S-3

As filed with the Securities and Exchange Commission on November 10, 2004

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

	POPULAR CAPITAL TRUST II
	POPULAR CAPITAL TRUST III
POPULAR, INC.	POPULAR CAPITAL TRUST IV
(Exact name of Co-Registrants as specified in their charters)

Puerto Rico	Delaware
(State or Other Jurisdiction of	(State or Other Jurisdiction of
Incorporation or Organization of Popular, Inc.)	Incorporation or Organization of each Trust)
66-0416582	To Be Applied For
(IRS Employer Identification Number)	(IRS Employer Identification Numbers)

Popular Center Building

209 Muñoz Rivera Avenue

San Juan, Puerto Rico 00918

(787) 765-9800

(Address, Including Zip Code, and Telephone Number, Including

Area Code, of Co-Registrants’ Principal Executive Offices)

JORGE A. JUNQUERA

209 MUNOZ RIVERA AVENUE

HATO REY, PUERTO RICO 00918

(787) 754-1685

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,

of Agent for Service for each Registrant)

Copies to:

Ignacio Alvarez, Esq.
Eduardo J. Arias, Esq.	Julio Pietrantoni, Esq.
Pietrantoni Méndez & Alvarez LLP	O’Neill & Borges
Banco Popular Center – Suite 1901	American International Plaza
209 Muñoz Rivera Avenue	250 Muñoz Rivera Avenue
San Juan, Puerto Rico 00918	San Juan, Puerto Rico 00918
(787) 274-4911	(787) 282-5752

   Approximate Date of Commencement of Proposed Sale to the Public: From time to time after the effective date of this Registration Statement as determined by the Registrants on the basis of market conditions and other factors.

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

   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 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

CALCULATION OF REGISTRATION FEE

		Proposed Maximum	Proposed Maximum
Title of Each Class of	Amount to be	Offering Price	Aggregate	Amount of
Securities to be Registered	Registered(1)	Per Security(2)	Offering Price(3)(4)	Registration Fee(4)
Popular, Inc. Junior Subordinated Debt Securities
Popular Capital Trust II Trust Preferred Securities
Popular Capital Trust III Trust Preferred Securities
Popular Capital Trust IV Trust Preferred Securities
Guarantees of Trust Preferred Securities of Popular Capital Trust II, Popular Capital Trust III and Popular Capital Trust IV by Popular, Inc. and certain back-up undertakings(5)	$300,000,000		$300,000,000	$38,010

(1)	Includes an indeterminate number of Trust Preferred Securities of Popular Capital Trust II, Popular Capital Trust III and Popular Capital Trust IV (the “Trusts”) as may be issued at indeterminate prices and Junior Subordinated Debt Securities that may be issued by Popular, Inc. to evidence a loan by a Trust to Popular, Inc. of the proceeds from the sale of the Preferred Securities of such Trust. Junior Subordinated Debt Securities evidencing the loan to Popular, Inc. may later be distributed to the holders of a Trust’s Preferred Securities upon dissolution of a Trust.
(2)	Omitted pursuant to General Instruction II.D of Form S-3. The proposed maximum offering price per security will be determined from time to time by the relevant Registrant in connection with the issuance by such Registrant of securities registered hereunder.
(3)	In no event will the aggregate initial offering price of the securities issued under this registration statement exceed the amount registered above or the equivalent thereof in one or more foreign currencies or currency units. No separate consideration will be received for the Junior Subordinated Debt Securities of Popular, Inc.
(4)	The proposed maximum aggregate offering price has been estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. Rule 457(o) permits the registration fee to be calculated on the basis of the maximum offering price of all of the securities listed and, therefore, the table does not specify by each class information as to the amount to be registered, the maximum offering price per unit or the proposed maximum aggregate offering price.
(5)	Includes the obligations of Popular, Inc. under one or more declarations of trust, preferred securities guarantees issued with respect to Preferred Securities issued by each Trust, the Junior Subordinated Debt Securities purchased by each Trust, and the Junior Subordinated Indenture, including Popular, Inc.’s agreement to pay all trust obligations other than the Common and Preferred Securities, which taken together, fully, irrevocably and unconditionally guarantee all of the respective obligations of Popular Capital Trust II, Popular Capital Trust III, and Popular Capital Trust IV. No separate consideration will be received for such obligations.

    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 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 Supplement Dated November 10, 2004

Prospectus Supplement

(To Prospectus Dated           , 2004)

$100,000,000

Popular Capital Trust II

          % Cumulative Monthly Income Trust Preferred Securities

(Liquidation Amount $25 Per Capital Security)

Fully, irrevocably and unconditionally guaranteed

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

      Popular Capital Trust II is offering trust preferred securities, which we refer to in this prospectus supplement as “capital securities,” that Popular, Inc. will fully and unconditionally guarantee, based on its combined obligations under a guarantee agreement, a trust agreement and a junior subordinated indenture. Popular Capital Trust II will redeem the capital securities on                     , 2034, and may redeem them earlier, subject to any required prior approval of the Federal Reserve or its district reserve bank.

      The capital securities may be redeemed, in whole or in part, at any time on or after                     , 2009 at a redemption price equal to 100% of the liquidation amount, plus accumulated and unpaid distributions to the date of redemption. In addition, the capital securities may be redeemed in whole if adverse changes in tax law, investment company law or banking laws or regulations occur.

      There is currently no market for the capital securities. Popular has applied to have the capital securities approved for quotation on the Nasdaq National Market under the symbol “BPOPM.” Trading of the capital securities on the Nasdaq National Market is expected to commence within 30 days after initial delivery of the capital securities.

      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 S-8.

		Underwriting	Proceeds To
	Price To	Discounts and	Popular Capital
	Public	Commissions(1)	Trust II(1)
Per Capital Security	$	$	$
Total	$	$	$

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

      This prospectus supplement and the accompanying prospectus may be used by the underwriter in connection with offers and sales of the capital securities in market-making transactions at negotiated prices related to prevailing market prices at the time of sale or otherwise. The underwriter may act as principal or agent in such transactions.

      The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

      The underwriter expects to deliver the capital securities in book-entry form only through the facilities of The Depository Trust Company on or about                     , 2004.

POPULAR SECURITIES

The date of this prospectus supplement is                     , 2004.

TABLE OF CONTENTS

EX-1 FORM OF UNDERWRITING AGREEMENT

EX-4.2 FORM OF CERTIFICATE OF JUNIOR SUBORDINATED DEBENTURE

EX-4.5 FORM OF AMENDED AND RESTATED DECLARATION OF TRUST AND TRUST AGREEMENT

EX-4.7 FORM OF PREFERRED SECURITIES GUARANTEE AGREEMENT

EX-5.1 OPINION OF BRUNILDA SANTOS DE ALVAREZ

EX-5.2 OPINION OF RICHARDS, LAYTON & FINGER, P.A.

EX-23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLP

EX-25.1 FORM T-1 STATEMENT OF ELIGIBILITY

EX-25.2 FORM T-1 STATEMENT OF ELIGIBILITY

EX-25.3 FORM T-1 STATEMENT OF ELIGIBILITY

TABLE OF CONTENTS

Prospectus Supplement

	Page
Prospectus Supplement Summary	S-3
Risk Factors	S-8
Forward-Looking Statements	S-12
Use of Proceeds	S-12
Selected Consolidated Financial and Other Data	S-13
Description of the Trust	S-15
Accounting Treatment; Regulatory Capital	S-15
Description of Capital Securities	S-16
Description of Junior Subordinated Debentures	S-24
Description of Guarantee	S-30
Relationship Among the Capital Securities, the Junior Subordinated Debentures and the Guarantee	S-30
Certain Tax Considerations	S-31
Certain ERISA Considerations	S-42
Underwriters	S-44
Legal Opinions	S-46
Certification of Status as Nontaxable Holder	S-48

Prospectus

	Page
About This Prospectus	2
Where You Can Find More Information	2
Popular, Inc.	3
The Trusts	3
Use of Proceeds	4
Ratios of Earnings to Fixed Charges and to Fixed Charges and Preferred Stock Dividends	5
Description of Junior Subordinated Debt Securities	5
Description of Trust Preferred Securities	18
Common Securities	29
Description of Guarantees	29
Relationship Among Trust Preferred Securities, Junior Subordinated Debt Securities and Guarantees	31
Plan of Distribution	33
Legal Opinions	35
Experts	35

      You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. The trust and Popular have not authorized anyone to provide you with information other than that contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. The information in this prospectus supplement and the accompanying prospectus may only be accurate as of their respective dates. In this prospectus supplement, references to the “trust” mean Popular Capital Trust II and references to “Popular,” “we,” “our” and “us” mean Popular, Inc., and not Popular, Inc. together with any of its subsidiaries, unless the context indicates otherwise.

      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 supplement and the accompanying 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 supplement and accompanying prospectus must inform themselves about and observe any restrictions relating to the offering of the capital securities and the distribution of this prospectus supplement and the accompanying prospectus outside the United States. This prospectus supplement and the accompanying prospectus do 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.

S-2

PROSPECTUS SUPPLEMENT SUMMARY

      The following information concerning Popular, the trust, the capital securities to be issued by the trust, the guarantee to be issued by Popular with respect to the capital securities and the           % junior subordinated debentures due                     , 2034 to be issued by Popular supplements, and should be read in conjunction with, the information contained in the accompanying prospectus. If the information set forth in this prospectus supplement differs in any way from the information set forth in the accompanying prospectus, you should rely on the information set forth in this prospectus supplement.

Popular, Inc.

      We are a diversified, financial services company and the largest locally based financial institution in Puerto Rico. We were incorporated in 1984 under the laws of the Commonwealth of Puerto Rico. We are 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 are subject to supervision and regulation by the Board of Governors of the Federal Reserve System. As a diversified financial services institution, we own subsidiaries engaged in banking and a variety of financial services. Our 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. Our principal subsidiary, Banco Popular de Puerto Rico, was incorporated in 1893 and is Puerto Rico’s largest bank.

      We are a separate and distinct legal entity from our banking and other subsidiaries. Our principal source of funds to pay our obligations including service on our debt is dividends from our subsidiaries. Various federal, Puerto Rico 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, Hato Rey, Puerto Rico 00918, and our telephone number is (787) 765-9800.

Popular Capital Trust II

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

•  issue and sell its common securities to Popular;

•  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; 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. Chase Manhattan Bank USA, National Association will act as the Delaware trustee of the trust. Two officers of Popular or its subsidiaries will act as administrative trustees of the trust. The principal office and telephone number of the trust are c/o Popular, Inc., Popular Center Building, 209 Muñoz Rivera Avenue, Hato Rey, Puerto Rico 00918, telephone number (787) 765-9800.

The Offering

Issuer	Popular Capital Trust II
Securities	4,000,000           % Cumulative Monthly Income Trust Preferred Securities, which represent an undivided beneficial interest in the assets of the trust.

S-3

	The assets of the trust will consist solely of the           % junior subordinated debentures of Popular.
Offering Price	$25 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 $25 per capital security. Distributions will accumulate from the date the trust issues the capital securities and are payable monthly in arrears on the first day of each month, beginning                     , 2005. The record date for distributions on the capital securities will be the fifteenth day of the month next preceding the distribution date. We may defer payment of cash distributions as described below.
Mandatory Redemption	The junior subordinated debentures will mature and the capital securities must be redeemed on                     , 2034.
Optional Redemption	The trust must redeem the capital securities when the junior subordinated debentures are paid at maturity or upon any earlier redemption of the junior subordinated debentures. The junior subordinated debentures may be redeemed before their stated maturity at 100% of their principal amount outstanding, plus accrued interest to the date of redemption, at any time, in whole only, and only if adverse changes in tax law, investment company law or banking laws or regulations occur. See “Description of the Capital Securities — Redemption.”
	Other than in connection with adverse changes in tax law, investment company law or banking laws or regulations, the junior subordinated debentures may be redeemed, at the option of Popular (in which case, the trust must also redeem the capital securities) at any time on or after                     , 2009 at 100% of their principal amount plus accrued interest to the date of redemption.
	Popular’s option to redeem the junior subordinated debentures is subject to any required approval of the Federal Reserve or its district reserve bank (the “Federal Reserve”).
Deferral of Distributions	Unless there is an event of default under the junior subordinated debentures, Popular can defer interest payments on the junior subordinated debentures during any period of up to 60 consecutive months, but not beyond their maturity date.
	If Popular 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 $25 per capital security; and
	• the deferred distributions will accrue additional distributions, to the extent permitted by applicable law, at an annual rate of           %, compounded monthly, until paid.

S-4

	If Popular exercises its right to defer payments of interest on the junior subordinated debentures, holders of the capital securities using the accrual method of accounting to determine their taxable income will be required to accrue income on the deferred interest allocable to the capital securities for United States federal and Puerto Rico 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 will be required to pay to the trust all accrued and unpaid interest under the junior subordinated debentures. The trust will then pay all accumulated and unpaid distributions to the holders.
Guarantee of the Capital Securities	Popular’s obligations described in this prospectus supplement and the accompanying prospectus, in the aggregate, constitute a full, irrevocable and unconditional guarantee by Popular, on a subordinated basis, of the obligations of the trust under the capital securities. Popular has entered into a guarantee agreement whereby it has guaranteed that the trust will use its assets to pay the distributions on the capital securities and the liquidation amount upon liquidation of the trust. However, the guarantee does not apply when the trust does not have sufficient funds to make the payments. If Popular does not make payments on the junior subordinated debentures, 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 for enforcement of payments under the junior subordinated debentures.
Distribution of the junior subordinated debentures	Popular has the right to terminate the trust at any time. If Popular decides to exercise its right to terminate the trust, the trust will distribute, after satisfaction of liabilities to creditors, approximately 97% of the junior subordinated debentures to holders of the capital securities and approximately 3% to the holders of the common securities. Any distributions of the junior subordinated debentures may require approval of the Federal Reserve.
	If the junior subordinated debentures are distributed, Popular will use its commercially reasonable efforts to list the junior subordinated debentures on the Nasdaq National Market or any other exchange on which the capital securities are then listed.
Ranking	The capital securities will generally rank equal to 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 as to payment if and so long as Popular fails to make principal or interest payments under the junior subordinated debentures when due. For a more detailed

S-5

	explanation, see “Description of Trust Preferred Securities — Ranking of Trust Securities” in the accompanying prospectus.
	The junior subordinated debentures and the guarantee will be unsecured and will rank subordinate and junior in right of payment to all of Popular’s current and future Senior Debt, as defined in the accompanying prospectus, which includes subordinated debt of Popular. For a more detailed explanation, see “Description of Junior Subordinated Debt Securities — Subordination” and “Description of Guarantees — Status of the Guarantees” in the accompanying 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 for cause or when there is an event of default under the junior subordinated indenture,
	• certain modifications to the terms of the capital securities and the guarantee, 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 Trust Preferred Securities — Removal of Trustees,” “— Voting Rights; Amendment of the Trust Agreement” and “Description of Guarantees — Amendments and Assignment” in the accompanying 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.
Puerto Rico Withholding Taxes	By purchasing the capital securities, holders who are subject to tax in Puerto Rico on the interest received on the junior subordinated debentures will be deemed to have made an irrevocable election to have the special 10% Puerto Rico tax applicable to corporate debt withheld on their proportionate share of such interest income. Other holders will be subject to the 10% Puerto Rico withholding tax unless certain conditions described under “Certain Tax Considerations” are complied with. Popular will not make any additional payments on the capital securities to compensate investors for any Puerto Rico taxes withheld from payments on the capital securities.

S-6

	See “Certain Tax Considerations” for a more detailed summary of material United States and Puerto Rico tax considerations for the capital securities.
Use of Proceeds	The trust will invest all of the proceeds from the sale of the capital securities in the junior subordinated debentures. Popular intends to use the net proceeds from the sale of the junior subordinated debentures to purchase subordinated notes of Banco Popular de Puerto Rico.
Trustee and Paying Agent	J.P. Morgan Trust Company, National Association will act as the property trustee of the trust. Chase Manhattan Bank USA, National Association will act as the Delaware trustee of the trust.
Listing of the Capital Securities	Popular has applied to have the capital securities approved for quotation on the Nasdaq National Market under the symbol “BPOPM.” Trading of the capital securities on the Nasdaq National Market is expected to commence approximately 30 days after initial delivery of the capital securities.
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 The Depository Trust Company (“DTC”) or its nominee. 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 supplement and the accompanying prospectus, before deciding whether an investment in the capital securities is suitable for you.

S-7

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 supplement and the accompanying 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 supplement and the accompanying prospectus about both of these securities and the guarantee.

Holders of Popular’s Senior Debt will get paid before the trust will get paid under the junior subordinated debentures and before you will get paid under the guarantee

      Popular’s obligations under the junior subordinated debentures and the guarantee are unsecured and will rank junior in priority of payment to all of Popular’s current and future Senior Debt, as defined in the accompanying prospectus, which includes subordinated debt of Popular. As of September 30, 2004, Popular had approximately $4.2 billion of outstanding Senior Debt, including guarantees of debt of its subsidiaries. In addition, Popular was obligated on such date under letters of credit, other guarantees, foreign exchange contracts and interest rate swap contracts to which the junior subordinated debentures will be subordinated pursuant to the terms of the junior subordinated indenture.

      Popular’s obligations under the junior subordinated debentures and the guarantee will also be effectively subordinated to all current and future indebtedness and other liabilities of its subsidiaries. See “Description of Junior Subordinated Debt Securities — General” in the accompanying prospectus.

      The capital securities, the junior subordinated debentures and the guarantee do not limit the ability of Popular or any of its subsidiaries to incur additional indebtedness, liabilities and obligations, including indebtedness, liabilities and obligations that rank senior to or equal with the junior subordinated debentures and the guarantee. For more information on the ranking of Popular’s obligations under the junior subordinated debentures and the guarantee, see “Description of Junior Subordinated Debt Securities — Subordination” and “Description of Guarantees — Status of the Guarantees” in the accompanying prospectus.

If Popular does not make payments on the junior subordinated debentures, the trust will not be able to pay distributions on the capital securities and the guarantee will not apply

      The ability of the trust to timely pay distributions on the capital securities and pay the liquidation amount of $25 per capital security depends solely upon Popular’s making the related payments on the junior subordinated debentures when due. If Popular defaults on its obligation to pay the principal of or interest on the junior subordinated debentures, the trust will not have sufficient funds to pay distributions on, or the $25 liquidation amount per security of, the capital securities. In that case, you will not be able to rely upon the guarantee for payment of these amounts because the guarantee only applies if Popular makes the corresponding payment of principal of or interest on the junior subordinated debentures. Instead, you or the property trustee will have to bring a legal action against Popular to enforce the property trustee’s rights under the indenture relating to the junior subordinated debentures.

You may not be able to enforce your rights against Popular directly if an event of default occurs; you may have to rely on the property trustee to enforce your rights

      You will not always be able to directly enforce your rights against Popular if an event of default occurs.

S-8

      If an event of default under the junior subordinated debentures 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.

      You may only bring a legal action against Popular directly if an event of default under the trust agreement occurs because of Popular’s failure to pay when due interest on or the principal of the junior subordinated debentures.

      See “Description of Junior Subordinated Debentures — Events of Default and the Rights of Capital Securities Holders to Take Action Against Popular” in this prospectus supplement.

Distributions on the capital securities could be deferred; you may have to include interest in your taxable income before you receive cash

      As long as Popular is not in default under the junior subordinated debentures, it may defer interest payments on the junior subordinated debentures one or more times. Each deferral period may last for up to 60 consecutive months, but not beyond the maturity date of the junior subordinated debentures. During a deferral period, the trust would also defer distributions on the capital securities.

      If Popular defers interest payments on the junior subordinated debentures and the trust defers distributions on the capital securities, holders of the capital securities using the accrual method of accounting to determine their taxable income will be required to accrue interest income for United States federal and Puerto Rico income tax purposes on their proportionate share of the deferred interest on the junior subordinated debentures held by the trust. As a result, you may have to include that accrued interest in your gross income for United States or Puerto Rico 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 has no current intention of exercising its right to defer payments of interest on the junior subordinated debentures. However, if Popular exercises this right, the market price of the capital securities may be adversely affected. 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 Tax Considerations — Puerto Rico Taxation; Taxation of Interest on the Junior Subordinated Debentures” and “Certain Tax Considerations — United States Taxation; Taxation of Interest and Original Issue Discount” in this prospectus supplement, for more information regarding the interest payment deferral option.

Federal income tax exposure if Popular ceases to meet the source of income tests for Puerto Rico income tax purposes

      To the extent interest payments on the junior subordinated debentures do not constitute income from Puerto Rico sources, the distributions on the capital securities will be subject to U.S. income taxation to Puerto Rico holders. Interest on the junior subordinated debentures will not be taxable for federal tax purposes to U.S. citizens who are bona fide residents of Puerto Rico during the entire taxable year (“Puerto Rico U.S. Holders”) so long as interest payments on the junior subordinated debentures are considered to be Puerto Rico source income for purposes of the United States Internal Revenue Code of 1986, as amended (the “Code”). Under the current source of income rules of the Code, the interest payments or accruals (including original issue discount, if any) on the junior subordinated debentures will be considered Puerto Rico source income if the following conditions are met: (1) such interest is not

S-9

treated as paid by a trade or business conducted by Popular outside of Puerto Rico, including for these purposes the United States, such determination to be made under Section 884(f)(1)(A) of the Code and the regulations thereunder; and (2) for the three-year period ending with the close of Popular’s taxable year immediately preceding the payment of the interest on the junior subordinated debentures (or such part of such period as may be applicable), Popular either: (A) derived more than 20% of its gross income from sources within Puerto Rico; or (B) derived more than 20% of its gross income from the conduct of a trade or business in Puerto Rico, both tests determined under the provisions of Section 861(c)(1)(B) of the Code, which require, among other things, that the gross income received by Popular from a 50% owned subsidiary (determined by voting interest or value) will retain the source and character that such income had in the hands of the subsidiary. Popular believes that the interest payments on the junior subordinated debentures will not be deemed to be paid by a trade or business outside Puerto Rico. Moreover, for the three-year period ended December 31, 2003, approximately 99% of Popular’s gross income was derived from sources within Puerto Rico and approximately 100% of its gross income was derived from the conduct of a trade business in Puerto Rico, both percentages determined by applying the rules established in Section 861(c)(1)(B) of the Code. However, there can be no assurance that Popular or any legal successor to Popular will be able to meet the Puerto Rico source of income requirements during the time that the junior subordinated debentures and the capital securities are outstanding, which can be as long as 30 years. If Popular or any legal successor fails to meet the Puerto Rico source of income requirements, then distributions on the capital securities will be taxable for federal income tax purposes to Puerto Rico Holders.

The capital securities may be redeemed prior to stated maturity; you may be taxed on the proceeds and you may not be able to reinvest the proceeds at the same or a higher rate of return

      Popular has the right to redeem the junior subordinated debentures at its option in whole or in part on one or more occasions at any time on or after 2009, subject to any required prior approval from the Federal Reserve. In addition, if adverse changes in the tax laws, investment company laws or banking laws or regulations discussed on pages S-18 and S-19 occur and are continuing, Popular 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.

      If the junior subordinated debentures are redeemed, the capital securities will be redeemed at a redemption price equal to the $25 per capital security liquidation amount plus accumulated but unpaid distributions to the redemption date. Under current United States federal and Puerto Rico income tax law, the redemption of the capital securities would be a taxable event to you. See “Certain Tax Considerations” in this prospectus supplement.

      In addition, you may not be able to reinvest the money you receive upon redemption 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” in this prospectus supplement for more information on redemption of the junior subordinated debentures.

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

      If Popular terminates the trust before the stated maturity of the junior subordinated debentures, the property trustee will distribute the junior subordinated debentures to the holders of the capital securities and the common 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.

S-10

      Although Popular has agreed to use its commercially reasonable efforts to list the junior subordinated debentures on the Nasdaq National Market or any other exchange on which the capital securities are then listed, Popular cannot assure you that the Nasdaq National Market will approve the junior subordinated debentures for listing or that a trading market will exist for the junior subordinated debentures.

      Under current United States federal and Puerto Rico income tax law, the distribution of junior subordinated debentures upon the termination of the trust would generally not be taxable to you. If, however, the trust is characterized for United States federal or Puerto Rico 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.

      See “Description of the Capital Securities — Liquidation Distribution Upon Dissolution” in this prospectus supplement for more information.

If you sell your capital securities between record dates for distribution payments, you will have to include accrued but unpaid distributions in your taxable income

      The capital securities may trade at prices that do not fully reflect the value of accrued but unpaid interest on the underlying junior subordinated debentures.

      If you dispose of your capital securities before the record date for a distribution payment, you will have to treat a portion of your proceeds from the disposition as ordinary income for Puerto Rico income tax purposes in an amount equal to the accrued but unpaid interest on your proportionate share of the junior subordinated debentures through the date of your disposition.

      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. The amount you receive for your capital securities may not fully reflect the value of any accrued but unpaid interest at the time of the sale while your adjusted tax basis will include any accrued but unpaid interest. The deductibility of capital losses is subject to limitations for Puerto Rico income tax purposes.

      See “Certain Tax Considerations — Puerto Rico Taxation; Taxation of Interest on the Junior Subordinated Debentures” and “Certain Tax Considerations — United States Taxation; Taxation of Interest and Original Issue Discount” in this prospectus supplement for more information.

Popular generally will control the trust because your voting rights are very limited; your interests may not be the same as Popular’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 default under the junior subordinated debentures. In general, only Popular, as the sole holder of the common securities of the trust, can replace or remove any of the trustees of the trust.

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

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. Popular has applied to have the capital securities approved for quotation on the Nasdaq National Market under the symbol “BPOPM” and trading of the capital securities on the Nasdaq National Market is expected to commence approximately 30 days after initial delivery of the capital securities. The underwriter has advised the trust that it presently intends to make a market in the capital securities prior to commencement of trading on the Nasdaq National Market. The underwriter is not obligated to make a market in the capital securities, however, and may discontinue market making activities at any time

S-11

without notice. Accordingly, there may not be development of or liquidity in any market for the capital securities. 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 supplement and the accompanying 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 Popular’s current expectations 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 Popular’s actual results, 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 supplement and the accompanying prospectus or in 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. Popular undertakes no obligation to publicly update or revise any of the forward-looking statements.

USE OF PROCEEDS

      The trust will use the proceeds from the sale of its capital securities and its common securities to acquire the junior subordinated debentures from Popular. The net proceeds from the sale of the junior subordinated debentures will be added to Popular’s general funds and will be used to purchase subordinated notes of Banco Popular de Puerto Rico.

      Until the net proceeds have been used, they will be invested in marketable securities.

S-12

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

      The following table shows certain selected consolidated financial and operating data of Popular on a historical basis as of and for the nine-month periods ended September 30, 2004 and 2003, and for each of the five years in the period ended December 31, 2003. Except for the information appearing under the captions “Performance Ratios,” “Capital Ratios” and “Asset Quality Ratios,” the financial data shown below for the five years ended December 31, 2003 is derived from information contained in Popular’s audited consolidated financial statements. Except for the information appearing under the captions “Performance Ratios,” “Capital Ratios” and “Asset Quality Ratios,” the financial data as of and for the nine months ended September 30, 2004 and 2003 is derived from Popular’s unaudited consolidated financial statements which, in the opinion of management, include all adjustments necessary for a fair presentation of the results for those periods. The results of operations for the nine months ended September 30, 2004 may not be indicative of results to be expected for any future period. You should read the summary consolidated financial data presented below together with Popular’s consolidated financial statements and the related notes, which are incorporated by reference in this prospectus supplement and the accompanying prospectus. All per share information shown in the table takes into account prior stock splits and dividends, including a two-for-one stock split effected on July 18, 2004.

      The return on average assets ratio is computed by dividing net income by average assets for the period. The return on average common equity ratio is computed by dividing net income less preferred stock dividends by average common stockholders’ equity for the period. The average equity to average assets ratio is computed by dividing average stockholders’ equity for the period by average assets. The return on average assets and average common equity ratios for the nine months ended September 30, 2004 and 2003 have been presented on an annualized basis.

		Nine Months
		Ended September 30,					Year Ended December 31,
		2004		2003			2003			2002			2001			2000		1999
		(Unaudited)
		(Dollars in thousands, except for per share data)
Condensed Income Statement:
Interest income		$	1,614,779	$	1,524,340		$	2,034,238		$	2,023,797		$	2,095,862		$	2,150,157	$	1,851,670
Interest expense			595,170		566,240			749,550			863,553			1,039,105			1,167,396		897,932
	Net interest income		1,019,609		958,100			1,284,688			1,160,244			1,056,757			982,761		953,738
Provision for loan losses			132,641		146,202			195,939			205,570			213,250			194,640		148,948
Securities and trading gains (losses)			12,687		60,619			60,880			(4,146	)		(1,754	)		13,192		(944	)
Other income			436,074		483,992			565,130			547,909			493,570			450,868		373,860
Operating expenses			869,271		394,330			1,113,083			1,029,002			926,209			876,433		837,482
Net (gain) loss of minority interest			—		(425	)		(435	)		(248	)		18			1,152		2,454
Income tax			104,774		100,667			130,326			117,255			105,280			100,797		85,120
Cumulative gain effect of change in accounting principle			—		—			—			—			686			—		—
	Net income	$	361,684	$	364,622		$	470,915		$	351,932		$	304,538		$	276,103	$	257,558
Per Common Share Data:(*)
Net income per common share (basic and diluted) (before and after cumulative effect of accounting change)		$	1.32	$	1.35		$	1.74		$	1.31		$	1.09		$	0.99	$	0.92
Dividend per common share		$	0.46	$	0.37		$	0.51		$	0.40		$	0.38		$	0.32	$	0.30
Weighted average share outstanding:
	Basic		266,197,350		265,369,490			265,481,840			267,830,164			272,476,576			271,814,952		271,171,268
	Diluted		266,507,936		265,443,503			265,595,832			267,830,550			272,476,938			271,814,952		271,171,268

S-13

	Nine Months
	Ended September 30,						Year Ended December 31,
	2004			2003			2003			2002			2001			2000			1999
	(Unaudited)
	(Dollars in thousands, except for per share data)
Average Balances:
Loans (less unearned income)	$	24,222,902		$	20,264,238		$	20,730,041		$	18,729,220		$	17,045,257		$	15,801,887		$	13,901,290
Earning assets		36,626,461			32,430,515			32,781,355			30,194,914			26,414,204			24,893,366			22,244,959
Total assets		38,793,708			34,290,003			34,674,761			31,822,390			27,957,107			26,569,755			23,806,372
Deposits		18,960,531			17,724,580			17,757,968			16,984,646			15,575,791			14,508,482			13,971,338
Total interest-bearing liabilities		31,470,346			27,817,659			28,098,305			25,947,964			22,324,244			21,147,746			18,578,311
Stockholders’ equity		2,860,175			2,492,582			2,595,113			2,150,386			2,096,534			1,884,525			1,712,792
Period End Balances:
Loans (less unearned income)	$	27,517,298		$	21,707,755		$	22,602,192		$	19,582,119		$	18,168,551		$	16,057,085		$	14,907,754
Allowance for loans losses		445,845			398,578			408,542			372,797			336,632			290,653			292,010
Earning assets		40,337,786			33,679,695			34,451,748			31,899,765			29,139,288			26,339,431			23,754,620
Total assets		42,855,594			35,777,187			36,434,715			33,660,352			30,744,676			28,057,051			25,460,539
Deposits		20,483,218			17,655,992			18,097,828			17,614,740			16,370,042			14,804,907			14,173,715
Total interest-bearing liabilities		35,067,658			28,871,925			29,263,757			27,203,321			24,676,422			22,480,261			20,043,234
Stockholders’ equity		3,010,495			2,751,006			2,754,417			2,410,879			2,272,818			1,993,644			1,660,986
Performance Ratios:
Net interest yield (taxable equivalent basic)		4.01	%		4.31	%		4.28	%		4.19	%		4.33	%		4.23	%		4.65	%
Return on average total assets		1.25			1.42			1.36			1.11			1.09			1.04			1.08
Return on average common equity		17.63			20.35			19.30			16.29			14.84			15.00			15.45
Capital Ratios:
Tier 1 capital to risk adjusted assets		10.62	%		11.14	%		12.43	%		9.85	%		9.96	%		10.44	%		10.17	%
Total capital to risk adjusted assets		12.09			12.76			13.93			11.52			11.74			12.37			12.29
Leverage ratio		7.12			7.02			8.00			6.19			6.46			6.40			6.40
Asset Quality Ratios:
Non-performing assets to total assets at end of period		1.45	%		1.76	%		1.68	%		1.60	%		1.49	%		1.24	%		1.28	%
Non-performing loans to total loans at end of period		2.05			2.64			2.46			2.55			2.35			2.01			1.99
Allowance for loan losses to total loans at end of period		1.62			1.84			1.81			1.90			1.85			1.81			1.96
Allowance for loan losses to total non-performing loans at end of period		79.01			69.43			73.34			74.58			78.88			89.92			98.37
Net charge-offs to average loans outstanding		0.65			0.83			0.84			0.92			0.99			1.14			0.90

*  All per common share data has been adjusted to reflect the two-for-one stock split effective July 8, 2004 effected in the form of a dividend.

S-14

DESCRIPTION OF THE TRUST

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

•  the execution of a declaration of trust and trust agreement by Popular, as depositor, 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 capital securities offered hereby will constitute all of the capital securities of the trust. Popular, or one of its affiliates, will acquire all of the common securities of the trust, which will have an aggregate liquidation amount equal to at least 3% of the total capital of the trust.

      Popular has agreed to pay all fees and expenses related to the trust and the offering of the common securities and the capital securities.

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 $103,092,800 aggregate principal amount of the junior subordinated debentures we issue to the trust as a liability (under the line item “notes payable”) and the $3,092,800 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.

      There can be no assurance that the Federal Reserve will adopt a final rule as proposed or at all. If Tier 1 regulatory capital treatment were disallowed, there would be a reduction in our consolidated capital ratios. As of September 30, 2004, on a pro forma basis, after giving effect to this offering, Popular will have $794 million in outstanding trust preferred securities that it treats as Tier 1 capital for bank regulatory purposes. If all of Popular’s outstanding trust preferred securities at September 30, 2004 were not treated as Tier 1 regulatory capital at that date, its Tier 1 leverage capital ratio would have declined from 7.12% to 6.01%, its Tier 1 risk-based capital ratio would have declined from 10.62% to 8.98%, and its total risk-based capital ratio would have declined from 12.09% to 10.44%. These reduced capital ratios would continue to meet the applicable Federal Reserve capital requirements for a well-capitalized institution. Pending a change in regulatory treatment, the outstanding trust preferred securities of our trusts will continue to be treated as Tier 1 regulatory capital by Popular.

S-15

DESCRIPTION OF CAPITAL SECURITIES

      The capital securities are “trust preferred securities” as described in the accompanying prospectus. The following, together with “Description of Trust Preferred Securities” in the accompanying prospectus, is a description of the material terms of the capital securities. If the description of the capital securities set forth in this prospectus supplement differs in any way from the description set forth in the accompanying prospectus, you should rely on the description set forth in this prospectus supplement. You should also read the amended and restated declaration of trust and trust agreement, to be dated as of                     , 2004 (the “trust agreement”), the Delaware Statutory Trust Act and the Trust Indenture Act. The form of the trust agreement is on file at the SEC as an exhibit to the registration statement pertaining to this prospectus supplement.

      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 $100,000,000 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 as to payment if and so long as Popular fails to make principal or interest payments under the junior subordinated debentures when due as described under “Description of Trust Preferred Securities — Ranking of Trust Securities” in the accompanying prospectus. 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 stated liquidation amount of $25 per capital security, payable monthly in arrears on the 1st day of each month, commencing                     , 2005. If the trust is terminated and its assets distributed, for each capital security you own, you are entitled to receive a like amount of junior subordinated debentures or the liquidation amount of $25 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 the 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 monthly. 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 rate per annum by twelve.

      Distributions on the capital securities:

•  will be cumulative;

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

•  will be payable monthly in arrears on the 1st day of each month, commencing                     , 2005 and will be payable to the holder of record, as described below.

      Funds available for distribution will be limited to payments received from Popular on the junior subordinated debentures.

S-16

Payment of Distributions

      The trust will pay distributions on the capital securities to DTC, which will credit the relevant accounts at DTC on the applicable payment dates. 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, if the securities certificate for the capital securities is not held by DTC or on behalf of DTC, a holder of $1 million or more in aggregate liquidation amount of capital securities may receive distribution payments, other than distributions payable at maturity, 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 of the month 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.

      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

      As long as there is no event of default under the junior subordinated debentures, Popular 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 60 consecutive months, but not beyond the maturity of the junior subordinated debentures.

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

      While Popular defers interest payments on the junior subordinated debentures, it will be restricted from:

•  declaring or paying any dividends or distributions on, or redeeming, purchasing, acquiring or making a liquidation payment on, any shares of its capital stock; and

•  making payments on or repaying, repurchasing or redeeming any of its debt securities that rank equal or junior to the junior subordinated debentures.

See “Description of Junior Subordinated Debentures — Option to Extend Interest Payment Period” and “— Restrictions on Certain Payments; Certain Covenants of Popular” in this prospectus, for more information regarding these restrictions and the applicable exceptions.

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

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

S-17

Redemption

      When Popular repays or redeems the junior subordinated debentures, whether at stated maturity 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 $25 liquidation amount, plus accumulated but unpaid distributions to the redemption date.

      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 approximately 3% to the common securities and 97% to the capital securities, except in the case of an event of default as a result of any failure by Popular to make any principal or interest payments under the junior subordinated debentures when due. See “Description of Trust Preferred Securities — Ranking of Trust Securities” in the accompanying prospectus.

      Popular will have the right, subject to any required prior approval of the Federal Reserve, 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:

•  on or after                     , 2009, 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.

      If less than all the junior subordinated debentures are to be repaid or redeemed on the date of redemption, then the proceeds from such repayment or redemption will be allocated to the redemption of capital securities and common securities proportionately, except in the case of an event of default as a result of any failure by Popular to make any principal or interest payments under the junior subordinated debentures when due.

      A redemption of the junior subordinated debentures will cause a mandatory redemption of the capital securities and the common securities. See “Description of Junior Subordinated Debentures — Redemption” in this prospectus supplement.

      “Tax event” means the receipt by the 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 prospective change, in the laws, or any regulations thereunder, of the United States or any political subdivision thereof or Puerto Rico, or a taxing authority of the United States or Puerto Rico, affecting taxation which is effective on or after the date of this prospectus supplement; or

•  any official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations which is announced on or after the date of this prospectus supplement;

there is more than an insubstantial risk that:

      (1) the trust is, or will be within 90 days of the delivery of the opinion of counsel, subject to United States federal or Puerto Rico income tax with respect to income received or accrued on the junior subordinated debentures;

      (2) interest payable by Popular to the trust on the junior subordinated debentures is not, or will not be within 90 days of the delivery of the opinion of counsel, deductible by Popular, in whole or in part, for Puerto Rico income tax purposes or for U.S. income tax purposes, to the extent applicable to Popular; or

      (3) the trust is, or will be within 90 days of the delivery of the opinion of counsel, subject to more than an immaterial amount of taxes, duties or other governmental charges.

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      If a tax event has occurred and is continuing and the trust is the holder of all the junior subordinated debentures, Popular will pay any additional sums required so that distributions on the capital securities will not be reduced by any additional taxes (other than withholding taxes), duties or other governmental charges payable by the trust as a result of the tax event. See “Description of Junior Subordinated Debentures — Additional Sums” in this prospectus supplement.

      “Investment company event” means the receipt by the trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or a written change, including any announced prospective change, in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, 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, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of this prospectus supplement.

      “Capital treatment event” means the reasonable determination of Popular that, as a result of any amendment to, or change in, including any announced proposed change in, the laws or regulations 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 or regulations, which amendment or change is effective or which proposed change, pronouncement, action or decision is announced on or after the date of this prospectus supplement, there is more than an insubstantial risk that Popular will not be entitled to treat an amount equal to the liquidation amount of the capital securities as Tier 1 capital, or the then-equivalent thereof, for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to Popular.

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 registered 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 holders of the capital securities.

      With respect to the capital securities not held in book-entry form, if 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 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.

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      If payment of the redemption price for the capital securities called for redemption is improperly withheld or refused and not paid either by the trust or by Popular under the guarantee, 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 or its 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 normally will be allocated approximately 3% to the common securities and 97% to the capital securities. However, if an event of default has occurred as a result of any failure by Popular to make any principal or interest payments under the junior subordinated debentures when due, holders of the capital securities will be paid in full before any payments are made to holders of the common securities. See “Description of Trust Preferred Securities — Ranking of Trust Securities” in the accompanying prospectus 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 $25 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.

      Popular can at any time dissolve the trust. 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.

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

      The trust agreement states that the trust will dissolve automatically on                    , 2035 or earlier upon:

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

      (2) the distribution of junior subordinated debentures having a principal amount equal to the liquidation amount of the capital securities and the common securities of the holders to whom the junior subordinated debentures are distributed, if Popular has 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 Popular;

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

      If the trust cannot pay the full amount due on the capital securities and the common securities because it has insufficient assets for payment, then the amounts the trust owes on the capital securities will be proportionately allocated. 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 an event

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of default under the junior subordinated debentures has occurred and is continuing as a result of any failure by Popular to make any principal or interest payments in respect of the junior subordinated debentures when due, the trust will pay the total amounts due on the capital securities before making any distribution on the common securities. See “Description of Trust Preferred Securities — 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 may 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.

Concerning the Property Trustee

      From time to time, Popular and certain of its subsidiaries maintain deposit accounts and conduct other banking transactions, including lending transactions, with the property trustee in the ordinary course of business.

The Capital Securities Will Initially Be Issued in Book-Entry Form and Held Through DTC

      The trust and Popular have obtained the information in this section concerning DTC and the book-entry system and procedures from sources that the trust and Popular believe to be reliable, but the trust and Popular take no 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. 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. Except as set forth below, 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 owner 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 of the capital securities.

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DTC

      DTC has provided the trust and Popular with the following information: DTC, the world’s largest securities depositary, 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 and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust Company & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearance Corporation and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTC), as well as 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 both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com or www.dtc.org.

      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 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 Participants 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 and Popular understand that, under DTC’s existing practices, if the trust or Popular 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

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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 each Direct Participant’s 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 make distributions 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 distributions on their capital securities since distributions 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.” These payments will be the responsibility of the participant and not of DTC, Popular, the trust, the trustees, the paying agent or any other agent of Popular or the trust.

      Accordingly, 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 participants or the relationship between those participants and the owners of beneficial interests in a global securities certificate held through those participants; or

•  the maintenance, supervision or review of any of DTC’s records relating to those beneficial ownership interests.

      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 an event of default under the trust agreement 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 owners of the beneficial interests in 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.

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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 rules and will be settled in immediately available funds using DTC’s Same Day Funds Settlement System.

      Although DTC has agreed to the foregoing procedures in order to facilitate transfers of capital securities among its participants DTC is under no obligation to perform or continue to perform such procedures and such procedures may be modified or discontinued at any time. Neither the trust, Popular nor the paying agent will have any responsibility for the performance by DTC, or its direct or indirect participants of their obligations under the rules and procedures governing their operations.

DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES

      The junior subordinated debentures are a series of junior subordinated debt securities as described in the accompanying prospectus. The following, together with the description applicable to junior subordinated debt securities under “Description of Junior Subordinated Debt Securities” in the accompanying prospectus, describes the material terms of the junior subordinated debentures. If the description of the junior subordinated debentures set forth in this prospectus supplement differs in any way from the description set forth in the accompanying prospectus, you should rely on the description set forth in this prospectus supplement. You should also read the junior subordinated indenture, dated as of October 31, 2003, between Popular and J.P. Morgan Trust Company, National Association (formerly Bank One Trust Company, N.A.), as indenture trustee, which is a junior subordinated indenture as described in the accompanying prospectus, and the Trust Indenture Act.

      Under 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.” If the junior subordinated debentures are distributed to the holders of capital securities, Popular will use its commercially reasonable efforts to have the junior subordinated debentures listed on the Nasdaq National Market or with another organization on which the capital securities are then listed.

General

      The junior subordinated debentures are unsecured, junior subordinated obligations of Popular. The junior subordinated debentures will be limited in aggregate principal amount to $103,092,800. The amount will be limited to the sum of:

•  the aggregate stated liquidation amount of the capital securities; and

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

      The junior subordinated debentures will rank junior to the Senior Debt, as defined in the accompanying prospectus, of Popular, including the subordinated debt of Popular. For information on the subordination of the junior subordinated debentures, see “Description of Junior Subordinated Debt Securities — Subordination” in the accompanying prospectus.

      The entire principal amount of the junior subordinated debentures will become due and payable, with any accrued and unpaid interest thereon, on                     , 2034. There is no sinking fund for the junior subordinated debentures.

      The provisions of the junior subordinated indenture described in the accompanying prospectus under “Description of Junior Subordinated Debt Securities — Defeasance and Discharge” relating to discharge, defeasance and covenant defeasance will not apply to the junior subordinated debentures.

      Popular will not pay any additional amounts on the junior subordinated debentures to compensate any holder or beneficial owner for any Puerto Rico tax withheld from payments of principal or interest on the junior subordinated debentures.

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      Popular will register the junior subordinated debentures in the name of Popular Capital Trust II. 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.

Interest

      The junior subordinated debentures will bear interest at an annual rate of           %, from and including their date of issuance until the principal becomes due and payable. Interest is payable monthly in arrears on the 1st day of each month, beginning                     , 2005. Interest payments not paid when due will accrue, as permitted by applicable law, additional interest, compounded monthly, at the annual rate of           %. Popular will pay interest on the junior subordinated debentures 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 of the month preceding the payment date, whether or not a business day.

      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 rate by twelve.

      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. To the extent permitted by law, accrued interest that is not paid when due will bear additional interest at the rate per annum of           %, compounded monthly, and 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 such period. The amount of additional interest payable for any full interest period will be computed by dividing the annual rate by twelve. The term “interest” as used in this prospectus supplement and the accompanying prospectus includes monthly interest payments, interest on monthly interest payments not paid when due, compounded interest and additional sums, as applicable.

      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 supplement.

Option to Extend Interest Payment Period

      As long as Popular is not in default under the junior subordinated debentures, Popular 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 60 consecutive months, but not beyond the maturity date of the junior subordinated debentures. During an extension period, interest will continue to accrue and holders of junior subordinated debentures, or holders of capital securities using the accrual method of accounting to determine their taxable income will be required to accrue interest income for Puerto Rico income tax purposes. See “Certain Tax Considerations — Puerto Rico Taxation; Taxation of Interest on the Junior Subordinated Debentures” and “Certain Tax Considerations — United States Taxation; Taxation of Interest and Original Issue Discount” for further information on Puerto Rico and United States federal income tax consequences. On the interest payment date following the last day of any extension period, Popular will pay all interest then accrued and unpaid, together with additional interest on the accrued and unpaid interest to the extent as permitted by law (“compounded interest”), compounded monthly, at the annual rate of           % plus any additional sums, as described below.

      Before termination of any extension period, Popular may further extend the payments of interest. However, no extension period, including all previous and further extensions, may exceed 60 consecutive months or extend beyond the maturity of the junior subordinated debentures. If any junior subordinated debentures are called for redemption before the end of an extension period, the extension period will end on that redemption date or an earlier date as determined by Popular. After the termination of any

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extension period and the payment of all amounts due, Popular may begin a new extension period, as described above. There is no limitation on the number of times Popular may elect to begin an extension period. Interest will not be payable during an extension period, only at the end of the extension period. Popular may, however, prepay, on any interest payment date, at any time all or any portion of the interest accrued during an extension period.

      If the property trustee is the sole holder of the junior subordinated debentures, Popular 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 notice of Popular’s election of an extension period to the holders of the capital securities.

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

      Popular 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 (other than withholding taxes), duties or other governmental charges as a result of a tax event, Popular 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 has the right, subject to any required prior approval from the Federal Reserve, 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:

•  on or after                    , 2009, 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 following the occurrence and continuation of a tax event, an investment company event or a capital treatment event (the “90-day period”), as described under “Description of Capital Securities — Redemption.”

Restrictions on Certain Payments; Certain Covenants of Popular

      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; or

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

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if at such time:

•  there has occurred any event of default under the junior subordinated debentures resulting from a failure to make principal or interest payments on the junior subordinated debentures or from certain events in bankruptcy, insolvency or reorganization of Popular;

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

•  Popular has given notice of its election of 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 capital stock of Popular 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 capital stock of Popular, 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, redemption or conversion of any class or series of Popular’s capital stock, or any capital stock of a subsidiary of Popular, for any other class or series of Popular’s capital stock, or of any class or series of Popular’s indebtedness for any class or series of Popular’s capital stock;

•  the purchase of fractional interests in shares of Popular’s 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;

•  payments by Popular under the guarantee of the capital securities; 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, Popular agrees:

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

•  as holder of the common securities, not to voluntarily dissolve, wind up 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 its reasonable efforts, consistent with the terms and provisions of the trust agreement, to cause the trust to continue not to be taxable as a corporation for United States federal or Puerto Rico income tax purposes.

Registration, Denomination and Transfer

      Popular 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

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under “Description of Capital Securities — The Capital Securities Will Initially Be Issued in Book-Entry Form and Held Through DTC” will be applicable to the junior subordinated debentures.

      If the junior subordinated debentures are issued in certificated form, payments of principal 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 as described under “Descriptions of Junior Subordinated Debt Securities — Payment; Exchange; Transfer” in the accompanying prospectus. In such case, payment of interest may also be made at the option of Popular 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 security registrar’s office in San Juan, Puerto Rico or the office of any transfer agent selected by Popular without service charge and upon payment of any taxes and other governmental charges as described in the junior subordinated indenture. Popular has appointed Banco Popular de Puerto Rico as transfer agent and security registrar under the junior subordinated indenture. Popular may at any time designate additional transfer agents with respect to the junior subordinated debentures.

      In the event of any redemption, Popular 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, funds deposited with the indenture trustee or any paying agent held for Popular for the payment of principal, 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 and the holder of the junior subordinated debenture will, as a general unsecured creditor, look only to Popular for payment thereof.

Modification of Indenture

      For a description of the provisions for modifying the junior subordinated indenture and the junior subordinated debentures, see “Description of Junior Subordinated Debt Securities — Modification of the Junior Subordinated Indenture” in the accompanying prospectus. In addition, if any of the capital securities are outstanding:

•  no modification 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 event of default under the junior subordinated debentures or compliance with any covenant under the junior subordinated indenture may be effective,

without the prior consent of the holders of at least a majority of the aggregate liquidation amount of the outstanding capital securities unless and until the principal of and premium, if any, on the junior subordinated debentures and all accrued and unpaid interest thereon have been paid in full and certain other conditions are satisfied.

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      In addition, if any of the capital securities are outstanding, all holders of the capital securities must consent if Popular wants to amend the junior subordinated indenture to:

•  remove the rights of holders of capital securities to institute a direct action (as defined below); or

•  modify a provision of the junior subordinated indenture that requires the consent of all the holders of the outstanding junior subordinated debentures.

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

      See “Description of Junior Subordinated Debt Securities — Events of Default, Waiver and Notice” in the accompanying prospectus for a description of:

•  the events of default for the junior subordinated debentures; and

•  the actions that may be taken by the indenture trustee and the holders of junior subordinated debentures, including the trust, following an event of default.

      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 an event of default:

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

•  unless the default is cured, 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

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

      If the event of default under the junior subordinated debentures is the failure of Popular to make payments of principal or interest on the junior subordinated debentures when due, then a registered holder of capital securities may bring a legal action against Popular directly for enforcement of payment to such registered holder of amounts owed on the junior subordinated debentures with a principal amount equal to the aggregate liquidation amount of such registered holder’s capital securities (a “direct action”). Popular may not amend the junior subordinated debentures to remove this right to bring a direct action without the prior written consent of the registered holders of all the capital securities. Popular can offset against payments then due under the junior subordinated debentures any corresponding payments made to holders of capital securities by Popular 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 paragraph.

Concerning the Indenture Trustee

      From time to time, Popular and certain of its subsidiaries maintain deposit accounts and conduct other banking transactions, including lending transactions, with the indenture trustee in the ordinary course of business.

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DESCRIPTION OF GUARANTEE

      The following, together with the “Description of Guarantees” in the accompanying prospectus, is a description of the material terms of the guarantee. If the description of the guarantee set forth in this prospectus supplement differs in any way from the description set forth in the accompanying prospectus, you should rely on the description set forth in this prospectus supplement. You should read the guarantee, to be dated as of                     , 2004, between Popular and J.P. Morgan Trust Company, National Association, as guarantee trustee, and the Trust Indenture Act.

      The following payments on the capital securities (the “guarantee payments”), if not fully paid by the trust, will be paid by Popular under the guarantee, without duplication:

•  any accumulated and unpaid distributions required to be paid on the capital securities, to the extent the trust has funds available to make the payment;

•  the redemption price for any capital securities called for redemption, to the extent the trust has funds available to make the payment; and

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

      (1) the aggregate of the $25 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 to make the payment; and

      (2) the amount of assets of the trust remaining available for distribution to holders of the capital securities upon liquidation of the trust.

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

RELATIONSHIP AMONG THE CAPITAL SECURITIES,

THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE

      Popular will guarantee payments of distributions and redemption and liquidation payments due on the capital securities to the extent the trust has funds available for such payment, as described under “Description of Guarantee” above. No single document executed by Popular will provide for the full, irrevocable and unconditional guarantee of the capital securities. It is only the combined operation of the guarantee, the trust agreement and the junior subordinated indenture 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 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 will pay any and all costs, expenses and liabilities of the trust, except withholding taxes and 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.

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      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 payments on junior subordinated debentures held by the holder, while 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 under the guarantee 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, the trust, as registered holder of the junior subordinated debentures, would be a subordinated creditor of Popular, subordinated and junior in right of payment to all Popular’s Senior Debt, as defined in the accompanying prospectus, but entitled to receive payment in full of all amounts payable with respect to the junior subordinated debentures before any stockholders of Popular receive payments or distributions. Since Popular is the guarantor under the guarantee and has agreed to pay all costs, expenses and liabilities of the trust (other than withholding taxes and 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 in the event of liquidation or bankruptcy of Popular are expected to be substantially the same.

CERTAIN TAX CONSIDERATIONS

General

      In the opinion of Pietrantoni Méndez & Alvarez LLP, counsel to Popular, the following discussion summarizes the material Puerto Rico and United States tax considerations relating to the purchase, ownership and disposition of the capital securities.

      This discussion is based on the tax laws of Puerto Rico and the United States as in effect on the date of this prospectus supplement, as well as regulations, administrative pronouncements and judicial decisions available on or before such date and now in effect. All of the foregoing are subject to different interpretations and also subject to change, which change could apply retroactively and could affect the continued validity of this summary. A prospective investor should be aware that an opinion of counsel represents only such counsel’s best legal judgment and that it is not binding on the Puerto Rico Treasury Department, any municipality or agency of Puerto Rico, the United States Internal Revenue Service or the courts. Accordingly there can be no assurance that the opinions set forth herein, if challenged, would be sustained.

      This discussion deals only with capital securities and indirect beneficial interests in the junior subordinated debentures held by a holder who purchases the capital securities upon initial issuance and holds them as capital assets within the meaning of Section 1121 of the Puerto Rico Internal Revenue Code of 1994, as amended (the “PR Code”) and Section 1221 of the Code (i.e., generally property held for investment). This discussion does not intend to describe all of the tax considerations that may be relevant to a particular investor in light of that person’s particular circumstances and does not describe any tax consequences arising under the laws of any state, locality or taxing jurisdiction other than Puerto Rico and the United States.

      You should consult your own tax advisor as to the application to your particular situation of the tax considerations discussed below, as well as the application of any state, local, foreign or other tax.

Puerto Rico Taxation

      The Puerto Rico income tax considerations in connection with the purchase, ownership and disposition of the capital securities are principally based upon a ruling issued by the Puerto Rico Treasury Department to Popular on October 5, 2004 with respect to the issuance of the capital securities (the “Ruling”). No assurance can be given that the Puerto Rico Treasury Department will not take contrary positions or will not challenge, modify or revoke, successfully or otherwise, the opinions expressed in the

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Ruling. Except in rare and unusual circumstances, the revocation or modification of a ruling issued by the Puerto Rico Treasury Department will not be applied retroactively with respect to the taxpayer to whom the ruling was originally issued provided certain conditions are met.

      The following discussion does not intend to cover all aspects of Puerto Rico taxation that may be relevant to a purchaser of capital securities in light of the purchaser’s particular circumstances, or to purchasers subject to special rules of taxation, such as life insurance companies, “special partnerships,” “Subchapter N corporations,” registered investment companies, estates and trusts.

      For purposes of the discussion below, a “Puerto Rico corporation” is a corporation organized under the laws of Puerto Rico and a “foreign corporation” is a corporation organized under the laws of a jurisdiction other than Puerto Rico. Corporations organized under the laws of the United States or any of the states of the United States are considered “foreign corporations” for Puerto Rico income tax purposes.

Classification of the Junior Subordinated Debentures

      Based on the provisions of the Ruling, and assuming full compliance with the terms of the trust agreement, certain other documents and certain factual matters, under current law, the junior subordinated debentures are classified for Puerto Rico income tax purposes as our indebtedness, and the holders of the capital securities will be required to treat the junior subordinated debentures as indebtedness and the capital securities as evidence of an indirect beneficial ownership interest in the junior subordinated debentures.

Classification of the Trust

      Under current law and assuming full compliance with the terms of the trust agreement, certain other documents and certain factual matters, the trust shall be classified for Puerto Rico income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for Puerto Rico income tax purposes, each beneficial owner of the capital securities (“Securityholder”) will be treated as owning an undivided beneficial interest in the junior subordinated debentures, and such Securityholder will be required to include in its gross income its pro rata share of the interest accrued or received on the junior subordinated debentures at the time such interest is accrued or is received by the trust, in accordance with such Securityholder’s method of accounting.

Market Discount and Acquisition Premium

      Securityholders other than a Securityholder who purchased the capital securities upon original issuance or who purchased for a price other than the initial public offering price may be considered to have acquired their undivided interests in the junior subordinated debentures with “market discount” or “acquisition premium” as these phrases have been defined for income tax purposes. Such Securityholders are advised to consult their tax advisors as to the income tax consequences of the acquisition, ownership and disposition of the capital securities.

Taxation of Interest on the Junior Subordinated Debentures

     General

      A Securityholder using the accrual method of accounting to determine its taxable income will be required to recognize as interest income its proportionate share of the interest income accrued on the junior subordinated debentures, including interest accrued during the period during which Popular may have exercised the option to defer any payment of interest on the junior subordinated debentures. For these purposes, interest will be deemed to accrue on the basis established in the junior subordinated debentures. The subsequent receipt of payments of interest previously accrued shall not constitute taxable income when received by such accrual basis Securityholder.

      A Securityholder using the cash basis method of accounting to determine its taxable income will be required to recognize as interest income its proportionate share of the interest income on the junior

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subordinated debentures at the time such interest is received by the trust. Accordingly, if Popular exercises the option to defer the payment of interest on the junior subordinated debentures, a cash basis Securityholder will not have to recognize the accrued interest as income during the deferral period.

      The discussion below regarding the income taxation of interest on the junior subordinated debentures received by individuals not residents of Puerto Rico (except United States citizens not residents of Puerto Rico) and foreign corporations not engaged in a trade or business in Puerto Rico assumes that interest will constitute income from sources within Puerto Rico. Generally, for Puerto Rico income tax purposes, the interest paid or accrued on indebtedness issued by a Puerto Rico corporation such as Popular will constitute income from sources within Puerto Rico unless the corporation derives less than 20% of its gross income from sources within Puerto Rico for the three taxable years preceding the year the payment of the interest. Popular has represented that it has derived more than 20% of its gross income from Puerto Rico sources on an annual basis since its incorporation in 1984. In the case of a United States citizen not resident of Puerto Rico, interest on the junior subordinated debentures is not deemed to be from sources within Puerto Rico.

      Moreover, the discussion below assumes that Popular will use the proceeds from the issuance of the junior subordinated debentures solely in its Puerto Rico trade or business within a period no longer than twenty four (24) months from the date of issuance of the junior subordinated debentures and that it will notify the Secretary of the Puerto Rico Treasury Department the investments made during the ninety (90) day period following the twenty four (24) months after the date of issuance of the junior subordinated debentures, or of having made the totality of the investment, whichever comes first. Popular has represented that it intends to comply with the investment and notice requirements referred to herein.

     Individual Residents of Puerto Rico and Puerto Rico Corporations

      In general, Securityholders who are Puerto Rico resident individuals or that are Puerto Rico corporations will be eligible to be taxed in Puerto Rico on their proportionate share of the interest income received by the trust on the junior subordinated debentures at a preferential income tax rate of 10%. In order to be entitled to such 10% preferential income tax rate, the Puerto Rico resident individual or the Puerto Rico corporation is generally required to file an election with Popular and Popular is required to withhold at source such 10% preferential income tax. By purchasing the capital securities, a holder who is otherwise subject to tax in Puerto Rico on its proportionate share of the interest income received or accrued on the junior subordinated debentures will be irrevocably making the election for the 10% preferential income tax to apply and agreeing that all interest income received by the trust on the junior subordinated debentures will be subject to the 10% Puerto Rico income tax withholding at source. Holders of the capital securities who are not otherwise subject to tax in Puerto Rico on their proportionate shares of the interest income received by the trust on the junior subordinated debentures will also be subject to the 10% Puerto Rico income tax withheld at source on such proportionate share unless they provide a written statement representing that they are not subject to tax in Puerto Rico on their proportionate share of the interest income on the junior subordinate debentures and that no withholding at source should be made on such interest income. See “— Special Withholding Tax Consideration” below.

      Upon filing their respective Puerto Rico income tax returns, the Puerto Rico resident individual or the Puerto Rico corporation may elect for the interest to be taxed at the normal income tax rates applicable to individuals or corporations on ordinary income, which may be up to 33% in the case of individuals and 39% in the case of Puerto Rico corporations. The 10% Puerto Rico income tax withheld at source is creditable against the normal tax so determined.

     United States Citizens not Residents of Puerto Rico

      Securityholders who are U.S. citizens not residents of Puerto Rico are not subject to Puerto Rico income or withholding taxation on their respective proportionate share of the interest income received or accrued by the trust on the junior subordinated debentures. Notwithstanding the above, a 10% Puerto Rico

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income tax withholding at source will be made by us unless the procedures described in “— Special Withholding Tax Considerations” below are followed.

     Individuals not Citizens of the United States and not Residents of Puerto Rico

      Securityholders who are individuals not citizens of the United States and not residents of Puerto Rico and who are not engaged in trade or business in Puerto Rico are not subject to Puerto Rico income or withholding taxation on their respective proportionate share of the interest income received or accrued on the junior subordinated debentures, provided such holders, individually, do not own, directly or indirectly, 50% or more of the value of all issued and outstanding shares of stock of Popular. Notwithstanding the above, a 10% Puerto Rico income tax withholding at source will be made by us unless the procedures described in “— Special Withholding Tax Considerations” below are followed.

     Foreign Corporations

      The Puerto Rico income taxation of interest income received or accrued on the junior subordinated debentures by a foreign corporation will depend upon whether or not the corporation is engaged in trade or business in Puerto Rico.

      A foreign corporation that is not engaged in trade or business in Puerto Rico is not subject to Puerto Rico income or withholding taxation on its proportionate share of the interest income received or accrued on the junior subordinated debentures, provided such holder, individually, does not own, directly or indirectly, 50% or more of the value of all issued and outstanding shares of stock of Popular, and provided Popular does not own, directly or indirectly, 50% or more of the value of all issued and outstanding shares of stock of said foreign corporation. Notwithstanding the above, a 10% Puerto Rico income tax withholding at source will be made by us unless the procedures described in “— Special Withholding Tax Considerations” below are followed.

      A foreign corporation that is engaged in trade or business in Puerto Rico will be subject to Puerto Rico corporate income tax at the 10% preferential income tax rate on its proportionate share of the interest income received or accrued by the trust on the junior subordinated debentures in the same manner and terms applicable to Puerto Rico corporations. In general, foreign corporations that are engaged in trade or business in Puerto Rico are also subject to a 10% branch profit tax.

     Partnerships

      Partnerships are generally taxed in the same manner as corporations. Accordingly, the preceding discussion with respect to Puerto Rico and foreign corporations is equally applicable in the case of most Puerto Rico and foreign partnerships, respectively.

Special Withholding Tax Considerations

      Because the capital securities are being issued in global form through the book-entry system of DTC, a 10% Puerto Rico tax will be withheld at source to all Securityholders unless your broker or other direct or indirect participant of DTC that maintains your position in the capital securities certifies to us through DTC that you are not subject to the 10% Puerto Rico withholding tax.

Distribution of Junior Subordinated Debentures

      Under the circumstances described in “— Description of Capital Securities — Liquidation Distribution upon Dissolution” the junior subordinated debentures will be distributed to holders of the capital securities upon the liquidation and dissolution of the trust. Under current Puerto Rico law and based on the provisions of the Ruling, a distribution by the trust of the junior subordinated debentures to a Securityholder upon termination of the trust and in exchange and cancellation of the capital securities will not be a taxable event to the trust or the Securityholder and will result in the Securityholder receiving directly a pro rata share of the junior subordinated debentures previously held indirectly through the

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capital securities, with the holding period and the tax basis of such junior subordinated debentures to be equal to the holding period and the tax basis that such Securityholder had in the capital securities before such distribution.

      If, however, the liquidation and dissolution of the trust were to occur because the trust is treated as an association taxable as a corporation, the distribution would likely constitute a taxable event to the trust and to each Securityholder, and each Securityholder would recognize gain or loss as if the Securityholder had exchanged the capital securities for the junior subordinated debentures received by him upon the liquidation of the trust. Such gain or loss will generally be determined and be subject to Puerto Rico income taxation in the manner described below under “— Taxation of Sales, Exchanges or Redemption of Capital Securities.” As described above under “— Classification of the Trust,” under current law and assuming full compliance with the terms of the trust agreement, certain other documents and certain factual matters, the trust should be classified for Puerto Rico income tax purposes as a grantor trust and not as an association taxable as a corporation.

Taxation of Sales, Exchanges or Redemptions of Capital Securities

     General

      Subject to the discussion under “Distribution of Junior Subordinated Debentures” above, the sale, exchange or redemption of the capital securities will generally give rise to gain or loss equal to the difference between the amount realized on the sale, exchange or redemption and the adjusted tax basis of the capital securities in the hands of the holder. The gain required to be recognized on the sale, exchange or redemption of the capital securities will be considered ordinary income up to the amount of interest accrued on the junior subordinated debentures to the date of disposition to the extent such interest has not been previously recognized as income while the holder was the owner of the capital securities, with the excess being recognized as a capital gain if the capital securities (and the corresponding junior subordinated debentures) represent a capital asset in the hands of the holder. Such capital gain will be a long-term capital gain or loss if the holders’ holding period of the capital securities exceeds six months. The deductibility of capital losses is subject to limitations under the PR Code.

     Individual Residents of Puerto Rico and Puerto Rico Corporations

      Any gain on the sale, exchange or redemption of the capital securities by an individual resident of Puerto Rico or a Puerto Rico corporation will generally be required to be recognized as gross income and will be subject to income tax. The part of the gain constituting capital gain will be considered a gain on the sale or exchange of property located in Puerto Rico, eligible to be taxed in Puerto Rico at a maximum 10% tax rate in the case of Puerto Rico resident individuals or a 12.5% tax rate in the case of Puerto Rico corporations if the Securityholder’s holding period exceeds six months. The maximum 10% tax rate is reduced to 5% if the gain is realized between July 1, 2004 and June 30, 2005 and the individual reinvests the net gain in certain eligible assets in Puerto Rico for a period of at least one (1) year. In the case of Puerto Rico corporations, the maximum 12.5% rate is reduced to 6.25% if the gain is realized between July 1, 2004 and June 30, 2005.

      The part of the gain constituting ordinary income and representing the interest accrued on the junior subordinated debentures to the date of disposition (to the extent such interest has not been previously recognized by the Securityholder) will be considered interest and will be taxed at the regular income tax rates applicable to the Securityholder, which may be up to 33% for Puerto Rico resident individuals and 39% in the case of Puerto Rico corporations.

     United States Citizens not Residents of Puerto Rico

      A United States citizen who is not a resident of Puerto Rico will not be subject to Puerto Rico income tax on such part of the gain realized on the sale, exchange or redemption of the capital securities that constitutes capital gain if the gain resulting therefrom constitutes income from sources outside Puerto Rico. Generally, the capital gain realized on the sale or exchange of the capital securities will be

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considered to be income from sources outside Puerto Rico if all rights, title and interest in or to the capital securities are transferred outside Puerto Rico, and if the delivery or surrender of the instruments that evidence the capital securities is made to an office of a paying or exchange agent located outside Puerto Rico. If the capital gain resulting from the sale, exchange or redemption constitutes income from sources within Puerto Rico, it will be subject to a tax at a maximum rate of 10% if the gain constitutes a long-term capital gain. The maximum 10% tax rate is reduced to 5% if the gain is realized between July 1, 2004 and June 30, 2005 and the individual reinvests the net gain in certain eligible assets in Puerto Rico for a period of at least one (1) year.

     Individuals not Citizens of the United States and not Residents of Puerto Rico

      An individual who is not a citizen of the United States and who is not a resident of Puerto Rico will be subject to the rules described above under “— United States Citizens not Residents of Puerto Rico.” However, if the capital gain resulting from the sale, exchange or redemption of the capital securities constitutes income from sources within Puerto Rico, the individual will generally be subject to tax on this gain at a fixed rate of 29%. The part of the gain that represents interest should not be subject to Puerto Rico income or withholding taxation, provided such holder does not own, directly or indirectly, 50% or more of the value of all issued and outstanding shares of stock of Popular.

     Foreign Corporations

      A Securityholder which is a foreign corporation that is engaged in a trade or business in Puerto Rico will generally be subject to Puerto Rico corporate income tax on any part of the gain realized on the sale, exchange or redemption of the capital securities that constitutes capital gain if the gain is (1) from sources within Puerto Rico, or (2) from sources outside Puerto Rico and effectively connected with a trade or business in Puerto Rico. Such capital gain will qualify for an alternative tax of 12.5% if it qualifies as a long-term capital gain. The 12.5% rate is reduced to 6.25% if the gain is realized between July 1, 2004 and June 30, 2005. The part of the gain that represents interest will be taxed at the regular income tax rates applicable to corporations, which may be up to 39%.

      In general, a Securityholder which is a corporation that is engaged in a trade or business in Puerto Rico will also be subject to a 10% branch profits tax. In the computation of this tax, any gain realized by these corporations on the sale, exchange or redemption of the capital securities and that is subject to Puerto Rico income tax will be taken into account. However, a deduction will be allowed in the computation for any income tax paid on such gain.

      A Securityholder which is a foreign corporation that is not engaged in a trade or business in Puerto Rico will generally be subject to a corporate income tax rate of 29% on any capital gain realized on the sale, exchange or redemption of the capital securities if the gain is from sources within Puerto Rico. In the case of such foreign corporation, no Puerto Rico income tax will be imposed if the gain constitutes income from sources outside Puerto Rico. Gain on the sale, exchange or redemption of the capital securities will generally not be considered to be from sources within Puerto Rico if all rights, title and interest in or to the capital securities are transferred outside Puerto Rico, and if the delivery or surrender of the instruments that evidence the capital securities is made to an office of a paying or exchange agent located outside Puerto Rico. The part of the gain realized on the sale, exchange or redemption of the capital securities by a foreign corporation not engaged in trade or business in Puerto Rico that represents interest should not be subject to Puerto Rico income or withholding taxation, provided such holder does not own, directly or indirectly, 50% or more of the value of all issued and outstanding shares of stock of Popular and provided Popular does not own, directly or indirectly, 50% or more of the value of such holder’s stock.

     Partnerships

      Partnerships are generally taxed as corporations. Accordingly, the discussion with respect to Puerto Rico and foreign corporations is equally applicable to most Puerto Rico and foreign partnerships, respectively.

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Estate And Gift Taxation

      The transfer of the capital securities by inheritance by an individual who is a resident of Puerto Rico at the time of his or her death will not be subject to estate tax if the individual is a citizen of the United States who acquired his or her citizenship solely by reason of birth or residence in Puerto Rico. The transfer of the capital securities by gift by an individual who is a resident of Puerto Rico at the time of the gift will not be subject to gift tax. Other individuals should consult their own tax advisors in order to determine the appropriate treatment for Puerto Rico estate and gift tax purposes of the transfer of the capital securities by death or gift.

Municipal License Taxation

      Individuals and corporations that are not engaged in a trade or business in Puerto Rico will not be subject to municipal license tax on interest paid on the capital securities or on any capital gain realized on the sale, exchange or redemption of the capital securities.

      Individuals, residents or nonresidents, and corporations or partnerships, Puerto Rico or foreign, that are engaged in a trade or business in Puerto Rico will generally be subject to municipal license tax on interest income paid or accrued on the capital securities and on the gain realized on the sale, exchange or redemption of the capital securities if the interest or gain are attributable to that trade or business. The municipal license tax is imposed on the volume of business of the taxpayer, and the tax rates range from a maximum of 1.5% for financial businesses to a maximum of 0.5% for other businesses.

Property Taxation

      The capital securities will not be subject to Puerto Rico property tax.

United States Taxation

      The following discussion is limited to the United States federal tax consequences of the ownership and disposition of the capital securities by U.S. Holders, as defined below, and corporations organized under the laws of Puerto Rico (Puerto Rico corporations) who purchase the capital securities upon initial issuance. The discussion does not cover all of the tax consequences that may be relevant to a holder in light of that person’s particular circumstances or to holders subject to special rules, such as entities that are treated as partnerships for federal income tax purposes, “Subchapter S corporations,” insurance companies, tax exempt entities, dealers in securities, financial institutions, real estate investment trusts, regulated investment companies, persons that hold the capital securities as part of a straddle, hedge or conversion transaction, persons subject to the alternative minimum tax, persons whose functional currency is not the U.S. dollar and persons that fall outside the definition of U.S. Holders provided below.

      As used herein, the term “U.S. Holder” means a beneficial owner of capital securities that does not own, directly, indirectly, constructively or by attribution, 10% or more of the voting stock of Popular and is, for United States federal income tax purposes:

      (i) an individual who is a citizen or resident of the United States;

      (ii) a corporation (or any other entity treated as a corporation) organized under the laws of the United States or any state thereof (including the District of Columbia);

      (iii) an estate the income of which is subject to United States federal income taxation regardless of its source; or

      (iv) a trust if (A) a court within the United States is able to exercise primary supervision over its administration and one or more persons described in (i), (ii) or (iii) above have the authority to control all substantial decisions of the trust; or (B) the trust was in existence on August 20, 1996 and validly elected to be treated as domestic trust.

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      The term “U.S. Holder” does not include individual Puerto Rico residents who are not citizens or residents of the United States nor does it include Puerto Rico corporations. As used herein, the term “Puerto Rico U.S. Holder” means an individual U.S. Holder who is a bona fide resident of Puerto Rico during the entire taxable year (or, in certain cases, a portion thereof).

Classification of the Junior Subordinated Debentures

      Based on the characteristics of the junior subordinated debentures described herein, under current law, and assuming full compliance with the terms of the trust agreement and certain other documents, the junior subordinated debentures should be classified for federal income tax purposes as our indebtedness and holders of the capital securities will be required to treat the junior subordinated debentures as indebtedness and the capital securities as evidence of an indirect beneficial ownership interest in the junior subordinated debentures. No assurance can be given, however, that this position will not be challenged by the United States Internal Revenue Service or, if challenged, that it will not be successful. The remainder of this federal tax discussion assumes that the junior subordinated debentures will be classified for United States federal income tax purposes as our indebtedness.

Classification of the Trust

      Under current law and assuming compliance with the terms of the trust agreement, certain other documents and certain factual matters the trust should be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for federal income tax purposes, each Securityholder will be treated as owning an undivided beneficial interest in the junior subordinated debentures, and such beneficial owner will be required to include in its gross income its pro rata share of the interest accrued or received on the junior subordinated debentures at the time such interest is accrued or is received by the trust, in accordance with such Securityholder’s method of accounting.

Market Discount and Acquisition Premium

      Securityholders other than Securityholders who purchased the capital securities upon original issuance or who purchased for a price other than the initial public offering price may be considered to have acquired their undivided interest in the junior subordinated debentures with “market discount” or “acquisition premium” as these phrases are defined for federal income tax purposes. Such Securityholders are advised to consult their tax advisors as to the income tax consequences of the acquisition, ownership and disposition of the capital securities.

Taxation of Interest and Original Issue Discount

     General

      Under applicable United States Treasury regulations, debt instruments such as the junior subordinated debentures which are issued at face value will not be considered issued with original issue discount (“OID”), even if their issuer can defer payment of interest, if the likelihood of any deferral is remote. As a result of terms and conditions of the junior subordinated debentures that prohibit dividend payments with respect to Popular’s capital stock if Popular elects to defer interest payments on the junior subordinated debentures, and the intention of Popular to continue to pay dividends on its common stock as it has done until now so as to not adversely affect the market of its common stock, Popular believes that the likelihood of it exercising its option to defer interest payments on the junior subordinated debentures is remote. Based on the foregoing, Popular believes that the junior subordinated debentures will not be considered to be issued with OID at the time of their original issuance and, accordingly, a Securityholder should include in gross income that holder’s allocable share of interest on the junior subordinated debentures at the time such interest is paid or accrued in accordance with the Securityholder’s regular accounting method. The following discussion assumes that unless and until Popular exercises its option to defer interest on the junior subordinated debentures, the junior subordinated debentures will not be treated as issued with OID.

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      If Popular exercises its option to defer any payment of interest on the junior subordinated debentures, the junior subordinated debentures will be treated as issued with OID at the time of such exercise, and all stated interest on the junior subordinated debentures will thereafter be treated as OID as long as the junior subordinated debentures remain outstanding. In that event, all of a Securityholder’s taxable interest income with respect to the junior subordinated debentures will be accounted for as OID on a constant yield method regardless of that Securityholder’s method of tax accounting, and actual distributions of stated interest would not be reported as taxable income. Consequently, a Securityholder will be required to include OID in gross income even though Popular would not make any actual cash payments during an interest payment deferral period.

      Under the current source of income rules of the Code, the interest payments or accruals (including original issue discount, if any) on the junior subordinated debentures will be considered Puerto Rico source income if the following conditions are met: (1) such interest is not treated as paid by a trade or business conducted by Popular outside of Puerto Rico, including for these purposes the United States, such determination to be made under Section 884(f)(1)(A) of the Code and the regulations thereunder; and (2) for the three year period ending with the close of Popular’s taxable year immediately preceding the payment of the interest on the junior subordinated debentures (or such part of such period as may be applicable), Popular either: (A) derived more than 20% of its gross income from sources within Puerto Rico; or (B) derived more than 20% of its gross income from the conduct of a trade or business in Puerto Rico, both tests determined under the provisions of Section 861(c)(1)(B) of the Code, which require, among other things, that the gross income received by Popular from a 50% owned subsidiary (determined in voting interest or value) will retain the source and character that such income had in the hands of the subsidiary.

      Popular believes that the interest payments on the notes will not be deemed to be paid by a trade or business outside Puerto Rico. Moreover, for the three year period ended December 31, 2003, approximately 99% of Popular’s gross income was derived from sources within Puerto Rico and approximately 100% of its gross income was derived from the conduct of a trade or business in Puerto Rico, both percentages determined by applying the rules established in Section 861(c)(1)(B) of the Code. Accordingly, interest payments on the junior subordinated debentures to be made by Popular during 2004 will be considered to be Puerto Rico source income for purposes of the Code. Interest payments on the junior subordinated debentures to be made by Popular for subsequent years will continue to be sourced in Puerto Rico for purposes of the Code so long as Popular continues to meet the requirements described above. However, there can be no assurance that Popular, or any legal successor to Popular, will be able to meet such requirements during the time that the junior subordinated debentures are outstanding, which can be as long as 30 years.

     U.S. Holders other than Puerto Rico U.S. Holders

      In general, interest paid or accrued on the junior subordinated debentures will be includable in the gross income of a U.S. Holder, other than a Puerto Rico U.S. Holder, as foreign source gross income, at the time such interest is accrued or received, in accordance with such Securityholder’s method of accounting.

      Under the United States Treasury regulations regarding the treatment of OID, if the possibility of Popular deferring payment of interest on the junior subordinated debentures is not remote at the time of issuance, the junior subordinated debentures will be treated as issued with OID and all stated interest on the junior subordinated debentures will be treated as OID for federal income tax purposes. If at the time of issuance the possibility of deferral is remote (such as it is considered to be in this case), but Popular subsequently exercises its option to defer payments of interest on the junior subordinated debentures, the junior subordinated debentures would be treated at that time as having been reissued with OID and all stated interest on the junior subordinated debentures would thereafter be treated as OID as long as the junior subordinated debentures remain outstanding. If the junior subordinated debentures are treated as issued or reissued with OID as indicated above, all of a U.S. Holder’s taxable interest income with respect to the junior subordinated debentures would be accounted for on an economic accrual basis regardless of

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the U.S. Holder’s method of tax accounting and actual cash distributions of stated interest would not be reported as taxable income. Consequently, a U.S. Holder of capital securities, other than Puerto Rico U.S. Holders, would be required to include OID in its gross income even if Popular does not make actual cash payments during the interest payment deferral period.

      Because income on the capital securities will constitute interest or OID, corporate U.S. Holders of the capital securities will not be entitled to a dividend received deduction with respect to any income recognized with respect to the capital securities. Furthermore, because income on the capital securities will constitute interest and not a dividend, such income will not qualify for the reduced rate of tax on dividends as provided by the Jobs and Growth Tax Relief Reconsideration Act of 2003 approved on May 28, 2003.

     Puerto Rico U.S. Holders

      Interest paid or accrued on the junior subordinated debentures to a Puerto Rico U.S. Holder will constitute gross income from sources within Puerto Rico, subject to the rules described above under “United States Taxation — Taxation of Interest and Original Issue Discount — General” above, will not be includable in the Puerto Rico U.S. Holder’s gross income subject to United States federal income taxation and will be exempt from United States federal income taxation. In addition, for United States federal income tax purposes, no deduction or credit will be allowed to the Puerto Rico U.S. Holder to the extent that such deduction or credit is allocable to or chargeable against amounts so excluded from the Puerto Rico U.S. Holder’s gross income.

     Puerto Rico Corporations

      In general and subject to the rules described above under “United States Taxation — Taxation of Interest and Original Issue Discount — General,” interest paid or accrued on the junior subordinated debentures to a Puerto Rico corporation will not, in the hands of the Puerto Rico corporation, be subject to United States income tax if the interest is not effectively connected with a United States trade or business of the Puerto Rico corporation and the Puerto Rico corporation is not treated as a domestic corporation for purposes of the Code. The Code provides special rules for Puerto Rico corporations that are “controlled foreign corporations,” “personal holding companies,” “foreign personal holding companies,” or “passive foreign investment companies.”

Taxation of Sales, Exchanges, or Redemptions of the Capital Securities

     U.S. Holders other than Puerto Rico U.S. Holders

      A U.S. Holder, other than a Puerto Rico U.S. Holder, that sells or exchanges the capital securities or completely redeems them for cash will generally recognize gain or loss equal to the difference between the amount realized on the sale, exchange or redemption of the capital securities and the U.S. Holder’s adjusted tax basis in the capital securities sold, exchanged or redeemed. A U.S. Holder’s adjusted tax basis in the capital securities generally will be its initial purchase price. If the junior subordinated debentures are deemed to be issued with OID as a result of Popular electing to defer interest payments, a U.S. Holder’s adjusted tax basis in the capital securities generally will be its initial purchase price, increased by OID previously includible in the U.S. Holder’s gross income to the date of disposition and decreased by distributions or other payments received on the capital securities since and including the date of the first deferral period. That gain or loss will generally be capital gain or loss, except to the extent any amount realized is treated as a payment of accrued interest with respect to that U.S. Holder’s ratable share of the junior subordinated debentures required to be included in income. The capital gain or loss that is recognized upon sale or redemption will also be long-term capital gain or loss if the capital securities have been held for more than one year. Long-term capital gains of non-corporate U.S. Holders, other than Puerto Rico U.S. Holders, are generally subject to reduced capital gain tax rates. The maximum tax for long-term capital gains realized by individual U.S. Holders generally is 15% through December 31, 2008.

      If Popular exercises its option to defer any amount of interest on the junior subordinated debentures, the capital securities may trade at a price that does not fully reflect the value of accrued but unpaid

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interest with respect to the underlying junior subordinated debentures. If that deferral occurs, and if the U.S. Holder disposes of the capital securities between record dates for payments of distributions, and consequently does not receive a distribution from the trust for the period prior to that disposition, the U.S. Holder will nevertheless be required:

•  to include as ordinary income accrued but unpaid interest on the junior subordinated debentures through the date of disposition; and

•  to add that amount to the U.S. Holder’s adjusted tax basis in the capital securities disposed of.

      The U.S. Holder would recognize a capital loss on the disposition of the capital securities to the extent the selling price, which may not fully reflect the value of accrued but unpaid interest, is less than the U.S. Holder’s adjusted tax basis in the capital securities, which will include accrued but unpaid interest. Capital losses cannot be applied to offset ordinary income for United States federal income tax purposes, except in a few limited cases.

     Puerto Rico U.S. Holders

      Pursuant to Notice 89-40 (“Notice 89-40”), issued by the United States Internal Revenue Service on March 27, 1989, the gain from the sale or exchange of the capital securities (excluding OID accrued under the Code as of the date of such sale or exchange), by a Puerto Rico U.S. Holder who is a bona fide resident of Puerto Rico for purposes of Section 865(g)(1) of the Code (1) will constitute income from sources within Puerto Rico, (2) will qualify for the exclusion from the Puerto Rico U.S. Holder’s gross income pursuant to Section 933 of the Code, and (3) will be exempt from United States federal income taxation provided that the capital securities do not constitute inventory in the hands of such Puerto Rico U.S. Holder. Also, no deduction or credit will be allowed that is allocable to or chargeable against amounts so excluded from the Puerto Rico U.S. Holder’s gross income.

     Puerto Rico Corporations

      In general, any gain derived by a Puerto Rico corporation from the sale or exchange of the capital securities will not, in the hands of the Puerto Rico corporation, be subject to United States income tax if the gain is not effectively connected with a United States trade or business of the Puerto Rico corporation and the Puerto Rico corporation is not treated as a domestic corporation for purposes of the Code. The Code provides special rules for Puerto Rico corporations that are “controlled foreign corporations,” “personal holding companies,” “foreign personal holding companies,” or “passive foreign investment companies.”

Distribution of Junior Subordinated Debentures

      Under current law, a distribution by the trust of the junior subordinated debentures as described under the caption “Description of the Capital Securities — Redemption” and “— Liquidation Distribution Upon Dissolution” will be non-taxable and will result in the Securityholder receiving directly its ratable share of the junior subordinated debentures previously held indirectly through the capital securities, with a holding period and aggregate tax basis equal to the holding period and aggregate tax basis that Securityholder had in the capital securities before that distribution.

      If, however, the liquidation of the trust were to occur because the trust is treated as an association taxable as a corporation, the distribution of junior subordinated debentures to Securityholders by the trust would be a taxable event to the trust and each Securityholder, and each Securityholder would recognize gain or loss as if the Securityholder had exchanged the capital securities for the junior subordinated debentures it received upon the liquidation of the trust and would take junior subordinated debentures with a new holding period. Such gain or loss will generally be determined and will be subject to federal income taxation in the manner described under “— Taxation of Sales, Exchanges, or Redemption of the Capital Securities.” As described above under “— Classification of the Trust,” under current law and assuming compliance with the terms of the trust agreement, certain other documents and certain factual matters, the

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trust should be classified for United States Federal income tax purposes as a grantor trust and not as an association taxable as a corporation.

     Information Reporting and Backup Withholding

      United States federal information reporting requirements will apply to interest on, and the proceeds of a sale, exchange or redemption of, the capital securities that are paid within the United States (and, in some cases, outside the United States) to U.S. Holders other than Puerto Rico U.S. Holders and certain exempt recipients (such as corporations). Backup withholding (currently at a rate of 28%) will apply to such reportable amounts if U.S. Holders fail to furnish a proper taxpayer identification number, to certify that such holders are not subject to backup withholding, or to otherwise comply with the applicable requirements of the backup withholding rules. Any amounts withheld under the backup withholding rules generally may be claimed as a credit against the U.S. Holder’s United States federal income tax liability and may entitle such U.S. Holder to a credit or refund provided that the required information is furnished to the United States Internal Revenue Service. U.S. Holders should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedure for obtaining any applicable exemption.

Estate and Gift Taxation

      The transfer of the capital securities by inheritance or gift by an individual who was a resident of Puerto Rico at the time of his or her death or at the time of the gift will not be subject to U.S. federal estate and gift tax if the individual was a citizen of the United States who acquired his or her citizenship solely by reason of birth or residence in Puerto Rico. Other individuals should consult their own tax advisors in order to determine the appropriate treatment for U.S. federal estate and gift tax purposes of the transfer of the capital securities by death or gift.

CERTAIN ERISA CONSIDERATIONS

      Each fiduciary of a pension, profit-sharing or other employee benefit plan to which Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”) applies or other arrangement that is subject to Title I of ERISA (a “Plan”), 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, the fiduciary 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.

      Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as individual retirement accounts and other plans to which Section 4975 of the Code applies (also “Plans”), from engaging in specified transactions involving “plan assets” with persons who are “parties in interest” under ERISA or “disqualified persons” under the Code (“Parties in Interest”) with respect to such Plan. A violation of those “prohibited transaction” rules may result in an excise tax under Section 4975 of the Code or other liabilities under ERISA for such persons, unless exemptive relief is available under an applicable statutory or administrative exemption.

      Employee benefit plans that are governmental plans, as defined in Section 3(32) of ERISA, certain church plans, as defined in Section 3(33) of ERISA, and foreign plans, as described in Section 4(b)(4) of ERISA, are not subject to the requirements of ERISA, or Section 4975 of the Code, but governmental and foreign plans may be subject to other legal restrictions.

      Under a regulation (the “Plan Assets 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 a Plan makes an “equity” investment in the trust and no exception were applicable under the Plan Assets Regulation. An “equity interest” is defined under the Plan Assets Regulation as any interest in an entity other than an instrument that is treated as indebtedness under

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applicable local law and which has no substantial equity features and specifically includes a beneficial interest in a trust.

      If the assets of the trust were deemed to be “plan assets,” the persons providing services to the assets of the trust may become Parties in Interest with respect to an investing Plan and may be governed by the fiduciary responsibility provisions of Title I of ERISA and the prohibited transaction provisions of ERISA and Section 4975 of the Code, as applicable, with respect to transactions involving those assets.

      In this regard, if the person or persons with discretionary responsibilities over the junior subordinated debentures or the guarantee were affiliated with Popular, any such discretionary actions taken regarding those assets could be deemed to constitute a prohibited transaction under ERISA or the Code (e.g., the use of such fiduciary authority or responsibility in circumstances under which those persons have interests that may conflict with the interests of the investing Plans and affect the exercise of their best judgement as fiduciaries).

      Under an exception contained in the Plan Assets Regulation, the assets of the trust would not be deemed to be “plan assets” of investing Plans if the capital securities are “publicly-offered securities” — that is, they are:

•  widely held, i.e., owned by more than 100 investors independent of the trust and of each other;

•  freely transferable; and

•  sold to a Plan as part of an offering pursuant to an effective registration statement under the Securities Act of 1933 (the “Securities Act”) and then timely registered under Section 12(b) or 12(g) of the Exchange Act.

      Popular expects that the capital securities will meet the criteria of “publicly-offered securities” above, although no assurance can be given in this regard. The underwriters expect that the capital securities will be held by at least 100 independent investors at the conclusion of the offering and that the capital securities will be freely transferable. The capital securities will be sold as part of an offering under an effective registration statement under the Securities Act, and then will be timely registered under the Exchange Act.

      All of the common securities will be purchased and held by Popular. Even if the assets of the trust are not deemed to be “plan assets” of Plans investing in the trust, specified transactions involving the trust could be deemed to constitute direct or indirect prohibited transactions under ERISA and Section 4975 of the Code regarding an investing Plan.

      For example, if Popular were a Party in Interest with respect to an investing Plan, either directly or by reason of the activities of one or more of its affiliates, sales of the capital securities by the trust to the Plan and or extensions of credit between Popular and the trust, as represented by the junior subordinated debentures and the guarantee, would likely be prohibited by Section 406(a)(1) of ERISA and Section 4975(c)(1) of the Code, unless exemptive relief were available under an applicable administrative exemption.

      The U.S. Department of Labor has issued five prohibited transaction class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting from the purchase or holding of the capital securities. Those class exemptions are:

•  PTCE 96-23, for specified transactions determined by in-house asset managers;

•  PTCE 95-60, for specified transactions involving insurance company general accounts;

•  PTCE 91-38, for specified transactions involving bank collective investment funds;

•  PTCE 90-1, for specified transactions involving insurance company separate accounts; and

•  PTCE 84-14, for specified transactions determined by independent qualified professional asset managers.

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      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 the purchaser or holder is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14, or the requirements of U.S. Department of Labor regulation Section 2550.401c-1 are satisfied such that the capital securities held by the purchaser or holder do not constitute plan assets.

      Any purchaser or holder of the capital securities or any interest in the capital securities will be deemed to have represented by its purchase and holding that it either:

•  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;

•  is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 with respect to such purchase or holding; or

•  has satisfied the requirements of U.S. Department of Labor regulation Section 2550.401c-1 such that the capital securities held by the purchaser or holder do not constitute plan assets.

      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.

      Purchasers of the capital securities have the exclusive responsibility for ensuring that their purchase and holding of the capital securities complies with the fiduciary responsibility rules of ERISA and does not violate the prohibited transaction rules of ERISA or the Code.

UNDERWRITERS

      Under the terms and subject to the conditions of an underwriting agreement dated as of the date of this prospectus supplement, Popular Securities, Inc. has agreed to purchase, and the trust has agreed to sell to Popular Securities, Inc., all capital securities offered pursuant to this prospectus supplement.

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

      Popular Securities, Inc. initially proposes 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 supplement. Popular Securities, Inc. may also offer the capital securities to securities dealers at a price that represents a concession not in excess of $      per capital security. Popular Securities, Inc. 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 Popular Securities, Inc..

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

	Per share	Total
Public offering price	$	$	100,000,000
Underwriting discounts and commissions(1)
Proceeds to the trust(1)	$	$	100,000,000

⁽¹⁾ Popular 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, the underwriting agreement provides that Popular will pay to Popular Securities, Inc. as compensation for its services $           per capital security, or $                    in the aggregate. Popular’s offering expenses, not including underwriting discounts and commissions, are estimated to be $                    .

      Popular and the trust have agreed that, without the prior written consent of Popular Securities, Inc., they will not, 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, or announce the offering of, any securities that are substantially similar to the capital securities and 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. Popular has applied to have the capital securities approved for quotation on the Nasdaq National Market under the symbol “BPOPM.” Trading of the capital securities on the Nasdaq National Market is expected to commence within 30 days after initial delivery of the capital securities. Popular Securities, Inc. has advised the trust that it presently intends to make a market in the capital securities prior to the commencement of trading on the Nasdaq National Market. Popular Securities, Inc. is 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 liquidity of any trading market for the capital securities.

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

      In order to facilitate the offering of the capital securities, Popular Securities, Inc. may engage in transactions that stabilize, maintain or otherwise affect the price of the capital securities. Specifically, Popular Securities, Inc. may over-allot in connection with the offering, creating a short position in the capital securities for its own account. Popular Securities, Inc. can close out a short position by purchasing capital securities in the open market. As an additional means of facilitating the offering of capital securities, Popular Securities, Inc. may bid for and purchase these capital securities in the open market to stabilize the price of these capital securities. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the capital securities in the offering, if the syndicate repurchases previously distributed capital securities in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the capital securities above independent market levels or prevent or retard a decline in the market price of the capital securities. Popular Securities, Inc. is not required to engage in these activities, and may end any of these activities at any time.

      Popular Securities, Inc. 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 supplement or the accompanying 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

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subject or in which it makes purchases, offers, sales or deliveries. Neither the trust nor Popular have any responsibility for a Popular Securities, Inc.’s compliance with applicable securities laws.

      Popular Securities, Inc., is an affiliate of Popular and the trust. Therefore, sales of the capital securities will comply with Rule 2720 of the Conduct Rules of the NASD.

      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, Popular Securities, Inc. 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.

      Popular Securities, Inc. 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.

      Popular Securities, Inc. engages in various general financing and banking transactions with Popular and its affiliates in the ordinary course of business.

LEGAL OPINIONS

      The validity of the securities offered by this prospectus will be passed upon for Popular by Brunilda Santos de Alvarez, Esq., Executive Vice President and General Counsel, and by Pietrantoni Méndez & Alvarez LLP, San Juan, Puerto Rico. Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel for the trust, will pass upon certain legal matters for the trust. Certain legal matters will be passed upon for Popular Securities, Inc. by O’Neill & Borges, San Juan, Puerto Rico. As of the date of this prospectus, Brunilda Santos de Alvarez, Esq. owns, directly or indirectly, 17,998 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. As of such date, members of the firm of Pietrantoni Méndez & Alvarez LLP beneficially owned approximately 27,650 shares of Popular common stock and 1,000 shares of Popular preferred stock.

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CERTIFICATION OF STATUS AS NONTAXABLE HOLDER

      The undersigned hereby certifies that it is not subject to Puerto Rico income taxation on its proportionate share of the interest income received or accrued on the junior subordinated debentures and agrees that no Puerto Rico income tax withholding is to be made on interest payments on the junior subordinated debentures and the capital securities. The undersigned certifies that it is either a:

o US citizen not resident of Puerto Rico;

o Individual not citizen of the United States and not resident of Puerto Rico;

o Corporation organized outside Puerto Rico not engaged in trade or business in Puerto Rico; or

o Other tax exempt entity:                                               (specify)

Very truly yours,

By: 

Name:

Title:*

Company:*

* Applicable only to legal entities.

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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 November 10, 2004

PROSPECTUS

$300,000,000

POPULAR, INC.

Junior Subordinated Debt Securities

Popular Center Building

209 Muñoz Rivera Avenue

San Juan, Puerto Rico 00918

(787) 765-9800

POPULAR CAPITAL TRUST II

POPULAR CAPITAL TRUST III

POPULAR CAPITAL TRUST IV

Trust Preferred Securities

Fully and Unconditionally

Guaranteed by Popular, Inc.

Popular Center Building

209 Muñoz Rivera Avenue

San Juan, Puerto Rico 00918

(787) 765-9800

      When we offer securities, we will provide you with a prospectus supplement describing the terms of the securities offered. You should read this prospectus and the applicable prospectus supplement carefully before you invest.

      We or certain or our affiliates may use this prospectus and the applicable prospectus supplement for offers and sales related to market-making transactions in the securities.

      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.

      These securities are our unsecured obligations and are not savings accounts, deposits or other obligations of any bank or nonbank subsidiary of Popular, Inc. These securities are not insured by the Federal Deposit Insurance Corporation, the Bank Insurance Fund or any other governmental agency.

This prospectus is dated                , 2004.

ABOUT THIS PROSPECTUS

      This prospectus is part of a registration statement that Popular, Inc., or “Popular,” and Popular Capital Trust II, Popular Capital Trust III and Popular Capital Trust IV, or the “trusts,” filed with the Securities and Exchange Commission using a “shelf” registration process. Under this shelf process, the trusts may sell trust preferred securities representing undivided beneficial interests in the trusts to the public and common securities representing undivided beneficial interests in the trusts to us in one or more offerings.

      This prospectus provides you with a general description of the trust preferred securities that a trust may issue and the junior subordinated debt securities and trust preferred securities guarantees that we may issue. Each time we or a trust sell securities, we and the trust will provide a prospectus supplement that will contain specific information about the terms of that offering. Such prospectus supplement may also add, update or change information contained in this prospectus. You should read this prospectus and the applicable prospectus supplement together with the additional information described under the heading “Where You Can Find More Information.”

      The registration statement that contains this prospectus, including the exhibits to the registration statement, contains additional information about us and the trusts and the securities offered under this prospectus. That registration statement can be read at the Securities and Exchange Commission, or “SEC,” web site or at the SEC offices mentioned under the heading “Where You Can Find More Information.”

WHERE YOU CAN FIND MORE INFORMATION

      We file annual, quarterly and special reports, proxy statements and other information with the SEC. Our 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 we file 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 we file 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 we file 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 we make 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 a 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:

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

•  Quarterly Reports on Form 10-Q for the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004; and

•  Current Reports on Form 8-K filed with the SEC on January 20, 2004, March 19, 2004, April 6, 2004, April 16, 2004, April 29, 2004, May 13, 2004, July 2, 2004, July 16, 2004, July 29, 2004, August 20, 2004, September 3, 2004, October 19, 2004 and November 1, 2004.

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      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. The information in our website is not incorporated by reference into this prospectus.

      You should rely only on the information incorporated by reference or presented in this prospectus or the applicable prospectus supplement. Neither we nor the trusts, nor any underwriters or agents, have authorized anyone else to provide you with different information. Popular and the trusts may only use this prospectus to sell securities if it is accompanied by a prospectus supplement. Popular and the trusts are only offering these securities in states where the offer is permitted. You should not assume that the information in this prospectus or the applicable prospectus supplement is accurate as of any date other than the dates on the front of those documents.

POPULAR, INC.

      Popular is a diversified, financial services company and the largest locally based financial institution in Puerto Rico. We were incorporated in 1984 under the laws of the Commonwealth of Puerto Rico. We are 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 are subject to supervision and regulation by the Board of Governors of the Federal Reserve System. As a diversified financial services institution, we own subsidiaries engaged in banking and a variety of financial services. Our 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. Our principal subsidiary, Banco Popular de Puerto Rico, was incorporated in 1893 and is Puerto Rico’s largest bank.

      We are a separate and distinct legal entity from our banking and other subsidiaries. Our principal source of funds to pay our obligations including service on our debt 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 209 Muñoz Rivera Avenue, Hato Rey, Puerto Rico 00918, and our telephone number is (787) 765-9800.

      When we refer to “Popular,” “we,” “our” and “us” in this prospectus under the headings “Popular, Inc.” and “Ratios of Earnings to Fixed Charges and to Fixed Charges and Preferred Stock Dividends,” we mean Popular, Inc. and its subsidiaries unless the context indicates otherwise. When such terms are used elsewhere in this prospectus, we refer only to Popular, Inc. unless the context indicates otherwise.

THE TRUSTS

      Each trust is a statutory trust formed under Delaware law pursuant to a declaration of trust and trust agreement, signed by Popular, as depositor of the trust, and the property trustee, the Delaware trustee and the administrative trustees, each as defined below, and a certificate of trust filed with the Delaware Secretary of State. The declaration of trust and trust agreement of the applicable trust will be amended and restated in its entirety before the issuance of trust preferred securities by such trust. We will refer to such declaration of trust and trust agreement, as so amended and restated, as the “trust agreement.” Each trust agreement will be qualified as an indenture under the Trust Indenture Act of 1939.

      Each trust exists for the exclusive purposes of:

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

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•  investing the gross proceeds of the trust preferred securities and the common securities in an equivalent amount of junior subordinated debt securities; and

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

      All of the common securities of the trusts will be directly or indirectly owned by us. The common securities of a trust rank equally with the trust preferred securities of such trust and a trust will make payment on its trust securities pro rata, except that upon certain events of default under the applicable trust agreement relating to payment defaults on the junior subordinated debt securities, 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 trust preferred securities. We will acquire common securities of a trust in an aggregate liquidation amount equal to at least three percent of the total capital of such trust.

      Each trust’s business and affairs will be conducted by its trustees, each appointed by Popular as depositor of such 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, 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 each trust agreement for purposes of compliance with the Trust Indenture Act and will also act as trustee under the guarantees. See “Description of Guarantees.”

      Unless an event of 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 trust preferred securities of such trust will be entitled to appoint, remove or replace the property trustee and the Delaware trustee for cause or if an event of 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 trust preferred securities have such right.

      No separate financial statements of the trusts are included in this prospectus. Popular and the trusts do not consider that such financial statements would be material to holders of trust preferred securities because the trusts are special purpose entities, have no operating histories or independent operations and are not engaged in and do not propose to engage in any activity other than holding as trust assets the junior subordinated debt securities of Popular and issuing the trust securities. Furthermore, taken together, Popular’s obligations under the junior subordinated debt securities, the junior subordinated indenture pursuant to which the junior subordinated debt securities will be issued, the related trust agreement and the guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of distributions and other amounts due on the trust preferred securities of each trust. For a more detailed discussion see “Description of Trust Preferred Securities,” “Description of Junior Subordinated Debt Securities — Correspondence Between Junior Subordinated Debt Securities and Trust Preferred Securities” and “Description of Guarantees.” In addition, we do not expect that the trusts will be filing reports with the SEC under the Securities Exchange Act of 1934.

      Unless otherwise specified in the applicable prospectus supplement, each trust has a term of approximately 30 years, but may be terminated earlier as provided in the applicable trust agreement.

      Popular will pay all fees and expenses related to the trusts and the offering of trust securities.

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

USE OF PROCEEDS

      Each trust will use the proceeds from the sale of its trust preferred securities and its common securities to acquire junior subordinated debt securities from Popular. Unless the applicable prospectus

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supplement states otherwise, the net proceeds from the sale of the junior subordinated debt securities will be added to our general funds and will be available for general corporate purposes, including investments in, or extensions of credit to, existing and future subsidiaries.

We do not at present have any plans to use proceeds from any offering for a material acquisition or to repay outstanding borrowings. Until the net proceeds have been used, they will be invested in marketable securities.

RATIOS OF EARNINGS TO FIXED CHARGES AND TO FIXED CHARGES

AND PREFERRED STOCK DIVIDENDS

      The ratios shown below measure Popular’s ability to generate sufficient earnings to pay the fixed charges or expenses of its debt and dividends on its preferred stock.

Nine Months Ended

September 30

Fiscal Year Ended December 31,

2004

2003

2002

2001

2000

1999

Ratio of Earnings to Fixed Charges:

Excluding interest on deposits

2.3x

2.4x

2.0x

1.8x

1.6x

1.7x

Including interest on deposits

1.8x

1.8x

1.5x

1.4x

1.3x

1.4x

Ratio of Earnings to Fixed Charges and Preferred Stock Dividends:

Excluding interest on deposits

2.2x

2.3x

2.0x

1.7x

1.5x

1.7x

Including interest on deposits

1.7x

1.8x

1.5x

1.4x

1.3x

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.

DESCRIPTION OF JUNIOR SUBORDINATED DEBT SECURITIES

      This section describes the general terms and provisions of our junior subordinated debt securities. The applicable prospectus supplement will describe the terms of the series of junior subordinated debt securities, which are sometimes referred to in this prospectus as “debt securities,” offered through that prospectus supplement and any general terms outlined in this section that will not apply to those debt securities. Unless otherwise stated in the applicable prospectus supplement, the junior subordinated debt securities will be issued under a junior subordinated indenture, which is sometimes referred to in this prospectus as an “indenture,” dated as of October 31, 2003 between us and J.P. Morgan Trust Company, National Association (formerly Bank One Trust Company, N.A.), as junior subordinated trustee.

      We have summarized the material terms and provisions of the junior subordinated indenture in this section. We have also incorporated by reference the junior subordinated indenture as an exhibit to the registration statement. You should read the junior subordinated indenture for additional information before you purchase any trust preferred securities. The summary that follows includes references to section numbers of the junior subordinated indenture so that you can more easily locate these provisions.

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General

      The junior subordinated debt securities will be our direct unsecured obligations. The junior subordinated indenture does not limit the principal amount of junior subordinated debt securities that we may issue. The junior subordinated indenture permits us to issue junior subordinated debt securities from time to time and junior subordinated debt securities issued under such indenture will be issued as part of a series that has been established by us under such indenture. (Section 301)

      The junior subordinated debt securities will be unsecured and will rank equally with all of our other junior subordinated debt securities and, together with such other junior subordinated debt securities, will be subordinated to all of our existing and future Senior Debt. See “— Subordination” below.

      The junior subordinated debt securities are our unsecured junior subordinated debt securities, but our assets consist primarily of equity in our subsidiaries. As a result, our ability to make payments on our junior subordinated debt securities 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 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 a direct creditor of that subsidiary. This subordination of creditors of a parent company to prior claims of creditors of its subsidiaries is commonly referred to as structural subordination.

      A prospectus supplement relating to a series of junior subordinated debt securities being offered will include specific terms relating to the offering. (Section 301) These terms will include some or all of the following:

•  the title and type of the debt securities;

•  any limit on the total principal amount of the debt securities of that series;

•  the price at which the debt securities will be issued;

•  the date or dates on which the principal of and any premium on the debt securities will be payable;

•  the maturity date or dates of the debt securities or the method by which those dates can be determined;

•  if the debt securities will bear interest:

•  the interest rate on the debt securities or the method by which the interest rate may be determined;

•  the date from which interest will accrue;

•  the record and interest payment dates for the debt securities;

•  the first interest payment date; and

•  any circumstances under which we may defer interest payments;

•  the place or places where:

•  we can make payments on the debt securities;

•  the debt securities can be surrendered for registration of transfer or exchange; and

•  notices and demands can be given to us relating to the debt securities and under the indenture;

•  any optional redemption provisions that would permit us or the holders of debt securities to elect redemption of the debt securities before their final maturity;

•  any sinking fund provisions that would obligate us to redeem the debt securities before their final maturity;

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•  whether the debt securities will be convertible into shares of common stock, shares of preferred stock or depositary shares and, if so, the terms and conditions of any such conversion, and, if convertible into shares of preferred stock or depositary shares, the terms of such preferred stock or depositary shares;

•  if the debt securities will be issued in bearer form, the terms and provisions contained in the bearer securities and in the indenture specifically relating to the bearer securities;

•  the currency or currencies in which the debt securities will be denominated and payable, if other than U.S. dollars and, if a composite currency, any special provisions relating thereto;

•  any circumstances under which the debt securities may be paid in a currency other than the currency in which the debt securities are denominated and any provisions relating thereto;

•  whether the provisions described below under the heading “— Defeasance” apply to the debt securities;

•  any events of default which will apply to the debt securities in addition to those contained in the indenture and any events of default contained in the indenture which will not apply to the debt securities;

•  any additions or changes to or deletions of the covenants contained in the indenture and the ability, if any, of the holders to waive our compliance with those additional or changed covenants;

•  whether all or part of the debt securities will be issued in whole or in part as temporary or permanent global securities and, if so, the depositary for those global securities and a description of any book-entry procedures relating to the global securities — a “global security” is a debt security that we issue in accordance with the junior subordinated indenture to represent all or part of a series of debt securities;

•  if we issue temporary global securities, any special provisions dealing with the payment of interest and any terms relating to the ability to exchange interests in a temporary global security for interests in a permanent global security or for definitive debt securities;

•  the identity of the security registrar and paying agent for the debt securities if other than the junior subordinated trustee;

•  any special tax implications of the debt securities;

•  any special provisions relating to the payment of any additional amounts on the debt securities;

•  the terms of any securities being offered together with or separately from the debt securities;

•  the terms and conditions of any obligation or right of Popular or a holder to convert or exchange the debt securities into trust preferred securities or other securities; and

•  any other terms of the debt securities.

      When we use the term “holder” in this prospectus with respect to a registered debt security, we mean the person in whose name such debt security is registered in the security register. (Section 101)

Additional Sums

      If a trust is required to pay any taxes, duties, assessments or governmental charges of whatever nature, other than withholding taxes, imposed by the United States, any political subdivision thereof or Puerto Rico or any other taxing authority of the United States or Puerto Rico, then we will be required to pay additional sums on the related junior subordinated debt securities. The amount of any additional sum will be an amount sufficient so that the net amounts received and retained by such trust after paying any such taxes, duties, assessments or other governmental charges will be not less than the amounts that such trust would have received had no such taxes, duties, assessments or other governmental charges been

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imposed. This means that the trust will be in the same position it would have been in if it did not have to pay such taxes, duties, assessments or other charges. (Section 1007)

Payment; Exchange; Transfer

      We will designate a place of payment where holders can receive payment of the principal of and any premium and interest on the junior subordinated debt securities. Even though we will designate a place of payment, we may elect to pay any interest on the junior subordinated debt securities by mailing a check to the person listed as the owner of the junior subordinated debt securities in the security register or by wire transfer to an account designated by that person in writing not less than ten days before the date of the interest payment. Unless we state otherwise in the applicable prospectus supplement, we will pay interest on a junior subordinated debt security:

•  on an interest payment date, to the person in whose name that junior subordinated debt security is registered at the close of business on the record date relating to that interest payment date; and

•  on the date of maturity or earlier redemption or repayment, to the person who surrenders such debt security at the office of our appointed paying agent. (Sections 307, 1002)

      Any money that we pay to a paying agent for the purpose of making payments on the junior subordinated debt securities and that remains unclaimed two years after the payments were due will, at our request, be returned to us and after that time any holder of such debt security can only look to us for the payments on such debt security. (Section 1003)

      Any junior subordinated debt securities of a series can be exchanged for other junior subordinated debt securities of that series so long as such other debt securities are denominated in authorized denominations and have the same aggregate principal amount and same terms as the junior subordinated debt securities that were surrendered for exchange. The junior subordinated debt securities may be presented for registration of transfer, duly endorsed or accompanied by a satisfactory written instrument of transfer, at the office or agency maintained by us for that purpose in a place of payment. There will be no service charge for any registration of transfer or exchange of the junior subordinated debt securities, but we may require holders to pay any tax or other governmental charge payable in connection with a transfer or exchange of the junior subordinated debt securities. (Sections 305, 1002) If the applicable prospectus supplement refers to any office or agency, in addition to the security registrar, initially designated by us where holders can surrender the junior subordinated debt securities for registration of transfer or exchange, we may at any time rescind the designation of any such office or agency or approve a change in the location. However, we will be required to maintain an office or agency in each place of payment for that series. (Section 1002)

      In the event of any redemption, neither we nor the junior subordinated trustee will be required to:

•  issue, register the transfer of, or exchange, junior subordinated debt securities of any series during a period beginning at the opening of business 15 days before the day of publication or mailing of the notice of redemption and ending at the close of business on the day of such publication or the mailing of such notice; or

•  transfer or exchange any junior subordinated debt securities so selected for redemption, except, in the case of any junior subordinated debt securities being redeemed in part, any portion thereof not to be redeemed. (Section 305)

Denominations

      Unless we state otherwise in the applicable prospectus supplement, the junior subordinated debt securities will be issued only in registered form, without coupons, in denominations of $1,000 each or multiples of $1,000.

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Bearer Debt Securities

      If we ever issue bearer debt securities, the applicable prospectus supplement will describe all of the special terms and provisions of junior subordinated debt securities in bearer form, and the extent to which those special terms and provisions are different from the terms and provisions which are described in this prospectus, which generally apply to junior subordinated debt securities in registered form, and will summarize provisions of the junior subordinated indenture that relate specifically to bearer debt securities.

Original Issue Discount

      Junior subordinated debt securities may be issued under the junior subordinated indenture as original issue discount securities and sold at a substantial discount below their stated principal amount. If a junior subordinated debt security is an original issue discount security, that means that an amount less than the principal amount of such debt security will be due and payable upon a declaration of acceleration of the maturity of such debt security under the junior subordinated indenture. (Section 101) The applicable prospectus supplement will describe the Puerto Rico income tax consequences and other special factors you should consider before purchasing any original issue discount securities.

Option to Defer Interest Payments

      If provided in the applicable prospectus supplement, we will have the right from time to time to defer payment of interest on a series of junior subordinated debt securities for up to such number of consecutive interest payment periods as may be specified in the applicable prospectus supplement, subject to the terms, conditions and covenants, if any, specified in such prospectus supplement. Such deferral, however, may not extend beyond the stated maturity of such junior subordinated debt securities. (Section 313) Certain Puerto Rico and United States federal income tax consequences and special considerations applicable to any such debt securities will be described in the applicable prospectus supplement.

Redemption

      Unless otherwise specified in the applicable prospectus supplement, the junior subordinated debt securities will not be subject to any sinking fund and will not be redeemable at the option of the holder.

      Unless otherwise specified in the applicable prospectus supplement, we may, at our option and subject to receipt of prior approval by the Federal Reserve or its district reserve bank (the “Federal Reserve”), if required, redeem the junior subordinated debt securities of any series in whole at any time or in part from time to time. If the junior subordinated debt securities of any series are redeemable only on or after a specified date or upon the satisfaction of additional conditions, the applicable prospectus supplement will specify such date or describe such conditions. Except as otherwise specified in the applicable prospectus supplement, the redemption price for any junior subordinated debt security so redeemed will equal 100% of the principal amount of such junior subordinated debt security plus accrued and unpaid interest to the redemption date.

      Except as otherwise specified in the applicable prospectus supplement, we may, at our option and subject to receipt of prior approval by the Federal Reserve, if required, redeem a series of junior subordinated debt securities in whole, but not in part, at any time within 90 days after the occurrence of a tax event, investment company event or capital treatment event, each as defined below, at a redemption price equal to 100% of the principal amount of such junior subordinated debt securities then outstanding plus accrued and unpaid interest to the redemption date. (Section 1108)

      “Tax Event” means the receipt by a trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to, or change in, including any announced proposed change in, the laws or regulations of the United States, any political subdivision thereof or Puerto Rico, or any 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 proposed change, pronouncement or decision is announced on or after the date of the prospectus

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supplement relating to the issuance of trust preferred securities by such trust, there is more than an insubstantial risk that:

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

•  interest payable by Popular on the junior subordinated debt securities is not, or within 90 days of the date of such opinion, will not be, deductible by Popular, in whole or in part, for Puerto Rico income tax purposes; or

•  such trust is, or will be within 90 days of the date of such opinion, subject to more than an immaterial amount of other taxes, duties or other governmental charges. (Section 101)

      “Investment Company Event” means the receipt by a trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or a written change, including any announced prospective change, in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that such trust is or will be considered an “investment company” that is required to be registered under the Investment Company Act of 1940, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the prospectus supplement relating to the issuance of the trust preferred securities. (Section 101)

      “Capital Treatment Event” means our reasonable determination that, as a result of any amendment to, or change in, including any announced proposed change in, the laws or regulations of the United States or any political subdivision thereof or Puerto Rico, or as a result of any 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 the prospectus supplement relating to issuance of trust preferred securities by such trust, there is more than an insubstantial risk that Popular will not be entitled to treat an amount equal to the liquidation amount of such trust preferred securities as Tier I capital, or the then-equivalent thereof, for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to Popular. (Section 101)

      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 debt securities to be redeemed at its registered address. However, if the debt securities are held by a trust, notice shall be mailed 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 debt securities or portions thereof called for redemption.

Restrictions on Certain Payments

      Unless otherwise specified in the applicable prospectus supplement, if:

•  there shall have occurred and be continuing an event of default with respect to a series of junior subordinated debt securities of which we have actual knowledge and which we have not taken reasonable steps to cure;

•  the junior subordinated debt securities of a series are held by a trust and we shall be in default relating to our payment of any obligations under our guarantee of the trust preferred securities issued by such trust; or

•  we shall have given notice of our election to defer payments of interest on a series of junior subordinated debt securities by extending the interest payment period and such period, or any extension of such period, shall be continuing;

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then:

•  we shall not 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, including our preferred stock; and

•  we shall 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 debt securities (except for partial payments of interest with respect to the junior subordinated debt securities).

      The restrictions listed above do not apply to:

•  any repurchase, redemption or other acquisition 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 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 applicable extension period;

•  any exchange, redemption or conversion of any class or series of our capital stock, or the 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;

•  payments by us under any guarantee agreement executed for the benefit of the trust preferred securities; or

•  any dividend in the form of stock, warrants, options or other rights where the dividend stock or 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. (Section 1008)

Limitation on Mergers and Sales of Assets

      The junior subordinated indenture generally permits a consolidation or merger between us and another entity. It also permits the sale or transfer by us of all or substantially all of our property and assets. These transactions are permitted if:

•  the resulting or acquiring entity, if other than us, is organized and existing under the laws of the United States or any state, the District of Columbia or the Commonwealth of Puerto Rico and assumes all of our responsibilities and liabilities under the junior subordinated indenture, including the payment of all amounts due on the debt securities and performance of the covenants in the junior subordinated indenture; and

•  immediately after the transaction, and giving effect to the transaction, no event of default under the junior subordinated indenture exists. (Section 801)

      If we consolidate or merge with or into any other entity or sell or lease all or substantially all of our assets according to the terms and conditions of the junior subordinated indenture, the resulting or acquiring entity will be substituted for us in such indenture with the same effect as if it had been an original party to the indenture. As a result, such successor entity may exercise our rights and powers under the junior subordinated indenture, in our name and, except in the case of a lease of all or substantially all of our properties, we will be released from all our liabilities and obligations under such indenture and under the junior subordinated debt securities. (Section 802)

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Events of Default, Waiver and Notice

      Unless otherwise specified in the applicable prospectus supplement, an “event of default,” when used in the junior subordinated indenture with respect to any series of junior subordinated debt securities, means any of the following:

•  failure to pay interest on a junior subordinated debt security of that series for 30 days after the payment is due (subject to the deferral of any due date in the case of an extension period);

•  failure to pay the principal of or any premium on any junior subordinated debt security of that series when due;

•  failure to deposit any sinking fund payment on junior subordinated debt securities of that series when due;

•  failure to perform any other covenant in the junior subordinated indenture that applies to junior subordinated debt securities of that series for 90 days after we have received written notice of the failure to perform in the manner specified in the junior subordinated indenture;

•  certain events relating to a bankruptcy, insolvency or reorganization of Popular; or

•  any other event of default that may be specified for the junior subordinated debt securities of that series when that series is created. (Section 501)

      If an event of default under the junior subordinated indenture occurs and continues, the junior subordinated trustee or the holders of at least 25% in aggregate principal amount of the outstanding junior subordinated debt securities of that series may declare the entire principal and all accrued but unpaid interest of all debt securities of that series to be due and payable immediately. If the trustee or the holders of junior subordinated debt securities do not make such declaration and the junior subordinated debt securities of that series are held by a trust or trustee of such trust, the property trustee or the holders of at least 25% in aggregate liquidation amount of the related trust preferred securities shall have the right to make such declaration. If an event of default under the junior subordinated indenture occurs and continues and the junior subordinated debt securities of that series are held by a trust or trustee of such trust, the property trustee may also declare the principal of and the interest on the junior subordinated debt securities to be due and payable and may enforce its other rights as a creditor with respect to the junior subordinated debt securities. (Section 502)

      If such a declaration occurs, the holders of a majority of the aggregate principal amount of the outstanding junior subordinated debt securities of that series can, subject to certain conditions (including, if the junior subordinated debt securities of that series are held by a trust or a trustee of such trust, the consent of the holders of at least a majority in aggregate liquidation amount of the related trust preferred securities), rescind the declaration. If the holders of such junior subordinated debt securities do not rescind such declaration and such junior subordinated debt securities are held by a trust or trustee of such trust, the holders of at least a majority in aggregate liquidation amount of the related trust preferred securities shall have the right to rescind the declaration. (Section 502)

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

•  a default in payment of principal of or any 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 debt security of that series.

      If the junior subordinated debt securities of that series are held by a trust or a trustee of such trust, any such waiver shall require the consent of the holders of at least a majority in aggregate liquidation amount of the related trust preferred securities. If the holders of junior subordinated debt securities do not

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waive such default, the holders of a majority in aggregate liquidation amount of the related trust preferred securities shall have the right to waive such default. (Section 513)

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

      We 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. (Section 1004)

      If the junior subordinated debt securities of any series are held by a trust or a trustee of such trust, a holder of the related trust preferred securities may institute a direct action if we fail to make interest or other payments on the junior subordinated debt securities when due, taking account of any extension period. (Section 508) A direct action may be brought without first:

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

•  suing us to enforce the property trustee’s rights under such junior subordinated debt securities.

      This right of direct action cannot be amended in a manner that would impair the rights of the holders of trust preferred securities thereunder without the consent of all holders of affected trust preferred securities. (Section 902)

Junior Subordinated Indenture Does Not Restrict Our Ability to Take Certain Actions That May Affect the Junior Subordinated Debt Securities

      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 under “— Restrictions on Certain Payments” above.

The junior subordinated indenture does not require the maintenance of 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 to repurchase or redeem or modify the terms of any of the junior subordinated debt securities upon a change of control or other event involving us which may adversely affect the creditworthiness of such debt securities.

Distribution of the Junior Subordinated Debt Securities

      Under circumstances involving the dissolution of a trust, which will be discussed more fully in the applicable prospectus supplement, the junior subordinated debt securities may be distributed to the holders of the trust securities in liquidation of that trust, provided that any required regulatory approval is obtained. See “Description of Trust Preferred Securities — Liquidation Distribution upon Dissolution.”

Modification of Junior Subordinated Indenture

      Under the junior subordinated indenture, certain of our rights and obligations and certain of the rights of holders of the junior subordinated debt securities may be modified or amended with the consent of the holders of at least a majority of the aggregate principal amount of the outstanding junior subordinated debt securities of all series affected by the modification or amendment, acting as one class. However, the following modifications and amendments will not be effective against any holder without its consent:

•  a change in the stated maturity date of any payment of principal or interest, including any additional interest (other than to the extent set forth in the applicable junior subordinated debt security);

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•  a reduction in payments due on the junior subordinated debt securities;

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

•  a limitation of a holder’s right to sue us for the enforcement of payments due on the junior subordinated debt securities;

•  a reduction in the percentage of outstanding junior subordinated debt securities 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;

•  a reduction in the requirements contained in the junior subordinated indenture for quorum or voting;

•  a limitation of a holder’s right, if any, to repayment of junior subordinated debt securities at the holder’s option;

•  in the case of junior subordinated debt securities convertible into common stock, a limitation of any right to convert such debt securities; and

•  a modification of any of the foregoing requirements contained in the junior subordinated indenture. (Section 902)

      Under the junior subordinated indenture, the holders of at least a majority of the aggregate principal amount of the outstanding junior subordinated debt securities of all series affected by a particular covenant or condition, acting as one class, may, on behalf of all holders of such series of debt securities, waive compliance by us with any covenant or condition contained in the junior subordinated indenture unless we specify that such covenant or condition cannot be so waived at the time we establish the series. (Section 1005)

      If the junior subordinated debt securities are held by a trust or the trustee of such trust, no modification may be made that adversely affects the holders of the related trust preferred securities, and no termination of the junior subordinated indenture may occur, and no waiver of any compliance with any covenant will be effective without the prior consent of a majority in liquidation amount of the trust preferred securities of such trust. If the consent of the holder of each outstanding junior subordinated debt security is required for such modification or waiver, no such modification or waiver shall be effective without the prior consent of each holder of trust preferred securities of such trust. (Section 902)

      We and the junior subordinated trustee may execute, without the consent of any holder of junior subordinated debt securities, any supplemental junior subordinated indenture for the purpose of creating any new series of junior subordinated debt securities.

Defeasance and Discharge

      Defeasance and Discharge. At the time that we establish a series of junior subordinated debt securities under the junior subordinated indenture, we can provide that the debt securities of that series are subject to the defeasance and discharge provisions of that indenture. If we so provide, we will be discharged from our obligations on the debt securities of that series if:

•  we deposit with the junior subordinated trustee, in trust, sufficient money or, if the junior subordinated debt securities of that series are denominated and payable in U.S. dollars only, Eligible Instruments, to pay the principal, any interest, any premium and any other sums due on the debt securities of that series, such as sinking fund payments, on the dates the payments are due under the junior subordinated indenture and the terms of such debt securities;

•  we deliver to the junior subordinated trustee an opinion of counsel that states that the holders of the junior subordinated debt securities of that series will not recognize income, gain or loss for

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	Puerto Rico or United States federal income tax purposes as a result of the deposit and will be subject to Puerto Rico or United States federal income tax on the same amounts and in the same manner and at the same times as would have been the case if no deposit had been made; and
•	if the junior subordinated debt securities of that series are listed on any domestic or foreign securities exchange, such debt securities will not be delisted as a result of the deposit. (Section 403)

      When we use the term “Eligible Instruments” in this section, we mean monetary assets, money market instruments and securities that are payable in dollars only and are essentially risk free as to collection of principal and interest, including:

•  direct obligations of the United States backed by the full faith and credit of the United States; or

•  any obligation of a person controlled or supervised by and acting as an agency or instrumentality of the United States if the timely payment of the obligation is unconditionally guaranteed as a full faith and credit obligation by the United States. (Section 101)

      In the event that we deposit money or Eligible Instruments, or a combination of both, in trust and discharge our obligations under a series of junior subordinated debt securities as described above, then:

•  the junior subordinated indenture, including the subordination provisions contained in the junior subordinated indenture, will no longer apply to the junior subordinated debt securities of that series; however, certain obligations to compensate, reimburse and indemnify the junior subordinated trustee, to register the transfer and exchange of junior subordinated debt securities, to replace lost, stolen or mutilated junior subordinated debt securities, to maintain paying agencies and the trust funds and to pay additional amounts, if any, required as a result of withholding taxes imposed on payments to non-U.S. persons will continue to apply; and

•  holders of junior subordinated debt securities of that series can only look to the trust fund for payment of principal, any premium and any interest on such debt securities of that series. (Section 403)

      Defeasance of Certain Covenants and Certain Events of Default. At the time that we establish a series of junior subordinated debt securities under the junior subordinated indenture, we can provide that the debt securities of that series are subject to the covenant defeasance provisions of such indenture. If we so provide and we make the deposit and deliver the opinion of counsel described above in this section under the heading “— Defeasance and Discharge” we will not have to comply with any covenant we designate when we establish the series of debt securities. In the event of a covenant defeasance, our obligations under the junior subordinated indenture and the junior subordinated debt securities, other than with respect to the covenants specifically referred to above, will remain in effect. (Section 1701)

      If we exercise our option not to comply with the covenants listed above and the junior subordinated debt securities of that series become immediately due and payable because an event of default under the junior subordinated indenture has occurred, other than as a result of an event of default specifically referred to above, the amount of money and Eligible Instruments on deposit with the junior subordinated trustee will be sufficient to pay the principal, any interest, any premium and any other sums due on the debt securities of that series, such as sinking fund payments, on the date the payments are due under the junior subordinated indenture and the terms of the junior subordinated debt securities, but may not be sufficient to pay amounts due at the time of acceleration. However, we would remain liable for the balance of the payments. (Section 1701)

Conversion or Exchange

      The junior subordinated debt securities may be convertible or exchangeable into junior subordinated debt securities of another series or into trust preferred securities of any of our trusts, on the terms provided in the applicable prospectus supplement. Such terms may include provisions for conversion or exchange, either mandatory, at the option of the holder, or at our option, in which case the number of shares of trust

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preferred securities or other securities to be received by the holders of junior subordinated debt securities would be calculated as of a time and in the manner stated in the applicable prospectus supplement.

Subordination

      The junior subordinated debt securities will be subordinated to all of our existing and future Senior Debt, as defined below. Our “Senior Debt” includes our senior debt securities and our subordinated debt securities and means:

•  any of our indebtedness for borrowed or purchased money, whether or not evidenced by bonds, debt securities, notes or other written instruments,

•  our obligations under letters of credit,

•  any of our indebtedness or other obligations with respect to commodity contracts, interest rate and currency swap agreements, cap, floor and collar agreements, currency spot and forward contracts, and other similar agreements or arrangements designed to protect against fluctuations in currency exchange or interest rates, and

•  any guarantees, endorsements (other than by endorsement of negotiable instruments for collection in the ordinary course of business) or other similar contingent obligations in respect of obligations of others of a type described above, whether or not such obligation is classified as a liability on a balance sheet prepared in accordance with generally accepted accounting principles,

whether outstanding on the date of execution of the junior subordinated indenture or thereafter incurred, other than obligations expressly on a parity with or junior to the junior subordinated debt securities. The junior subordinated debt securities 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, that is, directly or indirectly, our financing vehicle in connection with the issuance by such entity of capital securities or other similar securities.

      If certain events relating to a bankruptcy, insolvency or reorganization of Popular occur, we will first pay all Senior Debt, including any interest accrued after the events occur, in full before we make any payment or distribution, whether in cash, securities or other property, on account of the principal of or interest on the junior subordinated debt securities. In such an event, we will pay or deliver directly to the holders of Senior Debt any payment or distribution otherwise payable or deliverable to holders of the junior subordinated debt securities. We will make the payments to the holders of Senior Debt according to priorities existing among those holders until we have paid all Senior Debt, including accrued interest, in full. Notwithstanding the subordination provisions discussed in this paragraph, we may make payments or distributions on the junior subordinated debt securities so long as:

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

•  payment on those securities is subordinate to outstanding Senior Debt and any securities issued with respect to Senior Debt under such plan of reorganization or readjustment at least to the same extent provided in the subordination provisions of the junior subordinated debt securities. (Section 1801)

      If such events relating to a bankruptcy, insolvency or reorganization of Popular occur, after we have paid in full all amounts owed on Senior Debt, the holders of junior subordinated debt securities, together with the holders of any of our other obligations ranking equal with those junior subordinated debt securities, will be entitled to receive from our remaining assets any principal, premium or interest due at that time on the junior subordinated debt securities and such other obligations before we make any payment or other distribution on account of any of our capital stock or obligations ranking junior to those junior subordinated debt securities.

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      If we violate the junior subordinated indenture by making a payment or distribution to holders of the junior subordinated debt securities before we have paid all the Senior Debt in full, then such holders of the junior subordinated debt securities will be deemed to have received the payments or distributions in trust for the benefit of, and will have to pay or transfer the payments or distributions to, the holders of the Senior Debt outstanding at the time. The payment or transfer to the holders of the 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 debt securities will not be required to pay, or transfer payments or distributions to, holders of Senior Debt so long as:

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

•  payment on those securities is subordinate to outstanding Senior Debt and any securities issued with respect to Senior Debt under such plan of reorganization or readjustment at least to the same extent provided in the subordination provisions of those junior subordinated debt securities. (Section 1801)

      Because of the subordination, if we become insolvent, holders of Senior Debt may receive more, ratably, and holders of the junior subordinated debt securities may receive less, ratably, than our 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 debt securities.

      We may modify or amend the junior subordinated indenture as provided under “— Modification of Junior Subordinated Indenture” above. However, the modification or amendment may not, without the consent of the holders of all Senior Debt outstanding, modify any of the provisions of the junior subordinated indenture relating to the subordination of the junior subordinated debt securities in a manner that would adversely affect the holders of Senior Debt. (Section 902)

      The junior subordinated indenture places no limitation on the amount of Senior Debt that we may incur. We expect from time to time to incur additional indebtedness and other obligations constituting Senior Debt.

Governing Law

      The junior subordinated indenture and the junior subordinated debt securities will be governed by, and construed in accordance with, the internal laws of the Commonwealth of Puerto Rico.

The Trustee

      The junior subordinated 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 debt securities unless offered reasonable indemnification. (Sections 603, 601)

Correspondence Between Junior Subordinated Debt Securities and Trust Preferred Securities

      Popular may issue one or more series of junior subordinated debt securities under the junior subordinated indenture with terms corresponding to the terms of a series of trust preferred securities. In each such instance, concurrently with the issuance of a trust’s preferred securities, such trust will invest the proceeds from that issuance, together with the consideration paid by Popular for the common securities of such trust, in that series of junior subordinated debt securities. Each series of junior subordinated debt securities will be in a principal amount equal to the aggregate stated liquidation amount of the related trust preferred securities and the common securities of such trust and will rank equally with all other series of junior subordinated debt securities. Holders of the trust preferred securities will have the rights, in connection with modifications to the junior subordinated indenture or upon occurrence of an event of

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default, as described under “— Modification of Junior Subordinated Indenture” and “— Events of Default, Waiver and Notice.”

      Unless otherwise specified in the applicable prospectus supplement, if a tax event, investment company event or capital treatment event relating to a trust occurs and continues, we may, at our option and subject to any required prior approval of the Federal Reserve, redeem the junior subordinated debt securities at any time within 90 days of the occurrence of such event, in whole but not in part, subject to the provisions of the junior subordinated indenture and whether or not such junior subordinated debt securities are then redeemable at our option.

      The redemption price for any junior subordinated debt security shall be equal to 100% of the principal amount of such junior subordinated debt security then outstanding plus accrued and unpaid interest to the redemption date. As long as a trust is the holder of all the outstanding junior subordinated debt securities of a series, the proceeds of any redemption will be used by such trust to redeem the related trust securities in accordance with their terms.

      We will covenant, as to each series of junior subordinated debt securities:

•  to directly or indirectly maintain 100% ownership of the common securities of the applicable trust unless a permitted successor succeeds to ownership of the common securities;

•  not to voluntarily terminate, wind up or liquidate any trust, except:

•  in connection with a distribution of junior subordinated debt securities to the holders of trust preferred securities in exchange therefor upon liquidation of such trust, or

•  in connection with certain mergers, consolidations or amalgamations permitted by the applicable trust agreement, in either such case, if so specified in the applicable prospectus supplement and upon any required prior approval of the Federal Reserve; and

•  to use our reasonable efforts, consistent with the terms and provisions of the applicable trust agreement, to cause such trust to remain classified as a grantor trust and not as an association taxable as a corporation for United States federal or Puerto Rico income tax purposes.

DESCRIPTION OF TRUST PREFERRED SECURITIES

      The trust preferred securities will be issued by a trust under the terms of a trust agreement. Each trust agreement will be qualified as an indenture under the Trust Indenture Act. Each trust may issue only one series of trust preferred securities. The property trustee will act as trustee for each series of trust preferred securities under the applicable trust agreement for purposes of compliance with the provisions of the Trust Indenture Act. The terms of each series of trust preferred securities will include those stated in the applicable trust agreement and those made part of such trust agreement by the Trust Indenture Act.

      We have summarized material terms and provisions of the trust preferred securities in this section. This summary is not intended to be complete and is qualified by the trust agreement, the form of which we filed as an exhibit to the registration statement, the Delaware Statutory Trust Act and the Trust Indenture Act.

      Each trust agreement authorizes the trustees of the applicable trust to issue trust securities on behalf of such trust. The trust securities represent undivided beneficial interests in the assets of such trust. We will own, directly or indirectly, all of a trust’s common securities. The common securities rank equally, and payments will be made on a pro rata basis, with the trust preferred securities except as set forth under “— Ranking of Trust Securities.”

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      Each trust agreement does not permit a trust to issue any securities other than the trust securities or to incur any indebtedness. Under each trust agreement, the property trustee will own the junior subordinated debt securities purchased by such trust for the benefit of the holders of the trust securities.

      The guarantee agreement we execute for the benefit of the holders of trust preferred securities will be a guarantee on a subordinated basis with respect to the related trust securities. However, such guarantee will not guarantee payment of distributions or amounts payable on redemption or liquidation of such trust securities when a trust does not have funds on hand available to make such payments. See “Description of Guarantees.”

Distributions

      Distributions on each series of trust preferred securities:

•  will be cumulative;

•  will accumulate from the date of original issuance; and

•  will be payable on such dates as specified in the applicable prospectus supplement.

      In the event that any date on which distributions are payable on the trust preferred securities is not a business day, then payment of the distribution will be made on the next succeeding business day, and without any interest or other payment in respect to any such delay. Each date on which distributions are payable in accordance with the foregoing is referred to as a “distribution date.” The term “distribution” includes any interest payable on unpaid distributions unless otherwise stated. Unless otherwise specified in the applicable prospectus supplement, a “business day” is a day other than a Saturday, a Sunday, or any other day on which banking institutions in Puerto Rico, Wilmington, Delaware and New York, New York are authorized or required by law, regulation or executive order to remain closed or are customarily closed.

      The amount of distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of distributions payable for any period shorter than a full distribution period will be computed on the basis of the actual number of days elapsed in a partial month in that period. Distributions to which holders of trust preferred securities are entitled but are not paid will accumulate additional distributions at the annual rate if and as specified in the applicable prospectus supplement.

      If provided in the applicable prospectus supplement, we have the right under the junior subordinated indenture and the junior subordinated debt securities to which the prospectus supplement relates to defer the payment of interest on the junior subordinated debt securities for up to a number of consecutive interest payment periods that will be specified in the applicable prospectus supplement. We refer to this period as an “extension period.” No extension period may extend beyond the stated maturity of the junior subordinated debt securities to which the extension period relates.

      As a consequence of any such deferral, distributions on the trust preferred securities would be deferred by the related trust during any extension period, but would continue to accumulate additional distributions at the annual rate set forth in the prospectus supplement for such trust preferred securities.

      Unless otherwise specified in the applicable prospectus supplement, 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 debt securities (except for partial payments of interest with respect to the junior subordinated debt securities); or

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•  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, redemption 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;

•  payments by us under any guarantee agreement executed for the benefit of the trust preferred securities; 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.

      The funds available to each trust for distribution to holders of its trust preferred securities will be limited to payments under the junior subordinated debt securities in which such trust invests the proceeds from the issuance and sale of its trust securities. See “Description of Junior Subordinated Debt Securities — Correspondence Between Junior Subordinated Debt Securities and Trust Preferred Securities.” If we do not make interest payments on such junior subordinated debt securities, the property trustee will not have funds available to pay distributions on the related trust preferred securities. To the extent a trust has funds legally available for the payment of such distributions and cash sufficient to make such payments, the payment of distributions is guaranteed by us on the basis set forth under “Description of Guarantees.”

      Distributions on the trust preferred securities will be payable to the holders of such securities as they appear on the register of the applicable trust on the relevant record dates, which shall be the 15th calendar day, whether or not a business day, before the distribution date.

Redemption or Exchange

Mandatory Redemption

      Upon the repayment or redemption, in whole or in part, of any junior subordinated debt securities, whether at stated maturity or upon earlier redemption as provided in the junior subordinated indenture, the property trustee will apply the proceeds from such repayment or redemption to redeem a like amount, as defined below, of the related trust securities, upon not less than 30 nor more than 60 days’ notice. The redemption price will equal the aggregate liquidation amount of such trust securities, as defined below, plus accumulated but unpaid distributions to the date of redemption and the amount of the premium, if any, paid by us upon the concurrent redemption of such junior subordinated debt securities. See “Description of Junior Subordinated Debt Securities — Redemption.” If less than all of any series of junior subordinated debt securities are to be repaid or redeemed on a redemption date, then the proceeds from such repayment or redemption will be allocated pro rata to the redemption of the related trust preferred securities and the common securities, except as set forth under “— Ranking of Trust Securities.”

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The amount of premium, if any, paid by us upon the redemption or repayment of all or any part of any series of junior subordinated debt securities will be allocated pro rata to the redemption of the related trust preferred securities and common securities, except as set forth under “— Ranking of Trust Securities.”

      We will have the right to redeem any series of junior subordinated debt securities:

•  on or after such date as may be specified in the applicable prospectus supplement, in whole at any time or in part from time to time; or

•  at any time, in whole but not in part, upon the occurrence of a tax event, investment company event or capital treatment event, in any case subject to receipt of any required prior approval by the Federal Reserve. See “Description of Junior Subordinated Debt Securities — Redemption.”

      Within 90 days after any tax event, investment company event or capital treatment event occurs and continues, we will have the right to redeem the junior subordinated debt securities in whole, but not in part, and thereby cause a mandatory redemption of the related trust preferred securities and common securities in whole, but not in part, at the redemption price described above. In the event:

•  a tax event, investment company event or capital treatment event occurs and continues, and

•  we do not elect to redeem the junior subordinated debt securities and thereby cause a mandatory redemption of the related trust preferred securities and common securities or to dissolve the related trust and cause the junior subordinated debt securities to be distributed to holders of such trust preferred securities and common securities in exchange therefor upon liquidation of the trust as described below,

the related trust preferred securities will remain outstanding.

      “Like Amount” means:

•  with respect to a redemption of any series of trust securities, trust securities of such series having a liquidation amount equal to that portion of the principal amount of junior subordinated debt securities to be contemporaneously redeemed in accordance with the junior subordinated indenture, the proceeds of which will be used to pay the redemption price of such trust securities; and

•  with respect to a distribution of junior subordinated debt securities to holders of any series of trust securities in exchange therefor in connection with a dissolution or liquidation of a trust, junior subordinated debt securities having a principal amount equal to the liquidation amount of the trust securities of the holder to whom such junior subordinated debt securities would be distributed.

      “Liquidation Amount” means the stated amount per trust security as set forth in the applicable prospectus supplement.

Distribution of Junior Subordinated Debt Securities

      We will have the right at any time to liquidate a trust and cause the junior subordinated debt securities to be distributed to the holders of the related trust securities. This may require the prior approval of the Federal Reserve. Upon liquidation of the trust and after satisfaction of the liabilities of creditors of such trust as provided by applicable law, the junior subordinated debt securities held by such trust will be distributed to the holders of the trust securities of such trust in exchange therefor.

      After the liquidation date fixed for any distribution of junior subordinated debt securities for any series of trust preferred securities:

•  such series of trust preferred securities will no longer be deemed to be outstanding;

•  the depositary or its nominee, as the record holder of such series of trust preferred securities, will receive a registered global certificate or certificates representing the junior subordinated debt securities to be delivered upon such distribution;

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•  any certificates representing such series of trust preferred securities not held by The Depository Trust Company, or “DTC,” or its nominee, or surrendered to the exchange agent will be deemed to represent the junior subordinated debt securities to be delivered in the exchange, having a principal amount equal to the stated liquidation amount of such series of trust preferred securities, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid distributions on such series of trust preferred securities until such certificates are so surrendered for transfer or reissuance; and

•  all rights of the holders of such trust preferred securities will cease, except the right to receive junior subordinated debt securities, in the principal amount set forth above, upon such surrender.

Redemption Procedures

      Trust preferred securities redeemed on any redemption date will be redeemed at the redemption price, as described in the applicable prospectus supplement, with the proceeds from the contemporaneous redemption of the junior subordinated debt securities. Redemptions of trust preferred securities shall be made and the redemption price shall be payable on each redemption date only to the extent that the applicable trust has funds on hand available for the payment of such redemption price. See also “— Ranking of Trust Securities.” Redemptions of trust preferred securities may require prior approval of the Federal Reserve.

      If a trust gives a notice of redemption of its trust preferred securities, then, by 12:00 noon, New York time, on the redemption date, to the extent funds are available, the property trustee will deposit irrevocably with DTC funds sufficient to pay the redemption price and will give DTC irrevocable instructions and authority to pay the redemption price to the holders of such trust preferred securities. If such trust preferred securities are no longer in book-entry form, the property trustee, to the extent funds are available, will irrevocably deposit with the paying agent for such trust preferred securities funds sufficient to pay the redemption price and will give such paying agent irrevocable instructions and authority to pay the redemption price to the holders thereof upon surrender of their certificates evidencing such trust preferred securities.

      Notwithstanding the foregoing, distributions payable on or before the redemption date for any trust preferred securities called for redemption will be payable to the holders of such trust preferred securities on the relevant record dates for the related distribution dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit:

•  all rights of the holders of such trust preferred securities will cease, except the right to receive the redemption price on the redemption date, but without interest on such redemption price after the date of redemption; and

•  such trust preferred securities will cease to be outstanding.

      In the event that any date fixed for redemption of trust preferred securities is not a business day, then payment of the redemption price will be made on the next succeeding business day, without any interest or any other payment in respect of any such delay. In the event that payment of the redemption price in respect of trust preferred securities called for redemption is improperly withheld or refused and not paid either by the applicable trust or by us pursuant to the guarantee as described under “Description of Guarantees,” distributions on such trust preferred securities will continue to accrue at the then-applicable rate, from the redemption date originally established by such trust for such trust preferred 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.

      If less than all of the trust securities issued by a trust are to be redeemed on a redemption date, then the aggregate liquidation amount of such trust securities to be redeemed shall be allocated pro rata to the trust preferred securities and the common securities based upon the relative liquidation amounts of such classes, except as set forth under “— Ranking of Trust Securities.” The property trustee will select the particular trust preferred securities to be redeemed not more than 60 days before the redemption date from

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the outstanding trust preferred securities not previously called for redemption by any method the property trustee deems fair and appropriate, or, if the trust preferred securities are in book-entry only form, in accordance with the procedures of the depositary. The property trustee shall promptly notify the securities registrar in writing of the trust preferred securities selected for redemption and the liquidation amount to be redeemed. For all purposes of the applicable trust agreement, unless the context otherwise requires, all provisions relating to the redemption of trust preferred securities shall relate, in the case of any trust preferred securities redeemed or to be redeemed only in part, to the portion of the aggregate liquidation amount of trust preferred securities which has been or is to be redeemed.

      Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to the registered address of each holder of trust securities to be redeemed.

      Subject to applicable law, including, without limitation, United States federal securities laws, we or our subsidiaries may at any time and from time to time purchase outstanding trust preferred securities by tender, in the open market or by private agreement.

Ranking of Trust Securities

      Payment of distributions on, and the redemption price of and the liquidation distribution in respect of, trust preferred securities and common securities, as applicable, shall be made pro rata based on the relative liquidation amount of such trust preferred securities and common securities, except that upon certain events of default under the applicable trust agreement relating to payment defaults on the junior subordinated debt securities, 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 trust preferred securities.

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

Liquidation Distribution Upon Dissolution

      Pursuant to a trust agreement, a trust shall automatically dissolve upon expiration of its term and shall dissolve on the first to occur of:

•  certain events of bankruptcy, dissolution or liquidation of Popular;

•  the written direction from us, as holder of the trust’s common securities, to the property trustee to dissolve the trust and distribute a like amount of junior subordinated debt securities to the holders of its trust securities, subject to our having received any required prior approval of the Federal Reserve;

•  redemption of all of its trust preferred securities as described under “— Redemption or Exchange — Mandatory Redemption;” and

•  the entry of an order for the dissolution of the trust by a court of competent jurisdiction.

      Except as set forth in the next sentence, if an early dissolution occurs as described above, the property trustee will liquidate the trust as expeditiously as possible by distributing, after satisfaction of liabilities to creditors of such trust as provided by applicable law, to the holders of such trust securities a like amount of junior subordinated debt securities. If the property trustee determines that such distribution is not practical or if the early dissolution occurs as a result of the redemption of trust preferred securities, then the holders will be entitled to receive out of the assets of such trust available for distribution to holders and after satisfaction of liabilities to creditors of such trust as provided by applicable law, an amount equal

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to the aggregate liquidation amount plus accrued and unpaid distributions to the date of payment. If such trust has insufficient assets available to pay in full such aggregate liquidation distribution, then the amounts payable directly by such trust on its trust securities shall be paid on a pro rata basis, except as set forth under “— Ranking of Trust Securities.”

Events of Default; Notice

      Any one of the following events constitutes an event of default under the applicable 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 an event of default under the junior subordinated indenture with respect to the junior subordinated debt securities held by such trust (see “Description of Junior Subordinated Debt Securities — Events of Default, Waiver and Notice”); or

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

•  the default by the property trustee in the payment of any redemption price of any trust security of such trust when such redemption price 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 applicable trust agreement for 90 days after the defaulting trustee or trustees have received written notice of the failure to perform or breach of warranty in the manner specified in such 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 ten days after any event of default actually known to the property trustee occurs, the property trustee will transmit notice of such event of default to the holders of the trust securities and to the administrative trustees, unless such event of default shall have been cured or waived. We, as depositor, 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 an event of default under the trust agreement, in and of itself, with respect to the junior subordinated debt securities does not entitle the holders of the related trust preferred securities to accelerate the maturity of such junior subordinated debt securities.

Removal of Trustees

      Unless an event of default under the junior subordinated indenture has occurred and is continuing, the property trustee and the Delaware trustee of a trust may be removed at any time by the holder of the common securities of such trust. The property trustee and the Delaware trustee may be removed by the holders of a majority in liquidation amount of the outstanding trust preferred securities of such trust for cause or if an event of default under the junior subordinated indenture has occurred and is continuing. In no event will the holders of such trust preferred securities have the right to vote to appoint, remove or replace the administrative trustees, which voting rights are vested exclusively in us, as the holder 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.

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Co-Trustees and Separate Property Trustee

      Unless an event of default under the junior subordinated indenture 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, we, as the holder 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 such 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 such trust agreement. If an event of default under the junior subordinated indenture 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 such trustee shall be a party, or any person succeeding to all or substantially all the corporate trust business of such 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 Trusts

      A 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 or as otherwise described in the applicable trust agreement. Such trust may, at our request, with the consent of the administrative trustees but without the consent of the holders of the trust preferred 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 any state, the District of Columbia or the Commonwealth of Puerto Rico if:

•  such successor entity either:

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

•  substitutes for the trust preferred securities other securities having substantially the same terms as the trust preferred securities, or the “successor securities,” so long as the successor securities rank the same as the trust preferred 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 debt securities;

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

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

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

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•  prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, we have received an opinion from independent counsel to such trust experienced in such matters 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 trust preferred securities, including any successor securities, in any material respect, and

•  following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither such 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 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 applicable guarantee.

      Notwithstanding the foregoing, a trust may not, except with the consent of holders of 100% in liquidation amount of its trust preferred 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 or Puerto Rico income tax purposes.

Voting Rights; Amendment of the Trust Agreement

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

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

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

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

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

•  the consent of holders representing not less than a majority, based upon liquidation amounts, of the outstanding trust preferred securities; and

•  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 such trust’s status as a grantor trust for United States federal or Puerto Rico income tax purposes or the trust’s exemption from status as an “investment company” under the Investment Company Act.

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

•  change the amount or timing of any distribution required to be made in respect of such trust securities as of a specified date; or

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

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

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

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

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

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

      If a consent under the junior subordinated indenture would require the consent of each holder of junior subordinated debt securities affected thereby, no such consent may be given by the property trustee of any trust without the prior consent of each holder of the trust preferred securities of such trust. The property trustee may not revoke any action previously authorized or approved by a vote of the holders of the trust preferred securities except by subsequent vote of the holders of the trust preferred securities. The property trustee will notify each holder of the trust preferred securities of any notice of default with respect to the junior subordinated debt securities. In addition to obtaining the foregoing approvals of the holders of the trust preferred 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 such trust to be classified as other than a grantor trust for United States federal or Puerto Rico income tax purposes.

      Any required approval of holders of trust preferred securities may be given at a meeting of holders of trust preferred securities convened for such purpose or pursuant to written consent. The property trustee will cause a notice of any meeting at which holders of trust preferred 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 trust preferred securities in the manner set forth in the applicable trust agreement.

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

      Notwithstanding that holders of trust preferred securities are entitled to vote or consent under any of the circumstances described above, any of the trust preferred 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 trust preferred securities shall be made to the depositary, which shall credit the relevant accounts at the depositary on the applicable distribution dates. If any trust preferred 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.

      Unless otherwise specified in the applicable prospectus supplement, the paying agent shall initially be Banco Popular de Puerto Rico. The paying agent shall be permitted to resign as paying agent upon

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30 days’ written notice to the administrative trustees and to the property trustee. In the event that Banco Popular de Puerto Rico shall no longer be the paying agent, the property trustee will appoint a successor to act as paying agent, which will be a bank or trust company acceptable to the administrative trustees and to us.

Registrar and Transfer Agent

      Unless otherwise specified in the applicable prospectus supplement, Banco Popular de Puerto Rico Trust Division will act as registrar and transfer agent for the trust preferred securities.

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

Information Concerning the Property Trustee

      Other than during the occurrence and continuance of an event of default under the trust agreement, the property trustee undertakes to perform only the duties that are specifically set forth in the applicable trust agreement. After an event of default under the trust agreement, 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 applicable trust agreement at the request of any holder of trust preferred securities unless it is offered indemnity satisfactory to it by such holder against the costs, expenses and liabilities that might be incurred. If no 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 such trust agreement or is unsure of the application of any provision of such trust agreement, and the matter is not one upon which holders of trust preferred securities are entitled under the applicable 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.

      We and our affiliates maintain certain accounts and other banking relationships with the property trustee and its affiliates in the ordinary course of business.

Trust Expenses

      Pursuant to the applicable trust agreement, we, as depositor, agree to pay:

•  all debts and other obligations of the trust (other than with respect to the trust preferred 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, other than withholding taxes, to which the trust might become subject.

Governing Law

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

Miscellaneous

      The administrative trustees are authorized and directed to conduct the affairs of and to operate the applicable trust in such a way that it will not be required to register as an “investment company” under

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the Investment Company Act or characterized as other than a grantor trust for United States federal or Puerto Rico income tax purposes. The administrative trustees are authorized and directed to conduct their affairs so that the junior subordinated debt securities will be treated as indebtedness of Popular for Puerto Rico 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 applicable trust or the applicable 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 applicable trust preferred securities.

      Holders of the trust preferred securities have no preemptive or similar rights.

      No trust may borrow money or issue debt or mortgage or pledge any of its assets.

COMMON SECURITIES

      In connection with the issuance of trust preferred securities, the applicable trust will issue one series of common securities. The prospectus supplement relating to such issuance will specify the terms of such common securities, including distributions, redemption, voting and liquidation rights. Except for voting rights, the terms of the common securities will be substantially identical to the terms of the trust preferred securities. The common securities will rank equally, and payments will be made on the common securities pro rata, with the trust preferred securities, except as set forth under “Description of Trust Preferred Securities — Ranking of Trust Securities.” Except in limited circumstances, the common securities of a trust carry the right to vote to appoint, remove or replace any of the trustees of that trust. We will own, directly or indirectly, all of the common securities of the trusts.

DESCRIPTION OF GUARANTEES

      Set forth below is a summary of information concerning the guarantee that we will execute and deliver for the benefit of the holders of trust preferred securities when a trust issues trust securities. Each trust preferred securities guarantee will be qualified as an indenture under the Trust Indenture Act. The guarantee trustee for purposes of the Trust Indenture Act will be named in the applicable prospectus supplement. The guarantee trustee will hold the trust preferred securities guarantee for the benefit of the holders of the trust preferred securities.

General

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

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

•  the redemption price, plus all accrued and unpaid distributions relating to any trust preferred securities called for redemption by such trust, to the extent such trust has funds available for redemptions; and

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

•  the aggregate of the liquidation amount and all accrued and unpaid distributions on the trust preferred securities to the date of payment to the extent such trust has funds available; and

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

The redemption price and liquidation amount will be fixed at the time the trust preferred securities are issued.

      Our obligation to make a guarantee payment may be satisfied by direct payment of the required amounts to the holders of trust preferred securities or by causing the applicable trust to pay such amounts to such holders.

      A trust preferred securities guarantee will not apply to any payment of distributions except to the extent a trust shall have funds available for such payments. If we do not make interest payments on the junior subordinated debt securities purchased by a trust, such trust will not pay distributions on the trust preferred securities and will not have funds available for such payments. See “— Status of the Guarantees.” Because we are a holding company, our rights to participate in the assets of any of our subsidiaries upon the subsidiary’s liquidation or reorganization will be subject to the prior claims of the subsidiary’s creditors except to the extent that we may ourselves be a creditor with recognized claims against the subsidiary. Except as otherwise described in the applicable prospectus supplement, the trust preferred securities guarantees do not limit the incurrence or issuance by us of other secured or unsecured debt.

      A trust preferred securities guarantee, when taken together with our obligations under the junior subordinated debt securities, the junior subordinated indenture and the applicable trust agreement, including our obligations to pay costs, expenses, debts and liabilities of the applicable trust, other than those relating to trust securities, will provide a full and unconditional guarantee on a subordinated basis of payments due on the trust preferred securities.

      Unless otherwise specified in the applicable prospectus supplement, we will also agree separately to irrevocably and unconditionally guarantee the obligations of each trust with respect to the common securities to the same extent as the trust preferred securities guarantees.

Status of the Guarantees

      A guarantee will be unsecured and will rank:

•  subordinate and junior in right of payment to all our other liabilities in the same manner as the junior subordinated debt securities as set forth in the junior subordinated indenture; and

•  equally with all other trust preferred security guarantees that we issue.

      A guarantee will constitute 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. A guarantee will be held by the guarantee trustee for the benefit of the holders of the related trust securities. A 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 debt securities.

Amendments and Assignment

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

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Termination of the Guarantees

      A trust preferred securities guarantee will terminate (1) upon full payment of the redemption price of all related trust preferred securities, (2) upon distribution of the junior subordinated debt securities to the holders of the related trust securities or (3) upon full payment of the amounts payable in accordance with the applicable trust agreement upon liquidation of the trust. A trust preferred securities guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of trust preferred securities must restore payment of any sums paid under the trust preferred securities or the trust preferred securities guarantee.

Events of Default

      An event of default under a trust preferred securities guarantee will occur if we fail to perform any payment obligation or other obligation under such guarantee.

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

      As guarantor, we are required to file annually with the guarantee trustee a certificate as to whether or not we are in compliance with all applicable conditions and covenants under the trust preferred securities guarantee.

Information Concerning the Guarantee Trustee

      Prior to the occurrence of an event of default relating to a trust preferred securities guarantee, the guarantee trustee is required to perform only the duties that are specifically set forth in such trust preferred 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. Provided that the foregoing requirements have been met, the guarantee trustee is under no obligation to exercise any of the powers vested in it by the trust preferred securities guarantee at the request of any holder of trust preferred securities unless offered indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred thereby.

      We and our affiliates maintain certain accounts and other banking relationships with the guarantee trustee and its affiliates in the ordinary course of business.

Governing Law

      The trust preferred securities guarantees will be governed by and construed in accordance with the internal laws of the Commonwealth of Puerto Rico.

RELATIONSHIP AMONG TRUST PREFERRED SECURITIES,

JUNIOR SUBORDINATED DEBT SECURITIES AND GUARANTEES

      As set forth in the applicable trust agreement, the sole purpose of a trust is to issue the trust securities and to invest the proceeds in junior subordinated debt securities.

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      As long as payments of interest and other payments are made when due on a series of junior subordinated debt securities, those payments will be sufficient to cover the distributions and payments due on the related trust securities. This is due to the following factors:

•  the aggregate principal amount of such junior subordinated debt securities will be equal to the sum of the aggregate stated liquidation amount of such trust securities;

•  the interest rate and the interest and other payment dates on such junior subordinated debt securities will match the distribution rate and distribution and other payment dates for such trust securities;

•  under the junior subordinated indenture, we will pay, and the applicable trust will not be obligated to pay, directly or indirectly, all costs, expenses, debts and obligations of such trust, other than those relating to such trust securities; and

•  the applicable trust agreement further provides that the trustees may not cause or permit the trust to engage in any activity that is not consistent with the purposes of the trust.

      To the extent that funds are available, we guarantee payments of distributions and other payments due on trust preferred securities to the extent described in this prospectus. If we do not make interest payments on a series of junior subordinated debt securities, the related trust will not have sufficient funds to pay distributions on the trust preferred securities. A trust preferred securities guarantee is a subordinated guarantee in relation to the trust preferred securities. A trust preferred securities guarantee does not apply to any payment of distributions unless and until such trust has sufficient funds for the payment of such distributions. See “Description of Guarantees.”

      We have the right to set off any payment that we are otherwise required to make under the junior subordinated indenture with any payment that we have previously made or are concurrently on the date of such payment making under a related guarantee.

      A trust preferred securities guarantee covers the payment of distributions and other payments on the trust preferred securities of a trust only if and to the extent that we have made a payment of interest or principal or other payments on the junior subordinated debt securities. A trust preferred securities guarantee, when taken together with our obligations under the junior subordinated debt securities and the junior subordinated indenture and our obligations under the applicable trust agreement, will provide a full and unconditional guarantee of distributions, redemption payments and liquidation payments on the related trust preferred securities.

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

      A holder of trust preferred securities may institute a direct action if we fail to make interest or other payments on the junior subordinated debt securities when due, taking account of any extension period. A direct action may be brought without first:

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

•  suing us to enforce the property trustee’s rights under the junior subordinated debt securities. (Section 508)

In connection with such direct action, we will be subrogated to the rights of such holder of trust preferred securities under the applicable trust agreement to the extent of any payment made by us to such holder of trust preferred securities. Consequently, we will be entitled to payment of amounts that a holder of trust

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preferred 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 such trust.

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

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

Limited Purpose of Trust

      Each trust’s preferred securities evidence a beneficial interest in the assets such trust, and such trust exists for the sole purpose of issuing its trust preferred securities and common securities and investing the proceeds in junior subordinated debt securities issued by Popular. A principal difference between the rights of a holder of a trust preferred security and a holder of a junior subordinated debt security is that a holder of a junior subordinated debt security is entitled to receive from us the principal amount of and interest accrued on such junior subordinated debt securities, while a holder of trust preferred securities is entitled to receive distributions from such trust, or from us under the related guarantee, if and to the extent such trust has funds available for the payment of such distributions.

Rights Upon Dissolution

      Upon any voluntary or involuntary dissolution, winding up or liquidation of a trust involving the liquidation of the junior subordinated debt securities, after satisfaction of liabilities to creditors of such trust, the holders of the trust preferred securities of such trust will be entitled to receive, out of the assets held by such trust, the liquidation distribution in cash. See “Description of Trust Preferred Securities — Liquidation Distribution Upon Termination.” Upon any voluntary or involuntary liquidation or bankruptcy of Popular, the property trustee, as holder of the junior subordinated debt securities, would be a subordinated creditor of Popular, subordinated in right of payment to all Senior Debt as set forth in the junior subordinated indenture, but entitled to receive payment in full of principal and interest before any of our stockholders receive distributions. Since we are the guarantor under the guarantee and have agreed to pay for all costs, expenses and liabilities of each trust, other than such trust’s obligations to the holders of its trust preferred securities, the positions of a holder of such trust preferred securities and a holder of such junior subordinated debt securities relative to other creditors and to our stockholders in the event of liquidation or bankruptcy are expected to be substantially the same.

PLAN OF DISTRIBUTION

      We and the trusts may sell the securities offered under this prospectus through agents, through underwriters or dealers or directly to one or more purchasers. We may also offer the securities in exchange for our outstanding indebtedness.

      Underwriters, dealers and agents that participate in the distribution of the securities offered under this prospectus may be underwriters as defined in the Securities Act of 1933, and any discounts or commissions received by them from us and any profit on the resale of the offered securities by them may be treated as underwriting discounts and commissions under the Securities Act. Any underwriters or agents will be

33

identified and their compensation, including any underwriting discount or commission, will be described in the applicable prospectus supplement. The prospectus supplement will also describe other terms of the offering, including the initial public offering price, any discounts or concessions allowed or reallowed or paid to dealers and any securities exchanges on which the offered securities may be listed. The maximum discount or commission that may be received by any member of the National Association of Securities Dealers, Inc. for sales of securities pursuant to this prospectus will not exceed 8.00%.

      The distribution of the securities offered under this prospectus may occur from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, at prices related to the prevailing market prices or at negotiated prices.

      We may determine the price or other terms of the securities offered under this prospectus by use of an electronic auction. We will describe in the applicable prospectus supplement how any auction will be conducted to determine the price or any other terms of the securities, how potential investors may participate in the auction and, where applicable, the nature of the underwriters’ obligations with respect to the auction.

      If the securities offered under this prospectus are issued in exchange for our outstanding securities, the applicable prospectus supplement will set forth the terms of the exchange, the identity of and the terms of sale of the securities offered under this prospectus by the selling security holders.

      If the applicable prospectus supplement indicates, we or a trust will authorize dealers or agents to solicit offers by institutions to purchase offered securities under contracts that provide for payment and delivery on a future date. We or a trust must approve all institutions, but they may include, among others:

•  commercial and savings banks;

•  insurance companies;

•  pension funds;

•  investment companies; and

•  educational and charitable institutions.

The institutional purchaser’s obligations under the contract are only subject to the condition that the purchase of the offered securities at the time of delivery is allowed by the laws that govern the purchaser. The dealers and agents will not be responsible for the validity or performance of the contracts.

      One of our wholly-owned subsidiaries, Popular Securities, Inc., may participate as an underwriter in offerings of the securities offered under this prospectus. If this occurs, the offering will comply with Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc. The underwriters, agents and dealers participating in the sale of the securities offered by this prospectus will not confirm sales to accounts over which they exercise discretionary authority without the prior specific written approval of the customer in accordance with Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc.

      Because the National Association of Securities Dealers, Inc. may view the trust preferred 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 National Association of Securities Dealers, Inc.

      This prospectus, together with any applicable prospectus supplement, may also be used by our affiliates, including Popular Securities, Inc., in connection with offers and sales of the offered securities in market-making transactions at negotiated prices related to prevailing market prices at the time of sale. Such affiliates may act as principals or agents in such transactions. None of our affiliates have any obligation to make a market in any of the offered securities and each may discontinue any market-making activities at any time without notice, at its sole discretion.

      We and the trusts may have agreements with the underwriters, dealers and agents, including our subsidiaries mentioned above, to indemnify them against certain civil liabilities, including liabilities under

34

the Securities Act, or to contribute with respect to payments which the underwriters, dealers or agents may be required to make as a result of those certain civil liabilities.

      If we offer bearer debt securities under this prospectus, each underwriter, dealer and agent that participates in the distribution of any original issuance of bearer debt securities will agree not to offer, sell or deliver bearer debt securities to a United States citizen or to any person within the United States or Puerto Rico, unless federal and Puerto Rico law permits otherwise.

      When we or a trust issue securities, they may be new securities with no established trading market. If we or a trust sell a security offered by this prospectus to an underwriter for public offering and sale, the underwriter may make a market for that security, but the underwriter will not be obligated to do so and could discontinue any market making without notice at any time. Therefore, we cannot give any assurances to you concerning the liquidity of any security offered by this prospectus.

      Underwriters and agents and their affiliates may be customers of, engage in transactions with, or perform services for us or our subsidiaries in the ordinary course of their businesses. In connection with the distribution of securities offered under this prospectus, we may enter into swap or other hedging transactions with, or arranged by, underwriters or agents or their affiliates. These underwriters or agents or their affiliates may receive compensation, trading gain or other benefits from these transactions.

LEGAL OPINIONS

      The validity of the securities offered by this prospectus will be passed upon for Popular by Brunilda Santos de Alvarez, Esq., Executive Vice President and General Counsel, or another of our lawyers, or by any other of our counsel named in the applicable prospectus supplement. Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel for the trusts, will pass upon certain legal matters for the trusts. Certain legal matters will be passed upon for any underwriters or agents by counsel named in the applicable prospectus supplement. As of the date of this prospectus, Brunilda Santos de Alvarez, Esq. owns, directly or indirectly, 17,998 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 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.

35

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

SEC registration fee	$	38,010
NASD fee		30,500
Legal fees and expenses		200,000	*
Trustees’ fees and expenses		20,000	*
Accounting fees and expenses		45,000	*
Rating agency fees		232,500	*
Printing expenses		50,000	*
Miscellaneous expenses		16,990	*
Total	$	633,000	*

*  Estimate.

Item 15. Indemnification of Directors and Officers

      (a) Article ELEVENTH of the Restated Certificate of Incorporation of Popular, Inc. provides the following:

      (1) Popular shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of Popular) by reason of the fact that he is or was a director, officer, employee or agent of Popular, or is or was serving at the written request of Popular as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of Popular, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of Popular and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

      (2) Popular shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of Popular to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of Popular, or is or was serving at the written request of Popular as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of Popular, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to Popular unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

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      (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) Article 1.02(B)(6) of the Puerto Rico General Corporation Act (the “PR-GCA”) provides that a corporation may include in its certificate of incorporation a provision eliminating or limiting the personal liability of members of its board of directors or governing body for breach of a director’s fiduciary duty of care. However, no such provision may eliminate or limit the liability of a director for breaching his duty of loyalty, failing to act in good faith, engaging in intentional misconduct or knowingly violating a law, paying an unlawful dividend or approving an unlawful stock repurchase or obtaining an improper personal benefit.

      (c) Article 4.08 of the PR-GCA authorizes a Puerto Rico corporation to indemnify its officers and directors against liabilities arising out of pending or threatened actions, suits or proceedings to which such officers and directors may be made parties by reason of being officers or directors. Such rights of indemnification are not exclusive of any other rights to which such officers or directors may be entitled under any by-law, agreement, vote of stockholders or otherwise.

      (d) Popular, Inc. maintains directors’ and officers’ liability insurance.

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Item 16.     Exhibits

Exhibit
No.		Description
	1	Form of Underwriting Agreement
	4.1	Junior Subordinated Indenture dated as of October 31, 2003 between Popular, Inc. and J.P. Morgan Trust Company, National Association (formerly Bank One Trust Company, N.A.) (incorporated by reference from Exhibit 4.2 to Popular’s Current Report as Form 8-K dated November 3, 2003)
	4.2	Form of Certificate of Junior Subordinated Debenture
	4.3	Certificate of Trust of each of Popular Capital Trust II, Popular Capital Trust III, and Popular Capital Trust IV (the “Trusts”) (incorporated by reference to Exhibit 4.3 to Popular’s Registration Statement on Form S-3 filed September 5, 2003)
	4.4	Declaration of Trust and Trust Agreement of each of the Trusts (incorporated by reference to Exhibit 4.4 to Popular’s Registration Statement on Form S-3 filed September 5, 2003)
	4.5	Form of Amended and Restated Declaration of Trust and Trust Agreement for each of the Trusts
	4.6	Form of Preferred Security Certificate for each of the Trusts (included as part of Exhibit 4.5)
	4.7	Form of Preferred Securities Guarantee Agreement for each of the Trusts
	5.1	Opinion of Brunilda Santos de Alvarez, General Counsel to Popular, Inc.
	5.2	Opinion of Richards, Layton & Finger, P.A. special Delaware counsel to the Trusts, as to the validity of the Trust Preferred Securities to be issued by the Trusts.
	12	Computations of ratio of earnings to fixed charges and ratio of earnings to fixed charges and Preferred Stock dividends (incorporated by reference to Exhibit 12.1 to Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004)
	23.1	Consent of PricewaterhouseCoopers LLP
	23.2	Consent of Brunilda Santos de Alvarez, General Counsel to Popular, Inc. (included in Exhibit 5.1)
	23.3	Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2)
	24.1	Power of Attorney of Popular, Inc. (included in page II-5 and II-6 hereof)
	24.2	Power of Attorney of each of the Trusts (included as part of Exhibit 4.4)
	25.1	Form T-1 Statement of Eligibility of J.P. Morgan Trust Company, National Association to act as trustee under the Junior Subordinated Indenture
	25.2	Form T-1 Statement of Eligibility of J.P. Morgan Trust Company, National Association to act as trustee under the Declaration of Trust and Trust Agreement of the Trusts
	25.3	Form T-1 Statement of Eligibility of J.P. Morgan Trust Company, National Association under the Guarantee Agreement for the benefit of the holders of the Preferred Securities

Item 17.     Undertakings

      Each of the undersigned Registrants hereby undertakes:

      (a) (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

      (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

      (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b)

II-3

if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement;

      (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrants pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement.

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

      (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

      (b) For purposes of determining any liability under the Securities Act of 1933, as amended, each filing of a Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to 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 herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

      (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of each undersigned Registrant pursuant to the provisions, or otherwise, each Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by each undersigned Registrant of expenses incurred or paid by a director, officer of controlling person of each Registrant 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, each Registrant will, unless in the opinion of its counsel the matter has been settled by the controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

      (d) (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 Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 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 at that time shall be deemed to be the initial bona fide offering thereof.

      (e) To file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act.

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SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this 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 9th day of November, 2004.

POPULAR, INC.

By:  /s/ JORGE A. JUNQUERA

Jorge A. Junquera

Senior Executive Vice President

(Principal Financial Officer)

      Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Each of the directors and/or officers of the Registrant whose signature appears below hereby appoints each of Jorge A. Junquera, Richard Barrios and Brunilda Santos de Alvarez, as his or her attorney-in-fact to sign in his or her name and behalf, in any and all capacities stated below and to file with the Securities and Exchange Commission any and all amendments, including post-effective amendments, to this Registration Statement on Form S-3, and any Registration Statement relating to the same Offering as this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, making such changes in the Registration Statement as appropriate, and generally to do all such things in their behalf in their capacities as directors and/or officers to enable the Registrant to comply with the provisions of the Securities Act of 1933 and all requirements of the Securities and Exchange Commission.

Signature	Title	Date
/s/ RICHARD L. CARRIÓN Richard L. Carrión	Chairman, President and Chief Executive Officer (Principal Executive Officer)	November 9, 2004
/s/ JUAN J. BERMÚDEZ Juan J. Bermúdez	Director	November 9, 2004
/s/ JOSE B. CARRIÓN, JR. Jose B. Carrión, Jr.	Director	November 9, 2004
/s/ MARíA LUISA FERRÉ María Luisa Ferré	Director	November 9, 2004
/s/ MANUEL MORALES, JR. Manuel Morales, Jr.	Director	November 9, 2004
/s/ FRANCISCO M. REXACH, JR. Francisco M. Rexach, Jr.	Director	November 9, 2004
Frederic V. Salerno	Director

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Signature	Title	Date
/s/ FÉLIX J. SERRALLÉS Félix J. Serrallés	Director	November 9, 2004
William J. Teuber, Jr.	Director
/s/ JOSÉ R. VIZCARRONDO José R. Vizcarrondo	Director	November 9, 2004
/s/ JORGE A. JUNQUERA Jorge A. Junquera	Senior Executive Vice President (Principal Financial Officer)	November 9, 2004
/s/ ILEANA GONZÁLEZ Ileana González	Senior Vice President (Principal Accounting Officer)	November 9, 2004

      Pursuant to the requirements of the Securities Act of 1933, Popular Capital Trust II, Popular Capital Trust III, and Popular Capital Trust IV, certify that they have reasonable grounds to believe that they meet all the requirements for filing on Form S-3 and have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of San Juan, Commonwealth of Puerto Rico, on the 9th day of November, 2004.

POPULAR CAPITAL TRUST II

POPULAR CAPITAL TRUST III

POPULAR CAPITAL TRUST IV

By:  Popular, Inc., as Depositor

By:  /s/ JORGE A. JUNQUERA

Jorge A. Junquera

Senior Executive Vice President

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EXHIBIT INDEX

Exhibit No.			Description
	1		Form of Underwriting Agreement
	4	.1	Junior Subordinated Indenture dated as of October 31, 2003 between Popular, Inc. and J.P. Morgan Trust Company, National Association (formerly Bank One Trust Company, N.A.) (incorporated by reference from Exhibit 4.2 to Popular’s Current Report on Form 8-K dated November 3, 2003)
	4	.2	Form of Certificate of Junior Subordinated Debenture
	4	.3	Certificate of Trust of each of Popular Capital Trust II, Popular Capital Trust III, and Popular Capital Trust IV (the “Trusts”) (incorporated by reference to Exhibit 4.3 to Popular’s Registration Statement on Form S-3 filed September 5, 2003)
	4	.4	Declaration of Trust and Trust Agreement of each of the Trusts (incorporated by reference to Exhibit 4.4 to Popular’s Registration Statement on Form S-3 filed September 5, 2003)
	4	.5	Form of Amended and Restated Declaration of Trust and Trust Agreement for each of the Trusts
	4	.6	Form of Preferred Security Certificate for each of the Trusts (included as part of Exhibit 4.5)
	4	.7	Form of Preferred Securities Guarantee Agreement for each of the Trusts
	5	.1	Opinion of Brunilda Santos de Alvarez, General Counsel to Popular, Inc.
	5	.2	Opinion of Richards, Layton & Finger, P.A. special Delaware counsel to the Trusts, as to the validity of the Trust Preferred Securities to be issued by the Trusts.
	12		Computations of ratio of earnings to fixed charges and ratio of earnings to fixed charges and Preferred Stock dividends (incorporated by reference to Exhibit 12.1 to Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004)
	23	.1	Consent of PricewaterhouseCoopers LLP
	23	.2	Consent of Brunilda Santos de Alvarez, General Counsel to Popular, Inc. (included in Exhibit 5.1)
	23	.3	Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2)
	24	.1	Power of Attorney of Popular, Inc. (included in page II-5 and II-6 hereof)
	24	.2	Power of Attorney of each of the Trusts (included as part of Exhibit 4.4)
	25	.1	Form T-1 Statement of Eligibility of J.P. Morgan Trust Company, National Association to act as trustee under the Junior Subordinated Indenture
	25	.2	Form T-1 Statement of Eligibility of J.P. Morgan Trust Company, National Association to act as trustee under the Declaration of Trust and Trust Agreement of the Trusts
	25	.3	Form T-1 Statement of Eligibility of J.P. Morgan Trust Company, National Association under the Guarantee Agreement for the benefit of the holders of the Preferred Securities

EX-1

                                                                       EXHIBIT 1


                                   4,000,000

                            POPULAR CAPITAL TRUST II
          ____% Cumulative Monthly Income Trust Preferred Securities,
        Guaranteed to the extent set forth in the Guarantee Agreement by

                                 POPULAR, INC.

                             UNDERWRITING AGREEMENT




                                        November __, 2004


Popular Securities, Inc.
As representative
of the several Underwriters named in Schedule 1
Hato Rey, Puerto Rico 00918

Ladies and Gentlemen:

         POPULAR CAPITAL TRUST II, a statutory trust created under the Statutory
Trust Act (the "Delaware Act") of the state of Delaware (the "Trust"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to you and the other underwriters named in Schedule 1 hereto (collectively, the
"Underwriters"), for whom you are acting as the representative (the
"Representative") 4,000,000 of its ____% Cumulative Monthly Income Trust
Preferred Securities (the "Trust Preferred Securities"). The Trust Preferred
Securities shall have the terms described in the Prospectus (as defined below).

         The Trust Preferred Securities shall be guaranteed by Popular, Inc.
(the "Company") to the extent set forth in the Prospectus, with respect to the
distributions and amounts payable upon liquidation and redemption, pursuant to
the Guarantee Agreement, to be dated as of the Closing Date (as defined below)
(the "Guarantee Agreement"), and to be executed and delivered by the Company and
J.P. Morgan Trust Company, National Association, a national banking association
("J.P. Morgan"). The proceeds from the sale of the Trust Preferred Securities
will be aggregated with the proceeds from the sale by the Trust to the Company
of the Common Securities of the Trust (the "Common Securities") and will be used
by the Trust to purchase ____% junior subordinated debt securities (the
"Debentures") issued by the Company. The Trust Preferred Securities and the
Common Securities will be issued pursuant to an Amended and Restated Declaration
of Trust and Trust Agreement (the "Trust Agreement") among the Company, Chase
Manhattan Bank USA, National Association, a national banking association, as
Delaware Trustee (in such capacity, the "Delaware Trustee"), Jorge A. Junquera
and Richard Barrios, both of


 whom are employees or officers of or affiliated with the Company (the
"Administrative Trustees"), and J.P. Morgan, as "Property Trustee" and
"Guarantee Trustee" (the Delaware Trustee, the Administrative Trustees, the
Property Trustee and the Guarantee Trustee, collectively, the "Trustees"). The
Debentures will be issued pursuant to a Junior Subordinated Indenture (the
"Indenture") among the Company and J.P. Morgan, as Indenture Trustee (in such
capacity, the "Indenture Trustee").

         The Company and the Trust hereby confirm as follows its agreements
with the Representative and the several other Underwriters.

         1.       Agreement to Sell and Purchase.

                  (a)      On the basis of the representations, warranties and
agreements of the Company and the Trust herein contained and subject to all the
terms and conditions of this Agreement, the Trust agrees to sell to each
Underwriter and each Underwriter, severally and not jointly, agrees to purchase
from the Trust at a purchase price of $25 per Trust Preferred Security, the
number of Trust Preferred Securities set forth opposite the name of such
Underwriter in Schedule 1 hereto, plus such additional number of Trust
Preferred Securities which such Underwriter may become obligated to purchase
pursuant to Section 9 hereof.

                  (b)      Because the proceeds from the sale of the Trust
Preferred Securities shall be used to purchase the Debentures from the Company,
as compensation for its services hereunder, the Company will pay to the
Underwriters a nonrefundable fee in immediately available funds equal to
$__________, which shall be fully earned upon the delivery of the Trust
Preferred Securities on the Closing Date (as such term is defined below).

         2.       Delivery and Payment. Delivery of the Trust Preferred
Securities shall be made to the Representative for the accounts of the
Underwriters at the office of Pietrantoni Mendez & Alvarez LLP, counsel to the
Company, Banco Popular Center, 19th Floor, Hato Rey, Puerto Rico, against
payment of the purchase price by wire transfer of immediately available funds
to the bank account designated by the Company. Such payment shall be made at
10:00 a.m., New York City time, on the fourth full business day following the
date of this Agreement, or such other time on such other date, not later than
seven business days after the date of this Agreement, as may be agreed upon by
the Company and the Representative (such date is hereinafter referred to as the
"Closing Date"). Time shall be of the essence and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder.

         Certificates evidencing the Trust Preferred Securities shall be in
definitive form and shall be registered in such names and in such denominations
as the Representative shall request at least two business days prior to the
Closing Date by written notice to the Trust. For the purpose of expediting the
checking and packaging of certificates for the Trust Preferred Securities, the
Trust agrees to make such certificates available for inspection at least 24
hours prior to the Closing Date.


                                       2


         Notwithstanding the other provisions of this Section 2, if
transactions in the Trust Preferred Securities can be settled through the
facilities of The Depository Trust Company ("DTC"), payment for and delivery of
the Trust Preferred Securities on the Closing Date will be made through the
facilities of DTC if you are a member, unless you have otherwise notified us
prior to the date specified by you, or, if you are not a member, settlement may
be made through a correspondent who is a member pursuant to instruction you may
send to us prior to such specified date. The cost of original issue tax stamps,
if any, in connection with the issuance, sale and delivery of the Trust
Preferred Securities by the Trust to the respective Underwriters shall be borne
by the Company. The Company will pay and save each Underwriter and any
subsequent holder of the Trust Preferred Securities harmless from any and all
liabilities with respect to or resulting from any failure or delay in paying
Federal, state or Commonwealth of Puerto Rico stamp and other transfer taxes,
if any, which may be payable or determined to be payable in connection with the
original issuance, sale or delivery to such Underwriter of the Trust Preferred
Securities.

         3.       Representations and Warranties. Each of the Trust and the
Company jointly and severally represents and warrants, and agrees with, each
Underwriter that:

                  (a)      The Company and the Trust, as co-registrant with the
Company, meet the requirements for use of Form S-3, and a registration statement
(Registration No. 333-________ ) on Form S-3 with respect to the Trust Preferred
Securities, including a base prospectus and such amendments to such registration
statement as may have been required to the date of this Agreement, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission and has become effective. No
stop order suspending the effectiveness of the registration statement or
preventing or suspending the use of the Prospectus or any Preliminary Prospectus
(as defined below) has been issued and, to the Company's knowledge, no
proceeding for that purpose has been instituted or threatened by the Commission.
The term "Preliminary Prospectus" as used herein means a preliminary prospectus
relating to the Trust Preferred Securities included at any time as part of the
foregoing registration statement or any amendment thereto before it became
effective under the Act and any prospectus filed with the Commission by the
Company pursuant to Rule 424(b) of the Rules and Regulations. Copies of such
registration statement, any such amendment and each related Preliminary
Prospectus and all documents incorporated by reference therein that were filed
with the Commission on or prior to the date of this Underwriting Agreement have
been delivered to the Representative and its counsel. A final prospectus
relating to the Trust Preferred Securities containing information permitted to
be omitted at the time of effectiveness by Rule 430A of the Rules and
Regulations has been or will be prepared and filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations on or before the second business day
after the date hereof (or such earlier time as may be required by the Rules and
Regulations). The term "Registration Statement" means such registration
statement as amended at the time it became effective (the "Effective Date"),
including financial statements and all exhibits and any information deemed by
virtue of Rule 430A of the Rules and Regulations to be included in such
Registration Statement at the Effective Date (but excluding the Forms T-1) and
any prospectus supplement filed thereafter with


                                       3


the Commission, and shall include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The term "Prospectus"
means, collectively, the base prospectus together with any prospectus
supplement, in the respective forms they are filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations. Any reference herein to the terms
"amend", "amendment" or "supplement" with respect to the Registration
Statement, the Prospectus or any Preliminary Prospectus shall be deemed to
refer to and include the filing of any document under the Exchange Act after
the Effective Date, or the date of any Preliminary Prospectus or the
Prospectus, as the case may be, that is incorporated therein by reference. For
purposes of this Underwriting Agreement, all references to the Registration
Statement, the Prospectus, any Preliminary Prospectus or any amendment or
supplement thereto shall be deemed to include any copy filed with the
Commission pursuant to its Electronic Data Gathering Analysis and Retrieval
System (EDGAR), and such copy shall be identical (except to the extent
permitted by Regulation S-T) to any Prospectus delivered to the Representative
for use in connection with the offering of the Trust Preferred Securities by
the Trust.

                  (b)      Each part of the Registration Statement, when such
part became or becomes effective, each Preliminary Prospectus, on the date of
filing thereof with the Commission, and the Prospectus and any amendments or
supplement thereto, on the date of filing thereof with the Commission and at
the Closing Date, conformed or will conform in all material respects with the
requirements of the Act, the Trust Indenture Act of 1939 (the "Trust Indenture
Act") and the Rules and Regulations; each part of the Registration Statement
(excluding any prospectus supplement with respect to an offering of securities
other than the offering of the Trust Preferred Securities contemplated hereby),
when such part became or becomes effective, did not or 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; each Preliminary Prospectus, on the date of filing thereof with the
Commission, and the Prospectus and any amendment or supplement thereto, on the
date of filing thereof with the Commission and at the Closing Date, did not or
will not include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; the foregoing shall
not apply to the statements in or omissions from any such document relating to
any Underwriter in reliance upon, and in conformity with, written information
relating to such Underwriter furnished to the Company by the Representative, or
by any Underwriter through the Representative, specifically for use in the
preparation thereof. The Company has not distributed any offering material in
connection with the offering or sale of the Trust Preferred Securities other
than the Registration Statement, any Preliminary Prospectus, the Prospectus or
any other materials, if any, permitted by the Act.

                  (c)      The documents incorporated by reference in the
Registration Statement, the Prospectus and any amendment or supplement to such
Registration Statement or such Prospectus, when they became or become effective
under the Act or were or are filed with the Commission under the Exchange Act,
as the case may be, conformed or will conform in all material respects with the
requirements of the Act, the Trust Indenture Act, the Rules and Regulations,
the Exchange Act and


                                       4


the rules and regulations of the Commission thereunder (the "Exchange Act Rules
and Regulations"), as applicable.

                  (d)      The Trust has been duly formed and is validly
existing and in good standing as a statutory trust under Delaware law with
power and authority to own its property and conduct its business as described
in the Prospectus. All of the outstanding beneficial interests of the Trust
have been duly authorized and validly issued and are fully paid and
nonassessable undivided beneficial interests in the assets of the Trust; the
holders of such beneficial interests of the Trusts have no preemptive or other
rights to acquire Trust Preferred Securities or Common Securities.

                  (e)      The Trust Agreement has been duly authorized; and
when the Trust Preferred Securities are delivered and paid for pursuant to this
Agreement on the Closing Date, the Trust Agreement will have been duly executed
and delivered and will constitute a valid and legally binding instrument,
enforceable 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 Guarantee Agreement has been duly authorized;
and when the Trust Preferred Securities are delivered and paid for pursuant to
this Agreement on the Closing Date, the Guarantee Agreement will have been duly
executed and delivered and will constitute a valid and legally binding
instrument enforceable 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.

                  (g)      The Trust Preferred Securities have been duly
authorized; when the Trust Preferred Securities are delivered and paid for
pursuant to this Agreement on the Closing Date, such Trust Preferred Securities
will (i) have been validly issued and fully paid, (ii) represent nonassessable
undivided beneficial interest in the assets of the Trust, (iii) be entitled to
the benefits set forth in the Trust Agreement and (iv) conform to the
description thereof contained in the Registration Statement, the Prospectus and
any amendment or supplement to such Registration Statement or such Prospectus;
the issuance of the Trust Preferred Securities is not subject to preemptive or
other similar rights; and the holders of the Trust Preferred Securities will be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit incorporated under the General Corporation
Law of the State of Delaware.

                  (h)      The Common Securities have been duly authorized;
when the Common Securities are delivered and paid for pursuant to this
Agreement on the Closing Date, such Common Securities will (i) have been
validly issued and fully paid, (ii) represent nonassessable undivided
beneficial interest in the assets of the Trust, (iii) be entitled to the
benefits set forth in the Trust Agreement and (iv) conform to the description
thereof contained in the Registration Statement, the Prospectus and any
amendment or supplement to such Registration Statement or such Prospectus; the
issuance of the Common Securities is not subject to preemptive or other similar
rights; and the holders of the Common Securities will be entitled to the same
limitation of personal liability


                                       5


extended to stockholders of private corporations for profit incorporated under
the General Corporation Law of the State of Delaware; and at the Closing Date,
all of the issued and outstanding Common Securities of the Trust will be
directly owned by the Company free and clear of any security interest,
mortgage, pledge, lien encumbrance, claim or equity.

                  (i)      The only direct or indirect subsidiaries of the
Company ("Subsidiaries") that are "significant subsidiaries" as defined in Rule
405 of Regulation C of the Rules and Regulations under the Act (each, a
"Significant Subsidiary") are Banco Popular de Puerto Rico, a Puerto Rico
corporation ("Banco Popular"), Popular International Bank, Inc., a Puerto Rico
corporation, Popular North America, Inc., a Delaware corporation, Banco Popular
North America, Inc., a New York corporation, and Equity One, Inc., a Delaware
corporation. The Company has been and, at the Closing Date, will be duly
organized and validly existing as a corporation under the laws of the
Commonwealth of Puerto Rico and is and, at the Closing Date, will be in good
standing in the Commonwealth of Puerto Rico. The Company is and will be as of
the Closing Date registered with the Board of Governors of the Federal Reserve
System (the "Federal Reserve") as a bank holding company under the Bank Holding
Company Act of 1956 (the "BHCA") and its election to be treated as a financial
holding company under the BHCA, as amended by the Gramm-Leach-Bliley Act, is
and will remain in full force and effect. Each of the Significant Subsidiaries
is and, at the Closing Date, will be a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation. Each of the Company and its Significant Subsidiaries is and, at
the Closing Date, will be duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its business
or use of its property and assets makes such qualification necessary, except
where the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, prospects or business
affairs of the Company and its Subsidiaries considered as a single enterprise
(a "Material Adverse Effect"). All of the outstanding shares of capital stock
of each Significant Subsidiary have been duly and validly authorized and issued
and are fully paid and nonassessable (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 are owned directly or indirectly
by the Company free and clear of any perfected security interest and, to the
knowledge of such counsel, any other security interests, claims, liens or
encumbrances.

                  (j)      The outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable and are not subject to any preemptive or similar rights. The
Debentures to be issued and sold by the Company will be, upon such issuance and
payment therefore, duly authorized, valid, binding and enforceable obligations
of the Company. The Company has, and, upon completion of the sale of the
Debentures, will have, an authorized, issued and outstanding capitalization as
set forth in the Registration Statement and the Prospectus. The description of
the securities of the Company in the Registration Statement, the Preliminary
Prospectus and the Prospectus is, and at the Closing Date, will be, complete
and accurate in all respects. No holders of securities of the Company are
entitled to have such securities registered under the Registration Statement,
except where such rights have been waived.


                                       6


                  (k)      The consolidated financial statements and the
related notes of the Company included in the Registration Statement or
incorporated by reference therein and in the Prospectus present fairly the
financial condition of the Company and its Subsidiaries as of the dates
indicated and the consolidated results of operations and cash flows of the
Company and its Subsidiaries for the periods covered thereby, all in conformity
with generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the entire periods involved. PricewaterhouseCoopers LLP (the
"Accountants"), who have reported on those of such financial statements and
related notes which are audited, are independent accountants with respect to
the Company and its Subsidiaries within the meaning of the Act and the
applicable and published rules and regulations.

                  (l)      The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

                  (m)      Except as set forth in the Registration Statement
and Prospectus, subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the Closing
Date, (i) there has not been, and will not have been, any material adverse
change in the business, properties, financial condition, net worth or results
of operations of the Company and its Subsidiaries considered as a single
enterprise, (ii) neither the Company nor any of its Significant Subsidiaries
has entered into, or will have entered into any transactions that would be
considered material to the Company and its Subsidiaries considered as a single
enterprise, other than pursuant to this Agreement, and (iii) the Company has
not, and will not have, paid or declared any dividends or other distributions
of any kind on any class of its capital stock, except for the payment or
declaration of quarterly dividends on the Company's common stock (the "Common
Stock"), and the payment of monthly dividends on the Company's preferred stock,
in each case in the ordinary course of its business.

                  (n)      Neither the Trust nor the Company is and, after
giving effect to the offering and sale of the Trust Preferred Securities and
the Debentures and the application of the proceeds thereof as described in the
Prospectus, neither of them will be, required to be registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act").

                  (o)      Except as set forth or incorporated by reference in
the Registration Statement and the Prospectus, there are no actions, suits,
arbitrations, claims, governmental or other proceedings (formal or informal),
or investigations pending or threatened against or affecting the Company or any
of its Significant Subsidiaries, or any directors, officers or shareholders of
the Company or any of its Significant Subsidiaries in their respective
capacities as such, or any of the properties or assets owned or leased by the
Company or any of its Significant Subsidiaries, before or by any Federal, state
or Commonwealth of Puerto Rico court, commission, regulatory board,


                                       7


administrative agency or other governmental body, domestic or foreign
(collectively, a "Governmental Body"), wherein an unfavorable ruling, decision
or finding would adversely affect the business, prospects, financial condition,
net worth or results of operations of the Company and its Subsidiaries
considered as a single enterprise and would be required to be disclosed in the
Registration Statement and Prospectus. Neither the Company nor any Significant
Subsidiary is in violation of, or in default with respect to, any law, rule, or
regulation, or any order, judgment, or decree, except as described in the
Prospectus or such as in the aggregate do not now have and can reasonably be
expected in the future not to have a material adverse effect upon the
operations, business, properties, or assets of the Company and its Subsidiaries
considered as a single enterprise; nor is the Company or any Significant
Subsidiary presently required under any order, judgment or decree to take any
action in order to avoid any such violation or default, except as described in
the Prospectus.

                  (p)      The Company and each of its Significant Subsidiaries
possess and, at the Closing Date, will possess adequate governmental permits,
consents, orders, approvals, franchises, certificates and other authorizations
(collectively, "Licenses") necessary to carry on their respective businesses
and own or lease their respective properties as contemplated in the
Registration Statement and Prospectus. The Company and each of its Significant
Subsidiaries have and, at the Closing Date, will have complied in all material
respects with all laws, regulations and orders applicable to it or its
business, assets and properties, except for such violations, individually or in
the aggregate, which are not reasonably expected to have a material adverse
effect upon the operations, business, properties or assets of the Company and
its Significant Subsidiaries considered as a single enterprise. Neither the
Company nor any of its Significant Subsidiaries is, nor, at the Closing Date,
will be in default (nor has any event occurred which, with notice or lapse of
time or both, would constitute a default) in the due performance and
observation of any term, covenant or condition of any indenture, mortgage, deed
of trust, voting trust agreement, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, lease, contract or other agreement
or instrument (collectively, a "contract or other agreement") to which they are
a party or by which their respective properties are bound or affected, the
violation of which would individually or in the aggregate have a material
adverse effect on the condition, financial or otherwise, or the earnings,
prospects or business affairs of the Company and its Subsidiaries considered as
a single enterprise. There are no governmental proceedings or actions pending
or threatened for the purpose of suspending, modifying or revoking any License
held by the Company or any of its Significant Subsidiaries, except where such
suspension, modification or revocation would not individually or in the
aggregate have a material adverse effect on the condition, financial or
otherwise, or the earnings, prospects or business affairs of the Company and
its Subsidiaries considered as a single enterprise.

                  (q)      No consent, approval, authorization or order of, or
any filing or declaration with, any Governmental Body is required for the
consummation of the transactions contemplated by this Agreement or in
connection with the issuance and sale of the Trust Preferred Securities by the
Trust or in connection with the issuance and sale of the Debentures by the
Company, except such as have been obtained and such as may be required under
state or Commonwealth of Puerto Rico securities or blue sky laws or the bylaws
and rules of the National Association of Securities Dealers,


                                       8


Inc. (the "NASD") in connection with the purchase and distribution by the
Underwriters of the Trust Preferred Securities to be sold hereby.

                  (r)      Both the Trust and the Company have full power
(corporate and other) and authority to enter into this Agreement and to carry
out all the terms and provisions hereof to be carried out by it. This Agreement
has been duly authorized, executed and delivered by the Trust and the Company
and constitutes a valid and binding agreement of each of them and is
enforceable against each of them in accordance with the terms hereof, except as
rights to indemnity and contribution may be limited by federal, state or
Commonwealth of Puerto Rico securities laws or the public policy underlying
such laws. Except as disclosed in the Registration Statement and the
Prospectus, the execution, delivery and the performance of this Agreement and
the consummation of the transactions contemplated hereby will not result in the
creation or imposition of any Encumbrance upon any of the properties or assets
of the Trust, the Company or any of the Significant Subsidiaries pursuant to
the terms or provisions of, or result in a breach or violation of or conflict
with any of the terms or provisions of, or constitute a default under, or give
any other party a right to terminate any of its obligations under, or result in
the acceleration of any obligation under, (i) the Trust Agreement or the
Certificate of Incorporation or By-laws of the Company or any Significant
Subsidiary, in each case as amended, or (ii) any contract or other agreement to
which the Trust or the Company or any of the Significant Subsidiaries is a
party or by which it or any of their respective assets or properties are bound
or affected, the violation of which, in the case of the Company and the
Significant Subsidiaries, would individually or in the aggregate have a
material adverse effect on the condition, financial or otherwise, or the
earnings, prospects or business affairs of the Company and its Subsidiaries
considered as a single enterprise, or (iii) any judgment, ruling, decree,
order, law, statute, rule or regulation of any Governmental Body applicable to
the Trust, the Company or any of the Significant Subsidiaries or their
respective businesses or properties, the violation of which, in the case of the
Company and the Significant Subsidiaries, would individually or in the
aggregate have a material adverse effect on the financial condition or the
earnings, prospects or business affairs of the Company and its Subsidiaries
considered as a single enterprise.

                  (s)      No statement, representation, or warranty made by
the Trust or by the Company in this Agreement or made in any certificate or
document required by this Agreement to be delivered to the Representative was
or will be, when made, inaccurate, untrue or incorrect in any material respect.
Each certificate signed by an officer of the Company and delivered to the
Representative or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the
matters covered thereby.

                  (t)      Neither the Trust, the Company nor any of their
directors, officers or affiliates has taken, nor will he, she or it take,
directly or indirectly, any action designed, or which might reasonably be
expected in the future, to cause or result in, under the Act or otherwise, or
which has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Trust Preferred
Securities or otherwise.

                  (u)      Neither the Company nor any of its Significant
Subsidiaries is involved in any


                                       9


collective labor dispute with its employees nor is any such dispute threatened
or imminent.

                  (v)      Neither the Trust, the Company nor any of its
Significant Subsidiaries nor, to their best knowledge, any employee or agent of
the Trust, the Company or any Significant Subsidiary has made any payment of
funds of the Trust, the Company or any Significant Subsidiary or received or
retained any payment of funds of the Trust, the Company or any Significant
Subsidiary in violation of any law, rule or regulation, which payment, receipt
or retention of funds is of a character required to be disclosed in the
Prospectus.

                  (w)      The business, operations and facilities of the
Trust, the Company and its Significant Subsidiaries have been and are being
conducted in compliance with all applicable laws, ordinances, rules,
regulations, licenses, permits, approvals, plans, authorizations or
requirements relating to occupational safety and health, or pollution, or
protection of health or the environment (including, without limitation, those
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous or toxic substances, materials or wastes
into ambient air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment storage, disposal,
transport or handling of chemical substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, gaseous or
liquid in nature) of any governmental department, commission, board, bureau,
agency or instrumentality of the United States, any state, or the Commonwealth
of Puerto Rico or any political subdivision thereof, and all applicable
judicial or administrative agency or regulatory decrees, awards, judgments and
orders relating thereto; and neither the Company nor any of its Significant
Subsidiaries has received any notice from any governmental instrumentality or
any third party alleging any violation thereof or liability thereunder
(including, without limitation, liability for costs of investigating or
remediating sites containing hazardous substances or damages to natural
resources), except where failure to so comply would not have a material adverse
effect on the financial condition, or the earnings or business affairs of the
Company and its Subsidiaries considered as a single enterprise.

                  (x)      The Trust, the Company and each of its Significant
Subsidiaries has filed all foreign, federal, state and local tax returns that
are required to be filed or has requested extensions thereof and has paid all
taxes required to be paid by it and any other assessment, fine or penalty
levied against it, to the extent that any of the foregoing is due and payable,
except, in the case of the Company and each of its Significant Subsidiaries,
for any failure to file that would not have a material adverse effect on the
financial condition, or the earnings or business affairs of the Company and its
Subsidiaries considered as a single enterprise.

                  (y)      The Company and the Trust meet the requirements for
use of Form S-3 under the Rules and Regulations and the use of Rule 415 under
the Rules and Regulations.

                  (z)      The deposit accounts of Banco Popular, and of each
of the other Significant Subsidiaries of the Company that are depository
institutions, are insured by the Bank Insurance Fund (the "BIF") of the Federal
Deposit Insurance Corporation ("FDIC") to the legal maximum, and no proceeding
for the termination or revocation of such insurance is pending or threatened.
Banco


                                      10


Popular is a member in good standing of the Federal Reserve Bank of New York
and of the Federal Home Loan Bank of New York.

                  (aa)     Neither of the Trust, the Company nor any of its
Significant Subsidiaries or any of their respective directors or officers is
subject to any order or directive of, or party to any agreement with, any
regulatory agency having jurisdiction with respect to its business or
operations, except as disclosed in the Prospectus and except, in the case of
the Company and its Significant Subsidiaries, for any such order, directive or
agreement that is not material to the Company and its Subsidiaries considered
as a single enterprise.

                  (bb)     The Company has derived on an annual basis more than
20% of its gross income from Puerto Rico sources or from the conduct of a trade
or business in Puerto Rico since its incorporation in accordance with the
applicable sourcing rules under the Puerto Rico Internal Revenue Code of 1994,
as amended.

                  (cc)     The Company is not a "passive foreign investment
company" ("PFIC") within the meaning of Section 1296 of the United States
Internal Revenue Code of 1986, as amended, and does not anticipate that it will
become a PFIC in the foreseeable future.

                  (dd)     The Company is not a party to any agreement or order
of any governmental entity or court that, as of the date hereof, and assuming
no material adverse change to the Company's financial condition, restricts its
ability to pay interest on a monthly basis on the Debentures or restricts the
ability of the Trust to make monthly distributions on the Trust Preferred
Securities.

                  (ee)     The Trust is not a party to any agreement and has
not conducted any activities other than those incidental to its organization
and to the issuance of the Trust Preferred Securities and the Common
Securities, and is not subject to any order of any court or other governmental
entity.

                  (ff)     The Trust Preferred Securities have been approved
for listing on the Nasdaq National Market.

         4.       Agreements of the Company and the Trust. Each of the Trust
and the Company, jointly and severally covenants and agrees with each of the
several Underwriters as follows:

                  (a)      If a Prospectus Supplement has not been filed as
contemplated by Section 3(a) hereof, the Company and the Trust will cause the
Prospectus Supplement to be filed as contemplated by Section 3(a) hereof (but
only if the Representative has not reasonably objected thereto by notice to the
Company and the Trust after having been furnished a copy within a reasonable
time prior to filing) and will notify the Representative promptly of such
filing. The Company and the Trust will not during such period as the Prospectus
is required by law to be delivered in connection with sales of the Trust
Preferred Securities by any Underwriter or dealer (the "Prospectus Delivery
Period"), file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representative within a reasonable period of time prior


                                      11


to the filing thereof and the Representative shall not have objected thereto in
good faith.

                  (b)      Each of the Company and the Trust will use its best
efforts to cause the Registration Statement to remain effective through the
completion of the Underwriters' distribution of the Trust Preferred Securities,
and will notify the Representative promptly, and will confirm such advice in
writing, (i) of the preparation and filing (subject to Section 4(a)) of any
post-effective amendment to the Registration Statement and when any such
post-effective amendment becomes effective, (ii) of any request by the
Commission for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose or the threat
thereof, (iv) of the suspension of the qualification or registration of the
Trust Preferred Securities for offering or sale in any jurisdiction, or of the
initiation or threat of any proceeding for any such purpose; (v) of the
happening of any event during the Prospectus Delivery Period that in the
judgment of the Company makes any statement made in the Registration Statement
or the Prospectus untrue or that requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances in which they are made, not misleading
and (vi) of the receipt by the Company or any representative or attorney of the
Company of any other communication from the Commission relating to the Company,
the Registration Statement, any Preliminary Prospectus or the Prospectus. If at
any time the Commission or any jurisdiction shall threaten to issue, or shall
issue, any order suspending the effectiveness of the Registration Statement or
suspending the qualification or registration of the Trust Preferred Securities
for sale in any jurisdiction, the Company and the Trust will make every
reasonable effort to prevent the issuance of such order and, if such an order
should be issued, to obtain the withdrawal of such order at the earliest
possible moment. Each of the Company and the Trust will use its best efforts to
comply with the provisions of and make all requisite filings with the
Commission pursuant to Rule 430A and to notify the Representative promptly of
all such filings.

                  (c)      If, at any time when a Prospectus relating to the
Trust Preferred Securities is required to be delivered under the Act, any event
occurs as a result of which, in the judgment of the Company or the
Underwriters, the Prospectus, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or the Registration
Statement, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein not misleading, or if for any other reason it is necessary
at any time to amend or supplement the Prospectus or the Registration Statement
to comply with the Act or the Rules and Regulations, the Trust and the Company
will promptly notify the Representative thereof and, subject to Section 4(b)
hereof, will prepare and file with the Commission, at the Company's expense, an
amendment to the Registration Statement or an amendment or supplement to the
Prospectus that corrects such statement or omission or effects such compliance.

                  (d)      The Company will furnish to the Representative,
without charge, with a signed


                                      12


copy of the Registration Statement and of any post-effective amendment thereto,
including financial statements and schedules, and all exhibits thereto and will
furnish to the Representative, without charge, for transmittal to each of the
other Underwriters, copies of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules but without
exhibits.

                  (e)      The Company will comply with all the provisions of
all undertakings contained in the Registration Statement.

                  (f)      During the Prospectus Delivery Period, the Company
will promptly furnish to the Underwriters, without charge, as many copies of
the Prospectus (containing the Prospectus Supplement) and any amendment or
supplement thereto as the Underwriters may from time to time reasonably
request. The Company consents to the use of the Prospectus, as amended or
supplemented from time to time, by the Underwriters and by all dealers to whom
the Trust Preferred Securities may be sold, both in connection with the
offering or sale of the Trust Preferred Securities and, thereafter, during the
Prospectus Delivery Period. If during the Prospectus Delivery Period any event
shall occur which in the judgment of the Company or the Underwriters should be
set forth in the Prospectus in order to make any statement therein, in the
light of the circumstances under which it was made, not misleading, or if, in
the judgment of the Company or the Underwriters, it is necessary to supplement
or amend the Prospectus to comply with law, the Company will forthwith prepare
and duly file with the Commission an appropriate supplement or amendment
thereto. Except as required by the Exchange Act or the Exchange Act Rules and
Regulations, the Company shall not file any document under the Exchange Act to
which the Representative reasonably objects before the termination of the
Prospectus Delivery Period if such document would be deemed to be incorporated
by reference into the Prospectus.

                  (g)      Prior to any public offering of the Trust Preferred
Securities by the Underwriters, the Trust and the Company will cooperate with
the Representative and its counsel in connection with the registration or
qualification of the Trust Preferred Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as the Representative may
reasonably request; provided, that in no event shall the Company be obligated
to qualify to do business in any jurisdiction where it is not now so qualified
or to take any action which would subject it to general service of process in
any jurisdiction where it is not now so subject.

                  (h)      The Company will furnish to the Representative and
each other Underwriter who may so request copies of such financial statements
and other periodic and special reports as the Company may from time to time
distribute generally to the holders of any class of its capital stock, and will
furnish to the Representative and each other Underwriter who may so request a
copy of each annual or other report it shall be required to file with the
Commission.

                  (i)      The Company will timely file several reports
pursuant to the Exchange Act as are necessary in order to make generally
available to the security holders of the Company as soon as practicable an
earnings statement for the purposes of, and to provide for the benefits
contemplated


                                      13


by, the last paragraph of Section 11(a) of the Act.

                  (j)      The Trust and the Company will apply the net
proceeds from the offering and sale of the Trust Preferred Securities in the
manner set forth in the Prospectus under "Use of Proceeds."

                  (k)      The Trust and the Company will not at any time,
directly or indirectly, take any action intended, or which might reasonably be
expected, to cause or result in, or which will constitute, stabilization of the
price of the shares of Trust Preferred Securities to facilitate the sale or
resale of any of the Trust Preferred Securities.

                  (l)      During the period beginning on the date of this
Agreement and continuing and including the Closing Date, the Company will not,
without the consent of the Representative, publicly offer or announce the
public offering of, any securities that are substantially similar to the Trust
Preferred Securities and are covered by a registration statement filed under
the Act.

         5.       Expenses.

                  (a)      Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will
pay, or reimburse if paid by the Representative, all costs and expenses
incidental to the performance by the Trust of its obligations under this
Agreement, including, but not limited to, costs and expenses of or relating to
(i) the preparation, printing and filing by the Company of the Registration
Statement and exhibits thereto, each Preliminary Prospectus prior to or during
the period specified in the first sentence of Section 4(f) but not exceeding
nine months after the Effective Date, the Prospectus and any amendment or
supplement to the Registration Statement or the Prospectus, (ii) the
preparation and delivery of certificates representing the Trust Preferred
Securities, (iii) furnishing (including costs of shipping and mailing) such
copies of the Registration Statement, the Prospectus and any Preliminary
Prospectus, and all amendments and supplements thereto, as may be requested for
use in connection with the offering and sale of the Trust Preferred Securities
by the Underwriters or by dealers to whom Trust Preferred Securities may be
sold, (iv) the filing fees and out-of-pocket expenses relating to such filings
for any filings required to be made by the Underwriters with the NASD, (v) the
registration or qualification of the Trust Preferred Securities for offer and
sale under the securities or blue sky laws of such jurisdictions designated
pursuant to Section 4(g) and the preparation and printing of preliminary,
supplemental and final blue sky memoranda, (vi) counsel and accountants to the
Company, and (vii) the transfer agent for the Trust Preferred Securities. The
Company will also pay all fees and expenses of the Debenture Trustee, including
the fees and disbursements of counsel for the Debenture Trustee in connection
with the Indenture and the Debentures; the fees and expenses of the Property
Trustee and the Delaware Trustee, including the fees and disbursements of
counsel for the Property Trustee and the Delaware Trustee in connection with
the Certificate of Trust filed with the Delaware Secretary of State with
respect to the Trust (the "Certificate of Trust") and the Trust Agreement; and
the fees and expenses of the Guarantee Trustee, including the fees and
disbursements of counsel for the Guarantee Trustee in connection with the
Guarantee and the


                                      14


Guarantee Agreement.

                  (b)      If the transactions contemplated by this Agreement
are not consummated or if this Agreement is terminated by the Company or the
Trust pursuant to any of the provisions hereof, the Company will reimburse the
Representative for all of their accountable out-of-pocket fees and expenses
(including the fees, disbursements and other charges of their counsel) incurred
by them in connection herewith.

         6.       Conditions of the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Trust Preferred Securities
shall be subject to the accuracy of the representations and warranties on the
part of the Trust and the Company contained herein as of the date hereof, as of
the date of the effectiveness of any amendment to the Registration Statement
filed after the date hereof and prior to the Closing Date (including the filing
of any document incorporated by reference therein) and as of the Closing Date,
to the accuracy of the statements of the Trust and the Company made in any
certificates pursuant to the provisions hereof, to the performance by the Trust
and the Company of their obligations hereunder and to the following additional
conditions:

                  (a)      All filings required under Rule 424 and 430A of the
Rules and Regulations to be made by the Company or the Trust prior to the
Closing shall have been made by the Company or the Trust, as the case may be.

                  (b)      (i) No stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Trust Preferred Securities under the securities or blue
sky laws of any jurisdiction shall be in effect, and no proceeding for such
purpose shall be pending before or threatened or contemplated by the Commission
or the authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the
Commission or such authorities, and (iv) after the date hereof no amendment or
supplement to the Registration Statement or the Prospectus shall have been
filed unless a copy thereof was first submitted to the Representative and the
Representative did not object thereto in good faith, and the Representative
shall have received certificates, dated the Closing Date and signed by the
Chief Executive Officer, the President or any Senior Executive Vice President
of the Company and the Chief Financial Officer, the Treasurer or the Chief
Accounting Officer of the Company (who may, as to proceedings threatened, rely
upon the best of their information and belief), to the effect of the foregoing
clauses (i), (ii) and (iii).

                  (c)      Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, (i) there shall not
have been a material adverse change in the general affairs, business,
properties, management, financial condition or results of operations of the
Trust, or of the Company and its Subsidiaries considered as a single
enterprise, whether or not arising from transactions in the ordinary course of
business, and (ii) the Trust, or the Company and its Subsidiaries considered as
a single enterprise, shall not have sustained any material loss or


                                      15


interference with its business, assets or properties from fire, explosion,
flood or other casualty, or from any labor dispute or any court or legislative
or other governmental action, order or decree.

                  (d)      Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, there shall have
been no litigation or other proceeding instituted against the Trust, the
Company or any Significant Subsidiary, or any of their officers, directors or
shareholders in their capacities as such, or any of their assets or properties,
before or by any Governmental Body in which litigation or proceeding, in the
case of the Company and its Significant Subsidiaries, an unfavorable ruling,
decision or finding would materially and adversely affect the business,
properties, financial condition, net worth or results of operations of the
Company and its Subsidiaries considered as a single enterprise.

                  (e)      Each of the representations and warranties of the
Trust and the Company contained herein shall be true and correct at the Closing
Date as if made on such date, and all covenants and agreements herein contained
to be performed on the part of the Trust or the Company and all conditions
herein contained to be fulfilled or complied with by the Trust or the Company
at or prior to the Closing Date shall have been fully performed, fulfilled or
complied with.

                  (f)      The Representative shall have received opinions,
dated the Closing Date from Pietrantoni Mendez & Alvarez, LLP, counsel for the
Company, and Brunilda Santos de Alvarez, General Counsel of the Company, to the
following effect:

                           (A) in the case of the opinion from Pietrantoni
Mendez & Alvarez, LLP:

                                    (i)      The Company has been duly
organized and is validly existing as a corporation and is in good standing
under the laws of the Commonwealth of Puerto Rico; Banco Popular is a banking
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Puerto Rico;

                                    (ii)     The Registration Statement is
effective under the Act; any required filing of the Prospectus Supplement
pursuant to Rule 424(b) has been made in the manner and within the time period
required by Rule 424(b); and to the best knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto and no order directed at any document incorporated by
reference in the Registration Statement or any amendment thereto has been
issued, and no proceedings for that purpose have been instituted or are pending
or are threatened or contemplated under the Act;

                                    (iii)    The Registration Statement and the
Prospectus, as of their respective dates, appeared on their face to be
appropriately responsive, in all material respects (other than the documents
incorporated therein by reference and not including the financial statements,
schedules and other financial data contained therein, as to which such counsel
need not express any opinion), with the requirements of the Act and the related
Rules and Regulations thereunder;


                                      16


                                    (iv)     The descriptions contained and
summarized in the Registration Statement or the Prospectus, or incorporated
therein by reference, are accurate and fairly represent in all material
respects the information required to be shown in the Registration Statement and
Prospectus by the Act and the Rules and Regulations; and the statements set
forth under the headings "Description of Junior Subordinated Debt Securities",
"Description of Capital Securities", "Description of Guarantees", "Relationship
Among the Capital Securities, the Junior Subordinated Debentures and the
Guarantees," and "Plan of Distribution", insofar as such statements constitute
a summary of the legal matters, documents or proceedings referred to therein,
provide an accurate summary of such legal matters, documents and proceedings;

                                    (v)      The Company has full legal right,
power, and authority to enter into this Agreement and to consummate the
transactions provided for herein; and this Agreement has been duly authorized,
executed and delivered by the Company;

                                    (vi)     The Indenture has been duly
authorized, executed and delivered by the Company, has been duly qualified
under the Trust Indenture Act, as amended, and (assuming the Indenture has been
duly authorized, executed and delivered by the Debenture Trustee) constitutes a
valid and legally binding instrument enforceable against the Company in
accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect and subject
to general equity principles; and the Debentures have been duly authorized and
executed by the Company and, when authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Trust, the
Debentures will constitute valid and legally binding obligations of the Company
enforceable against the Company in accordance with their terms and entitled to
the benefits of the Indenture, subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect and subject
to general equity principles;

                                    (vii)    The Guarantee Agreement has been
duly authorized, executed and delivered by the Company, and (assuming the
Guarantee Agreement has been duly authorized, executed and delivered by the
Guarantee Trustee) constitutes a valid and legally binding instrument,
enforceable against the Company in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights generally from time to
time in effect and subject to general equity principles; and the Trust
Agreement has been duly authorized, executed and delivered by the Company and
each of the Administrative Trustees.

                                    (viii)   None of the Company's execution or
delivery of this Agreement, its performance hereof, its consummation of the
transactions contemplated herein or its application of the net proceeds of the
offering in the manner set forth under the caption "Use of Proceeds" conflicts
or will conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a default
under, or results or will result in the creation or imposition of any
Encumbrance upon, any property or assets of the Company


                                      17


pursuant to (A) the terms of the Certificate of Incorporation or By-laws of the
Company, in each case as amended; or (B) any statute, rule or regulation of any
Governmental Body having jurisdiction over the Company or any of its activities
or properties; and no consent, approval, authorization or order of any
Governmental Body has been or is required for the Company's performance of this
Agreement, the Guarantee Agreement, the Indenture, the Debentures, or the Trust
Agreement, or the consummation of the transactions contemplated hereby, except
such as have been obtained under the Act or may be required under state or
Commonwealth of Puerto Rico securities or blue sky laws in connection with the
purchase and distribution by the Underwriters of the Trust Preferred
Securities;

                                    (ix)     Neither the Company nor the Trust
are required to be registered as an investment company under the Investment
Company Act; and

                                    (x)      The deposit accounts of Banco
Popular are insured by the BIF of the FDIC to the legal maximum, and to such
counsel's knowledge no proceeding for the termination or revocation of such
insurance is pending or threatened. Banco Popular is a member of the Federal
Reserve Bank of New York and of the Federal Home Loan Bank of New York.

         In addition, such counsel shall state that in the course of the
preparation of the Prospectus, such counsel has participated in conferences
with officers and representatives of the Company and with the Accountants, at
which conferences such counsel made inquiries of such officers, representatives
and Accountants and discussed the contents of the Prospectus and, on the basis
of the foregoing and of the experience such counsel has gained through its
practice under the Act, nothing has come to such counsel's attention that
causes such counsel to believe that the Registration Statement as of the date
it became effective or the Prospectus as of its date and as of the Closing Date
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as of the date hereof and as of
the Closing Date, contained any untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel need not
express any opinion with respect to the financial statements, schedules and
other financial data included in the Prospectus). Such counsel may state that
they make no representation that they have independently verified the accuracy
or completeness of the statements contained in the Registration Statement and
Prospectus.

                           (B) in the case of the opinion from Brunilda Santos
de Alvarez:

                                    (i)      The Company has been duly
organized and is validly existing as a corporation and is in good standing
under the laws of the Commonwealth of Puerto Rico. Each of Banco Popular and
each of the other Significant Subsidiaries is a corporation or bank duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation. Each of the Company, Banco Popular,
and each of the other Significant Subsidiaries is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the character
or location of its properties (owned, leased or licensed) or the nature or
conduct of its


                                      18


business or use of its property and assets makes such qualification necessary,
except where the failure to so qualify would not have a material adverse effect
on the financial condition, or the earnings or business affairs of the Company
and its Subsidiaries considered as a single enterprise;

                                    (ii)     The Company has an authorized
capitalization as set forth in the Prospectus; the Company has duly authorized
the issuance and sale of the Debentures to be sold by it to the Trust and has
duly authorized the creation of the Trust and the issuance and sale by the
Trust of the Trust Preferred Securities to be sold by it hereunder; such
Debentures and Trust Preferred Securities, when issued by the Company and the
Trust, respectively, will be validly issued, fully paid and nonassessable
legal, valid and binding obligators of the Company and the Trust, respectively,
enforceable in accordance with their terms, subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors' rights generally from time to time in effect
and subject to general equity principles, will conform in all material respects
to the descriptions thereof contained in the Prospectus, and will not be
subject to any preemptive, subscription or other similar rights; and no holders
of securities of the Company are entitled to have such securities registered
under the Registration Statement, except for holders who have waived any such
registration rights;

                                    (iii)    The Guarantee Agreement has been
duly authorized, executed and delivered by the Company, and (assuming the
Guarantee Agreement has been duly authorized, executed and delivered by the
Guarantee Trustee) constitutes a valid and legally binding instrument,
enforceable against the Company in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights generally from time to
time in effect and subject to general equity principles; and the Trust
Agreement has been duly authorized, executed and delivered by the Company and
each of the Administrative Trustees;

                                    (iv)     To the knowledge of such counsel,
there are no contracts or documents which are required by the Act to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement which are not filed or incorporated
therein by reference as required by the Act and the Rules and Regulations;

                                    (v)      To the knowledge of such counsel,
there is not pending or threatened against the Trust, the Company or any of its
Significant Subsidiaries, any legal action or proceeding, suit, arbitration,
claim, or governmental or other proceeding (informal or formal) or
investigation before or by any Governmental Body, of a character required to be
disclosed in the Registration Statement or the Prospectus which is not so
disclosed therein or in the materials incorporated by reference therein, and to
the knowledge of such counsel, no such proceedings have been threatened against
the Trust, the Company or any of its Significant Subsidiaries, or any of their
respective assets or properties. To the knowledge of such counsel, neither the
Trust, the Company, nor any Significant Subsidiary is in violation of, or in
default with respect to, any law, rule, or regulation, or any order, judgment
or decree, except as described in the Registration Statement or Prospectus or
in the materials incorporated by reference therein, or, in the case of the
Company and


                                      19


its Significant Subsidiaries, such as in the aggregate do not now have and can
reasonably be expected in the future not to have a material adverse effect upon
the operations, business, properties, or assets of the Company and its
Subsidiaries considered as a single enterprise; nor is the Trust, the Company,
or any Significant Subsidiary presently required under any order, judgment or
decree to take any action in order to avoid any such violation or default;

                                    (vi)     Each of the Company and the Trust
has full legal right, power, and authority to enter into this Agreement and to
consummate the transactions provided for herein; and this Agreement has been
duly authorized, executed and delivered by the Company and the Trust;

                                    (vii)    None of the Company's or the
Trust's execution or delivery of this Agreement, its performance hereof, its
consummation of the transactions contemplated herein or its application of the
net proceeds of the offering in the manner set forth under the caption "Use of
Proceeds" conflicts or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any Encumbrance upon,
any property or assets of the Trust, the Company, or any of its Significant
Subsidiaries, pursuant to (A) the terms of Trust Agreement or the Certificate
of Incorporation or By-laws of the Company or any Significant Subsidiary, in
each case as amended; (B) the terms of any contract or other agreement to which
the Trust, the Company or any Significant Subsidiary is a party or by which any
of them is or may be bound or to which any of their properties is or may be
subject and of which such counsel has knowledge; (C) any statute, rule or
regulation of any Governmental Body having jurisdiction over the Trust, the
Company or any Significant Subsidiary or any of their activities or properties;
or (D) the terms of any judgment, decree or order of any court, arbitrator or
Governmental Body having such jurisdiction and of which such counsel has
knowledge, the breach of which, in the case of the Company and the Significant
Subsidiaries, would result in a material adverse effect on the financial
condition of the Company and its Subsidiaries, considered as a single
enterprise; and no consent, approval, authorization or order of any
Governmental Body has been or is required for the Company's or the Trust's
performance of this Agreement, the Guarantee Agreement, the Indenture, the
Debentures or the Trust Agreement, or the consummation of the transactions
contemplated thereby, except such as have been obtained under the Act or may be
required under state or Commonwealth of Puerto Rico securities or blue sky laws
in connection with the purchase and distribution by the Underwriters of the
Trust Preferred Securities;

                                    (viii)   To such counsel's knowledge, the
conduct of the respective businesses of the Trust, the Company and its
Significant Subsidiaries are not in violation of any federal, state or local
statute, administrative regulation or other law, which violation, in the case
of the Company and the Significant Subsidiaries, is likely to have a material
adverse effect on the Company and its Subsidiaries considered as a single
enterprise; and the Trust, the Company and its Significant Subsidiaries have
obtained all material licenses as are necessary or required for the conduct of
their businesses as presently conducted;

                                    (ix)     To the knowledge of such counsel,
none of the Trust, the Company or any of the Significant Subsidiaries is in
breach or violation of any of the terms or


                                      20


provisions of, or in default under (nor has an event occurred which with notice
or lapse of time or both would constitute a default or acceleration under), (A)
the terms of the Trust Agreement or its Certificate of Incorporation or
By-laws, in each case as amended; (B) the terms of any contract or other
agreement known to such counsel to which the Trust, the Company or any
Significant Subsidiary is a party or by which any of them is or may be bound or
to which any of their properties or assets is or may be subject, which breach,
violation or default, in the case of the Company and the Significant
Subsidiaries, could have a material adverse effect on the Company and its
Subsidiaries considered as a single enterprise; (C) any statute, rule or
regulation of any Government Body having jurisdiction over the Trust, the
Company or any Significant Subsidiary, or any of their activities, assets or
properties, which breach, violation or default, in the case of the Company and
the Significant Subsidiaries, could have a material adverse effect on the
Company and its Subsidiaries considered as a single enterprise; or (D) the
terms of any judgment, decree or order known to such counsel, of any arbitrator
or Governmental Body having such jurisdiction, which breach, violation or
default, in the case of the Company and the Significant Subsidiaries, could
have a material adverse effect on the Company and its Subsidiaries considered
as a single enterprise; provided such counsel shall not be required to opine as
to matters involving the Federal or state securities laws, other antifraud
provisions, fraudulent transfer laws and the United States Employee Retirement
Income Security Act of 1974.

                                    (x)      The deposit accounts of Banco
Popular and of each other Significant Subsidiary of the Company that is a
depository institution are insured by the BIF of the FDIC to the legal maximum,
and to such counsel's knowledge no proceeding for the termination or revocation
of such insurance is pending or threatened. Banco Popular is a member of the
Federal Reserve Bank of New York and of the Federal Home Loan Bank of New York;
and

                                    (xi)     To the knowledge of such counsel,
none of the Trust, the Company or any of its Significant Subsidiaries, or any
of their respective directors or officers, is subject to any order or directive
of, or party to any agreement with, any regulatory agency having jurisdiction
with respect to the business or operations of the Trust, the Company or any of
its Significant Subsidiaries, except as disclosed in the Registration Statement
or the Prospectus or in the materials incorporated by reference therein, and
except, in the case of the Company and the Significant Subsidiaries, for any
such order, directive or agreement that is not material to the Company and its
Subsidiaries considered as a single enterprise.

         In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and the Trust and public officials and, as to matters
involving the application of laws of any jurisdiction other than the
Commonwealth of Puerto Rico and the United States (to the extent satisfactory
in form and scope to counsel for the Underwriters) such counsel may rely upon
the opinion of local (including in-house) counsel to the Company. The foregoing
opinion shall also state that such counsel has no reason to believe that the
Underwriters are not justified in relying upon such opinion of local counsel,
and copies of such opinion shall be delivered to the Representative and its
counsel.


                                      21

         In addition, such counsel shall state that in the course of the
preparation of the Prospectus, such counsel has participated in conferences
with officers and representatives of the Company and with the Accountants, at
which conferences such counsel made inquiries of such officers, representatives
and Accountants and discussed the contents of the Prospectus and, on the basis
of the foregoing and of the experience such counsel has gained through its
practice under the Act, nothing has come to such counsel's attention that
causes such counsel to believe that the Registration Statement as of the date
it became effective or the Prospectus as of its date and as of the Closing Date
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as of the date hereof and as of
the Closing Date, contained any untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel need not
express any opinion with respect to the financial statements, schedules and
other financial data included in the Prospectus). Such counsel may state that
she makes no representation that she has independently verified the accuracy or
completeness of the statements contained in the Registration Statement and
Prospectus.

         References to the Registration Statement and the Prospectus in this
paragraph (f) shall include any amendment or supplement thereto at the date of
such opinion.

                  (g)      The Representative shall have received the opinion
of counsel to J.P. Morgan, as Property Trustee under the Trust Agreement,
Indenture Trustee under the Indenture, and Guarantee Trustee under the
Guarantee Agreement, dated the Closing Date, to the effect that:

                           (i)      J.P. Morgan is duly incorporated and is
validly existing in good standing as a banking corporation under the law of the
United States.

                           (ii)     J.P. Morgan has the power and authority to

execute, deliver and perform its obligations under the Trust Agreement, the
Indenture and the Guarantee Agreement.

                           (iii)    Each of the Trust Agreement, the Indenture
and the Guarantee Agreement has been duly authorized, executed and delivered by
J.P. Morgan and constitutes a legal, valid and binding obligation of J.P.
Morgan, enforceable against J.P. Morgan in accordance with its terms.

                           (iv)     The execution, delivery and performance by
J.P. Morgan of the Trust Agreement, the Indenture and the Guarantee Agreement do
not conflict with or constitute a breach of the charter or by-laws of J.P.
Morgan.

                           (v)      No consent, approval or authorization of,
or registration with or notice to, any governmental authority or agency of the
United States of America governing the banking or trust powers of J.P. Morgan is
required for the execution, delivery or performance by J.P. Morgan of the Trust
Agreement, the Indenture and the Guarantee Agreement.


                                      22


                  (h)      The Representative shall have received an opinion,
dated the Closing Date, from Richards, Layton & Finger, P.A., special Delaware
counsel to the Company, to the effect that:

                           (i)      The Trust has been duly created and is
validly existing in good standing as a business trust under the Delaware
Statutory Trust Act (the "Delaware Act"), and all filings required as of the
date hereof under the Delaware Act with respect to the creation and valid
existence of the Trust as a business trust have been made.

                           (ii)     Under the Trust Agreement and the Delaware
Act, the Trust has the trust power and authority to own property and to conduct
its business, all as described in the Prospectus.

                           (iii)    The Trust Agreement constitutes a valid and
legally binding instrument enforceable against the Company and each of the
Administrative Trustees in accordance with its terms (subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights generally from time to
time in effect and subject to general equity principles and except further as
enforcement thereof may be limited by any governmental authority that limits,
delays or prohibits the making of payments outside the United States).

                           (iv)     Under the Trust Agreement and the Delaware
Act, the Trust has the trust power and authority (i) to execute and deliver,
and to perform its obligations under, this Agreement, and (ii) to issue, and to
perform its obligations under, the Trust Preferred Securities and the Trust
Common Securities.

                           (v)      Under the Trust Agreement and the Delaware
Act, the execution and delivery by the Trust of this Agreement, and the
performance by the Trust of its obligations under this Agreement, have been
duly authorized by all necessary trust action on the part of the Trust.

                           (vi)     Under the Delaware Act, the certificate
attached to the Trust Agreement as Exhibit A is an appropriate form of
certificate to evidence ownership of the Trust Preferred Securities. The Trust
Preferred Securities have been duly authorized by the Trust pursuant to the
Trust Agreement and, when issued and delivered in accordance with this
Agreement, will be duly and validly issued, and, subject to the qualifications
hereinafter expressed in this paragraph (vi), fully paid and non-assessable
undivided beneficial interests in the assets of the Trust and are entitled to
the benefits of the Trust Agreement. The Trust Common Securities have been duly
authorized by the Trust Agreement and are duly and validly issued undivided
beneficial interests in the assets of the Trust and are entitled to the
benefits of the Trust Agreement. The holders of the Trust Preferred Securities,
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.


                                      23


                           (vii)    Under the Trust Agreement and the Delaware
Act, the issuance of the Trust Preferred Securities and the Trust Common
Securities is not subject to preemptive or similar rights.

                           (viii)   The issuance and sale by the Trust of the
Trust Preferred Securities and the Trust Common H Securities, the purchase by
the Trust of the Debentures, the execution, delivery and performance by the
Trust of this Agreement, the consummation by the Trust of the transactions
contemplated by this Agreement and compliance by the Trust with its obligations
under this Agreement do not violate (a) any of the provisions of the
Certificate of Trust or the Trust Agreement, (b) any applicable Delaware law or
Delaware administrative regulation.

                  (i)      The Representative shall have received an opinion,
dated the Closing Date, from O'Neill & Borges, counsel to the Underwriters,
which opinion shall be satisfactory in all respects to the Representative.

                  (j)      Concurrently with the execution and delivery of this
Agreement, the Accountants shall have furnished to the Representative a letter,
dated the date of its delivery (the "Accountants Letter"), addressed to the
Representative and in form and substance satisfactory to the Representative, to
the effect that:

                           (i)      they are independent accountants within the
meaning of the Act and the applicable published rules and regulations
thereunder;

                           (ii)     in their opinion, the consolidated
financial statements of the Company and its Subsidiaries audited by them and
incorporated by reference in the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the Act, the Exchange
Act and the published rules and regulations thereunder with respect to
registration statements on Form S-3;

                           (iii)    on the basis of procedures (but not an
audit in accordance with Public Company Accounting Oversight Board (PCAOB)
standards) consisting of (a) reading the minutes of meetings of the stockholders
and the Board of Directors of the Company and its Subsidiaries since December
31, 2003, as set forth in the minute books through a date five business days
before the date hereof; (b) performing the procedures specified by the American
Institute of Certified Public Accountants for a review of interim financial
information as described in SAS No. 71, "Interim Financial Information" on the
unaudited consolidated interim financial statements of the Company and its
Subsidiaries included in the Prospectus and reading the unaudited interim
financial data for the period from the date of the latest audited balance sheet
incorporated by reference in the Prospectus to the date of the latest available
interim financial data; and (c) making inquiries of certain officials of the
Company who have responsibility for financial and accounting matters regarding
the specific items for which representations are requested below, nothing has
come to their attention (as of a date not earlier than five business days before
the date hereof) as a result of the foregoing procedures that caused them to
believe that: (1) the unaudited consolidated interim financial statements
incorporated by reference in


                                      24


the Registration Statement or in the Prospectus, do not comply as to form in
all material respects with the applicable accounting requirements of the
Exchange Act and the published rules and regulations thereunder; (2) any
material modifications should be made to the unaudited consolidated interim
financial statements, if any, incorporated by reference in the Registration
Statement or in the Prospectus, for them to be in conformity with generally
accepted accounting principles; (3)(i) at the date of the latest available
interim financial data and at a specified date not earlier than five business
days before the date hereof, there was any decrease in the total assets or
consolidated stockholders' equity, any increase in long term debt, or any
change in capital stock of the Company and its Subsidiaries as compared with
amounts shown in the most recent balance sheet incorporated by reference in the
Prospectus and (ii) for the period from the date of the most recent balance
sheet incorporated by reference in the Prospectus to the date of the latest
interim financial data available, and to a date not earlier than five business
days before the date hereof, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated net interest
income, non-interest income, or in the total or per share amounts of net
income, except in all instances for changes or decreases which the Registration
Statement discloses have occurred or may occur, or they shall state any
specific changes or decreases; and

                           (iv)     the information set forth under the
captions "Ratios of Earnings to Fixed Charges and Preferred Stock Dividends,"
"Capitalization," and "Selected Consolidated Financial and Other Data" in the
Prospectus and Prospectus Supplement, and under the headings "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Statistical Summaries" in the Company's Annual Report, incorporated by
reference in the Prospectus, which is expressed in dollars (or percentages
derived from such dollar amounts) and has been obtained from accounting records
which are subject to the internal controls of the Company's accounting system or
which has been derived directly from such accounting records and analysis or
computations, is in agreement with such records or computations made therefrom.

         At the Closing Date, the Accountants shall have furnished to the
Representative a letter, dated the date of its delivery, which shall confirm,
on the basis of a review in accordance with the procedures set forth in the
Accountants Letter, that nothing has come to their attention during the period
from the date of the Accountants Letter referred to in the prior sentence to a
date (specified in the letter) not more than five business days prior to the
Closing Date, which would require any change in the original letter if it were
required to be dated and delivered at the Closing Date.

         In the event that the Accountants Letter sets forth any such changes,
decreases or increases, it shall be a further condition to the obligations of
the Underwriters that (A) such letter shall be accompanied by a written
explanation of the Company as to the significance thereof, unless the
Representative deems such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representative, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Trust Preferred Securities as contemplated by the Registration Statement and
the Prospectus, as amended as of the date hereof.

                  (k)      At the Closing Date, there shall be furnished to the
Representative an accurate


                                      25


certificate, dated the date of its delivery, signed by each of the Chief
Executive Officer, or any Senior Executive Vice President and the Chief
Financial Officer, the Treasurer or the Chief Accounting Officer of the Company
and with respect to the Trust, by an Administrative Trustee of the Trust, in
form and substance satisfactory to the Representative, to the effect that to
the best of their knowledge:

                           (i)      Each signer of such certificate has
carefully examined the Registration Statement and the Prospectus and (A) as of
the date of such certificate, (x) the Registration Statement does not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading and (y) the Prospectus does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (B) since
the Effective Date no event has occurred as a result of which it is necessary
to amend or supplement the Prospectus in order to make the statements therein
not untrue or misleading in any material respect;

                           (ii)     Each of the representations and warranties
of the Trust and the Company contained in this Agreement were, when originally
made, and are, at the time such certificate is delivered, true and correct in
all respects; each of the covenants required herein to be performed by any of
them on or prior to the date of such certificate has been duly, timely and
fully performed and each condition herein required to be complied with on or
prior to the delivery of such certificate has been duly, timely and fully
complied with; and

                           (iii)    No stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereto and no
order directed at any document incorporated by reference in the Registration
Statement or any amendment thereto or the Prospectus has been issued, and no
proceedings for that purpose have been instituted or threatened by the
Commission.

                  (l)      The Trust Preferred Securities shall be qualified
for sale in such states and possessions as the Representative may reasonably
request, and each such qualification shall be in effect and not subject to any
stop order or other proceeding on the Closing Date.

                  (m)      The Company and the Trust shall have furnished to
the Representative such officers' certificates, certificates of government
officials, letters and other documents, in addition to those specifically
mentioned herein, as the Representative may have reasonably requested as to the
accuracy and completeness at the Closing Date of any statement in the
Registration Statement or the Prospectus, as to the accuracy at the Closing
Date of the representations and warranties of the Company, as to the
performance by the Company of its obligations hereunder, and as to the
fulfillment of the conditions concurrent and precedent to the obligations
hereunder of the Underwriters.

                  (n)      The Representative shall have received a copy of the
ruling from the Puerto


                                      26


Rico Department of the Treasury to the effect that the Trust will be considered
a grantor trust for purposes of Puerto Rico income tax purposes, and a copy of
a confirmation letter from the Puerto Rico Department of the Treasury to the
effect that said ruling is applicable to the Trust.

                  (o)      The Representative shall have received copies, duly
certified by the Secretary or an Assistant Secretary of the Company, of the
resolutions or other corporate actions adopted or taken by the Company in
connection with the transactions contemplated herein.

                  (p)      The Representative shall have received a copy of the
certificate of incorporation of the Company, as amended, certified as of a
recent date by the appropriate officer of the Commonwealth, together with
certificates dated as of a recent date from the Secretary of the Sate of the
Commonwealth as to the existence and good standing of the Company under the
laws of the Commonwealth and copies of the by-laws of the Company certified by
the Secretary or an Assistant Secretary of the Company. The Representative
shall further have received a copy, certified by the Secretary or an Assistant
Secretary of the Company, of the Trust Agreement, the Indenture and the
Guarantee Agreement.

         All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to you. The Company will furnish you with such conformed copies
of such opinions, certificates, letters and other documents as you shall
reasonably request.

         If (i) any of the conditions specified in this Section 6 shall not
have been fulfilled when and as provided in this Agreement, or (ii) any of the
opinions and certificates mentioned above or elsewhere in this Agreement shall
not be reasonably satisfactory in form and substance to the Representatives and
their counsel, this Agreement and all obligations of the Underwriters hereunder
may be cancelled on, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Trust and
the Company in writing or by telephone or facsimile confirmed in writing.

         7.       Indemnification and Contribution.

                  (a)      Each of the Trust and the Company, jointly and
severally, agrees to indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person,
if any, who controls each Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages or liabilities, joint or several (and actions in respect
thereof), to which they, or any of them, may become subject under the Act or
other Federal, state or Commonwealth of Puerto Rico statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement made by the Company in
Section 3 of this Agreement, (ii) any untrue statement or alleged untrue
statement of any material fact contained in (A) any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the


                                      27


Prospectus or (B) any application or other document, or any amendment or
supplement thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify the Trust Preferred Securities under the securities or blue sky laws
thereof or filed with the Commission or any securities association or
securities exchange (each, an "Application"), or (iii) the omission or alleged
omission to state in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any amendment or supplement to the Registration Statement or
the Prospectus or any Application a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse,
as incurred, each Underwriter and each such other person for any legal or other
expenses reasonably incurred by such Underwriter or such other person in
connection with investigating, defending or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action; provided,
however, that the Company and the Trust will not be liable in any such case to
the extent that any such loss, claim, damage or liability is based solely upon
an untrue statement or omission or alleged untrue statement or omission in any
of such documents made in reliance upon and in conformity with information
relating to any Underwriter furnished in writing to the Company by the
Representative on behalf of any Underwriter expressly for inclusion therein;
provided, further that such indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or any such other
person) from whom the person asserting any such loss, claim, damage, liability
or action purchased Trust Preferred Securities which are the subject thereof to
the extent that any such loss, claim, damage or liability (i) results from the
fact that such Underwriter failed to send or give a copy of the Prospectus (as
amended or supplemented) to such person at or prior to the confirmation of the
sale of such Trust Preferred Securities to such person, in any case where such
delivery is required by the Act and (ii) arises out of or is based upon an
untrue statement or omission of a material fact contained in such Preliminary
Prospectus that was corrected in the Prospectus (or any amendment or supplement
thereto), unless such failure to deliver the Prospectus (as amended or
supplemented) was the result of noncompliance by the Company with Section 4(f).
This indemnity agreement will be in addition to any liability that the Company
might otherwise have. The Company will not, without the prior written consent
of each Underwriter, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act is a party to each
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of each Underwriter and each such
other person from all liability arising out of such claim, action, suit or
proceeding.

                  (b)      Each Underwriter will severally and not jointly
indemnify and hold harmless each of the Company and the Trust, its respective
employees, officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against all losses, claims, damages or liabilities (or actions in
respect thereof) to which any of them may become subject under the Act or other
federal, state or Commonwealth of Puerto Rico statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the


                                      28


Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus or any Application, or (ii) the
omission or the alleged omission to state in the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus, or any Application, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by such Underwriter through the Representative expressly for use
therein; and, subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses reasonably
incurred by the Company and any such director, officer or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or any action in respect thereof. The Company acknowledges that, for
all purposes under this Agreement, the statements relating to the Underwriters
set forth under the heading "Underwriting" (which do not include information on
the Company's expenses and the listing of the Trust Preferred Securities)
constitute the only information furnished in writing to the Company by the
Representative on behalf of the Underwriters expressly for inclusion in the
Registration Statement, any Preliminary Prospectus or the Prospectus. This
indemnity agreement will be in addition to any liability that each Underwriter
might otherwise have.

                  (c)      Promptly after receipt by an indemnified party under
this H Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party or parties under this Section 7, notify the indemnifying party or parties
of the commencement thereof, but the omission so to notify the indemnifying
party or parties will not relieve it or them from any liability which it or
they may have to any indemnified party under the foregoing provisions of this
Section 7 or otherwise unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party. If any such action is brought against an indemnified party and it
notifies an indemnifying party or parties of its commencement, the indemnifying
party or parties against which a claim is made will be entitled to participate
therein and, to the extent that it or they may wish, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses
available to it or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses other than reasonable costs of
investigation subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood that, in connection with such action, the indemnifying
party shall not be liable for


                                      29


the reasonable fees and expenses of more than one separate counsel (in addition
to the fees and expenses of local counsel necessary in connection with any such
proceedings) in any one action or separate but substantially similar actions in
the same jurisdiction arising out of the same general allegations or
circumstances, designated by the Representative in the case of paragraph (a) of
this Section 7, representing the indemnified parties under paragraph (a) who
are parties to such action or actions), or (ii) the indemnifying party has
authorized in writing the employment of counsel for the indemnified party at
the expense of the indemnifying party. After such notice from the indemnifying
party to such indemnified party, the indemnifying party will not be liable for
the costs and expenses of any settlement of such action effected by such
indemnified party without the written consent of the indemnifying party, unless
such indemnified party waived its right under this Section 7, in which case the
indemnified party may effect such a settlement without such consent.

                  (d)      If the indemnification provided for in the foregoing
paragraphs of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under paragraph (a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties, on the one hand, and the indemnified party, on the other, from the
offering of the Trust Preferred Securities or (ii) if, but only if, the
allocation provided by the foregoing 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 the
indemnifying party or parties on the one hand, and the indemnified party, on
the other, in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Trust and the Company, on
the one hand, and the Underwriters, on the other, shall be deemed to be in the
same proportion as the total proceeds from the offering of the Trust Preferred
Securities (before deducting expenses) received by the Company bear to the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus.
Relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Representative on behalf of the Underwriters, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Trust and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
7(d) were to be 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 into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities (or actions in respect
thereof) referred to above in this Section 7(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7(d), no Underwriter shall be
required to contribute any amount in excess of the total underwriting discounts


                                      30


and commissions received by it with respect to the Trust Preferred Securities
purchased by such Underwriter under this Agreement, less the aggregate amount
of any damages that such Underwriter has otherwise been required to pay in
respect of the same or any substantially similar claim. No person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) will be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to contribute
as provided in this Section 7(d) are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 7(d), each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act will have the same rights to
contribution as such Underwriter, and each director or officer of the Company
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, will have the same rights to
contribution as the Company, subject in each case to the provisions of this
paragraph (d). The provisions of section 7(c) shall be applicable to any claim
for contribution under this Section 7(d). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made under this Section 7(d), notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other
obligations it or they may have hereunder or otherwise than under this
paragraph (d) or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may otherwise have.
No party will be liable for contribution with respect to any action or claim
settled without its written consent (which consent will not be unreasonably
withheld).

                  (e)      The indemnity and contribution agreements contained
in this Section 7 and the representations and warranties of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any investigation made by or on behalf of the Underwriters,
(ii) acceptance of any of the Trust Preferred Securities and payment therefor
or (iii) any termination of this Agreement.

         8.       Termination. The obligations of the several Underwriters
under this Agreement may be terminated at any time prior to the Closing Date by
notice to the Company and the Trust from the Representative, without liability
on the part of any Underwriter to the Company and the Trust if, prior to
delivery and payment for the Securities, in the sole judgment of the
Representative, (i) trading in the Common Stock, the Preferred Stock or any
trust preferred securities of the Company or any affiliate of the Company or in
securities generally shall have been suspended by the Commission or by the
Nasdaq Stock Market, Inc., (ii) minimum or maximum prices shall have been
established for the Common Stock, the Preferred Stock or any trust preferred
securities of the Company or any affiliate of the Company or for securities
generally on either the Nasdaq or the NYSE, or additional material governmental
restrictions, not in force on the date of this Agreement, shall have been
imposed upon trading in securities generally by any of such market or exchange
or by order of the Commission or any court or other Governmental Authority,
(iii) a general banking moratorium shall have been declared by United States,
New York State, or Commonwealth of Puerto Rico authorities,


                                      31


or (iv) any material adverse change in the financial or securities markets in
the United States or any outbreak or material escalation of hostilities or
declaration by the United States of war or other calamity or crisis shall have
occurred, the effect of any of which is such as to make it, in the sole
judgment of the Representative, impracticable or inadvisable to market the
Trust Preferred Securities on the terms and in the manner contemplated by the
Prospectus. Any termination pursuant to Section 8 shall be without liability of
any party to any other party except as provided in Sections 5(a) and 7.

         9.       Default of Underwriters. If one or more Underwriters default
in their obligations to purchase Trust Preferred Securities hereunder and the
aggregate number of such Trust Preferred Securities that such defaulting
Underwriter or Underwriters agreed but failed to purchase is ten percent or
less of the aggregate number of Trust Preferred Securities to be purchased by
all of the Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representative for the purchase of such Trust
Preferred Securities by other persons (who may include one or more of the
nondefaulting Underwriters, including the Representative), but if no such
arrangements are made by the Closing Date, the other Underwriters shall be
obligated severally in proportion to their respective commitments hereunder to
purchase the Trust Preferred Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase. If one or more Underwriters so
default with respect to an aggregate number of Trust Preferred Securities that
is more than ten percent of the aggregate number of Trust Preferred Securities,
as the case may be, to be purchased by all of the Underwriters at such time
hereunder, and if arrangements satisfactory to the Representative are not made
within 36 hours after such default for the purchase by other persons (who may
include one or more of the nondefaulting Underwriters, including the
Representative) of the Trust Preferred Securities with respect to which such
default occurs, this Agreement will terminate without liability on the part of
any nondefaulting Underwriter, the Trust and the Company other than as provided
in Section 10 hereof. In the event of any default by one or more Underwriters
as described in this Section 9, the Representative shall have the right to
postpone the Closing Date, established as provided in Section 9 hereof for not
more than seven business days in order that any necessary changes may be made
in the arrangements or documents for the purchase and delivery of the Trust
Preferred Securities. As used in this Agreement, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 9.
Nothing herein shall relieve any defaulting Underwriter from liability for its
default.

         10.      Survival. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Trust, the
Company, its officers, and the several Underwriters set forth in this Agreement
or made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Trust, the Company, any of its officers or directors, any
Underwriter or any controlling person referred to in Section 7 hereof and (ii)
delivery of and payment for the Trust Preferred Securities. The respective
agreements, covenants, indemnities and other statements set forth in Sections 5
and 7 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.


                                      32


         11.      Notices. Notice given pursuant to any of the provisions of
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at the office of the Company, Banco
Popular Center, 268 Munoz Rivera Avenue, Hato Rey, PR 00918, Attention: Jorge
Junquera, (b) if to the Trust, to the office of the Company, Banco Popular
Center, 268 Munoz Rivera Avenue, Hato Rey, PR 00918, Attention: Richard
Barrios, or (c) if to the Underwriters, to the office of the Representative,
Banco Popular Center, Suite 1020, 268 Munoz Rivera Avenue, Hato Rey, PR 00918,
Attention: Kenneth McGrath, President. Any such notice shall be effective only
upon receipt. Any notice under Section 7 or 8 may be made by telex or
telephone, but if so made shall be subsequently confirmed in writing.

         12.      Successors. This Agreement shall inure to the benefit of and
shall be binding upon the several Underwriters, the Trust, the Company, and
their respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of
this Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole
and exclusive benefit of such persons and for the benefit of no other person
except that (i) the indemnities of the Trust and the Company contained in
Section 7 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act and (ii) the indemnities of the Underwriters,
contained in Section 7 of this Agreement shall also be for the benefit of the
directors , employees and officers of the Company and any person or persons who
control the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act. No purchaser of Trust Preferred Securities from any
Underwriter shall be deemed a successor because of such purchase. This
Agreement shall not be assignable by any party hereto without the prior written
consent of the other party.


                                      33


         13.      APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO,
WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.

         14.      Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.

                                 Very truly yours,

                                 POPULAR CAPITAL TRUST II




                                 By:
                                    -------------------------------------------
                                 Name:
                                 Title:


                                 POPULAR, INC.


                                 By:
                                    -------------------------------------------
                                 Name:
                                 Title:


Confirmed as of the date first above mentioned:

POPULAR SECURITIES, INC.
Acting on its behalf and as representative
of the several Underwriters named in Schedule 1 hereof


                                 By:
                                    -------------------------------------------
                                 Name:
                                 Title:


                                      34


                                                                     SCHEDULE I

                                  UNDERWRITERS

                                                      Aggregate Number of Trust
                                                     Preferred Securities to be
                                                                      Purchased


Popular Securities, Inc.
                                                                  ----------








Total:                                                             4,000,000
                                                                  ==========

EX-4.2

                                                                     EXHIBIT 4.2

                               [FACE OF DEBENTURE]


         The following legend applies if this Security is a Global Security:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or 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 ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.

         This Security is not a deposit or other obligation of a depository
institution and is not insured by the Federal Deposit Insurance Corporation, the
Bank Insurance Fund or any other governmental agency.

CUSIP NO. __________                             PRINCIPAL AMOUNT: $___________
REGISTERED NO. _____

                                  POPULAR, INC.

                _____% JUNIOR SUBORDINATED DEBENTURES, SERIES ___
                             DUE _____________, 20__

         POPULAR, INC., a corporation duly organized and existing under the laws
of the Commonwealth of Puerto Rico (hereinafter called the "Company," which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to ______________________________, or
registered assigns, the principal sum of _______________________________________
($____________) on _____________, 20__. The Company further promises to pay
interest on the principal sum from _____________, 20__ or from the most recent
Interest Payment Date to which interest has been paid or duly provided for
monthly (subject to deferral as set forth herein) on the first day of each month
of each year commencing _____________, 20__ at the rate of _____% per annum,
together with Additional Sums, if any, as provided in Section 1007 of the
Indenture, until the principal hereof is paid or made available for payment;
provided, however, that any overdue installment of interest (after giving effect
to any Extension Period permitted by this Security) shall bear Additional
Interest at the rate of _____% per annum (to the extent that the payment of such
interest shall be legally enforceable), compounded monthly, from the date such
installment was due until it is paid or made available for payment. The amount
of interest payable for any period less than a full monthly 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 monthly interest period shall be computed by dividing the
applicable rate per annum by twelve. The interest so 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, which shall be the _____ calendar day (whether or
not a Business





Day, as defined below) next preceding such Interest Payment Date. If an Interest
Payment Date is not a Business Day, interest on this Security shall be payable
on the next day that is a Business Day, with the same force and effect as if
made on such Interest Payment Date, and without any interest or other payment
with respect to the delay. "Business Day" as used hereinabove is a day other
than a Saturday, a Sunday or any other day on which banking institutions in San
Juan, Puerto Rico, Wilmington, Delaware or New York, New York are authorized or
required by law, regulation or executive order to remain closed or and
customarily closed.

         Any interest not punctually paid or duly provided for will 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 of this series 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 of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in the Indenture.

         So long as no Event of Default has occurred and is continuing, the
Company 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 60
consecutive monthly interest payment periods with respect to each deferral
period (each an "Extension Period"), during which Extension Period the Company
shall have the right to make a partial payment of interest on any Interest
Payment Date, at the end of which the Company 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 Maturity of
the principal of this Security and no such Extension Period may end other than
at the end of a full monthly interest period; and provided, further, however,
that during any such Extension Period, the Company shall not (i) make any
payment of principal of or interest or premium, if any, on or repay, repurchase
or redeem any debt securities of the Company that rank pari passu in all
respects with or junior in interest to this Security (except for any partial
payments of interest with respect to and permitted under the Securities of this
series), or (ii) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company 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 Company (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, redemption
or conversion of any class or series of the Company's capital stock (or any
capital stock of a subsidiary of the Company) for any other class or series of
the Company's capital stock or of any class or series of the Company's
indebtedness for any class or series of the Company's capital stock, (c) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such



                                       2


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, (e) payments by the Company under the Guarantee
Agreement, or (f) 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 Company may extend such
Extension Period and further defer the payment of interest, provided that no
Extension Period shall exceed 60 consecutive monthly interest payment periods,
extend beyond the Maturity of the principal of this Security or end other than
at the end of a full monthly interest period. 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 Company may elect
to begin a new Extension Period, subject to the above conditions. No interest or
Additional Interest 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 Additional Interest
(to the extent that the payment of such interest shall be legally enforceable)
at the rate of _____% per annum, compounded monthly 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 Company 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
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 or
on behalf of Popular Capital Trust __, at least one Business Day prior to the
earlier of (i) the next succeeding date on which Distributions on the Capital
Trust Securities of such Issuer Trust would be payable but for such deferral,
and (ii) the date on which the Property Trustee of such Issuer Trust is required
to give notice to holders of such Capital Trust Securities of the record date or
the date such Distributions are payable.

         Payment of interest, including Additional Interest, on this Security
will be made in immediately available funds at the office or agency of the
Company maintained for that purpose in the City of San Juan, Puerto Rico, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however,
that, at the option of the Company, payment of interest may be paid by check
mailed to the Person entitled thereto at such Person's last address as it
appears in the Security Register or, upon written request of a Holder of
$1,000,000 or more in aggregate principal amount of Securities of this series
not less than 15 calendar days prior to the applicable Interest Payment Date, by
wire transfer to such account as may have been designated by such Person.
Payment of principal of and interest, including Additional Interest, on this
Security at Maturity will be made against presentation of this Security at the
office or agency of the Company maintained for that purpose in the City of San
Juan, Puerto Rico.

         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.


                                       3


         Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature or its duly
authorized agent under the Indenture 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 Company has caused this instrument to be duly
executed.

DATED:
      -------------------------
                                             POPULAR, INC.



                                             By:
                                                --------------------------------


                                             Attest:
                                                    ----------------------------
                                                            Secretary

TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities
of the series designated
therein referred to in the
within-mentioned Indenture.

Bank One Trust Company, N.A.,
as Trustee


By:
   -----------------------------------
          Authorized Signature

OR

________________________________, as
Authenticating Agent for the Trustee



By:
   -----------------------------------
          Authorized Signature



                                       4


                             [REVERSE OF DEBENTURE]


                                  POPULAR, INC.

                _____% JUNIOR SUBORDINATED DEBENTURES, SERIES ___
                             DUE _____________, 20__


         This Security is one of a duly authorized issue of junior subordinated
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an indenture dated as of October 31, 2003, as
amended or supplemented from time to time (herein called the "Indenture"),
between the Company and J.P. Morgan Trust Company, National Association
(Formerly known as Bank One Trust Company, N.A.), 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 Company, the Trustee and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate principal amount to $_______________. All
terms used in this Security which are defined in the Indenture shall have the
meanings assigned to them in the Indenture unless otherwise defined in this
Security.

         Subject to any required prior approval of the Primary Federal
Regulator, the Company may at any time, at its option, on or after
_____________, 20__, and subject to the terms and conditions of Article Eleven
of the Indenture, redeem the Securities of this series in whole at any time or
in part from time to time, at a Redemption Price equal to 100% of the principal
amount thereof, together, in the case of any such redemption, with accrued but
unpaid interest, including any Additional Interest, to but excluding the
Redemption Date.

         In addition, upon the occurrence and during the continuation of a Tax
Event, an Investment Company Event or a Capital Treatment Event in respect of
Popular Capital Trust __, the Company may, at its option, at any time within 90
days of the occurrence and during the continuation of such Tax Event, Investment
Company Event or Capital Treatment Event, as the case may be, subject to any
required prior approval of the Primary Federal Regulator, redeem the Securities
of this series, in whole but not in part, subject to the terms and conditions of
Article Eleven of the Indenture, at a Redemption Price equal to 100% of the
principal amount thereof, together, in the case of any such redemption, with
accrued but unpaid interest, including any Additional Interest, to but excluding
the Redemption Date.

         The Securities of this series are not subject to repayment at the
option of the Holder hereof. The Securities of this series will not be entitled
to any sinking fund.

         The indebtedness evidenced by the Securities of this series is, to the
extent and in the manner set forth in the Indenture, subordinate and subject in
right of payment to the prior payment in full of the principal of and premium,
if any, and interest on all Senior Debt of the Company, and each Holder of the


                                       5


Securities of this series, by accepting the same, agrees to and shall be bound
by the provisions of the Indenture with respect hereto. The Securities of this
series shall rank on a parity with all Trust Related Securities, including
without limitation, the Guarantee Agreement related to the _____% Capital
Securities of Popular Capital Trust __.

         If an Event of Default, as defined in the Indenture, with respect to
Securities of this series shall occur and be continuing, the principal of the
Securities of this series may be declared due and payable in the manner and with
the effect provided in the Indenture.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of all series to be affected, acting together. The
Indenture also contains provisions permitting the Holders of a majority in
principal amount of the Securities of all series at the time Outstanding
affected by certain provisions of the Indenture, acting together, on behalf of
the Holders of all Securities of such series, to waive compliance by the Company
with those provisions of the Indenture. Certain past defaults under the
Indenture and their consequences may be waived under the Indenture by the
Holders of a majority in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series.
All of the rights of the Holders set forth in this paragraph are subject to the
rights of the holders of Capital Trust Securities as set forth in the Indenture.
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.

         The provisions contained in Section 403 and Article Seventeen of the
Indenture for defeasance of the entire indebtedness on this Security and certain
restrictive covenants and certain Events of Default do not apply to this
Security. The provisions contained in Section 401 of the Indenture for
defeasance of the entire indebtedness on this Security in certain circumstances
shall apply to this Security.

         Upon due presentment for registration of transfer of this Security at
the office or agency of the Company in the City of San Juan, Puerto Rico, a new
Security or Securities of this series in authorized denominations of $___ or
integral multiples thereof for an equal aggregate principal amount will be
issued to the transferee in exchange herefor, as provided in the Indenture and
subject to the limitations provided therein and to the limitations described
below, without charge except for any tax or other governmental charge imposed in
connection therewith.

         If this Security is a Global Security, this Security is exchangeable
for definitive Securities in registered form only if (x) the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for this


                                       6


Security or if at any time the Depositary ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, and a
successor depositary is not appointed within 90 days, (y) the Company in its
sole discretion determines that this Security shall be exchangeable for
definitive Securities in registered form and notifies the Trustee thereof, or
(z) an Event of Default with respect to the Securities represented hereby has
occurred and is continuing. If this Security is exchangeable pursuant to the
preceding sentence, it shall be exchangeable for definitive Securities in
registered form, bearing interest, including Additional Interest, at the same
rate, having the same date of issuance, redemption provisions, Stated Maturity
and other terms and of authorized denominations aggregating a like amount.

         If this Security is a Global Security, this Security 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 or by the Depositary or any such nominee to a successor of the
Depositary or a nominee of such successor. Except as provided above, owners of
beneficial interests in this global Security will not be entitled to receive
physical delivery of Securities in definitive form and will not be considered
the Holders hereof for any purpose under the Indenture.

         Subject to the rights of holders of Senior Debt of the Company set
forth in this Security and the indenture referred to above, no reference herein
to the Indenture and no provision of this Security or of the Indenture shall
alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of and interest, including any Additional
Interest, on this Security at the times, place and rate, and in the coin or
currency, herein prescribed, except as otherwise provided in this Security and
except that in the event the Company deposits money or Eligible Instruments as
provided in Section 401 of the Indenture, such payments will be made only from
proceeds of such money or Eligible Instruments.

         Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company 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 Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

         No recourse shall be had for the payment of the principal of or the
interest, including Additional Interest, on this Security, or for any claim
based hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture or any indenture supplemental thereto, against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or any successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issuance hereof, expressly waived and released.

         The Company and, by its acceptance of this Security or a beneficial
interest herein, the Holder of, and any Person that acquires a beneficial
interest in, this Security, agree that for United States Federal, Puerto Rico,
state and local tax purposes it is intended that this Security constitute
indebtedness.


                                       7


                                  ABBREVIATIONS


         The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM  --  as tenants in common

TEN ENT  --  as tenants by the entireties

JT TEN   --  as joint tenants with right of survivorship and not as tenants in
             common

UNIF GIFT MIN ACT --  _______________________ Custodian _______________________
                             (Cust)                             (Minor)


Under Uniform Gifts to Minors Act


- ---------------------------------
           (State)

         Additional abbreviations may also be used though not in the above list.

         FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto

Please Insert Social Security or
Other Identifying Number of Assignee


- ------------------------------------


- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
 (Please print or type name and address including postal zip code of Assignee)

the within Security of POPULAR, INC. and does hereby irrevocably constitute and
appoint __________________ attorney to transfer the said Security on the books
of the Company, with full power of substitution in the premises.

Dated:
      ----------------------------


                                           ------------------------------------

                                           ------------------------------------


                                       8


NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement or any change whatever.




                                       9

EX-4.5

                                                                     EXHIBIT 4.5





                    AMENDED AND RESTATED DECLARATION OF TRUST
                               AND TRUST AGREEMENT



                                      AMONG



                                 POPULAR, INC.,
                                  AS DEPOSITOR



                           J.P.MORGAN TRUST COMPANY,
                             NATIONAL ASSOCIATION,
                              AS PROPERTY TRUSTEE


                           CHASE MANHATTAN BANK USA,
                             NATIONAL ASSOCIATION,
                              AS DELAWARE TRUSTEE



                 AND THE SEVERAL HOLDERS OF THE TRUST SECURITIES



                        DATED AS OF _____________, 200_



                            POPULAR CAPITAL TRUST __







                                TABLE OF CONTENTS




                                                                                                                 PAGE
                                                                                                                 ----

                                                                                                              
ARTICLE I - DEFINED TERMS........................................................................................  1
                  SECTION 1.1.      Definitions..................................................................  1

ARTICLE II - CONTINUATION OF THE ISSUER TRUST.................................................................... 10
                  SECTION 2.1.      Name......................................................................... 10
                  SECTION 2.2.      Office of the Delaware Trustee; Principal
                                    Place of Business............................................................ 10
                  SECTION 2.3.      Initial Contribution of Trust Property;
                                    Organizational Expenses...................................................... 11
                  SECTION 2.4.      Issuance of the Capital Securities........................................... 11
                  SECTION 2.5.      Issuance of the Common Securities;
                                    Subscription and Purchase Debentures......................................... 11
                  SECTION 2.6.      Declaration of Trust......................................................... 11
                  SECTION 2.7.      Authorization to Enter into Certain
                                    Transactions................................................................. 12
                  SECTION 2.8.      Assets of Trust.............................................................. 16
                  SECTION 2.9.      Title to Trust Property...................................................... 16

ARTICLE III - PAYMENT ACCOUNT.................................................................................... 16
                  SECTION 3.1.      Payment Account.............................................................. 16

ARTICLE IV - DISTRIBUTIONS; REDEMPTION........................................................................... 16
                  SECTION 4.1.      Distributions................................................................ 16
                  SECTION 4.2.      Redemption................................................................... 17
                  SECTION 4.3.      Ranking of Trust Securities.................................................. 19
                  SECTION 4.4.      Payment Procedures........................................................... 20
                  SECTION 4.5.      Tax Returns and Reports...................................................... 20
                  SECTION 4.6.      Payment of Expenses of the Issuer Trust...................................... 21
                  SECTION 4.7.      Payments under Indenture or Pursuant
                                    to Direct Actions............................................................ 21

ARTICLE V - TRUST SECURITIES CERTIFICATES........................................................................ 21
                  SECTION 5.1.      Initial Ownership............................................................ 21
                  SECTION 5.2.      The Trust Securities Certificates............................................ 21
                  SECTION 5.3.      Execution and Delivery of Trust
                                    Securities Certificates...................................................... 22
                  SECTION 5.4.      Registration of Transfer and Exchange of
                                    Capital Securities Certificates.............................................. 22
                  SECTION 5.5.      Mutilated, Destroyed, Lost or Stolen
                                    Trust Securities Certificates................................................ 23
                  SECTION 5.6.      Persons Deemed Holders....................................................... 23
                  SECTION 5.7.      Access to List of Holders' Names
                                    and Addresses................................................................ 24
                  SECTION 5.8.      Maintenance of Office Agency................................................. 24
                  SECTION 5.9.      Appointment of Paying Agent.................................................. 24
                  SECTION 5.10.     Ownership of Common Securities by Depositor.................................. 25
                  SECTION 5.11.     Book-Entry Capital Securities Certificates;
                                    Common Securities Certificate................................................ 25
                  SECTION 5.12.     Notices to Clearing Agency................................................... 26








                                                                                                                 PAGE
                                                                                                                 ----
                                                                                                              
                  SECTION 5.13.     Definitive Capital Securities Certificates...................................26
                  SECTION 5.14.     Rights of Holders; Waivers of Past Defaults..................................27
                  SECTION 5.15.     CUSIP Numbers................................................................29

ARTICLE VI - ACTS OF HOLDERS; MEETINGS; VOTING...................................................................29
                  SECTION 6.1.      Limitations on Voting Rights.................................................29
                  SECTION 6.2.      Notice of Meetings...........................................................30
                  SECTION 6.3.      Meetings of Holders of the Capital
                                    Securities...................................................................30
                  SECTION 6.4.      Voting Rights................................................................31
                  SECTION 6.5.      Proxies, etc.................................................................31
                  SECTION 6.6.      Holder Action by Written Consent.............................................31
                  SECTION 6.7.      Record Date for Voting and Other Purposes....................................31
                  SECTION 6.8.      Acts of Holders..............................................................32
                  SECTION 6.9.      Inspection of Records........................................................33

ARTICLE VII - REPRESENTATIONS AND WARRANTIES.....................................................................33
                  SECTION 7.1.      Representations and Warranties of the
                                    Property Trustee and the Delaware Trustee....................................33
                  SECTION 7.2.      Representations and Warranties of Depositor..................................34

ARTICLE VIII - THE ISSUER TRUSTEES...............................................................................35
                  SECTION 8.1.      Certain Duties and Responsibilities..........................................35
                  SECTION 8.2.      Certain Notices..............................................................37
                  SECTION 8.3.      Certain Rights of Property Trustee...........................................37
                  SECTION 8.4.      Not Responsible for Recitals or Issuance
                                    of Securities................................................................39
                  SECTION 8.5.      May Hold Securities..........................................................40
                  SECTION 8.6.      Compensation; Indemnity; Fees................................................40
                  SECTION 8.7.      Corporate Property Trustee Required;
                                    Eligibility of Issuer Trustees and
                                    Administrative Trustees......................................................41
                  SECTION 8.8.      Conflicting Interests........................................................41
                  SECTION 8.9.      Co-Trustees and Separate Trustee.............................................42
                  SECTION 8.10.     Resignation and Removal; Appointment
                                    of Successor.................................................................43
                  SECTION 8.11.     Acceptance of Appointment by Successor.......................................44
                  SECTION 8.12.     Merger, Conversion, Consolidation or
                                    Succession to Business.......................................................45
                  SECTION 8.13.     Preferential Collection of Claims
                                    Against Depositor or Issuer Trust............................................45
                  SECTION 8.14.     Trustee May File Proofs of Claim.............................................46
                  SECTION 8.15.     Reports by Property Trustee..................................................46
                  SECTION 8.16.     Reports to the Property Trustee..............................................47
                  SECTION 8.17.     Evidence of Compliance with Conditions
                                    Precedent....................................................................47
                  SECTION 8.18.     Number of Issuer Trustees....................................................47
                  SECTION 8.19.     Delegation of Power..........................................................48

ARTICLE IX - DISSOLUTION, LIQUIDATION AND MERGER.................................................................48
                  SECTION 9.1.      Dissolution Upon Expiration Date.............................................48


                                       ii







                                                                                                               PAGE
                                                                                                               ----

                                                                                                              
                  SECTION 9.2.      Early Dissolution........................................................... 48
                  SECTION 9.3.      Dissolution................................................................. 48
                  SECTION 9.4.      Liquidation................................................................. 49
                  SECTION 9.5.      Mergers, Consolidations, Amalgamations
                                    or Replacements of Issuer Trust............................................. 50

ARTICLE X - MISCELLANEOUS PROVISIONS............................................................................ 51
                  SECTION 10.1.     Limitation of Rights of Holders............................................. 51
                  SECTION 10.2.     Amendment................................................................... 51
                  SECTION 10.3.     Separability................................................................ 53
                  SECTION 10.4.     Governing Law............................................................... 53
                  SECTION 10.5.     Payments Due on Non-Business Day............................................ 53
                  SECTION 10.6.     Successors.................................................................. 53
                  SECTION 10.7.     Headings.................................................................... 54
                  SECTION 10.8.     Reports, Notices and Demands................................................ 54
                  SECTION 10.9.     Agreement Not to Petition................................................... 54
                  SECTION 10.10.    Trust Indenture Act; Conflict with Trust
                                    Indenture Act............................................................... 56
                  SECTION 10.11.    Acceptance of Terms of Trust Agreement,
                                    Guarantee Agreement and Indenture........................................... 56
                  SECTION 10.12.    Counterparts................................................................ 56


EXHIBIT A         -   CERTIFICATE OF TRUST.................................................................Exh. A-1
EXHIBIT B         -   FORM OF COMMON SECURITIES CERTIFICATE................................................Exh. B-1
EXHIBIT C         -   FORM OF GLOBAL CAPITAL SECURITIES CERTIFICATE........................................Exh. C-1




                                       iii





AMENDED AND RESTATED DECLARATION OF TRUST AND TRUST AGREEMENT, dated as of
_____________, 200_ among (i) Popular, Inc., a Commonwealth of Puerto Rico
corporation (including any successors or assigns, the "Depositor"), (ii)
J.P.Morgan Trust Company, National Association, a national banking association,
as property trustee (in such capacity, the "Property Trustee"), (iii) Chase
Manhattan Bank USA, National Association, a national banking association, as
Delaware trustee (in such capacity, the "Delaware Trustee"), (iv)
__________________, an individual, and ____________, an individual, each of
whose address is c/o __________ ____________________________ (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 (v) the several Holders,
as hereinafter defined.

                                   WITNESSETH

         WHEREAS, the Depositor and certain of the Issuer Trustees have
heretofore duly declared and established a statutory trust (the "Issuer Trust")
pursuant to the Delaware Statutory Trust Act (as hereinafter defined) by
entering into that certain Declaration of Trust and Trust Agreement, dated as of
September 5, 2003 (the "Original Trust Agreement"), and by the execution and
filing with the Secretary of State of the State of Delaware the Certificate of
Trust, filed on September 5, 2003, attached as Exhibit A (the "Certificate of
Trust"); and

         WHEREAS, the Depositor and the Issuer 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 Underwriting Agreement, and (iii)
the acquisition by the Issuer Trust from the Depositor of all of the right,
title and interest in the Debentures;

         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 are 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:

                  The terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;

                  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;







                  The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation;"

                  All accounting terms used but not defined herein have the
meanings assigned to them in accordance with United States generally accepted
accounting principles;

                  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

                  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.

                  "Administrative Trustee" means each of the individuals
identified as an "Administrative Trustee" in the preamble to this Trust
Agreement solely in such individual's capacity as Administrative Trustee of the
Trust formed and continued hereunder and not in such individual's individual
capacity, or such Administrative Trustee's successor in interest in such
capacity, or any successor 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.

                  "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 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 Federal or
                  State 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



                                       2


                           (b) the institution by such Person of proceedings to
                  be adjudicated 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
                  Federal or State 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 bankrupt, or the taking of corporate action by
                  such Person in furtherance of any such action.

                  "Bankruptcy Laws" has the meaning specified in Section 10.9.

                  "Board of Directors" means the board of directors of the
Depositor or a committee designated by the board of directors of the Depositor
(or any such committee), comprised of one or more members of the board of
directors of the Depositor or officers of the Depositor, or both.

                  "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 5.11.

                  "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 or
executive order to remain closed.

                  "Capital Securities Certificate" means a certificate
evidencing ownership of Capital Securities, substantially in the form attached
as Exhibit C.

                  "Capital Security" means an undivided beneficial interest in
the assets of the Issuer Trust, having a Liquidation Amount of $__ and having
the rights provided therefor in this Trust Agreement, including the right to
receive Distributions and a Liquidation Distribution as provided herein.

                  "Certificate Depository Agreement" means the agreement among
the Issuer Trust, the Paying Agent and DTC, as the initial Clearing Agency,
dated as of the Closing Date.

                  "Certificate of Trust" has the meaning specified in the
recitals hereof, as amended from time to time.

                  "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.



                                       3


                  "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 Time of Delivery, 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 at such time.

                  "Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit B.

                  "Common Security" means an undivided beneficial interest in
the assets of the Issuer Trust, having a Liquidation Amount of $__ and having
the rights provided therefor in this Trust Agreement, including the right to
receive Distributions and a Liquidation Distribution as provided herein.

                  "Corporate Trust Office" means (i) when used with respect to
the Property Trustee, the principal office of the Property Trustee located at 1
Bank One Plaza, Mail Code IL1-0823, Chicago, Illinois 60670-0823, Attention:
Global Corporate Trust Services Division, and (ii) when used with respect to the
Debenture Trustee, the principal office of the Debenture Trustee located at 1
Bank One Plaza, Mail Code IL1-0823, Chicago, Illinois 60670-0823, Attention:
Global Corporate Trust Services Division.

                  "Debenture Event of Default" means any "Event of Default"
specified in Section 501 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 Trustee" means Bank One Trust Company, N.A., a
national banking association, 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, Series ___ due _____________, 20__, 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 5.11, and (ii)
Capital Securities Certificates issued in certificated, fully registered form as
provided in Section 5.13.




                                       4


                  "Delaware Statutory Trust Act" means Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. Section 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.

                  "Depositor Bankruptcy Event" means (i) the entry of a decree
or order for relief in respect of the Depositor by a court having jurisdiction
in the premises in an involuntary case under the Federal bankruptcy laws, as now
or hereafter constituted, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days or (ii) the
commencement by the Depositor of a voluntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or the consent by the Depositor to the
entry of a decree or order for relief in an involuntary case under any such law.

                  "Distribution Date" has the meaning specified in Section
4.1(a)(i).

                  "Distribution Period" means the period of time beginning on
any Distribution Date and ending on the day immediately preceding the next
succeeding Distribution Date.

                  "Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.1.

                  "DTC" means The Depository Trust Company.

                  "Early Dissolution Event" has the meaning specified in Section
9.2.

                  "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 Event of 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 any
Redemption Price of any Trust Security when it becomes due and payable; or

                  (d)      default in the performance, or breach, in any
material respect, of any covenant or warranty of the Issuer Trustees in this
Trust Agreement (other





                                       5


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 Issuer Trustees and to the Depositor 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

                  (e)      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.

                  "Exchange Act" means the Securities Exchange Act of 1934, and
any successor statute thereto, in each case as amended from time to time.

                  "Expiration Date" has the meaning specified in Section 9.1.

                  "Federal Reserve" means the Board of Governors of the Federal
Reserve System, as from time to time constituted, or if at any time after the
execution of this Trust Agreement the Federal Reserve is not existing and
performing the duties now assigned to it, then the body performing such duties
at such time.

                  "Guarantee" means the Guarantee Agreement executed and
delivered by the Depositor and Bank One Trust Company, N.A., as 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.

                  "Holder" means a Person in whose name a Trust Security or
Trust Securities 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 October 31, 2003, between the Depositor 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 Capital Trust __" which was created on September 5, 2003 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" means, collectively, the Property Trustee,
the Delaware Trustee, and the Administrative Trustees.

                  "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.



                                       6


                  "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 to be contemporaneously redeemed in accordance
with the Indenture, the proceeds of which will be used to pay the Redemption
Price of such Trust Securities, (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, and (c) with respect to any distribution of Additional Amounts
to Holders of Trust Securities, Debentures having a principal amount equal to
the Liquidation Amount of the Trust Securities in respect of which such
distribution is made.

                  "Liquidation Amount" means the stated amount of $__ per Trust
Security.

                  "Liquidation Date" means the date of the dissolution,
winding-up or dissolution 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, with respect to any Person, a
certificate signed by the Chairman of the Board of Directors of such Person, a
Vice Chairman of the Board of Directors of such Person, the President or a Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of such Person. 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 with respect to 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 canceled by the
                  Property Trustee or delivered to the Property Trustee for
                  cancellation;

                           (b)   Trust Securities for whose payment or
                  redemption money in the necessary amount has been theretofore
                  deposited with the Property Trustee or any Paying Agent;
                  provided that, if such Trust Securities are to be redeemed,
                  notice of such redemption has been duly given pursuant to this
                  Trust Agreement; and

                           (c)   Trust Securities that have been paid or in
                  exchange for or in lieu of which other Capital Securities have
                  been executed and delivered pursuant to Sections 5.4, 5.5 and
                  5.11; 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, any Issuer Trustee,
                  or any Affiliate of the Depositor or any Issuer Trustee shall
                  be disregarded and deemed not to be Outstanding, except that
                  (a) 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, and (b) the foregoing shall not
                  apply at any time when all of the outstanding Capital
                  Securities are owned by the Depositor, one or more of the
                  Issuer Trustees, and/or any such Affiliate. 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 Affiliate of the Depositor.
                  "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
                  not the 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 5.9 and shall initially be Banco Popular de
Puerto Rico.

                  "Payment Account" means a segregated non-interest-bearing
corporate trust account maintained by the Property Trustee with Banco Popular
de Puerto Rico in its trust department for the benefit of the Holders in which
all amounts


                                       8


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.

                  "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 of a Like Amount of
Debentures.

                  "Relevant Trustee" shall have the meaning specified in Section
8.10.

                  "Responsible Officer" means, with respect to any Issuer
Trustee, the President, 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 of such
Issuer Trustee.

                  "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 5.4.

                  "Time of Delivery" means _____________, 200__.

                  "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.




                                       9


                  "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 of this Trust
Agreement.

                  "Trust Security" means any one of the Common Securities or the
Capital Securities.

                  "Trust Securities Certificate" means any one of the Common
Securities Certificates or the Capital Securities Certificates.

                  "Underwriting Agreement" means the Underwriting Agreement,
dated as of _____________, 200__, among the Trust, the Depositor and Popular
Securities, Inc., as representative of the underwriters named therein.

                  "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 Capital
Trust __," as such name may be modified from time to time by the Administrative
Trustees following written notice to the Holders and the other Issuer Trustees,
in which name the Administrative Trustees and the other 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 on behalf of the
Trust.

         SECTION 2.2.      Office of the Delaware Trustee; Principal Place of
Business.

                  The address of the Delaware Trustee in the State of Delaware
is _____________________________________________________, or such other address
in the State of Delaware as the Delaware Trustee may designate by written notice
to the Depositor, the Property Trustee and the Administrative Trustees. The
principal executive office of the Issuer Trust is ___________________________.



                                       10


         SECTION 2.3.      Initial Contribution of Trust Property;
Organizational Expenses.

                  The Issuer Trustees acknowledge receipt 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 as they arise or shall, upon request of any Issuer
Trustee, promptly reimburse such Issuer Trustee for any such expenses paid by
such Issuer Trustee. 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 _____________, 200__, the Depositor, both on its own behalf
and on behalf of the Issuer Trust pursuant to the Original Trust Agreement,
executed and delivered the Underwriting Agreement. Contemporaneously with the
execution and delivery of this Trust Agreement, an Administrative Trustee, on
behalf of the Trust, shall execute in accordance with Section 5.3 and deliver to
the Underwriters named in the Underwriting Agreement a Capital Securities
Certificate, registered in the name of the nominee of the initial Clearing
Agency, in an aggregate amount of _________ Capital Securities having an
aggregate Liquidation Amount of $___________, against payment of the purchase
price therefor in immediately available funds, which funds such Administrative
Trustee shall promptly deliver to 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 Section 5.3 and deliver to the Depositor Common
Securities Certificates, registered in the name of the Depositor, in an
aggregate amount of _______ Common Securities having an aggregate Liquidation
Amount of $_________ against payment by the Depositor of the purchase price
therefor in immediately available funds, which amount such Administrative
Trustee shall promptly deliver to the Property Trustee. Contemporaneously
therewith, an Administrative Trustee, on behalf the Issuer Trust, shall
subscribe to and purchase from the Depositor Debentures registered in the name
of the Issuer Trust and having an aggregate principal amount equal to
$___________ and shall deliver to the Depositor the purchase price therefor
(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.      Declaration 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 the Debentures, and (c) to engage in those activities necessary,
convenient or incidental thereto. The Depositor hereby appoints the Issuer
Trustees as trustees of the Issuer Trust, to have all the rights, powers and
duties to the extent set forth herein, and the Issuer Trustees hereby accept
such appointment. The Property Trustee hereby declares that it will hold the
Trust





                                       11


Property 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 or the Administrative Trustees, or any of the duties and
responsibilities of the Issuer Trustees generally, 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(a) 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 under this Trust Agreement, and to
perform all acts in furtherance thereof, including the following:

                           (i)   As among the Issuer Trustees, the
         Administrative Trustees, and each of them, 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)   to cause the Issuer Trust to perform on
               behalf of the Issuer Trust the Underwriting Agreement and to
               cause the Issuer Trust to enter into, and to execute, deliver and
               perform on behalf of the Issuer Trust the Certificate Depository
               Agreement 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 Securities Act and under state
               securities or blue sky laws, and the qualification of this
               Trust Agreement under the Trust Indenture Act;

                                 (D)   assisting in the listing of the Capital
               Securities upon such securities exchange or exchanges as shall be
               determined by the Depositor, with the registration of the Capital
               Securities under the Exchange Act, if required, and with the
               preparation and filing of all periodic and other reports and
               other documents pursuant to the foregoing;

                                 (E)   assisting in the sending of notices
               (other than notices of default) and other information regarding
               the Trust





                                       12


               Securities and the Debentures to the Holders in accordance with
               this Trust Agreement;

                                 (F)   the appointment of a Paying Agent and
               Securities Registrar in accordance with this Trust Agreement;

                                 (G)   to the extent provided in this Trust
               Agreement, the winding up of the affairs of and liquidation of
               the Issuer Trust and the execution and filing of the certificate
               of cancellation with the Secretary of State of the State of
               Delaware;

                                 (H)   execution of the Trust Securities on
               behalf of the Trust in accordance with this Trust Agreement;

                                 (I)   execution and delivery of closing
               certificates, if any, pursuant to the Underwriting Agreement and
               application for a taxpayer identification number for the Issuer
               Trust;

                                 (J)   unless otherwise determined by the
               Depositor, the Property Trustee, or the Administrative Trustees
               or as otherwise required by the Delaware Statutory Trust Act or
               the Trust Indenture Act, to execute 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

                                 (K)   the taking of any action incidental to
               the foregoing as the Issuer Trustees may from time to time
               determine is 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;



                                       13


                                 (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;

                                 (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)   after an Event of Default (other than
               under paragraph (b),(c), (d) or (e) of the definition of such
               term if such 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); and

                                 (J)   except as otherwise provided in this
               Section 2.7(a)(ii), the Property Trustee shall have none of the
               duties, liabilities, powers or the authority of the
               Administrative Trustees set forth in Section 2.7(a)(i).

               (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 transactions 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 or Puerto
Rico income tax purposes, (iv) incur any indebtedness for borrowed money or
issue any other debt, (v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property, (vi) invest any proceeds
received by the Issuer Trust from holding the Debentures, but shall distribute
all such proceeds to Holders of Trust Securities pursuant to the terms of this
Trust Agreement and of the Trust Securities, (vii) acquire any assets other than
the Trust Property, (viii) possess any power or otherwise act in such a way as
to vary the Trust Property, (ix) possess any power or otherwise act in such a
way as to vary the terms of the Trust Securities in any way whatsoever (except
to the extent expressly authorized in this Trust Agreement or by the terms of
the Trust Securities) or (x) issue any securities or other evidences of
beneficial ownership of, or beneficial interest in, the Issuer Trust other than
the Trust Securities. The Property Trustee shall defend all claims and demands
of all





                                       14


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 issuance 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 of 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;

                           (ii)  the determination of the states in which to
         take appropriate action to qualify or register for sale all or part of
         the Capital Securities and the determination of any and all such acts,
         other than actions that must be taken by or on behalf of the Issuer
         Trust, and the advice to the Issuer Trust of actions they must take 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 laws of any such
         states;

                           (iii) the preparation for filing by the Issuer Trust
         and execution on behalf of the Issuer Trust of an application to the
         New York Stock Exchange or any other national stock exchange or the
         Nasdaq National Market or any other automated quotation system for
         listing upon notice of issuance of any Capital Securities and filing
         with such exchange or self-regulatory organization such notification
         and documents as may be necessary from time to time to maintain such
         listing;

                           (iv)  the negotiation of the terms of, and the
         execution and delivery of, the Underwriting Agreement providing for the
         sale of the Capital Securities; and

                           (v)   the taking of any other actions necessary or
         desirable to carryout any of the foregoing activities.

               (d)     Notwithstanding anything herein to the contrary, the
Administrative 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 or Puerto Rico income
tax purposes and so that the Debentures will be treated as indebtedness of the
Depositor for Puerto Rico tax purposes. In this connection, the Depositor and
the Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the Certificate of Trust or this Trust Agreement, that they
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



                                       15


interests of the Holders of the Outstanding Capital Securities. In no event
shall the Depositor or 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 solely 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 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 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
         Trust available for the payment of Distributions. Distributions shall



                                       16


         accumulate from _____________, 200__ 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 monthly in arrears on the ______ day of each month, commencing
         on __________, 200__. 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").

                           (ii)  In the event (and to the extent) that the
         Depositor exercises its right under the Indenture to defer the payment
         of interest on the Debentures, Distributions on the Trust Securities
         shall be deferred but shall continue to accumulate. Distributions on
         the Trust Securities shall be payable at a rate of _____% per annum of
         the Liquidation Amount of the Trust Securities. The amount of
         Distributions payable for any full monthly period shall be computed on
         the basis of a 360-day year of twelve 30-day months. The amount of
         Distributions 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 a partial month in that period. The amount of Distributions
         payable for any period shall include the Additional Amounts, if any.

                           (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 for such Distribution Date, which shall be the 15th
calendar day, whether or not a Business Day, before the relevant Distribution
Date. Distributions payable on any Trust Securities that are not punctually paid
on any Distribution Date will cease to be payable to the Person in whose name
such Trust Securities are registered on the relevant record date, and such
defaulted Distribution will instead be payable to the Person in whose name such
Trust Securities are registered on the special record date or other specified
date for determining Holders entitled to such defaulted interest established in
accordance with the Indenture.

         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





                                       17


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, 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);

                           (iii) the CUSIP number or CUSIP numbers of the
         Capital Securities affected;

                           (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)  if the Capital Securities are no longer in
         book-entry-only form, the place or places where the Capital Securities
         Certificates are to be surrendered for the payment of the Redemption
         Price.

               (c)     The Trust Securities redeemed on each Redemption Date
shall be redeemed at the Redemption Price with the proceeds from the
contemporaneous redemption or payment at stated maturity of the 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,



                                       18


Distributions payable on 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 dates for the related Distribution Dates. 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 cease, except the right of such Holders to receive the
Redemption Price and any Distribution payable in respect of the Trust Securities
on or prior to the Redemption Date, but without interest, and such Trust
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 pursuant to the Guarantee, 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 such classes. 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 from the Outstanding Capital Securities not
previously called for redemption by any method the Property Trustee deems fair
and appropriate, 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 for 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.      Ranking of Trust 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, subject to
Section 4.2(e), 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 Event of
Default resulting from a Debenture Event of Default specified in Section 501(1)
or 501(2)





                                       19


of the Indenture 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 all accumulated and
unpaid Distributions (including any Additional Amounts) on all Outstanding
Capital Securities for all Distribution Periods terminating on or prior thereto,
or in the case of payment of the Redemption Price the full amount of such
Redemption Price on all Outstanding Capital Securities then called for
redemption, or in the case of payment of the Liquidation Distribution 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,
the Capital Securities then due and payable.

               (b)     In the case of the occurrence of any Event of Default
resulting from any Debenture Event of Default, the Holders of the Common
Securities shall have no right to act with respect to any such Event of Default
under this Trust Agreement until the effect of all such Events of Default with
respect to the Capital Securities have been cured, waived or otherwise
eliminated. Until all such 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) in
respect of the Capital Securities shall, subject to the next succeeding
sentence, 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. A Holder of $1,000,000 or
more in aggregate Liquidation Amount of Capital Securities may receive payments
of Distributions (including any Additional Amounts) by wire transfer of
immediately available funds upon written request to the Property Trustee not
later than the 15th calendar day, whether or not a Business Day, before the
relevant Distribution Date. 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,
Puerto Rico and any other 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 and Puerto Rico Treasury forms
required to be filed in



                                       20


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 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 and
Puerto Rico 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 Expenses of the Issuer Trust.

               The Depositor shall pay to the Issuer Trust, and reimburse the
Issuer Trust for, the full amount of any costs, expenses or liabilities of the
Issuer Trust (other than obligations of the Issuer Trust to pay the Holders of
any Capital Securities or other similar interests in the Issuer Trust the
amounts due such Holders pursuant to the terms of the Capital Securities or such
other similar interests, as the case may be), including, without limitation, any
taxes, duties or other governmental charges of whatever nature (other than
withholding taxes) imposed on the Issuer Trust by the United States or any other
taxing authority. Such payment obligation includes any such costs, expenses or
liabilities of the Issuer Trust that are required by applicable law to be
satisfied in connection with a dissolution of the Issuer Trust.

         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 508 of the Indenture or Section 5.14 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.

               The Capital Securities Certificates shall be issued in minimum
denominations of $__ Liquidation Amount and integral multiples of $__ in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $__ Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be (i) executed on behalf of the Issuer Trust by manual or
facsimile signature of at least one Administrative Trustee and, if executed on
behalf of the Issuer Trust by facsimile, countersigned by the Securities
Registrar or its agent and (ii) authenticated by the Property Trustee by manual
or facsimile signature of an authorized signatory thereof and, if executed by
such authorized signatory of the Property Trustee by facsimile, countersigned by




                                       21

the Securities Registrar or its agent. Trust Securities Certificates bearing the
manual signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Issuer Trust or the
Property Trustee or, if executed on behalf of the Issuer Trust or the Property
Trustee by facsimile, countersigned by the Securities Registrar or its agent,
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 hereunder, upon due registration of such Trust Securities Certificate in
such transferee's name pursuant to Sections 5.4, 5.11 and 5.13.

         SECTION 5.3.      Execution and Delivery of Trust Securities
Certificates.

               At the Time of Delivery, 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, such written order executed by
one authorized officer thereof, without further corporate action by the
Depositor, in authorized denominations.

         SECTION 5.4.      Registration of Transfer and Exchange of Capital
Securities Certificates.

               The Depositor shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 5.8, a register or registers for the
purpose of registering Trust Securities Certificates and transfers and exchanges
of Capital Securities Certificates (the "Securities Register") in which the
transfer agent and registrar designated by the Depositor (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 5.10 in the case of the Common
Securities Certificates) and registration of transfers and exchanges of Capital
Securities Certificates as herein provided. __________________________ shall be
the initial Securities Registrar. The provisions of Sections 8.1, 8.3 and 8.6
herein shall apply to ________________________ also in its role as Securities
Registrar, for so long as __________________________ shall act as Securities
Registrar.

               Upon surrender for registration of transfer of any Capital
Securities Certificate at the office or agency maintained pursuant to Section
5.8, the Administrative Trustees or any one of them shall execute on behalf of
the Issuer Trust (and if executed on behalf of the Issuer Trust by a facsimile
signature, such certificate shall be countersigned by the Securities Registrar
or its agent) and 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 to register the transfer of any Capital Securities that have been
called for redemption during a period beginning at the opening of business 15
days before the day of selection for such redemption.



                                       22


               At the option of a Holder, Capital Securities Certificates may be
exchanged for other Capital Securities Certificates in authorized denominations
of the same class and of a like aggregate Liquidation Amount upon surrender of
the Capital Securities Certificates to be exchanged at the office or agency
maintained pursuant to Section 5.8.

               Every Capital Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Capital Securities Certificate surrendered for registration of
transfer or exchange shall be canceled and subsequently disposed of by an
Administrative Trustee or the Securities Registrar in accordance with such
Person's 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.

         SECTION 5.5.      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 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 class, tenor and
denomination. In connection with the issuance of any new Trust Securities
Certificate under this Section 5.5, 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 5.6.      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 of such Trust Securities Certificate for
the purpose of receiving Distributions and for all other purposes whatsoever,
and



                                       23


none of the Issuer Trustees, the Administrative Trustees and the Securities
Registrar shall be bound by any notice to the contrary.

         SECTION 5.7.      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.

         SECTION 5.8.      Maintenance of Office or Agency.

               The Administrative Trustees shall designate 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 _______________________,
as its office and agency for such purposes. The Administrative Trustee shall
give prompt written notice to the Depositor, the Property Trustees and to the
Holders of any change in the location of the Securities Register or any such
office or agency.

         SECTION 5.9.      Appointment of Paying Agent.

               The Paying Agent shall make 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 Property Trustee may
revoke such power and remove the Paying Agent in its sole discretion. The Paying
Agent shall initially be [Banco Popular de Puerto Rico]. 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 [Banco
Popular de Puerto Rico] shall no longer be the Paying Agent or a successor
Paying Agent shall resign or its authority to act be revoked, the Property
Trustee shall appoint a successor (which shall be a bank or trust company) that
is reasonably acceptable to the Administrative Trustees and the Depositor to act
as Paying Agent. Such successor Paying Agent or any additional Paying Agent
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 [Banco Popular de Puerto Rico] also in
its role as Paying Agent, for so long as [Banco Popular de Puerto Rico] 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.



                                       24


         SECTION 5.10.     Ownership of Common Securities by Depositor.

               At the Time of Delivery, the Depositor shall acquire, and
thereafter shall retain, beneficial and record ownership of the Common
Securities. To the fullest extent permitted by law, other than a transfer in
connection with a consolidation or merger of the Depositor into another Person,
or any conveyance, transfer or lease by the Depositor of its properties and
assets substantially as an entirety to any Person, pursuant to Section 801 of
the Indenture, any attempted transfer of the Common Securities shall be void.
The Administrative Trustees shall cause each Common Securities Certificate
issued to the Depositor to contain a legend consistent with this Section 5.10.

         SECTION 5.11.     Book-Entry Capital Securities Certificates; Common
Securities Certificate.

               (a)     The Capital Securities Certificates, upon original
issuance, will be issued in the form of a typewritten Capital Securities
Certificate or Certificates representing Book-Entry Capital Securities
Certificates, to be delivered to, or on behalf of, DTC, the initial Clearing
Agency, by, or on behalf of, the Issuer Trust. Such Capital Securities
Certificate or Certificates shall initially be registered on the Securities
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Owner will receive a Definitive Capital Securities Certificate
representing such Owner's interest in such Capital Securities, except as
provided in Section 5.13. Unless and until Definitive Capital Securities
Certificates have been issued to Owners pursuant to Section 5.13:

                           (i)   the provisions of this Section 5.11(a) shall be
         in full force and effect;

                           (ii)  the Securities Registrar and the 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 Liquidation Amount of and
         Distributions on the Capital Securities evidenced by Book-Entry Capital
         Securities Certificates and the giving of instructions or directions to
         Owners of Capital Securities evidenced by Book-Entry Capital Securities
         Certificates) as the sole Holder of Capital Securities evidenced by
         Book-Entry Capital Securities Certificates and shall have no
         obligations to the Owners thereof;

                           (iii) to the extent that the provisions of this
         Section 5.11 conflict with any other provisions of this Trust
         Agreement, the provisions of this Section 5.11 shall control; and

                           (iv)  the rights of the Owners of the Book-Entry
         Capital Securities Certificate shall be exercised only through the
         Clearing Agency and shall be limited to those established by law and
         agreements between such Owners and the Clearing Agency and/or the
         Clearing Agency Participants. Pursuant to the Certificate Depository
         Agreement, unless and until Definitive Capital Securities Certificates
         are issued pursuant to Section 5.13, the initial Clearing Agency will
         make book-entry transfers





                                       25


         among the Clearing Agency Participants and receive and transmit
         payments on the Capital Securities to such Clearing Agency
         Participants.

               (b)     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 5.12.     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 Certificates, the
Administrative Trustees and the Issuer Trustee 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.     Definitive Capital Securities Certificates.

               If (a) the Depositor advises the Issuer Trustees in writing
that the Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Capital Securities Certificates, and the
Depositor is unable to locate a qualified successor, (b) the Depositor at its
option advises the Issuer Trustees in writing that it elects to terminate the
book-entry system through the Clearing Agency or (c) after the occurrence of a
Debenture Event of Default, Owners of Capital Securities Certificates
representing beneficial interests aggregating at least a majority of the
Liquidation Amount advise the Administrative Trustees in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interest of the Owners of Capital Securities Certificates, then the
Administrative Trustees shall notify the other Issuer Trustees and the Clearing
Agency, and the Clearing Agency, in accordance with its customary rules and
procedures, shall notify all Clearing Agency Participants for whom it holds
Capital Securities of the occurrence of any such event and of the availability
of the Definitive Capital Securities Certificates to Owners of such class or
classes, as applicable, requesting the same. Upon surrender to the
Administrative Trustees of the typewritten Capital Securities Certificate or
Certificates representing the Book-Entry Capital Securities 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, if
executed on behalf of the Issuer Trust by facsimile, countersigned by the
Securities Registrar or its agent. Neither the Securities Registrar nor the
Trustees 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 of Trust Securities. 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 that meets the requirements of any stock exchange or automated
quotation system on which the Capital Securities are then listed or approved for
trading, as evidenced by the execution thereof by the Administrative Trustees or
any one of them.



                                       26


         SECTION 5.14.     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, upon a Debenture Event of Default, the Debenture Trustee fails 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 Property Trustee or 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 Depositor, the Debenture Trustee
and the Property Trustee, in the case of notice by the Holders of the Capital
Securities, or to the Depositor, the Debenture Trustee and the Holders of the
Capital Securities, in the case of notice by the Property Trustee.

               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 in the Indenture
provided, the Holders of at least a Majority in Liquidation Amount of the
Capital Securities, by written notice to the Property Trustee, the Depositor and
the Debenture Trustee, may rescind and annul such declaration and its
consequences if:

                           (i)   the Depositor 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)   any accrued Additional Interest (as
                  defined in the Indenture) 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 (as defined in the Indenture) 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,




                                       27


                  disbursements and advances of the Debenture Trustee and the
                  Property Trustee, their agents and counsel; and

                           (ii)  all 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 513 of the Indenture.

               The Holders of at least 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 default in the payment of
principal or interest (unless such default has been cured and a sum sufficient
to pay all matured installments of interest and principal 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 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 5.14(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 Event of Default specified in
Section 501(1) or 501(2) of the Indenture, any Holder of Capital Securities
shall have the right to institute a proceeding directly against the Depositor,
pursuant to Section 508 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
5.14(b) and this Section 5.14(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.



                                       28


               (d)     Except as otherwise provided in paragraphs (a), (b) and
(c) of this Section 5.14, the Holders of at least 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 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 Trust Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.

         SECTION 5.15.     CUSIP Numbers.

               The Administrative Trustees in issuing the Capital Securities
may use "CUSIP" numbers (if then generally in use), and, if so, the Property
Trustee shall use "CUSIP" numbers in notices of redemption 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 Capital
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Capital
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Administrative Trustees will promptly notify the
Property Trustee of any change in the CUSIP numbers.

                                   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 Issuer Trustees 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 513 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
at least 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





                                       29


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 Issuer Trustees 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 or Puerto
Rico income tax purposes.

               (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 the
Trust Agreement or otherwise, or (ii) the dissolution and winding-up of the
Issuer Trust, other than pursuant to the terms of this Trust Agreement, then the
Holders of Outstanding Capital Securities as a class 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 at least a Majority in Liquidation
Amount of the Capital Securities. Notwithstanding any other provision of this
Trust 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 or Puerto Rico income tax purposes.

         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 Property
Trustee, 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 at least 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






                                       30


at least 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 $__ 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 Property Trustee, or with such other
officer or agent of the Issuer Trust as the Property Trustee 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 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 at least 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 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.



                                       31


         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 are delivered to the Property 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 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 signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution 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.

               The ownership of Trust Securities shall be proved by the
Securities Register.

               Any request, demand, authorization, direction, notice, consent,
waiver or other Act 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 registration of 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 between the Holders and the Issuer
Trustees or 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 Act 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.



                                       32


               A Holder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee (as defined
in the Guarantee), the Issuer Trust, any Issuer Trustee, or any person or
entity.

         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:

               (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 Delaware corporation;

               (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 have been duly authorized by all necessary corporate or other action
on the part of the Property Trustee and the Delaware Trustee and do not require
any approval of stockholders of the Property Trustee and 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,





                                       33


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), other than the filing of the Certificate of Trust
with the Delaware Secretary of State; and

               (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 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 Time of
Delivery 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 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 any Issuer
Trustee of this Trust Agreement.



                                       34


                                  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, subject to Section 10.10 hereof.
Notwithstanding the foregoing, but subject to Section 8.1(c), no provision of
this Trust Agreement shall require any of the Issuer Trustees to expend or risk
its or their own funds or otherwise incur any financial liability in the
performance of any of its or their duties hereunder, or in the exercise of any
of its or their rights or powers, if it or they 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. To the extent
that, at law or in equity, an Administrative Trustee has duties and liabilities
relating to the Issuer Trust or to the Holders, such Administrative Trustee
shall not be liable to the Issuer Trust or to any Holder for such Administrative
Trustee's good faith reliance on the provisions of this Trust Agreement. The
provisions of this Trust Agreement, to the extent that they restrict the duties
and liabilities of the Administrative 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 Administrative 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 such Holder 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)     If an Event of Default has occurred and is continuing,
the Property Trustee shall enforce this Trust Agreement for the benefit of the
Holders.

               (d)     The Property 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 Trust Agreement (including pursuant to Section 10.10), and no implied
covenants shall be read into this Trust Agreement against the Property Trustee.
If an Event of Default has occurred (that has not been cured or waived pursuant
to Section 5.14), 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





                                       35


in its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

               (e)     No provision of this Trust Agreement shall be construed
to relieve the Property 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 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
               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 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 at least 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





                                       36


         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, the Administrative Trustees or the Depositor;
         and

                           (vii) subject to Section 8.1(c), 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.

               (f)     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 default or misconduct of any other
Issuer Trustee or the Depositor.

         SECTION 8.2.      Certain Notices.

               Within ninety days after the occurrence of any 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 Event of
Default to the Holders and the Administrative Trustees, unless such Event of
Default shall have been cured or waived.

               Within five Business 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 Property Trustee shall transmit, in
the manner and to the extent provided in Section 10.8, notice of such exercise
to the Holders and the Administrative Trustees, unless such exercise shall have
been revoked.

               The Property Trustee shall not be deemed to have knowledge of any
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 Event of
Default.

         SECTION 8.3.      Certain Rights of Property Trustee.

               Subject to the provisions of Section 8.1:



                                       37


               (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; provided, however, that if the Depositor fails to deliver
such opinion, the Property Trustee shall take such action, or refrain from
taking such action, as the Property Trustee 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


                                       38


occurrence of an 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 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.      Issuer Trustees 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.




                                       39


         SECTION 8.5.      Issuer Trustees 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 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
separately agreed by the Depositor and the Issuer Trustees 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 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 or claim of any kind
or nature whatsoever incurred by such Indemnified Person by reason of the
creation, operation or dissolution of the Issuer Trust or any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Issuer Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of authority conferred on such Indemnified Person by this Trust
Agreement, 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.

               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



                                       40


the Issuer Trust and the Holders of Trust 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 and any Issuer Trustee
shall have the right to 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 depository 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.

         SECTION 8.7.      Corporate Property Trustee Required; Eligibility of
Issuer Trustees and Administrative 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, Puerto Rico 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 8.7
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 8.7, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article VIII. 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.

               (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




                                       41


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 and until a Debenture 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 Holder of Common
Securities and the Administrative Trustees shall have the power to appoint one
or more Persons 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. If a
Debenture Event of Default shall have occurred and be continuing, the Property
Trustee shall have the sole power to so appoint such a co-trustee or separate
trustee, and upon the written request of the Property Trustee, the Depositor and
the Administrative Trustees shall for such purpose join with the Property
Trustee in the execution, delivery, and performance of all instruments and
agreements necessary or proper to appoint, such co-trustee or separate trustee.
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 Puerto Rico, 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.

               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 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




                                       42


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 8.9, and, in case a Debenture Event of 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 8.9.

               (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 VIII shall become effective 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
and by appointing a successor Relevant Trustee. The Relevant Trustee shall
appoint a successor by requesting from at least three Persons meeting the
eligibility requirements its expenses and charges to serve as the Relevant
Trustee on a form provided by the Administrative Trustees, and selecting the
Person who agrees to the lowest expenses and charges. If the instrument of
acceptance by the successor Issuer Trustee required by Section 8.11 shall not
have been delivered to the Relevant Trustee within 60 days after the giving of
such notice of resignation, the Relevant Trustee may petition, at the expense of
the Depositor, in the case of the Property Trustee, any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.



                                       43


               The Administrative Trustees, or any of them, may be removed at
any time by Act of the Holders of Common Securities delivered to the Relevant
Trustee.

               The Property Trustee or the Delaware Trustee, or both of them,
may be removed by Act of the Holders of at least a Majority in Liquidation
Amount of the Capital Securities, delivered to the Relevant Trustee (in its
individual capacity and, in the case of the Property Trustee, on behalf of the
Issuer Trust) (i) for cause (including upon the occurrence of an Event of
Default described in subparagraph (d) of the definition thereof with respect to
the Relevant Trustee), or (ii) at any time if a Debenture Event of Default shall
have occurred and be continuing. Unless and until a Debenture Event of Default
shall have occurred and be continuing, the Property Trustee or the Delaware
Trustee, or both of them, may be removed at any time by Act of the Holders of
the Common Securities.

               If a resigning Property Trustee or Delaware Trustee shall fail
to appoint a successor, or if the Property Trustee or the Delaware Trustee shall
be removed or become incapable of acting as Issuer Trustee, or if a vacancy
shall occur in the office of the Property Trustee or the Delaware Trustee for
any cause, the Holders of the Common Securities by Act of such Holders delivered
to the Relevant Trustee or, if a Debenture Event of Default shall have occurred
and be continuing, the Holders of the Capital Securities, by Act of the Holders
of not less than 25% in aggregate Liquidation Amount of the Capital Securities
then Outstanding delivered to such Relevant Trustee, may appoint a successor
Relevant Trustee or Trustees, and such successor Issuer Trustee shall comply
with the applicable requirements of Section 8.11. If no successor Relevant
Trustee shall have been so appointed by the Holders of the Common Securities or
Capital Securities, as the case may be, and accepted appointment in the manner
required by Section 8.11, any Holder, on behalf of such Holder and all others
similarly situated, or any other Issuer Trustee, may 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 manner provided in Section 10.8 and shall give
notice to the Depositor and to the Administrative Trustees. 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, if any Delaware Trustee who is a natural person dies or
becomes, in the opinion of the Holders of the Common Securities, incompetent or
incapacitated, the vacancy created by such death, incompetence or incapacity may
be filled by the Property Trustee following the procedures regarding expenses
and charges set forth above (with the successor being a Person who satisfies the
eligibility requirement for the Delaware Trustee set forth in Section 8.7).

         SECTION 8.11.     Acceptance of Appointment by Successor.

               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





                                       44


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 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, other
than the filing of an amendment to the Certificate of Trust to the extent
required under the Delaware Statutory Trust Act, 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 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 preceding paragraph.

               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 VIII.

         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 VIII, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, other than the filing of an amendment to the Certificate of
Trust to the extent required under the Delaware Statutory Trust Act.

         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 or
the Issuer Trust (or any such other obligor).



                                       45


         SECTION 8.14.     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 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)     Within 60 days after _____________ of each year
commencing with _____________, 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 _____________ 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 _____________ or, if
         the Property Trustee has not complied in any material respect with such
         obligations, a description of such noncompliance; and



                                       46


                           (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.

               (c)     A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with the Depositor.

         SECTION 8.16.     Reports to the Property Trustee.

               Each of the Depositor 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 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 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 shall be four, unless the
Property Trustee also acts as the Delaware Trustee, in which case the number of
Issuer Trustees may be three.

               (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 or dissolve the Issuer Trust.



                                       47


         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) or making any governmental filing; and

               (b)     The Administrative Trustees shall have power to delegate
from time to time to such of their number the doing of such things and the
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.

                                   ARTICLE IX
                       DISSOLUTION, LIQUIDATION AND MERGER

         SECTION 9.1.      Dissolution Upon Expiration Date.

               Unless earlier dissolved, the Issuer Trust shall automatically
dissolve, and its affairs be wound up, on _____________, 20__ (the "Expiration
Date"), following the distribution of the Trust Property in accordance with
Section 9.4.

         SECTION 9.2.      Early Dissolution.

               The first to occur of any of the following events is an "Early
Dissolution Event":

               (a)     the occurrence of a Depositor Bankruptcy Event in respect
of, or the dissolution or liquidation of, the Depositor, in its capacity as the
Holder of the Common Securities, unless the Depositor shall transfer the Common
Securities as provided by Section 5.10, in which case this provision shall refer
instead to any such successor Holder of the Common Securities;

               (b)     the written direction to the Property Trustee from all of
the Holders of the Common Securities at any time to dissolve 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 redemption or repayment 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.      Dissolution.

               The respective obligations and responsibilities of the Issuer
Trustees, the Administrative Trustees and the Issuer Trust created and continued
hereby shall terminate upon the latest to occur of the following: (a) the



                                       48





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.

         SECTION 9.4.      Liquidation.

               (a)     If an Early Dissolution 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 Property Trustee as expeditiously as the Property
Trustee determines 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 CUSIP Number of the Trust Securities;

                           (ii)  state the Liquidation Date;

                           (iii) 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, or if Section 9.4(d)
         applies, a right to receive a Liquidating Distribution; and

                           (iv)  provide such information with respect to the
         mechanics by which Holders may exchange Trust Securities Certificates
         for Debentures, or if Section 9.4(d) applies, receive a Liquidation
         Distribution, as the Property Trustee (after consultation with the
         Administrative Trustees) shall deem appropriate.

               (b)     Except where Section 9.2(c) or 9.4(d) applies, in order t
o 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



                                       49


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 otherwise, distribution of the Debentures in the manner provided
herein is determined by the Property Trustee not to be practical, or if an Early
Dissolution Event specified in clause (c) of Section 9.2 occurs, the Trust
Property shall be liquidated, and the Issuer Trust shall be dissolved and its
affairs wound-up, 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 Event of Default
specified in Section 501(1) or 501(2) of the Indenture 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, but without the
consent of the Holders of the Capital Securities, the Property Trustee or the
Delaware Trustee, 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 any state or Puerto Rico; provided, that (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,




                                       50


(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 Capital Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (iv)
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, (v) such successor entity has a purpose substantially
identical to that of the Issuer Trust, (vi) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Property Trustee
has received an Opinion of Counsel 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,
and (b) 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 (vii) the Depositor or its 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 or Puerto
Rico income tax purposes.

                                    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.

         SECTION 10.2.     Amendment.

               (a)     This Trust Agreement may be amended from time to time by
the Administrative Trustees 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




                                       51


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 or Puerto
Rico 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 (ii), such action shall not adversely affect
in any material respect the interests of any Holder.

               (b)     Except as provided in Section 10.2(c), any provision of
this Trust Agreement may be amended by the Administrative Trustees, the Property
Trustee, and the Holders of all of the Common Securities and with (i) the
consent of Holders of at least a Majority in Liquidation Amount of the Capital
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
Trustees or the Administrative Trustees in accordance with such amendment will
not affect the Trust's status as a grantor trust or cause the Issuer Trust to be
taxable as a corporation or as other than a grantor trust for United States
Federal or Puerto Rico 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 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date, or (ii) restrict the right of a Holder to institute suit for the
enforcement of any such payment on or after such date; 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 hereof), this
paragraph (c) of this Section 10.2 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 or Puerto Rico income tax
purposes.

               (e)     Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor and the Administrative Trustees,
this Trust Agreement may not be amended in a manner that imposes any additional
obligation on the Depositor or the Administrative Trustees.

               (f)     Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Property Trustee, this Trust Agreement may
not be amended in a manner that imposes any additional obligation on the
Property Trustee.



                                       52


               (g)     Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Delaware Trustee, this Trust Agreement may
not be amended in a manner that imposes any additional obligation on the
Delaware Trustee.

               (h)     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 a copy of such amendment.

               (i)     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, 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 without
reference to its conflicts of laws provisions.

         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 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 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.




                                       53


         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 or the Depositor 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 or the Depositor, to Popular, Inc., 209 Munoz Rivera Avenue,
San Juan, Puerto Rico 00918, Attention: Principal Financial Officer, 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 Issuer
Trust, 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 Associates. Attention: __________________ (b) with respect to the
Delaware Trustee, to____________________________ (c) with respect to the
Administrative Trustees, to them at ________________________________________;
and (d) with respect to the Issuer Trust, to its principal office specified in
Section 2.2, 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 and the Depositor agree for the
benefit of the Holders that, until at least one year and one day after the
Issuer Trust has been dissolved in accordance with Article IX, they shall not
file, or join in the filing of, a petition against the Issuer Trust under any
bankruptcy, insolvency, reorganization or other similar law (including the
United States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise
join in the commencement of any proceeding against the Issuer Trust under any
Bankruptcy Law. If the Depositor takes action in violation of this Section 10.9,
the Property Trustee agrees, for the benefit of Holders, that at the expense of
the Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest




                                       54


the filing of such petition by the Depositor against the Issuer Trust or the
commencement of such action and raise the defense that the Depositor has 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 Trustee 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. Except as
otherwise expressly provided herein, if and to the extent that any provision of
this Trust Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.

               (b)     The Property Trustee shall be the only Issuer Trustee
that is a trustee for the purposes of the Trust Indenture Act.

               (c)     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.

         SECTION 10.12.          Counterparts.

               This Trust Agreement may contain more than one counterpart of
the signature page and this Trust Agreement may be executed by the affixing of
the signature of each of the Trustees to one of such counterpart signature
pages. All of such counterpart signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]



                                       55



         IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Trust Agreement.

                                              POPULAR, INC.


                                              By:
                                                 ---------------------------



                                              J.P. MORGAN TRUST COMPANY,
                                              NATIONAL ASSOCIATION
                                              as Property Trustee


                                              By:
                                                 ---------------------------
                                                 Its

                                              CHASE MANHATTAN BANK USA,
                                              NATIONAL ASSOCIATION
                                              as Delaware Trustee


                                              By:                           ,
                                                 ---------------------------


                                              POPULAR CAPITAL TRUST

                                              By:
                                                 ---------------------------



                                                 ---------------------------,
                                                 as Administrative Trustee


                                                 ---------------------------,
                                                 as Administrative Trustee



                                       56






Affidavit No.: ______

         Sworn and subscribed to before me by _________________  of legal age,
_________, executive, and a resident of __________, Puerto Rico, in his capacity
as Senior Executive Vice President of Popular, Inc., personally known to me, in
San Juan, Puerto Rico, this ____ day of ___________, 20___.



                                                   ----------------------------
                                                           Notary Public


STATE OF                   )
                           ) ss:
                           )

         On _____________, 20___ before me, the undersigned, a Notary Public in
and for the State of ____________, personally appeared ________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument, and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that the foregoing instrument is the free act and deed of the entity upon
behalf of which such person acted.

                                            WITNESS my hand and official seal


                                            SIGNATURE:
                                                      --------------------------

(This area for official notarial seal)



                                       57





STATE OF DELAWARE                     )
                                      ) ss:
COUNTY OF _____________               )

         On ______________, 20___ before me, the undersigned, a Notary Public in
and for the State of Delaware, personally appeared __________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument, and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that the foregoing instrument is the free act and deed of the entity upon
behalf of which such person acted.

                                     WITNESS my hand and official seal


                                     SIGNATURE:
                                               --------------------------

(This area for official notarial seal)





                                       58



                                                                       EXHIBIT A

                              CERTIFICATE OF TRUST





                                    Exh. A-1





                                                                       EXHIBIT B

                      FORM OF COMMON SECURITIES CERTIFICATE


THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN AFFILIATE OF
THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.10 OF THE TRUST
AGREEMENT

Certificate Number _______                   Number of Common Securities _______

                    Certificate Evidencing Common Securities

                           of Popular Capital Trust __

                            _____% Common Securities

                  (liquidation amount $__ per Common Security)

         Popular Capital Trust __, a statutory trust created under the laws of
the State of Delaware (the "Issuer Trust"), hereby certifies that Popular, Inc.
(the "Holder") is the registered owner of _______________________ (___________)
Common Securities of the Issuer Trust representing undivided common beneficial
interests in the assets of the Issuer Trust and designated the _____% Common
Securities (liquidation amount $__ per Common Security) (the "Common
Securities"). Except in accordance with 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 Declaration of Trust and
Trust Agreement of the Issuer Trust, dated as of _____________, 20___, as the
same may be amended from time to time (the "Trust Agreement"), among Popular,
Inc., as Depositor, J.P. Morgan Trust Company, National Association, as Property
Trustee, Chase Manhattan Bank USA, National Association, as Delaware Trustee,
and the Holders of Trust Securities, 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. 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.

                                    Exh. B-1





         IN WITNESS WHEREOF, one of the Administrative Trustees of the Issuer
Trust has executed this certificate this ____ day of _________, 20___.

                                             POPULAR CAPITAL TRUST __


                                             By:
                                                -------------------------------
                                             Name:
                                             Title: Administrative Trustee

                PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION

         This is one of the Common Securities referred to in the above mentioned
Trust Agreement.

Dated:________________                       J.P. MORGAN TRUST COMPANY,
                                                NATIONAL ASSOCIATION
                                             as Property Trustee


                                             By:_____________________________
                                             Name:
                                             Title:


                                    Exh. B-2





                                                                       EXHIBIT C

                  FORM OF GLOBAL CAPITAL SECURITIES CERTIFICATE


         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 Capital Trust __ 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.

         NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH, A "PLAN"), NO
ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S
INVESTMENT IN THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD THIS CAPITAL SECURITIES CERTIFICATE OR
ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION
CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER
APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING OR THE
REQUIREMENTS OF U.S. DEPARTMENT OF LABOR REGULATION SECTION 2550.401c-1 ARE
SATISFIED SUCH THAT THE CAPITAL SECURITIES CERTIFICATE HELD BY THE PURCHASER OR
HOLDER DOES NOT CONSTITUTE "PLAN ASSETS" AND, IN THE CASE OF ANY PURCHASER OR
HOLDER RELYING ON ANY EXEMPTION OTHER THAN PTCE 96-23, 95-60, 91-38, 90-1 OR
84-14 OR U.S. DEPARTMENT OF LABOR REGULATION SECTION 2550.401c-1, HAS COMPLIED
WITH ANY REQUEST BY THE DEPOSITOR OR THE ISSUER TRUST FOR AN OPINION OF COUNSEL
OR OTHER EVIDENCE WITH RESPECT TO THE AVAILABILITY OF SUCH EXEMPTION. ANY
PURCHASER OR HOLDER OF THIS CAPITAL SECURITIES CERTIFICATE OR ANY INTEREST
HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING HEREOF
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 OR U.S. DEPARTMENT OF LABOR REGULATION SECTION 2550.401c-1.


                                    Exh. C-1







Certificate Number _____                      Number of Capital Securities _____

CUSIP NO.

                    Certificate Evidencing Capital Securities
                           of Popular Capital Trust __
                        _____% Trust Preferred Securities
                  (liquidation amount $__ per Capital Security)

         Popular Capital Trust __, a statutory trust created under the laws of
the State of Delaware (the "Issuer Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of _________________________________
(____________) Capital Securities of the Trust representing an undivided
preferred beneficial interest in the assets of the Trust and designated the
Popular Capital Trust __ _____% Trust Preferred Securities (liquidation amount
$__ 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 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 Declaration of Trust and Trust Agreement of the Issuer Trust, dated as
of _____________, 2003, as the same may be amended from time to time (the "Trust
Agreement"), among Popular, Inc., as Depositor, J.P. Morgan Trust Company,
National Association, as Property Trustee, Chase Manhattan Bank USA, National
Association, as Delaware Trustee, and the Holders of Trust Securities, including
the designation of the terms of the Capital Securities as set forth therein. The
Holder is entitled to the benefits of the Guarantee Agreement, dated as of
_____________, 20___, (the "Guarantee Agreement"), by and between Popular, Inc.,
as Guarantor, and J.P. Morgan Trust Company, National Association, as Guarantee
Trustee, to the extent provided therein. The Issuer Trust will furnish a copy of
the Issuer Trust Agreement and the Guarantee Agreement to the Holder without
charge upon written request to the Issuer Trust at its principal place of
business or registered office.

         Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.

         IN WITNESS WHEREOF, one of the Administrative Trustees of the Issuer
Trust has executed this certificate this ____ day of _________________.



                                               POPULAR CAPITAL TRUST __


                                                By:
                                                   -----------------------------
                                                Name:
                                                Title: Administrative Trustee



                                    Exh. C-2




                PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION

         This is one of the Capital Securities referred to in the above
mentioned Trust Agreement.

Dated:________________                       J.P. MORGAN TRUST COMPANY,
                                                NATIONAL ASSOCIATION
                                             as Property Trustee


                                             By:
                                                --------------------------------
                                             Name:
                                             Title:


                                   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.

Dated:________________                      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.








                                    Exh. C-3

EX-4.7

                                                                     EXHIBIT 4.7


                                     FORM OF


                               GUARANTEE AGREEMENT


                                 BY AND BETWEEN


                                 POPULAR, INC.,
                                  AS GUARANTOR

                                       AND

                           J.P. MORGAN TRUST COMPANY,
                             NATIONAL ASSOCIATION,
                              AS GUARANTEE TRUSTEE


                                   RELATING TO


                            POPULAR CAPITAL TRUST __





                           ---------------------------


                         DATED AS OF _____________, 20__

                           ---------------------------




                                TABLE OF CONTENTS



                                                                                                               PAGE
                                                                                                               ----
                                                                                                            
ARTICLE I                  -        DEFINITIONS...................................................................2
         SECTION 1.1.      Definitions............................................................................2

ARTICLE II        -        TRUST INDENTURE ACT....................................................................6
         SECTION 2.1.      Trust Indenture Act; Application.......................................................6
         SECTION 2.2.      List of Holders........................................................................6
         SECTION 2.3.      Reports by the Guarantee Trustee.......................................................7
         SECTION 2.4.      Periodic Reports to the Guarantee
                           Trustee................................................................................7
         SECTION 2.5.      Evidence of Compliance with
                           Conditions Precedent...................................................................7
         SECTION 2.6.      Events of Default; Waiver..............................................................8
         SECTION 2.7.      Event of Default; Notice...............................................................8
         SECTION 2.8.      Conflicting Interests..................................................................8

ARTICLE III       -        POWERS, DUTIES AND RIGHTS OF THE
                           GUARANTEE TRUSTEE......................................................................9
         SECTION 3.1.      Powers and Duties of the Guarantee
                           Trustee................................................................................9
         SECTION 3.2.      Certain Rights of Guarantee Trustee...................................................11
         SECTION 3.3.      Compensation; Indemnity; Fees.........................................................13

ARTICLE IV        -        GUARANTEE TRUSTEE.....................................................................14
         SECTION 4.1.      Guarantee Trustee; Eligibility........................................................14
         SECTION 4.2.      Appointment, Removal and Resignation
                           of the Guarantee Trustee..............................................................15

ARTICLE V                  -        GUARANTEE....................................................................16
         SECTION 5.1.      Guarantee.............................................................................16
         SECTION 5.2.      Waiver of Notice and Demand...........................................................16
         SECTION 5.3.      Obligations Not Affected..............................................................16
         SECTION 5.4.      Rights of Holders.....................................................................18
         SECTION 5.5.      Guarantee of Payment..................................................................18
         SECTION 5.6.      Subrogation...........................................................................18
         SECTION 5.7.      Independent Obligations...............................................................19

ARTICLE VI        -        COVENANTS AND SUBORDINATION...........................................................19
         SECTION 6.1.      Subordination.........................................................................19
         SECTION 6.2.      Pari Passu Guarantees.................................................................19







                                                                                                               PAGE
                                                                                                               ----
                                                                                                            
ARTICLE VII       -        TERMINATION...........................................................................20
         SECTION 7.1.      Termination...........................................................................20

ARTICLE VIII      -        MISCELLANEOUS.........................................................................20
         SECTION 8.1.      Successors and Assigns................................................................20
         SECTION 8.2.      Amendments............................................................................20
         SECTION 8.3.      Notices...............................................................................21
         SECTION 8.4.      Benefit...............................................................................22
         SECTION 8.5.      Governing Law.........................................................................22
         SECTION 8.6.      Counterparts..........................................................................22



                                       ii




         GUARANTEE AGREEMENT, dated as of ___________, 20__, between POPULAR,
INC., a Commonwealth of 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, 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 CAPITAL TRUST __, a
Delaware statutory trust (the "Issuer Trust").

                                    RECITALS

         WHEREAS, pursuant to an Amended and Restated Declaration of Trust and
Trust Agreement, of even date herewith (the "Trust Agreement"), among Popular,
Inc., as Depositor, the Property Trustee, the Delaware Trustee, and the
Administrative Trustees (each as named therein) and the holders from time to
time of undivided beneficial interests in the assets of the Issuer Trust, the
Issuer Trust is issuing $___________ aggregate Liquidation Amount (as defined in
the Trust Agreement) of its _____% Trust Preferred Securities (liquidation
amount $__ 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; and

         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 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 Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Capital Securities the
Guarantee Payments (as defined herein) 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 Guarantor hereby acknowledges shall benefit
the Guarantor, the Guarantor executes




and delivers 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.

         "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.



                                       2


         "Board of Directors" means the board of directors of the Guarantor or
any committee of the board of directors of the Guarantor, comprised of one or
more members of the board of directors of the Guarantor or officers of the
Guarantor, 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.

         "Debentures" shall have the meaning specified in the Trust Agreement.

         "Distributions" shall have the meaning specified in the Trust
Agreement.

         "Event of Default" means (i) a default by the Guarantor in any of its
payment obligations under this Guarantee Agreement or (ii) a default by the
Guarantor in any other obligation hereunder 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 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 with respect to any Capital Securities called for 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
dissolution, winding-up or liquidation of the Issuer Trust, unless Debentures
are distributed to the Holders, the lesser of (a) the Liquidation Distribution
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.


                                       3


         "Guarantee Trustee" means Bank One Trust Company, N.A., 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 first paragraph 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 Guarantor,
the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee
Trustee.

         "Indenture" means the Junior Subordinated Indenture, dated as of
October 31, 2003, between Popular, Inc. 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 first paragraph of this
Guarantee Agreement.

         "Liquidation Distribution" shall have the meaning specified in the
Trust 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. Any Officers' Certificate delivered with respect to


                                       4


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.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, company,
limited liability company, trust, business trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

         "Redemption Price" shall have the meaning set forth in the Trust
Agreement.

         "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 Declaration of Trust
and Trust Agreement of the Issuer Trust referred to in


                                       5



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 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."


                                   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)      Except as otherwise expressly provided herein, if and
to the extent that any provision of this Guarantee Agreement limits, qualifies
or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.

                  (c)      The application of the Trust Indenture Act to this
Guarantee Agreement shall not affect the nature of the Capital Securities as
equity securities representing undivided beneficial interests in the assets of
the Issuer Trust.

         SECTION 2.2.  LIST OF HOLDERS.

                  (a)      The Guarantor shall furnish or cause to be furnished
to the Guarantee Trustee (a) semiannually, on or before __________ and
___________ 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 request in writing, within
30 days after the receipt by the Guarantor of


                                       6


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 Guarantor 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 on 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.

                  Within 60 days after __________ each year, commencing
__________, 20__, 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.
If this Guarantee Agreement shall have been qualified under 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 Guarantor shall provide to the Guarantee Trustee 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, provided that such
documents, reports and information shall be required to be provided to the
Securities and Exchange Commission only if this Guarantee Agreement shall have
been qualified under the Trust Indenture Act.

         SECTION 2.5.  EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

                  The Guarantor 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 the Guarantor pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.


                                       7



         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 known to the Guarantee Trustee, 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.

                  (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 written notice,
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.


                                       8



                                   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 and cessation 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 (including pursuant to Section 2.1), and no
implied covenants shall be read into this Guarantee Agreement against the
Guarantee Trustee. If an Event of Default has occurred (that has not been cured
or waived pursuant to Section 2.6), 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 willful 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:


                                       9



                                    (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
                  (including pursuant to Section 2.1); 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
                  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;
         and

                           (iv)     subject to Section 3.1(b), 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



                                       10


         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 the Guarantor
         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 the Guarantor.

                           (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 be legal counsel to the Guarantor 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.


                                       11



                           (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 (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.



                                       12


                  (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.

                  The Guarantor 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 Guarantor 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 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, any Affiliate of
the Guarantee Trustee and any officer, director, shareholder, employee,
representative or agent of the Guarantee Trustee (each, an "Indemnified Person")
for, and to hold each Indemnified Person harmless against, any loss, liability
or expense incurred without negligence, willful misconduct or bad faith on the
part of the Indemnified Person, 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.


                                       13


                  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 the Guarantor; 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 Guarantor shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act.


                                       14



         SECTION 4.2.  APPOINTMENT, REMOVAL AND RESIGNATION OF THE GUARANTEE
TRUSTEE.

                  (a)      Subject to Section 4.2(c), the Guarantee Trustee may
be appointed or removed at any time by the action of the Holders of a Majority
in Liquidation Amount of the Capital Securities delivered to the Guarantee
Trustee and the Guarantor (i) for cause or (ii) if a Debenture Event of Default
(as defined in the Trust Agreement) shall have occurred and be continuing at any
time.

                  (b)      Subject to Section 4.2(c), the Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by giving
written notice thereof to the Holders and the Guarantor and by appointing a
successor Guarantee Trustee. The Guarantee Trustee shall appoint a successor by
requesting from at least three Persons meeting the requirements of Section
4.1(a) their expenses and charges to serve as the Guarantee Trustee, and
selecting the Person who agrees to the lowest expenses and charges.

                  (c)      The Guarantee Trustee appointed hereunder shall hold
office until a Successor Guarantee Trustee shall have been appointed and shall
have accepted such appointment. No removal or resignation of a Guarantee Trustee
shall be effective 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 Guarantor and, in the case of any
resignation, 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 Holders and the Guarantor of a notice of resignation,
the resigning Guarantee Trustee may petition, at the expense of the Guarantor,
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.

                  (e)      If a resigning Guarantee Trustee shall fail to
appoint a successor, or if a Guarantee Trustee shall be removed or become
incapable of acting as Guarantee Trustee and a replacement shall not be
appointed prior to such resignation or removal, or if a vacancy shall occur in
the office of Guarantee Trustee for any cause, the Holders of the Capital
Securities, by


                                       15


the action of the Holders of record of not less than 25% in aggregate
Liquidation Amount (as defined in the Trust Agreement) of the Capital Securities
then Outstanding (as defined in the Trust Agreement) delivered to such Guarantee
Trustee, may appoint a Successor Guarantee Trustee or Trustees. If no successor
Guarantee Trustee shall have been so appointed by the Holders of the Capital
Securities and accepted appointment, any Holder, on behalf of such Holder and
all others similarly situated, or any other Guarantee Trustee, may petition any
court of competent jurisdiction for the appointment of 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), 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 the Guarantor to the Holders or by causing the Issuer Trust
to pay such amounts to the Holders.

         SECTION 5.2.  WAIVER OF NOTICE AND DEMAND.

                  The Guarantor 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 the Guarantor, 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 the
Guarantor 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:


                                       16


                  (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 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 the Guarantor 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, the Guarantor with respect to the happening of any of
the foregoing.


                                       17


         SECTION 5.4.  RIGHTS OF HOLDERS.

                  The Guarantor 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 the
Guarantor 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 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.

                  The Guarantor 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 the Guarantor under this Guarantee Agreement; provided, however, that
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 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 the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.


                                       18


         SECTION 5.7.  INDEPENDENT OBLIGATIONS.

                  The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer Trust with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments 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.

                                   ARTICLE VI
                           COVENANTS AND SUBORDINATION

         SECTION 6.1.  SUBORDINATION.

                  The obligations of the Guarantor under this Guarantee
Agreement will constitute unsecured obligations of the Guarantor and will rank
subordinate and junior in right of payment to all Senior Debt (as defined in the
Indenture) of the Guarantor to the extent and in the manner set forth in the
Indenture with respect to the Debentures, and the provisions of Article Eighteen
of the Indenture will apply, mutatis mutandis, to the obligations of the
Guarantor hereunder. The obligations of the Guarantor hereunder do not
constitute Senior Debt (as defined in the Indenture) of the Guarantor.

         SECTION 6.2.  PARI PASSU GUARANTEES.

                  The obligations of the Guarantor under this Guarantee
Agreement shall rank pari passu with the obligations of the Guarantor under (i)
any similar guarantee agreements issued by the Guarantor on behalf of the
holders of preferred or capital securities issued by any statutory trust, (ii)
the Indenture and the Debt Securities (as defined therein) issued thereunder;
(iii) any expense agreements entered into by the Guarantor in connection with
the offering of preferred or capital securities by any statutory trust, 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 under this
Guarantee Agreement or with any obligation that ranks pari passu with the
obligations of the Guarantor under this Guarantee Agreement.


                                       19


                                   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 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 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 the Guarantor 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 the Guarantor that is permitted under
Article Eight of the Indenture and pursuant to which the successor or assignee
agrees in writing to perform the Guarantor's obligations hereunder, the
Guarantor 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.


                                       20


         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 or such other address or telecopy number as the Guarantor
may give notice to the Guarantee Trustee and the Holders:

                           Popular, Inc.
                           209 Munoz Rivera Avenue
                           San Juan, Puerto Rico 00918
                           Attention: ____________________
                           Telecopy: (787) _______________

                  (b)      if given to the Guarantee Trustee, to 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

with a copy to:

                           Popular Capital Trust __
                           c/o Popular, Inc.
                           209 Munoz Rivera Avenue
                           San Juan, Puerto Rico 00918
                           Attention: ____________________
                           Telecopy: (787) _______________

                  (c)      if given to any Holder, at the address 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


                                       21


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 COMMONWEALTH OF PUERTO RICO.

         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.

         IN WITNESS WHEREOF, the parties hereto have executed this Guarantee
Agreement as of the day and year first above written.

                                                 POPULAR, INC.,
                                                 as Guarantor


                                                 By:
                                                    --------------------------
                                                 Name:
                                                 Title:

                                                 J.P. MORGAN TRUST COMPANY,
                                                 NATIONAL ASSOCIATION
                                                 as Guarantee Trustee


                                                 By:
                                                    --------------------------
                                                 Name:
                                                 Title:



                                       22

EX-5.1

                                                                     EXHIBIT 5.1

                                  POPULAR, INC.
                             209 Munoz Rivera Avenue
                           San Juan, Puerto Rico 00918
                            Telephone (787) 765-9800

                                          November 9, 2004


Popular, Inc.
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918

Popular Capital Trust II
c/o Popular, Inc.
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918

Popular Capital Trust III
c/o Popular, Inc.
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918

Popular Capital Trust IV
c/o Popular, 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) up to $300,000,000 aggregate liquidation amount
of trust preferred securities representing beneficial ownership interests (the
"Preferred Securities") in Popular Capital Trust II, Popular Capital Trust III
and Popular Capital Trust IV (the "Trusts"), (ii) up to $300,000,000 aggregate
principal amount of junior subordinated debentures (the "Debentures") to be
issued by Popular, Inc. (the "Corporation"), and (iii) unconditional and
irrevocable guarantees (the "Guarantees" and each a




Popular Inc.
Popular Capital Trust II
Popular Capital Trust III
Popular Capital Trust IV
November 9, 2004
Page 2

"Guarantee") of the obligations of the Trusts under the Preferred Securities, to
be issued by the Corporation, in each case to be offered from time to time at
prices and on terms to be determined at the time of sale, I, as Counsel to the
Corporation, 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 Corporation 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 has been duly
authorized, executed and delivered, the terms of the Debentures 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 and so as to comply
with any requirement or restriction imposed by any court or governmental body
having jurisdiction over the Corporation, the Debentures have been duly executed
and authenticated 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 has been duly
authorized, executed and delivered, the terms of the Guarantee and of its
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 and so as to comply
with any requirement or restriction imposed by any court or governmental body
having jurisdiction over the Corporation, and the Guarantees have been duly
authorized, executed and delivered by the Corporation, 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.

         The foregoing opinion is limited to the Federal laws of the United
States and the laws of the Commonwealth of Puerto Rico, and I am expressing no
opinion as to the effect of the laws of any other jurisdiction.

         Also, I have relied as to certain matters on information obtained from
public officials, officers of the Corporation and other sources believed by me
to be responsible.




Popular Inc.
Popular Capital Trust II
Popular Capital Trust III
Popular Capital Trust IV
November 9, 2004
Page 3

         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 "Legal
Opinions" 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-5.2

                                                                     EXHIBIT 5.2


                                November 9, 2004


Popular Capital Trust II
Popular Capital Trust III
Popular Capital Trust IV
c/o Popular, Inc.
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918


        Re:    Popular Capital Trust II
               Popular Capital Trust III
               Popular Capital Trust IV

Ladies and Gentlemen:


         We have acted as special Delaware counsel for Popular Capital Trust II,
Popular Capital Trust III, and Popular Capital Trust IV, each a Delaware
statutory trust (each, a "Trust" and collectively, the "Trusts"), 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 Declaration of Trust and Trust Agreement for each of the
                  Trusts, each dated as of September 3, 2003 (collectively, the
                  "Original Trust Agreements"), by and among Popular, Inc., a
                  Commonwealth of Puerto Rico corporation, as depositor (the
                  "Depositor"), Chase Manhattan Bank USA, National Association
                  (as successor to Bank One Delaware, Inc.), a national banking
                  association, as Delaware trustee (the "Delaware Trustee"),
                  J.P. Morgan Trust Company, National Association (formerly
                  known as Bank One Trust Company, N.A.), a national banking
                  association, as property trustee (the "Property Trustee"), and
                  the individual trustees named therein (the "Administrative
                  Trustees");

         (b)      A certified copy of the Certificate of Trust for each of the
                  Trusts (collectively, the "Certificates of Trust"), each as
                  filed with the Office of the Secretary of State of the State
                  of Delaware (the "Secretary of State") on September 5, 2003;




Popular Capital Trust II
Popular Capital Trust III
Popular Capital Trust IV
November 9, 2004
Page 2


         (c)      A form of Amended and Restated Declaration of Trust and Trust
                  Agreement for each Trust, among the Depositor, the Property
                  Trustee, the Delaware Trustee, the Administrative Trustees
                  named therein and the Holders of the Trust Securities
                  (collectively, the "Amended and Restated Trust Agreements,"
                  and, together with the Original Trust Agreements, the "Trust
                  Agreements");

         (d)      The Registration Statement on Form S-3 (the "Registration
                  Statement"), including a preliminary prospectus (the
                  "Prospectus"), relating to, among other securities, the
                  Capital Securities of each Trust representing preferred
                  undivided beneficial ownership interests in the assets of each
                  Trust, filed by the Depositor and the Trusts with the
                  Securities and Exchange Commission (the "Commission") on or
                  about November 9, 2004; and

         (e)      A Certificate of Good Standing for each Trust, each dated
                  November 9, 2004, obtained from the Secretary of State.

         Initially capitalized terms used herein and not otherwise defined are
used as defined in the Trust Agreements, 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 (e) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (e) 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 bears upon or 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 each Trust
Agreement will constitute the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation and termination of each Trust, that the Certificates of Trust are in
full force and effect and have not been further amended and that the Trust
Agreements will be in full force and effect and will be executed in
substantially the forms reviewed by us, (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




Popular Capital Trust II
Popular Capital Trust III
Popular Capital Trust IV
November 9, 2004
Page 3


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) except to
the extent provided in paragraph 2 below, 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) except to the extent
provided in paragraph 2 below, the due authorization, execution and delivery by
all parties thereto of all documents examined by us, (vi) the receipt by each
Person to whom Capital Securities are to be issued by the Trusts (collectively,
the "Capital Security Holders") of a Capital Security Certificate for such
Capital Security and the payment for the Capital Security acquired by it, in
accordance with the Trust Agreements and the Registration Statement, and (vii)
that the Capital Securities are issued and sold to the Capital Security Holders
in accordance with the Trust Agreements and the Registration Statement. We have
not participated in the preparation of the Registration Statement or Prospectus
and assume no responsibility for their contents.

         This opinion is limited to the laws of the State of Delaware (excluding
the securities laws and blue sky 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.       Each Trust has been duly created and is validly existing in
good standing as a statutory trust under the Delaware Statutory Trust Act, 12
Del. C. Section 3801, et seq.

         2.       Upon execution of the Amended and Restated Trust Agreements,
the Capital Securities of each Trust will be duly authorized by each Trust
Agreement and, when executed and delivered to and paid for by the purchasers
thereof in accordance with the applicable Trust Agreement and the Registration
Statement, will be duly and validly issued and, subject to the qualifications
set forth in paragraph 3 below, fully paid and non-assessable undivided
beneficial interests in the assets of the applicable Trust.

         3.       The Capital Security Holders, as beneficial owners of the
Trusts, 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 each 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




Popular Capital Trust II
Popular Capital Trust III
Popular Capital Trust IV
November 9, 2004
Page 4


reference to us as local counsel under the heading "Legal Opinions" 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.


                                          Very truly yours,


                                          /s/ Richards, Layton & Finger, P.A.


DKD/jmb

EX-23.1

                                                                    EXHIBIT 23.1

            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
November 9, 2004

EX-25.1

                                                                    EXHIBIT 25.1


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                            -------------------------

                                    FORM T-1

                            STATEMENT OF ELIGIBILITY
                    UNDER THE TRUST INDENTURE ACT OF 1939 OF
                   A CORPORATION DESIGNATED TO ACT AS TRUSTEE

                   -------------------------------------------
               CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
                A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________

                    ----------------------------------------

                J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
               (Exact name of trustee as specified in its charter)

                                                           95-4655078
(State of incorporation                                (I.R.S. employer
if not a national bank)                                identification No.)

1999 AVENUE OF THE STARS - FLOOR 26
LOS ANGELES, CA                                               90067
(Address of principal executive offices)                    (Zip Code)

                               William H. McDavid
                                 General Counsel
                                 270 Park Avenue
                            New York, New York 10017
                               Tel: (212) 270-2611
            (Name, address and telephone number of agent for service)

                  --------------------------------------------
                                  POPULAR, INC
               (Exact name of obligor as specified in its charter)

         PUERTO RICO                                  66-0416582
(State or other jurisdiction of                   (I.R.S. employer
incorporation or organization)                    identification No.)

209 MUNOZ RIVERA AVENUE
SAN JUAN, PUERTO RICO                                00918
(Address of principal executive offices)           (Zip Code)





                                  POPULAR, INC
               (Exact name of obligor as specified in its charter)

         DELAWARE                                   660476353
(State or other jurisdiction of                   (I.R.S. employer
incorporation or organization)                    identification No.)

209 MUNOZ RIVERA AVENUE
SAN JUAN, PUERTO RICO                                00918
(Address of principal executive offices)           Zip Code)



                         JUNIOR SUBORDINATED DEBENTURES
                       (Title of the indenture securities)

- -------------------------------------------------------------------------------







ITEM 1.        GENERAL INFORMATION.

               Furnish the following information as to the trustee:

       (a)     Name and address of each examining or supervising authority to
               which it is subject.

               Comptroller of the Currency, Washington, D.C.
               Board of Governors of the Federal Reserve System,
               Washington, D.C.

       (b)     Whether it is authorized to exercise corporate trust powers.

               Yes.

ITEM 2.        AFFILIATIONS WITH OBLIGOR.

       If the Obligor is an affiliate of the trustee, describe each such
       affiliation.

       None.


NO RESPONSES ARE INCLUDED FOR ITEMS 3-15 OF THIS FORM T-1 BECAUSE THE OBLIGOR IS
NOT IN DEFAULT AS PROVIDED UNDER ITEM 13.

ITEM 16.       LIST OF EXHIBITS.

       List below all exhibits filed as part of this statement of eligibility.

       Exhibit 1.     Articles of Association of the Trustee as Now in Effect
                      (see Exhibit 1 to Form T-1 filed in connection with
                      Form 8K of the Southern California Water Company filing,
                      dated December 7, 2001, which is incorporated by
                      reference).

       Exhibit 2.     Certificate of Authority of the Trustee to Commence
                      Business (see Exhibit 2 to Form T-1 filed in connection
                      with Registration Statement No. 333-41329, which is
                      incorporated by reference).

       Exhibit 3.     Authorization of the Trustee to Exercise Corporate Trust
                      Powers (contained in Exhibit 2).

       Exhibit 4.     Existing By-Laws of the Trustee (see Exhibit 4 to Form
                      T-1 filed in connection with Form 8K of the Southern
                      California Water Company filing, dated December 7, 2001,
                      which is incorporated by reference).

       Exhibit 5.     Not Applicable

       Exhibit 6.     The consent of the Trustee required by Section 321 (b)
                      of the Act (see Exhibit 6 to Form T-1 filed in connection
                      with Registration Statement No. 333-41329, which is
                      incorporated by reference).

       Exhibit 7.     A copy of the latest report of condition of the Trustee,
                      published pursuant to law or the requirements of its
                      supervising or examining authority.

       Exhibit 8.     Not Applicable

       Exhibit 9.     Not Applicable


                                    SIGNATURE

         Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, J. P. Morgan Trust Company, National Association, has duly caused this
statement of eligibility and qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of San Francisco, and
State of California, on the 9th day of November 2004.


                        J. P. Morgan Trust Company, National Association


                              By /s/ George Reaves
                                 ---------------------------------------
                                 George Reaves
                                 Authorized Officer




          J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
                       STATEMENT OF CONDITION

                         SEPTEMBER 30, 2004



                                                                        ($000)
                                                                      ----------
                                                                   
ASSETS
 Cash and Due From Banks                                              $   28,672
 Securities                                                              145,134
 Loans and Leases                                                        110,847
 Premises and Fixed Assets                                                11,202
 Intangible Assets                                                       384,284
 Goodwill                                                                201,011
 Other Assets                                                             45,941
                                                                      ----------
  Total Assets                                                        $  927,091
                                                                      ==========


LIABILITIES
 Deposits                                                             $   94,426
 Other Liabilities                                                        55,575
                                                                      ----------
  Total Liabilities                                                      150,001

EQUITY CAPITAL
 Common Stock                                                                600
 Surplus                                                                 701,587
 Retained Earnings                                                        74,903
                                                                      ----------
  Total Equity Capital                                                   777,090
                                                                      ----------

  Total Liabilities and Equity Capital                                $  927,091
                                                                      ==========







                J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
                             STATEMENT OF CONDITION

                                  JUNE 30, 2004




                                                                        ($000)
                                                                      ----------
                                                                   
ASSETS
  Cash and Due From Banks                                             $   26,366
  Securities                                                             115,613
  Loans and Leases                                                       110,964
  Premises and Fixed Assets                                               12,083
  Intangible Assets                                                      391,238
  Goodwill                                                               250,990
  Other Assets                                                            47,784
                                                                      ----------
    Total Assets                                                      $  955,038
                                                                      ==========

LIABILITIES
  Deposits                                                            $   94,257
  Other Liabilities                                                       92,800
                                                                      ----------
    Total Liabilities                                                    187,057

EQUITY CAPITAL
  Common Stock                                                               600
  Surplus                                                                701,587
  Retained Earnings                                                       65,794
                                                                      ----------
    Total Equity Capital                                                 767,981
                                                                      ----------

    Total Liabilities and Equity Capital                              $  955,038
                                                                      ==========






                J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
                             STATEMENT OF CONDITION

                                  MARCH 31, 2004



                                                                        ($000)
                                                                      ----------
ASSETS
                                                                   
  Cash and Due From Banks                                             $   27,267
  Securities                                                             134,089
  Loans and Leases                                                       106,161
  Premises and Fixed Assets                                               12,698
  Intangible Assets                                                      396,967
  Goodwill                                                               250,539
  Other Assets                                                            52,961
                                                                      ----------
    Total Assets                                                      $  980,682
                                                                      ==========


LIABILITIES
  Deposits                                                            $  116,957
  Other Liabilities                                                      103,967
                                                                      ----------
    Total Liabilities                                                    220,924

EQUITY CAPITAL
  Common Stock                                                               600
  Surplus                                                                701,587
  Retained Earnings                                                       57,571
                                                                      ----------
    Total Equity Capital                                                 759,758
                                                                      ----------

    Total Liabilities and Equity Capital                              $  980,682
                                                                      ==========

EX-25.2

                                                                    EXHIBIT 25.2

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                            -------------------------

                                    FORM T-1

                            STATEMENT OF ELIGIBILITY
                    UNDER THE TRUST INDENTURE ACT OF 1939 OF
                   A CORPORATION DESIGNATED TO ACT AS TRUSTEE

                   -------------------------------------------
               CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
                A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________

                    ----------------------------------------

                J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
               (Exact name of trustee as specified in its charter)

                                                         95-4655078
(State of incorporation                                (I.R.S. employer
if not a national bank)                               identification No.)

1999 AVENUE OF THE STARS - FLOOR 26
LOS ANGELES, CA                                         90067
(Address of principal executive offices)              (Zip Code)

                               William H. McDavid
                                 General Counsel
                                 270 Park Avenue
                            New York, New York 10017
                               Tel: (212) 270-2611
            (Name, address and telephone number of agent for service)
                  --------------------------------------------
                            POPULAR CAPITAL TRUST II
                            POPULAR CAPITAL TRUST III
                            POPULAR CAPITAL TRUST IV
               (Exact name of obligor as specified in its charter)



        DELAWARE                                        TO BE APPLIED FOR
(State or other jurisdiction of                         (I.R.S. employer
incorporation or organization)                          identification No.)

209 MUNOZ RIVERA AVENUE
SAN JUAN, PUERTO RICO                                       00918
(Address of principal executive offices)                 (Zip Code)





                   PROPERTY TRUSTEE FOR THE CAPITAL SECURITIES

              IN CONNECTION WITH THE JUNIOR SUBORDINATED DEBENTURES
                       (Title of the indenture securities)
- -------------------------------------------------------------------------------


ITEM 1.         GENERAL INFORMATION.

                Furnish the following information as to the trustee:

         (a)    Name and address of each examining or supervising authority to
                which it is subject.

                Comptroller of the Currency, Washington, D.C. Board of
                Governors of the Federal Reserve System, Washington, D.C.

         (b)    Whether it is authorized to exercise corporate trust powers.

                                 Yes.

ITEM 2.         AFFILIATIONS WITH OBLIGOR.

         If the Obligor is an affiliate of the trustee, describe each such
         affiliation.

         None.


NO RESPONSES ARE INCLUDED FOR ITEMS 3-15 OF THIS FORM T-1 BECAUSE THE OBLIGOR IS
NOT IN DEFAULT AS PROVIDED UNDER ITEM 13.

ITEM 16.       LIST OF EXHIBITS.

         List below all exhibits filed as part of this statement of eligibility.

         Exhibit 1.        Articles of Association of the Trustee as Now in
                           Effect (see Exhibit 1 to Form T-1 filed in connection
                           with Form 8K of the Southern California Water Company
                           filing, dated December 7, 2001, which is incorporated
                           by reference).

         Exhibit 2.        Certificate of Authority of the Trustee to Commence
                           Business (see Exhibit 2 to Form T-1 filed in
                           connection with Registration Statement No. 333-41329,
                           which is incorporated by reference).

         Exhibit 3.        Authorization of the Trustee to Exercise Corporate
                           Trust Powers (contained in Exhibit 2).

         Exhibit 4.        Existing By-Laws of the Trustee (see Exhibit 4 to
                           Form T-1 filed in connection with Form 8K of the
                           Southern California Water Company filing, dated
                           December 7, 2001, which is incorporated by
                           reference).


         Exhibit 5.        Not Applicable

         Exhibit 6.        The consent of the Trustee required by Section
                           321 (b) of the Act (see Exhibit 6 to Form T-1 filed
                           in connection with Registration Statement No.
                           333-41329, which is incorporated by reference).

         Exhibit 7.        A copy of the latest report of condition of the
                           Trustee, published pursuant to law or the
                           requirements of its supervising or examining
                           authority.

         Exhibit 8.        Not Applicable

         Exhibit 9.        Not Applicable





                                    SIGNATURE

         Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, J. P. Morgan Trust Company, National Association, has duly caused this
statement of eligibility and qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of San Francisco, and
State of California, on the 9th day of November 2004.


                            J. P. Morgan Trust Company, National Association


                                By /s/ George Reaves
                                   --------------------------------
                                   George Reaves
                                   Authorized Officer

          J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
                       STATEMENT OF CONDITION

                         SEPTEMBER 30, 2004



                                                                        ($000)
                                                                      ----------
                                                                   
ASSETS
 Cash and Due From Banks                                              $   28,672
 Securities                                                              145,134
 Loans and Leases                                                        110,847
 Premises and Fixed Assets                                                11,202
 Intangible Assets                                                       384,284
 Goodwill                                                                201,011
 Other Assets                                                             45,941
                                                                      ----------
  Total Assets                                                        $  927,091
                                                                      ==========


LIABILITIES
 Deposits                                                             $   94,426
 Other Liabilities                                                        55,575
                                                                      ----------
  Total Liabilities                                                      150,001

EQUITY CAPITAL
 Common Stock                                                                600
 Surplus                                                                 701,587
 Retained Earnings                                                        74,903
                                                                      ----------
  Total Equity Capital                                                   777,090
                                                                      ----------

  Total Liabilities and Equity Capital                                $  927,091
                                                                      ==========







                J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
                             STATEMENT OF CONDITION

                                  JUNE 30, 2004




                                                                        ($000)
                                                                      ----------
                                                                   
ASSETS
  Cash and Due From Banks                                             $   26,366
  Securities                                                             115,613
  Loans and Leases                                                       110,964
  Premises and Fixed Assets                                               12,083
  Intangible Assets                                                      391,238
  Goodwill                                                               250,990
  Other Assets                                                            47,784
                                                                      ----------
    Total Assets                                                      $  955,038
                                                                      ==========

LIABILITIES
  Deposits                                                            $   94,257
  Other Liabilities                                                       92,800
                                                                      ----------
    Total Liabilities                                                    187,057

EQUITY CAPITAL
  Common Stock                                                               600
  Surplus                                                                701,587
  Retained Earnings                                                       65,794
                                                                      ----------
    Total Equity Capital                                                 767,981
                                                                      ----------

    Total Liabilities and Equity Capital                              $  955,038
                                                                      ==========






                J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
                             STATEMENT OF CONDITION

                                  MARCH 31, 2004



                                                                        ($000)
                                                                      ----------
ASSETS
                                                                   
  Cash and Due From Banks                                             $   27,267
  Securities                                                             134,089
  Loans and Leases                                                       106,161
  Premises and Fixed Assets                                               12,698
  Intangible Assets                                                      396,967
  Goodwill                                                               250,539
  Other Assets                                                            52,961
                                                                      ----------
    Total Assets                                                      $  980,682
                                                                      ==========


LIABILITIES
  Deposits                                                            $  116,957
  Other Liabilities                                                      103,967
                                                                      ----------
    Total Liabilities                                                    220,924

EQUITY CAPITAL
  Common Stock                                                               600
  Surplus                                                                701,587
  Retained Earnings                                                       57,571
                                                                      ----------
    Total Equity Capital                                                 759,758
                                                                      ----------

    Total Liabilities and Equity Capital                              $  980,682
                                                                      ==========

EX-25.3

                                                                    EXHIBIT 25.3




                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                            -------------------------

                                    FORM T-1

                            STATEMENT OF ELIGIBILITY
                    UNDER THE TRUST INDENTURE ACT OF 1939 OF
                   A CORPORATION DESIGNATED TO ACT AS TRUSTEE

                   -------------------------------------------
               CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
                A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________

                    ----------------------------------------

                J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
               (Exact name of trustee as specified in its charter)

                                                                 95-4655078
(State of incorporation                                     (I.R.S. employer
if not a national bank)                                    identification No.)

1999 AVENUE OF THE STARS - FLOOR 26
LOS ANGELES, CA                                              90067
(Address of principal executive offices)                   (Zip Code)

                               William H. McDavid
                                 General Counsel
                                 270 Park Avenue
                            New York, New York 10017
                               Tel: (212) 270-2611
            (Name, address and telephone number of agent for service)

                  --------------------------------------------
                            POPULAR CAPITAL TRUST II
                            POPULAR CAPITAL TRUST III
                            POPULAR CAPITAL TRUST IV
               (Exact name of obligor as specified in its charter)


        DELAWARE                                        TO BE APPLIED FOR
(State or other jurisdiction of                         (I.R.S. employer
incorporation or organization)                          identification No.)

209 MUNOZ RIVERA AVENUE
SAN JUAN, PUERTO RICO                                    00918
(Address of principal executive offices)               (Zip Code)


                  GUARANTEE TRUSTEE FOR THE CAPITAL SECURITIES




              IN CONNECTION WITH THE JUNIOR SUBORDINATED DEBENTURES
                       (Title of the indenture securities)

- --------------------------------------------------------------------------------


ITEM 1.  GENERAL INFORMATION.

         Furnish the following information as to the trustee:

    (a)  Name and address of each examining or supervising authority to which it
         is subject.

         Comptroller of the Currency, Washington, D.C. Board of Governors of the
         Federal Reserve System, Washington, D.C.

    (b)  Whether it is authorized to exercise corporate trust powers.

         Yes.

ITEM 2.  AFFILIATIONS WITH OBLIGOR.

         If the Obligor is an affiliate of the trustee, describe each such
         affiliation.

         None.


NO RESPONSES ARE INCLUDED FOR ITEMS 3-15 OF THIS FORM T-1 BECAUSE THE OBLIGOR IS
NOT IN DEFAULT AS PROVIDED UNDER ITEM 13.

ITEM 16. LIST OF EXHIBITS.

         List below all exhibits filed as part of this statement of eligibility.

         Exhibit 1. Articles of Association of the Trustee as Now in Effect
                    (see Exhibit 1 to Form T-1 filed in connection with Form 8K
                    of the Southern California Water Company filing, dated
                    December 7, 2001, which is incorporated by reference).

         Exhibit 2. Certificate of Authority of the Trustee to Commence
                    Business (see Exhibit 2 to Form T-1 filed in connection with
                    Registration Statement No. 333-41329, which is incorporated
                    by reference).

         Exhibit 3. Authorization of the Trustee to Exercise Corporate Trust
                    Powers (contained in Exhibit 2).

         Exhibit 4. Existing By-Laws of the Trustee (see Exhibit 4 to Form T-1
                    filed in connection with Form 8K of the Southern California
                    Water Company filing, dated December 7, 2001, which is
                    incorporated by reference).

         Exhibit 5. Not Applicable

         Exhibit 6. The consent of the Trustee required by Section 321 (b) of
                    the Act (see Exhibit 6 to Form T-1 filed in connection with
                    Registration Statement No. 333-41329, which is incorporated
                    by reference).


         Exhibit 7. A copy of the latest report of condition of the Trustee,
                    published pursuant to law or the requirements of its
                    supervising or examining authority.

         Exhibit 8. Not Applicable

         Exhibit 9. Not Applicable


                                    SIGNATURE

         Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, J. P. Morgan Trust Company, National Association, has duly caused this
statement of eligibility and qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of San Francisco, and
State of California, on the 9th day of November 2004.


                           J. P. Morgan Trust Company, National Association


                              By /s/ George Reaves
                                 -------------------------------------
                                     George Reaves
                                     Authorized Officer








          J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
                       STATEMENT OF CONDITION

                         SEPTEMBER 30, 2004



                                                                        ($000)
                                                                      ----------
                                                                   
ASSETS
 Cash and Due From Banks                                              $   28,672
 Securities                                                              145,134
 Loans and Leases                                                        110,847
 Premises and Fixed Assets                                                11,202
 Intangible Assets                                                       384,284
 Goodwill                                                                201,011
 Other Assets                                                             45,941
                                                                      ----------
  Total Assets                                                        $  927,091
                                                                      ==========


LIABILITIES
 Deposits                                                             $   94,426
 Other Liabilities                                                        55,575
                                                                      ----------
  Total Liabilities                                                      150,001

EQUITY CAPITAL
 Common Stock                                                                600
 Surplus                                                                 701,587
 Retained Earnings                                                        74,903
                                                                      ----------
  Total Equity Capital                                                   777,090
                                                                      ----------

  Total Liabilities and Equity Capital                                $  927,091
                                                                      ==========







                J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
                             STATEMENT OF CONDITION

                                  JUNE 30, 2004




                                                                        ($000)
                                                                      ----------
                                                                   
ASSETS
  Cash and Due From Banks                                             $   26,366
  Securities                                                             115,613
  Loans and Leases                                                       110,964
  Premises and Fixed Assets                                               12,083
  Intangible Assets                                                      391,238
  Goodwill                                                               250,990
  Other Assets                                                            47,784
                                                                      ----------
    Total Assets                                                      $  955,038
                                                                      ==========

LIABILITIES
  Deposits                                                            $   94,257
  Other Liabilities                                                       92,800
                                                                      ----------
    Total Liabilities                                                    187,057

EQUITY CAPITAL
  Common Stock                                                               600
  Surplus                                                                701,587
  Retained Earnings                                                       65,794
                                                                      ----------
    Total Equity Capital                                                 767,981
                                                                      ----------

    Total Liabilities and Equity Capital                              $  955,038
                                                                      ==========






                J. P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
                             STATEMENT OF CONDITION

                                  MARCH 31, 2004



                                                                        ($000)
                                                                      ----------
ASSETS
                                                                   
  Cash and Due From Banks                                             $   27,267
  Securities                                                             134,089
  Loans and Leases                                                       106,161
  Premises and Fixed Assets                                               12,698
  Intangible Assets                                                      396,967
  Goodwill                                                               250,539
  Other Assets                                                            52,961
                                                                      ----------
    Total Assets                                                      $  980,682
                                                                      ==========


LIABILITIES
  Deposits                                                            $  116,957
  Other Liabilities                                                      103,967
                                                                      ----------
    Total Liabilities                                                    220,924

EQUITY CAPITAL
  Common Stock                                                               600
  Surplus                                                                701,587
  Retained Earnings                                                       57,571
                                                                      ----------
    Total Equity Capital                                                 759,758
                                                                      ----------

    Total Liabilities and Equity Capital                              $  980,682
                                                                      ==========