EX-4.10 2 d192149dex410.htm EX-4.10
EXHIBIT 4.10
POPULAR, INC.
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT
TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
AS OF DECEMBER 31, 2021
The following is a summary description of the
securities of Popular, Inc. (the “Company”) that are registered
under Section 12
of the Securities
Exchange Act
of 1934, as
amended, consisting
of (1) our
Common Stock and
(2)
our 6.125% Cumulative Monthly Income Trust Preferred
Securities.
In
this
summary,
when
we
refer
to
the
“Company,”
“we,”
“us”
or
“our”
or
when
we
otherwise
refer
to
ourselves, we mean
Popular, Inc.,
excluding the Company’s
subsidiaries, unless otherwise
expressly stated or
as the
context requires; all references to “common stock” refer only to common stock issued
by the Company and not to any
common stock issued by any subsidiary.
Description of Common Stock
The
following
description
of
the
Company’s
Common
Stock
is
a
summary
and
does
not
purport
to
be
complete.
It
is
subject
to
and
qualified
in
its
entirety
by
reference
to
the
Company’s
Restated
Certificate
of
Incorporation (the
“Charter”) and
the Company’s
Amended and
Restated By-laws
(the “Bylaws”),
each of
which is
filed as an
exhibit to the
Annual Report on
Form 10 K
of which this
exhibit is a
part. We
encourage you to
read the
Charter and
Bylaws and the
applicable provisions
of the General
Corporations Act of
the Commonwealth
of Puerto
Rico for additional information.
Authorized Capital Shares
Pursuant to
the Charter,
the Company’s
authorized capital
stock consists
of 170,000,000
million shares
of
common stock,
$0.01 par value
per share
(“Common Stock”),
and 30,000,000
shares of preferred
stock without
par
value (“Preferred Stock”).
Voting
Rights
The holders of the Company’s Common Stock
are entitled to one
vote per share on
all matters brought before
the stockholders. The holders
of the Common Stock
do not have cumulative voting
rights. The Charter provides
that
the
approval
of
the
Company’s
merger,
reorganization,
or
consolidation
or
the
sale,
lease
or
hypothecation
of
substantially
all
of
the
Company’s
assets
or
the
approval
of
the
Company’s
voluntary
dissolution
requires
the
affirmative
vote
of
the
holders
of
a
majority
of
the
outstanding
shares
of
the
Common
Stock
(the
minimum
vote
standard required by
the Puerto Rico General
Corporations Act). In
addition, the affirmative
vote of the holders
of a
majority of the outstanding shares of Common Stock are required to amend
the Charter.
Dividend Rights
Subject to the rights of
holders of any Preferred Stock outstanding, holders
of the Common Stock are
entitled
to receive
ratably such
dividends, if
any,
as the
Company’s
Board of
Directors may
in its
discretion declare
out of
legally available funds.
Liquidation Rights
In
the
event
of
liquidation,
holders
of
the
Common
Stock
are
entitled
to
receive
pro
rata
any
assets
distributable to a stockholder with respect to the shares held
by them, after payment of liabilities and such preferential
amounts as may be required to be paid to the holders
of the Company’s outstanding
series of preferred stock and any
preferred stock the Company may hereafter issue.
Other Rights and Preferences
The Company’s
Common Stock
has no
sinking fund
or redemption
provisions or
preemptive, conversion,
exchange or call rights.
Classification of the Board of Directors
Until our existing classified Board of Directors structure is fully phased out beginning
with our 2023 annual
meeting of stockholders, the Charter provides that the members of the Company’s Board of Directors are divided into
three
classes.
At
the
2021
annual
meeting
of
stockholders,
one-third
of
the
members
of
the
Company’s
Board
of
Directors were elected for a
term expiring at the 2022 annual meeting
of stockholders, at the 2022 annual
meeting of
stockholders, two-thirds
of the members
of the Company’s
Board of
Directors will be
elected for a
term expiring at
the 2023 annual meeting of stockholders, and thereafter directors will be elected annually.
The Charter
provides that a
director, or
the entire Board
of Directors, may
be removed by
the stockholders
only for cause.
The Charter and the Bylaws also
provide that the affirmative vote
of the holders of at least two-thirds
of the
combined
voting
power
of
the
outstanding
capital
stock
entitled
to
vote
generally
for
the
election
of
directors
is
required to remove a director or the entire Board of Directors from office
for cause.
Advance Notice Requirements
The Company’s
Bylaws establish advance
notice procedures
with respect to
shareholder proposals
relating
to
nominations
or
any
other
matter
to
be
brought
before
any
meetings
of
shareholders
of
the
Company.
These
procedures provide
that notice of
such shareholder proposals
must be timely
given in writing
to the Secretary
of the
Company prior to
the meeting at which
the action is to
be taken. The required
notice period varies
depending on the
timing of the
proposal and the
shareholders meeting
to which it
relates. The notice
must contain certain
information
specified in the Bylaws and must otherwise comply with the amended and
restated Bylaws.
“Blank Check” Preferred Stock
The Charter authorizes the
issuance of “blank
check” preferred stock,
which may be
issued by the
Company’s
Board
of
Directors
without
shareholder
approval
and
may
contain
voting,
liquidation,
dividend
and
other
rights
superior to the Common Stock.
Listing
The Common Stock is traded on The Nasdaq Stock Market LLC under
the trading symbol “BPOP”.
Description of 6.125% Cumulative Monthly Income Trust
Preferred Securities of Popular Capital Trust
II
(Fully and Unconditionally Guaranteed by Popular,
Inc.).
The following description of the Company’s 6.125% Cumulative Monthly Income Trust Preferred Securities
(the “Capital Securities”) is a
summary and does not purport to
be complete. It is
subject to and qualified in
its entirety
by reference to (i) the Amended and Restated Declaration of Trust and Trust Agreement, dated as of August 31, 2009
(the
“Trust
Agreement”),
among
the
Company,
as
depositor,
the
Property
Trustee,
the
Delaware
Trustee,
the
Administrative
Trustees
and
the
several
Holders
(as
defined
therein),
as
amended,
amended
and
restated
or
supplemented from time to time, and (ii) the Prospectus Supplement (to Prospectus dated November 18, 2004), dated
as
of
November
24,
2004,
relating
to
the
Capital
Securities
(the
“Prospectus
Supplement”),
each
of
which
is
incorporated
by
reference
as
an
exhibit
to
the
Annual
Report
on
Form
10-K
of
which
this
exhibit
is
a
part.
We
encourage you to read the Trust Agreement, the Prospectus Supplement and the Delaware Statutory Trust Act and the
Trust Indenture Act for more information.
The Capital Securities and the Common Securities (the “Common
Securities”, and together with the Capital
Securities,
the
“Trust
Securities”)
of
Popular
Capital
Trust
II
(the
“Trust”),
a
Delaware
statutory
trust,
represent
beneficial
interests
in
the
Trust.
The
Trust
holds
the
Company’s
6.125%
junior
subordinated
debentures
(the
“Debentures”).
Each
holder
of the
Capital
Securities
has
a
beneficial
interest
in
the
Trust
but
does
not
own
any
specific
Debentures
held by
the Trust.
However,
the Trust
Agreement under
which the
Trust
operates defines
the financial
entitlements of the
Capital Securities in
a manner that
causes those financial
entitlements to correspond to
the financial
entitlements of the Trust in the Debentures it holds.
The Trust
The Trust is a statutory trust formed under Delaware law pursuant to the Trust Agreement and the certificate
of trust filed with the Delaware Secretary of State.
The Trust exists for the exclusive purposes of:
●
issuing the Trust Securities;
●
investing the gross proceeds of the Trust Securities
in an equivalent amount of the Debentures and
holding the Debentures; and
●
engaging in only those activities convenient, necessary or incidental to the
activities described above.
In addition to
the Capital Securities, the
Trust Agreement
authorizes the Trust
to issue Common Securities.
All of the Common Securities are directly or indirectly owned
by the Company. The Common Securities rank equally
with the
Capital Securities
and
the Trust
makes payment
on the
Trust
Securities pro
rata, except
that upon
certain
events of default under the Trust
Agreement relating to payment defaults
on the Debentures, the rights of the
holders
of
the
Common
Securities
to
payment
in
respect
of
distributions
and
payments
upon
liquidation,
redemption
and
otherwise
are
subordinated
to the
rights of
the holders
of the
Capital
Securities.
The
Company
acquired
Common
Securities in an aggregate liquidation amount equal to at least three percent of
the total capital of the Trust.
The Trust
Agreement does
not permit
the Trust
to issue
any securities
other than
the Trust
Securities or
to
incur any indebtedness.
The Trust’s
business and
affairs are
conducted by
its respective
trustees. The
Property Trustee
acts as
sole
trustee under
the Trust
Agreement for
purposes of
compliance with
the Trust
Indenture Act
and also
acts as
trustee
under the Guarantee (as defined below).
The
Trust
has
a
term
of
approximately
30
years,
but
may
be
terminated
earlier
as
provided
in
the
Trust
Agreement.
The Company pays all fees and expenses related to the Trus
t.
DESCRIPTION OF THE CAPITAL
SECURITIES
General
The terms
of the
Capital Securities
include (i)
those stated
in the
Trust
Agreement, as
amended, amended
and restated, or
supplemented from time
to time,
and (ii)
those made
part of
the Trust Agreement
by the
Trust Indenture
Act and the Delaware Statutory Trust Act.
The Property
Trustee
acts as
indenture trustee
for purposes
of compliance
with the
provisions of
the Trust
Indenture Act with respect to the Trust. The Capital Securities have
a liquidation amount of $25.
The payment of distributions out
of money held by the Trust,
and payments upon redemption
of the Capital
Securities or
liquidation of
the Trust,
are guaranteed
by the Company
to the
extent described
under “Description
of
the
Guarantee”.
The
Guarantee,
when
taken
together
with
the
Company’s
obligations
under
the
Trust
Agreement,
including the Company’s
obligations to pay costs, expenses, debts and liabilities of the
Trust, other than with respect
to the Trust
Securities, has the
effect of
providing a
full and unconditional
guarantee of amounts
due on the
Capital
Securities. The Property Trustee,
in its role as the guarantee trustee with respect to the Trust,
holds the Guarantee for
the benefit of the holders of the Capital Securities. The
Guarantee does not cover payment of distributions or amounts
payable on redemption
or liquidation of the Capital
Securities when the Trust
does not have funds
on hand available
to make such payments.
The Capital Securities
were issued in
the form of
one or more
global securities deposited with
The Depository
Trust Company (“DTC”).
The Capital Securities are
securities of the Trust
and are issued pursuant
to the Trust
Agreement. Under the
Trust
Agreement, the
Trust
holds the
Debentures for
the benefit
of the
holders of
the Trust
Securities. The
Capital
Securities are limited to $130,000,000 aggregate liquidation amount. The Capital
Securities are traded on The Nasdaq
Stock Market LLC under the trading symbol “BPOPM”.
Distributions
Distributions on the Capital Securities are fixed at an annual rate of 6.125% of the stated liquidation amount
of $25 per Capital Security.
Distributions under the Trust Agreement are cumulative.
Distributions under
the currently
effective Trust
Agreement are
payable monthly
in arrears on
the first
day
of each
month, commencing
on September
1, 2009.
Distributions under
the Amended
and Restated
Declaration of
Trust and Trust
Agreement dated as of November
30, 2004 (the “Initial Trust
Agreement”) were payable monthly
in
arrears on the first day of each month commencing on January 1, 2005. Funds available for distributions
with respect
to the Capital Securities are limited to payments received from the Company
on the Debentures.
If the Trust is terminated and
its assets distributed, for
each Capital Security, each holder is
entitled to receive
a
like
amount
of
the
Debentures
held
by
the
Trust
or
the
liquidation
amount
of
$25
plus accumulated
but
unpaid
distributions from
the assets
of the
Trust
available for
distribution, after
it has
paid liabilities
owed to
its creditors,
subject to the rights of the holders of the Common Securities to receive a pro rata distribution. Distributions
to which
holders of the Capital Securities are
entitled and that are past
due will accumulate additional distributions to the
extent
permitted by applicable law,
at an annual rate of 6.125% of the unpaid distributions, compounded monthly.
The term
“distribution” includes any additional distributions payable unless otherwise
stated.
The term “like amount” as used in this description means:
●
with respect to a redemption
of any Trust Securities,
Capital Securities or Common
Securities having a
liquidation amount equal
to that portion
of the principal amount
of the Debentures held
by the Trust
to
be contemporaneously
redeemed in
accordance with
the Indenture,
the proceeds
of which
are used
to
pay the redemption price of the Capital Securities or Common Securities; and
●
with respect to a distribution of
the Debentures held by the Trust
to holders of any Capital Securities or
Common
Securities in
exchange therefor
in connection
with a
dissolution or
liquidation of
the Trust,
Debentures held
by the Trust
having a
principal amount
equal to the
liquidation amount
of the Capital
Securities or Common Securities of the holder to whom the Debentures
would be distributed.
Under the
Trust Agreement,
the amount of
distributions payable
for any period
less than a
full distribution
period is computed on the basis of a 360-day year of twelve 30- day months and the actual number of days elapsed in
a partial month in
that period. Under the Trust Agreement, the
amount of distributions payable for
any full distribution
period is computed by dividing the rate per annum by twelve.
Payment of Distributions
The Trust pays
distributions on its Capital Securities
to DTC, which credits
the applicable accounts at
DTC
on the
applicable payment
dates, or
if the
securities certificate
for the
Capital Securities
is no
longer held
by or
on
behalf of DTC,
the Trust
will make the
payments by
check mailed to
the addresses of
the holders as
such addresses
appear on the books and records of the Trust on the
applicable record dates. However, a holder of $1
million or more
in aggregate liquidation
amount of the
Capital Securities may receive
distribution payments, other
than distributions
payable at
maturity,
by wire transfer
of immediately
available funds
upon written
request to the
Trust not
later than
15 calendar days prior to the date on which the
distribution is payable. The record date for distributions on the Capital
Securities is the fifteenth day of the month preceding the distribution
date, whether or not a business day.
The Trust pays distributions
through the Property
Trustee. The Property Trustee holds
amounts received from
the Debentures in the payment account for the benefit of the holders of the Trust
Securities.
If a
distribution
is payable
pursuant
to the
Trust
Agreement
on a
day that
is not
a business
day,
then that
distribution is to be paid
on the next day that
is a business day, and without any interest
or other payment for any
delay
with the same force and effect as if made on the payment date.
The Trust
Agreement defines
a business
day as
a day
other than
a Saturday,
a Sunday
or any
other day
on
which banking institutions in
New York,
New York,
San Juan, Puerto Rico or
Wilmington, Delaware
are authorized
or required by law,
regulation or executive order to remain closed or are customarily closed.
Deferral of Distributions
As long as there is no event of default under the Debentures, the Company has the
right to defer payments of
interest on the Debentures at any time and from time to
time by extending the interest payment period for a period (an
“Extension Period”) of up to 60 consecutive months, but not beyond the maturity
of the Debentures.
As a consequence, during an Extension
Period, the Trust will defer payment
of the monthly distributions on
the Capital Securities. The accumulated but unpaid
distributions will continue to accumulate additional distributions,
as permitted by applicable law,
at an annual rate of 6.125% compounded monthly.
While the Company defers interest payments on the Debentures, it will be restricted
from:
●
declaring
or
paying
any
dividends
or
distributions
on,
or
redeeming,
purchasing,
acquiring
or
making a liquidation payment on, any shares of its capital stock; and
●
making
payments
on
or
repaying,
repurchasing
or
redeeming
any
of
its
debt
securities
that
rank
equal or junior to the Debentures.
If the
Trust
defers distributions,
the deferred
distributions,
including
accumulated
additional distributions,
are to
be paid
on the
distribution payment
date following
the last
day of
the Extension
Period to
the holders
on the
record date for
that distribution payment
date. Upon termination
of an Extension Period
and payment of all
amounts
due on the Capital Securities, the
Company may elect to begin a
new Extension Period with respect to
the Debentures,
subject to the above conditions.
Redemption
Repayment or Redemption of the Debentures
When the Company
repays or redeems
the Debentures, whether at
stated maturity or
upon earlier redemption,
the Property Trustee
will apply the
proceeds from the
repayment or redemption
to redeem Capital
Securities having
an aggregate liquidation amount equal
to that portion of
the principal amount of
Debentures being repaid or redeemed.
The
redemption
price
per
security
is the
$25
liquidation
amount,
plus
accumulated
but unpaid
distributions
to
the
redemption date.
If less than all of
the Debentures are to
be repaid or redeemed,
then the aggregate liquidation
amount of the
Trust Securities to be redeemed will be allocated approximately 3% to the
Common Securities and 97% to the Capital
Securities, except in the case of an event of default as a result of any failure by the Company to make
any principal or
interest payments under the Debentures when due.
The Company
has the
right,
subject to
any
required
prior
approval of
the Federal
Reserve, to
redeem
the
Debentures at a redemption price equal to 100%
of the principal amount, plus accrued and unpaid
interest to the date
of redemption:
●
on or after December 1, 2009, in whole or in part, on one or more occasions,
at any time; and
●
in
whole,
but not
in part,
at
any
time within
90 days
following
the occurrence
and
continuation
of a
Tax
Event, an Investment Company Event or a Capital Treatment
Event, each as described below.
If less than all of the Debentures
are to be repaid or redeemed on
the date of redemption, then the proceeds
from
such repayment or redemption will be allocated to the redemption of Trust
Securities proportionately.
A redemption of the Debentures will cause a mandatory redemption of the Trust
Securities.
Tax Event; Investment
Company Event; Capital Treatment Event
A “Tax Event”,
under the Trust Agreement, means the
receipt by the Trust of an opinion
of counsel experienced
in such matters to the effect that as a result of:
●
any amendment to,
or change, including any
announced prospective change,
in the laws, or
any regulations
thereunder, of
the United States or
any political subdivision
thereof or Puerto
Rico, or a taxing
authority of
the United States or Puerto Rico, affecting taxation; or
●
any official or administrative pronouncement or
action or judicial decision
interpreting or applying such laws
or regulations;
there is more
than an insubstantial risk that:
(1)
the
Trust
is, or
will be
within 90
days of
the delivery
of
the opinion
of
counsel,
subject to
United
States
federal or Puerto Rico income tax with respect to income received
or accrued on the Debentures held by the
Trust;
(2)
interest payable by the Company to the Trust on the
Debentures held by the Trust is not, or
will not be within
90 days of the delivery of the opinion of counsel, deductible by the Company, in whole or in part, for Puerto
Rico income tax purposes or for U.S. income tax purposes, to the extent applicable
to the Company; or
(3)
the
Trust
is, or
will be
within
90
days
of
the delivery
of
the opinion
of
counsel,
subject
to
more
than
an
immaterial amount of taxes, duties or other governmental charges.
If a Tax Event
has occurred and is continuing with respect to the Trust
Agreement, and the Trust is the holder of
all the Debentures, the Company
will pay any additional sums required
so that distributions on the Capital
Securities
will
not
be
reduced
by
any
additional
taxes
(other
than
withholding
taxes),
duties
or
other
governmental
charges
payable by the Trust as a result of the Tax
Event.
An “Investment
Company Event”,
under the
Trust
Agreement, means
the receipt
by the
Trust
of an
opinion of
counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or
a written change, including any announced prospective change, in
interpretation or application of law or
regulation by
any legislative body,
court, governmental agency or regulatory
authority, there
is more than an insubstantial risk that
the
Trust
is or
will be
considered
an “investment
company”
that
is required
to be
registered
under the
Investment
Company Act.
A “Capital Treatment
Event”, under the
Trust Agreement,
means the reasonable
determination of
the Company
that,
as
a
result
of
any
amendment
to,
or
change
in,
including
any
announced
proposed
change
in,
the
laws
or
regulations
of
the
United
States
or
any
political
subdivision
thereof
or
therein,
or
as
a
result
of
any
official
or
administrative
pronouncement
or action
or judicial
decision interpreting
or applying
such laws
or regulations,
that
there is more than
an insubstantial risk that
the Company will not
be entitled to treat
an amount equal to
the liquidation
amount of
the Capital
Securities as
Tier
1 capital,
or the
then-equivalent thereof,
for purposes
of capital
adequacy
guidelines of the Federal Reserve, as then in effect and applicable
to the Company.
Redemption Procedures
The Trust may redeem the Capital Securities only in an amount equal to the funds it has on hand and legally
available to pay the redemption price.
The Property
Trustee
will mail
written notice
of the
redemption of
the Capital
Securities to
the registered
holders
at
least
30
but
not
more
than
60
days
before
the
date
fixed
for
redemption.
If
the
Trust
gives
a
notice
of
redemption,
then,
by
12:00
noon,
New
York
City
time,
on
the
date
of
redemption,
if
the
funds
are
available
for
payment, the Property Trustee will, for Capital Securities
held in book-entry form:
●
irrevocably deposit with DTC funds sufficient to pay the redemption
price; and
●
give
DTC irrevocable
instructions and
authority
to pay
the redemption
price
to the
holders of
the Capital
Securities.
With respect to the Capital
Securities not held in
book-entry form, if funds
are available for
payment, the Property
Trustee will:
●
irrevocably deposit with the paying agent funds sufficient
to pay the redemption price; and
●
give the paying agent irrevocable instructions and authority to pay the redemption price to the holders of the
Capital Securities upon surrender of the certificates evidencing the
Capital Securities.
Notwithstanding the above,
distributions payable on
or prior to
the date of
redemption for Capital
Securities called
for redemption are payable to the holders of the Capital Securities on
the applicable record dates.
Once notice
of redemption
pursuant to
the Trust
Agreement is
given and
funds are
deposited, then
all rights
of
the holders of the Capital Securities called for redemption terminate, except the right
to receive the redemption price,
but without any interest or other payment for any
delay in receiving it. If such notice
of redemption is given and funds
deposited as required, the Capital Securities then will cease to be outstanding.
If
payment
of the
redemption
price
for
the Capital
Securities
called
for
redemption
is improperly
withheld
or
refused and not
paid either by the
Trust or
by the Company
under the Guarantee,
then distributions on
those Capital
Securities will
continue to
accumulate at
the then-applicable
rate, from
the date
of redemption
to the
date of
actual
payment. In
this case,
the actual
payment date
will be
the date
fixed for
redemption for
purposes of
calculating the
redemption price.
If less than all of the Trust Securities are redeemed, then the aggregate liquidation amount of the Trust
Securities
to
be
redeemed
normally
will
be
allocated
approximately
3%
to
the
Common
Securities
and
97%
to
the
Capital
Securities. However, if an
event of default
has occurred as
a result
of any failure
by the Company
to make any
principal
or interest payments under
the Debentures when due,
holders of the Capital Securities
will be paid in
full before any
payments are made to
holders of the Common
Securities. The Property Trustee selects
the particular Capital Securities
to be
redeemed on
the pro
rata basis
described
above not
more than
60 days
before the
date of
redemption by
any
method the Property Trustee deems fair and appropriate or,
if the Capital Securities are then held in book-entry form,
in accordance with DTC’s customary
procedures.
Under the Trust Agreement,
if any
date fixed for
redemption is not
a business
day, then payment of the
redemption
price will be made on the next day that is a business day,
without any interest or other payment for the delay.
Subject
to
the
above
and
applicable
law
and
regulations,
including
United
States
federal
securities
laws
and
banking laws
and regulations,
the Company
or its
affiliates
may,
under the
Trust Agreement,
at any
time and
from
time to time purchase
outstanding Capital Securities by
tender, in the
open market or by private
agreement, and may
resell the Capital Securities.
Ranking of Capital Securities
Payment of distributions on, and the redemption price of
and the liquidation distribution in respect of
Capital
Securities and
Common Securities,
as applicable,
are made
pro rata
based on
the relative
liquidation amount
of the
Capital
Securities
and
Common
Securities,
except
that
upon
certain
events
of
default
under
the
Trust
Agreement
relating to payment defaults on Debentures, the rights of the holders of the Common
Securities to payment in respect
of distributions and payments upon liquidation, redemption and
otherwise are subordinated to the rights of
the holders
of the Capital Securities.
In the
case of
any event
of default
under the
Trust Agreement
resulting from
an event
of default
under the
Indenture, the
Company,
as holder
of the
Common Securities,
will be
deemed to
have waived
any right
to act
with
respect to any
such event of default
under the Trust Agreement
until all such
events of default have
been cured, waived
or otherwise eliminated. Until
all events of
default under the
Trust Agreement have been
so cured, waived
or otherwise
eliminated,
the
Property
Trustee
will
act
solely
on
behalf
of
the
holders
of
the
Capital
Securities
and
not
on
the
Company’s behalf,
and only the holders
of the Capital Securities
will have the right
to direct the Property
Trustee to
act on their behalf.
Liquidation Distribution Upon Dissolution
The amount
payable on
the Capital
Securities in
the event
of any
liquidation of
the Trust
is the
liquidation
amount of
$25 per
Capital Security
plus accumulated
but unpaid
distributions, subject
to certain
exceptions, which
may be paid in the form of a distribution of Debentures.
The Company can at any time dissolve the Trust. If the Trust
dissolves and it has paid the liabilities owed to
its creditors, the Debentures will be distributed to the holders of the Trust
Securities.
Any distributions of the Debentures may require approval of the Federal
Reserve.
The Trust Agreement states that the Trust
will dissolve automatically on December 1, 2035 or earlier upon:
(1)
the bankruptcy, dissolution
or liquidation of the Company;
(2)
the
distribution
of
Debentures
having
a
principal
amount
equal
to
the
liquidation
amount
of
the
Trust
Securities of the holders to whom the Debentures are distributed, if the Company has given written direction
to the Property Trustee to dissolve the
Trust, which direction, subject to the foregoing restrictions,
is optional
and wholly within the discretion of the Company;
(3)
the redemption of all Capital Securities in connection with the redemption of all the Debentures or the stated
maturity of the Debentures; or
(4)
the entry of an order for the dissolution of the Trust
by a court of competent jurisdiction.
If the
Trust
dissolves as
described in
clauses (1),
(2) or
(4) in
the preceding
paragraph, after
the Trust
pays all
amounts owed to creditors,
holders of the Capital Securities
and holders of its Common
Securities will be entitled to
receive Debentures having a principal amount equal to the liquidation
amount of the Trust Securities of the holders.
If the Trust cannot pay the full amount due
on the Trust Securities because it has insufficient
assets for payment,
then the amounts the Trust
owes on the Capital Securities
will be proportionately allocated.
The holders of Common
Securities are entitled to receive
distributions upon any liquidation
on a pro rata basis
with the holders of the
Capital
Securities, except
that if
an event
of default
under the
Debentures has
occurred and
is continuing
as a
result of
any
failure by the Company to make any principal or interest payments
in respect of Debentures when due, the Trust will
pay the total amounts due on the Capital Securities before making any distributi
on on the Common Securities.
After the liquidation date is fixed for any distribution of Debentures, upon dissolution
the Trust:
●
the Trust Securities will no longer be deemed to be outstanding;
●
DTC
or
its
nominee,
as
the
registered
holder
of
the
Capital
Securities,
will
receive
a
registered
global
certificate
or certificates
representing the
Debentures to
be delivered
upon distribution
with respect
to the
Capital Securities held by DTC or its nominee; and
●
any
certificates
representing
the Capital
Securities
will
be
deemed
to
represent
the
Debentures
having
an
aggregate principal amount equal to the
liquidation amount of the Capital Securities,
and bearing accrued but
unpaid interest equal to accumulated
but unpaid distributions on Capital
Securities, until the holder of
those
certificates presents them to the security registrar for Capital Securities for transfer
or reissuance.
Exchanges
If
at
any
time
a
Depositor
Affiliated
Owner
is
the
owner
of
Capital
Securities,
such
Depositor
Affiliated
Owner will have the right to deliver to the Property Trustee all or such portion of its Capital Securities as it elects and
receive,
in
exchange
therefore,
a
like
amount
of
Debentures.
After
the
exchange,
the
Capital
Securities
will
be
cancelled and will no longer
be deemed to be
outstanding and all rights of
the Depositor Affiliated Owner with
respect
to the Capital Securities will cease.
In the case of an exchange described in the previous paragraph, the Trust will, on the date of such exchange,
exchange Debentures having
a principal amount
equal to a proportional
amount of the
aggregate liquidation amount
of its outstanding Common Securities, based on the ratio of the aggregate liquidation
amount of its Capital Securities
exchanged divided by the aggregate
liquidation amount of its Capital
Securities outstanding immediately prior to such
exchange, for
such proportional amount
of its Common
Securities held by
the Company (which
contemporaneously
will be cancelled and no longer be deemed to be outstanding).
Events of Default; Notice
Any one of the following events constitutes an event of default
of the Trust, regardless of the reason for such
event of default and whether
it will be voluntary or involuntary
or be effected by operation
of law or pursuant to any
judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body:
●
the occurrence of an event of default under the Indenture with
respect to the Debentures held by the Trust; or
●
the default by the
Property Trustee in
the payment of any
distribution on the Capital
Securities or Common
Securities when such distribution becomes due and payable, and
continuation of such default for a period of
30 days; or
●
the default by the Property Trustee in the payment of any redemption price of Capital Securities or Common
Securities when such redemption price becomes due and payable; or
●
the failure to perform or the breach, in any material respect,
of any other covenant or warranty of the trustees
of the Trust in
the Trust Agreement
for 90 days after the defaulting
trustee or trustees have received
written
notice of the failure to perform or breach of warranty in the manner
specified in the Trust Agreement; or
●
the occurrence
of certain
events of
bankruptcy
or insolvency
with respect
to the
Property Trustee
and the
Company’s failure to appoint a successor
property trustee within 90 days.
Within ten days after any event
of default of the Trust actually
known to the Property Trustee occurs,
the Property
Trustee will transmit notice of such event of default to
the holders of the Capital Securities or Common Securities
and
to
the
Administrative
Trustees,
unless
such
event
of
default
shall
have
been
cured
or
waived.
The
Company,
as
depositor,
and the
Administrative Trustees
are required
to file
annually with
the Property
Trustee
a certificate
as to
whether or not
the Company or
the Administrative Trustees
are in compliance
with all the conditions
and covenants
applicable to the Company and the Administrative Trustees
under the Trust Agreement.
The existence
of an event
of default under
the Trust
Agreement, in and
of itself, with
respect to the
Debentures
does not entitle the holders of the Capital Securities to accelerate the maturity of
the Debentures.
Removal of Trustees
Unless an event
of default under the
Indenture has occurred
and is continuing,
the Property Trustee
and the
Delaware Trustee may be removed at any time by the holder of the Common Securities. The Property Trustee and the
Delaware
Trustee
may
be
removed
by
the
holders
of
a
majority
in
liquidation
amount
of
the
outstanding
Capital
Securities for cause
or if an event
of default under the
Indenture has occurred
and is continuing. In
no event will the
holders
of the
Capital
Securities have
the
right
to vote
to
appoint,
remove
or replace
the Administrative
Trustees,
which voting
rights are vested
exclusively in the
Company,
as the holder
of the Common
Securities. No resignation
or removal of a trustee and
no appointment of a successor trustee will
be effective until the acceptance of appointment
by the successor trustee in accordance with the provisions of the Trust
Agreement.
Co-Trustees and Separate
Property Trustee
Unless an event of default under
the Debentures has occurred and
is continuing, at any time or
from time to
time, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any
part of the
trust property may
at the time
be located, the
Company,
as the holder
of the Common
Securities, and the
Administrative Trustees have the power to
appoint one or more
persons either to act
as a co-trustee of
the Trust, jointly
with the Property
Trustee, of all
or any part
of such trust property,
or to act as
separate trustee of
any such property,
in either
case with such
powers as
may be provided
in the
instrument of
appointment, and
to vest in
such person or
persons in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of
the Trust
Agreement. If an
event of default
under the Indenture
has occurred and
is continuing, the Property
Trustee
alone shall have power to make such appointment.
Mergers or Consolidation of Trustees
Any person into which the Property Trustee or the Delaware Trustee, if not a natural person, may be merged
or
converted
or
with
which
it
may
be
consolidated,
or
any
person
resulting
from
any
merger,
conversion
or
consolidation to
which such trustee
is a party,
or any person
succeeding to
all or substantially
all the corporate
trust
business of
such trustee,
will be
the successor
of such
trustee under
the Trust
Agreement, provided
such person
is
otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trusts
The Trust
may not
merge
with or
into, consolidate,
amalgamate, or
be replaced
by,
or convey,
transfer or
lease its
properties
and assets
substantially as
an entirety
to the
Company or
any other
person, except
as described
below or as otherwise described
in the Trust
Agreement. The Trust
may, at
the Company’s
request, with the consent
of the Administrative
Trustees but
without the
consent of
the holders
of the Capital
Securities, the Property
Trustee
or the Delaware Trustee, merge
with or into, consolidate, amalgamate, or be
replaced by, or convey,
transfer or lease
its properties and assets
substantially as an entirety
to, a trust
organized as such under the
laws of any
state, the District
of Columbia or the Commonwealth of Puerto Rico if:
●
such successor entity either:
o
expressly assumes all of the obligations of the Trust
with respect to the Capital Securities, or
o
substitutes
for
the
Capital
Securities
other
securities
having
substantially
the
same
terms
as
the
Capital Securities, or the “Successor
Securities”, so long as the
Successor Securities rank the same
as
the
substituted
Capital
Securities
in
priority
with
respect
to
distributions
and
payments
upon
liquidation, redemption and otherwise;
●
the Company expressly appoints a trustee of such successor entity possessing the same powers and duties as
the Property Trustee as the holder of the Debentures;
●
such
merger,
consolidation,
amalgamation,
replacement,
conveyance,
transfer
or
lease
does not
cause
the
Capital
Securities,
including
any
Successor
Securities,
to
be
downgraded
by
any
nationally
recognized
statistical rating organization;
●
such
merger,
consolidation,
amalgamation,
replacement,
conveyance,
transfer
or
lease
does not
adversely
affect the rights, preferences and privileges
of the holders of the Capital Securities, including any
Successor
Securities, in any material respect;
●
such successor entity has a purpose substantially identical to that of the Trust;
●
prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Company
has received an opinion from independent counsel to the Trust experienced in such matters to the effect that:
o
such
merger,
consolidation,
amalgamation,
replacement,
conveyance,
transfer
or
lease
does
not
adversely
affect
the
rights,
preferences
and
privileges
of
the
holders
of
the
Capital
Securities,
including any Successor Securities, in any material respect, and
o
following
such merger,
consolidation,
amalgamation,
replacement,
conveyance,
transfer or
lease,
neither the
Trust
nor such
successor entity
will be
required to
register as
an investment
company
under the Investment Company Act; and
●
the Company
or any permitted
successor or assignee
owns all of
the Common
Securities of such
successor
entity and
guarantees the
obligations of
such successor
entity under
the Successor
Securities at least
to the
extent provided by the Guarantee.
Notwithstanding
the
foregoing,
the
Trust
may
not,
except
with
the
consent
of
holders
of
100%
in
liquidation
amount of the
Capital Securities, consolidate,
amalgamate, merge
with or into, or
be replaced by
or convey,
transfer
or lease its
properties and assets
substantially as an
entirety to any
other entity or
permit any other
entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance,
transfer or lease would
cause the Trust
or the successor entity
to be classified as other
than a grantor trust
for United
States federal or Puerto Rico income tax purposes.
Voting
Rights; Amendment of the Trust
Agreement
Except as otherwise provided below
and as otherwise required by law
and the Trust Agreement,
the holders
of the Capital Securities have no voting rights.
The Company and
the Administrative Trustees
may amend the
Trust Agreement
without the consent
of the
holders
of
the
Capital
Securities,
unless
such
amendment
will
materially
and
adversely
affect
the
interests
of
any
holder of the Capital Securities, to:
●
cure any
ambiguity,
correct or supplement
any provisions
in the
Trust Agreement
that may be
inconsistent
with any other provision,
or to make any other
provisions with respect to matters
or questions arising under
the Trust Agreement, which may not be inconsistent
with the other provisions of the Trust Agreement;
or
●
modify,
eliminate
or add
to any
provisions
of the
Trust
Agreement
to such
extent as
will be
necessary
to
ensure
that the
Trust
will be
classified for
United
States federal
or Puerto
Rico income
tax purposes
as a
grantor trust at all times that any Capital Securities and Common Securities are outstanding or to ensure that
the Trust will not be required to register as an “investment
company” under the Investment Company Act.
The Company,
the Administrative Trustees
and the Property Trustee
may generally amend the
Trust Agreement
with:
●
the
consent
of
holders
representing
not
less
than
a
majority,
based
upon
liquidation
amounts,
of
the
outstanding Capital Securities; and
●
receipt by the
trustees of an
opinion of counsel
to the effect that
such amendment or the
exercise of any
power
granted to the trustees in accordance with such amendment will not affect the Trust’s status as a grantor trust
for
United
States
federal
or
Puerto
Rico
income
tax
purposes
or
the
Trust’s
exemption
from
status
as
an
“investment company” under the Investment Company Act.
However, without the consent of each holder
of Trust Securities, the Trust
Agreement may not be amended to:
●
change the amount or timing of any distribution required to be made in respect of the Trust Securities as of a
specified date; or
●
restrict the right of a holder of Trust Securities to institute a suit for the enforcement of any such payment on
or after such date.
So long
as the
Property Trustee
holds any
Debentures, the
trustees of
the Trust
may not,
without obtaining
the
prior approval of the holders of a majority in aggregate liquidation amount
of all outstanding Capital Securities:
●
direct
the
time,
method
and
place
of
conducting
any
proceeding
for
any
remedy
available
to
the
junior
subordinated trustee, or
executing any trust
or power conferred
on the junior
subordinated trustee with
respect
to the Debentures;
●
waive any past default that is waivable under the Indenture;
●
exercise any right to rescind
or annul a declaration that
the principal of all
the Debentures is due and payable;
or
●
consent
to
any
amendment,
modification
or
termination
of
the
Indenture
or
the
Debentures,
where
such
consent will be required.
If a consent under the Indenture
would require the consent of
each holder of Debentures affected thereby, no such
consent may be given by
the Property Trustee without
the prior consent of each
holder of the Capital Securities. The
Property Trustee may not revoke any action previously authorized or approved by a vote of the holders of the Capital
Securities except
by subsequent
vote of
the holders
of the
Capital Securities.
The Property
Trustee will
notify each
holder
of
Capital
Securities
of
any
notice
of
default
with
respect
to
the
Debentures.
In
addition
to
obtaining
the
foregoing approvals
of the
holders of
the Capital
Securities, before
taking any
of the
foregoing actions,
the trustees
will obtain an opinion of counsel experienced in such
matters to the effect that such action would
not cause the Trust
to be classified as other than a grantor trust for United States federal or Puerto Rico income tax
purposes.
Any required approval of holders of Capital Securities may be given at a meeting of holders of Capital Securities
convened for such purpose or pursuant to written consent. The Property Trustee
will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter upon which action
by written consent of such
holders is
to be taken,
to be given
to each holder
of record of
Capital Securities
in the manner
set forth
in the Trust
Agreement.
Notwithstanding that holders of
Capital Securities are entitled to
vote or consent under any of
the circumstances
described above, any of the Capital Securities that are owned by the Company or its affiliates or the trustees or any of
their affiliates, will, for purposes of such vote or consent, be treated as if they
were not outstanding.
Payment and Paying Agent
Payments on
the Capital
Securities are made
to DTC, which
credits the applicable
accounts at DTC
on the
applicable distribution dates. If any Capital Securities are not held by DTC, such payments are made by check mailed
to the address of the holder as such address appears on the register.
The paying agent
for the Trust
is Banco Popular
de Puerto Rico. The
paying agent is
permitted to resign
as
paying agent of the Trust
upon 30 days’ written notice
to the Administrative Trustees
and to the Property Trustee.
In
the event
that Banco
Popular de
Puerto Rico
is no
longer be
the paying
agent, the
Property Trustee
will appoint
a
successor to act as paying agent, which will be a
bank or trust company acceptable to the Administrative Trustees and
to the Company.
Registrar and Transfer
Agent
Banco Popular de Puerto Rico Trust Division acts as registrar
and transfer agent for the Capital Securities.
Registrations of
transfers of Capital
Securities are effected
without charge
by or on
behalf of the
Trust, but
upon
payment
of
any
tax
or
other
governmental
charges
that
may
be
imposed
in
connection
with
any
transfer
or
exchange. The Trust is
not required to register or cause to be
registered the transfer of the Capital Securities
after the
Capital Securities have been called for redemption.
Information Concerning the Property Trustee
Other
than
during
the
occurrence
and
continuance
of
an
event
of
default
under
the
Trust
Agreement,
the
Property Trustee undertakes to perform only the duties that are specifically set forth in the Trust
Agreement. After an
event of default under the Trust Agreement, the Property Trustee
must exercise the same degree of care and skill as a
prudent individual would exercise
or use in
the conduct of
his or her
own affairs. Subject to
this provision, the
Property
Trustee is under no obligation to exercise
any of the powers vested in it by the Trust
Agreement at the request of any
holder
of
the
Capital
Securities
unless
it
is
offered
indemnity
satisfactory
to
it
by
such
holder
against
the
costs,
expenses and liabilities
that might be
incurred. If no event
of default under
the Trust Agreement
has occurred and
is
continuing and the
Property Trustee
is required to
decide between alternative
courses of action,
construe ambiguous
provisions the Trust Agreement or is
unsure of the application
of any provision of
the Trust Agreement, and the
matter
is
not
one
upon
which
holders
of
the
Capital
Securities
are
entitled
under
the
Trust
Agreement
to
vote,
then
the
Property
Trustee
will
take
any
action
that
the
Company
directs.
If
the
Company
does
not
provide
direction,
the
Property
Trustee
may
take
any
action
that
it deems
advisable
and
in
the
best
interests
of
the
holders
of
the
Trust
Securities and will have no liability except for its own bad faith, negligence or
willful misconduct.
The Company and
its affiliates maintain
certain accounts and
other banking relationships
with the Property
Trustee and its affiliates in the ordinary
course of business.
Trust Expenses
Pursuant to the Trust Agreement, the Company,
as depositor, has agreed to pay:
●
all debts and other obligations of the Trust (other
than with respect the Capital Securities);
●
all costs and expenses of the Trust, including costs and expenses relating to the organization of the Trust, the
fees and expenses of the trustees of the Trust and the cost and expenses relating to the
operation of the Trust;
and
●
any
and
all taxes
and
costs and
expenses
with respect
thereto,
other
than
withholding
taxes, to
which
the
Trust might become subject.
Governing Law
The Trust Agreement is governed by and construed
in accordance with the laws of Delaware.
Miscellaneous
The Administrative Trustees are authorized
and directed to conduct the affairs of and to operate
the Trust in
such a way that it will not be required to register
as an “investment company” under the Investment Company
Act or
characterized
as
other
than
a
grantor
trust
for
United
States
federal
or
Puerto
Rico
income
tax
purposes.
The
Administrative Trustees
are authorized and
directed to conduct
their affairs so
that the Debentures
will be treated
as
indebtedness of the Company for Puerto Rico income tax purposes.
In
this
regard,
the
Company
and
the
Administrative
Trustees
are
authorized
to
take
any
action,
not
inconsistent with applicable law, the certificate of trust of the Trust or the Trust Agreement, that the Company and the
Administrative Trustees
determine to
be necessary
or desirable to
achieve such
end, as long
as such action
does not
materially and adversely affect the interests of the holders of the Capital Securities.
Holders of the Capital Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt or
mortgage or pledge any of its assets.
DESCRIPTION OF THE GUARANTEE
The following description of the terms of the guarantee (the
“Guarantee”) is a summary and does not purport
to be
complete. It
is subject
to and qualified
in its
entirety by
reference to
(i) the
Guarantee Agreement,
dated as
of
August 31, 2009 (the “Guarantee Agreements”) and (ii) the Prospectus Supplement, each of which is incorporated by
reference as an exhibit to
the Annual Report on Form 10-K of
which this exhibit is a part. We
encourage you to read
the Guarantee Agreement and Prospectus Supplement for more information.
General
The Company’s obligation to make a Guarantee Payment (as defined below) to the Trust may be satisfied by
direct payment
of the
required amounts
to the
holders of
the Capital
Securities or
by causing
the Trust
to pay
such
amounts to such holders.
The Guarantee does not apply to any payment of distributions by the Trust except to the extent the Trust has
funds available
for such
payments. If
the Company
does not
make interest
payments on
the Debentures
held by
the
Trust, the Trust will
not pay distributions
on the Capital
Securities and will
not have funds
available for such
payments.
See “— Status of the Guarantee”. Because the Company is a holding company, the Company’s rights to participate in
the assets
of any
of the
Company’s
subsidiaries upon
the subsidiary’s
liquidation or
reorganization is
subject to
the
prior claims of
the subsidiary’s creditors except to
the extent that
the Company may
itself be a
creditor with recognized
claims against the
subsidiary. Except as otherwise described
in this exhibit,
the Guarantee does
not limit the
incurrence
or issuance by the Company of other secured or unsecured debt.
The Guarantee,
when taken
together with
the Company’s
obligations
under the
Debentures,
the Indenture
and
the
Trust
Agreement,
including
the
Company’s
obligations
to
pay
costs,
expenses,
debts
and
liabilities
of
the
Trust, other than
those relating
to Capital
Securities or Common
Securities, provides a
full and
unconditional guarantee
on a subordinated basis of payments due on the Capital Securities issued by the Trust.
Under the
Guarantee Agreement,
the Company
irrevocably and
unconditionally agrees
to pay in
full to the
holders of
the Trust
Securities, except
to the
extent paid
by the
Trust,
as and
when due,
regardless of
any defense,
right of set-off or counterclaim which the Trust
may have or assert, the Guarantee Payments without duplication:
●
any accrued and
unpaid distributions that
are required to
be paid on
the Capital Securities,
to the extent
the
Trust has funds available for distributions;
●
the redemption
price, plus
all accrued
and unpaid
distributions relating
to any
Capital Securities
called for
redemption by the Trust, to the extent the Trust
has funds available for redemptions; and
●
upon a voluntary or involuntary dissolution, winding-up or termination of the
Trust, other than in connection
with the distribution of Debentures to the holders of Capital Securities or the redemption
of all of its Capital
Securities, the lesser of:
●
the aggregate of the liquidation
amount and all accrued and unpaid
distributions on the Capital Securities
to
the date of payment to the extent the Trust has funds available;
and
●
the amount of assets of
the Trust remaining
for distribution to holders of
Capital Securities in liquidation of
the Trust.
Status of the Guarantee
The Guarantee is unsecured and ranks:
●
subordinate and
junior in right
of payment
to all the
Company’s
other liabilities in
the same
manner as
the
Debentures as set forth in the Indenture; and
●
equally with all other Guarantees that the Company issues.
The Guarantee
constitutes a guarantee
of payment and
not of collection,
which means that
the guaranteed party
may sue the
guarantor to enforce
its rights
under the Guarantee
without suing any
other person or
entity. The Guarantee
is held by the guarantee trustee for the benefit of the
holders of the Trust Securities. The Guarantee will be discharged
only
by payment
of the
Guarantee Payments
in full
to the
extent
not paid
by the
Trust
or upon
the distribution
of
Debentures.
Amendments and Assignment
The Guarantee
may be
amended only
with the
prior approval
of the
holders of
not less
than a
majority in
aggregate liquidation amount of the outstanding Capital Securities.
No vote is required, however, for any changes that
do
not
adversely
affect
the
rights
of
holders
of
the
Capital
Securities
in
any
material
respect.
All
guarantees
and
agreements
contained
in
the
Guarantee
bind
the
Company’s
successors,
assignees,
receivers,
trustees
and
representatives and will be for the benefit of the holders of the Capital Securities then
outstanding.
Termination
of the Guarantee
The Guarantee will
terminate (1) upon full
payment of the
redemption price of all
Capital Securities, (2) upon
distribution of the
Debentures to the holders
of the Trust
Securities or (3) upon
full payment of the
amounts payable
in accordance with the Trust Agreement upon
liquidation of the Trust. The Guarantee will continue
to be effective or
will be reinstated, as the
case may be, if at
any time any holder of
Capital Securities must restore payment of
any sums
paid under the Capital Securities or the Guarantee.
Events of Default
Under the Guarantee, an event of default will occur if the Company fails to perform
any payment obligation
or other obligation under the Guarantee.
With respect to the Guarantee, the holders
of a majority in liquidation amount of the Capital Securities have
the right to direct the time, method and place of conducting any proceeding for any remedy available to the guarantee
trustee or to
direct the exercise
of any trust
or power conferred
upon the guarantee
trustee under the
Guarantee. Holders
of
the
Capital
Securities
may
institute
a
legal
proceeding
directly
against
the
Company
to
enforce
the
guarantee
trustee’s rights and the Company’s obligations under the Guarantee,
without first instituting a
legal proceeding against
the Trust, the guarantee trustee or any other person
or entity.
As
guarantor
under
the
Guarantee,
the
Company
is
required
to
file
annually
with
the
guarantee
a
trustee
certificate pursuant to the Guarantee,
as to whether or
not the Company is
in compliance with all
applicable conditions
and covenants under the Guarantee.
Information Concerning the Guarantee Trustee
With
respect to
the Guarantee,
prior to
the occurrence
of an
event of
default relating
to the
Guarantee, the
guarantee trustee is required
to perform only the duties
that are specifically set forth
in the Guarantee. Following
the
occurrence of an
event of default, the
guarantee trustee will exercise
the same degree
of care as a
prudent individual
would exercise in the
conduct of his or her
own affairs. Provided that
the foregoing requirements have
been met, the
guarantee trustee
is under no
obligation to
exercise any of
the powers vested
in it by
the Guarantee at
the request of
any holder
of Capital
Securities unless
offered indemnity
satisfactory to
it against the
costs, expenses
and liabilities
which might be incurred thereby.
The Company and its affiliates maintain certain accounts and other banking relationships with the guarantee
trustee and its affiliates in the ordinary course of business.
Governing Law
The Guarantee is
governed by and
construed in accordance with
the internal laws
of the Commonwealth
of
Puerto Rico.
DESCRIPTION OF THE DEBENTURES
The following is a brief description
of the terms of the Debentures held
by the Trust. This summary
does not purport
to be
complete and
is subject
to and
qualified in
its entirety
by reference
to the
Junior Subordinated
Indenture (the
“Base Indenture”), dated
as of
October 31, 2003,
as supplemented by
the Second Supplemental
Indenture (the “Second
Supplemental Indenture”, and together with the Base
Indenture, the “Indenture”), as supplemented by the Supplement
to Second Supplemental Indenture, dated as of August 31, 2009; and (ii) the Prospectus Supplement, each of which is
incorporated by
reference to
the Annual
Report on
Form 10
K of
which this
exhibit is
a part.
We
encourage you
to
read the Indenture and the Prospectus Supplement for more information.
General
The
Debentures
are
unsecured,
junior
subordinated
obligations
of
the
Company.
The
Debentures
are
limited
in
aggregate principal amount to $134,021,000. The
aggregate principal amount of the Debentures is limited to the
sum
of:
●
the aggregate stated liquidation amount of the Capital Securities; and
●
the amount of capital contributed by the Company in exchange for the Common Securities.
The Debentures ranks junior to the Company’s senior debt, including the subordinated debt of the Company.
For
information on the subordination of the Debentures, see “Description of
the Debentures — Subordination”.
The entire principal amount of
the Debentures will become due
and payable, with any accrued
and unpaid interest
thereon, on December 1, 2034. There is no sinking fund for the Debentures.
The Company
does not
pay any
additional amounts
on the
Debentures to
compensate any
holder or
beneficial
owner for any Puerto Rico tax withheld from payments of principal or interest
on the Debentures.
The Debentures are registered in the name
of the Trust. The Property Trustee holds the Debentures in trust
for the
benefit of the holders of the Trust Securities.
Interest
The Debentures bear interest
at an annual rate of
6.125%,from and including their
date of issuance until the
principal becomes
due and payable.
Interest is payable
monthly in arrears
on the first
day of each
month, beginning
January 1,
2005. Interest
payments not
paid when
due accrue,
to the
extent permitted
by applicable
law,
additional
interest, compounded
monthly, at
the annual rate
of 6.125%, computed
on the basis
of a 360-day
year of twelve
30-
day months and the actual number of days elapsed in a partial month in such period.
The Company
pays interest
on the
Debentures to
the holders
of record
on the
applicable record
date. The
record date
for interest
payments on
the Debentures
is the
fifteenth
day of
the month
preceding the
payment
date,
whether or not a business day.
The amount
of interest
payable for
any period
less than
a full interest
period is
computed on
the basis of
a
360-day year
of twelve
30-day months
and the
actual days elapsed
in a partial
month in
that period.
The amount
of
interest payable for any full interest period is computed by dividing the
annual rate by twelve.
If any date on which interest is payable on the Debentures is not a business day, then payment of the interest
payable
on that
date will
be made
on the
next succeeding
day
that is
a business
day,
without
any interest
or other
payment in
respect of
the delay,
with the
same force
and effect
as if
made on
the date
that payment
was originally
payable.
The amount of additional interest payable for any full interest period is
computed by dividing the annual rate
by twelve.
The term
“interest” as
used in
this description
includes
monthly
interest payments,
interest on
monthly
interest payments not
paid when due,
compounded interest and
additional sums, as
applicable. The interest
payment
provisions for the Debentures correspond to the distribution provisions for the Capital Securities. See “Description of
the Capital Securities — Payment of Distributions” in this description.
Option to Extend Interest Payment Period
As long as the
Company is not in default
under the Debentures, the
Company has the right,
at any time and
from time to time, to
defer payments of interest
during an Extension Period,
of up to 60 consecutive
months, but not
beyond the maturity
date of the Debentures.
During an Extension
Period, interest continues
to accrue and
holders of
the Debentures,
or holders
of Capital
Securities using
the accrual
method of
accounting to
determine
their taxable
income, are required to accrue interest income for Puerto Rico income tax purposes.
On the interest
payment date following
the last day of
any Extension Period,
the Company pays
all interest
then accrued and unpaid, together with additional interest
on the accrued and unpaid interest
to the extent as permitted
by law, compounded monthly,
at the annual rate of 6.125%, plus any additional sums, as described below.
Before termination of an
Extension Period for
the Debentures, the
Company may further
extend the payments
of interest. However,
no Extension Period, including all
previous and further extensions, may
exceed 60 consecutive
months or extend beyond
the maturity of the Debentures.
If any Debentures are called
for redemption before the end
of an Extension Period relating
to the Debentures, such
Extension Period will end
on that redemption date
or an earlier
date as determined by the Company. After the termination of an Extension Period for
the Debentures and the payment
of all
amounts due,
the Company
may begin
a new
Extension Period,
as described
above. There
is no
limitation on
the number of times the
Company may elect to begin
an Extension Period for the
Debentures. Interest is not payable
during
an
Extension
Period
for
the
Debentures,
only
at
the
end
of
the
Extension
Period
for
the
Debentures.
The
Company may,
however, prepay,
on any interest
payment date, at
any time all
or any portion
of the interest
accrued
during an Extension Period for the Debentures.
If the Property Trustee is the sole holder of the Debentures, the Company
will give the Property Trustee and
the Delaware Trustee written notice of its election of an Extension Period for the Debentures
at least one business day
before the earlier of:
●
the next succeeding date on which the distributions on the Capital Securities are payable;
and
●
the date
the Property
Trustee is
required to
give notice
to holders
of the
Capital Securities
of the
record or
payment date for the applicable distribution.
The Property Trustee will give notice of the Company’s election of an Extension Period for the Debentures to the
holders of the Capital Securities.
With
respect
to
either
Trust,
if
the
Property
Trustee
is
not
the
sole
holder,
or
is
not
itself
the
holder,
of
the
Debentures, the Company
will give
the holders of
the Debentures and
the indenture trustee
written notice of
its election
of
an
Extension
Period
for
the
Debentures
at
least
one
business
day
before
the
next
interest
payment
date
for
the
Debentures.
Additional Sums
If, at
any time
while the
Property Trustee
is the
holder of
the Debentures,
the Trust
is required
to pay
any
additional taxes (other
than withholding taxes), duties
or other governmental
charges as a result
of a Tax
Event with
respect to
the Trust,
the Company
will pay
as additional
interest on
the Debentures
any additional
amounts that
are
required
so
that
the
distributions
paid
by the
Trust
will not
be
reduced
as a
result
of any
of
those taxes,
duties
or
governmental charges.
Redemption
The Company
has the
right,
subject to
any
required
prior
approval of
the Federal
Reserve, to
redeem
the
Debentures at a redemption price equal to 100%
of the principal amount, plus accrued and unpaid
interest to the date
of redemption:
●
on or after December 1, 2009, in whole or in part, on one or more occasions,
at any time; and
●
in
whole,
but not
in part,
at
any
time within
90 days
following
the occurrence
and
continuation
of a
Tax
Event, an Investment Company Event or a Capital Treatment
Event, each as described above.
Notice of any
redemption will be
mailed at least 45
days but not
more than 75 days
before the redemption
date.
Unless the Company defaults in payment of the redemption price,
on and after the redemption date, interest will
cease
to accrue on the Debentures
or portions thereof called for
redemption. The Debentures are not
subject to any sinking
fund and are not redeemable at the option of the holder.
Restrictions on Certain Payments; Certain Covenants of the Company
Any money that the Company pays to a paying agent for the purpose of making
payments on the Debentures
and
that
remains
unclaimed
two
years
after
the
payments
were
due
under
the
Debentures,
will,
at
the
Company’s
request, be returned
to the Company and
after that time any
holder of the
Debentures can only
look to the Company
for the payments on the Debentures.
With respect to the Debentures, the Company
may not:
●
declare or
pay any
dividends or distributions,
or redeem,
purchase, acquire,
or make
a liquidation payment
on any of its capital stock; or
●
make
any payment
of principal
of or
interest or
premium, if
any,
on or
repay,
repurchase or
redeem debt
securities of the Company that rank equal or junior to the Debentures,
if at such time:
●
there has
occurred any
event of
default under
the Debentures
resulting from
a failure
to make
principal or
interest payments
on the
Debentures or
from certain
events in
bankruptcy,
insolvency or
reorganization
of
the Company;
●
the
Debentures
are
held
by
the
Trust
and
the
Company
is
in
default
with
respect
to
its
payment
of
any
obligations under the Guarantee; or
●
the Company has given
notice of its election of
an Extension Period with
respect to the Debentures
and has
not rescinded that notice, and such Extension Period, or any extension thereof,
is continuing.
The restrictions listed above do not apply to:
●
repurchases, redemptions or other acquisitions of shares of
capital stock of the Company in connection with
(1) any employment contract, benefit plan
or other similar arrangement with or for
the benefit of any one or
more employees,
officers, directors,
consultants or
independent contractors,
(2) a dividend
reinvestment or
stockholder stock purchase plan, or
(3) the issuance of
capital stock of the
Company, or securities convertible
into or exercisable
for such capital stock,
as consideration in an
acquisition transaction entered
into prior to
the Extension Period for the Debentures;
●
an exchange, redemption or
conversion of any class or
series of the Company’s
capital stock, or any capital
stock of a subsidiary of the Company,
for any other class or series of the Company’s
capital stock, or of any
class or series of the Company’s indebtedness
for any class or series of the Company’s capital stock;
●
the purchase of
fractional interests in
shares of the
Company’s capital stock under the
conversion or exchange
provisions of the capital stock or the security being converted or exchanged;
●
any declaration of a
dividend in connection with
any stockholder’s rights plan, or
the issuance of rights,
stock
or other property
under any stockholder’s
rights plan, or
the redemption or
repurchase of rights
pursuant to
the plan;
●
payments by the Company under the Guarantee; or
●
any dividend
in the
form of
stock, warrants,
options or
other rights
where the
dividend stock
or the
stock
issuable upon exercise
of such
warrants, options or
other rights
is the same
stock as
that on which
the dividend
is being paid or ranks equal or junior to that stock.
In addition, as long as the Trust holds the Debentures,
the Company agrees, with respect to the Debentures:
●
to continue to hold, directly or
indirectly, 100%
of the Common Securities, provided
that certain successors
that are permitted
under the Indenture may
succeed to the
Company’s ownership of such Common
Securities;
●
as holder of the Common Securities, not to
voluntarily dissolve, wind up or liquidate the Trust, other than
(a)
as part
of the
distribution of
the Debentures
to the
holders of
the Capital
Securities in
accordance with
the
terms of the Capital Securities
or (b) as part of
a merger,
consolidation or amalgamation which
is permitted
under the Trust Agreement; and
●
to use
its reasonable
efforts, consistent
with the
terms and
provisions of
the Trust
Agreement, to
cause the
Trust
to
continue
not
to
be
taxable
as
a
corporation
for
United
States
federal
or
Puerto
Rico
income
tax
purposes.
Registration, Denomination and Transfer
The
Company
registered
the Debentures
in
the
name
of
the Property
Trustee
on
behalf of
the
Trust.
The
Property Trustee
holds the Debentures
in trust for
the benefit of
the holders
of the Trust
Securities. The
Debentures
are issued in denominations of $1,000 and integral multiples of $1,000.
DTC acts as securities depositary for the Debentures.
With respect to the Debentures, if the Debentures are in certificated form, payments of principal and interest
will be
payable, the
transfer of
the Debentures
will be
registrable, and
the Debentures
will be
exchangeable for
the
Debentures of other authorized denominations of a like aggregate principal amount. In such case, payment of interest
may also be made at the option of the Company by
check mailed to the address of the holder entitled to the payment.
Upon written request to the paying agent not less than 15 calendar days prior to the date on which
interest is payable,
a holder
of $1,000,000
or more
in aggregate
principal amount
of the
Debentures may
receive payment
of interest,
other than payments of interest payable at maturity,
by wire transfer of immediately available funds.
The Debentures may be presented for registration of transfer or exchange with an endorsed form
of transfer,
or a duly executed and satisfactory written instrument of transfer, at the security registrar’s
office in San Juan, Puerto
Rico or
the office
of any
transfer agent
selected by
the Company
without service
charge and
upon payment
of any
taxes and other
governmental charges
as described
in the Indenture.
The Company has
appointed Banco
Popular de
Puerto
Rico
as transfer
agent
and
security
registrar
under
the Indenture.
The Company
may
at
any
time designate
additional transfer agents with respect to the Debentures.
With respect
to the Debentures,
in the event
of any
redemption, the
Company and
the indenture
trustee for
the Debentures will not be required to:
●
issue, register the transfer of or exchange the
Debentures during a period beginning 15 calendar days before
the first mailing of the notice of redemption; or
●
register the
transfer of
or exchange
the Debentures
selected for
redemption, except,
in the
case of
any the
Debentures being redeemed in part, any portion not to be redeemed.
At
the
request
of
the
Company,
funds
deposited
with
the
indenture
trustee
or
any
paying
agent
held
for
the
Company for the payment
of principal, interest, and premium,
if any,
on any Debenture which remain
unclaimed for
two years
after the
principal, interest,
and premium,
if any,
has become
payable will
be repaid
to the
Company and
the holder of the Debentures will, as a general unsecured creditor,
look only to the Company for payment thereof.
Limitation on Mergers and Sales of Assets
The Indenture generally
permit a consolidation
or merger between
the Company and
another entity. The Indenture
also permits the sale or transfer by the Company of all or substantially all of its property and assets.
Such transactions
are permitted if:
●
the resulting or
acquiring entity,
if other than
the Company,
is organized
and existing under
the laws of the
United States or any state, the District of Columbia or the Commonwealth of Puerto Rico and assumes all of
the Company’s responsibilities and liabilities under
the Indenture, including the payment of all amounts due
on the Debentures and performance of the covenants in the Indenture; and
●
immediately after the transaction, and giving
effect to the transaction, no event
of default under the Indenture
exists.
If the Company consolidates or merges with or into any other entity or sells or leases all or substantially all of its
assets according to
the terms and conditions
of the Indenture,
the resulting or
acquiring entity will be
substituted for
the Company in the Indenture with the
same effect as if it had been
an original party to the
Indenture. As a result, such
successor entity
may exercise
the Company’s
rights and
powers under
the Indenture,
in the
Company’s
name and,
except in the case of a lease
of all or substantially all of
the Company’s properties, the Company will be released from
all the Company’s liabilities and
obligations under the Indenture and under the Debentures.
Modification of Indenture
With respect to the Capital Securities, if any of the
Capital Securities are outstanding:
●
no modification
may be
made to
the Indenture
that materially
adversely affects
the holders
of the
Capital
Securities;
●
no termination of the Indenture may occur; and
●
no waiver of any event of
default under the Debentures or compliance with any
covenant under the Indenture
may be effective,
without the prior
consent of the
holders of at
least a majority
of the aggregate
liquidation
amount of
such outstanding Capital
Securities unless and
until the principal
of and premium,
if any,
on the
Debentures and
all accrued
and unpaid
interest thereon
have been
paid in
full and
certain other
conditions
are satisfied.
In addition,
with respect to
the Capital Securities,
if any of
the Capital Securities
are outstanding, all
holders of
the Capital Securities must consent if the Company wants to amend the Indenture
to:
●
remove the rights of holders of the Capital Securities to institute a Direct Action (as defined
below); or
●
modify a provision of the
Indenture that requires the consent
of all the holders of
the outstanding Debentures.
Events of Default and the Rights of Capital Securities Holders to Take
Action Against the Company
An event of default under the Indenture means any of the following, with
respect to the Debentures:
●
failure to pay
interest on the Debentures
for 30 days after
the payment is due
(subject to the deferral
of any
due date in the case of an Extension Period with respect to the Debentures);
●
failure to pay the principal of or any premium on any the Debentures when due;
●
failure to
perform any
other covenant
in the
Indenture for
90 days
after the
Company has
received written
notice of the failure to perform in the manner specified in the Indenture;
●
certain events relating to a bankruptcy,
insolvency or reorganization of the Company; or
●
any other event of default that may be specified for the Debentures in the
Indenture.
With
respect
to
the
Trust,
so
long
as the
Trust
holds
Debentures,
the
Property
Trustee
and
the
holders
of
the
Capital Securities will have the following rights under the Indenture upon the
occurrence of an event of default:
●
the
Property
Trustee
and
the holders
of not
less than
25% in
aggregate
liquidation
amount
of the
Capital
Securities may declare the principal of and interest accrued on the Debentures due and payable immediately;
●
if all defaults have been cured, the consent of the holders of more than 50% in aggregate liquidation amount
of the Capital
Securities is required
to annul a
declaration by the
indenture trustee,
the Trust
or the holders
of Capital Securities that the principal of the Debentures is due and payable
immediately;
●
unless the default
is cured, the consent
of each holder
of Capital Securities
is required to
waive a default
in
the
payment
of
principal,
premium
or
interest
with
respect
to
the
Debentures
or
a
default
in
respect
of
a
covenant
or
provision
that
cannot
be
modified
or
amended
without
the
consent
of
the
holder
of
each
outstanding Debenture; and
●
unless the default
is cured, the
consent of the
holders of more
than 50% in
aggregate liquidation amount
of
the Capital Securities is required to waive any other default.
If the event
of default under
the Debentures is
the failure of
the Company to
make payments of
principal or interest
on
the
Debentures
when
due,
then
a
registered
holder
of
Capital
Securities
may
bring
a
legal
action
against
the
Company directly
for enforcement of
payment to such
registered holder of
amounts owed on
the Debentures
with a
principal amount
equal to
the aggregate
liquidation amount
of such
registered holder’s
Capital Securities
(a “Direct
Action”). The Company may not amend the Debentures to
remove this right to bring a
Direct Action without the prior
written consent of the registered holders of all the
Capital Securities. The Company can offset against
payments then
due
under
the
Debentures
any
corresponding
payments
made
to
holders
of
Capital
Securities
by
the
Company
in
connection with a Direct Action.
The holders of the Capital Securities are not able to exercise directly any remedies available to the holders of the
Debentures except under the circumstance described in the preceding
paragraph.
The Indenture Does Not Restrict the Company’s Ability to Take
Certain Actions that may Affect the Debentures
The Indenture does not contain restrictions on the Company’s
ability to:
●
incur, assume or become liable for any type of debt
or other obligation;
●
create liens on the Company’s property
for any purpose; or
●
pay dividends or make distributions on the Company’s capital stock or repurchase or redeem the Company’s
capital stock, except as set forth under “— Restrictions on Certain Payments”
above.
The Indenture does not
require the maintenance of
any financial ratios or
specified levels of
net worth or liquidity.
In addition, the Indenture does contain
any provisions which would require
the Company to repurchase or redeem
or
modify the terms of any of the
Debentures upon a change of control or
other event involving the Company which may
adversely affect the creditworthiness of such debt securities.
Subordination
The Debentures are subordinated to all of the Company’s existing and
future Senior Debt, as defined below.
The Company’s “Senior Debt” includes
its senior debt securities and its subordinated debt securities and means:
●
any of the Company’s
indebtedness for borrowed or
purchased money,
whether or not evidenced
by bonds,
debt securities, notes or other written instruments,
●
the Company’s obligations
under letters of credit,
●
any of
the Company’s
indebtedness or
other obligations
with respect
to commodity
contracts, interest
rate
and currency
swap agreements,
cap, floor
and collar
agreements, currency
spot and
forward contracts,
and
other similar
agreements or
arrangements designed
to protect
against fluctuations
in currency
exchange or
interest rates, and
●
any
guarantees,
endorsements
(other
than
by
endorsement
of
negotiable
instruments
for
collection
in
the
ordinary course
of business)
or other
similar contingent
obligations in
respect of
obligations of
others of
a
type described
above, whether or
not such obligation
is classified as
a liability on
a balance sheet
prepared
in accordance with generally accepted accounting principles,
whether outstanding on the date
of execution of the Indenture
or thereafter incurred, other than
obligations expressly
on a parity with or junior to the Debentures. The
Debentures rank on a parity with obligations evidenced
by any debt
securities, and
guarantees in
respect of
those debt
securities, initially
issued to
any trust,
partnership or
other entity
affiliated with
the Company,
that is,
directly or
indirectly,
the Company’s
financing vehicle
in connection
with the
issuance by such entity of capital securities or other similar securities.
If certain events relating to a bankruptcy,
insolvency or reorganization of the Company occur,
the Company
will first pay all Senior Debt, including any interest accrued after the events occur, in full before the Company makes
any payment or distribution, whether in cash, securities or other property, on account of the principal of or interest on
the Debentures. In such an event, the Company will pay or deliver directly to the holders of Senior Debt any payment
or distribution
otherwise payable
or deliverable
to holders
of the Debentures.
The Company
makes the payments
to
the holders of Senior Debt according to priorities existing among those holders until the Company has paid all Senior
Debt, including accrued interest, in
full. Notwithstanding the subordination provisions discussed in
this paragraph, the
Company may make payments or distributions on the Debentures so
long as:
●
the payments or distributions consist of securities issued by the Company or another company in connection
with a plan of reorganization or readjustment; and
●
payment on those securities is subordinate to outstanding Senior
Debt and any securities issued with respect
to Senior Debt under
such plan of reorganization
or readjustment at least to
the same extent provided
in the
subordination provisions of the Debentures.
If such
events relating
to a bankruptcy,
insolvency or
reorganization of
the Company
occur,
after it
has paid
in
full all
amounts owed on
Senior Debt, the
holders of the
Debentures, together with
the holders
of any of
the Company’s
other obligations ranking equal with the Debentures, will be entitled to receive from the Company’s
remaining assets
any principal, premium or interest due at that time on the Debentures and such other
obligations before the Company
makes any
payment
or other
distribution
on account
of any
of the
Company’s
capital stock
or obligations
ranking
junior to the Debentures.
If the Company violates the Indenture by making a payment or distribution to holders of the Debentures before it
has paid all the Senior Debt in full, then the holders
of the Debentures will be deemed to have received the payments
or distributions in trust for the benefit of, and will have to pay or transfer the payments or distributions to, the holders
of the
Senior Debt
outstanding at
the time.
The payment
or transfer
to the
holders of
the Senior
Debt will
be made
according to
the priorities
existing among
those holders.
Notwithstanding the
subordination provisions
discussed in
this paragraph, holders
of the Debentures are
not required to pay,
or transfer payments
or distributions to, holders
of
Senior Debt so long as:
●
the payments or distributions consist of securities issued by the Company or another company in connection
with a plan of reorganization or readjustment; and
●
payment on those securities is subordinate to outstanding Senior
Debt and any securities issued with respect
to Senior Debt under
such plan of reorganization
or readjustment at least to
the same extent provided
in the
subordination provisions of those Debentures.
Because
of
the
subordination,
if
the
Company
becomes
insolvent,
holders
of
Senior
Debt
may
receive
more,
ratably,
and holders
of the
Debentures may
receive
less, ratably,
than
the Company’s
other
creditors.
This type
of
subordination
will
not
prevent
an
event
of
default
from
occurring
under
the
Indenture
in
connection
with
the
Debentures.
Any modification or amendment
of the Indenture may
not, without the consent
of the holders of all
Senior Debt
outstanding,
modify
any
of
the
provisions
of
the
Debentures
relating
to
the
subordination
of
the
Debentures
in
a
manner that would adversely affect the holders of Senior Debt.
The Indenture does not place a limitation on the amount of Senior Debt that
the Company may incur.
Concerning the Indenture Trustee
The indenture
trustee has
all the
duties and
responsibilities specified
under the
Trust
Indenture Act.
Other
than its duties in case of a default, the indenture trustee is under no obligation to exercise any of the powers under the
Indenture at the request, order or direction of any holders of Debentures unless
offered reasonable indemnification.
From time to time, the Company
and certain of its subsidiaries maintain
deposit accounts and conduct other
banking transactions, including lending transactions, with the indenture
trustee in the ordinary course of business.
Governing Law
The Indenture
and the
Debentures are
governed by,
and construed
in accordance
with, the
internal laws
of
the Commonwealth of Puerto Rico.