0000950144-95-002136.txt : 19950808 0000950144-95-002136.hdr.sgml : 19950808 ACCESSION NUMBER: 0000950144-95-002136 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19950804 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANPONCE CORP CENTRAL INDEX KEY: 0000763901 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 660416582 STATE OF INCORPORATION: PR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-61601 FILM NUMBER: 95559234 BUSINESS ADDRESS: STREET 1: 209 MUNOZ RIVERA AVE STREET 2: POPULAR CENTER BUILDING CITY: HATO REY STATE: PR ZIP: 00918 BUSINESS PHONE: 8097659800 MAIL ADDRESS: STREET 1: P.O. BOX 362708 CITY: SAN JUAN STATE: PR ZIP: 00936-2708 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANPONCE FINANCIAL CORP CENTRAL INDEX KEY: 0000877337 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 660476353 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-61601-01 FILM NUMBER: 95559235 BUSINESS ADDRESS: STREET 1: C/O CT 1209 ORANGE ST CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: 8097659800 MAIL ADDRESS: STREET 1: C/O SULLIVAN & CROMWELL STREET 2: 125 BROAD ST CITY: NEW YORK STATE: NY ZIP: 10004 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POPULAR INTERNATIONAL BANK INC CENTRAL INDEX KEY: 0000896074 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: A7 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-61601-02 FILM NUMBER: 95559236 BUSINESS ADDRESS: STREET 1: 209 MUNOZ RIVERA AVE CITY: HATO REY STATE: A7 ZIP: 00918 BUSINESS PHONE: 8097659800 MAIL ADDRESS: STREET 1: C/O SULLIVAN & CROMWELL STREET 2: 125 BROAD ST CITY: NEW YORK STATE: NY ZIP: 10004 S-3 1 BANPONCE CORPORATION FORM S-3 1 As filed with the Securities and Exchange Commission dated August 4, 1995 Registration No. 33- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM S-3 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ----------------------- BANPONCE CORPORATION (Exact name of co-registrant as specified in its charter) ----------------------- PUERTO RICO 66-0416582 (State or other jurisdiction of (IRS employer incorporation or organization) identification number) 209 Munoz Rivera Avenue 00918 Hato Rey, Puerto Rico (Zip Code) (Address of principal executive offices) (809) 765-9800 (Co-registrant's telephone number, including area code) ----------------------- POPULAR INTERNATIONAL BANK, INC. (Exact name of co-registrant as specified in its charter) PUERTO RICO N/A (State or other jurisdiction of (IRS employer incorporation or organization) identification number) 209 Munoz Rivera Avenue 00918 Hato Rey, Puerto Rico (Zip Code) (Address of principal executive offices) (809) 765-9800 (Co-registrant's telephone number, including area code) ----------------------- BANPONCE FINANCIAL CORP. (Exact name of co-registrant as specified in its charter) DELAWARE 66-0476353 (State or other jurisdiction of (IRS employer incorporation or organization) identification number) 521 Fellowship Road 08054 Mt. Laurel, New Jersey (Zip Code) (Address of principal executive office) (809) 765-9800 (Co-registrant's telephone number, including area code) DAVID H. CHAFEY, JR. 209 Munoz Rivera Avenue Hato Rey, Puerto Rico 00918 (809) 765-9800 (Name, address, and telephone number, including area code, of agent for service) ----------------------- COPIES TO: DONALD J. TOUMEY, ESQ. Sullivan & Cromwell 125 Broad Street New York, New York 10004 ------------------------ Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement as determined by the Registrants on the basis of market conditions and other factors. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [x] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] -----------------------
CALCULATION OF REGISTRATION FEE ==================================================================================================================================== PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OF OFFERING REGISTRATION TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) FEE ------------------------------------------------------------------------------------------------------------------------------------ Debt Securities and Preferred Stock.. $500,000,000 100% $500,000,000 $172,414 Guarantees........................... (2) (2) (2) (2) ====================================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457. (2) No additional consideration will be received for the Guarantees. ----------------------- 2 The Co-registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Co-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. ================================================================================ 3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED AUGUST 4, 1995 PROSPECTUS DEBT SECURITIES OF BANPONCE CORPORATION OR POPULAR INTERNATIONAL BANK, INC. (UNCONDITIONALLY GUARANTEED BY BANPONCE CORPORATION) OR BANPONCE FINANCIAL CORP. (UNCONDITIONALLY GUARANTEED BY BANPONCE CORPORATION) PREFERRED STOCK OF BANPONCE CORPORATION OR POPULAR INTERNATIONAL BANK INC. (UNCONDITIONALLY GUARANTEED BY BANPONCE CORPORATION) OR BANPONCE FINANCIAL CORP. (UNCONDITIONALLY GUARANTEED BY BANPONCE CORPORATION) _______________ BanPonce Corporation (the "Corporation") intends to issue from time to time in one or more series its (i) unsecured debt securities, which may be either senior or subordinated, and (ii) shares of preferred stock. Popular International Bank, Inc. ("PIB") intends to issue from time to time in one or more series its (i) unsecured debt securities, which may be either senior or subordinated, and (ii) shares of preferred stock. BanPonce Financial Corp. ("Financial") intends to issue from time to time in one or more series its (i) unsecured debt securities, which may be either senior or subordinated, and (ii) shares of preferred stock. Unsecured debt securities issued by PIB or Financial will be unconditionally guaranteed as to the payment of principal, premium, if any, and interest by the Corporation. Shares of preferred stock issued by PIB or Financial will be unconditionally guaranteed as to the payment of dividends, redemption price, if any, and liquidation preference, if any, by the Corporation. The foregoing debt securities and shares of preferred stock are collectively referred to herein as the "Securities." The Corporation's guarantees of debt securities or preferred stock issued by PIB or Financial are collectively referred to herein as the "Guarantees." The Securities and the Guarantees collectively will be limited to an aggregate initial offering price not to exceed $500,000,000 or, in the case of debt securities, the equivalent thereof in one or more foreign currencies, including composite currencies. The Securities offered may be offered, separately or together, in separate series, in amounts, at prices and on terms to be determined at the time of sale and to be set forth in a supplement to this Prospectus (a "Prospectus Supplement"). 4 The subordinated debt securities when issued will be subordinated as described herein under "Description of Debt Securities and Guarantees." Unless otherwise indicated in the Prospectus Supplement, payment of the principal of the subordinated debt securities may be accelerated only in the case of certain events involving the bankruptcy, insolvency or reorganization of the Corporation, PIB or Financial, as the case may be. There is no right of acceleration of payment of subordinated debt securities in the case of a default in the performance of any covenant of the Corporation, PIB or Financial, including the payment of principal or interest. The specific terms of the Securities in respect of which this Prospectus is being delivered, including (i) in the case of debt securities, the issuer, the specific designation, aggregate principal amount, denominations, maturity, premium, if any, rate (which may be fixed or variable) and time of payment of interest, if any, terms for redemption at the option of the Corporation, PIB, Financial or the holder, if any, currency or currencies of denomination and payment, if other than U.S. dollars, the terms, if any, for conversion into other debt securities or preferred stock and any other terms in connection with the offering and sale of the debt securities in respect of which this Prospectus is being delivered, as well as the initial public offering price, and the principal amounts, if any, to be purchased by underwriters and (ii) in the case of preferred stock, the issuer, the specific title and stated value, number of shares or fractional interests therein, any dividend, liquidation, redemption, voting and other rights, the terms, if any, for conversion into other preferred stock, the securities exchanges, if any, on which the preferred stock is to be listed, the initial public offering price, and the number of shares, if any, to be purchased by the underwriters, will be as set forth in the accompanying Prospectus Supplement. All or a portion of the debt securities may be issued in permanent global form. The Securities may be sold to underwriters for public offering pursuant to terms of offering fixed at the time of sale. In addition, the Securities may be sold by the Corporation, PIB or Financial directly or through dealers or agents designated from time to time, which agents may be affiliates of the Corporation. The Prospectus Supplement will also set forth with respect to the sale of the Securities in respect of which this Prospectus is being delivered the names of the underwriters, dealers or agents, if any, together with the terms of offering, the compensation of such underwriters and the net proceeds to the Corporation. _______________ THE SECURITIES WILL BE UNSECURED OBLIGATIONS OF THE CORPORATION, PIB OR FINANCIAL, AS THE CASE MAY BE, AND WILL NOT BE SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE SECURITIES OFFICE OF THE OFFICE OF THE COMMISSIONER OF FINANCIAL INSTITUTIONS OF THE COMMONWEALTH OF PUERTO RICO OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, SUCH SECURITIES OFFICE, OR ANY STATE SECURITIES COMMISSION, PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. _______________ The date of this Prospectus is ______________, 1995 -2- 5 AVAILABLE INFORMATION The Corporation is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information concerning the Corporation can be inspected and copied at the Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549, and the Commission's Regional Offices in New York (7 World Trade Center, New York, New York 10048) and Chicago (Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661). Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. This Prospectus does not contain all of the information set forth in the Registration Statement which the Corporation has filed with the Commission under the Securities Act of 1933 (the "Act"), to which reference is hereby made. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Corporation hereby incorporates by reference into this Prospectus the following documents filed by the Corporation with the Commission: 1. The Corporation's Annual Report on Form 10-K for the year ended December 31, 1994, provided, however, that the information referred to in Item 402(a)(8) of Regulation S-K promulgated by the Commission shall not be deemed to be specifically incorporated by reference herein. 2. The Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995. 3. The Corporation's Current Reports on Form 8-K, dated March 7, 1995 and April 13, 1995 (as amended by the Corporation's Amendment on Form 8-K/A, dated May 16, 1995). 4. The Corporation's Registration Statement on Form 8-A, dated August 18, 1988, filed pursuant to Section 12(g) of the Exchange Act, pursuant to which the Corporation registered its Series A Participating Cumulative Preferred Stock Purchase Rights. 5. The Corporation's Registration Statement on Form 8-A, dated June 17, 1994, as amended by the Corporation's Amendment on Form 8-A/A, dated June 21, 1994, filed pursuant to Section 12(g) of the Exchange Act, pursuant to which the Corporation registered its 8.35% Non-Cumulative Monthly Income Preferred Stock, 1994 Series A. All documents filed by the Corporation subsequent to the date of this Prospectus and prior to the termination of the offering of the Securities and the Guarantees pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act shall be deemed to be incorporated by reference into this Prospectus and to be a part thereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies -3- 6 or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Any person receiving a copy of this Prospectus, including any beneficial owner, may obtain without charge, upon oral or written request, a copy of any of the documents incorporated by reference herein, except for the exhibits to such documents. Written requests should be mailed to Amilcar Jordan, Senior Vice President, BanPonce Corporation, P.O. Box 362708, San Juan, Puerto Rico 00936-2708. Telephone requests may be directed to (809) 765-9800. -4- 7 BANPONCE CORPORATION The Corporation is a bank holding company registered under the Bank Holding Company Act of 1956 and incorporated in 1984 under the laws of the Commonwealth of Puerto Rico ("Puerto Rico"). The Corporation is the largest financial institution in Puerto Rico, with consolidated assets of $13.1 billion, total deposits of $9.4 billion and stockholders' equity of $1.4 billion as of March 31, 1995. Based on both total assets and total deposits at December 31, 1994, the Corporation was the 52nd largest bank holding company in the United States. The Corporation's principal executive offices are located at 209 Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918 and its telephone number is (809) 765-9800. The Corporation's principal subsidiary, Banco Popular de Puerto Rico ("Banco Popular" or the "Bank"), was incorporated over 100 years ago in 1893 and is Puerto Rico's largest bank with total assets of $11.6 billion, deposits of $8.9 billion and stockholders' equity of $849.6 million at March 31, 1995. The Bank accounted for 88.4% of the total consolidated assets of the Corporation at March 31, 1994. A consumer-oriented bank, Banco Popular has the largest retail franchise in Puerto Rico, operating 208 branches and 296 automated teller machines. The Bank also has the largest trust operation in Puerto Rico and is a leader in the mortgage banking business. In addition, it operates the largest Hispanic bank branch network in the mainland United States with 30 branches in New York, one branch in Los Angeles and an agency in Chicago. As of March 31, 1995, these branches had a total of approximately $1.3 billion in deposits. The Bank also operates seven branches in the U.S. Virgin Islands and one branch in the British Virgin Islands. Banco Popular has three subsidiaries, Popular Leasing & Rental, Puerto Rico's second largest vehicle leasing and daily rental company, Popular Consumer Services, Inc., a small-loan company with 27 offices in Puerto Rico operating under the name of Best Finance and Popular Mortgage, Inc., a mortgage loan company with three offices in Puerto Rico operating under the name of Puerto Rico Home Mortgage. The Corporation has two other principal subsidiaries: Vehicle Equipment Leasing Company, Inc. ("VELCO") and Financial. VELCO is engaged primarily in the finance leasing of passenger vehicles and is the largest leasing company in Puerto Rico. For additional information regarding Financial, see "BanPonce Financial Corp." Also, BP Capital Markets is, effective April 30, 1995, a direct subsidiary of BanPonce Corporation and engages in the business of a securities broker-dealer in Puerto Rico, with institutional brokerage, financial advisory, and investment and security brokerage operations. POPULAR INTERNATIONAL BANK INC. Popular International Bank, Inc. ("PIB") is a wholly owned subsidiary of the Corporation organized in 1992 under the laws of the Commonwealth of Puerto Rico and operating as an "international banking entity" under the International Banking Center Regulatory Act of Puerto Rico (the "IBC Act"). PIB owns all of the outstanding capital stock of Financial. Summary consolidated financial statements of PIB are included in the notes to the Corporation's consolidated financial statements. -5- 8 BANPONCE FINANCIAL CORP. BanPonce Financial Corp. ("Financial"), a wholly owned subsidiary of PIB and an indirect, wholly owned subsidiary of the Corporation, was organized in 1991 under the laws of the State of Delaware. On March 31, 1994, Financial acquired all of the common stock of Pioneer Bancorp, Inc., a corporation organized under the laws of Delaware and headquartered in Chicago, Illinois, and a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"), which through its wholly owned subsidiary River Associates Bancorp, Inc., a Delaware corporation, owns and operates Pioneer Bank & Trust Company ("Pioneer"), a bank organized under the laws of the State of Illinois with two branches in that state. The deposits of Pioneer are insured by the Federal Deposit Insurance Corporation (the "FDIC"). On August 31, 1994, Pioneer acquired most of the assets and assumed all of the liabilities of a branch of Banco Popular operating in Chicago. As of December 31, 1994, the assets of Pioneer were $385.4 million and its deposits were $325.8 million. Effective January 16, 1995, Banco Popular converted its branch in Chicago into an agency. See "BanPonce Corporation" above. On January 20, 1995, Financial became the direct owner of all the common stock of Banco Popular, FSB, a new federal savings bank which acquired from the Resolution Trust Corporation certain assets and all of the deposits of four New Jersey branches of the former Carteret Federal Savings Bank, a federal savings bank under Resolution Trust Corporation (the "RTC") conservatorship. The deposits of Banco Popular, FSB are insured by the FDIC. As a result of the acquisition of Pioneer and of becoming the owner of all shares of Banco Popular, FSB, Financial and PIB have become registered bank holding companies under the BHC Act and registered savings and loan holding companies under the Home Owners' Loan Act. On January 20, 1995, simultaneously with the organization of Banco Popular, FSB, Financial transferred the control of all the issued and outstanding shares of its wholly owned subsidiary Equity One, Inc., a Delaware corporation (formerly Spring Financial Services, Inc.) ("Equity One"), to Banco Popular, FSB, and Equity One became an operating subsidiary of Banco Popular, FSB. Equity One is a diversified consumer finance company engaged in the business of granting personal and mortgage loans and providing dealer financing through 73 offices in 20 states with total assets of $620.5 million as of December 31, 1994. Equity One had initially been acquired by Financial on September 30, 1991, prior to which time Financial had no significant business operations. Summary consolidated financial statements of Financial are included in the notes to the Corporation's consolidated financial statements. -6- 9 CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES OF THE CORPORATION
Quarter Ended Year Ended December 31, June 30, 1995 1994 1993 1992 1991 1990 ------------- ---- ---- ---- ---- ---- Ratio of Earnings to Fixed Charges: Excluding Interest on Deposits . . . . . . . . . . . . . 2.0 2.6 3.0 2.9 2.1 3.6 Including Interest on Deposits . . . . . . . . . . . . . 1.4 1.5 1.5 1.3 1.2 1.3 Ratio of Earnings to Fixed Charges and Preferred Stock Dividends: Excluding Interest on Deposits . . . . . . . . . . . . . 1.9 2.5 3.0 2.9 2.0 3.6 Including Interest on Deposits . . . . . . . . . . . . . 1.3 1.5 1.5 1.3 1.2 1.3
For purposes of computing these consolidated ratios, earnings represent income (loss) before income taxes, cumulative effect of a change in accounting principles and equity in undistributed income of unconsolidated subsidiaries and affiliates, plus fixed charges excluding capitalized interest. 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, the amortization of debt issuance expense and capitalized interest. USE OF PROCEEDS The Corporation intends to use the net proceeds from the sale of the Securities issued by the Corporation for general corporate purposes, including investments in, or extensions of credit to, its existing and future subsidiaries, for the acquisition of other banking and financial institutions and repayment of outstanding borrowings. The Corporation does not at present have any plans to use the proceeds from any offering for a material acquisition or to repay outstanding borrowings. All or a substantial portion of the proceeds from the sale of Securities issued by Financial will be lent by Financial to its direct or indirect subsidiaries, including Equity One, or used by Financial for general corporate purposes. The net proceeds from the sale of Securities by PIB will be lent by PIB to its affiliates or used by PIB for general corporate purposes. The precise amounts and timing of the application of proceeds will depend on various factors existing at the time of offering of the Securities, including the Corporation's subsidiaries' funding requirements and the availability of other funds. Pending such use, the proceeds may be temporarily invested in short-term obligations. CERTAIN REGULATORY MATTERS GENERAL Each of the Corporation, PIB and Financial are bank holding companies subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") under the BHC Act. As a bank holding company, the Corporation's, PIB's and Financial's activities and those of their banking and nonbanking subsidiaries are limited to the business of banking and activities closely related or incidental to banking, and neither the Corporation, PIB or Financial may directly or indirectly acquire the ownership or control of more than 5% of any class of voting shares or substantially all of the assets of any company in the United States, including a bank, without the prior approval of the Federal Reserve Board. In addition, bank holding companies are generally prohibited under the BHC Act -7- 10 from engaging in nonbanking activities, subject to certain exceptions. As a result of the acquisition of Banco Popular, FSB, the Corporation, PIB and Financial are also subject to the regulation and supervision of the Office of Thrift Supervision (the "OTS") as savings and loan holding companies registered under the Home Owners' Loan Act, as amended. Banco Popular is considered a foreign bank for purposes of the International Banking Act of 1978 (the "IBA"). Under the IBA and the BHC Act, the Corporation and Banco Popular are not permitted to operate a branch or agency, or acquire more than 5% of any class of the voting shares or substantially all the assets of, or control of, an additional bank or bank holding company that is located outside of their "home state," except that (i) the Corporation may acquire control of a bank in a state if the laws of that state explicitly authorize a bank holding company from such bank holding company's home state to do so and (ii) Banco Popular may continue to operate a "grandfathered" branch or agency and will be permitted to branch interstate as described under "-- Recent Banking Legislation" below. Puerto Rico is not considered a state for purposes of these geographic limitations. Banco Popular has designated the state of New York as its home state. In addition, some states have laws prohibiting or restricting foreign banks from acquiring banks located in such states and treat Puerto Rico's banks and bank holding companies as foreign banks for such purposes. Effective January 16, 1995, Banco Popular converted its branch in Chicago into an agency. See "BanPonce Financial Corp." above. Banco Popular, Pioneer Bank and Banco Popular, FSB are subject to supervision and examination by applicable federal and state banking agencies including, in the case of Banco Popular, the Federal Reserve Board and the Office of the Commissioner of Financial Institutions of Puerto Rico, in the case of Pioneer Bank, the FDIC and the Illinois Commissioner of Banks and Trust Companies, and in the case of Banco Popular, FSB, the OTS and the FDIC. Banco Popular, Pioneer Bank and Banco Popular, FSB are subject to requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, and limitations on the types of other investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of Banco Popular, Pioneer Bank and Banco Popular, FSB. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. HOLDING COMPANY STRUCTURE Banco Popular, Pioneer Bank and Banco Popular, FSB are subject to restrictions under federal law that limit the transfer of funds between them and the Corporation, Financial, PIB and the Corporation's other nonbanking subsidiaries, whether in the form of loans, other extensions of credit, investments or asset purchases. Such transfers by Banco Popular, Pioneer Bank or Banco Popular, FSB, respectively, to the Corporation, Financial or PIB, as the case may be, or to any one nonbanking subsidiary, are limited in amount to 10% of the transferring institution's capital stock and surplus and, with respect to the Corporation and all of its nonbanking subsidiaries, to an aggregate of 20% of the transferring institution's capital stock and surplus. Furthermore, such loans and extensions of credit are required to be secured in specified amounts. -8- 11 Under Federal Reserve Board policy, a bank holding company, such as the Corporation, PIB or Financial, is expected to act as a source of financial strength to each of its subsidiary banks and to commit resources to support each such subsidiary bank. This support may be required at times when, absent such policy, the bank holding company might not otherwise provide such support. In addition, any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment. Banco Popular, Pioneer Bank and Banco Popular, FSB are currently the only subsidiary depository institutions of the Corporation, PIB and Financial. Because the Corporation, PIB and Financial are holding companies, their right to participate in the assets of any subsidiary upon the latter's liquidation or reorganization will be subject to the prior claims of the subsidiary's creditors (including depositors in the case of depository institution subsidiaries) except to the extent that the Corporation, PIB or Financial, as the case may be, may itself be a creditor with recognized claims against the subsidiary. Under the Federal Deposit Insurance Act (the "FDIA"), a depository institution (which term includes both banks and savings associations), the deposits of which are insured by the FDIC, can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC after August 9, 1989 in connection with (i) the default of a commonly controlled FDIC-insured depository institution or (ii) any assistance provided by the FDIC to any commonly controlled FDIC-insured depository institution "in danger of default." "Default" is defined generally as the appointment of a conservator or a receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. Banco Popular, Pioneer Bank and Banco Popular, FSB are currently the only controlled FDIC-insured depository institutions of the Corporation. In some circumstances (depending upon the amount of the loss or anticipated loss suffered by the FDIC), cross-guarantee liability may result in the ultimate failure or insolvency of one or more insured depository institutions in a holding company structure. Any obligation or liability owed by a subsidiary bank to its parent company is subordinated to the subsidiary bank's cross-guarantee liability with respect to commonly controlled insured depository institutions. CAPITAL ADEQUACY Under the Federal Reserve Board's risk-based capital guidelines for bank holding companies and member banks, the minimum guidelines for the ratio of qualifying total capital ("Total capital") to risk-weighted assets (including certain off-balance sheet items, such as standby letters of credit) is 8%. At least half of the Total capital is to be comprised of common equity, retained earnings, minority interests in unconsolidated subsidiaries, noncumulative perpetual preferred stock and a limited amount of cumulative perpetual preferred stock, less goodwill and certain other intangible assets discussed below ("Tier 1 capital"). The remainder may consist of a limited amount of subordinated debt, other preferred stock, certain other instruments and a limited amount of loan and lease loss reserves ("Tier 2 capital"). The Federal Reserve Board has adopted regulations that require most intangibles, including core deposit intangibles, to be deducted from Tier 1 Capital. The regulations, however, permit the inclusion of a limited amount of intangibles related to purchased mortgage servicing rights and purchased credit -9- 12 card relationships and include a "grandfather" provision permitting the continued inclusion of certain existing intangibles. In addition, the Federal Reserve Board has established minimum leverage ratio guidelines for bank holding companies and member banks. These guidelines provide for a minimum ratio of Tier 1 capital to total assets, less goodwill and certain other intangible assets discussed below (the "leverage ratio") of 3% for bank holding companies and member banks that meet certain specified criteria, including that they have the highest regulatory rating. All other bank holding companies and member banks will be required to maintain a leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis points. The guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. Furthermore, the guidelines indicate that the Federal Reserve Board will continue to consider a "tangible Tier 1 leverage ratio" and other indicia of capital strength in evaluating proposals for expansion or new activities. The tangible Tier 1 leverage ratio is the ratio of a banking organization's Tier 1 capital, less all intangibles, to total assets, less all intangibles. Under the Federal Reserve Board's requirements, the Corporation's and Banco Popular's capital ratios at December 31, 1994 are set forth below:
CORPORATION BANCO POPULAR ----------- ------------- Tier 1 capital . . . . . . . . . . . . . . . . . . . . 12.85% 11.87% Total capital . . . . . . . . . . . . . . . . . . . . 14.25% 13.29% Leverage ratio . . . . . . . . . . . . . . . . . . . . 7.62% 6.99%
Pioneer Bank and Banco Popular, FSB are subject to similar capital requirements adopted by the FDIC and the OTS, respectively. Failure to meet capital guidelines could subject a bank to a variety of enforcement remedies, including the termination of deposit insurance by the FDIC, and to certain restrictions on its business. See "FDICIA" below. Bank regulators have in the past indicated their desire to raise capital requirements applicable to banking organizations beyond current levels. However, management is unable to predict whether and when higher capital requirements would be imposed and, if so, at what levels or on what schedule. FDICIA Under the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") federal banking regulators must take prompt corrective action in respect of depository institutions that do not meet minimum capital requirements. The FDICIA and regulations thereunder establish five capital tiers: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." A depository institution is deemed well capitalized if it maintains a leverage ratio of at least 5%, a risk-based Tier 1 capital ratio of at least 6% and a risk-based Total capital ratio of at least 10% and is not subject to any written agreement or directive to meet a specific capital level. A depository institution is deemed adequately capitalized if it is not well capitalized but maintains a leverage ratio of at least 4% (or at least 3% if given the highest regulatory rating and not experiencing or anticipating significant growth), a risk-based Tier 1 capital ratio of at least 4% and a risk-based Total -10- 13 capital ratio of at least 8%. A depository institution is deemed undercapitalized if it fails to meet the standards for adequately capitalized institutions (unless it is deemed significantly or critically undercapitalized). An institution is deemed significantly undercapitalized if it has a leverage ratio of less than 3%, a risk-based Tier 1 capital ratio of less than 3% or a risk-based Total capital ratio of less than 6%. An institution is deemed critically undercapitalized if it has tangible equity equal to 2% or less of total assets. A depository institution may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it receives a less than satisfactory examination rating in any one of four categories. At March 31, 1995, Banco Popular, Banco Popular, FSB and Pioneer Bank were well capitalized. An institution's capital category, as determined by applying the prompt corrective action provisions of law, may not constitute an accurate representation of the overall financial condition or prospects of the Corporation or its banking subsidiaries, and should be considered in conjunction with other available information regarding the Corporation's financial condition and results of operations. FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions are subject to growth limitations and are required to submit capital restoration plans. A depository institution's holding company must guarantee the capital plan, up to an amount equal to the lesser of 5% of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. The federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator. The capital-based prompt corrective action provisions of the FDICIA and their implementing regulations apply to FDIC insured depository institutions such as the banking subsidiaries of the Corporation, PIB and Financial, but they are not directly applicable to holding companies, such as the Corporation, PIB or Financial which control such institutions. However, federal banking agencies have indicated that, in regulating holding companies, they may take appropriate action at the holding company level based on their assessment of the effectiveness of supervisory actions imposed upon subsidiary insured depository institutions pursuant to such provisions and regulations. RECENT BANKING LEGISLATION The recently enacted Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 will permit bank holding companies, with Federal Reserve Board approval, to acquire banks located in states other than the holding company's home state without regard to whether the transaction is prohibited under state law, beginning September 29, 1995. In addition, commencing June 1, 1997, national and state banks with different home states will be permitted to merge across state lines, with approval of the appropriate federal banking agency, unless the home state of a participating bank passes legislation prior to this date -11- 14 expressly prohibiting interstate mergers. States may "opt in" to permit interstate branching by merger prior to June 1, 1997 and to permit de novo interstate branching. A foreign bank, like Banco Popular, may branch interstate by merger or de novo to the same extent as domestic banks in the foreign bank's home state, which, in the case of Banco Popular, is New York. Various other legislation, including proposals to overhaul the bank regulatory system, expand bank and bank holding company powers and limit the investments that a depository institution may make with insured funds, is from time to time introduced in Congress. The Corporation, PIB and Financial cannot determine the ultimate effect that such potential legislation, if enacted, or implementing regulations, would have upon their financial condition or results of operations. DIVIDEND RESTRICTIONS The principal source of cash flow for the Corporation is dividends from Banco Popular. Various statutory provisions limit the amount of dividends Banco Popular can pay to the Corporation without regulatory approval. As a member bank subject to the regulation of the Federal Reserve Board, Banco Popular must obtain the approval of the Federal Reserve Board for any dividend if the total of all dividends declared by the bank in any calendar year would exceed the total of its net profits, as defined by the Federal Reserve Board, for that year, combined with its retained net profits for the preceding two years. In addition, a member bank may not pay a dividend in an amount greater than its undivided profits then on hand after deducting its losses and bad debts. For this purpose, bad debts are generally defined to include the principal amount of loans that are in arrears with respect to interest by six months or more unless such loans are fully secured and in the process of collection. Moreover, for purposes of this limitation, a member bank is not permitted to add the balance in its allowance for loan losses account to its undivided profits then on hand. A member bank may, however, net the sum of its bad debts as so defined against the balance in its allowance for loan losses account and deduct from undivided profits only bad debts as so defined in excess of that account. At March 31, 1995, Banco Popular could have declared a dividend of approximately $150.8 million without the approval of the Federal Reserve Board. Illinois law contains similar limitations on the amount of dividends that Pioneer Bank can pay. In addition, OTS regulations limit the amount of capital distributions (whether by dividend or otherwise) that any savings association may make without prior OTS approval, based upon the savings association's regulatory capital levels. These limitations are applicable to Banco Popular, FSB. Also, in connection with the acquisition by Banco Popular, FSB, from the RTC of four New Jersey branches of the former Carteret Federal Savings Bank, the RTC provided Banco Popular FSB and Financial interim financial assistance. See "BanPonce Financial Corp." above. Pursuant to the terms of such financing, evidenced by a promissory note (which matures on January 20, 2000 but is prepayable any time before then), Banco Popular may not, among other things, declare or pay any stock dividends on its outstanding capital stock (unless such dividends are used exclusively for payment of principal of or interest on such promissory note) or make any distributions of its assets until payment in full of such promissory note. The payment of dividends by Banco Popular, Pioneer Bank or Banco Popular, FSB, may also be affected by other regulatory requirements and policies, such as the maintenance of adequate capital. If, in the opinion of the applicable regulatory authority, a depository institution under its jurisdiction is engaged in, or is about to engage in, an unsafe or unsound practice (that, depending on the financial condition of the depository institution, could include the payment of dividends), such authority may require, after notice and hearing, that such depository institution cease and desist from such practice. The Federal Reserve Board has issued a policy statement that provides that insured banks and bank holding -12- 15 companies should generally pay dividends only out of current operating earnings. In addition, all insured depository institutions are subject to the capital-based limitations required by the FDICIA. See "FDICIA." See "Certain Regulatory Matters -- Puerto Rico Regulation" for a description of certain restrictions on Banco Popular's ability to pay dividends under Puerto Rico law. FDIC INSURANCE ASSESSMENTS Banco Popular, Pioneer Bank and Banco Popular, FSB are subject to FDIC deposit insurance assessments. Pursuant to FDICIA, the FDIC has adopted a risk-based assessment system, under which the assessment rate for an insured depository institution varies according to the level of risk incurred in its activities. An institution's risk category is based partly upon whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. Each insured depository institution is also assigned to one of the following "supervisory subgroups": "A," "B" or "C". Group "A" institutions are financially sound institutions with only a few minor weaknesses; group "B" institutions are institutions that demonstrate weaknesses that, if not corrected, could result in significant deterioration; and group "C" institutions are institutions for which there is a substantial probability that the FDIC will suffer a loss in connection with the institution unless effective action is taken to correct the areas of weakness. Based on its capital and supervisory subgroups, each FDIC member institution is assigned an annual FDIC assessment rate varying between 0.23% and 0.31%. The FDIC has the authority to raise or lower assessment rates on Bank Insurance Fund-insured deposits and to impose additional special assessments in order to achieve certain statutorily mandated reserve ratios in each fund. Any such increase would have an adverse effect upon the net earnings of Banco Popular, Pioneer Bank and Banco Popular, FSB, and, therefore, the Corporation. The FDIC has proposed to establish a new Bank Insurance Fund assessment rate schedule providing for assessments of from 4 cents for each $100 of deposits to 41 cents per $100, depending upon the institution's assigned risk category. There is no certainty that this new assessment rate schedule will be adopted by the FDIC as proposed. BROKERED DEPOSITS FDIC regulations adopted under FDICIA govern the receipt of brokered deposits. Under these regulations, a bank cannot accept, rollover or renew brokered deposits (which term is defined also to include any deposit with an interest rate more than 75 basis points above prevailing rates) unless (i) it is well capitalized, or (ii) it is adequately capitalized and receives a waiver from the FDIC. A bank that is adequately capitalized may not pay an interest rate on any deposits in excess of 75 basis points over certain prevailing market rates specified by regulation. There are no such restrictions on a bank that is well capitalized. The Corporation does not believe the brokered deposits regulation has had or will have a material effect on the funding or liquidity of Banco Popular, Pioneer Bank or Banco Popular, FSB. -13- 16 PUERTO RICO REGULATION General As a commercial bank organized under the laws of the Commonwealth, Banco Popular is subject to supervision, examination and regulation by the Office of the Commissioner of Financial Institutions of the Commonwealth (the "Office of the Commissioner"), pursuant to the Puerto Rico Banking Act of 1933, as amended (the "Banking Law"). Section 27 of the Banking Law requires that at least ten percent (10%) of the yearly net income of the Bank be credited annually to a reserve fund. This apportionment shall be done every year until the reserve fund shall be equal to ten percent (10%) of the total deposits or the total paid-in capital, whichever is greater. At the end of its most recent fiscal year, Banco Popular had an adequate reserve fund established. Section 27 of the Banking Law also provides that when the expenditures of a bank are greater than the receipts, the excess of the former over the latter shall be charged against the undistributed profits of the bank, and the balance, if any, shall be charged against the reserve fund, as a reduction thereof. If there is no reserve fund sufficient to cover such balance in whole or in part, the outstanding amount shall be charged against the capital account and no dividend shall be declared until said capital has been restored to its original amount and the reserve fund to 20% of the original capital. Section 16 of the Banking Law requires every bank to maintain a legal reserve which shall not be less than 20% of its demand liabilities, except government deposits (federal, state and municipal) which are secured by actual collateral. However, if a bank becomes a member of the Federal Reserve System, the 20% legal reserve shall not be effective and the reserve requirements demanded by the Federal Reserve System shall be applicable. However, pursuant to an order of the Federal Reserve Board dated November 24, 1982, the Bank has been exempted from such reserve requirements with respect to deposits payable in Puerto Rico. As to those deposits, the Section 16 reserve requirements are applicable. Section 17 of the Banking Law permits the Bank to make loans to any one person, firm, partnership or corporation, up to an aggregate amount of fifteen percent (15%) of the paid-in capital and reserve fund of the Bank. As of March 31, 1995, the legal lending limit for the Bank under this provision was approximately $85 million. If such loans are secured by collateral worth at least twenty-five percent (25%) more than the amount of the loan, the aggregate maximum amount may reach one third of the paid-in capital of the Bank, plus its reserve fund. There are no restrictions under Section 17 on the amount of loans that are wholly secured by bonds, securities and other evidences of indebtedness of the Government of the United States or the Commonwealth, or by current debt bonds, not in default, of municipalities or instrumentalities of the Commonwealth. Section 14 of the Banking Law authorizes the Bank to conduct certain financial and related activities directly or through subsidiaries, including finance leasing of personal property, making and servicing mortgage loans and operating a small-loan company. The Bank engages in these activities through its wholly owned subsidiaries, Popular Leasing & Rental, Inc., Popular Mortgage, Inc., and Popular Consumer Services, Inc., respectively, all of which are organized and operate in Puerto Rico. -14- 17 The Finance Board, which is a part of the Office of the Commissioner, but also includes as its members the Secretary of the Treasury, the Secretary of Commerce, the Secretary of Consumer Affairs, the President of the Planning Board, and the President of the Government Development Bank for Puerto Rico, has the authority to regulate the maximum interest rates and finance charges that may be charged on loans to individuals and unincorporated businesses in the Commonwealth. The current regulations of the Finance Board provide that the applicable interest rate on loans to individuals and unincorporated businesses (including real estate development loans but excluding certain other personal and commercial loans secured by mortgages on real estate properties) is to be determined by free competition. The Finance Board also has authority to regulate the maximum finance charges on retail installment sales contracts, which are currently set at 21%, and for credit card purchases, which are currently set at 26%. There is no maximum rate set for installment sales contracts involving motor vehicles, commercial, agricultural and industrial equipment, commercial electric appliances and insurance premiums. IBC Act Under the IBC Act, without the prior approval of the Office of the Commissioner, PIB may not amend its articles of incorporation or issue additional shares of capital stock or other securities convertible into additional shares of capital stock unless such shares are issued directly to the shareholders of PIB previously identified in the application to organize the international banking entity, in which case notification to the Office of the Commissioner must be given within ten business days following the date of the issue. Pursuant to the IBC Act, without the prior approval of the Office of the Commissioner, PIB may not initiate the sale, encumbrance, assignment, merger or other transfer of shares if by such transaction a person or persons acting in concert could acquire direct or indirect control of 10% or more of any class of the Company's stock. Such authorization must be requested at least 30 days prior to the transaction. PIB must submit to the Office of the Commissioner a report of its condition and results of operation on a monthly basis and its annual audited financial statement at the close of its fiscal year. Under the IBC Act, PIB may not deal with "domestic persons" as such term is defined in the IBC Act. Also, it may only engage in those activities authorized in the IBC Act, the regulations adopted thereunder and its license. The IBC Act empowers the Office of the Commissioner to revoke or suspend, after a hearing, the license of an international banking entity if, among other things, it fails to comply with the IBC Act, regulations issued by the Office of the Commissioner or the terms of its license, or if the Office of the Commissioner finds that the business of the international banking entity is conducted in a manner not consistent with the public interest. DESCRIPTION OF DEBT SECURITIES AND GUARANTEES The Corporation's senior debt securities (the "Senior Debt Securities"), may be issued from time to time in one or more series under an Indenture, dated as of February 15, 1995 (the "Senior Indenture") between the Corporation and The First National Bank of Chicago (the successor trustee to Citibank, N.A.), as trustee (the "Senior Trustee"). The Corporation's subordinated debt securities (the "Subordinated Debt Securities") may be issued from time to time in one or more series under an Indenture (the "Subordinated Indenture") between the Corporation and the trustee named in the applicable Prospectus Supplement, as trustee (the "Subordinated Trustee"). -15- 18 PIB's senior debt securities (the "PIB Senior Debt Securities") may be issued from time to time in one or more series under an Indenture (the "PIB Senior Indenture") among the Corporation, PIB and the trustee named in the applicable Prospectus Supplement, as trustee (the "PIB Senior Trustee"). PIB's subordinated debt securities ("PIB Subordinated Debt Securities") may be issued from time to time in one or more series under an Indenture (the "PIB Subordinated Indenture") among the Corporation, PIB and the trustee named in the applicable Prospectus Supplement, as trustee (the "PIB Subordinated Trustee"). Financial's senior debt securities (the "Financial Senior Debt Securities") may be issued from time to time in one or more series under an Indenture, dated as of October 1, 1991, as supplemented by the First Supplemental Indenture thereto, dated as of February 28, 1995 (collectively, the "Financial Senior Indenture"), among the Corporation, Financial and The First National Bank of Chicago (the successor trustee to Citibank N.A.), as trustee (the "Financial Senior Trustee"). Financial's subordinated debt securities (the "Financial Subordinated Debt Securities") may be issued from time to time in one or more series under an Indenture (the "Financial Subordinated Indenture") among the Corporation, Financial and the trustee named in the applicable Prospectus Supplement, as trustee (the "Financial Subordinated Trustee"). The Senior Debt Securities, the Subordinated Debt Securities, the PIB Senior Debt Securities, the PIB Subordinated Debt Securities, the Financial Senior Debt Securities and the Financial Subordinated Debt Securities are sometimes referred to collectively as the "Debt Securities." The Senior Indenture, the Subordinated Indenture, the PIB Senior Indenture, the PIB Subordinated Indenture, the Financial Senior Indenture and the Financial Subordinated Indenture are sometimes referred to collectively as the "Indentures," and the Senior Trustee, the Subordinated Trustee, the PIB Senior Trustee, the PIB Subordinated Trustee, the Financial Senior Trustee and the Financial Subordinated Trustee are sometimes referred to collectively as the "Trustees." The statements under this caption are brief summaries of material provisions contained in the Indentures, do not purport to be complete and are qualified in their entirety by reference to the Indentures, including the definition therein of certain terms, copies of which are filed as exhibits to the Registration Statement of which this Prospectus is a part. GENERAL Each Indenture provides for the issuance of debt securities in one or more series, and does not limit the principal amount of debt securities which may be issued thereunder. Reference is made to the Prospectus Supplement for the following terms of the Debt Securities being offered hereby: (1) the specific title of the Debt Securities; (2) whether the Debt Securities are Senior Debt Securities, Subordinated Debt Securities, PIB Senior Debt Securities, PIB Subordinated Debt Securities, Financial Senior Debt Securities or Financial Subordinated Debt Securities; (3) the aggregate principal amount of the Debt Securities; (4) the percentage of their principal amount at which the Debt Securities will be issued; (5) the date or dates on which the Debt Securities will mature; (6) the rate or rates (which may be fixed or variable) per annum or the method for determining such rate or rates, if any, at which the Debt Securities will bear interest; (7) the times, if any, at which any such interest will be payable; (8) any provisions relating to optional or mandatory redemption of the Debt Securities; (9) the denominations in which the Debt Securities are authorized to be issued; (10) the extent to which Debt Securities will be issuable in global form and, if so, the identity of the Depositary for such global Debt Securities; (11) the currency or units of two or more currencies in which the Debt Securities are denominated, if other than United States dollars, and the currency in which interest is payable if other than the currency in which the Debt Securities are denominated; (12) the place or places at which the Corporation, PIB or Financial will make payments of principal (and premium, if any) and interest, if any, and the method of such payment; (13) the Person to whom any Debt Security of such series will be -16- 19 payable, if other than the Person in whose name that Debt Security (or one or more Predecessor Debt Securities) is registered at the close of business on the Regular Record Date for such interest; (14) whether the Debt Securities may be issued as Original Issue Discount Securities; (15) whether the amount of payment of principal of or any premium or interest on any Debt Security may be determined with reference to an index, formula or other method and the manner in which such amount shall be determined; (16) any additional covenants and Events of Default and the remedies with respect thereto not currently set forth in the respective Indenture; and (17) any other specific terms of Debt Securities. One or more series of the Debt Securities may be issued as Discount Securities. A "Discount Security" is a debt security, including any zero-coupon security, which is issued at a price lower than the amount payable at the Stated Maturity thereof and which provides that upon redemption or acceleration of the Maturity thereof an amount less than the amount payable upon the Stated Maturity thereof and determined in accordance with the terms thereof shall become due and payable. Unless otherwise indicated in the applicable Prospectus Supplement, the covenants contained in the Indentures and the Debt Securities will not afford holders of the Debt Securities protection in the event of a sudden decline in credit rating that might result from a recapitalization, restructuring, or other highly leveraged transaction. FORM, EXCHANGE, REGISTRATION AND TRANSFER Debt Securities of a series may be issuable in certificated or global form. Debt Securities in certificated form may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed), at the office of the Security Registrar or at the office of any transfer agent designated by the Corporation, PIB or Financial, as the case may be, for such purpose with respect to any series of Debt Securities and referred to in an applicable Prospectus Supplement, without service charge and upon payment of any taxes and other governmental charges as described in the relevant Indenture. Such transfer or exchange will be effected upon the Security Registrar being satisfied with the documents of title and identity of the Person making the request. The Security Registrar with respect to the Debt Securities will be designated in the applicable Prospectus Supplement. If a Prospectus Supplement refers to any transfer agents (in addition to the Security Registrar) initially designated by the Corporation, PIB or Financial with respect to any series of Debt Securities, the Corporation, PIB or Financial, as the case may be, may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, except that the Corporation, PIB or Financial, as the case may be, will be required to maintain a transfer agent in each Place of Payment for such series. The Corporation, PIB or Financial, as the case may be, may at any time designate additional transfer agents with respect to any series of Debt Securities. In the event of any redemption in part, the Corporation, PIB or Financial, as the case may be, shall not be required to (i) issue, register the transfer of or exchange any Debt Security during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Debt Securities of like tenor and of the series of which such Debt Security is a part and ending at the close of business on the day of such mailing and (ii) register the transfer of or exchange any Debt Security so selected for redemption, in whole or in part, except the unredeemed portion of any Debt Security being redeemed in part. -17- 20 PAYMENT AND PAYING AGENT Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of and premium (if any) on any Debt Security will be made only against surrender to the Paying Agent of such Debt Security. Unless otherwise indicated in an applicable Prospectus Supplement, principal of and any premium and interest on the Debt Securities will be payable, subject to any applicable laws and regulations, at the office of such Paying Agent or Paying Agents as the Corporation, PIB or Financial, as the case may be, may designate from time to time, except that at the option of the Corporation, PIB or Financial, as the case may be, payment of any interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Security Register with respect to such Debt Securities. Unless otherwise indicated in an applicable Prospectus Supplement, payment of interest on a Debt Security on any Interest Payment Date will be made to the Person in whose name such Debt Security (or Predecessor Debt Security) is registered at the close of business on the Regular Record Date for such interest. The Paying Agent for payments with respect to Debt Securities of each series will be specified in the applicable Prospectus Supplement. The Corporation, PIB or Financial, as the case may be, may at any time designate additional Paying Agents or rescind the designation of any Paying Agent or approve a change in the office through which any Paying Agent acts, except that the Corporation, PIB or Financial, as the case may be, will be required to maintain a Paying Agent in each Place of Payment for each series of Debt Securities. All moneys paid by the Corporation, PIB or Financial, as the case may be, to a Paying Agent for the payment of the principal of and any premium or interest on any Debt Security which remain unclaimed at the end of two years after such principal, premium or interest shall have become due and payable will be repaid to the Corporation, PIB or Financial, as the case may be, and the Holder of such Debt Security will thereafter look only to the Corporation, PIB or Financial, as the case may be, for payment thereof. CERTAIN COVENANTS Each of the Senior Indenture, the PIB Senior Indenture and the Financial Senior Indenture provides that the Corporation, subject to the provisions described under "Consolidation, Merger, Sale or Conveyance," will not sell, assign, transfer, or otherwise dispose of, or permit Banco Popular to issue, sell, assign, transfer or otherwise dispose of any shares of, or securities convertible into or options to subscribe for, Voting Stock of Banco Popular unless Banco Popular remains a Controlled Subsidiary (as defined below) of the Corporation, and will not permit Banco Popular to merge or consolidate or convey, transfer, lease or sell its properties substantially as an entirety, unless the surviving corporation or transferee, as the case may be, is a Controlled Subsidiary of the Corporation. There is no similar restriction in the Subordinated Indenture, the PIB Subordinated Indenture or the Financial Subordinated Indenture. Each of the Senior Indenture, the PIB Senior Indenture and the Financial Senior Indenture also provides that the Corporation will not, and it will not permit any Material Banking Subsidiary (as defined below) at any time directly or indirectly to, create, assume, incur or permit to exist any indebtedness for borrowed money secured by a pledge, lien or other encumbrance on the Voting Stock of any Material Banking Subsidiary without making effective provision whereby the Debt Securities and the Guarantees -18- 21 (and, if the Corporation so elects, any other indebtedness ranking on a parity with the Debt Securities and the Guarantees) shall be secured equally and ratably with such secured indebtedness so long as such other indebtedness shall be so secured; provided, however, that the foregoing covenant shall not be applicable to liens for taxes or assessments or governmental charges or levies not then due and delinquent or the validity of which is being contested in good faith or which are less than $10,000,000 in amount, liens created by or resulting from any litigation or legal proceeding which is currently being contested in good faith by appropriate proceedings or which involve claims of less than $10,000,000, or deposits to secure (or in lieu of) surety, stay, appeal or customs bonds. There is no similar restriction in the Subordinated Indenture, the PIB Subordinated Indenture or the Financial Subordinated Indenture. For the purpose of the foregoing provisions, "Material Banking Subsidiary" means any Controlled Subsidiary chartered as a banking corporation under federal, state or Puerto Rican law that is a significant subsidiary of the Corporation as defined in Rule 1-02 of Regulation S-X of the Rules and Regulations of the Commission. "Controlled Subsidiary" means any corporation more than 80% of the outstanding Voting Stock of which is owned by the Corporation. As of the date of this Prospectus, Banco Popular is the only "Material Banking Subsidiary" of the Corporation. REDEMPTION General If the Debt Securities of a series provide for mandatory redemption by the Corporation, PIB or Financial, as the case may be, or redemption at the election of the Corporation, PIB or Financial, as the case may be, unless otherwise provided in the applicable Prospectus Supplement, such redemption shall be on not less than 30 nor more than 60 days' notice and, in the event of redemption of Debt Securities of a series of like tenor in part, the Debt Securities to be redeemed will be selected by the Trustee in such usual manner as it shall deem fair and appropriate. Notice of such redemption will be mailed to Holders of Debt Securities of such series to their last addresses as they appear on the register of the Debt Securities of such series. For Taxation Should the Corporation or PIB, on the occasion of the next payment in respect of any series of the Debt Securities, be obliged to pay any Additional Amounts as are referenced in "Taxation by the Commonwealth of Puerto Rico" below, due to a change in law, regulation or interpretation, the Corporation, PIB or Financial, as the case may be, may, at its option, on the giving of not less than 30 nor more than 60 days' notice to the Holders of the Debt Securities of each series, redeem such series of the Debt Securities as a whole at a redemption price of 100% of the principal amount thereof with the accrued interest to the date fixed for redemption or such other redemption price as set forth in the applicable Prospectus Supplement. Global Securities The Debt Securities may be issued in whole or in part in the form of one or more Global Securities that will be deposited with, or on behalf of, a depositary (the "Depositary") identified in the Prospectus Supplement relating to such Debt Securities. Unless and until it is exchangeable in whole or in part for Debt Securities in definitive form, a Global Security may not be transferred except as a whole -19- 22 by the Depositary for such Global Security to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. The specific terms of the depositary arrangement, if any, with respect to a series of Debt Securities will be described in the Prospectus Supplement relating to such series. The Corporation, PIB and Financial anticipate that the following provisions will apply to all depositary arrangements. Ownership of beneficial interests in a Global Security will be limited to persons that have accounts with the Depositary for such Global Security or its nominee ("Participant") or persons that may hold interests through Participants. Such accounts shall be designated by the underwriters or agents with respect to the Debt Securities underwritten or solicited by them or by the Corporation, PIB or Financial in the case of Debt Securities offered and sold directly by the Corporation, PIB or Financial, as the case may be. The Corporation, PIB or Financial, as the case may be, will obtain confirmation from the Depositary that upon the issuance of a Global Security the Depositary for such Global Security will credit, on its book-entry registration and transfer system, the Participants' accounts with the respective principal amounts of the Debt Securities represented by such Global Security. Ownership of beneficial interests in such Global Security will be shown on, and the transfer of such ownership interests will be effected only through, records maintained by the Depositary (with respect to interests of Participants) and on the records of Participants (with respect to interests of persons held through Participants). The laws of some states may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to own, transfer or pledge beneficial interests in a Global Security. So long as the Depositary for a Global Security, or its nominee, is the registered owner of such Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or Holder of the Debt Securities represented by such Global Security for all purposes under the Indentures. Except as provided below, owners of beneficial interests in a Global Security will not be entitled to have the Debt Securities represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of the Debt Securities in definitive form and will not be considered the owners or Holders thereof under the Indentures. Accordingly, each person owning a beneficial interest in such a Global Security must rely on the procedures of the Depositary and, if such person is not a Participant, on the procedures of the Participant through which such person owns its interests, to exercise any rights of a Holder under the applicable Indenture. The Corporation, PIB and Financial understand that under existing industry practices, in the event that the Corporation, PIB or Financial, as the case may be, requests any action of Holders or that an owner of a beneficial interest in such a Global Security desires to give or take any action that a Holder is entitled to give or take under the applicable Indenture, the Depositary would authorize the Participants holding the relevant beneficial interests to give or take such action, and such Participants would authorize beneficial owners owning through such Participants to give or take such action or would otherwise act upon the instructions of beneficial owners owning through them. Payment of principal of, and premium and interest, if any, on Debt Securities registered in the name of a Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner of the Global Security representing such Debt Securities. None of the Corporation, PIB, Financial, the Trustee, any Paying Agent or any other agent of the Corporation, PIB, Financial or the Trustee will have any responsibility or liability for any aspect of the records relating to -20- 23 payments made on account of beneficial ownership interests in the Global Security for such Debt Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Corporation, PIB or Financial, as the case may be, will obtain confirmation from the Depositary that upon receipt of any payment of principal of, or premium or interest on, a Global Security, the Depositary will immediately credit Participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Security as shown on the records of the Depositary. Payments by Participants to owners of beneficial interests in such Global Security held through such Participants will be the responsibility of such Participants, as is now the case with securities held for the accounts of customers registered in "street names." If the Depositary for any Debt Securities represented by a Global Security notifies the Corporation, PIB or Financial, as the case may be, that it is unwilling or unable to continue as Depositary or ceases to be a clearing agency registered under the Exchange Act and a successor Depositary is not appointed by the Corporation, PIB or Financial, as the case may be, then within ninety days after receiving such notice or becoming aware that Depositary is no longer so registered, the Corporation, PIB or Financial, as the case may be, will issue such Debt Securities in definitive form in exchange for such Global Security. In addition, if an event of default, or an event which with notice or the lapse of time or both would become an event of default, with respect to the Debt Securities of a series has occurred and is continuing or either the Corporation, PIB or Financial, as the case may be, at any time and in its sole discretion determines not to have the Debt Securities represented by one or more Global Securities, the Corporation, PIB or Financial, as the case may be, will issue Debt Securities in definitive form in exchange for all of the Global Securities representing such Debt Securities. TAXATION BY THE COMMONWEALTH OF PUERTO RICO All payments of, or in respect of, principal of, and any premium or interest on, the Debt Securities and all payments pursuant to the Guarantees will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Puerto Rico or by or with any district, municipality or other political subdivision thereof or authority therein having power to tax unless such taxes, duties, assessments or governmental charges are required by law to be withheld or deducted. In the event that the Corporation or PIB is required by law to deduct or withhold any amounts in respect of taxes, duties, assessments or governmental charges, the Corporation or PIB, as the case may be, will pay such additional amounts of, or in respect of, principal, premium and interest as will result (after deduction of the said taxes, duties, assessments or governmental charges) in the payment to the Holders of the Debt Securities, of the amounts which would otherwise have been payable in respect to the Debt Securities in the absence of such deduction or withholding ("Additional Amounts"), except that no such Additional Amounts shall be payable: (i) to any Holder of a Debt Security or any interest therein or rights in respect thereof where such deduction or withholding is required by reason of such Holder having some connection with Puerto Rico or any political subdivision or taxing authority thereof or therein other than the mere holding of and payment in respect of such Debt Security; -21- 24 (ii) in respect of any deduction or withholding that would not have been required but for the presentation by the Holder of a Debt Security for payment on a date more than 30 days after Maturity or the date on which payment thereof is duly provided for, whichever occurs later; or (iii) in respect of any deduction or withholding that would not have been required but for the failure to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with Puerto Rico, or any political subdivision or taxing authority thereof or therein, of the Holder of a Debt Security or any interest therein or rights in respect thereof, if compliance is required by Puerto Rico, or any political subdivision or taxing authority thereof or therein, as a precondition to exemption from such deduction or withholding. GOVERNING LAW The Indentures, the Debt Securities and the Guarantees of the Debt Securities of PIB and Financial will be governed by, and construed in accordance with, the laws of the State of New York. TERMS APPLICABLE TO THE SENIOR DEBT SECURITIES OR SUBORDINATED DEBT SECURITIES MODIFICATION OF THE SENIOR AND SUBORDINATED INDENTURES The Senior and Subordinated Indentures contain provisions permitting the Corporation and the respective Trustees, with the consent of Holders of not less than a majority in principal amount of the Senior Debt Securities or Subordinated Debt Securities which are affected by the modification, to modify the particular Indenture or any supplemental indenture or the rights of the Holders of the Senior Debt Securities or Subordinated Debt Securities issued under such Indenture; provided that no such modification may, without the consent of the Holder of each Outstanding Senior Debt Security or Subordinated Debt Security affected thereby, (a) change the stated maturity date of the principal of, or any installment of principal of or interest, if any, on, any Senior Debt Security or Subordinated Debt Security, (b) reduce the principal amount of, or premium or rate of interest, if any, on, any Senior Debt Security or Subordinated Debt Security, (c) reduce the amount of principal of an Original Issue Discount Security payable upon acceleration of the maturity thereof, (d) change the place or coin or currency of payment of principal of, or premium or interest, if any, on, any Senior Debt Security or Subordinated Debt Security, (e) impair the right to institute suit for the enforcement of any payment on or with respect to any Senior Debt Security or Subordinated Debt Security, (f) reduce the percentage in principal amount of Outstanding Senior Debt Securities or Subordinated Debt Securities of any series, the consent of whose Holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults, (g) modify (with certain exceptions) any provision of the Indenture which requires the consent of the Holder of each Outstanding Senior Debt Security or Subordinated Debt Security affected thereby or (h) with respect to the Subordinated Indenture, modify the subordination provisions in a manner adverse to Holders of Outstanding Subordinated Debt Securities. -22- 25 SUBORDINATION Unless otherwise indicated in the applicable Prospectus Supplement, the following provisions shall apply to the Subordinated Debt Securities. The payment of the principal of, premium, if any, and interest on the Subordinated Debt Securities will, to the extent set forth in the Subordinated Indenture, be subordinated in right of payment to the prior payment in full of all Senior Indebtedness (as defined below) of the Corporation. In certain events of insolvency, the payment of the principal of, premium, if any, and interest on the Subordinated Debt Securities will, to the extent set forth in the Subordinated Indenture, also be effectively subordinated in right of payment to the prior payment in full of all Other Financial Obligations (as defined below) of the Corporation. As of March 31, 1995, $1,021 million aggregate principal amount of Senior Indebtedness and no Other Financial Obligations of the Corporation were outstanding. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency or similar proceedings of the Corporation, the holders of all Senior Indebtedness of the Corporation will first be entitled to receive payment in full of all amounts due or to become due thereon before the Holders of the Subordinated Debt Securities will be entitled to receive any payment in respect of the principal of, premium, if any, or interest on the Subordinated Debt Securities. If, upon any such payment or distribution of assets to creditors, there remain, after giving effect to such subordination provisions in favor of the holders of Senior Indebtedness of the Corporation, any amounts of cash, property or securities available for payment or distribution in respect of Subordinated Debt Securities (as defined in the Subordinated Indenture, "Corporation Excess Proceeds") and if, at such time, any person entitled to payment pursuant to the terms of Other Financial Obligations of the Corporation has not received payment in full of all amounts due or to become due on or in respect of such Other Financial Obligations of the Corporation, then such Corporation Excess Proceeds shall first be applied to pay or provide for the payment in full of such Other Financial Obligations of the Corporation before any payment or distribution may be made in respect of the Subordinated Debt Securities. In the event of the acceleration of the maturity of any Subordinated Debt Securities, the holders of all Senior Indebtedness of the Corporation will first be entitled to receive payment in full of all amounts due or to become due thereon before the Holders of the Subordinated Debt Securities will be entitled to receive any payment of the principal of, premium, if any, or interest on the Subordinated Debt Securities. Accordingly, in case of such an acceleration, all Senior Indebtedness of the Corporation would have to be repaid before any payment could be made in respect of the Subordinated Debt Securities. No payments on account of principal, premium, if any, or interest in respect of the Subordinated Debt Securities may be made if there shall have occurred and be continuing a default in any payment with respect to any Senior Indebtedness of the Corporation, or an event of default with respect to any Senior Indebtedness of the Corporation permitting the holders thereof to accelerate the maturity thereof, or if any judicial proceeding shall be pending with respect to any such default. By reason of such subordination, in the event of the insolvency of the Corporation, creditors of the Corporation who are not holders of Senior Indebtedness of the Corporation or the Subordinated Debt Securities may recover less, ratably, than holders of Senior Indebtedness of the Corporation and may recover more, ratably, than Holders of the Subordinated Debt Securities. "Senior Indebtedness" of the Corporation is defined in the Subordinated Indenture to mean the principal of, premium, if any, and interest on (i) all indebtedness of the Corporation for money borrowed -23- 26 (including indebtedness of others guaranteed by the Corporation) other than the Subordinated Debt Securities, whether outstanding on the date of the Subordinated Indenture or thereafter created, assumed or incurred and (ii) any amendments, renewals, extensions, modifications and refundings of any such indebtedness, unless in either case in the instrument creating or evidencing any such indebtedness or pursuant to which it is outstanding it is provided that such indebtedness is not superior in right of payment to the Subordinated Debt Securities. For the purposes of this definition, "indebtedness for money borrowed" is defined as (i) any obligation of, or any obligation guaranteed by, the Corporation for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments, (ii) any deferred payment obligation of, or any such obligation guaranteed by, the Corporation for the payment of the purchase price of property or assets evidenced by a note or similar instrument and (iii) any obligation of, or any such obligation guaranteed by, the Corporation for the payment of rent or other amounts under a lease of property or assets which obligation is required to be classified and accounted for as a capitalized lease on the balance sheet of the Corporation under generally accepted accounting principles. "Other Financial Obligations" of the Corporation is defined in the Subordinated Indenture to mean all obligations of the Corporation to make payment pursuant to the terms of financial instruments, such as (i) securities contracts and foreign currency exchange contracts, (ii) derivative instruments, such as swap agreements (including interest rate and currency and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange agreements, options, commodity futures contracts, commodity options contracts and (iii) similar financial instruments; provided that the term Other Financial Obligations shall not include (x) obligations on account of Senior Indebtedness of the Corporation and (y) obligations on account of indebtedness for money borrowed ranking pari passu with or subordinate to the Subordinated Debt Securities. EVENTS OF DEFAULT Senior Indenture An Event of Default with respect to Senior Debt Securities of any series is defined in the Senior Indenture as being: default for 30 days in payment of any interest on Senior Debt Securities of such series; default in payment of principal of, or premium, if any, on any Senior Debt Securities of such series; default in deposit of any mandatory sinking fund payment required by the Senior Debt Securities of such series; default for 60 days after notice, in performance or breach of any other covenant or warranty in the Senior Indenture (except for a covenant expressly relating to a series of Senior Debt Securities other than that series of Senior Debt Securities) or in the Senior Debt Securities of such series; acceleration of the Senior Debt Securities of any other series or any other indebtedness for borrowed money of the Corporation or any Material Banking Subsidiary, in each case exceeding $10,000,000 in an aggregate principal amount, as a result of a default under the terms of the instrument or instruments under which such indebtedness is issued or secured, unless such acceleration is annulled within 30 days after written notice as provided in the Indenture, provided that if such default is remedied or cured by the Corporation or any Material Banking Subsidiary or waived by holders of such indebtedness, the Event of Default by reason thereof shall be deemed to have been thereupon remedied, cured or waived; certain events of bankruptcy, insolvency or reorganization with respect to the Corporation or any Material Banking Subsidiary; or any other Event of Default specified in the applicable Prospectus Supplement. In case an Event of Default with respect to Senior Debt Securities of any series shall occur and be continuing, the Senior Trustee or the Holders of not less than 25% in principal amount of the Senior Debt Securities of -24- 27 such series then outstanding may declare the principal of all such Senior Debt Securities of such series to be due and payable. The Corporation is required to furnish to the Senior Trustee annually a statement as to the performance by the Corporation of its obligations under the Senior Indenture and as to any default in such performance. Under certain circumstances any declaration of acceleration with respect to Senior Debt Securities of any series may be rescinded and past defaults (except a default in the payment of principal of or interest on the Senior Debt Securities) may be waived by the Holders of a majority in aggregate principal amount of the Senior Debt Securities of such series then outstanding. The Senior Indenture provides that the Senior Trustee may withhold notice to the Holders of Senior Debt Securities of any series of any continuing default (except in the payment of the principal of (or premium, if any) or interest on any Senior Debt Securities of such series) if such Senior Trustee considers it in the interest of Holders of such series of Senior Debt Securities to do so. Subordinated Indenture An Event of Default with respect to the Subordinated Debt Securities of any series is defined in the Subordinated Indenture as being certain events involving a bankruptcy, insolvency or reorganization of the Corporation. If an Event of Default with respect to Subordinated Debt Securities of any series shall have occurred and be continuing, either the Subordinated Trustee or the Holders of not less than 25% in aggregate principal amount of the Subordinated Debt Securities of such series then outstanding may declare the principal of the Subordinated Debt Securities of such series to be due and payable immediately. The Corporation is required to furnish to the Subordinated Trustee annually a statement as to the performance by the Corporation of its obligations under the Subordinated Indenture and as to any default in such performance. Under certain circumstances, any declaration of acceleration with respect to Subordinated Debt Securities of any series may be rescinded and past defaults (except a default in the payment of principal of or interest on the Subordinated Debt Securities) may be waived by the Holders of a majority in aggregate principal amount of the Subordinated Debt Securities of such series then outstanding. The Subordinated Indenture provides that the Subordinated Trustee may withhold notice to the Holders of the Subordinated Debt Securities of any series of any continuing default (except in the payment of the principal of (or premium, if any) or interest on any Subordinated Debt Securities of such series) if the Subordinated Trustee considers it in the interest of the Holders of such series of Subordinated Debt Securities to do so. The Subordinated Indenture does not provide for any right of acceleration of the payment of principal of a series of Subordinated Debt Securities upon a default in the payment of principal or interest or in the performance of any covenant or agreement in the Subordinated Debt Securities of the particular series or in the Subordinated Indenture. CONSOLIDATION, MERGER, SALE OR CONVEYANCE The Corporation has covenanted in the Senior and Subordinated Indentures that it will not merge or consolidate with any other corporation or sell, convey, transfer or lease all or substantially all of its assets to any person, firm or corporation unless the Corporation is the continuing corporation or the successor corporation expressly assumes the obligations under any outstanding Senior Debt Securities and Subordinated Debt Securities and the respective Senior and Subordinated Indentures and the Corporation or such successor corporation is not, immediately after such merger, consolidation, sale or conveyance, in default in the performance of any of the covenants or conditions of the respective Indenture. The Indentures do not contain any other covenant which restricts the Corporation's ability to merge or -25- 28 consolidate with any other corporation, sell, convey, transfer or lease all or substantially all of its assets to any persons, firm or corporation or otherwise engage in restructuring transactions. TERMS APPLICABLE TO THE FINANCIAL SENIOR DEBT SECURITIES OR FINANCIAL SUBORDINATED DEBT SECURITIES MODIFICATION OF THE FINANCIAL SENIOR AND FINANCIAL SUBORDINATED INDENTURES The Financial Senior and Financial Subordinated Indentures contain provisions permitting the Corporation, Financial and the respective Financial Trustees, with the consent of Holders of not less than a majority in principal amount of the Financial Senior Debt Securities or Financial Subordinated Debt Securities that are affected by the modification, to modify the particular Indenture or any supplemental indenture or the rights of the Holders of the Financial Senior Debt Securities or Financial Subordinated Debt Securities issued under such Indenture, provided that no such modification may, without the consent of the Holder of each Outstanding Financial Senior Debt Security or Financial Subordinated Debt Security affected thereby, (a) change the stated maturity date of the principal of, or any installment of principal of or interest, if any, on, any Financial Senior Debt Security or Financial Subordinated Debt Security, (b) reduce the principal amount of, or premium or rate of interest, if any, on, any Financial Senior Debt Security or Financial Subordinated Debt Security, (c) reduce the amount of principal of an Original Issue Discount Financial Senior Debt Security or Financial Subordinated Debt Security payable upon acceleration of the maturity thereof, (d) change the place or coin or currency of payment of principal of, or premium or interest, if any, on, any Financial Senior Debt Security or Financial Subordinated Debt Security, (e) impair the right to institute suit for the enforcement of any payment on or with respect to any Financial Senior Debt Security or Financial Subordinated Debt Security, (f) modify or affect in any manner adverse to Holders the terms and conditions of the obligations of the Guarantor in respect of the due and punctual payment of principal or any premium and interest, sinking fund payment or Additional Amounts in respect of the Financial Senior Debt Securities or Financial Subordinated Debt Securities, (g) reduce the percentage in principal amount of Outstanding Financial Senior Debt Securities or Financial Subordinated Debt Securities of any series, the consent of whose Holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults, (h) modify (with certain exceptions) any provision of the Indenture that requires the consent of the Holder of each Outstanding Financial Senior Debt Security or Financial Subordinated Debt Security affected thereby or (i) with respect to the Financial Subordinated Indenture, modify the subordination provisions in a manner adverse to Holders of Outstanding Financial Subordinated Debt Securities. SUBORDINATION Unless otherwise indicated in the applicable Prospectus Supplement, the following provisions shall apply to the Financial Subordinated Debt Securities and the guarantee of them by the Corporation. The payment of the principal of, premium, if any, and interest on the Financial Subordinated Debt Securities and the Corporation's Guarantees thereof (the "Financial Subordinated Guarantees") -26- 29 will, to the extent set forth in the Financial Subordinated Indenture, be subordinated in right of payment to the prior payment in full of all Senior Indebtedness (as defined below) of Financial or the Corporation, as the case may be. In certain events of insolvency, the payment of the principal of, premium, if any, and interest on the Financial Subordinated Debt Securities and any payments with respect to the Financial Subordinated Guarantees will, to the extent set forth in the Financial Subordinated Indenture, also be effectively subordinated in right of payment to the prior payment in full of all Other Financial Obligations (as defined below) of Financial or the Corporation, as the case may be. As of March 31, 1995, $524.4 million aggregate principal amount of Senior Indebtedness and no Other Financial Obligations of Financial were outstanding. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency or similar proceedings of Financial or the Corporation, the holders of all Senior Indebtedness thereof will first be entitled to receive payment in full of all amounts due or to become due thereon before the Holders of the Financial Subordinated Debt Securities or the Financial Subordinated Guarantees will be entitled to receive any payment in respect of the principal of, premium, if any, or interest on the Financial Subordinated Debt Securities or the Financial Subordinated Guarantees, as the case may be. If, upon any such payment or distribution of assets to creditors, there remain, after giving effect to such subordination provisions in favor of the holders of Senior Indebtedness of Financial and the Corporation, any amounts of cash, property or securities available for payment or distribution in respect of Financial Subordinated Debt Securities or the Financial Subordinated Guarantees (as defined in the Financial Subordinated Indenture, "Financial Excess Proceeds") and if, at such time, any person entitled to payment pursuant to the terms of Other Financial Obligations of Financial or the Corporation has not received payment in full of all amounts due or to become due on or in respect of such Other Financial Obligations of Financial or the Corporation, then such Financial Excess Proceeds shall first be applied to pay or provide for the payment in full of such Other Financial Obligations of Financial or the Corporation, as the case may be, before any payment or distribution may be made in respect of the Financial Subordinated Debt Securities or the Financial Subordinated Guarantees. In the event of the acceleration of the maturity of any Financial Subordinated Debt Securities, the holders of all Senior Indebtedness of Financial or the Corporation, as the case may be, will first be entitled to receive payment in full of all amounts due or to become due thereon before the Holders of the Financial Subordinated Debt Securities or the Financial Subordinated Guarantees will be entitled to receive any payment of the principal of, premium, if any, or interest on the Financial Subordinated Debt Securities or the Financial Subordinated Guarantees, as the case may be. Accordingly, in case of such an acceleration, all Senior Indebtedness of Financial or the Corporation would have to be repaid before any payment could be made in respect of the Financial Subordinated Debt Securities or the Financial Subordinated Guarantees, as the case may be. No payments on account of principal, premium, if any, or interest in respect of the Financial Subordinated Debt Securities or the Financial Subordinated Guarantees may be made if there shall have occurred and be continuing a default in any payment with respect to any Senior Indebtedness of Financial or the Corporation, an event of default with respect to any Senior Indebtedness of Financial or the Corporation permitting the holders thereof to accelerate the maturity thereof, or if any judicial proceeding shall be pending with respect to any such default. By reason of such subordination, in the event of the insolvency of Financial or the Corporation, creditors of Financial or the Corporation who are not holders of Senior Indebtedness, the Financial Subordinated Debt Securities or the Financial Subordinated Guarantees may recover less, ratably, than holders of Senior Indebtedness of Financial or the Corporation, as the case may be, -27- 30 and may recover more, ratably, than Holders of the Financial Subordinated Debt Securities or the Financial Subordinated Guarantees. "Senior Indebtedness" of Financial is defined in the Financial Subordinated Indenture to mean the principal of, premium, if any, and interest on (i) all indebtedness of Financial for money borrowed (including indebtedness of others guaranteed by Financial) other than the Financial Subordinated Debt Securities, whether outstanding on the date of the Financial Subordinated Indenture or thereafter created, assumed or incurred and (ii) any amendments, renewals, extensions, modifications and refundings of any such indebtedness, unless in either case in the instrument creating or evidencing any such indebtedness or pursuant to which it is outstanding it is provided that such indebtedness is not superior in right of payment to the Financial Subordinated Debt Securities. For the purposes of this definition, "indebtedness for money borrowed" is defined as (i) any obligation of, or any obligation guaranteed by, Financial for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments, (ii) any deferred payment obligation of, or any such obligation guaranteed by, Financial for the payment of the purchase price of property or assets evidenced by a note or similar instrument, and (iii) any obligation of, or any such obligation guaranteed by, Financial for the payment of rent or other amounts under a lease of property or assets which obligation is required to be classified and accounted for as a capitalized lease on the balance sheet of Financial under generally accepted accounting principles. "Other Financial Obligations" of Financial is defined in the Financial Subordinated Indenture to mean all obligations of Financial to make payment pursuant to the terms of financial instruments, such as (i) securities contracts and foreign currency exchange contracts, (ii) derivative instruments, such as swap agreements (including interest rate and currency and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange agreements, options, commodity futures contracts, commodity options contracts and (iii) similar financial instruments; provided that the term Other Financial Obligations shall not include (x) obligations on account of Senior Indebtedness of Financial and (y) obligations on account of indebtedness for money borrowed ranking pari passu with or subordinate to the Financial Subordinated Debt Securities. "Senior Indebtedness" of the Corporation is defined in the Financial Subordinated Indenture to mean the principal of, premium, if any, and interest on (i) all indebtedness of the Corporation for money borrowed (including indebtedness of others guaranteed by the Corporation other than the Financial Subordinated Guarantees), whether outstanding on the date of the Financial Subordinated Indenture or thereafter created, assumed or incurred and (ii) any amendments, renewals, extensions, modifications and refundings of any such indebtedness, unless in either case in the instrument creating or evidencing any such indebtedness or pursuant to which it is outstanding it is provided that such indebtedness is not superior in right of payment to the Financial Subordinated Guarantees. For the purposes of this definition, "indebtedness for money borrowed" is defined as (i) any obligation of, or any obligation guaranteed by, the Corporation for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments, (ii) any deferred payment obligation of, or any such obligation guaranteed by, the Corporation for the payment of the purchase price of property or assets evidenced by a note or similar instrument, and (iii) any obligation of, or any such obligation guaranteed by, the Corporation for the payment of rent or other amounts under a lease of property or assets which obligation is required to be classified and accounted for as a -28- 31 capitalized lease on the balance sheet of the Corporation under generally accepted accounting principles. "Other Financial Obligations" of the Corporation is defined in the Financial Subordinated Indenture to mean all obligations of the Corporation to make payment pursuant to the terms of financial instruments, such as (i) securities contracts and foreign currency exchange contracts, (ii) derivative instruments, such as swap agreements (including interest rate and currency and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange agreements, options, commodity futures contracts, commodity options contracts and (iii) similar financial instruments; provided that the term Other Financial Obligations shall not include (x) obligations on account of Senior Indebtedness and (y) obligations on account of indebtedness for money borrowed ranking pari passu with or subordinate to the Financial Subordinated Guarantees. EVENTS OF DEFAULT Financial Senior Indenture An Event of Default with respect to Financial Senior Debt Securities of any series is defined in the Financial Senior Indenture as being: default for 30 days in payment of any interest on Financial Senior Debt Securities of such series; default in payment of principal of (or premium, if any) on any Financial Senior Debt Securities of such series; default in deposit of any mandatory sinking fund payment required by the Financial Senior Debt Securities of such series; default for 60 days, after notice, in performance or breach of any other covenant or warranty in the Financial Senior Indenture (except for a covenant expressly relating to a series of Financial Senior Debt Securities other than that series of Financial Senior Debt Securities) or in the Financial Senior Debt Securities of such series; acceleration of the Financial Senior Debt Securities of any other series or any other indebtedness for borrowed money of the Corporation, Financial or any Material Banking Subsidiary, in each case exceeding $10,000,000 in an aggregate principal amount, as a result of a default under the terms of the instrument or instruments under which such indebtedness is issued or secured, unless such acceleration is annulled within 30 days after written notice as provided in the Indenture, provided that if such default is remedied or cured by the Corporation, Financial or any Material Banking Subsidiary or waived by the holders of such indebtedness, the Event of Default by reason thereof shall be deemed to have been thereupon remedied, cured or waived; certain events of bankruptcy, insolvency or reorganization of the Corporation, any Material Banking Subsidiary or Financial; or any other Event of Default specified in the applicable Prospectus Supplement. In case an Event of Default with respect to Financial Senior Debt Securities of any series shall occur and be continuing, the Financial Senior Trustee or the Holders of not less than 25% in principal amount of the Financial Senior Debt Securities of such series then outstanding may declare the principal of all the Financial Senior Debt Securities of such series to be due and payable. The Corporation and Financial are required to furnish to the Financial Senior Trustee annually a statement or statements as to the performance by the Corporation and Financial of their respective obligations under the Financial Senior Indenture of such series and as to any default in such performance. Under certain circumstances any declaration of acceleration with respect to Financial Senior Debt Securities of any series may be rescinded and past defaults (except a default in the payment of principal of or interest on the Financial Senior Debt Securities) may be waived by the Holders of a majority in aggregate principal amount of the Financial Senior Debt Securities of such series then outstanding. The -29- 32 Financial Senior Indenture provides that the Financial Senior Trustee may withhold notice to the Holders of Financial Senior Debt Securities of any series of any continuing default (except in the payment of the principal of (or premium, if any) or interest on any Financial Senior Debt Securities of such series) if such Financial Senior Trustee considers it in the interest of Holders of such series of Financial Senior Debt Securities to do so. Financial Subordinated Indenture An Event of Default with respect to the Financial Subordinated Debt Securities of any series is defined in the Financial Subordinated Indenture as being certain events involving a bankruptcy, insolvency or reorganization of the Corporation or Financial. If an Event of Default with respect to Financial Subordinated Debt Securities of any series shall have occurred and be continuing, either the Financial Subordinated Trustee or the Holders of not less than 25% in aggregate principal amount of the Financial Subordinated Debt Securities of such series then outstanding may declare the principal of the Financial Subordinated Debt Securities of such series to be due and payable immediately. The Corporation and Financial are required to furnish to the Financial Subordinated Trustee annually a statement as to the performance by the Corporation and Financial of their respective obligations under the Financial Subordinated Indenture and as to any default in such performance. Under certain circumstances, any declaration of acceleration with respect to Financial Subordinated Debt Securities of any series may be rescinded and past defaults (except a default in the payment of principal of or interest on the Financial Subordinated Debt Securities) may be waived by the Holders of a majority in aggregate principal amount of the Financial Subordinated Debt Securities of such series then outstanding. The Financial Subordinated Indenture provides that the Financial Subordinated Trustee may withhold notice to the Holders of the Financial Subordinated Debt Securities of any series of any continuing default (except in the payment of the principal of (or premium, if any) or interest on any Financial Subordinated Debt Securities of such series) if the Financial Subordinated Trustee considers it in the interest of the Holders of such series of Financial Subordinated Debt Securities to do so. The Financial Subordinated Indenture does not provide for any right of acceleration of the payment of principal of a series of Financial Subordinated Debt Securities upon a default in the payment of principal or interest or in the performance of any covenant or agreement in the Financial Subordinated Debt Securities of the particular series, in the Financial Subordinated Indenture or in the Financial Subordinated Guarantees. CONSOLIDATION, MERGER, SALE OR CONVEYANCE Each of the Corporation and Financial has covenanted in the Financial Senior and Financial Subordinated Indentures that it will not merge or consolidate with any other corporation or sell, convey, transfer or lease all or substantially all of its assets to any person, firm or corporation unless the Corporation or Financial, as the case may be, is the continuing corporation or the successor corporation expressly assumes the obligations under any outstanding Financial Senior Debt Securities and Financial Subordinated Debt Securities and the Financial Subordinated Guarantees and the respective Financial Senior and Financial Subordinated Indentures and the Corporation or Financial, as the case may be, or such successor corporation is not, immediately after such merger, consolidation, sale or conveyance, in default in the performance of any of the covenants or conditions of the respective Indenture. The Indentures do not contain any other covenant that restricts the Corporation's or Financial's ability to merge or consolidate with any other corporation, sell, convey, -30- 33 transfer or lease all or substantially all of its assets to any person, firm or corporation or otherwise engage in restructuring transactions. GUARANTEE Financial Senior Debt Securities The Corporation will guarantee the punctual payment of the principal of, premium, if any, and interest on the Financial Senior Debt Securities, when and as the same are due and payable. The guarantee is absolute and unconditional, irrespective of any circumstance that might otherwise constitute a legal or equitable discharge of a surety or guarantor. To evidence the guarantee, a Guarantee, executed by the Corporation, will be endorsed on each Financial Senior Debt Security. Holders of the Financial Senior Debt Securities may proceed directly against the Corporation in the event of default under the Financial Senior Debt Securities without first proceeding against Financial. The Guarantees will rank pari passu with all other unsecured and unsubordinated obligations of the Corporation. Financial Subordinated Debt Securities The Corporation will guarantee, on a subordinated basis, the punctual payment of the principal of, premium, if any, and interest on the Financial Subordinated Debt Securities, when and as the same are due and payable. The guarantee is absolute and unconditional, irrespective of any circumstance that might otherwise constitute a legal or equitable discharge of a surety or guarantor. To evidence the guarantee, a Guarantee, executed by the Corporation, will be endorsed on each Financial Subordinated Debt Security. Holders of the Financial Subordinated Debt Securities may proceed directly against the Corporation in the event of default under the Financial Subordinated Debt Securities without first proceeding against Financial. The Financial Subordinated Guarantees will rank pari passu with all other unsecured and subordinated obligations of the Corporation. See "Subordination." TERMS APPLICABLE TO THE PIB SENIOR DEBT SECURITIES OR PIB SUBORDINATED DEBT SECURITIES MODIFICATION OF THE PIB SENIOR AND PIB SUBORDINATED INDENTURES The PIB Senior and PIB Subordinated Indentures contain provisions permitting the Corporation, PIB and the respective PIB Trustees, with the consent of Holders of not less than a majority in principal amount of the PIB Senior Debt Securities or PIB Subordinated Debt Securities that are affected by the modification, to modify the particular Indenture or any supplemental indenture or the rights of the Holders of the PIB Senior Debt Securities or PIB Subordinated Debt Securities issued under such Indenture; provided that no such modification may, without the consent of the Holder of each outstanding PIB Senior Debt Security or PIB Subordinated Debt Security affected thereby, (a) change the stated maturity date of the principal of, or any installment of principal of or interest, if any, on, any PIB Senior Debt Security or PIB Subordinated Debt Security, (b) reduce the principal amount of, or premium or rate of interest, if any, on, any PIB Senior Debt Security or PIB Subordinated Debt Security, (c) reduce the amount of principal of an Original Issue Discount Security -31- 34 payable upon acceleration of the maturity thereof, (d) change the place or coin or currency of payment of principal of, or premium or interest, if any, on, any PIB Senior Debt Security or PIB Subordinated Debt Security, (e) impair the right to institute suit for the enforcement of any payment on or with respect to any PIB Senior Debt Security or PIB Subordinated Debt Security, (f) modify or affect in any manner adverse to Holders the terms and conditions of the obligations of the Guarantor in respect of the due and punctual payment of principal or any premium and interest, sinking fund payment or Additional Amounts in respect of the PIB Senior Debt Securities or PIB Subordinated Debt Securities, (g) reduce the percentage in principal amount of Outstanding PIB Senior Debt Securities or PIB Subordinated Debt Securities of any series, the consent of whose Holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults, (h) modify (with certain exceptions) any provision of the Indenture that requires the consent of the Holder of each Outstanding PIB Senior Debt Security or PIB Subordinated Debt Security affected thereby or (i) with respect to the PIB Subordinated Indenture, modify the subordination provisions in a manner adverse to Holders of Outstanding PIB Subordinated Debt Securities. SUBORDINATION Unless otherwise indicated in the applicable Prospectus Supplement, the following provisions shall apply to the PIB Subordinated Debt Securities and the guarantee of them by the Corporation. The payment of the principal of, premium, if any, and interest on the PIB Subordinated Debt Securities and the Corporation's Guarantees thereof (the "PIB Subordinated Guarantees") will, to the extent set forth in the PIB Subordinated Indenture, be subordinated in right of payment to the prior payment in full of all Senior Indebtedness (as defined below) of PIB or the Corporation, as the case may be. In certain events of insolvency, the payment of the principal of, premium, if any, and interest on the PIB Subordinated Debt Securities and any payments with respect to the PIB Subordinated Guarantees will, to the extent set forth in the PIB Subordinated Indenture, also be effectively subordinated in right of payment to the prior payment in full of all Other Financial Obligations (as defined below) of PIB or the Corporation, as the case may be. As of March 31, 1995, no Senior Indebtedness and no Other Financial Obligations of PIB were outstanding. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency or similar proceedings of PIB or the Corporation, the holders of all Senior Indebtedness thereof will first be entitled to receive payment in full of all amounts due or to become due thereon before the Holders of the PIB Subordinated Debt Securities or the PIB Subordinated Guarantees will be entitled to receive any payment in respect of the principal of, premium, if any, or interest on the PIB Subordinated Debt Securities or the PIB Subordinated Guarantees, as the case may be. If, upon any such payment or distribution of assets to creditors, there remain, after giving effect to such subordination provisions in favor of the holders of Senior Indebtedness of PIB and the Corporation, any amounts of cash, property or securities available for payment or distribution in respect of PIB Subordinated Debt Securities or the PIB Subordinated Guarantees (as defined in the PIB Subordinated Indenture, "PIB Excess Proceeds") and if, at such time, any person entitled to payment pursuant to the terms of Other Financial Obligations of PIB or the Corporation has not received payment in full of all amounts due or to become due on or in respect of such Other Financial Obligations of PIB or the Corporation, then such PIB Excess Proceeds shall first be applied to pay or provide for the payment in full of such Other Financial Obligations of PIB or the Corporation, as the case may be, -32- 35 before any payment or distribution may be made in respect of the PIB Subordinated Debt Securities or the PIB Subordinated Guarantees. In the event of the acceleration of the maturity of any PIB Subordinated Debt Securities, the holders of all Senior Indebtedness of PIB or the Corporation, as the case may be, will first be entitled to receive payment in full of all amounts due or to become due thereon before the Holders of the PIB Subordinated Debt Securities or the PIB Subordinated Guarantees will be entitled to receive any payment of the principal of, premium, if any, or interest on the PIB Subordinated Debt Securities or the PIB Subordinated Guarantees, as the case may be. Accordingly, in case of such an acceleration, all Senior Indebtedness of PIB or the Corporation would have to be repaid before any payment could be made in respect of the PIB Subordinated Debt Securities or the PIB Subordinated Guarantees, as the case may be. No payments on account of principal, premium, if any, or interest in respect of the PIB Subordinated Debt Securities or the PIB Subordinated Guarantees may be made if there shall have occurred and be continuing a default in any payment with respect to any Senior Indebtedness of PIB or the Corporation, an event of default with respect to any Senior Indebtedness of PIB or the Corporation permitting the holders thereof to accelerate the maturity thereof, or if any judicial proceeding shall be pending with respect to any such default. By reason of such subordination, in the event of the insolvency of PIB or the Corporation, creditors of PIB or the Corporation who are not holders of Senior Indebtedness, the PIB Subordinated Debt Securities or the PIB Subordinated Guarantees may recover less, ratably, than holders of Senior Indebtedness of PIB or the Corporation, as the case may be, and may recover more, ratably, than Holders of the PIB Subordinated Debt Securities or the PIB Subordinated Guarantees. "Senior Indebtedness" of PIB is defined in the PIB Subordinated Indenture to mean the principal of, premium, if any, and interest on (i) all indebtedness of PIB for money borrowed (including indebtedness of others guaranteed by PIB) other than the PIB Subordinated Debt Securities, whether outstanding on the date of the PIB Subordinated Indenture or thereafter created, assumed or incurred and (ii) any amendments, renewals, extensions, modifications and refundings of any such indebtedness, unless in either case in the instrument creating or evidencing any such indebtedness or pursuant to which it is outstanding it is provided that such indebtedness is not superior in right of payment to the PIB Subordinated Debt Securities. For the purposes of this definition, "indebtedness for money borrowed" is defined as (i) any obligation of, or any obligation guaranteed by, PIB for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments, (ii) any deferred payment obligation of, or any such obligation guaranteed by, PIB for the payment of the purchase price of property or assets evidenced by a note or similar instrument, and (iii) any obligation of, or any such obligation guaranteed by, PIB for the payment of rent or other amounts under a lease of property or assets which obligation is required to be classified and accounted for as a capitalized lease on the balance sheet of PIB under generally accepted accounting principles. "Other Financial Obligations" of PIB is defined in the PIB Subordinated Indenture to mean all obligations of PIB to make payment pursuant to the terms of financial instruments, such as (i) securities contracts and foreign currency exchange contracts, (ii) derivative instruments, such as swap agreements (including interest rate and currency and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange agreements, options, commodity futures contracts, commodity options contracts and (iii) similar financial instruments; provided that the term Other Financial Obligations shall not include (x) -33- 36 obligations on account of Senior Indebtedness of PIB and (y) obligations on account of indebtedness for money borrowed ranking pari passu with or subordinate to the PIB Subordinated Debt Securities. "Senior Indebtedness" of the Corporation is defined in the PIB Subordinated Indenture to mean the principal of, premium, if any, and interest on (i) all indebtedness of the Corporation for money borrowed (including indebtedness of others guaranteed by the Corporation other than the PIB Subordinated Guarantees), whether outstanding on the date of the PIB Subordinated Indenture or thereafter created, assumed or incurred and (ii) any amendments, renewals, extensions, modifications and refundings of any such indebtedness, unless in either case in the instrument creating or evidencing any such indebtedness or pursuant to which it is outstanding it is provided that such indebtedness is not superior in right of payment to the PIB Subordinated Guarantees. For the purposes of this definition, "indebtedness for money borrowed" is defined as (i) any obligation of, or any obligation guaranteed by, the Corporation for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments, (ii) any deferred payment obligation of, or any such obligation guaranteed by, the Corporation for the payment of the purchase price of property or assets evidenced by a note or similar instrument, and (iii) any obligation of, or any such obligation guaranteed by, the Corporation for the payment of rent or other amounts under a lease of property or assets which obligation is required to be classified and accounted for as a capitalized lease on the balance sheet of the Corporation under generally accepted accounting principles. "Other Financial Obligations" of the Corporation is defined in the PIB Subordinated Indenture to mean all obligations of the Corporation to make payment pursuant to the terms of financial instruments, such as (i) securities contracts and foreign currency exchange contracts, (ii) derivative instruments, such as swap agreements (including interest rate and currency and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange agreements, options, commodity futures contracts, commodity options contracts and (iii) similar financial instruments; provided that the term Other Financial Obligations shall not include (x) obligations on account of Senior Indebtedness and (y) obligations on account of indebtedness for money borrowed ranking pari passu with or subordinate to the PIB Subordinated Guarantees. EVENTS OF DEFAULT PIB Senior Indenture An Event of Default with respect to PIB Senior Debt Securities of any series is defined in the PIB Senior Indenture as being: default for 30 days in payment of any interest on PIB Senior Debt Securities of such series; default in payment of principal of (or premium on, if any) any PIB Senior Debt Securities of such series; default in deposit of any mandatory sinking fund payment required by the PIB Senior Debt Securities of such series; default for 60 days, after notice, in performance or breach of any other covenant or warranty in the PIB Senior Indenture (except for a covenant expressly relating to a series of PIB Senior Debt Securities other than that series of PIB Senior Debt Securities) or in the PIB Senior Debt Securities of such series; acceleration of the PIB Senior Debt Securities of any other series or any other indebtedness for borrowed money, of the Corporation, PIB or any Material Banking Subsidiary, in each case in an aggregate principal amount exceeding $10,000,000, as a result of a default under the terms of the instrument or instruments under which such indebtedness is issued or secured, unless such acceleration is annulled within 30 days after written notice as provided in the Indenture, provided that if such default is remedied or cured by the -34- 37 Corporation, PIB or any Material Banking Subsidiary or waived by holders of such indebtedness, the Event of Default by reason thereof shall be deemed to have been thereupon remedied, cured or waived; certain events of bankruptcy, insolvency or reorganization with respect to the Corporation, PIB or any Material Banking Subsidiary; or any other Event of Default specified in the applicable Prospectus Supplement. In case an Event of Default with respect to PIB Senior Debt Securities of any series shall occur and be continuing, the PIB Senior Trustee or the Holders of not less than 25% in principal amount of the PIB Senior Debt Securities of such series then outstanding may declare the principal of all the PIB Senior Debt Securities of such series to be due and payable. The Corporation and PIB are required to furnish to the PIB Senior Trustee annually a statement as to the performance by the Corporation and PIB of their respective obligations under the PIB Senior Indenture and as to any default in such performance. Under certain circumstances any declaration of acceleration with respect to PIB Senior Debt Securities of any series may be rescinded and past defaults (except a default in the payment of principal of or interest on the PIB Senior Debt Securities) may be waived by the Holders of a majority in aggregate principal amount of the PIB Senior Debt Securities of such series then outstanding. The PIB Senior Indenture provides that the PIB Senior Trustee may withhold notice to the Holders of PIB Senior Debt Securities of any series of any continuing default (except in the payment of the principal of (or premium, if any) or interest on any PIB Senior Debt Securities of such series) if such PIB Senior Trustee considers it in the interest of Holders of such series of PIB Senior Debt Securities to do so. PIB Subordinated Indenture An Event of Default with respect to the PIB Subordinated Debt Securities of any series is defined in the PIB Subordinated Indenture as being certain events involving a bankruptcy, insolvency or reorganization of the Corporation or PIB. If an Event of Default with respect to PIB Subordinated Debt Securities of any series shall have occurred and be continuing, either the PIB Subordinated Trustee or the Holders of not less than 25% in aggregate principal amount of the PIB Subordinated Debt Securities of such series then outstanding may declare the principal of the PIB Subordinated Debt Securities of such series to be due and payable immediately. The Corporation and PIB are required to furnish to the PIB Subordinated Trustee annually a statement as to the performance by the Corporation and PIB of their respective obligations under the PIB Subordinated Indenture and as to any default in such performance. Under certain circumstances, any declaration of acceleration with respect to PIB Subordinated Debt Securities of any series may be rescinded and past defaults (except a default in the payment of principal of or interest on the PIB Subordinated Debt Securities) may be waived by the Holders of a majority in aggregate principal amount of the PIB Subordinated Debt Securities of such series then outstanding. The PIB Subordinated Indenture provides that the PIB Subordinated Trustee may withhold notice to the Holders of the PIB Subordinated Debt Securities of any series of any continuing default (except in the payment of the principal of (or premium, if any) or interest on any PIB Subordinated Debt Securities of such series) if the PIB Subordinated Trustee considers it in the interest of the Holders of such series of PIB Subordinated Debt Securities to do so. The PIB Subordinated Indenture does not provide for any right of acceleration of the payment of principal of a series of PIB Subordinated Debt Securities upon a default in the payment of principal or interest or in the performance of any covenant or agreement in the PIB Subordinated Debt Securities of the particular series, in the PIB Subordinated Indenture or in the PIB Subordinated Guarantees. -35- 38 CONSOLIDATION, MERGER, SALE OR CONVEYANCE Each of the Corporation and PIB has covenanted in the PIB Senior and PIB Subordinated Indentures that it will not merge or consolidate with any other corporation or sell, convey, transfer or lease all or substantially all of its assets to any person, firm or corporation unless the Corporation or PIB, as the case may be, is the continuing corporation or the successor corporation expressly assumes the obligations under any outstanding PIB Senior Debt Securities and Subordinated Debt Securities and the PIB Subordinated Guarantees and the respective PIB Senior and PIB Subordinated Indentures and the Corporation, or PIB, as the case may be, or such successor corporation is not, immediately after such merger, consolidation, sale or conveyance, in default in the performance of any of the covenants or conditions of the respective Indenture. The Indentures do not contain any other covenant that restricts the Corporation's or PIB's ability to merge or consolidate with any other corporation, sell, convey, transfer or lease all or substantially all of its assets to any persons, firm or corporation or otherwise engage in restructuring transactions. GUARANTEE PIB Senior Debt Securities The Corporation will guarantee the punctual payment of the principal of, premium, if any, and interest on the PIB Senior Debt Securities, when and as the same are due and payable. The guarantee is absolute and unconditional, irrespective of any circumstance that might otherwise constitute a legal or equitable discharge of a surety or guarantor. To evidence the guarantee, a Guarantee, executed by the Corporation, will be endorsed on each PIB Senior Debt Security. Holders of the PIB Senior Debt Securities may proceed directly against the Corporation in the event of default under the PIB Senior Debt Securities without first proceeding against PIB. The Guarantees will rank pari passu with all other unsecured and unsubordinated obligations of the Corporation. PIB Subordinated Debt Securities The Corporation will guarantee, on a subordinated basis, the punctual payment of the principal of, premium, if any, and interest on the PIB Subordinated Debt Securities, when and as the same are due and payable. The guarantee is absolute and unconditional, irrespective of any circumstance that might otherwise constitute a legal or equitable discharge of a surety or guarantor. To evidence the guarantee, a Guarantee, executed by the Corporation, will be endorsed on each PIB Subordinated Debt Security. Holders of the PIB Subordinated Debt Securities may proceed directly against the Corporation in the event of default under the PIB Subordinated Debt Securities without first proceeding against PIB. The PIB Subordinated Guarantees will rank pari passu with all other unsecured and subordinated obligations of the Corporation. See "Subordination." DESCRIPTION OF PREFERRED STOCK OF THE CORPORATION The following summary contains a description of certain general terms of the Corporation's preferred stock (the "Preferred Stock") to which any Prospectus Supplement may relate. Certain terms of any series of the Preferred Stock offered by any Prospectus Supplement will be described in the Prospectus Supplement relating thereto. If so indicated in the Prospectus Supplement, the terms of any series may differ from the terms set forth below. The description of certain provisions of the -36- 39 Preferred Stock does not purport to be complete and is subject to and qualified in its entirety by reference to the provisions of the Corporation's Restated Certificate of Incorporation, as amended, the Certificates of Designation describing the Corporation's 8.35% Non-Cumulative Monthly Income Preferred Stock, 1994 Series A (the "Series A Preferred Stock") and the Corporation's Series A Participating Preferred Stock (the "Series A Participating Preferred Stock"), respectively, and the Certificate of Resolution (the "Certificate of Resolution") relating to each particular series of the Preferred Stock, each of which will be filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement of which this Prospectus is a part at or prior to the time of the issuance of such Preferred Stock. GENERAL Under the Corporation's Restated Certificate of Incorporation, the Board of Directors of the Corporation is authorized, without further stockholder action, to provide for the issuance of up to 10,000,000 shares of preferred stock (of which 4,000,000 shares have been designated and issued as Series A Preferred Stock and 350,000 shares have been authorized and designated but not issued for the Series A Participating Preferred Stock), without par value, in one or more series, with such designations of titles; dividend rates; special or relative rights in the event of a liquidation, distribution or sale of assets or dissolution or winding up of the Corporation; sinking fund provisions; redemption or purchase account provisions; conversion provisions; and voting rights, as shall be set forth as and when established by the Board of Directors of the Corporation. The shares of any series of Preferred Stock will be, when issued, fully paid and non-assessable and holders thereof shall have no preemptive rights in connection therewith. The liquidation preference of any series of the Preferred Stock is not necessarily indicative of the price at which shares of such series of Preferred Stock will actually trade at or after the time of their issuance. The market price of any series of Preferred Stock can be expected to fluctuate with changes in market and economic conditions, the financial condition and prospects of the Corporation and other factors that generally influence the market prices of securities. RANK Any series of Preferred Stock will, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank (i) senior to all classes of common stock of the Corporation and to all equity securities issued by the Corporation the terms of which specifically provide that such equity securities will rank junior to the Preferred Stock (collectively referred to as the "Junior Securities"); (ii) on a parity with all equity securities issued by the Corporation the terms of which specifically provide that such equity securities will rank on a parity with the Preferred Stock (collectively referred to as the "Parity Securities"); and (iii) junior to all equity securities issued by the Corporation the terms of which specifically provide that such equity securities will rank senior to the Preferred Stock. As used in any Certificate of Resolution for these purposes, the term "equity securities" will not include debt securities convertible into or exchangeable for equity securities. DIVIDENDS Holders of each series of Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors of the Corporation out of funds legally available therefor, cash dividends at -37- 40 such rates and on such dates as are set forth in the Prospectus Supplement relating to such series of Preferred Stock. Dividends will be payable to holders of record of the Preferred Stock as they appear on the books of the Corporation on such record dates as shall be fixed by the Board of Directors. Dividends on any series of Preferred Stock may be cumulative or non-cumulative. The Corporation's ability to pay dividends on its Preferred Stock is subject to policies established by the Federal Reserve Board. See "Certain Regulatory Matters -- Dividend Restrictions." No full dividends may be declared or paid or funds set apart for the payment of dividends on any Parity Securities unless dividends shall have been paid or set apart for such payment on the Preferred Stock. If full dividends are not so paid, the Preferred Stock shall share dividends pro rata with the Parity Securities. The holders of any series of shares of Preferred Stock at the close of business on a dividend payment record date will be entitled to receive the dividend payable on such shares (except that holders of shares called for redemption on a redemption date occurring between such record date and the dividend payment date shall not be entitled to receive such dividend on such dividend payment date but instead will receive accrued and unpaid dividends to such redemption date) on the corresponding dividend payment date notwithstanding the conversion thereof or the Corporation's default in payment of the dividend due. Except as provided above, the Corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of preferred stock or issued upon conversion. CONVERSION The Prospectus Supplement for any series of Preferred Stock will state the terms, if any, on which shares of that series are convertible into shares of another series of preferred stock of the Corporation. For any series of Preferred Stock which is convertible, the Corporation shall at all times reserve and keep available, out of the aggregate of its authorized but unissued preferred stock or preferred stock held in its treasury or both, for the purpose of effecting the conversion of the shares of such series of Preferred Stock, the full number of shares of preferred stock then deliverable upon the conversion of all outstanding shares of such series. No fractional shares or scrip representing fractional shares of preferred stock will be issued upon the conversion of shares of any series of convertible Preferred Stock. Each holder to whom fractional shares would otherwise be issued will instead be entitled to receive, at the Corporation's election, either (a) a cash payment equal to the current market price of such holder's fractional interest or (b) a cash payment equal to such holder's proportionate interest in the net proceeds (following the deduction of applicable transaction costs) from the sale promptly by an agent, on behalf of such holders, of shares of preferred stock representing the aggregate of such fractional shares. -38- 41 EXCHANGEABILITY If so determined by the Board of Directors of the Corporation, the holders of shares of Preferred Stock of any series may be obligated at any time or at maturity to exchange such shares for preferred stock or debt securities of the Corporation. The terms of any such exchange and any such preferred stock or debt securities will be described in the Prospectus Supplement relating to such series of Preferred Stock. REDEMPTION A series of Preferred Stock may be redeemable at any time, in whole or in part, at the option of the Corporation or the holder thereof upon terms and at the redemption prices set forth in the Prospectus Supplement relating to such series. In the event of partial redemptions of Preferred Stock, whether by mandatory or optional redemption, the shares to be redeemed will be determined by lot or pro rata, as may be determined by the Board of Directors of the Corporation or by any other method determined to be equitable by the Board of Directors. On or after a redemption date, unless the Corporation defaults in the payment of the redemption price, dividends will cease to accrue on shares of Preferred Stock called for redemption and all rights of holders of such shares will terminate except for the right to receive the redemption price. Under current regulations, bank holding companies may not exercise any option to redeem shares of preferred stock included as Tier 1 capital, or exchange such preferred stock for debt securities, without the prior approval of the Federal Reserve Board. Ordinarily, the Federal Reserve Board would not permit such a redemption unless (1) the shares are redeemed with the proceeds of a sale by the bank holding company of common stock or perpetual preferred stock or (2) the Federal Reserve Board determines that the bank holding company's condition and circumstances warrant the reduction of a source of permanent capital. LIQUIDATION PREFERENCE Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of each series of Preferred Stock that ranks senior to the Junior Securities will be entitled to receive out of assets of the Corporation available for distribution to shareholders, before any distribution is made on any Junior Securities, including Common Stock, distributions upon liquidation in the amount set forth in the Prospectus Supplement relating to such series of Preferred Stock, plus an amount equal to any declared and unpaid dividends. If upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the amounts payable with respect to the Preferred Stock of any series and any other Parity Securities are not paid in full, the holders of the Preferred Stock of such series and the Parity Securities will share ratably in any such distribution of assets of the Corporation in proportion to the full liquidation preferences to which each is entitled. After payment of the full amount of the liquidation preference to which they are entitled, the holders of such series of Preferred Stock will not be entitled to any further participation in any distribution of assets of the Corporation. -39- 42 VOTING RIGHTS Except as indicated in the Prospectus Supplement relating to a particular series of Preferred Stock, or except as expressly required by applicable law, the holders of the Preferred Stock will have no voting rights. Under regulations adopted by the Federal Reserve Board, if the holders of shares of any series of Preferred Stock of the Corporation become entitled to vote for the election of directors, such series may then be deemed a "class of voting securities" and a holder of 25% or more of such series (or a holder of 5% if it otherwise exercises a "controlling influence" over the Corporation) may then be subject to regulation as a bank holding company in accordance with the BHC Act. In addition, at such time as such series is deemed a class of voting securities, (i) any other bank holding company may be required to obtain the approval of the Federal Reserve Board to acquire or retain 5% or more of such series, and (ii) any person other than a bank holding company may be required to file with the Federal Reserve Board under the Change in Bank Control Act to acquire or retain 10% or more of such series. Section 12 of the Banking Law requires the prior approval of the Office of the Commissioner to obtain control of any bank organized under the Banking Law. The Banking Law requires that in any transfer of voting and outstanding capital stock of any bank organized under the laws of Puerto Rico to any person or entity that, upon consummation of the transfer, will become the owner, directly or indirectly, of more than 5% of the voting and outstanding capital stock of said bank, the parties to the transfer shall inform the Office of the Commissioner of the proposed transfer at least 60 days prior to the date such transfer is to be effected. The Banking Law does not contain any provision allowing for the extension of such 60-day time period. The transfer requires the approval of the Office of the Commissioner if it results in a change of control of the bank. For the purposes of Section 12 of the Banking Law, the term "control" means the power to, directly or indirectly, direct or influence decisively the administration or the norms of the bank. The Department of the Treasury (predecessor to the Office of the Commissioner) made a determination that the foregoing provisions of the Banking Law are applicable to a change in control of the Corporation in a letter dated April 9, 1985. Pursuant to Section 12(d) of the Banking Law, as soon as the Office of the Commissioner receives notice of a proposed transaction that may result in the control or in a change of control of a bank, the Office of the Commissioner shall have the duty to make the necessary investigations. The Office of the Commissioner shall issue authorization for the transfer of control of the bank if the results of his investigations are in his judgment satisfactory. The decision of the Office of the Commissioner is final and unreviewable. DESCRIPTION OF PREFERRED STOCK OF PIB The following summary contains a description of certain general terms of PIB's preferred stock (the "PIB Preferred Stock") to which any Prospectus Supplement may relate. Certain terms of any series of the Preferred Stock offered by any Prospectus Supplement will be described in the Prospectus Supplement relating thereto. If so indicated in the Prospectus Supplement, the terms of any series may differ from the terms set forth below. The description of certain provisions of the PIB -40- 43 Preferred Stock does not purport to be complete and is subject to and qualified in its entirety by reference to the provisions of PIB's Certificate of Incorporation, as amended, and the Certificate of Amendment relating to each particular series of the PIB Preferred Stock, each of which will be filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement of which this Prospectus is a part at or prior to the time of the issuance of such PIB Preferred Stock. The authorized capital stock of PIB consists of 1,000,000 shares of Common Stock, par value $5.00 per share, and 25,000,000 shares of preferred stock, par value $25.00 per share. The preferred stock is issuable in one or more series, with such terms, and at such times and for such consideration as the Board of Directors of PIB determines. As of the date of this Prospectus, no shares of preferred stock of PIB were issued and outstanding. All of the common stock of PIB is owned by the Corporation. GENERAL Under PIB's Certificate of Incorporation, the Board of Directors of the Corporation is authorized, without further stockholder action, to provide for the issuance of up to 25,000,000 shares of preferred stock, par value $25.00 per share, in one or more series, with such designations of titles; dividend rates; special or relative rights in the event of a liquidation, distribution or sale of assets or dissolution or winding up of PIB; sinking fund provisions; any redemption or purchase account provisions; conversion provisions; and voting rights, as shall be set forth as and when established by the Board of Directors of PIB. The shares of any series of PIB Preferred Stock will be, when issued, fully paid and nonassessable and holders thereof shall have no preemptive rights in connection therewith. The liquidation preference of any series of the PIB Preferred Stock is not necessarily indicative of the price at which shares of such series of PIB Preferred Stock will actually trade at or after the time of their issuance. The market price of any series of PIB Preferred Stock can be expected to fluctuate with changes in market and economic conditions, the financial condition and prospects of the Corporation and PIB and other factors that generally influence the market prices of securities. RANK Any series of PIB Preferred Stock will, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank (i) senior to all classes of common stock of PIB and to all equity securities issued by PIB the terms of which specifically provide that such equity securities will rank junior to the PIB Preferred Stock (collectively referred to as the "PIB Junior Securities"); (ii) on a parity with all equity securities issued by PIB, the terms of which specifically provide that such equity securities will rank on a parity with the PIB Preferred Stock (collectively referred to as the "PIB Parity Securities"); and (iii) junior to all equity securities issued by PIB, the terms of which specifically provide that such equity securities will rank senior to the PIB Preferred Stock (collectively referred to as the "PIB Senior Securities"). As used in any Certificate of Amendment for these purposes, the term "equity securities" will not include debt securities convertible into or exchangeable for equity securities. -41- 44 DIVIDENDS Holders of each series of PIB Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors of PIB out of funds legally available therefor, cash dividends at such rates and on such dates as are set forth in the Prospectus Supplement relating to such series of the PIB Preferred Stock. Dividends will be payable to holders of record of the PIB Preferred Stock as they appear on the books of PIB on such record dates as shall be fixed by the Board of Directors. Dividends on any series of PIB Preferred Stock may be cumulative or non-cumulative. PIB's ability to pay dividends on its Preferred Stock is subject to policies established by the Federal Reserve Board. See "Certain Regulatory Matters -- Dividend Restrictions." No full dividends may be declared or paid or funds set apart for the payment of dividends on any PIB Parity Securities unless dividends shall have been paid or set apart for such payment on the PIB Preferred Stock. If full dividends are not so paid, the PIB Preferred Stock shall share dividends pro rata with the PIB Parity Securities. The holders of any series of shares of PIB Preferred Stock at the close of business on a dividend payment record date will be entitled to receive the dividend payable on such shares (except that holders of shares called for redemption on a redemption date occurring between such record date and the dividend payment date shall not be entitled to receive such dividend on such dividend payment date but instead will receive accrued and unpaid dividends to such redemption date) on the corresponding dividend payment date notwithstanding the conversion thereof or PIB's default in payment of the dividend due. Except as provided above, PIB will make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of preferred stock issued upon conversion. CONVERSION The Prospectus Supplement for any series of the PIB Preferred Stock will state the terms, if any, on which shares of that series are convertible into shares of another series of preferred stock of PIB. For any series of PIB Preferred Stock which is convertible, PIB shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued preferred stock or shares of preferred stock held in its treasury or both, for the purpose of effecting the conversion of the shares of such series of PIB Preferred Stock, the full number of shares of preferred stock then deliverable upon the conversion of all outstanding shares of such series. No fractional shares or scrip representing fractional shares of preferred stock will be issued upon the conversion of shares of any series of convertible PIB Preferred Stock. Each holder to whom fractional shares would otherwise be issued will instead be entitled to receive, at PIB's election, either (a) a cash payment equal to the current market price of such holder's fractional interest or (b) a cash payment equal to such holder's proportionate interest in the net proceeds (following the deduction of applicable transaction costs) from the sale promptly by an agent, on behalf of such holders, of shares of preferred stock representing the aggregate of such fractional shares. -42- 45 EXCHANGEABILITY If so determined by the Board of Directors of PIB, the holders of shares of PIB Preferred Stock of any series may be obligated at any time or at maturity to exchange such shares for preferred stock or debt securities of PIB. The terms of any such exchange and any such preferred stock or debt securities will be described in the Prospectus Supplement relating to such series of PIB Preferred Stock. REDEMPTION A series of PIB Preferred Stock may be redeemable at any time, in whole or in part, at the option of PIB or the holder thereof upon terms and at the redemption prices set forth in the Prospectus Supplement relating to such series. In the event of partial redemptions of PIB Preferred Stock, whether by mandatory or optional redemption, the shares to be redeemed will be determined by lot or pro rata, as may be determined by the Board of Directors of PIB or by any other method determined to be equitable by the Board of Directors. On or after a redemption date, unless PIB defaults in the payment of the redemption price, dividends will cease to accrue on shares of PIB Preferred Stock called for redemption and all rights of holders of such shares will terminate except for the right to receive the redemption price. Under current regulations, bank holding companies may not exercise any option to redeem shares of preferred stock included as Tier 1 capital, or exchange such preferred stock for debt securities, without the prior approval of the Federal Reserve Board. Ordinarily, the Federal Reserve Board would not permit such a redemption unless (1) the shares are redeemed with the proceeds of a sale by the bank holding company of common stock or perpetual preferred stock or (2) the Federal Reserve Board determines that the bank holding company's condition and circumstances warrant the reduction of a source of permanent capital. LIQUIDATION PREFERENCE Upon any voluntary or involuntary liquidation, dissolution or winding up of PIB, holders of each series of PIB Preferred Stock that ranks senior to the PIB Junior Securities will be entitled to receive out of assets of PIB available for distribution to shareholders, before any distribution is made on any PIB Junior Securities, including common stock, distributions upon liquidation in the amount set forth in the Prospectus Supplement relating to such series of Preferred Stock, plus an amount equal to any accrued and unpaid dividends. If upon any voluntary or involuntary liquidation, dissolution or winding up of PIB the amounts payable with respect to the PIB Preferred Stock of any series and any other PIB Parity Securities are not paid in full, the holders of the PIB Preferred Stock of such series and the PIB Parity Securities will share ratably in any such distribution of assets of PIB in proportion to the full liquidation preferences to which each is entitled. After payment of the full amount of the liquidation preference to which they are entitled, the holders of such series of PIB Preferred Stock will not be entitled to any further participation in any distribution of assets of PIB. -43- 46 VOTING RIGHTS Except as indicated in the Prospectus Supplement relating to a particular series of PIB Preferred Stock, or except as expressly required by applicable law, the holders of the PIB Preferred Stock will have no voting rights. Under regulations adopted by the Federal Reserve Board, if the holders of shares of any series of PIB Preferred Stock become entitled to vote for the election of directors, such series may then be deemed a "class of voting securities" and a holder of 25% or more of such series (or a holder of 5% if it otherwise exercises a "controlling influence" over PIB) may then be subject to regulation as a bank holding company in accordance with the BHC Act. In addition, at such time as such series is deemed a class of voting securities, (i) any other bank holding company may be required to obtain the approval of the Federal Reserve Board to acquire or retain 5% or more of such series, and (ii) any person other than a bank holding company may be required to file with the Federal Reserve Board under the Change in Bank Control Act to acquire or retain 10% or more of such series. GUARANTEE Unless otherwise specified in the applicable Prospectus Supplement, the Corporation will guarantee the punctual payment of (i) any accrued and unpaid dividends, whether or not declared, on the PIB Preferred Stock of any series, (ii) the redemption price for any shares of PIB Preferred Stock called or redemption at the option of PIB or the holder thereof in accordance with the terms of such series of PIB Preferred Stock, (iii) the liquidation preference of PIB Preferred Stock and (iv) any additional amounts with respect to a series of PIB Preferred Stock. The Guarantee of the PIB Preferred Stock shall constitute an unsecured obligation of the Corporation and will rank junior to all liabilities of the Corporation. The Guarantee will rank senior to the Corporation's common stock and shall have such rank relative to the preferred stock of the Corporation as shall be specified in the applicable Prospectus Supplement. DESCRIPTION OF PREFERRED STOCK OF FINANCIAL The following summary contains a description of certain general terms of Financial's preferred stock (the "Financial Preferred Stock") to which any Prospectus Supplement may relate. Certain terms of any series of the Financial Preferred Stock offered by any Prospectus Supplement will be described in the Prospectus Supplement relating thereto. If so indicated in the Prospectus Supplement, the terms of any series may differ from the terms set forth below. The description of certain provisions of the Financial Preferred Stock does not purport to be complete and is subject to and qualified in its entirety by reference to the provisions of Financial's Certificate of Incorporation, as amended, and the Certificate of Designation relating to each particular series of the Financial Preferred Stock, each of which will be filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement of which this Prospectus is a part at or prior to the time of the issuance of such Financial Preferred Stock. The authorized capital stock of Financial consists of 10,000 shares of Common Stock, par value $1.00 per share, and 10,000,000 shares of preferred stock, par value $.01 per share. The -44- 47 preferred stock is issuable in one or more series, with such terms, and at such times and for such consideration as the Board of Directors of Financial determines. As of the date of this Prospectus, no shares of preferred stock of Financial were issued and outstanding. All of the common stock of Financial is owned by PIB. GENERAL Under Financial's Certificate of Incorporation, the Board of Directors of the Corporation is authorized, without further stockholder action, to provide for the issuance of up to 10,000,000 shares of preferred stock, par value $.01 per share, in one or more series, with such designations of titles; dividend rates; special or relative rights in the event of a liquidation, distribution or sale of assets or dissolution or winding up of Financial; sinking fund provisions; any redemption or purchase account provisions; conversion provisions; and voting rights, as shall be set forth as and when established by the Board of Directors of Financial. The shares of any series of Financial Preferred Stock will be, when issued, fully paid and nonassessable and holders thereof shall have no preemptive rights in connection therewith. The liquidation preference of any series of the Financial Preferred Stock is not necessarily indicative of the price at which shares of such series of Financial Preferred Stock will actually trade at or after the time of their issuance. The market price of any series of Financial Preferred Stock can be expected to fluctuate with changes in market and economic conditions, the financial condition and prospects of the Corporation and Financial and other factors that generally influence the market prices of securities. RANK Any series of Financial Preferred Stock will, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank (i) senior to all classes of common stock of Financial and to all equity securities issued by Financial the terms of which specifically provide that such equity securities will rank junior to the Financial Preferred Stock (collectively referred to as the "Financial Junior Securities"); (ii) on a parity with all equity securities issued by Financial, the terms of which specifically provide that such equity securities will rank on a parity with the Financial Preferred Stock (collectively referred to as the "Financial Parity Securities"); and (iii) junior to all equity securities issued by Financial, the terms of which specifically provide that such equity securities will rank senior to the Financial Preferred Stock (collectively referred to as the "Financial Senior Securities"). As used in any Certificate of Designation for these purposes, the term "equity securities" will not include debt securities convertible into or exchangeable for equity securities. DIVIDENDS Holders of each series of Financial Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors of Financial out of funds legally available therefor, cash dividends at such rates and on such dates as are set forth in the Prospectus Supplement relating to such series of the Financial Preferred Stock. Dividends will be payable to holders of record of the Financial Preferred Stock as they appear on the books of Financial on such record dates as shall be fixed by the Board of Directors. Dividends on any series of Financial Preferred Stock may be cumulative or non- -45- 48 cumulative. Financial's ability to pay dividends on its Preferred Stock is subject to policies established by the Federal Reserve Board. See "Certain Regulatory Matters -- Dividend Restrictions." No full dividends may be declared or paid or funds set apart for the payment of dividends on any Financial Parity Securities unless dividends shall have been paid or set apart for such payment on the Financial Preferred Stock. If full dividends are not so paid, the Financial Preferred Stock shall share dividends pro rata with the Financial Parity Securities. The holders of any series of shares of Financial Preferred Stock at the close of business on a dividend payment record date will be entitled to receive the dividend payable on such shares (except that holders of shares called for redemption on a redemption date occurring between such record date and the dividend payment date shall not be entitled to receive such dividend on such dividend payment date but instead will receive accrued and unpaid dividends to such redemption date) on the corresponding dividend payment date notwithstanding the conversion thereof or Financial's default in payment of the dividend due. Except as provided above, Financial will make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of preferred stock issued upon conversion. CONVERSION The Prospectus Supplement for any series of the Financial Preferred Stock will state the terms, if any, on which shares of that series are convertible into shares of another series of preferred stock of Financial. For any series of Financial Preferred Stock which is convertible, Financial shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued preferred stock or shares of preferred stock held in its treasury or both, for the purpose of effecting the conversion of the shares of such series of Financial Preferred Stock, the full number of shares of preferred stock then deliverable upon the conversion of all outstanding shares of such series. No fractional shares or scrip representing fractional shares of preferred stock will be issued upon the conversion of shares of any series of convertible Financial Preferred Stock. Each holder to whom fractional shares would otherwise be issued will instead be entitled to receive, at Financial's election, either (a) a cash payment equal to the current market price of such holder's fractional interest or (b) a cash payment equal to such holder's proportionate interest in the net proceeds (following the deduction of applicable transaction costs) from the sale promptly by an agent, on behalf of such holders, of shares of preferred stock representing the aggregate of such fractional shares. EXCHANGEABILITY If so determined by the Board of Directors of Financial, the holders of shares of Financial Preferred Stock of any series may be obligated at any time or at maturity to exchange such shares for preferred stock or debt securities of Financial. The terms of any such exchange and any such preferred stock or debt securities will be described in the Prospectus Supplement relating to such series of Financial Preferred Stock. -46- 49 REDEMPTION A series of Financial Preferred Stock may be redeemable at any time, in whole or in part, at the option of Financial or the holder thereof upon terms and at the redemption prices set forth in the Prospectus Supplement relating to such series. In the event of partial redemptions of Financial Preferred Stock, whether by mandatory or optional redemption, the shares to be redeemed will be determined by lot or pro rata, as may be determined by the Board of Directors of Financial or by any other method determined to be equitable by the Board of Directors. On or after a redemption date, unless Financial defaults in the payment of the redemption price, dividends will cease to accrue on shares of Financial Preferred Stock called for redemption and all rights of holders of such shares will terminate except for the right to receive the redemption price. Under current regulations, bank holding companies may not exercise any option to redeem shares of preferred stock included as Tier 1 capital, or exchange such preferred stock for debt securities, without the prior approval of the Federal Reserve Board. Ordinarily, the Federal Reserve Board would not permit such a redemption unless (1) the shares are redeemed with the proceeds of a sale by the bank holding company of common stock or perpetual preferred stock or (2) the Federal Reserve Board determines that the bank holding company's condition and circumstances warrant the reduction of a source of permanent capital. LIQUIDATION PREFERENCE Upon any voluntary or involuntary liquidation, dissolution or winding up of Financial, holders of each series of Financial Preferred Stock that ranks senior to the Financial Junior Securities will be entitled to receive out of assets of Financial available for distribution to shareholders, before any distribution is made on any Financial Junior Securities, including common stock, distributions upon liquidation in the amount set forth in the Prospectus Supplement relating to such series of Preferred Stock, plus an amount equal to any accrued and unpaid dividends. If upon any voluntary or involuntary liquidation, dissolution or winding up of Financial the amounts payable with respect to the Financial Preferred Stock of any series and any other Financial Parity Securities are not paid in full, the holders of the Financial Preferred Stock of such series and the Financial Parity Securities will share ratably in any such distribution of assets of Financial in proportion to the full liquidation preferences to which each is entitled. After payment of the full amount of the liquidation preference to which they are entitled, the holders of such series of Financial Preferred Stock will not be entitled to any further participation in any distribution of assets of Financial. VOTING RIGHTS Except as indicated in the Prospectus Supplement relating to a particular series of Financial Preferred Stock, or except as expressly required by applicable law, the holders of the Financial Preferred Stock will have no voting rights. Under regulations adopted by the Federal Reserve Board, if the holders of shares of any series of Financial Preferred Stock become entitled to vote for the election of directors, such series -47- 50 may then be deemed a "class of voting securities" and a holder of 25% or more of such series (or a holder of 5% if it otherwise exercises a "controlling influence" over Financial) may then be subject to regulation as a bank holding company in accordance with the BHC Act. In addition, at such time as such series is deemed a class of voting securities, (i) any other bank holding company may be required to obtain the approval of the Federal Reserve Board to acquire or retain 5% or more of such series, and (ii) any person other than a bank holding company may be required to file with the Federal Reserve Board under the Change in Bank Control Act to acquire or retain 10% or more of such series. GUARANTEE Unless otherwise specified in the applicable Prospectus Supplement, the Corporation will guarantee the punctual payment of (i) any accrued and unpaid dividends, whether or not declared, on the Financial Preferred Stock of any series, (ii) the redemption price for any shares of Financial Preferred Stock called for redemption at the option of Financial or the holder thereof in accordance with the terms of such series of Financial Preferred Stock, (iii) the liquidation preference of Financial Preferred Stock and (iv) any additional amounts with respect to a series of Financial Preferred Stock. The Guarantee of the Financial Preferred Stock shall constitute an unsecured obligation of the Corporation and will rank junior to all liabilities of the Corporation. The Guarantee will rank senior to the Corporation's common stock and shall have such rank relative to the preferred stock of the Corporation as shall be specified in the applicable Prospectus Supplement. -48- 51 VALIDITY OF OFFERED SECURITIES The validity of the Preferred Stock and the PIB Preferred Stock will be passed upon for the Corporation and PIB by Brunilda Santos de Alvarez, counsel to the Corporation. The validity of the Senior Debt Securities, the Subordinated Debt Securities, the PIB Senior Debt Securities, the PIB Subordinated Debt Securities and the Guarantees will be passed upon for the Corporation and PIB by Ms. Alvarez as to matters of the laws of the Commonwealth of Puerto Rico and by Sullivan & Cromwell as to matters of New York law. The validity of the Financial Preferred Stock, the Financial Senior Debt Securities and the Financial Subordinated Debt Securities will be passed upon for Financial by Sullivan & Cromwell. The validity of the Securities will be passed upon for any underwriters or agents by counsel named in the Prospectus Supplement. EXPERTS The financial statements incorporated in this Prospectus by reference from the Corporation's Annual Report on Form 10-K for the year ended December 31, 1994 have been so incorporated in reliance on the report of Price Waterhouse, independent accountants, given on the authority of said firm as experts in auditing and accounting. -49- 52 PLAN OF DISTRIBUTION The Corporation, PIB or Financial, as the case may be, may sell Securities to or through underwriting syndicates represented by managing underwriters, or through one or more underwriters without a syndicate for public offering and sale by them, or may sell Securities to investors directly or through agents. Any such underwriter or agent involved in the offer and sale of the Securities will be named in the Prospectus Supplement. Underwriters may offer and sell the Securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. In connection with the sale of the Securities, underwriters may be deemed to have received compensation from the Corporation, PIB or Financial, as the case may be, in the form of underwriting discounts or commissions and may also receive commissions from purchasers of the Securities for whom they may act as agent. Underwriters may sell the Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent. Any compensation paid by the Corporation, PIB or Financial, as the case may be, to underwriters or agents in connection with the offering of the Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in the Prospectus Supplement. Underwriters, dealers and agents participating in the distribution of the Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Securities may be deemed to be underwriting discounts and commissions under the Securities Act of 1933. Underwriters, dealers and agents may be entitled, under agreements entered into with Corporation, PIB or Financial, as the case may be, to indemnification against certain civil liabilities, including liabilities under the Securities Act of 1933. All Securities will be a new issue of securities with no established trading market. Any underwriters to whom Securities are sold by the Corporation, PIB or Financial, as the case may be, for public offering and sale may make a market in such Securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of the trading market for any Securities. Certain of the underwriters and their associates may be customers of, engage in transactions with, and perform services for, the Corporation or its subsidiaries in the ordinary course of business. -50- 53 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The estimated expenses in connection with the issuance and distribution of the securities being registered are: Registration Fee $172,414 Fees and Expenses of Accountants 20,000 Fees and Expenses of Counsel 100,000 Blue Sky Fees and Expenses 22,500 Printing and Engraving Expenses 16,000 Rating Agency Fees 125,000 Trustee's Fees 20,000 Miscellaneous 4,086 Total $480,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) The Corporation and PIB are Puerto Rico corporations. (i) Article ELEVENTH of the Restated Certificate of Incorporation of the Corporation provides the following: (1) The Corporation 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 the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the written request of the Corporation 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 the Corporation, 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 the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (2) The Corporation 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 the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the written request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney's 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 the Corporation, 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 the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. (3) To the extent that a director, officer, employee or agent of the Corporation 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 II-1 54 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 the Corporation 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 the Corporation 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 the Corporation 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, the Corporation 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 the Corporation, or is or was serving at the written request of the Corporation 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 the Corporation would have the power or would be required to indemnify him against such liability under the provisions of this Article ELEVENTH or of the General Corporation Law of the Commonwealth of Puerto Rico or of any other state of the United States or foreign country as may be applicable. (ii) Article ELEVENTH of the Certificate of Incorporation of PIB provides the following: (1) PIB 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 PIB) by reason of the fact that he is or was a director, officer, employee or agent of PIB, or is or was serving at the written request of PIB 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 PIB, 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 PIB and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (2) PIB 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 PIB to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of PIB, or is or was serving at the written request of PIB 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 PIB, II-2 55 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 PIB unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. (3) To the extent that a director, officer, employee or agent of PIB 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 PIB 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 PIB 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 PIB 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, PIB 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 PIB, or is or was serving at the written request of PIB 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 PIB 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) Financial is a Delaware corporation. (i) Section 102 of the Delaware General Corporation Law allows a corporation to eliminate the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except in cases where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowing violation of law, authorized the unlawful payment of a dividend or approved an unlawful stock repurchase or obtained an improper personal benefit. Section 145 of the Delaware General Corporation Law, as amended, provides that a corporation may indemnify any person who was or is a party or is threatened to be a party to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in right of the Corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at its request in such capacity in another corporation or business association against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. II-3 56 (ii) Section 6.4 of the By-laws of Financial provides the following: Section 6.4. Indemnification of Directors, Officers and Employees. The Corporation shall indemnify to the full extent permitted by law any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. Expenses, including attorneys' fees, incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director, officer or employee as provided above. No amendment of this by-law shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this by-law, the term "Corporation" shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. ITEM 16. EXHIBITS (1)(a) Form of Underwriting Agreement. (Incorporated by reference from Registration Statement No. 33-57038) (4)(a) Restated Certificate of Incorporation of BanPonce Corporation, as amended (English translation). (Incorporated by reference from Registration Statement No. 33-54299) (4)(b) Certificate of Incorporation of Popular International Bank, Inc. (English translation). (Incorporated by Reference from Registration Statement No. 33-54299) (4)(c) Certificate of Incorporation of BanPonce Financial Corp., as amended. (4)(d) Copy of Senior Indenture of BanPonce Corporation, dated as of February 15, 1995, between BanPonce Corporation and The First National Bank of Chicago, as trustee. (Incorporated by reference from the Corporation's Current Report on Form 8-K/A dated May 16, 1995) (4)(e) Form of Subordinated Indenture of BanPonce Corporation. (Incorporated by reference from Registration Statement No. 33-57038) (4)(f) Copy of Senior Indenture of BanPonce Financial Corp., dated as of October 1, 1991, as supplemented by the First Supplemental Indenture thereto, dated as of February 28, 1995, each among BanPonce Financial Corp., BanPonce Corporation, as Guarantor, and The First National Bank of Chicago, as trustee. (4)(g) Form of Subordinated Indenture of BanPonce Financial Corp. (4)(h) Form of Senior Indenture of Popular International Bank, Inc. (Incorporated by reference from Registration Statement No. 33-57038) (4)(i) Form of Subordinated Indenture of Popular International Bank, Inc. (Incorporated by reference from Registration Statement No. 33-57038) II-4 57 (4)(j) Rights Agreement, dated as of August 11, 1988, between BanPonce Corporation and Chemical Bank (as successor to Manufacturers Hanover Trust Company). (Incorporated by reference from Registration Statement No. 33-39028) (4)(k) Amendment to Rights Agreement, dated as of December 11, 1990, between BanPonce Corporation and Chemical Bank (as successor to Manufacturers Hanover Trust Company). (Incorporated by reference from Registration Statement No. 33-39028) (5)(a) Opinion of Brunilda Santos de Alvarez, Esq. (5)(b) Opinion of Sullivan & Cromwell. (12) Computation of Consolidated Ratios of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred Stock Dividends. (23)(a) Consent of Independent Auditors. (23)(b) Consents of Counsel (included in Exhibit (5)(a) and (b)). (24) Powers of attorney (included on pages II-7 through II-12). (25)(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The First National Bank of Chicago, as Trustee under the Senior Indenture of BanPonce Corporation. (25)(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The First National Bank of Chicago, as Trustee under the Senior Indenture of BanPonce Financial Corp. ITEM 17. UNDERTAKINGS The undersigned Co-registrants hereby undertake: (a)(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (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 information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Co-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. II-5 58 (b) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Corporation's annual report pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) That, for purposes of determining any liability under the Securities Act, 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 any Co-registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. The undersigned Co-registrants hereby undertake to file an application for the purpose of determining the eligibility of the Subordinated Trustee, Financial Subordinated Trustee, PIB Senior Trustee and PIB Subordinated 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 such Act. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Co-registrants pursuant to the provisions referred to in Item 15 of this Registration Statement, or otherwise, the Co-registrants have 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 by the Co-registrants against such liabilities (other than the payment by the Co-registrants of expenses incurred or paid by a director, officer or controlling person of the Co-registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Co-registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-6 59 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the undersigned Co-registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of San Juan, Commonwealth of Puerto Rico, on the 3rd day of August, 1995. BANPONCE CORPORATION (Co-registrant) By /s/ David H. Chafey, Jr. -------------------------------- Name: David H. Chafey, Jr. Title: Executive Vice President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and/or officers of BANPONCE CORPORATION (the "Corporation") hereby constitutes and appoints Richard L. Carrion, David H. Chafey, Jr., Jorge A. Junquera, Orlando Berges and Roberto Herencia, and each of them singly, the true and lawful agents and attorneys-in-fact of the undersigned with full power of substitution and resubstitution and with full power and authority in said agents and attorneys-in-fact, and in any one of them, to sign for each of the undersigned and in his name, place or stead in any and all capacities indicated below, a Registration Statement on Form S-3 to be filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, relating to the registration of up to $500,000,000 aggregate initial offering price of debt, securities, preferred stock and guarantees, and to sign any and all pre-effective amendments or post-effective amendments to such Registration Statement and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said agents and attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said agents and attorneys-in-fact or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue thereof.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Richard L. Carrion Chairman and President August 2, 1995 ------------------------------------------------- (Principal Executive Officer) ----------------- Richard L. Carrion /s/ Alfonso F. Ballester Director August 2, 1995 ------------------------------------------------- ----------------- Alfonso F. Ballester /s/ Juan J. Bermcdez Director August 2, 1995 ------------------------------------------------- ----------------- Juan J. Bermcdez /s/ Francisco J. Carreras Director August 2, 1995 ------------------------------------------------- ----------------- Francisco J. Carreras
II-7 60
SIGNATURE TITLE DATE --------- ----- ---- Director ------------------------------------------------- ----------------- Waldemar del Valle Director ------------------------------------------------- ----------------- Luis E. Dubon, Jr. /s/ Antonio Luis Ferre Director August 2, 1995 ------------------------------------------------- ----------------- Antonio Luis Ferre /s/ Hector R. Gonzalez Director August 2, 1995 ------------------------------------------------- ----------------- Hector R. Gonzalez /s/ Jorge A. Junquera Executive Vice President and August 2, 1995 ------------------------------------------------- Director ----------------- Jorge A. Junquera /s/ Franklin A. Mathias Director August 2, 1995 ------------------------------------------------- ----------------- Franklin A. Mathias Director ------------------------------------------------- ----------------- Manuel Morales, Jr. /s/ Alberto M. Paracchini Director August 2, 1995 ------------------------------------------------- ----------------- Alberto M. Paracchini Director ------------------------------------------------- ----------------- Francisco Perez, Jr. /s/ Francisco M. Rexach, Jr. Director August 2, 1995 ------------------------------------------------- ----------------- Francisco M. Rexach, Jr. /s/ Felix J. Serralles Nevares Director August 2, 1995 ------------------------------------------------- ----------------- Felix J. Serralles Nevares /s/ Emilio Jose Venegas Director August 2, 1995 ------------------------------------------------- ----------------- Emilio Jose Venegas /s/ Julio E. Vizcarrondo Director August 2, 1995 ------------------------------------------------- ----------------- Julio E. Vizcarrondo /s/ David H. Chafey, Jr. Executive Vice President August 2, 1995 ------------------------------------------------- (Principal Financial Officer) ----------------- David H. Chafey, Jr. /s/ Amilcar Jordan Senior Vice President August 2, 1995 ------------------------------------------------- (Principal Accounting Officer) ----------------- Amilcar Jordan
II-8 61 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the undersigned Co-registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of San Juan, Commonwealth of Puerto Rico, on the 3rd day of August, 1995. POPULAR INTERNATIONAL BANK, INC. (Co-registrant) By /s/ David H. Chafey, Jr. ----------------------------- Name: David H. Chafey, Jr. Title: President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and/or officers of POPULAR INTERNATIONAL BANK, INC. (the "Corporation") hereby constitutes and appoints Richard L. Carrion, David H. Chafey, Jr., Jorge A. Junquera, Orlando Berges and Roberto Herencia, and each of them singly, the true and lawful agents and attorneys-in-fact of the undersigned with full power of substitution and resubstitution and with full power and authority in said agents and attorneys-in-fact, and in any one of them, to sign for each of the undersigned and in his name, place or stead in any and all capacities indicated below, a Registration Statement on Form S-3 to be filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, relating to the registration of up to $500,000,000 aggregate initial offering price of debt, securities, preferred stock and guarantees, and to sign any and all pre- effective amendments or post-effective amendments to such Registration Statement and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said agents and attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said agents and attorneys-in-fact or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue thereof.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Richard L. Carrion Chairman of the Board August 2, 1995 ------------------------------------------------- ----------------- Richard L. Carrion /s/ Alfonso F. Ballester Director August 2, 1995 ------------------------------------------------- ----------------- Alfonso F. Ballester /s/ David H. Chafey, Jr. President and Director August 2, 1995 ------------------------------------------------- ----------------- David H. Chafey, Jr. Director ------------------------------------------------- ----------------- Manuel L. del Valle
II-9 62
SIGNATURE TITLE DATE --------- ----- ---- /s/ Jorge A. Junquera Executive Vice President and August 2, 1995 ------------------------------------------------- Director ----------------- Jorge A. Junquera /s/ Amilcar Jordan Senior Vice President and August 2, 1995 ------------------------------------------------- Treasurer ----------------- Amilcar Jordan (Principal Accounting Officer)
II-10 63 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Co-registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of San Juan, Commonwealth of Puerto Rico, on the 3rd day of August, 1995. BANPONCE FINANCIAL CORP. (Co-registrant) By /s/ David H. Chafey, Jr. --------------------------- Name: David H. Chafey, Jr. Title: President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and/or officers of BANPONCE FINANCIAL CORP. (the "Corporation") hereby constitutes and appoints Richard L. Carrion, David H. Chafey, Jr., Jorge A. Junquera, Orlando Berges and Roberto Herencia, and each of them singly, the true and lawful agents and attorneys-in-fact of the undersigned with full power of substitution and resubstitution and with full power and authority in said agents and attorneys-in-fact, and in any one of them, to sign for each of the undersigned and in his name, place or stead in any and all capacities indicated below, a Registration Statement on Form S-3 to be filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, relating to the registration of up to $500,000,000 aggregate initial offering price of debt, securities, preferred stock and guarantees, and to sign any and all pre-effective amendments or post-effective amendments to such Registration Statement and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said agents and attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said agents and attorneys-in-fact or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue thereof.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Richard L. Carrion Chairman August 2, 1995 ------------------------------------------------- ---------------- Richard L. Carrion /s/ Alfonso F. Ballester Director August 2, 1995 ------------------------------------------------- ---------------- Alfonso F. Ballester /s/ David H. Chafey, Jr. President and Director August 2, 1995 ------------------------------------------------- ---------------- David H. Chafey, Jr.
II-11 64
SIGNATURE TITLE DATE --------- ----- ---- Director ------------------------------------------------- ----------------- Manuel L. del Valle /s/ Thomas J. Fitzpatrick Director August 2, 1995 ------------------------------------------------- ----------------- Thomas J. Fitzpatrick /s/ Jorge A. Junquera Director August 2, 1995 ------------------------------------------------- ----------------- Jorge A. Junquera Executive Vice President and ------------------------------------------------- Director ----------------- Larry B. Kesler /s/ Roberto R. Herencia Senior Vice President and August 2, 1995 ------------------------------------------------- Director ----------------- Roberto R. Herencia /s/ Amilcar Jordan Senior Vice President August 2, 1995 ------------------------------------------------- (Principal Accounting Officer) ----------------- Amilcar Jordan
II-12 65 Exhibit Index
Page (4)(c) Certificate of Incorporation of BanPonce Financial Corp., as amended. (4)(f) Copy of Senior Indenture of BanPonce Financial Corp., dated as of October 1, 1991, as supplemented by the First Supplemental Indenture thereto, dated as of February 28, 1995, each among BanPonce Financial Corp., BanPonce Corporation, as Guarantor, and The First National Bank of Chicago, as trustee. (4)(g) Form of Subordinated Indenture of BanPonce Financial Corp. (5)(a) Opinion of Brunilda Santos de Alvarez, Esq. (5)(b) Opinion of Sullivan & Cromwell. (12) Computation of Consolidated Ratios of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred Stock Dividends. (23)(a) Consent of Independent Auditors. (23)(b) Consents of Counsel (included in Exhibit (5)(a) and (b)). (24) Powers of attorney (included on pages II-7 through II-12). (25)(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The First National Bank of Chicago, as Trustee under the Senior Indenture of BanPonce Corporation. (25)(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The First National Bank of Chicago, as Trustee under the Senior Indenture of BanPonce Financial Corp.
EX-4.(C) 2 CERTIFICATE OF INCORPORATION AS AMENDED 1 EXHIBIT (4)(c) CERTIFICATE OF INCORPORATION OF BANPONCE FINANCIAL CORP. FIRST. The name of the corporation is BanPonce Financial Corp. SECOND. The address of the corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD. The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares which the corporation shall have authority to issue is 100 shares of Common Stock, and the par value of each of such shares is $.01. FIFTH. The name and mailing address of the incorporator is William C. Caccamise, Jr., 125 Broad Street, New York, New York 10004. SIXTH. The board of directors of the corporation is expressly authorized to adopt, amend or repeal by-laws of the corporation. SEVENTH. Elections of directors need not be by written ballot except and to the extent provided in the by-laws of the corporation. 2 IN WITNESS WHEREOF, I have signed this certificate of incorporation this 11th day of April, 1991. /s/ William C. Caccamise, Jr. ----------------------------------- William C. Caccamise, Jr. 3 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF BANPONCE FINANCIAL CORPORATION BanPonce Financial Corp. a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That a special meeting of the Stockholders of said corporation, duly called and held, upon written waiver of notice signed by the sole stockholder of the Corporation, a resolution was adopted to amend the Certificate of Incorporation of said Corporation. The resolution setting forth the proposed amendment is as follows: "RESOLVED, that the Certificate of Incorporation of BanPonce Financial Corp. is hereby amended by changing the fourth Article thereof so that, as amended said Article shall be and read as follows: FOURTH: The total number of shares which the corporation shall have the authority to issue is 10,000 shares of Common Stock, and the par value of each of such shares is $1.00." SECOND: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, BanPonce Financial Corp. has caused this certificate to be signed by Richard L. Carrion, its Chairman of the Board of Directors and attested by Ernesto N. Mayoral Megwinoff, its Assistant Secretary, this 23 day of May, 1994. By: /s/ Richard L. Carrion --------------------------- Richard L. Carrion Chairman of the Board of Directors -2- 4 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF BANPONCE FINANCIAL CORP. Banponce Financial Corp., a Delaware corporation, hereby certifies as follows: FIRST. The Board of Directors of said corporation duly adopted a resolution setting forth and declaring advisable the amendment of Article Fourth of the certificate of incorporation, as amended, of said corporation to create a new class of stock of the Corporation designated as Preferred Stock and to increase the total number of shares of stock of all classes that the Corporation shall have the authority to issue from 10,000 shares of Common Stock, par value $1.00 per share, to 10,010,000 shares of stock, of which 10,000 shares of the par value of $1.00 per share shall be designated as Common Stock and 10,000,000 shares of the par value of $.01 per share shall be designated as Preferred Stock, so that, as amended, said Article shall read as follows: "FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 10,010,000, of which 10,000 shares of the par value of $1.00 per share shall be designated as Common -3- 5 Stock and 10,000,000 shares of the par value of $.01 per share shall be designated as Preferred Stock. Shares of Preferred Stock may be issued in series from time to time by the board of directors, and the board of directors is expressly authorized to fix by resolution or resolutions the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions thereof, of the shares of each series of Preferred Stock, including without limitation the following: (a) the distinctive serial designation of such series which shall distinguish it from other series; (b) the number of shares included in such series, which number may be increased or decreased from time to time unless otherwise provided by the board of directors in the resolution or resolutions providing for the issue of such series; (c) the dividend rate (or method of determining such rate) payable to the holders of the shares of such series, any conditions upon which such dividends shall be paid and the date or dates upon which such dividends shall be payable; (d) whether dividends on the shares of such series shall be cumulative and, in the case of shares of any series having cumulative dividend rights, the date or dates or method of determining the date or dates from -4- 6 which dividends on the shares of such series shall be cumulative; (e) the amount or amounts which shall be payable out of the assets of the corporation to the holders of the shares of such series upon voluntary or involuntary liquidation, dissolution or winding up the corporation; (f) the price or prices at which, the period or periods within which and the terms and conditions upon which the shares of such series may be redeemed, in whole or in part, at the option of the corporation or at the option of the holder or holders thereof or upon the happening of a specified event or events; (g) the obligation, if any, of the corporation to purchase or redeem shares of such series pursuant to a sinking fund or otherwise and the price or prices at which, the period or periods within which and the terms and conditions upon which the shares of such series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (h) whether or not the shares of such series shall be convertible or exchangeable, at any time or times at the option of the holder or holders thereof or at the option of the corporation or upon the happening of a specified event or events, into shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation, and -5- 7 the price or prices or rate or rates of exchange or conversion and any adjustments applicable thereto; and (i) the voting rights, if any, of the holders of the shares of such series. SECOND. In lieu of a vote of stockholders, written consent to the foregoing amendment has been given by the holder of all of the outstanding stock entitled to vote thereon in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware; and such amendment has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, BanPonce Financial Corp. has caused this certificate to be signed by David H. Chafey, Jr., its President, on the 2nd day of August, 1995. BANPONCE FINANCIAL CORP. By: /s/ David H. Chafey, Jr. ------------------------- Name: David H. Chafey, Jr. Title: President -6- EX-4.(F) 3 SENIOR INDENTURE 1 EXHIBIT (4)(f) ================================================================================ BANPONCE FINANCIAL CORP., Issuer and BANPONCE CORPORATION, Guarantor TO CITIBANK, N.A., Trustee __________ INDENTURE Dated as of October 1, 1991 __________ ================================================================================ 2 Banponce Financial Corp. Certain Sections of this Indenture relating to Sections 310 through 318, inclusive, of the Trust Indenture Act of 1939:
Trust Indenture Act Section Indenture Section Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 609 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 609 (a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . 608 610 Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . 613 (b) . . . . . . . . . . . . . . . . . . . . . . . . . 613 Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . 701 702(a) (b) . . . . . . . . . . . . . . . . . . . . . . . . . 702(b) (c) . . . . . . . . . . . . . . . . . . . . . . . . . 702(c) Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . 703(a) (b) . . . . . . . . . . . . . . . . . . . . . . . . . 703(a) (c) . . . . . . . . . . . . . . . . . . . . . . . . . 703(a) (d) . . . . . . . . . . . . . . . . . . . . . . . . . 703(b) Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . 704 (a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . 101 1004 (b) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 102 (c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 102 (c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (d) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (e) . . . . . . . . . . . . . . . . . . . . . . . . . 102 Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . 601 (b) . . . . . . . . . . . . . . . . . . . . . . . . . 602 (c) . . . . . . . . . . . . . . . . . . . . . . . . . 601 (d) . . . . . . . . . . . . . . . . . . . . . . . . . 601 (e) . . . . . . . . . . . . . . . . . . . . . . . . . 514 Section 316(a) . . . . . . . . . . . . . . . . . . . . . . . . . 101 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . 502 512 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . 513 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . 508 (c) . . . . . . . . . . . . . . . . . . . . . . . . . 104(c) Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 503 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 504 (b) . . . . . . . . . . . . . . . . . . . . . . . . . 1003 Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . 107
___________________ NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS -----------------
Page ---- PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE ONE ----------- DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions: . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Additional Amounts . . . . . . . . . . . . . . . . . . . . . . . . 2 Affiliate; control . . . . . . . . . . . . . . . . . . . . . . . . 2 Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . 2 Banco Popular . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 2 Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . 3 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company Request; Company Order . . . . . . . . . . . . . . . . . . 3 Controlled Subsidiary . . . . . . . . . . . . . . . . . . . . . . . 3 Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . 3 corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . 3 Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . 4 Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . 4 Material Banking Subsidiary . . . . . . . . . . . . . . . . . . . . 4 Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . 5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 5 Original Issue Discount Security . . . . . . . . . . . . . . . . . 5 Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 7 Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . 7 Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . 7 Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . 7 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Security Register and Security Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . 7
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Page ---- Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Subsidiary; voting stock . . . . . . . . . . . . . . . . . . . . . 8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . 8 Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 102. Compliance Certificates and Opinions . . . . . . . . . . . . . . . 8 Section 103. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . 9 Section 104. Acts of Holders; Record Dates . . . . . . . . . . . . . . . . . . . 10 Section 105. Notices, Etc., to Trustee, Company and the Guarantor . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . 13 Section 107. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . 14 Section 108. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 14 Section 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . 14 Section 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 114. Appointment of Agent for Service . . . . . . . . . . . . . . . . . 15 ARTICLE TWO ----------- SECURITY FORMS AND GUARANTEES Section 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 202. Form of Face of Security . . . . . . . . . . . . . . . . . . . . . 17 Section 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . 19 Section 204. Form of Trustee's Certificate of Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 205. Form of Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 206. Form of Legend for Global Securities . . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE THREE ------------- THE SECURITIES Section 301. Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . 26 Section 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 303. Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . 31 Section 305. Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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Page ---- Section 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 307. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . 37 Section 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 310. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . 38 Section 311. Guarantee of Debt Securities . . . . . . . . . . . . . . . . . . . 38 Section 312. Execution of Guarantees . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE FOUR ------------ SATISFACTION AND DISCHARGE Section 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . 40 Section 402. Application of Trust Money . . . . . . . . . . . . . . . . . . . . 41 ARTICLE FIVE ------------ REMEDIES Section 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 502. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . 46 Section 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . 47 Section 505. Trustee May Enforce Claims Without Possession of Securities . . . . . . . . . . . . . . . . . . . . . 47 Section 506. Application of Money Collected . . . . . . . . . . . . . . . . . . 48 Section 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . 49 Section 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . 50 Section 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . 50 Section 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . 51 Section 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . 51 Section 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . 51
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Page ---- ARTICLE SIX ----------- THE TRUSTEE Section 601. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . 52 Section 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . 52 Section 604. Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . 54 Section 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 607. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . 55 Section 608. Disqualification; Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 610. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 611. Acceptance of Appointment by Successor . . . . . . . . . . . . . . 58 Section 612. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . . . 59 Section 613. Preferential Collection of Claims Against the Company or the Guarantor . . . . . . . . . . . . . . . 60 Section 614. Appointment of Authenticating Agent . . . . . . . . . . . . . . . . 60 ARTICLE SEVEN ------------- HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Company and the Guarantor to Furnish Trustee Names and Addresses of Holders . . . . . . . . . . . . . . 62 Section 702. Preservation of Information; Communications to Holders . . . . . . . . . . . . . . . . . . . . 63 Section 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 704. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . 64
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Page ---- ARTICLE EIGHT ------------- CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 801. Company and Guarantor May Consolidate, Etc., Only on Certain Terms . . . . . . . . . . . . . . . . . . . 64 Section 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . 65 ARTICLE NINE ------------ SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Section 902. Supplemental Indentures with Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 903. Execution of Supplemental Indentures . . . . . . . . . . . . . . . 69 Section 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . 70 Section 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . 70 Section 906. Reference in Securities to Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 ARTICLE TEN ----------- COVENANTS Section 1001. Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Section 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . 70 Section 1003. Money for Securities Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 1004. Statement by Officers as to Default . . . . . . . . . . . . . . . . 72 Section 1005. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Section 1006. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . 73 Section 1007. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . 73 Section 1008. Statement by Officers as to the Default of the Guarantor . . . . . . . . . . . . . . . . . . . . . 74 Section 1009. Existence of the Guarantor . . . . . . . . . . . . . . . . . . . . 74 Section 1010. Limitation Upon Disposition of Voting Stock of, and Merger and Sale of Assets of, Banco Popular . . . . . . . . . . . . . . . . . 74 Section 1011. Limitation Upon Creation of Liens on Voting Stock of Material Banking Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 75 Section 1012. Payment of Additional Amounts . . . . . . . . . . . . . . . . . . . 76 Section 1013. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . 77
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Page ---- ARTICLE ELEVEN -------------- REDEMPTION OF SECURITIES Section 1101. Applicability of Article . . . . . . . . . . . . . . . . . . . . . 77 Section 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . 77 Section 1103. Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Section 1104. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . 78 Section 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . 79 Section 1106. Securities Payable on Redemption Date . . . . . . . . . . . . . . . 79 Section 1107. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . 80 ARTICLE TWELVE -------------- SINKING FUNDS Section 1201. Applicability of Article . . . . . . . . . . . . . . . . . . . . . 80 Section 1202. Satisfaction of Sinking Fund Payments with Securities . . . . . . . . . . . . . . . . . . . . . . . . . 81 Section 1203. Redemption of Securities for Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9 INDENTURE, dated as of October 1, 1991 among Banponce Financial Corp., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at 521 Fellowship Road, Mt. Laurel, New Jersey 08054, Banponce Corporation, a corporation duly organized and existing under the laws of the Commonwealth of Puerto Rico (the "Guarantor"), having its principal offices at 209 Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918, and Citibank, N.A., a national banking association, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY AND THE GUARANTOR The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. The Guarantor has duly authorized the execution and delivery of this Indenture to provide for the issuance of Guarantees with respect to the Securities. All things necessary to make this Indenture a valid agreement of the Company and the Guarantor, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: 10 (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in effect; and (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Additional Amounts" has the meaning assigned thereto in Section 1012. "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. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series. "Banco Popular" means Banco Popular de Puerto Rico and its successors and assigns. "Board of Directors" means either the board of directors of the Company or the Guarantor, as the context requires, or any duly authorized committee of that board. -2- 11 "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or the Guarantor, as the case may be, to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day", except as may otherwise be provided herein or in any security, when used with respect to any Place of Payment or other location, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law or executive order to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, 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. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Controlled Subsidiary" means any corporation more than 80 percent of the outstanding Voting Stock of which, except for directors' qualifying shares, shall at the time be owned directly or indirectly by the Guarantor. "Corporate Trust Office" means the principal office of the Trustee in the Borough of Manhattan, The City of New York, at which at any particular time its corporate trust business shall be administered. "corporation" means a corporation, association, company, joint-stock company or business trust. "Defaulted Interest" has the meaning specified in Section 307. -3- 12 "Depositary" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depositary by the Company pursuant to Section 301. "Event of Default" has the meaning specified in Section 501. "Global Security" means a Security bearing the legend prescribed in Section 206 evidencing all or part of a series of Securities, issued to the Depository for such series or its nominee, and registered in the name of such Depository or nominee. "Guarantees" means the guarantees of the Guarantor to be endorsed on the Securities authenticated and delivered hereunder. "Guarantor" means Banponce Corporation, a corporation organized under the laws of the Commonwealth of Puerto Rico and its successors and assigns. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument, and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. The term "Indenture" shall also include the terms of particular series of Securities established as contemplated by Section 301. "interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an instalment of interest on such Security. "Material Banking Subsidiary" means any Controlled Subsidiary of the Guarantor chartered as a banking corporation under United States Federal, State or Puerto Rico law which is a significant subsidiary of the Guarantor as defined in 1-02 of Regulation S-X of the Rules and -4- 13 Regulations of the Securities and Exchange Commission under the Securities Act of 1933, as amended. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an instalment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, or the Guarantor, as the context requires, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Company. "Opinion of Counsel" means a written opinion of counsel, who may be an employee of or counsel for the Company or the Guarantor, as the case may be, or other counsel who shall be acceptable to the Trustee. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company or the Guarantor) in trust or set aside and segregated in trust by the Company (if the Company or the Guarantor shall act as Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or -5- 14 provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 502, (ii) the principal amount of a Security denominated in one or more foreign currencies or currency units shall be the U.S. dollar equivalent, determined in the manner provided as contemplated by Section 301 on the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent on the date of original issuance of such Security of the amount determined as provided in (i) above) of such Security, and (iii) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of or any premium or interest on any Securities on behalf of the Company. -6- 15 "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of and any premium and interest on the Securities of that series are payable as specified as contemplated by Section 301. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any instalment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such instalment of principal or interest is due and payable. -7- 16 "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or the Guarantor, as the context requires or by one or more other Subsidiaries, or by the Company or the Guarantor, as the context requires and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Taxes" has the meaning specified in Section 1012. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "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. "Vice President", when used with respect to the Company, the Guarantor or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock" means, with respect to any Person, Capital Stock (however designated) having general voting power for the election of a majority of the members of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time Capital Stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). Section 102. Compliance Certificates and Opinions. Upon any application or request by the Company or the Guarantor to the Trustee to take any action under any provision of this Indenture, the Company or the Guarantor, as the case may be, shall furnish to the Trustee such certificates and opinions as may be required under the Trust -8- 17 Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company or the Guarantor, as the case may be, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company or the Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or -9- 18 in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or the Guarantor, as the case may be, stating that the information with respect to such factual matters is in the possession of the Company or the Guarantor, as the case may be, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 104. Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given 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 agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company and the Guarantor. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee, the Company and the Guarantor, if made in the manner provided in this Section. Without limiting the generality of the foregoing, a Holder, including a Depositary that is a Holder of a Global Security, may make, give or take, by a proxy, or proxies, duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted in this Indenture to be made, given or taken by Holders, and a Depositary that is a Holder of a Global Security may provide its proxy or proxies to the beneficial owners of interest in any such Global Security. -10- 19 (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by 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 which the Trustee deems sufficient. (c) Except as provided in the next paragraph, the Company may, in the circumstances permitted by the Trust Indenture Act, set any day as the record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action provided or permitted by this Indenture to be given or taken by Holders of Registered Securities of such series. With regard to any record date set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to give or take the relevant action, whether or not such Holders remain Holders after such record date. With regard to any action that may be given or taken hereunder only by Holders of a requisite principal amount of appointed agents, and for which a record date is set pursuant to this paragraph, the Company may, at its option, set an expiration date after which no such action purported to be given or taken by any Holder shall be effective hereunder unless given or taken on or prior to such expiration date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this paragraph, the Company may, on one or more occasions at its option, extend such date to any later date. Nothing in this paragraph shall prevent any Holder (or any duly appointed agent thereof) from giving or taking, after any expiration date, any action identical to, or, at any time, contrary to or different from, any action given or taken, or purported to have been given or taken, hereunder by a Holder on or prior to such date, in which event the Company may set a record date in respect thereof pursuant to this paragraph. -11- 20 Notwithstanding the foregoing, upon receipt by the Trustee, with respect to Securities of any Series, of (i) any Notice of Default pursuant to Section 501; (ii) any declaration of acceleration, or any rescission and annulment of any such declaration pursuant to Section 502; or (iii) any direction given pursuant to Section 512 (any such notice, declaration, rescission and annulment, or direction being referred to herein as a "Direction"), a record date shall automatically and without any other action by any Person be set for the purpose of determining the Holders of Outstanding Securities of such series entitled to join in such Direction, which record date shall be the close of business on the day the Trustee receives such Director. The Holders of Outstanding Securities of such series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such Direction, whether or not such Holders remain Holders after such record date; provided that, unless such Direction shall have become effective by virtue of Holders of the requisite principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such direction shall automatically and without any action by any Person be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a direction contrary to or different from, or, after the expiration of such period, identical to, from, or, after the expiration or such period, identical to, a direction that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. Without limiting the foregoing, a Holder entitled hereunder to give or take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every 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 Trustee, the Company or the -12- 21 Guarantor in reliance thereon, whether or not notation of such action is made upon such Security. Section 105. Notices, Etc., to Trustee, Company and the Guarantor. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company or Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at 120 Wall Street, New York, New York 10043, Attention: Corporate Trust Administration, or (2) the Company or Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company or Guarantor, as the case may be, addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company or Guarantor. Section 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not -13- 22 be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Section 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company and the Guarantor shall bind their respective successors and assigns, whether so expressed or not. Section 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. -14- 23 Section 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York. Section 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities (other than a provision of the Securities of any series which specifically states that such provision shall apply in lieu of this Section)) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. Section 114. Appointment of Agent for Service. The Guarantor hereby appoints the Senior Vice President of Banco Popular at the office of Banco Popular located in the City of New York as the Guarantor's authorized agent (the "Authorized Agent") upon whom service of process may be served in any action arising out of or based on the Securities, the Guarantees or this Indenture (including any action based on or arising out of the United States federal securities laws) that may be instituted in New York State or United States Federal Courts sitting in The City of New York, by the Trustee or the Holder of any Security, and the Guarantor hereby expressly accepts the jurisdiction of any such court in respect of any such action. Such appointment shall be irrevocable unless and until the appointment of a successor authorized agent for service of process, and such successor's acceptance of such appointment, shall have occurred, and the Guarantor and such Authorized Agent will take any and all actions, including the filing of any and all documents and instruments, that may be necessary to continue such appointment or appointments in full force and effect as aforesaid. Service of process upon an Authorized Agent will be deemed, in every respect, effective service of process upon the Guarantor. Notwithstanding the foregoing, any action against the Guarantor arising out of or based on any Security, the Guarantees or this Indenture may also be instituted by the -15- 24 Holder of such Security in any court in the Commonwealth of Puerto Rico, and the Guarantor hereby expressly accepts the jurisdiction of any such court in respect of any such action. ARTICLE TWO Security Forms and Guarantees Section 201. Forms Generally. The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution of the Company or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution of the Company, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. The Guarantees to be endorsed on the Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution of the Guarantor or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of the guarantees to be endorsed on the Securities of any series is established by action taken pursuant to a Board Resolution of the Guarantor, a copy of an appropriate record of such action shall be certified by the Secretary or an -16- 25 Assistant Secretary of the Guarantor and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Form of Face of Security. [Insert any legend required by the Internal Revenue Code and the regulations thereunder.] Banponce Financial Corp. ............................................ No. ......... $ ........ Banponce Financial Corp., a corporation duly organized and existing under the laws of the state of Delaware (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to ................... ............................, or registered assigns, the principal sum of ..................................... Dollars on .............................. ........................... [if the Security is to bear interest prior to Maturity, insert -- , and to pay interest thereon from ............. or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on ............ and ............ in each year, commencing ........., at the rate of ....% per annum, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such 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 ....... or ....... (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so 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 -17- 26 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 said Indenture]. [If the Security is not to bear interest prior to Maturity, insert -- The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of ....% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of ......% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.] Payment of the principal of (and premium, if any) and [if applicable, insert -- any such] interest on this Security will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, 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 [if applicable, insert -- ; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register]. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be -18- 27 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 under its corporate seal. Dated: Banponce Financial Corp. By..................... Attest: ........................... Section 203. Form of Reverse of Security. This Security is one of a duly authorized issue of 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 1, 1991 (herein called the "Indenture"), among the Company, Banponce Corporation, as Guarantor, and, Citibank, 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 $...........]. [If applicable, insert -- The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, [if applicable, insert -- (1) on ........... in any year commencing with the year ...... and ending with the year ...... through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [on or after .........., 19..], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [on or before ..............., __%, and if redeemed] during the 12-month period beginning ............. of the years indicated, -19- 28
Redemption Redemption Year Price Year Price ---- ----- ---- -----
and thereafter at a Redemption Price equal to .....% of the principal amount, together in the case of any such redemption [if applicable, insert -- (whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [If applicable, insert -- The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, (1) on ............ in any year commencing with the year .... and ending with the year .... through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after ............], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning ............ of the years indicated, -20- 29
Redemption Price For Redemption Redemption Price For Through Operation Redemption Otherwise of the Than Through Operation Year Sinking Fund of the Sinking Fund ---- ----------------- ----------------------
and thereafter at a Redemption Price equal to .....% of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [Notwithstanding the foregoing, the Company may not, prior to ............., redeem any Securities of this series as contemplated by [Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than .....% per annum.] [The sinking fund for this series provides for the redemption on ............ in each year beginning with the year ....... and ending with the year ...... of [not less than $.......... ("mandatory sinking fund") and not more than] $......... aggregate principal amount of Securities of this series. Securities of this series acquired or redeemed by the Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent [mandatory] sinking fund payments otherwise required to be made [in the inverse order in which they become due].] -21- 30 [If the Security is subject to redemption, insert -- In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.] [If the Security is not an Original Issue Discount Security, insert -- If an Event of Default 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.] [If the Security is an Original Issue Discount Security, insert -- If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to -- insert formula for determining the amount. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.] 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, the Guarantor and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company and the Guarantor with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. -22- 31 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 any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registerable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the 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. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. -23- 32 Section 204. Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Citibank, N.A., As Trustee By.............................. Authorized Signatory Section 205. Form of Guarantee. Banponce Corporation (the "Guarantor") hereby unconditionally guarantees to the Holder of this Security duly authenticated and delivered by the Trustee, the due and punctual payment of the principal, and premium, if any, of (including any amount in respect of original issue discount), and interest, if any (together with any additional amounts payable pursuant to the terms of this Security), on this Security and the due and punctual payment of the sinking fund payments, if any, and analogous obligations, if any, provided for pursuant to the terms of this Security, when and as the same shall become due and payable, whether at Stated Maturity or upon redemption, repayment or upon declaration of acceleration or otherwise according to the terms of this Security and of the Indenture. In case of default by the Company in the payment of any such principal (including any amount in respect of original issue discount), and any premium or interest (together with any Additional Amounts payable pursuant to the terms of this Security), sinking fund payment, or analogous obligation, the Guarantor agrees duly and punctually to pay the same when and as the same shall become due and payable. The Guarantor hereby agrees that its obligations hereunder shall be as principal and not merely as surety, and shall be absolute and unconditional irrespective of any extension of the time for payment of this Security, any modification of this Security, any invalidity, irregularity or unenforceability of this Security or the Indenture, any failure to enforce the same or any waiver, modification, consent or indulgence granted to the Company with respect thereto by the holder of this Security or the Trustee, or any other -24- 33 circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a demand or proceeding first against the Company, protest or notice with respect to this Security or the indebtedness evidenced thereby and all demands whatsoever, and covenants that this guarantee will not be discharged as to this Security except by payment in full of the principal of (including any amount payable in respect of original issue discount), and any premium or interest (together with any Additional Amounts payable pursuant to the terms of this Security), thereon. The Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder (i) to be subrogated to the rights of a Holder against the Company with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Company in respect thereof or (ii) to receive any payment, in the nature of contribution or for any other reason, from any other obligor with respect to such payment. This guarantee shall not be valid or become obligatory for any purpose with respect to this Security until the certificate of authentication on this Security shall have been signed by the Trustee. This guarantee is governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, Banponce Corporation has caused this Guarantee to be signed by facsimile by its duly authorized officers and has caused a facsimile of its corporate seal to be affixed hereunto or imprinted hereon. BANPONCE CORPORATION By _______________________ By _______________________ -25- 34 Section 206. Form of Legend for Global Securities. Any Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form: "This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee thereof. This Security may not be transferred to, or registered or exchanged for Securities registered in the name of, any Person other than the Depositary or a nominee thereof and no such transfer may be registered, except in the limited circumstances described in the Indenture. Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, this Security shall be a Global Security subject to the foregoing, except in such limited circumstances." ARTICLE THREE The Securities Section 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established, with respect to the securities of any series, in or pursuant to a Board Resolution of the Company and, subject to Section 303, set forth, or determined in the manner provided, in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of such series, (1) the title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration -26- 35 of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906 or 1107 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates on which the principal of the Securities of the series is payable; (5) the rate or rates at which the Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any interest payable on any Interest Payment Date; and the basis upon which interest shall be calculated, if other than a 360-day year of twelve 30-day months; (6) the place or places where the principal of and any premium and interest on Securities of the series shall be payable; (7) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; -27- 36 (9) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (10) the currency, currencies or currency units in which payment of the principal of and any premium and interest on any Securities of the series shall be payable if other than the currency of the United States of America and the manner of determining the equivalent thereof in the currency of the United States of America for purposes of the definition of "Outstanding" in Section 101; (11) if the amount of payments of principal of or any premium or interest on any Securities of the series may be determined with reference to an index, the manner in which such amounts shall be determined; (12) if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Company or a Holder thereof, in one or more currencies or currency units other than that or those in which the Securities are stated to be payable, the currency, currencies or currency units in which payment of the principal of and any premium and interest on Securities of such series as to which such election is made shall be payable, and the periods within which and the terms and conditions upon which such election is to be made; (13) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502; and (14) if and as applicable, that the Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the Depositary or Depositaries for such Global Security or Global Securities and any circumstances other than those set forth in Section 305 in which any such Global Security -28- 37 may be transferred to, and registered and exchanged for Securities registered in the name of, a Person other than the Depositary for such Global Security or a nominee thereof and in which any such transfer may be registered; and (15) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 901(5)). All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 303) set forth, or determined in the manner provided, in the Officers' Certificate referred to above or in any such indenture supplemental hereto. If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. Section 302. Denominations. The Securities of each series shall be issuable in registered form without coupons in such denominations as shall be specified as contemplated by Section 301. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding -29- 38 that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any Series executed by the Company, having endorsed thereon Guarantees duly executed by the Guarantor, to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. If the form or terms of the Securities of the series have been established in or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating, (a) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 201, that such form has been established in conformity with the provisions of this Indenture; (b) if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 301, that such terms have been established in conformity with the provisions of this Indenture; and (c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will -30- 39 affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 301 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. Section 304. Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities, having endorsed thereon Guarantees duly executed by the Guarantor, which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series, -31- 40 having endorsed thereon Guarantees duly executed by the Guarantor, to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series of like tenor shall be exchangeable for definitive Securities of such series, having endorsed thereon Guarantees duly executed by the Guarantor, upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series, having endorsed thereon Guarantees duly executed by the Guarantor, of any authorized denominations and of a like aggregate principal amount and tenor. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. Section 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security of any series at the office or agency in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, having endorsed thereon Guarantees duly executed by the Guarantor, of any authorized denominations and of a like aggregate principal amount and tenor and bearing a number not contemporaneously outstanding. At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, having endorsed thereon Guarantees duly executed by the Guarantor, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. -32- 41 Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities (having Guarantees duly endorsed thereon) which the Holder making the exchange is entitled to receive. All Securities and the Guarantees endorsed thereon issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company and the Guarantor, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities and the Guarantees surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. Notwithstanding the foregoing and except as otherwise specified or contemplated by Section 301, no Global Security shall be exchangeable pursuant to this Section 305 or Sections 304, 906 and 1107 for Securities registered in the name of, and no transfer of a Global Security of any series may be registered to, any Person other than the Depositary for such Security or its nominee, unless (1) such Depositary (A) notifies the Company that it is unwilling or unable to continue as Depository for such Global Security or (B) ceases to be a clearing agency -33- 42 registered under the Securities Exchange Act of 1934, as amended, (2) the Company executes and delivers to the Trustee a Company Order that such Global Security shall be so exchangeable and the transfer thereof so registerable, or (3) there shall have occurred and be continuing an Event of Default, or an event which with notice or lapse of time or both would become an Event of Default, with respect to the Securities evidenced by such Global Security. Upon the occurrence in respect of any Global Security of any series of any one or more of the conditions specified in clauses (1), (2) or (3) of the preceding sentence or such other conditions as may be specified as contemplated by Section 301 for such series, such Global Security may be exchanged for Securities registered in the names of, and the transfer of such Global Security may be registered to, such Persons, (including Persons other than the Depository with respect to such series and its nominees) as such Depository shall direct. Notwithstanding any other provision of this Indenture, any Security authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, any Global Security shall also be a Global Security and shall bear the legend specified in Section 206 except for any Security authenticated and delivered in exchange for, or upon registration of transfer of, a Global Security pursuant to the preceding sentence. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series (having Guarantees duly endorsed thereon) and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them, the Guarantor and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series (having Guarantees duly endorsed thereon) and of like tenor and principal amount and bearing a number not contemporaneously outstanding. -34- 43 In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series and the related Guarantees issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company and the Guarantor, respectively, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons -35- 44 in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at his or her address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securi- -36- 45 ties exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Section 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company or the Guarantor may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be destroyed and the Trustee shall, upon request from the Company, deliver a certificate of destruction to the Company. -37- 46 Section 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. Section 311. Guarantee of Debt Securities. The Guarantor hereby unconditionally guarantees to each holder of a Security of each series authenticated and delivered by the Trustee, the due and punctual payment of the principal of (including any amount in respect of original issue discount), and any premium and interest (together with any Additional Amounts payable pursuant to the terms of such Security), on such Security and the due and punctual payment of the sinking fund payments, if any, and analogous obligations, if any, provided for pursuant to the terms of such Security, when and as the same shall become due and payable, whether at Stated Maturity or upon redemption or upon declaration of acceleration or otherwise according to the terms of such Security and of this Indenture. In case of default by the Company in the payment of any such principal (including any amount in respect of original issue discount), interest (together with any Additional Amounts payable pursuant to the terms of such Security), sinking fund payment, or analogous obligation, the Guarantor agrees duly and punctually to pay the same. The Guarantor hereby agrees that its obligations hereunder shall rank pari passu with all other unsecured and unsubordinated obligations of the Guarantor, shall be as principal and not merely as surety, and shall be absolute and unconditional irrespective of any extension of the time for payment of any such Security, any modification of any such Security, any invalidity, irregularity or unenforceability of any such Security or this Indenture, any failure to enforce the same or any waiver, modification, consent or indulgence granted to the Company with respect thereto by the Holder of such Security or the Trustee, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a demand or proceeding first against the Company, protest or notice with respect to any such Security or the indebtedness evidenced thereby and all demands whatsoever, and covenants that this guarantee will not be discharged as to any such Security except by payment in full of the principal of (including any amount payable in respect of original issue discount), and any premium and interest (together with any Additional -38- 47 Amounts payable pursuant to the terms of such Security), thereon. The Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder (i) to be subrogated to the rights of a Holder against the Company with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Company in respect thereof or (ii) to receive any payment, in the nature of contribution or for any other reason, from any other obligor with respect to such payment. The guarantee set forth in this Section shall not be valid or become obligatory for any purpose with respect to a Security of any series until the certificate of authentication on such Security shall have been signed by the Trustee. Section 312. Execution of Guarantees. To evidence its guarantee specified in Section 311 to the Holders of Securities of any series, the Guarantor hereby agrees to execute the Guarantees in substantially the form above recited to be endorsed on each Security of such series authenticated and delivered by the Trustee. Such Guarantees shall be executed on behalf of the Guarantor by both (a) its Chairman or its Vice Chairman or its President or any Vice President and (b) its Treasurer or any Assistant Treasurer or its Secretary or any Assistant Secretary, under its corporate seal which may, but need not, be attested, prior to the authentication of the Security on which it is endorsed, and the delivery of such Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of such Guarantees on behalf of the Guarantor. The seal of the Guarantor may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Guarantees. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Guarantee that has been duly authenticated and delivered by the Trustee. Such signatures may be the manual or facsimile signatures of such officers and may be imprinted or otherwise reproduced on the Guarantees. In case any officer of the Guarantor who shall have signed any of the Guarantees shall cease to be an officer before the Security on which such Guarantees are endorsed shall have been authenticated and delivered by the Trustee or disposed of by the Company, such Security nevertheless may be authenticated and -39- 48 delivered or disposed of as though the person who signed such Guarantees had not ceased to be such officer, and any Guarantees may be signed on behalf of the Guarantor by such persons as, at the actual date of the execution of such Guarantees, shall be the proper officers of the Guarantor, although at the date of such Security or of the execution of this Indenture any such person was not such an officer. ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company or the Guarantor and thereafter repaid to the Company or the Guarantor or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the -40- 49 giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company or the Guarantor, as the case may be, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company or the Guarantor, as the case may be, has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company and the Guarantor to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. Section 402. Application of Trust Money. Subject to provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and Guarantees and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such money has been deposited with the Trustee. -41- 50 ARTICLE FIVE Remedies Section 501. Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events (whatever 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): (1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of a Security of that series; or (4) default in the performance, or breach, of any covenant or warranty of the Company or the Guarantor in this Indenture, the Securities of such series or the Guarantees endorsed thereon (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of series of Securities other than that series), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company and the Guarantor by the Trustee or to the Company, the Guarantor and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series 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 -42- 51 (5) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed (including a default with respect to Securities of any series other than that series) or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company, any Material Banking Subsidiary or the Guarantor in excess of $10,000,000, whether such indebtedness now exists or shall hereafter be created, which default shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such acceleration having been rescinded or annulled within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of not less than 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default and requiring the Company, the Guarantor or the Material Banking Subsidiary, as the case may be, to cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; provided, however, that if such default shall be remedied or cured by the Company, the Material Banking Subsidiary or the Guarantor or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without any action on the part of the Trustee or any of the Holders; or (6) the entry by a court or, in the case of a Material Banking Subsidiary, a governmental authority having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company or any Material Banking Subsidiary in an involuntary case or proceeding under any applicable Federal, State or Commonwealth of Puerto Rico bankruptcy, insolvency, reorganization or other similar law or in respect of the Guarantor in -43- 52 any involuntary case or proceeding under any applicable Federal or Commonwealth of Puerto Rico bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company, any Material Banking Subsidiary or the Guarantor a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Material Banking Subsidiary, under any applicable Federal, State or Commonwealth of Puerto Rico law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company, any Material Banking Subsidiary or the Guarantor or of any substantial part of their respective property, or ordering the winding up or liquidation of their respective affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company, any Material Banking Subsidiary or the Guarantor of a voluntary case or proceeding under any applicable Federal, State, or Commonwealth of Puerto Rico bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company, any Material Banking Subsidiary or the Guarantor in an involuntary case or proceeding under any applicable Federal, State, or Commonwealth of Puerto Rico bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal, State, or Commonwealth of Puerto Rico law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or the Guarantor or of any substantial part of their respective property, or -44- 53 the making by either of them of an assignment for the benefit of creditors, or the admission by either of them in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company, any Material Banking Subsidiary or the Guarantor in furtherance of any such action; or (8) any other Event of Default provided with respect to Securities of that series. Section 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount (or, if any of the Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company and the Guarantor (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company, the Guarantor and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company or the Guarantor has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration -45- 54 and any interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company and the Guarantor covenant that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company and the Guarantor will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and -46- 55 expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company or the Guarantor (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; 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 Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities or the Guarantees may be prosecuted and enforced by the Trustee without the possession of any -47- 56 of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively. Section 507. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceed- -48- 57 ings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Section 307) any interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the -49- 58 Company, the Guarantor, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. -50- 59 Section 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of or any premium or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 514. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. Section 515. Waiver of Stay or Extension Laws. The Company and the Guarantor covenant (to the extent that they may lawfully do so) that they will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company and the Guarantor (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law and covenants that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and -51- 60 permit the execution of every such power as though no such law had been enacted. ARTICLE SIX The Trustee Section 601. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 602. Notice of Defaults. If a default occurs hereunder with respect to Securities of any series, the Trustee shall give the Holders of Securities of such series notice of such default as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. Section 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document -52- 61 believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company or the Guarantor mentioned herein shall be sufficiently evidenced by a Company Request or Company or Guarantor Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, -53- 62 and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Section 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company and the Guarantor, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. Section 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company or the Guarantor, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company or the Guarantor with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. Section 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. -54- 63 Section 607. Compensation and Reimbursement. Each of the Company and the Guarantor agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. Section 608. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall 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 its Corporate Trust Office in the Borough of Manhattan, The City of New York. If such Person publishes reports of condition -55- 64 at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such 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 Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company and the Guarantor. (d) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company and the Guarantor or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company and the Guarantor or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or -56- 65 insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company and the Guarantor by a Board Resolution may remove the Trustee with respect to all securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company and the Guarantor, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company, the Guarantor and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company and the Guarantor. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company and the Guarantor or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. -57- 66 (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series to all Holders of Securities of such series in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. Section 611. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and the Guarantor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company, the Guarantor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the Guarantor, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to -58- 67 provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company, the Guarantor, or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company and the Guarantor shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) and (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so -59- 68 authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 613. Preferential Collection of Claims Against the Company or the Guarantor. If and when the Trustee shall be or become a creditor of the Company or the Guarantor (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company or the Guarantor (or any such other obligor). Section 614. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. -60- 69 Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company and the Guarantor. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company and the Guarantor. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the -61- 70 Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Citibank, N.A., As Trustee By........................., As Authenticating Agent By......................... Authorized Officer ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company Section 701. Company and the Guarantor to Furnish Trustee Names and Addresses of Holders. The Company and the Guarantor will furnish or cause to be furnished to the Trustee (a) semi-annually, not later than June 30 and December 30 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of the preceding June 15 or December 15, as the case may be, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company or the Guarantor of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. -62- 71 Section 702. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of the Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company, the Guarantor and the Trustee that neither the Company, the Guarantor nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. Section 703. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. -63- 72 Section 704. Reports by Company and Guarantor. The Company and Guarantor shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease Section 801. Company and Guarantor May Consolidate, Etc., Only Certain Terms. Neither the Guarantor nor the Company shall consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and neither the Guarantor nor the Company shall permit any Person to consolidate with or merge into the Guarantor or the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Guarantor or the Company, unless: (1) in case the Guarantor or the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Guarantor or the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Guarantor or the Company substantially as an entirety shall by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, (i) in the case of the Guarantor, expressly guarantee, or (ii) in the case of the Company, expressly assume the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the -64- 73 part of the Guarantor or the Company, as the case may be, to be performed or observed; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Guarantor or the Company, as the case may be, or a Subsidiary as a result of such transaction as having been incurred by the Guarantor or the Company, as the case may be, or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Guarantor or the Company, as the case may be, would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Guarantor or the Company, as the case may be, or such successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; and (4) the Guarantor or the Company, as the case may be, has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 802. Successor Substituted. Upon any consolidation of the Guarantor or the Company, as the case may be, with, or merger of the Guarantor or the Company, as the case may be, into, any other Person or any conveyance, transfer or lease of the properties and assets of the Guarantor or the Company, as the case may be, substantially as an entirety in accordance with Section 801, the successor Person formed by such -65- 74 consolidation or into which the Guarantor or the Company, as the case may be, is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Guarantor or the Company, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Guarantor or the Company, as the case may be, herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company and the Guarantor, when authorized by Board Resolutions, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company or the Guarantor and the assumption by any such successor of the covenants of the Company or the Guarantor herein, in the Securities and in the Guarantees; or (2) to add to the covenants of the Company or the Guarantor for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default; or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate -66- 75 the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Securities in uncertificated form; or (5) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, provided that any such addition, change or elimination (i) shall neither (A) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Security with respect to such provision or (ii) shall become effective only when there is no such Security Outstanding; or (6) to secure the Securities; or (7) to establish the form or terms of Securities or Guarantees of any series as permitted by Sections 201, 205, 301 and 312; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); or (9) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this clause (9) shall not adversely affect the interests of the Holders of Securities of any series in any material respect. -67- 76 Section 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company, the Guarantor and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any instalment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 513 or Section 1013, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived -68- 77 without the consent of the Holder of each Outstanding Security affected thereby, provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Section 1013, or the deletion of this proviso, in accordance with the requirements of Sections 611(b) and 901(8), or (4) modify or effect in any manner adverse to the Holders the terms and conditions of the obligations of the Guarantor in respect of the due and punctual payments of principal of, or premium, if any, interest or sinking fund requirements, if any, on, or Additional Amounts in respect of, the Securities. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. -69- 78 Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. Section 906. Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE TEN Covenants Section 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of and any premium and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. -70- 79 Section 1002. Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 1003. Money for Securities Payments to Be Held in Trust. If the Company or the Guarantor shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of or any premium or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provi- -71- 80 sions of this Section, that such Paying Agent will (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment in respect of the Securities of that series, and upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities of that series. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or any premium or interest on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 1004. Statement by Officers as to Default. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and -72- 81 observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. Section 1005. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 1006. Maintenance of Properties. The Company and the Guarantor will cause all properties used or useful in the conduct of its respective business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company or the Guarantor, as the case may be, may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company or the Guarantor from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company or the Guarantor, as the case may be, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. Section 1007. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or -73- 82 discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. Section 1008. Statement by Officers as to Default of the Guarantor. The Guarantor will deliver to the Trustee, within 120 days after the end of each fiscal year of the Guarantor ending after the date hereof, an Officers' Certificate, stating whether or not to the best of knowledge of the signers thereof the Guarantor is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period or grace or requirement of notice provided hereunder) and, if the Guarantor shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. Section 1009. Existence of the Guarantor. Subject to Article Eight, the Guarantor will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Guarantor shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Guarantor and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 1010. Limitation Upon Disposition of Voting Stock of, and Merger and Sale of Assets of, Banco Popular. Subject to the provisions of Article Eight, the Guarantor will not (1) sell, assign, transfer or otherwise dispose of any shares of Voting Stock of Banco Popular or permit Banco Popular to issue, sell, assign, transfer or otherwise dispose of any shares of, or securities convertible into or options, warrants or rights to subscribe for, its Voting Stock, unless, after giving effect to any such transaction, Banco Popular remains a Controlled Subsidiary; or (2) permit Banco Popular to -74- 83 (a) merge or consolidate, unless the surviving corporation is a Controlled Subsidiary; or (b) convey, transfer, lease or sell its properties and assets substantially as an entirety to any Person, except to a Controlled Subsidiary. Section 1011. Limitation Upon Creation of Liens on Voting Stock of Material Banking Subsidiaries. The Guarantor will not, and it will not permit any Material Banking Subsidiary at any time directly or indirectly to create, assume, incur or permit to exist any indebtedness for borrowed money secured by a pledge, lien or other encumbrance (any pledge, lien or other encumbrance being hereinafter in this Section referred to as a "lien") on the Voting Stock of any Material Banking Subsidiary without making effective provisions whereby the Outstanding Guarantees (and, if the Guarantor so elects, any other indebtedness ranking on a parity with the Guarantees) shall be secured equally and ratably with such secured indebtedness so long as such other indebtedness shall be so secured, provided, however, that the foregoing covenant shall not be applicable to liens for taxes or assessments or governmental charges or levies not then due and delinquent of the validity of which is being contested in good faith or which are less than $10,000,000 in amount, liens created by or resulting from any litigation or legal proceeding which is currently being contested in good faith by appropriate proceedings or which involve claims of less than $10,000,000, or deposits to secure (or in lieu of) surety, stay, appeal or customs bonds. If the Guarantor shall hereafter be required to secure the Guarantees equally and ratably with any other indebtedness pursuant to this Section, (i) the Guarantor will promptly deliver to the Trustee an Officers' Certificate stating that the foregoing covenant has been complied with, and an Opinion of Counsel stating that in the opinion of such counsel the foregoing covenant has been complied with and that any instruments executed by the Guarantor or any Subsidiary in the performance of the foregoing covenant comply with the requirements of the foregoing covenant and (ii) the Trustee is hereby authorized to enter into an indenture or agreement supplemental hereto and to take such action, if any, as it may deem advisable to enable it to force the rights of the holders of the Guarantees so secured. -75- 84 Section 1012. Payment of Additional Amounts. All payments of principal, premium, if any, and interest in respect of the Guarantees shall be made without set-off, counterclaim, fees, liabilities or similar deductions, and free and clear of, and without deduction or withholding for, taxes, levies, imposts, duties, charges or fees of whatsoever nature now or hereafter imposed, levied, collected, deducted, withheld or assessed by or on behalf of the Commonwealth of Puerto Rico or any political subdivision or taxing authority thereof or therein ("Taxes"). If the Guarantor or any agent thereof is required by law or regulation to make any deduction or withholding for or on account of Taxes, the Guarantor shall pay such additional amounts ("Additional Amounts") as shall be necessary in order that the net amounts received by the Holders of the Securities or any series or the holders or beneficial owners of any interest therein or rights in respect thereof after such deduction or withholding shall equal the amount that would have been receivable thereunder in the absence of such deduction or withholding, except that no such Additional Amounts shall be payable: (a) to any Holder of a Security or any interest therein or rights in respect thereof where such deduction or withholding is required by reason of such Holder having some connection with the Commonwealth of Puerto Rico or any political subdivision or taxing authority thereof or therein other than the mere holding of and payment in respect of such Security; (b) in respect of any deduction or withholding that would not have been required but for the presentation by the Holder of a Security for payment on a date more than 30 days after the Date of Maturity or the date on which payment thereof is duly provided for, whichever occurs later; or (c) in respect of any deduction or withholding that would not have been required but for the failure to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with the Commonwealth of Puerto Rico, or any political subdivision of taxing authority thereof or therein, of the Holder of a Security or any interest therein or rights in respect thereof, if compliance is required by the Commonwealth of Puerto Rico, or any political subdivision or taxing authority thereof or therein, as a precondition to exemption from such deduction or withholding. -76- 85 Any reference in the Indenture to principal or interest shall be deemed also to refer to any Additional Amounts that may be payable under this Section 1011. Section 1013. Waiver of Certain Covenants. The Company and the Guarantor may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1006, 1007 and 1009 to 1011, inclusive, with respect to the Securities of any series if before the time for such compliance the Holders of at least 66-2/3% in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the Guarantor and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE ELEVEN Redemption of Securities Section 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. Section 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall -77- 86 furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. Section 1103. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of any series are to be redeemed (unless all of the Securities of such series and of a specified tenor are to be redeemed), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. If less than all of the Securities of such series and of a specified tenor are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 1104. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, unless a shorter period is specified in the Securities to be redeemed, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. -78- 87 All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption of any Securities, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (6) that the redemption is for a sinking fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Section 1105. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. Section 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for -79- 88 redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. Section 1107. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor with the Guarantee or Guarantee endorsed therein, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE Sinking Funds Section 1201. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein -80- 89 referred to as an "optional sinking fund payment". If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. Section 1202. Satisfaction of Sinking Fund Payments with Securities. The Company (1) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (2) may apply as a credit Securities of a series which have been redeemed and so delivered either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. Section 1203. Redemption of Securities for Sinking Fund. Not less than 45 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1202 and will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. _____________________________ -81- 90 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. BANPONCE FINANCIAL CORP. By /s/ David H. Chafey, Jr. -------------------------------- David H. Chafey, Jr. Executive Vice President Attest: /s/ Ernesto N. Mayoral ------------------------ Ernesto N. Mayoral, Esq Secretary BANPONCE CORPORATION By /s/ David H. Chafey, Jr. -------------------------------- David H. Chafey, Jr. Executive Vice President Attest: /s/ Ernesto N. Mayoral ------------------------ Ernesto N. Mayoral, Esq. Assistant Secretary CITIBANK, N.A. By /s/ Robert Eddy -------------------------------- Robert Eddy Assistant Vice President Attest: Laura Pushkarsh ----------------------- -82- 91 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 11th day of October, 1991, before me personally came David H. Chafey, Jr., to me known, who, being by me duly sworn, did depose and say that he is Executive Vice President of BanPonce Financial Corp., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. /s/ James Gallagher ------------------------------------- JAMES GALLAGHER Notary Public, State of New York Qualified in Westchester County Westchester County Clerk's No. 4949761 Certificate Filed in New York County Commission Expires April 17, 1993 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 11th day of October, 1991, before me personally came David H. Chafey, Jr., to me known, who, being by me duly sworn, did depose and say that he is Executive Vice President of BanPonce Corporation, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. /s/ James Gallagher ------------------------------------- JAMES GALLAGHER Notary Public, State of New York Qualified in Westchester County Westchester County Clerk's No. 4949761 Certificate Filed in New York County Commission Expires April 17, 1993 -83- 92 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 11th day of October, 1991, before me personally came Robert Eaddy, to me known, who, being by me duly sworn, did depose and say that he is Corporate Trust Officer of Citibank, N.A., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. /s/ James Gallagher -------------------------------------- JAMES GALLAGHER Notary Public, State of New York Qualified in Westchester County Westchester County Clerk's No. 4949761 Certificate Filed in New York County Commission Expires April 17, 1993 -84- 93 BANPONCE FINANCIAL CORP., Issuer and BANPONCE CORPORATION, Guarantor TO CITIBANK, N.A., Trustee ___________ FIRST SUPPLEMENTAL INDENTURE Dated as of February 28, 1995 To Indenture dated as of October 1, 1991 ___________ -1- 94 FIRST SUPPLEMENTAL INDENTURE, dated as of February 28, 1995 between BanPonce Financial Corp., a Delaware corporation, BanPonce Corporation, a Puerto Rico corporation (the "Guarantor"), and Citibank, N.A., a national banking association (the "Company"), as Trustee (the "Trustee"). RECITALS The Company, the Guarantor and the Trustee, as Trustee, are parties to an Indenture, dated as of October 1, 1991 (the "Original Indenture"), which provides for the issuance from time to time of unsecured debt securities of the Company, unconditionally guaranteed as to the payment of principal, premium (if any) and interest by the Guarantor. Section 901(9) of the Original Indenture provides that without the consent of any Holders, the Company and the Guarantor, when authorized by Board Resolutions, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental to the Original Indenture, in form satisfactory to the Trustee, to cure any ambiguity, to correct or supplement any provision in the Original Indenture which may be inconsistent with any other provision in the Original Indenture, or to make any other provisions with respect to matters or questions arising under the Original Indenture, provided that such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect. The Company and the Guarantor believe that Section 609 of the Original Indenture should be amended to substitute the word "a" for the word "its" in the fourth line of such Section, that paragraph (1) of Section 105 of the Original Indenture should be amended to provide that notices to the Trustee shall be addressed to the Trustee at the Corporate Trust Office, and that such amendments will not adversely affect the Holders of Securities in any material respect. The respective Boards of Directors of the Company and the Guarantor have duly authorized the execution and delivery by the Company and the Guarantor, respectively, of this First Supplemental Indenture. -2- 95 NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company, the Guarantor and the Trustee mutually agree as follows: ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions. Except as otherwise expressly provided or unless the context otherwise requires, all terms used in this First Supplemental Indenture which are defined in the Original Indenture shall have the meanings ascribed to them by the Original Indenture. Section 102. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 103. Successors and Assigns. All covenants and agreements in this First Supplemental Indenture by the parties hereto shall bind their respective successors and assigns, whether so expressed or not. Section 104. Separability Clause. In case any provision in this First Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 105. Benefits of Instrument. Nothing in this First Supplemental Indenture, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this First Supplemental Indenture or the Original Indenture. -3- 96 Section 106. Governing Law. This First Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York. ARTICLE TWO Amendment of the Original Indenture Section 201. Amendment of Section 609 of the Original Indenture. Section 609 of the Original Indenture is hereby amended and restated in its entirety as follows: "There shall at all times be a Trustee hereunder which shall 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 a Corporate Trust Office in the Borough of Manhattan, The City of New York. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such 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 Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article." Section 202. Amendment of Section 105 of the Original Indenture. Paragraph (1) of Section 105 of the Original Indenture is hereby amended and restated in its entirety as follows: "(1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, or". -4- 97 Section 203. Reaffirmation of Original Indenture. Each of the Company, the Guarantor and the Trustee hereby confirms, reaffirms and agrees to the Original Indenture in every particular, as amended by this First Supplemental Indenture. Section 204. Trust Indenture Act. If any provision of this First Supplemental Indenture limits, qualifies or conflicts with a provision of the Trust Indenture Act of 1939, as it may be amended from time to time, that is required under such Act to be a part of and govern this First Supplemental Indenture, the latter provision shall control. If any provision hereof modifies or excludes any provision of such Act that may be so modified or excluded, the latter provision shall be deemed to apply to this First Supplemental Indenture as so modified or excluded, as the case may be. * * * This First Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -5- 98 IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. BANPONCE FINANCIAL CORP. By: /s/ David H. Chafey, Jr. David H. Chafey, Jr. Executive Vice President By: /s/ Jose Luis Lopez Calderon Jose Luis Lopez Calderon Senior Vice President Attest: /s/ Brunilda Santos de Alvarez Brunilda Santos de Alvarez Assistant Secretary Affidavit No. 177 Subscribed to before me by David H. Chafey, Jr. of legal age, married and resident of San Juan, Puerto Rico, as Executive Vice President of BanPonce Financial Corp. and Jose Luis Lopez Calderon, of legal age, married and resident of San Juan, Puerto Rico as Senior Vice President of BanPonce Financial Corp. and who are personally known to me, in San Juan, Puerto Rico, this 28 day of February, 1995. [SEAL] /s/ Estela Martinez de Miranda Notary Public -6- 99 BANPONCE CORPORATION By: /s/ David H. Chafey, Jr. David H. Chafey, Jr. Executive Vice President By: /s/ Jose Luis Lopez Calderon Jose Luis Lopez Calderon Senior Vice President Attest: /s/ Brunilda Santos de Alvarez Brunilda Santos de Alvarez Assistant Secretary Affidavit No. 176 Subscribed to before me by David H. Chafey, Jr. of legal age, married and resident of San Juan, Puerto Rico, as Executive Vice President of BanPonce Corporation and Jose Luis Lopez Calderon, of legal age, married and resident of San Juan, Puerto Rico as Senior Vice President of BanPonce Corporation and who are personally known to me, in San Juan, Puerto Rico, this 28 day of February, 1995. [SEAL] /s/ Estela Martinez de Miranda Notary Public -7- 100 CITIBANK, N.A. By: /s/ F. Mills Name: F. Mills Title: Senior Trust Officer Attest: /s/ Louis A. Piscitelli STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 1st day of MAR, 1995, before me personally came F. Mills, to me known, who, being by me duly sworn, did depose and say that she is a Corporate Trust Officer of Citibank, N.A., the national banking association described in and which executed the foregoing instrument; that she knows the seal of said national banking association; that the seal affixed to said instrument is such seal; that it was so affixed by authority of the Board of Directors of said national banking association, and that he signed his name thereto by like authority. [SEAL] /s/ Peter M. Pavlyshin -8- EX-4.(G) 4 FORM OF SUBORDINATED INDENTURE 1 EXHIBIT (4)(g) ============================================================ BANPONCE FINANCIAL CORPORATION Issuer and BANPONCE CORPORATION, Guarantor TO Trustee __________ SUBORDINATED INDENTURE Dated as of _________, __________ ============================================================ 2
TABLE OF CONTENTS ------------ Page ---- PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE ONE ----------- DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Additional Amounts . . . . . . . . . . . . . . . . . . . . . . . . 2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . 2 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 2 Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . 3 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company Request; Company Order . . . . . . . . . . . . . . . . . . 3 Controlled Subsidiary . . . . . . . . . . . . . . . . . . . . . . . 3 Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . 3 Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . 4 Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Entitled Persons . . . . . . . . . . . . . . . . . . . . . . . . . 4 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . 4 Excess Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Indebtedness of the Company or Guarantor, as the case may be, for money borrowed . . . . . . . . . . . . . . . . . . . . . . . . 4 Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . 5 Material Banking Subsidiary . . . . . . . . . . . . . . . . . . . . 5 Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . 6 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 6 Original Issue Discount Security . . . . . . . . . . . . . . . . . 6 Other Financial Obligations . . . . . . . . . . . . . . . . . . . . 6 Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
______________ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. 3 -ii-
Page ---- Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 8 Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . 8 Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . 9 Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . 9 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Security Register; Security Registrar . . . . . . . . . . . . . . . 9 Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 9 Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . 9 Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . 10 Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 102. Compliance Certificates and Opinions . . . . . . . . . . . . . . . 10 Section 103. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . 11 Section 104. Acts of Holders; Record Dates . . . . . . . . . . . . . . . . . . . 12 Section 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . . . . . 15 Section 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . 15 Section 107. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . 16 Section 108. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 16 Section 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . 17 Section 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 114. Appointment of Agent for Service . . . . . . . . . . . . . . . . . 17 ARTICLE TWO ----------- SECURITY FORMS AND GUARANTEES Section 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 202. Form of Face of Security . . . . . . . . . . . . . . . . . . . . . 19 Section 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . 22
______________ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. 4 -iii-
Page ---- Section 204. Form of Trustee's Certificate of Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 205. Form of Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 206. Additional Provisions Required in Global Security . . . . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE THREE ------------- THE SECURITIES Section 301. Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . 31 Section 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 303. Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . 37 Section 305. Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 307. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . 43 Section 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 310. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . 43 Section 311. Guarantee of Debt Securities . . . . . . . . . . . . . . . . . . . 43 Section 312. Execution of Guarantees . . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE FOUR ------------ SATISFACTION AND DISCHARGE Section 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . 46 Section 402. Application of Trust Money . . . . . . . . . . . . . . . . . . . . 47
______________ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. 5 -iv-
Page ---- ARTICLE FIVE ------------ REMEDIES Section 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 502. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . 51 Section 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . 52 Section 505. Trustee May Enforce Claims Without Possession of Securities . . . . . . . . . . . . . . . . . . . . . 52 Section 506. Application of Money Collected . . . . . . . . . . . . . . . . . . 53 Section 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . 54 Section 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . 55 Section 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . 55 Section 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . 56 Section 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . 56 Section 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE SIX ----------- THE TRUSTEE Section 601. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . 57 Section 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . 57 Section 604. Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . 59 Section 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 607. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . 59 Section 608. Disqualification; Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
______________ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. 6 -v-
Page ---- Section 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Section 610. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Section 611. Acceptance of Appointment by Successor . . . . . . . . . . . . . . 63 Section 612. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . . . 64 Section 613. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 614. Appointment of Authenticating Agent . . . . . . . . . . . . . . . . 65 ARTICLE SEVEN ------------- HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Company to Furnish Trustee Names and Addresses of Holders . . . . . . . . . . . . . . . . . . . . . . . 67 Section 702. Preservation of Information; Communications to Holders . . . . . . . . . . . . . . . . . . . . 67 Section 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 704. Reports by Company and Guarantor . . . . . . . . . . . . . . . . . 68 ARTICLE EIGHT ------------- CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 801. Guarantor May Consolidate, Etc., Only on Certain Terms . . . . . . . . . . . . . . . . . . . . . . 69 Section 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . 70 ARTICLE NINE ------------ SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Section 902. Supplemental Indentures With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Section 903. Execution of Supplemental Indentures . . . . . . . . . . . . . . . 74
______________ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. 7 -vi-
Page ---- Section 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . 74 Section 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . 74 Section 906. Reference in Securities to Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Section 907. Subordination Unimpaired . . . . . . . . . . . . . . . . . . . . . 75 ARTICLE TEN ----------- COVENANTS Section 1001. Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Section 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . 75 Section 1003. Money for Securities Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Section 1004. Statement by Officers as to Default . . . . . . . . . . . . . . . . 78 Section 1005. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Section 1006. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . 78 Section 1007. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . 78 Section 1008. Payment of Additional Amounts . . . . . . . . . . . . . . . . . . . 79 Section 1009. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . 80 Section 1010. Statement by Officers as to Default of the Guarantor . . . . . . . . . . . . . . . . . . . . . 80 Section 1011. Existence of the Guarantor . . . . . . . . . . . . . . . . . . . . 81 ARTICLE ELEVEN -------------- REDEMPTION OF SECURITIES Section 1101. Applicability of Article . . . . . . . . . . . . . . . . . . . . . 81 Section 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . 81 Section 1103. Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Section 1104. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . 82 Section 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . 83 Section 1106. Securities Payable on Redemption Date . . . . . . . . . . . . . . . 83 Section 1107. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . 84
______________ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. 8 -vii-
Page ---- ARTICLE TWELVE -------------- SINKING FUNDS Section 1201. Applicability of Article . . . . . . . . . . . . . . . . . . . . . 84 Section 1202. Satisfaction of Sinking Fund Payments with Securities . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 1203. Redemption of Securities for Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 ARTICLE THIRTEEN ---------------- SUBORDINATION OF SECURITIES AND GUARANTEES Section 1301. Securities Subordinate to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 1302. Payment Over of Proceeds Upon Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 1303. Prior Payment to Senior Indebtedness Upon Acceleration of Securities . . . . . . . . . . . . . . . . . 88 Section 1304. No Payment When Senior Indebtedness Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Section 1305. Payment Permitted If No Default . . . . . . . . . . . . . . . . . . 89 Section 1306. Subrogation to Rights of Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . 90 Section 1307. Provisions Solely to Define Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . 91 Section 1308. Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . 92 Section 1309. No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Section 1310. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 93 Section 1311. Reliance on Judicial Order or Certificate of Liquidating Agent . . . . . . . . . . . . . . . . . 94 Section 1312. Trustee Not Fiduciary for Holders of Senior Indebtedness or Entitled Persons . . . . . . . . . . . . . . . . . . . . . . . . . 95 Section 1313. Rights of Trustee as Holder of Senior Indebtedness or Entitled Person; Preservation of Trustee's Rights . . . . . . . . . . . . . . . . . 95 Section 1314. Article Applicable to Paying Agents . . . . . . . . . . . . . . . . 95 Section 1315. Payment of Proceeds in Certain Cases . . . . . . . . . . . . . . . 96
______________ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. 9 INDENTURE, dated as of _________________, among BanPonce Financial Corporation, a corporation duly organized and existing under the laws of the state of Delaware (herein called the "Company"), having its principal office at 521 Fellowship Road, Mt. Laurel, New Jersey 08054, BanPonce Corporation, a corporation duly organized and existing under the laws of the Commonwealth of Puerto Rico (the "Guarantor"), having its principal offices at 209 Munoz Rivera Ave, Hato Rey, Puerto Rico 00918, and ________________________, a _________________, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured and subordinated debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. The Guarantor has duly authorized the execution and delivery of this Indenture to provide for the issuance of Guarantees with respect to the Securities. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this 10 Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; and (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Additional Amounts" has the meaning assigned thereto in Section 1008. "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. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series. "Board of Directors" means either the board of directors of the Company or the Guarantor, as the context requires, or any duly authorized committee of that board. -2- 11 "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or the Guarantor, as the case may be, to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day", except as may otherwise be provided herein or in any Security, when used with respect to any Place of Payment or other location, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law or executive order to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, 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. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Controlled Subsidiary" means any corporation more than 80 percent of the outstanding Voting Stock of which, except for directors' qualifying shares, shall at the time be owned directly or indirectly by the Guarantor. "Corporate Trust Office" means the principal office of the Trustee at which at any -3- 12 particular time its corporate trust business shall be administered, which office at the date hereof is located at ______________, except that for purposes of Section 1002, such term shall mean the office or agency of the Trustee in the Borough of Manhattan, the City of New York, which office at the date hereof is located at ______________. "corporation" means a corporation, association, company, joint-stock company or business trust. "Defaulted Interest" has the meaning specified in Section 307. "Depositary" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depositary by the Company pursuant to Section 301. "Entitled Persons" means any person entitled to payment pursuant to the terms of Other Financial Obligations. "Event of Default" has the meaning specified in Section 501. "Excess Proceeds" has the meaning specified in Section 1315(a). "Global Security" means a Security bearing the legend prescribed in Section 206 evidencing all or part of a series of Securities, issued to the Depositary for such series or its nominee, and registered in the name of such Depositary or nominee. "Guarantees" means the guarantees of the Guarantor to be endorsed on the Securities authenticated and delivered hereunder. "Guarantor" means Banponce Corporation, a corporation organized under the laws of the Commonwealth of Puerto Rico and its successors and assigns. "Holder" means a Person in whose name a Security is registered in the Security Register. -4- 13 "indebtedness of the Company or the Guarantor, as the case may be, for money borrowed" when used with respect to the Company or the Guarantor, as the case may be, means (i) any obligation of, or any obligation guaranteed by, the Company or the Guarantor, as the case may be, for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments, (ii) any deferred payment obligation of, or any such obligation guaranteed by, the Company or the Guarantor, as the case may be, for the payment of the purchase price of property or assets evidenced by a note or similar instrument, and (iii) any obligation of, or any such obligation guaranteed by, the Company or the Guarantor, as the case may be, for the payment of rent or other amounts under a lease of property or assets which obligation is required to be classified and accounted for as a capitalized lease on the balance sheet of the Company or the Guarantor, as the case may be, under generally accepted accounting principles. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument, and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. The term "Indenture" shall also include the terms of particular series of Securities established as contemplated by Section 301. "interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an instalment of interest on such Security. "Material Banking Subsidiary" means any Controlled Subsidiary of the Guarantor chartered as a banking corporation under United States -5- 14 Federal, State, or Puerto Rico law which is a significant subsidiary of the Guarantor as defined in 1-02 of Regulation S-X of the rules and regulations of the Securities and Exchange Commission under the Securities Act of 1933, as amended. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an instalment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company or the Guarantor, as the context requires, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Company. "Opinion of Counsel" means a written opinion of counsel, who may be an employee of or counsel for the Company, or the Guarantor, or other counsel who shall be acceptable to the Trustee. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Other Financial Obligations" means, unless otherwise determined with respect to any series of Securities pursuant to Section 301, all obligations to make payment pursuant to the terms of financial instruments of the Company or the Guarantor, as the case may be, such as (i) securities contracts and currency and foreign exchange rate contracts, (ii) derivative instruments, such as swap agreements (including interest rate and currency and foreign exchange -6- 15 rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange agreements, options, commodity futures contracts, commodity options contracts and (iii) similar financial instruments; provided that the term Other Financial Obligations shall not include (A) obligations on account of Senior Indebtedness of the Company or the Guarantor, as the case may be, and (B) obligations on account of indebtedness of the Company or the Guarantor, as the case may be, for money borrowed ranking pari passu with or subordinate to the Securities or the Guarantees, as the case may be. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; -7- 16 provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 502, (ii) the principal amount of a Security denominated in one or more foreign currencies or currency units shall be the U.S. dollar equivalent, determined in the manner provided as contemplated by Section 301 on the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent on the date of original issuance of such Security of the amount determined as provided in (i) above) of such Security, and (iii) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of or any premium or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of and any premium and interest on the Securities of that series are payable as specified as contemplated by Section 301. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of -8- 17 the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Indebtedness" means, unless otherwise determined with respect to any series of Securities pursuant to Section 301, the principal of (and premium, if any) and interest on (a) all Indebtedness of the Company or the Guarantor, as the case may be, for money borrowed, whether outstanding on the date of execution of this Indenture or thereafter created, assumed or incurred, except (i) such indebtedness as is by its terms expressly stated to be junior in right of payment to the Securities, and (ii) such indebtedness as is by its terms expressly stated to rank pari passu in right of payment with the Securities, and (b) any deferrals, renewals or extensions of any such Senior Indebtedness. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any instalment of principal thereof or interest thereon, means the date specified in such Security as the -9- 18 fixed date on which the principal of such Security or such instalment of principal or interest is due and payable. "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or the Guarantor, as the context requires, or by one or more other Subsidiaries, or by the Company or the Guarantor, as the context requires, and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Taxes" has the meaning specified in Section 1008. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "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. "Vice President", when used with respect to the Company, the Guarantor or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock" means, with respect to any Person, Capital Stock (however designated) having general voting power for the election of a majority of the members of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time Capital Stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). Section 102. Compliance Certificates and Opinions. -10- 19 Upon any application or request by the Company or the Guarantor to the Trustee to take any action under any provision of this Indenture, the Company or the Guarantor, as the case may be, shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company or the Guarantor, as the case may be, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify -11- 20 or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company or the Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or the Guarantor, as the case may be, stating that the information with respect to such factual matters is in the possession of the Company or the Guarantor, as the case may be, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 104. Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given 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 agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company and the Guarantor. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee, the Company and the Guarantor, if made in the manner provided in this Section. -12- 21 Without limiting the generality of the foregoing, a Holder, including a Depositary that is a Holder of a Global Security, may make, give or take, by a proxy, or proxies, duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted in this Indenture to be made, given or taken by Holders, and a Depositary that is a Holder of a Global Security may provide its proxy or proxies to the beneficial owners of interest in any such Global Security. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by 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 which the Trustee deems sufficient. (c) Except as provided in the next paragraph, the Company may, in the circumstances permitted by the Trust Indenture Act, set any day as the record date for the purpose of determining the Holders of Securities of any series entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders of Securities of such series. With regard to any record date set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to give or take the relevant action, whether or not such Holders remain Holders after such record date. With regard to any action that may be given or taken hereunder only by Holders of a requisite principal amount of Outstanding Securities of any series (or their duly appointed agents) and for which a record date is set pursuant to this paragraph, the Company may, at its option, set an expiration date after which no such action purported to be given or taken by any Holder shall be effective hereunder unless given or taken on or prior to such expiration date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents). On or -13- 22 prior to any expiration date set pursuant to this paragraph, the Company may, on one or more occasions at its option, extend such date to any later date. Nothing in this paragraph shall prevent any Holder (or any duly appointed agent thereof) from giving or taking, after any expiration date, any action identical to, or, at any time, contrary to or different from any action given or taken, or purported to have been given or taken, hereunder by a Holder on or prior to such date, in which event the Company may set a record date in respect hereof pursuant to this paragraph. Notwithstanding the foregoing, upon receipt by the Trustee, with respect to Securities of any Series, of (i) any Notice of Default pursuant to Section 501, (ii) any declaration of acceleration, or any rescission and annulment of any such declaration pursuant to Section 502 or (iii) any direction given pursuant to Section 512 (any such notice, declaration, rescission and annulment, or direction being referred to herein as a "Direction"), a record date shall automatically and without any other action by any Person be set for the purpose of determining the Holders of Outstanding Securities of such series entitled to join in such Direction, which record date shall be the close of business on the day the Trustee receives such Direction. The Holders of Outstanding Securities of such series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such Direction, whether or not such Holders remain Holders after such record date; provided that, unless such Direction shall have become effective by virtue of Holders of the requisite principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such Direction shall automatically and without any action by any Person be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a Direction contrary to or different from, or, after the expiration or such period, identical to, a Direction that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. Without limiting the foregoing, a Holder entitled hereunder to give or take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so -14- 23 pursuant to such appointment with regard to all or any different part of such principal amount. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every 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 Trustee, the Company or the Guarantor in reliance thereon, whether or not notation of such action is made upon such Security. Section 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company or the Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at ______________________________________________________ Attention: ______________________________________________________, or (2) the Company or the Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company or the Guarantor, as the case may be, addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company or the Guarantor. Section 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each -15- 24 Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Section 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company and the Guarantor shall bind their respective successors and assigns, whether so expressed or not. -16- 25 Section 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness, the Holders, and, subject to Section 907, Entitled Persons in respect of Other Financial Obligations, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York. Section 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities (other than a provision of the Securities of any series which specifically states that such provision shall apply in lieu of this Section)) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. Section 114. Appointment of Agent for Service. The Company and the Guarantor each hereby appoints the ____________________ of Banco Popular de Puerto Rico at the office of Banco Popular de Puerto Rico located in The City of New York as the Company's and the Guarantor's authorized agent (the "Authorized Agent") upon whom service -17- 26 of process may be served in any action arising out of or based on the Securities, the Guarantees or this Indenture (including any action based on or arising out of the United States federal securities laws) that may be instituted in New York State or United States Federal Courts sitting in The City of New York, by the Trustee or the Holder of any Security, and the Company and the Guarantor each hereby expressly accepts the jurisdiction of any such court in respect of any such action. Such appointment shall be irrevocable unless and until the appointment of a successor authorized agent for service of process, and such successor's acceptance of such appointment, shall have occurred, and the Company and the Guarantor and such Authorized Agent will take any and all actions, including the filing of any and all documents and instruments, that may be necessary to continue such appointment or appointments in full force and effect as aforesaid. Service of process upon an Authorized Agent will be deemed, in every respect, effective service of process upon the Company and the Guarantor. Notwithstanding the foregoing, any action against the Company or the Guarantor arising out of or based on any Security or Guarantee, or this Indenture may also be instituted by the Holder of such Security or Guarantee in any court in the Commonwealth of Puerto Rico, and the Company and the Guarantor hereby expressly accepts the jurisdiction of any such court in respect of any such action. ARTICLE TWO Security Forms and Guarantees Section 201. Forms Generally. The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution -18- 27 of the Company, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. The Guarantees to be endorsed on the Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution of the Guarantor or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of the Guarantees to be endorsed on the Securities of any of the Guarantees to be endorsed on the Securities of any series is established by action taken pursuant to a Board Resolution of the Guarantor, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Guarantor and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Form of Face of Security. FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SECURITY IS % OF ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS , 19 [,] [AND] THE YIELD TO MATURITY IS %[, THE METHOD USED TO DETERMINE THE YIELD IS AND THE AMOUNT OF ORIGINAL ISSUE DISCOUNT APPLICABLE TO THE SHORT ACCRUAL PERIOD OF , 19 TO , 19 IS % OF THE PRINCIPAL AMOUNT OF THIS SECURITY.]] -19- 28 THIS SECURITY IS NOT A SAVINGS ACCOUNT, DEPOSIT OR OTHER OBLIGATION OF ANY BANK OR NONBANK SUBSIDIARY OF THE COMPANY, THE GUARANTOR, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY. [Insert any legend required by the Internal Revenue Code and the regulations thereunder.] BanPonce Financial Corporation ............................................ No. ......... $ ........ BanPonce Financial Corporation, a corporation duly organized and existing under the laws of the state of Delaware (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to ..............................................., or registered assigns, the principal sum of .................. ................... Dollars on ............................ ........................... [if the Security is to bear interest prior to Maturity, insert -- , and to pay interest thereon from ............. or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on ............ and ............ in each year, commencing ........., at the rate of ....% per annum, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such 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 ....... or ....... (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so 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 -20- 29 required by such exchange, all as more fully provided in said Indenture]. [If the Security is not to bear interest prior to Maturity, insert -- The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of ....% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of ......% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.] Payment of the principal of (and premium, if any) and [if applicable, insert -- any such] interest on this Security will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, 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 [if applicable, insert -- ; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register]. 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. -21- 30 Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: BANPONCE FINANCIAL CORPORATION BY_________________________ Attest: ___________________________ Section 203. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of _______________ (herein called the "Indenture"), among the Company, BanPonce Corporation, as Guarantor, and ______________, 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, holders of Senior Indebtedness 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 $...........]. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness of the Company (as defined in the Indenture), and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, agrees that each holder of Senior Indebtedness of the Company, whether -22- 31 created or acquired before or after the issuance of the Securities of this series, shall be deemed conclusively to have relied on such provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness of the Company. The Indenture also provides that if, upon the occurrence of certain events of bankruptcy or insolvency relating to the Company, there remains, after giving effect to such subordination provisions, any amount of cash, property or securities available for payment or distribution in respect of Securities of this series (as defined in the Indenture, "Excess Proceeds"), and if, at such time, any Entitled Person (as defined in the Indenture) has not received payment in full of all amounts due or to become due on or in respect of Other Financial Obligations (as defined in the Indenture), then such Excess Proceeds shall first be applied to pay or provide for the payment in full of such Other Financial Obligations before any payment or distribution may be made in respect of Securities of this series. This Security is also issued subject to the provisions of the Indenture regarding payments to Entitled Persons in respect of Other Financial Obligations of the Company. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination of this Security and payment of Excess Proceeds as provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. [If applicable, insert -- The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, [if applicable, insert -- (1) on ........... in any year commencing with the year ...... and ending with the year ...... through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [on or after .........., 19..], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [on or before ..............., __%, and if redeemed] during the 12-month period beginning ............. of the years indicated, -23- 32
Redemption Redemption Year Price Year Price ---- ----- ---- -----
and thereafter at a Redemption Price equal to .....% of the principal amount, together in the case of any such redemption [if applicable, insert -- (whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [If applicable, insert -- The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, (1) on ............ in any year commencing with the year .... and ending with the year .... through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after ............], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning ............ of the years indicated, -24- 33
Redemption Price For Redemption Redemption Price For Through Operation Redemption Otherwise of the Than Through Operation Year Sinking Fund of the Sinking Fund ---- ----------------- ----------------------
and thereafter at a Redemption Price equal to .....% of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [Notwithstanding the foregoing, the Company may not, prior to ............., redeem any Securities of this series as contemplated by [Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than .....% per annum.] [The sinking fund for this series provides for the redemption on ............ in each year beginning with the year ....... and ending with the year ...... of [not less than $.......... ("mandatory sinking fund") and not more than] $......... aggregate principal amount of Securities of this series. Securities of this series acquired or redeemed by the Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent [mandatory] sinking fund payments otherwise required to be made [in the inverse order in which they become due].] -25- 34 [If the Security is subject to redemption, insert -- In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.] [If the Security is not an Original Issue Discount Security, insert -- If an Event of Default 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.] [If the Security is an Original Issue Discount Security, insert -- If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to -- insert formula for determining the amount. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.] 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, the Guarantor and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company and the Guarantor with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in -26- 35 lieu hereof, whether or not notation of such consent or waiver is made upon this Security. 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 any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registerable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the 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. -27- 36 All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Section 204. Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. _____________, As Trustee By........................... Authorized Signatory SECTION 205. Form of Guarantee. BanPonce Corporation (the "Guarantor") hereby unconditionally guarantees to the holder of this Security duly authenticated and delivered by the Trustee, the due and punctual payment of the principal, and premium, if any, of (including any amount in respect of original issue discount), and interest, if any (together with any additional amounts payable pursuant to the terms of this Security), on this Security and the due and punctual payment of the sinking fund payments, if any, and analogous obligations, if any, provided for pursuant to the terms of this Security, when and as the same shall become due and payable, whether at maturity or upon redemption or upon declaration of acceleration or otherwise according to the terms of this Security and of the Indenture. In case of default by the Company in the payment of any such principal (including any amount in respect of original issue discount), interest (together with any additional amounts payable pursuant to the terms of this Security), sinking fund payment, or analogous obligation, the Guarantor agrees duly and punctually to pay the same. The Guarantor hereby agrees that its obligations hereunder shall be absolute and unconditional irrespective of any extension of the time for payment of this Security, any modification of this Security, any invalidity, irregularity or unenforceability of this -28- 37 Security or the Indenture, any failure to enforce the same or any waiver, modification or indulgence granted to the Company with respect thereto by the holder of this Security or the Trustee, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a demand or proceeding first against the Company, protest or notice with respect to this Security or the indebtedness evidenced thereby and all demands whatsoever, and covenants that this guarantee will not be discharged as to this Security except by payment in full of the principal of (including any amount payable in respect of original issue discount), and interest, if any (together with any additional amounts payable pursuant to the terms of this Security), thereon. The Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder (i) to be subrogated to the rights of a Holder against the Company with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Company in respect thereof or (ii) to receive any payment, in the nature of contribution or for any other reason, from any other obligor with respect to such payment. The indebtedness evidenced by this Guarantee is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness of the Guarantor, and this Guarantee is issued subject to the provisions of the Indenture with respect thereto. The Indenture also provides that if, upon the occurrence of certain events of bankruptcy or insolvency relating to the Guarantor, there remains, after giving effect to such subordination provisions, any amount of cash, property or securities available for payment or distribution in respect of the Guarantees (as defined in the Indenture, "Excess Proceeds" of the Guarantor), and if, at such time, any Entitled Person of the Guarantor (as defined in the Indenture) has not received payment in full of all amounts due or to become due on or in respect of Other Financial Obligations of the Guarantor (as defined in the Indenture), then such Excess Proceeds of the Guarantor shall first be applied to pay or provide for the payment in full of such Other Financial Obligations of the Guarantor before any payment or distribution may be made in respect of the Guarantees. This Guarantee is also issued subject to the -29- 38 provisions of the Indenture regarding payments to Entitled Persons in respect of Other Financial Obligations. Each Holder of this Guarantee, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination of this Guarantee and payment of Excess Proceeds as provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. This guarantee shall not be valid or become obligatory for any purpose with respect to this Security until the certificate of authentication on this Security shall have been signed by the Trustee. IN WITNESS WHEREOF, the BanPonce Corporation has caused the Guaranty to be signed by facsimile by its duly authorized officers and has caused a facsimile of its corporate seal to be affixed hereunto or imprinted hereon. BANPONCE CORPORATION BY ______________________ BY ______________________ SECTION 206. Additional Provisions Required in Global Security. Any Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form: "This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee thereof. This Security may not be transferred to, or registered or exchanged for Securities registered in the name of, any Person other than the Depositary or a nominee thereof and no such transfer may be registered, except in the limited circumstances described in the Indenture. Every Security authenticated and delivered upon registration or transfer of, or in exchange for or in lieu of, this Security shall be a Global Security subject to the foregoing, except in such limited circumstances." -30- 39 ARTICLE THREE The Securities Section 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established, with respect to the Securities of any series, in or pursuant to a Board Resolution of the Company and, subject to Section 303, set forth, or determined in the manner provided, in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of such series, (1) the title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906 or 1107 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates on which the principal of the Securities of the series is payable; -31- 40 (5) the rate or rates at which the Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any interest payable on any Interest Payment Date and the basis upon which interest shall be calculated, if other than in 360-day year of twelve 30-day months; (6) the place or places where the principal of and any premium and interest on Securities of the series shall be payable; (7) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (9) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (10) the currency, currencies or currency units in which payment of the principal of and any premium and interest on any Securities of the series shall be payable if other than the currency of the United States of America and the manner of determining the equivalent thereof in the currency of the United States of America for purposes of the definition of "Outstanding" in Section 101; -32- 41 (11) if the amount of payments of principal of or any premium or interest on any Securities of the series may be determined with reference to an index, the manner in which such amounts shall be determined; (12) if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Company or a Holder thereof, in one or more currencies or currency units other than that or those in which the Securities are stated to be payable, the currency, currencies or currency units in which payment of the principal of and any premium and interest on Securities of such series as to which such election is made shall be payable, and the periods within which and the terms and conditions upon which such election is to be made; (13) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502; (14) if and as applicable, that the Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the Depositary or Depositaries for such Global Security or Global Securities and any circumstances other than those set forth in Section 305 in which any such Global Security may be transferred to, and registered and exchanged for Securities registered in the name of, a Person other than the Depositary for such Global Security or nominee thereof, and in which any such transfer may be registered; (15) if other than as specified in Section 501, the Events of Default applicable with respect to the Securities of the series; (16) the Events of Default set forth in Section 501 applicable with respect to the Securities of the series, if fewer than all -33- 42 of the Events of Default set forth in Section 501; (17) if other than as specified in Section 502, the Events of Default the occurrence of which would permit the declaration of the acceleration of Maturity pursuant to Section 502; (18) any other covenant or warranty included for the benefit of Securities of the series in addition to (and not inconsistent with) those included in this Indenture for the benefit of Securities of all series, or any other covenant or warranty included for the benefit of Securities of the series in lieu of any covenant or warranty included in this Indenture for the benefit of Securities of all series, or any provision that any covenant or warranty included in this Indenture for the benefit of Securities of all series shall not be for the benefit of Securities of such series, or any combination of such covenants, warranties or provisions; (19) if other than as specified in Article Thirteen, the subordination provisions applicable with respect to the Securities of the series, including a different definition of the terms "Senior Indebtedness," "Entitled Persons" or "Other Financial Obligations"; and (20) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 901(5)). All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 303) set forth, or determined in the manner provided, in the Officers' Certificate referred to above or in any such indenture supplemental hereto. Unless otherwise provided with respect to the interest on the Securities, at the option of the Company, interest on the Securities of any series that bears interest -34- 43 may be paid by mailing a check to the address of the person entitled thereto as such address shall appear in the Security Register. If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. Section 302. Denominations. The Securities of each series shall be issuable in registered form without coupons in such denominations as shall be specified as contemplated by Section 301. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. If the form or terms of the Securities of the series have been established in or pursuant to one or more Board Resolutions as -35- 44 permitted by Sections 201 and 301, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating, (a) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 201, that such form has been established in conformity with the provisions of this Indenture; (b) if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 301, that such terms have been established in conformity with the provisions of this Indenture; and (c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and, if applicable, to provisions of law which may require that a judgment for money damages rendered by a court in the United States be expressed in United States dollars. If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 301 or the Company Order and -36- 45 Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. Section 304. Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series of like tenor shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of -37- 46 any series the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. Section 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security of any series at the office or agency in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor and bearing a number not contemporaneously outstanding. At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. -38- 47 Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 1103 and ending at the close of business on the date of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. Notwithstanding the foregoing and except as otherwise specified or contemplated by Section 301, no Global Security shall be exchangeable pursuant to this Section 305 or Sections 304, 906 and 1107 for Securities registered in the name of, and no transfer of a Global Security of any series may be registered to, any Person other than the Depositary for such Security or its nominee unless (1) such Depositary (A) notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or (B) ceases to be a clearing agency registered under the Exchange Act, (2) the Company executes and delivers to the Trustee a Company Order that such Global Security shall be so exchangeable and the transfer thereof so registerable, or (3) there shall have occurred and be continuing an Event of Default, or an event which with notice or lapse of time or both would become an Event of Default, with respect to the Securities evidenced by such Global Security. Upon the occurrence in respect of any Global Security of any series of any one or more of the conditions specified in clauses (1), (2) or (3) of the preceding sentence or such other conditions as may be specified as contemplated by Section 301 for such series, -39- 48 such Global Security may be exchanged for Securities registered in the names of, and the transfer of such Global Security may be registered to, such Persons (including Persons other than the Depositary with respect to such series and its nominees), as such Depositary shall direct. Notwithstanding any other provision of this Indenture, any Security authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, any Global Security shall also be a Global Security and shall bear the legend specified in Section 206 except for any Security authenticated and delivered in exchange for, or upon registration of transfer of, a Global Security pursuant to the preceding sentence. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them, the Guarantor and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. -40- 49 Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount -41- 50 proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon -42- 51 registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Section 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Guarantor, the Trustee nor any agent of the Company, the Guarantor or the Trustee shall be affected by notice to the contrary. Section 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be destroyed and the Trustee, upon request by the Company, shall deliver a certificate of destruction to the Company. Section 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. Section 311. Guarantee of Debt Securities. -43- 52 The Guarantor hereby unconditionally guarantees to each holder of a Security of each series authenticated and delivered by the Trustee, the due and punctual payment of the principal of (including any amount in respect of original issue discount), and interest, if any (together with any additional amounts payable pursuant to the terms of such Security), on such Security and the due and punctual payment of the sinking fund payments, if any, and analogous obligations, if any, provided for pursuant to the terms of such Security, when and as the same shall become due and payable, whether at maturity or upon redemption or upon declaration of acceleration or otherwise according to the terms of such Security and of this Indenture. In case of default by the Company in the payment of any such principal (including any amount in respect of original issue discount), interest (together with any additional amounts payable pursuant to the terms of such Security), sinking fund payment, or analogous obligation, the Guarantor agrees duly and punctually to pay the same. The Guarantor hereby agrees that its obligations hereunder shall be absolute and unconditional irrespective of any extension of the time for payment of any such Security, any modification of any such Security, any invalidity, irregularity or unenforceability of any such Security or this Indenture, any failure to enforce the same or any waiver, modification or indulgence granted to the Company with respect thereto by the holder of such Security or the Trustee, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a demand or proceeding first against the Company, protest or notice with respect to any such Security or the indebtedness evidenced thereby and all demands whatsoever, and covenants that this guarantee will not be discharged as to any such Security except by payment in full of the principal of (including any amount payable in respect of original issue discount), and interest, if any (together with any additional amounts payable pursuant to the terms of such Security), thereon. The Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder (i) to be subrogated to the rights of a Holder against the Company with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Company in respect thereof or (ii) to receive any payment, in the nature of -44- 53 contribution or for any other reason, from any other obligor with respect to such payment. The indebtedness evidenced by the Guarantee is, to the extent provided in Article Thirteen hereto, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness of the Guarantor, and the Guarantee is issued subject to the provisions of Article Thirteen with respect thereto. The guarantee set forth in this Section shall not be valid or become obligatory for any purpose with respect to a Security of any series until the certificate of authentication on such Security shall have been signed by the Trustee. Section 312. Execution of Guarantees. To evidence its guarantee specified in Section 311 to the holders of Securities of any series, the Guarantor hereby agrees to execute the Guarantees in substantially the form above recited to be endorsed on each Security of such series authenticated and delivered by the Trustee. Such Guarantees shall be executed on behalf of the Guarantor by both (a) its Chairman or its Vice Chairman or its President or any Vice President and (b) its Treasurer or any Assistant Treasurer or its Secretary or any Assistant Secretary, under its corporate seal which may, but need not, be attested, prior to the authentication of the Security on which it is endorsed, and the delivery of such Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of such Guarantees on behalf of the Guarantor. The seal of the Guarantor may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Guarantees. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Guarantee that has been duly authenticated and delivered by the Trustee. Such signatures may be the manual or facsimile signatures of such officers and may be imprinted or otherwise reproduced on the Guarantees. In case any officer of the Guarantor who shall have signed any of the Guarantees shall cease to be an officer before the Security on which such Guarantees are endorsed shall have been authenticated and delivered by the Trustee or disposed of by the Company, such Security nevertheless may be authenticated and delivered or disposed of as though the person who signed -45- 54 such Guarantees had not ceased to be such officer, and any Guarantees may be signed on behalf of the Guarantor by such persons as, at the actual date of the execution of such Guarantees, shall be the proper officers of the Guarantor, although at the date of such Security or of the execution of this Indenture any such person was not such an officer. ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company or the Guarantor and thereafter repaid to the Company or the Guarantor or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or -46- 55 (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company or the Guarantor, as the case may be, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company or the Guarantor, as the case may be, has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. Section 402. Application of Trust Money. Subject to provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any -47- 56 Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such money has been deposited with the Trustee. ARTICLE FIVE Remedies Section 501. Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Thirteen or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) the entry by a court, or in the case of a Material Banking Subsidiary, a governmental authority having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company, the Guarantor, or any Material Banking Subsidiary in an involuntary case or proceeding under any applicable Federal, state or Commonwealth of Puerto Rico bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company, the Guarantor or any Material Banking Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company, the Guarantor, or any Material Banking Subsidiary under any applicable Federal, state or Commonwealth of Puerto Rico law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company, the Guarantor or any Material Banking Subsidiary or of any substantial part of their respective -48- 57 property, or ordering the winding up or liquidation of their respective affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (2) the commencement by the Company, the Guarantor or any Material Banking Subsidiary of a voluntary case or proceeding under any applicable Federal or Commonwealth of Puerto Rico bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company, the Guarantor or any Material Banking Subsidiary in an involuntary case or proceeding under any applicable Federal, state or Commonwealth of Puerto Rico bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal, state or Commonwealth of Puerto Rico law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or the Guarantor or of any substantial part of their respective property, or the making by either of them of an assignment for the benefit of creditors, or the admission by either of them in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company, the Guarantor or any Material Banking Subsidiary in furtherance of any such action; or -49- 58 (3) any other Event of Default provided with respect to Securities of that series. Section 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default specified in Sections 501(1) or 501(2) with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount (or, if any of the Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company, the Guarantor and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company or the Guarantor has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon -50- 59 overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. -51- 60 If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company or the Guarantor (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; 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 Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and -52- 61 any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 506. Application of Money Collected. Subject to the provisions of Article Thirteen, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively. Section 507. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; -53- 62 (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Section 307) any interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored -54- 63 severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. -55- 64 Section 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of or any premium or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 514. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. Section 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the -56- 65 execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX The Trustee Section 601. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 602. Notice of Defaults. If a default occurs hereunder with respect to Securities of any series, the Trustee shall give the Holders of Securities of such series notice of such default as and to the extent provided in the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(3) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. Section 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, -57- 66 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) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and -58- 67 (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Section 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. Section 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. Section 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); -59- 68 (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. Section 608. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall 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 having an office in the Borough of Manhattan, The City of New York, at which at any particular time its corporate trust business may be conducted. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such 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 Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. -60- 69 Section 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, -61- 70 then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to all securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series to all Holders of Securities of such series in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. -62- 71 Section 611. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company, the Guarantor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company, the Guarantor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the Guarantor, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution -63- 72 and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company, the Guarantor or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company and the Guarantor shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) and (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. -64- 73 Section 613. Preferential Collection of Claims Against the Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). Section 614. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conver- -65- 74 sion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. _______________, -66- 75 As Trustee By______________________, As Authenticating Agent By______________________, Authorized Officer ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company Section 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (a) semi-annually, not later than June 30 and December 30 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of the preceding June 15 or December 15, as the case may be, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such is furnished, excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. Section 702. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. -67- 76 (b) The rights of the Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. Section 703. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. Section 704. Reports by Company and Guarantor. The Company and the Guarantor shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. -68- 77 ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease Section 801. Guarantor May Consolidate, Etc., Only on Certain Terms. Neither the Guarantor nor the Company shall consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and neither the Guarantor nor the Company shall permit any Person to consolidate with or merge into the Guarantor or the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Guarantor or the Company, unless: (1) in case the Guarantor or the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Guarantor or the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Guarantor or the Company substantially as an entirety shall (i) in the case of the Guarantor expressly guarantee, or (ii) in the case of the Company, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, expressly assume the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Guarantor or the Company, as the case may be, to be performed or observed; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Guarantor or the Company, as the case may be, or a Subsidiary as a result of such transaction as having been incurred by the Guarantor or the Company, as the case may be, or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default shall have happened and be continuing; (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Guarantor or the Company, as the -69- 78 case may be, would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Guarantor or the Company or such successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; and (4) the Guarantor or the Company, as the case may be, has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 802. Successor Substituted. Upon any consolidation of the Guarantor or the Company, as the case may be, with, or merger of the Guarantor or the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Guarantor or the Company, as the case may be, substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Guarantor or the Company, as the case may be, is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Guarantor or the Company, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Guarantor or the Company, as the case may be, herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company and the Guarantor, when authorized by Board Resolutions, and -70- 79 the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company or the Guarantor and the assumption by any such successor of the covenants of the Company or the Guarantor herein, in the Securities and in the Guarantees; or (2) to add to the covenants of the Company or the Guarantor for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default; or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Securities in uncertificated form; or (5) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, provided that any such addition, change or elimination (i) shall neither (A) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Security with respect to such provision or (ii) shall become effective only when there is no such Security Outstanding; or -71- 80 (6) to secure the Securities; or (7) to establish the form or terms of Securities or Guarantees of any series as permitted by Sections 201, 205, 301 and 312; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); or (9) subject to Section 907, to add to, change or eliminate any of the provisions of Article Thirteen in respect of any series of Securities, including Outstanding Securities, provided that any such action pursuant to this clause (9) shall not adversely affect the interests of the Holders of Securities of any series in any material respect; (10) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this clause (10) shall not adversely affect the interests of the Holders of Securities of any series in any material respect. Section 902. Supplemental Indentures With Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company and the Guarantor, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of -72- 81 modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date) or modify the provisions of the Indenture with respect to the subordination of the Securities on the Guarantees of any series in a manner adverse to the Holders of the Securities, or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 513 or Section 1009, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby, provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the -73- 82 references to "the Trustee" and concomitant changes in this Section and Section 1009, or the deletion of this proviso, in accordance with the requirements of Sections 611(b) and 901(8). A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. -74- 83 Section 906. Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. Section 907. Subordination Unimpaired. No provision in any supplemental indenture that affects the superior position of the holders of Senior Indebtedness shall be effective against any holder of Senior Indebtedness unless such holder shall have consented thereto. Notwithstanding any provisions in this Indenture or otherwise, the rights of Entitled Persons in respect of Other Financial Obligations under this Indenture and otherwise in respect of the Securities or any series of the Securities may, at any time and from time to time, be modified in any respect or eliminated without the consent of any Entitled Person in respect of Other Financial Obligations. ARTICLE TEN Covenants Section 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of and any premium and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered -75- 84 for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 1003. Money for Securities Payments to Be Held in Trust. If the Company or the Guarantor shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of or any premium or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. -76- 85 The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment in respect of the Securities of that series, and upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities of that series. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of and any premium or interest on any Security of any series and remaining unclaimed for two years after such principal and any premium or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security or any coupon appertaining thereto shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. -77- 86 Section 1004. Statement by Officers as to Default. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. Section 1005. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 1006. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. Section 1007. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied -78- 87 or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. Section 1008. Payment of Additional Amounts. All payments of principal, premium, if any, and interest in respect of the Guarantees, shall be made without set-off, counterclaim, fees, liabilities or similar deductions, and free and clear of, and without deduction or withholding for, taxes, levies, imposts, duties, charges or fees of whatsoever nature now or hereafter imposed, levied, collected, deducted, withheld or assessed by or on behalf of the Commonwealth of Puerto Rico or any political subdivision or taxing authority thereof or therein ("Taxes"). If the Guarantor or any agent thereof is required by law or regulation to make any deduction or withholding for or on account of Taxes, the Guarantor shall pay such additional amounts ("Additional Amounts") as shall be necessary in order that the net amounts received by the Holders of the Securities of any series or the holders or beneficial owners of any interest therein or rights in respect thereof after such deduction or withholding shall equal the amount that would have been receivable thereunder in the absence of such deduction or withholding, except that no such Additional Amounts shall be payable: (a) to any Holder of a Security or any interest therein or rights in respect thereof where such deduction or withholding is required by reason of such Holder having some connection with the Commonwealth of Puerto Rico or any political subdivision or taxing authority thereof or thereon other than the mere holding of a payment in respect of such security; (b) in respect of any deduction or withholding that would not have been required but for the presentation by the Holder of a Security for payment on a date more than 30 days after the Date of Maturity or the date on which payment thereof is duly provided for, whichever occurs later; or -79- 88 (c) in respect of any deduction or withholding that would not have been required but for the failure to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with the Commonwealth of Puerto Rico, or any political subdivision or taxing authority thereof or therein, of the Holder of a Security or any interest therein or rights in respect thereof, if compliance is required by the Commonwealth of Puerto Rico, or any political subdivision or taxing authority thereof or therein, as a precondition to exemption from such deduction or withholding. Any reference in the Indenture to principal or interest shall be deemed also to refer to any Additional Amounts that may be payable under this Section 1008. Section 1009. Waiver of Certain Covenants. The Company and the Guarantor may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1003, 1004, 1006 and 1007, with respect to the Securities of any series if before the time for such compliance the Holders of at least 66-2/3% in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the Guarantor and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. Section 1010. Statement by Officers as to Default of the Guarantor. The Guarantor will deliver to the Trustee, within 120 days after the end of each fiscal year of the Guarantor ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Guarantor is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Guarantor shall be in default, specifying all such defaults -80- 89 and the nature and status thereof of which they may have knowledge. Section 1011. Existence of the Guarantor. Subject to Article Eight, the Guarantor will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises. The Guarantor shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Guarantor and that the loss thereof is not disadvantageous in any material respect to the Holders. ARTICLE ELEVEN Redemption of Securities Section 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. Section 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. -81- 90 Section 1103. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of any series are to be redeemed (unless all of the Securities of such series and of a specified tenor are to be redeemed), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. If less than all of the Securities of such series and of a specified tenor are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 1104. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, unless a shorter period is specified in the Securities to be redeemed, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, -82- 91 (2) the Redemption Price, (3) if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption of any Securities, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (6) that the redemption is for a sinking fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Section 1105. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. Section 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, -83- 92 together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. Section 1107. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE Sinking Funds Section 1201. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment". If -84- 93 provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. Section 1202. Satisfaction of Sinking Fund Payments with Securities. The Company (1) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (2) may apply as a credit Securities of a series which have been redeemed and so delivered either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. Section 1203. Redemption of Securities for Sinking Fund. Not less than 45 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1202 and will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. -85- 94 ARTICLE THIRTEEN Subordination of Securities and Guarantees Section 1301. Securities Subordinate to Senior Indebtedness. Each of the Company and the Guarantor covenants and agrees, and each Holder of a Security of any series, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Securities of such series, and the Guarantees endorsed thereon and the payment of the principal of (and premium, if any) and interest on each of all of the Securities of such series are hereby expressly made subordinate and subject in right of payment to the prior payment in full, in the case of the Securities, of all Senior Indebtedness of the Company and, in the case of the Guarantees all Senior Indebtedness of the Guarantor. Section 1302. Payment Over of Proceeds Upon Dissolution, Etc. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or the Guarantor, as the case may be, or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company or the Guarantor, as the case may be, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company or the Guarantor, as the case may be, then and in any such event the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness of the Company or the Guarantor, as the case may be, or provision shall be made for such payment in money or money's worth, before the Holders of the Securities of any series are entitled to receive any payment on account of principal of (or premium, if any) or interest on the Securities of such series, and to that end the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, shall be entitled to receive, for application to the payment hereof, any payment or distribution of any kind or character, whether in cash, property or securities, -86- 95 which may be payable or deliverable in respect of the Securities of any series in any such case, proceeding, dissolution, liquidation or other winding up or event. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the holder of any Security of any series shall have received any payment or distribution of assets of the Company or the Guarantor, as the case may be, of any kind or character, whether in cash, property or securities, before all Senior Indebtedness of the Company or the Guarantor, as the case may be, is paid in full or payment thereof provided for, and if such fact shall, at or prior to the time of such payment or distribution have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company or the Guarantor, as the case may be, for application to the payment of all Senior Indebtedness of the Company or the Guarantor, as the case may be, remaining unpaid, to the extent necessary to pay all Senior Indebtedness of the Company or the Guarantor, as the case may be, in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be. For purposes of this Article only, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company or the Guarantor, as the case may be, as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment which are subordinated in right of payment to all Senior Indebtedness of the Company or the Guarantor, as the case may be, which may at the time be outstanding to the same extent as, or to a greater extent than, the Securities or the Guarantees are so subordinated as provided in this Article. The consolidation of the Company or the Guarantor, as the case may be, with, or the merger of the Company , or the Guarantor, as the case may be, into, another Person or the liquidation or dissolution of the Company or the Guarantor, as the case may be, following the sale, conveyance, transfer or lease of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article Eight shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the -87- 96 benefit of creditors or marshalling of assets and liabilities of the Company or the Guarantor, as the case may be, for the purposes of this Section if the Person formed by such consolidation or into which the Company or the Guarantor, as the case may be, is merged or the Person which acquires by sale, conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such sale, consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight. Section 1303. Prior Payment to Senior Indebtedness Upon Acceleration of Securities. In the event that any Securities of any series are declared due and payable before their Stated Maturity, then and in such event the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness of the Company or the Guarantor, as the case may be, or provision shall be made for such payment in cash, before the Holders of the Securities of such series are entitled to receive any payment of the principal of, premium, if any, or interest on the Securities of such series or on account of the purchase or other acquisition of Securities of such series; provided, however, that if, as contemplated by Section 301, Article Twelve is applicable to any series of Securities nothing in this Section shall prevent the satisfaction of any sinking fund payment in accordance with Article Twelve by delivering and crediting pursuant to Section 1202 Securities of such series which have been acquired (upon redemption or otherwise) prior to such declaration of acceleration. In the event that, notwithstanding the foregoing, the Company or the Guarantor, as the case may be, shall make any payment to the Trustee or the Holder of any Security of any series prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company or the Guarantor, as the case may be. The provisions of this Section shall not apply to any payment with respect to which Section 1302 would be applicable. -88- 97 Section 1304. No Payment When Senior Indebtedness Default. (a) In the event and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Senior Indebtedness of the Company or the Guarantor, as the case may be, beyond any applicable grace period with respect thereto, or in the event that any event of default with respect to any Senior Indebtedness of the Company or the Guarantor, as the case may be, shall have occurred and be continuing permitting the holders of such Senior Indebtedness (or a trustee on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, unless and until such event of default shall have been cured or waived or shall have ceased to exist and such acceleration shall have been rescinded or annulled, or (b) in the event any judicial proceeding shall be pending with respect to any such default in payment, or event of default, then no payment shall be made by the Company or the Guarantor, as the case may be, on account of principal of (or premium, if any) or interest on the Securities of any series or on account of the purchase or other acquisition of Securities of any series; provided, however, that nothing in this Section shall prevent the satisfaction of any sinking fund payment in accordance with Article Twelve by delivering and crediting pursuant to Section 1202 Securities of such series which have been acquired (upon redemption or otherwise) prior to such default in payment or event of default. In the event that, notwithstanding the foregoing, the Company or the Guarantor, as the case may be, shall make any payment to the Trustee or the Holder of any Security of any series prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company or the Guarantor, as the case may be. The provisions of this Section shall not apply to any payment with respect to which Section 1302 would be applicable. Section 1305. Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities of any series, or in the Guarantees, shall prevent (a) the Company or the -89- 98 Guarantor, as the case may be, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company or the Guarantor, as the case may be, referred to in Section 1302 or under the conditions described in Section 1303 or 1304, from making payments at any time of principal of (and premium, if any) or interest on the Securities of any series, or (b) the application by the Trustee of any money deposited with it hereunder to the payment of or on account of the principal of (and premium, if any) or interest on the Securities of any series or the retention of such payment by the Holder, if, at the time of such application by the Trustee, it did not have actual knowledge that such payment would have been prohibited by the provisions of this Article. Section 1306. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness of the Company or the Guarantor, as the case may be, the Holders of the Securities of a series shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to indebtedness of the Company to substantially the same extent as the Securities of such service are subordinated and is entitled to like rights of subrogation) to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness of the Company or the Guarantor, as the case may be, until the principal of (and premium, if any) and interest on the Securities of such series shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of the Company or the Guarantor, as the case may be, of any cash, property or securities to which the Holders of the Securities of a series or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, by Holders of the Securities of a series or the Trustee, shall, as among the Company, the Guarantor, their respective creditors other than holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, and the Holders of the Securities of such -90- 99 series, be deemed to be a payment or distribution by the Company or the Guarantor, as the case may be, to or on account of the Senior Indebtedness of the Company or the Guarantor, as the case may be. Section 1307. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities of a series on the one hand and the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be (and, in the case of Section 1315, Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be), on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities of any series is intended to or shall (a) impair, as among the Company or the Guarantor, as the case may be, their respective creditors other than holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, and the Holders of the Securities of any series, the obligation of the Company or the Guarantor, as the case may be, which is absolute and unconditional (and which, subject to the rights under this Article of the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, and the rights under Section 1315 of Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, is intended to rank equally with all other obligations of the Company or the Guarantor, as the case may be), to pay to the Holders of the Securities of a series the principal of (and premium, if any) and interest on the Securities of such series as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company or the Guarantor, as the case may be, of the Holders of the Securities of a series and creditors of the Company or the Guarantor, as the case may be, other than the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be; or (c) prevent the Trustee or the Holder of any Security of any series from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness, and under Section 1315 of Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. -91- 100 Section 1308. Trustee to Effectuate Subordination. Each holder of a Security of any series by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination and payment provisions provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. Section 1309. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness of the Company or the Guarantor, as the case may be, to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or the Guarantor, as the case may be, or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company or the Guarantor, as the case may be, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities of any series, without incurring responsibility to the Holders of the Securities of any series and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness of the Company or the Guarantor, as the case may be, or otherwise amend or supplement in any manner Senior Indebtedness of the Company or the Guarantor, as the case may be, or any instrument evidencing the same or any agreement under which Senior Indebtedness of the Company or the Guarantor, as the case may be, is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness of the Company or the Guarantor, as the case may be; (iii) release any Person liable in any manner for the collection of Senior Indebtedness of the Company or the Guarantor, as the case may be; and (iv) exercise or refrain from exer- -92- 101 cising any rights against the Company or the Guarantor, as the case may be, and any other Person. Section 1310. Notice to Trustee. The Company or the Guarantor, as the case may be, shall give prompt written notice to the Trustee of any fact known to the Company or the Guarantor, as the case may be, which would prohibit the making of any payment or distribution to or by the Trustee in respect of the Securities of any series or the Guarantees. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment or distribution to or by the Trustee in respect of the Securities of a series or the Guarantees, unless and until the Trustee shall have received written notice thereof from the Company or the Guarantor, as the case may be, or a holder of Senior Indebtedness of the Company or the Guarantor, as the case may be, or from any trustee therefor or from any Entitled Person in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 601, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness of the Company or the Guarantor, as the case may be, (or a trustee therefor) or an Entitled Person in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, to establish that such notice has been given by a holder of Senior Indebtedness of the Company or the Guarantor, as the case may be (or a trustee therefor), or an Entitled Person in respect of Other Financial Obligations of the Company or -93- 102 the Guarantor, as the case may be. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company or the Guarantor, as the case may be, or an Entitled Person in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of the Company or the Guarantor, as the case may be, or Other Financial Obligations of the Company or the Guarantor, as the case may be, held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment on distribution to such Person pending judicial determination as to the right of such Person to receive such payment or distribution. Section 1311. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company or the Guarantor, as the case may be, referred to in this Article, the Trustee, subject to the provisions of Section 601, and the Holders of the Securities of any series shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities of such series, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness of the Company or the Guarantor, as the case may be, and other indebtedness of the Company and the Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. -94- 103 Section 1312. Trustee Not Fiduciary for Holders of Senior Indebtedness or Entitled Persons. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, or Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, and shall not be liable to any such holders or Entitled Persons if it shall in good faith mistakenly pay over or distribute to Holders of Securities of any series or to the Company or the Guarantor, as the case may be, or to any other Person cash, property or securities to which any holders of Senior Indebtedness or Entitled Persons in respect of Other Financial Obligations shall be entitled by virtue of this Article or otherwise. Section 1313. Rights of Trustee as Holder of Senior Indebtedness or Entitled Person; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it and with respect to any Other Financial Obligations owed to the Trustee as an Entitled Person, to the same extent as any other holder of Senior Indebtedness or Entitled Person in respect of Other Financial Obligations, as the case may be, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder or Entitled Person. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 607. Section 1314. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Section 1313 shall not apply to the Company or -95- 104 any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 1315. Payment of Proceeds in Certain Cases. (a) If, after giving effect to the provisions of Section 1302 and Section 1306, any amount of cash, property or securities shall be available for payment or distribution in respect of the Securities ("Excess Proceeds"), and any Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, shall not have received payment in full of all amounts due or to become due on or in respect of such Other Financial Obligations of the Company or the Guarantor, as the case may be (and provision shall not have been made for such payment in money or money's worth), then such Excess Proceeds shall first be applied (ratably with any amount of cash, property or securities available for payment or distribution in respect of any other indebtedness of the Company or the Guarantor, as the case may be, that by its express terms provides for the payment over of amounts corresponding to Excess Proceeds to Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be) to pay or provide for the payment of the Other Financial Obligations of the Company or the Guarantor, as the case may be, remaining unpaid, to the extent necessary to pay all Other Financial Obligations of the Company or the Guarantor, as the case may be, in full, after giving effect to any concurrent payment or distribution to or for Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be. Any Excess Proceeds remaining after the payment (or provision for payment) in full of all Other Financial Obligations shall be available for payment or distribution in respect of the Securities. (b) In the event that, notwithstanding the foregoing provisions of subsection (a) of this Section, the Trustee or Holder of any Security shall have received any payment or distribution of assets of the Company or the Guarantor, as the case may be, of any kind or character, whether in cash, property or securities, before all Other Financial Obligations of the Company or the Guarantor, as the case may be, are paid in full or payment thereof duly provided for, and if such fact shall, at or prior to the time of such payment or distribution have been made known to the Trustee or, as the case may be, such Holder, then and in such event, subject to any obligation that the Trustee or such Holder may have pursuant to Section 1302, such payment -96- 105 or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for payment in accordance with subsection (a). (c) Subject to the payment in full of all Other Financial Obligations, the Holders of the Securities shall be subrogated (equally and ratably with the holders of all indebtedness of the Company or the Guarantor, as the case may be, that by its express terms provides for the payment over of amounts corresponding to Excess Proceeds to Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, and is entitled to like rights of subrogation) to the rights of the Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, to receive payments and distributions of cash, property and securities applicable to the Other Financial Obligations of the Company or the Guarantor, as the case may be, until the principal of and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, of any cash, property or securities to which Holders of the Securities or the Trustee would be entitled except for the provisions of this Section, and no payments over pursuant to the provisions of this Section to Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, by Holders of Securities or the Trustee, shall, as among the Company, its creditors other than Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, and the Holders of Securities be deemed to be a payment or distribution by the Company or the Guarantor, as the case may be, to or on account of the Other Financial Obligations. (d) The provisions of subsections (a), (b) and (c) of this Section are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the Entitled Persons in respect of Other Financial Obligations of the Company or the Guarantor, as the case may be, on the other hand, after giving effect to the rights of the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, as provided in this Article. Nothing contained in subsections (b) and (c) of this Section is intended to or shall affect the relative rights against the Company or the -97- 106 Guarantor, as the case may be, of the Holders of the Securities and (1) the holders of Senior Indebtedness or (2) other creditors of the Company other than Entitled Persons in respect of Other Financial Obligations. -98- 107 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. _____________________________ IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. BANPONCE FINANCIAL CORPORATION By____________________________ By____________________________ Attest: ______________________ BANPONCE CORPORATION By____________________________ By____________________________ Attest: ______________________ [TRUSTEE] By___________________________ -99- 108 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ____ day of ___________, ____, before me personally came _____________________________, to me known, who, being by me duly sworn, did depose and say that he is _____________________ of ________________________ __________, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. _____________________ STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ____ day of ___________, ____, before me personally came ____________________________, to me known, who, being by me duly sworn, did depose and say that he is ____________________ of _________________________ _________________, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. _____________________ -100- EX-5.(A) 5 OPINION OF BRUNILDA SANTOS DE ALVAREZ 1 EXHIBIT 5(a) August 3, 1995 The Board of Directors BanPonce Corporation 209 Munoz Rivera Avenue Hato Rey, Puerto Rico 00918 The Board of Directors Popular International Bank, Inc. c/o BanPonce Corporation 209 Munoz Rivera Avenue Hato Rey, Puerto Rico 00918 The Board of Directors BanPonce Financial Corp. 521 Fellowship Road Mt. Laurel, New Jersey 08054 Ladies and Gentlemen: This opinion is delivered in connection with the registration under the Securities Act of 1933 (the "Act") of (i) senior debt securities (the "BanPonce Senior Debt Securities"), subordinated debt securities (the "BanPonce Subordinated Debt Securities") and preferred stock, without par value (the "BanPonce Preferred Stock"), of BanPonce Corporation, a Puerto Rico corporation (the "Corporation"), (ii) senior debt securities (the "BanPonce Financial Senior Debt Securities") of BanPonce Financial Corp., a Delaware corporation ("Financial"), bearing the unconditional guarantees (the "BanPonce Financial Senior Debt Guarantees") of the Corporation, subordinated debt securities (the "BanPonce Financial Subordinated Debt Securities") of Financial, bearing the unconditional guarantees (the "BanPonce Financial Subordinated Debt Guarantees") of the Corporation, and shares of preferred stock, par value $.01 per share (the "BanPonce Financial Preferred Stock") of Financial, bearing the unconditional guarantees (the "BanPonce Financial Preferred Stock Guarantees"), and (iii) senior debt securities (the "PIB Senior Debt Securities") of Popular International Bank, Inc., a Puerto 2 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -2- Rico corporation ("PIB"), bearing the unconditional guarantees (the "PIB Senior Debt Securities Guarantees") of the Corporation, subordinated debt securities (the "PIB Subordinated Debt Securities") of PIB, bearing the unconditional guarantees (the "PIB Subordinated Debt Securities Guarantees") of the Corporation and preferred stock, par value $25.00 per share (the "PIB Preferred Stock") of PIB, bearing the unconditional guarantees (the "PIB Preferred Stock Guarantees") of the Corporation (the BanPonce Senior Debt Securities, the BanPonce Subordinated Debt Securities, the BanPonce Financial Senior Debt Securities, the BanPonce Financial Subordinated Debt Securities, the PIB Senior Debt Securities and the PIB Subordinated Debt Securities are sometimes collectively referred to herein as the "Debt Securities", the BanPonce Financial Senior Debt Guarantees, the BanPonce Financial Subordinated Debt Guarantees, the BanPonce Financial Preferred Stock Guarantees, the PIB Senior Debt Securities Guarantees, the PIB Subordinated Debt Securities Guarantees and the PIB Preferred Stock Guarantees are sometimes collectively referred to herein as the "Guarantees", and the Debt Securities, the BanPonce Preferred Stock, the BanPonce Financial Preferred Stock and the PIB Preferred Stock are sometimes collectively referred to herein as the "Securities"). The Securities are limited to an aggregate initial offering price not to exceed $500,000,000. 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. On the basis of such examination, I advise you that, in my opinion: (i) Each of the Corporation and PIB has been duly incorporated and is an existing corporation in good standing under the laws of the Commonwealth of Puerto Rico. (ii) When the registration statement relating to the Securities and the Guarantees (the "Registration Statement") has become effective under the Act, the terms of the BanPonce Senior Debt Securities and of their issuance and sale have been duly established in conformity with the indenture relating to the BanPonce Senior Debt Securities (the "BanPonce Senior 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, and the BanPonce Senior Debt Securities have 3 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -3- been duly executed and authenticated in accordance with the BanPonce Senior Indenture and issued and sold as contemplated in the Registration Statement, the BanPonce Senior Debt Securities 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. (iii) When the Registration Statement has become effective under the Act, the indenture relating to the BanPonce Subordinated Debt Securities (the "BanPonce Subordinated Indenture") has been duly executed and delivered, the terms of the BanPonce Subordinated Debt Securities and of their issuance and sale have been duly established in conformity with the BanPonce Subordinated 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, and the BanPonce Subordinated Debt Securities have been duly executed and authenticated in accordance with the BanPonce Subordinated Indenture and issued and sold as contemplated in the Registration Statement, the BanPonce Subordinated Debt Securities 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. (iv) When the Registration Statement has become effective under the Act, the terms of the BanPonce Financial Senior Debt Securities and of the BanPonce Financial Senior Debt Guarantees and of their issuance and sale have been duly established in conformity with the indenture relating to the BanPonce Financial Senior Debt Securities (the "BanPonce Financial Senior Indenture") so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon Financial or the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over Financial or the Corporation, the BanPonce Financial Senior Debt Securities have been duly executed and authenticated, and the BanPonce Financial Senior Debt Guarantees have been duly executed, each in accordance 4 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -4- with the BanPonce Financial Senior Indenture, and the BanPonce Financial Senior Debt Securities and the BanPonce Financial Senior Debt Guarantees have been issued and sold as contemplated in the Registration Statement, the BanPonce Financial Senior Debt Securities will constitute valid and legally binding obligations of Financial and the BanPonce Financial Senior Debt Guarantees will constitute valid and legally binding obligations of the Corporation, in each case 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. (v) When the Registration Statement has become effective under the Act, the indenture relating to the BanPonce Financial Subordinated Debt Securities (the "BanPonce Financial Subordinated Indenture") has been duly executed and delivered, the terms of the BanPonce Financial Subordinated Debt Securities and of the BanPonce Financial Subordinated Debt Guarantees and of their issuance and sale have been duly established in conformity with the BanPonce Financial Subordinated Indenture so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon Financial or the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over Financial or the Corporation, the BanPonce Financial Subordinated Debt Securities have been duly executed and authenticated, and the BanPonce Financial Subordinated Debt Guarantees have been duly executed, each in accordance with the BanPonce Financial Subordinated Indenture, and the BanPonce Financial Subordinated Debt Securities and the BanPonce Financial Subordinated Debt Guarantees have been issued and sold as contemplated in the Registration Statement, the BanPonce Financial Subordinated Debt Securities will constitute valid and legally binding obligations of Financial and the BanPonce Financial Subordinated Debt Guarantees will constitute valid and legally binding obligations of the Corporation, in each case 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. (vi) When the Registration Statement has become effective under the Act, the indenture relating to the PIB Senior Debt Securities (the "PIB Senior Indenture") has been duly executed and delivered, the terms of the PIB Senior Debt 5 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -5- Securities and of the PIB Senior Debt Securities Guarantees and of their issuance and sale have been duly established in conformity with the PIB Senior Indenture so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon PIB or the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over PIB or the Corporation, the PIB Senior Debt Securities have been duly executed and authenticated and the PIB Senior Debt Securities Guarantees have been duly executed, each in accordance with the PIB Senior Indenture, and the PIB Senior Debt Securities and the PIB Senior Debt Securities Guarantees have been issued and sold as contemplated in the Registration Statement, the PIB Senior Debt Securities will constitute valid and legally binding obligations of PIB and the PIB Senior Debt Securities Guarantees will constitute valid and legally binding obligations of the Corporation, in each case 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. (vii) When the Registration Statement has become effective under the Act, the indenture relating to the PIB Subordinated Debt Securities (the "PIB Subordinated Indenture") has been duly executed and delivered, the terms of the PIB Subordinated Debt Securities and of the PIB Subordinated Debt Securities Guarantees and of their issuance and sale have been duly established in conformity with the PIB Subordinated Indenture so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon PIB or the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over PIB or the Corporation, and the PIB Subordinated Debt Securities have been duly executed and authenticated and the PIB Subordinated Debt Securities Guarantees have been duly executed, each in accordance with the PIB Subordinated Indenture, and the PIB Subordinated Debt Securities and the PIB Subordinated Debt Securities Guarantees have been issued and sold as contemplated in the Registration Statement, the PIB Subordinated Debt Securities will constitute valid and legally binding obligations of PIB and the PIB Subordinated Debt Securities Guarantees will constitute valid and legally binding obligations of the Corporation, in each case subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar 6 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -6- laws of general applicability relating to or affecting creditors' rights and to general equity principles. (viii) When the Registration Statement has become effective under the Act, a certificate with respect to the BanPonce Preferred Stock has been duly filed and recorded with the Department of State of the Commonwealth of Puerto Rico as required by the General Corporation Law of the Commonwealth of Puerto Rico, the terms of the BanPonce Preferred Stock and of its issue and sale have been duly established in conformity with the Corporation's restated certificate of incorporation 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, all regulatory consents or approvals for the issuance and sale of the BanPonce Preferred Stock have been obtained and the BanPonce Preferred Stock has been duly issued and sold as contemplated by the Registration Statement, the BanPonce Preferred Stock will be validly issued, fully paid, and nonassessable. (ix) When the Registration Statement has become effective under the Act, a certificate with respect to the PIB Preferred Stock has been duly filed and recorded with the Department of State of the Commonwealth of Puerto Rico as required by the General Corporation Law of the Commonwealth of Puerto Rico, the terms of the PIB Preferred Stock and of its issue and sale have been duly established in conformity with PIB's certificate of incorporation so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon PIB or the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over PIB or the Corporation, all regulatory consents or approvals for the issuance and sale of the PIB Preferred Stock and for the issuance of the PIB Preferred Stock Guarantees have been obtained, and the PIB Preferred Stock has been duly issued and sold as contemplated by the Registration Statement, the PIB Preferred Stock will be validly issued, fully paid and nonassessable, and when the terms of the PIB Preferred Stock Guarantees have been duly approved by the Board of Directors or other authorized officials of the Corporation and the PIB Preferred Stock Guarantees have been duly executed, the PIB Preferred Stock Guarantees will constitute valid and legally binding obligations of the Corporation, subject to 7 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -7- bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (x) When the Registration Statement has become effective under the Act, a certificate of designations with respect to the BanPonce Financial Preferred Stock has been duly filed and recorded with the Secretary of State of the State of Delaware, the terms of the BanPonce Financial Preferred Stock and of its issue and sale have been duly established in conformity with Financial's certificate of incorporation, as amended, so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon Financial or the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over Financial or the Corporation, all regulatory consents or approvals for the issuance and sale of the BanPonce Financial Preferred Stock and for the issuance of the BanPonce Financial Preferred Stock Guarantees have been obtained, when the terms of the BanPonce Financial Preferred Stock Guarantees have been duly approved by the Board of Directors or other authorized officials of the Corporation and the BanPonce Preferred Stock Guarantees have been duly executed, and the BanPonce Financial Preferred Stock and the BanPonce Financial Preferred Stock Guarantees have been duly issued and sold as contemplated by the Registration Statement, the BanPonce Financial Preferred Stock 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. I note that, as of the date of this opinion, a judgment for money in an action based on a Debt Security denominated in a foreign currency or currency unit, or on a related Guarantee, in a Federal or state court in the United States ordinarily would be enforced in the United States only in United States dollars. The date used to determine the rate of conversion of the foreign currency or currency unit in which a particular Debt Security is denominated into United States dollars will depend on various factors, including which court renders the judgment. In the case of a Debt Security denominated in a foreign currency, or a related Guarantee, a state court in the State of New York rendering 8 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -8- a judgment on a Debt Security, or on a related Guarantee, would be required under Section 27 of the New York Judiciary Law to render such judgment in the foreign currency in which the Debt Security is denominated, and such judgment would be converted into United States dollars at the exchange rate prevailing on the date of entry of the judgment. The foregoing opinion is limited to the Federal laws of the United States, the General Corporation Law of the State of Delaware, the laws of the State of New York and the Commonwealth of Puerto Rico, and I am expressing no opinion as to the effect of the laws of any other jurisdiction. With respect to all matters of the laws of the State of New York, I have relied upon the opinion, dated the date hereof, of Sullivan & Cromwell, and my opinion is subject to the same assumptions, qualifications and limitations with respect to such matters as are contained in such opinion of Sullivan & Cromwell. Also, I have relied as to certain matters on information obtained from public officials, officers of the Corporation, Financial and PIB, and other sources believed by me to be responsible, and I have assumed that each of the BanPonce Senior Indenture and the BanPonce Financial Senior Indenture has been duly authorized, executed and delivered by the respective Trustee thereunder, assumptions which I have not independently verified. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to me under the heading "Validity of Offered Securities" in the Prospectus contained in the Registration Statement. 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 Brunilda Santos de Alvarez EX-5.(B) 6 OPINION OF SULLIVAN & CROMWELL 1 EXHIBIT 5(b) August 4, 1995 BanPonce Corporation, 209 Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918. Popular International Bank, Inc., c/o BanPonce Corporation, 209 Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918. BanPonce Financial Corp., 521 Fellowship Road, Mt. Laurel, New Jersey 08054. Ladies and Gentlemen: This opinion is delivered in connection with the registration under the Securities Act of 1933 (the "Act") of (i) senior debt securities (the "BanPonce Senior Debt Securities"), subordinated debt securities (the "BanPonce Subordinated Debt Securities") and preferred stock, without par value (the "BanPonce Preferred Stock"), of BanPonce Corporation, a Puerto Rico corporation (the "Corporation"), (ii) senior debt securities (the "BanPonce Financial Senior Debt Securities") of BanPonce Financial Corp., a Delaware corporation ("Financial"), bearing the unconditional guarantees (the "BanPonce Financial Senior Debt Guarantees") 2 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -2- of the Corporation, subordinated debt securities of Financial (the "BanPonce Financial Subordinated Debt Securities"), bearing the unconditional guarantees (the "BanPonce Financial Subordinated Debt Guarantees") of the Corporation, and shares of preferred stock, par value $.01 per share, of Financial (the "BanPonce Financial Preferred Stock"), bearing the unconditional guarantees (the "BanPonce Financial Preferred Stock Guarantees") of the Corporation, and (iii) senior debt securities (the "PIB Senior Debt Securities") of Popular Bank International, Inc., a Puerto Rico corporation ("PIB"), bearing the unconditional guarantees (the "PIB Senior Debt Securities Guarantees") of the Corporation, subordinated debt securities of PIB (the "PIB Subordinated Debt Securities"), bearing the unconditional guarantees (the "PIB Subordinated Debt Securities Guarantees") of the Corporation and preferred stock, par value $25.00 per share, of PIB (the "PIB Preferred Stock"), bearing the unconditional guarantees (the "PIB Preferred Stock Guarantees") of the Corporation (the BanPonce Senior Debt Securities, the BanPonce Subordinated Debt Securities, the BanPonce Financial Senior Debt Securities, the BanPonce 3 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -3- Financial Subordinated Debt Securities, the PIB Senior Debt Securities and the PIB Subordinated Debt Securities are sometimes collectively referred to herein as the "Debt Securities"; the BanPonce Financial Senior Debt Guarantees, the BanPonce Financial Subordinated Debt Guarantees, the BanPonce Financial Preferred Stock Guarantees, the PIB Senior Debt Securities Guarantees, the PIB Subordinated Debt Securities Guarantees and the PIB Preferred Stock Guarantees are sometimes collectively referred to herein as the "Guarantees"; and the Debt Securities, the BanPonce Preferred Stock, the BanPonce Financial Preferred Stock and the PIB Preferred Stock are sometimes collectively referred to herein as the "Securities"). The Securities are limited to an aggregate initial offering price not to exceed $500,000,000. We, as your counsel, have examined such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion. On the basis of such examination, we advise you that, in our opinion: (1) When the registration statement relating to the Securities and the Guarantees (the "Registration 4 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -4- Statement") has become effective under the Act, the terms of the BanPonce Senior Debt Securities and of their issuance and sale have been duly established in conformity with the indenture relating to the BanPonce Senior Debt Securities (the "BanPonce Senior 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, and the BanPonce Senior Debt Securities have been duly executed and authenticated in accordance with the BanPonce Senior Indenture and issued and sold as contemplated in the Registration Statement, the BanPonce Senior Debt Securities 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. 5 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -5- (2) When the Registration Statement has become effective under the Act, the indenture relating to the BanPonce Subordinated Debt Securities (the "BanPonce Subordinated Indenture") has been duly executed and delivered, the terms of the BanPonce Subordinated Debt Securities and of their issuance and sale have been duly established in conformity with the BanPonce Subordinated 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, and the BanPonce Subordinated Debt Securities have been duly executed and authenticated in accordance with the BanPonce Subordinated Indenture and issued and sold as contemplated in the Registration Statement, the BanPonce Subordinated Debt Securities will constitute valid and legally binding obligations of the Corporation, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and 6 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -6- similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (3) When the Registration Statement has become effective under the Act, the terms of the BanPonce Financial Senior Debt Securities and of the BanPonce Financial Senior Debt Guarantees and of their issuance and sale have been duly established in conformity with the indenture relating to the BanPonce Financial Senior Debt Securities (the "BanPonce Financial Senior Indenture") so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon Financial or the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over Financial or the Corporation, the BanPonce Financial Senior Debt Securities and the BanPonce Financial Service Debt Guarantees have been duly executed and authenticated, and the BanPonce Financial Senior Debt Guarantees have been duly executed, each in accordance with the BanPonce 7 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -7- Financial Senior Indenture, and the BanPonce Financial Senior Debt Securities and the BanPonce Financial Senior Debt Guarantees have been issued and sold as contemplated in the Registration Statement, the BanPonce Financial Senior Debt Securities will constitute valid and legally binding obligations of Financial and the BanPonce Financial Senior Debt Guarantees will constitute valid and legally binding obligations of the Corporation, in each case 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. (4) When the Registration Statement has become effective under the Act, the indenture relating to the BanPonce Financial Subordinated Debt Securities (the "BanPonce Financial Subordinated Indenture") has been duly executed and delivered, the terms of the BanPonce Financial Subordinated Debt Securities and of the BanPonce Financial Subordinated Debt Guarantees and of their issuance and sale have been duly established in 8 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -8- conformity with the BanPonce Financial Subordinated Indenture so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon Financial or the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over Financial or the Corporation, the BanPonce Financial Subordinated Debt Securities have been duly executed and authenticated, and the BanPonce Financial Subordinated Debt Guarantees have been duly executed, each in accordance with the BanPonce Financial Subordinated Indenture, and the BanPonce Financial Subordinated Debt Securities and the BanPonce Financial Subordinated Debt Guarantees have been issued and sold as contemplated in the Registration Statement, the BanPonce Financial Subordinated Debt Securities will constitute valid and legally binding obligations of Financial and the BanPonce Financial Subordinated Debt Guarantees will constitute valid and legally binding obligations of the Corporation, in each case subject to bankruptcy, insolvency, fraudulent transfer, 9 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -9- reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (5) When the Registration Statement has become effective under the Act, the indenture relating to the PIB Senior Debt Securities (the "PIB Senior Indenture") has been duly executed and delivered, the terms of the PIB Senior Debt Securities and of the PIB Senior Debt Securities Guarantees and of their issuance and sale have been duly established in conformity with the PIB Senior Indenture so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon PIB or the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over PIB or the Corporation, the PIB Senior Debt Securities have been duly executed and authenticated and the PIB Senior Debt Securities Guarantees have been duly executed, each in accordance with the PIB Senior Indenture, and the PIB Senior Debt Securities and the PIB Senior Debt Securities 10 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -10- Guarantees have been issued and sold as contemplated in the Registration Statement, the PIB Senior Debt Securities will constitute valid and legally binding obligations of PIB and the PIB Senior Debt Securities Guarantees will constitute valid and legally binding obligations of the Corporation, in each case 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. (6) When the Registration Statement has become effective under the Act, the indenture relating to the PIB Subordinated Debt Securities (the "PIB Subordinated Indenture") has been duly executed and delivered, the terms of the PIB Subordinated Debt Securities and of the PIB Subordinated Debt Securities Guarantees and of their issuance and sale have been duly established in conformity with the PIB Subordinated Indenture so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon PIB or the Corporation and so as to comply 11 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -11- with any requirement or restriction imposed by any court or governmental body having jurisdiction over PIB or the Corporation, the PIB Subordinated Debt Securities have been duly executed and authenticated and the PIB Subordinated Debt Securities Guarantees have been duly executed, each in accordance with the PIB Subordinated Indenture, and the PIB Subordinated Debt Securities and the PIB Subordinated Debt Securities Guarantees have been issued and sold as contemplated in the Registration Statement, the PIB Subordinated Debt Securities will constitute valid and legally binding obligations of PIB and the PIB Subordinated Debt Securities Guarantees will constitute valid and legally binding obligations of the Corporation, in each case 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. (7) When the Registration Statement has become effective under the Act, a certificate of designations 12 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -12- with respect to the BanPonce Financial Preferred Stock has been duly filed and recorded with the Secretary of State of the State of Delaware, the terms of the BanPonce Financial Preferred Stock and of its issue and sale have been duly established in conformity with Financial's certificate of incorporation, as amended, so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon Financial or the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over Financial or the Corporation, all regulatory consents or approvals for the issuance and sale of the BanPonce Financial Preferred Stock and for the issuance of the BanPonce Financial Preferred Stock Guarantees have been obtained, and the BanPonce Financial Preferred Stock and the BanPonce Financial Preferred Stock Guarantees have been duly issued and sold as contemplated by the Registration Statement, the BanPonce Financial Preferred Stock will be validly issued, fully paid and nonassessable, and when the terms of the BanPonce 13 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -13- Financial Preferred Stock Guarantees have been duly approved by the Board of Directors or other authorized officials of the Corporation and the BanPonce Preferred Stock Guarantees have been duly executed, the BanPonce Financial Preferred Stock 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. We note that, as of the date of this opinion, a judgment for money in an action based on a Debt Security denominated in a foreign currency or currency unit, or on a related Guarantee, in a Federal or state court in the United States ordinarily would be enforced in the United States only in United States dollars. The date used to determine the rate of conversion of the foreign currency or currency unit in which a particular Debt Security is denominated into United States dollars will depend on various factors, including which court renders the judgment. In the case of 14 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -14- a Debt Security denominated in a foreign currency, or a related Guarantee, a state court in the State of New York rendering a judgment on a Debt Security, or on a related Guarantee, would be required under Section 27 of the New York Judiciary Law to render such judgment in the foreign currency in which the Debt Security is denominated, and such judgment would be converted into United States dollars at the exchange rate prevailing on the date of entry of the judgment. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the Commonwealth of Puerto Rico, and the General Corporation Law of the State of Delaware, and we are expressing no opinion as to the effect of the laws of any other jurisdiction. With respect to all matters of the laws of the Commonwealth of Puerto Rico, we have relied upon the opinion, dated the date hereof, of Brunilda Santos de Alvarez, Counsel to the Corporation, and our opinion is subject to the same assumptions, qualifications and limitations with respect to such matters as are contained in such opinion of Brunilda Santos de Alvarez. 15 BanPonce Corporation Popular International Bank, Inc. BanPonce Financial Corp. -15- Also, we have relied as to certain matters on information obtained from public officials, officers of the Corporation, Financial and PIB, and other sources believed by us to be responsible, and we have assumed that each of the BanPonce Senior Indenture and the BanPonce Financial Senior Indenture has been duly authorized, executed and delivered by the respective Trustee thereunder, assumptions that we have not independently verified. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to us under the heading "Validity of Offered Securities" in the Prospectus contained in the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, /s/ Sullivan & Cromwell Sullivan & Cromwell EX-12 7 COMPUTATION OF CONSOLIDATED RATIOS 1 EXHIBIT (12) BANPONCE CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (Dollars in thousands)
Year Ended December 31, --------------------------------------------------------------------- Second Quarter 1995 1994 1993 1992 1991 1990 Income before income taxes $ 45,124 175,177 132,140 100,145 $ 72,164 $ 72,606 Fixed charges: Interest expense 126,698 351,633 280,008 300,136 387,134 281,561 Estimated interest component of net rental payments 1,392 5,568 4,827 4,691 4,674 3,007 Total fixed charges including interest on deposits 128,090 357,201 284,835 304,826 391,808 284,568 Less: Interest on deposits 84,585 247,726 219,447 253,375 323,717 257,099 Total fixed charges excluding interest on deposits 43,505 109,475 65,388 51,451 68,091 27,469 Income before income taxes and fixed charges (including interest on deposits) $173,214 $532,378 $416,975 $404,971 $463,972 $357,174 Income before income taxes and fixed charges (excluding interest on deposits) $ 88,629 $284,652 $197,528 $151,596 $140,255 $100,075 Preferred stock dividends $ 2,087 $ 4,630 $ 770 $ 770 $ 807 -- Ratio of earnings to fixed charges Including Interest on Deposits 1.4 1.5 1.5 1.3 1.2 1.3 Excluding Interest on Deposits 2.0 2.6 3.0 2.9 2.1 3.6 Ratio of earnings to fixed charges & Preferred Stock Dividends Including Interest on Deposits 1.3 1.5 1.5 1.3 1.2 1.3 Excluding Interest on Deposits 1.9 2.5 3.0 2.9 2.0 3.6
EX-23.(A) 8 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23(a) PRICE WATERHOUSE The Chase Manhattan Bank Building P.O. Box 363566 San Juan, PR 00936-3566 CONSENT OF INDEPENDENT ACCOUNTANTS To the Board of Directors BanPonce Corporation We hereby consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 of our report dated January 27, 1995, which appears on page 32 of the 1994 Annual Report to Shareholders of BanPonce Corporation, which is incorporated by reference in BanPonce Corporation's Annual Report on Form 10-K for the year ended December 31, 1994. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Price Waterhouse Price Waterhouse San Juan, Puerto Rico August 2, 1995 EX-25.(A) 9 FORM T-1 UNDER BANPONCE CORP. STAT. OF ELIGIBILITY 1 EXHIBIT (25)(a) 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)_____ _______________________ THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312) 732-6919 (Name, address and telephone number of agent for service) _____________________ BANPONCE CORPORATION (Exact name of co-registrant as specified in its charter) Puerto Rico (State or other jurisdiction of 66-0416582 incorporation or organization) (IRS Employer Identification No.) 209 Munoz Rivera Avenue 00918 Hato Rey, Puerto Rico (Zip Code) (Address of Principal Executive Offices) 2 Debt Securities (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 SUPERVISION AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of Currency, Washington, D. C., Federal Deposit Insurance Corporation, Washington, D. C., The Board of Governors of the Federal Reserve System, Washington, D. C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. No such affiliation exists with the trustee. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 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. 8. Not applicable. 9. Not applicable. * EXHIBIT 1,2,3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418). 3 Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 27th day of July, 1995. The First National Bank of Chicago, Trustee By: /s/ Melissa G. Weisman --------------------------------- Melissa G. Weisman Assistant Vice President 4 EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE ACT July 27, 1995 Securities and Exchange Commission Washington, D. C. 20549 Gentlemen: In connection with the qualification of an indenture between BanPonce Corporation and The First National Bank of Chicago, as trustee, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State Authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Melissa G. Weisman ------------------------------- Melissa G. Weisman Assistant Vice President 5 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. 6 Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-1 City, State Zip: Chicago, IL 60670-0460 FDIC Certificate No.: 0/3/6/1/8 CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1995 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
DOLLAR AMOUNTS IN C400 THOUSANDS RCFD BIL MIL THOU <- --------- ---- ------------ ---------- ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1) . . . . . . . . . . . . . . . . . 0081 2,948,128 1.a. b. Interest-bearing balances(2) . . . . . . . . . . . 0071 8,482,108 1.b. 2. Securities a. Held-to-maturity securities(from Schedule RC-B, column A) . . . . . . . . . . . . . . . 1754 167,911 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) . . . . . . . . . . . . 1773 540,011 2.b 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs: . . . . . . . . . . . . . . a. Federal Funds sold . . . . . . . . . . . . . . . . . 0276 2,508,883 3.a b. Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . 0277 1,422,695 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C) . . . . . . . . . . . . . . RCFD 2122 16,238,310 4.a b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . . . . . . . . . . RCFD 3123 358,207 4.b. c. LESS: Allocated transfer risk reserve . . . . . . . RCFD 3128 0 4.d d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c) . . 2125 15,880,103 4.c. 5. Assets held in trading accounts . . . . . . . . . . . . 3545 13,257,798 5. 6. Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . 2145 516,827 6. 7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . . 2150 13,166 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) . . . . . . . . . . . . 2130 10,363 8. 9. Customers' liability to this bank on acceptances outstanding . . . . . . . . . 2155 463,961 9. 10. Intangible assets (from Schedule RC-M) . . . . . . . . 2143 119,715 10. 11. Other assets (from Schedule RC-F) . . . . . . . . . . . 2160 1,346,941 11. 12. Total assets (sum of items 1 through 11) . . . . . . . 2170 47,678,610 12.
__________________ (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. 7 Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-2 City, State Zip: Chicago, IL 60670-0460 FDIC Certificate No.: 0/3/6/1/8 SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN THOUSANDS BIL MIL THOU ---------------- ------------ LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part 1) . . . . . . . . . . . RCON 2200 14,675,401 13.a. (1) Noninterest-bearing(1) . . . . . . . . . . . RCON 6631 5,498,690 13.a.(1) (2) Interest-bearing . . . . . . . . . . . . . . RCON 6636 9,176,711 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II). . . . . . . . RCFN 2200 11,809,645 13.b. (1) Noninterest bearing . . . . . . . . . . . . RCFN 6631 304,669 13.b.(1) (2) Interest-bearing . . . . . . . . . . . . . . RCFN 6636 11,504,976 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased . . . . . . . . . . . . RCFD 0278 2,072,830 14.a. b. Securities sold under agreements to repurchase . . . . . . . . . . . . .. . . . . . . RCFD 0279 1,484,164 14.b. 15. a. Demand notes issued to the U.S. Treasury . . . . RCON 2840 103,138 15.a. b. Trading Liabilities . . . . . . . . . . . . . . . RCFD 3548 9,101,186 15.b 16. Other borrowed money: a. With original maturity of one year or less . . . RCFD 2332 2,307,860 16.a. b. With original maturity of more than one year . . RCFD 2333 506,476 17. Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . . . . . . RCFD 2910 278,108 17. 18. Bank's liability on acceptance executed and outstanding . . . . . . . . . . . . . . . . . . RCFD 2920 463,961 18. 19. Subordinated notes and debentures . . . . . . . . . RCFD 3200 1,225,000 19. 20. Other liabilities (from Schedule RC-G) . . . . . . . RCFD 2930 699,375 20. 21. Total liabilities (sum of items 13 through 20) . . . RCFD 2948 44,727,144 21. 22. Limited-Life preferred stock and related surplus . . RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus . . . RCFD 3838 0 23. 24. Common stock . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . RCFD 3839 2,304,657 25. 26. a. Undivided profits and capital reserves . . . . . RCFD 3632 447,916 26.a b. Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . RCFD 8434 (2,165) 26.b 27. Cumulative foreign currency translation adjustments RCFD 3284 200 27. 28. Total equity capital (sum of items 23 through 27). . RCFD 3210 2,951,466 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28) . . RCFD 3300 47,678,610 29.
Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number auditors as of any date during 1993 . . . . . . . . . . . . . . . . . . . . . . RCFD 6724 N/A M.1.
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank with generally accepted auditing standards by a certified performed by other external auditors public accounting firm which submits a report on the bank (may be required by state chartering 2 = Independent audit of the bank's parent holding company authority) conducted in accordance with generally accepted auditing 5 = Review of the bank's financial statements by standards by a certified public accounting firm which external auditors submits a report on the consolidated holding company 6 = Compilation of the bank's financial (but not on the bank separately) statements by external 3 = Directors' examination of the bank conducted in auditors accordance with generally accepted auditing standards 7 = Other audit procedures (excluding tax by a certified public accounting firm (may be required by preparation work) state chartering authority) 8 = No external audit work
___________________ (1) Includes total demand deposits and noninterest-bearing time and savings deposits. EX-25.(B) 10 FORM T-1 UNDER BANPONCE FINANCIAL CORPORATION 1 EXHIBIT (25)(b) 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)_____ _______________________ THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312) 732-6919 (Name, address and telephone number of agent for service) _____________________ BANPONCE CORPORATION (Exact name of co-registrant as specified in its charter) Puerto Rico (State or other jurisdiction of 66-0416582 incorporation or organization) (IRS Employer Identification No.) 209 Munoz Rivera Avenue 00918 Hato Rey, Puerto Rico (Zip Code) (Address of Principal Executive Offices) 2 BANPONCE FINANCIAL CORPORATION (Exact name of co-registrant as specified in its charter) Delaware (State or other jurisdiction of 66-0476353 incorporation or organization) (IRS Employer Identification No.) c/o CT Corporation 1209 Orange Street 19801 Wilmington, Delaware (Zip Code) (Address of Principal Executive Offices) Debt Securities and Guarantees (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 SUPERVISION AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of Currency, Washington, D. C., Federal Deposit Insurance Corporation, Washington, D. C., The Board of Governors of the Federal Reserve System, Washington, D. C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. No such affiliation exists with the trustee. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 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. 8. Not applicable. 9. Not applicable. 3 * EXHIBITS 1,2,3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418). 4 Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 27th day of July, 1995. The First National Bank of Chicago, Trustee, By: /s/ Melissa G. Weisman --------------------------------- Melissa G. Weisman Assistant Vice President 5 EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE ACT July 27, 1995 Securities and Exchange Commission Washington, D. C. 20549 Gentlemen: In connection with the qualification of an indenture among BanPonce Corporation, BanPonce Financial Corporation and The First National Bank of Chicago, as trustee, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State Authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Melissa G. Weisman -------------------------------- Melissa G. Weisman Assistant Vice President 6 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. 7 Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-1 City, State Zip: Chicago, IL 60670-0460 FDIC Certificate No.: 0/3/6/1/8 CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1995 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
C400 <- DOLLAR AMOUNTS IN ------------ ---------- THOUSANDS RCFD BIL MIL THOU ------------------ ---- ------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1) . . . . . . . . . . . . . . . . . . 0081 2,948,128 1.a. b. Interest-bearing balances(2) . . . . . . . . . . . . . 0071 8,482,108 1.b. 2. Securities a. Held-to-maturity securities (from Schedule RC-B, column A) . . . . . . . . . . . . . 1754 167,911 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) . . . . . . . . . . . . . 1773 540,011 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs: a. Federal Funds sold . . . . . . . . . . . . . . . . . . 0276 2,508,883 3.a. b. Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . . . . 0277 1,422,695 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C) . . . . . . . . . . . . . . . RCFD 2122 16,238,310 4.a. b. LESS: Allowance for loan and lease losses . . . . . . RCFD 3123 358,207 4.b.c. c. LESS: Allocated transfer risk reserve . . . . . . . . RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c) . . . 2125 15,880,103 4.d. 5. Assets held in trading accounts . . . . . . . . . . . . . 3545 13,257,798 5. 6. Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . 2145 516,827 6. 7. Other real estate owned (from Schedule RC-M) . . . . . . 2150 13,166 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) . . . . . . 2130 10,363 8. 9. Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . 2155 463,961 9. 10. Intangible assets (from Schedule RC-M) . . . . . . . . . 2143 119,715 10. 11. Other assets (from Schedule RC-F) . . . . . . . . . . . 2160 1,346,941 11. 12. Total assets (sum of items 1 through 11) . . . . . . . . 2170 47,678,610 12.
__________________ (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. 8 Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-2 City, State Zip: Chicago, IL 60670-0460 FDIC Certificate No.: 0/3/6/1/8 SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN THOUSANDS BIL MIL THOU ---------------- ------------ LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part 1) . . . . . . . . . . . . . . . . . . . RCON 2200 14,675,401 13.a. (1) Noninterest-bearing(1) . . . . . . . . . . . . . RCON 6631 5,498,690 13.a.(1) (2) Interest-bearing . . . . . . . . . . . . . . . RCON 6636 9,176,711 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II) . . . . . . . . . RCFN 2200 11,809,645 13.b. (1) Noninterest bearing . . . . . . . . . . . . . . RCFN 6631 304,669 13.b.(1) (2) Interest-bearing . . . . . . . . . . . . . . RCFN 6636 11,504,976 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased . . . . . . . . . . . . . . RCFD 0278 2,072,830 14.a. b. Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . RCFD 0279 1,484,164 14.b. 15. a. Demand notes issued to the U.S. Treasury . . . . . . RCON 2840 103,138 15.a. b. Trading Liabilities . . . . . . . . . . . . . . . . RCFD 3548 9,101,186 15.b. 16. Other borrowed money: a. With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2332 2,307,860 16.a. b. With original maturity of more than one year . . . . . . . . . . . . . . . . . . . . . RCFD 2333 506,476 16.b 17. Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . . . . . . . RCFD 2910 278,108 17. 18. Bank's liability on acceptance executed and outstanding . . . . . . . . . . . . . . . RCFD 2920 463,961 18. 19. Subordinated notes and debentures . . . . . . . . . . . RCFD 3200 1,225,000 19. 20. Other liabilities (from Schedule RC-G) . . . . . . . . RCFD 2930 699,375 20. 21. Total liabilities (sum of items 13 through 20) . . . . . . . . . . . . . . . . . . . . . . RCFD 2948 44,727,144 21. 22. Limited-Life preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3838 0 23. 24. Common stock . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . RCFD 3839 2,304,657 25. 26. a. Undivided profits and capital reserves . . . . . . RCFD 3632 447,916 26.a b. Net unrealized holding gains (losses) on available- for-sale securities . . . . . . . . . . . . . . . . RCFD 8434 (2,165) 26.b 27. Cumulative foreign currency translation adjustments . . RCFD 3284 200 27. 28. Total equity capital (sum of items 23 through 27) . . . RCFD 3210 2,951,466 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28) . . . RCFD 3300 47,678,610 29.
Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number auditors as of any date during 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 6724 N/A M.1.
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank with generally accepted auditing standards by a certified performed by other external auditors public accounting firm which submits a report on the bank (may be required by state chartering 2 = Independent audit of the bank's parent holding company authority) conducted in accordance with generally accepted auditing 5 = Review of the bank's financial statements by standards by a certified public accounting firm which external auditors submits a report on the consolidated holding company 6 = Compilation of the bank's financial (but not on the bank separately) statements by external 3 = Directors' examination of the bank conducted in auditors accordance with generally accepted auditing standards 7 = Other audit procedures (excluding tax by a certified public accounting firm (may be required by preparation work) state chartering authority) 8 = No external audit work
___________________ (1) Includes total demand deposits and noninterest-bearing time and savings deposits.