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                                 EXHIBIT 10.10

                              SEPARATION AGREEMENT

         This Separation Agreement ("Agreement") is made and entered into by
and among Action Products International, Inc. ("APII"), a Florida corporation,
with its principal offices at 390 North Orange Avenue, Suite 2185, Orlando,
Florida 32801 and Ronald E. Tuchman ("Tuchman"), an individual residing at 566
Wayne Drive, River Vale, New Jersey 07675.

         WHEREAS, Tuchman accepted employment as President and Chief Operating
Officer of APII under an Employment Agreement with an effective date of January
29, 2001, as amended, including the Amendment to Employment Agreement dated as
of July 1, 2002 (the "Employment Agreement"), and subsequently began employment
with APII; and

         WHEREAS, pursuant to Section 3(c) of the Employment Agreement, APII
agreed to grant Tuchman the right to purchase up to 130,000 shares of APII's
common stock, par value $0.001 per share, pursuant to, and subject to the terms
of, a Stock Option Agreement dated February, 2001 (the "Non-Plan Stock Option
Agreement"); and

         WHEREAS, APII granted to Tuchman the right to purchase up to 70,000
shares of APII's common stock, par value $0.001 per share, under the 1996 Stock
Option Plan (the "Plan Stock Option Agreement") (the Non-Plan Stock Option
Agreement and Plan Stock Option Agreement are collectively referred to herein
as the "Stock Option Agreements"); and

         WHEREAS, pursuant to Section 4 of the Employment Agreement, APII and
Tuchman executed a Subscription Agreement (the "Subscription Agreement") dated
February 2001, under which Tuchman acquired 114,286 shares of APII's common
stock, par value $0.001 per share from APII at a purchase price of $1.75 per
share for an aggregate purchase price of $200,000; and

         WHEREAS, APII and Tuchman desire, among other matters contained
herein, to terminate both the employment relationship and the Employment
Agreement, upon mutually acceptable terms and to settle any and all
differences, claims and potential claims arising out of, among other matters,
(i) Tuchman's employment and termination of employment with APII, (ii)
termination of the Employment Agreement, (iii) termination of APII's
obligations under the Stock Option Agreements and any other options or warrants
issued or granted to Tuchman, and (iv) termination of the parties executory
obligations under the Subscription Agreement.

         NOW THEREFORE, in consideration of the mutual promises and other
consideration contained herein and intending to be legally bound, the parties
agree as follows:

1.       SEPARATION.

         (A)      Tuchman hereby resigns, effective on the date hereof, from
any and all positions, officerships, and directorships he holds with APII or
any of its subsidiaries or affiliates. Simultaneous with the execution and
delivery hereof, Tuchman has delivered to APII his written resignation in the
form attached hereto as Exhibit "A".

         (B)      Tuchman has returned to APII any of the following that he has
in his possession: records and business documents, whether on computer or hard
copy, and other materials

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(including but not limited to computer disks and tapes, computer programs and
software, office keys, APII credit cards, business cards (which business cards
Tuchman has either returned to API or destroyed), correspondence, files,
customer lists, technical information, customer information, pricing
information, sources of supply, vendor information, business strategies, sales
and purchasing records and copies thereof) (collectively, the "APII Records")
provided by APII and/or its predecessors, subsidiaries or affiliates and/or
obtained as a result of his employment with, or in any of his capacities with,
or rendering of services for, APII and/or its predecessors, subsidiaries or
affiliates, and/or created by Tuchman while employed by and/or rendering
services to or for APII and/or its predecessors, subsidiaries or affiliates.
Tuchman acknowledges that all such APII Records are the property of APII. In
addition, Tuchman shall promptly return in good condition, normal wear and tear
excepted, any and all computer equipment and accessories belonging to and/or
leased by APII and/or its predecessors, subsidiaries or affiliates.

2.       TERMINATION OF EMPLOYMENT AGREEMENT. The parties hereby mutually agree
that the Employment Agreement is terminated in its entirety as of the date of
this Agreement, and that Tuchman waives any claim he has or may have under the
Employment Agreement for any payment of salary or accrued vacation time,
receipt of other benefits, reimbursement for any expenses or automobile
allowance; provided, however, that nothing herein shall restrict Tuchman's
right to elect to continue health benefits in accordance with the Consolidated
Omnibus Budget Reconciliation Act of 1986 ("COBRA").

3.       TERMINATION OF STOCK OPTION AGREEMENTS. The parties hereby mutually
agree that the Stock Option Agreements, and any other rights to acquire any
capital stock of APII issued or granted, or discussed or contemplated, to
Tuchman, are terminated in their entirety as of the date of this Agreement.

4.       TERMINATION OF SUBSCRIPTION AGREEMENT. The parties hereby mutually
agree that Articles IV and V of the Subscription Agreement are terminated as of
the date of this Agreement.

5.       RIGHTS OF INTELLECTUAL PROPERTY. Tuchman acknowledges and agrees that
all patents, licenses, copyrights, tradenames, trademarks, service marks,
planning, marketing and/or creative policies, advertising campaigns, media
campaigns, and budgets, practices, concepts, strategies, and methods of
operation (excluding such budgets, practices, concepts, strategies, and methods
of operation that are standard practices in the toy industries), financial or
business projections, designs, logos, slogans and business plans developed or
created by Tuchman in the course and scope of his employment with APII and/or
any of its subsidiaries or affiliates, either individually or in collaboration
with others, was and is deemed works for hire and the sole and absolute
property of APII. Tuchman agrees that, at APII's request and expense, he will
take all steps necessary to secure the rights thereto to APII by patent,
copyright or otherwise.

6.       REPRESENTATIONS AND WARRANTIES.

         (A)      As an inducement for APII to enter into this Agreement,
Tuchman represents and warrants to APII that (i) during his employment with
APII, he has not committed material breach of any restrictive covenant in
Section 10 of the Employment Agreement, (ii) that he has not assigned or
attempted to assign any right or interest in any claim against APII or any of
its affiliates or subsidiaries to any other person and that no other person has
an interest in such rights

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or claims, whether such claim arises under the Employment Agreement, Stock
Option Agreements, Subscription Agreement, or otherwise, and he has not used or
disclosed his knowledge of APII's business affairs to aide others in
competition with APII.

         (B)      As an inducement for Tuchman to enter into this Agreement,
APII represents and warrants to Tuchman that (i) APII is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Florida; (ii) APII has the requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder;
(iii) the execution, delivery and performance of this Agreement by APII and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action, and no other corporate
proceedings on the part of APII is necessary to authorize the execution,
delivery or performance of this Agreement; and (iv) APII has adequate capital
under the Florida Business Corporation Act to purchase the Redemption Shares
under Paragraph 7.

7.       STOCK REPURCHASE. Provided Tuchman has not revoked this Agreement, and
has delivered written confirmation that he has not revoked this Agreement,
pursuant to Paragraph 17(c) herein, on the seventh (7th) business day after the
date of this Agreement (the "Redemption Date"), APII shall purchase from
Tuchman, and Tuchman sell to APII, 114,286 shares of APII common stock, par
value $0.001 per share, which Tuchman acquired from APII pursuant to the
Subscription Agreement, (the "Redemption Shares") for a total purchase price of
One Hundred Twenty Eight Thousand Dollars ($128,000.00) (the "Redemption
Price"). On the Redemption Date, (i) Tuchman shall deliver to APII the
certificate(s) evidencing the Redemption Shares, with medallion guaranteed
stock powers, endorsed in blank, which, Tuchman represents and warrants to APII
are free and clear of any liens or claims and, and (ii) APII shall deliver to
Tuchman the Redemption Price by wire transfer to such account as designated by
Tuchman.

8.       NON-DISPARAGEMENT.

         (A)      Tuchman shall not communicate, directly or indirectly, any
negative or disparaging comments or information about APII or any of the
current officers, directors, managers, supervisors, executives, employees or
representatives of APII ("APII Agents") or any of APII's subsidiaries and
affiliates concerning the reputation or status of APII's or APII's Agents'
professional abilities or APII's, or any of APII's subsidiary's or affiliate's
business or financial condition. In addition, Tuchman shall inform his
affiliates, agents and representatives ("Tuchman Agents") to comply with these
same terms with respect to APII and the APII Agents, and shall use reasonable
efforts to cause them to comply with such terms, where he has actual knowledge
of their failure to do so."

         (B)      APII shall not communicate, directly or indirectly, any
negative or disparaging comments or information about Tuchman or any of the
Tuchman Agents concerning the reputation or status of Tuchman's or the Tuchman
Agents' professional abilities or the business or financial condition of any of
Tuchman, the Tuchman Agents, or any business in which Tuchman is currently, or
in the future, involved. In addition, APII shall inform the APII Agents to
comply with these same terms with respect to Tuchman, the Tuchman Agents, and
any other business in which Tuchman is involved, and shall use reasonable
efforts to cause them to comply with such terms, where APII has actual
knowledge of their failure to do so."

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         (C)      Notwithstanding the foregoing, nothing contained in
subparagraphs (a) and (b) immediately preceding shall be applicable with
respect to any statements made by a party, where compelled by law to make any
such statements, provided that such statements are true."

         (D)      In addition to all other remedies, any party that has been
damaged by any statements prohibited by the provisions of this Paragraph 8,
shall be entitled to a temporary and permanent injunction without the necessity
of showing any actual damage, or posting bond.

9.       CONFIDENTIALITY OF SEPARATION AGREEMENT.

         (A)      Tuchman agrees not to disclose to anyone, either directly or
indirectly, any information whatsoever regarding the existence or substance of
this Agreement or the matters which have resulted in it, including those
pertaining to Tuchman's separation from APII.

         (B)      APII agrees not to disclose to anyone, either directly or
indirectly, any information whatsoever regarding the existence or substance of
this Agreement or the matters which have resulted in it, including those
pertaining to Tuchman's separation from APII. If contacted by an outside party,
APII will use its best efforts to have all such inquiries referred to Ronald S.
Kaplan (APII's Chief Executive Officer), or any successor Chief Executive
Officer of APII if Mr. Kaplan is not available, who shall be instructed to
respond that Tuchman's termination was by mutual agreement and on an amicable
basis and to confirm Tuchman's position and period of employment.

         (C)      If either party is requested or becomes legally compelled or
is required by any law, regulation or order, or by a regulatory body to make
any disclosure that is prohibited or otherwise constrained by this Paragraph 9,
such party will provide the other party with prompt notice of such request so
that it may seek an appropriate protective order or other appropriate remedy.
Subject to the foregoing, such party may furnish that portion (and only that
portion) of such information that, in the written opinion of its counsel, the
other party is legally compelled or is otherwise required to disclose. For
purposes of APII's public disclosure obligations under Federal and state
securities laws, the Rules and Regulation of the Securities and Exchange
Commission and the Nasdaq Stock Market, APII may disclose such information
about this Agreement as, in the opinion of counsel for APII, is necessary to
comply with such laws, rules and regulations.

10.      TUCHMAN'S RELEASE OF ALL CLAIMS. Tuchman, on behalf of himself, his
agents, executors, legatees, devisees, administrators, successors, and assigns,
does hereby irrevocably, forever and unconditionally release and forever
discharge (i) APII, and (ii) each of its current executive officers and
directors, and (iii) each of its past, present and future shareholders, agents,
directors, officers, executives, employees, representatives, attorneys in each
of their capacity as such, and (iv) their predecessors, successors, affiliates,
insurers, heirs, executors, administrators and assigns, and all persons acting
by, through, under or in concert with any of them (collectively referred to
herein as the "APII Released Parties"), of and from any and all actions, causes
of action, suits, debts, judgments, charges and expenses (including attorneys'
and paralegal fees and costs at all levels of dispute resolution), of any
nature whatsoever, asserted or unasserted, known or unknown, ("Claims"), which
Tuchman ever had, now has, or hereafter may have against any of the APII
Released Parties; including, without limitation, any Claims in any way arising
out of or

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related to Tuchman's employment and/or other capacity and/or service as a
director and/or otherwise with APII and/or any of its subsidiary and/or
affiliated entities and/or the termination of his employment and/or other
capacities and/or services with APII and/or its subsidiary and affiliated
entities, regardless of whether any or all of such Claims arises under any
state, federal or foreign statute, ordinance, regulation, order or common law.
The Claims released by Tuchman include, but are not limited to, those under the
Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. Section 621 et seq.;
Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. Section
2000e et seq.; the Americans with Disabilities Act of 1990 ("ADA") 42 U.S.C.
Section 12101 et seq.; the Family and Medical Leave Act of 1993 ("FMLA"), 29
U.S.C. Section 2601 et seq.; and the Employee Retirement Income Security Act of
1974 ("ERISA"), 29 U.S.C. Section 1001 et seq. and under any state law of a
similar nature; and as any or all of the foregoing are or may be amended, or
any other federal, state local or foreign statute, rule or ordinance and any
other claims in law or equity. In further expansion of the foregoing releases,
Tuchman releases the APII Released Parties of and from any and all Claims based
on constructive discharge, express, implied or quasi-contract, and breach of
the implied covenant of good faith and fair dealing. In still further expansion
of the foregoing releases, Tuchman releases the APII Released Parties of and
from any and all Claims for fraud of any kind. Expanding the foregoing releases
further still, Tuchman releases the APII Released Parties of and from any and
all Claims for wrongful discharge of any kind (including in violation of public
policy and constructive discharge), infliction of emotional distress, whether
intentional or negligent, defamation, negligence, conspiracy, any and all other
common law torts and discrimination on any basis prohibited by statute, public
policy or otherwise.

11.      APII'S RELEASE OF ALL CLAIMS. APII, on behalf of itself and its
subsidiaries, successors and assigns, does hereby irrevocably, forever and
unconditionally release and forever discharge Tuchman and each of his
successors, heirs, executors, administrators and assigns, and all persons
acting by, through, under or in concert with any of them (collectively referred
to herein as the "Tuchman Released Parties"), of and from any and all Claims,
which APII ever had, now has, or hereafter may have against any of the Tuchman
Released Parties; including, without limitation, any Claims in any way arising
out of or related to Tuchman's employment and/or other capacity and/or service
as a director and/or otherwise with APII and/or any of its subsidiary and/or
affiliated entities and/or the termination of his employment and/or other
capacities and/or services with APII and/or its subsidiary and affiliated
entities, regardless of whether any or all of such Claims arises under any
state, federal or foreign statute, ordinance, regulation, order or common law.
In still further expansion of the foregoing releases, APII releases the Tuchman
Released Parties of and from any and all Claims for fraud of any kind.

12.      CLAIMS RELEASED CONSTRUED BROADLY. Tuchman and APII intend that the
provisions of this Agreement regarding the Claims being released by the parties
under the provisions of this Agreement shall be construed as broadly as
possible. However, nothing contained in this Agreement is intended to waive any
claims or rights based on this Agreement or a breach of this Agreement, or
based on conduct or any event that occurs after the effective date of this
Agreement.

13.      ASSUMPTION OF RISK OF CHANGE IN FACTS. Each of the parties understands
that the facts under which either of them gives this release herein may prove
to be different than now known or

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believed by him or it, and each of them accepts and assumes the risk thereof
and agrees that the party's respective release shall remain in full force and
effect and not subject to modification, termination or rescission by reason of
any difference in facts.

14.      COVENANT NOT TO SUE.

         (A)      Neither Tuchman nor any person or entity on Tuchman's behalf
has or shall commence, maintain or prosecute any lawsuit, complaint, action or
proceeding of any kind against any of the APII Released Parties with respect to
any act, omission or other matter in connection with any of the Claims released
under Paragraph 10 occurring up to and including the effective date of this
Agreement. The foregoing notwithstanding, this covenant not to sue does not
extend to any claim for breach of this Agreement.

         (B)      Neither APII nor any person or entity on APII's behalf has or
shall commence, maintain or prosecute any lawsuit, complaint, action or
proceeding of any kind against any of the Tuchman Released Parties with respect
to any act, omission or other matter in connection with any of the Claims
released under Paragraph 11 occurring up to and including the effective date of
this Agreement. The foregoing notwithstanding, this covenant not to sue does not
extend to any claim for breach of this Agreement.

15.      RESTRICTION ON COMPETING ACTIVITIES.

         (A)      Tuchman shall not, until the first anniversary of the date of
this Agreement, directly or indirectly, alone or in conjunction with others,
through subsidiaries or affiliates, joint ventures or other business
arrangements:

                  (i)      develop, aid, consult, own, manage, operate, join,
control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director, employee,
consultant or otherwise with, any business or enterprise located anywhere in
the world, engaged in any business that designs, develops, markets,
manufactures, distributes or sells anything substantially similar or directly
competitive to the following products, as such products are described in the
attached catalogs:

         -        I Dig Excavation Kits -- using toys pre-embedded in
                  sand-like, clay, plaster or other material and sold as an
                  activity toy/kit for excavating;

         -        Jay Jay the Jet Plane - a wooden play system that includes
                  airplanes, buildings and accessories, used in conjunction
                  with a wooden play system centered on airplanes; or other
                  toys using the Jay Jay the Jet Plane brand;

         -        Space Voyagers, Ocean Voyagers, et al, - a line of authentic,
                  educational non-violent action figures, vehicles and
                  accessories based on science and nature exploration
                  activities;

         -        EZ Build - wooden construction projects for children;

         -        Play & Store - a line of packaged toys marketing the
                  convenience of container packaging as the unique selling
                  proposition, where the container is the common value added;

         -        Climbatron - remote control or mechanical (including wind-up)
                  toys that scale vertical surfaces; and

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         -        Drop Zone - parachute toys using parachute material.

Nothing under this Section 15(a)(i) shall prohibit Tuchman from employment (as
an employee, consultant or otherwise) or being a shareholder or director with
any retailer that currently carries any product that is similar or directly
competitive to the APII products set forth on the list above.

                           (ii)     solicit any officers or employees of APII
to terminate their relationships with or to take any action that would have a
material adverse effect on the business of APII;

                           (iii)    induce or attempt to induce any customers,
suppliers or distributors of APII to terminate their relationships with or to
take any action that would have a material adverse effect on the business of
APII;

                           (iv)     collude with Pablo Savetman and/or Timothy
Young, former APII employees, in the inducement to profit from advantageous and
privileged access to APII confidential information during employment; or

                           (v)      contact employees of APII (other than
Ronald S. Kaplan (or any successor chief executive officer) or other employees
solely for administrative purposes), during business hours, for any reason.

It is expressly  agreed that the limitation  under  Paragraph  15(a)(i) is not
intended to restrict or prohibit the ownership by Tuchman of stock or other
securities of a publicly-held  corporation in which the Tuchman does not possess
beneficial  ownership of five (5%) percent or more of the voting capital stock
of corporation or participate in any management or advisory capacity.

         (B)      In the event that any of the provisions contained in this
Paragraph 15 relating to the period of restriction or the scope of such
restrictions shall be determined by a court of competent jurisdiction to exceed
the maximum periods of time which such court determines to be enforceable, or
to exceed the enforceable scope of such provisions, the period or scope of such
restriction, as the case may be, shall, for purposes of this Agreement, be
deemed to be the maximum time period or maximum scope which such court would
deem valid and enforceable; and

         (C)      In addition to all other remedies, APII shall be entitled to
a temporary and permanent injunction without the necessity of showing any
actual damage and or a decree for specific performance of this Paragraph 15.

16.      CONFIDENTIAL INFORMATION. During Tuchman's employment and other
service with APII and/or its subsidiary or affiliated entities, he has had
access to confidential and other information proprietary to APII and/or its
subsidiary or affiliated entities, including but not limited to trade secrets,
operations, customer information, customer prospects, vendor information,
sources of supply, strategic plans, inventions, business plans, formulas
processes, designs, methods, techniques, know-how, systems, software programs,
works of authorship, plans, proposals, information about products including
product costs or sale prices, manufacturer and supplier lists, compensation
information, and other proprietary information (the "Confidential
Information"). Tuchman has not and shall not at any time disclose to any person
or entity the Confidential Information acquired during or in connection with
his employment with or in rendering services to

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APII and/or any of its subsidiaries and affiliates without prior written
permission from APII. Tuchman shall keep secret the Confidential Information
and all matters that have been entrusted to him and shall not use or attempt to
use any of the Confidential Information in any manner that may injure or cause
loss or may be calculated to injure or cause loss, whether directly or
indirectly, to APII and/or its subsidiaries and affiliates. The above
restrictions shall not apply to:

                  (i)      information that at the time of disclosure is in the
public domain through no fault of Tuchman;

                  (ii)     information received from a third party outside of
APII that was disclosed without a breach of any confidentiality obligation;

                  (iii)    information approved for release by written
authorization of APII;

                  (iv)     information that may be required to be disclosed by
law or by an order of any court, agency or proceeding, provided that Tuchman
shall provide APII with notice of any such required disclosure once Tuchman has
knowledge of it and will provide all reasonable assistance requested by APII to
obtain an appropriate protective order with respect to such information; or

                  (v)      information known by Tuchman prior to the
commencement of his relationship with APII or developed independently by
Tuchman prior to the period of his relationship with APII, provided that no
Confidential Information is used by Tuchman.

17.      KNOWING AND VOLUNTARY AGREEMENT.

         (A)      Tuchman acknowledges that he has carefully read and
understands all of the provisions and effects of this Agreement; that he is
voluntarily and knowingly entering into this Agreement free of coercion or
duress; and that in agreeing to sign this Agreement, he has not, except for
representations, promises, statements, or explanations made herein or in an
exhibit attached hereto, relied on any representations, promises, agreements,
statements or explanations made by APII or its attorneys concerning the terms
or effects of this Agreement in connection with his decisions to execute the
same.

         (B)      TUCHMAN REPRESENTS AND WARRANTS THAT HE HAS HAD A FULL AND
COMPLETE OPPORTUNITY TO REVIEW THIS AGREEMENT AND THAT HE HAS BEEN STRONGLY
ADVISED TO SEEK LEGAL COUNSEL PRIOR TO SIGNING THIS AGREEMENT. TUCHMAN
ACKNOWLEDGES THAT HE HAS THE RIGHT TO CONSIDER THIS AGREEMENT FOR TWENTY-ONE
(21) DAYS PRIOR TO SIGNING AND RETURNING IT TO RONALD S. KAPLAN, CHIEF
EXECUTIVE OFFICER, ACTION PRODUCTS INTERNATIONAL, INC., 390 NORTH ORANGE
AVENUE, SUITE 2185, ORLANDO, FLORIDA 32801. TUCHMAN REPRESENTS THAT, IF HE
SIGNED THIS AGREEMENT PRIOR TO THE EXPIRATION OF THE TWENTY-ONE (21) DAY
PERIOD, HE HAS FREELY AND VOLUNTARILY WAIVED HIS RIGHT TO CONSIDER THIS
AGREEMENT FOR SUCH PERIOD.

         (C)      TUCHMAN ALSO ACKNOWLEDGES THAT HE IS AWARE OF AND HAS BEEN
ADVISED OF HIS RIGHT TO REVOKE THIS AGREEMENT FOR A PERIOD OF SEVEN (7) DAYS
AFTER HE SIGNS THIS AGREEMENT BY NOTIFYING, IN WRITING, RONALD S. KAPLAN, BY
FACSIMILE TO (419) 781-3805, BY 5 P.M., NEW YORK TIME, ON OR BEFORE THE SEVENTH
(7TH) DAY AFTER HE SIGNS AND RETURNS THE AGREEMENT.

         (D)      THIS AGREEMENT WILL NOT BECOME EFFECTIVE UNTIL THE SEVEN-DAY
REVOCATION PERIOD HAS EXPIRED AND TUCHMAN HAS NOT OTHERWISE REVOKED THIS
AGREEMENT IN ACCORDANCE

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WITH PARAGRAPH 17(C). APII SHALL HAVE NO OBLIGATIONS UNDER THIS AGREEMENT UNTIL
THIS AGREEMENT HAS BECOME EFFECTIVE.

18.      APPLICABLE LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida, without regard for
its conflicts of laws principles.

19.      INDEMNIFICATION.

         (A)      DIRECTORS AND OFFICERS INDEMNITY. APII shall, to the extent
not covered by its directors' and officers' insurance policy then in effect,
and to the full extent permitted by law and by APII's articles of incorporation
and by-laws, indemnify Tuchman and hold him harmless for any acts or decisions
made by him while performing his duties as a director, officer and employee,
during the term of his employment and services as a director of APII; provided
that Tuchman acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of APII and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.

         (B)      INDEMNIFICATION OF APII.

                  (i)      Tuchman agrees to indemnify, defend and hold
harmless APII and its shareholders, officers, directors, affiliates, agents and
employees (each an "APII Indemnified Party") from and against and in respect of
any and all losses, damages, claims, liabilities, actions, suits, proceedings
and costs and expenses of defense thereof, including reasonable attorneys' fees
(a "Loss"), suffered or incurred by any such party by reason of or arising out
of any breach of any representation, warranty, covenant or agreement of Tuchman
set forth in this Agreement.

                  (ii)     An APII Indemnified Party shall give to Tuchman
prompt written notice of any claim, suit or demand which such APII Indemnified
Party believes will give rise to a claim for indemnification under Paragraph
19(b)(i); provided, however, that the failure of such APII Indemnified Party to
give such prompt written notice shall not affect the liability of Tuchman
hereunder, except to the extent that the rights of Tuchman to defend himself or
to cure or mitigate the damages are actually prejudiced thereby. Thereafter,
such APII Indemnified Party shall furnish to Tuchman, in reasonable detail,
such information as it may have with respect to such claim, action, suit or
proceeding, including copies of any summons, complaint or other pleading which
may have been served upon it or any written claim, demand, invoice, billing or
other document evidencing or asserting the same. Provided Tuchman, within ten
(10) days after receipt of such written notice from such APII Indemnified
Party, shall acknowledge in writing to such APII Indemnified Party, Tuchman's
assumption of responsibility for defense and indemnification with respect to
such claim, action, suit or proceeding, Tuchman shall have the right to assume
defense of such claim, action, suit or proceedings through counsel selected by
Tuchman at Tuchman's expense, and to contest or compromise such claim, action,
suit or proceeding. Upon such assumption of defense by Tuchman, such APII
Indemnified Party shall cooperate with Tuchman in Tuchman's conduct of such
defense to the extent reasonably requested by Tuchman and at Tuchman's expense.
So long as Tuchman is defending such claim, action, suit or proceeding, such
APII Indemnified Party shall not settle or compromise the same without
Tuchman's prior written consent, which consent shall not be unreasonably
withheld. Without the

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prior written consent of APII and such APII Indemnified Party, Tuchman shall
not be entitled to settle any claim, action, suit or proceedings the defense of
which has been assumed by Tuchman if such settlement might have a material
adverse effect or impose any material condition or limitation on the business,
operations, prospects or condition (financial or otherwise) conducted by APII.

         (C)      INDEMNIFICATION OF TUCHMAN.

                  (i)      APII agrees to indemnify, defend and hold harmless
Tuchman and his successors, heirs and assigns (each a "Tuchman Indemnified
Party") from and against and in respect of any and all Losses suffered or
incurred by any such party by reason of or arising out of any breach of any
representation, warranty, covenant or agreement of APII set forth in this
Agreement.

                  (ii)     A Tuchman Indemnified Party shall give to APII
prompt written notice of any claim, suit or demand which such Tuchman
Indemnified Party believes will give rise to a claim for indemnification under
Paragraph 19(c)(i); provided, however, that the failure of such Tuchman
Indemnified Party to give such prompt written notice shall not affect the
liability of APII hereunder, except to the extent that the rights of APII to
defend itself or to cure or mitigate the damages are actually prejudiced
thereby. Thereafter, such Tuchman Indemnified Party shall furnish to APII, in
reasonable detail, such information as it may have with respect to such claim,
action, suit or proceeding, including copies of any summons, complaint or other
pleading which may have been served upon it or any written claim, demand,
invoice, billing or other document evidencing or asserting the same. Provided
APII, within ten (10) days after receipt of such written notice from such
Tuchman Indemnified Party, shall acknowledge in writing to such Tuchman
Indemnified Party APII's assumption of responsibility for defense and
indemnification with respect to such claim, action, suit or proceeding, APII
shall have the right to assume defense of such claim, action, suit or
proceedings through counsel selected by APII at APII's expense, and to contest
or compromise such claim, action, suit or proceeding. Upon such assumption of
defense by APII, such Tuchman Indemnified Party shall cooperate with APII in
APII's conduct of such defense to the extent reasonably requested by APII and
at APII's expense. So long as APII is defending such claim, action, suit or
proceeding, such Tuchman Indemnified Party shall not settle or compromise the
same without APII's prior written consent which consent shall not be
unreasonably withheld.

20.      CHANGE, MODIFICATION AND WAIVER. No change or modification of this
Agreement shall be valid unless it is in writing and signed by Tuchman and an
authorized officer of APII. No waiver of any provision of this Agreement shall
be valid unless it is in writing and signed by the party against whom the
waiver is sought to be enforced (in the case of APII, by an authorized officer
of APII). The failure of a party to insist upon strict performance of any
provision of this Agreement in any one or more instances shall not be construed
as a waiver or relinquishment of the right to insist upon strict compliance
with such provision in the future.

21.      INTEGRATION. This Agreement and its exhibits constitutes the entire
agreement between APII and Tuchman concerning the subject matters hereof and
supercedes all prior representations, promises and agreements, whether oral or
written, implied or otherwise with respect thereto.

                                      10
<PAGE>

22.      BINDING AGREEMENT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective officers,
directors, agents, representatives, employees, servants, affiliates, attorneys,
heirs, successors, assigns, or other representatives, if any.

23.      SEVERABILITY. Any provision of this Agreement which is adjudged to be
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without affecting the validity or
enforceability of the remainder of this Agreement.

24.      ATTORNEYS' FEES. In the event an action is brought by either party for
breach of by, or to enforce this Agreement, including Paragraph 15, against,
the other party, including arbitration, the prevailing party shall receive his
or its reasonable attorneys and paralegal fees and costs at all levels of
dispute resolution involved as determined by the court or arbitrators, as the
case may be.

25.      JURISDICTION OF DISPUTES; WAIVER OF JURY TRIAL. In the event any party
to this Agreement commences any litigation, proceeding or other legal action in
connection with or relating to this Agreement or any matters described or
contemplated herein, with respect to any of the matters described or
contemplated herein or therein, the parties to this Agreement hereby (a) agree
under all circumstances absolutely and irrevocably to institute any litigation,
proceeding or other legal action in a court of competent jurisdiction located
within the County of Orange, Florida, whether a state or federal court; (b)
agree that in the event of any such litigation, proceeding or action, such
parties will consent and submit to personal jurisdiction in such court; (c)
agree to waive to the full extent permitted by law any objection that they may
now or hereafter have to the venue of any such litigation, proceeding or action
in any such court or that any such litigation, proceeding or action was brought
in an inconvenient forum; (d) agree as an alternative method of service to
service of process in any legal proceeding by mailing of copies thereof to such
party at its address set forth herein for communications to such party; (e)
agree that any service made as provided herein shall be effective and binding
service in every respect; and (f) agree that nothing herein shall affect the
rights of any party to effect service of process in any other manner permitted
by law. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT OR ANY MATTERS DESCRIBED OR
CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY AND ALL ACTION NECESSARY
OR APPROPRIATE TO EFFECT SUCH WAIVER.

26.      NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered to the recipient by (i) hand, (ii) mailed, first
class certified mail, return receipt, with postage paid, or (iii) a nationally
recognized overnight courier service:

If to APII, to:
Action Products International, Inc.
390 North Orange Avenue, Suite 2185
Orlando, Florida 32801
Attn: Ronald S. Kaplan

with a copy to:
Raice Paykin & Krieg, LLP

                                      11
<PAGE>
185 Madison Avenue, 10th Floor
New York, New York 10016
Attn: James G. Smith, Esq.

If to Tuchman, to:
Ronald E. Tuchman
566 Wayne Drive
River Vale, New Jersey 07675

With a copy to:
Foreht, Last, Ladau, Miller and Katz, LLP
228 East 45th Street, 17th Floor
New York, NY  10017
Attn: Scott M. Miller, Esq.

27.      COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument. Execution and delivery of this Agreement by exchange of facsimile
copies bearing the facsimile signature of a party hereto shall constitute a
valid and binding execution and delivery of this Agreement by such party. Such
facsimile copies shall constitute enforceable original documents.

                 [remainder of page internationally left blank]

                                      12
<PAGE>

         IN WITNESS WHEREOF, the parties have agreed to, and executed, this
Agreement, effective as of the last date written below.

EXECUTIVE:

/s/ RONALD E. TUCHMAN
---------------------
Ronald E. Tuchman

Dated: February 7, 2003

APII:

Action Products International, Inc.

By: /s/ RONALD S. KAPLAN
    --------------------
Ronald S. Kaplan, Chief Executive Officer

Dated: February 7, 2003

                                      13
<PAGE>

                                  EXHIBIT "A"

                         Form of Letter of Resignation

February 7, 2003

Ronald S. Kaplan
Action Products International, Inc.
390 N. Orange Ave., Suite 2815
Orlando, FL  32801

Dear Ron,

Effective with this notice of February 7, 2003, I hereby resign as an officer
and director of Action Products International, Inc. I wish you and the
organization success in the future.

Sincerely,

Ronald Tuchman

                                      14<PAGE>
                                                                    EXHIBIT 4(e)

                      [Form of Fixed Rate Medium-Term Note]

                               (FACE OF SECURITY)

         [IF A GLOBAL SECURITY, INSERT -- THIS SECURITY IS A GLOBAL SECURITY
WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS
SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER
THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.]

         [IF DTC IS THE DEPOSITARY, INSERT -- UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO POPULAR, INC. OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]

         [INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND THE
REGULATIONS THEREUNDER.]

<PAGE>

                                                              CUSIP NO. _______
REGISTERED NO. FXR ______

                                  POPULAR, INC.

                           MEDIUM-TERM NOTES, SERIES 4
                                  (Fixed Rate)

         The following terms apply to this Security, as and to the extent shown
below:

<TABLE>
<S>                                              <C>
PRINCIPAL AMOUNT:                                REGULAR  RECORD DATE(S):

STATED MATURITY DATE:                            ORIGINAL ISSUE DISCOUNT
                                                 SECURITY:
SPECIFIED CURRENCY:  U.S.
dollars for all payments                             -  Total Amount of OID:
unless otherwise specified                           -  Yield to Maturity:
below:                                               -  Initial Accrual Period
                                                        OID:
    -  payments of principal and                     -  OID Default Amount:
       any premium:                                  -  Default Rate:

    -  payments of interest:                     REDEMPTION COMMENCEMENT DATE:

    -  Exchange Rate Agent:                      REPAYMENT DATE(S):

INTEREST RATE: _____% per                        REDEMPTION OR REPAYMENT
annum                                            PRICE(S):

INTEREST PAYMENT DATE(S):                        OTHER TERMS:

ORIGINAL ISSUE DATE*:
</TABLE>

         Terms left blank or marked "N/A", "No", "None" or in a similar manner
do not apply to this Security except as otherwise may be specified.

         Whenever used in this Security, the terms specified above that apply to
this Security have the meanings specified above, unless the context requires
otherwise. Other terms used in this Security that are not defined herein but
that are defined in the Indenture

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

*        This date shall be the issue date of this Security, unless there is a
         Predecessor Security, in which case this date shall be the issue date
         of the first Predecessor Security.

                    (Face of Security continued on next page)

                                       -2-

<PAGE>

referred to in Section 1 on the reverse of this Security are used herein as
defined therein.

         Popular, Inc., a corporation duly organized and existing under the laws
of the Commonwealth of Puerto Rico (hereinafter called the "Company", which term
includes any successor Person under the Indenture), for value received, hereby
promises to pay to _____________, or registered assigns, as principal the
Principal Amount on the Stated Maturity Date and to pay interest thereon, from
the Original Issue Date or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, on the Interest Payment Date(s) in
each year, commencing on the first such date that is at least 15 calendar days
after the Original Issue Date, and at the Maturity of the principal hereof, at
the rate per annum equal to the Interest Rate specified on the face hereof,
until the principal hereof is paid or made available for payment.
Notwithstanding the foregoing, interest on any principal that is overdue shall
be payable on demand.

         The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the 15th calendar day (whether or not a
Business Day, as such term is defined in Section 3 on the reverse hereof) next
preceding such Interest Payment Date, unless otherwise provided on the face
hereof (a "Regular Record Date"). Any interest so payable, but not punctually
paid or duly provided for, on any Interest Payment Date will forthwith cease to
be payable to the Holder on such Regular Record Date and such Defaulted Interest
either may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of this Security not less
than 10 days prior to such Special Record Date, or may be paid in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which this Security may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture.

                    (Face of Security continued on next page)

                                       -3-

<PAGE>

         If this Security is issued with an original issue discount, (i) if an
Event of Default with respect to the Securities of this series shall have
occurred and be continuing, the amount of principal of this Security which may
be declared due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture, shall be determined in the manner set
forth under "OID Default Amount" on the face hereof, and (ii) in the case of a
default in payment of principal upon acceleration, redemption, repayment at the
option of the Holder or at the Stated Maturity Date hereof, in lieu of any
interest otherwise payable, the overdue principal of this Security shall bear
interest at a rate of interest per annum equal to the Default Rate stated on the
face hereof (to the extent that the payment of such interest shall be legally
enforceable), which shall accrue from the date of such acceleration,
redemption, repayment at the option of the Holder or Stated Maturity Date, as
the case may be, to the date payment has been made or duly provided for or such
default has been waived in accordance with the terms of the Indenture.

      CURRENCY OF PAYMENT

         Payment of principal of (and premium, if any) and interest on this
Security will be made in the Specified Currency for such payment, except as
provided in this and the next three paragraphs. The Specified Currency for any
payment shall be the currency specified as such on the face of this Security
unless, at the time of such payment, such currency is not legal tender for the
payment of public and private debts in the country issuing such currency on the
Original Issue Date, in which case the Specified Currency for such payment shall
be such coin or currency as at the time of such payment is legal tender for the
payment of public and private debts in such country.

         Except as provided in the next paragraph, any payment to be made on
this Security in a Specified Currency other than U.S. dollars will be made in
U.S. dollars if the Person entitled to receive such payment transmits a written
request for such payment to be made in U.S. dollars to the Trustee at its
Corporate Trust Office, Attention: Securities Processing Division, on or before
the fifth Business Day before the payment is to be made. Such written request
may be mailed, hand delivered, telecopied or delivered in any other manner
approved by the Trustee. Any such request made with

                    (Face of Security continued on next page)

                                       -4-

<PAGE>

respect to any payment on this Security payable to a particular Holder will
remain in effect for all later payments on this Security payable to such Holder,
unless such request is revoked on or before the fifth Business Day before a
payment is to be made, in which case such revocation shall be effective for such
and all later payments. In the case of any payment of interest payable on an
Interest Payment Date, such written request must be made by the Person who is
the registered Holder of this Security on the relevant Regular Record Date.

         The U.S. dollar amount of any payment made pursuant to the immediately
preceding paragraph will be determined by the Exchange Rate Agent based upon the
highest bid quotation received by the Exchange Rate Agent as of 11:00 A.M., New
York City time, on the second Business Day preceding the applicable payment
date, from three (or, if three are not available, then two) recognized foreign
exchange dealers selected by the Exchange Rate Agent in The City of New York, in
each case for the purchase by the quoting dealer, for U.S. dollars and for
settlement on such payment date of an amount of the Specified Currency for such
payment equal to the aggregate amount of such Specified Currency payable on such
payment date to all Holders of Securities of this or any other series who elect
to receive U.S. dollar payments on such payment date, and at which the
applicable dealer commits to execute a contract. If the Exchange Rate Agent
determines that two such bid quotations are not available on such second
Business Day, such payment will be made in the Specified Currency for such
payment. All currency exchange costs associated with any payment in U.S. dollars
on this Security will be borne by the Holder entitled to receive such payment,
by deduction from such payment.

         Notwithstanding the foregoing, if any amount payable on this Security
is payable on any day (including at Maturity) in a Specified Currency other than
U.S. dollars, and if such Specified Currency is not available to the Company on
the two Business Days before such day, due to the imposition of exchange
controls, disruption in a currency market or any other circumstances beyond the
control of the Company, the Company will be entitled to satisfy its obligation
to pay such amount in such Specified Currency by making such payment in U.S.
dollars. The amount of such payment in U.S. dollars shall be determined by the
Exchange Rate Agent on the basis of the noon buying rate for cable transfers in
The

                    (Face of Security continued on next page)

                                       -5-
<PAGE>

City of New York for such Specified Currency (the "Exchange Rate") as of the
latest day before the day on which such payment is to be made. Any payment made
under such circumstances in U.S. dollars where the required payment is in other
than U.S. dollars will not constitute an Event of Default under the Indenture or
this Security.

      MANNER OF PAYMENT - U.S. DOLLARS

         Except as provided in the next paragraph, payment of any amount payable
on this Security in U.S. dollars will be made at the office or agency of the
Company maintained for that purpose in The City of New York (or at any other
office or agency maintained by the Company for that purpose), against surrender
of this Security in the case of any payment due at the Maturity of the principal
hereof (other than any payment of interest that first becomes due on an Interest
Payment Date); provided, however, that, at the option of the Company and subject
to the next paragraph, payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.

         Payment of any amount payable on this Security in U.S. dollars will be
made by wire transfer of immediately available funds to an account maintained by
the payee with a bank located in the Borough of Manhattan, The City of New York,
if (i) the principal of this Security is at least $10,000,000 and (ii) the
Holder entitled to receive such payment transmits a written request for such
payment to be made in such manner to the Paying Agent at its Corporate Trust
Office, Attention: Securities Processing Division, on or before the Regular
Record Date preceding the day on which such payment is to be made; provided
that, in the case of any such payment due at the Maturity of the principal
hereof (other than any payment of interest that first becomes due on an Interest
Payment Date), this Security must be surrendered at the office or agency of the
Company maintained for that purpose in The City of New York (or at any other
office or agency maintained by the Company for that purpose) in time for the
Paying Agent to make such payment in such funds in accordance with its normal
procedures. Any such request made with respect to any payment on this Security
payable to a particular Holder will remain in effect for all later payments on
this Security payable to such Holder, unless such request is revoked on or
before the Regular Record Date preceding

                    (Face of Security continued on next page)

                                       -6-

<PAGE>

the day on which such payment is to be made, in which case such revocation shall
be effective for such payment and all later payments; provided that in the case
of any payment due at Maturity of the principal of this Security to be effective
any request for revocation must be made no later than the 15th day prior to the
Maturity of the principal of this Security. In the case of any payment of
interest payable on an Interest Payment Date, such written request must be made
by the Person who is the registered Holder of this Security on the relevant
Regular Record Date. The Company will pay any administrative costs imposed by
banks in connection with making payments by wire transfer with respect to this
Security, but any tax, assessment or other governmental charge imposed upon any
payment will be borne by the Holder of this Security and may be deducted from
the payment by the Company or the Paying Agent.

      MANNER OF PAYMENT - OTHER SPECIFIED CURRENCIES

         Payment of any amount payable on this Security in a Specified Currency
other than U.S. dollars will be made by wire transfer of immediately available
funds to such account as is maintained in such Specified Currency at a bank or
other financial institution acceptable to the Company and the Trustee and as
shall have been designated at least five Business Days prior to the applicable
payment date by the Person entitled to receive such payment; provided that, in
the case of any such payment due at the Maturity of the principal hereof (other
than any payment of interest that first becomes due on an Interest Payment
Date), this Security must be surrendered at the office or agency of the Company
maintained for that purpose in The City of New York (or at any other office or
agency maintained by the Company for that purpose) in time for the Paying Agent
to make such payment in such funds in accordance with its normal procedures.
Such account designation shall be made by transmitting the appropriate
information to the Trustee at its Corporate Trust Office in the Borough of
Manhattan, The City of New York, by mail, hand delivery, telecopier or in any
other manner approved by the Trustee. Unless revoked, any such account
designation made with respect to this Security by the Holder hereof will remain
in effect with respect to any further payments with respect to this Security
payable to such Holder. If a payment in a Specified Currency other than U.S.
dollars with respect to this Security cannot be made by wire transfer because
the required account designation

                    (Face of Security continued on next page)

                                       -7-

<PAGE>

has not been received by the Trustee on or before the requisite date or for any
other reason, the Company will cause a notice to be given to the Holder of this
Security at its registered address requesting an account designation pursuant to
which such wire transfer can be made and such payment will be made within five
Business Days after the Trustee's receipt of such a designation meeting the
requirements specified above, with the same force and effect as if made on the
due date. The Company will pay any administrative costs imposed by banks in
connection with making payments by wire transfer with respect to this Security,
but any tax, assessment or other governmental charge imposed upon any payment
will be borne by the Holder of this Security and may be deducted from the
payment by the Company or the Paying Agent.

       MANNER OF PAYMENT - GLOBAL SECURITIES

         Notwithstanding any provision of this Security or the Indenture, if
this Security is a Global Security, the Company may make any and all payments of
principal, premium and interest on this Security pursuant to the Applicable
Procedures of the Depositary for this Security as permitted in the Indenture.

      PAYMENTS DUE ON A BUSINESS DAY

         Unless otherwise specified on the face of this Security, the following
sentence shall apply to this Security. Notwithstanding any provision of this
Security or the Indenture, if any amount of principal, premium or interest would
otherwise be due on this Security on a day (the "Specified Day") that is not a
Business Day, such amount may be paid or made available for payment on the next
succeeding Business Day with the same force and effect as if such amount were
paid on the Specified Day. The provisions of this paragraph shall apply to the
Security in lieu of the provisions of Section 113 of the Indenture.

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

         Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.

                    (Face of Security continued on next page)

                                       -8-

<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.

Dated:

                                            POPULAR, INC.

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

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

                                            Attest:
                                                  -------------------------

         This Security is one of the Securities of the series designated herein
and referred to in the within-mentioned Indenture.

                                            BANK ONE, NA,
                                            as Trustee

                                            By:
                                               ----------------------------
                                                   Authorized Officer

                                       -9-

<PAGE>

                              (Reverse of Security)

         1.       SECURITIES AND INDENTURE

         This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities") issued and to be issued in one or more
series under an Indenture, dated as of February 15, 1995, as supplemented by the
First Supplemental Indenture, dated as of May 8, 1997, and the Second
Supplemental Indenture, dated as of August 5, 1999 (together herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and Bank One, NA (formerly known as The First
National Bank of Chicago), as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), and reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered.

         2.       SERIES AND DENOMINATIONS

         This Security is one of the series designated on the face hereof,
limited to an aggregate initial offering price not to exceed $3,500,000,000 (or
the equivalent thereof in any other currency or currencies or currency units)
less the aggregate initial offering price of "Securities" (as defined in the
Prospectus dated November 19, 2001 relating to debt securities and preferred
stock of the Company, Popular International Bank, Inc. and Popular North
America, Inc.) authenticated and delivered upon initial issuance, other than the
Securities of this series, which amount may be increased at the option of the
Company if in the future it determines that it may wish to sell additional
Securities of this series. References herein to "this series" mean the series of
securities designated on the face hereof.

         The Securities of this series are issuable only in registered form
without coupons in "Authorized Denominations", which term shall have the
following meaning. For each Security of this series having a principal amount
payable in U.S. dollars, the Authorized

                  (Reverse of Security continued on next page)

                                      -10-

<PAGE>

Denominations shall be $1,000 and any integral multiples of $1,000. For each
Security of this series having a principal amount payable in a Specified
Currency other than U.S. dollars, the Authorized Denominations shall be the
amount of such Specified Currency equivalent, at the Exchange Rate on the first
Business Day next preceding the date on which the Company accepts the offer to
purchase such Security, to $1,000 and any integral multiples of $1,000.

         3.       EXCHANGE RATE AGENT AND RELATED TERMS

         If the principal of or interest on this Security is payable in a
Specified Currency other than U.S. dollars, the Company has initially appointed
the institution named on the face of this Security as Exchange Rate Agent to act
as such agent with respect to this Security, but the Company may, in its sole
discretion, appoint any other institution (including any Affiliate of the
Company) to serve as any such agent from time to time. The Company will give the
Trustee prompt written notice of any change in any such appointment. Insofar as
this Security provides for any such agent to obtain rates, quotes or other data
from a bank, dealer or other institution for use in making any determination
hereunder, such agent may do so from any institution or institutions of the kind
contemplated hereby notwithstanding that any one or more of such institutions
are such agent, Affiliates of such agent, any of the agents named on the cover
of the Company's Prospectus Supplement dated March 21, 2003 relating to the
Company's Medium-Term Notes, Series 4 or any Affiliate of any such agent or
Affiliates of the Company.

         All determinations made by the Exchange Rate Agent may be made by such
agent in its sole discretion and, absent manifest error, shall be conclusive for
all purposes and binding on the Holder of this Security and the Company. The
Exchange Rate Agent shall not have any liability therefor.

         Unless otherwise specified on the face hereof, for all purposes of this
Security, the term "Business Day" means (i) a Monday, Tuesday, Wednesday,
Thursday or Friday that is neither a legal holiday nor a day on which commercial
banking institutions in New York City

                  (Reverse of Security continued on next page)

                                      -11-

<PAGE>

generally are authorized or required by law, regulation or executive order to
close and (ii) if the Specified Currency for payment of principal of or interest
on this Security is other than U.S. dollars, is also a day on which banking
institutions are not authorized or required by law, regulation or executive
order to close in the principal financial center of the country issuing such
Specified Currency. With respect to any particular location, the close of
business on any day on which business is not being conducted shall be deemed to
mean 5:00 P.M., New York City time, on that day.

         References in this Security to U.S. dollars shall mean, as of any time,
the coin or currency that is then legal tender for the payment of public and
private debts in the United States of America.

         References in this Security to a particular currency other than U.S.
dollars shall mean, as of any time, the coin or currency that is then legal
tender for the payment of public and private debts in the country issuing such
currency on the Original Issue Date.

         4.       REDEMPTION AT THE COMPANY'S OPTION

         Unless a Redemption Commencement Date is specified on the face hereof,
except as provided below, this Security shall not be redeemable at the option of
the Company before the Stated Maturity Date. If a Redemption Commencement Date
is so specified, and unless otherwise specified on the face hereof, this
Security is subject to redemption upon not less than 30 days' nor more than 60
days' notice at any time and from time to time on or after the Redemption
Commencement Date, in each case as a whole or in part, at the election of the
Company and at the applicable Redemption Price specified on the face hereof
(expressed as a percentage of the principal amount of this Security to be
redeemed), together with accrued interest to the Redemption Date, but interest
installments due on or prior to such Redemption Date will be payable to the
Holder of this Security, or one or more Predecessor Securities, of record at the
close of business on the relevant record date, all as provided in the Indenture;
provided, however, that the first two paragraphs of Section 1103 of the
Indenture shall not apply to this Security, and if

                  (Reverse of Security continued on next page)

                                      -12-

<PAGE>

less than all of the Securities of this series are to be redeemed, the Company
may select, from Securities of this series that are subject to redemption
pursuant to the terms thereof, the Security or Securities, or portion or
portions thereof, to be redeemed.

         In the event that the Company shall be obligated to pay any Additional
Amounts due to a change in law, regulation or interpretation, the Company may,
at its option, redeem this Security as a whole at a redemption price of 100% of
the principal amount thereof (or, if this Security is issued with an original
issue discount, 100% of the OID Default Amount) together with accrued interest
to the date fixed for redemption.

         5.       REPAYMENT AT THE HOLDER'S OPTION

         Except as otherwise may be provided on the face hereof, if one or more
Repayment Dates are specified on the face hereof, this Security will be
repayable in whole or in part in an amount equal to any Authorized Denomination
(provided that the remaining principal amount of any Security surrendered for
partial repayment shall at least equal an Authorized Denomination), on any such
Repayment Date, in each case at the option of the Holder and at the applicable
Repayment Price specified on the face hereof (expressed as a percentage of the
principal amount to be repaid), together with accrued interest to the applicable
Repayment Date (but interest installments due on or prior to such Repayment Date
will be payable to the Holder of this Security, or one or more Predecessor
Securities, of record at the close of business on the relevant record date as
provided in the Indenture). If this Security provides for more than one
Repayment Date and the Holder exercises its option to elect repayment, the
Holder shall be deemed to have elected repayment on the earliest Repayment Date
after all conditions to such exercise have been satisfied, and references herein
to the "applicable Repayment Date" shall mean such earliest Repayment Date.

         In order for the exercise of such option to be effective and this
Security to be repaid, the Company must receive at the applicable address of the
Paying Agent set forth below (or at such other place or places of which the
Company shall from time to time notify the

                  (Reverse of Security continued on next page)

                                      -13-

<PAGE>

Holder of this Security), on any Business Day not later than the 30th, and not
earlier than the 60th, calendar day prior to the applicable Repayment Date (or,
if either such calendar day is not a Business Day, the next succeeding Business
Day), either (i) this Security, with the form below entitled "Option to Elect
Repayment" duly completed and signed, or (ii) a telegram, telex, facsimile
transmission or letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc., a commercial bank or a trust
company in the United States of America setting forth (a) the name, address and
telephone number of the Holder of this Security, (b) the principal amount of
this Security and the amount of this Security to be repaid, (c) a statement that
the option to elect repayment is being exercised thereby and (d) a guarantee
stating that the Company will receive this Security, with the form below
entitled "Option to Elect Repayment" duly completed and signed, not later than
five Business Days after the date of such telegram, telex, facsimile
transmission or letter (provided that this Security and form duly completed and
signed are received by the Company by such fifth Business Day). Any such
election shall be irrevocable. The address to which such deliveries are to be
made is Bank One, NA, Attention: Securities Processing Division, 55 Water
Street, 1st Floor, Jeanette Park Entrance, New York, New York 10041 (or at such
other places as the Company or the Paying Agent shall notify the Holder of this
Security). All questions as to the validity, eligibility (including time of
receipt) and acceptance of any Security for repayment will be determined by the
Company, whose determination will be final and binding. Notwithstanding the
foregoing, (x) if this Security is a Global Security, the option of the Holder
to elect repayment may be exercised in accordance with the Applicable Procedures
of the Depositary for this Security at least 30 calendar days prior to the
applicable Repayment Date and (y) whether or not this Security is a Global
Security, the option of the Holder to elect repayment may be exercised in any
such manner as the Company may approve.

         6.       TRANSFER AND EXCHANGE

         As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this

                  (Reverse of Security continued on next page)

                                      -14-

<PAGE>

Security is registrable in the Security Register, upon surrender of this
Security for registration of transfer at the office or agency of the Company in
any place where the principal of and any premium and interest on this Security
are payable, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his or her attorney duly authorized in
writing, and thereupon one or more new Securities of this series and of like
tenor, of Authorized Denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.

         As provided in the Indenture and subject to certain limitations therein
set forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different
Authorized Denomination, as requested by the Holder surrendering the same.

         No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

         Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company nor
the Trustee nor any such agent shall be affected by notice to the contrary.

         If this Security is a Global Security, this Security shall be subject
to the provisions of the Indenture relating to Global Securities, including the
limitations in Section 305 thereof on transfers and exchanges of Global
Securities.

         7.       [RESERVED].

                  (Reverse of Security continued on next page)

                                      -15-

<PAGE>

         8.       REMEDIES.

         If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.

         As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee indemnity reasonably satisfactory
to it, and the Trustee shall not have received from the Holders of a majority in
principal amount of Securities of this series at the time Outstanding a
direction inconsistent with such request, and shall have failed to institute
any such proceeding, for 60 days after receipt of such notice, request and offer
of indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.

         No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.

                  9.       MODIFICATION AND WAIVER.

                  The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each

                  (Reverse of Security continued on next page)

                                      -16-

<PAGE>
series to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in principal amount of the
Securities at the time Outstanding of all series to be affected (considered
together as one class for this purpose). The Indenture also contains provisions
(i) permitting the Holders of a majority in principal amount of the Securities
at the time Outstanding of all series to be affected under the Indenture
(considered together as one class for this purpose), on behalf of the Holders of
all Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and (ii) permitting the Holders of a majority in
principal amount of the Securities at the time Outstanding of any series to be
affected under the Indenture (with each such series considered separately for
this purpose), on behalf of the Holders of all Securities of such series, to
waive certain past defaults under the Indenture and their consequences. Any
such consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.

         10.      GOVERNING LAW.

         THIS SECURITY AND THE INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                  (Reverse of Security continued on next page)

                                      -17-
<PAGE>

                                                   REGISTERED NO. FXR __________

                                                            CUSIP NO. __________

                                                 ORIGINAL ISSUE DATE: __________

                                  POPULAR, INC.
                           MEDIUM-TERM NOTE, SERIES 4

                            OPTION TO ELECT REPAYMENT

               TO BE COMPLETED ONLY IF THIS SECURITY IS REPAYABLE
                   AT THE OPTION OF THE HOLDER AND THE HOLDER
                          ELECTS TO EXERCISE SUCH RIGHT

         The undersigned hereby irrevocably requests and instructs the Company
to repay the Security referred to in this notice (or the portion thereof
specified below) at the applicable Repayment Price, together with interest to
the Repayment Date, all as provided for in such Security, to the undersigned,
whose name, address and telephone number are as follows:

--------------------------------------------------------------------------------
                     (please print name of the undersigned)

--------------------------------------------------------------------------------
                    (please print address of the undersigned)

--------------------------------------------------------------------------------
               (please print telephone number of the undersigned)

         If such Security provides for more than one Repayment Date, the
undersigned requests repayment on the earliest Repayment Date after the
requirements for exercising this option have been satisfied, and references in
this notice to the Repayment Date mean such earliest Repayment Date. Terms used
in this notice that are defined in such Security are used herein as defined
therein.

         For such Security to be repaid the Company must receive at the
applicable address of the Trustee set forth below or at such other place or
places of which the Company or the Trustee shall from time to time notify the
Holder of such Security, on any Business Day not later

                                      -18-

<PAGE>

than the 30th or earlier than the 60th calendar day prior to the Repayment Date
(or, if either such calendar day is not a Business Day, the next succeeding
Business Day), either (i) such Security, with this "Option to Elect Repayment"
form duly completed and signed, or (ii) a telegram, telex, facsimile
transmission or letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc., a commercial bank or a trust
company in the United States of America setting forth (a) the name, address and
telephone number of the Holder of such Security, (b) the principal amount of
such Security and the amount of such Security to be repaid, (c) a statement that
the option to elect repayment is being exercised thereby and (d) a guarantee
stating that such Security to be repaid with the form entitled "Option to Elect
Repayment" on the addendum to the Security duly completed and signed will be
received by the Company not later than five Business Days after the date of such
telegram, telex, facsimile transmission or letter (provided that such Security
and form duly completed and signed are received by the Company by such fifth
Business Day). The address to which such deliveries are to be made is:

              Bank One, NA
              Attention: Securities Processing Division
              55 Water Street, 1st Floor
              Jeanette Park Entrance
              New York, New York 10041

or at such other place as the Company or the Paying Agent shall notify the
Holder of such Security.

              If less than the entire principal amount of such Security is to be
repaid, specify the portion thereof (which shall equal any Authorized
Denomination) that the Holder elects to have repaid:

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

and specify the denomination or denominations (which shall equal any Authorized
Denomination) of the Security or Securities to be issued to the Holder in
respect of the portion of such Security not being repaid (in the absence of any
specification, one Security will be issued in respect of the portion not being
repaid):

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

                                      -19-

<PAGE>

Date: _______________               ______________________________
                                    Notice: The signature to this
                                    Option to Elect Repayment must
                                    correspond with the name of
                                    the Holder as written on the
                                    face  of such Security in
                                    every particular without
                                    alteration or enlargement or
                                    any other change whatsoever.

                                  ABBREVIATIONS

         The following abbreviations, when used in the inscription on the face
of this Security, shall be construed as though they were written out in full
according to applicable laws or regulations.

                  TEN COM - as tenants in common

                  TEN ENT - as tenants by the entireties

                  JT TEN - as joint tenants with the right of
                               survivorship and not as tenants
                               in common

                  UNIF GIFT MIN ACT - __________ Custodian _________
                                        (Cust)              (Minor)

                        under Uniform Gifts to Minors Act

                         ------------------------------
                                     (State)

                    Additional abbreviations may also be used
                          though not in the above list.

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

                                      -20-

<PAGE>

                                   ASSIGNMENT

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto

--------------------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

 -----------------------
/----------------------/

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

--------------------------------------------------------------------------------
                   (Please Print or Typewrite Name and Address
                     Including Postal Zip Code of Assignee)

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

the attached Security and all rights thereunder, and hereby
irrevocably constitutes and appoints _______________________

--------------------------------------------------------------------------------
to transfer said Security on the books of the Company, with full power of
substitution in the premises.
Dated:______________

Signature Guaranteed

-------------------------                            ---------------------------
NOTICE: Signature must be                            NOTICE:  The signature to
guaranteed.                                          this assignment must
                                                     correspond with the name of
                                                     the Holder as written upon
                                                     the face of the attached
                                                     Security in every
                                                     particular, without
                                                     alteration or enlargement
                                                     or any change whatever.

                                      -21-

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