EXHIBIT 1
4,000,000
POPULAR CAPITAL TRUST II
____% Cumulative Monthly Income Trust Preferred Securities,
Guaranteed to the extent set forth in the Guarantee Agreement by
POPULAR, INC.
UNDERWRITING AGREEMENT
November __, 2004
Popular Securities, Inc.
As representative
of the several Underwriters named in Schedule 1
Hato Rey, Puerto Rico 00918
Ladies and Gentlemen:
POPULAR CAPITAL TRUST II, a statutory trust created under the Statutory
Trust Act (the "Delaware Act") of the state of Delaware (the "Trust"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to you and the other underwriters named in Schedule 1 hereto (collectively, the
"Underwriters"), for whom you are acting as the representative (the
"Representative") 4,000,000 of its ____% Cumulative Monthly Income Trust
Preferred Securities (the "Trust Preferred Securities"). The Trust Preferred
Securities shall have the terms described in the Prospectus (as defined below).
The Trust Preferred Securities shall be guaranteed by Popular, Inc.
(the "Company") to the extent set forth in the Prospectus, with respect to the
distributions and amounts payable upon liquidation and redemption, pursuant to
the Guarantee Agreement, to be dated as of the Closing Date (as defined below)
(the "Guarantee Agreement"), and to be executed and delivered by the Company and
J.P. Morgan Trust Company, National Association, a national banking association
("J.P. Morgan"). The proceeds from the sale of the Trust Preferred Securities
will be aggregated with the proceeds from the sale by the Trust to the Company
of the Common Securities of the Trust (the "Common Securities") and will be used
by the Trust to purchase ____% junior subordinated debt securities (the
"Debentures") issued by the Company. The Trust Preferred Securities and the
Common Securities will be issued pursuant to an Amended and Restated Declaration
of Trust and Trust Agreement (the "Trust Agreement") among the Company, Chase
Manhattan Bank USA, National Association, a national banking association, as
Delaware Trustee (in such capacity, the "Delaware Trustee"), Jorge A. Junquera
and Richard Barrios, both of
whom are employees or officers of or affiliated with the Company (the
"Administrative Trustees"), and J.P. Morgan, as "Property Trustee" and
"Guarantee Trustee" (the Delaware Trustee, the Administrative Trustees, the
Property Trustee and the Guarantee Trustee, collectively, the "Trustees"). The
Debentures will be issued pursuant to a Junior Subordinated Indenture (the
"Indenture") among the Company and J.P. Morgan, as Indenture Trustee (in such
capacity, the "Indenture Trustee").
The Company and the Trust hereby confirm as follows its agreements
with the Representative and the several other Underwriters.
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties and
agreements of the Company and the Trust herein contained and subject to all the
terms and conditions of this Agreement, the Trust agrees to sell to each
Underwriter and each Underwriter, severally and not jointly, agrees to purchase
from the Trust at a purchase price of $25 per Trust Preferred Security, the
number of Trust Preferred Securities set forth opposite the name of such
Underwriter in Schedule 1 hereto, plus such additional number of Trust
Preferred Securities which such Underwriter may become obligated to purchase
pursuant to Section 9 hereof.
(b) Because the proceeds from the sale of the Trust
Preferred Securities shall be used to purchase the Debentures from the Company,
as compensation for its services hereunder, the Company will pay to the
Underwriters a nonrefundable fee in immediately available funds equal to
$__________, which shall be fully earned upon the delivery of the Trust
Preferred Securities on the Closing Date (as such term is defined below).
2. Delivery and Payment. Delivery of the Trust Preferred
Securities shall be made to the Representative for the accounts of the
Underwriters at the office of Pietrantoni Mendez & Alvarez LLP, counsel to the
Company, Banco Popular Center, 19th Floor, Hato Rey, Puerto Rico, against
payment of the purchase price by wire transfer of immediately available funds
to the bank account designated by the Company. Such payment shall be made at
10:00 a.m., New York City time, on the fourth full business day following the
date of this Agreement, or such other time on such other date, not later than
seven business days after the date of this Agreement, as may be agreed upon by
the Company and the Representative (such date is hereinafter referred to as the
"Closing Date"). Time shall be of the essence and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder.
Certificates evidencing the Trust Preferred Securities shall be in
definitive form and shall be registered in such names and in such denominations
as the Representative shall request at least two business days prior to the
Closing Date by written notice to the Trust. For the purpose of expediting the
checking and packaging of certificates for the Trust Preferred Securities, the
Trust agrees to make such certificates available for inspection at least 24
hours prior to the Closing Date.
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Notwithstanding the other provisions of this Section 2, if
transactions in the Trust Preferred Securities can be settled through the
facilities of The Depository Trust Company ("DTC"), payment for and delivery of
the Trust Preferred Securities on the Closing Date will be made through the
facilities of DTC if you are a member, unless you have otherwise notified us
prior to the date specified by you, or, if you are not a member, settlement may
be made through a correspondent who is a member pursuant to instruction you may
send to us prior to such specified date. The cost of original issue tax stamps,
if any, in connection with the issuance, sale and delivery of the Trust
Preferred Securities by the Trust to the respective Underwriters shall be borne
by the Company. The Company will pay and save each Underwriter and any
subsequent holder of the Trust Preferred Securities harmless from any and all
liabilities with respect to or resulting from any failure or delay in paying
Federal, state or Commonwealth of Puerto Rico stamp and other transfer taxes,
if any, which may be payable or determined to be payable in connection with the
original issuance, sale or delivery to such Underwriter of the Trust Preferred
Securities.
3. Representations and Warranties. Each of the Trust and the
Company jointly and severally represents and warrants, and agrees with, each
Underwriter that:
(a) The Company and the Trust, as co-registrant with the
Company, meet the requirements for use of Form S-3, and a registration statement
(Registration No. 333-________ ) on Form S-3 with respect to the Trust Preferred
Securities, including a base prospectus and such amendments to such registration
statement as may have been required to the date of this Agreement, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission and has become effective. No
stop order suspending the effectiveness of the registration statement or
preventing or suspending the use of the Prospectus or any Preliminary Prospectus
(as defined below) has been issued and, to the Company's knowledge, no
proceeding for that purpose has been instituted or threatened by the Commission.
The term "Preliminary Prospectus" as used herein means a preliminary prospectus
relating to the Trust Preferred Securities included at any time as part of the
foregoing registration statement or any amendment thereto before it became
effective under the Act and any prospectus filed with the Commission by the
Company pursuant to Rule 424(b) of the Rules and Regulations. Copies of such
registration statement, any such amendment and each related Preliminary
Prospectus and all documents incorporated by reference therein that were filed
with the Commission on or prior to the date of this Underwriting Agreement have
been delivered to the Representative and its counsel. A final prospectus
relating to the Trust Preferred Securities containing information permitted to
be omitted at the time of effectiveness by Rule 430A of the Rules and
Regulations has been or will be prepared and filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations on or before the second business day
after the date hereof (or such earlier time as may be required by the Rules and
Regulations). The term "Registration Statement" means such registration
statement as amended at the time it became effective (the "Effective Date"),
including financial statements and all exhibits and any information deemed by
virtue of Rule 430A of the Rules and Regulations to be included in such
Registration Statement at the Effective Date (but excluding the Forms T-1) and
any prospectus supplement filed thereafter with
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the Commission, and shall include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The term "Prospectus"
means, collectively, the base prospectus together with any prospectus
supplement, in the respective forms they are filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations. Any reference herein to the terms
"amend", "amendment" or "supplement" with respect to the Registration
Statement, the Prospectus or any Preliminary Prospectus shall be deemed to
refer to and include the filing of any document under the Exchange Act after
the Effective Date, or the date of any Preliminary Prospectus or the
Prospectus, as the case may be, that is incorporated therein by reference. For
purposes of this Underwriting Agreement, all references to the Registration
Statement, the Prospectus, any Preliminary Prospectus or any amendment or
supplement thereto shall be deemed to include any copy filed with the
Commission pursuant to its Electronic Data Gathering Analysis and Retrieval
System (EDGAR), and such copy shall be identical (except to the extent
permitted by Regulation S-T) to any Prospectus delivered to the Representative
for use in connection with the offering of the Trust Preferred Securities by
the Trust.
(b) Each part of the Registration Statement, when such
part became or becomes effective, each Preliminary Prospectus, on the date of
filing thereof with the Commission, and the Prospectus and any amendments or
supplement thereto, on the date of filing thereof with the Commission and at
the Closing Date, conformed or will conform in all material respects with the
requirements of the Act, the Trust Indenture Act of 1939 (the "Trust Indenture
Act") and the Rules and Regulations; each part of the Registration Statement
(excluding any prospectus supplement with respect to an offering of securities
other than the offering of the Trust Preferred Securities contemplated hereby),
when such part became or becomes effective, did not or will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; each Preliminary Prospectus, on the date of filing thereof with the
Commission, and the Prospectus and any amendment or supplement thereto, on the
date of filing thereof with the Commission and at the Closing Date, did not or
will not include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; the foregoing shall
not apply to the statements in or omissions from any such document relating to
any Underwriter in reliance upon, and in conformity with, written information
relating to such Underwriter furnished to the Company by the Representative, or
by any Underwriter through the Representative, specifically for use in the
preparation thereof. The Company has not distributed any offering material in
connection with the offering or sale of the Trust Preferred Securities other
than the Registration Statement, any Preliminary Prospectus, the Prospectus or
any other materials, if any, permitted by the Act.
(c) The documents incorporated by reference in the
Registration Statement, the Prospectus and any amendment or supplement to such
Registration Statement or such Prospectus, when they became or become effective
under the Act or were or are filed with the Commission under the Exchange Act,
as the case may be, conformed or will conform in all material respects with the
requirements of the Act, the Trust Indenture Act, the Rules and Regulations,
the Exchange Act and
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the rules and regulations of the Commission thereunder (the "Exchange Act Rules
and Regulations"), as applicable.
(d) The Trust has been duly formed and is validly
existing and in good standing as a statutory trust under Delaware law with
power and authority to own its property and conduct its business as described
in the Prospectus. All of the outstanding beneficial interests of the Trust
have been duly authorized and validly issued and are fully paid and
nonassessable undivided beneficial interests in the assets of the Trust; the
holders of such beneficial interests of the Trusts have no preemptive or other
rights to acquire Trust Preferred Securities or Common Securities.
(e) The Trust Agreement has been duly authorized; and
when the Trust Preferred Securities are delivered and paid for pursuant to this
Agreement on the Closing Date, the Trust Agreement will have been duly executed
and delivered and will constitute a valid and legally binding instrument,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(f) The Guarantee Agreement has been duly authorized;
and when the Trust Preferred Securities are delivered and paid for pursuant to
this Agreement on the Closing Date, the Guarantee Agreement will have been duly
executed and delivered and will constitute a valid and legally binding
instrument enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(g) The Trust Preferred Securities have been duly
authorized; when the Trust Preferred Securities are delivered and paid for
pursuant to this Agreement on the Closing Date, such Trust Preferred Securities
will (i) have been validly issued and fully paid, (ii) represent nonassessable
undivided beneficial interest in the assets of the Trust, (iii) be entitled to
the benefits set forth in the Trust Agreement and (iv) conform to the
description thereof contained in the Registration Statement, the Prospectus and
any amendment or supplement to such Registration Statement or such Prospectus;
the issuance of the Trust Preferred Securities is not subject to preemptive or
other similar rights; and the holders of the Trust Preferred Securities will be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit incorporated under the General Corporation
Law of the State of Delaware.
(h) The Common Securities have been duly authorized;
when the Common Securities are delivered and paid for pursuant to this
Agreement on the Closing Date, such Common Securities will (i) have been
validly issued and fully paid, (ii) represent nonassessable undivided
beneficial interest in the assets of the Trust, (iii) be entitled to the
benefits set forth in the Trust Agreement and (iv) conform to the description
thereof contained in the Registration Statement, the Prospectus and any
amendment or supplement to such Registration Statement or such Prospectus; the
issuance of the Common Securities is not subject to preemptive or other similar
rights; and the holders of the Common Securities will be entitled to the same
limitation of personal liability
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extended to stockholders of private corporations for profit incorporated under
the General Corporation Law of the State of Delaware; and at the Closing Date,
all of the issued and outstanding Common Securities of the Trust will be
directly owned by the Company free and clear of any security interest,
mortgage, pledge, lien encumbrance, claim or equity.
(i) The only direct or indirect subsidiaries of the
Company ("Subsidiaries") that are "significant subsidiaries" as defined in Rule
405 of Regulation C of the Rules and Regulations under the Act (each, a
"Significant Subsidiary") are Banco Popular de Puerto Rico, a Puerto Rico
corporation ("Banco Popular"), Popular International Bank, Inc., a Puerto Rico
corporation, Popular North America, Inc., a Delaware corporation, Banco Popular
North America, Inc., a New York corporation, and Equity One, Inc., a Delaware
corporation. The Company has been and, at the Closing Date, will be duly
organized and validly existing as a corporation under the laws of the
Commonwealth of Puerto Rico and is and, at the Closing Date, will be in good
standing in the Commonwealth of Puerto Rico. The Company is and will be as of
the Closing Date registered with the Board of Governors of the Federal Reserve
System (the "Federal Reserve") as a bank holding company under the Bank Holding
Company Act of 1956 (the "BHCA") and its election to be treated as a financial
holding company under the BHCA, as amended by the Gramm-Leach-Bliley Act, is
and will remain in full force and effect. Each of the Significant Subsidiaries
is and, at the Closing Date, will be a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation. Each of the Company and its Significant Subsidiaries is and, at
the Closing Date, will be duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its business
or use of its property and assets makes such qualification necessary, except
where the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, prospects or business
affairs of the Company and its Subsidiaries considered as a single enterprise
(a "Material Adverse Effect"). All of the outstanding shares of capital stock
of each Significant Subsidiary have been duly and validly authorized and issued
and are fully paid and nonassessable (subject to the provisions of Section 55
of Title 12 of the United States Code in the case of Significant Subsidiaries
which are national banking associations), and are owned directly or indirectly
by the Company free and clear of any perfected security interest and, to the
knowledge of such counsel, any other security interests, claims, liens or
encumbrances.
(j) The outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable and are not subject to any preemptive or similar rights. The
Debentures to be issued and sold by the Company will be, upon such issuance and
payment therefore, duly authorized, valid, binding and enforceable obligations
of the Company. The Company has, and, upon completion of the sale of the
Debentures, will have, an authorized, issued and outstanding capitalization as
set forth in the Registration Statement and the Prospectus. The description of
the securities of the Company in the Registration Statement, the Preliminary
Prospectus and the Prospectus is, and at the Closing Date, will be, complete
and accurate in all respects. No holders of securities of the Company are
entitled to have such securities registered under the Registration Statement,
except where such rights have been waived.
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(k) The consolidated financial statements and the
related notes of the Company included in the Registration Statement or
incorporated by reference therein and in the Prospectus present fairly the
financial condition of the Company and its Subsidiaries as of the dates
indicated and the consolidated results of operations and cash flows of the
Company and its Subsidiaries for the periods covered thereby, all in conformity
with generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the entire periods involved. PricewaterhouseCoopers LLP (the
"Accountants"), who have reported on those of such financial statements and
related notes which are audited, are independent accountants with respect to
the Company and its Subsidiaries within the meaning of the Act and the
applicable and published rules and regulations.
(l) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(m) Except as set forth in the Registration Statement
and Prospectus, subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the Closing
Date, (i) there has not been, and will not have been, any material adverse
change in the business, properties, financial condition, net worth or results
of operations of the Company and its Subsidiaries considered as a single
enterprise, (ii) neither the Company nor any of its Significant Subsidiaries
has entered into, or will have entered into any transactions that would be
considered material to the Company and its Subsidiaries considered as a single
enterprise, other than pursuant to this Agreement, and (iii) the Company has
not, and will not have, paid or declared any dividends or other distributions
of any kind on any class of its capital stock, except for the payment or
declaration of quarterly dividends on the Company's common stock (the "Common
Stock"), and the payment of monthly dividends on the Company's preferred stock,
in each case in the ordinary course of its business.
(n) Neither the Trust nor the Company is and, after
giving effect to the offering and sale of the Trust Preferred Securities and
the Debentures and the application of the proceeds thereof as described in the
Prospectus, neither of them will be, required to be registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act").
(o) Except as set forth or incorporated by reference in
the Registration Statement and the Prospectus, there are no actions, suits,
arbitrations, claims, governmental or other proceedings (formal or informal),
or investigations pending or threatened against or affecting the Company or any
of its Significant Subsidiaries, or any directors, officers or shareholders of
the Company or any of its Significant Subsidiaries in their respective
capacities as such, or any of the properties or assets owned or leased by the
Company or any of its Significant Subsidiaries, before or by any Federal, state
or Commonwealth of Puerto Rico court, commission, regulatory board,
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administrative agency or other governmental body, domestic or foreign
(collectively, a "Governmental Body"), wherein an unfavorable ruling, decision
or finding would adversely affect the business, prospects, financial condition,
net worth or results of operations of the Company and its Subsidiaries
considered as a single enterprise and would be required to be disclosed in the
Registration Statement and Prospectus. Neither the Company nor any Significant
Subsidiary is in violation of, or in default with respect to, any law, rule, or
regulation, or any order, judgment, or decree, except as described in the
Prospectus or such as in the aggregate do not now have and can reasonably be
expected in the future not to have a material adverse effect upon the
operations, business, properties, or assets of the Company and its Subsidiaries
considered as a single enterprise; nor is the Company or any Significant
Subsidiary presently required under any order, judgment or decree to take any
action in order to avoid any such violation or default, except as described in
the Prospectus.
(p) The Company and each of its Significant Subsidiaries
possess and, at the Closing Date, will possess adequate governmental permits,
consents, orders, approvals, franchises, certificates and other authorizations
(collectively, "Licenses") necessary to carry on their respective businesses
and own or lease their respective properties as contemplated in the
Registration Statement and Prospectus. The Company and each of its Significant
Subsidiaries have and, at the Closing Date, will have complied in all material
respects with all laws, regulations and orders applicable to it or its
business, assets and properties, except for such violations, individually or in
the aggregate, which are not reasonably expected to have a material adverse
effect upon the operations, business, properties or assets of the Company and
its Significant Subsidiaries considered as a single enterprise. Neither the
Company nor any of its Significant Subsidiaries is, nor, at the Closing Date,
will be in default (nor has any event occurred which, with notice or lapse of
time or both, would constitute a default) in the due performance and
observation of any term, covenant or condition of any indenture, mortgage, deed
of trust, voting trust agreement, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, lease, contract or other agreement
or instrument (collectively, a "contract or other agreement") to which they are
a party or by which their respective properties are bound or affected, the
violation of which would individually or in the aggregate have a material
adverse effect on the condition, financial or otherwise, or the earnings,
prospects or business affairs of the Company and its Subsidiaries considered as
a single enterprise. There are no governmental proceedings or actions pending
or threatened for the purpose of suspending, modifying or revoking any License
held by the Company or any of its Significant Subsidiaries, except where such
suspension, modification or revocation would not individually or in the
aggregate have a material adverse effect on the condition, financial or
otherwise, or the earnings, prospects or business affairs of the Company and
its Subsidiaries considered as a single enterprise.
(q) No consent, approval, authorization or order of, or
any filing or declaration with, any Governmental Body is required for the
consummation of the transactions contemplated by this Agreement or in
connection with the issuance and sale of the Trust Preferred Securities by the
Trust or in connection with the issuance and sale of the Debentures by the
Company, except such as have been obtained and such as may be required under
state or Commonwealth of Puerto Rico securities or blue sky laws or the bylaws
and rules of the National Association of Securities Dealers,
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Inc. (the "NASD") in connection with the purchase and distribution by the
Underwriters of the Trust Preferred Securities to be sold hereby.
(r) Both the Trust and the Company have full power
(corporate and other) and authority to enter into this Agreement and to carry
out all the terms and provisions hereof to be carried out by it. This Agreement
has been duly authorized, executed and delivered by the Trust and the Company
and constitutes a valid and binding agreement of each of them and is
enforceable against each of them in accordance with the terms hereof, except as
rights to indemnity and contribution may be limited by federal, state or
Commonwealth of Puerto Rico securities laws or the public policy underlying
such laws. Except as disclosed in the Registration Statement and the
Prospectus, the execution, delivery and the performance of this Agreement and
the consummation of the transactions contemplated hereby will not result in the
creation or imposition of any Encumbrance upon any of the properties or assets
of the Trust, the Company or any of the Significant Subsidiaries pursuant to
the terms or provisions of, or result in a breach or violation of or conflict
with any of the terms or provisions of, or constitute a default under, or give
any other party a right to terminate any of its obligations under, or result in
the acceleration of any obligation under, (i) the Trust Agreement or the
Certificate of Incorporation or By-laws of the Company or any Significant
Subsidiary, in each case as amended, or (ii) any contract or other agreement to
which the Trust or the Company or any of the Significant Subsidiaries is a
party or by which it or any of their respective assets or properties are bound
or affected, the violation of which, in the case of the Company and the
Significant Subsidiaries, would individually or in the aggregate have a
material adverse effect on the condition, financial or otherwise, or the
earnings, prospects or business affairs of the Company and its Subsidiaries
considered as a single enterprise, or (iii) any judgment, ruling, decree,
order, law, statute, rule or regulation of any Governmental Body applicable to
the Trust, the Company or any of the Significant Subsidiaries or their
respective businesses or properties, the violation of which, in the case of the
Company and the Significant Subsidiaries, would individually or in the
aggregate have a material adverse effect on the financial condition or the
earnings, prospects or business affairs of the Company and its Subsidiaries
considered as a single enterprise.
(s) No statement, representation, or warranty made by
the Trust or by the Company in this Agreement or made in any certificate or
document required by this Agreement to be delivered to the Representative was
or will be, when made, inaccurate, untrue or incorrect in any material respect.
Each certificate signed by an officer of the Company and delivered to the
Representative or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
(t) Neither the Trust, the Company nor any of their
directors, officers or affiliates has taken, nor will he, she or it take,
directly or indirectly, any action designed, or which might reasonably be
expected in the future, to cause or result in, under the Act or otherwise, or
which has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Trust Preferred
Securities or otherwise.
(u) Neither the Company nor any of its Significant
Subsidiaries is involved in any
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collective labor dispute with its employees nor is any such dispute threatened
or imminent.
(v) Neither the Trust, the Company nor any of its
Significant Subsidiaries nor, to their best knowledge, any employee or agent of
the Trust, the Company or any Significant Subsidiary has made any payment of
funds of the Trust, the Company or any Significant Subsidiary or received or
retained any payment of funds of the Trust, the Company or any Significant
Subsidiary in violation of any law, rule or regulation, which payment, receipt
or retention of funds is of a character required to be disclosed in the
Prospectus.
(w) The business, operations and facilities of the
Trust, the Company and its Significant Subsidiaries have been and are being
conducted in compliance with all applicable laws, ordinances, rules,
regulations, licenses, permits, approvals, plans, authorizations or
requirements relating to occupational safety and health, or pollution, or
protection of health or the environment (including, without limitation, those
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous or toxic substances, materials or wastes
into ambient air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment storage, disposal,
transport or handling of chemical substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, gaseous or
liquid in nature) of any governmental department, commission, board, bureau,
agency or instrumentality of the United States, any state, or the Commonwealth
of Puerto Rico or any political subdivision thereof, and all applicable
judicial or administrative agency or regulatory decrees, awards, judgments and
orders relating thereto; and neither the Company nor any of its Significant
Subsidiaries has received any notice from any governmental instrumentality or
any third party alleging any violation thereof or liability thereunder
(including, without limitation, liability for costs of investigating or
remediating sites containing hazardous substances or damages to natural
resources), except where failure to so comply would not have a material adverse
effect on the financial condition, or the earnings or business affairs of the
Company and its Subsidiaries considered as a single enterprise.
(x) The Trust, the Company and each of its Significant
Subsidiaries has filed all foreign, federal, state and local tax returns that
are required to be filed or has requested extensions thereof and has paid all
taxes required to be paid by it and any other assessment, fine or penalty
levied against it, to the extent that any of the foregoing is due and payable,
except, in the case of the Company and each of its Significant Subsidiaries,
for any failure to file that would not have a material adverse effect on the
financial condition, or the earnings or business affairs of the Company and its
Subsidiaries considered as a single enterprise.
(y) The Company and the Trust meet the requirements for
use of Form S-3 under the Rules and Regulations and the use of Rule 415 under
the Rules and Regulations.
(z) The deposit accounts of Banco Popular, and of each
of the other Significant Subsidiaries of the Company that are depository
institutions, are insured by the Bank Insurance Fund (the "BIF") of the Federal
Deposit Insurance Corporation ("FDIC") to the legal maximum, and no proceeding
for the termination or revocation of such insurance is pending or threatened.
Banco
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Popular is a member in good standing of the Federal Reserve Bank of New York
and of the Federal Home Loan Bank of New York.
(aa) Neither of the Trust, the Company nor any of its
Significant Subsidiaries or any of their respective directors or officers is
subject to any order or directive of, or party to any agreement with, any
regulatory agency having jurisdiction with respect to its business or
operations, except as disclosed in the Prospectus and except, in the case of
the Company and its Significant Subsidiaries, for any such order, directive or
agreement that is not material to the Company and its Subsidiaries considered
as a single enterprise.
(bb) The Company has derived on an annual basis more than
20% of its gross income from Puerto Rico sources or from the conduct of a trade
or business in Puerto Rico since its incorporation in accordance with the
applicable sourcing rules under the Puerto Rico Internal Revenue Code of 1994,
as amended.
(cc) The Company is not a "passive foreign investment
company" ("PFIC") within the meaning of Section 1296 of the United States
Internal Revenue Code of 1986, as amended, and does not anticipate that it will
become a PFIC in the foreseeable future.
(dd) The Company is not a party to any agreement or order
of any governmental entity or court that, as of the date hereof, and assuming
no material adverse change to the Company's financial condition, restricts its
ability to pay interest on a monthly basis on the Debentures or restricts the
ability of the Trust to make monthly distributions on the Trust Preferred
Securities.
(ee) The Trust is not a party to any agreement and has
not conducted any activities other than those incidental to its organization
and to the issuance of the Trust Preferred Securities and the Common
Securities, and is not subject to any order of any court or other governmental
entity.
(ff) The Trust Preferred Securities have been approved
for listing on the Nasdaq National Market.
4. Agreements of the Company and the Trust. Each of the Trust
and the Company, jointly and severally covenants and agrees with each of the
several Underwriters as follows:
(a) If a Prospectus Supplement has not been filed as
contemplated by Section 3(a) hereof, the Company and the Trust will cause the
Prospectus Supplement to be filed as contemplated by Section 3(a) hereof (but
only if the Representative has not reasonably objected thereto by notice to the
Company and the Trust after having been furnished a copy within a reasonable
time prior to filing) and will notify the Representative promptly of such
filing. The Company and the Trust will not during such period as the Prospectus
is required by law to be delivered in connection with sales of the Trust
Preferred Securities by any Underwriter or dealer (the "Prospectus Delivery
Period"), file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representative within a reasonable period of time prior
11
to the filing thereof and the Representative shall not have objected thereto in
good faith.
(b) Each of the Company and the Trust will use its best
efforts to cause the Registration Statement to remain effective through the
completion of the Underwriters' distribution of the Trust Preferred Securities,
and will notify the Representative promptly, and will confirm such advice in
writing, (i) of the preparation and filing (subject to Section 4(a)) of any
post-effective amendment to the Registration Statement and when any such
post-effective amendment becomes effective, (ii) of any request by the
Commission for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose or the threat
thereof, (iv) of the suspension of the qualification or registration of the
Trust Preferred Securities for offering or sale in any jurisdiction, or of the
initiation or threat of any proceeding for any such purpose; (v) of the
happening of any event during the Prospectus Delivery Period that in the
judgment of the Company makes any statement made in the Registration Statement
or the Prospectus untrue or that requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances in which they are made, not misleading
and (vi) of the receipt by the Company or any representative or attorney of the
Company of any other communication from the Commission relating to the Company,
the Registration Statement, any Preliminary Prospectus or the Prospectus. If at
any time the Commission or any jurisdiction shall threaten to issue, or shall
issue, any order suspending the effectiveness of the Registration Statement or
suspending the qualification or registration of the Trust Preferred Securities
for sale in any jurisdiction, the Company and the Trust will make every
reasonable effort to prevent the issuance of such order and, if such an order
should be issued, to obtain the withdrawal of such order at the earliest
possible moment. Each of the Company and the Trust will use its best efforts to
comply with the provisions of and make all requisite filings with the
Commission pursuant to Rule 430A and to notify the Representative promptly of
all such filings.
(c) If, at any time when a Prospectus relating to the
Trust Preferred Securities is required to be delivered under the Act, any event
occurs as a result of which, in the judgment of the Company or the
Underwriters, the Prospectus, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or the Registration
Statement, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein not misleading, or if for any other reason it is necessary
at any time to amend or supplement the Prospectus or the Registration Statement
to comply with the Act or the Rules and Regulations, the Trust and the Company
will promptly notify the Representative thereof and, subject to Section 4(b)
hereof, will prepare and file with the Commission, at the Company's expense, an
amendment to the Registration Statement or an amendment or supplement to the
Prospectus that corrects such statement or omission or effects such compliance.
(d) The Company will furnish to the Representative,
without charge, with a signed
12
copy of the Registration Statement and of any post-effective amendment thereto,
including financial statements and schedules, and all exhibits thereto and will
furnish to the Representative, without charge, for transmittal to each of the
other Underwriters, copies of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules but without
exhibits.
(e) The Company will comply with all the provisions of
all undertakings contained in the Registration Statement.
(f) During the Prospectus Delivery Period, the Company
will promptly furnish to the Underwriters, without charge, as many copies of
the Prospectus (containing the Prospectus Supplement) and any amendment or
supplement thereto as the Underwriters may from time to time reasonably
request. The Company consents to the use of the Prospectus, as amended or
supplemented from time to time, by the Underwriters and by all dealers to whom
the Trust Preferred Securities may be sold, both in connection with the
offering or sale of the Trust Preferred Securities and, thereafter, during the
Prospectus Delivery Period. If during the Prospectus Delivery Period any event
shall occur which in the judgment of the Company or the Underwriters should be
set forth in the Prospectus in order to make any statement therein, in the
light of the circumstances under which it was made, not misleading, or if, in
the judgment of the Company or the Underwriters, it is necessary to supplement
or amend the Prospectus to comply with law, the Company will forthwith prepare
and duly file with the Commission an appropriate supplement or amendment
thereto. Except as required by the Exchange Act or the Exchange Act Rules and
Regulations, the Company shall not file any document under the Exchange Act to
which the Representative reasonably objects before the termination of the
Prospectus Delivery Period if such document would be deemed to be incorporated
by reference into the Prospectus.
(g) Prior to any public offering of the Trust Preferred
Securities by the Underwriters, the Trust and the Company will cooperate with
the Representative and its counsel in connection with the registration or
qualification of the Trust Preferred Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as the Representative may
reasonably request; provided, that in no event shall the Company be obligated
to qualify to do business in any jurisdiction where it is not now so qualified
or to take any action which would subject it to general service of process in
any jurisdiction where it is not now so subject.
(h) The Company will furnish to the Representative and
each other Underwriter who may so request copies of such financial statements
and other periodic and special reports as the Company may from time to time
distribute generally to the holders of any class of its capital stock, and will
furnish to the Representative and each other Underwriter who may so request a
copy of each annual or other report it shall be required to file with the
Commission.
(i) The Company will timely file several reports
pursuant to the Exchange Act as are necessary in order to make generally
available to the security holders of the Company as soon as practicable an
earnings statement for the purposes of, and to provide for the benefits
contemplated
13
by, the last paragraph of Section 11(a) of the Act.
(j) The Trust and the Company will apply the net
proceeds from the offering and sale of the Trust Preferred Securities in the
manner set forth in the Prospectus under "Use of Proceeds."
(k) The Trust and the Company will not at any time,
directly or indirectly, take any action intended, or which might reasonably be
expected, to cause or result in, or which will constitute, stabilization of the
price of the shares of Trust Preferred Securities to facilitate the sale or
resale of any of the Trust Preferred Securities.
(l) During the period beginning on the date of this
Agreement and continuing and including the Closing Date, the Company will not,
without the consent of the Representative, publicly offer or announce the
public offering of, any securities that are substantially similar to the Trust
Preferred Securities and are covered by a registration statement filed under
the Act.
5. Expenses.
(a) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will
pay, or reimburse if paid by the Representative, all costs and expenses
incidental to the performance by the Trust of its obligations under this
Agreement, including, but not limited to, costs and expenses of or relating to
(i) the preparation, printing and filing by the Company of the Registration
Statement and exhibits thereto, each Preliminary Prospectus prior to or during
the period specified in the first sentence of Section 4(f) but not exceeding
nine months after the Effective Date, the Prospectus and any amendment or
supplement to the Registration Statement or the Prospectus, (ii) the
preparation and delivery of certificates representing the Trust Preferred
Securities, (iii) furnishing (including costs of shipping and mailing) such
copies of the Registration Statement, the Prospectus and any Preliminary
Prospectus, and all amendments and supplements thereto, as may be requested for
use in connection with the offering and sale of the Trust Preferred Securities
by the Underwriters or by dealers to whom Trust Preferred Securities may be
sold, (iv) the filing fees and out-of-pocket expenses relating to such filings
for any filings required to be made by the Underwriters with the NASD, (v) the
registration or qualification of the Trust Preferred Securities for offer and
sale under the securities or blue sky laws of such jurisdictions designated
pursuant to Section 4(g) and the preparation and printing of preliminary,
supplemental and final blue sky memoranda, (vi) counsel and accountants to the
Company, and (vii) the transfer agent for the Trust Preferred Securities. The
Company will also pay all fees and expenses of the Debenture Trustee, including
the fees and disbursements of counsel for the Debenture Trustee in connection
with the Indenture and the Debentures; the fees and expenses of the Property
Trustee and the Delaware Trustee, including the fees and disbursements of
counsel for the Property Trustee and the Delaware Trustee in connection with
the Certificate of Trust filed with the Delaware Secretary of State with
respect to the Trust (the "Certificate of Trust") and the Trust Agreement; and
the fees and expenses of the Guarantee Trustee, including the fees and
disbursements of counsel for the Guarantee Trustee in connection with the
Guarantee and the
14
Guarantee Agreement.
(b) If the transactions contemplated by this Agreement
are not consummated or if this Agreement is terminated by the Company or the
Trust pursuant to any of the provisions hereof, the Company will reimburse the
Representative for all of their accountable out-of-pocket fees and expenses
(including the fees, disbursements and other charges of their counsel) incurred
by them in connection herewith.
6. Conditions of the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Trust Preferred Securities
shall be subject to the accuracy of the representations and warranties on the
part of the Trust and the Company contained herein as of the date hereof, as of
the date of the effectiveness of any amendment to the Registration Statement
filed after the date hereof and prior to the Closing Date (including the filing
of any document incorporated by reference therein) and as of the Closing Date,
to the accuracy of the statements of the Trust and the Company made in any
certificates pursuant to the provisions hereof, to the performance by the Trust
and the Company of their obligations hereunder and to the following additional
conditions:
(a) All filings required under Rule 424 and 430A of the
Rules and Regulations to be made by the Company or the Trust prior to the
Closing shall have been made by the Company or the Trust, as the case may be.
(b) (i) No stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Trust Preferred Securities under the securities or blue
sky laws of any jurisdiction shall be in effect, and no proceeding for such
purpose shall be pending before or threatened or contemplated by the Commission
or the authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the
Commission or such authorities, and (iv) after the date hereof no amendment or
supplement to the Registration Statement or the Prospectus shall have been
filed unless a copy thereof was first submitted to the Representative and the
Representative did not object thereto in good faith, and the Representative
shall have received certificates, dated the Closing Date and signed by the
Chief Executive Officer, the President or any Senior Executive Vice President
of the Company and the Chief Financial Officer, the Treasurer or the Chief
Accounting Officer of the Company (who may, as to proceedings threatened, rely
upon the best of their information and belief), to the effect of the foregoing
clauses (i), (ii) and (iii).
(c) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, (i) there shall not
have been a material adverse change in the general affairs, business,
properties, management, financial condition or results of operations of the
Trust, or of the Company and its Subsidiaries considered as a single
enterprise, whether or not arising from transactions in the ordinary course of
business, and (ii) the Trust, or the Company and its Subsidiaries considered as
a single enterprise, shall not have sustained any material loss or
15
interference with its business, assets or properties from fire, explosion,
flood or other casualty, or from any labor dispute or any court or legislative
or other governmental action, order or decree.
(d) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, there shall have
been no litigation or other proceeding instituted against the Trust, the
Company or any Significant Subsidiary, or any of their officers, directors or
shareholders in their capacities as such, or any of their assets or properties,
before or by any Governmental Body in which litigation or proceeding, in the
case of the Company and its Significant Subsidiaries, an unfavorable ruling,
decision or finding would materially and adversely affect the business,
properties, financial condition, net worth or results of operations of the
Company and its Subsidiaries considered as a single enterprise.
(e) Each of the representations and warranties of the
Trust and the Company contained herein shall be true and correct at the Closing
Date as if made on such date, and all covenants and agreements herein contained
to be performed on the part of the Trust or the Company and all conditions
herein contained to be fulfilled or complied with by the Trust or the Company
at or prior to the Closing Date shall have been fully performed, fulfilled or
complied with.
(f) The Representative shall have received opinions,
dated the Closing Date from Pietrantoni Mendez & Alvarez, LLP, counsel for the
Company, and Brunilda Santos de Alvarez, General Counsel of the Company, to the
following effect:
(A) in the case of the opinion from Pietrantoni
Mendez & Alvarez, LLP:
(i) The Company has been duly
organized and is validly existing as a corporation and is in good standing
under the laws of the Commonwealth of Puerto Rico; Banco Popular is a banking
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Puerto Rico;
(ii) The Registration Statement is
effective under the Act; any required filing of the Prospectus Supplement
pursuant to Rule 424(b) has been made in the manner and within the time period
required by Rule 424(b); and to the best knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto and no order directed at any document incorporated by
reference in the Registration Statement or any amendment thereto has been
issued, and no proceedings for that purpose have been instituted or are pending
or are threatened or contemplated under the Act;
(iii) The Registration Statement and the
Prospectus, as of their respective dates, appeared on their face to be
appropriately responsive, in all material respects (other than the documents
incorporated therein by reference and not including the financial statements,
schedules and other financial data contained therein, as to which such counsel
need not express any opinion), with the requirements of the Act and the related
Rules and Regulations thereunder;
16
(iv) The descriptions contained and
summarized in the Registration Statement or the Prospectus, or incorporated
therein by reference, are accurate and fairly represent in all material
respects the information required to be shown in the Registration Statement and
Prospectus by the Act and the Rules and Regulations; and the statements set
forth under the headings "Description of Junior Subordinated Debt Securities",
"Description of Capital Securities", "Description of Guarantees", "Relationship
Among the Capital Securities, the Junior Subordinated Debentures and the
Guarantees," and "Plan of Distribution", insofar as such statements constitute
a summary of the legal matters, documents or proceedings referred to therein,
provide an accurate summary of such legal matters, documents and proceedings;
(v) The Company has full legal right,
power, and authority to enter into this Agreement and to consummate the
transactions provided for herein; and this Agreement has been duly authorized,
executed and delivered by the Company;
(vi) The Indenture has been duly
authorized, executed and delivered by the Company, has been duly qualified
under the Trust Indenture Act, as amended, and (assuming the Indenture has been
duly authorized, executed and delivered by the Debenture Trustee) constitutes a
valid and legally binding instrument enforceable against the Company in
accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect and subject
to general equity principles; and the Debentures have been duly authorized and
executed by the Company and, when authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Trust, the
Debentures will constitute valid and legally binding obligations of the Company
enforceable against the Company in accordance with their terms and entitled to
the benefits of the Indenture, subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect and subject
to general equity principles;
(vii) The Guarantee Agreement has been
duly authorized, executed and delivered by the Company, and (assuming the
Guarantee Agreement has been duly authorized, executed and delivered by the
Guarantee Trustee) constitutes a valid and legally binding instrument,
enforceable against the Company in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights generally from time to
time in effect and subject to general equity principles; and the Trust
Agreement has been duly authorized, executed and delivered by the Company and
each of the Administrative Trustees.
(viii) None of the Company's execution or
delivery of this Agreement, its performance hereof, its consummation of the
transactions contemplated herein or its application of the net proceeds of the
offering in the manner set forth under the caption "Use of Proceeds" conflicts
or will conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a default
under, or results or will result in the creation or imposition of any
Encumbrance upon, any property or assets of the Company
17
pursuant to (A) the terms of the Certificate of Incorporation or By-laws of the
Company, in each case as amended; or (B) any statute, rule or regulation of any
Governmental Body having jurisdiction over the Company or any of its activities
or properties; and no consent, approval, authorization or order of any
Governmental Body has been or is required for the Company's performance of this
Agreement, the Guarantee Agreement, the Indenture, the Debentures, or the Trust
Agreement, or the consummation of the transactions contemplated hereby, except
such as have been obtained under the Act or may be required under state or
Commonwealth of Puerto Rico securities or blue sky laws in connection with the
purchase and distribution by the Underwriters of the Trust Preferred
Securities;
(ix) Neither the Company nor the Trust
are required to be registered as an investment company under the Investment
Company Act; and
(x) The deposit accounts of Banco
Popular are insured by the BIF of the FDIC to the legal maximum, and to such
counsel's knowledge no proceeding for the termination or revocation of such
insurance is pending or threatened. Banco Popular is a member of the Federal
Reserve Bank of New York and of the Federal Home Loan Bank of New York.
In addition, such counsel shall state that in the course of the
preparation of the Prospectus, such counsel has participated in conferences
with officers and representatives of the Company and with the Accountants, at
which conferences such counsel made inquiries of such officers, representatives
and Accountants and discussed the contents of the Prospectus and, on the basis
of the foregoing and of the experience such counsel has gained through its
practice under the Act, nothing has come to such counsel's attention that
causes such counsel to believe that the Registration Statement as of the date
it became effective or the Prospectus as of its date and as of the Closing Date
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as of the date hereof and as of
the Closing Date, contained any untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel need not
express any opinion with respect to the financial statements, schedules and
other financial data included in the Prospectus). Such counsel may state that
they make no representation that they have independently verified the accuracy
or completeness of the statements contained in the Registration Statement and
Prospectus.
(B) in the case of the opinion from Brunilda Santos
de Alvarez:
(i) The Company has been duly
organized and is validly existing as a corporation and is in good standing
under the laws of the Commonwealth of Puerto Rico. Each of Banco Popular and
each of the other Significant Subsidiaries is a corporation or bank duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation. Each of the Company, Banco Popular,
and each of the other Significant Subsidiaries is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the character
or location of its properties (owned, leased or licensed) or the nature or
conduct of its
18
business or use of its property and assets makes such qualification necessary,
except where the failure to so qualify would not have a material adverse effect
on the financial condition, or the earnings or business affairs of the Company
and its Subsidiaries considered as a single enterprise;
(ii) The Company has an authorized
capitalization as set forth in the Prospectus; the Company has duly authorized
the issuance and sale of the Debentures to be sold by it to the Trust and has
duly authorized the creation of the Trust and the issuance and sale by the
Trust of the Trust Preferred Securities to be sold by it hereunder; such
Debentures and Trust Preferred Securities, when issued by the Company and the
Trust, respectively, will be validly issued, fully paid and nonassessable
legal, valid and binding obligators of the Company and the Trust, respectively,
enforceable in accordance with their terms, subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors' rights generally from time to time in effect
and subject to general equity principles, will conform in all material respects
to the descriptions thereof contained in the Prospectus, and will not be
subject to any preemptive, subscription or other similar rights; and no holders
of securities of the Company are entitled to have such securities registered
under the Registration Statement, except for holders who have waived any such
registration rights;
(iii) The Guarantee Agreement has been
duly authorized, executed and delivered by the Company, and (assuming the
Guarantee Agreement has been duly authorized, executed and delivered by the
Guarantee Trustee) constitutes a valid and legally binding instrument,
enforceable against the Company in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights generally from time to
time in effect and subject to general equity principles; and the Trust
Agreement has been duly authorized, executed and delivered by the Company and
each of the Administrative Trustees;
(iv) To the knowledge of such counsel,
there are no contracts or documents which are required by the Act to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement which are not filed or incorporated
therein by reference as required by the Act and the Rules and Regulations;
(v) To the knowledge of such counsel,
there is not pending or threatened against the Trust, the Company or any of its
Significant Subsidiaries, any legal action or proceeding, suit, arbitration,
claim, or governmental or other proceeding (informal or formal) or
investigation before or by any Governmental Body, of a character required to be
disclosed in the Registration Statement or the Prospectus which is not so
disclosed therein or in the materials incorporated by reference therein, and to
the knowledge of such counsel, no such proceedings have been threatened against
the Trust, the Company or any of its Significant Subsidiaries, or any of their
respective assets or properties. To the knowledge of such counsel, neither the
Trust, the Company, nor any Significant Subsidiary is in violation of, or in
default with respect to, any law, rule, or regulation, or any order, judgment
or decree, except as described in the Registration Statement or Prospectus or
in the materials incorporated by reference therein, or, in the case of the
Company and
19
its Significant Subsidiaries, such as in the aggregate do not now have and can
reasonably be expected in the future not to have a material adverse effect upon
the operations, business, properties, or assets of the Company and its
Subsidiaries considered as a single enterprise; nor is the Trust, the Company,
or any Significant Subsidiary presently required under any order, judgment or
decree to take any action in order to avoid any such violation or default;
(vi) Each of the Company and the Trust
has full legal right, power, and authority to enter into this Agreement and to
consummate the transactions provided for herein; and this Agreement has been
duly authorized, executed and delivered by the Company and the Trust;
(vii) None of the Company's or the
Trust's execution or delivery of this Agreement, its performance hereof, its
consummation of the transactions contemplated herein or its application of the
net proceeds of the offering in the manner set forth under the caption "Use of
Proceeds" conflicts or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any Encumbrance upon,
any property or assets of the Trust, the Company, or any of its Significant
Subsidiaries, pursuant to (A) the terms of Trust Agreement or the Certificate
of Incorporation or By-laws of the Company or any Significant Subsidiary, in
each case as amended; (B) the terms of any contract or other agreement to which
the Trust, the Company or any Significant Subsidiary is a party or by which any
of them is or may be bound or to which any of their properties is or may be
subject and of which such counsel has knowledge; (C) any statute, rule or
regulation of any Governmental Body having jurisdiction over the Trust, the
Company or any Significant Subsidiary or any of their activities or properties;
or (D) the terms of any judgment, decree or order of any court, arbitrator or
Governmental Body having such jurisdiction and of which such counsel has
knowledge, the breach of which, in the case of the Company and the Significant
Subsidiaries, would result in a material adverse effect on the financial
condition of the Company and its Subsidiaries, considered as a single
enterprise; and no consent, approval, authorization or order of any
Governmental Body has been or is required for the Company's or the Trust's
performance of this Agreement, the Guarantee Agreement, the Indenture, the
Debentures or the Trust Agreement, or the consummation of the transactions
contemplated thereby, except such as have been obtained under the Act or may be
required under state or Commonwealth of Puerto Rico securities or blue sky laws
in connection with the purchase and distribution by the Underwriters of the
Trust Preferred Securities;
(viii) To such counsel's knowledge, the
conduct of the respective businesses of the Trust, the Company and its
Significant Subsidiaries are not in violation of any federal, state or local
statute, administrative regulation or other law, which violation, in the case
of the Company and the Significant Subsidiaries, is likely to have a material
adverse effect on the Company and its Subsidiaries considered as a single
enterprise; and the Trust, the Company and its Significant Subsidiaries have
obtained all material licenses as are necessary or required for the conduct of
their businesses as presently conducted;
(ix) To the knowledge of such counsel,
none of the Trust, the Company or any of the Significant Subsidiaries is in
breach or violation of any of the terms or
20
provisions of, or in default under (nor has an event occurred which with notice
or lapse of time or both would constitute a default or acceleration under), (A)
the terms of the Trust Agreement or its Certificate of Incorporation or
By-laws, in each case as amended; (B) the terms of any contract or other
agreement known to such counsel to which the Trust, the Company or any
Significant Subsidiary is a party or by which any of them is or may be bound or
to which any of their properties or assets is or may be subject, which breach,
violation or default, in the case of the Company and the Significant
Subsidiaries, could have a material adverse effect on the Company and its
Subsidiaries considered as a single enterprise; (C) any statute, rule or
regulation of any Government Body having jurisdiction over the Trust, the
Company or any Significant Subsidiary, or any of their activities, assets or
properties, which breach, violation or default, in the case of the Company and
the Significant Subsidiaries, could have a material adverse effect on the
Company and its Subsidiaries considered as a single enterprise; or (D) the
terms of any judgment, decree or order known to such counsel, of any arbitrator
or Governmental Body having such jurisdiction, which breach, violation or
default, in the case of the Company and the Significant Subsidiaries, could
have a material adverse effect on the Company and its Subsidiaries considered
as a single enterprise; provided such counsel shall not be required to opine as
to matters involving the Federal or state securities laws, other antifraud
provisions, fraudulent transfer laws and the United States Employee Retirement
Income Security Act of 1974.
(x) The deposit accounts of Banco
Popular and of each other Significant Subsidiary of the Company that is a
depository institution are insured by the BIF of the FDIC to the legal maximum,
and to such counsel's knowledge no proceeding for the termination or revocation
of such insurance is pending or threatened. Banco Popular is a member of the
Federal Reserve Bank of New York and of the Federal Home Loan Bank of New York;
and
(xi) To the knowledge of such counsel,
none of the Trust, the Company or any of its Significant Subsidiaries, or any
of their respective directors or officers, is subject to any order or directive
of, or party to any agreement with, any regulatory agency having jurisdiction
with respect to the business or operations of the Trust, the Company or any of
its Significant Subsidiaries, except as disclosed in the Registration Statement
or the Prospectus or in the materials incorporated by reference therein, and
except, in the case of the Company and the Significant Subsidiaries, for any
such order, directive or agreement that is not material to the Company and its
Subsidiaries considered as a single enterprise.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and the Trust and public officials and, as to matters
involving the application of laws of any jurisdiction other than the
Commonwealth of Puerto Rico and the United States (to the extent satisfactory
in form and scope to counsel for the Underwriters) such counsel may rely upon
the opinion of local (including in-house) counsel to the Company. The foregoing
opinion shall also state that such counsel has no reason to believe that the
Underwriters are not justified in relying upon such opinion of local counsel,
and copies of such opinion shall be delivered to the Representative and its
counsel.
21
In addition, such counsel shall state that in the course of the
preparation of the Prospectus, such counsel has participated in conferences
with officers and representatives of the Company and with the Accountants, at
which conferences such counsel made inquiries of such officers, representatives
and Accountants and discussed the contents of the Prospectus and, on the basis
of the foregoing and of the experience such counsel has gained through its
practice under the Act, nothing has come to such counsel's attention that
causes such counsel to believe that the Registration Statement as of the date
it became effective or the Prospectus as of its date and as of the Closing Date
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as of the date hereof and as of
the Closing Date, contained any untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel need not
express any opinion with respect to the financial statements, schedules and
other financial data included in the Prospectus). Such counsel may state that
she makes no representation that she has independently verified the accuracy or
completeness of the statements contained in the Registration Statement and
Prospectus.
References to the Registration Statement and the Prospectus in this
paragraph (f) shall include any amendment or supplement thereto at the date of
such opinion.
(g) The Representative shall have received the opinion
of counsel to J.P. Morgan, as Property Trustee under the Trust Agreement,
Indenture Trustee under the Indenture, and Guarantee Trustee under the
Guarantee Agreement, dated the Closing Date, to the effect that:
(i) J.P. Morgan is duly incorporated and is
validly existing in good standing as a banking corporation under the law of the
United States.
(ii) J.P. Morgan has the power and authority to
execute, deliver and perform its obligations under the Trust Agreement, the
Indenture and the Guarantee Agreement.
(iii) Each of the Trust Agreement, the Indenture
and the Guarantee Agreement has been duly authorized, executed and delivered by
J.P. Morgan and constitutes a legal, valid and binding obligation of J.P.
Morgan, enforceable against J.P. Morgan in accordance with its terms.
(iv) The execution, delivery and performance by
J.P. Morgan of the Trust Agreement, the Indenture and the Guarantee Agreement do
not conflict with or constitute a breach of the charter or by-laws of J.P.
Morgan.
(v) No consent, approval or authorization of,
or registration with or notice to, any governmental authority or agency of the
United States of America governing the banking or trust powers of J.P. Morgan is
required for the execution, delivery or performance by J.P. Morgan of the Trust
Agreement, the Indenture and the Guarantee Agreement.
22
(h) The Representative shall have received an opinion,
dated the Closing Date, from Richards, Layton & Finger, P.A., special Delaware
counsel to the Company, to the effect that:
(i) The Trust has been duly created and is
validly existing in good standing as a business trust under the Delaware
Statutory Trust Act (the "Delaware Act"), and all filings required as of the
date hereof under the Delaware Act with respect to the creation and valid
existence of the Trust as a business trust have been made.
(ii) Under the Trust Agreement and the Delaware
Act, the Trust has the trust power and authority to own property and to conduct
its business, all as described in the Prospectus.
(iii) The Trust Agreement constitutes a valid and
legally binding instrument enforceable against the Company and each of the
Administrative Trustees in accordance with its terms (subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights generally from time to
time in effect and subject to general equity principles and except further as
enforcement thereof may be limited by any governmental authority that limits,
delays or prohibits the making of payments outside the United States).
(iv) Under the Trust Agreement and the Delaware
Act, the Trust has the trust power and authority (i) to execute and deliver,
and to perform its obligations under, this Agreement, and (ii) to issue, and to
perform its obligations under, the Trust Preferred Securities and the Trust
Common Securities.
(v) Under the Trust Agreement and the Delaware
Act, the execution and delivery by the Trust of this Agreement, and the
performance by the Trust of its obligations under this Agreement, have been
duly authorized by all necessary trust action on the part of the Trust.
(vi) Under the Delaware Act, the certificate
attached to the Trust Agreement as Exhibit A is an appropriate form of
certificate to evidence ownership of the Trust Preferred Securities. The Trust
Preferred Securities have been duly authorized by the Trust pursuant to the
Trust Agreement and, when issued and delivered in accordance with this
Agreement, will be duly and validly issued, and, subject to the qualifications
hereinafter expressed in this paragraph (vi), fully paid and non-assessable
undivided beneficial interests in the assets of the Trust and are entitled to
the benefits of the Trust Agreement. The Trust Common Securities have been duly
authorized by the Trust Agreement and are duly and validly issued undivided
beneficial interests in the assets of the Trust and are entitled to the
benefits of the Trust Agreement. The holders of the Trust Preferred Securities,
as beneficial owners of the Trust, will be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
23
(vii) Under the Trust Agreement and the Delaware
Act, the issuance of the Trust Preferred Securities and the Trust Common
Securities is not subject to preemptive or similar rights.
(viii) The issuance and sale by the Trust of the
Trust Preferred Securities and the Trust Common H Securities, the purchase by
the Trust of the Debentures, the execution, delivery and performance by the
Trust of this Agreement, the consummation by the Trust of the transactions
contemplated by this Agreement and compliance by the Trust with its obligations
under this Agreement do not violate (a) any of the provisions of the
Certificate of Trust or the Trust Agreement, (b) any applicable Delaware law or
Delaware administrative regulation.
(i) The Representative shall have received an opinion,
dated the Closing Date, from O'Neill & Borges, counsel to the Underwriters,
which opinion shall be satisfactory in all respects to the Representative.
(j) Concurrently with the execution and delivery of this
Agreement, the Accountants shall have furnished to the Representative a letter,
dated the date of its delivery (the "Accountants Letter"), addressed to the
Representative and in form and substance satisfactory to the Representative, to
the effect that:
(i) they are independent accountants within the
meaning of the Act and the applicable published rules and regulations
thereunder;
(ii) in their opinion, the consolidated
financial statements of the Company and its Subsidiaries audited by them and
incorporated by reference in the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the Act, the Exchange
Act and the published rules and regulations thereunder with respect to
registration statements on Form S-3;
(iii) on the basis of procedures (but not an
audit in accordance with Public Company Accounting Oversight Board (PCAOB)
standards) consisting of (a) reading the minutes of meetings of the stockholders
and the Board of Directors of the Company and its Subsidiaries since December
31, 2003, as set forth in the minute books through a date five business days
before the date hereof; (b) performing the procedures specified by the American
Institute of Certified Public Accountants for a review of interim financial
information as described in SAS No. 71, "Interim Financial Information" on the
unaudited consolidated interim financial statements of the Company and its
Subsidiaries included in the Prospectus and reading the unaudited interim
financial data for the period from the date of the latest audited balance sheet
incorporated by reference in the Prospectus to the date of the latest available
interim financial data; and (c) making inquiries of certain officials of the
Company who have responsibility for financial and accounting matters regarding
the specific items for which representations are requested below, nothing has
come to their attention (as of a date not earlier than five business days before
the date hereof) as a result of the foregoing procedures that caused them to
believe that: (1) the unaudited consolidated interim financial statements
incorporated by reference in
24
the Registration Statement or in the Prospectus, do not comply as to form in
all material respects with the applicable accounting requirements of the
Exchange Act and the published rules and regulations thereunder; (2) any
material modifications should be made to the unaudited consolidated interim
financial statements, if any, incorporated by reference in the Registration
Statement or in the Prospectus, for them to be in conformity with generally
accepted accounting principles; (3)(i) at the date of the latest available
interim financial data and at a specified date not earlier than five business
days before the date hereof, there was any decrease in the total assets or
consolidated stockholders' equity, any increase in long term debt, or any
change in capital stock of the Company and its Subsidiaries as compared with
amounts shown in the most recent balance sheet incorporated by reference in the
Prospectus and (ii) for the period from the date of the most recent balance
sheet incorporated by reference in the Prospectus to the date of the latest
interim financial data available, and to a date not earlier than five business
days before the date hereof, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated net interest
income, non-interest income, or in the total or per share amounts of net
income, except in all instances for changes or decreases which the Registration
Statement discloses have occurred or may occur, or they shall state any
specific changes or decreases; and
(iv) the information set forth under the
captions "Ratios of Earnings to Fixed Charges and Preferred Stock Dividends,"
"Capitalization," and "Selected Consolidated Financial and Other Data" in the
Prospectus and Prospectus Supplement, and under the headings "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Statistical Summaries" in the Company's Annual Report, incorporated by
reference in the Prospectus, which is expressed in dollars (or percentages
derived from such dollar amounts) and has been obtained from accounting records
which are subject to the internal controls of the Company's accounting system or
which has been derived directly from such accounting records and analysis or
computations, is in agreement with such records or computations made therefrom.
At the Closing Date, the Accountants shall have furnished to the
Representative a letter, dated the date of its delivery, which shall confirm,
on the basis of a review in accordance with the procedures set forth in the
Accountants Letter, that nothing has come to their attention during the period
from the date of the Accountants Letter referred to in the prior sentence to a
date (specified in the letter) not more than five business days prior to the
Closing Date, which would require any change in the original letter if it were
required to be dated and delivered at the Closing Date.
In the event that the Accountants Letter sets forth any such changes,
decreases or increases, it shall be a further condition to the obligations of
the Underwriters that (A) such letter shall be accompanied by a written
explanation of the Company as to the significance thereof, unless the
Representative deems such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representative, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Trust Preferred Securities as contemplated by the Registration Statement and
the Prospectus, as amended as of the date hereof.
(k) At the Closing Date, there shall be furnished to the
Representative an accurate
25
certificate, dated the date of its delivery, signed by each of the Chief
Executive Officer, or any Senior Executive Vice President and the Chief
Financial Officer, the Treasurer or the Chief Accounting Officer of the Company
and with respect to the Trust, by an Administrative Trustee of the Trust, in
form and substance satisfactory to the Representative, to the effect that to
the best of their knowledge:
(i) Each signer of such certificate has
carefully examined the Registration Statement and the Prospectus and (A) as of
the date of such certificate, (x) the Registration Statement does not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading and (y) the Prospectus does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (B) since
the Effective Date no event has occurred as a result of which it is necessary
to amend or supplement the Prospectus in order to make the statements therein
not untrue or misleading in any material respect;
(ii) Each of the representations and warranties
of the Trust and the Company contained in this Agreement were, when originally
made, and are, at the time such certificate is delivered, true and correct in
all respects; each of the covenants required herein to be performed by any of
them on or prior to the date of such certificate has been duly, timely and
fully performed and each condition herein required to be complied with on or
prior to the delivery of such certificate has been duly, timely and fully
complied with; and
(iii) No stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereto and no
order directed at any document incorporated by reference in the Registration
Statement or any amendment thereto or the Prospectus has been issued, and no
proceedings for that purpose have been instituted or threatened by the
Commission.
(l) The Trust Preferred Securities shall be qualified
for sale in such states and possessions as the Representative may reasonably
request, and each such qualification shall be in effect and not subject to any
stop order or other proceeding on the Closing Date.
(m) The Company and the Trust shall have furnished to
the Representative such officers' certificates, certificates of government
officials, letters and other documents, in addition to those specifically
mentioned herein, as the Representative may have reasonably requested as to the
accuracy and completeness at the Closing Date of any statement in the
Registration Statement or the Prospectus, as to the accuracy at the Closing
Date of the representations and warranties of the Company, as to the
performance by the Company of its obligations hereunder, and as to the
fulfillment of the conditions concurrent and precedent to the obligations
hereunder of the Underwriters.
(n) The Representative shall have received a copy of the
ruling from the Puerto
26
Rico Department of the Treasury to the effect that the Trust will be considered
a grantor trust for purposes of Puerto Rico income tax purposes, and a copy of
a confirmation letter from the Puerto Rico Department of the Treasury to the
effect that said ruling is applicable to the Trust.
(o) The Representative shall have received copies, duly
certified by the Secretary or an Assistant Secretary of the Company, of the
resolutions or other corporate actions adopted or taken by the Company in
connection with the transactions contemplated herein.
(p) The Representative shall have received a copy of the
certificate of incorporation of the Company, as amended, certified as of a
recent date by the appropriate officer of the Commonwealth, together with
certificates dated as of a recent date from the Secretary of the Sate of the
Commonwealth as to the existence and good standing of the Company under the
laws of the Commonwealth and copies of the by-laws of the Company certified by
the Secretary or an Assistant Secretary of the Company. The Representative
shall further have received a copy, certified by the Secretary or an Assistant
Secretary of the Company, of the Trust Agreement, the Indenture and the
Guarantee Agreement.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to you. The Company will furnish you with such conformed copies
of such opinions, certificates, letters and other documents as you shall
reasonably request.
If (i) any of the conditions specified in this Section 6 shall not
have been fulfilled when and as provided in this Agreement, or (ii) any of the
opinions and certificates mentioned above or elsewhere in this Agreement shall
not be reasonably satisfactory in form and substance to the Representatives and
their counsel, this Agreement and all obligations of the Underwriters hereunder
may be cancelled on, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Trust and
the Company in writing or by telephone or facsimile confirmed in writing.
7. Indemnification and Contribution.
(a) Each of the Trust and the Company, jointly and
severally, agrees to indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person,
if any, who controls each Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages or liabilities, joint or several (and actions in respect
thereof), to which they, or any of them, may become subject under the Act or
other Federal, state or Commonwealth of Puerto Rico statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement made by the Company in
Section 3 of this Agreement, (ii) any untrue statement or alleged untrue
statement of any material fact contained in (A) any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the
27
Prospectus or (B) any application or other document, or any amendment or
supplement thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify the Trust Preferred Securities under the securities or blue sky laws
thereof or filed with the Commission or any securities association or
securities exchange (each, an "Application"), or (iii) the omission or alleged
omission to state in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any amendment or supplement to the Registration Statement or
the Prospectus or any Application a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse,
as incurred, each Underwriter and each such other person for any legal or other
expenses reasonably incurred by such Underwriter or such other person in
connection with investigating, defending or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action; provided,
however, that the Company and the Trust will not be liable in any such case to
the extent that any such loss, claim, damage or liability is based solely upon
an untrue statement or omission or alleged untrue statement or omission in any
of such documents made in reliance upon and in conformity with information
relating to any Underwriter furnished in writing to the Company by the
Representative on behalf of any Underwriter expressly for inclusion therein;
provided, further that such indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or any such other
person) from whom the person asserting any such loss, claim, damage, liability
or action purchased Trust Preferred Securities which are the subject thereof to
the extent that any such loss, claim, damage or liability (i) results from the
fact that such Underwriter failed to send or give a copy of the Prospectus (as
amended or supplemented) to such person at or prior to the confirmation of the
sale of such Trust Preferred Securities to such person, in any case where such
delivery is required by the Act and (ii) arises out of or is based upon an
untrue statement or omission of a material fact contained in such Preliminary
Prospectus that was corrected in the Prospectus (or any amendment or supplement
thereto), unless such failure to deliver the Prospectus (as amended or
supplemented) was the result of noncompliance by the Company with Section 4(f).
This indemnity agreement will be in addition to any liability that the Company
might otherwise have. The Company will not, without the prior written consent
of each Underwriter, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act is a party to each
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of each Underwriter and each such
other person from all liability arising out of such claim, action, suit or
proceeding.
(b) Each Underwriter will severally and not jointly
indemnify and hold harmless each of the Company and the Trust, its respective
employees, officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against all losses, claims, damages or liabilities (or actions in
respect thereof) to which any of them may become subject under the Act or other
federal, state or Commonwealth of Puerto Rico statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the
28
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus or any Application, or (ii) the
omission or the alleged omission to state in the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus, or any Application, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by such Underwriter through the Representative expressly for use
therein; and, subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses reasonably
incurred by the Company and any such director, officer or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or any action in respect thereof. The Company acknowledges that, for
all purposes under this Agreement, the statements relating to the Underwriters
set forth under the heading "Underwriting" (which do not include information on
the Company's expenses and the listing of the Trust Preferred Securities)
constitute the only information furnished in writing to the Company by the
Representative on behalf of the Underwriters expressly for inclusion in the
Registration Statement, any Preliminary Prospectus or the Prospectus. This
indemnity agreement will be in addition to any liability that each Underwriter
might otherwise have.
(c) Promptly after receipt by an indemnified party under
this H Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party or parties under this Section 7, notify the indemnifying party or parties
of the commencement thereof, but the omission so to notify the indemnifying
party or parties will not relieve it or them from any liability which it or
they may have to any indemnified party under the foregoing provisions of this
Section 7 or otherwise unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party. If any such action is brought against an indemnified party and it
notifies an indemnifying party or parties of its commencement, the indemnifying
party or parties against which a claim is made will be entitled to participate
therein and, to the extent that it or they may wish, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses
available to it or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses other than reasonable costs of
investigation subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood that, in connection with such action, the indemnifying
party shall not be liable for
29
the reasonable fees and expenses of more than one separate counsel (in addition
to the fees and expenses of local counsel necessary in connection with any such
proceedings) in any one action or separate but substantially similar actions in
the same jurisdiction arising out of the same general allegations or
circumstances, designated by the Representative in the case of paragraph (a) of
this Section 7, representing the indemnified parties under paragraph (a) who
are parties to such action or actions), or (ii) the indemnifying party has
authorized in writing the employment of counsel for the indemnified party at
the expense of the indemnifying party. After such notice from the indemnifying
party to such indemnified party, the indemnifying party will not be liable for
the costs and expenses of any settlement of such action effected by such
indemnified party without the written consent of the indemnifying party, unless
such indemnified party waived its right under this Section 7, in which case the
indemnified party may effect such a settlement without such consent.
(d) If the indemnification provided for in the foregoing
paragraphs of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under paragraph (a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties, on the one hand, and the indemnified party, on the other, from the
offering of the Trust Preferred Securities or (ii) if, but only if, the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
indemnifying party or parties on the one hand, and the indemnified party, on
the other, in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Trust and the Company, on
the one hand, and the Underwriters, on the other, shall be deemed to be in the
same proportion as the total proceeds from the offering of the Trust Preferred
Securities (before deducting expenses) received by the Company bear to the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus.
Relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Representative on behalf of the Underwriters, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Trust and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
7(d) were to be determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities (or actions in respect
thereof) referred to above in this Section 7(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7(d), no Underwriter shall be
required to contribute any amount in excess of the total underwriting discounts
30
and commissions received by it with respect to the Trust Preferred Securities
purchased by such Underwriter under this Agreement, less the aggregate amount
of any damages that such Underwriter has otherwise been required to pay in
respect of the same or any substantially similar claim. No person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) will be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to contribute
as provided in this Section 7(d) are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 7(d), each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act will have the same rights to
contribution as such Underwriter, and each director or officer of the Company
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, will have the same rights to
contribution as the Company, subject in each case to the provisions of this
paragraph (d). The provisions of section 7(c) shall be applicable to any claim
for contribution under this Section 7(d). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made under this Section 7(d), notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other
obligations it or they may have hereunder or otherwise than under this
paragraph (d) or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may otherwise have.
No party will be liable for contribution with respect to any action or claim
settled without its written consent (which consent will not be unreasonably
withheld).
(e) The indemnity and contribution agreements contained
in this Section 7 and the representations and warranties of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any investigation made by or on behalf of the Underwriters,
(ii) acceptance of any of the Trust Preferred Securities and payment therefor
or (iii) any termination of this Agreement.
8. Termination. The obligations of the several Underwriters
under this Agreement may be terminated at any time prior to the Closing Date by
notice to the Company and the Trust from the Representative, without liability
on the part of any Underwriter to the Company and the Trust if, prior to
delivery and payment for the Securities, in the sole judgment of the
Representative, (i) trading in the Common Stock, the Preferred Stock or any
trust preferred securities of the Company or any affiliate of the Company or in
securities generally shall have been suspended by the Commission or by the
Nasdaq Stock Market, Inc., (ii) minimum or maximum prices shall have been
established for the Common Stock, the Preferred Stock or any trust preferred
securities of the Company or any affiliate of the Company or for securities
generally on either the Nasdaq or the NYSE, or additional material governmental
restrictions, not in force on the date of this Agreement, shall have been
imposed upon trading in securities generally by any of such market or exchange
or by order of the Commission or any court or other Governmental Authority,
(iii) a general banking moratorium shall have been declared by United States,
New York State, or Commonwealth of Puerto Rico authorities,
31
or (iv) any material adverse change in the financial or securities markets in
the United States or any outbreak or material escalation of hostilities or
declaration by the United States of war or other calamity or crisis shall have
occurred, the effect of any of which is such as to make it, in the sole
judgment of the Representative, impracticable or inadvisable to market the
Trust Preferred Securities on the terms and in the manner contemplated by the
Prospectus. Any termination pursuant to Section 8 shall be without liability of
any party to any other party except as provided in Sections 5(a) and 7.
9. Default of Underwriters. If one or more Underwriters default
in their obligations to purchase Trust Preferred Securities hereunder and the
aggregate number of such Trust Preferred Securities that such defaulting
Underwriter or Underwriters agreed but failed to purchase is ten percent or
less of the aggregate number of Trust Preferred Securities to be purchased by
all of the Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representative for the purchase of such Trust
Preferred Securities by other persons (who may include one or more of the
nondefaulting Underwriters, including the Representative), but if no such
arrangements are made by the Closing Date, the other Underwriters shall be
obligated severally in proportion to their respective commitments hereunder to
purchase the Trust Preferred Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase. If one or more Underwriters so
default with respect to an aggregate number of Trust Preferred Securities that
is more than ten percent of the aggregate number of Trust Preferred Securities,
as the case may be, to be purchased by all of the Underwriters at such time
hereunder, and if arrangements satisfactory to the Representative are not made
within 36 hours after such default for the purchase by other persons (who may
include one or more of the nondefaulting Underwriters, including the
Representative) of the Trust Preferred Securities with respect to which such
default occurs, this Agreement will terminate without liability on the part of
any nondefaulting Underwriter, the Trust and the Company other than as provided
in Section 10 hereof. In the event of any default by one or more Underwriters
as described in this Section 9, the Representative shall have the right to
postpone the Closing Date, established as provided in Section 9 hereof for not
more than seven business days in order that any necessary changes may be made
in the arrangements or documents for the purchase and delivery of the Trust
Preferred Securities. As used in this Agreement, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 9.
Nothing herein shall relieve any defaulting Underwriter from liability for its
default.
10. Survival. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Trust, the
Company, its officers, and the several Underwriters set forth in this Agreement
or made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Trust, the Company, any of its officers or directors, any
Underwriter or any controlling person referred to in Section 7 hereof and (ii)
delivery of and payment for the Trust Preferred Securities. The respective
agreements, covenants, indemnities and other statements set forth in Sections 5
and 7 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
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11. Notices. Notice given pursuant to any of the provisions of
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at the office of the Company, Banco
Popular Center, 268 Munoz Rivera Avenue, Hato Rey, PR 00918, Attention: Jorge
Junquera, (b) if to the Trust, to the office of the Company, Banco Popular
Center, 268 Munoz Rivera Avenue, Hato Rey, PR 00918, Attention: Richard
Barrios, or (c) if to the Underwriters, to the office of the Representative,
Banco Popular Center, Suite 1020, 268 Munoz Rivera Avenue, Hato Rey, PR 00918,
Attention: Kenneth McGrath, President. Any such notice shall be effective only
upon receipt. Any notice under Section 7 or 8 may be made by telex or
telephone, but if so made shall be subsequently confirmed in writing.
12. Successors. This Agreement shall inure to the benefit of and
shall be binding upon the several Underwriters, the Trust, the Company, and
their respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of
this Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole
and exclusive benefit of such persons and for the benefit of no other person
except that (i) the indemnities of the Trust and the Company contained in
Section 7 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act and (ii) the indemnities of the Underwriters,
contained in Section 7 of this Agreement shall also be for the benefit of the
directors , employees and officers of the Company and any person or persons who
control the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act. No purchaser of Trust Preferred Securities from any
Underwriter shall be deemed a successor because of such purchase. This
Agreement shall not be assignable by any party hereto without the prior written
consent of the other party.
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13. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO,
WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours,
POPULAR CAPITAL TRUST II
By:
-------------------------------------------
Name:
Title:
POPULAR, INC.
By:
-------------------------------------------
Name:
Title:
Confirmed as of the date first above mentioned:
POPULAR SECURITIES, INC.
Acting on its behalf and as representative
of the several Underwriters named in Schedule 1 hereof
By:
-------------------------------------------
Name:
Title:
34
SCHEDULE I
UNDERWRITERS
Aggregate Number of Trust
Preferred Securities to be
Purchased
Popular Securities, Inc.
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Total: 4,000,000
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