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[POPULAR INC. LOGO]                                                 EXHIBIT 10.3

July 16, 2004

PERSONAL AND CONFIDENTIAL

Mr. Frederic V. Salerno
Verizon Communications
400 Westchester Avenue
White Plains, NY 10604

Dear Mr. Salerno:

We are very pleased to have you on the Board of Directors (the "Board") of
Popular, Inc. (the "Corporation"), and are writing to set forth the general
terms of your compensation as a Director, pursuant to resolutions adopted by the
Board (without your participation) on July 14, 2004. These terms are, of course,
subject to future modification by the Board.

Your current term as a Director commenced on April 2004 and will run through the
2005 annual meeting of shareholders of the Corporation. As compensation for your
services, you will receive:

      - An annual retainer fee (the "Annual Retainer") of $18,750 for the period
      ending on the day the 2005 annual meeting of shareholders of the
      Corporation is held and $20,000 for each subsequent twelve month period
      that you are a Director or $25,000 if you are elected Chairman of any
      Board committee;

      - $1,000 for each meeting of the Board or of a Board committee that you
      attend (the "Meeting Fee"); and

      - A grant of $26,250 payable in Restricted Stock of Popular, Inc. (the
      "Restricted Stock") under the Popular, Inc. 2004 Omnibus Incentive Plan
      (the "Omnibus Plan") for the period ending on the day the 2005 annual
      meeting of shareholders of the Corporation is held and an annual grant of
      $35,000 payable in Restricted Stock under the Omnibus Plan for each
      subsequent twelve month period that you are a Director.

The Annual Retainer will be paid annually in advance, within the 30 days
following the annual Corporation's shareholder meeting, in cash unless you elect
to receive payment in Restricted Stock. The Annual Retainer for the period
ending on the day the 2005 annual meeting of shareholders of Popular is held
will be paid on August 16, 2004. The Meeting

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Fee may be paid in cash on a per meeting basis or quarterly in arrears in
Restricted Stock. The number of shares of Restricted Stock to be delivered in
payment of an Annual Retainer and/or Meeting Fee shall be determined based on
the per share closing price of the Corporation's common stock on the date
payment is made and the amount of the Annual Retainer and/or Meeting Fee owed
you.

If you elect to receive payment in the form of Restricted Stock, such shares
shall be subject to the terms of the Annual Retainer and/or Meeting Fee
Restricted Stock Agreement (attached hereto). If you elect to receive Restricted
Stock you must return to us the attached Director Compensation Election Form and
the executed Annual Retainer and/or Meeting Fee Restricted Stock Agreement. If
you do not provide us with a completed election form prior to such date, the
Annual Retainer will be paid to you annually in advance in cash and the Meeting
Fee will be paid in cash on a per meeting basis. Once you have made an election
to receive Restricted Stock, the election will be applicable to all future
payments of the Annual Retainer and/or Meeting Fee, unless you notify us in
writing of your desire to no longer receive Restricted Stock. In such case, your
notice will apply to compensation payable for the year following receipt of the
notice.

If you do not currently elect to receive the Annual Retainer and/or the Meeting
Fee in the form of Restricted Stock, you may make such an election for future
payments of either compensation element, by sending us a written notice with
respect to the Annual Retainer, at least 30 days prior to the date of such
year's annual meeting of the Corporation's shareholders for which the election
would be in effect and, with respect to the Meeting Fees, at least 30 days prior
to Board of Director's meeting for which you want to commence receiving the
Meeting Fee in the form of Restricted Stock.

An election to receive the Annual Retainer and/or Meeting Fee in the form of
Restricted Stock will result in deferral of taxation of those amounts until such
later year as the restrictions lapse.

Dividends paid on your Restricted Stock will be reinvested in your name in the
Popular, Inc. Dividend Reinvestment Plan. The dividend will be subject to Puerto
Rico income taxes in the year paid by the Corporation at a special 10% rate.

Your grant of Restricted Stock is covered by a separate agreement attached
hereto. We have enclosed the following documents in connection with the
foregoing:

      1.    Director Compensation Election Form,

      2.    Annual Grant Restricted Stock Agreement,

      3.    Annual Retainer and/or Meeting Fee Restricted Stock Agreement, and

      4.    Omnibus Plan

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Please complete and sign the Director Compensation Election Form and sign the
Annual Grant Restricted Stock Agreement where indicated. If you elect to receive
payment of the Annual Retainer and/or the Meeting Fee in Restricted Stock,
please sign the Annual Retainer and/or Meeting Fee Restricted Stock Agreement.
Return all of the executed documents to Marie Reyes Rodriguez at the Corporate
Secretary's Office. Please retain a copy of these documents for your records.

Once more, thank you for joining the Board of Directors of Popular, Inc. We look
forward to working with you.

Cordially,

Brunilda Santos de Alvarez
Executive Vice President
Chief Legal Officer &
Assistant Secretary of the Board

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                              [POPULAR INC. LOGO]

                       DIRECTOR COMPENSATION ELECTION FORM

I have received Popular, Inc.'s letter dated July 16, 2004 informing me of my
compensation as a member of the Board of Directors of Popular, Inc. I am in
agreement with the terms set forth therein.

In connection therewith, I hereby make the following elections with respect to
my future compensation as a member of the Board of Directors of Popular, Inc.:

                           ANNUAL RETAINER

                         ANNUALLY IN ADVANCE
                                   RESTRICTED
                         CASH         STOCK

                               MEETING FEE

                                      QUARTERLY
                          MONTHLY    RESTRICTED
                        (CASH ONLY)    STOCK

I understand that an election to defer receipt of any amounts due me will not
change the nature of the compensation to be received. Amounts received will be
taxed as ordinary income when received.

                                          __________________________

                                    Name: __________________________

                                    Date: __________________________

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                              [POPULAR INC. LOGO]

                                  ANNUAL GRANT
                           RESTRICTED STOCK AGREEMENT

      This Annual Grant Restricted Stock Agreement ("Agreement") by and between
Popular, Inc. (the "Corporation") and Frederic V. Salerno ("Director") is
entered pursuant to the meeting of the Board of Directors of the Corporation
held on the 14th day of July 2004, whereby the Corporation in consideration of
Director's services as a member of the Board of Directors of the Corporation
and/or its wholly owned subsidiary, Banco Popular de Puerto Rico ("BPPR"),
granted to the Director a number of restricted shares of the Corporation's
Common Stock (the "Restricted Stock") subject to the terms and conditions
hereinafter set forth and the terms and conditions of the Popular, Inc. 2004
Omnibus Incentive Plan (the "Plan"), a copy of which is attached hereto as
Exhibit A. Capitalized terms not otherwise defined herein shall having the
meaning ascribed them in the Plan.

      1. NUMBER OF SHARES. Pursuant to the terms of the Director's Compensation
letter dated July 16, 2004, the Corporation has agreed to grant to the Director
TWENTY-SIX THOUSAND TWO HUNDRED FIFTY DOLLARS ($26,250) worth of Restricted
Stock for the period ending on the day the 2005 annual meeting of the
Corporation's shareholders is held and an annual grant of THIRTY FIVE THOUSAND
DOLLARS ($35,000) for each subsequent year the Director is such of the
Corporation and/or BPPR, based on the per share closing price of the
Corporation's Common Stock on the Grant Date. The Grant Date shall be the day
the Restricted Stock is purchased for the Director which date shall be August
16, 2004 with respect to the period ending the day of the 2005 annual meeting of
shareholders of the Corporation and with respect to subsequent annual grants,
within the 30 days following the annual meeting of the Corporation's
shareholders. For all purposes the Grant Price shall be zero ($0).

      The Restricted Stock shall be subject to all the terms, conditions, and
restrictions set forth in this Agreement and the Plan. In the event any stock
dividend, stock split, recapitalization or other change affecting the
outstanding common stock of the Corporation as a class is effected without
consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) that is by
reason of any such transaction distributed with respect to shares of Restricted
Stock will be immediately subject to the provisions of this Agreement in the
same manner and to the same extent as the Restricted Stock with respect to which
such change was effected. Cash dividends paid on Restricted Stock shall be
reinvested in Common Stock through the Corporation's Dividend Reinvestment Plan.

      2. FORFEITURE AND TRANSFER RESTRICTIONS. All Restricted Stock granted to
Director shall be issued and delivered on the Grant Date. In the event
Director's relationship with the Corporation or BPPR, as applicable, is
terminated for Cause (as defined in the Plan), or if Director, Director's legal
representative, or other holder of the Restricted Stock attempts to sell,
exchange, transfer, pledge, or otherwise dispose of any Restricted Stock, all
Restricted Stock will be immediately forfeited without any further action by the
Corporation.

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      Restricted Stock may not be assigned, transferred, pledged or otherwise
disposed of in any way other than by the Last Will and Testament of the Director
or the laws of descent and distribution, subject to the bylaws of the
Corporation. Any Restricted Stock held by a beneficiary shall be subject to the
restrictions imposed on such Restricted Stock. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect.

      3. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, no shares under this Agreement may be granted unless the
shares of Restricted Stock issuable upon such grant are then registered under
the Securities Act of 1933, as amended (the "Securities Act") or, if such shares
of Restricted Stock are not then so registered, the Corporation has determined
that such grant and issuance would be exempt from the registration requirements
of the Securities Act. The grant of shares must also comply with other
applicable laws and regulations governing the grant, and no grant of shares will
be permitted if the Corporation determines that such purchase would not be in
material compliance with such laws and regulations.

      4. STOCK LEGEND. The Corporation and Director agree that all certificates
representing all shares of Restricted Stock that at any time are subject to the
provisions of this Agreement and the Plan will have endorsed upon them in
bold-faced type a legend substantially in the following form:

      THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
      TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE
      WITH THE TERMS OF AN ANNUAL GRANT RESTRICTED STOCK AGREEMENT BETWEEN THE
      CORPORATION AND THE INITIAL HOLDER OF THE SHARES. THE ANNUAL GRANT
      RESTRICTED STOCK AGREEMENT MAY GRANT CERTAIN PURCHASE OPTIONS TO THE
      CORPORATION, PROVIDES FOR FORFEITURE OF THE STOCK IN CERTAIN
      CIRCUMSTANCES, AND IMPOSES RESTRICTIONS ON THE TRANSFER OF THESE SHARES. A
      COPY OF THE ANNUAL GRANT RESTRICTED STOCK AGREEMENT IS ON DEPOSIT AT THE
      PRINCIPAL OFFICE OF THE CORPORATION AND WILL BE FURNISHED BY THE
      CORPORATION TO THE REGISTERED HOLDER HEREOF UPON WRITTEN REQUEST.

      5. AGREEMENT NOT A SERVICE CONTRACT. This Agreement is not an employment
or service contract, and nothing in this Agreement nor the Plan shall be deemed
to create in any way whatsoever any obligation for the Director to continue his
relationship with the Corporation or BPPR, as applicable, or of the Corporation
or BPPR, as applicable, to continue the relationship with the Director.

      6. SECTION 83(b) ELECTION. Director acknowledges that if he is subject to
taxation under the United States Internal Revenue Code of 1986, as amended (the
"Code"), under Section 83(b) of the Code, the difference between the Grant Price
and its fair market value at the time any forfeiture restrictions applicable to
such Restricted Stock lapse is reportable as ordinary income at that time. For
this purpose, the term "forfeiture restrictions" includes the forfeiture
provisions, and restrictions described in Section 2 of this Agreement.

<PAGE>

      Notwithstanding the preceding, Director understands that he or she may
elect to be taxed at the time the Restricted Stock is acquired hereunder, rather
than when and as such Restricted Stock ceases to be subject to such forfeiture
restrictions, by filing an election under Section 83(b) of the Code with the
Internal Revenue Service within 30 days after the Grant Date. If the Grant Price
equals the fair market value of the Restricted Stock on such date, or if it is
likely that the fair market value of the Restricted Stock at the time any
forfeiture restrictions lapse will exceed the Grant Price, the election may
avoid adverse tax consequences in the future. A form for making this election is
attached as Exhibit B. Director understands that the failure to make this filing
within said 30 day period will result in the recognition of ordinary income by
Director (in the event the fair market value of the Restricted Stock increases
after Grant Date) as the forfeiture restrictions lapse. Director acknowledges
that it is his or her sole responsibility, and not the Corporation's, to file a
timely election under Section 83(b). Director further acknowledges that the
election under Section 83(b) is an election that must be made with respect to
each separate grant of Restricted Stock that is subject to this Agreement.

      7. NOTICES. Any notices provided for in this Agreement or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by mail by the Corporation to the Director, five
(5) days after deposit in the United States mail, postage prepaid, addressed to
the Director at the last address the Director provided to the Corporation and/or
BPPR. Notice to the Corporation and/or BPPR shall be given in writing and shall
be deemed effectively given upon receipt or, in the case of notices delivered by
mail to the Corporation and/or BPPR by the Director, five (5) days after deposit
in the United States mail, postage prepaid, addressed to Chief Legal Officer,
Popular, Inc./Banco Popular de Puerto Rico, Board of Directors (751), PO Box
362708, San Juan, Puerto Rico 00936-2708.

      8. RIGHTS AS A SHAREHOLDER. Except for the restrictions set forth in this
Agreement and the Plan and unless otherwise determined by the Corporation, the
Director shall be entitled to all of the rights of a shareholder with respect to
the shares of Restricted Stock awarded pursuant to this Agreement including the
right to vote such shares of Restricted Stock and to receive dividends and other
distributions (if any) payable with respect to such shares. Provided, however,
that cash dividends paid on Restricted Stock shall be reinvested in Common Stock
through the Corporation's Dividend Reinvestment Plan.

      9. TAX WITHHOLDING. The Corporation may withhold or cause to be withheld
from any Restricted Stock grant (or Director's compensation) any Federal, Puerto
Rico, state or local taxes required by law to be withheld with respect to such
Restricted Stock grant. By acceptance of this Agreement, Director agrees to such
deductions.

      10. GOVERNING LAW. All questions arising with respect to this Agreement
and the provisions of the Plan shall be determined by application of the laws of
the Commonwealth of Puerto Rico except to the extent such governing law is
preempted by Federal law. The obligation of the Corporation to grant and deliver
Restricted Stock under this Agreement is subject to applicable laws and to the
approval of any governmental authority required in connection with the
authorization, issuance, sale, or delivery of such Restricted Stock.

      11. SEVERABILITY. If any provision of this Agreement is held to be illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions of the

<PAGE>

Agreement, but such provision shall be fully severable and the Agreement shall
be construed and enforced as if the illegal or invalid provision had never been
included in the Agreement.

      12. SUCCESSORS. This Agreement shall be binding upon the Director, his
legal representatives, heirs, legatees, distributees, and shall be binding upon
the Corporation and its successors and assigns.

      IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
this 16th day of July 2004.

                                    POPULAR, INC.

                                    By: _______________________________

                                    Name: _____________________________

                                    Title: ____________________________

                                    DIRECTOR:

                                          _____________________________

                                    Name: _____________________________

<PAGE>

                                    EXHIBIT B

                             SECTION 83(b) STATEMENT

      This statement is being made under Section 83(b) of the Internal Revenue
Code, pursuant to Treas. Reg. Section 1.83-2.

      The person who performed the services is:

      Name: ___________________________________
      Address: ________________________________
               _______________________________

      Taxpayer Identification No.: ______________

      Taxable Year: Calendar Year

      The property with respect to which the election is being made is    shares
of Common Stock of Popular, Inc. (the "Restricted Stock").

      The property was issued on __________, 2004.

      The property is subject to forfeiture if for any reason stockholder's
relationship with the issuer is terminated prior to vesting of the property. The
forfeiture provision lapses according to Section 2 of the Agreement.

      The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction that by its terms will never lapse)
is $________ per share.

      The value of such property was $       per share on the Grant Date.

      A copy of this statement is being furnished to Popular, Inc., for whom
Director rendered the service underlying the transfer of property.

      This statement is executed as of ___________________, 2004.

                                    ________________________________________
                                    Director

<PAGE>

                              [POPULAR INC. LOGO]

                       ANNUAL RETAINER AND/OR MEETING FEE
                           RESTRICTED STOCK AGREEMENT

      This Annual Retainer and/or Meeting Fee Restricted Stock Agreement
("Agreement") by and between Popular, Inc. (the "Corporation") and Frederic V.
Salerno ("Director") is entered pursuant to the meeting of the Board of
Directors of the Corporation held the 14th day of July 2004, whereby the
Corporation in consideration of Director's services as a member of the Board of
Directors of the Corporation and/or its wholly owned subsidiary, Banco Popular
de Puerto Rico ("BPPR"), granted to the Director certain compensation for his
services as such and Director elected to receive some or all of such
compensation in a number of restricted shares of the Corporation's Common Stock
(the "Restricted Stock"), subject to the terms and conditions hereinafter set
forth and the terms and conditions of the Popular, Inc. 2004 Omnibus Incentive
Plan (the "Plan"), a copy of which is attached hereto as Exhibit A. Capitalized
terms not otherwise defined herein shall having the meaning ascribed them in the
Plan.

      8. NUMBER OF SHARES. Pursuant to the terms of the Director's Compensation
letter dated July 16, 2004 (the "Compensation Letter"), the Corporation and/or
BPPR has agreed to pay the Director certain compensation and the Director has
elected to receive such compensation in the form of Restricted Stock. The number
of shares of Restricted Stock shall be based on the per share closing price of
the Corporation's Common Stock on the Grant Date and the total amount of
compensation owed to the Director on the Grant Date. The Grant Date shall be the
day the Restricted Stock is purchased for the Director which date shall be
within the 30 days following the date the compensation is payable to the
Director pursuant to the Compensation Letter. For all purposes the Grant Price
shall be zero ($0).

      The Restricted Stock shall be subject to all the terms, conditions, and
restrictions set forth in this Agreement and the Plan. In the event any stock
dividend, stock split, recapitalization or other change affecting the
outstanding common stock of the Corporation as a class is effected without
consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) that is by
reason of any such transaction distributed with respect to shares of Restricted
Stock will be immediately subject to the provisions of this Agreement in the
same manner and to the same extent as the Restricted Stock with respect to which
such change was effected. Cash dividends paid on Restricted Stock shall be
reinvested in Common Stock through the Corporation's Dividend Reinvestment Plan.

      9. FORFEITURE AND TRANSFER RESTRICTIONS. All Restricted Stock granted to
Director shall be issued and delivered on the Grant Date. In the event
Director's relationship with the Corporation or BPPR, as applicable, is
terminated for Cause (as defined in the Plan), or if Director, Director's legal
representative, or other holder of the Restricted Stock attempts to sell,
exchange, transfer, pledge, or otherwise dispose of any Restricted Stock, all
Restricted Stock will be immediately forfeited without any further action by the
Corporation.

<PAGE>

      Restricted Stock may not be assigned, transferred, pledged or otherwise
disposed of in any way other than by the Last Will and Testament of the Director
or the laws of descent and distribution, subject to the bylaws of the
Corporation. Any Restricted Stock held by a beneficiary shall be subject to the
restrictions imposed on such Restricted Stock. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect.

      10. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, no shares under this Agreement may be granted unless the
shares of Restricted Stock issuable upon such grant are then registered under
the Securities Act of 1933, as amended (the "Securities Act") or, if such shares
of Restricted Stock are not then so registered, the Corporation has determined
that such grant and issuance would be exempt from the registration requirements
of the Securities Act. The grant of shares must also comply with other
applicable laws and regulations governing the grant, and no grant of shares will
be permitted if the Corporation determines that such purchase would not be in
material compliance with such laws and regulations.

      11. STOCK LEGEND. The Corporation and Director agree that all certificates
representing all shares of Restricted Stock that at any time are subject to the
provisions of this Agreement and the Plan will have endorsed upon them in
bold-faced type a legend substantially in the following form:

      THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
      TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE
      WITH THE TERMS OF AN ANNUAL RETAINER AND/OR MEETING FEE RESTRICTED STOCK
      AGREEMENT BETWEEN THE CORPORATION AND THE INITIAL HOLDER OF THE SHARES.
      THE ANNUAL RETAINER AND/OR MEETING FEE RESTRICTED STOCK AGREEMENT MAY
      GRANT CERTAIN PURCHASE OPTIONS TO THE CORPORATION, PROVIDES FOR FORFEITURE
      OF THE STOCK IN CERTAIN CIRCUMSTANCES, AND IMPOSES RESTRICTIONS ON THE
      TRANSFER OF THESE SHARES. A COPY OF THE ANNUAL RETAINER AND/OR MEETING FEE
      RESTRICTED STOCK AGREEMENT IS ON DEPOSIT AT THE PRINCIPAL OFFICE OF THE
      CORPORATION AND WILL BE FURNISHED BY THE CORPORATION TO THE REGISTERED
      HOLDER HEREOF UPON WRITTEN REQUEST.

      12. AGREEMENT NOT A SERVICE CONTRACT. This Agreement is not an employment
or service contract, and nothing in this Agreement nor the Plan shall be deemed
to create in any way whatsoever any obligation for the Director to continue his
relationship with the Corporation or BPPR, as applicable, or of the Corporation
or BPPR, as applicable, to continue the relationship with the Director.

      13. SECTION 83(b) ELECTION. Director acknowledges that if he is subject to
taxation under the United States Internal Revenue Code of 1986, as amended (the
"Code"), under Section 83(b) of the Code, the difference between the Grant Price
and its fair market value at the time any forfeiture restrictions applicable to
such Restricted Stock lapse is reportable as ordinary

<PAGE>

income at that time. For this purpose, the term "forfeiture restrictions"
includes the forfeiture provisions, and restrictions described in Section 2 of
this Agreement.

      Notwithstanding the preceding, Director understands that he or she may
elect to be taxed at the time the Restricted Stock is acquired hereunder, rather
than when and as such Restricted Stock ceases to be subject to such forfeiture
restrictions, by filing an election under Section 83(b) of the Code with the
Internal Revenue Service within 30 days after the Grant Date. If the Grant Price
equals the fair market value of the Restricted Stock on such date, or if it is
likely that the fair market value of the Restricted Stock at the time any
forfeiture restrictions lapse will exceed the Grant Price, the election may
avoid adverse tax consequences in the future. A form for making this election is
attached as Exhibit B. Director understands that the failure to make this filing
within said 30 day period will result in the recognition of ordinary income by
Director (in the event the fair market value of the Restricted Stock increases
after Grant Date) as the forfeiture restrictions lapse. Director acknowledges
that it is his or her sole responsibility, and not the Corporation's, to file a
timely election under Section 83(b). Director further acknowledges that the
election under Section 83(b) is an election that must be made with respect to
each separate grant of Restricted Stock that is subject to this Agreement.

      14. NOTICES. Any notices provided for in this Agreement or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by mail by the Corporation to the Director, five
(5) days after deposit in the United States mail, postage prepaid, addressed to
the Director at the last address the Director provided to the Corporation and/or
BPPR. Notice to the Corporation and/or BPPR shall be given in writing and shall
be deemed effectively given upon receipt or, in the case of notices delivered by
mail to the Corporation and/or BPPR by the Director, five (5) days after deposit
in the United States mail, postage prepaid, addressed to Chief Legal Officer,
Popular, Inc./Banco Popular de Puerto Rico, Board of Directors (751), PO Box
362708, San Juan, Puerto Rico 00936-2708.

      8. RIGHTS AS A SHAREHOLDER. Except for the restrictions set forth in this
Agreement and the Plan and unless otherwise determined by the Corporation, the
Director shall be entitled to all of the rights of a shareholder with respect to
the shares of Restricted Stock awarded pursuant to this Agreement including the
right to vote such shares of Restricted Stock and to receive dividends and other
distributions (if any) payable with respect to such shares. Provided, however,
that cash dividends paid on Restricted Stock shall be reinvested in Common Stock
through the Corporation's Dividend Reinvestment Plan.

      9. TAX WITHHOLDING. The Corporation may withhold or cause to be withheld
from any Restricted Stock grant (or Director's compensation) any Federal, Puerto
Rico, state or local taxes required by law to be withheld with respect to such
Restricted Stock grant. By acceptance of this Agreement, Director agrees to such
deductions.

         10. GOVERNING LAW. All questions arising with respect to this Agreement
and the provisions of the Plan shall be determined by application of the laws of
the Commonwealth of Puerto Rico except to the extent such governing law is
preempted by Federal law. The obligation of the Corporation to grant and deliver
Restricted Stock under this Agreement is subject to applicable laws and to the
approval of any governmental authority required in connection with the
authorization, issuance, sale, or delivery of such Restricted Stock.

<PAGE>

      11. SEVERABILITY. If any provision of this Agreement is held to be illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions of the Agreement, but such provision shall be fully
severable and the Agreement shall be construed and enforced as if the illegal or
invalid provision had never been included in the Agreement.

      12. SUCCESSORS. This Agreement shall be binding upon the Director, his
legal representatives, heirs, legatees, distributees, and shall be binding upon
the Corporation and its successors and assigns.

      IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
this 16th day of July 2004.

                                    POPULAR, INC.

                                    By: _______________________________

                                    Name: _____________________________

                                    Title: ____________________________

                                    DIRECTOR: _________________________

                                    Name: _____________________________

<PAGE>

                                    EXHIBIT B

                             SECTION 83(b) STATEMENT

      This statement is being made under Section 83(b) of the Internal Revenue
Code, pursuant to Treas. Reg. Section 1.83-2.

      The person who performed the services is:

      Name: ___________________________________
      Address: ________________________________
               ________________________________

      Taxpayer Identification No.: ______________

      Taxable Year: Calendar Year

      The property with respect to which the election is being made is    shares
of Common Stock of Popular, Inc. (the "Restricted Stock").

      The property was issued on __________, 2004.

      The property is subject to forfeiture if for any reason stockholder's
relationship with the issuer is terminated prior to vesting of the property. The
forfeiture provision lapses according to Section 2 of the Agreement.

      The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction that by its terms will never lapse)
is $________ per share.

      The value of such property was $       per share on the Grant Date.

      A copy of this statement is being furnished to Popular, Inc., for whom
Director rendered the service underlying the transfer of property.

      This statement is executed as of ___________________, 2004.

                                    ___________________________________________
                                    Director