<PAGE>
                                                                     EXHIBIT 4.7


                                     FORM OF


                               GUARANTEE AGREEMENT


                                 BY AND BETWEEN


                                 POPULAR, INC.,
                                  AS GUARANTOR

                                       AND

                          BANK ONE TRUST COMPANY, N.A.,
                              AS GUARANTEE TRUSTEE


                                   RELATING TO


                            POPULAR CAPITAL TRUST __





                           ---------------------------


                         DATED AS OF _____________, 2003

                           ---------------------------


<PAGE>

                                TABLE OF CONTENTS

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                                                                                                               PAGE
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<S>                                                                                                            <C>
ARTICLE I                  -        DEFINITIONS...................................................................2
         SECTION 1.1.      Definitions............................................................................2

ARTICLE II        -        TRUST INDENTURE ACT....................................................................6
         SECTION 2.1.      Trust Indenture Act; Application.......................................................6
         SECTION 2.2.      List of Holders........................................................................6
         SECTION 2.3.      Reports by the Guarantee Trustee.......................................................7
         SECTION 2.4.      Periodic Reports to the Guarantee
                           Trustee................................................................................7
         SECTION 2.5.      Evidence of Compliance with
                           Conditions Precedent...................................................................7
         SECTION 2.6.      Events of Default; Waiver..............................................................8
         SECTION 2.7.      Event of Default; Notice...............................................................8
         SECTION 2.8.      Conflicting Interests..................................................................8

ARTICLE III       -        POWERS, DUTIES AND RIGHTS OF THE
                           GUARANTEE TRUSTEE......................................................................9
         SECTION 3.1.      Powers and Duties of the Guarantee
                           Trustee................................................................................9
         SECTION 3.2.      Certain Rights of Guarantee Trustee...................................................11
         SECTION 3.3.      Compensation; Indemnity; Fees.........................................................13

ARTICLE IV        -        GUARANTEE TRUSTEE.....................................................................14
         SECTION 4.1.      Guarantee Trustee; Eligibility........................................................14
         SECTION 4.2.      Appointment, Removal and Resignation
                           of the Guarantee Trustee..............................................................15

ARTICLE V                  -        GUARANTEE....................................................................16
         SECTION 5.1.      Guarantee.............................................................................16
         SECTION 5.2.      Waiver of Notice and Demand...........................................................16
         SECTION 5.3.      Obligations Not Affected..............................................................16
         SECTION 5.4.      Rights of Holders.....................................................................18
         SECTION 5.5.      Guarantee of Payment..................................................................18
         SECTION 5.6.      Subrogation...........................................................................18
         SECTION 5.7.      Independent Obligations...............................................................19

ARTICLE VI        -        COVENANTS AND SUBORDINATION...........................................................19
         SECTION 6.1.      Subordination.........................................................................19
         SECTION 6.2.      Pari Passu Guarantees.................................................................19
</TABLE>


<PAGE>

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                                                                                                               PAGE
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ARTICLE VII       -        TERMINATION...........................................................................20
         SECTION 7.1.      Termination...........................................................................20

ARTICLE VIII      -        MISCELLANEOUS.........................................................................20
         SECTION 8.1.      Successors and Assigns................................................................20
         SECTION 8.2.      Amendments............................................................................20
         SECTION 8.3.      Notices...............................................................................21
         SECTION 8.4.      Benefit...............................................................................22
         SECTION 8.5.      Governing Law.........................................................................22
         SECTION 8.6.      Counterparts..........................................................................22
</TABLE>


                                       ii

<PAGE>


         GUARANTEE AGREEMENT, dated as of ___________, 2003, between POPULAR,
INC., a Commonwealth of Puerto Rico corporation (the "Guarantor"), having its
principal office at 209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, and
BANK ONE TRUST COMPANY, N.A., as trustee (the "Guarantee Trustee"), for the
benefit of the Holders (as defined herein) from time to time of the Capital
Securities (as defined herein) of POPULAR CAPITAL TRUST __, a Delaware statutory
trust (the "Issuer Trust").

                                    RECITALS

         WHEREAS, pursuant to an Amended and Restated Declaration of Trust and
Trust Agreement, of even date herewith (the "Trust Agreement"), among Popular,
Inc., as Depositor, the Property Trustee, the Delaware Trustee, and the
Administrative Trustees (each as named therein) and the holders from time to
time of undivided beneficial interests in the assets of the Issuer Trust, the
Issuer Trust is issuing $___________ aggregate Liquidation Amount (as defined in
the Trust Agreement) of its _____% Trust Preferred Securities (TruPS(R))
(liquidation amount $__ per capital security) (the "Capital Securities"),
representing preferred undivided beneficial interests in the assets of the
Issuer Trust and having the terms set forth in the Trust Agreement; and

         WHEREAS, the Capital Securities will be issued by the Issuer Trust, and
the proceeds thereof, together with the proceeds from the issuance of the Issuer
Trust's Common Securities (as defined herein), will be used to purchase the
Debentures of the Guarantor, which Debentures will be deposited with Bank One
Trust Company, N.A., as Property Trustee under the Trust Agreement, as trust
assets; and

         WHEREAS, as an incentive for the Holders to purchase Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Capital Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the purchase of Capital Securities
by each Holder, which purchase the Guarantor hereby acknowledges shall benefit
the Guarantor, the Guarantor executes


<PAGE>

and delivers this Guarantee Agreement for the benefit of the Holders from time
to time.


                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.1.  DEFINITIONS. FOR ALL PURPOSES OF THIS GUARANTEE
AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED OR UNLESS THE
CONTEXT OTHERWISE REQUIRES:

                  (a)      The terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;

                  (b)      All other terms used herein that are defined in the
Trust Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;

                  (c)      The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation;"

                  (d)      All accounting terms used but not defined herein have
the meanings assigned to them in accordance with United States generally
accepted accounting principles;

                  (e)      Unless the context otherwise requires, any reference
to an "Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Guarantee Agreement; and

                  (f)      The words "hereby," "herein," "hereof" and
"hereunder" and other words of similar import refer to this Guarantee Agreement
as a whole and not to any particular Article, Section or other subdivision.

         "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.



                                       2
<PAGE>

         "Board of Directors" means the board of directors of the Guarantor or
any committee of the board of directors of the Guarantor, comprised of one or
more members of the board of directors of the Guarantor or officers of the
Guarantor, or both.

         "Capital Securities" has the meaning specified in the recitals to this
Guarantee Agreement.

         "Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer Trust.

         "Debentures" shall have the meaning specified in the Trust Agreement.

         "Distributions" shall have the meaning specified in the Trust
Agreement.

         "Event of Default" means (i) a default by the Guarantor in any of its
payment obligations under this Guarantee Agreement or (ii) a default by the
Guarantor in any other obligation hereunder that remains unremedied for 30 days.

         "Guarantee Agreement" means this Guarantee Agreement, as modified,
amended or supplemented from time to time.

         "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Capital Securities, to the extent not
paid or made by or on behalf of the Issuer Trust: (i) any accumulated and unpaid
Distributions required to be paid on the Capital Securities, to the extent the
Issuer Trust shall have funds on hand available therefor at such time; (ii) the
Redemption Price with respect to any Capital Securities called for redemption by
the Issuer Trust, to the extent the Issuer Trust shall have funds on hand
available therefor at such time; and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of the Issuer Trust, unless Debentures
are distributed to the Holders, the lesser of (a) the Liquidation Distribution
with respect to the Capital Securities, to the extent that the Issuer Trust
shall have funds on hand available therefor at such time, and (b) the amount of
assets of the Issuer Trust remaining available for distribution to Holders on
liquidation of the Issuer.


                                       3
<PAGE>

         "Guarantee Trustee" means Bank One Trust Company, N.A., solely in its
capacity as Guarantee Trustee and not in its individual capacity, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee Agreement, and thereafter means each
such Successor Guarantee Trustee.

         "Guarantor" has the meaning specified in the first paragraph of this
Guarantee Agreement.

         "Holder" means any Holder (as defined in the Trust Agreement) of any
Capital Securities; provided, however, that in determining whether the holders
of the requisite percentage of Capital Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor,
the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee
Trustee.

         "Indenture" means the Junior Subordinated Indenture, dated as of
_____________, 2003, between Popular, Inc. and Bank One Trust Company, N.A., as
trustee, as the same may be modified, amended or supplemented from time to time.

         "Issuer Trust" has the meaning specified in the first paragraph of this
Guarantee Agreement.

         "Liquidation Distribution" shall have the meaning specified in the
Trust Agreement.

         "List of Holders" has the meaning specified in Section 2.2(a).

         "Majority in Liquidation Amount of the Capital Securities" means,
except as provided by the Trust Indenture Act, Capital Securities representing
more than 50% of the aggregate Liquidation Amount (as defined in the Trust
Agreement) of all Capital Securities then Outstanding (as defined in the Trust
Agreement).

         "Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman or a Vice Chairman of the Board of Directors
of such Person or the President or a Vice President of such Person, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
such Person. Any Officers' Certificate delivered with respect to


                                       4
<PAGE>

compliance with a condition or covenant provided for in this Guarantee Agreement
shall include:

                  (a)      a statement by each officer signing the Officers'
Certificate that such officer has read the covenant or condition and the
definitions relating thereto;

                  (b)      a brief statement of the nature and scope of the
examination or investigation undertaken by such officer in rendering the
Officers' Certificate;

                  (c)      a statement that such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and

                  (d)      a statement as to whether, in the opinion of such
officer, such condition or covenant has been complied with.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, company,
limited liability company, trust, business trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

         "Redemption Price" shall have the meaning set forth in the Trust
Agreement.

         "Responsible Officer" means, with respect to the Guarantee Trustee, any
Senior Vice President, any Vice President, any Assistant Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any
Trust Officer or Assistant Trust Officer or any other officer of the Corporate
Trust Department of the Guarantee Trustee and also means, with respect to a
particular matter, any other officer to whom such matter is referred because of
that officer's knowledge of and familiarity with the particular subject.

         "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.

         "Trust Agreement" means the Amended and Restated Declaration of Trust
and Trust Agreement of the Issuer Trust referred to in


                                       5

<PAGE>

the recitals to this Guarantee Agreement, as modified, amended or supplemented
from time to time.

         "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this Guarantee Agreement was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.

         "Vice President," when used with respect to the Guarantor, means any
duly appointed vice president, whether or not designated by a number or a word
or words added before or after the title "vice president."


                                   ARTICLE II
                               TRUST INDENTURE ACT

         SECTION 2.1.  TRUST INDENTURE ACT; APPLICATION.

                  (a)      This Guarantee Agreement is subject to the provisions
of the Trust Indenture Act that are required to be part of this Guarantee
Agreement and shall, to the extent applicable, be governed by such provisions.

                  (b)      Except as otherwise expressly provided herein, if and
to the extent that any provision of this Guarantee Agreement limits, qualifies
or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.

                  (c)      The application of the Trust Indenture Act to this
Guarantee Agreement shall not affect the nature of the Capital Securities as
equity securities representing undivided beneficial interests in the assets of
the Issuer Trust.

         SECTION 2.2.  LIST OF HOLDERS.

                  (a)      The Guarantor shall furnish or cause to be furnished
to the Guarantee Trustee (a) semiannually, on or before __________ and
___________ of each year, a list, in such form as the Guarantee Trustee may
reasonably require, of the names and addresses of the Holders (a "List of
Holders") as of a date not more than 15 days prior to the delivery thereof, and
(b) at such other times as the Guarantee Trustee may request in writing, within
30 days after the receipt by the Guarantor of


                                       6
<PAGE>

any such request, a List of Holders as of a date not more than 15 days prior to
the time such list is furnished, in each case to the extent such information is
in the possession or control of the Guarantor and has not otherwise been
received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.

                  (b)      The Guarantee Trustee shall comply with the
requirements of Section 311(a), Section 311(b) and Section 312(b) of the Trust
Indenture Act.

         SECTION 2.3.  REPORTS BY THE GUARANTEE TRUSTEE.

                  Within 60 days after __________ each year, commencing
__________, 2004, the Guarantee Trustee shall provide to the Holders such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
If this Guarantee Agreement shall have been qualified under the Trust Indenture
Act, the Guarantee Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.

         SECTION 2.4.  PERIODIC REPORTS TO THE GUARANTEE TRUSTEE.

                  The Guarantor shall provide to the Guarantee Trustee and the
Holders such documents, reports and information, if any, as required by Section
314 of the Trust Indenture Act and the compliance certificate required by
Section 314 of the Trust Indenture Act, in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act, provided that such
documents, reports and information shall be required to be provided to the
Securities and Exchange Commission only if this Guarantee Agreement shall have
been qualified under the Trust Indenture Act.

         SECTION 2.5.  EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

                  The Guarantor shall provide to the Guarantee Trustee such
evidence of compliance with such conditions precedent, if any, provided for in
this Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer of the Guarantor pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.


                                       7
<PAGE>


         SECTION 2.6.  EVENTS OF DEFAULT; WAIVER.

                  The Holders of at least a Majority in Liquidation Amount of
the Capital Securities may, by vote, on behalf of the Holders of all the Capital
Securities, waive any past default or Event of Default and its consequences.
Upon such waiver, any such default or Event of Default shall cease to exist, and
any default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Guarantee Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.

         SECTION 2.7.  EVENT OF DEFAULT; NOTICE.

                  (a)      The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default known to the Guarantee Trustee, transmit by
mail, first class postage prepaid, to the Holders, notice of any such Event of
Default known to the Guarantee Trustee, unless such Event of Default has been
cured before the giving of such notice, provided that, except in the case of a
default in the payment of a Guarantee Payment, the Guarantee Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Guarantee Trustee in good faith determines that the withholding
of such notice is in the interests of the Holders.

                  (b)      The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Guarantee Trustee shall have
received written notice, or a Responsible Officer charged with the
administration of this Guarantee Agreement shall have obtained written notice,
of such Event of Default.

         SECTION 2.8.  CONFLICTING INTERESTS.

                  The Trust Agreement and the Indenture shall be deemed to be
specifically described in this Guarantee Agreement for the purposes of clause
(i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.


                                       8
<PAGE>


                                   ARTICLE III
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

         SECTION 3.1.  POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.

                  (a)      This Guarantee Agreement shall be held by the
Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee
shall not transfer this Guarantee Agreement to any Person except to a Successor
Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its
appointment to act as Guarantee Trustee hereunder. The right, title and interest
of the Guarantee Trustee, as such, hereunder shall automatically vest in any
Successor Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee
of its appointment hereunder, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and delivered
pursuant to the appointment of such Successor Guarantee Trustee.

                  (b)      If an Event of Default has occurred and is
continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the
benefit of the Holders.

                  (c)      The Guarantee Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Guarantee Agreement (including pursuant to Section 2.1), and no
implied covenants shall be read into this Guarantee Agreement against the
Guarantee Trustee. If an Event of Default has occurred (that has not been cured
or waived pursuant to Section 2.6), the Guarantee Trustee shall exercise such of
the rights and powers vested in it by this Guarantee Agreement, and use the same
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.

                  (d)      No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:

                           (i)      prior to the occurrence of any Event of
         Default and after the curing or waiving of all such Events of Default
         that may have occurred:


                                       9
<PAGE>


                                    (A) the duties and obligations of the
                  Guarantee Trustee shall be determined solely by the express
                  provisions of this Guarantee Agreement (including pursuant to
                  Section 2.1), and the Guarantee Trustee shall not be liable
                  except for the performance of such duties and obligations as
                  are specifically set forth in this Guarantee Agreement
                  (including pursuant to Section 2.1); and

                                    (B) in the absence of bad faith on the part
                  of the Guarantee Trustee, the Guarantee Trustee may
                  conclusively rely, as to the truth of the statements and the
                  correctness of the opinions expressed therein, upon any
                  certificates or opinions furnished to the Guarantee Trustee
                  and conforming to the requirements of this Guarantee Agreement
                  (but in the case of any such certificates or opinions that by
                  any provision hereof or of the Trust Indenture Act are
                  specifically required to be furnished to the Guarantee
                  Trustee, the Guarantee Trustee shall be under a duty to
                  examine the same to determine whether or not they conform to
                  the requirements of this Guarantee Agreement);

                           (ii)     the Guarantee Trustee shall not be liable
         for any error of judgment made in good faith by a Responsible Officer
         of the Guarantee Trustee, unless it shall be proved that the Guarantee
         Trustee was negligent in ascertaining the pertinent facts upon which
         such judgment was made;

                           (iii)    the Guarantee Trustee shall not be liable
         with respect to any action taken or omitted to be taken by it in good
         faith in accordance with the direction of the Holders of not less than
         a Majority in Liquidation Amount of the Capital Securities relating to
         the time, method and place of conducting any proceeding for any remedy
         available to the Guarantee Trustee, or exercising any trust or power
         conferred upon the Guarantee Trustee under this Guarantee Agreement;
         and

                           (iv)     subject to Section 3.1(b), no provision of
         this Guarantee Agreement shall require the Guarantee Trustee to expend
         or risk its own funds or otherwise incur personal financial liability
         in the performance of any of its duties or in the exercise of any of
         its rights or



                                       10
<PAGE>

         powers, if the Guarantee Trustee shall have reasonable grounds for
         believing that the repayment of such funds or liability is not
         reasonably assured to it under the terms of this Guarantee Agreement or
         adequate indemnity against such risk or liability is not reasonably
         assured to it.

         SECTION 3.2. CERTAIN RIGHTS OF GUARANTEE TRUSTEE.

                  (a)      Subject to the provisions of Section 3.1:

                           (i)      The Guarantee Trustee may rely and shall be
         fully protected in acting or refraining from acting upon any
         resolution, certificate, statement, instrument, opinion, report,
         notice, request, direction, consent, order, bond, debenture, note,
         other evidence of indebtedness or other paper or document reasonably
         believed by it to be genuine and to have been signed, sent or presented
         by the proper party or parties.

                           (ii)     Any direction or act of the Guarantor
         contemplated by this Guarantee Agreement shall be sufficiently
         evidenced by an Officers' Certificate unless otherwise prescribed
         herein.

                           (iii)    Whenever, in the administration of this
         Guarantee Agreement, the Guarantee Trustee shall deem it desirable that
         a matter be proved or established before taking, suffering or omitting
         to take any action hereunder, the Guarantee Trustee (unless other
         evidence is herein specifically prescribed) may, in the absence of bad
         faith on its part, request and rely upon an Officers' Certificate
         which, upon receipt of such request from the Guarantee Trustee, shall
         be promptly delivered by the Guarantor.

                           (iv)     The Guarantee Trustee may consult with legal
         counsel, and the written advice or opinion of such legal counsel with
         respect to legal matters shall be full and complete authorization and
         protection in respect of any action taken, suffered or omitted to be
         taken by it hereunder in good faith and in accordance with such advice
         or opinion. Such legal counsel may be legal counsel to the Guarantor or
         any of its Affiliates and may be one of its employees. The Guarantee
         Trustee shall have the right at any time to seek instructions
         concerning the administration of this Guarantee Agreement from any
         court of competent jurisdiction.


                                       11
<PAGE>


                           (v)      The Guarantee Trustee shall be under no
         obligation to exercise any of the rights or powers vested in it by this
         Guarantee Agreement at the request or direction of any Holder unless
         such Holder shall have provided to the Guarantee Trustee such adequate
         security and indemnity as would satisfy a reasonable person in the
         position of the Guarantee Trustee against the costs, expenses
         (including attorneys' fees and expenses) and liabilities that might be
         incurred by it in complying with such request or direction, including
         such reasonable advances as may be requested by the Guarantee Trustee;
         provided that nothing contained in this Section (a)(v) shall be taken
         to relieve the Guarantee Trustee, upon the occurrence of an Event of
         Default, of its obligation to exercise the rights and powers vested in
         it by this Guarantee Agreement.

                           (vi)     The Guarantee Trustee shall not be bound to
         make any investigation into the facts or matters stated in any
         resolution, certificate, statement, instrument, opinion, report,
         notice, request, direction, consent, order, bond, debenture, note,
         other evidence of indebtedness or other paper or document, but the
         Guarantee Trustee, in its discretion, may make such further inquiry or
         investigation into such facts or matters as it may see fit.

                           (vii)    The Guarantee Trustee may execute any of the
         trusts or powers hereunder or perform any duties hereunder either
         directly or by or through its agents or attorneys, and the Guarantee
         Trustee shall not be responsible for any misconduct or negligence on
         the part of any such agent or attorney appointed by it with due care
         hereunder.

                           (viii)   Whenever in the administration of this
         Guarantee Agreement the Guarantee Trustee shall deem it desirable to
         receive instructions with respect to enforcing any remedy or right or
         taking any other action hereunder, the Guarantee Trustee (A) may
         request instructions from the Holders, (B) may refrain from enforcing
         such remedy or right or taking such other action until such
         instructions are received, and (C) shall be protected in acting in
         accordance with such instructions.



                                       12
<PAGE>

                  (b)      No provision of this Guarantee Agreement shall be
deemed to impose any duty or obligation on the Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Guarantee Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts or to exercise any such right,
power, duty or obligation. No permissive power or authority available to the
Guarantee Trustee shall be construed to be a duty to act in accordance with such
power and authority.

         SECTION 3.3.  COMPENSATION; INDEMNITY; FEES.

                  The Guarantor agrees:

                  (a)      to pay to the Guarantee Trustee from time to time
such reasonable compensation for all services rendered by it hereunder as may be
agreed by the Guarantor and the Guarantee Trustee from time to time (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);

                  (b)      except as otherwise expressly provided herein, to
reimburse the Guarantee Trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by the Guarantee Trustee in
accordance with any provision of this Guarantee Agreement (including the
reasonable compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and

                  (c)      to indemnify the Guarantee Trustee, any Affiliate of
the Guarantee Trustee and any officer, director, shareholder, employee,
representative or agent of the Guarantee Trustee (each, an "Indemnified Person")
for, and to hold each Indemnified Person harmless against, any loss, liability
or expense incurred without negligence, willful misconduct or bad faith on the
part of the Indemnified Person, arising out of or in connection with the
acceptance or administration of this Guarantee Agreement, including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.


                                       13
<PAGE>

                  The Guarantee Trustee will not claim or exact any lien or
charge on any Guarantee Payments as a result of any amount due to it under this
Guarantee Agreement.

                  The provisions of this Section 3.3 shall survive the
termination of this Guarantee Agreement or the resignation or removal of the
Guarantee Trustee.

                                   ARTICLE IV
                                GUARANTEE TRUSTEE


         SECTION 4.1.  GUARANTEE TRUSTEE; ELIGIBILITY.

                  (a)      There shall at all times be a Guarantee Trustee
which shall:

                           (i)      not be an Affiliate of the Guarantor; and

                           (ii)     be a Person that is eligible pursuant to the
         Trust Indenture Act to act as such and has a combined capital and
         surplus of at least $50,000,000, and shall be a corporation meeting the
         requirements of Section 310(a) of the Trust Indenture Act. If such
         corporation publishes reports of condition at least annually, pursuant
         to law or to the requirements of its supervising or examining
         authority, then, for the purposes of this Section 4.1 and to the extent
         permitted by the Trust Indenture Act, the combined capital and surplus
         of such corporation shall be deemed to be its combined capital and
         surplus as set forth in its most recent report of condition so
         published.

                  (b)      If at any time the Guarantee Trustee shall cease to
be eligible to so act under Section 4.1(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2.

                  (c)      If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act.


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<PAGE>


         SECTION 4.2.  APPOINTMENT, REMOVAL AND RESIGNATION OF THE GUARANTEE
TRUSTEE.

                  (a)      Subject to Section 4.2(c), the Guarantee Trustee may
be appointed or removed at any time by the action of the Holders of a Majority
in Liquidation Amount of the Capital Securities delivered to the Guarantee
Trustee and the Guarantor (i) for cause or (ii) if a Debenture Event of Default
(as defined in the Trust Agreement) shall have occurred and be continuing at any
time.

                  (b)      Subject to Section 4.2(c), the Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by giving
written notice thereof to the Holders and the Guarantor and by appointing a
successor Guarantee Trustee. The Guarantee Trustee shall appoint a successor by
requesting from at least three Persons meeting the requirements of Section
4.1(a) their expenses and charges to serve as the Guarantee Trustee, and
selecting the Person who agrees to the lowest expenses and charges.

                  (c)      The Guarantee Trustee appointed hereunder shall hold
office until a Successor Guarantee Trustee shall have been appointed and shall
have accepted such appointment. No removal or resignation of a Guarantee Trustee
shall be effective until a Successor Guarantee Trustee has been appointed and
has accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor and, in the case of any
resignation, the resigning Guarantee Trustee.

                  (d)      If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Holders and the Guarantor of a notice of resignation,
the resigning Guarantee Trustee may petition, at the expense of the Guarantor,
any court of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Guarantee Trustee.

                  (e)      If a resigning Guarantee Trustee shall fail to
appoint a successor, or if a Guarantee Trustee shall be removed or become
incapable of acting as Guarantee Trustee and a replacement shall not be
appointed prior to such resignation or removal, or if a vacancy shall occur in
the office of Guarantee Trustee for any cause, the Holders of the Capital
Securities, by


                                       15
<PAGE>

the action of the Holders of record of not less than 25% in aggregate
Liquidation Amount (as defined in the Trust Agreement) of the Capital Securities
then Outstanding (as defined in the Trust Agreement) delivered to such Guarantee
Trustee, may appoint a Successor Guarantee Trustee or Trustees. If no successor
Guarantee Trustee shall have been so appointed by the Holders of the Capital
Securities and accepted appointment, any Holder, on behalf of such Holder and
all others similarly situated, or any other Guarantee Trustee, may petition any
court of competent jurisdiction for the appointment of a successor Guarantee
Trustee.

                                    ARTICLE V
                                    GUARANTEE

         SECTION 5.1.  GUARANTEE.

                  The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by or on behalf of the Issuer Trust), as and when due,
regardless of any defense, right of set-off or counterclaim that the Issuer
Trust may have or assert, except the defense of payment. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer Trust
to pay such amounts to the Holders.

         SECTION 5.2.  WAIVER OF NOTICE AND DEMAND.

                  The Guarantor hereby waives notice of acceptance of this
Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Guarantee Trustee, the Issuer Trust or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice
of redemption and all other notices and demands.

         SECTION 5.3.  OBLIGATIONS NOT AFFECTED.

                  The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement shall in no way be affected or impaired
by reason of the happening from time to time of any of the following:


                                       16
<PAGE>

                  (a)      the release or waiver, by operation of law or
otherwise, of the performance or observance by the Issuer Trust of any express
or implied agreement, covenant, term or condition relating to the Capital
Securities to be performed or observed by the Issuer Trust;

                  (b)      the extension of time for the payment by the Issuer
Trust of any portion of the Distributions (other than an extension of time for
payment of Distributions that results from the extension of any interest payment
period on the Debentures as provided in the Indenture), Redemption Price,
Liquidation Distribution or any other sums payable under the terms of the
Capital Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Capital Securities;

                  (c)      any failure, omission, delay or lack of diligence on
the part of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the Capital
Securities, or any action on the part of the Issuer Trust granting indulgence or
extension of any kind;

                  (d)      the voluntary or involuntary liquidation,
dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer Trust or any of the assets of
the Issuer Trust;

                  (e)      any invalidity of, or defect or deficiency in, the
Capital Securities;

                  (f)      the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or

                  (g)      any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a guarantor
(other than payment of the underlying obligation), it being the intent of this
Section 5.3 that the obligations of the Guarantor hereunder shall be absolute
and unconditional under any and all circumstances.

                  There shall be no obligation of the Holders to give notice to,
or obtain the consent of, the Guarantor with respect to the happening of any of
the foregoing.


                                       17
<PAGE>

         SECTION 5.4.  RIGHTS OF HOLDERS.

                  The Guarantor expressly acknowledges that: (i) this Guarantee
Agreement will be deposited with the Guarantee Trustee to be held for the
benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust
or power conferred upon the Guarantee Trustee under this Guarantee Agreement;
and (iv) any Holder may institute a legal proceeding directly against the
Guarantor to enforce its rights under this Guarantee Agreement without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust
or any other Person.

         SECTION 5.5.  GUARANTEE OF PAYMENT.

                  This Guarantee Agreement creates a guarantee of payment and
not of collection. This Guarantee Agreement will not be discharged except by
payment of the Guarantee Payments in full (without duplication of amounts
theretofore paid by the Issuer Trust) or upon the distribution of Debentures to
Holders as provided in the Trust Agreement.

         SECTION 5.6.  SUBROGATION.

                  The Guarantor shall be subrogated to all rights (if any) of
the Holders against the Issuer Trust in respect of any amounts paid to the
Holders by the Guarantor under this Guarantee Agreement; provided, however, that
the Guarantor shall not (except to the extent required by mandatory provisions
of law) be entitled to enforce or exercise any rights which it may acquire by
way of subrogation or any indemnity, reimbursement or other agreement, in all
cases as a result of payment under this Guarantee Agreement, if, at the time of
any such payment, any amounts are due and unpaid under this Guarantee Agreement.
If any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.


                                       18
<PAGE>

         SECTION 5.7.  INDEPENDENT OBLIGATIONS.

                  The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer Trust with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.

                                   ARTICLE VI
                           COVENANTS AND SUBORDINATION

         SECTION 6.1.  SUBORDINATION.

                  The obligations of the Guarantor under this Guarantee
Agreement will constitute unsecured obligations of the Guarantor and will rank
subordinate and junior in right of payment to all Senior Debt (as defined in the
Indenture) of the Guarantor to the extent and in the manner set forth in the
Indenture with respect to the Debentures, and the provisions of Article Eighteen
of the Indenture will apply, mutatis mutandis, to the obligations of the
Guarantor hereunder. The obligations of the Guarantor hereunder do not
constitute Senior Debt (as defined in the Indenture) of the Guarantor.

         SECTION 6.2.  PARI PASSU GUARANTEES.

                  The obligations of the Guarantor under this Guarantee
Agreement shall rank pari passu with the obligations of the Guarantor under (i)
any similar guarantee agreements issued by the Guarantor on behalf of the
holders of preferred or capital securities issued by any statutory trust, (ii)
the Indenture and the Debt Securities (as defined therein) issued thereunder;
(iii) any expense agreements entered into by the Guarantor in connection with
the offering of preferred or capital securities by any statutory trust, and (iv)
any other security, guarantee or other agreement or obligation that is expressly
stated to rank pari passu with the obligations of the Guarantor under this
Guarantee Agreement or with any obligation that ranks pari passu with the
obligations of the Guarantor under this Guarantee Agreement.


                                       19
<PAGE>

                                   ARTICLE VII
                                   TERMINATION

         SECTION 7.1.  TERMINATION.

                  This Guarantee Agreement shall terminate and be of no further
force and effect upon (i) full payment of the Redemption Price of all Capital
Securities, (ii) the distribution of Debentures to the Holders in exchange for
all of the Capital Securities or (iii) full payment of the amounts payable in
accordance with Article IX of the Trust Agreement upon liquidation of the Issuer
Trust. Notwithstanding the foregoing, this Guarantee Agreement will continue to
be effective or will be reinstated, as the case may be, if at any time any
Holder is required to repay any sums paid with respect to Capital Securities or
this Guarantee Agreement.

                                  ARTICLE VIII
                                  MISCELLANEOUS

         SECTION 8.1.  SUCCESSORS AND ASSIGNS.

                  All guarantees and agreements contained in this Guarantee
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Capital Securities then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article Eight of the Indenture and pursuant to which the successor or assignee
agrees in writing to perform the Guarantor's obligations hereunder, the
Guarantor shall not assign its obligations hereunder, and any purported
assignment other than in accordance with this provision shall be void.

         SECTION 8.2.  AMENDMENTS.

                  Except with respect to any changes that do not adversely
affect the rights of the Holders in any material respect (in which case no
consent of the Holders will be required), this Guarantee Agreement may only be
amended with the prior approval of the Holders of not less than a Majority in
Liquidation Amount of the Capital Securities. The provisions of Article VI of
the Trust Agreement concerning meetings of the Holders shall apply to the giving
of such approval.


                                       20
<PAGE>

         SECTION 8.3.  NOTICES.

                  Any notice, request or other communication required or
permitted to be given hereunder shall be in writing, duly signed by the party
giving such notice, and delivered, telecopied or mailed by first class mail as
follows:

                  (a)      if given to the Guarantor, to the address or telecopy
number set forth below or such other address or telecopy number as the Guarantor
may give notice to the Guarantee Trustee and the Holders:

                           Popular, Inc.
                           209 Munoz Rivera Avenue
                           San Juan, Puerto Rico 00918
                           Attention: ____________________
                           Telecopy: (787) _______________

                  (b)      if given to the Guarantee Trustee, to the address or
telecopy number set forth below or such other address or telecopy number as the
Guarantee Trustee may give notice to the Guarantor and Holders:

                           Bank One Trust Company, N.A.
                           1 Bank One Plaza
                           Mail Code IL1-0823
                           Chicago, Illinois 60670-0823
                           Attention: Global Corporate Trust Services Division
                           Telecopy: (312) 336-8840

with a copy to:

                           Popular Capital Trust __
                           c/o Popular, Inc.

                           --------------------------

                           --------------------------

                           --------------------------
                           Attention: ____________________
                           Telecopy: (787) _______________

                  (c)      if given to any Holder, at the address set forth on
the books and records of the Issuer Trust.

                  All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt


                                       21
<PAGE>

confirmed, or mailed by first class mail, postage prepaid, except that if a
notice or other document is refused delivery or cannot be delivered because of a
changed address of which no notice was given, such notice or other document
shall be deemed to have been delivered on the date of such refusal or inability
to deliver.

         SECTION 8.4.  BENEFIT.

                  This Guarantee Agreement is solely for the benefit of the
Holders and is not separately transferable from the Capital Securities.

         SECTION 8.5.  GOVERNING LAW.

                  THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO.

         SECTION 8.6.  COUNTERPARTS.

                  This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have executed this Guarantee
Agreement as of the day and year first above written.

                                                 POPULAR, INC.,
                                                 as Guarantor


                                                 By:
                                                    --------------------------
                                                 Name:
                                                 Title:

                                                 BANK ONE TRUST COMPANY, N.A.,
                                                 as Guarantee Trustee


                                                 By:
                                                    --------------------------
                                                 Name:
                                                 Title:



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