; and

• a modification of any of the foregoing requirements contained in the junior subordinated indenture.

If the consent of the holder of each outstanding junior subordinated debenture is required for such modification or amendment, no such modification or amendment shall be effective without the prior consent of each holder of capital securities of the trust.

In addition, if any of the capital securities are outstanding, without the prior consent of the holders of a majority of the aggregate liquidation amount of the outstanding capital securities:

• no modification or amendment may be made to the junior subordinated indenture that materially adversely affects the holders of the capital securities;

• no termination of the junior subordinated indenture may occur; and

• no waiver of any past default under the junior subordinated debentures or compliance with any covenant under the junior subordinated indenture may be effective.

In addition, if any of the capital securities are outstanding, all holders of the capital securities must consent if Popular North America wants to amend the junior subordinated indenture to remove the rights of holders of capital securities to institute a direct action (as defined below).

Limitation on Mergers and Sales of Assets

If certain conditions are met, the junior subordinated indenture generally permits a consolidation or merger between us or Popular and another entity, as the case may be. If certain conditions are met, the junior subordinated indenture also permits the sale, lease or transfer by us or Popular, as the case may be, of all or substantially all of our or its property and assets. These transactions are permitted if:

• the resulting or acquiring entity, if other than us or Popular, is organized and existing under the laws of the United States or any state, the District of Columbia or Puerto Rico and assumes all of our or Popular’s responsibilities and liabilities under the junior subordinated indenture, including the payment of all amounts due on the junior subordinated debentures and performance of the covenants in the junior subordinated indenture and the guarantees issued by us or Popular, as applicable (and in the event such entity is organized and existing under the laws of Puerto Rico, an additional obligation to make such payments without withholding or deduction for any taxes of whatever nature imposed or levied by or on behalf of Puerto Rico);

• immediately after the transaction, and giving effect to the transaction, no debenture default under the junior subordinated indenture exists; and

• an officers’ certificate and an opinion of counsel to the effect that the relevant provisions of the indenture have been complied with has been delivered to the indenture trustee.

If we or Popular consolidate or merge with or into any other entity or sell, lease or transfer all or substantially all of our or its property or assets according to the terms and conditions of the junior subordinated indenture, the resulting or acquiring entity will be substituted for us or it in such indenture with the same effect as if it had been an original party to the indenture. As a result, such resulting or acquiring entity may exercise our or Popular’s rights and powers under the junior subordinated indenture, in our or its name and we or Popular, as the case may be, will be released from all our or its liabilities and obligations under such indenture and under the junior subordinated debentures.

Events of Default and the Rights of Capital Securities Holders to Take Action Against Popular North America

A “debenture event of default,” when used in the junior subordinated indenture with respect to the junior subordinated debentures, means any of the following:

• failure to pay interest on a junior subordinated debenture for 30 days following the deferral of such interest for 10 consecutive semi-annual periods; or

• certain events relating to a bankruptcy, insolvency or reorganization of Popular North America or Popular.

A “debenture default”, when used in the junior subordinated indenture with respect to the junior subordinated debentures, means any of the following:

• the occurrence of a debenture event of default with respect to the junior subordinated debentures;

• failure in the payment of any interest when due on such junior subordinated debentures, including any additional interest, and the continuance of such failure to pay for a period of 30 days (subject to any deferral in the case of an extension period);

• failure to pay any principal or premium, if any, on such junior subordinated debentures when due; or

• failure to observe or perform any other covenants contained in the junior subordinated indenture that apply to junior subordinated debentures for 90 days after we have received written notice of the failure to perform in the manner specified in the junior subordinated indenture.

In case a debenture default shall occur and be continuing, the indenture trustee may in its discretion proceed to protect and enforce its rights and the rights of the holders by appropriate judicial proceedings as the indenture trustee deems most effectual. In case of a debenture default (other than a debenture event of default) there is no right to declare the principal amount of the junior subordinated debentures immediately payable.

If a debenture event of default under the junior subordinated indenture referred to in the first bullet above occurs and continues, the indenture trustee or the holders of at least 25% in aggregate principal amount of the outstanding junior subordinated debentures may declare the entire principal of and all accrued but unpaid interest on all junior subordinated debentures to be due and payable immediately. If the indenture trustee or the holders of junior subordinated debentures do not make such declaration and the junior subordinated debentures are held by the trust or property trustee of the trust, the property trustee or the holders of at least 25% in aggregate liquidation amount of the outstanding capital securities shall have the right to make such declaration. If a debenture event of default under the junior subordinated indenture referred to in the second bullet above occurs and continues, the entire principal of and all accrued but unpaid interest on the junior subordinated debentures will be due and payable immediately without further action.

If a declaration of acceleration of the maturity of the junior subordinated debentures occurs, the holders of a majority of the aggregate principal amount of the outstanding junior subordinated debentures may, subject to conditions (including, if the junior subordinated debentures are held by the trust or a trustee of the trust, the consent of the holders of a majority in aggregate liquidation amount of the outstanding capital securities), rescind the declaration. If the requisite holders of junior subordinated debentures do not rescind such declaration and such junior subordinated debentures are held by the trust or a trustee of the trust, the holders of a majority in aggregate liquidation amount of the outstanding capital securities may rescind the declaration.

The holders of a majority in aggregate principal amount of the outstanding junior subordinated debentures may, on behalf of all holders, waive any past default, except:

• a default in payment of principal, premium or interest; or

• a default under any provision of the junior subordinated indenture which itself cannot be modified or amended without the consent of the holder of each outstanding junior subordinated debenture.

The holders of a majority in principal amount of the junior subordinated debentures shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee under the junior subordinated indenture.

So long as the trust holds the junior subordinated debentures, the property trustee and the holders of the capital securities will have the following rights under the junior subordinated indenture upon the occurrence of a debenture event of default:

• the property trustee and the holders of not less than 25% in aggregate liquidation amount of the outstanding capital securities may declare the principal of and all accrued but unpaid interest on the junior subordinated debentures due and payable immediately;

• if all defaults have been cured, the consent of the holders of more than 50% in aggregate liquidation amount of the outstanding capital securities is required to annul a declaration by the indenture trustee, the trust or the holders of the capital securities that the principal of and all accrued but unpaid interest on the junior subordinated debentures is due and payable immediately;

• the consent of each holder of capital securities is required to waive a default in the payment of principal, premium or interest with respect to the junior subordinated debentures or a default in respect of a covenant or provision that cannot be modified or amended without the consent of the holder of each outstanding junior subordinated debenture; and

• the consent of the holders of more than 50% in aggregate liquidation amount of the outstanding capital securities is required to waive any other default.

If the debenture default under the junior subordinated indenture arises from the failure of Popular North America to make a payment of principal of or any premium or interest on the junior subordinated debentures when due, then a holder of capital securities may bring a legal action against Popular North America (or Popular under the related guarantees) directly for enforcement of such payment to such holder of amounts owed on the junior subordinated debentures with a principal amount equal to the liquidation amount of such holder’s capital securities (a “direct action”). Popular North America may not amend the junior subordinated indenture to remove this right to bring a direct action without the prior written consent of the holders of all outstanding capital securities. Popular North America can offset against payments then due under the junior subordinated debentures any corresponding payments made to holders of capital securities by Popular North America (or Popular under the related guarantees) in connection with a direct action.

The holders of the capital securities will not be able to exercise directly any remedies available to the holders of the junior subordinated debentures except under the circumstance described in the preceding paragraphs.

We and Popular are required to file an officers’ certificate with the junior subordinated trustee each year that states, to the knowledge of the certifying officer, whether or not any defaults exist under the terms of the junior subordinated indenture.

Governing Law

The junior subordinated indenture and the junior subordinated debentures will be governed by, and construed in accordance with, the laws of the State of New York.

Concerning the Indenture Trustee

The indenture trustee will have all of the duties and responsibilities specified under the Trust Indenture Act. Other than its duties in case of a default, the trustee is under no obligation to exercise any of the powers under the junior subordinated indenture at the request, order or direction of any holders of junior subordinated debentures unless offered reasonable indemnification.

From time to time, Popular North America and Popular and certain of their respective subsidiaries have maintained and may maintain deposit accounts and conduct other banking transactions, including lending transactions, with the indenture trustee in the ordinary course of business.

DESCRIPTION OF DEBENTURE GUARANTEES

The following is a description of the material terms of the debenture guarantees from Popular. You should read the debenture guarantees, which are executed by Popular and endorsed on each junior subordinated debenture.

General

Under the debenture guarantees, Popular will guarantee, on a subordinated basis, the punctual payment of the principal of and premium, if any, and interest on the junior subordinated debentures, when and as the same are due and payable by Popular North America. The guarantee is absolute and unconditional, irrespective of any circumstance that might otherwise constitute a legal or equitable discharge of a surety or guarantor. To evidence the guarantee, a debenture guarantee, executed by Popular, will be endorsed on each junior subordinated debenture. Holders of the junior subordinated debentures and, if outstanding, capital securities may proceed directly against Popular under the debenture guarantees for payment defaults under the junior subordinated debentures without first proceeding against Popular North America.

Status of the Debenture Guarantees

Each debenture guarantee will be unsecured and will rank:

• subordinate and junior in right of payment to all of Popular’s current and future Senior Debt and secured debt in the same manner as the junior subordinated debentures as set forth in the junior subordinated indenture;

• equally with all other guarantees that Popular issues in connection with junior subordinated debentures or similar securities; and

• senior to Popular’s capital stock.

In the event of Popular’s insolvency, bankruptcy, liquidation or other proceeding, the occurrence and continuance of any default in the payment of principal, premium or interest on its Senior Debt beyond any applicable grace period, the occurrence and continuance of any event of default with respect to its Senior Debt permitting the holders of that Senior Debt (or a trustee) to accelerate the maturity of that Senior Debt, whether or not the maturity is in fact accelerated (unless the payment default or event of default has been cured or waived or ceased to exist and any related acceleration has been rescinded), or the occurrence and continuance of any judicial proceeding with respect to any such payment default or event of default, all Senior Debt is required to be paid in full before any payment or distribution is made on account of the debenture guarantees. In these circumstances, any payment or distribution on account of the debenture guarantees that would otherwise be payable in respect of the debenture guarantees will be paid directly to the holders of Senior Debt until all the Senior Debt of Popular has been paid in full. If any payment or distribution by Popular is received by any holder of any debenture guarantee in contravention of any of the terms of the debenture guarantee and before all the Senior Debt of Popular has been paid in full, this payment or distribution will be received in trust for the benefit of the holders of the Senior Debt of Popular to the extent necessary to pay all such Senior Debt of Popular in full. Notwithstanding the subordination provisions discussed in this paragraph, Popular may make payments or distributions in respect of the debenture guarantees so long as:

Taxation by Puerto Rico

All payments pursuant to any debenture guarantee will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Puerto Rico or by or with any district, municipality or other political subdivision thereof or authority therein having power to tax unless such taxes, duties, assessments or governmental charges are required by law to be withheld or deducted.

In the event that Popular is required by law to deduct or withhold any amounts in respect of taxes, duties, assessments or governmental charges, it will pay such additional amounts in respect of principal, premium and interest as will result (after deduction of the said taxes, duties, assessments or governmental charges) in the payment to the holders of the junior subordinated debentures of the amounts which would otherwise have been payable in respect to the junior subordinated debentures in the absence of such deduction or withholding (“additional debenture guarantee payments”), except that no such additional debenture guarantee payments shall be payable:

      (i) to any holder of junior subordinated debentures or any interest therein or rights in respect thereof where such deduction or withholding is required by reason of such holder having some connection with Puerto Rico or any political subdivision or taxing authority thereof or therein other than the mere holding of and payment in respect of such junior subordinated debentures;

      (ii) in respect of any deduction or withholding that would not have been required but for the presentation by the holder of junior subordinated debentures for payment on a date more than 30 days after the date on which payment thereof is duly provided for; or

      (iii) in respect of any deduction or withholding that would not have been required but for the failure to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with Puerto Rico, or any political subdivision or taxing authority thereof or therein, of the holder of junior subordinated debentures or any interest therein or rights in respect thereof, if compliance is required by Puerto Rico, or any political subdivision or taxing authority thereof or therein, as a precondition to exemption from such deduction or withholding.

Governing Law

The debenture guarantees will be governed by, and construed in accordance with, the laws of the State of New York.

DESCRIPTION OF CAPITAL SECURITIES GUARANTEES

The following is a description of the material terms of the capital securities guarantees from Popular North America and Popular (also referred to as the “capital securities guarantees”) pursuant to the guarantee agreement between Popular, Popular North America and J.P. Morgan Trust Company, National Association, as guarantee trustee. You should read the guarantee agreement and the Trust Indenture Act.

General

Under the capital securities guarantee we will irrevocably and unconditionally agree to pay in full to the holders of the capital securities, except to the extent paid by the trust, as and when due, regardless of any defense, right of set-off or counterclaim which the trust may have or assert, the following payments, which are referred to as “guarantee payments,” without duplication:

• any accumulated and unpaid distributions that are required to be paid on the capital securities, to the extent the trust has funds available for such distributions;

• the redemption price for any capital securities called for redemption or then subject to mandatory redemption by the trust, to the extent the trust has funds available for such redemption; and

• upon a voluntary or involuntary dissolution, winding-up or termination of the trust, other than in connection with the distribution of junior subordinated debentures to the holders of capital securities or the redemption of all of the capital securities, the lesser of:

• the aggregate of the $1,000 liquidation amount and all accumulated and unpaid distributions on the capital securities to the date of payment, to the extent the trust has funds available therefor; and

• the amount of assets of the trust remaining for distribution to holders of the capital securities in liquidation of the trust.

Under the capital securities guarantee, Popular will irrevocably and unconditionally agree to pay in full, to the holders of the capital securities, Popular North America’s obligation under its guarantee to make the guarantee payments, regardless of any defense, right of set-off or counterclaim which the trust may have or assert, when and as the same are due and payable by Popular North America.

Our and Popular’s obligation to make a guarantee payment may be satisfied by direct payment of the required amounts by us or Popular to the holders of capital securities or by causing the trust to pay such amounts to such holders.

The capital securities guarantees will not apply to any payment of distributions or other amounts except to the extent the trust shall have funds available for such payment. If we do not make interest and other payments on the junior subordinated debentures purchased by the trust, the trust will not have sufficient funds to pay distributions and other amounts on the capital securities. See “— Status of the Capital Securities Guarantees.”

Because each of Popular North America and Popular is a holding company, the rights of Popular North America and Popular to participate in the distribution of assets of any of our respective subsidiaries upon the subsidiary’s liquidation or reorganization will be subject to the prior claims of the subsidiary’s creditors and preferred equity holders except to the extent that Popular North America or Popular may be a creditor with recognized claims against the subsidiary. The capital securities guarantees do not limit the incurrence or issuance by us or Popular of other secured or unsecured debt, including Senior Debt.

The capital securities guarantees, when taken together with our and Popular’s obligations under the junior subordinated debentures, the debenture guarantees, the junior subordinated indenture, the trust agreement and the expense agreement, including our and Popular’s obligations to pay costs, expenses, debts and liabilities of the trust, other than those relating to trust securities, will provide a full and unconditional guarantee on a subordinated basis of payments due on the capital securities.

We will also agree separately to irrevocably and unconditionally guarantee the obligations of the trust with respect to the common securities to the same extent as the capital securities guarantee.

Status of the Capital Securities Guarantees

Each capital securities guarantee will be unsecured and will rank:

• subordinate and junior in right of payment to all of Popular North America’s and Popular’s Senior Debt and secured debt in the same manner as the junior subordinated debentures as set forth in the junior subordinated indenture;

• equally with all other guarantees that Popular North America or Popular issue in connection with capital securities or similar preferred securities; and

• senior to Popular North America’s and Popular’s capital stock.

Each guarantee constitutes a guarantee of payment and not of collection, which means that the guaranteed party may sue the guarantor to enforce its rights under the guarantee without suing any other person or entity. Each guarantee will be held by the guarantee trustee for the benefit of the holders of the capital securities. Each guarantee will be discharged only by payment of the guarantee payments in full to

the extent not paid by the trust or upon the distribution of the junior subordinated debentures as described herein.

Taxation by Puerto Rico

All payments pursuant to any capital securities guarantee will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Puerto Rico or by or with any district, municipality or other political subdivision thereof or authority therein having power to tax unless such taxes, duties, assessments or governmental charges are required by law to be withheld or deducted.

In the event that Popular is required by law to deduct or withhold any amounts in respect of taxes, duties, assessments or governmental charges, it will pay such additional amounts in respect of principal, premium and interest as will result (after deduction of the said taxes, duties, assessments or governmental charges) in the payment to the holders of the capital securities of the amounts which would otherwise have been payable in respect to the capital securities in the absence of such deduction or withholding (“additional capital security guarantee payments”), except that no such additional capital security guarantee payments shall be payable:

      (i) to any holder of capital securities or any interest therein or rights in respect thereof where such deduction or withholding is required by reason of such holder having some connection with Puerto Rico or any political subdivision or taxing authority thereof or therein other than the mere holding of and payment in respect of such capital securities;

      (ii) in respect of any deduction or withholding that would not have been required but for the presentation by the holder of capital securities for payment on a date more than 30 days after the date on which payment thereof is duly provided for; or

      (iii) in respect of any deduction or withholding that would not have been required but for the failure to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with Puerto Rico, or any political subdivision or taxing authority thereof or therein, of the holder of capital securities or any interest therein or rights in respect thereof, if compliance is required by Puerto Rico, or any political subdivision or taxing authority thereof or therein, as a precondition to exemption from such deduction or withholding.

Amendments and Assignment

Each capital securities guarantee may be amended only with the prior approval of the holders of a majority in aggregate liquidation amount of the outstanding capital securities. No vote will be required, however, for any changes that do not adversely affect the rights of holders of the capital securities in any material respect. All guarantees and agreements contained in each capital securities guarantee will bind our successors, assignees, receivers, trustees and representatives and will be for the benefit of the holders of the capital securities then outstanding.

Termination of the Capital Securities Guarantees

Each capital securities guarantee will terminate (1) upon full payment of the redemption price of all capital securities, (2) upon distribution of the junior subordinated debentures to the holders of the trust securities as described herein or (3) upon full payment of the amounts payable in accordance with the trust agreement upon liquidation of the trust. Each capital securities guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of capital securities is required to repay any sums paid under the capital securities or any capital securities guarantee.

Events of Default

An event of default under a capital securities guarantee will occur if Popular North America or Popular, as the case may be, fails to perform any payment obligation under that guarantee or fails to

perform any other obligation under that guarantee and such other obligation remains unremedied for 30 days.

The holders of a majority in liquidation amount of the capital securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the guarantee trustee in respect of any capital securities guarantee or to direct the exercise of any trust or power conferred upon the guarantee trustee under any guarantee. Any holder of capital securities may institute a legal proceeding directly against Popular North America or Popular, as the case may be, to enforce its or the guarantee trustee’s rights and our obligations under any capital securities guarantee without first instituting a legal proceeding against the trust, the guarantee trustee or any other person or entity.

As guarantors, Popular North America and Popular are required to file annually with the guarantee trustee a certificate as to whether or not it is in compliance with all applicable conditions and covenants under its capital securities guarantee.

Information Concerning the Guarantee Trustee

Prior to the occurrence of an event of default relating to any capital securities guarantee, the guarantee trustee is required to perform only the duties that are specifically set forth in the capital securities guarantee. Following the occurrence of an event of default, the guarantee trustee will exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs and the guarantee trustee is under no obligation to exercise any of the powers vested in it by any capital securities guarantee at the request of any holder of capital securities unless offered indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred thereby.

Popular North America and Popular and their respective affiliates have maintained and may maintain certain accounts and other banking relationships with the guarantee trustee and its affiliates in the ordinary course of business.

Governing Law

Each capital securities guarantee will be governed by, and construed in accordance with, the laws of the State of New York.

RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE JUNIOR SUBORDINATED

DEBENTURES, THE EXPENSE AGREEMENT AND THE GUARANTEES

Popular North America and Popular will each guarantee payments of distributions and redemption and liquidation payments due on the capital securities to the extent the trust has funds available for such payments, as described under “Description of Capital Securities Guarantees” above. No single document executed by Popular North America or Popular will provide for the full, irrevocable and unconditional guarantee of the capital securities. It is only the combined operation of the guarantees, the trust agreement, the junior subordinated debentures, the junior subordinated indenture and the expense agreement that has the effect of providing a full, irrevocable and unconditional guarantee of the trust’s obligations under the capital securities.

As long as Popular North America pays interest and other payments when due on the junior subordinated debentures, those payments will be sufficient to cover distributions and redemption and liquidation payments due on the capital securities, primarily because:

• the aggregate principal amount of the junior subordinated debentures will be equal to the sum of the aggregate liquidation amount of the capital securities and the common securities;

• the interest rate and interest and other payment dates on the junior subordinated debentures will match the distribution rate and distribution and other payment dates for the capital securities;

• Popular North America will pay any and all costs, expenses and liabilities of the trust, except the trust’s obligations to holders of the capital securities and the common securities; and

• the trust agreement provides that the trust will not engage in any activity that is not consistent with the limited purposes of the trust.

If we do not make interest or other payments on the junior subordinated debentures, the trust will not have sufficient funds to pay distributions and other amounts on the capital securities. A capital securities guarantee is a subordinated guarantee in relation to the capital securities. A capital securities guarantee does not apply to any payment of distributions unless and until the trust has sufficient funds for the payment of such distributions. See “Description of Capital Securities Guarantees.”

Each of Popular North America and Popular has the right to set off any payment that it is otherwise required to make under the junior subordinated indenture with any payment that previously has been made to holders of the capital securities or is concurrently on the date of such payment being made under a capital securities guarantee.

If we fail to make interest or other payments on the junior subordinated debentures when due, taking account of any grace period or extension period, the trust agreement allows the holders of the capital securities to direct the property trustee to enforce its rights under the junior subordinated debentures. If the property trustee fails to enforce these rights, any holder of capital securities may directly sue us to enforce such rights without first suing the property trustee or any other person or entity. See “Description of Capital Securities — Voting Rights; Amendment of the Trust Agreement.”

A holder of capital securities may also institute a direct action against Popular and us if we fail to make interest or other payments on the junior subordinated debentures when due, taking account of any grace period or extension period. A direct action may be brought without first:

• directing the property trustee to enforce the terms of the junior subordinated debentures, or

• suing us to enforce the property trustee’s rights under the junior subordinated debentures.

In connection with such direct action, we will be subrogated to the rights of such holder of capital securities under the trust agreement to the extent of any payment made by us to such holder of capital securities. Consequently, we will be entitled to payment of amounts that a holder of capital securities receives in respect of an unpaid distribution to the extent that such holder receives or has already received full payment relating to such unpaid distribution from the trust.

We acknowledge that the guarantee trustee will enforce the capital securities guarantees on behalf of the holders of the capital securities. If we fail to make payments under our capital securities guarantee or if Popular fails to make payments under its capital securities guarantee, the holders of the capital securities may direct the guarantee trustee to enforce its rights under any such guarantee. If the guarantee trustee fails to enforce any capital securities guarantee, any holder of capital securities may directly sue us or Popular to enforce the guarantee trustee’s rights under the applicable capital securities guarantee. Such holder need not first sue the trust, the guarantee trustee, or any other person or entity. A holder of capital securities may also directly sue us or Popular to enforce such holder’s right to receive payment under any capital securities guarantee. Such holder need not first direct the guarantee trustee to enforce the terms of such capital securities guarantee or sue the trust, the guarantee trustee or any other person or entity.

We and the trust believe that the above mechanisms and obligations, taken together, are equivalent to a full and unconditional guarantee by us and Popular on a subordinated basis of payments due on the capital securities. See “Description of Capital Securities Guarantees — General.”

The trust’s capital securities evidence a beneficial interest in the assets of the trust, and the trust exists for the sole purpose of issuing its capital securities and common securities and investing the proceeds in junior subordinated debentures issued by Popular North America. A principal difference between the rights of a holder of a capital security and a holder of a junior subordinated debenture is that a holder of a junior subordinated debenture is entitled to receive from Popular North America payments on junior subordinated debentures held by the holder, while, other than the right of direct action, a holder of capital securities is entitled to receive distributions or other amounts payable with respect to the capital

securities from the trust or from Popular or Popular North America under the capital securities guarantees only if and to the extent the trust has funds available for the payment of those distributions.

In the event of any voluntary or involuntary liquidation or bankruptcy of Popular North America or Popular, the trust, as holder of the junior subordinated debentures, would be a creditor of Popular North America or Popular, respectively, that is subordinated and junior in right of payment to all Popular North America’s or Popular’s current and future Senior Debt as defined in this prospectus, and secured debt, respectively, but entitled to receive payment in full of all amounts payable with respect to the junior subordinated debentures before any stockholders of Popular North America or Popular, respectively, receive payments or distributions. Since each of Popular North America and Popular is the guarantor under a guarantee and has agreed to pay all costs, expenses and liabilities of the trust (other than the trust’s obligations to the holders of the capital securities and common securities), the positions of a holder of the capital securities and a holder of the junior subordinated debentures relative to other creditors and to stockholders of Popular North America in the event of liquidation or bankruptcy of Popular North America or Popular are expected to be substantially the same.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the principal United States federal income tax consequences of the purchase, ownership and disposition of capital securities. It applies to you only if you acquire capital securities on their original issue date at their original offering price and you hold your capital securities as capital assets for tax purposes. This summary does not address all tax consequences that may be applicable to you, nor does it address the tax consequences to you if you are:

• a member of a class of holders subject to special rules, such as: a dealer in securities or currencies, a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings, a bank, a life insurance company, a tax-exempt organization,

• a person that owns capital securities that are a hedge or that are hedged against interest rate risks,

• a person that owns capital securities as part of a straddle or conversion transaction for tax purposes, or

• a U.S. holder, as defined below, whose functional currency for tax purposes is not the U.S. dollar.

The statements of law or legal conclusion set forth in this summary constitute the opinion of Sullivan & Cromwell LLP, counsel to Popular, Popular North America and the trust. This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed regulations under the Code, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. The authorities on which this discussion is based are subject to various interpretations, and it is possible that the United States federal income tax treatment of the purchase, ownership and disposition of capital securities may differ from the treatment below.

Please consult your own tax advisor concerning the consequences of purchasing, owning and disposing of these capital securities in your particular circumstances under the Code and the laws of any other taxing jurisdiction.

U.S. Holders

This subsection describes the tax consequences to a U.S. holder. You are a U.S. holder if you are a beneficial owner of capital securities and you are:

• a citizen or resident of the United States,

• a domestic corporation,

• an estate whose income is subject to United States federal income tax regardless of its source, or

• a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.

If you are not a U.S. holder, this subsection does not apply to your and you should refer to “U.S. Alien Holders” below.

Classification of the Trust

Under current law and assuming full compliance with the terms of the trust agreement, the trust will be classified as a grantor trust and will not be taxable as a corporation for United States federal income tax purposes. Accordingly, for United States federal income tax purposes, the trust will not be subject to United States federal income tax and each holder of a capital security will be considered the owner of an undivided portion of the junior subordinated debentures owned by the trust. As a result, you will be required to include in your gross income your proportional share of the interest income, including original issue discount, if any, paid or accrued with respect to the junior subordinated debentures, whether or not the trust actually distributes cash to you. See “— Interest Income and Original Issue Discount.”

Classification of Junior Subordinated Debentures

We and the trust will agree to treat the junior subordinated debentures as indebtedness for all United States federal income tax purposes. Under current law, the junior subordinated debentures will be characterized for United States federal income tax purposes as our indebtedness.

Interest Income and Original Issue Discount

Under Treasury regulations, an issuer and the Internal Revenue Service will ignore a “remote” contingency that stated interest will not be timely paid when determining whether a debt instrument is issued with original issue discount (“OID”). As a result of the terms and conditions of the junior subordinated debentures that prohibit certain payments with respect to our capital stock and indebtedness if we elect to defer payment of interest on the junior subordinated debentures, we believe that the likelihood that we will exercise our option to defer interest payments is remote. Based on the foregoing, we believe that the junior subordinated debentures will not be considered to be issued with OID at the time of their original issuance.

Under these regulations, if we were to exercise our option to defer any payment of interest, the junior subordinated debentures would at that time be treated as issued with OID, and all stated interest on the junior subordinated debentures would thereafter be treated as OID as long as the junior subordinated debentures remained outstanding. In that event, all of your taxable interest income on the junior subordinated debentures would be accounted for as OID on an economic accrual basis regardless of your method of tax accounting, and actual distributions of stated interest would not be reported separately as taxable income. Consequently, you would be required to include OID in gross income even though we would not make any actual cash payments during an extension period.

These regulations have not been addressed in any rulings or other interpretations by the Internal Revenue Service, and it is possible that the Internal Revenue Service could take a position contrary to the interpretation in this prospectus supplement.

Because income on the capital securities will constitute interest or OID, U.S. holders of the capital securities will not be entitled to the preferential tax rate (generally 15%) generally applicable to payments of dividends before January 1, 2009. Moreover, because income on the capital securities will constitute interest or OID, U.S. holders of the capital securities will not be entitled to a dividends-received deduction for any income taken into account with respect to the capital securities.

In the rest of this discussion, we assume that unless and until we exercise our option to defer any payment of interest, the junior subordinated debentures will not be treated as issued with OID.

Distribution of Junior Subordinated Debentures to Holders of Capital Securities Upon Liquidation of the Trust

Under current law, if the trust distributes junior subordinated debentures as described under the caption “Certain Terms of Capital Securities — Liquidation of Trust and Distribution of Junior Subordinated Debentures to Holders,” you will receive directly your proportional share of junior subordinated debentures previously held indirectly through the trust. Under current law, you will not be taxed on the distribution and your holding period and aggregate adjusted tax basis in your junior subordinated debentures will be the same as the holding period and aggregate adjusted tax basis that you had in your capital securities before the distribution. If, however, the trust were to become taxed on the income received or accrued on junior subordinated debentures due to a Tax Event, the trust might be taxed on a distribution of junior subordinated debentures to you, and you might recognize gain or loss as if you had exchanged your capital securities for the junior subordinated debentures you received upon the liquidation of the trust.

If you receive junior subordinated debentures in exchange for your capital securities, you will continue to include interest and OID, if any, in income in respect of junior subordinated debentures received from the trust in the manner described above under “— Interest Income and Original Issue Discount.”

Sale or Redemption of Capital Securities

If you sell your capital securities, including through a redemption for cash, you will recognize gain or loss equal to the difference between your adjusted tax basis in your capital securities and the amount you realize on the sale of your capital securities. Assuming that we do not exercise our option to defer payment of interest on the junior subordinated debentures, your adjusted tax basis in your capital securities generally will be the price you paid for your capital securities.

If the junior subordinated debentures are deemed to be issued with OID as a result of an actual deferral of interest payments, your adjusted tax basis in your capital securities generally will be the price you paid for your capital securities, increased by OID previously includible in your gross income to the date of disposition and decreased by distributions or other payments you received on your capital securities since and including the date of the first extension period. Any gain or loss that you recognize upon a sale of your capital securities generally will be capital gain or loss, except to the extent any amount that you realize is treated as a payment of accrued interest on your proportional share of the junior subordinated debentures required to be included in income.

Capital gain of a non-corporate U.S. holder that is recognized before January 1, 2009 is generally taxed at a maximum rate of 15% where the holder has a holding period greater than one year.

If we exercise our option to defer any payment of interest on the junior subordinated debentures, our capital securities may trade at a price that does not accurately reflect the value of accrued but unpaid interest with respect to the underlying junior subordinated debentures. If you sell your capital securities before the record date for the payment of distributions, you will not receive payment of a distribution for the period before the sale. However, you will be required to include in income any OID that has accrued with respect to your capital securities. As previously discussed, your adjusted tax basis in your capital securities generally would be increased by OID previously includible in your gross income. In such an instance, your increased tax basis in the capital securities will increase the amount of any capital loss that you may have otherwise realized on the sale. In general, an individual taxpayer may offset only $3,000 of capital losses against ordinary income during any taxable year.

U.S. Alien Holders

This subsection describes the tax consequences to a U.S. alien holder. You are a U.S. alien holder if you are a beneficial owner of capital securities and you are, for United States federal income tax purposes:

• a nonresident alien individual,

• a foreign corporation,

• a foreign partnership, or

• an estate or trust that in either case 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 U.S. holder, this subsection does not apply to you.

Under United States federal income and estate tax law, and subject to the discussion of backup withholding below, if you are a U.S. alien holder of capital securities:

• we and other U.S. payors generally will not be required to deduct United States withholding tax from payments of principal and interest, including OID, to you if, in the case of payments of interest:

• you do not actually or constructively own 10% or more of the total combined voting power of all classes of stock of Popular North America, Inc. entitled to vote,

• you are not a controlled foreign corporation that is related to Popular North America, Inc. through stock ownership, and

• the U.S. payor does not have actual knowledge or reason to know that you are a United States person and:

• 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,

• 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,

• 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:

• 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),

• 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

• 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),

• 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,

• 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

• to which is attached a copy of the Internal Revenue Service Form W-8BEN or acceptable substitute form, or

• 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 capital security. In addition, a U.S. alien holder will not be subject to United States federal income tax on gain realized upon any sale or other disposition of the capital securities unless (i) the gain is effectively connected with the U.S. alien holder’s conduct of a trade or business in the United States or (ii) in the case of an individual, the U.S. alien holder is present in the United States for 183 days or more in the taxable year in which the sale or other disposition occurs and certain other conditions are met.

Further, a capital security 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 capital security would not have been effectively connected with a United States trade or business of the decedent at the same time.

Backup Withholding Tax and Information Reporting

In general, if you are a noncorporate U.S. holder, we and other payors are required to report to the Internal Revenue Service all payments of principal and interest and the accrual of OID on your capital security. In addition, we and other payors are required to report to the Internal Revenue Service any payment of proceeds of the sale of your capital security 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 Internal Revenue Service that you have failed to report all interest and dividends required to be shown on your federal income tax returns.

In general, if you are a U.S. alien holder, payments of principal or interest, including OID, made by us and other payors to you will not be subject to backup withholding and information reporting, provided that the certification requirements described above under “— U.S. Alien Holders” are satisfied or you otherwise establish an exemption. However, we and other payors are required to report payments of interest on your capital securities 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 capital securities 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:

• 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

• 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 capital securities 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,

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:

• 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

• such 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 capital securities 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.

Any amounts withheld from you under the backup withholding rules will be allowed as a refund or credit against your United States federal income tax liability, provided the required information is furnished to the Internal Revenue Service.

CERTAIN ERISA CONSIDERATIONS

If you are a fiduciary of a pension, profit-sharing or other employee benefit plan subject to the Employee Retirement Income Security Act of 1974, or “ERISA,” you should consider the fiduciary standards of ERISA in the context of the plan’s particular circumstances before authorizing an investment in the capital securities. Accordingly, among other factors, you should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the plan.

In addition, if you are a fiduciary of an employee benefit plan subject to ERISA, or if you are investing on behalf of an individual retirement account or a pension or profit-sharing plan for one or more self-employed persons (each of which we refer to as a “Plan”), you should consider whether an investment in the capital securities could result in a prohibited transaction. ERISA and the Section 4975 of the Code prohibit Plans from engaging in certain transactions involving “plan assets” with persons who are “parties in interest” under ERISA or “disqualified persons” under the Code with respect to the Plan. A violation of these “prohibited transaction” rules may result in a substantial excise tax under the Code and other liabilities under ERISA, unless relief is available under an applicable statutory or administrative exemption. Employee benefit plans that are governmental plans, certain church plans and foreign plans generally are not subject to the prohibited transaction rules or the fiduciary standards of ERISA, although governmental plans may be subject to similar provisions under applicable state laws.

Under a regulation (the “Plan Asset Regulation”) issued by the U.S. Department of Labor, the assets of the trust would be deemed to be “plan assets” of a Plan for purposes of ERISA and Section 4975 of the Code if “plan assets” of the Plan were used to acquire an equity interest in the trust and no exception were applicable under the Plan Asset Regulation. An “equity interest” is defined in the Plan Asset Regulation as any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and which has no substantial equity features. For purposes of the Plan Asset Regulation, the capital securities are likely to be treated as “equity interests” in the trust.

Pursuant to an exception contained in the Plan Asset Regulation, the assets of the trust will not be deemed to be “plan assets” of investing Plans if the capital securities are “publicly offered securities” —

that is, they are (i) part of a class of securities that is “widely held,” i.e., held by 100 or more investors who are independent of the issuer and each other, (ii) freely transferable and (iii) either (a) part of a class of securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) or (b) sold as part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act of 1933 and such class is registered under the Exchange Act within 120 days after the end of the fiscal year of the issuer during which the offering of such securities to the public occurred. Although no assurances can be given, the underwriters believe that the capital securities will meet the foregoing criteria for treatment as publicly offered securities within the meaning of the Plan Asset Regulation.

Even if the assets of the trust are not considered plan assets of any Plan, it is possible that Popular or Popular North America might be considered a “party in interest” or “disqualified person” with respect to a Plan by reason of, for example, the provision of services by Popular, Popular North America or any affiliates to the Plan. In that event, the purchase of capital securities by any such Plan might be considered to result in a prohibited transaction unless an exemption applies.

The Department of Labor has issued five prohibited transaction class exemptions (“PTCEs”) that may provide exemptive relief if required for direct or indirect prohibited transactions that may arise from the purchase or holding of the capital securities. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts), and PTCE 84-14 (for certain transactions determined by independent qualified asset managers).

In view of the prohibitions under ERISA and Section 4975 of the Code, discussed above, the capital securities may not be purchased or held by any Plan, any entity whose underlying assets include “plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person investing “plan assets” of any Plan, unless such purchaser or holder is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption. Any purchaser or holder of the capital securities or any interest therein will be deemed to have represented by its purchase and holding thereof that it either (a) is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf of or with “plan assets” of any Plan or (b) is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption with respect to such purchase or holding. If a purchaser or holder of the capital securities that is a Plan or a Plan Asset Entity elects to rely on an exemption other than PTCE 96-23, 95-60, 91-38, 90-1 or 84-14, Popular, Popular North America and the trust may require a satisfactory opinion of counsel or other evidence with respect to the availability of such exemption for such purchase and holding.

Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing the capital securities on behalf of or with “plan assets” of any Plan consult with their counsel regarding the potential consequences if the assets of the trust were deemed to be “plan assets” and the availability of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or any other applicable exemption.

UNDERWRITERS

Under the terms and subject to the conditions of an underwriting agreement dated , 2004, the underwriters named below, for whom Credit Suisse First Boston LLC and J.P. Morgan Securities Inc.

are acting as joint book-running managers, have severally agreed to purchase, and the trust has agreed to sell to them, severally, the following respective number of capital securities:


		Number of
		Capital
Name		Securities

Credit Suisse First Boston LLC
J.P. Morgan Securities Inc.
Popular Securities, Inc.

The underwriters are offering the capital securities subject to their acceptance of the capital securities from the trust and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the capital securities are conditioned upon the delivery of legal opinions by their counsel and certain other conditions. The underwriters are obligated to purchase all the capital securities, if any capital securities are purchased.

The underwriters initially propose to offer part of the capital securities directly to the public at the public offering price set forth on the cover page of this prospectus. The underwriters may also offer the capital securities to securities dealers at a price that represents a concession not in excess of $ per capital security. Any underwriter may allow, and dealers may reallow, a concession not in excess of $ per capital security to certain other dealers. After the initial offering of the capital securities, the offering price and other selling terms may from time to time be changed by the underwriters.

The following table shows the per capital security and total offering price, underwriting discounts and commissions to be paid to the underwriters by Popular North America as well as the proceeds received by the trust from the offering.


	Per Capital
	Security	Total

Public offering price	$	$	250,000,000
Underwriting discounts and commissions(1)	$	$
Proceeds to the trust(1)	$	$	250,000,000

(1) Popular North America will pay all underwriting discounts and commissions.

Because the proceeds from the sale of the capital securities will be used to purchase the junior subordinated debentures issued by Popular North America, the underwriting agreement provides that Popular North America will pay to the underwriters as compensation for their services $ per capital security, or $ in the aggregate. Popular North America’s offering expenses, not including underwriting discounts and commissions, are estimated to be $530,000.

Popular, Popular North America and the trust have agreed that, without the prior written consent of Credit Suisse First Boston LLC and J.P. Morgan Securities Inc. on behalf of the underwriters, they will not, directly or indirectly, during the period beginning on the date of the underwriting agreement and continuing to and including the closing under the underwriting agreement, offer or sell, grant any option for sale of, or otherwise dispose of, or announce the offering of, any securities that are substantially similar to the capital securities, or any security convertible into or exchangeable into capital securities or equity securities substantially similar to the capital securities and, in each case, are covered by a registration statement filed under the Securities Act.

Prior to this offering, there has been no public market for the capital securities. The underwriters have advised the trust that they presently intend to make a market in the capital securities. The underwriters are not obligated to make a market in the capital securities, however, and may discontinue market making activities at any time without notice. No assurance can be given as to the development, maintenance or liquidity of any trading market for the capital securities.

Popular, Popular North America and the trust have agreed to indemnify the underwriters and certain other persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make under the Securities Act.

In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions, and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934.

• Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

• Over-allotment involves sales by the underwriters of capital securities in excess of the number of capital securities the underwriters are obligated to purchase, which creates a syndicate short position.

• Syndicate covering transactions involve purchases of the capital securities in the open market after the distribution has been completed in order to cover syndicate short positions. A short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the capital securities in the open market after pricing that could adversely affect investors who purchase in the offering.

• Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the capital securities originally sold by the syndicate member are purchased in a stabilizing transaction or a syndicate covering transaction to cover syndicate short positions.

Any of these activities may have the effect of raising or maintaining the market price of the capital securities or preventing or retarding a decline in the market price of the capital securities. As a result, the price of the capital securities may be higher than the price that might otherwise exist in the open market. These transactions, if commenced, may be discontinued at any time.

Each underwriter has agreed that it will, to the best of its knowledge and belief, comply with all applicable securities laws and regulations in force in any jurisdiction in which it purchases, offers, sells or delivers the capital securities or possesses or distributes this prospectus and will obtain any required consent, approval or permission for its purchase, offer, sale or delivery of the capital securities under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes purchases, offers, sales or deliveries. None of the trust, Popular North America or Popular has any responsibility for an underwriter’s compliance with applicable securities laws.

In particular, each underwriter has represented and agreed that:

(i) it has not offered or sold, and, prior to the expiration of the period of six months from the closing date for the issue of the capital securities, will not offer or sell any capital securities to persons in the United Kingdom, except to those persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purpose of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995;

(ii) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of the capital securities in circumstances in which section 21(1) of the FSMA does not apply to us; and

(iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the capital securities in, from or otherwise involving the United Kingdom.

In addition, each underwriter understands and agrees that:

• This prospectus has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each of the underwriters has agreed that it has not offered or sold any capital securities or made any capital securities the subject of an invitation for subscription or purchase, and it has not circulated or distributed and will not circulate or distribute this

prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the capital securities, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor or other person falling within Section 274 of the Securities and Futures Act (Chapter 289) of Singapore (the “Singapore Securities and Futures Act”), (ii) to a sophisticated investor, and in accordance with the conditions, specified in Section 275 of the Singapore Securities and Futures Act or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the Singapore Securities and Futures Act.

• Each underwriter and each of its affiliates has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, any invitation, document or advertisement relating to the capital securities in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (unless permitted to do so under the securities laws of Hong Kong) other than with respect to capital securities intended to be disposed of outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made thereunder.

• It will not offer or sell any capital securities directly or indirectly in Japan or to, or for the benefit of any Japanese person or to others, for re-offering or re-sale directly or indirectly in Japan or to any Japanese person, except in each case pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law of Japan and any other applicable laws and regulations of Japan. For purposes of this paragraph, “Japanese person” means any person resident in Japan, including any corporation or other entity organized under the laws of Japan.

• No German selling prospectus (Verkaufsprospekt) has been or will be published in respect of the sale of the capital securities and that each underwriter will comply with the Securities Sales Prospectus Act of the Federal Republic of Germany (Wertpapier-Verkaufsprospektgesetz). It will not engage in a public offering in the Federal Republic of Germany with respect to any capital securities otherwise than in accordance with the Securities Sales Prospectus Act and any other act replacing or supplementing the Securities Sales Prospectus Act and all other applicable laws and regulations.

• The capital securities are being issued and sold outside the Republic of France and that, in connection with their initial distribution, it has not offered or sold and will not offer or sell, directly or indirectly, any capital securities to the public in the Republic of France, and that it has not distributed and will not distribute or cause to be distributed to the public in the Republic of France this prospectus or any other offering material relating to the capital securities, and that such offers, sales and distributions have been and will be made in the Republic of France only to (a) qualified investors (investisseurs qualifiés) and/or (b) a restricted group of investors (cercle restreint d’investisseurs), all as defined in Article L.411-2 of the Monetary and Financial Code and decrét no. 98-880 dated 1st October, 1998.

• The capital securities may not be offered, sold, transferred or delivered in or from the Netherlands as part of their initial distribution or at any time thereafter, directly or indirectly, other than to banks, pension funds, insurance companies, securities firms, investment institutions, central governments, large international and supranational institutions and other comparable entities, including, among others, treasuries and finance companies of large enterprises, which trade or invest in securities in the course of a profession or trade. It understands and agrees that individuals or legal entities who or which do not trade or invest in securities in the course of their profession or trade may not participate in the offering of the capital securities, and this prospectus or any other offering material relating to the capital securities may not be considered an offer or the prospect of an offer to sell or exchange the capital securities.

Popular Securities, Inc., a wholly owned subsidiary of Popular, is a member of the NASD and is participating in the distribution of this offering. The offering is therefore being made in compliance with the applicable provisions of NASD Conduct Rule 2720.

Because the NASD may view the capital securities as interests in a direct participation program, this offering will be made in compliance with the applicable provisions of Rule 2810 of the Conduct Rules of the NASD.

In recommending to an investor the purchase, sale or exchange of the capital securities, each underwriter shall (i) have reasonable grounds to believe, on the basis of information obtained from the investor concerning its investment objectives, other investments, financial situation and needs, and any other information known by such underwriter, that (a) the investor is or will be in a financial position appropriate to enable it to realize to a significant extent the benefits described in this prospectus, including any tax benefits discussed herein, (b) the investor has a fair market net worth sufficient to sustain the risks inherent in an investment in the capital securities, including loss of investment and lack of liquidity, and (c) the capital securities are otherwise suitable for the investor and (ii) maintain in its files written documentation as to the determination of suitability.

The underwriters and any dealers utilized in the sale of the capital securities do not intend to confirm sales to accounts over which they exercise discretionary authority without the prior specific written approval of the customer.

Certain of the underwriters and their affiliates engage in various general financing and banking transactions with Popular and Popular North America and their respective affiliates in the ordinary course of business.

VALIDITY OF SECURITIES

The validity of the capital securities will be passed upon by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to Popular North America and the trust. The validity of the junior subordinated debentures and the guarantees of Popular North America will be passed upon by Sullivan & Cromwell LLP, New York, New York, counsel to Popular North America, and the validity of the guarantees of Popular will be passed upon by Brunilda Santos de Alvarez, Esq., Executive Vice President and General Counsel of Popular. Sidley Austin Brown & Wood LLP, New York, New York, will act as counsel to the underwriters. Sullivan & Cromwell LLP and Sidley Austin Brown & Wood LLP will rely as to certain matters of Delaware law upon the opinion of Richards, Layton & Finger, P.C. and as to all matters of Puerto Rico law upon the opinion of Brunilda Santos de Alvarez, Esq. As of the date of this prospectus, Brunilda Santos de Alvarez, Esq. owns, directly or indirectly, 17,863 shares of common stock of Popular pursuant to Popular’s employee stock ownership plan or otherwise. She also held stock options to acquire 92,748 shares of common stock of Popular pursuant to Popular’s stock option plan.

EXPERTS

The financial statements incorporated by reference in this prospectus by reference to Popular, Inc.’s annual report on Form 10-K for the year ended December 31, 2003 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

Popular files annual, quarterly and special reports, proxy statements and other information with the SEC. Popular’s SEC filings are available to the public over the Internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document Popular files with the SEC at its public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC 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 facilities.

We “incorporate by reference” into this prospectus the information Popular files with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus. Some information contained in this prospectus updates the information incorporated by reference, and information that Popular files subsequently with the SEC will automatically update this prospectus. In other words, in the case of a conflict or inconsistency between information set forth in this prospectus and information incorporated by reference into this prospectus, you should rely on the information contained in the document that was filed later.

We incorporate by reference the documents listed below and any filings Popular makes with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 after the initial filing of the registration statement that contains this prospectus and prior to the later of (1) the time that we and/or the trust sell all the securities offered by this prospectus and (2) the date that our broker-dealer subsidiaries cease offering securities in market-making transactions pursuant to this prospectus:

• Popular’s Annual Report on Form 10-K for the year ended December 31, 2003, including information specifically incorporated by reference into Popular’s Form 10-K from its 2004 Annual Report to Stockholders and its definitive Proxy Statement for its 2004 Annual Meeting of Stockholders;

• Popular’s Quarterly Report on Form 10-Q for the quarters ended March 31 and June 30, 2004; and

• Popular’s Current Reports on Form 8-K filed with the SEC on January 20, 2004, April 6, 2004, April 16, 2004, April 29, 2004, May 13, 2004, July 2, 2004, July 16, 2004 and July 29, 2004.

You may request a copy of these filings, other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing, at no cost, by writing to or telephoning us at the following address: Ileana González, Senior Vice President, Popular, Inc., P.O. Box 362708, San Juan, Puerto Rico 009396-2708. Telephone requests may also be directed to (787) 765-9800. You may also access this information at our website at http://www.popularinc.com. No additional information on Popular’s website is incorporated by reference in this prospectus.

As an indirect, wholly owned subsidiary of Popular, Popular North America does not file reports under the Securities Exchange Act of 1934 with the SEC, and does not expect to do so in the future. Financial disclosure by Popular North America is contained in the footnotes to the financial statements of Popular which are filed with the SEC.

You should rely only on the information incorporated by reference or presented in this prospectus. Neither Popular, Popular North America, or the trust, nor any underwriters, have authorized anyone else to provide you with different or additional information. Popular, Popular North America and the trust are only offering these securities for sale in jurisdictions where the offer and sale is permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of this prospectus.

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	$	31,675
Fees and Expenses of Accountants	$	18,000
Fees and Expenses of Counsel	$	240,000
Blue Sky Fees and Expenses	$	10,000
Printing and Engraving Expenses	$	23,000
Rating Agency Fees	$	185,000
Trustee’s Fees	$	12,000
Miscellaneous	$	10,325

Total	$	530,000


Item 15.	Indemnification of Directors and Officers.

(a) Popular, Inc. is a Puerto Rico corporation.

(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

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adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

      (3) To the extent that a director, officer, employee or agent of Popular has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraph 1 or 2 of this Article ELEVENTH, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

      (4) Any indemnification under paragraph 1 or 2 of this Article ELEVENTH (unless ordered by a court) shall be made by Popular only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth therein. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders.

      (5) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by Popular in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by Popular as authorized in this Article ELEVENTH.

      (6) The indemnification provided by this Article ELEVENTH shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any statute, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

      (7) By action of its Board of Directors, notwithstanding any interest of the directors in the action, Popular may purchase and maintain insurance, in such amounts as the Board of Directors deems appropriate, on behalf of any person who is or was a director, officer, employee or agent of Popular, or is or was serving at the written request of Popular, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not Popular would have the power or would be required to indemnify him against such liability under the provisions of this Article ELEVENTH or of the General Corporation Law of the Commonwealth of Puerto Rico or of any other state of the United States or foreign country as may be applicable.

(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, 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

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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.

(d) Reference is made to the indemnity provisions in the underwriting agreements, which are attached as Exhibit 1(a) and Exhibit 1(b) to this Registration Statement.


Item 16.	Exhibits.


(1)(a)	—	Form of Underwriting Agreement.
(4)(a)	—	Form of Junior Subordinated Indenture between Popular North America, Inc., Popular, Inc. and J.P. Morgan Trust Company, National Association.
(4)(b)	—	Certificate of Trust of Popular North America Capital Trust I.
(4)(c)	—	Trust Agreement of Popular North America Capital Trust I.
(4)(d)	—	Form of Amended and Restated Trust Agreement of Popular North America Capital Trust I.
(4)(e)	—	Form of Capital Security Certificate for Popular North America Capital Trust I (included as Exhibit E of Exhibit (4)(d)).
(4)(f)	—	Form of Guarantee Agreement for Popular North America Capital Trust I.
(5)(a)	—	Opinion of Brunilda Santos de Alvarez, Esq.
(5)(b)	—	Opinion of Sullivan & Cromwell LLP.
(5)(c)	—	Opinion of Richards, Layton & Finger as to the legality of the capital securities to be issued by Popular North America Capital Trust I.
(8)	—	Opinion of Sullivan & Cromwell LLP, United States tax counsel to Popular, Inc. and Popular North America, Inc., re: tax matters.

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(12)	—	Computation of Consolidated Ratios of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred Stock Dividends. (Incorporated by reference from Exhibit 12.1 of Form 10-Q filed on May 10, 2004).
(23)(a)	—	Consent of Independent Registered Public Accounting Firm.
(23)(b)	—	Consent of Brunilda Santos de Alvarez, Esq. (included in Exhibit (5)(a)).
(23)(c)	—	Consents of Sullivan & Cromwell LLP (included in Exhibits (5)(b) and (8)).
(23)(d)	—	Consent of Richards, Layton & Finger (included in Exhibit (5)(c)).
(24)	—	Powers of attorney (included in pages II-6 through II-9).*
(25)(a)	—	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of J.P. Morgan Trust Company, National Association, as Trustee under the Junior Subordinated Indenture.*
(25)(b)	—	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of J.P. Morgan Trust Company, National Association, as Trustee under the Amended and Restated Trust Agreement of Popular North America Capital Trust I.*
(25)(c)	—	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of J.P. Morgan Trust Company, National Association under the Guarantee Agreement for Popular North America Capital Trust I.*


*	Previously filed


Item 17.	Undertakings.

(a) The undersigned registrants hereby undertake 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.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the provisions referred to in Item 15 of this Registration Statement, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification by the Registrants against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

II-4

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities as that time shall be deemed to be the initial bona fide offering thereof.

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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 ninth day of September, 2004.

POPULAR, INC.

(Co-registrant)

By: /s/ Jorge A. Junquera

Jorge A. Junquera

Senior Executive Vice President

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.

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Signature	Title	Date


/s/ Richard L. Carrión* Richard L. Carrión	Chairman, President and Chief Executive Officer (Principal Executive Officer)	September 9, 2004

/s/ José B. Carrión, Jr.* José B. Carrión, Jr.	Director	September 9, 2004

/s/ Juan J. Bermudez* Juan J. Bermudez	Director	September 9, 2004

Frederic V. Salerno	Director

/s/ José R. Vizcarrondo* José R. Vizcarrondo	Director	September 9, 2004

/s/ María Luisa Ferré* María Luisa Ferré	Director	September 9, 2004

/s/ Manuel Morales, Jr.* Manuel Morales, Jr.	Director	September 9, 2004

/s/ Francisco M. Rexach, Jr.* Francisco M. Rexach, Jr.	Director	September 9, 2004

/s/ Félix J. Serallés Nevares* Félix J. Serallés Nevares	Director	September 9, 2004

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Signature		Title	Date


/s/ Ileana González Ileana González		Senior Vice President (Principal Accounting Officer)	September 9, 2004

/s/ Jorge A. Junquera Jorge A. Junquera		Senior Executive Vice President (Principal Financial Officer)	September 9, 2004

*By:	/s/ JORGE A. JUNQUERA Jorge A. Junquera Attorney-in-Fact

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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 ninth day of September, 2004.

POPULAR NORTH AMERICA, INC.

(Co-registrant)

By: /s/ Jorge A. Junquera

Jorge A. Junquera

President

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.

II-9



Signature	Title	Date


/s/ Richard L. Carrión* Richard L. Carrión	Chairman (Principal Executive Officer)	September 9, 2004

/s/ Jorge A. Junquera* Jorge A. Junquera	President and Director (Principal Financial Officer)	September 9, 2004

/s/ Alfonso F. Ballester* Alfonso F. Ballester	Director	September 9, 2004

/s/ Roberto R. Herencia* Roberto R. Herencia	Executive Vice President and Director	September 9, 2004

/s/ Francisco M. Rexach, Jr.* Francisco M. Rexach, Jr.	Director	September 9, 2004

/s/ Félix J. Serallés Nevares* Félix J. Serallés Nevares	Director	September 9, 2004

/s/ Richard N. Speer, Jr.* Richard N. Speer, Jr.	Director	September 9, 2004

/s/ Julio E. Vizcarrondo, Jr.* Julio E. Vizcarrondo, Jr.	Director	September 9, 2004

Frederic V. Salerno	Director

/s/ Héctor R. González* Héctor R. González	Director	September 9, 2004

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II-11

SIGNATURE

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 ninth day of September, 2004.

POPULAR NORTH AMERICA CAPITAL TRUST I

(Co-registrant)

By: POPULAR NORTH AMERICA, INC. AS DEPOSITOR

By: /s/ JORGE A. JUNQUERA

Jorge A. Junquera

President

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EXHIBIT INDEX


(1)(a)	—	Form of Underwriting Agreement.
(4)(a)	—	Form of Junior Subordinated Indenture between Popular North America, Inc., Popular, Inc. and J.P. Morgan Trust Company, National Association.
(4)(b)	—	Certificate of Trust of Popular North America Capital Trust I.
(4)(c)	—	Trust Agreement of Popular North America Capital Trust I.
(4)(d)	—	Form of Amended and Restated Trust Agreement of Popular North America Capital Trust I.
(4)(e)	—	Form of Capital Security Certificate for Popular North America Capital Trust I (included as Exhibit E of Exhibit (4)(d)).
(4)(f)	—	Form of Guarantee Agreement for Popular North America Capital Trust I.
(5)(a)	—	Opinion of Brunilda Santos de Alvarez, Esq.
(5)(b)	—	Opinion of Sullivan & Cromwell LLP.
(5)(c)	—	Opinion of Richards, Layton & Finger as to the legality of the capital securities to be issued by Popular North America Capital Trust I.
(8)	—	Opinion of Sullivan & Cromwell LLP, 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. (Incorporated by reference from Exhibit 12.1 of Form 10-Q filed on May 10, 2004).
(23)(a)	—	Consent of Independent Registered Public Accounting Firm.
(23)(b)	—	Consent of Brunilda Santos de Alvarez, Esq. (included in Exhibit (5)(a)).
(23)(c)	—	Consents of Sullivan & Cromwell LLP (included in Exhibits (5)(b) and (8)).
(23)(d)	—	Consent of Richards, Layton & Finger (included in Exhibit (5)(c)).
(24)	—	Powers of attorney.*
(25)(a)	—	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of J.P. Morgan Trust Company, National Association, as Trustee under the Junior Subordinated Indenture.*
(25)(b)	—	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of J.P. Morgan Trust Company, National Association, as Trustee under the Amended and Restated Trust Agreement of Popular North America Capital Trust I.*
(25)(c)	—	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of J.P. Morgan Trust Company, National Association under the Guarantee Agreement for Popular North America Capital Trust I.*


*	Previously filed.

EX-1.(A) 2 g90482a2exv1wxay.txt EX-1(A) FORM OF UNDERWRITING AGREEMENT Exhibit 1(a) PURCHASE AGREEMENT POPULAR, INC. (a Puerto Rico corporation); POPULAR NORTH AMERICA, INC. (a Delaware corporation); and POPULAR NORTH AMERICA CAPITAL TRUST I (a Delaware statutory trust) 250,000 [-]% Capital Securities (Liquidation Amount $1,000 Per Capital Security) Dated: September [-], 2004 Table of Contents

i (a) Effectiveness of Registration Statement........................................................................ 15 (b) Opinion of Counsel for Popular and PNA......................................................................... 15 (c) Opinion of Puerto Rico Counsel for Popular and PNA............................................................. 16 (d) Opinion of United States Tax Counsel for the Trust, PNA and Popular............................................ 16 (e) Opinion of Special Delaware Counsel for PNA and the Trust...................................................... 16 (f) Opinion of Counsel for J.P. Morgan Trust Company, National Association......................................... 16 (g) Opinion of Counsel for Underwriters............................................................................ 16 (h) Officers' Certificates......................................................................................... 17 (i) Accountant's Comfort Letter.................................................................................... 17 (j) Bring-down Comfort Letter...................................................................................... 17 (k) Maintenance of Rating.......................................................................................... 17 (l) Additional Documents........................................................................................... 17 (m) Termination of Agreement....................................................................................... 18 SECTION 6. Indemnification................................................................................................ 18 (a) Indemnification of Underwriters................................................................................ 18 (b) Indemnification of the Trust, Popular, PNA, Directors and Officers............................................. 19 (c) Actions against Parties; Notification.......................................................................... 19 SECTION 7. Contribution................................................................................................... 20 SECTION 8. Representations, Warranties and Agreements to Survive Delivery................................................. 21 SECTION 9. Termination of Agreement....................................................................................... 21 (a) Termination; General........................................................................................... 21 (b) Liabilities.................................................................................................... 22 SECTION 10. Default by One or More of the Underwriters................................................................... 22 SECTION 11. Notices...................................................................................................... 23 SECTION 12. Parties...................................................................................................... 23 SECTION 13. Governing Law and Time....................................................................................... 23 SECTION 14. Effect of Headings........................................................................................... 23 SECTION 15. Severability................................................................................................. 23

ii SCHEDULES Schedule A -- List of Underwriters............................................................................ Sch. A-1 EXHIBITS Exhibit A -- Form of Opinion of Counsel to Popular and PNA....................................................... A-1 Exhibit B -- Form of Opinion of Puerto Rico Counsel for Popular and PNA.......................................... B-1 Exhibit C -- Form of Opinion of Special Delaware Counsel for PNA and the Trust....................................................................................... C-1

iii POPULAR, INC. (a Puerto Rico corporation) POPULAR NORTH AMERICA, INC. (a Delaware Corporation) POPULAR NORTH AMERICA CAPITAL TRUST I (a Delaware statutory trust) 250,000 [-]% Capital Securities (Liquidation Amount $1,000 Per Capital Security) PURCHASE AGREEMENT September [-], 2004 Credit Suisse First Boston LLC J.P. Morgan Securities Inc. as Representatives of the several Underwriters c/o Credit Suisse First Boston LLC Eleven Madison Avenue New York, NY 10010-3629 Ladies and Gentlemen: Popular North America Capital Trust I (the "Trust"), a statutory trust created under the Statutory Trust Act (the "Delaware Act") of the State of Delaware (Chapter 38, Title 12 of the Delaware Code, 12 Del. Sections 3801 et seq.), Popular North America, Inc., a Delaware corporation ("PNA"), and Popular, Inc., a Puerto Rico corporation ("Popular"), each confirms its agreement with Credit Suisse First Boston LLC ("CSFB"), J.P. Morgan Securities Inc. ("JPMorgan") and, the other Underwriters listed in Schedule A hereto (collectively, the "Underwriters," which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom CSFB and JPMorgan are acting as Representatives (in such capacity, the "Representatives"), with respect to the issue and sale by the Trust and the purchase by the Underwriters, acting severally and not jointly, of 250,000 [-]% Capital Securities (liquidation amount $1,000 per security) in the respective numbers set forth in said Schedule A hereto (the "Capital Securities"). The Capital Securities will be guaranteed by Popular and PNA, to the extent set forth in the Prospectus (as defined below), with respect to distributions and amounts payable upon liquidation of the Trust or redemption of the Capital Securities (collectively, the "Capital Securities Guarantees") pursuant to the Capital Securities Guarantee Agreement (the "Guarantee Agreement"), to be dated as of Closing Time (as defined below), executed and delivered by Popular, PNA and J.P. Morgan Trust Company, National Association (the "Guarantee Trustee"), a national banking association, not in its individual capacity but solely as trustee, for the benefit of the holders from time to time of the Capital Securities. The entire proceeds from the sale of the Capital Securities will be combined with the entire proceeds from the sale by the Trust to PNA of its common securities (the "Common Securities") and will be used by the Trust to purchase $257,732,000 aggregate principal amount of [-]% Junior Subordinated Debentures due 2034 (the "Debentures") issued by PNA and guaranteed (the "Debenture Guarantees") by Popular. The Capital Securities and the Common Securities will be issued pursuant to the Amended and Restated Trust Agreement, to be dated as of Closing Time (the "Trust Agreement"), among Popular, PNA, as Depositor, J.P. Morgan Trust Company, National Association, as property trustee (the "Property Trustee"), Chase Manhattan Bank USA, National Association, as Delaware trustee (the "Delaware Trustee"), and Jorge A. Junquera, an individual, and Richard Barrios, an individual, as administrative trustees (the "Administrative Trustees," and together with the Property Trustee and the Delaware Trustee, the "Trustees"), and the holders from time to time of undivided beneficial interests in the assets of the Trust. The Debentures and the Debenture Guarantees will be issued pursuant to a Junior Subordinated Indenture (the "Indenture"), to be dated as of the Closing Time, between PNA, as issuer, Popular, as guarantor, and J.P. Morgan Trust Company, National Association, as indenture trustee (the "Indenture Trustee"). The Capital Securities, the Capital Securities Guarantees, the Debentures and the Debenture Guarantees are collectively referred to herein as the "Securities." This Agreement, the Trust Agreement, the Guarantee Agreement, the Indenture and the Expense Agreement (as defined herein) are collectively referred to as the "Operative Documents"). Capitalized terms used herein without definition have the respective meanings specified in the Prospectus. Popular, PNA and the Trust each understands that the Underwriters propose to make a public offering of the Capital Securities as soon as the Representatives deem advisable after this Agreement has been executed and delivered. Popular, PNA and the Trust have filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 333-118197, 333-118197-01 and 333-118197 02), including the relevant forms of prospectus and preliminary prospectus, covering the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), and regulations of the Commission under the 1933 Act (the "1933 Act Regulations"). Promptly after execution and delivery of this Agreement, Popular, PNA and the Trust will either (i) prepare and file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the 1933 Act Regulations, if applicable, and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations. The information included in such prospectus that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A Information." Any prospectus used before such registration statement became effective, and any prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a "preliminary prospectus." Such registration statement, including the exhibits thereto, schedules thereto, if any, the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act and the Rule 430A Information, if any, at the time it became effective, is herein called the "Registration Statement." Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the Rule 462(b) Registration Statement. The final prospectus, including the documents incorporated by reference 2 therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the form first furnished to the Underwriters for use in connection with the offering of the Capital Securities, is herein called the "Prospectus." For purposes of this Agreement, all references to the Registration Statement, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated," or words of similar import, in the Registration Statement, any preliminary prospectus or the Prospectus shall include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, any preliminary prospectus or the Prospectus, as the case may be, prior to the execution and delivery of this Agreement; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectus shall include the filing of any document under the Securities Exchange Act of 1934, as amended (the "1934 Act"), which is incorporated by reference in the Registration Statement, any preliminary prospectus or the Prospectus, as the case may be, at or after the execution and delivery of this Agreement. SECTION 1. Representations and Warranties. (a) Representations and Warranties by Popular, PNA and the Trust. Popular, PNA and the Trust, jointly and severally, represent and warrant to each Underwriter as of the date hereof and as of the Closing Time (each, a "Representation Date"), and agree with each Underwriter, as follows: (i) Due Incorporation and Qualification of Popular and PNA. Each of Popular and PNA has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation with corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus. Each of Popular and PNA is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify and be in good standing would not result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Trust, PNA or Popular and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"). Each of Popular and PNA is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "Bank Holding Company Act"). (ii) Subsidiaries. Each subsidiary of Popular or PNA which is a significant subsidiary (each, a "Significant Subsidiary"), as defined in Rule 1-02 of Regulation S-X promulgated under the 1933 Act, has been duly incorporated and is validly existing as a corporation or a bank in good standing under the laws of the jurisdiction of its organization, has corporate or other organizational power and authority to own, lease and operate its properties and conduct its business as described in the Prospectus and is duly 3 qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify and be in good standing would not have a Material Adverse Effect. All of the issued and outstanding shares of capital stock of each such Significant Subsidiary have been duly authorized and validly issued, are fully paid and non-assessable (subject to the provisions of Section 55 of Title 12 of the United States Code in the case of Significant Subsidiaries which are national banking associations) and, except as otherwise disclosed in the Prospectus and, except for directors' qualifying shares, are owned by Popular or PNA, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity or, if such is not the case, that any such security interest, mortgage, pledge, lien, encumbrance, claim or equity, when exercised, enforced or otherwise asserted, will not have a Material Adverse Effect. (iii) Existence of Trust. The Trust has been duly created and is validly existing in good standing as a statutory trust under the Delaware Act, is and will be treated as a "grantor trust" for federal income tax purposes under existing law, has the statutory trust power and authority to conduct its business as presently conducted and as described in the Prospectus and is not required to be authorized to do business in any other jurisdiction. (iv) Compliance with Registration Requirements. Popular, PNA and the Trust meet the requirements for use of Form S-3 under the 1933 Act. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of Popular, PNA and the Trust, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. At the respective times the Registration Statement and any post-effective amendment thereto became effective and at each Representation Date, the Registration Statement and each such amendment complied, complies and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and the Trust Indenture Act of 1939, as amended (the "1939 Act"), and the rules and regulations of the Commission under the 1939 Act (the "1939 Act Regulations") and did not, does not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither the Prospectus nor any amendment or supplement thereto, at the time the Prospectus or any such amendment or supplement was issued or at the Closing Time, included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The representations and warranties in this subsection shall not apply to (A) statements in or omissions from the Registration Statement or Prospectus made in reliance upon and in conformity with information furnished to the Trust, PNA and Popular in writing by any Underwriter through the Representatives expressly for use in the Registration Statement or the 4 Prospectus or (B) that part of the Registration Statement that constitutes the Statements of Eligibility on Form T-1 (the "Forms T-1") under the Trust Indenture Act of the Indenture Trustee, the Property Trustee and the Guarantee Trustee. The relevant forms of prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and any preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with the offering of Capital Securities was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (v) Incorporated Documents. The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations") and, when read together with the other information in the Prospectus, did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (vi) Independent Accountants. The independent registered public accounting firm or firms who certified the financial statements and supporting schedules included in the Registration Statement and the Prospectus is or are, as the case may be, independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (vii) Financial Statements. The consolidated financial statements and any supporting schedules included in the Registration Statement and the Prospectus present fairly the consolidated financial position of Popular and its consolidated subsidiaries as of the dates indicated and the consolidated results of their operations for the periods specified. Except as stated therein, said financial statements have been prepared in conformity with generally accepted accounting principles in the United States ("GAAP") applied on a consistent basis during the periods involved. The supporting schedules, if any, included in the Registration Statement and the Prospectus present fairly the information required to be stated therein. Neither pro-forma financial statements of Popular and its subsidiaries nor audited financial statements of any entity other than the consolidated financial statements of Popular and its consolidated subsidiaries are required to be included in the Registration Statement or the Prospectus in accordance with the 1933 Act, the 1933 Act Regulations, the 1934 Act or the 1934 Act Regulations. (viii) Authorization of Trust Agreement. The Trust Agreement has been duly authorized by each of Popular and PNA, is duly qualified under the 1939 Act and, at the Closing Time, will be duly executed and delivered by Popular, PNA and the Administrative Trustees and, assuming the due authorization, execution and delivery of the Trust Agreement by the Delaware Trustee and the Property Trustee, will constitute a valid and legally binding instrument of each of Popular, PNA and the Administrative 5 Trustees, enforceable against each of Popular, PNA and the Administrative Trustees in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfers, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (ix) Common Securities. The Common Securities have been duly authorized by the Trust Agreement and, when issued and delivered by the Trust to PNA in accordance with the terms of the Trust Agreement and against payment therefor as described in the Prospectus, will be validly issued and fully paid, will represent nonassessable undivided beneficial interests in the assets of the Trust and will be entitled to the benefits of the Trust Agreement. The issuance of the Common Securities is not subject to preemptive or other similar rights. No holder of Common Securities will be subject to personal liability by reason of being such a holder. At the Closing Time, all of the issued and outstanding Common Securities of the Trust will be directly owned by PNA free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (x) Capital Securities. The Capital Securities have been duly authorized by the Trust Agreement and, when authenticated in the manner provided for in the Trust Agreement and issued and delivered pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and fully paid, will represent nonassessable undivided beneficial interests in the assets of the Trust and will be entitled to the benefits of the Trust Agreement and the Guarantee Agreement. The issuance of the Capital Securities is not subject to preemptive or other similar rights. Holders of Capital Securities will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. (xi) Guarantee Agreement. The Guarantee Agreement has been duly authorized by each of Popular and PNA, and at the Closing Time, will be duly executed and delivered by Popular and PNA and, assuming due authorization, execution and delivery of the Guarantee Agreement by the Guarantee Trustee, will constitute a valid and legally binding instrument of Popular and PNA, enforceable against Popular and PNA in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfers, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The Guarantee Agreement is duly qualified under the 1939 Act. (xii) Authorization of Indenture. The Indenture has been duly authorized by each of Popular and PNA, is duly qualified under the 1939 Act and, at the Closing Time, will be duly executed and delivered by each of Popular and PNA and, assuming the due authorization, execution and delivery of the Indenture by the Indenture Trustee, will constitute a valid and legally binding instrument of each of Popular and PNA, enforceable against each of Popular and PNA in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfers, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. 6 (xiii) Authorization of Debentures. The Debentures have been duly authorized by PNA and, when executed, authenticated, issued and delivered in the manner provided for in the Indenture against payment of the consideration contemplated in this Agreement, will constitute valid and legally binding obligations of PNA entitled to the benefits of the Indenture and the Debenture Guarantees and enforceable against PNA in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfers, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (xiv) Authorization of Debenture Guarantees. The Debenture Guarantees have been duly authorized by Popular and, when the Debentures have been executed, authenticated, issued and delivered by PNA, and the Debenture Guarantees are endorsed on the Debentures, in the manner provided for in the Indenture against payment of the consideration contemplated in this Agreement, will constitute valid and legally binding obligations of Popular entitled to the benefits of the Indenture and enforceable against Popular in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfers, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (xv) Authorization of Expense Agreement. The Agreement as to Expenses and Liabilities to be entered into between Popular, PNA and the Property Trustee at the Closing Time (the "Expense Agreement") has been duly authorized by each of Popular and PNA and, at the Closing Time, will be duly executed and delivered by each of Popular and PNA and will constitute a valid and legally binding instrument of each of Popular and PNA, enforceable against each of Popular and PNA in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfers, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (xvi) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by each of Popular, PNA and the Trust. (xvii) Accuracy of Descriptions. The Securities and the Operative Documents conform to the descriptions thereof contained in the Registration Statement and the Prospectus. (xviii) No Material Changes. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated therein or contemplated thereby, there has been no Material Adverse Effect. (xix) No Defaults; Regulatory Approvals. None of Popular, PNA, any of the Significant Subsidiaries or the Trust is in violation of its charter or by-laws or other organizational documents, or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which it is a party or by which it or any of them or their properties may be bound. The execution, delivery and performance of the Operative Documents by 7 Popular, PNA and the Trust, the issuance and delivery by Popular, PNA and the Trust of their respective Securities and the consummation of the transactions contemplated herein and therein do not and will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of Popular, PNA, any of the Significant Subsidiaries or the Trust pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which it is a party or by which it or any of them is bound or to which any of their properties is subject, nor will such action result in any violation of the provisions of the charter, by-laws or other organizational documents of Popular, PNA or any of the Significant Subsidiaries or the Trust Agreement or any law, administrative regulation or administrative or court order or decree which breach, default, creation, imposition or violation would, in each case, have a Material Adverse Effect. No consent, approval, authorization or order of, or qualification with, any court or governmental body or agency is required for the consummation of the transactions contemplated under this Agreement, except such as have been already obtained and as may be required by the securities or Blue Sky laws of the various states or the securities laws of non-U.S. jurisdictions in connection with the sale of the Capital Securities. (xx) Legal Proceedings; Contracts. Except as may be set forth in the Registration Statement and the Prospectus, there is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of Popular, PNA or the Trust, threatened, against or affecting Popular, PNA, any subsidiary of Popular or PNA or the Trust, which might result in a Material Adverse Effect or which might materially and adversely affect the consummation of the transactions contemplated in this Agreement. There are no contracts or documents of Popular, PNA, any subsidiary of Popular or PNA or the Trust that are required to be filed or incorporated by reference as exhibits to the Registration Statement by the 1933 Act or by the 1933 Act Regulations which have not been so filed or incorporated by reference. (xxi) Regulatory Certificates, Authorities and Permits. Popular, PNA and the Significant Subsidiaries possess adequate certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the business now operated by them except for such certificates, authorities or permits as are not material to the business, operations, financial condition or income of Popular, PNA or the Significant Subsidiaries. None of Popular, PNA or any of the Significant Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xxii) Investment Company Act. None of Popular, PNA or the Trust is, or upon the issuance and sale of their respective Securities as herein contemplated and the application of the net proceeds therefrom as described in the Prospectus will be, an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"). 8 (b) Officers' Certificates. Any certificate signed by any officer of Popular, PNA or the Trust delivered to Underwriters or to counsel for the Underwriters shall be deemed a representation and warranty by Popular, PNA or the Trust, respectively, to each Underwriter as to the matters covered thereby on the date of such certificate and, unless subsequently amended or supplemented, at each Representation Date subsequent thereto. SECTION 2. Sale and Delivery to Underwriters; Closing. (a) Capital Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Trust agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Trust, at the purchase price of $1,000 per Capital Security, the number of Capital Securities set forth in Schedule A opposite the name of such Underwriter, plus any additional number of Capital Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof, subject, in each case, to such adjustments among the Underwriters as they in their sole discretion shall make to eliminate any sales or purchases of fractional securities. (b) Payment. As compensation to the Underwriters for their commitments hereunder and in view of the fact that the proceeds of the sale of the Capital Securities will be used to purchase the Debentures, PNA hereby agrees to pay at the Closing Time to the Underwriters a commission of $10 per Capital Security purchased by the Underwriters. Payment of the purchase price for, and delivery of certificates for, the Capital Securities shall be made at the offices of Sidley Austin Brown & Wood llp, 787 Seventh Avenue, New York, New York 10019, or at such other place as shall be agreed upon by the Underwriters, Popular, PNA and the Trust, at 9:00 A.M. (Eastern time) on the [-] ([-], if the pricing occurs after 4:30 p.m. (Eastern time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Underwriters, Popular, PNA and the Trust (such time and date of payment and delivery being herein called the "Closing Time"). Payment shall be made to the Trust by wire transfer of immediately available funds to the order of the Trust, against delivery to the Underwriters of certificates for the Capital Securities to be purchased by them. It is understood that each Underwriter has authorized the Representatives for its account, to accept delivery of, receipt for, and make payment of the purchase price for the Capital Securities which it has agreed to purchase. CSFB and JPMorgan, individually and not as Representatives of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Capital Securities to be purchased by any Underwriter whose funds have not been received by the Closing Time, but such payment shall not relieve such Underwriter from its obligations hereunder. At the Closing Time, PNA will pay, or cause to be paid, the commission payable to the Underwriters at such time under this Section 2 to CSFB on behalf of the Underwriters by wire transfer of immediately available funds. (c) Denominations; Registration. Certificates for the Capital Securities shall be in such denominations and registered in such names as the Representatives may request in writing 9 at least two full business days before the Closing Time. The certificates for the Capital Securities will be made available for examination and packaging by the Representatives in The City of New York not later than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time. SECTION 3. Covenants. (a) Popular, PNA and the Trust, jointly and severally, covenant with each Underwriter as follows: (i) Compliance with Securities Regulations and Commission Requests. Popular, PNA and the Trust, subject to Section 3(b), will comply with the requirements of Rule 424 or Rule 430A as applicable, and will notify the Underwriters immediately (w) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectus or any amended Prospectus shall have been filed, (x) of the receipt of any comments from the Commission, (y) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information and (z) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, any prospectus, or of the suspension of the qualification of the Capital Securities for offering or sale in any jurisdiction or of the initiation or threatening of any proceedings for any of such purposes. Popular, PNA and the Trust will promptly effect the filings necessary pursuant to Rule 424(b) and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. Popular, PNA and the Trust will use their reasonable efforts to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof. (ii) Filing of Amendments. Popular, PNA and the Trust will give the Representatives notice of their intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)), any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the Representatives with copies of any such documents within a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Representatives shall reasonably object. (iii) Delivery of Registration Statements. Popular has furnished or will deliver to the Representatives and counsel for the Representatives, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith and, upon request, documents incorporated or deemed to be incorporated by reference therein), and will also deliver to the Representatives, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters 10 will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (iv) Delivery of Prospectus. Popular has delivered to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter reasonably requested, and Popular, PNA and the Trust each hereby consents to the use of such copies for purposes permitted by the 1933 Act. Popular will deliver to each Underwriter, without charge, as many copies of the Prospectus and any amendment or supplement thereto as such Underwriter reasonably requests, and Popular, PNA and the Trust each hereby consents to the use of such copies for purposes permitted by the 1933 Act. Popular will furnish to each Underwriter, without charge, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (v) Continued Compliance with Securities Laws. Popular, PNA and the Trust will comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Prospectus. If, at any time when a prospectus is required by law to be delivered in connection with sales of the Capital Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the reasonable opinion of counsel for the Underwriters, to amend the Registration Statement or amend or supplement the Prospectus in order that the Prospectus will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the reasonable opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, Popular, PNA and the Trust will promptly prepare and file with the Commission, subject to Section 3(b), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and Popular will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. (vi) Blue Sky Qualifications. Popular, PNA and the Trust will endeavor, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representatives may reasonably designate and to maintain such qualifications in effect for as long as may be required for the distribution of the Capital Securities; provided, however, that none of Popular, PNA or the Trust shall be obligated to file any general consent to service of process in any jurisdiction. Popular will promptly advise the Representatives of its receipt of any notification with respect to the suspension of qualification of the Securities for sale in any applicable jurisdiction or the initiating or 11 threatening of any proceeding for such purpose. Popular, PNA and the Trust will also supply the Underwriters with such information as is necessary for the determination of the legality of the Capital Securities for investment under the laws of such jurisdictions as the Underwriters may reasonably request. (vii) Reporting Requirements. Popular, PNA and the Trust, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time period required by the 1934 Act and the 1934 Act Regulations. (viii) Rule 158. Popular will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to the security holders of Popular as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (ix) DTC. The Trust, PNA and Popular will cooperate with the Underwriters and use their best efforts to permit the Capital Securities and, if applicable, the Debentures, to be eligible for clearance, settlement and trading through the facilities of The Depository Trust Company. (x) Use of Proceeds. The Trust and PNA will use the proceeds referred to in the Prospectus under "Use of Proceeds" in the manner described therein. (xi) Restriction on Sale of Securities. From the date hereof until the Closing Time, none of Popular, PNA or the Trust will, without the prior written consent of the Representatives, directly or indirectly, sell, offer to sell, announce the offering of, grant any option for sale of, or otherwise dispose of, any Capital Securities, any security convertible into or exchangeable into or exercisable for Capital Securities, or equity securities substantially similar to the Capital Securities, in each case issued in a transaction registered with the Commission under the 1933 Act. The foregoing sentence shall not apply to the Capital Securities contemplated to be issued hereunder and under the Prospectus. (b) Each Underwriter, jointly and severally, covenants with Popular, PNA and the Trust as follows: (i) It has not offered, sold or delivered and will not offer, sell or deliver any of the Capital Securities directly or indirectly, or distribute the Prospectus or any other offering material relating to the Capital Securities, in or from any jurisdiction except under circumstances that will result in compliance in all material respects with the applicable laws and regulations thereof and that will not impose any obligations on Popular, PNA or the Trust except as set forth in this Agreement. (ii) (A) It has not offered or sold, and, prior to the expiration of the period of six months from the Closing Time, will not offer or sell any Capital Securities to persons in the United Kingdom, except to those persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their 12 businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, as amended; (B) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 ("FSMA") received by it in connection with the issue or sale of the Capital Securities in circumstances in which Section 21(1) of the FSMA does not apply to the Trust, Popular or PNA; and (C) it has complied and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the Capital Securities in, from or otherwise involving the United Kingdom. (iii) It will not offer or sell any Capital Securities directly or indirectly in Japan or to, or for the benefit of any Japanese person or to others, for re-offering or re-sale directly or indirectly in Japan or to any Japanese person, except in each case pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law of Japan and any other applicable laws and regulations of Japan. For purposes of this paragraph (b)(iii), "Japanese person" means any person resident in Japan, including any corporation or other entity organized under the laws of Japan. (iv) It and each of its affiliates have not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, any invitation, document or advertisement relating to Capital Securities in Hong Kong or elsewhere, which is directed at, or the contents are likely to be accessed or read by, the public in Hong Kong (unless permitted to do so under the securities laws of Hong Kong) other than with respect to Capital Securities intended to be disposed of outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made thereunder. (v) It understands and agrees that the Prospectus or any other offering material relating to the Capital Securities has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. It has agreed that it has not offered or sold any Capital Securities or made any Capital Securities the subject of an invitation for subscription or purchase, and it has not circulated or distributed and will not circulate or distribute the Prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Capital Securities, whether directly or indirectly, to the public or any member of the public in Singapore other than (a) to an institutional investor or other person falling within Section 274 of the Securities and Futures Act (Chapter 289) of Singapore (the "Singapore Securities and Futures Act"), (b) to a sophisticated investor, and in accordance with the conditions, specified in Section 275 of the Singapore Securities and Futures Act or (c) otherwise 13 pursuant to, and in accordance with the conditions of, any other applicable provision of the Singapore Securities and Futures Act. (vi) It understands and agrees that no German selling prospectus (Verkaufsprospekt) has been or will be published in respect of the sale of the Capital Securities and that it will comply with the Securities Sales Prospectus Act of the Federal Republic of Germany (Wertpapier-Verkaufsprospektgesetz). It will not engage in a public offering in the Federal Republic of Germany with respect to any Capital Securities otherwise than in accordance with the Securities Sales Prospectus Act and any other act replacing or supplementing the Securities Sales Prospectus Act and all other applicable laws and regulations. (vii) It understands and agrees that the Capital Securities are being issued and sold outside the Republic of France and that, in connection with their initial distribution, it has not offered or sold and will not offer or sell, directly or indirectly, any Capital Securities to the public in the Republic of France, and that it has not distributed and will not distribute or cause to be distributed to the public in the Republic of France the Prospectus or any other offering material relating to the Capital Securities, and that such offers, sales and distributions have been and will be made in the Republic of France only to (a) qualified investors (investisseurs qualifies) and/or (b) a restricted group of investors (cercle restreint d'investisseurs), all as defined in Article L.411-2 of the Monetary and Financial Code and decret no. 98-880 dated 1st October, 1998. (viii) It understands and agrees that the Capital Securities may not be offered, sold, transferred or delivered in or from the Netherlands as part of their initial distribution or at any time thereafter, directly or indirectly, other than to banks, pension funds, insurance companies, securities firms, investment institutions, central governments, large international and supranational institutions and other comparable entities, including, among others, treasuries and finance companies of large enterprises, which trade or invest in securities in the course of a profession or trade. It understands and agrees that individuals or legal entities who or which do not trade or invest in securities in the course of their profession or trade may not participate in the offering of the Capital Securities, and the Prospectus or any other offering material relating to the Capital Securities may not be considered an offer or the prospect of an offer to sell or exchange the Capital Securities. SECTION 4. Payment of Expenses. (a) Expenses. PNA will pay all expenses incident to the performance of the obligations of Popular, PNA and/or the Trust under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, any Agreement among Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Capital Securities, (iii) the preparation, issuance and delivery of the certificates for the Capital Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Capital Securities to the Underwriters, 14 (iv) the fees and disbursements of counsel to Popular, PNA and the Trust, as well as their accountants and other advisors, (v) the qualification of the Securities under state securities laws in accordance with the provisions of Section 3(a)(v) hereof, including filing fees and the fees and disbursements of Sullivan & Cromwell LLP in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, if any, (vi) the printing and delivery to the Underwriters of copies of any preliminary prospectus and the Prospectus and any amendments or supplements thereto, (vii) the fees and expenses of any transfer agent or registrar for the Capital Securities, (viii) the fees and expenses of the Indenture Trustee, the Property Trustee and the Guarantee Trustee, including the fees and disbursements of their counsel, (ix) any fees payable in connection with the rating of the Capital Securities and the Debentures, (x) the cost and charges associated with the approval of the Capital Securities by The Depository Trust Company for clearance, settlement and trading, and (xi) any filing fees required by, and the fees and disbursements of Sullivan & Cromwell LLP relating to any review by, the National Association of Securities Dealers, Inc. (b) Termination of Agreement. If this Agreement is terminated in accordance with the provisions of Section 5 or Section 9(a)(i) hereof, PNA shall reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters. SECTION 5. Conditions of Underwriters' Obligations. The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of Popular, PNA and the Trust contained herein or in certificates of any officer or representative of Popular, PNA, the Trust or any Trustee delivered pursuant to the provisions hereof, to the performance by Popular, PNA and the Trust of their respective covenants and other obligations hereunder, and to the following further conditions: (a) Effectiveness of Registration Statement. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the Underwriters. A prospectus shall have been filed with the Commission in accordance with Rule 424(b) (or a post-effective amendment providing such information shall have been filed and declared effective). (b) Opinion of Counsel for Popular and PNA. At the Closing Time, the Representatives shall have received the favorable opinion, dated the Closing Time, of Sullivan & Cromwell LLP, counsel for Popular and PNA, together with signed or reproduced copies of such letter for each of the other Underwriters, to the effect set forth in Exhibit A hereto. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of Popular and PNA and their respective subsidiaries and certificates of public officials and as to all matters relating to the laws of the Commonwealth of Puerto Rico upon the opinion of Brunilda Santos de Alvarez, Esq., delivered pursuant to Section 5(c) hereof. 15 (c) Opinion of Puerto Rico Counsel for Popular and PNA. At the Closing Time, the Representatives shall have received the favorable opinion, dated the Closing Time, of Brunilda Santos de Alvarez, Executive Vice President and Chief Legal Officer for Popular, together with signed or reproduced copies of such letter for each of the other Underwriters, to the effect set forth in Exhibit B hereto. Such counsel may also state that, insofar as such opinion involves factual matters, she has relied, to the extent she deems proper, upon certificates of officers of Popular and PNA and their respective subsidiaries and certificates of public officials and as to all matters relating to the laws of the State of New York and the General Corporation Law of the State of Delaware upon the opinion of Sullivan & Cromwell LLP, delivered pursuant to Section 5(b) hereof. (d) Opinion of United States Tax Counsel for the Trust, PNA and Popular. At the Closing Time, the Representatives shall have received an opinion, dated the Closing Time, of Sullivan & Cromwell LLP, United States tax counsel to the Trust, PNA and Popular, that (i) the Debentures will be classified for United States federal income tax purposes as indebtedness of PNA, (ii) the Debenture Guarantees will be classified for U.S. federal income tax purposes as indebtedness of Popular, (iii) the Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation and (iv) although the discussion set forth in the Prospectus under the heading "Certain Federal Income Tax Considerations" does not purport to discuss all possible U.S. federal income tax consequences of the purchase, ownership and disposition of the Capital Securities and, assuming that all of the transaction documents, including the Indenture, the Trust Agreement and the Guarantee Agreement, will be complied with in all material respects, such discussion constitutes, in all material respects, a fair and accurate summary of the United States federal income tax consequences of the purchase, ownership and disposition of the Capital Securities under current law. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of Popular and PNA and their respective subsidiaries and certificates of public officials. (e) Opinion of Special Delaware Counsel for PNA and the Trust. At the Closing Time, the Representatives shall have received the favorable opinion, dated the Closing Time, of Richards, Layton & Finger, P.A., special Delaware counsel to PNA and the Trust, together with signed or reproduced copies of such letter for each of the Underwriters, to the effect set forth in Exhibit C hereto. (f) Opinion of Counsel for J.P. Morgan Trust Company, National Association. At the Closing Time, the Representatives shall have received an opinion, dated the Closing Time, of Richards, Layton & Finger, P.A., counsel to J.P. Morgan Trust Company, National Association, as Property Trustee, Indenture Trustee and Guarantee Trustee, in form and substance satisfactory to the Underwriters. (g) Opinion of Counsel for Underwriters. At the Closing Time, the Representatives shall have received the favorable opinion, dated the Closing Time, of Sidley Austin Brown & Wood LLP, counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters with respect to the validity of the Securities, the disclosure in the Registration Statement and the Prospectus and such other matters as the Underwriters may reasonably request. In giving such opinion such counsel may rely, as to all matters governed by 16 the laws of jurisdictions other than the law of the State of New York and the federal law of the United States, upon the opinions of counsel satisfactory to the Underwriters. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of Popular and their respective subsidiaries and certificates of public officials. (h) Officers' Certificates. At the Closing Time, since the date hereof or since the respective dates as of which information is given in the Prospectus, the Representatives shall have received a certificate of the President or any Vice President of each of Popular and PNA, dated the Closing Time, to the effect that (i) since the date of this Agreement or since the respective dates as of which information is given in the Prospectus, there has been no Material Adverse Effect, (ii) the representations and warranties contained herein are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (iii) each of Popular, PNA and the Trust has complied with all agreements and satisfied all conditions on their respective parts to be performed or satisfied at or prior to the Closing Time and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending threatened by the Commission. (i) Accountant's Comfort Letter. At the time of the execution of this Agreement, the Representatives shall have received from PricewaterhouseCoopers LLP a letter dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the Underwriters containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and financial information contained in the Registration Statement and the Prospectus. (j) Bring-down Comfort Letter. At the Closing Time, the Representatives shall have received from PricewaterhouseCoopers LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (i) of this Section 5, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time. (k) Maintenance of Rating. At the Closing Time, the Capital Securities shall be rated - by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., and - by Moody's Investors Service, Inc., and PNA shall have delivered to the Underwriters a letter, dated the Closing Time, from each such rating agency, or other evidence satisfactory to the Representatives, confirming that the Capital Securities have such rating; and since the execution of this Agreement, there shall not have occurred a downgrading in or withdrawal of the rating assigned to the Capital Securities or any preferred or debt securities of Popular or PNA by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and no such organization shall have publicly announced that it has under surveillance or review its rating of the Capital Securities or any preferred or debt securities or Popular or PNA. (l) Additional Documents. At the Closing Time, counsel for the Underwriters shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to render the opinion referred to in Section 5(g), or in order to evidence the 17 accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by Popular, PNA and the Trust in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Underwriters. (m) Termination of Agreement. If any condition specified in this Section 5 shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Underwriters by notice to Popular and PNA at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6 and 7 shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification. (a) Indemnification of Underwriters. Each of Popular, PNA and the Trust, jointly and severally, agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission if such settlement is effected with the written consent of Popular and PNA; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by the Representatives), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information 18 furnished to Popular and PNA by any Underwriter through the Representatives expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto). This indemnity is subject to the conditions that, insofar as it relates to any untrue statement or omission, or any alleged untrue statement or omission, made in a preliminary prospectus or the Prospectus but eliminated or remedied in the Prospectus or in an amended or supplemented Prospectus, as the case may be, it shall not inure to the benefit of any Underwriter (or to the benefit of any person who controls such Underwriter) if a copy of the Prospectus or the Prospectus as amended or supplemented at the time of the sale of the Capital Securities, as the case may be, excluding documents incorporated therein by reference, was delivered by the Trust, Popular or PNA to the Representatives a reasonable amount of time in advance of the delivery of written confirmations by such Underwriter to investors but such Underwriter failed to deliver such Prospectus or the Prospectus as amended or supplemented, as the case may be, to the person in question at or prior to the time required by the 1933 Act and the receipt of such Prospectus or the Prospectus as amended or supplemented, as the case may be, would have constituted a sufficient defense to the claim asserted by such person. (b) Indemnification of the Trust, Popular, PNA, Directors and Officers. Each Underwriter severally agrees to indemnify and hold harmless Popular, PNA and the Trust, their respective directors or trustees, each of their respective officers who signed the Registration Statement, and each person, if any, who controls Popular, PNA or the Trust within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to Popular and PNA by such Underwriter through the Representatives expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus, if any, or the Prospectus (or any amendment or supplement thereto). (c) Actions against Parties; Notification. Each indemnified party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by the Representatives, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by Popular. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with 19 any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by Popular, PNA and the Trust, on the one hand, and the Underwriters, on the other hand, from the offering of the Capital Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of Popular, PNA and the Trust, on the one hand, and the Underwriters, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by Popular, PNA and the Trust, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Capital Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Capital Securities pursuant to this Agreement (before deducting expenses) indirectly received by PNA and the total underwriting discount received by the Underwriters, in each case as set forth on the cover of the Prospectus. The relative fault of Popular, PNA and the Trust, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by Popular, PNA or the Trust or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Popular, PNA, the Trust and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal 20 or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. The Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Capital Securities set forth opposite their respective names in Schedule A hereto and not joint. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Capital Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Underwriter and the respective directors or trustees of Popular, PNA or the Trust, each officer of Popular or PNA who signed the Registration Statement, and each person, if any, who controls Popular, PNA or the Trust within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as Popular, PNA and the Trust. SECTION 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or in certificates of officers of Popular or PNA or the Trustees of the Trust or any of its other subsidiaries submitted pursuant hereto or thereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of Popular, PNA or the Trust, and shall survive delivery of and payment for the Capital Securities. SECTION 9. Termination of Agreement. (a) Termination; General. The Representatives may terminate this Agreement, by notice to Popular, PNA and the Trust, at any time at or prior to the Closing Time if (i) there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Prospectus, any Material Adverse Effect, (ii) there has occurred any material adverse change in the financial markets in the United States, or any outbreak or escalation of hostilities, or other national or international calamity or crisis, in each case the effect of which is such as to make it, in the judgment of the Representatives, impracticable to market the Capital Securities or to enforce contracts for the sale of the Capital Securities, (iii) trading in any securities of Popular or PNA has been suspended or materially limited by the Commission or a national securities exchange, or if trading generally on the New York Stock 21 Exchange or the American Stock Exchange or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by either of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or a material disruption has occurred in commercial general banking or securities settlement or clearance services in the United States, (iv) a general banking moratorium has been declared by U.S. federal, New York or Puerto Rico authorities or (v) the rating assigned by any nationally recognized statistical rating organization to the Capital Securities or any preferred or debt securities of Popular or PNA as of the date of this Agreement shall have been lowered or withdrawn since that date or if any such rating organization shall have publicly announced that it has under surveillance or review (other than with positive implications) its rating of the Capital Securities or any such preferred or debt securities. (b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6 and 7 shall survive such termination and remain in full force and effect. SECTION 10. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the Closing Time to purchase the Capital Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then: (a)if the number of Defaulted Securities does not exceed 10% of the number of Capital Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or (b)if the number of Defaulted Securities exceeds 10% of the number of Capital Securities to be purchased on such date, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter. No action taken pursuant to this Section 10 shall relieve any defaulting Underwriter from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement, either the Representatives or Popular and PNA shall have the right to postpone the Closing Time for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. As used herein, the term "Underwriter" includes any person substituted for an Underwriter under this Section 10. 22 SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Representatives shall be directed to CSFB at Credit Suisse First Boston LLC, Eleven Madison Avenue, New York, New York 10010-3629, attention of Transactions Advisory Group, and J.P. Morgan Securities Inc., 270 Park Avenue, New York, New York 10017, Attn: High Grade Syndicate Desk; notices to the Trust shall be directed to it at 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, attention of Richard Barrios, and notices to Popular or PNA shall be directed to Popular, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, attention of Richard Barrios. SECTION 12. Parties. This Agreement shall inure to the benefit of and be binding upon the Underwriters, Popular, PNA and the Trust and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the parties hereto and their respective successors and the controlling persons and officers, directors and trustees referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and their respective successors, and said controlling persons and officers, trustees and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Capital Securities shall be deemed to be a successor by reason merely of such purchase. SECTION 13. Governing Law and Time. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Specified times of day refer to New York City time. SECTION 14. Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 15. Severability. In case any provisions in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 23 If the foregoing is in accordance with your understanding of our agreement, please sign and return to Popular, PNA and the Trust a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Underwriters, Popular, PNA and the Trust in accordance with its terms. Very truly yours, POPULAR, INC. By: ------------------------------------- Name: Title: POPULAR NORTH AMERICA, INC. By: ------------------------------------- Name: Title: POPULAR NORTH AMERICA CAPITAL TRUST I By: ------------------------------------- Name: Title: 24 The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON LLC J.P. MORGAN SECURITIES INC. Acting on behalf of themselves and as the Representatives of the several Underwriters BY CREDIT SUISSE FIRST BOSTON LLC By: --------------------------------------- Name: Title: BY J.P. MORGAN SECURITIES INC. By: --------------------------------------- Name: Title: 25 SCHEDULE A
Number of Name of Underwriter Capital Securities - -------------------------------------------------------- ------------------ Credit Suisse First Boston LLC.......................... J.P. Morgan Securities Inc.............................. Popular Securities, Inc................................. ------------------ Total..........................................
SCH-A-1 EX-4.(A) 3 g90482a2exv4wxay.txt EX-4(A) FORM OF JUNIOR SUBORDINATED INDENTURE EXHIBIT 4(a) ================================================================================ POPULAR NORTH AMERICA, INC., as Issuer and POPULAR, INC., as Guarantor to J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION as Trustee ---------------------- JUNIOR SUBORDINATED INDENTURE Dated as of September ____, 2004 ---------------------- ================================================================================ POPULAR NORTH AMERICA, INC. Reconciliation and tie between the Trust Indenture Act of 1939 (including cross-references to provisions of Sections 310 to and including 318 which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the Trust Reform Act of 1990, are a part of and govern the Indenture whether or not physically contained therein) and the Junior Subordinated Indenture, dated as of - , 2004.
TRUST INDENTURE INDENTURE ACT SECTION SECTION - --------------- --------- Section 310 (a) (1), (2) and (5). ............................................................ 6.9 (a) (3). ......................................................................... Not Applicable (a) (4). ......................................................................... Not Applicable (b)............................................................................... 6.8 .................................................................................. 6.10 (c). ............................................................................. Not Applicable Section 311 (a). ............................................................................. 6.13 (b). ............................................................................. 6.13 Section 312 (a). ............................................................................. 7.1 .................................................................................. 7.2(a) (b). ............................................................................. 7.2(b) (c). ............................................................................. 7.2(c) Section 313 (a). ............................................................................. 7.3(a), 7.3(b) (b). ............................................................................. 7.3(a), 7.3(b) (c). ............................................................................. 7.3(a), 7.3(b) (d). ............................................................................. 7.3(c) Section 314 (a) (1), (2) and (3). ............................................................ 7.4 (a) (4). ......................................................................... 10.4 (b). ............................................................................. Not Applicable (c) (1). ......................................................................... 1.2 (c) (2). ......................................................................... 1.2 (c) (3). ......................................................................... Not Applicable (d). ............................................................................. Not Applicable (e). ............................................................................. 1.2 (f). ............................................................................. Not Applicable Section 315 (a). ............................................................................. 6.1(a) (b). ............................................................................. 6.2 .................................................................................. 7.3 (c). ............................................................................. 6.1(b) (d). ............................................................................. 6.1(c) (d) (1). ......................................................................... 6.1(a) (d) (2). ......................................................................... 6.1(c) (2) (d) (3). ......................................................................... 6.1(c) (3)
-i-
TRUST INDENTURE INDENTURE ACT SECTION SECTION - --------------- --------- (e). ............................................................................. 5.15 Section 316 (a). ............................................................................. 1.1 (a) (1) (A). ..................................................................... 5.13 (a) (1) (B). ..................................................................... 5.14 (a) (2). ......................................................................... Not Applicable (b). ............................................................................. 5.9 (c). ............................................................................. 1.4(f) Section 317 (a) (1). ......................................................................... 5.4 (a) (2). ......................................................................... 5.5 (b). ............................................................................. 10.3 Section 318 (a). ............................................................................. 1.7
- -------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Junior Subordinated Indenture. -ii- TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1. Definitions...................................................................1 SECTION 1.2. Compliance Certificate and Opinions..........................................10 SECTION 1.3. Forms of Documents Delivered to Trustee......................................10 SECTION 1.4. Acts of Holders..............................................................11 SECTION 1.5. Notices, Etc. to Trustee, Corporation and the Guarantor......................13 SECTION 1.6. Notice to Holders; Waiver....................................................13 SECTION 1.7. Conflict with Trust Indenture Act............................................13 SECTION 1.8. Effect of Headings and Table of Contents.....................................14 SECTION 1.9. Successors and Assigns.......................................................14 SECTION 1.10. Separability Clause..........................................................14 SECTION 1.11. Benefits of Indenture........................................................14 SECTION 1.12. Governing Law................................................................14 SECTION 1.13. Non-Business Days............................................................14 ARTICLE II SECURITY FORMS SECTION 2.1. Forms Generally..............................................................14 SECTION 2.2. Form of Face of Security.....................................................15 SECTION 2.3. Form of Reverse of Security..................................................18 SECTION 2.4. Additional Provisions Required in Global Security............................21 SECTION 2.5. Form of Trustee's Certificate of Authentication..............................21 SECTION 2.6. Form of Guarantee............................................................22 ARTICLE III THE SECURITIES SECTION 3.1. Title and Terms..............................................................23 SECTION 3.2. Denominations................................................................24 SECTION 3.3. Execution, Authentication, Delivery and Dating...............................24 SECTION 3.4. Temporary Securities.........................................................25 SECTION 3.5. Global Securities............................................................25 SECTION 3.6. Registration, Transfer and Exchange Generally................................26 SECTION 3.7. Mutilated, Destroyed, Lost and Stolen Securities.............................27 SECTION 3.8. Payment of Interest and Additional Interest; Interest Rights Preserved.......28 SECTION 3.9. Persons Deemed Owners........................................................29 SECTION 3.10. Cancellation.................................................................29 SECTION 3.11. Computation of Interest......................................................30
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SECTION 3.12. Deferrals of Interest Payment Dates..........................................30 SECTION 3.13. Right of Set-Off.............................................................31 SECTION 3.14. Agreed Tax Treatment.........................................................31 SECTION 3.15. CUSIP Numbers................................................................31 SECTION 3.16. Guarantee of Debt Securities.................................................32 SECTION 3.17. Execution of Guarantees......................................................33 ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1. Satisfaction and Discharge of Indenture......................................34 SECTION 4.2. Application of Trust Money...................................................35 ARTICLE V REMEDIES SECTION 5.1. Debenture Event of Default...................................................35 SECTION 5.2. Debenture Default............................................................36 SECTION 5.3. Acceleration of Maturity; Rescission and Annulment...........................36 SECTION 5.4. Collection of Indebtedness and Suits for Enforcement by Trustee..............37 SECTION 5.5. Trustee May File Proofs of Claim.............................................38 SECTION 5.6. Trustee May Enforce Claim Without Possession of Securities...................38 SECTION 5.7. Application of Money Collected...............................................39 SECTION 5.8. Limitation on Suits..........................................................39 SECTION 5.9. Unconditional Right of Holders to Receive Principal, Premium and Interest; Direct Action by Holders of Capital Securities...............................40 SECTION 5.10. Restoration of Rights and Remedies...........................................40 SECTION 5.11. Rights and Remedies Cumulative...............................................40 SECTION 5.12. Delay or Omission Not Waiver.................................................40 SECTION 5.13. Control by Holders...........................................................41 SECTION 5.14. Waiver of Past Defaults......................................................41 SECTION 5.15. Undertaking for Costs........................................................41 SECTION 5.16. Waiver of Usury, Stay or Extension Laws......................................42 ARTICLE VI THE TRUSTEE SECTION 6.1. Certain Duties and Responsibilities..........................................42 SECTION 6.2. Notice of Defaults...........................................................43 SECTION 6.3. Certain Rights of Trustee....................................................43 SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.......................44 SECTION 6.5. May Hold Securities..........................................................44 SECTION 6.6. Money Held in Trust..........................................................44 SECTION 6.7. Compensation and Reimbursement...............................................44 SECTION 6.8. Disqualification; Conflicting Interests......................................45 SECTION 6.9. Corporate Trustee Required; Eligibility......................................45
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SECTION 6.10. Resignation and Removal; Appointment of Successor............................46 SECTION 6.11. Acceptance of Appointment by Successor.......................................47 SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business..................47 SECTION 6.13. Preferential Collection of Claims Against Corporation or Guarantor...........48 SECTION 6.14. Appointment of Authenticating Agent..........................................48 ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND CORPORATION SECTION 7.1. Corporation to Furnish Trustee Names and Addresses of Holders................49 SECTION 7.2. Preservation of Information, Communications to Holders.......................49 SECTION 7.3. Reports by Trustee...........................................................50 SECTION 7.4. Reports by Corporation.......................................................50 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 8.1. Corporation and Guarantor May Consolidate, Etc., Only on Certain Terms.......50 SECTION 8.2. Successor Corporation Substituted............................................51 ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1. Supplemental Indentures without Consent of Holders...........................52 SECTION 9.2. Supplemental Indentures with Consent of Holders..............................52 SECTION 9.3. Execution of Supplemental Indentures.........................................53 SECTION 9.4. Effect of Supplemental Indentures............................................54 SECTION 9.5. Conformity with Trust Indenture Act..........................................54 SECTION 9.6. Reference in Securities to Supplemental Indentures...........................54 ARTICLE X COVENANTS SECTION 10.1. Payment of Principal, Premium and Interest...................................54 SECTION 10.2. Maintenance of Office or Agency..............................................54 SECTION 10.3. Money for Security Payments to be Held in Trust..............................55 SECTION 10.4. Statement as to Compliance...................................................56 SECTION 10.5. Waiver of Certain Covenants..................................................56 SECTION 10.6. Additional Sums..............................................................56 SECTION 10.7. Additional Covenants.........................................................57
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ARTICLE XI REDEMPTION OF SECURITIES SECTION 11.1. Applicability of This Article................................................58 SECTION 11.2. Election to Redeem; Notice to Trustee........................................58 SECTION 11.3. Selection of Securities to be Redeemed.......................................58 SECTION 11.4. Notice of Redemption.........................................................59 SECTION 11.5. Deposit of Redemption Price..................................................59 SECTION 11.6. Payment of Securities Called for Redemption..................................60 SECTION 11.7. Right of Redemption of Securities Initially Issued to an Issuer Trust........60 ARTICLE XII SUBORDINATION OF SECURITIES SECTION 12.1. Securities Subordinate to Senior Debt........................................62 SECTION 12.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc. ...........................................................62 SECTION 12.3. Payment Permitted If No Default..............................................63 SECTION 12.4. Subrogation to Rights of Holders of Senior Debt..............................64 SECTION 12.5. Provisions Solely to Define Relative Rights..................................64 SECTION 12.6. Trustee to Effectuate Subordination..........................................65 SECTION 12.7. No Waiver of Subordination Provisions........................................65 SECTION 12.8. Notice to Trustee............................................................65 SECTION 12.9. Reliance on Judicial Order or Certificate of Liquidating Agent...............66 SECTION 12.10. Trustee Not Fiduciary for Holders of Senior Debt.............................66 SECTION 12.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights.66 SECTION 12.12. Article Applicable to Paying Agents..........................................67
-vi- JUNIOR SUBORDINATED INDENTURE, dated as of September ___, 2004, among POPULAR NORTH AMERICA, INC., a Delaware corporation (the "Corporation"), having its principal office at 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, POPULAR, INC., a Puerto Rico corporation (the "Guarantor") having its principal office at 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, and J.P. Morgan Trust Company, National Association, a national banking association, as Trustee (the "Trustee"). RECITALS OF THE CORPORATION AND THE GUARANTOR WHEREAS, the Corporation has duly authorized the execution and delivery of this Indenture to provide for the issuance of its - % Junior Subordinated Debentures, due - , 2034 (hereinafter called the "Securities") of substantially the tenor and amount hereinafter provided, including Securities issued to evidence loans made to the Corporation of the proceeds from the issuance by a statutory trust ("Popular North America Capital Trust I" or the "Issuer Trust") of undivided preferred beneficial interests in the assets of the Issuer Trust (the "Capital Securities") and undivided common beneficial interests in the assets of the Issuer Trust (the "Common Securities" and, collectively with the Capital Securities, the "Trust Securities"), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered; and WHEREAS, the Guarantor has duly authorized the execution and delivery of this Indenture to provide for the issuance of Guarantees with respect to the Securities; and WHEREAS, all things necessary to make this Indenture a valid agreement of the Corporation and the Guarantor, in accordance with its terms, have been done. NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of Securities, as follows: ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) All other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (4) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States; (5) Whenever the context may require, any gender shall be deemed to include the others; (6) Unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; and (7) The words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act" when used with respect to any Holder has the meaning specified in Section 1.4. "Additional Guarantee Payments" has the meaning specified in Section 3.16. "Additional Interest" means the interest, if any, that shall accrue on any interest on the Securities the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in this Indenture. "Additional Sums" has the meaning specified in Section 10.6. "Additional Taxes" means any additional taxes, duties and other governmental charges to which the Issuer Trust has become subject from time to time as a result of a Tax Event. "Administrative Trustees" means, in respect of the Issuer Trust, each Person identified as an "Administrative Trustee" in the Trust Agreement, solely in such Person's capacity as Administrative Trustee of the Issuer Trust under the Trust Agreement and not in such Person's individual capacity, or any successor administrative trustee appointed as therein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Member" means any member of, or participant in, the Depositary. "Allocable Amounts," when used with respect to any Senior Subordinated Indebtedness of the Corporation or the Guarantor, as the case may be, means the amount necessary to pay all principal of (and premium, if any) and interest, if any, on such Senior Subordinated Indebtedness of the Corporation or the Guarantor, as the case may be, in full less, if applicable, any portion of such amounts which would have been paid to, and retained by, the holders of such Senior Subordinated Indebtedness (whether as a result of the receipt of payments by the holders of such Senior Subordinated Indebtedness from the Corporation or the Guarantor, as the case may be, or any other obligor thereon or from any holders of, or trustee in respect of, other indebtedness that is subordinate and junior in right of payment to such Senior Subordinated Indebtedness pursuant to any provision of such indebtedness for the payment over of -2- amounts received on account of such indebtedness to the holders of such Senior Subordinated Indebtedness) but for the fact that such Senior Subordinated Indebtedness is subordinate or junior in right of payment to trade accounts payable or accrued liabilities arising in the ordinary course of business. "Applicable Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate the Securities. "Bankruptcy Code" means Title 11 of the United States Code or any successor statute thereto, in each case as amended from time to time. "Board of Directors" means, with respect to the Corporation and the Guarantor, the board of directors of the Corporation or the Guarantor, or the Executive Committee of the board of directors of the Corporation or the Guarantor (or any other committee of the board of directors of the Corporation or the Guarantor performing similar functions) or a committee designated by the board of directors of the Corporation or the Guarantor (or such committee), comprised of two or more members of the board of directors or officers, or both, of the Corporation or the Guarantor, in each case as the context requires. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Corporation or the Guarantor, as the case may be, to have been duly adopted by the Board of Directors, or officers of the Corporation or the Guarantor, as the case may be, to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means a day other than a Saturday, a Sunday or any other day on which banking institutions in New York, New York, San Juan, Puerto Rico or Wilmington, Delaware are authorized or required by law, regulation or executive order to remain closed or are customarily closed. "Capital Securities" has the meaning specified in the first recital of this Indenture. "Capital Treatment Event" means, with respect to the Issuer Trust, the reasonable determination by the Corporation (as evidenced by an Officers' Certificate delivered to the Trustee), based on an Opinion of Counsel experienced in such matters, that, as a result of the occurrence of any amendment to, or change (including any announced proposed change) in, the laws (or any rules or regulations thereunder) of the United States or any political subdivision thereof or therein, or as a result of any official or administrative pronouncement or action or judicial decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or such pronouncement, action or decision is announced on or after the date of the issuance of the Capital Securities, there is more than an insubstantial risk that the Guarantor will not be entitled to treat the Capital Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital adequacy guidelines of the Board of Governors of the Federal Reserve System, as then in effect and applicable to the Corporation and the Guarantor. Notwithstanding the foregoing, a Capital Treatment Event shall not be deemed to have occurred as a result of the adoption by the Federal Reserve Board of final rules pursuant to its notice of proposed rulemaking dated May 6, 2004. -3- "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Common Securities" has the meaning specified in the first recital of this Indenture. "Common Stock" means the common stock of the Corporation or the Guarantor, as the case may be. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered. "corporation" includes a corporation, association, company, limited liability company, joint-stock company or statutory trust. "Corporation" means the Person named as the "Corporation" in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Corporation" shall mean such successor corporation. "Corporation Request" and "Corporation Order" mean, respectively, the written request or order signed in the name of the Corporation by its Chairman of the Board of Directors, its Vice Chairman of the Board of Directors, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Debenture Default" has the meaning specified in Article V. "Debenture Event of Default" has the meaning specified in Article V. "Defaulted Interest" has the meaning specified in Section 3.8. "Delaware Trustee" means, in respect of the Issuer Trust, the Person identified as the "Delaware Trustee" in the Trust Agreement, solely in its capacity as Delaware Trustee of the Issuer Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware Trustee appointed as therein provided. "Depositary" means, with respect to any Securities issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depositary by the Corporation pursuant to Section 3.5 with respect to such Securities (or any successor thereto). "Distributions," with respect to the Trust Securities, means amounts payable in respect of such Trust Securities as provided in the Trust Agreement and referred to therein as "Distributions." "Dollar" or "$" means the currency of the United States that, as at the time of payment, is legal tender for the payment of public and private debts. "Exchange Act" means the Securities Exchange Act of 1934 or any statute successor thereto, in each case as amended from time to time. "Expiration Date" has the meaning specified in Section 1.4. -4- "Extension Period" has the meaning specified in Section 3.12. "Global Security" means a Security in the form prescribed in Section 2.4 evidencing all or part of the Securities, issued to the Depositary or its nominee for the Securities, and registered in the name of such Depositary or its nominee. "Guarantees" means the guarantees of the Guarantor to be endorsed on the Securities authenticated and delivered hereunder. "Guarantee Agreement" means the Guarantee Agreement executed by the Corporation, the Guarantor and J.P. Morgan Trust Company, National Association, as guarantee trustee, contemporaneously with the execution and delivery of this Indenture, for the benefit of the Holders of Capital Securities, as amended from time to time. "Guarantor" means the Person named as the "Guarantor" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Guarantor" shall mean such successor corporation. "Guarantor Request" and "Guarantor Order" mean, respectively, the written request or order signed in the name of the Guarantor by its Chairman of the Board of Directors, its Vice Chairman of the Board of Directors, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Holder" means a Person in whose name a Security or Securities is or are registered in the Securities Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Investment Company Act" means the Investment Company Act of 1940 or any successor statute thereto, in each case as amended from time to time. "Investment Company Event" means the receipt by the Issuer Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of any (i) amendment to, or change (including any announced proposed change) in, the applicable laws (or any regulations thereunder) of the United States or any political subdivision or other governmental agency or regulatory authority of or in the United States, or (ii) official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which proposed change, pronouncement, action or decision is announced on or after the date of original issuance of the Capital Securities, there is more than an insubstantial risk that the Issuer Trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940. "Issuer Trust" has the meaning specified in the first recital of this Indenture. -5- "Maturity" when used with respect to any Security means the date on which the principal of such Security or any installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Notice of Default" means a written notice of the kind specified in Section 5.2(3). "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Corporation or the Guarantor, as the context requires, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for or an employee of the Corporation or the Guarantor, or any Affiliate of the Corporation or the Guarantor. "Original Issue Date" means the date of issuance specified as such in each Security. "Outstanding" means, when used in reference to any Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Securities; and (iii) Securities in substitution for or in lieu of which other Securities have been authenticated and delivered or that have been paid pursuant to Section 3.7, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Corporation; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Corporation or any other obligor upon the Securities or any Affiliate of the Corporation or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that the Trustee knows to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Corporation or any other obligor upon the Securities or any Affiliate of the Corporation or such other obligor. Upon the written request of the Trustee, the Corporation shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Corporation to be owned or held by or for the account of the Corporation, or any other obligor on the Securities or any Affiliate of the Corporation or such obligor, and subject to the provisions of Section 6.1, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. Notwithstanding anything herein to the contrary, Securities initially issued to the Issuer Trust that are owned by the Issuer Trust shall be deemed -6- to be Outstanding notwithstanding the ownership by the Corporation or an Affiliate of any beneficial interest in the Issuer Trust. "Paying Agent" means the Trustee or any Person authorized by the Corporation to pay the principal of (or premium, if any) or interest on, or other amounts in respect of, any Securities on behalf of the Corporation. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Place of Payment" means, with respect to the Securities, the place or places where the principal of (and premium, if any) and interest on the Securities are payable pursuant to Section 3.1. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security. For the purposes of this definition, any security authenticated and delivered under Section 3.7 in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Proceeding" has the meaning specified in Section 12.2. "Property Trustee" means, in respect of the Issuer Trust, the Person identified as the "Property Trustee" in the Trust Agreement, solely in its capacity as Property Trustee of the Issuer Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Property Trustee appointed as therein provided. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date with respect to the Securities means the date that is fifteen days next preceding such Interest Payment Date (whether or not a Business Day). "Responsible Officer", when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Rights Plan" means a plan of the Corporation or the Guarantor, as the case may be, providing for the issuance by the Corporation or the Guarantor, as the case may be, to all holders of its Common -7- Stock of rights entitling the holders thereof to subscribe for or purchase shares of any class or series of capital stock of the Corporation or Guarantor, as the case may be, which rights (i) are deemed to be transferred with such shares of such Common Stock, and (ii) are also issued in respect of future issuances of such Common Stock, in each case until the occurrence of a specified event or events. "Securities" or "Security" means any debt securities or debt security, as the case may be, authenticated and delivered under this Indenture. "Securities Act" means the Securities Act of 1933 or any successor statute thereto, in each case as amended from time to time. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 3.6. "Senior Debt" of the Corporation or the Guarantor, as the case may be, means (i) Senior Indebtedness of the Corporation or the Guarantor, respectively (but excluding trade accounts payable and accrued liabilities arising in the ordinary course of business), and (ii) the Allocable Amounts of Senior Subordinated Indebtedness of the Corporation or Guarantor, respectively. "Senior Indebtedness" means any obligation of the Corporation or the Guarantor, as the case may be, to its creditors, whether now outstanding or subsequently incurred, other than any obligation as to which, in the instrument creating or evidencing the obligation or pursuant to which the obligation is outstanding, it is provided that such obligation is not Senior Indebtedness. Senior Indebtedness does not include Senior Subordinated Indebtedness or the Securities or any junior subordinated debt securities issued in the future by the Corporation or the Guarantor, as the case may be, with subordination terms substantially similar to those of the Securities. "Senior Subordinated Indebtedness" means any obligation of the Corporation or the Guarantor, as the case may be, to its creditors, whether now outstanding or subsequently incurred, where the instrument creating or evidencing the obligation or pursuant to which the obligation is outstanding, provides that it is subordinate and junior in right of payment to Senior Indebtedness, including the Subordinated Indenture, dated as of November 30, 1995, between the Guarantor and The First National Bank of Chicago, as Trustee, but does not include the Securities or any junior subordinated debt securities issued in the future by the Corporation or the Guarantor, as the case may be, with subordination terms substantially similar to those of the Securities. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.8. "Stated Maturity", when used with respect to any Security or any installment of principal thereof (or premium, if any) or interest (including any Additional Interest) thereon, means the date specified pursuant to the terms of such Security as the fixed date on which the principal of such Security or such installment of principal (or premium, if any) or interest (including any Additional Interest) is due and payable, as such date may, in the case of the stated maturity of the principal on any security, be shortened or extended as provided pursuant to the terms of such Security and this Indenture and, in the case of any installment of interest, subject to the deferral of any such date in the case of any Extension Period. "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Corporation or the Guarantor, as the context requires, or by one or -8- more other Subsidiaries, or by the Corporation or the Guarantor, as the context requires, and one or more other Subsidiaries. For purposes of this definition, "voting stock" means stock that ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Successor Security" of any particular Security means every Security issued after, and evidencing all or a portion of the same debt as that evidenced by, such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.7 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Tax Event" means the receipt by the Issuer Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Capital Securities, there is more than an insubstantial risk that (i) the Issuer Trust is, or will be within 90 days following the delivery of such Opinion of Counsel, subject to United States Federal income tax with respect to income received or accrued on the Securities issued by the Corporation to the Issuer Trust, (ii) interest payable by the Corporation on such Securities is not, or within 90 days following the delivery of such Opinion of Counsel will not be, deductible by the Corporation, in whole or in part, for United States Federal income tax purposes, or (iii) the Issuer Trust is, or will be within 90 days following the delivery of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties or other governmental charges. With respect to Securities that are no longer held by the Issuer Trust, "Tax Event" means the receipt by the Corporation of an Opinion of Counsel experienced in such matters to the effect that, as a result of any (i) amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority of or in the United States or (ii) official or administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which proposed change, pronouncement or decision is announced on or after the date of original issuance of the Securities under this Indenture, there is more than an insubstantial risk that interest payable by the Corporation on the Securities is not, or within 90 days following the date of such Opinion of Counsel will not be, deductible by the Corporation, in whole or in part, for United States Federal income tax purposes. "Taxes" has the meaning specified in Section 3.16. "Trust Agreement" means, with respect to the Issuer Trust, the trust agreement or other governing instrument of the Issuer Trust, as amended from time to time. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture, solely in its capacity as such and not in its individual capacity, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force on the date as of this Indenture; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such -9- date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Securities" has the meaning specified in the first recital of this Indenture. "United States" means the United States of America. "Vice President," when used with respect to the Corporation or the Guarantor, means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president," of the Corporation or the Guarantor, respectively. SECTION 1.2. Compliance Certificate and Opinions. Upon any application or request by the Corporation or the Guarantor to the Trustee to take any action under any provision of this Indenture, the Corporation or the Guarantor, as the case may be, shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificates provided pursuant to Section 10.4) shall include: (1) a statement by each individual signing such certificate or opinion that such individual has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions of such individual contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of such individual, such condition or covenant has been complied with. SECTION 1.3. Forms of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. -10- Any certificate or opinion of an officer of the Corporation or the Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Corporation or the Guarantor, as the case may be, stating that the information with respect to such factual matters is in the possession of the Corporation or the Guarantor, as the case may be, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions, or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 1.4. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments is or are delivered to the Trustee, and, where it is hereby expressly required, to the Corporation and the Guarantor. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee, the Corporation and the Guarantor, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such execution is by a Person acting in other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. (c) The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine. (d) The ownership of Securities shall be proved by the Securities Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by the Trustee, the Corporation or the Guarantor in reliance thereon, whether or not notation of such action is made upon such Security. -11- (f) The Corporation may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities, provided that the Corporation may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next succeeding paragraph. If any record date is set pursuant to this paragraph, the Holders of the Outstanding Securities on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date, provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date (as defined below) by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Corporation from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Corporation, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities in the manner set forth in Section 1.6. The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration referred to in Section 5.3, (iii) any request to institute proceedings referred to in Section 5.8(2), or (iv) any direction referred to in Section 5.13, in each case with respect to such Securities. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date, provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities on the date such action is taken. Promptly after a record date is set pursuant to this paragraph, the Trustee, at the Corporation's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Corporation in writing and to each Holder of Securities in the manner set forth in Section 1.6. With respect to any record date set pursuant to this Section, the party that sets such record date may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day, provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities in the manner set forth in Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto that set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date. -12- (g) Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. SECTION 1.5. Notices, Etc. to Trustee, Corporation and the Guarantor. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder, any holder of Capital Securities, the Corporation or the Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, or (2) the Corporation or the Guarantor by the Trustee, any Holder or any holder of Capital Securities shall be sufficient for every purpose (except as otherwise provided in Section 5.2) hereunder if in writing and mailed, first class, postage prepaid, to the Corporation or the Guarantor, as the case may be, addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Corporation or Guarantor. SECTION 1.6. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Securities Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. If, by reason of the suspension of or irregularities in regular mail service or for any other reason, it shall be impossible or impracticable to mail notice of any event to Holders when said notice is required to be given pursuant to any provision of this Indenture or of the relevant Securities, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 1.7. Conflict with Trust Indenture Act. If any provision of this Indenture limits, qualifies or conflicts with another provision hereof which is required or deemed to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required or deemed provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. -13- SECTION 1.8. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.9. Successors and Assigns. All covenants and agreements in this Indenture by the Corporation or the Guarantor shall bind their respective successors and assigns, whether so expressed or not. SECTION 1.10. Separability Clause. If any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns, the holders of Senior Debt, the Holders of Securities and, to the extent expressly provided in Sections 1.5, 3.5(e), 5.1, 5.2, 5.3, 5.9, 5.10, 5.12, 5.14, 9.1 and 9.2, the holders of Capital Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 1.12. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND WHOLLY TO BE PERFORMED IN SUCH STATE. SECTION 1.13. Non-Business Days. If any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest or principal (and premium, if any) or other amounts in respect of such Security need not be made on such date, but may be made on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, until such next succeeding Business Day). ARTICLE II SECURITY FORMS SECTION 2.1. Forms Generally. The Securities and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, or in such other form or forms as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed -14- thereon as may be required to comply with applicable tax laws or the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such securities, as evidenced by their execution of the Securities. If the form of Securities is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Corporation and delivered to the Trustee at or prior to the delivery of the Corporation Order contemplated by Section 3.3 with respect to the authentication and delivery of such Securities. The Guarantees to be endorsed on the Securities shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution of the Guarantor or in one or more indentures supplemental hereto, in each case with appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends and endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Guarantees, as evidenced by their execution of such Guarantees. The definitive Securities shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. SECTION 2.2. Form of Face of Security. POPULAR NORTH AMERICA, INC. ____% JUNIOR SUBORDINATED DEBENTURES, DUE ____, 2034 CUSIP ____ No. $ POPULAR NORTH AMERICA, INC., a corporation organized and existing under the laws of Delaware (hereinafter called the "Corporation", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to ___________, or registered assigns, the principal sum of __________ Dollars on __________ __, or such other principal amount represented hereby as may be set forth in the records of the Securities Registrar hereinafter referred to in accordance with the Indenture. The Corporation further promises to pay interest on said principal sum from ______, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually (subject to deferral as set forth herein) in arrears on __________ and ___________ of each year, commencing ________, 2005, at the rate of __% per annum, together with Additional Sums, if any, as provided in Section 10.6 of the Indenture until the principal hereof is paid or duly provided for or made available for payment; provided that any overdue principal, premium or Additional Sums and any overdue installment of interest or Additional Interest shall bear interest at the rate of ___% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded semi-annually, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand. The amount of interest payable for any period less than a full interest period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in such period. The amount of interest payable for any full interest period shall be computed by dividing the applicable rate per annum by two. The interest so -15- payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment, which shall be the fifteenth day (whether or not a Business Day), preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. So long as no Debenture Event of Default has occurred and is continuing, the Corporation shall have the right, at any time during the term of this Security, from time to time to defer the payment of interest on this Security for up to 10 consecutive semi-annual interest payment periods with respect to each deferral period (each an "Extension Period"), and at the end of which the Corporation shall pay all interest then accrued and unpaid, including any Additional Interest, as provided below; provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of this Security and no such Extension Period may end on a date other than an Interest Payment Date; and provided, further, however, that during any such Extension Period, the Corporation shall not, and shall not permit any of its Subsidiaries to, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Corporation's capital stock, (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Corporation that rank pari passu in all respects with or junior in interest to this Security or the Guarantees, respectively or (iii) make any guarantee payments with respect to any guarantee by the Corporation of the debt securities of any Subsidiary of the Corporation if such guarantee ranks pari passu with or junior in interest to this Security or the Guarantees (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Corporation in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors, consultants or independent contractors, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Corporation (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of an exchange or conversion of any class or series of the Corporation's capital stock (or any capital stock of a Subsidiary of the Corporation) for any class or series of the Corporation's capital stock or of any class or series of the Corporation's indebtedness for any class or series of the Corporation's capital stock, (c) the purchase of fractional interests in shares of the Corporation's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan, or the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto, or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock). Prior to the termination of any such Extension Period, the Corporation may further defer the payment of interest, provided that no Extension Period shall exceed 10 consecutive semi-annual interest periods, extend beyond the Stated Maturity of the principal of this Security or end on a date other than an Interest Payment Date. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Corporation -16- may elect to begin a new Extension Period, subject to the above conditions. No interest other than Additional Sums shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear interest (to the extent that the payment of such interest shall be legally enforceable) at the rate of ___% per annum, compounded semi-annually and calculated as set forth in the first paragraph of this Security, from the dates on which amounts would otherwise have been due and payable until paid or made available for payment. The Corporation shall give the Holder of this Security and the Trustee notice of its election to begin any Extension Period at least one Business Day prior to the record date for the next succeeding Interest Payment Date on which interest on this Security would be payable but for such deferral or so long as such Securities are held by Popular North America Capital Trust I, at least one Business Day prior to the earlier of (i) the next succeeding date on which Distributions on the Capital Securities would be payable but for such deferral, and (ii) the date on which the Property Trustee is required to give notice to holders of the Capital Securities of the record date or the date such Distributions are payable. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Corporation maintained for that purpose in The City of New York, in such coin or currency of the United States as at the time of payment is legal tender for payment of public and private debts; provided, however, that (i) at the option of the Corporation payment of interest on an Interest Payment Date may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register, (ii) upon the written request by any Holder of $1,000,000 or more in aggregate principal amount of the Securities, not later than 15 calendar days prior to the date on which such interest is payable, payment of such interest shall be made by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto, as specified in the Securities Register or (iii) payments due at the Stated Maturity of this Security will be made in immediately available funds against presentation and surrender of this Security. If the Holder of this Security is the Depository Trust Company or the Issuer Trust (or a trustee thereof), all payments in respect of this Security shall be made in immediately available funds. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided, and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed under its corporate seal. -17- POPULAR NORTH AMERICA, INC. By: Name: Title: Attest: - ---------------------------------- [Secretary or Assistant Secretary] SECTION 2.3. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Corporation designated as its ____% Junior Subordinated Debentures, due ____, 2034 (herein called the "Securities"), limited in aggregate principal amount to $____, issued and to be issued under the Junior Subordinated Indenture, dated as of ______, 2004 (herein called the "Indenture"), among the Corporation, Popular, Inc., as Guarantor, and J.P Morgan Trust Company, National Association, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Corporation, the Guarantor, the Trustee, the holders of Senior Debt and the Holders of Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security that are defined in the Indenture or in the Amended and Restated Trust Agreement, dated as of August __, 2004 (as modified, amended or supplemented from time to time, the "Trust Agreement"), relating to Popular North America Capital Trust I (the "Issuer Trust") among the Corporation, as Depositor, Popular, Inc., as Guarantor, the Trustees named therein and the Holders from time to time of the Trust Securities issued pursuant thereto, shall have the meanings assigned to them in the Indenture or the Trust Agreement, as the case may be. The Corporation may, at its option, subject to the terms and conditions of Article XI of the Indenture and subject to the Corporation having received prior approval of the Federal Reserve if then required under applicable capital guidelines or policies, redeem this Security in whole at any time or in part from time to time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of this Security being redeemed or (ii) as determined by a Quotation Agent (as defined below), the sum of the present values of scheduled payments of principal and interest for the Remaining Life (as defined below) of this Security being redeemed, discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus ____%, plus, in the case of either (i) or (ii), accrued and unpaid interest thereon to the Redemption Date. "Remaining Life" means, with respect to an optional redemption of the Securities, the period from the Redemption Date through ____, 2034. "Treasury Rate" means (i) the yield, under the heading which represents the average for the immediately prior week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Board of Governors of the -18- Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Remaining Life (if no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Remaining Life shall be determined and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price of the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, The Treasury Rate shall be calculated on the third Business Day preceding the Redemption Date. "Comparable Treasury Issue" means, with respect to any Redemption Date, the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the Remaining Life that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the Remaining Life. If no United States Treasury security has a maturity which is within a period from three months before to three months after __________, 2034, the two most closely corresponding United States Treasury securities shall be used as the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or extrapolated on a straight-line basis, rounding to the nearest month using such securities. "Quotation Agent" means each of Credit Suisse First Boston LLC and J.P. Morgan Securities Inc. and their respective successors; provided, however, that if the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Corporation shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any other Primary Treasury Dealer selected by the Trustee after consultation with the Corporation. "Comparable Treasury Price" means (A) if the Trustee obtains five Reference Treasury Dealer Quotations, the average of three Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations obtained, or (B) if the Trustee obtains fewer than five Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date. In addition, upon the occurrence and during the continuation of a Tax Event, Capital Treatment Event or Investment Company Event in respect of the Issuer Trust, the Corporation may, at its option, subject to its having received prior approval of the Federal Reserve if then required under applicable capital guidelines or policies, at any time within 90 days following the occurrence and during the continuation of such Tax Event, Capital Treatment Event or Investment Company Event, as the case may be, redeem this Security, in whole but not in part, subject to the terms and conditions of Article XI of the Indenture, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest thereon to the date of redemption. -19- In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. The Indenture contains provisions for satisfaction and discharge of the entire indebtedness of this Security upon compliance by the Corporation with certain conditions set forth in the Indenture. The Indenture permits, with certain exceptions as therein provided, the Corporation, the Guarantor and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Corporation, the Guarantor and of the Holders of Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Corporation and the Guarantor with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. If a Debenture Event of Default specified in Section 5.1(1) of the Indenture with respect to the Securities at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities may declare the principal amount of all the Securities to be due and payable immediately, by a notice in writing to the Corporation and the Guarantor (and to the Trustee if given by Holders), provided that, if upon such Debenture Event of Default, the Trustee or the Holders fail to declare the principal of all the Outstanding Securities to be immediately due and payable, the holders of at least 25% in aggregate Liquidation Amount of the Capital Securities then Outstanding shall have the right to make such declaration by a notice in writing to the Corporation and the Trustee; and upon any such declaration such principal amount (or specified portion thereof) of and the accrued interest (including any Additional Interest) on all the Securities shall become immediately due and payable. If a Debenture Event of Default specified in Section 5.1(2) or 5.1(3) of the Indenture with respect to the Securities at the time Outstanding occurs, the principal amount of all such Securities shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. The payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XII of the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest (including any Additional Interest) on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Corporation maintained under Section 10.2 of the Indenture for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form reasonably satisfactory to the Corporation and the Securities Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. -20- The Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Corporation, the Guarantor, the Trustee and any agent of the Corporation, the Guarantor or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Corporation, the Guarantor, the Trustee nor any such agent shall be affected by notice to the contrary. The Corporation and, by its acceptance of this Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that for United States Federal, State and local tax purposes it is intended that this Security constitute indebtedness. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND WHOLLY TO BE PERFORMED IN SUCH STATE. SECTION 2.4. Additional Provisions Required in Global Security. Any Global Security issued hereunder shall, in addition to the provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the following form: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. SECTION 2.5. Form of Trustee's Certificate of Authentication. The Trustee's certificates of authentication shall be in substantially the following form: This is one of the Securities referred to in the within-mentioned Indenture. -21- Dated: J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: ---------------------------------------- Authorized officer SECTION 2.6. Form of Guarantee. POPULAR, INC. (the "Guarantor") hereby irrevocably and unconditionally guarantees to the Holder of this Security, and, to the extent specified in Section 5.9 of the Indenture, each registered holder of Capital Securities, duly authenticated and delivered by the Trustee the due and punctual payment of the principal of, and premium, if any, (including any amount in respect of original issue discount), and interest, if any (together with any Additional Interest and Additional Sums payable pursuant to the terms of this Security), on, this Security, provided for pursuant to the terms of this Security, when and as the same shall become due and payable, whether at Stated Maturity or on redemption, acceleration or otherwise according to the terms of this Security and of the Indenture. In case of default by the Corporation in the payment of any such principal (including any amount in respect of original issue discount), or any premium or interest (together with any Additional Interest and Additional Sums payable pursuant to the terms of this Security), the Guarantor agrees duly and punctually to pay the same when and as the same shall become due and payable. The Guarantor hereby agrees that its obligations hereunder shall be as principal and not merely as surety, and shall be absolute and unconditional irrespective of any circumstances which may constitute a legal or equitable discharge of a surety or guarantor, including, without limitation, any modification of this Security, any invalidity, irregularity or unenforceability of this Security or the Indenture, any failure to enforce the same or any waiver, modification, consent or indulgence granted to the Corporation with respect thereto by the Holder of this Security or the Trustee. The Guarantor hereby waives diligence, presentment, demand or payment, filing of claims with a court in the event of merger or bankruptcy of the Corporation, any right to require a demand or proceeding first against the Corporation, the Trustee, the Issuer Trust or a trustee of the Issuer Trust, protest or notice with respect to this Security or the indebtedness evidenced thereby and all demands whatsoever, and covenants that this guarantee will not be discharged as to this Security except by payment in full of the principal of (including any amount payable in respect of original issue discount), and any premium or interest (together with any Additional Interest and Additional Sums payable pursuant to the terms of this Security), on this Security. The indebtedness evidenced by this Guarantee is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt, and this Guarantee is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Guarantee, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided, and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. -22- Payments pursuant to this Guarantee shall be made without set-off, counterclaim, fees, liabilities or similar deductions, and free and clear of, and without deduction or withholding for, taxes, levies, imposts, duties, charges or fees of whatsoever nature now or hereafter imposed, levied, collected, deducted, withheld or assessed by or on behalf of the Commonwealth of Puerto Rico or any political subdivision or taxing authority thereof or therein, as provided for in Section 3.16 of the Indenture. The Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, by making any payment hereunder (i) to be subrogated to the rights of a Holder against the Corporation with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Corporation in respect thereof or (ii) to receive any payment, in the nature of contribution or for any other reason, from any other obligor with respect to such payment. This guarantee shall not be valid or become obligatory for any purpose with respect to this Security until the certificate of authentication on this Security shall have been signed by the Trustee. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND WHOLLY TO BE PERFORMED IN SUCH STATE. IN WITNESS WHEREOF, Popular, Inc. has caused this Guarantee to be signed by facsimile by its duly authorized officers and has caused a facsimile of its corporate seal to be affixed hereunto or imprinted hereon. POPULAR, INC. By: -------------------------------------- Authorized officer ARTICLE III THE SECURITIES SECTION 3.1. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $257,732,000, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6. The Securities shall be known and designated as the ____% Junior Subordinated Debentures, due ____, 2034, of the Corporation. Their Stated Maturity shall be ____, 2034, and they shall bear interest at the rate of ____% per annum, from and including ____, 2004 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable semi-annually in arrears on ____ and ____ commencing ____, 2005, until the principal thereof is paid or made available for payment. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Corporation maintained for that purpose in The City of New York, in such coin or -23- currency of the United States as at the time of payment is legal tender for payment of public and private debts; provided, however, that (i) at the option of the Corporation payment of interest on an Interest Payment Date may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register, (ii) upon the written request by any Holder of $1,000,000 or more in aggregate principal amount of the Securities, not later than 15 calendar days prior to the date on which such interest is payable, payment of such interest shall be made by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto, as specified in the Securities Register or (iii) payments due at the Stated Maturity of the Securities will be made in immediately available funds against presentation and surrender of the Securities. If the Holder of the Securities is the Depository Trust Company or the Issuer Trust (or a trustee thereof), all payments in respect of the Securities shall be made in immediately available funds. The Securities shall be redeemable as provided in Article XI. The Securities shall be subordinated in right of payment to Senior Debt as provided in Article XII. All Securities shall be substantially identical except as to denomination and except as may otherwise be provided herein. SECTION 3.2. Denominations. The Securities shall be in registered form without coupons and shall be issuable in denominations of $1,000 and any integral multiple thereof. SECTION 3.3. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Corporation by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents, and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Corporation shall bind the Corporation, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Corporation may deliver Securities executed by the Corporation, having endorsed thereon Guarantees duly executed by the Guarantor, to the Trustee for authentication, together with a Corporation Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Corporation Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized officers, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall -24- have been authenticated and delivered hereunder but never issued and sold by the Corporation, and the Corporation shall deliver such Security to the Trustee for cancellation as provided in Section 3.10, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 3.4. Temporary Securities. Pending the preparation of definitive Securities, the Corporation may execute, and upon Corporation Order the Trustee shall authenticate and deliver, temporary Securities, having endorsed thereon Guarantees duly executed by the Guarantor, that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Corporation will cause definitive Securities, having endorsed thereon Guarantees duly executed by the Guarantor, to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities, having endorsed thereon Guarantees duly executed by the Guarantor, upon surrender of the temporary Securities at the office or agency of the Corporation designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Corporation shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities, having endorsed thereon Guarantees duly executed by the Guarantor, of any authorized denominations having the same Original Issue Date and Stated Maturity and having the same terms as such temporary Securities. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 3.5. Global Securities. (a) Each Global Security issued under this Indenture shall be registered in the name of the Depositary designated by the Corporation for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (b) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (i) such Depositary advises the Trustee in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Security, and the Corporation does not appoint a qualified successor within 90 days, (ii) the Corporation executes and delivers to the Trustee a Corporation Order stating that the Corporation elects to terminate the book-entry system through the Depositary, or (iii) a Debenture Default shall have occurred and be continuing. (c) If any Global Security is to be exchanged for other Securities or cancelled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Securities Registrar for exchange or cancellation as provided in this Article III. If any Global Security is to be exchanged for other Securities or cancelled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, then either (i) such Global Security shall be so surrendered for -25- exchange or cancellation as provided in this Article III or (ii) the principal amount thereof shall be reduced, subject to Section 3.5(b)(v), or increased by an amount equal to the portion thereof to be so exchanged or cancelled, or equal to the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Trustee, in accordance with the Applicable Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security by the Depositary, accompanied by registration instructions, the Trustee shall, subject to Section 3.5(b) and as otherwise provided in this Article III, authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) in accordance with the instructions of the Depositary. The Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. (d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Article III, Section 9.6 or 11.6 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof. (e) Securities distributed to holders of Book-Entry Capital Securities (as defined in the Trust Agreement) upon the dissolution of the Issuer Trust shall be distributed in the form of one or more Global Securities registered in the name of a Depositary or its nominee, and deposited with the Securities Registrar, as custodian for such Depositary, or with such Depositary, for credit by the Depositary to the respective accounts of the beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Securities distributed to holders of Capital Securities other than Book-Entry Capital Securities upon the dissolution of the Issuer Trust shall not be issued in the form of a Global Security or any other form intended to facilitate book-entry trading in beneficial interests in such Securities. (f) The Depositary or its nominee, as the registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under this Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Procedures. Accordingly, any such owner's beneficial interest in a Global Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members. Neither the Trustee nor the Securities Registrar shall have any liability in respect of any transfers effected by the Depositary. (g) The rights of owners of beneficial interests in a Global Security shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Agent Members. SECTION 3.6. Registration, Transfer and Exchange Generally. The Corporation shall cause to be kept at the Corporate Trust Office of the Trustee a register in which, subject to such reasonable regulations as it may prescribe, the Corporation shall provide for the registration of Securities and of transfers of Securities. Such register is herein sometimes referred to as the "Securities Register." The Trustee is hereby appointed "Securities Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. -26- Upon surrender for registration of transfer of any Security at the offices or agencies of the Corporation designated for that purpose, the Corporation shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities, having endorsed thereon Guarantees duly executed by the Guarantor, of any authorized denominations of like tenor and aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities, having endorsed thereon Guarantees duly executed by the Guarantor, of any authorized denominations, of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any securities are so surrendered for exchange, the Corporation shall execute, and the Trustee shall authenticate and deliver, the Securities (having Guarantees duly endorsed thereon) that the Holder making the exchange is entitled to receive. All Securities and the Guarantees endorsed thereon issued upon any transfer or exchange of Securities shall be the valid obligations of the Corporation and the Guarantor, respectively, evidencing the same debt and guarantee thereon, and entitled to the same benefits under this Indenture, as the Securities and Guarantees surrendered upon such transfer or exchange. Every Security presented or surrendered for transfer or exchange shall (if so required by the Corporation or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Corporation and the Securities Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing. No service charge shall be made to a Holder for any transfer or exchange of Securities, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities. Neither the Corporation nor the Trustee shall be required, pursuant to the provisions of this Section, (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the day of selection for redemption of Securities pursuant to Article XI and ending at the close of business on the day of mailing of the notice of redemption, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except, in the case of any such Security to be redeemed in part, any portion thereof not to be redeemed. SECTION 3.7. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Corporation or the Trustee to save each of them harmless, the Corporation shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same issue (having Guarantees duly endorsed thereon), of like tenor and aggregate principal amount, and bearing a number not contemporaneously outstanding. If there shall be delivered to the Corporation and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security, and (ii) such security or indemnity as may be required by them to save each of them, the Guarantor and any agent of any of them harmless, then, in the absence of notice to the Corporation or the Trustee that such Security has been acquired by a bona fide purchaser, the Corporation shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security (having Guarantees duly endorsed thereon), of like -27- tenor and aggregate principal amount as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding. If any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Corporation in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Corporation may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security and the related Guarantees issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Corporation and the Guarantor, respectively, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 3.8. Payment of Interest and Additional Interest; Interest Rights Preserved. Interest and Additional Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date, shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest in respect of the Securities, except that, interest and any Additional Interest payable on the Stated Maturity of the principal of a Security other than on an Interest Payment Date shall be paid to the Person to whom principal is paid. Any interest on any Security that is due and payable, but is not timely paid or duly provided for, on any Interest Payment Date for the Securities (herein called "Defaulted Interest"), shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Corporation, at its election in each case, as provided in Clause (1) or (2) below: (1) The Corporation may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities in respect of which interest is in default (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Corporation shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Corporation shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest, which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Corporation of such Special Record Date and, in -28- the name and at the expense of the Corporation, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Holder of a Security at the address of such Holder as it appears in the Securities Register not less than 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Corporation, cause a similar notice to be published at least once in a newspaper, customarily published in the English language on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, but such publication shall not be a condition precedent to the establishment of such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Corporation may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities in respect of which interest is in default may be listed and, upon such notice as may be required by such exchange (or by the Trustee if the Securities are not listed), if, after notice given by the Corporation to the Trustee of the proposed payment pursuant to this Clause, such payment shall be deemed practicable by the Trustee. Any interest on any Security which is deferred or extended pursuant to Section 3.12 shall not be Defaulted Interest for purposes of this Section 3.8 Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security. SECTION 3.9. Persons Deemed Owners. The Corporation, the Guarantor, the Trustee and any agent of the Corporation, the Guarantor or the Trustee shall treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Section 3.8) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Corporation, the Guarantor, the Trustee nor any agent of the Corporation, the Guarantor or the Trustee shall be affected by notice to the contrary. No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Corporation, the Trustee and any agent of the Corporation or the Trustee as the owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Corporation, the Trustee or any agent of the Corporation or the Trustee from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as Holder of any Security. SECTION 3.10. Cancellation. All Securities surrendered for payment, redemption, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities -29- surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Corporation may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Corporation may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities shall be destroyed by the Trustee and the Trustee shall deliver to the Corporation a certificate of such destruction. SECTION 3.11. Computation of Interest. Interest on the Securities for any partial period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in any partial month in such period, and interest on the Securities for a full period shall be computed by dividing the rate per annum by the number of interest periods that together constitute a full twelve months. SECTION 3.12. Deferrals of Interest Payment Dates. So long as no Debenture Event of Default has occurred and is continuing, the Corporation shall have the right, at any time during the term of the Securities, from time to time to defer the payment of interest on the Securities for a period not exceeding 10 consecutive semi-annual periods (each, an "Extension Period"). No Extension Period shall end on a date other than an Interest Payment Date. At the end of any such Extension Period the Corporation shall pay all interest then accrued and unpaid on the Securities (together with Additional Interest thereon, if any, at the rate specified for the Securities to the extent permitted by applicable law); provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities or end on a date other than an Interest Payment Date; and provided further, however that during any such Extension Period, the Corporation and the Guarantor shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Corporation's or the Guarantor's capital stock, (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Corporation that rank pari passu in all respects with or junior in interest to the Securities or the Guarantees, respectively or (iii) make any guarantee payments with respect to any guarantee by the Corporation or the Guarantor if such guarantee ranks pari passu with or junior in interest to the Securities or the Guarantees (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Corporation or the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors, consultants or independent contractors, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Corporation or the Guarantor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of an exchange or conversion of any class or series of the Corporation's or the Guarantor's capital stock (or any capital stock of a Subsidiary of the Corporation or the Guarantor) for any class or series of the Corporation's or the Guarantor's capital stock, respectively, or of any class or series of the Corporation's or the Guarantor's indebtedness for any class or series of the Corporation's or the Guarantor's capital stock, respectively, (c) the purchase of fractional interests in shares of the Corporation's or the Guarantor's capital stock, respectively, pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan, or the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto, or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on -30- which the dividend is being paid or ranks pari passu with or junior to such stock). Prior to the termination of any such Extension Period, the Corporation may further defer the payment of interest, provided that no Extension Period shall exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of the principal of such Securities or end on a date other than an Interest Payment Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Corporation may elect to begin a new Extension Period, subject to the above conditions. No interest or Additional Interest, other than Additional Sums, shall be due and payable during an Extension Period, except at the end thereof. The Corporation shall give the Holders of Securities and the Trustee notice of its election to begin any such Extension Period at least one Business Day prior to the record date for the next succeeding Interest Payment Date on which interest on the Securities would be payable but for such deferral or, with respect to the Securities issued to the Issuer Trust, so long as any such Securities are held by the Issuer Trust, at least one Business Day prior to the earlier of (i) the next succeeding date on which Distributions on the Capital Securities would be payable but for such deferral, and (ii) the date on which the Property Trustee is required to give notice to any securities exchange or other applicable self-regulatory organization or to holders of the Capital Securities of the record date or the date such Distributions are payable. The Trustee shall promptly give notice of the Corporation's election to begin any such Extension Period to the Holders of the Outstanding Securities. SECTION 3.13. Right of Set-Off. So long as the Securities are held by the Issuer Trust, notwithstanding anything to the contrary herein, the Corporation and the Guarantor shall have the right to set off any payment it is otherwise required to make in respect of any such Security or the related Guarantee, respectively, to the extent the Corporation or the Guarantor has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee Agreement relating to such Security or to a holder of Capital Securities pursuant to an action undertaken under Section 5.9 of this Indenture. SECTION 3.14. Agreed Tax Treatment. Each Security issued hereunder shall provide that the Corporation and, by its acceptance of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Security agree that for United States Federal, State and local tax purposes it is intended that such Security constitutes indebtedness. SECTION 3.15. CUSIP Numbers. The Corporation in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption and other similar or related materials as a convenience to Holders; provided that any such notice or other materials may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption or other materials and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. -31- SECTION 3.16. Guarantee of Debt Securities. The Guarantor hereby irrevocably and unconditionally guarantees to each Holder of a Security authenticated and delivered by the Trustee the due and punctual payment of the principal of (including any amount in respect of original issue discount), and any premium and interest (together with any Additional Interest and Additional Sums payable pursuant to the terms of such Security) on, such Security, provided for pursuant to the terms of such Security, when and as the same shall become due and payable, whether at Stated Maturity or upon redemption, acceleration or otherwise according to the terms of such Security and of this Indenture. In case of default by the Corporation in the payment of any such principal (including any amount in respect of original issue discount), or any premium or interest (together with any Additional Interest and Additional Sums payable pursuant to the terms of such Security), the Guarantor agrees duly and punctually to pay the same. The Guarantor hereby agrees that its obligations hereunder shall be as principal and not merely as surety, and shall be absolute and unconditional irrespective of any invalidity, irregularity or unenforceability of any such Security or this Indenture, any failure to enforce the same or any waiver, modification, consent or indulgence granted to the Corporation with respect thereto by the Holder of such Security or the Trustee, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Corporation, the Trustee, the Issuer Trust or a trustee of the Issuer Trust, any right to require a demand or proceeding first against the Corporation, protest or notice with respect to any such Security or the indebtedness evidenced thereby and all demands whatsoever, and covenants that this guarantee will not be discharged as to any such Security except by payment in full of the principal of (including any amount payable in respect of original issue discount), and any premium and interest (together with any Additional Interest and Additional Sums payable pursuant to the terms of such Security) on, such Security. The indebtedness evidenced by the Guarantee is, to the extent provided in this Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt, and the Guarantee is issued subject to the provisions of this Indenture with respect thereto. Each Holder of the Guarantee, by accepting the same, (a) shall agree to and shall be bound by such provisions, (b) shall authorize and direct the Trustee on his or her behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided, and (c) shall appoint the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder shall waive all notice of the acceptance of the subordination provisions contained in the Guarantee and in this Indenture by each holder of Senior Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. All payments pursuant to the Guarantee shall be made without set-off, counterclaim, fees, liabilities or similar deductions, and free and clear of, and without deduction or withholding for, taxes, levies, imposts, duties, charges or fees of whatsoever nature now or hereafter imposed, levied, collected, deducted, withheld or assessed by or on behalf of the Commonwealth of Puerto Rico or any political subdivision or taxing authority thereof or therein ("Taxes"). If the Guarantor or any agent thereof is required by law or regulation to make any deduction or withholding for or on account of Taxes, the Guarantor shall pay such additional amounts ("Additional Guarantee Payments") as shall be necessary in order that the net amounts received pursuant to the Guarantee by the Holders of Securities or the holders or beneficial owners of any interest therein or rights in respect thereof after such deduction or withholding shall equal the amount that would have been receivable thereunder in the absence of such deduction or withholding, except that no such Additional Guarantee Payments shall be payable: -32- (a) to any Holder of a Security or any interest therein or rights in respect thereof where such deduction or withholding is required by reason of such Holder having some connection with the Commonwealth of Puerto Rico or any political subdivision or taxing authority thereof or thereon other than the mere holding of a payment in respect of such Security; (b) in respect of any deduction or withholding that would not have been required but for the presentation by the Holder of a Security for payment on a date more than 30 days after the date on which payment thereof is duly provided for; or (c) in respect of any deduction or withholding that would not have been required but for the failure to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with the Commonwealth of Puerto Rico, or any political subdivision or taxing authority thereof or therein, of the Holder of a Security or any interest therein or rights in respect thereof, if compliance is required by the Commonwealth of Puerto Rico, or any political subdivision or taxing authority thereof or therein, as a precondition to exemption from such deduction or withholding. The Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making payment hereunder (i) to be subrogated to the rights of a Holder against the Corporation with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Corporation in respect thereof or (ii) to receive any payment, in the nature of contribution or for any other reason, from any other obligor with respect to such payment. The guarantee set forth in this Section shall not be valid or become obligatory for any purpose with respect to a Security until the certificate of authentication on such Security shall have been signed by the Trustee. SECTION 3.17. Execution of Guarantees. To evidence its guarantee specified in Section 3.16 to the Holders of Securities, the Guarantor hereby agrees to execute the Guarantees in substantially the form above recited to be endorsed on each Security authenticated and delivered by the Trustee. Such Guarantees shall be executed on behalf of the Guarantor by its Chairman or its Vice Chairman or its President or any Vice President prior to the authentication of the Security on which it is endorsed, and the delivery of such Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of such Guarantees on behalf of the Guarantor. Typographical and other minor errors or defects in any such reproduction of any signature shall not affect the validity or enforceability of any Guarantee that has been duly authenticated and delivered by the Trustee. Such signatures may be the manual or facsimile signatures of such officers and may be imprinted or otherwise reproduced on the Guarantees. In case any officer of the Guarantor who shall have signed any of the Guarantees shall cease to be an officer before the Security on which such Guarantees are endorsed shall have been authenticated and delivered by the Trustee or disposed of by the Corporation, such Security nevertheless may be authenticated and delivered or disposed of as though the person who signed such Guarantees had not ceased to be such officer, and any Guarantees may be signed on behalf of the Guarantor by such persons as, at the actual date of the execution of such Guarantees, shall be the proper officers of the Guarantor, although at the date of such Security or of the execution of this Indenture any such person was not such an officer. -33- ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1. Satisfaction and Discharge of Indenture. This Indenture shall, upon Corporation Request, cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for and as otherwise provided in this Section 4.1) and the Trustee, on demand of and at the expense of the Corporation, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.7 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Corporation and thereafter repaid to the Corporation or discharged from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year of the date of deposit, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Corporation, and the Corporation, in the case of subclause (B)(i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount in the currency or currencies in which the Securities are payable sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest (including any Additional Interest) to the date of such deposit (in the case of Securities that have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Corporation or the Guarantor has paid or caused to be paid all other sums payable hereunder by the Corporation; and (3) the Corporation has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Corporation and the Guarantor to the Trustee under Section 6.7, the obligations of the Trustee to any Authenticating Agent under Section 6.14 and, if money shall have been irrevocably deposited with the Trustee pursuant to -34- subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3 shall survive. SECTION 4.2. Application of Trust Money. Subject to the provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and Guarantees and this Indenture, to the payment, either directly or through any Paying Agent (including the Corporation acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest (including any Additional Interest) for the payment of which such money or obligations have been deposited with or received by the Trustee. ARTICLE V REMEDIES SECTION 5.1. Debenture Event of Default "Debenture Event of Default", wherever used herein with respect to the Securities, means any of the following events (whatever the reason for such Debenture Event of Default and whether it shall be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of 30 days following the deferral of such interest for 10 consecutive semi-annual periods; or (2) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Corporation or the Guarantor a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Corporation or the Guarantor under the Bankruptcy Code or any other similar applicable Federal or State law, which decree or order shall have continued undischarged and unstayed for a period of 60 days; or the entry of a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Corporation or the Guarantor or of its property, or for the winding up or liquidation of its affairs, which decree or order shall have continued undischarged and unstayed for a period of 60 days; or (3) the commencement by the Corporation or the Guarantor of voluntary proceedings to be adjudicated a bankrupt, or consent by the Corporation or the Guarantor to the filing of a bankruptcy proceeding against it, or the filing by the Corporation or the Guarantor of a petition or answer or consent seeking reorganization under the Bankruptcy Code or any other similar Federal or State law, or consent by the Corporation or the Guarantor to the filing of any such petition, or the consent by the Corporation or the Guarantor to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or the making by the Corporation or the Guarantor of an assignment for the benefit of creditors, or the admission by the Corporation or the Guarantor in writing of its inability to pay its debts generally as they become due. -35- SECTION 5.2. Debenture Default. "Debenture Default", wherever used herein with respect to the Securities, means any event that is a Debenture Event of Default or any one of the following events (whatever the reason for such Debenture Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of 30 days (subject to the deferral of any due date in the case of an Extension Period); or (2) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity; or (3) failure on the part of the Corporation or the Guarantor duly to observe or perform any other of the covenants or agreements on the part of the Corporation or the Guarantor, respectively, in the Securities or the Guarantees endorsed thereon or in this Indenture for a period of 90 days after the date on which written notice of such failure, requiring the Corporation or the Guarantor, as the case may be, to remedy the same, shall have been given to the Corporation and the Guarantor by the Trustee by registered or certified mail or to the Corporation, the Guarantor and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities. SECTION 5.3. Acceleration of Maturity; Rescission and Annulment. If a Debenture Event of Default specified in Section 5.1(1) with respect to the Securities at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities may declare the principal amount of all the Securities to be due and payable immediately, by a notice in writing to the Corporation and the Guarantor (and to the Trustee if given by Holders), provided that, so long as the Securities are held by the Issuer Trust, if, upon such Debenture Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities fail to declare the principal of all the Outstanding Securities to be immediately due and payable, the holders of at least 25% in aggregate Liquidation Amount of the corresponding Capital Securities then outstanding shall have the right to make such declaration by a notice in writing to the Corporation, the Guarantor and the Trustee; and upon any such declaration such principal amount (or specified portion thereof) of and the accrued interest (including any Additional Interest) on all the Securities shall become immediately due and payable. If a Debenture Event of Default specified in Section 5.1(2) or 5.1(3) with respect to the Securities at the time Outstanding occurs, the principal amount of all the Securities shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. Payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XII notwithstanding that such amount shall become immediately due and payable as herein provided. At any time after such a declaration of acceleration with respect to the Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Corporation, the Guarantor and the Trustee, may rescind and annul such declaration and its consequences if: -36- (1) the Corporation or the Guarantor has paid or deposited with the Trustee a sum sufficient to pay: (A) all overdue installments of interest on all the Securities, (B) any Additional Sums and accrued Additional Interest on all Securities, (C) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities, other than the non-payment of the principal of the Securities which has become due solely by such acceleration, have been cured or waived as provided in Section 5.14. In the case of Securities held by the Issuer Trust, if the Holders of such Securities fail to annul such declaration and waive such default, the holders of a majority in aggregate Liquidation Amount of the corresponding Capital Securities then outstanding shall also have the right to rescind and annul such declaration and its consequences by written notice to the Corporation, the Guarantor and the Trustee, subject to the satisfaction of the conditions set forth in Clauses (1) and (2) above of this Section 5.3. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 5.4. Collection of Indebtedness and Suits for Enforcement by Trustee. Each of the Corporation and the Guarantor covenants that if: (1) default is made in the payment of any installment of interest (including any Additional Interest) on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (and premium, if any, on) any Security at the Maturity thereof, the Corporation and the Guarantor will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest (including any Additional Interest), and, in addition thereto, all amounts owing the Trustee under Section 6.7. If the Corporation and the Guarantor fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Corporation and the Guarantor or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Corporation and the Guarantor or any other obligor upon the Securities, wherever situated. -37- If a Debenture Default with respect to the Securities occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy; provided, however, that in the event of a Debenture Default that is not a Debenture Event of Default, there is no right to declare the principal amount of the Securities immediately payable. SECTION 5.5. Trustee May File Proofs of Claim. In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Corporation or the Guarantor (or any other obligor upon the Securities), or the property of the Corporation or the Guarantor or of such other obligor or their creditors, (a) the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Corporation or the Guarantor for the payment of overdue principal (and premium, if any) or interest (including any Additional Interest)) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest (including any Additional Interest) owing and unpaid in respect to the Securities and to file such other papers or documents as may be necessary or advisable and to take any and all actions as are authorized under the Trust Indenture Act in order to have the claims of the Holders and any predecessor to the Trustee under Section 6.7 allowed in any such judicial proceedings; and (ii) in particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same in accordance with Section 5.7; and (b) any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee for distribution in accordance with Section 5.7, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it and any predecessor Trustee under Section 6.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. SECTION 5.6. Trustee May Enforce Claim Without Possession of Securities. All rights of action and claims under this Indenture or the Securities or the Guarantees may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the Guarantees -38- or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, subject to Article XII and after provision for the payment of all the amounts owing the Trustee and any predecessor Trustee under Section 6.7, its agents and counsel, be for the ratable benefit of the Holders of Securities in respect of which such judgment has been recovered. SECTION 5.7. Application of Money Collected. Any money or property collected or to be applied by the Trustee with respect to the Securities or the Guarantees thereon pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal (or premium, if any) or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 6.7; SECOND: Subject to Article XII, to the payment of the amounts then due and unpaid upon the Securities for principal (and premium, if any) and interest (including any Additional Interest) in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal (and premium, if any) and interest (including any Additional Interest), respectively; and THIRD: The balance, if any, to the Person or Persons entitled thereto. SECTION 5.8. Limitation on Suits. Subject to Section 5.9, no Holder of Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless: (1) such Holder has previously given written notice to the Trustee of a continuing Debenture Default with respect to the Securities; (2) the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Debenture Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect, disturb or -39- prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 5.9. Unconditional Right of Holders to Receive Principal, Premium and Interest; Direct Action by Holders of Capital Securities. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Sections 3.8 and 3.12) interest (including any Additional Interest) on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. So long as the Securities are held by the Issuer Trust, any registered holder of the corresponding Capital Securities shall have the right, upon the occurrence of a Debenture Default, to institute a suit directly against the Corporation or the Guarantor for enforcement of payment to such holder of principal of (premium, if any) and (subject to Sections 3.8 and 3.12) interest (including any Additional Interest) on the Securities having a principal amount equal to the aggregate Liquidation Amount of such Capital Securities held by such holder. SECTION 5.10. Restoration of Rights and Remedies. If the Trustee, any Holder or any holder of Capital Securities has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee, such Holder or such holder of Capital Securities, then and in every such case the Corporation, the Guarantor, the Trustee, such Holders and such holder of Capital Securities shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee, such Holder and such holder of Capital Securities shall continue as though no such proceeding had been instituted. SECTION 5.11. Rights and Remedies Cumulative. Except as otherwise provided in the last paragraph of Section 3.7, no right or remedy herein conferred upon or reserved to the Trustee or the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.12. Delay or Omission Not Waiver. No delay or omission of the Trustee, any Holder of any Security or any holder of any Capital Security to exercise any right or remedy accruing upon any Debenture Default shall impair any such right or remedy or constitute a waiver of any such Debenture Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders and the right and remedy given to the holders of Capital Securities by Section 5.9 may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Holders or the holders of Capital Securities, as the case may be. -40- SECTION 5.13. Control by Holders. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities and the holders of a majority in liquidation amount of the Capital Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, with respect to the Securities, provided that: (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction, and (3) subject to the provisions of Section 6.1, the Trustee shall have the right to decline to follow such direction if a Responsible Officer or Officers of the Trustee shall, in good faith, determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability. SECTION 5.14. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities affected thereby and, in the case of any Securities held by the Issuer Trust, the holders of a majority in aggregate Liquidation Amount of the Capital Securities may waive any past default hereunder and its consequences with respect to the Securities except a default: (1) in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security (unless such default has been cured and the Corporation or Guarantor has paid to or deposited with the Trustee a sum sufficient to pay all matured installments of interest (including any Additional Interest) and all principal of (and premium, if any, on) all Securities due otherwise than by acceleration), or (2) in respect of a covenant or provision hereof that under Article IX cannot be modified or amended without the consent of each Holder of any Outstanding Security affected. Any such waiver shall be deemed to be on behalf of the Holders of all the Securities or, in the case of a waiver by holders of Capital Securities, by all holders of Capital Securities. Upon any such waiver, such default shall cease to exist, and any Debenture Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 5.15. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to -41- any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in aggregate principal amount of the Outstanding Securities, or to any suit instituted by any Holder or registered holder of Capital Securities for the enforcement of the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security on or after the respective Stated Maturities expressed in such Security. SECTION 5.16. Waiver of Usury, Stay or Extension Laws. Each of the Corporation and the Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and each of the Corporation and the Guarantor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VI THE TRUSTEE SECTION 6.1. Certain Duties and Responsibilities. (a) Except during the continuance of a Debenture Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions that by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case a Debenture Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct except that (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and -42- (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of Holders pursuant to Section 5.13 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 6.2. Notice of Defaults. Within 90 days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to the Securities, the Trustee shall transmit by mail to all Holders of Securities, as their names and addresses appear in the Securities Register, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of Securities; and provided, further, that, in the case of any default of the character specified in Section 5.2(3), no such notice to Holders of Securities shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event that is, or after notice or lapse of time or both would become, a Debenture Default with respect to the Securities. SECTION 6.3. Certain Rights of Trustee. Subject to the provisions of Section 6.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, Security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Corporation or the Guarantor mentioned herein shall be sufficiently evidenced by a Corporation or Guarantor Request or Corporation or Guarantor Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; -43- (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, indenture, Security or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Corporation, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 6.4. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Corporation and the Guarantor, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Corporation of the Securities or the proceeds thereof. SECTION 6.5. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Securities Registrar or any other agent of the Corporation or the Guarantor, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.8 and 6.13, may otherwise deal with the Corporation or the Guarantor with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar or such other agent. SECTION 6.6. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Corporation or the Guarantor. SECTION 6.7. Compensation and Reimbursement. Each of the Corporation and the Guarantor agrees -44- (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amounts as the Corporation and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense (including the reasonable compensation and the expenses and disbursements of its agents and counsel) incurred without negligence or bad faith, arising out of or in connection with the acceptance or administration of this trust or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. This indemnification shall survive the termination of this Indenture. When the Trustee incurs expenses or renders services after a Debenture Event of Default specified in Section 5.1(2) or 5.1(3) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Bankruptcy Reform Act of 1978 or any successor statute. SECTION 6.8. Disqualification; Conflicting Interests. (a) The Trustee for the Securities issued hereunder shall be subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the second to last paragraph of said Section 310(b). (b) The Trust Agreement and the Guarantee Agreement shall be deemed to be specifically described in this Indenture for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. SECTION 6.9. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be: (a) a corporation organized and doing business under the laws of the United States or of any State or Territory or the District of Columbia or the Commonwealth of Puerto Rico, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal, State, Territorial, District of Columbia or Puerto Rican authority, or (b) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the Commission, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, in either case having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purposes of this -45- Section 6.9, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI. Neither the Corporation, the Guarantor nor any Person directly or indirectly controlling, controlled by or under common control with the Corporation or the Guarantor shall serve as Trustee for the Securities issued hereunder. SECTION 6.10. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article VI shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (b) The Trustee may resign at any time by giving written notice thereof to the Corporation and the Guarantor. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, delivered to the Trustee and to the Corporation and the Guarantor. (d) If at any time: (1) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Corporation, the Guarantor or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Corporation, the Guarantor or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Corporation, acting pursuant to the authority of a Board Resolution, may remove the Trustee, or (ii) subject to Section 5.15, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Corporation, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities delivered to the Corporation, the Guarantor and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such -46- appointment, become the successor Trustee and supersede the successor Trustee appointed by the Corporation. If no successor Trustee shall have been so appointed by the Corporation or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, subject to Section 5.15, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities. (f) The Corporation shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses appear in the Securities Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 6.11. Acceptance of Appointment by Successor. (a) Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Corporation, the Guarantor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Corporation, the Guarantor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) Upon request of any such successor Trustee, the Corporation and the Guarantor shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in paragraph (a) of this Section. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have. -47- SECTION 6.13. Preferential Collection of Claims Against Corporation or Guarantor. If and when the Trustee shall be or become a creditor of the Corporation or the Guarantor (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Corporation or the Guarantor (or any such other obligor). SECTION 6.14. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents, which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Corporation and shall at all times be a corporation organized and doing business under the laws of the United States, or of any State or Territory thereof or the District of Columbia or the Commonwealth of Puerto Rico, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal, State, Territorial, District of Columbia or Puerto Rican authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Corporation and the Guarantor. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Corporation and the Guarantor. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent, which shall be acceptable to the Corporation and shall give notice of such appointment in the manner provided in Section 1.6 to all Holders of Securities. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provision of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 6.7. -48- If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities described in the within-mentioned Indenture. Dated: J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: ------------------------------------- As Authenticating Agent By: ------------------------------------- Authorized officer ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND CORPORATION SECTION 7.1. Corporation to Furnish Trustee Names and Addresses of Holders. The Corporation will furnish or cause to be furnished to the Trustee: (a) semi-annually, on or before June 30 and December 31 of each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Corporation of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the corporation and has not otherwise been received by the Trustee in its capacity as Securities Registrar. SECTION 7.2. Preservation of Information, Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Securities Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished. -49- (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided in the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Corporation, the Guarantor and the Trustee that none of the Corporation, the Guarantor nor the Trustee nor any agent of any of them shall be held accountable by reason of the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act. SECTION 7.3. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act, at the times and in the manner provided pursuant thereto. (b) Reports so required to be transmitted at stated intervals of not more than 12 months shall be transmitted no later than January 31 in each calendar year. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each securities exchange upon which any Securities are listed and also with the Commission. The Corporation will notify the Trustee when any Securities are listed on any securities exchange. SECTION 7.4. Reports by Corporation. The Corporation and the Guarantor shall file with the Trustee and with the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided in the Trust Indenture Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is required to be filed with the Commission. Notwithstanding that the Guarantor may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Guarantor shall continue to file with the Commission and provide the Trustee with the annual reports and the information, documents and other reports which are specified in Sections 13 and 15(d) of the Exchange Act. The Corporation and the Guarantor also shall comply with the other provisions of Trust Indenture Act Section 314(a). ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 8.1. Corporation and Guarantor May Consolidate, Etc., Only on Certain Terms. Neither the Guarantor nor the Corporation shall consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and no Person shall consolidate with or merge into the Guarantor or the Corporation or convey, transfer or lease its properties and assets substantially as an entirety to the Guarantor or the Corporation, unless: -50- (1) if the Guarantor or the Corporation shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the corporation formed by such consolidation or into which the Guarantor or the Corporation is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of the Guarantor or the Corporation substantially as an entirety shall be a corporation, partnership or trust organized and existing under the laws of the United States or any State or Territory thereof or the District of Columbia or the Commonwealth of Puerto Rico and shall, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, (i) in the case of the Guarantor, expressly guarantee, or (ii) in the case of the Corporation, expressly assume, the due and punctual payment of the principal of (and premium, if any) and interest (including any Additional Interest) on all the Securities and the performance of every covenant of this Indenture on the part of the Guarantor or the Corporation, as the case may be, to be performed or observed (and in the event such Person is organized and existing under the laws of the Commonwealth of Puerto Rico, such Person accepts the additional obligation to make such payments without withholding of, or deduction for, any taxes, of whatever nature imposed or levied by or on behalf of the Commonwealth of Puerto Rico); (2) immediately after giving effect to such transaction, no Debenture Default, and no event that, after notice or lapse of time, or both, would constitute a Debenture Default, shall have happened and be continuing; and (3) the Guarantor or the Corporation, as the case may be, has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and any such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with; and the Trustee, subject to Section 6.1, may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1. SECTION 8.2. Successor Corporation Substituted. Upon any consolidation or merger by the Guarantor or the Corporation, as the case may be, with or into any other Person, or any conveyance, transfer or lease by the Guarantor or the Corporation of its properties and assets substantially as an entirety to any Person in accordance with Section 8.1, the successor corporation formed by such consolidation or into which the Guarantor or the Corporation, as the case may be, is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Guarantor or the Corporation, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Guarantor or the Corporation, as the case may be, herein; and in the event of any such conveyance, transfer or lease the Guarantor or the Corporation, as the case may be, shall be discharged from all obligations and covenants under this Indenture and the Securities and the Guarantees, as the case may be. Such successor Person may cause to be executed, and may issue either in its own name or in the name of the Corporation, any or all of the Securities issuable hereunder that theretofore shall not have been signed by the Corporation, and having endorsed thereon Guarantees duly executed by the Guarantor, and delivered to the Trustee; and, upon the order of such successor Person instead of the Corporation and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities having endorsed thereon Guarantees duly executed by the Guarantor, that previously shall have been signed and delivered by the officers of the Corporation to the Trustee for authentication pursuant to such provisions and any Securities that such successor Person thereafter shall cause to be executed and delivered to the Trustee on its behalf for the purpose pursuant to -51- such provisions. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture. In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Corporation and the Guarantor, when authorized by Board Resolutions, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Corporation or the Guarantor, and the assumption by any such successor of the covenants of the Corporation or Guarantor herein and in the Securities and Guarantees contained; or (2) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to surrender any right or power herein conferred upon the Corporation or Guarantor; or (3) to add to the covenants of the Corporation or the Guarantor for the benefit of the Holders of Securities or to surrender any right or power herein conferred upon the Corporation or the Guarantor; or (4) to add any additional Debenture Events of Default and Debenture Defaults for the benefit of the Holders of Securities; or (5) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this clause (5) shall not adversely affect the interest of the Holders of Securities in any material respect or, for so long as any of the Capital Securities shall remain outstanding, the holders of such Capital Securities; or (6) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11(b); or (7) to comply with the requirements of the Commission in order to effect or maintain qualification of this Indenture under the Trust Indenture Act. SECTION 9.2. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities, by Act of said Holders delivered to the Corporation, the Guarantor and the -52- Trustee, the Corporation, when authorized by a Board Resolution, the Guarantor, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security, (1) except to the extent permitted by Section 3.11 with respect to the deferral of the payment of interest on the Securities, change the Stated Maturity of the principal of, or any installment of interest (including any Additional Interest) on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the Redemption Date, redemption events or Redemption Prices, or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or (2) reduce the percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 5.4 or Section 10.5, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; provided, further, that, so long as any of the Capital Securities remains outstanding, (i) no such modification or amendment shall be made that adversely affects the holders of such Capital Securities in any material respect, and no termination of this Indenture shall occur, and no waiver of any Debenture Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate Liquidation Amount of such Capital Securities then outstanding unless and until the principal of (and premium, if any, on) the Securities and all accrued and (subject to Section 3.8) unpaid interest (including any Additional Interest) thereon have been paid in full, and (ii) no amendment shall be made to Section 5.9 of this Indenture that would impair the rights of the holders of Capital Securities provided therein without the prior consent of the holders of each Capital Security then outstanding unless and until the principal of (and premium, if any, on) the Securities and all accrued and (subject to Section 3.12) unpaid interest (including any Additional Interest) thereon have been paid in full. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 9.3. Execution of Supplemental Indentures. In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent herein provided for relating to -53- such action have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 9.4. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 9.5. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 9.6. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Corporation, bear a notation in form approved by the Corporation as to any matter provided for in such supplemental indenture. If the Corporation shall so determine, new Securities so modified as to conform, in the opinion of the Corporation, to any such supplemental indenture may be prepared and executed by the Corporation and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE X COVENANTS SECTION 10.1. Payment of Principal, Premium and Interest. The Corporation covenants and agrees that it will duly and punctually pay the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities in accordance with the terms of such Securities and this Indenture. SECTION 10.2. Maintenance of Office or Agency. The Corporation will maintain in each Place of Payment for the Securities an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Corporation in respect of the Securities and this Indenture may be served. The Corporation initially appoints the Trustee, acting through its Corporate Trust Office, as its agent for said purposes. The Corporation will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Corporation shall fail to maintain such office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Corporation hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. -54- The Corporation may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Corporation of its obligation to maintain an office or agency in each Place of Payment for the Securities for such purposes. The Corporation will give prompt written notice to the Trustee of any such designation and any change in the location of any such office or agency. SECTION 10.3. Money for Security Payments to be Held in Trust. If the Corporation shall at any time act as its own Paying Agent with respect to the Securities, it will, on or before each due date of the principal of (and premium, if any, on) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its failure so to act. Whenever the Corporation shall have one or more Paying Agents, it will, prior to 10:00 a.m., New York City time, on each due date of the principal of (or premium, if any) or interest (including any Additional Interest) on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest (including any Additional Interest) so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal (and premium, if any) or interest (including any Additional Interest), and (unless such Paying Agent is the Trustee) the Corporation will promptly notify the Trustee of its failure so to act. The Corporation will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest (including any Additional Interest) on the Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Corporation (or any other obligor upon such Securities) in the making of any payment of principal (and premium, if any) or interest (including any Additional Interest); (3) at any time during the continuance of any default with respect to the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and (4) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent. The Corporation may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Corporation Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Corporation or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Corporation or such Paying -55- Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Corporation in trust for the payment of the principal of (and premium, if any) or interest (including any Additional Interest) on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Corporation Request to the Corporation, or (if then held by the Corporation) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Corporation for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Corporation as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Corporation cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Corporation. SECTION 10.4. Statement as to Compliance. Each of the Corporation and the Guarantor shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Corporation or the Guarantor, respectively, ending after the date hereof, an Officers' Certificate covering the preceding calendar year, stating whether or not to the best knowledge of the signers thereof the Corporation or the Guarantor, respectively, is in default in the performance, observance or fulfillment of or compliance with any of the terms, provisions, covenants and conditions of this Indenture, and if the Corporation or the Guarantor, respectively, shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. For the purpose of this Section 10.4, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. SECTION 10.5. Waiver of Certain Covenants. Subject to the rights of holders of Capital Securities specified in Section 9.2, if any, the Corporation or the Guarantor, as the case may be, may omit in any particular instance to comply with any covenant or condition provided pursuant to Section 9.1(3) with respect to the Securities, if before or after the time for such compliance the Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Corporation or the Guarantor, as the case may be, in respect of any such covenant or condition shall remain in full force and effect. SECTION 10.6. Additional Sums. If, at any time while the Issuer Trust is the Holder of the Securities, the Issuer Trust is required to pay any Additional Taxes, the Corporation shall pay any and all additional amounts ("Additional Sums") that are required so that the amounts then due and payable by the Issuer Trust on the Capital Securities -56- and Common Securities that at any time remain outstanding in accordance with the terms thereof shall not be reduced as a result of such Additional Taxes. Whenever in this Indenture, the Securities or the Guarantees there is a reference in any context to the payment of principal of or interest on the Securities, such mention shall be deemed to include mention of the payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided, however, that the deferral of the payment of interest pursuant to Section 3.12 or the Securities shall not defer the payment of any Additional Sums that may be due and payable. SECTION 10.7. Additional Covenants. Each of the Corporation and the Guarantor covenants and agrees with each Holder of Securities that it shall not, and shall not permit any of its subsidiaries, (x) declare or pay any dividends or distributions on, or redeem purchase, acquire or make a liquidation payment with respect to, any shares of the Corporation's or the Guarantor's capital stock, or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Corporation or the Guarantor (including other Securities) that rank pari passu in all respects with or junior in interest to the Securities or the Guarantees, respectively, or (z) make any guarantee payments with respect to any guarantee by the Corporation or the Guarantor of the debt securities of any Subsidiary of the Corporation or the Guarantor if such guarantee ranks pari passu with or junior in interest to the Securities or the Guarantees (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Corporation or the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors, consultants or independent contractors, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Corporation or the Guarantor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of an exchange or conversion of any class or series of the Corporation's or the Guarantor's capital stock (or any capital stock of a Subsidiary of the Corporation or the Guarantor) for any class or series of the Corporation's or the Guarantor's capital stock, respectively, or of any class or series of the Corporation's or the Guarantor's indebtedness for any class or series of the Corporation's or the Guarantor's capital stock, respectively, (c) the purchase of fractional interests in shares of the Corporation's or the Guarantor's capital stock, respectively, pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan, or the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock) if at such time (i) there shall have occurred any event (A) of which the Corporation or the Guarantor has actual knowledge that would constitute a Debenture Default with respect to the Securities, and (B) which the Corporation and the Guarantor shall not have taken reasonable steps to cure, (ii) if the Securities are held by the Issuer Trust, the Corporation or the Guarantor shall be in default with respect to its payment of any obligations under the Guarantee Agreement relating to the Capital Securities, or the Guarantor shall be in default with respect to its payment of any obligations under the Guarantees or (iii) the Corporation shall have given notice of its election to begin an Extension Period with respect to the Securities as provided herein and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing. -57- The Corporation also covenants with each Holder of Securities issued to the Issuer Trust (i) to hold, directly or indirectly, 100% of the Common Securities, provided that any permitted successor of the Corporation hereunder may succeed to the Corporation's ownership of the Common Securities, (ii) as holder of the Common Securities, not to voluntarily terminate, wind-up or liquidate the Issuer Trust, other than (a) in connection with a distribution of the Securities to the holders of the Capital Securities in liquidation of the Issuer Trust, or (b) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement, and (iii) to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause the Issuer Trust to be characterized as a grantor trust for United States Federal income tax purposes and to not be required to register as an "investment company" under the Investment Company Act. ARTICLE XI REDEMPTION OF SECURITIES SECTION 11.1. Applicability of This Article. Redemption of Securities as permitted or required by the form of Security issued pursuant to this Indenture shall be made in accordance with the form of Security and this Article; provided, however, that if any provision of the form of Security shall conflict with any provision of this Article, the provision of the form of Security shall govern. Each Security shall be subject to partial redemption only in the amount of $1,000 or any integral multiples thereof. SECTION 11.2. Election to Redeem; Notice to Trustee. The election of the Corporation to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Corporation of less than all Securities, the Corporation shall, not less than 30 nor more than 60 days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such date and of the principal amount of Securities to be redeemed and provide the additional information required to be included in the notice or notices contemplated by Section 11.4; provided that in the case of any Securities held by the Issuer Trust, such notice shall be given to the Property Trustee under the Trust Agreement, not less than 45 nor more than 75 days prior to such Redemption Date (unless a shorter notice shall be satisfactory to the Property Trustee under the Trust Agreement). In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities, the Corporation shall furnish the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing compliance with such restriction. SECTION 11.3. Selection of Securities to be Redeemed. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security, provided that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. -58- The Trustee shall promptly notify the Corporation in writing of the Securities selected for partial redemption and the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security that has been or is to be redeemed. SECTION 11.4. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not later than the thirtieth day, and not earlier than the sixtieth day, prior to the Redemption Date, to each Holder of Securities to be redeemed, at the address of such Holder as it appears in the Securities Register, provided that in the case of any Securities held by the Issuer Trust, such notice shall be given not less than 45 nor more than 75 days prior to such Redemption Date (unless a shorter notice shall be satisfactory to the Property Trustee under the Trust Agreement). With respect to Securities to be redeemed, each notice of redemption shall state: (a) the Redemption Date; (b) the Redemption Price or, if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, the estimate of the Redemption Price together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the third Business Day prior to the Redemption Date (and if an estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated); (c) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Securities to be redeemed; (d) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that interest (including any Additional Interest) thereon, if any, shall cease to accrue on and after said date; and (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Corporation shall be given by the Corporation or, at the Corporation's request, by the Trustee in the name and at the expense of the Corporation and shall be irrevocable. The notice if mailed in the manner provided above shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. SECTION 11.5. Deposit of Redemption Price. Prior to 10:00 a.m., New York City time, on the Redemption Date specified in the notice of redemption given as provided in Section 11.4, the Corporation will deposit with the Trustee or with one or more Paying Agents (or if the Corporation is acting as its own Paying Agent, the Corporation will segregate and hold in trust as provided in Section 10.3) an amount of money sufficient to pay the -59- Redemption Price of, and any accrued interest (including any Additional Interest) on, all the Securities (or portions thereof) that are to be redeemed on that date. SECTION 11.6. Payment of Securities Called for Redemption. If any notice of redemption has been given as provided in Section 11.4, the Securities or portion of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date. On presentation and surrender of such Securities at a Place of Payment in said notice specified, the said Securities or the specified portions thereof shall be paid and redeemed by the Corporation at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date; provided, however, that, installments of interest (including any Additional Interest) whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant record dates according to their terms and the provisions of Section 3.8. Upon presentation of any Security redeemed in part only, the Corporation shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Corporation, a new Security or Securities, of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Original Issue Date, Stated Maturity and terms. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and premium, if any, on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. SECTION 11.7. Right of Redemption of Securities Initially Issued to an Issuer Trust. The Corporation may, at its option, subject to the Corporation having received prior approval of the Federal Reserve if then required under applicable capital guidelines or policies, redeem the Securities in whole at any time or in part from time to time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Security being redeemed or (ii) as determined by a Quotation Agent (as defined below), the sum of the present values of scheduled payments of principal and interest for the Remaining Life (as defined below) of the Securities being redeemed, discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus ____% (as defined below), plus, in the case of either (i) or (ii), accrued and unpaid interest thereon to the Redemption Date. "Remaining Life" means, with respect to an optional redemption of the Securities, the period from the Redemption Date through ____, 2034. "Treasury Rate" means (i) the yield, under the heading which represents the average for the immediately prior week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Remaining Life (if no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Remaining Life shall be determined -60- and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price of the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, The Treasury Rate shall be calculated on the third Business Day preceding the Redemption Date. "Comparable Treasury Issue" means, with respect to any Redemption Date, the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the Remaining Life that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the Remaining Life. If no United States Treasury security has a maturity which is within a period from three months before to three months after __________, 2034, the two most closely corresponding United States Treasury securities shall be used as the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or extrapolated on a straight-line basis, rounding to the nearest month using such securities. "Quotation Agent" means each of Credit Suisse First Boston LLC and J.P. Morgan Securities Inc. and their respective successors; provided, however, that if the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Corporation shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any other Primary Treasury Dealer selected by the Trustee after consultation with the Corporation. "Comparable Treasury Price" means (A) if the Trustee obtains five Reference Treasury Dealer Quotations, the average of three Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations obtained, or (B) if the Trustee obtains fewer than five Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date. In addition, upon the occurrence and during the continuation of a Tax Event, Capital Treatment Event or Investment Company Event in respect of the Issuer Trust, the Corporation may, at its option, subject to its having received prior approval of the Federal Reserve if then required under applicable capital guidelines or policies, at any time within 90 days following the occurrence and during the continuation of such Tax Event, Capital Treatment Event or Investment Company Event, as the case may be, redeem this Security, in whole but not in part, subject to the terms and conditions of Article XI of the Indenture, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest thereon to the date of redemption. If less than all the Securities are to be redeemed, the aggregate principal amount of such Securities remaining Outstanding after giving effect to such redemption shall be sufficient to satisfy any provisions of the Trust Agreement, including any requirement in the Trust Agreement as to the minimum Liquidation Amount of Capital Securities that may be held by a holder of Capital Securities thereunder. -61- ARTICLE XII SUBORDINATION OF SECURITIES SECTION 12.1. Securities Subordinate to Senior Debt. Each of the Corporation and the Guarantor covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the payment of the principal of (and premium, if any) and interest (including any Additional Interest) on each and all of the Securities and payments under the Guarantees are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Debt of the Corporation and the Guarantor, respectively. SECTION 12.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc. If the Corporation or the Guarantor shall default in the payment of any principal of (or premium, if any) or interest on any of its respective Senior Debt when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise (whether or not acceleration is declared), or if any judicial proceeding with respect to any such payment default is continuing, then unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of (or premium, if any) or interest (including any Additional Interest) on any of the Securities or the Guarantees, respectively, or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the Securities. In the event of (a) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceedings relating to either of the Corporation or the Guarantor, its creditors or its property, (b) any proceeding for the liquidation, dissolution or other winding up of the Corporation or the Guarantor, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings, (c) any assignment by the Corporation or the Guarantor for the benefit of creditors or (d) any other marshalling of the assets of the Corporation or the Guarantor (each such event, if any, herein sometimes referred to as a "Proceeding"), all Senior Debt of the Corporation or the Guarantor, as the case may be (including any interest thereon accruing after the commencement of any such proceedings), shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to any Holder of any of the Securities on account thereof. Any payment or distribution, whether in cash, securities or other property (other than securities of the Corporation or the Guarantor or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities and the Guarantees, as the case may be, to the payment of all Senior Debt of the Corporation or the Guarantor, respectively, at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Securities or the Guarantees thereon, as the case may be, shall be paid or delivered directly to the holders of Senior Debt of the Corporation or the Guarantor, respectively, in accordance with the priorities then existing among such holders until all such Senior Debt (including any interest thereon accruing after the commencement of any Proceeding) shall have been paid in full. -62- In the event of any Proceeding, after payment in full of all sums owing with respect to the Corporation's or the Guarantor's Senior Debt, as the case may be, the Holders of Securities, together with the holders of any obligations of the Corporation or the Guarantor, as the case may be, ranking on a parity with the Securities or the Guarantees, respectively (which for this purpose only shall include the Allocable Amounts of Senior Subordinated Indebtedness), shall be entitled to be paid from the remaining assets of the Corporation or the Guarantor, as the case may be, the amounts at the time due and owing on account of unpaid principal of (and premium, if any) and interest on the Securities or the Guarantees, as the case may be, and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or any obligations of the Corporation or the Guarantor, respectively, ranking junior to the Securities or the Guarantees, as the case may be, and such other obligations. If, notwithstanding the foregoing, any payment or distribution of any character or any security, whether in cash, securities or other property (other than securities of the Corporation or the Guarantor or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities and the Guarantees, as the case may be, to the payment of all Senior Debt of the Corporation or the Guarantor, respectively, at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), shall be received by the Trustee or any Holder in contravention of any of the terms hereof and before all Senior Debt of the Corporation or the Guarantor, as the case may be, shall have been paid in full, such payment or distribution or security shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Debt of the Corporation or the Guarantor, as the case may be, at the time outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Debt of the Corporation or the Guarantor, as the case may be, remaining unpaid, to the extent necessary to pay all such Senior Debt of the Corporation or the Guarantor, as the case may be, in full. In the event of the failure of the Trustee or any Holder to endorse or assign any such payment, distribution or security, each holder of Senior Debt of the Corporation or the Guarantor, as the case may be, is hereby irrevocably authorized to endorse or assign the same. The Trustee and the Holders shall take such action (including, without limitation, the delivery of this Indenture to an agent for the holders of Senior Debt of the Corporation or the Guarantor, as the case may be, or consent to the filing of a financing statement with respect hereto) as may, in the opinion of counsel designated by the holders of a majority in principal amount of the Senior Debt of the Corporation or the Guarantor, as the case may be, at the time outstanding, be necessary or appropriate to assure the effectiveness of the subordination effected by these provisions. The provisions of this Section 12.2 shall not impair any rights, interests, remedies or powers of any secured creditor of the Corporation or the Guarantor in respect of any security interest the creation of which is not prohibited by the provisions of this Indenture. The securing of any obligations of the Corporation or the Guarantor, as the case may be, otherwise ranking on a parity with the Securities or Guarantees, respectively, or ranking junior to the Securities or Guarantees, respectively, shall not be deemed to prevent such obligations from constituting, respectively, obligations ranking on a parity with the Securities or Guarantees, as the case may be, or ranking junior to the Securities or the Guarantees, as the case may be. SECTION 12.3. Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities or Guarantees shall prevent (a) the Corporation or the Guarantor, at any time, except during the pendency of -63- the conditions described in the first paragraph of Section 12.2 or of any Proceeding referred to in Section 12.2, from making payments at any time of principal of (and premium, if any) or interest (including any Additional Interest) on the Securities or the Guarantees, respectively, or (b) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of (and premium, if any) or interest (including any Additional Interest) on the Securities or the Guarantees, as the case may be, or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article. SECTION 12.4. Subrogation to Rights of Holders of Senior Debt. Subject to the payment in full of all amounts due or to become due on all Senior Debt of the Corporation or the Guarantor, as the case may be, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt of the Corporation or the Guarantor, as the case may be, the Holders of Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt pursuant to the provisions of this Article (equally and ratably with the holders of all indebtedness of the Corporation or the Guarantor, as the case may be, that by its express terms is subordinated to Senior Debt of the Corporation or the Guarantor, as the case may be, to substantially the same extent as the Securities and the Guarantees, respectively, are subordinated to the Senior Debt of the Corporation or the Guarantor, as the case may be, and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt) to the rights of the holders of such Senior Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt of the Corporation or the Guarantor, as the case may be, until the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities or the Guarantees, respectively, shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of the Corporation or the Guarantor, as the case may be, of any cash, property or securities to which the Holders of Securities or the Guarantees, as the case may be, or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Debt of the Corporation or the Guarantor, as the case may be, by Holders of Securities, or the Trustee, shall, as among the Corporation or the Guarantor, as the case may be, its creditors other than holders of its Senior Debt, and the Holders of Securities, be deemed to be a payment or distribution by the Corporation or the Guarantor, as the case may be, to or on account of its Senior Debt. SECTION 12.5. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of Securities on the one hand and the holders of Senior Debt of the Corporation and the Guarantor, respectively, on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities or Guarantees, as the case may be, is intended to or shall (a) impair, as between the Corporation or the Guarantor, as the case may be, and the Holders of Securities, the obligations of the Corporation or the Guarantor, as the case may be, which are absolute and unconditional, to pay to the Holders of Securities the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities or the Guarantees, as the case may be, as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Corporation or the Guarantor, as the case may be, of the Holders of Securities and creditors of the Corporation and the Guarantor, respectively, other than their rights in relation to the holders of Senior Debt of the Corporation or the Guarantor, as the case may be; or (c) prevent the Trustee or the Holder of any Security (or to the extent expressly provided herein, the holder of any Capital Security) from -64- exercising all remedies otherwise permitted by applicable law upon default under this Indenture, including filing and voting claims in any Proceeding, subject to the rights, if any, under this Article of the holders of Senior Debt of the Corporation or the Guarantor, as the case may be, to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. SECTION 12.6. Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. SECTION 12.7. No Waiver of Subordination Provisions. No right of any present or future holder of any of the Corporation's or the Guarantor's Senior Debt, as the case may be, to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Corporation or the Guarantor, as the case may be, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Corporation or the Guarantor, as the case may be, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. Without in any way limiting the generality of the immediately preceding paragraph, the holders of the Corporation's or the Guarantor's Senior Debt, as the case may be, may, at any time and from to time, without the consent of or notice to the Trustee or the Holders of Securities, without incurring responsibility to such Holders of Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of such Holders of Securities to the holders of the Corporation's and the Guarantor's Senior Debt, respectively, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt of the Corporation or the Guarantor, as the case may be, or otherwise amend or supplement in any manner such Senior Debt or any instrument evidencing the same or any agreement under which such Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt of the Corporation or the Guarantor, as the case may be; (iii) release any Person liable in any manner for the collection of Senior Debt of the Corporation or the Guarantor, as the case may be; and (iv) exercise or refrain from exercising any rights against the Corporation, the Guarantor and any other Person. SECTION 12.8. Notice to Trustee. The Corporation or the Guarantor, as the case may be, shall give prompt written notice to the Trustee of any fact known to the Corporation or the Guarantor, as the case may be, that would prohibit the making of any payment to or by the Trustee in respect of the Securities and the Guarantees, respectively. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment to or by the Trustee in respect of the Securities or the Guarantees, unless and until the Trustee shall have received written notice thereof from the Corporation or the Guarantor, as the case may be, or a holder of the Corporation's or the Guarantor's Senior Debt, as the case may be, or from any trustee, agent or representative therefor; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof -65- any monies may become payable for any purpose (including, the payment of the principal of (and premium, if any, on) or interest (including any Additional Interest) on any Security or any Guarantee), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. Subject to the provisions of Section 6.1, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or herself to be a holder of Senior Debt of the Corporation or the Guarantor, as the case may be (or a trustee or attorney-in-fact therefor), to establish that such notice has been given by a holder of Senior Debt of the Corporation or the Guarantor, as the case may be (or a trustee or attorney-in-fact therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt of the Corporation or the Guarantor, as the case may be, to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt of the Corporation or the Guarantor, as the case may be, held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 12.9. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Corporation or the Guarantor referred to in this Article, the Trustee, subject to the provisions of Section 6.1, and the Holders of Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Corporation or the Guarantor, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. SECTION 12.10. Trustee Not Fiduciary for Holders of Senior Debt. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of the Corporation's or the Guarantor's Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or Guarantees, as the case may be, or to the Corporation or the Guarantor, as the case may be, or to any other Person cash, property or securities to which any holders of Corporation's or the Guarantor's Senior Debt, as the case may be, shall be entitled by virtue of this Article or otherwise. SECTION 12.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Debt of the Corporation or the Guarantor, as the case may be, that may at any time be held by it, to the same extent as any other holder of Senior Debt of the Corporation and the Guarantor, respectively, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. -66- SECTION 12.12. Article Applicable to Paying Agents. If at any time any Paying Agent other than the Trustee shall have been appointed by the Corporation and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. * * * * 67 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. POPULAR NORTH AMERICA, INC. By: ------------------------------------- Name: Title: POPULAR, INC. By: ------------------------------------- Name: Title: Attest: - --------------------------------- J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION as Trustee By: ------------------------------------- Name: Title: Attest: - --------------------------------- 68 EX-4.(B) 4 g90482a2exv4wxby.txt EX-4(B) CERTIFICATE OF TRUST EXHIBIT 4(b) CERTIFICATE OF TRUST OF POPULAR NORTH AMERICA CAPITAL TRUST I THIS Certificate of Trust of Popular North America Capital Trust I (the "Trust") is being duly executed and filed by the undersigned, being all the trustees, to form a statutory trust under the Delaware Statutory Trust Act (12 Del. C. ss.3801 et seq.)(the "Act"). 1. Name. The name of the statutory trust formed hereby is Popular North America Capital Trust I. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware is Chase Manhattan Bank USA, National Association, 500 Stanton Christiana Road, 3rd Floor/OPS4, Newark, Delaware 19713. 3. Effective Date. This Certificate of Trust shall be effective upon filing. IN WITNESS WHEREOF, the undersigned have duly executed this Certificate in accordance with Section 3811(a) of the Act. CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION, as Trustee By: /s/ John J. Cashin -------------------------------- Name: John J. Cashin Title: Vice President /s/ Jorge A. Junquera , as Trustee ----------------------- Name: Jorge A. Junquera /s/ Richard Barrios , as Trustee ----------------------- Name: Richard Barrios -4- EX-4.(C) 5 g90482a2exv4wxcy.txt EX-4(C) TRUST AGREEMENT Exhibit 4(c) TRUST AGREEMENT, dated as of September 8, 2004, by and between Popular North America, Inc., a Delaware corporation, as "Depositor", Popular, Inc., a Puerto Rico corporation, as "Guarantor", and Jorge A. Junquera, Richard Barrios and Chase Manhattan Bank USA, National Association, as "Trustees". The Depositor, the Guarantor and the Trustees hereby agree as follows: Section 1. The Trust. The trust created hereby shall be known as Popular North America Capital Trust I (the "Trust"), in which name the Trustees, or the Depositor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. Section 2. The Trust Estate. The Depositor hereby assigns, transfers, conveys and sets over to the Trust the sum of $10. The Trustees hereby acknowledge receipt of such amount in trust from the Depositor, which amount shall constitute the initial trust estate. The Trustees hereby declare that they will hold the trust estate in trust for the Depositor. It is the intention of the parties hereto that the Trust created hereby constitute a statutory trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801 et seq. (the "Statutory Trust Act"), and that this document constitutes the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State in accordance with the provisions of the Statutory Trust Act in the form attached hereto as Exhibit A. Section 3. Amended and Restated Trust Agreement. The Depositor, the Guarantor, the Trustees and certain other parties will enter into an amended and restated Trust Agreement, satisfactory to each such party and substantially in the form to be included as an exhibit to the 1933 Act Registration Statement (as defined below), to provide for the contemplated operation of the Trust created hereby and the issuance of the Capital Securities (as defined below) and common securities of the Trust to be referred to therein. Prior to the execution and delivery of such amended and restated Trust Agreement, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise. Section 4. Certain Authorizations. The Depositor, the Guarantor and the Trustees hereby authorize and direct the Depositor, as the sponsor of the Trust, (i) to file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust (a) the Registration Statement on Form S-3 (the "1933 Act Registration Statement"), including any pre-effective or post-effective amendments to such 1933 Act Registration Statement (including the prospectus and the exhibits contained therein), relating to the registration under the Securities Act of 1933, as amended, of the capital securities of the Trust (the "Capital Securities") and certain other securities of the Depositor and (b) a Registration Statement on Form 8-A (the "1934 Act Registration Statement") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Capital Securities of the Trust under Section 12 of the Securities Exchange Act of 1934, as amended; (ii) to file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as the Depositor on behalf of the Trust, may deem necessary or desirable to register the Capital Securities under the securities or "Blue Sky" laws; and (iii) to execute on behalf of the Trust such Underwriting Agreements with one or more underwriters relating to the offering of the Capital Securities as the Depositor, on behalf of the Trust, may deem necessary or desirable. In the event that any filing referred to in clauses (i) or (ii) above is required by the rules and regulations of the Commission, the National Association of Securities Dealers ("NASD") or state securities or "Blue Sky" laws, to be executed on behalf of the Trust by a Trustee, the Depositor, the Guarantor and any Trustee are hereby authorized to join in any such filing and to execute on behalf of the Trust any and all of the foregoing; it being understood that Chase Manhattan Bank USA, National Association, in its capacity as a Trustee of the Trust, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by any such law, rule or regulation. Section 5. Counterparts. This Trust Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Section 6. Trustees. The number of Trustees initially shall be three (3) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Depositor, which may increase or decrease the number of Trustees; provided, however, that to the extent required by the Statutory Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable Delaware law. Subject to the foregoing, the Depositor is entitled to appoint or remove without cause any Trustee at any time. Any Trustee may resign upon thirty days' prior notice to the Depositor; provided, however, such notice shall not be required if it is waived by the Depositor. Section 7. Limitation Applicable to Chase Manhattan Bank USA, National Association. Chase Manhattan Bank USA, National Association, in its capacity as a Trustee, shall not have any of the powers or duties of the Trustees set forth herein, except as expressly required by the Statutory Trust Act, and shall be a Trustee of the Trust for the sole purpose of satisfying the requirements of Section 3807 of the Statutory Trust Act. Section 8. Governing Law. This Trust Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without regard to conflicts of law principles). -2- IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the day and year first above written. POPULAR NORTH AMERICA, INC. as Depositor By: /s/ Jorge A. Junquera --------------------------------- Name: Jorge A. Junquera Title: Senior Executive Vice President POPULAR, INC. as Guarantor By: /s/ Richard Barrios --------------------------------- Name: Richard Barrios Title: Senior Vice President /s/ Jorge A. Junquera --------------------------------- Jorge A. Junquera, as Trustee /s/ Richard Barrios --------------------------------- Richard Barrios, as Trustee CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION as Trustee By: /s/ John Cashin --------------------------------- Name: John J. Cashin Title: Vice President -3- EXHIBIT A CERTIFICATE OF TRUST OF POPULAR NORTH AMERICA CAPITAL TRUST I THIS Certificate of Trust of Popular North America Capital Trust I (the "Trust") is being duly executed and filed by the undersigned, being all the trustees, to form a statutory trust under the Delaware Statutory Trust Act (12 Del. C. Section 3801 et seq.)(the "Act"). 1. Name. The name of the statutory trust formed hereby is Popular North America Capital Trust I. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware is Chase Manhattan Bank USA, National Association, 500 Stanton Christiana Road, 3rd Floor/OPS4, Newark, Delaware 19713. 3. Effective Date. This Certificate of Trust shall be effective upon filing. IN WITNESS WHEREOF, the undersigned have duly executed this Certificate in accordance with Section 3811(a) of the Act. CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION, as Trustee By:_________________________________ Name: Title: ________________________, as Trustee Name: ________________________, as Trustee Name: -4- EX-4.(D) 6 g90482a2exv4wxdy.txt EX-4(D) FORM OF AMENDED AND RESTATED TRUST AGREEMENT EXHIBIT 4(d) ================================================================================ AMENDED AND RESTATED TRUST AGREEMENT AMONG POPULAR NORTH AMERICA, INC., as Depositor POPULAR, INC., as Guarantor J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Property Trustee CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION, as Delaware Trustee and THE ADMINISTRATIVE TRUSTEES NAMED HEREIN -------------------- Dated as of September __, 2004 -------------------- POPULAR NORTH AMERICA CAPITAL TRUST I ================================================================================ POPULAR NORTH AMERICA CAPITAL TRUST I Certain Sections of this Trust Agreement relating to Sections 310 through 318 of the Trust Indenture Act of 1939:
Trust Indenture Trust Agreement Act Section Section - --------------- --------------- (ss.) 310 (a)(1)........................................................... 8.7 (a)(2)........................................................... 8.7 (a)(3)........................................................... 8.9 (a)(4)........................................................... 2.7(a)(ii) (b).............................................................. 8.8 (ss.) 311 (a).............................................................. 8.13 (b).............................................................. 8.13 (ss.) 312 (a).............................................................. 5.8 (b).............................................................. 5.8 (c).............................................................. 5.8 (ss.) 313 (a).............................................................. 8.15(a) (a)(4)........................................................... 8.15(b) (b).............................................................. 8.15(b) (c).............................................................. 10.8 (d).............................................................. 8.15(c) (ss.) 314 (a).............................................................. 8.16 (b).............................................................. Not Applicable (c)(1)........................................................... 8.17 (c)(2)........................................................... 8.17 (c)(3)........................................................... Not Applicable (d).............................................................. Not Applicable (e).............................................................. 1.1, 8.17 (ss.) 315 (a).............................................................. 8.1, 8.3 (b).............................................................. 8.2, 10.8 (c).............................................................. 8.1(c) (d).............................................................. 8.1, 8.3 (e).............................................................. Not Applicable (ss.) 316 (a).............................................................. Not Applicable (a)(1)(A)........................................................ Not Applicable (a)(1)(B)........................................................ Not Applicable (a)(2)........................................................... Not Applicable (b).............................................................. 5.15 (c).............................................................. 6.7 (ss.) 317 (a)(1)........................................................... Not Applicable (a)(2)........................................................... Not Applicable (b).............................................................. 5.10 (ss.) 318 (a).............................................................. 10.10
- ---------- Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Trust Agreement. TABLE OF CONTENTS ARTICLE I DEFINED TERMS Section 1.1 Definitions............................................................................2 ARTICLE II CONTINUATION OF THE ISSUER TRUST Section 2.1 Name..................................................................................11 Section 2.2 Office of the Delaware Trustee; Principal Place of Business...........................11 Section 2.3 Initial Contribution of Trust Property; Organizational Expenses.......................12 Section 2.4 Issuance of the Capital Securities....................................................12 Section 2.5 Issuance of the Common Securities; Subscription and Purchase of Debentures............12 Section 2.6 Continuation of Trust.................................................................12 Section 2.7 Authorization to Enter into Certain Transactions......................................13 Section 2.8 Assets of Trust.......................................................................16 Section 2.9 Title to Trust Property...............................................................16 ARTICLE III PAYMENT ACCOUNT Section 3.1 Payment Account.......................................................................17 ARTICLE IV DISTRIBUTIONS; REDEMPTION Section 4.1 Distributions.........................................................................17 Section 4.2 Redemption............................................................................18 Section 4.3 Subordination of Common Securities....................................................20 Section 4.4 Payment Procedures....................................................................21 Section 4.5 Tax Returns and Reports...............................................................21 Section 4.6 Payment of Taxes, Duties, Etc. of the Issuer Trust....................................22 Section 4.7 Payments under Indenture or Pursuant to Direct Actions................................22

-i- ARTICLE V TRUST SECURITIES CERTIFICATES Section 5.1 Initial Ownership.....................................................................22 Section 5.2 The Trust Securities Certificates.....................................................22 Section 5.3 Execution and Delivery of Trust Securities Certificates...............................23 Section 5.4 Book-Entry Capital Securities.........................................................23 Section 5.5 Registration of Transfer and Exchange of Capital Securities Certificates..............25 Section 5.6 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates....................27 Section 5.7 Persons Deemed Holders................................................................27 Section 5.8 Access to List of Holders' Names and Addresses........................................27 Section 5.9 Maintenance of Office or Agency.......................................................28 Section 5.10 Appointment of Paying Agent...........................................................28 Section 5.11 Ownership of Common Securities by Depositor...........................................28 Section 5.12 Notices to Clearing Agency............................................................29 Section 5.13 Rights of Holders; Waivers of Past Defaults...........................................29 ARTICLE VI ACTS OF HOLDERS; MEETINGS; VOTING Section 6.1 Limitations on Voting Rights..........................................................32 Section 6.2 Notice of Meetings....................................................................33 Section 6.3 Meetings of Holders of the Capital Securities.........................................33 Section 6.4 Voting Rights.........................................................................33 Section 6.5 Proxies, etc..........................................................................33 Section 6.6 Holder Action by Written Consent......................................................34 Section 6.7 Record Date for Voting and Other Purposes.............................................34 Section 6.8 Acts of Holders.......................................................................34 Section 6.9 Inspection of Records.................................................................35 ARTICLE VII REPRESENTATIONS AND WARRANTIES Section 7.1 Representations and Warranties of the Property Trustee and the Delaware Trustee.......35 Section 7.2 Representations and Warranties of Depositor...........................................37

-ii- ARTICLE VIII THE ISSUER TRUSTEES Section 8.1 Certain Duties and Responsibilities...................................................37 Section 8.2 Certain Notices.......................................................................40 Section 8.3 Certain Rights of Property Trustee....................................................40 Section 8.4 Not Responsible for Recitals or Issuance of Securities................................42 Section 8.5 May Hold Securities...................................................................42 Section 8.6 Compensation; Indemnity; Fees.........................................................42 Section 8.7 Corporate Property Trustee Required; Eligibility of Issuer Trustees...................43 Section 8.8 Conflicting Interests.................................................................44 Section 8.9 Co-Trustees and Separate Trustee......................................................44 Section 8.10 Resignation and Removal; Appointment of Successor.....................................45 Section 8.11 Acceptance of Appointment by Successor................................................47 Section 8.12 Merger, Conversion, Consolidation or Succession to Business...........................48 Section 8.13 Preferential Collection of Claims Against Depositor or Issuer Trust...................48 Section 8.14 Property Trustee May File Proofs of Claim.............................................48 Section 8.15 Reports by Property Trustee...........................................................49 Section 8.16 Reports to the Property Trustee.......................................................50 Section 8.17 Evidence of Compliance with Conditions Precedent......................................50 Section 8.18 Number of Issuer Trustees.............................................................50 Section 8.19 Delegation of Power...................................................................50 Section 8.20 Appointment of Administrative Trustees................................................51 Section 8.21 Outside Business......................................................................51 ARTICLE IX TERMINATION, LIQUIDATION AND MERGER Section 9.1 Termination Upon Expiration Date......................................................52 Section 9.2 Early Termination.....................................................................52 Section 9.3 Termination...........................................................................52 Section 9.4 Liquidation...........................................................................53 Section 9.5 Mergers, Consolidations, Amalgamations or Replacements of Issuer Trust................54 ARTICLE X MISCELLANEOUS PROVISIONS Section 10.1 Limitation of Rights of Holders.......................................................55

-iii- Section 10.2 Amendment.............................................................................56 Section 10.3 Separability..........................................................................57 Section 10.4 Governing Law.........................................................................57 Section 10.5 Payments Due on Non-Business Day......................................................57 Section 10.6 Successors............................................................................57 Section 10.7 Headings..............................................................................58 Section 10.8 Reports, Notices and Demands..........................................................58 Section 10.9 Agreement Not to Petition.............................................................58 Section 10.10 Trust Indenture Act; Conflict with Trust Indenture Act................................59 Section 10.11 Acceptance of Terms of Trust Agreement, Guarantee Agreement and Indenture.............59 Exhibit A Certificate of Trust Exhibit B Form of Letter of Representations Exhibit C Form of Common Securities Certificate Exhibit D Form of Expense Agreement Exhibit E Form of Capital Securities Certificate

-iv- AMENDED AND RESTATED TRUST AGREEMENT, dated as of _____, 2004, among (i) Popular North America, Inc., a Delaware corporation (including any permitted successors or assigns under the Indenture (as hereinafter defined), the "Depositor"), (ii) Popular, Inc., a Puerto Rico corporation (including any permitted successors or assigns under the Indenture, the "Guarantor"), (iii) J.P. Morgan Trust Company, National Association, a national banking association, as property trustee (in such capacity, the "Property Trustee" and, in its separate corporate capacity as JPMorgan Chase Bank and not in its capacity as Property Trustee, the "Bank"), (iv) Chase Manhattan Bank USA, National Association, a national banking association, as Delaware trustee (in such capacity, the "Delaware Trustee"), (v) Jorge A. Junquera, an individual, and Richard Barrios, an individual, each of whose address is c/o Popular North America, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918 (each an "Administrative Trustee" and collectively the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees being referred to collectively as the "Issuer Trustees"), and (vi) the several Holders, as hereinafter defined. WITNESSETH WHEREAS, the Depositor, the Guarantor, the Delaware Trustee and the Administrative Trustees have heretofore duly declared and established a statutory trust pursuant to the Delaware Statutory Trust Act by entering into the Trust Agreement, dated as of September 8, 2004 (the "Original Trust Agreement"), and by the execution and filing by the Delaware Trustee and the Administrative Trustees with the Secretary of State of the State of Delaware of the Certificate of Trust, filed on September 8, 2004, attached as Exhibit A; and WHEREAS, the Depositor, the Guarantor, the Delaware Trustee and the Administrative Trustees desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities by the Issuer Trust to the Depositor, (ii) the issuance and sale of the Capital Securities by the Issuer Trust pursuant to the Purchase Agreement, (iii) the acquisition by the Issuer Trust from the Depositor of all of the right, title and interest in the Debentures and (iv) the appointment of the Issuer Trustees; NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Holders, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE I DEFINED TERMS SECTION 1.1 Definitions. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) All other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (d) All accounting terms used but not defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles; (e) Unless the context otherwise requires, any reference to an "Article", a "Section" or an "Exhibit" refers to an Article, a Section or an Exhibit, as the case may be, of or to this Trust Agreement; and (f) The words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 6.8. "Additional Amount" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of Additional Interest (as defined in the Indenture) paid by the Depositor on a Like Amount of Debentures for such period. "Additional Sums" has the meaning specified in Section 10.6 of the Indenture. "Administrative Trustee" means each of the Persons appointed in accordance with Section 8.20 solely in such Person's capacity as Administrative Trustee of the Issuer Trust heretofore formed and continued hereunder and not in such Person's individual capacity, or any successor Administrative Trustee appointed as herein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Procedures" means, with respect to any transfer or transaction involving a Book-Entry Capital Security or beneficial interest therein, the rules and procedures of the Clearing Agency for such Book-Entry Capital Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Bank" has the meaning specified in the preamble to this Trust Agreement. "Bankruptcy Event" means, with respect to any Person: (a) the entry of a decree or order by a court having jurisdiction in the premises judging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such Person under any applicable bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of such Person or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (b) the institution by such Person of voluntary proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of such Person or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt. "Bankruptcy Laws" means any bankruptcy, insolvency, reorganization or other similar law, including Title 11 of the United States Code. "Board of Directors" means the board of directors of the Depositor or the Executive Committee of the board of directors of the Depositor (or any other committee of the board of directors of the Depositor performing similar functions) or a committee designated by the board of directors of the Depositor (or any such committee), comprised of two or more members of the board of directors of the Depositor or officers of the Depositor, or both. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors, or officers of the Depositor to which authority to act on behalf of the Board -3- of Directors has been delegated and to be in full force and effect on the date of such certification, and delivered to the Issuer Trustees. "Book-Entry Capital Securities Certificate" means a Capital Securities Certificate evidencing ownership of Book-Entry Capital Securities. "Book-Entry Capital Security" means a Capital Security, the ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 5.4. "Business Day" means a day other than a Saturday, a Sunday or any other day on which banking institutions in New York, New York, San Juan, Puerto Rico or Wilmington, Delaware are authorized or required by law, regulation or executive order to remain closed or are customarily closed. "Capital Securities Certificate" means a certificate evidencing ownership of Capital Securities, substantially in the form attached as Exhibit E. "Capital Security" means a preferred undivided beneficial interest in assets of the Issuer Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution to the extent provided herein. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. DTC will be the initial Clearing Agency. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means the Closing Time specified in the Purchase Agreement, which date is also the date of execution and delivery of this Trust Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit C. "Common Security" means a common undivided beneficial interest in the assets of the Issuer Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution to the extent provided herein. -4- "Corporate Trust Office" means (i) when used with respect to the Property Trustee, the principal office of the Property Trustee located in Chicago, Illinois, and (ii) when used with respect to the Debenture Trustee, the principal office of the Debenture Trustee located in Chicago, Illinois. "Debenture Default" means any "Debenture Default" specified in Section 5.2 of the Indenture. "Debenture Event of Default" means any "Debenture Event of Default" specified in Section 5.1 of the Indenture. "Debenture Redemption Date" means, with respect to any Debentures to be redeemed under the Indenture, the date fixed for redemption of such Debentures under the Indenture. "Debenture Tax Event" means a "Tax Event" as defined in the Indenture. "Debenture Trustee" means the Person identified as the "Trustee" in the Indenture, solely in its capacity as Trustee pursuant to the Indenture and not in its individual capacity, or its successor in interest in such capacity, or any successor Trustee appointed as provided in the Indenture. "Debentures" means the Depositor's _____% Junior Subordinated Debentures, issued pursuant to the Indenture. "Definitive Capital Securities Certificates" means either or both (as the context requires) of (i) Capital Securities Certificates issued as Book-Entry Capital Securities Certificates as provided in Section 5.2 or 5.4, and (ii) Capital Securities Certificates issued in certificated, fully registered form as provided in Section 5.2, 5.4 or 5.5. "Delaware Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code ss. 3801 et seq., as it may be amended from time to time. "Delaware Trustee" means the Person identified as the "Delaware Trustee" in the preamble to this Trust Agreement, solely in its capacity as Delaware Trustee of the trust heretofore formed and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware Trustee appointed as herein provided. "Depositor" has the meaning specified in the preamble to this Trust Agreement. "Distribution Date" has the meaning specified in Section 4.1(a)(i). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.1, and includes any and all Additional Amounts and Additional Sums. -5- "DTC" means The Depository Trust Company. "Early Termination Event" has the meaning specified in Section 9.2. "Exchange Act" means the Securities Exchange Act of 1934, and any successor statute thereto, in each case as amended from time to time. "Expense Agreement" means the Agreement as to Expenses and Liabilities, dated as of the Closing Date, between the Depositor, in its capacity as holder of the Common Securities, the Guarantor and the Issuer Trust, substantially in the form attached as Exhibit D, as amended from time to time. "Expiration Date" has the meaning specified in Section 9.1. "Guarantee Agreement" means the Guarantee Agreement executed and delivered by the Depositor, the Guarantor and J.P. Morgan Trust Company, National Association, as guarantee trustee, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the Holders of the Capital Securities, as amended from time to time. "Guarantor" has the meaning specified in the preamble to this Trust Agreement. "Holder" means a Person in whose name a Trust Security or Trust Securities is or are registered in the Securities Register; any such Person shall be deemed to be a beneficial owner within the meaning of the Delaware Statutory Trust Act. "Indenture" means the Junior Subordinated Indenture, dated as of the Closing Date, among the Depositor, the Guarantor and the Debenture Trustee, as trustee, as amended or supplemented from time to time. "Investment Company Act" means the Investment Company Act of 1940, or any successor statute thereto, in each case as amended from time to time. "Issuer Trust" means the Delaware statutory trust known as "Popular North America Capital Trust I" which was formed on September __, 2004 under the Delaware Statutory Trust Act pursuant to the Original Trust Agreement and the filing of the Certificate of Trust, and continued pursuant to this Trust Agreement. "Issuer Trustees" has the meaning specified in the preamble to this Trust Agreement. "Letter of Representations" means the agreement among the Issuer Trust, the Property Trustee and DTC, as the initial Clearing Agency, dated as of the Closing Date, substantially in the form attached as Exhibit B, as the same may be amended and supplemented from time to time. -6- "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption of any Trust Securities, Trust Securities having a Liquidation Amount equal to the principal amount of Debentures that are contemporaneously maturing or being redeemed in accordance with the Indenture, the proceeds of which will be used to pay the Redemption Price of such Trust Securities and (b) with respect to a distribution of Debentures to Holders of Trust Securities in connection with a dissolution or liquidation of the Issuer Trust, Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Debentures are distributed. "Liquidation Amount" means the stated amount of $1,000 per Trust Security. "Liquidation Date" means the date of the dissolution, winding-up or termination of the Issuer Trust pursuant to Section 9.4. "Liquidation Distribution" has the meaning specified in Section 9.4(d). "Majority in Liquidation Amount of the Capital Securities" or "Majority in Liquidation Amount of the Common Securities" means, except as provided by the Trust Indenture Act, Capital Securities or Common Securities, as the case may be, representing more than 50% of the aggregate Liquidation Amount of all then Outstanding Capital Securities or Common Securities, as the case may be. "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Depositor, and delivered to the Issuer Trustees. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: (a) a statement by each officer signing the Officers' Certificate that such officer has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by such officer in rendering the Officers' Certificate; (c) a statement that such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of such officer, such condition or covenant has been complied with. -7- "Opinion of Counsel" means a written opinion of counsel, who may be counsel for or an employee of the Depositor or any Affiliate of the Depositor. "Original Trust Agreement" has the meaning specified in the recitals to this Trust Agreement. "Outstanding", when used in reference to any Trust Securities, means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Trust Agreement, except: (a) Trust Securities theretofore cancelled by the Property Trustee or delivered to the Property Trustee for cancellation; (b) Trust Securities for whose payment money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent in trust for the Holders of such Trust Securities; and (c) Trust Securities in substitution for or in lieu of which other Trust Securities have been authenticated and delivered or that have been paid pursuant to Section 3.7 of the Indenture, unless proof satisfactory to the Property Trustee is presented that any such Trust Securities are held by Holders in whose hands such Trust Securities are valid, binding and legal obligations of the Depositor; provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Capital Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Capital Securities owned by the Depositor or any other obligor upon the Trust Securities or any Affiliate of the Depositor or such other obligor shall be disregarded and deemed not to be Outstanding, except that in determining whether any Issuer Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Capital Securities that such Issuer Trustee knows to be so owned shall be so disregarded. Capital Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to act with respect to such Capital Securities and that the pledgee is not the Depositor or any other obligor upon the Trust Securities or any Affiliate of the Depositor or such other obligor. Upon the written request of the Property Trustee, the Depositor shall furnish to the Property Trustee promptly an Officers' Certificate listing and identifying all Capital Securities, if any, known by the Depositor to be owned or held by or for the account of the Depositor, or any other obligor on the Capital Securities or any Affiliate of the Depositor or such obligor, and subject to the provisions of Section 6.1 of the Indenture, the Property Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Capital Securities not listed therein are Outstanding for the purpose of any such determination. "Owner" means each Person who is the beneficial owner of Book-Entry Capital Securities as reflected in the records of the Clearing Agency or, if a Clearing Agency Participant is reflected in such records as the beneficial owner but is not the actual -8- beneficial owner, then as reflected in the records of a Person maintaining an account with such Clearing Agency (directly or indirectly, in accordance with the rules of such Clearing Agency). "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 5.10 and shall initially be the Bank. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee for the benefit of the Holders in which all amounts paid in respect of the Debentures will be held and from which the Property Trustee, through the Paying Agent, shall make payments to the Holders in accordance with Sections 4.1 and 4.2. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Property Trustee" means the Person identified as the "Property Trustee" in the preamble to this Trust Agreement, solely in its capacity as Property Trustee of the trust heretofore formed and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor Property Trustee appointed as herein provided. "Purchase Agreement" means the Purchase Agreement, dated as of _____, 2004, among the Issuer Trust, the Depositor and the Underwriters, as named therein, as the same may be amended from time to time. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date and the stated maturity of the Debentures shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions to the Redemption Date, plus the related amount of the premium, if any, paid by the Depositor upon the concurrent redemption or maturity of a Like Amount of Debentures. "Relevant Trustee" has the meaning specified in Section 8.10. "Responsible Officer", when used with respect to the Property Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Property Trustee customarily performing functions similar to those performed by any of -9- the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Securities Act" means the Securities Act of 1933, and any successor statute thereto, in each case as amended from time to time. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.5. "Successor Securities" has the meaning specified in Section 9.5. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including (i) all exhibits, and (ii) for all purposes of this Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "Trust Event of Default" means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) the occurrence of a Debenture Default; or (b) default by the Issuer Trust in the payment of any Distribution when it becomes due and payable and continuation of such default for a period of 30 days; or (c) default by the Issuer Trust in the payment of the Liquidation Amount of any Trust Security when it becomes due and payable; or (d) default by the Issuer Trust in the payment of the Liquidation Distribution or Distribution of Issuer Trust property when the same becomes due and payable; or (e) default in the performance, or breach, in any material respect, of any covenant or warranty of the Issuer Trustees in this Trust Agreement (other than those specified in clause (b) or (c) above) and continuation of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the defaulting Issuer Trustees by the Holders of at least 25% in aggregate Liquidation Amount of the Outstanding Capital Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or -10- (f) the occurrence of a Bankruptcy Event with respect to the Property Trustee if a successor Property Trustee has not been appointed within 90 days thereof. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or owing to, the Payment Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to this Trust Agreement. "Trust Security" means any one of the Common Securities or the Capital Securities, as the case may be. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Capital Securities Certificates, as the case may be. "Vice President," when used with respect to the Depositor, means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president." ARTICLE II CONTINUATION OF THE ISSUER TRUST SECTION 2.1 Name. The trust continued hereby shall be known as "Popular North America Capital Trust I", as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities and the other Issuer Trustees, in which name the Issuer Trustees may conduct the business of the Issuer Trust, make and execute contracts and other instruments on behalf of the Issuer Trust and sue and be sued. SECTION 2.2 Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is 500 Stanton Christiana Road, 3rd Floor/OPS4 Newark, New Castle County, Delaware 19713, Attention: [John Cashin], or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Holders, the Depositor, the Property Trustee and the Administrative Trustees. The principal executive office of the Issuer Trust is c/o Popular North America, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, Attention: Secretary. -11- SECTION 2.3 Initial Contribution of Trust Property; Organizational Expenses. The Property Trustee acknowledges receipt in trust from the Depositor in connection with the Original Trust Agreement of the sum of $10, which constituted the initial Trust Property. The Depositor shall pay organizational expenses of the Issuer Trust in accordance with the Expense Agreement. The Depositor shall make no claim upon the Trust Property for the payment of such expenses. SECTION 2.4 Issuance of the Capital Securities. On _____, 2004, the Depositor, both on its own behalf and on behalf of the Issuer Trust pursuant to the Original Trust Agreement, executed and delivered the Purchase Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Issuer Trust, shall manually execute in accordance with Sections 5.2, 5.3 and 8.9(a) and the Property Trustee shall deliver to the Underwriters, Capital Securities Certificates, registered in the names requested by the Underwriters, evidencing an aggregate of 250,000 Capital Securities having an aggregate Liquidation Amount of $250,000,000, against receipt of the aggregate purchase price of such Capital Securities of $250,000,000 by the Property Trustee. SECTION 2.5 Issuance of the Common Securities; Subscription and Purchase of Debentures. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Issuer Trust, shall execute in accordance with Sections 5.2, 5.3 and 8.9(a) and the Property Trustee shall deliver to the Depositor, Common Securities Certificates, registered in the name of the Depositor, evidencing an aggregate of 7,732 Common Securities having an aggregate Liquidation Amount of $7,732,000, against receipt of the aggregate purchase price of such Common Securities of $7,732,000 by the Property Trustee. Contemporaneously therewith, an Administrative Trustee, on behalf of the Issuer Trust, shall subscribe for and purchase from the Depositor the Debentures, registered in the name of the Property Trustee on behalf of the Issuer Trust and having an aggregate principal amount equal to $257,732,000, and, in satisfaction of the purchase price for such Debentures, the Property Trustee, on behalf of the Issuer Trust, shall deliver to the Depositor the sum of $257,732,000 (being the sum of the amounts delivered to the Property Trustee pursuant to (i) the second sentence of Section 2.4, and (ii) the first sentence of this Section 2.5). SECTION 2.6 Continuation of Trust. The exclusive purposes and functions of the Issuer Trust are (a) to issue and sell Trust Securities, (b) to use the proceeds from such sale to acquire an equivalent principal amount of the Debentures, and (c) to engage in those activities convenient, necessary or incidental thereto. The Depositor hereby reaffirms the appointment of the Property Trustee and the Delaware Trustee and appoints or reaffirms the appointment of, as the case may be, the Administrative Trustees as trustees of the Issuer Trust, to have all the -12- rights, powers and duties to the extent set forth herein, and the respective Issuer Trustees hereby accept such appointment. The Property Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Issuer Trust and the Holders. The Administrative Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Issuer Trust. The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Property Trustee, the Administrative Trustees or of the Issuer Trustees generally (except as may be required under the Delaware Statutory Trust Act) set forth herein. The Delaware Trustee shall be one of the trustees of the Issuer Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Statutory Trust Act and for taking such actions as are required to be taken by a Delaware trustee under the Delaware Statutory Trust Act. SECTION 2.7 Authorization to Enter into Certain Transactions. (a) The Issuer Trustees shall conduct the affairs of the Issuer Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Issuer Trustees shall have the authority to enter into all transactions and agreements determined by the Issuer Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Issuer Trustees, as the case may be, under this Trust Agreement, and to perform all acts in furtherance thereof, including, without limitation, the following: (i) As among the Issuer Trustees, each Administrative Trustee shall have the power and authority to act on behalf of the Issuer Trust with respect to the following matters: (A) the issuance and sale of the Trust Securities; (B) causing the Issuer Trust to enter into, and to execute, deliver and perform, the Expense Agreement and the Letter of Representations and such other agreements as may be necessary or desirable in connection with the purposes and function of the Issuer Trust; (C) assisting in the registration of the Capital Securities under the Act and other applicable securities or blue sky laws and the qualification of this Trust Agreement as a trust indenture under the Trust Indenture Act; (D) assisting in the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Debentures to the Holders in accordance with this Trust Agreement; (E) the consent to the appointment of a Paying Agent, Authenticating Agent (as defined in the Indenture) and Securities -13- Registrar in accordance with this Trust Agreement (which consent shall not be unreasonably withheld); (F) the execution of the Trust Securities on behalf of the Issuer Trust in accordance with this Trust Agreement; (G) the execution and delivery of closing certificates, if any, pursuant to the Purchase Agreement and application for a taxpayer identification number for the Issuer Trust; (H) unless otherwise determined by the Property Trustee or Holders of a Majority in Liquidation Amount of the Capital Securities or as otherwise required by the Delaware Statutory Trust Act or the Trust Indenture Act, executing on behalf of the Issuer Trust (either acting alone or together with any or all of the Administrative Trustees) any documents that the Administrative Trustees have the power to execute pursuant to this Trust Agreement; and (I) the taking of any action incidental to the foregoing as the Issuer Trustees may from time to time determine to be necessary or advisable to give effect to the terms of this Trust Agreement. (ii) As among the Issuer Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Issuer Trust with respect to the following matters: (A) the establishment of the Payment Account; (B) the receipt of the Debentures; (C) the collection of interest, principal and any other payments made in respect of the Debentures and the holding of such amounts in the Payment Account; (D) the distribution through the Paying Agent of amounts distributable to the Holders in respect of the Trust Securities; (E) the exercise of all of the rights, powers and privileges of a holder of the Debentures; (F) the sending of notices of default and other information regarding the Trust Securities and the Debentures to the Holders in accordance with this Trust Agreement; (G) the distribution of the Trust Property in accordance with the terms of this Trust Agreement; -14- (H) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Issuer Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware; (I) performing the duties of the Property Trustee set forth in this Trust Agreement; and (J) after a Trust Event of Default (other than under paragraph (b), (c), (d) or (e) of the definition of such term if such Trust Event of Default is by or with respect to the Property Trustee), the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder). (b) So long as this Trust Agreement remains in effect, the Issuer Trust (or the Issuer Trustees acting on behalf of the Issuer Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Issuer Trustees (acting on behalf of the Issuer Trust) shall not (i) acquire any investments or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) take any action that would reasonably be expected to cause the Issuer Trust to become taxable as a corporation or classified as other than a grantor trust for United States Federal income tax purposes or to be required to be registered as an "investment company" under the Investment Company Act, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Administrative Trustees shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Issuer Trust or the Holders in their capacity as Holders. (c) In connection with the issue and sale of the Capital Securities, the Depositor shall have the right and responsibility to assist the Issuer Trust with respect to, or effect on behalf of the Issuer Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) the preparation and filing by the Issuer Trust with the Commission and the execution on behalf of the Issuer Trust of a registration statement on the appropriate form in relation to the Capital Securities, including any amendments thereto and the taking of any action necessary or desirable to sell the Capital Securities in a transaction or a series of transactions pursuant thereto; -15- (ii) the determination of the jurisdictions in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and the taking of any and all such acts, other than actions that must be taken by or on behalf of the Issuer Trust, and advice to the Issuer Trust of actions that must be taken by or on behalf of the Issuer Trust, and the preparation for execution and filing of any documents to be executed and filed by the Issuer Trust or on behalf of the Issuer Trust, as the Depositor deems necessary or advisable in order to comply with the applicable securities laws of any such jurisdictions in connection with the sale of the Capital Securities; (iii) if necessary, the preparation for filing by the Issuer Trust with the Commission and the execution on behalf of the Issuer Trust of a registration statement on Form 8-A relating to the registration of the Capital Securities under Section 12(b) or 12(g) of the Exchange Act, including any amendments thereto; (iv) the negotiation of the terms of, and the execution and delivery of, the Purchase Agreement providing for the sale of the Capital Securities; and (v) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (d) Notwithstanding anything herein to the contrary, the Issuer Trustees are authorized and directed to conduct the affairs of the Issuer Trust and to operate the Issuer Trust so that the Issuer Trust will not be deemed to be an "investment company" required to be registered under the Investment Company Act, and will not be taxable as a corporation or classified as other than a grantor trust for United States Federal income tax purposes so that the Debentures will be treated as indebtedness of the Depositor for United States Federal income tax purposes. In this connection, each Administrative Trustee, the Property Trustee and the Holders of a Majority in Liquidation Amount of the Common Securities are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or this Trust Agreement, that such Administrative Trustee, the Property Trustee or such Holders of Common Securities determine in their discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect in any material respect the interests of the Holders of the Outstanding Capital Securities. In no event shall the Issuer Trustees be liable to the Issuer Trust or the Holders for any failure to comply with this Section that results from a change in law or regulation or in the interpretation thereof. SECTION 2.8 Assets of Trust. The assets of the Issuer Trust shall consist of the Trust Property. SECTION 2.9 Title to Trust Property. Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee in -16- trust for the benefit of the Issuer Trust and the Holders in accordance with this Trust Agreement. ARTICLE III PAYMENT ACCOUNT Section 3.1 Payment Account. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and its agents shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Holders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof. ARTICLE IV DISTRIBUTIONS; REDEMPTION SECTION 4.1 Distributions. (a) The Trust Securities represent undivided beneficial interests in the Trust Property, and Distributions (including of Additional Amounts) will be made on the Trust Securities at the rate and on the dates that payments of interest (including of Additional Interest, as defined in the Indenture) are made on the Debentures. Accordingly: (i) Distributions on the Trust Securities shall be cumulative, and will accumulate whether or not there are funds of the Issuer Trust available for the payment of Distributions. Distributions shall accumulate from _____, 2004, and, except in the event (and to the extent) that the Depositor exercises its right to defer the payment of interest on the Debentures pursuant to the Indenture, shall be payable semi-annually in arrears on _____ and _____ of each year, commencing on _____, 2005. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on the date on which such payment was originally payable (each date on which Distributions are payable in accordance with this Section 4.1(a), a "Distribution Date"). -17- (ii) The Trust Securities shall be entitled to Distributions payable at a rate of ___% per annum of the Liquidation Amount of the Trust Securities. The amount of Distributions payable for any period less than a full Distribution period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in a partial month in that period. The amount of Distributions payable for any full Distribution period shall be computed by dividing the Distribution rate of ___% per annum by two. The amount of Distributions payable for any period shall include any Additional Amounts in respect of such period. (iii) Distributions on the Trust Securities shall be made by the Property Trustee from the Payment Account and shall be payable on each Distribution Date only to the extent that the Issuer Trust has funds then on hand and available in the Payment Account for the payment of such Distributions. (b) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities at the close of business on the relevant record date, which shall be at the close of business on the fifteenth day (whether or not a Business Day) next preceding the relevant Distribution Date. SECTION 4.2 Redemption. (a) On each Debenture Redemption Date and on the stated maturity of the Debentures, the Issuer Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. (b) Notice of redemption shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Security Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price or, if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, an estimate of the Redemption Price together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the third Business Day prior to the Redemption Date (and if an estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated); (iii) the CUSIP number or CUSIP numbers of the Capital Securities affected (if applicable); -18- (iv) if less than all the Outstanding Trust Securities are to be redeemed, the identification and the aggregate Liquidation Amount of the particular Trust Securities to be redeemed; (v) that on the Redemption Date the Redemption Price will become due and payable upon each such Trust Security to be redeemed and that Distributions thereon will cease to accumulate on and after said date, except as provided in Section 4.2(d) below; and (vi) the place or places where the Trust Securities are to be surrendered for the payment of the Redemption Price. The Issuer Trust in issuing the Trust Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Property Trustee shall indicate the "CUSIP" numbers of the Trust Securities in notices of redemption and related materials as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Trust Securities or as contained in any notice of redemption and related materials. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption or maturity of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Issuer Trust has funds then on hand and available in the Payment Account for the payment of such Redemption Price. (d) If the Property Trustee gives a notice of redemption in respect of any Capital Securities, then, by 12:00 noon, New York City time, on the Redemption Date, subject to Section 4.2(c), the Property Trustee will, with respect to Book-Entry Capital Securities, irrevocably deposit with the Clearing Agency for such Book-Entry Capital Securities, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give such Clearing Agency irrevocable instructions and authority to pay the Redemption Price to the Holders of the Capital Securities. With respect to Capital Securities that are not Book-Entry Capital Securities, the Property Trustee, subject to Section 4.2(c), will irrevocably deposit with the Paying Agent, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders of the Capital Securities upon surrender of their Capital Securities Certificates. Notwithstanding the foregoing, Distributions payable on any Distribution Date or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities on the relevant record date for such Distribution Date. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Holders holding Trust Securities so called for redemption will terminate, except the right of such Holders to receive the Redemption Price for such Trust Securities, but without any interest or other payment for delay in -19- receiving the Redemption Price, and such Securities will cease to be Outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of any such delay), with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Issuer Trust or by the Depositor or the Guarantor pursuant to the Indenture or the Guarantee Agreement, Distributions on such Trust Securities will continue to accumulate, as set forth in Section 4.1, from the Redemption Date originally established by the Issuer Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. (e) Subject to Section 4.3(a), if less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated pro rata to the Common Securities and the Capital Securities based upon the relative Liquidation Amounts of the Trust Securities. The particular Capital Securities to be redeemed shall be selected on a pro rata basis based upon their respective Liquidation Amounts not more than 60 days prior to the Redemption Date by the Property Trustee, using any method deemed by the Property Trustee to be fair and appropriate, from the Outstanding Capital Securities not previously called for redemption, provided that so long as the Capital Securities are in book-entry-only form, such selection shall be made in accordance with the customary procedures of the Clearing Agency for the Capital Securities. The Property Trustee shall promptly notify the Securities Registrar in writing of the Capital Securities selected for redemption and, in the case of any Capital Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Capital Securities shall relate, in the case of any Capital Securities redeemed or to be redeemed only in part, to the portion of the aggregate Liquidation Amount of Capital Securities that has been or is to be redeemed. SECTION 4.3 Subordination of Common Securities. (a) Payment of Distributions (including any Additional Amounts) on, the Redemption Price of, and the Liquidation Distribution in respect of, the Trust Securities, as applicable, shall be made, pro rata among the Common Securities and the Capital Securities based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date, Redemption Date or Liquidation Date any Trust Event of Default resulting from a Debenture Default shall have occurred and be continuing, no payment of any Distribution (including any Additional Amounts) on, Redemption Price of, or Liquidation Distribution in respect of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of (i) all accumulated and unpaid Distributions (including any Additional Amounts) on all Outstanding Capital Securities -20- for all Distribution periods terminating on or prior thereto, (ii) in the case of redemption of Trust Securities, the full amount of the Redemption Price on all Outstanding Capital Securities then subject to redemption, or (iii) in the case of any dissolution, liquidation or other termination of the Issuer Trust, the full amount of such Liquidation Distribution on all Outstanding Capital Securities, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions (including any Additional Amounts) on, or the Redemption Price of, or Liquidation Distribution in respect of, the Capital Securities then due and payable. (b) In the case of the occurrence of any Trust Event of Default resulting from any Debenture Default, the Holders of the Common Securities shall have no right to act with respect to any such Trust Event of Default under this Trust Agreement until the effect of all such Trust Events of Default with respect to the Capital Securities have been cured, waived or otherwise eliminated. Until all such Trust Events of Default under this Trust Agreement with respect to the Capital Securities have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Capital Securities and not on behalf of the Holders of the Common Securities, and only the Holders of the Capital Securities will have the right to direct the Property Trustee to act on their behalf. SECTION 4.4 Payment Procedures. Payments of Distributions (including any Additional Amounts) on a Distribution Date other than a Redemption Date in respect of the Capital Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Capital Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency in immediately available funds; provided, however, that a Holder of $1 million or more in Liquidation Amount of Capital Securities may receive Distributions, other than Distributions payable on a Redemption Date, by wire transfer of immediately available funds upon written request to the Issuer Trust not later than 15 calendar days prior to the Distribution Date. All payments in respect of the Capital Securities on a Redemption Date shall be made in immediately available funds against presentation and surrender of such Capital Securities. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Holders of the Common Securities. SECTION 4.5 Tax Returns and Reports. The Administrative Trustees shall prepare (or cause to be prepared), at the Depositor's expense, and file all United States Federal, state and local tax and information returns and reports required to be filed by or in respect of the Issuer Trust. In this regard, the Administrative Trustees shall (a) prepare and file (or cause to be prepared and filed) all Internal Revenue Service forms required to be filed in respect of the Issuer Trust in each taxable year of the Issuer Trust, and (b) prepare and furnish (or cause to be prepared and furnished) to each Holder all Internal Revenue Service forms required to be -21- provided by the Issuer Trust. The Administrative Trustees shall provide the Depositor and the Property Trustee with a copy of all such returns and reports promptly after such filing or furnishing. The Issuer Trustees shall comply with United States Federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Holders under the Trust Securities. SECTION 4.6 Payment of Taxes, Duties, Etc. of the Issuer Trust. Upon receipt under the Debentures of Additional Sums, the Property Trustee shall promptly pay any taxes, duties or governmental charges of whatsoever nature (including withholding taxes) imposed on the Issuer Trust by the United States or any other taxing authority, which were included in such Additional Sums. SECTION 4.7 Payments under Indenture or Pursuant to Direct Actions. Any amount payable hereunder to any Holder of Capital Securities (or any Owner with respect thereto) shall be reduced by the amount of any corresponding payment such Holder (or Owner) has directly received pursuant to Section 5.9 of the Indenture or Section 5.13(c) of this Trust Agreement. ARTICLE V TRUST SECURITIES CERTIFICATES SECTION 5.1 Initial Ownership. Upon the formation of the Issuer Trust and the contribution by the Depositor pursuant to Section 2.3 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Depositor shall be the sole beneficial owner of the Issuer Trust. SECTION 5.2 The Trust Securities Certificates. (a) The Capital Securities Certificates shall be issued in minimum denominations of $1,000 Liquidation Amount and integral multiples thereof, and the Common Securities Certificates shall be issued in denominations of $1,000 Liquidation Amount and integral multiples thereof. The Trust Securities Certificates shall be executed on behalf of the Issuer Trust by manual signature or facsimile of at least one Administrative Trustee. Trust Securities Certificates bearing the manual signatures or facsimiles of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Issuer Trust, shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Holder, and shall be entitled to the rights and subject to the obligations of a Holder -22- hereunder, upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Section 5.5. (b) Upon their original issuance, Capital Securities Certificates shall be issued in the form of one or more Book-Entry Capital Securities Certificates registered in the name of DTC, as Clearing Agency, or its nominee and deposited with DTC or a custodian for DTC for credit by DTC to the respective accounts of the Owners thereof (or such other accounts as they may direct). (c) A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate. SECTION 5.3 Execution and Delivery of Trust Securities Certificates. On the Closing Date, the Administrative Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.4 and 2.5, to be executed on behalf of the Issuer Trust and delivered to or upon the written order of the Depositor, executed by one authorized officer thereof, without further corporate action by the Depositor, in authorized denominations. SECTION 5.4 Book-Entry Capital Securities. (a) Each Book-Entry Capital Securities Certificate issued under this Agreement shall be registered in the name of the Clearing Agency or a nominee thereof and delivered to such Clearing Agency or a nominee thereof or custodian therefor, and each such Book-Entry Capital Securities Certificate shall constitute a single Capital Securities Certificate for all purposes of this Agreement. (b) Notwithstanding any other provision in this Trust Agreement, no Book-Entry Capital Securities Certificate may be exchanged in whole or in part for Capital Securities Certificates registered, and no transfer of a Book-Entry Capital Securities Certificate in whole or in part may be registered, in the name of any Person other than the Clearing Agency for such Book-Entry Capital Securities Certificates or a nominee thereof unless (i) the Clearing Agency advises the Issuer Trust in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Book-Entry Capital Securities Certificates, and a qualified successor shall not have been appointed, or the Clearing Agency ceases to be a clearing agency registered under the Exchange Act within 90 calendar days at a time when it is required to be so registered to act as such clearing agent, (ii) the Issuer Trust at its option determines that a Book Entry Capital Securities Certificate shall be so exchangeable, or (iii) a Trust Event of Default has occurred and is continuing. Upon the occurrence of any event specified in clause (i), (ii) or (iii) above, the Property Trustee shall notify the Clearing Agency and instruct the Clearing Agency to notify all Owners of Book-Entry Capital Securities, the Delaware Trustee and the Administrative Trustees of the occurrence of such event and of the availability of the Definitive Capital Securities Certificates to Owners of such Book-Entry Capital Securities, requesting the same. -23- (c) If any Book-Entry Capital Securities Certificate is to be exchanged for other Capital Securities Certificates or cancelled in part, or if any other Capital Securities Certificate is to be exchanged in whole or in part for Book-Entry Capital Securities represented by a Book-Entry Capital Securities Certificate, then either (i) such Book-Entry Capital Securities Certificate shall be so surrendered for exchange or cancellation as provided in this Article V or (ii) the aggregate Liquidation Amount represented by such Book-Entry Capital Securities Certificate shall be reduced, subject to Section 5.2, or increased by an amount equal to the Liquidation Amount represented by that portion of the Book-Entry Capital Securities Certificate to be so exchanged or cancelled, or equal to the Liquidation Amount represented by such other Capital Securities Certificates to be so exchanged for Book-Entry Capital Securities represented thereby, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Property Trustee, in accordance with the Applicable Procedures, shall instruct the Clearing Agency or its authorized representative to make a corresponding adjustment to its records. Upon surrender to the Administrative Trustees or the Securities Registrar of the Book-Entry Capital Securities Certificate or Certificates by the Clearing Agency, accompanied by registration instructions, the Administrative Trustees, or any one of them, shall execute the Definitive Capital Securities Certificates in accordance with the instructions of the Clearing Agency. Neither the Securities Registrar nor any Issuer Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Capital Securities Certificates, the Issuer Trustees shall recognize the Holders of the Definitive Capital Securities Certificates as Holders. The Definitive Capital Securities Certificates shall be typewritten, printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustees, as evidenced by the execution thereof by the Administrative Trustees or any one of them. (d) Every Capital Securities Certificate executed and delivered upon registration of transfer of, or in exchange for or in lieu of, a Book-Entry Capital Securities Certificate or any portion thereof, whether pursuant to this Article V or Article IV or otherwise, shall be executed and delivered in the form of, and shall be, a Book-Entry Capital Securities Certificate, unless such Capital Securities Certificate is registered in the name of a Person other than the Clearing Agency for such Book-Entry Capital Securities Certificate or a nominee thereof. (e) The Clearing Agency or its nominee, as registered owner of a Book-Entry Capital Securities Certificate, shall be the Holder of such Book-Entry Capital Securities Certificate for all purposes under this Agreement and the Book-Entry Capital Securities Certificate, and Owners with respect to a Book-Entry Capital Securities Certificate shall hold such interests pursuant to the Applicable Procedures. The Securities Registrar and the Issuer Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Trust Agreement relating to the Book-Entry Capital Securities Certificates (including the payment of the Redemption Price of and Distributions on the Book-Entry Capital Securities represented thereby and the giving of instructions or directions by Owners of Book-Entry Capital Securities represented thereby) as the sole Holder of the Book-Entry -24- Capital Securities represented thereby and shall have no obligations to the Owners thereof. Solely for the purpose of determining whether the Holders of the requisite Liquidation Amount of Capital Securities have voted on any matter provided for in this Trust Agreement, so long as Definitive Capital Securities Certificates have not been issued, the Issuer Trustees may conclusively rely on, and shall be protected in relying on, any written instrument (including a proxy) delivered to the Issuer Trustees by the Clearing Agency setting forth the Owners' votes or assigning the right to vote on any matter to any other Persons in whole or in part. Neither the Securities Registrar nor any Issuer Trustee shall have any liability in respect of any transfers effected by the Clearing Agency. The rights of the Owners of the Book-Entry Capital Securities shall be exercised only through the Clearing Agency and shall be limited to those established by law, the Applicable Procedures and agreements between such Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Letter of Representations, unless and until Definitive Capital Securities Certificates are issued pursuant to Section 5.4(b), the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments on the Capital Securities to such Clearing Agency Participants, and none of the Depositor, the Guarantor or the Issuer Trustees shall have any responsibility or obligation with respect thereto. SECTION 5.5 Registration of Transfer and Exchange of Capital Securities Certificates. (a) The Property Trustee shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.9, a register or registers for the purpose of registering Trust Securities Certificates and transfers and exchanges of Trust Securities Certificates (the "Securities Register") in which the registrar and transfer agent with respect to the Trust Securities (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Capital Securities Certificates and Common Securities Certificates (subject to Section 5.11 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Capital Securities Certificates as herein provided. The Person acting as the Property Trustee shall at all times also be the Securities Registrar. Upon surrender for registration of transfer of any Capital Securities Certificate at the office or agency maintained pursuant to Section 5.9, the Administrative Trustees or any one of them shall execute and deliver to the Property Trustee, and the Property Trustee shall deliver, in the name of the designated transferee or transferees, one or more new Capital Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of execution by such Administrative Trustee or Trustees. The Securities Registrar shall not be required (i) to issue, register the transfer of or exchange any Capital Security during a period beginning at the opening of business 15 calendar days before the first mailing of the notice of redemption, or (ii) to register the -25- transfer of or exchange any Capital Security so selected for redemption in whole or in part, except, in the case of any such Capital Security to be redeemed in part, any portion thereof not to be redeemed. Every Capital Securities Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form reasonably satisfactory to an Administrative Trustee and the Securities Registrar duly executed by the Holder or its attorney duly authorized in writing. Each Capital Securities Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by the Property Trustee in accordance with its customary practice. No service charge shall be made for any registration of transfer or exchange of Capital Securities Certificates, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Capital Securities Certificates. (b) Notwithstanding any other provision of this Agreement, transfers and exchanges of Capital Securities Certificates and beneficial interests in a Book-Entry Capital Securities Certificate of the kinds specified in this Section 5.5(b) shall be made only in accordance with this Section 5.5(b). (i) Non-Book-Entry Capital Securities Certificate to Book-Entry Capital Securities Certificate. If the Holder of a Capital Securities Certificate (other than a Book-Entry Capital Securities Certificate) wishes at any time to transfer all or any portion of such Capital Securities Certificate to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Book-Entry Capital Securities Certificate, such transfer may be effected only in accordance with the provisions of this Clause (b)(i) and subject to the Applicable Procedures. Upon receipt by the Securities Registrar of (A) such Capital Securities Certificate as provided in Section 5.5(a) and instructions satisfactory to the Securities Registrar directing that a beneficial interest in the Book-Entry Capital Securities Certificate of a specified Liquidation Amount of Capital Securities not greater than the Liquidation Amount of Capital Securities represented by such Capital Securities Certificate be credited to a specified Clearing Agency Participant's account, then the Securities Registrar shall cancel such Capital Securities Certificate (and issue a new Capital Securities Certificate in respect of any untransferred portion thereof) as provided in Section 5.5(a) and increase the aggregate Liquidation Amount of the Book-Entry Capital Securities Certificate by the Liquidation Amount represented by such Capital Securities so transferred as provided in Section 5.4(c). (ii) Non-Book-Entry Capital Securities Certificate to Non-Book-Entry Capital Securities Certificate. A Capital Securities Certificate that is not a Book-Entry Capital Securities Certificate may be transferred, in whole or in part, to a Person who takes delivery in the form of another Capital Securities Certificate -26- that is not a Book-Entry Capital Securities Certificate as provided in Section 5.5(a). (iii) Exchanges between Book-Entry Capital Securities Certificate and Non-Book-Entry Capital Securities Certificate. A beneficial interest in a Book-Entry Capital Securities Certificate may be exchanged for a Capital Securities Certificate that is not a Book-Entry Capital Securities Certificate as provided in Section 5.4. SECTION 5.6 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. If (a) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its reasonable satisfaction of the destruction, loss or theft of any Trust Securities Certificate, and (b) there shall be delivered to the Securities Registrar and the Administrative Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustees, or any one of them, on behalf of the Issuer Trust shall execute and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section 5.6, the Administrative Trustees or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Issuer Trust corresponding to that evidenced by the lost, stolen or destroyed Trust Securities Certificate, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. SECTION 5.7 Persons Deemed Holders. The Issuer Trustees and the Securities Registrar shall each treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner and Holder of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and neither the Securities Registrar nor any Issuer Trustee shall be bound by any notice to the contrary. SECTION 5.8 Access to List of Holders' Names and Addresses. Each Holder and each Owner shall be deemed to have agreed not to hold the Depositor, the Property Trustee, the Delaware Trustee or the Administrative Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. -27- SECTION 5.9 Maintenance of Office or Agency. The Property Trustee shall designate, with the consent of the Administrative Trustees, which consent shall not be unreasonably withheld, an office or offices or agency or agencies where Capital Securities Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Issuer Trustees in respect of the Trust Securities Certificates may be served. The Administrative Trustees initially designate J.P. Morgan Trust Company, National Association, 227 W. Monroe, Suite 2600, Chicago, Illinois 60606, Attention: George Reaves, as its office and agency for such purposes. The Property Trustee shall give prompt written notice to the Depositor, the Administrative Trustees and to the Holders of any change in the location of the Securities Register or any such office or agency. SECTION 5.10 Appointment of Paying Agent. The Paying Agent shall make payments of Distributions, the Redemption Price and the Liquidation Distributions to Holders from the Payment Account and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account solely for the purpose of making the Distributions referred to above. The Administrative Trustees may revoke such power and remove the Paying Agent in their sole discretion. The Paying Agent shall initially be the Bank. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustees and the Property Trustee. If the Bank shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor (which shall be a bank or trust company) to act as Paying Agent. Such successor Paying Agent or any additional Paying Agent appointed by the Administrative Trustees shall execute and deliver to the Issuer Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Issuer Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Holders in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Holders. The Paying Agent shall return all unclaimed funds to the Property Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also in its role as Paying Agent, for so long as the Bank shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. SECTION 5.11 Ownership of Common Securities by Depositor. On the Closing Date, the Depositor shall acquire, and thereafter shall retain, beneficial and record ownership of the Common Securities. To the fullest extent permitted by applicable law, the Depositor may not transfer the Common Securities except (i) in connection with a consolidation or merger of the Depositor into another -28- corporation, or any conveyance, transfer or lease by the Depositor of its properties and assets substantially as an entirety to any Person, pursuant to Section 8.1 of the Indenture, or (ii) to an Affiliate of the Depositor in compliance with applicable law (including the Securities Act and other applicable securities and blue sky laws). To the fullest extent permitted by law, any attempted transfer of the Common Securities other than as set forth in the proceeding sentence shall be void. The Administrative Trustees shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating substantially "TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO AN AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT AND ONLY IN CONNECTION WITH A SIMULTANEOUS DELEGATION AND ASSIGNMENT OF THE EXPENSE AGREEMENT REFERRED TO THEREIN." SECTION 5.12 Notices to Clearing Agency. To the extent that a notice or other communication to the Holders is required under this Trust Agreement, for so long as Capital Securities are represented by a Book-Entry Capital Securities Certificate, the Issuer Trustees shall give all such notices and communications specified herein to be given to the Clearing Agency, and shall have no obligations to the Owners. SECTION 5.13 Rights of Holders; Waivers of Past Defaults. (a) The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 2.9, and the Holders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Issuer Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Issuer Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Holders against payment of the purchase price therefor will be fully paid and, to the fullest extent permitted by applicable law, nonassessable by the Issuer Trust. The Holders of the Trust Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. (b) For so long as any Capital Securities remain Outstanding, if a Debenture Event of Default under Section 5.1(1) occurs and continues and the Debenture Trustee or the holders of not less than 25% in principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of at least 25% in Liquidation Amount of the Capital Securities then Outstanding shall have the right to make such declaration by a notice in writing to the Property Trustee, the Depositor and the Debenture Trustee. If a Debenture Event of Default under Sections 5.1(2) or 5.1(3) of the Indenture occurs and continues, the entire principal of and -29- all accrued but unpaid interest on the Debentures will be due and payable immediately without further action in accordance with Section 5.3 of the Indenture. At any time after a declaration of acceleration with respect to the Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Debenture Trustee as provided in the Indenture, if the Property Trustee fails to annul any such declaration, the Holders of a Majority in Liquidation Amount of the Capital Securities, by written notice to the Property Trustee, the Depositor, the Guarantor and the Debenture Trustee, may rescind and annul such declaration and its consequences if: (i) the Depositor or the Guarantor has paid or deposited with the Debenture Trustee a sum sufficient to pay (A) all overdue installments of interest on all of the Debentures, (B) all Additional Sums and any accrued Additional Interest on all of the Debentures, (C) the principal of (and premium, if any, on) any Debentures that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Debentures, and (D) all sums paid or advanced by the Debenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee and the Property Trustee, their agents and counsel; and (ii) all Trust Events of Default with respect to the Debentures, other than the non-payment of the principal of the Debentures that has become due solely by such acceleration, have been cured or waived as provided in Section 5.14 of the Indenture. The Holders of a Majority in Liquidation Amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default under the Indenture, except a payment default (unless such default has been cured and a sum sufficient to pay the entire payment due otherwise than by acceleration has been deposited with the Debenture Trustee) or a default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture. No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon receipt by the Property Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, by Holders of any part of the Capital Securities a record date shall be established for determining Holders of Outstanding Capital Securities entitled to join in such notice, which record date shall be at the close of -30- business on the day the Property Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day that is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.13(b). (c) For so long as any Capital Securities remain Outstanding, to the fullest extent permitted by law and subject to the terms of this Trust Agreement and the Indenture, upon a Debenture Default specified in Sections 5.2(1) or 5.2(2) of the Indenture, any Holder of Capital Securities shall have the right to institute a proceeding directly against the Depositor or the Guarantor, pursuant to Section 5.9 of the Indenture, for enforcement of payment to such Holder of any amounts payable in respect of Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such Holder (a "Direct Action"). Except as set forth in Section 5.13(b) and this Section 5.13(c), the Holders of Capital Securities shall have no right to exercise directly any right or remedy available to the holders of, or in respect of, the Debentures. In addition, a Holder may institute a legal proceeding directly against the Depositor or the Guarantor under the Guarantee Agreement to enforce its rights under the Guarantee Agreement without first instituting a legal proceeding against the Guarantee Trustee (as defined in the Guarantee Agreement), the Issuer Trust, any Issuer Trustee or any Person or entity. (d) Except as otherwise provided in clauses (a), (b) and (c) of this Section 5.13, the Holders of a Majority in Liquidation Amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default or Trust Event of Default and its consequences. Upon such waiver, any such default or Trust Event of Default shall cease to exist, and any default or Trust Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Trust Agreement, but no such waiver shall extend to any subsequent or other default or Trust Event of Default or impair any right consequent thereon. -31- ARTICLE VI ACTS OF HOLDERS; MEETINGS; VOTING SECTION 6.1 Limitations on Voting Rights. (a) Except as expressly provided in this Trust Agreement and in the Indenture and as otherwise required by law, no Holder of Capital Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Issuer Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Holders from time to time as partners or members of an association. (b) So long as any Debentures are held by the Property Trustee on behalf of the Issuer Trust, the Property Trustee shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or execute any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default that may be waived under Section 5.14 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of a Majority in Liquidation Amount of the Capital Securities, provided, however, that where a consent under the Indenture would require the consent of each Holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Capital Securities. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Capital Securities, except by a subsequent vote of the Holders of the Capital Securities. The Property Trustee shall notify all Holders of the Capital Securities of any notice of default received with respect to the Debentures. In addition to obtaining the foregoing approvals of the Holders of the Capital Securities, prior to taking any of the foregoing actions, the Property Trustee shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that such action shall not cause the Issuer Trust to be taxable as a corporation or classified as other than a grantor trust for United States Federal income tax purposes or to be required to be registered as an "investment company" under the Investment Company Act. (c) If any proposed amendment to the Trust Agreement provides for, or the Issuer Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Capital Securities, whether by way of amendment to this Trust Agreement or otherwise, or (ii) the dissolution, winding-up or termination of the Issuer Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Capital Securities will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of a Majority in Liquidation Amount of the Capital Securities. Notwithstanding any other provision of this Trust -32- Agreement, no amendment to this Trust Agreement may be made if, as a result of such amendment, it would cause the Issuer Trust to be taxable as a corporation or classified as other than a grantor trust for United States Federal income tax purposes or to be required to be registered as an "investment company" under the Investment Company Act. SECTION 6.2 Notice of Meetings. Notice of all meetings of the Holders of the Capital Securities, stating the time, place and purpose of the meeting, shall be given by the Property Trustee pursuant to Section 10.8 to each Holder of Capital Securities, at such Holder's registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. SECTION 6.3 Meetings of Holders of the Capital Securities. No annual meeting of Holders is required to be held. The Administrative Trustees, however, shall call a meeting of the Holders of the Capital Securities to vote on any matter upon the written request of the Holders of at least 25% in aggregate Liquidation Amount of the Outstanding Capital Securities and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of the Holders of the Capital Securities to vote on any matters as to which such Holders are entitled to vote. The Holders of a Majority in Liquidation Amount of the Capital Securities, present in person or by proxy, shall constitute a quorum at any meeting of the Holders of the Capital Securities. If a quorum is present at a meeting, an affirmative vote by the Holders present, in person or by proxy, holding Capital Securities representing a Majority in Liquidation Amount of the Capital Securities held by the Holders present, either in person or by proxy, at such meeting shall constitute the action of the Holders of the Capital Securities, unless this Trust Agreement requires a greater number of affirmative votes. SECTION 6.4 Voting Rights. Holders shall be entitled to one vote for each $1,000 of Liquidation Amount represented by their Outstanding Trust Securities in respect of any matter as to which such Holders are entitled to vote. SECTION 6.5 Proxies, etc. At any meeting of Holders, any Holder entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Issuer Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Property Trustee, proxies may be -33- solicited in the name of the Property Trustee or one or more officers of the Property Trustee. Only Holders of record shall be entitled to vote. When Trust Securities are held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Holder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. SECTION 6.6 Holder Action by Written Consent. Any action that may be taken by Holders at a meeting may be taken without a meeting if Holders holding a Majority in Liquidation Amount of all Capital Securities entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any other provision of this Trust Agreement) shall consent to the action in writing. SECTION 6.7 Record Date for Voting and Other Purposes. For the purposes of determining the Holders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any Distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees or Property Trustee may from time to time fix a date, not more than 90 days prior to the date of any meeting of Holders or the payment of a Distribution or other action, as the case may be, as a record date for the determination of the identity of the Holders of record for such purposes. SECTION 6.8 Acts of Holders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments is or are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor of the Issuer Trustees, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate -34- of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a Person acting in a capacity other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that any Issuer Trustee receiving the same deems sufficient and in accordance with such reasonable rules as such Issuer Trustee may determine. The ownership of Trust Securities shall be proved by the Securities Register. Any request, demand, authorization, direction, notice, consent, waiver or other action of the Holder of any Trust Security shall bind every future Holder of the same Trust Security and the Holder of every Trust Security issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Issuer Trustees or the Issuer Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount. If any dispute shall arise among the Holders or the Issuer Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other action of such Holder or Issuer Trustee under this Article VI, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter. SECTION 6.9 Inspection of Records. Upon reasonable notice to the Administrative Trustees and the Property Trustee, the records of the Issuer Trust shall be open to inspection by Holders during normal business hours for any purpose reasonably related to such Holder's interest as a Holder. ARTICLE VII REPRESENTATIONS AND WARRANTIES SECTION 7.1 Representations and Warranties of the Property Trustee and the Delaware Trustee. The Property Trustee and the Delaware Trustee, each severally on behalf of and as to itself, hereby represents and warrants for the benefit of the Depositor and the Holders that: -35- (a) the Property Trustee is a national banking association, duly organized, validly existing and in good standing under the laws of the United States; (b) the Property Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) the Delaware Trustee is a national banking association with its principal place of business in the State of Delaware; (d) the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (e) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and the Delaware Trustee and constitutes the valid and legally binding agreement of each of the Property Trustee and the Delaware Trustee enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (f) the execution, delivery and performance of this Trust Agreement has been duly authorized by all necessary corporate or other action on the part of the Property Trustee and the Delaware Trustee and does not require any approval of stockholders of the Property Trustee or the Delaware Trustee and such execution, delivery and performance will not (i) violate the Charter or By-laws of the Property Trustee or the Delaware Trustee, (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of, any Lien on any properties included in the Trust Property pursuant to the provisions of, any indenture, mortgage, credit agreement, license or other agreement or instrument to which the Property Trustee or the Delaware Trustee is a party or by which it is bound, or (iii) violate any law, governmental rule or regulation of the United States or the State of Delaware, as the case may be, governing the banking, trust or general powers of the Property Trustee or the Delaware Trustee (as appropriate in context) or any order, judgment or decree applicable to the Property Trustee or the Delaware Trustee; (g) neither the authorization, execution or delivery by the Property Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee or the Delaware Trustee (as the case may be) contemplated herein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing law of the United States or the State of Delaware governing the banking, trust or general powers of the Property Trustee or the Delaware Trustee, as appropriate in context; and -36- (h) there are no proceedings pending or, to the best of each of the Property Trustee's and the Delaware Trustee's knowledge, threatened against or affecting the Property Trustee or the Delaware Trustee in any court or before any governmental authority, agency or arbitration board or tribunal that, individually or in the aggregate, would materially and adversely affect the Issuer Trust or would question the right, power and authority of the Property Trustee or the Delaware Trustee, as the case may be, to enter into or perform its obligations as one of the Issuer Trustees under this Trust Agreement. SECTION 7.2 Representations and Warranties of Depositor. The Depositor hereby represents and warrants for the benefit of the Holders that: (a) the Trust Securities Certificates issued at the Closing Date on behalf of the Issuer Trust have been duly authorized and will have been duly and validly executed, issued and delivered by the Issuer Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Holders will be, as of each such date, entitled to the benefits of this Trust Agreement; and (b) there are no taxes, fees or other governmental charges payable by the Issuer Trust (or the Issuer Trustees on behalf of the Issuer Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery and performance by the Property Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement. ARTICLE VIII THE ISSUER TRUSTEES SECTION 8.1 Certain Duties and Responsibilities. (a) The duties and responsibilities of the Issuer Trustees shall be as provided by this Trust Agreement and, in the case of the Property Trustee, subject to Section 10.10 hereof. Notwithstanding the foregoing, no provision of this Trust Agreement shall require any of the Issuer Trustees to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Issuer Trustees shall be subject to the provisions of this Section 8.1. Nothing in this Trust Agreement shall be construed to release an Administrative Trustee from liability for his or her own negligent action, his or her own negligent failure to act, or his or her own willful misconduct. To the extent that, at law or in equity, an Issuer Trustee has duties and liabilities relating to the Issuer Trust or to the Holders, such Issuer Trustee shall not be liable to the Issuer Trust or to any Holder for such Issuer Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this -37- Trust Agreement, to the extent that they restrict the duties and liabilities of the Issuer Trustees otherwise existing at law or in equity, are agreed by the Depositor and the Holders to replace such other duties and liabilities of the Issuer Trustees. (b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Holder, by its acceptance of a Trust Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Issuer Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.1(b) does not limit the liability of the Issuer Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. (c) The Property Trustee, before the occurrence of any Trust Event of Default and after the curing of all Trust Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Trust Agreement (including pursuant to Section 10.10), and no implied covenants shall be read into this Trust Agreement against the Property Trustee. If a Trust Event of Default has occurred and is continuing, the Property Trustee shall exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Trust Agreement shall be construed to relieve the Property Trustee or the Delaware Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Trust Event of Default and after the curing or waiving of all such Trust Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Trust Agreement (including pursuant to Section 10.10), and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Trust Agreement (including pursuant to Section 10.10); and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Trust Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust -38- Indenture Act are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement. (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a Majority in Liquidation Amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; (iv) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Payment Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement and the Trust Indenture Act; (v) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Depositor; and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 3.1 and except to the extent otherwise required by law; (vi) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the default or misconduct of any other Issuer Trustee or the Depositor; and (vii) No provision of this Trust Agreement shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Property Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Trust Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. (e) The Administrative Trustees shall not be responsible for monitoring the compliance by the other Issuer Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall either Administrative Trustee be liable for the -39- default or misconduct of any other Administrative Trustee, the other Issuer Trustees or the Depositor. SECTION 8.2 Certain Notices. Within five calendar days after the occurrence of any Trust Event of Default actually known to the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.8, notice of such Trust Event of Default to the Holders, the Administrative Trustees and the Depositor, unless such Trust Event of Default shall have been cured or waived. Within five calendar days after the receipt of notice of the Depositor's exercise of its right to defer the payment of interest on the Debentures pursuant to the Indenture, the Administrative Trustees shall transmit, in the manner and to the extent provided in Section 10.8, notice of such exercise to the Holders, unless such exercise shall have been revoked. The Property Trustee shall not be deemed to have knowledge of any Trust Event of Default unless the Property Trustee shall have received written notice or a Responsible Officer of the Property Trustee charged with the administration of this Trust Agreement shall have obtained actual knowledge of such Trust Event of Default. SECTION 8.3 Certain Rights of Property Trustee. Subject to the provisions of Section 8.1: (a) the Property Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if (i) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Trust Agreement the Property Trustee finds the same ambiguous or inconsistent with any other provisions contained herein, or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Holders of the Capital Securities are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting the Depositor's opinion as to the course of action to be taken and the Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor; provided, however, that if the Property Trustee does not receive such instructions of the Depositor within ten Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than two Business Days), it may, but shall be under no duty to, take or refrain from -40- taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in the best interests of the Holders, in which event the Property Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; (c) any direction or act of the Depositor contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate; (d) any direction or act of an Administrative Trustee contemplated by this Trust Agreement shall be sufficiently evidenced by a certificate executed by such Administrative Trustee and setting forth such direction or act; (e) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or re-registration thereof; (f) the Property Trustee may consult with counsel (which counsel may be counsel to the Depositor or any of its Affiliates, and may include any of its employees) and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice; the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; (g) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Holders pursuant to this Trust Agreement, unless such Holders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; provided that, nothing contained in this Section 8.3(g) shall be taken to relieve the Property Trustee, upon the occurrence of a Trust Event of Default, of its obligation to exercise the rights and powers vested in it by this Trust Agreement; (h) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Holders, but the Property Trustee may make such further inquiry or investigation into such facts or matters as it may see fit; (i) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, provided that the Property Trustee shall be responsible for its own negligence or misconduct with respect to selection of any agent or attorney appointed by it hereunder; (j) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Property Trustee (i) may request -41- instructions from the Holders (which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of the Trust Securities in respect of such remedy, right or action), (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and (k) except as otherwise expressly provided by this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement. No provision of this Trust Agreement shall be deemed to impose any duty or obligation on any Issuer Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which such Person shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to any Issuer Trustee shall be construed to be a duty. SECTION 8.4 Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Issuer Trust and the Depositor, and the Issuer Trustees do not assume any responsibility for their correctness. The Issuer Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures. The Property Trustee may conclusively assume that any funds held by it hereunder are legally available unless an officer of the Property Trustee assigned to its Corporate Trust Administration department shall have received written notice from the Depositor, any Holder or any other Issuer Trustee that such funds are not legally available. SECTION 8.5 May Hold Securities. Any Issuer Trustee or any other agent of any Issuer Trustee or the Issuer Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 8.8 and 8.13, and except as provided in the definition of the term "Outstanding" in Article I, may otherwise deal with the Issuer Trust with the same rights it would have if it were not an Issuer Trustee or such other agent. SECTION 8.6 Compensation; Indemnity; Fees. The Depositor agrees: (a) to pay to the Issuer Trustees from time to time such reasonable compensation for all services rendered by them hereunder as may be agreed by the Depositor and the Issuer Trustees from time to time (which compensation shall not be -42- limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Issuer Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Issuer Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of their agents and counsel), except any such expense, disbursement or advance as may be attributable to their negligence, bad faith or willful misconduct; and (c) to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) each Issuer Trustee, (ii) any Affiliate of any Issuer Trustee, (iii) any officer, director, shareholder, employee, representative or agent of any Issuer Trustee, and (iv) any employee or agent of the Issuer Trust (referred to herein as an "Indemnified Person") from and against any loss, damage, liability, tax, penalty, expense, action, suit or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Issuer Trust or any act or omission performed or omitted by such Indemnified Person on behalf of the Issuer Trust, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence, bad faith or willful misconduct with respect to such acts or omissions. The provisions of this Section 8.6 shall survive the termination of this Trust Agreement and the removal or resignation of any Issuer Trustee. No Issuer Trustee may claim any Lien on any Trust Property as a result of any amount due pursuant to this Section 8.6. SECTION 8.7 Corporate Property Trustee Required; Eligibility of Issuer Trustees. (a) There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a Person that is a national or state chartered bank and eligible pursuant to the Trust Indenture Act to act as such and that has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. At the time of appointment, the Property Trustee must have securities rated in one of the three highest rating categories by a nationally recognized statistical rating organization. -43- (b) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. (c) There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware, or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law and that shall act through one or more persons authorized to bind such entity. SECTION 8.8 Conflicting Interests. (a) If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement. (b) The Guarantee Agreement and the Indenture shall be deemed to be specifically described in this Trust Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. SECTION 8.9 Co-Trustees and Separate Trustee. Unless a Trust Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Holders of Common Securities and the Administrative Trustees, by agreed action of the majority of such Trustees, shall have power to appoint, and upon the written request of the Administrative Trustees, the Depositor shall for such purpose join with the Administrative Trustees in the execution, delivery, and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Property Trustee either to act as co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. Any co-trustee or separate trustee appointed pursuant to this Section shall either be (i) a natural person who is at least 21 years of age and a resident of the United States, or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. In case a Trust Event of Default shall have occurred and be continuing, the Property Trustee alone shall have the power to make such appointment. Should any written instrument from the Depositor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate -44- trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Depositor. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: (a) The Trust Securities shall be executed by one or more Administrative Trustees, and the Trust Securities shall be delivered by the Property Trustee, and all rights, powers, duties, and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Property Trustee specified hereunder shall be exercised solely by the Property Trustee and not by such co-trustee or separate trustee. (b) The rights, powers, duties and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee. (c) The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case a Debenture Default has occurred and is continuing, the Property Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigning or removed may be appointed in the manner provided in this Section. (d) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee or any other trustee hereunder. (e) The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee. (f) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. SECTION 8.10 Resignation and Removal; Appointment of Successor. No resignation or removal of any Issuer Trustee (the "Relevant Trustee") and no appointment of a successor Issuer Trustee pursuant to this Article shall become effective -45- until the acceptance of appointment by the successor Issuer Trustee in accordance with the applicable requirements of Section 8.11. Subject to the immediately preceding paragraph, the Relevant Trustee may resign at any time by giving written notice thereof to the Holders. If the instrument of acceptance by the successor Trustee required by Section 8.11 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Trust, any court of competent jurisdiction for the appointment of a successor Relevant Trustee. Unless a Debenture Default shall have occurred and be continuing, any Issuer Trustee may be removed at any time by Act of the Holders of Common Securities. The Property Trustee or the Delaware Trustee, or both of them, may be removed by Act of the Holders of a Majority in Liquidation Amount of the Capital Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust) for cause or if a Debenture Default shall have occurred and be continuing. An Administrative Trustee may be removed by the Holders of Common Securities at any time. In no event will the Holders of the Capital Securities have a right to vote to appoint, remove or replace the Administrative Trustees. If any Issuer Trustee shall resign, be removed or become incapable of acting as Issuer Trustee, or if a vacancy shall occur in the office of any Issuer Trustee for any reason, at a time when no Debenture Default shall have occurred and be continuing, the Holders of Common Securities, by Act of the Holders of Common Securities, shall promptly appoint a successor Issuer Trustee or Issuer Trustees, and the retiring Issuer Trustee shall comply with the applicable requirements of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when a Debenture Default shall have occurred and be continuing, the Holders of Capital Securities, by Act of the Holders of a Majority in Liquidation Amount of the Capital Securities then Outstanding, shall promptly appoint a successor Relevant Trustee or Trustees, and such successor Trustee shall comply with the applicable requirements of Section 8.11. If an Administrative Trustee shall resign, be removed or become incapable of acting as Administrative Trustee, at a time when a Debenture Default shall have occurred and be continuing, the Holders of Common Securities by Act of the Holders of Common Securities shall promptly appoint a successor Administrative Trustee or Administrative Trustees and such successor Administrative Trustee or Trustees shall comply with the applicable requirements of Section 8.11. If no successor Relevant Trustee shall have been so appointed by the Holders of Common Securities or the Holders of Capital Securities and accepted appointment in the manner required by Section 8.11, any Holder who has been a Holder of Trust Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Relevant Trustee. The Property Trustee shall give notice of each resignation and each removal of an Issuer Trustee and each appointment of a successor Issuer Trustee to all Holders in the -46- manner provided in Section 10.8 and shall give notice to the Depositor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Property Trustee. Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of the remaining Administrative Trustees if there are at least two of them or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees or Delaware Trustee, as the case may be, set forth in Section 8.7). SECTION 8.11 Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Issuer Trustee such successor Issuer Trustee so appointed shall execute, acknowledge and deliver to the Issuer Trust and to the retiring Issuer Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Issuer Trustee shall become effective and such successor Issuer Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Issuer Trustee; but, on the request of the Depositor or the successor Issuer Trustee, such retiring Issuer Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Issuer Trustee all the rights, powers and trusts of the retiring Issuer Trustee and if the Property Trustee is the resigning Issuer Trustee shall duly assign, transfer and deliver to the successor Issuer Trustee all property and money held by such retiring Property Trustee hereunder. Notwithstanding the foregoing, any successor Delaware Trustee shall file an amendment to the Certificate of Trust with the Secretary of State of the state of Delaware. In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Trust Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Issuer Trust, and (b) shall add to or change any of the provisions of this Trust Agreement as shall be necessary to provide for or facilitate the administration of the Issuer Trust by more than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees as co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on request of the Issuer Trust or any successor Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver to -47- such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Issuer Trust. Upon request of any such successor Relevant Trustee, the Issuer Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article. SECTION 8.12 Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Property Trustee or the Delaware Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any Person, succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided that such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. SECTION 8.13 Preferential Collection of Claims Against Depositor or Issuer Trust. If and when the Property Trustee shall be or become a creditor of the Depositor or the Issuer Trust (or any other obligor upon the Capital Securities), the Property Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor, the Guarantor or the Issuer Trust (or any such other obligor). SECTION 8.14 Property Trustee May File Proofs of Claim. In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other similar judicial proceeding relative to the Issuer Trust or any other obligor upon the Trust Securities or the property of the Issuer Trust or of such other obligor or their creditors, the Property Trustee (irrespective of whether any Distributions on the Trust Securities shall then be due and payable and irrespective of whether the Property Trustee shall have made any demand on the Issuer Trust for the payment of any past due Distributions) shall be entitled and empowered, to the fullest extent permitted by law, by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of any Distributions owing and unpaid in respect of the Trust Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Property Trustee (including any claim for the reasonable compensation, expenses, disbursements and -48- advances of the Property Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Property Trustee and, in the event the Property Trustee shall consent to the making of such payments directly to the Holders, to pay to the Property Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel, and any other amounts due the Property Trustee. Nothing herein contained shall be deemed to authorize the Property Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or compensation affecting the Trust Securities or the rights of any Holder thereof or to authorize the Property Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 8.15 Reports by Property Trustee. (a) Not later than February 28 of each year (commencing in 2005), the Property Trustee shall transmit to all Holders in accordance with Section 10.8, and to the Depositor, a brief report dated as of the immediately preceding December 31 with respect to: (i) its eligibility under Section 8.7 or, in lieu thereof, if to the best of its knowledge it has continued to be eligible under said Section, a written statement to such effect; (ii) a statement that the Property Trustee has complied with all of its obligations under this Trust Agreement during the twelve-month period (or, in the case of the initial report, the period since the Closing Date) ending with such December 31 or, if the Property Trustee has not complied in any material respect with such obligations, a description of such noncompliance; and (iii) any change in the property and funds in its possession as Property Trustee since the date of its last report and any action taken by the Property Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Trust Securities. (b) In addition the Property Trustee shall transmit to Holders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. -49- (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with the Commission and with the Depositor. SECTION 8.16 Reports to the Property Trustee. Each of the Depositor, the Guarantor and the Administrative Trustees shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. The Depositor, the Guarantor and the Administrative Trustees shall annually file with the Property Trustee a certificate specifying whether such Person is in compliance with all of the terms and covenants applicable to such Person hereunder. SECTION 8.17 Evidence of Compliance with Conditions Precedent. Each of the Depositor, the Guarantor and the Administrative Trustees shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Trust Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers' Certificate. SECTION 8.18 Number of Issuer Trustees. (a) The number of Issuer Trustees initially shall be six, provided that the Property Trustee and the Delaware Trustee may be the same Person, in which case the number of Issuer Trustees may be less than six. (b) If an Issuer Trustee ceases to hold office for any reason, a vacancy shall occur. The vacancy shall be filled with an Issuer Trustee appointed in accordance with Section 8.10. (c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of an Issuer Trustee shall not operate to annul, dissolve or terminate the Issuer Trust. SECTION 8.19 Delegation of Power. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 2.7(a), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) The Administrative Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the -50- execution of such instruments either in the name of the Issuer Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Trust Agreement. SECTION 8.20 Appointment of Administrative Trustees. (a) The Administrative Trustees shall initially be Jorge A. Junquera, an individual, and Richard Barrios, an individual, and their successors shall be appointed by the Holders of a Majority in Liquidation Amount of the Common Securities and may resign or be removed by the Holders of a Majority in Liquidation Amount of the Common Securities at any time. Upon any resignation or removal, the Depositor shall promptly appoint a successor Administrative Trustee. Each Administrative Trustee shall sign an agreement agreeing to comply with the terms of this Trust Agreement. If at any time there is no Administrative Trustee, the Property Trustee or any Holder who has been a Holder of Trust Securities for at least six months may petition any court of competent jurisdiction for the appointment of one or more Administrative Trustees. (b) Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with this Section 8.20, the Administrative Trustees in office, regardless of their number (and not withstanding any other provision of this Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. (c) Notwithstanding the foregoing or any other provision of this Trust Agreement, if any Administrative Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by the acts of the remaining Administrative Trustee, if there were at least two of them prior to such vacancy, and by the Depositor, if there were not two such Administrative Trustees immediately prior to such vacancy (with the successor being a Person who satisfies the eligibility requirement for Administrative Trustees set forth in Section 8.7). SECTION 8.21 Outside Business. The Depositor and any Issuer Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Issuer Trust, and the Issuer Trust and the Holders of Capital Securities shall have no rights by virtue of this Trust Agreement in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Issuer Trust, shall not be deemed wrongful or improper. Neither the Depositor, nor any Issuer Trustee, shall be obligated to present any particular investment or other opportunity to the Issuer Trust even if such opportunity is of a character that, if presented to the Issuer Trust, could be taken by the Issuer Trust, and the Depositor or any Issuer Trustee shall have the right to -51- take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Issuer Trustee may engage or be interested in any financial or other transaction with the Depositor or any Affiliate of the Depositor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Depositor or its Affiliates. ARTICLE IX TERMINATION, LIQUIDATION AND MERGER SECTION 9.1 Termination Upon Expiration Date. Unless earlier terminated, the Issuer Trust shall automatically terminate on _____, 2039 (the "Expiration Date"), following the distribution of the Trust Property in accordance with Section 9.4. SECTION 9.2 Early Termination. The first to occur of any of the following events is an "Early Termination Event": (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor or the Guarantor; (b) the written direction to the Property Trustee from all of the Holders of the Common Securities, as well as the delivery of an Opinion of Counsel that Holders of Capital Securities will not recognize income or loss for United States Federal income tax purposes as a result, at any time to terminate the Issuer Trust and to distribute the Debentures to Holders in exchange for the Capital Securities (which direction is optional and wholly within the discretion of the Holders of the Common Securities); (c) the redemption of all of the Capital Securities in connection with the contemporaneous redemption or maturity of all the Debentures; and (d) the entry of an order for dissolution of the Issuer Trust by a court of competent jurisdiction. SECTION 9.3 Termination. The respective obligations and responsibilities of the Issuer Trustees and the Issuer Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Holders of all amounts required to be distributed hereunder upon the liquidation of the Issuer Trust pursuant to Section 9.4, or upon the redemption of all of the Trust Securities pursuant to Section 4.2; (b) the payment of any expenses owed by the Issuer Trust; and (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Issuer Trust or the Holders. -52- SECTION 9.4 Liquidation. (a) If an Early Termination Event specified in clause (a), (b) or (d) of Section 9.2 occurs or upon the Expiration Date, the Issuer Trust shall be liquidated by the Issuer Trustees as expeditiously as the Issuer Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Issuer Trust as provided by applicable law, to each Holder a Like Amount of Debentures, subject to Section 9.4(d). Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid mailed not less than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All such notices of liquidation shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Debentures; and (iii) provide such information with respect to the procedures by which Holders may exchange Trust Securities Certificates for Debentures, or if Section 9.4(d) applies receive a Liquidation Distribution, as Administrative Trustees or the Property Trustee shall deem appropriate. (b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the liquidation of the Issuer Trust and distribution of the Debentures to Holders, the Property Trustee, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish a record date for such distribution (which shall be not more than 30 days prior to the Liquidation Date) and, establish such procedures as it shall deem appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. (c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Debentures will be issued to Holders of Trust Securities Certificates, upon surrender of such Certificates to the exchange agent for exchange, (iii) any Trust Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Debentures bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on such Trust Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal will be made to Holders of Trust Securities Certificates with respect to such Debentures) and (iv) all rights of Holders holding Trust Securities will cease, except the right of such Holders to receive Debentures upon surrender of Trust Securities Certificates. (d) If, notwithstanding the other provisions of this Section 9.4, whether because of an order for dissolution entered by a court of competent jurisdiction or -53- otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustee not to be practical, or if an Early Termination Event specified in Section 9.2(c) has occurred and the entire Redemption Price properly paid, the Trust Property shall be liquidated, and the Issuer Trust shall be dissolved, wound-up or terminated, by the Property Trustee in such manner as the Property Trustee determines. In such event, on the date of the dissolution, winding-up or other termination of the Issuer Trust, Holders will be entitled to receive out of the assets of the Issuer Trust available for distribution to Holders, after satisfaction of liabilities to creditors of the Issuer Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such dissolution, winding up or termination, the Liquidation Distribution can be paid only in part because the Issuer Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Issuer Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holders of the Common Securities will be entitled to receive Liquidation Distributions upon any such dissolution, winding-up or termination pro rata (determined as aforesaid) with Holders of Capital Securities, except that, if a Debenture Default has occurred and is continuing, the Capital Securities shall have a priority over the Common Securities as provided in Section 4.3. SECTION 9.5 Mergers, Consolidations, Amalgamations or Replacements of Issuer Trust. The Issuer Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except pursuant to this Section 9.5. At the request of the Holders of the Common Securities, with the consent of the Administrative Trustees (the consent of the Property Trustee, the Delaware Trustee and the Holders of the Capital Securities not being required), the Issuer Trust may merge with or into, consolidate, amalgamate, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of the United States, any State or the District of Columbia; provided that if the Issuer Trust is not the surviving entity (i) such successor entity either (a) expressly assumes all of the obligations of the Issuer Trust with respect to the Capital Securities, or (b) substitutes for the Capital Securities other securities having substantially the same terms as the Capital Securities (the "Successor Securities") so long as the Successor Securities have the same priority as the Capital Securities with respect to Distributions and payments upon liquidation, redemption and otherwise, (ii) a trustee of such successor entity possessing the same powers and duties as the Property Trustee is appointed to hold the Debentures, (iii) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the rating of the Capital Securities (including any Successor Securities) to be downgraded or withdrawn by any nationally recognized statistical rating organization which assigns ratings to the Capital Securities, (iv) the Successor Securities are listed, or any Successor Securities will be listed upon notice of issuance, on the national securities exchange, the Nasdaq National Market or on such other exchange, interdealer quotation system or self regulatory organization as the Capital Securities are then listed, if any (it being understood that the Depositor has no current intention of listing the Capital Securities on any national stock exchange, the Nasdaq National Market or on any other exchange, -54- interdealer quotation system or self-regulatory organization), (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Capital Securities (including any Successor Securities) in any material respect, (vi) after giving effect to the transaction, no Debenture Default and no event which, after the giving of notice or the lapse of time, or both, would become a Debenture Default, has occurred and is continuing under the Indenture, (vii) such successor entity has a purpose substantially identical to that of the Issuer Trust, (viii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Depositor has received an opinion from independent counsel to the Issuer Trust to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Capital Securities (including any Successor Securities) in any material respect, (b) the Issuer Trust continues to be, and the successor entity shall be, a grantor trust for United States Federal income tax purposes and (c) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Issuer Trust nor such successor entity will be required to register as an "investment company" under the Investment Company Act, and (ix) the Depositor or its permitted successor or permitted transferee owns all of the Common Securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee Agreement. Notwithstanding the foregoing, the Issuer Trust shall not, except with the consent of Holders of all of the Capital Securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Issuer Trust or the successor entity to be taxable as a corporation or classified as other than a grantor trust for United States Federal income tax purposes or the Issuer Trust to be required to be registered as an "investment company" under the Investment Company Act. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1 Limitation of Rights of Holders. Except as set forth in Section 9.2, the death or incapacity of any person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement, nor entitle the legal representatives or heirs of such person or any Holder for such person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. -55- SECTION 10.2 Amendment. (a) This Trust Agreement may be amended from time to time by the Property Trustee, the Administrative Trustees, the Guarantor and the Holders of all of the Common Securities, without the consent of any Holder of the Capital Securities, (i) to cure any ambiguity, correct or supplement any provision herein that may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Trust Agreement, which shall not be inconsistent with the other provisions of this Trust Agreement, or (ii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Issuer Trust will not be taxable as a corporation or classified as other than a grantor trust for United States Federal income tax purposes at all times that any Trust Securities are Outstanding or to ensure that the Issuer Trust will not be required to register as an "investment company" under the Investment Company Act, provided, however, that in the case of either clause (i) or clause (ii) such action shall not adversely affect in any material respect the interests of any Holder, and any such amendment of this Trust Agreement shall become effective when notice thereof is given to the Holders. (b) Except as provided in Section 10.2(c), any provision of this Trust Agreement may be amended by the Issuer Trustees, the Guarantor and the Holders of all of the Common Securities and with (i) the consent of Holders of a Majority in Liquidation Amount of the Trust Securities, and (ii) receipt by the Issuer Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Issuer Trustees in accordance with such amendment will not cause the Issuer Trust to be taxable as a corporation or as other than a grantor trust for United States Federal income tax purposes or affect the Issuer Trust's exemption from status as an "investment company" under the Investment Company Act. (c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Holder (such consent being obtained in accordance with Section 6.3 or 6.6), this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities, (ii) change the Redemption Date, Redemption Price, the Liquidation Distribution or events that would cause a redemption of Trust Securities or liquidation, dissolution or termination of the Issuer Trust or (iii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after its due date, including the right to bring a Direct Action; and notwithstanding any other provision herein, without the unanimous consent of the Holders (such consent being obtained in accordance with Section 6.3 or 6.6), this Section 10.2(c) may not be amended. (d) Notwithstanding any other provisions of this Trust Agreement, no Issuer Trustee shall enter into or consent to any amendment to this Trust Agreement that would cause the Issuer Trust to fail or cease to qualify for the exemption from status as an "investment company" under the Investment Company Act or to be taxable as a corporation or to be classified as other than a grantor trust for United States Federal income tax purposes. -56- (e) Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Depositor, the Guarantor and the Administrative Trustees, this Trust Agreement may not be amended in a manner that imposes any additional obligation on the Depositor, the Guarantor or the Administrative Trustees. (f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustees or the Property Trustee shall promptly provide to the Depositor and the Guarantor a copy of such amendment. (g) Neither the Property Trustee nor the Delaware Trustee shall be required to enter into any amendment to this Trust Agreement that affects its own rights, duties or immunities under this Trust Agreement. The Property Trustee shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Trust Agreement is in compliance with this Trust Agreement. SECTION 10.3 Separability. In case any provision in this Trust Agreement or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 10.4 Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE ISSUER TRUST, THE DEPOSITOR, THE GUARANTOR AND THE ISSUER TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND WHOLLY TO BE PERFORMED IN SUCH STATE, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. SECTION 10.5 Payments Due on Non-Business Day. If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day that is a Business Day, with the same force and effect as though made on the date fixed for such payment, and no Distributions shall accumulate on such unpaid amount for the period after such date. SECTION 10.6 Successors. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Guarantor, the Issuer Trust and any Issuer Trustee, including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Depositor that is permitted under Article Eight of the -57- Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. SECTION 10.7 Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. SECTION 10.8 Reports, Notices and Demands. Any report, notice, demand or other communication that by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Holder, the Depositor or the Guarantor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Holder of Capital Securities, to such Holder as such Holder's name and address may appear on the Securities Register; and (b) in the case of the Holder of the Common Securities, the Depositor or the Guarantor, to Popular North America, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, Attention: Secretary, facsimile no.: _________, or to such other address as may be specified in a written notice by the Holder of the Common Securities or the Depositor, as the case may be, to the Property Trustee. Such notice, demand or other communication to or upon a Holder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Such notice, demand or other communication to or upon the Depositor shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Depositor. Any notice, demand or other communication that by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Property Trustee, the Delaware Trustee, the Administrative Trustees or the Issuer Trust shall be given in writing addressed to such Person as follows: (a) with respect to the Property Trustee to J.P. Morgan Trust Company, National Association, 227 W. Monroe, Suite 2600, Chicago, Illinois 60606, Attention: George Reaves; (b) with respect to the Delaware Trustee, to Chase Manhattan Bank USA, National Association, 500 Stanton Christiana Road, 3rd Floor/OPS4 Newark, New Castle County, Delaware 19713, Attention: [John Cashin]; (c) with respect to the Administrative Trustees, to them at the address above for notices to the Depositor, marked "Attention: Administrative Trustees of Popular North America Capital Trust I"; and (d) with respect to the Issuer Trust, to its principal office specified in Section 2.1, with a copy to the Property Trustee. Such notice, demand or other communication to or upon the Issuer Trust, the Property Trustee or the Administrative Trustees shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Issuer Trust, the Property Trustee or such Administrative Trustee. SECTION 10.9 Agreement Not to Petition. Each of the Issuer Trustees, the Depositor and the Guarantor agrees for the benefit of the Holders that, until at least one year and one day after the Issuer Trust has been -58- terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Issuer Trust under Bankruptcy Laws or otherwise join in the commencement of any proceeding against the Issuer Trust under any Bankruptcy Law. If any action is taken in violation of this Section 10.9, the Property Trustee agrees, for the benefit of Holders, that at the expense of the Depositor and the Guarantor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition against the Issuer Trust or the commencement of such action and raise the defense that the Depositor and the Guarantor have agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Issuer Trustees or the Issuer Trust may assert. SECTION 10.10 Trust Indenture Act; Conflict with Trust Indenture Act. (a) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Issuer Trustee that is a trustee for the purposes of the Trust Indenture Act. (c) If any provision hereof limits, qualifies or conflicts with another provision hereof which is required or deemed to be included in this Trust Agreement by any of the provisions of the Trust Indenture Act, such required or deemed provisions shall control. If any provision of this Trust Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Trust Agreement as so modified or excluded, as the case may be. (d) The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Trust Securities as equity securities representing undivided beneficial interests in the assets of the Issuer Trust. SECTION 10.11 Acceptance of Terms of Trust Agreement, Guarantee Agreement and Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A HOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE HOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT, THE GUARANTEE AGREEMENT AND THE INDENTURE, AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AGREEMENT AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE ISSUER TRUST, SUCH HOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE ISSUER TRUST AND SUCH HOLDER AND SUCH OTHERS. -59- [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -60- IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Trust Agreement. POPULAR NORTH AMERICA, INC., as Depositor By: --------------------------------------------- Name: Title: POPULAR, INC., as Guarantor By: --------------------------------------------- Name: Title: J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Property Trustee By: --------------------------------------------- Name: Title: CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION, as Delaware Trustee By: --------------------------------------------- Name: Title: ---------------------------------------------------- Name: Jorge A. Junquera, an individual, as Administrative Trustee ---------------------------------------------------- Name: Richard Barrios, an individual, as Administrative Trustee -61- EXHIBIT A CERTIFICATE OF TRUST OF POPULAR NORTH AMERICA CAPITAL TRUST I THIS Certificate of Trust of Popular North America Capital Trust I (the "Trust") is being duly executed and filed by the undersigned, as trustees, to form a statutory trust under the Delaware Statutory Trust Act (12 Del. C. Section 3801 et seq.) (the "Act"). 1. Name. The name of the statutory trust formed hereby is Popular North America Capital Trust I. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware is Chase Manhattan Bank USA, National Association, 500 Stanton Christiana Road, 3rd Floor/OPS4, Newark, Delaware 19713. 3. Effective Date. This Certificate of Trust shall be effective upon filing. IN WITNESS WHEREOF, the undersigned have duly executed this Certificate in accordance with Section 3811(a) of the Act. CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION, as Trustee By: ------------------------------------------- Name: Title: -----------------------------------, as Trustee Name: -----------------------------------, as Trustee Name: A-1 EXHIBIT B [FORM OF LETTER OF REPRESENTATIONS] [To come - SABW.] B-1 EXHIBIT C [FORM OF COMMON SECURITIES CERTIFICATE] TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT AND ONLY IN CONNECTION WITH A SIMULTANEOUS DELEGATION AND ASSIGNMENT OF THE EXPENSE AGREEMENT REFERRED TO THEREIN Certificate Number Number of Common Securities CI- Certificate Evidencing Common Securities of Popular North America Capital Trust I _____% Common Securities (liquidation amount $1,000 per Common Security) Popular North America Capital Trust I, a statutory trust formed under the laws of the State of Delaware (the "Issuer Trust"), hereby certifies that [NAME OF HOLDER] (the "Holder") is the registered owner of Common Securities of the Issuer Trust representing common undivided beneficial interests in the assets of the Issuer Trust and designated the _____% Common Securities (liquidation amount $1,000 per Common Security) (the "Common Securities"). To the fullest extent permitted by applicable law and except in accordance with Section 5.11 of the Trust Agreement (as defined below) the Common Securities are not transferable and any attempted transfer hereof other than in accordance therewith shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Issuer Trust, dated as of _____, 2004, as the same may be amended from time to time (the "Trust Agreement"), among Popular North America, Inc., as Depositor, Popular, Inc., as Guarantor, J.P. Morgan Trust Company, National Association, as Property Trustee, Chase Manhattan Bank USA, National Association, as Delaware Trustee, and the Administrative Trustees named therein, including the designation of the terms of the Common Securities as set forth therein. The Issuer Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Issuer Trust at its principal place of business or registered office. C-1 Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. Terms used but not defined herein have the meanings set forth in the Trust Agreement. IN WITNESS WHEREOF, one of the Administrative Trustees of the Issuer Trust has executed this certificate this _____ day of _____, _____. POPULAR NORTH AMERICA CAPITAL TRUST I By: -----------------------------_ Name: Administrative Trustee C-2 EXHIBIT D [FORM OF EXPENSE AGREEMENT] AGREEMENT AS TO EXPENSES AND LIABILITIES AGREEMENT AS TO EXPENSES AND LIABILITIES, dated as of September __, 2004, among Popular North America, Inc., a Delaware corporation (the "Corporation"), Popular, Inc., a Puerto Rico corporation (the "Guarantor") and Popular North America Capital Trust I, a Delaware statutory trust (the "Issuer Trust"). WHEREAS, the Issuer Trust intends to issue its Common Securities (the "Common Securities") to and acquire ____% Junior Subordinated Debentures of the Corporation (the "Debentures") from the Corporation and to issue and sell ____% Capital Securities (the "Capital Securities") with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Trust Agreement of the Issuer Trust, dated as of September __, 2004 among the Corporation, as Depositor, Popular, Inc., as Guarantor, J.P. Morgan Trust Company, National Association, as Property Trustee, Chase Manhattan Bank USA, National Association, as Delaware Trustee, and the Administrative Trustees named therein, as the same may be amended from time to time (the "Trust Agreement"); WHEREAS, the Corporation will own all of the Common Securities of the Trust; WHEREAS, terms used but not defined herein have the meanings set forth in the Trust Agreement; NOW, THEREFORE, for good and valid consideration, the receipt and sufficiency of which are hereby acknowledged: ARTICLE I Section 1.1. Guarantee by the Corporation and the Guarantor. Subject to the terms and conditions hereof, the Corporation and the Guarantor hereby jointly and severally irrevocably and unconditionally guarantee to each person or entity to whom the Issuer Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment, when and as due, of any and all Obligations (as hereinafter defined) to such Beneficiaries. As used herein, "Obligations" means (i) all debts and other obligations of the Issuer Trust, other than obligations of the Issuer Trust to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities, (ii) all costs and expenses of the Issuer Trust, including without limitation costs and expenses relating to the organization of the Issuer Trust, the fees and expenses of the Trustees (as defined in the Trust Agreement) and the costs and expenses relating to the operation of the Issuer Trust, and (iii) any and all taxes and costs and expenses with respect thereto to which the Issuer Trust might become subject, in each case, including without limitation, any such costs, expenses or liabilities of the Issuer Trust that are required by applicable law to be satisfied in connection with the termination of the Issuer Trust. This Agreement is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof. D-1 Section 1.2. Subordination of Guarantee. The guarantee and other liabilities and obligations of the Corporation and the Guarantor under this Agreement shall constitute joint and several unsecured obligations of the Corporation and the Guarantor, respectively, and shall rank subordinate and junior in right of payment to all Senior Debt (as defined in the Indenture) of the Corporation and the Guarantor, as the case may be, to the extent and in the manner set forth in the Indenture with respect to the Debentures, and the provisions of Article XII of the Indenture will apply, mutatis mutandis, to the obligations of the Corporation and the Guarantor hereunder. The obligations of the Corporation and the Guarantor hereunder do not constitute Senior Debt (as defined in the Indenture) of the Corporation or the Guarantor. Section 1.3. Term of Agreement. This Agreement shall terminate and be of no further force and effect upon the dissolution of the Issuer Trust, provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any holder of Capital Securities or any Beneficiary is required to repay any sums paid under the Capital Securities, under any Obligation, under the Guarantee Agreement dated the date hereof among the Depositor, the Guarantor and J.P. Morgan Trust Company, National Association, as guarantee trustee, or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute. Section 1.4. Waiver of Notice. The Corporation and the Guarantor hereby waive notice of acceptance of this Agreement and of any Obligation to which it applies or may apply, and the Corporation and the Guarantor hereby waive presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Section 1.5. No Impairment. The obligations, covenants, agreements and duties of the Corporation and the Guarantor under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the extension of time for the payment by the Issuer Trust of all or any portion of the Obligations or for the performance of any other obligation under, arising out of, or in connection with, the Obligations; (b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the Obligations or any action on the part of the Issuer Trust granting indulgence or extension of any kind; or (c) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer Trust or any of the assets of the Issuer Trust (other than the liquidation of the Issuer Trust in accordance with the terms thereof). D-2 There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, the Corporation or the Guarantor with respect to the happening of any of the foregoing. Section 1.6. Enforcement. A Beneficiary may enforce this Agreement directly against the Corporation or the Guarantor and each of the Corporation and the Guarantor waives any right or remedy to require that any action be brought against the Issuer Trust or any other person or entity before proceeding against the Corporation or the Guarantor. Section 1.7. Subrogation. Each of the Corporation and the Guarantor shall be subrogated to all rights (if any) of the Issuer Trust in respect of any amounts paid to the Beneficiaries by the Corporation or the Guarantor, respectively, under this Agreement; provided, however, that each of the Corporation and the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Agreement. ARTICLE II Section 2.1. Assignment. This Agreement may not be assigned by any party hereto without the consent of the others, and any purported assignment without such consent shall be void; Section 2.2. Binding Effect. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of each of the Corporation and the Guarantor and shall inure to the benefit of the Beneficiaries. Section 2.3. Amendment. So long as there remains any Beneficiary or any Capital Securities are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to the holders of the Capital Securities without the consent of such Beneficiary or the holders of the Capital Securities, as the case may be. Section 2.4. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail), telex or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed or upon receipt of an answer-back, if sent by telex): D-3 If given to the Issuer Trust: Popular North America Capital Trust I c/o Popular North America, Inc. 209 Munoz Rivera Avenue San Juan, Puerto Rico 00918 Facsimile No.: ________ Attention: Secretary With a copy to: Popular North America, Inc. 209 Munoz Rivera Avenue San Juan, Puerto Rico 00918 Facsimile No.: ________ Attention: Secretary Section 2.5. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND WHOLLY TO BE PERFORMED IN SUCH STATE. D-4 THIS AGREEMENT is executed as of the day and year first above written. POPULAR NORTH AMERICA, INC. By: --------------------------------------------- Name: Title: POPULAR, INC. By: --------------------------------------------- Name: Title: POPULAR NORTH AMERICA CAPITAL TRUST I By: --------------------------------------------- Name: Administrative Trustee D-5 EXHIBIT E [FORM OF CAPITAL SECURITIES CERTIFICATE] [IF THE CAPITAL SECURITIES CERTIFICATE IS TO BE EVIDENCED BY A BOOK-ENTRY CAPITAL SECURITIES CERTIFICATE, INSERT -- This Capital Securities Certificate is a Book-Entry Capital Securities Certificate within the meaning of the Trust Agreement hereinafter referred to and is registered in the name of a Clearing Agency or a nominee of a Clearing Agency. This Capital Securities Certificate is exchangeable for Capital Securities Certificates registered in the name of a person other than the Clearing Agency or its nominee only in the limited circumstances described in the Trust Agreement and may not be transferred except as a whole by the Clearing Agency to a nominee of the Clearing Agency or by a nominee of the Clearing Agency to the Clearing Agency or another nominee of the Clearing Agency, except in the limited circumstances described in the Trust Agreement. Unless this Capital Security Certificate is presented by an authorized representative of The Depository Trust Company, a New York Corporation ("DTC"), to Popular North America Capital Trust I or its agent for registration of transfer, exchange or payment, and any Capital Security Certificate issued is registered in the name of Cede & Co. or such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO A PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] E-1 CERTIFICATE NUMBER NUMBER OF CAPITAL SECURITIES CAI- CUSIP NO. _____________ CERTIFICATE EVIDENCING CAPITAL SECURITIES OF POPULAR NORTH AMERICA CAPITAL TRUST I _____% CAPITAL SECURITIES (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) Popular North America Capital Trust I, a statutory trust formed under the laws of the State of Delaware (the "Issuer Trust"), hereby certifies that ___________________ (the "Holder") is the registered owner of _________________ (___) Capital Securities of the Issuer Trust representing preferred undivided beneficial interests in the assets of the Issuer Trust and designated the Popular North America Capital Trust I _____% Capital Securities (liquidation amount $1,000 per Capital Security) (the "Capital Securities"). The Capital Securities are transferable on the books and records of the Issuer Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.5 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities are set forth in, and this certificate and the Capital Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Issuer Trust, dated as of _____, 2004, as the same may be amended from time to time (the "Trust Agreement"), among Popular North America, Inc., as Depositor, Popular, Inc., as Guarantor, J.P. Morgan Trust Company, National Association, as Property Trustee, Chase Manhattan Bank USA, National Association, as Delaware Trustee, and the Administrative Trustees named therein, including the designation of the terms of the Capital Securities as set forth therein. Reference is also made to the Junior Subordinated Indenture, dated as of _____, 2004 (the "Indenture"), between Popular, Inc., a Puerto Rico corporation, Popular North America, Inc., a Delaware corporation, and J.P. Morgan Trust Company, National Association. The Holder is entitled to the benefits of the Guarantee Agreement entered into by Popular North America, Inc., Popular, Inc., and J.P. Morgan Trust Company, National Association, as guarantee trustee, dated as of _____, 2004 (the "Guarantee Agreement"), to the extent provided therein. The Issuer Trust will furnish a copy of the Trust Agreement, the Indenture and the Guarantee Agreement without charge upon written request to the Issuer Trust at its principal place of business or registered office. E-2 Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. E-3 IN WITNESS WHEREOF, one of the Administrative Trustees of the Issuer Trust has executed this certificate this _____ day of _____, ____. POPULAR NORTH AMERICA CAPITAL TRUST I By: --------------------------------- Name: Administrative Trustee E-4 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security to: - ------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Insert address and zip code of assignee) and irrevocably appoints_______________________________________________________ agent to transfer this Capital Security Certificate on the books of the Issuer Trust. The agent may substitute another to act for him or her. Date: ________________ Signature: --------------------------------------------------------------------- (Sign exactly as your name appears on the other side of this Capital Security Certificate) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. E-5 EX-4.(F) 7 g90482a2exv4wxfy.txt EX-4(F) FORM OF GUARANTEE AGREEMENT EXHIBIT 4(f) ================================================================================ GUARANTEE AGREEMENT BY AND AMONG POPULAR NORTH AMERICA, INC., AS GUARANTOR POPULAR, INC., AS ADDITIONAL GUARANTOR and J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, AS GUARANTEE TRUSTEE RELATING TO POPULAR NORTH AMERICA CAPITAL TRUST I ------------------------ Dated as of September __, 2004 ------------------------ ================================================================================ CROSS-REFERENCE TABLE(1)
Section of Trust Indenture Act Section of Guarantee of 1939, as amended Agreement - ------------------- --------- 310(a).................................................................................... 4.1(a) 310(b).................................................................................... 4.1(c), 2.8 310(c).................................................................................... Inapplicable 311(a).................................................................................... 2.2(b) 311(b).................................................................................... 2.2(b) 311(c).................................................................................... Inapplicable 312(a).................................................................................... 2.2(a) 312(b).................................................................................... 2.2(b) 313....................................................................................... 2.3 314(a).................................................................................... 2.4 314(b).................................................................................... Inapplicable 314(c).................................................................................... 2.5 314(d).................................................................................... Inapplicable 314(e).................................................................................... 1.1, 2.5, 3.2 314(f).................................................................................... 2.1, 3.2 315(a).................................................................................... 3.1(d) 315(b).................................................................................... 2.7 315(c).................................................................................... 3.1 315(d).................................................................................... 3.1(d) 316(a).................................................................................... 1.1, 2.6, 5.4 316(b).................................................................................... 5.3 316(c).................................................................................... 8.2 317(a).................................................................................... Inapplicable 317(b).................................................................................... Inapplicable 318(a).................................................................................... 2.1 318(b).................................................................................... 2.1 318(c).................................................................................... 2.1
- -------------- (1) This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. -i- TABLE OF CONTENTS ARTICLE I DEFINITIONS Section 1.1. Definitions................................................................... 1 ARTICLE II TRUST INDENTURE ACT Section 2.1. Trust Indenture Act; Application.............................................. 4 Section 2.2. List of Holders............................................................... 4 Section 2.3. Reports by the Guarantee Trustee.............................................. 5 Section 2.4. Periodic Reports to the Guarantee Trustee..................................... 5 Section 2.5. Evidence of Compliance with Conditions Precedent.............................. 5 Section 2.6. Events of Default; Waiver..................................................... 5 Section 2.7. Event of Default; Notice...................................................... 5 Section 2.8. Conflicting Interests......................................................... 6 ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE Section 3.1. Powers and Duties of the Guarantee Trustee.................................... 6 Section 3.2. Certain Rights of Guarantee Trustee........................................... 7 Section 3.3. Compensation; Indemnity; Fees................................................. 8 ARTICLE IV GUARANTEE TRUSTEE Section 4.1. Guarantee Trustee; Eligibility................................................ 9 Section 4.2. Appointment, Removal and Resignation of the Guarantee Trustee................. 9 ARTICLE V GUARANTEE Section 5.1. Guarantee..................................................................... 10 Section 5.2. Waiver of Notice and Demand................................................... 10 Section 5.3. Obligations Not Affected...................................................... 10 Section 5.4. Rights of Holders............................................................. 11 Section 5.5. Guarantee of Payment.......................................................... 11 Section 5.6. Subrogation................................................................... 12 Section 5.7. Independent Obligations....................................................... 12 Section 5.8. Guarantee Payments and Additional Guarantee Payments Free of Puerto Rico Tax............................................................... 12

-ii- ARTICLE VI COVENANTS AND SUBORDINATION Section 6.1. Subordination................................................................. 13 Section 6.2. Pari Passu Guarantees......................................................... 13 Section 6.3. Common Stock.................................................................. 13 ARTICLE VII TERMINATION Section 7.1. Termination................................................................... 13 ARTICLE VIII MISCELLANEOUS Section 8.1. Successors and Assigns........................................................ 14 Section 8.2. Amendments.................................................................... 14 Section 8.3. Notices....................................................................... 14 Section 8.4. Benefit....................................................................... 15 Section 8.5. Governing Law................................................................. 15 Section 8.6. Counterparts.................................................................. 15

-iii- GUARANTEE AGREEMENT, dated as of September __, 2004, by and among POPULAR NORTH AMERICA, INC., a Delaware corporation (the "Guarantor"), having its principal office at 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, POPULAR, INC., a Puerto Rico corporation (the "Additional Guarantor", and together with the Guarantor, the "Guarantors"), having its principal office at 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, and J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of POPULAR NORTH AMERICA CAPITAL TRUST I, a Delaware statutory trust (the "Issuer Trust"). RECITALS OF THE CORPORATION WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of September __, 2004 (the "Trust Agreement"), among Popular North America, Inc., as Depositor, Popular, Inc., as Guarantor, the Property Trustee, the Delaware Trustee and the Administrative Trustees named therein, the Issuer Trust is issuing $250,000,000 aggregate Liquidation Amount (as defined in the Trust Agreement) of its ____% Capital Securities (liquidation amount $1,000 per Capital Security) (the "Capital Securities"), representing preferred undivided beneficial interests in the assets of the Issuer Trust and having the terms set forth in the Trust Agreement; WHEREAS, the Capital Securities will be issued by the Issuer Trust and the proceeds thereof, together with the proceeds from the issuance of the Issuer Trust's Common Securities (as defined herein), will be used to purchase the Debentures (as defined in the Trust Agreement) of the Guarantor, which Debentures will be deposited with J.P. Morgan Trust Company, National Association, as Property Trustee under the Trust Agreement, as trust assets; and WHEREAS, as an incentive for the Holders to purchase Capital Securities, the Guarantors desire irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders of the Capital Securities the Guarantee Payments and Additional Guarantee Payments (as defined herein), as the case may be, and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase of Capital Securities by each Holder, which purchase the Guarantors hereby acknowledge shall benefit the Guarantors, the Guarantors execute and deliver this Guarantee Agreement for the benefit of the Holders from time to time. ARTICLE I DEFINITIONS SECTION 1.1. Definitions. For all purposes of this Guarantee Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) All other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (d) All accounting terms used but not defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles; (e) Unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Guarantee Agreement; and (f) The words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Guarantee Agreement as a whole and not to any particular Article, Section or other subdivision. "Additional Guarantee Payments" means payments by the Additional Guarantor with respect to the Guarantee Payments owed by the Guarantor. "Additional Guarantor" has the meaning specified in the preamble of this Guarantee Agreement. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Board of Directors" means, as the context requires, the board of directors of either of the Guarantors or the Executive Committee of the board of directors of either of the Guarantors (or any other committee of the board of directors of either of the Guarantors performing similar functions) or a committee designated by the board of directors of either of the Guarantors (or such committee), comprised of two or more members of the board of directors of either of the Guarantors or officers of either of the Guarantors, or both. "Capital Securities" has the meaning specified in the recitals to this Guarantee Agreement. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer Trust. "Event of Default" means (i) a default by either of the Guarantors in any of its payment obligations under this Guarantee Agreement or (ii) a default by either of the Guarantors in any other obligation under this Guarantee Agreement that remains unremedied for 30 days. "Guarantee Agreement" means this Guarantee Agreement, as modified, amended or supplemented from time to time. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by or on behalf of the Issuer Trust: (i) any accumulated and unpaid Distributions (as defined in the Trust Agreement) required to be paid on the Capital Securities, to the extent the Issuer Trust shall have funds on hand available therefor at such time; (ii) the Redemption Price (as defined in the Trust Agreement) with respect to any Capital Securities called for redemption or then subject to mandatory redemption by the Issuer Trust, to the extent the Issuer Trust shall have funds on hand available therefor at such time; and (iii) upon a voluntary or involuntary -2- dissolution, winding-up or termination of the Issuer Trust, other than in connection with the distribution of Debentures to the Holders or the redemption of all the Capital Securities, the lesser of (a) the Liquidation Distribution (as defined in the Trust Agreement) with respect to the Capital Securities, to the extent that the Issuer Trust shall have funds on hand available therefor at such time, and (b) the amount of assets of the Issuer Trust remaining available for distribution to Holders on liquidation of the Issuer. "Guarantee Trustee" means J.P. Morgan Trust Company, National Association, solely in its capacity as Guarantee Trustee and not in its individual capacity, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement, and thereafter means each such Successor Guarantee Trustee. "Guarantor" has the meaning specified in the preamble of this Guarantee Agreement. "Guarantors" has the meaning specified in the preamble of this Guarantee Agreement. "Holder" means any Holder (as defined in the Trust Agreement) of any Capital Securities; provided, however, that in determining whether the holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantors, the Guarantee Trustee, or any Affiliate of the Guarantors or the Guarantee Trustee. "Indenture" means the Junior Subordinated Indenture, dated as of _______, 2004, among the Guarantor, the Additional Guarantor and J.P. Morgan Trust Company, National Association, as trustee, as the same may be modified, amended or supplemented from time to time. "Issuer Trust" has the meaning specified in the preamble of this Guarantee Agreement. "List of Holders" has the meaning specified in Section 2.2(a). "Majority in Liquidation Amount of the Capital Securities" means, except as provided by the Trust Indenture Act, Capital Securities representing more than 50% of the aggregate Liquidation Amount (as defined in the Trust Agreement) of all Capital Securities then Outstanding (as defined in the Trust Agreement). "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chairman or a Vice Chairman of the Board of Directors of such Person or the President or a Vice President of such Person, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement by each officer signing the Officers' Certificate that such officer has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by such officer in rendering the Officers' Certificate; (c) a statement that such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of such officer, such condition or covenant has been complied with. -3- "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, company, limited liability company, trust, statutory trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Responsible Officer" means, with respect to the Guarantee Trustee, any Senior Vice President, any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer or Assistant Trust Officer or any other officer of the Corporate Trust Department of the Guarantee Trustee and also means, with respect to a particular matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Trust Agreement" means the Amended and Restated Trust Agreement of the Issuer Trust referred to in the recitals to this Guarantee Agreement, as modified, amended or supplemented from time to time. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this Guarantee Agreement was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Vice President," when used with respect to either of the Guarantors, means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president." ARTICLE II TRUST INDENTURE ACT SECTION 2.1. Trust Indenture Act; Application. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with another provision hereof which is required or deemed to be included in this Guarantee Agreement by any of the provisions of the Trust Indenture Act, such required or deemed provision shall control. If any provision of this Guarantee Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Guarantee Agreement as so modified or to be excluded, as the case may be. SECTION 2.2. List of Holders. (a) The Guarantors shall furnish or cause to be furnished to the Guarantee Trustee (a) semi-annually, on or before January 31 and July 31 of each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders (a "List of Holders") as of a date not more than 15 days prior to the delivery thereof and (b) at such other times as the Guarantee Trustee may -4- request in writing, within 30 days after the receipt by the Guarantors of any such request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Guarantors and has not otherwise been received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee may destroy any List of Holders previously given to it upon receipt of a new List of Holders. (b) The Guarantee Trustee shall comply with the requirements of Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3. Reports by the Guarantee Trustee. Not later than February 28 of each year, commencing in 2005, the Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4. Periodic Reports to the Guarantee Trustee. The Guarantors shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act and the compliance certificate required by Section 314 of the Trust Indenture Act, in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5. Evidence of Compliance with Conditions Precedent. Each of the Guarantors shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer of either of the Guarantors pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6. Events of Default; Waiver. The Holders of at least a Majority in Liquidation Amount of the Capital Securities may, by vote, on behalf of the Holders of all the Capital Securities, waive any past default or Event of Default and its consequences. Upon such waiver, any such default or Event of Default shall cease to exist, and any default or Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7. Event of Default; Notice. (a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default known to the Guarantee Trustee, transmit by mail, first class postage prepaid, to the Holders notice of any such Event of Default, unless such Event of Default has been cured before the giving of such notice, provided that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. -5- (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of this Guarantee Agreement shall have obtained actual knowledge, of such Event of Default. SECTION 2.8. Conflicting Interests. The Trust Agreement and the Indenture shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE SECTION 3.1. Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Guarantee Trustee hereunder. The right, title and interest of the Guarantee Trustee, as such, hereunder shall automatically vest in any Successor Guarantee Trustee upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders. (c) The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. The Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) Prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement (including pursuant to Section 2.1), and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the -6- correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement. (ii) The Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made. (iii) The Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement. (iv) No provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 3.2. Certain Rights of Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Guarantee Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document reasonably believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of either of the Guarantors contemplated by this Guarantee Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise prescribed herein. (iii) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by either of or both of the Guarantors. (iv) The Guarantee Trustee may consult with legal counsel, and the written advice or opinion of such legal counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may -7- be legal counsel to either of the Guarantors or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction. (v) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder unless such Holder shall have provided to the Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided that nothing contained in this Section 3.2(a)(v) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement. (vi) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (vii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care hereunder. (viii) Whenever in the administration of this Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be protected in acting in accordance with such instructions. (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty to act in accordance with such power and authority. SECTION 3.3. Compensation; Indemnity; Fees. Each of the Guarantors agrees: (a) to pay to the Guarantee Trustee from time to time such reasonable compensation for all services rendered by it hereunder as may be agreed by the Guarantors and the Guarantee Trustee from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made -8- by the Guarantee Trustee in accordance with any provision of this Guarantee Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Guarantee Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence, wilful misconduct or bad faith on the part of the Guarantee Trustee, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee Agreement. The provisions of this Section 3.3 shall survive the termination of this Guarantee Agreement or the resignation or removal of the Guarantee Trustee. ARTICLE IV GUARANTEE TRUSTEE SECTION 4.1. Guarantee Trustee; Eligibility. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of either of the Guarantors; and (ii) be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000, and shall be a corporation meeting the requirements of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then, for the purposes of this Section 4.1 and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2. (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantors shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2. Appointment, Removal and Resignation of the Guarantee Trustee. (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by either of the Guarantors. (b) The Guarantee Trustee shall not be removed until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantors. -9- (c) The Guarantee Trustee appointed hereunder shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantors, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantors and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantors of an instrument of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantors, any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. ARTICLE V GUARANTEE SECTION 5.1. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer Trust or the Additional Guarantor), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer Trust may have or assert, except the defense of payment. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by either of the Guarantors to the Holders or by causing the Issuer Trust to pay such amounts to the Holders. The Additional Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Additional Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer Trust or the Guarantor), as and when the same are due and payable by the Guarantor, regardless of any defense, right of set-off or counterclaim that the Issuer Trust or the Guarantor may have or assert, except the defense of payment. The Additional Guarantor's obligation to make an Additional Guarantee Payment may be satisfied by direct payment of the required amounts by either of the Guarantors to the Holders or by causing the Issuer Trust to pay such amounts to the Holders. SECTION 5.2. Waiver of Notice and Demand. Each of the Guarantors hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Guarantee Trustee, the Issuer Trust or any other Person before proceeding against either of the Guarantors, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3. Obligations Not Affected. The obligations, covenants, agreements and duties of each of the Guarantors under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: -10- (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer Trust of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer Trust; (b) the extension of time for the payment by the Issuer Trust of all or any portion of the Distributions (other than an extension of time for payment of Distributions that results from the extension of any interest payment period on the Debentures as provided in the Indenture), Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Capital Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer Trust granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer Trust or any of the assets of the Issuer Trust; (e) any invalidity of, or defect or deficiency in, the Capital Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor (other than payment of the underlying obligation), it being the intent of this Section 5.3 that the obligations of each of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain the consent of, either of the Guarantors with respect to the happening of any of the foregoing. SECTION 5.4. Rights of Holders. Each of the Guarantors expressly acknowledges that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in Liquidation Amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder may institute a legal proceeding directly against either of the Guarantors to enforce its rights under this Guarantee Agreement without first instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust or any other Person. SECTION 5.5. Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without -11- duplication of amounts theretofore paid by the Issuer Trust) or upon the distribution of Debentures to Holders as provided in the Trust Agreement. SECTION 5.6. Subrogation. Each of the Guarantors shall be subrogated to all rights (if any) of the Holders against the Issuer Trust in respect of any amounts paid to the Holders by such Guarantors under this Guarantee Agreement; provided, however, that the Guarantors shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which they may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to either of the Guarantors in violation of the preceding sentence, the Guarantor or the Additional Guarantor, as the case may be, agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7. Independent Obligations. Each of the Guarantors acknowledges that its obligations hereunder are independent of the obligations of the Issuer Trust with respect to the Capital Securities and that it shall be liable as principal and as debtor hereunder to make Guarantee Payments or Additional Guarantee Payments, as the case may be, pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. SECTION 5.8. Guarantee Payments and Additional Guarantee Payments Free of Puerto Rico Tax. All Guarantee Payments and Additional Guarantee Payments shall be made without set-off, counterclaim, fees, liabilities or similar deductions, and free and clear of, and without deduction or withholding for, taxes, levies, imposts, duties, charges or fees of whatsoever nature now or hereafter imposed, levied, collected, deducted, withheld or assessed by or on behalf of the Commonwealth of Puerto Rico or any district, municipality or political subdivision or taxing authority thereof or therein ("Taxes"). If the Additional Guarantor or any agent thereof is required by law or regulation to make any deduction or withholding for or on account of Taxes, the Additional Guarantor shall pay such additional amounts (the "Tax Gross-Up Amounts") as shall be necessary in order that the net amounts received pursuant to the Guarantee Agreement by the Holders of the Capital Securities or the holders or beneficial owners of any interest therein or rights in respect thereof after such deduction or withholding shall equal the amount that would have been receivable thereunder in the absence of such deduction or withholding, except that no such Tax Gross-Up Amounts shall be payable: (a) to any Holder of a Capital Security or any interest therein or rights in respect thereof where such deduction or withholding is required by reason of such Holder having some connection with the Commonwealth of Puerto Rico or any political subdivision or taxing authority thereof or thereon other than the mere holding of a payment in respect of such security; (b) in respect of any deduction or withholding that would not have been required but for the presentation by the Holder of a Capital Security for payment on a date more than 30 days after the date on which payment thereof is duly provided for; or (c) in respect of any deduction or withholding that would not have been required but for the failure to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with the Commonwealth of Puerto -12- Rico, or any political subdivision or taxing authority thereof or therein, of the Holder of a Capital Security or any interest therein or rights in respect thereof, if compliance is required by the Commonwealth of Puerto Rico, or any political subdivision or taxing authority thereof or therein, as a precondition to exemption from such deduction or withholding. ARTICLE VI COVENANTS AND SUBORDINATION SECTION 6.1. Subordination. The obligations of each of the Guarantors under this Guarantee Agreement will constitute unsecured obligations of each of the Guarantors and will rank subordinate and junior in right of payment to all Senior Debt (as defined in the Indenture) of each of the Guarantors, respectively, to the extent and in the manner set forth in the Indenture with respect to the Debentures, and the provisions of Article XII of the Indenture will apply, mutatis mutandis, to the obligations of each of the Guarantors hereunder. The obligations of each of the Guarantors hereunder do not constitute Senior Debt (as defined in the Indenture) of each of the Guarantors, respectively. SECTION 6.2. Pari Passu Guarantees. The obligations of each of the Guarantors under this Guarantee Agreement shall rank pari passu with the obligations of each of the Guarantors, respectively, under (i) any similar guarantee agreements issued by the Guarantor or the Additional Guarantor, as the case may be, on behalf of the holders of preferred or capital securities issued by any Issuer Trust (as defined in the Indenture), (ii) the Indenture and the Securities (as defined therein) issued thereunder; (iii) the Expense Agreement (as defined in the Trust Agreement) and any similar expense agreements entered into by the Guarantor or the Additional Guarantor, as the case may be, in connection with the offering of Capital Securities (as defined in the Indenture) by any Issuer Trust (as defined in the Indenture), and (iv) any other security, guarantee or other agreement or obligation that is expressly stated to rank pari passu with the obligations of the Guarantor or the Additional Guarantor, as the case may be, under this Guarantee Agreement or with any obligation that ranks pari passu with the obligations of the Guarantor or the Additional Guarantor, as the case may be, under this Guarantee Agreement. SECTION 6.3. Common Stock. The obligations of each of the Guarantors under this Guarantee Agreement shall rank senior in right of payment to the obligations of the Guarantors on common stock issued by each of the Guarantors, respectively. ARTICLE VII TERMINATION SECTION 7.1. Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price (as defined in the Trust Agreement) of all Capital Securities, (ii) the distribution of Debentures to the Holders in exchange for all of the Capital Securities or (iii) full payment of the amounts payable in accordance with Article IX of the Trust Agreement upon liquidation of the Issuer Trust. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or -13- will be reinstated, as the case may be, if at any time any Holder is required to repay any sums paid with respect to Capital Securities or this Guarantee Agreement. ARTICLE VIII MISCELLANEOUS SECTION 8.1. Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of each of the Guarantors, respectively, and shall inure to the benefit of the Holders of the Capital Securities then outstanding. Except in connection with a consolidation, merger or sale involving either of the Guarantors that is permitted under Article VIII of the Indenture and pursuant to which the successor or assignee agrees in writing to perform such Guarantor's obligations hereunder, each of the Guarantors shall not assign its obligations hereunder, and any purported assignment other than in accordance with this provision shall be void. SECTION 8.2. Amendments. Except with respect to any changes that do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than a Majority in Liquidation Amount of the Capital Securities. The provisions of Article VI of the Trust Agreement concerning meetings of the Holders shall apply to the giving of such approval. SECTION 8.3. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantor, to the address or telecopy number set forth below (with a copy to the Additional Guarantor) or such other address or telecopy number as the Guarantor may give notice to the Guarantee Trustee and the Holders: Popular North America, Inc. 209 Munoz Rivera Avenue San Juan, Puerto Rico 00918 Attention: ___________ Telecopy: ____________ (b) if given to the Additional Guarantor, to the address or telecopy number set forth below or such other address or telecopy number as the Additional Guarantor may give notice to the Guarantee Trustee and the Holders: Popular, Inc. 209 Munoz Rivera Avenue San Juan, Puerto Rico 00918 Attention: ___________ Telecopy: ____________ -14- (c) if given to the Guarantee Trustee, at the address or telecopy number set forth below or such other address or telecopy number as the Guarantee Trustee may give notice to the Guarantor and Holders: J.P. Morgan Trust Company, National Association 227 W. Monroe, Suite 2600 Chicago, Illinois 60606 Attention: ________________ Telecopy: ________________ with a copy to: Popular North America Capital Trust I c/o Popular North America, Inc. 209 Munoz Rivera Avenue San Juan, Puerto Rico 00918 Attention: ___________ Telecopy: ____________ (d) if given to any Holder, at the address of such Holder set forth on the books and records of the Issuer Trust. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 8.4. Benefit. This Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Capital Securities. SECTION 8.5. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND WHOLLY TO BE PERFORMED IN SUCH STATE. SECTION 8.6. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -15- IN WITNESS WHEREOF, the parties hereto have executed this Guarantee Agreement as of the day and year first above written. POPULAR NORTH AMERICA, INC. By: ___________________________________ Name: Title: POPULAR, INC. By: ___________________________________ Name: Title: J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Guarantee Trustee By: ___________________________________ Name: Title: EX-5.(A) 8 g90482a2exv5wxay.txt EX-5(A) OPINION OF BRUNILDA SANTOS DE ALVAREZ, ESQ. EXHIBIT 5(A) Popular, Inc. P.O. Box 362708 San Juan, Puerto Rico 00936-2708 Telephone (787) 765-9800 September 8, 2004 Popular, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918. Popular North America, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918. Popular North America Capital Trust I, c/o Popular North America, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918. Ladies and Gentlemen: In connection with the registration under the Securities Act of 1933, as amended (the "Act"), of (i) $250,000,000 aggregate liquidation amount of capital securities (the "Capital Securities") representing beneficial ownership interests in Popular North America Capital Trust I (the "Trust"), (ii) $250,000,000 aggregate principal amount of junior subordinated debentures (the "Debentures") to be issued by Popular North America, Inc. (the "Corporation"), (iii) unconditional and irrevocable guarantees (the "Guarantees" and each a "Guarantee") of the obligations of the Trust under the Capital Securities, to be issued by the Corporation, (iv) unconditional and irrevocable guarantees (the "Additional Guarantees" and each an "Additional Guarantee") of the Popular, Inc. Popular North America, Inc. Popular North America Capital Trust I -2- obligations of the Corporation under the Guarantees, to be issued by Popular, Inc. (the "Guarantor") and (v) unconditional and irrevocable guarantees (the "Debenture Guarantees" and each a "Debenture Guarantee") of the obligations of the Corporation under the Debentures, to be issued by the Guarantor, in each case to be offered at prices and on terms to be determined at the time of sale, I, as Counsel to the Guarantor, have examined such corporate records, certificates and other documents, and such questions of law, as I have considered necessary or appropriate for the purposes of this opinion. Upon the basis of such examination, I advise you that, in my opinion: (i) the Guarantor has been duly incorporated and is an existing corporation in good standing under the laws of the Commonwealth of Puerto Rico, and (ii) when the Registration Statement has become effective under the Act, the indenture (the "Indenture") relating to the Debentures and the Debenture Guarantees has been duly authorized, executed and delivered, the terms of the Debentures and the Debenture Guarantees and of their issuance and sale have been duly established in conformity with the Indenture so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon the Corporation or the Guarantor and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Corporation or the Guarantor, the Debentures have been duly executed and authenticated and the Debenture Guarantees have been duly executed, each in accordance with the Indenture, the Debentures have been issued and sold as contemplated in the Registration Statement, the guarantee agreement (the "Guarantee Agreement") relating to the Guarantee and the Additional Popular, Inc. Popular North America, Inc. Popular North America Capital Trust I -3- Guarantee has been duly authorized, executed and delivered, the terms of the Guarantee and the Additional Guarantee and of their issuance have been duly established in conformity with the Guarantee Agreement so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon the Corporation or the Guarantor and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Corporation or the Guarantor, and the Guarantees and the Additional Guarantees have been duly authorized, executed and delivered by the Corporation and the Guarantor, respectively, (i) each of the Debentures and the Guarantees will constitute valid and legally binding obligations of the Corporation, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and (ii) each of the Debenture Guarantees and the Additional Guarantees will constitute valid and legally binding obligations of the Guarantor, enforceable against the Guarantor in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the Commonwealth of Puerto Rico, and the General Corporation Law of the State of Delaware, and I am expressing no opinion as to the effect of the laws of any other jurisdiction. With respect to all matters of the laws of the State of New York and the General Corporation Law of the State of Delaware, I have Popular, Inc. Popular North America, Inc. Popular North America Capital Trust I -4- relied upon the opinion, dated of even date herewith, of Sullivan & Cromwell LLP, and my opinion is subject to the same assumptions, qualifications and limitations with respect to such matters as are contained in such opinion of Sullivan & Cromwell LLP. Also, I have relied as to certain matters on information obtained from public officials, officers of the Corporation and the Guarantor and other sources believed by me to be responsible. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to me under the heading "Validity of Securities" in the Prospectus. In giving such consent, I do not thereby admit that I am in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, /s/ Brunilda Santos de Alvarez EX-5.(B) 9 g90482a2exv5wxby.txt EX-5.(B) OPINION OF SULLIVAN AND CROMWELL LLP Exhibit 5(B) [SULLIVAN & CROMWELL LLP LETTERHEAD] September 8, 2004 Popular, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918. Popular North America, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918. Popular North America Capital Trust I, c/o Popular North America, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918. Ladies and Gentlemen: In connection with the registration under the Securities Act of 1933, as amended (the "Act"), of (i) $250,000,000 aggregate liquidation amount of capital securities (the "Capital Securities") representing beneficial ownership interests in Popular North America Capital Trust I (the "Trust"), (ii) $250,000,000 aggregate principal amount of junior subordinated debentures (the "Debentures") to be issued by Popular North America, Inc. (the "Corporation"), (iii) unconditional and irrevocable guarantees (the "Guarantees" and each a "Guarantee") of the obligations of the Trust under the Capital Securities, to be issued by the Corporation, (iv) unconditional and irrevocable guarantees (the "Additional Guarantees" and each an "Additional Guarantee") of the obligations of the Corporation under the Guarantees, to be issued by Popular, Inc. (the "Guarantor") and (v) unconditional and irrevocable guarantees (the "Debenture Guarantees" and each a "Debenture Guarantee") of the obligations of the Corporation under the Debentures, to be issued by the Guarantor, in each case to be offered at prices and on terms to be determined at the time of sale, we, as your counsel, have examined such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion. Upon the basis of such examination, we advise you that, in our opinion, when the Registration Statement has become effective under the Act, the indenture (the "Indenture") relating to the Debentures and the Debenture Guarantees has been duly Popular, Inc. Popular North America, Inc. Popular North America Capital Trust I -2- authorized, executed and delivered, the terms of the Debentures and the Debenture Guarantees and of their issuance and sale have been duly established in conformity with the Indenture so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon the Corporation or the Guarantor and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Corporation or the Guarantor, the Debentures have been duly executed and authenticated and the Debenture Guarantees have been duly executed, each in accordance with the Indenture, the Debentures have been issued and sold as contemplated in the Registration Statement, the guarantee agreement (the "Guarantee Agreement") relating to the Guarantee and the Additional Guarantee has been duly authorized, executed and delivered, the terms of the Guarantee and the Additional Guarantee and of their issuance have been duly established in conformity with the Guarantee Agreement so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon the Corporation or the Guarantor and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Corporation or the Guarantor, and the Guarantees and the Additional Guarantees have been duly authorized, executed and delivered by the Corporation and the Guarantor, respectively, (i) each of the Debentures and the Guarantees will constitute valid and legally binding obligations of the Corporation, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and (ii) each of the Debenture Guarantees and the Additional Guarantees will constitute valid and legally binding obligations of the Guarantor, enforceable against the Guarantor in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the Commonwealth of Puerto Rico, and the General Corporation Law of the State of Delaware, and we are expressing no opinion as to the effect of the laws of any other jurisdiction. With respect to all matters of the laws of the Commonwealth of Puerto Rico, we have relied upon the opinion, dated of even date herewith, of Brunilda Santos de Alvarez, Esq., Counsel of the Guarantor, and our opinion is subject to the same assumptions, qualifications and limitations with respect to such matters as are contained in such opinion of Ms. Santos de Alvarez. Also, we have relied as to certain matters on information obtained from public officials, officers of the Corporation and the Guarantor and other sources believed by us to be responsible. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to us under the heading "Validity of Popular, Inc. Popular North America, Inc. Popular North America Capital Trust I -3- Securities" in the Prospectus. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, /s/ Sullivan & Cromwell LLP --------------------------- EX-5.(C) 10 g90482a2exv5wxcy.txt EX-5(C) OPINION OF RICHARDS, LAYTON & FINGER Exhibit 5(c) [LETTERHEAD OF RICHARDS, LAYTON & FINGER, P.A.] September 8, 2004 Popular North America Capital Trust I c/o Popular North America, Inc. 209 Munoz Rivera Avenue San Juan, Puerto Rico 00918 RE: POPULAR NORTH AMERICA CAPITAL TRUST I Ladies and Gentlemen: We have acted as special Delaware counsel for Popular North America, Inc., a Delaware corporation, (the "Depositor"), Popular, Inc., a Puerto Rico corporation (the "Company"), and Popular North America Capital Trust I, a Delaware statutory trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust (the "Certificate"), as filed with the office of the Secretary of State of the State of Delaware (the "Secretary of State") on September 8, 2004; (b) The Trust Agreement of the Trust, dated as of September 8, 2004 among the Depositor, the Company and the trustees of the Trust named therein; (c) The Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus with respect to the Trust (the "Prospectus"), relating to the Capital Securities of the Trust representing preferred undivided beneficial interests in the assets of the Trust (each, a "Capital Security" and collectively, the "Capital Securities"), filed by the Company and the Trust with the Securities and Exchange Commission (the "SEC") on or about August 13, 2004, as amended by Amendment No. 1 thereto, filed with the SEC on or about September 8, 2004; and Popular North America Capital Trust I September 8, 2004 Page 2 (d) A form of Amended and Restated Trust Agreement for the Trust, to be entered into between the Depositor, the Company, the trustees of the Trust named therein, and the holders, from time to time, of the undivided beneficial interests in the assets of the Trust (including Exhibits C and E thereto) (the "Trust Agreement"), attached as an exhibit to the Registration Statement. Initially capitalized terms used herein and not otherwise defined are used as defined in the Trust Agreement, except that reference herein to any document shall mean such document as in effect on the date hereof. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (d) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (d) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Trust Agreement and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, the due creation or due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its creation, organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) that each party has complied with all of the obligations and satisfied all of the conditions on its part to be performed or satisfied pursuant to the documents examined by us, (vii) the receipt by each Person to whom a Preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a Preferred Securities Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Trust Agreement and the Registration Statement, (viii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Trust Agreement and the Registration Statement, and (ix) that J.P. Morgan Popular North America Capital Trust I September 8, 2004 Page 3 Trust Company, National Association satisfies for the Trust Section 3807 of the Delaware Statutory Trust Act, 12 Del. C. Section 3801, et seq. (the "Trust Act"). We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a statutory trust under the Delaware Statutory Trust Act. 2. The Capital Securities of the Trust will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Capital Security Holders, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Capital Security Holders may be obligated to make payments as set forth in the Trust Agreement. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. In addition, we hereby consent to the use of our name under the heading "Validity of Securities" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, DKD /s/ Richards, Layton & Finger, P.A. . EX-8 11 g90482a2exv8.txt EX-8 OPINION OF SULLIVAN & CROMWELL LLP, TAX MATTERS Exhibit 8 September 9, 2004 Popular, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918. Popular North America, Inc., 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918. Popular North America Capital Trust I, 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918. Ladies and Gentlemen: As United States tax counsel to Popular, Inc., Popular North America, Inc. and Popular North America Capital Trust I (the "Registrants") in connection with the issuance of $250,000,000 liquidation amount of capital securities as described in the registration statement on Form S-3 filed by the Registrants dated September 9, 2004 (the "Registration Statement"), assuming the transactions described in the operative documents described in the Registration Statement will be performed in accordance with the terms described therein, we hereby confirm to you our opinion as set forth under the heading "Certain Federal Income Tax Considerations" in the Registration Statement, subject to the limitations set forth therein. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the heading "Certain Federal Income Tax Considerations" in the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933. Popular, Inc. Popular North America, Inc. Popular North America Capital Trust I -2- Very truly yours, /s/ Sullivan & Cromwell LLP EX-23.(A) 12 g90482a2exv23wxay.txt EX-23(A) CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCCOUNTING FIRM EXHIBIT 23(a) [PRICEWATERHOUSECOOPERS LETTERHEAD] Consent Of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated February 27, 2004 relating to the financial statements, which appears in the 2003 Annual Report to Shareholders, which is incorporated by reference in Popular Inc.'s Annual Report on Form 10-K for the year ended December 31, 2003. We also consent to the references to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP San Juan, Puerto Rico September 8, 2004 GRAPHIC 13 g90482a2g9048201.gif GRAPHIC begin 644 g90482a2g9048201.gif M1TE&.#EA#@$G`+,``/_____,S/^9F?]FF?]F9O\S,_\`,\S,_\S,S)F9S)F9 MF6:9F69FF3-FF3,S9@`S9B'Y!```````+``````.`2<```3_4,A)J[U8!L"[ M_V`HCF1IGFBJKFSKOD8LSW1MW_'V[GSO_\"@\(,K&F^ZH7+);#J;QV@T^:Q: MKUBK=(NC9K_@L-@D+>@"LL*@,!V[W_"LL<`V$#CH-$!P],;_@($N10(`!#)W M:`1\!F9]@I"1DB,W9AR'=0**``,QAT9^3@@(DZ5`HZ-8-X67!@&??'<`=8VT M-:&HN;JI*`@,#@_!P@T)!R*[R*0AR;P@N1W,*\DD!\RZ/@O!#JHXA8<;;&RR MC':S2"'"Z>K"#@P)(PG`Z^H,QA_R\^H."\H<#/D/1/Q[L`W`@7P,5F1;EU"$ M`H#SW-EC@2"8`FXU,GW;@ZA#G3OD_VB$`M@@7X,0^(350U!2W3L/+=?%5'>2 M0P*3#H,MZ#!3V$45`]>->#BO`0(%*56VJ/C@IY89!;XQ8J.C3H$.GV2=`P&0 M`U%U3CE$]!!4V$Z>^6R.!%-7$PW]P.7\%V2!JLH0JF=Z',>.7* MD`P=GPQT8"0KG$AT:?W-\\`WX(=Y+P'T%-;AYCIC;?6&(.IT,]P4>84NL]LY M\E^+&!L9WD!.![G%GEHESA'"M&6V\Y2EU@FBK#![OB=B!CXO,`#2<46CJ"PL MLX?0Z9QB%]:O%^PK,P;,YLB;O&(.G)O_PX" M^OWX*-273_]!'^QW&G/K='<"8+%ML%%B.J1WGCGJL2'!8+VYMM]%`J:SVF0` M&,==!_JQ]J%?ICF783`&*HB@="*R*`U_;"FP4P(MM3.1"`DPT,"/#2RP(P%X>LN41`)-)?O">5_/%^-ME\PTGXXO5<>G3,<'4I!F`=`TSIEL% MFF@@@2DPV-H#`S6`CW4>"(C/744:]@E[A4')04@<704`AB!,:>!_('(5GY8/ M*%,9:"8Z$V9TV:$0U#L=CH@E0P@L--^,!R+HU`$#N3@0`_WX@F<,@B9VU8-Y M.N:*A40>MF*"C/YDFIB;ZL5H`HPVE"F-UTV*J'0E>"@?0XI"M([_`RXN2"-3 M?G7P#YL`>%8M"7KHR0:?1\:0GF&.-");K>5)Z2R:(;K6:Z6,0H17I&D^(&:* M)]1W%@">JC/DN@FZX"8'3+G(%):\EI#G-P$X5L<`>7SR9!I)$*HNP`2%Q:@( M^9`2[UI4DOD!4?>*/,*I8`"S<`'\@>G4OIE"0;*ZX%)*J_L7:@'%]T/42I@N!$Y M!;#"I-F$AA1THB541N=S187\F0D&)LQ!70?B6X*5$%F'$]_14AWSE4Y_;6_8 M,H@WMJUX-)($&G2OSDDMS,(L!$MCZO7^!U9Z?ZNF2F8U@]?;%J)0O3/RJE. M=P,^DS(I^&SOI;%U6]OY:]>#'7/HUSP4T"!R!`@'56PGOI^5`TH62YYJ4F"Z MT?%E>6<*F+1:1J>6<:8MVY+@_/9WN+T,J$!-.UI8NE:O[A#E;:!V.6/<^8ZS@N,YJQZ[,]KPUF649F$L(9<:@6\2LJ:CB:PEUELA]EH(-6*1 M"G4X(("#HE0[&\%RP@8CH==?%``D(#'M9/G`X((6,),&2.1#&(-6]`+'KZ0X MX$='T0>0=D1&/?(*BA^28J.R-[)AL%$>6+0!*\;C11N&)(*FB.0?%N*0'U4+ M1\2@SX]@>`` ~~-----END PRIVACY-ENHANCED MESSAGE-----~~


	(1)	Because Popular North America Capital Trust I will use all of the proceeds from the sale of the capital securities and its common securities to purchase junior subordinated debentures of Popular North America, Inc., Popular North America, Inc. will pay all underwriting discounts and commissions.


	•	issue and sell its common securities to Popular North America;

	•	issue and sell its capital securities to the public;

	•	use the proceeds from the sale of its common securities and capital securities to purchase junior subordinated debentures from Popular North America; and

	•	engage in other activities that are necessary, convenient or incidental to these purposes.


	•	amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority of or in the United States; or

	•	official or administrative pronouncement or judicial decision interpreting or applying such laws or regulations,


	•	the trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the junior subordinated debentures;

	•	interest payable by Popular North America on the junior subordinated debentures is not, or within 90 days of the date of such opinion, will not be, deductible by Popular North America, in whole or in part, for United States federal income tax purposes; or

	•	the trust is, or will be within 90 days of the date of such opinion, subject to more than a minimal amount of taxes, duties or other governmental charges.


	•	changes in interest rates;

	•	regional and national economic conditions;

	•	the impact of new competitors or competitive products;

	•	regulatory or legislative changes;

	•	natural disasters affecting Puerto Rico, our primary market; and

	•	other factors described in this prospectus or in our other filings with the SEC.



		Quarter Ended
		March 31,

		2004		2003

PER COMMON SHARE DATA
Net Income (basic and diluted) (before and after cumulative effect of accounting changes)		$	0.43	$	0.37
Dividends declared			0.14		0.10
Book Value			10.39		9.38
Market Price			21.55		17.00
Outstanding shares:
	Average		265,997,350		265,153,178
	End of period		265,920,898		265,104,578



		Year Ended December 31,

		2003		2002		2001		2000		1999		1998		1997		1996		1995		1994

PER COMMON SHARE DATA
Net Income (basic and diluted) (before and after cumulative effect of accounting changes)		$	1.74	$	1.31	$	1.09	$	0.99	$	0.92	$	0.83	$	0.75	$	0.67	$	0.53	$	0.46
Dividends declared			0.51		0.40		0.38		0.32		0.30		0.25		0.20		0.18		0.15		0.13
Book Value			9.66		9.10		7.97		6.96		5.76		5.93		5.19		4.40		3.96		3.44
Market Price			22.43		16.90		14.54		13.16		13.97		17.00		12.38		8.44		4.85		3.52
Outstanding shares:
	Average		265,481,840		267,830,165		272,476,576		271,814,952		271,171,268		271,064,172		268,073,928		264,089,248		263,265,200		262,385,944
	End of period		265,783,892		264,878,094		272,724,728		271,997,234		271,308,584		271,274,654		270,730,816		264,354,024		263,589,088		262,705,024


	•	the execution of a certificate of trust and trust agreement by Popular North America, as depositor, Popular, as guarantor, and certain of the trustees of the trust, and

	•	the filing of a certificate of trust with the Secretary of State of the State of Delaware.


	•	issuing the capital securities and common securities, or the “trust securities,” representing undivided beneficial interests in the assets of the trust;

	•	investing the gross proceeds of the capital securities and the common securities in an equivalent principal amount of junior subordinated debentures; and

	•	engaging in only those activities convenient, necessary or incidental thereto.


	•	will be cumulative;

	•	will accrue from the date of original issuance of the capital securities; and

	•	will be payable semi-annually in arrears on the day of each and and will be payable to the holders of record, as described below.


	•	make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities issued by us that rank equally with or junior to the junior subordinated debentures or our guarantees of the capital securities;

	•	make any payment on guarantees issued by us that rank equally with or junior to the junior subordinated debentures or our guarantees of the capital securities; or

	•	declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of our capital stock, other than:


	•	any repurchase, redemption or other acquisition of shares of our capital stock (1) in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors, consultants or independent contractors, (2) in connection with a dividend reinvestment or stockholder stock purchase plan or (3) in connection with the issuance of our capital stock, or securities convertible into or exercisable for such capital stock, as consideration in an acquisition transaction entered into before the applicable extension period;

	•	any exchange or conversion of any class or series of our capital stock, or any capital stock of one of our subsidiaries, for any other class or series of our capital stock, or of any class or series of our indebtedness for any class or series of our capital stock;

	•	any purchase of fractional interests in shares of our capital stock pursuant to the conversion or exchange provisions of such capital stock or the securities being converted or exchanged;

	•	any declaration of a dividend in connection with any rights plan, or the issuance of rights, stock or other property under any rights plan, or the redemption or repurchase of rights pursuant thereto;

	•	any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equally with or junior to such stock.


	•	in whole or in part, on one or more occasions, at any time; and

	•	in whole, but not in part, at any time within 90 days following the occurrence and continuation of a Tax Event, an Investment Company Event or a Capital Treatment Event, each as defined below.


	•	irrevocably deposit with DTC funds sufficient to pay the applicable redemption price; and

	•	give DTC irrevocable instructions and authority to pay the redemption price to the beneficial owners of the capital securities.


	•	irrevocably deposit with the paying agent funds sufficient to pay the applicable redemption price; and

	•	give the paying agent irrevocable instructions and authority to pay the redemption price to the holders of capital securities upon surrender of their certificates evidencing the capital securities.


	(1) the bankruptcy, dissolution or liquidation of Popular North America or Popular;

	(2) the distribution of junior subordinated debentures to the holders of the capital securities and the common securities, if the holders of common securities have delivered an opinion of counsel that holders of capital securities will not recognize income or loss for United States federal income tax purposes as a result and have given written direction to the property trustee to dissolve the trust, which direction, subject to the foregoing restrictions, is optional and wholly within the discretion of the holders of common securities;

	(3) the redemption of all the capital securities in connection with the maturity or redemption of the junior subordinated debentures; or

	(4) the entry of an order for the dissolution of the trust by a court of competent jurisdiction.


	•	the capital securities and the common securities will no longer be deemed to be outstanding;

	•	DTC or its nominee, as the registered holder of capital securities, will receive a registered global certificate or certificates representing the junior subordinated debentures to be delivered upon distribution with respect to capital securities held by DTC or its nominee; and

	•	any certificates representing capital securities will be deemed to represent the junior subordinated debentures having an aggregate principal amount equal to the liquidation amount of the capital securities, and bearing accrued but unpaid interest equal to accumulated but unpaid distributions on the capital securities, until the holder of those certificates presents them to the security registrar for the capital securities for transfer or reissuance.


	•	the occurrence of a debenture default under the junior subordinated indenture with respect to the junior subordinated debentures held by the trust (see “Description of Junior Subordinated Debentures — Events of Default and the Rights of Capital Security Holders to Take Action Against Popular North America”); or

	•	the default by the trust in the payment of any distribution on any trust security of the trust when such distribution becomes due and payable, and continuation of such default for a period of 30 days; or

	•	the default by the trust in the payment of any redemption price of any trust security of the trust when such redemption price becomes due and payable; or


	•	the default by the trust in the payment of the liquidation distribution or distribution of trust property when the same becomes due and payable; or

	•	the failure to perform or the breach, in any material respect, of any other covenant or warranty of the trustees in the trust agreement for 90 days after the defaulting trustee or trustees have received written notice by holders of at least 25% in aggregate liquidation amount of the outstanding capital securities of the failure to perform or breach of warranty in the manner specified in the trust agreement; or

	•	the occurrence of certain events of bankruptcy or insolvency with respect to the property trustee and our failure to appoint a successor property trustee within 90 days.


	•	the trust is not the surviving entity, then such successor entity either:


	•	expressly assumes all of the obligations of the trust with respect to the capital securities, or

	•	substitutes for the capital securities other securities having substantially the same terms as the capital securities (the “successor securities”) so long as the successor securities rank the same as the capital securities in priority with respect to distributions and payments upon liquidation, redemption and otherwise;


	•	we expressly appoint a trustee of such successor entity possessing the same powers and duties as the property trustee as the holder of the junior subordinated debentures;

	•	such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the rating of the capital securities, including any successor securities, to be downgraded or withdrawn by any nationally recognized statistical rating organization;

	•	the successor securities are listed, or any successor securities will be listed upon notice of issuance, on the national securities exchange, interdealer quotation system or self regulatory organization as the capital securities are then listed, if any;

	•	such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the capital securities, including any successor securities, in any material respect;

	•	after giving effect to the transaction, no debenture default and no event which, after notice or lapse of time, or both, would become a debenture default, has occurred and is continuing under the junior subordinated indenture;

	•	such successor entity has a purpose substantially identical to that of the trust;

	•	prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, we have received an opinion from independent counsel to the trust to the effect that:


	•	such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the capital securities, including any successor securities, in any material respect,

	•	the trust continues to be, and the successor entity will be, a grantor trust for United States federal income tax purposes; and

	•	following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the trust nor such successor entity will be required to register as an investment company under the Investment Company Act; and


	•	we or any permitted successor or assignee own all of the common securities of such successor entity and guarantees the obligations of such successor entity under the successor securities at least to the extent provided by the applicable guarantee.


	•	cure any ambiguity, correct or supplement any provisions in the trust agreement that may be inconsistent with any other provisions, or to make any other provisions with respect to matters or questions arising under the trust agreement, which will not be inconsistent with the other provisions of the trust agreement; or

	•	modify, eliminate or add to any provisions of the trust agreement to such extent as shall be necessary to ensure that the trust will be classified for United States federal income tax purposes as a grantor trust at all times that any trust securities are outstanding or to ensure that the trust will not be required to register as an “investment company” under the Investment Company Act.


	•	the consent of holders of a majority in liquidation amount of the outstanding capital securities.

	•	receipt by the trustees of an opinion of counsel to the effect that such amendment or the exercise of any power granted to the trustees in accordance with such amendment will not affect the trust’s status as a grantor trust for United States federal income tax purposes or the trust’s exemption from status as an “investment company” under the Investment Company Act.


	•	change the amount or timing of any distribution required to be made in respect of the trust securities;

	•	change the redemption dates, events or prices, the liquidation distribution amounts or event, or events that would cause liquidation or dissolution of the trust; and

	•	restrict the right of a holder of the trust securities to institute a suit for the enforcement of any payment on or after the specified date.


	•	direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee, or executing any trust or power conferred on the indenture trustee with respect to such junior subordinated debentures;

	•	waive any past default that is waivable under the junior subordinated indenture;

	•	exercise any right to rescind or annul a declaration that the maturity of the principal of all the junior subordinated debentures is due and payable; or


	•	consent to any amendment, modification or termination of the junior subordinated indenture or such junior subordinated debentures where such consent shall be required.


	•	all debts and other obligations of the trust (other than with respect to the trust securities);

	•	all costs and expenses of the trust, including costs and expenses relating to the organization of the trust, the fees and expenses of the trustees and the cost and expenses relating to the operation of the trust; and

	•	any and all taxes and costs and expenses with respect thereto to which the trust might become subject.