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þ | No fee required. |
o | Fee computed on table below per Exchange ActRules 14a-6(i)(1) and0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange ActRule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
o | Fee paid previously with preliminary materials. |
o | Check box if any part of the fee is offset as provided by Exchange ActRule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
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P. Michael Ehlerman
Chairman of the Board
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Banco Santander, S.A. New York Branch 45 East 53rd Street New York, New York 10022 Attention: Investor Relations Telephone:(212) 350-3681 www.santander.com | Sovereign Bancorp, Inc. 1130 Berkshire Boulevard Wyomissing, Pennsylvania 19610 Attn: Investor Relations Telephone: 1-800-628-2673 | |
or | ||
Banco Santander, S.A. | ||
Ciudad Grupo Santander Avenida de Cantabria, s/n Edificio Pereda, 1a planta 28660 Boadilla del Monte Madrid, Spain Telephone: +34 91 259 6514 |
• | ‘‘$” and “U.S. dollar” each refer to the United States dollar; and | |
• | ‘‘€” and “euro” each refer to the euro, the single currency established for members of the European Economic and Monetary Union since January 1, 1999; |
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Annex A | ||||
Annex B | ||||
Annex C | ||||
Annex D |
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Q: | What matters will be considered at the special meeting? | |
A: | At the Sovereign special meeting, Sovereign common shareholders will be asked to vote in favor of approving and adopting the transaction agreement. | |
Q: | What is the required vote to approve and adopt the transaction agreement? | |
A: | Approval of the transaction agreement requires the affirmative vote of the holders of a majority of the votes cast at the special meeting. | |
Q: | What constitutes a quorum? What do I need to do now in order to vote? | |
A: | In accordance with Sovereign’s amended bylaws, shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast must be present in person or by proxy in order to hold the special meeting and conduct business. This is called a quorum. Shares of Sovereign common stock are counted as present at the special meeting if the holder of such shares (i) is present and votes in person at the special meeting or (ii) has properly submitted a proxy card by mail, telephone or Internet. Abstentions and broker “non-votes” will be counted as present for purposes of determining a quorum. | |
If you are a common shareholder of record as of the record date, you can give a proxy to be voted at the special meeting in any of the following ways: | ||
• over the telephone or electronically, using the Internet, by following the instructions on the proxy card; or | ||
• by completing, signing and mailing the proxy card. | ||
The telephone and Internet voting procedures have been set up for your convenience. We encourage you to save corporate expense by submitting your vote by telephone or on the Internet. The procedures have been designed to authenticate your identity, to allow you to give voting instructions, and to confirm that those instructions have been recorded properly. If you are a common shareholder of record and you would like to submit your proxy by telephone or on the Internet, please refer to the specific instructions provided on the proxy card. If you wish to submit your proxy by mail, please return your signed proxy card to us before the special meeting. | ||
Q: | How do I vote my shares if my shares are held in “street name”? | |
A: | You should contact your broker, bank or other nominee. Your broker, bank or other nominee can give you directions on how to instruct the broker, bank or other nominee to vote your shares. Your broker, bank or other nominee will not vote your shares unless the broker, bank or other nominee receives appropriate instructions from you. You should therefore provide your broker, bank or other nominee with instructions as to how to vote your shares. |
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Q: | If shares of Sovereign common stock are allocated to my account(s) under the Sovereign Bancorp, Inc. Retirement Plan, or the Retirement Plan, will I be allowed to vote the shares in connection with the transaction? | |
A: | Yes, you may vote the number of shares allocated to your account(s) under the Retirement Plan on the record date. You may vote by giving instructions to the plan trustee in accordance with the instructions accompanying the materials that the trustee will mail separately to plan participants. The trustee will vote your shares in accordance with your duly executed instructions if you meet the deadline for submitting your voting instructions to the trustee. This deadline may be earlier than the deadline generally applicable to Sovereign shareholders. If you do not properly or timely submit your directions to vote the shares allocated to your account(s) under the Retirement Plan, the trustee will vote your shares in the same proportion as the shares for which voting instructions have been properly and timely submitted by other plan participants. | |
Q: | Will employees be able to continue to purchase shares under the Employee Stock Purchase Plan, or ESPP? | |
A: | No, effective as of October 13, 2008, all purchases under the ESPP have ceased. | |
Q: | When and where is the Sovereign special meeting? |
A: | The Sovereign special meeting will take place on January 28, 2009 at 10:00 a.m. (New York City time) at Steiner Studios, 15 Washington Avenue, Brooklyn Navy Yard, Brooklyn, NY, 11205. |
Q: | How can I attend the special meeting? |
A: | Only shareholders who own Sovereign common stock as of the close of business on December 19, 2008, will be entitled to attend the special meeting. An admission ticket (or other proof of stock ownership) and some form of government-issued photo identification (such as a valid driver’s license or passport) will serve as verification of your ownership. |
If your shares of common stock are registered in your name and you received your proxy materials by mail, an admission ticket is attached to your proxy card. |
If your shares of common stock are held in a bank or brokerage account, contact your bank or broker to obtain a written legal proxy in order to vote your shares at the special meeting. If you do not obtain a legal proxy from your bank or broker, you will not be entitled to vote your shares, but you can still attend the special meeting if you bring a recent bank or brokerage statement showing that you owned shares of common stock on December 19, 2008. |
Q: | Can I vote my shares in person at the special meeting? | |
A: | If you are a common shareholder of record, you may vote your shares in person at the special meeting by completing a ballot at the special meeting. Even if you currently plan to attend the special meeting, we recommend that you also submit your proxy as described above so that your vote will be counted if you later decide not to, or are unable to, attend the special meeting. | |
If you are a street name holder, you may vote your shares in person at the special meeting only if you obtain a signed letter or other proxy from your broker, bank, or other nominee giving you the right to vote the shares at the special meeting. | ||
If you are a participant in the Retirement Plan, you may submit a proxy vote as described above, but you may not vote your Retirement Plan shares in person at the special meeting. | ||
Q: | How are votes counted? | |
A: | Assuming the presence of a quorum, the failure to submit a proxy card or the failure to vote in person at the special meeting, abstentions from voting, and broker “non-votes” will not have an effect on the proposal to approve and adopt the transaction agreement. |
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The rules of the New York Stock Exchange, or NYSE, allow banks, brokers or other nominees to vote shares held by them on behalf of their “street name” customers on matters the NYSE determines to be “routine” (such as the uncontested election of directors), even though the broker, bank or other nominee has not received instructions from its customer. A broker “non-vote” occurs when a broker, bank or other nominee does not vote the shares because it has not received voting instructions from its customer and it does not have discretion to vote shares of street name holders because the matter is not considered “routine” under the NYSE rules. The proposal with respect to approving and adopting the transaction agreement is not a “routine” matter, and therefore, a broker, bank or other nominee may not vote the shares of a street name holder in favor of such proposal if the broker, bank or other nominee does not receive instructions from such street name holder. | ||
Q: | What if I do not specify how I want my shares voted? | |
A: | If you submit a signed proxy card or submit your proxy by telephone or on the Internet and do not specify how you want to vote your shares, Sovereign will vote your shares “FOR” the proposal to approve and adopt the transaction agreement. | |
Q: | Will my vote be kept confidential? | |
A: | Yes. Sovereign has procedures to ensure that, regardless of whether shareholders vote by mail, telephone, on the Internet or in person, all proxies, ballots and voting tabulations that identify shareholders are kept permanently confidential, except as disclosure may be required by federal or state law or as expressly permitted by a shareholder. Sovereign also has the voting tabulations performed by IVS Associates, Inc., an independent third party. | |
Q: | Are there risks associated with the transaction that I should consider in deciding how to vote? |
A: | Yes. There are a number of risks related to the transaction, Santander and Sovereign that are discussed in this document and in other documents incorporated by reference in this document.Please read with particular care the detailed description of the risks associated with the transaction on pages 29 through 35 and in the Santander and Sovereign SEC filings referred to on pages 122. |
Q: | When do you currently expect to complete the transaction? | |
A: | In the first quarter of 2009. However, Santander and Sovereign cannot assure you when or if the transaction will occur. Santander and Sovereign must first obtain the required approvals of Sovereign shareholders and Santander shareholders and the necessary regulatory approvals. | |
Q: | What type of consideration can I receive in the transaction? | |
A: | As a part of the transaction, each share of Sovereign common stock will be converted into the right to receive 0.3206 Santander American Depositary Shares, referred to as “Santander ADSs.” The share consideration will be issued in the form of Santander ADSs, except for those shares of Sovereign common stock in respect of which a Sovereign shareholder elects to receive Santander ordinary shares (which would be exchanged at the same ratio as Santander ADSs). Santander has the right to decide in its discretion to invalidate elections to receive Santander ordinary shares instead of Santander ADSs in which case only Santander ADSs will be delivered to Sovereign common shareholders in the transaction. Each outstanding share of Sovereign Series C preferred stock, other than shares for which dissenters’ rights are perfected, will be converted into an identical share of Series C preferred stock of Sovereign, reincorporated as a Virginia corporation. | |
Q: | Should I send in my Sovereign common stock certificates with my proxy card? | |
A: | No. Please DO NOT send your Sovereign common stock certificates with your proxy card. You will be provided at a later date a form of election and instructions regarding surrender of your Sovereign common stock certificates. | |
Q: | What if I want to change my vote after I have delivered my proxy card? |
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A: | You may revoke your proxy and change your vote at any time before your proxy is voted at the special meeting. If you are a shareholder of record, you may revoke your proxy and change your vote by submitting a later-dated proxy by telephone, Internet or mail, or by voting in person at the special meeting. To request an additional proxy card, or if you have any questions about the meeting or how to vote or revoke your proxy, you should contact MacKenzie Partners, Inc. at1-800-322-2885. | |
If you hold your shares in street name, contact your broker or other nominee regarding how to instruct your broker or other nominee to revoke your proxy and change your vote and any deadlines for the receipt of these instructions. |
If you are a participant in the Retirement Plan, you may revoke your proxy and change your vote as described above, but only until 5:00 p.m. on January 22, 2009. |
Q: | How is Santander going to vote its shares of common stock at the special meeting? | |
A: | As of the record date, Santander owned 165,919,150 shares, or 24.99%, of Sovereign’s common stock. Under the terms of the transaction agreement, Santander will vote all of these shares “FOR” the proposal to approve and adopt the transaction agreement. | |
Q: | How is Relational going to vote its shares at the special meeting? |
A: | Relational Investors, LLC and its affiliates, or Relational, own and are entitled to vote 52,811,143 shares, or 7.95%, of Sovereign’s common stock as of the record date. Under the terms of the voting agreement between Santander and Relational, dated as of October 13, 2008, Relational and its affiliates will vote all of those shares “FOR” the proposal to approve and adopt the transaction agreement. The non-Santander directors who collectively are entitled to vote 54,038,119 shares or 8.14% of Sovereign’s common stock as of the record date also are required to vote “FOR” the proposal. |
Q: | Who pays for the cost of proxy preparation and solicitation? | |
A: | Sovereign will pay for the cost of proxy preparation and solicitation, including the reasonable charges and expenses of brokers, banks or other nominees for forwarding proxy materials to street name holders. | |
Sovereign has retained MacKenzie Partners, Inc. to assist Sovereign with soliciting shareholder proxies, and MacKenzie Partners, Inc. will receive customary fees plus reimbursement of expenses. In addition, Sovereign may solicit proxies by Internet and mail. Moreover, each of Sovereign’s and Santander’s directors, officers and regular employees may solicit proxies by telephone, facsimile or personally. These individuals will receive no additional compensation for their services other than their regular salaries or fees, if any. | ||
Q: | Whom can I call with questions about the shareholder meeting or the transaction? | |
A: | If you have questions about the transaction or the special meeting of shareholders, need additional copies of this document, have questions about the process for voting or need a replacement proxy card, you should contact: |
1-800-322-2885
Q: | Where can I find more information about the companies? |
A: | You can find more information about Santander and Sovereign from the various sources described under “Where You Can Find More Information” beginning on page 122. |
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Avenida de Cantabria, s/n
28660 Boadilla del Monte
Madrid, Spain
+34-91-259-6520
1500 Market Street
Philadelphia, Pennsylvania 19102
(267) 256-8601
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• | on October 10, 2008, the last full trading day prior to the announcement of the transaction, the implied value per share of Sovereign common stock of the share consideration was $3.92 (or, using the exchange ratio before it was adjusted to take into account the Santander rights offering, $3.57); | |
• | on October 13, 2008, the day of the announcement of the transaction, the implied value per share of Sovereign common stock of the share consideration was $4.04; and | |
• | on December 18, 2008, the latest practicable date prior to the date of this document, the implied value per share of Sovereign common stock of the share consideration was $3.09. |
• | on October 10, 2008, the implied value per share of Sovereign common stock of the share consideration was $4.18 (or, using the exchange ratio before it was adjusted to take into account the Santander rights offering, $3.81); | |
• | on October 13, 2008, the implied value per share of Sovereign common stock of the share consideration was $4.65; and | |
• | on December 18, 2008, the implied value per share of Sovereign common stock of the share consideration was $2.99. |
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• | the approval by the Santander shareholders of the capital increase of Santander necessary for effecting the transaction and the approval and adoption of the transaction agreement by Sovereign shareholders; | |
• | the other party’s representations and warranties in the transaction agreement being true and correct, subject to certain materiality and material adverse effect standards contained in the transaction agreement, and the performance by the other party in all material respects of its obligations under the transaction agreement; | |
• | the absence of any applicable law prohibiting or preventing the transaction; | |
• | certain regulatory approvals required to consummate the transactions contemplated by the transaction agreement having been obtained, and no such regulatory approval having resulted in the imposition of a requirement on Santander or Sovereign to take any action, or commit to take any action, or agree to any condition or restriction, that would reasonably be expected to have a material adverse effect (measured on a scale relative to Sovereign) on any of Sovereign, Santander or Sovereign Virginia; | |
• | as a condition to Santander’s obligation only, there not having occurred, since the date of the transaction agreement, any effect, change, circumstances, conditions or developments that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on Sovereign, excluding any effect resulting from certain specified factors, including changes in accounting principles, changes in laws, changes in political, economic or market conditions, the failure to meet earnings projects (but not the underlying causes), the impact of the transaction on relationships with customers |
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or employees, the public disclosure of the transaction agreement and the transaction, any outbreak of war or hostilities, actions or omissions taken with the prior written consent of the other party to the transaction agreement, adverse events related to the deterioration of the credit markets; provided that any such change or event shall only be considered to the extent such change or event does not have a materially disproportionate effect on the relevant party and its subsidiaries, taken as a whole, compared to other companies engaged in the same industry as such party and its subsidiaries; and |
• | no order having been issued or plan made or effected by any governmental authority that would result in the issuance of any Sovereign capital stock, voting securities or certain other types of securities to a governmental authority or would otherwise interfere with the ability of Santander to, control one hundred percent of the voting power of Sovereign and its subsidiaries and one hundred percent of Sovereign Virginia common stock following the effective time of the share exchange. |
• | there is a permanent legal prohibition to completing the transaction; | |
• | the transaction is not completed by June 30, 2009 (other than because of a breach of the transaction agreement caused by the party seeking termination); | |
• | the other party breaches the transaction agreement in a way that would entitle the party seeking to terminate the agreement not to consummate the transaction, subject to the right of the breaching party to cure the breach within 30 days following written notice (unless it is not possible due to the nature or timing for the breach for the breaching party to cure the breach); or | |
• | approval of Santander’s shareholders of the capital increase, or approval of Sovereign’s shareholders of the transaction agreement, is not obtained. |
• | Sovereign breaches its “non-solicitation” obligations. See “The Transaction Agreement — No Solicitation of Alternative Transactions”; |
• | Sovereign fails to make, withdraws or modifies in a manner adverse to Santander the recommendation by Sovereign’s board of directors that Sovereign’s shareholders adopt and approve the transaction agreement and the transactions contemplated thereby at a duly held meeting of such shareholders (or recommends an acquisition proposal made by a third party or takes any action or makes any statement inconsistent with such recommendation by Sovereign’s board of directors), such action by Sovereign an adverse recommendation change; |
• | Sovereign’s board of directors fails to confirm publicly its recommendation of the transaction agreement within five business days of a written request by Santander that it do so; or | |
• | Sovereign’s board of directors fails to include and maintain until the closing of the transactions its recommendation of the transactions to the Sovereign shareholders in this document. |
• | Sovereign makes an adverse recommendation change; | |
• | Sovereign’s board of directors fails to confirm publicly its recommendation of the transaction agreement within five business days of a written request by Santander that it do so; | |
• | Sovereign’s board of directors fails to include and maintain until the closing of the transactions its recommendation of the transactions to the Sovereign shareholders in this document; or |
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• | Sovereign breaches the transaction agreement in a way that would entitle Santander to terminate the agreement and not to consummate the transaction; and | |
• | in any such case prior to such termination, an acquisition proposal has been publicly announced or otherwise communicated to Sovereign’s board of directors or its shareholders, and within 12 months of the date of such termination, Sovereign or any of its subsidiaries enters into a definitive agreement with respect to, or consummates, an acquisition proposal; or | |
• | Sovereign intentionally breaches its non-solicitation provisions under Section 8.03 of the transaction agreement. |
• | to approve and adopt the transaction agreement; | |
• | to vote upon an adjournment of the Sovereign special meeting, if necessary, to solicit additional proxies; and | |
• | to transact any other business as may properly be brought before the Sovereign special meeting or any adjournment of the Sovereign special meeting. |
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CR1 | = | CR0 x | OS0 + X OS0 + Y |
CR1 | = | the exchange ratio adjusted to give effect to the rights offering; | ||||
CR0 | = | the original exchange ratio; | ||||
OS0 | = | the number of Santander ordinary shares outstanding immediately prior to the opening of business on the record date for the rights offering; |
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X | = | the total number of Santander ordinary shares issued pursuant to the rights granted to its existing ordinary shareholders; and | ||||
Y | = | the number of Santander ordinary shares equal to the aggregate price paid to exercise such rights divided by the simple average of the closing prices of the Santander ordinary shares in the Spanish Automated Quotation System over the 10 consecutive trading-day period ending on the record date for the rights offering, which was November 12, 2008. |
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Nine Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2008 | 2007 | |||||||||||||||||||
(In thousands of euros, except percentages and per share data) | ||||||||||||||||||||||||
Consolidated Income Statement Data | ||||||||||||||||||||||||
Interest and similar income | 46,312,706 | 37,239,602 | 33,827,323 | 17,915,307 | 39,304,927 | 33,768,050 | ||||||||||||||||||
Interest expense and similar charges | (31,359,417 | ) | (25,118,665 | ) | (23,477,278 | ) | (10,741,775 | ) | (26,705,454 | ) | (22,702,246 | ) | ||||||||||||
Interest income/(charges) | 14,953,289 | 12,120,937 | 10,350,045 | 7,173,532 | 12,599,473 | 11,065,804 | ||||||||||||||||||
Income from equity instruments | 422,618 | 412,714 | 335,576 | 388,876 | 402,385 | 364,481 | ||||||||||||||||||
Share of results of entities accounted for using the equity method | 441,457 | 426,921 | 619,157 | 448,220 | 800,407 | 248,428 | ||||||||||||||||||
Fee and commission income | 9,479,986 | 8,288,580 | 7,153,947 | 5,417,676 | 7,254,521 | 7,071,191 | ||||||||||||||||||
Fee and commission expense | (1,439,811 | ) | (1,264,385 | ) | (1,092,751 | ) | (866,923 | ) | (1,025,111 | ) | (1,049,617 | ) | ||||||||||||
Gains/losses on financial assets and liabilities (net) | 2,331,696 | 2,062,471 | 1,457,847 | 728,878 | 2,293,436 | 1,673,839 | ||||||||||||||||||
Exchange differences (net) | 650,734 | 96,635 | 76,513 | 361,465 | 30,088 | 466,420 | ||||||||||||||||||
Other operating income | 6,741,246 | 6,076,845 | 3,355,378 | 2,968,389 | 7,187,735 | 5,241,955 | ||||||||||||||||||
Other operating expenses | (6,503,829 | ) | (5,839,785 | ) | (3,058,935 | ) | (2,891,193 | ) | (7,025,093 | ) | (5,092,606 | ) |
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Nine Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2008 | 2007 | |||||||||||||||||||
(In thousands of euros, except percentages and per share data) | ||||||||||||||||||||||||
Gross operating income | 27,077,386 | 22,380,933 | 19,196,777 | 13,728,920 | 22,517,841 | 19,989,895 | ||||||||||||||||||
Administrative expenses | (11,018,329 | ) | (9,969,171 | ) | (9,364,408 | ) | (6,683,623 | ) | (8,438,408 | ) | (8,089,238 | ) | ||||||||||||
Personnel expenses | (6,551,201 | ) | (5,967,873 | ) | (5,611,308 | ) | (4,232,981 | ) | (5,024,217 | ) | (4,790,965 | ) | ||||||||||||
Other general expenses | (4,467,128 | ) | (4,001,298 | ) | (3,753,100 | ) | (2,450,642 | ) | (3,414,191 | ) | (3,298,273 | ) | ||||||||||||
Depreciation and amortization | (1,267,880 | ) | (1,146,547 | ) | (1,013,943 | ) | (830,621 | ) | (919,364 | ) | (955,904 | ) | ||||||||||||
Provisions (net) | (1,023,563 | ) | (1,079,337 | ) | (1,807,381 | ) | (1,103,287 | ) | (1,020,503 | ) | (490,118 | ) | ||||||||||||
Impairment losses on financial assets (net) | (3,502,604 | ) | (2,480,993 | ) | (1,636,923 | ) | (1,615,647 | ) | (4,005,067 | ) | (2,398,346 | ) | ||||||||||||
Profit/(loss) from operations | 10,265,010 | 7,704,885 | 5,374,122 | 3,495,742 | 8,134,499 | 8,056,289 | ||||||||||||||||||
Impairment losses on other assets (net) | (1,548,610 | ) | (20,781 | ) | (154,475 | ) | (81,402 | ) | (28,758 | ) | (24,047 | ) | ||||||||||||
Gains/(losses) on disposal of assets not classified as non-current assets held for sale | 1,815,867 | 352,120 | 1,379,554 | 200,649 | 75,160 | 53,464 | ||||||||||||||||||
Gains/(losses) on non-current assets held for sale not classified as discontinued operations | 642,974 | 959,162 | 1,061,696 | 740,735 | 721,964 | 606,460 | ||||||||||||||||||
Profit/loss before tax | 11,175,241 | 8,995,386 | 7,660,897 | 4,355,724 | 8,902,865 | 8,692,166 | ||||||||||||||||||
Income tax | (2,335,686 | ) | (2,254,598 | ) | (1,241,830 | ) | (491,922 | ) | (1,587,303 | ) | (1,807,653 | ) | ||||||||||||
Profit for the period from continuing operations | 8,839,555 | 6,740,788 | 6,419,067 | 3,863,802 | 7,315,562 | 6,884,513 | ||||||||||||||||||
Profit from discontinued operations (net) | 796,595 | 1,504,965 | 330,703 | 132,432 | 4,130 | 98,998 | ||||||||||||||||||
Consolidated profit for the period | 9,636,150 | 8,245,753 | 6,749,770 | 3,996,234 | 7,319,692 | 6,983,511 | ||||||||||||||||||
Profit for the period attributable to the parent | 9,060,258 | 7,595,947 | 6,220,104 | 3,605,870 | 6,935,196 | 6,571,803 | ||||||||||||||||||
Profit attributable to minority interests | 575,892 | 649,806 | 529,666 | 390,364 | 384,496 | 411,708 | ||||||||||||||||||
Per Share Information: | ||||||||||||||||||||||||
Average number of shares(thousands)(1) | 6,341,771 | 6,248,376 | 6,240,611 | 4,950,498 | 6,669,192 | 6,238,875 | ||||||||||||||||||
Basic earnings per share (in euros) | 1.4287 | 1.2157 | 0.9967 | 0.7284 | 1.0399 | 1.0534 | ||||||||||||||||||
Basic earnings per share continuing operation (in euros) | 1.3170 | 1.0127 | 0.9599 | 0.7142 | 1.0394 | 1.0412 | ||||||||||||||||||
Diluted earnings per share (in euros) | 1.4139 | 1.2091 | 0.9930 | 0.7271 | 1.0347 | 1.0363 | ||||||||||||||||||
Dividends paid (in euros)(2) | 0.65 | 0.52 | 0.42 | 0.33 | 0.14 | 0.12 | ||||||||||||||||||
Dividends paid (in US$)(2) | 0.96 | 0.65 | 0.49 | 0.39 | 0.19 | 0.17 |
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Nine Months Ended | ||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2008 | ||||||||||||||||
(In thousands of euros, except percentages and per share data) | ||||||||||||||||||||
Total assets | 912,914,971 | 833,872,715 | 809,106,914 | 664,486,300 | 953,034,782 | |||||||||||||||
Loans and advances to credit institutions(3) | 57,642,604 | 69,757,056 | 66,127,043 | 60,895,933 | 81,018,504 | |||||||||||||||
Loans and advances to customers (net)(3) | 571,098,513 | 527,035,514 | 439,109,692 | 390,078,751 | 577,247,918 | |||||||||||||||
Investment Securities(4) | 132,035,268 | 136,760,433 | 203,938,360 | 138,753,764 | 108,349,960 | |||||||||||||||
Investments: Associates | 15,689,127 | 5,006,109 | 3,031,482 | 3,747,564 | 15,319,190 | |||||||||||||||
Liabilities | ||||||||||||||||||||
Deposits from central banks and credit institutions(5) | 112,897,308 | 113,038,061 | 148,624,811 | 83,750,339 | 122,229,202 | |||||||||||||||
Customer deposits(5) | 355,406,519 | 330,947,770 | 305,631,794 | 285,710,616 | 372,308,037 | |||||||||||||||
Debt securities(5) | 233,286,688 | 203,742,817 | 148,829,300 | 113,838,603 | 236,881,499 | |||||||||||||||
Capitalization | ||||||||||||||||||||
Guaranteed Subordinated debt excluding preferred securities and preferred shares(6) | 16,742,134 | 11,186,480 | 8,973,699 | 9,369,939 | 16,499,189 | |||||||||||||||
Secured Subordinated debt | — | — | — | 508,039 | — | |||||||||||||||
Other Subordinated debt | 11,666,663 | 12,399,771 | 13,016,989 | 12,300,178 | 10,924,582 | |||||||||||||||
Preferred securities(6) | 7,261,382 | 6,836,570 | 6,772,768 | 5,292,016 | 7,151,193 | |||||||||||||||
Preferred shares(6) | 522,558 | 668,328 | 1,308,847 | 2,124,222 | 497,788 | |||||||||||||||
Minority interest (including net income of the period) | 2,358,269 | 2,220,743 | 2,848,223 | 2,085,316 | 2,527,345 | |||||||||||||||
Stockholders’ equity(7) | 55,199,882 | 44,851,559 | 39,778,476 | 34,414,942 | 53,799,586 | |||||||||||||||
Total capitalization | 93,750,888 | 78,163,451 | 72,699,002 | 66,094,652 | 91,399,683 | |||||||||||||||
Stockholders’ Equity per Share(7) | 8.70 | 7.18 | 6.37 | 6.95 | 8.07 | |||||||||||||||
Other managed funds | ||||||||||||||||||||
Mutual funds | 119,210,503 | 119,838,418 | 109,480,095 | 97,837,724 | 97,255,664 | |||||||||||||||
Pension funds | 11,952,437 | 29,450,103 | 28,619,183 | 21,678,522 | 11,172,484 | |||||||||||||||
Managed portfolio | 19,814,340 | 17,835,031 | 14,746,329 | 8,998,388 | 18,259,755 | |||||||||||||||
Savings -insurance policies | 9,008,968 | 6,384,994 | 15,145,607 | 16,843,995 | 11,260,193 | |||||||||||||||
Total other managed funds | 159,986,248 | 173,508,546 | 167,991,214 | 145,358,629 | 137,948,096 | |||||||||||||||
Consolidated Ratios | ||||||||||||||||||||
Profitability Ratios: | ||||||||||||||||||||
Return on average total assets (ROA) | 1.10 | % | 1.01 | % | 0.91 | % | 1.01 | % | 1.08 | % | ||||||||||
Return on average stockholders’ equity (ROE) | 21.91 | % | 21.39 | % | 19.86 | % | 19.74 | % | 18.12 | % | ||||||||||
Capital Ratio: | ||||||||||||||||||||
Average stockholders’ equity to average total assets | 4.71 | % | 4.36 | % | 4.24 | % | 4.62 | % | 5.63 | % | ||||||||||
Ratio of earnings to fixed charges(8) | ||||||||||||||||||||
Excluding interest on deposits | 1.64 | % | 1.74 | % | 1.74 | % | 1.81 | % | 1.64 | % | ||||||||||
Including interest on deposits | 1.34 | % | 1.34 | % | 1.30 | % | 1.37 | % | 1.32 | % |
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Nine Months Ended | ||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2008 | ||||||||||||||||
(In thousands of euros, except percentages and per share data) | ||||||||||||||||||||
Credit Quality Data | ||||||||||||||||||||
Allowances for impaired assets (excluding country risk)(9) | 9,302,230 | 8,626,937 | 7,902,225 | 6,813,354 | 11,035,213 | |||||||||||||||
Allowances for impaired assets (excluding country risk) as a percentage of total loans | 1.60 | % | 1.61 | % | 1.77 | % | 1.72 | % | 1.88 | % | ||||||||||
Impaired assets(10) | 6,178,655 | 4,607,547 | 4,341,500 | 4,114,691 | 10,476,368 | |||||||||||||||
Impaired assets as a percentage of total loans | 1.06 | % | 0.86 | % | 0.97 | % | 1.04 | % | 1.78 | % | ||||||||||
Allowances for impaired assets (excluding country risk) as a percentage of impaired assets | 150.55 | % | 187.23 | % | 182.02 | % | 165.59 | % | 105.33 | % | ||||||||||
Net loan charge-offs as a percentage of total loans | 0.46 | % | 0.34 | % | 0.23 | % | 0.16 | % | 0.43 | % |
(1) | Average number of shares have been calculated on the basis of the weighted average number of shares outstanding in the relevant period, net of treasury stock. | |
(2) | Dividends paid during the nine months ended September 30, 2008 and 2007 include the first interim dividend for 2008 and 2007, respectively, which were paid in August of the relevant year. | |
(3) | Equals the sum of the amounts included under the headings “Financial assets held for trading”, “Other financial assets at fair value through profit or loss” and “Loans and receivables” as stated in Santander’s interim consolidated financial statements. | |
(4) | Equals the amounts included as “Debt instruments” and “Other equity instruments” under the headings “Financial assets held for trading”, “Other financial assets at fair value through profit or loss”,“Available-for-sale financial assets” and “Loans and receivables” as stated in Santander’s interim consolidated financial statements. | |
(5) | Equals the sum of the amounts included under the headings “Financial liabilities held for trading”, “Other financial liabilities at fair value through profit or loss” and “Financial liabilities at amortized cost.” | |
(6) | In its consolidated financial statements preferred securities and preferred shares are included under “Financial liabilities at amortized cost” within “Subordinated liabilities.” | |
(7) | Equals the sum of the amounts included at the end of each period as “Own funds” and “Valuation adjustments” as stated in its consolidated financial statements. Santander has deducted the book value of treasury stock from stockholders’ equity. | |
(8) | For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of income from continuing operations before taxation and minority interests plus fixed charges and after deduction of the unremitted pre-tax income of companies accounted for by the equity method. Fixed charges consist of total interest expense, including or excluding interest on deposits as appropriate, and the proportion of rental expense deemed representative of the interest factor. Fixed charges include dividends and interest paid on preferred shares. |
(9) | The Bank of Spain requires Spanish banks to identify, among their loan loss provisions, the amount of such provisions corresponding to cover the transfer risk arising from outstanding loans to borrowers in countries falling into certain risk categories established by the Bank of Spain. The following tables set forth our country-risk outstandings and provisions. |
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EU – IFRS (*) | Nine Months Ended | |||||||||||||||||||||||
Year Ended December 31, | September 30 | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2008 | ||||||||||||||||||||
(In millions of euros) | ||||||||||||||||||||||||
Risk (gross) | 844.5 | 899.1 | 668.1 | 1,063.7 | 171.0 | |||||||||||||||||||
Provisions (country-risk) | 124.0 | 233.5 | 313.0 | 275.0 | 35.5 | |||||||||||||||||||
Risk (net) | 720.5 | 665.6 | 355.1 | 788.8 | 135.5 |
(*) | The EU-IFRS required to be applied under Bank of Spain’s Circular 4/2004 |
(10) | Impaired assets reflect Bank of Spain classifications. Such classifications differ from the classifications applied by U.S. banks in reporting loans as non-accrual, past due, restructured and potential problem loans. See “Item 4. Information on the Company — B. Business Overview — Financial Management and Equity Stakes — Classified Assets — Bank of Spain Classification Requirements” in its 2007Form 20-F. |
Year Ended December 31, | ||||||||||||||||
Previous Format: | 2007 | 2006 | 2005 | 2004 | ||||||||||||
(In thousands of euros) | ||||||||||||||||
Net interest income | 15,295,126 | 12,479,796 | 10,659,377 | 7,555,432 | ||||||||||||
Gross income | 27,068,469 | 22,333,170 | 19,075,556 | 13,789,277 | ||||||||||||
Net operating income | 14,815,693 | 11,217,740 | 8,764,677 | 6,332,277 | ||||||||||||
Profit before tax | 11,175,241 | 8,995,386 | 7,660,897 | 4,355,724 | ||||||||||||
Profit from continuing operation | 8,839,555 | 6,740,788 | 6,419,067 | 3,863,802 | ||||||||||||
Consolidated profit for the year | 9,636,150 | 8,245,753 | 6,749,770 | 3,996,234 | ||||||||||||
Profit attributed to the Group | 9,060,258 | 7,595,947 | 6,220,104 | 3,605,870 | ||||||||||||
Profit attributed to minority interest | 575,892 | 649,806 | 529,666 | 390,364 |
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Year Ended December 31, | ||||||||||||||||
New Format: | 2007 | 2006 | 2005 | 2004 | ||||||||||||
(In thousands of euros) | ||||||||||||||||
Interest income/(charges) | 14,953,289 | 12,120,937 | 10,350,045 | 7,173,532 | ||||||||||||
Gross operating income | 27,077,386 | 22,380,933 | 19,196,777 | 13,728,920 | ||||||||||||
Profit/(loss) from operations | 10,265,010 | 7,704,885 | 5,374,122 | 3,495,742 | ||||||||||||
Profit/(loss) before tax | 11,175,241 | 8,995,386 | 7,660,897 | 4,355,724 | ||||||||||||
Profit for the period from continuing operations | 8,839,555 | 6,740,788 | 6,419,067 | 3,863,802 | ||||||||||||
Consolidated profit for the period | 9,636,150 | 8,245,753 | 6,749,770 | 3,996,234 | ||||||||||||
a) Profit for the period attributable to the parent | 9,060,258 | 7,595,947 | 6,220,104 | 3,605,870 | ||||||||||||
b) Profit attributable to minority interests | 575,892 | 649,806 | 529,666 | 390,364 |
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Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | 2008 | 2007 | ||||||||||||||||||||||
(In thousands of dollars, except percentages and per share data) | ||||||||||||||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||||||||||
Total assets | 84,746,396 | 89,641,849 | 63,678,726 | 54,489,026 | 43,517,433 | 77,320,833 | 86,607,328 | |||||||||||||||||||||
Loans held for investment, net of allowance | 56,522,575 | 54,505,645 | 43,072,670 | 36,102,598 | 25,695,715 | 55,719,546 | 55,949,604 | |||||||||||||||||||||
Loans held for sale(1) | 547,760 | 7,611,921 | 311,578 | 137,478 | 137,154 | 236,478 | 569,013 | |||||||||||||||||||||
Investment securities | 15,142,392 | 14,877,640 | 12,557,328 | 11,546,877 | 12,618,971 | 9,554,002 | 15,289,850 | |||||||||||||||||||||
Deposits and other customer accounts | 49,915,905 | 52,384,554 | 37,977,706 | 32,555,518 | 27,344,008 | 43,123,174 | 50,098,048 | |||||||||||||||||||||
Borrowings and other debt obligations | 26,126,082 | 26,849,717 | 18,720,897 | 16,140,128 | 12,197,603 | 25,213,772 | 26,161,337 | |||||||||||||||||||||
Stockholders’ equity | 6,992,325 | 8,644,399 | 5,810,699 | 4,988,372 | 3,260,406 | 7,339,905 | 8,725,914 | |||||||||||||||||||||
Summary Statement of Operations | ||||||||||||||||||||||||||||
Total interest income | 4,656,256 | 4,326,404 | 2,962,587 | 2,255,917 | 1,951,888 | 3,037,811 | 3,516,916 | |||||||||||||||||||||
Total interest expense | 2,792,234 | 2,504,856 | 1,330,498 | 819,327 | 724,123 | 1,558,347 | 2,118,918 | |||||||||||||||||||||
Net interest income | 1,864,022 | 1,821,548 | 1,632,089 | 1,436,590 | 1,227,765 | 1,479,464 | 1,397,998 | |||||||||||||||||||||
Provision for credit losses(1) | 407,692 | 484,461 | 90,000 | 127,000 | 161,957 | 571,000 | 259,500 | |||||||||||||||||||||
Net interest income after provision for credit losses(5) | 1,456,330 | 1,337,087 | 1,542,089 | 1,309,590 | 1,065,808 | 908,464 | 1,138,498 | |||||||||||||||||||||
Total non-interest income (expense)(1) | 354,396 | 285,574 | 602,664 | 450,525 | 499,439 | (616,859 | ) | 380,422 | ||||||||||||||||||||
General and administrative expenses | 1,345,838 | 1,289,989 | 1,089,204 | 942,661 | 852,364 | 1,128,628 | 1,008,234 | |||||||||||||||||||||
Other expenses(1)(2) | 1,874,600 | 313,541 | 163,429 | 236,232 | 157,984 | 125,734 | 240,235 | |||||||||||||||||||||
(Loss)/Income before income taxes | (1,409,712 | ) | 19,131 | 892,120 | 581,222 | 554,899 | (962,757 | ) | 270,451 | |||||||||||||||||||
Income tax provision (benefit) | (60,450 | ) | (117,780 | ) | 215,960 | 127,670 | 153,048 | (208,740 | ) | 16,730 | ||||||||||||||||||
Net (Loss)/Income(3) | (1,349,262 | ) | 136,911 | 676,160 | 453,552 | 401,851 | (754,017 | ) | 253,721 | |||||||||||||||||||
Share Data | ||||||||||||||||||||||||||||
Common shares outstanding at end of period (in thousands)(3) | 481,404 | 473,755 | 358,018 | 345,775 | 293,111 | 663,817 | 480,436 | |||||||||||||||||||||
Basic (loss)/earnings per share(3) | (2.85 | ) | 0.30 | 1.77 | 1.34 | 1.38 | (1.33 | ) | 0.51 | |||||||||||||||||||
Diluted (loss)/earnings per share(3) | (2.85 | ) | 0.30 | 1.69 | 1.29 | 1.32 | (1.33 | ) | 0.51 | |||||||||||||||||||
Common share price at end of period | $ | 11.40 | $ | 25.39 | $ | 20.59 | $ | 21.48 | $ | 22.62 | $ | 3.95 | $ | 17.04 | ||||||||||||||
Dividends declared per common share | $ | .320 | $ | .300 | $ | .170 | $ | .115 | $ | .100 | $ | .000 | $ | .240 |
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Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | 2008 | 2007 | ||||||||||||||||||||||
(In thousands of dollars, except percentages and per share data) | ||||||||||||||||||||||||||||
Selected Financial Ratios | ||||||||||||||||||||||||||||
Book value per common share(4) | $ | 14.12 | $ | 17.83 | $ | 15.46 | $ | 13.74 | $ | 10.59 | $ | 10.76 | $ | 17.76 | ||||||||||||||
Common dividend payout ratio(5) | N/A | 92.11 | % | 9.02 | % | 8.21 | % | 6.99 | % | N/A | 42.22 | % | ||||||||||||||||
Return on average assets(6) | (1.62 | )% | 0.17 | % | 1.11 | % | .90 | % | .97 | % | (1.26 | )% | 0.41 | % | ||||||||||||||
Return on average equity(7) | (15.40 | )% | 1.82 | % | 11.92 | % | 10.74 | % | 13.41 | % | (13.32 | )% | 3.87 | % | ||||||||||||||
Average equity to average assets(8) | 10.52 | % | 9.46 | % | 9.34 | % | 8.36 | % | 7.24 | % | 9.49 | % | 10.48 | % |
(1) | Sovereign’s provision for credit losses in 2007 and 2008 was negatively impacted by the deterioration in the credit quality of its loan portfolios (particularly auto loans, commercial loans and its remaining correspondent home equity portfolios) which was impacted by the weakening of the U.S. economy as well as declines in residential real estate prices. Non-interest income for the nine-month period ended September 30, 2008 included an other-than-temporary impairment charge of $575 million on Sovereign’s FNMA and FHLMC preferred stock portfolio and a loss of $602 million on the sale of its entire portfolio of collateralized debt obligations. Non-interest income for 2007 includes a pretax other-than-temporary impairment charge of $180.5 million on FNMA and FHLMC preferred stock. Non-interest income also included charges of $46.9 million within capital markets revenue related to losses on repurchase agreements and other financing agreements that Sovereign provided to a number of mortgage companies who declared bankruptcy and/or defaulted on their agreements. In connection with a strategic decision made in the fourth quarter of 2006, management decided to take several steps to improve the profitability and capital position of Sovereign. Sovereign decided to sell certain loans including $2.9 billion of low yielding residential real estate and $4.3 billion of correspondent home equity loans whose credit quality had deteriorated significantly in 2006. The proceeds from these sales were utilized to reduce FHLB borrowings and brokered certificate of deposits. In 2006, Sovereign recorded charges of $296 million through the provision for credit losses related to the correspondent home equity loan sale and recorded a $28.2 million reduction in mortgage banking revenues as a result of re-classifying these loans to held for sale at December 31, 2006 and carrying the loans at their market value which was less than cost. In the first quarter of 2007, Sovereign recorded an additional charge of $119.9 million on its correspondent home equity loan portfolio. Also in the fourth quarter of 2006, several members of executive management resigned from Sovereign and approximately 360 employees were notified that their positions were being eliminated. In 2006, Sovereign recorded severance charges of $63.9 million related to these events which was recorded in other expenses. Finally, Sovereign sold approximately $1.5 billion of low yielding investment securities in connection with the restructuring plan. The proceeds from this sale were reinvested in higher yielding securities as they were needed for collateral on certain of Sovereign debt and deposit obligations. However, in 2006, Sovereign recorded a pre-tax loss of $43 million in connection with this sale which was recorded in non-interest income. Sovereign also recorded investment securities charges of $305.8 million during the second quarter of 2006 which was recorded in non-interest income. See Footnotes 6, 7 and 28 in Sovereign’s 2007Form 10-K for further discussion. | |
(2) | 2007 results include a $1.58 billion goodwill impairment charge related to Sovereign’s Metro New York and Shared Services Consumer reporting units. See Footnote 4 in Sovereign’s 2007Form 10-K for further discussion. | |
(3) | Net income includes after-tax investment security impairment charges and losses of $966.8 million ($1.68 per share) for the nine-month period ended September 30, 2008, after-tax goodwill and investment security impairment charges, merger-related charges, restructuring charges, debt extinguishment charges or other charges of $1.9 billion ($3.92 per share) in 2007, $538 million ($1.24 per share) in 2006, $15 million ($0.04 per diluted share) in 2005, $98 million ($0.27 per diluted share) in 2004 and $19 million ($0.06 per diluted share) in 2003. |
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(4) | Book value per share is calculated using stockholders’ equity divided by common shares outstanding at end of such period. | |
(5) | Common dividend payout ratio is calculated by dividing total common dividends paid by net income for the period. The ratio for 2007 is not applicable due to the net loss recorded during this time period. The ratio for the nine months of 2008 is not applicable as no common dividends were paid, as well as, due to the net loss recorded during this period. | |
(6) | Return on average assets is calculated by dividing annualized net income by the average balance of total assets for the period. | |
(7) | Return on average equity is calculated by dividing annualized net income by the average balance of stockholders’ equity for the period. | |
(8) | Average equity to average assets is calculated by dividing the average balance of stockholders’ equity for the period by the average balance of total assets for the period. |
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• | Based upon the published unaudited interim results of Santander and Sovereign for the six months ended June 30, 2008 and the published audited financial statements of Santander and Sovereign for the year ended December 31, 2007, and prepared in accordance with U.S. GAAP, after giving effect to the offer; | |
• | The pro forma financial information assumes that the transaction had become effective on January 1, 2007; and | |
• | The pro forma financial information reflects appropriate adjustments based solely on publicly available information, including an adjustment to eliminate the equity method investee of Sovereign from Santander’s financial statements, as Sovereign is accounted for in those financial statements by the equity method. |
Year Ended | Six-Months Ended | |||||||
December 31, 2007 | June 30, 2008 | |||||||
(under U.S. GAAP) | ||||||||
Millions of euros | ||||||||
Pro Forma Condensed Combined Income Statement | ||||||||
Interest income/(charges) | 16,304 | 9,120 | ||||||
Gross operating income | 28,642 | 15,939 | ||||||
Profit/(loss) from operations | 10,559 | 6,282 | ||||||
Profit/(loss) before tax | 10,343 | 6,241 | ||||||
Profit for the period from continuing operations | 8,007 | 5,132 | ||||||
Consolidated profit for the period | 8,847 | 5,102 | ||||||
Profit attributable to minority interests | 576 | 262 | ||||||
Profit for the period attributable to the parent | 8,272 | 4,840 | ||||||
Adjustments to U.S. GAAP | (1,763 | ) | 153 | |||||
Profit for the period attributable to the parent (U.S. GAAP) | 6,508 | 4,992 |
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Year Ended | Year Ended | Six-Months Ended | Six-Months Ended | |||||||||||||
December 31, 2007 | December 31, 2007 | June 30, 2008 | June 30, 2008 | |||||||||||||
(Under EU-IFRS*) | (Under U.S. GAAP) | (Under EU-IFRS*) | (Under U.S. GAAP) | |||||||||||||
Santander — Historical | ||||||||||||||||
Historical per Santander share(1): | ||||||||||||||||
Basic earnings(2) | € | 1.43 | € | 1.15 | € | 0.71 | € | 0.73 | ||||||||
Diluted earnings(2) | € | 1.41 | € | 1.14 | € | 0.71 | € | 0.73 | ||||||||
Dividends per Santander share (in U.S. dollars)(3) | $ | 0.96 | $ | 0.96 | $ | 0.21 | $ | 0.21 | ||||||||
Book value(4) | € | 0.50 | € | 0.50 | € | 0.50 | € | 0.50 | ||||||||
Pro Forma Combined | ||||||||||||||||
Pro forma per combined company share: | ||||||||||||||||
Basic earnings(5)(6) | N/A | € | 0.95 | N/A | € | 0.69 | ||||||||||
Diluted earnings(5)(6) | N/A | € | 0.94 | N/A | € | 0.69 | ||||||||||
Dividends per share (in U.S.dollars)(6)(7) | N/A | $ | 0.91 | N/A | $ | 0.19 | ||||||||||
Book value(4)(6) | N/A | € | 1.16 | N/A | € | 1.19 | ||||||||||
Sovereign — Historical | ||||||||||||||||
Historical per share of Sovereign common stock (in U.S. dollars): | ||||||||||||||||
Basic earnings/(losses) | N/A | $ | (2.85 | ) | N/A | $ | 0.42 | |||||||||
Diluted earnings/(losses) | N/A | $ | (2.85 | ) | N/A | $ | 0.42 | |||||||||
Cash dividends declared | N/A | $ | 0.32 | N/A | $ | — | ||||||||||
Book value(4) | N/A | $ | 14.12 | N/A | $ | 12.13 |
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Year Ended | Year Ended | Six-Months Ended | Six-Months Ended | |||||||||||||
December 31, 2007 | December 31, 2007 | June 30, 2008 | June 30, 2008 | |||||||||||||
(Under EU-IFRS*) | (Under U.S. GAAP) | (Under EU-IFRS*) | (Under U.S. GAAP) | |||||||||||||
Pro Forma Sovereign Equivalents(8) | ||||||||||||||||
Pro forma per share of Sovereign common stock share: | ||||||||||||||||
Basic earnings(5)(6)(7) | N/A | $ | 0.42 | N/A | $ | 0.34 | ||||||||||
Diluted earnings(5)(6)(7) | N/A | $ | 0.42 | N/A | $ | 0.34 | ||||||||||
Dividends per share (in U.S. dollars) | N/A | $ | 0.29 | N/A | $ | 0.06 | ||||||||||
Book value(4)(6)(7) | N/A | $ | 0.51 | N/A | $ | 0.59 |
* | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. | |
(1) | A Santander share refers to one Santander ordinary share or one Santander ADS, which represents the right to receive one Santander ordinary share. | |
(2) | In the case of the information under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 provided above, the terms “Basic Earnings” and “Diluted Earnings” refer to income from continuing operations attributed to the group. | |
(3) | Dividends per Santander share are translated into U.S. dollars at an average exchange rate for each period, calculated based on the average of the noon buying rates for the euro from the Federal Reserve Bank of New York on the last date of each month during the relevant period. | |
(4) | At the end of the reported period. | |
(5) | In the case of the information provided above, the terms “Basic Earnings” and “Diluted Earnings” refer to income from continuing operations of the combined company. | |
(6) | Calculated on the basis of the pro forma weighted average number of shares outstanding over the period. | |
(7) | Translated into U.S. dollars at an average exchange rate for each period, calculated based on the average of the noon buying rates for the euro from the Federal Reserve Bank of New York on the last date of each month during the relevant period ($1.3797=€1.00 as of December 31, 2007 and $1.54515=€1.00 as of June 30, 2008). | |
(8) | Sovereign equivalent pro forma combined share amounts are calculated by multiplying the pro forma combined per share amounts by the exchange ratio of 0.3206. |
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Santander | ||||||||||||||||
Ordinary Shares | ADSs | |||||||||||||||
High | Low | High | Low | |||||||||||||
(Euros) | (U.S. dollars) | |||||||||||||||
Fiscal year ended December 31, 2008 | ||||||||||||||||
First Quarter | 14.59 | 11.17 | 21.54 | 16.52 | ||||||||||||
Second Quarter | 14.22 | 11.67 | 22.24 | 18.19 | ||||||||||||
Third Quarter | 12.48 | 9.95 | 19.25 | 13.91 | ||||||||||||
Fourth Quarter (through December 18, 2008) | 11.69 | 5.11 | 16.44 | 6.06 | ||||||||||||
Last six months | ||||||||||||||||
June | 13.09 | 11.67 | 20.39 | 18.19 | ||||||||||||
July | 12.48 | 10.96 | 19.25 | 17.22 | ||||||||||||
August | 12.46 | 11.27 | 19.25 | 16.56 | ||||||||||||
September | 11.91 | 9.95 | 17.26 | 13.91 | ||||||||||||
October | 11.69 | 6.70 | 16.44 | 8.53 | ||||||||||||
November | 8.65 | 5.11 | 11.32 | 6.06 | ||||||||||||
December (through December 18, 2008) | 6.83 | 6.00 | 9.73 | 7.48 |
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Per Santander Share (euros) | ||||||||||||||||||||
Fourth | ||||||||||||||||||||
First | Second | Third | Interim/ | |||||||||||||||||
Year | Interim | Interim | Interim | Final | Total | |||||||||||||||
2006 | 0.106904 | 0.106904 | 0.106904 | 0.199913 | 0.520625 | |||||||||||||||
2007 | 0.12294 | 0.12294 | 0.12294 | 0.281961 | 0.650781 | |||||||||||||||
2008 (through second interim dividend) | 0.135234 | 0.135234 |
Sovereign Common Stock | ||||||||
High | Low | |||||||
(U.S. dollars) | ||||||||
Fiscal Year ended December 31, 2008 | ||||||||
First Quarter | 13.26 | 9.07 | ||||||
Second Quarter | 10.10 | 6.48 | ||||||
Third Quarter | 10.72 | 2.20 | ||||||
Fourth Quarter (through December 18, 2008) | 5.84 | 1.63 | ||||||
Last six months | ||||||||
June | 9.54 | 7.19 | ||||||
July | 10.00 | 5.64 | ||||||
August | 10.72 | 7.76 | ||||||
September | 10.23 | 2.20 | ||||||
October | 6.50 | 2.02 | ||||||
November | 3.06 | 1.63 | ||||||
December (through December 18, 2008) | 3.06 | 2.11 |
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Per Share of Sovereign Common Stock (U.S. Dollars) | ||||||||||||||||||||
First | Second | Third | Fourth | |||||||||||||||||
Year | Quarter | Quarter | Quarter | Quarter | Total | |||||||||||||||
2006 | 0.060 | 0.080 | 0.080 | 0.080 | 0.30 | |||||||||||||||
2007 | 0.080 | 0.080 | 0.080 | 0.080 | 0.32 | |||||||||||||||
2008 (through third quarter) | 0 | 0 | 0 |
Equivalent per Share Value of Sovereign | ||||||||||||||||||||||||||||
Common Stock Exchanged for: | ||||||||||||||||||||||||||||
Santander Ordinary Shares | Santander | |||||||||||||||||||||||||||
Exchange | Santander | Ordinary | Santander | |||||||||||||||||||||||||
Date | (Euros) | Rate ($/ €) | (U.S. Dollars) | ADSs | Sovereign | Shares | ADSs | |||||||||||||||||||||
October 10, 2008 | € | 9.07 | 1.3471 | $ | 12.2181 | $ | 13.03 | $ | 3.81 | $ | 3.9171 | $ | 4.1774 | |||||||||||||||
October 13, 2008 | € | 10.19 | 1.3471 | $ | 13.7269 | $ | 14.50 | $ | 3.68 | $ | 4.4008 | $ | 4.6487 | |||||||||||||||
December 18, 2008 | € | 6.73 | 1.4302 | $ | 9.6252 | $ | 9.32 | $ | 2.84 | $ | 3.0859 | $ | 2.99 |
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Period End | Average Rate | |||||||
Annual Data (Year Ended December 31,) | ($) | ($)(1) | ||||||
2003 | 1.2597 | 1.1411 | ||||||
2004 | 1.3538 | 1.2478 | ||||||
2005 | 1.1842 | 1.2449 | ||||||
2006 | 1.3197 | 1.2661 | ||||||
2007 | 1.4603 | 1.3797 |
Period End | Average Rate | |||||||
Interim Data (Nine Months Ended September 30,) | ($) | ($)(1) | ||||||
2008 | 1.4081 | 1.5228 |
(1) | The average rates for the interim and annual periods were calculated by taking the simple average of the noon buying rates for the euro on the last day of each month during the relevant period. |
High | Low | |||||||
Recent Monthly Data | ($) | ($) | ||||||
June 2008 | 1.5749 | 1.5368 | ||||||
July 2008 | 1.5923 | 1.5559 | ||||||
August 2008 | 1.5569 | 1.4660 | ||||||
September 2008 | 1.4737 | 1.3939 | ||||||
October 2008 | 1.4058 | 1.2446 | ||||||
November 2008 | 1.3039 | 1.2525 | ||||||
December 2008 (through December 18, 2008) | 1.4358 | 1.2634 |
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• | over the telephone or electronically, using the Internet, by following the instructions on the proxy card; or | |
• | by completing, signing and mailing the proxy card. |
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• | considerably expanding the exclusions from the definition of “Company Material Adverse Effect”, thereby limiting the conditionality of the transaction agreement from Sovereign’s perspective; |
• | qualifying many of Sovereign’s representations and warranties in the transaction agreement by “materiality” and “Company Material Adverse Effect” thresholds and “knowledge” qualifiers, thereby decreasing the likelihood of circumstances under which Santander would be permitted to fail to consummate the transaction in the event such representations and warranties are inaccurate; and |
• | eliminating certain events, and adding additional conditions to certain other events, giving rise to the obligation of Sovereign to pay Santander a termination fee. |
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• | The Special Committee unanimously recommended to the Sovereign board of directors that the Sovereign board of directors approve and adopt the transaction agreement; |
• | The terms of the transaction agreement pursuant to which Sovereign shareholders will have the right to receive 0.2924 of a Santander ADS, per share as consideration (which has been adjusted to 0.3206 as described in “Recent Developments — Santander Rights Offering.”), which, based on the closing price of the ADSs on the last trading day prior to the execution of the transaction agreement was an implied value of $3.81 per share; |
• | The written opinion of Barclays that, based upon and subject to the factors and assumptions stated therein, from a financial point of view, the exchange ratio to be offered to Sovereign’s shareholders was fair to such shareholders (other than Santander or its affiliates, as to which Barclays expressed no opinion) under the circumstances applicable to Sovereign as of the date thereof; |
• | That while a number of analyses performed by Barclays produced valuation ranges that exceeded the implied value of the Santander transaction, none of these took into account the various risks facing Sovereign as a result of the financial market disruptions and other recent events described under the headings “The Transaction — Opinion of Barclays, Financial Advisor to Sovereign” and the heading “— Sovereign Situational Analysis” thereunder; |
• | That (i) Sovereign experienced intermittent but significant deposit outflows that had reduced its cash available to fund its future operations, (ii) in light of volatile market conditions and recent experiences of Sovereign’s industry peers, there was a perceived significant risk that such deposit outflows could recur and intensify at any time, and (iii) there was substantial uncertainty as to whether the collateral available to obtain loans from the Federal Home Loan Bank and the Federal Reserve discount window would have continued to be sufficient to meet Sovereign’s future liquidity needs; | |
• | That Sovereign’s board of directors believed that the OTS was supportive of the transaction; |
• | The recent industry precedent transactions that demonstrate that shareholders may realize little or no value in the event that the regulatory agencies determine to force a supervised transaction (even though the OTS had not provided any formal indication that a regulatory action, including a supervised transaction, was imminent); |
• | The terms of the Investment Agreement with Santander, which, among other things, (i) prohibit, until June 1, 2009, Sovereign from soliciting, initiating or taking any action to facilitate or encourage the submission of an acquisition proposal from a third party other than Santander, (ii) restrict Sovereign’s right to respond to unsolicited acquisition proposals from third parties other than Santander, including, until June 1, 2009, a prohibition of the right to negotiate with third parties with respect to any offer that is less than, or enter into an acquisition agreement with any such third party unless the acquisition price is at least, $38.10 per share, and (iii) include “first negotiation” right and “last look” matching rights for Santander and timing and procedural considerations during the entire term of the Investment Agreement that make it more difficult for a third party other than Santander to acquire Sovereign and thus may make such third parties reluctant to submit acquisition proposals for Sovereign; |
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• | The belief that a transaction with Santander will result in Sovereign becoming part of a significantly larger and more diversified financial institution that is both better equipped to respond to economic and industry developments and better positioned to develop and build on Sovereign’s market share in its footprint; | |
• | The benefits and social and economic effects of the transaction on other constituencies, which are believed to include: |
• | The effects on Sovereign’s depositors, which will benefit from the stability of the combined company; | |
• | The effects on customers and suppliers and the communities in which Sovereign operates, which Sovereign’s board of directors believes will be advanced by combining Sovereign and Santander; | |
• | The effects on Sovereign’s employees, in particular, certain provisions of the transaction agreement which provide certain assurances and protections for employees up to and for a period following the closing of the transaction; | |
• | That, since Santander is a new entrant into retail and commercial banking in the United States, a transaction with Santander is not as likely to result in the closing of branches, the loss of jobs or other adverse consequences for these constituencies that would be likely to occur in connection with a combination between Sovereign and a competitor already operating in Sovereign’s markets; and | |
• | The effects on Sovereign’s creditors, which the Sovereign board of directors generally believed would be advanced by Sovereign becoming part of a larger, financially strong organization. |
• | Sovereign’s current financial condition and recent results of operations, including: |
• | That Sovereign’s board of directors anticipated that the increased level of Sovereign’s provision for credit losses recorded in the third quarter of 2008 as a proportion to total loans was likely to continue; | |
• | The impact on Sovereign of the downgrade in Sovereign’s debt ratings announced by Moody’s on September 30, 2008; and | |
• | The estimated $980 million loss for Sovereign’s third fiscal quarter of 2008 and concern regarding the reaction of the press, customers, rating agencies, retail investors, regulators and other constituencies to that loss, notwithstanding that the items leading to the aggregate loss had previously been disclosed in a press release. | |
• | That, as of the third quarter of 2008, Sovereign’s Tier I capital, after giving effect to the capital raised earlier in May 2008, had been reduced by the losses described above; |
• | The current environment in the financial services industry, including: |
• | the unprecedented dislocations in the world financial market which have resulted in the failure a number of financial institutions and the government supervised sale or conservatorship of others, often under circumstances that delivered little or no value to shareholders and failed to protect other important constituencies; | |
• | that runs on deposits and the resulting failure of major institutions, including Washington Mutual Bank, which before its failure was the only savings and loan institution larger than Sovereign, have occurred in a matter of days and resulted in the inability of management and the board to control the outcome of the situation in the best interests of security holders (including debt and preferred holders), depositors, customers, employees and other constituencies; | |
• | the extreme degree of volatility in the financial markets; and | |
• | the current lack of liquidity, including, as a result of the absence of a functioning inter-bank lending market, a global freeze on most lending and the lack of investor interest in financial institutions |
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resulting from the substantial losses suffered by investors on the public and private investments they made in financial institutions earlier in 2008. |
• | The sharp decline in Sovereign’s stock price, especially on September 29, 2008, which, based on market information, Sovereign management believed was attributable in part to the initial failure of the U.S. House of Representatives to pass the TARP and the unusual selling pressure from a small number of large institutional holders; | |
• | That Sovereign, as a result of general market conditions and matters specific to Sovereign’s condition (financial and otherwise), was having difficulty accessing the capital markets, and that this difficulty was expected to continue for the foreseeable future; | |
• | That neither the Federal Reserve nor the OTS had offered any financial assistance to Sovereign on a stand-alone basis other than the Federal Home Loan Bank and Federal Reserve borrowings referred immediately above, and in Sovereign’s management’s and legal counsels’ belief, such financial assistance was not likely to be available in the future; | |
• | Uncertainty expressed by Santander as to its willingness to participate in a public capital transaction in view of the losses that it had suffered in connection with its participation in Sovereign’s May 2008 capital increase transaction and in view of the fact that as of the end of the third quarter of 2008, Sovereign would have lost over 50% of the approximately $1.4 billion of Tier I capital raised in May 2008 as a result of the write offs relating to Fannie Mae, Freddie Mac and CDO investments; | |
• | That the timing, terms, implementation and applicability to Sovereign of the TARP program was unclear; | |
• | Trends toward consolidation in the industry which may make it increasingly difficult for Sovereign to compete successfully on a stand alone basis; | |
• | That the transaction agreement and the terms of the transaction were negotiated by members of the Special Committee, that the Santander directors were not present at, and did not take part in, any of the meetings of the Special Committee or the Sovereign board of directors at which Sovereign’s strategic options or the Santander transaction were discussed, that all of Sovereign’s non-Santander directors are independent directors and that all eight of these independent directors approved the transaction and the transaction agreement. | |
• | The terms of the final transaction agreement, which, among other things: |
• | permits Sovereign’s board of directors to respond to unsolicited offers and to provide information to other bidders in the event that the Sovereign board of directors (excluding the Santander directors) determines that an alternative proposal constitutes or is reasonably likely to constitute a proposal superior to the Santander proposal and permits the Sovereign board of directors (excluding the Santander directors) to withdraw or change its recommendation, in either case if Sovereign’s board of directors determines in good faith after consultation with outside legal counsel that such action is required by its fiduciary duties under Pennsylvania law (which rights were considered in conjunction with the fact that the Sovereign board of directors may not terminate the transaction agreement to pursue an alternative transaction in light of the fact that the Investment Agreement currently prohibits Sovereign from, among other things, entering into an agreement with a third party at a price of less than $38.10 per share and provides Santander with certain “first negotiation”, “last look” and “first look” rights); | |
• | provides for reasonable certainty of closing as a result of limitations on the nature of a material adverse effect that would give Santander a right not to complete the transaction; and | |
• | provides that Sovereign would be required to pay Santander a termination fee of $95 million if the transaction agreement is terminated under certain circumstances; but that, other than in circumstances where the transaction agreement is terminated by Santander because Sovereign intentionally breached its “non-solicitation” obligations, no termination fee is payable to Santander upon termination of the |
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transaction agreement unless (i) an acquisition proposal meeting certain criteria is received from a third party or otherwise made public, and (ii) within twelve months of the date of such termination, Sovereign or any of its subsidiaries enters into a definitive agreement with respect to, or consummates, an acquisition proposal meeting certain criteria with a third party. |
• | That the transaction agreement would be submitted to a vote of the Sovereign shareholders; | |
• | That Relational Investors, LLC and certain affiliated shareholders and the non-Santander directors (in their capacity as shareholders) will vote for the transaction in accordance with their respective voting agreements; | |
• | That the transaction agreement provides for a fixed exchange ratio, which means that the value of the consideration received by Sovereign shareholders will vary based on the prevailing market price for the Santander ADSs; | |
• | That the transaction will be taxable to Sovereign shareholders, including the fact that many shareholders are likely to have a tax basis that will result in the recognition of a tax loss; | |
• | The restrictions on the conduct of Sovereign’s business during the period between signing of the transaction agreement and the completion of the transaction or the termination of the transaction agreement and management’s view that these restrictions were not expected to present significant difficulties; | |
• | The potential risk of diverting management focus and resources from other strategic opportunities and from operational matters while working to implement the transaction and management’s view that accomplishing the implementation and continuing to operate the business is manageable; | |
• | That some of Sovereign’s directors and executive officers have other interests in the transaction that are in addition to their interests as Sovereign shareholders, including as a result of employment and compensation arrangements with Sovereign and the manner in which they would be affected by the transaction. See “— Interests of Sovereign’s Executive Officers and Directors in the Transaction”; | |
• | The risks in the current environment of implementing management’s business plan to provide growth opportunities; | |
• | That the transaction consideration does not reflect a premium over the closing sales prices of Sovereign common stock on October 10, 2008, the last trading day before the public announcement of the proposed transaction, and October 13, 2008, the day of the public announcement of the proposed transaction; | |
• | That Santander, despite multiple efforts, refused to increase its original proposal with respect to the transaction consideration; | |
• | The risk that the transaction will not be consummated. |
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• | As a result of general market conditions and matters specific to Sovereign’s condition (financial and otherwise), Sovereign was having difficulty accessing the capital markets, and this difficulty was expected to continue for the foreseeable future. | |
• | Sovereign had recently experienced intermittent but significant deposit outflows that reduced its cash available to fund its future operations. Sovereign had concluded that, in light of volatile market conditions and recent experiences of Sovereign’s industry peers, there was a significant risk that such deposit outflows could recur and intensify at any time. There was substantial uncertainty as to whether the collateral available to obtain loans from the Federal Home Loan Bank and the Federal Reserve discount window would continue to be sufficient to meet Sovereign’s future liquidity needs. | |
• | Neither the Federal Reserve nor the OTS had offered any financial assistance to Sovereign on a stand-alone basis other than the Federal Home Loan Bank and Federal Reserve borrowings referred to above, and Sovereign did not expect that any such financial assistance, including any equity investment by any bank regulatory authority, would be available in the future. |
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• | Royal Bank of Scotland | |
• | Deutsche Bank | |
• | Barclays | |
• | BNP Paribas | |
• | HSBC | |
• | BBVA | |
• | Lloyds |
• | the return on average assets; | |
• | the return on average equity; | |
• | the ratio of fee income to operating revenue; | |
• | net interest margin (defined as annualized net interest income as a percentage of average earning assets); | |
• | the efficiency ratio (the ratio of non-interest expenses to total revenue); | |
• | the ratio of tangible equity to tangible assets; | |
• | the ratio of core deposits (defined as total deposits less all time deposits) to total deposits; | |
• | the ratio of loans to deposits; | |
• | the ratio of non-performing loans (defined as loans on which interest is no longer accruing) to assets; | |
• | the ratio of loan loss reserves to total loans; | |
• | the ratio of net charge-offs (defined as loans charged-off net of recoveries of loans previously charged-off) to average loans; | |
• | the multiple of market price per share to 2009 estimated earnings per share; | |
• | the multiple of market price per share to book value per share; | |
• | the multiple of market price per share to tangible book value per share; | |
• | the total deposit premium; and | |
• | the core deposit premium (core deposits defined as total deposits less total time deposits). |
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Median of | ||||||||
Comparable | ||||||||
Performance Metrics | Santander | Companies | ||||||
Return on Average Assets | 1.06 | % | 0.32 | % | ||||
Return on Average Equity | 18.6 | % | 12.0 | % | ||||
Fee Income/Operating Revenue | 42.8 | % | 48.3 | % | ||||
Net Interest Margin | 2.20 | % | 2.01 | % | ||||
Efficiency Ratio | 42.3 | % | 75.2 | % | ||||
Tangible Equity/Tangible Assets | 3.86 | % | 2.26 | % | ||||
Core Deposits/Total Deposits | 50.6 | % | 68.7 | % | ||||
Loans/Deposits | 167.3 | % | 100.7 | % | ||||
Non-Performing Loans/Assets | 1.1 | % | 2.0 | % | ||||
Loan Loss Reserves/Loans | 1.66 | % | 0.99 | % | ||||
Net Charge-Offs/Average Loans | 0.55 | % | 0.46 | % |
Median of | ||||||||
Comparable | ||||||||
Valuation Metrics | Santander | Companies | ||||||
Multiple of Market Price to | ||||||||
2009 Estimated Earnings Per Share | 5.9 | x | 4.2 | x | ||||
Book Value | 1.04 | x | 0.91 | x | ||||
Tangible Book Value | 1.47 | x | 1.39 | x | ||||
Premium to Total Deposits | 15.4 | % | 0.7 | % | ||||
Premium to Core Deposits | 30.3 | % | 1.1 | % |
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• | The transaction will allow Santander to convert its minority equity stake in Sovereign into control of 100% of Sovereign’s outstanding voting shares and control of the Sovereign board of directors; | |
• | The acquisition of Sovereign furthers Santander’s objective of expanding the geographical diversification of the Santander group; | |
• | The acquisition will allow Santander to enter the United States commercial and retail banking market in a region that Santander considers demographically attractive; | |
• | Sovereign has a strong market share of deposits in five of the eight states in which it operates and Sovereign’s business model is focused on consumer and small business banking, both of which are consistent with Santander’s overall strategy; | |
• | Completion of the transaction will not have a significant adverse effect on Santander’s capital or capital ratios; | |
• | Santander believes that its track record of successfully completing acquisitions, its knowledge of Sovereign’s business and its expertise as one of the world’s leading retail and commercial banks will allow Santander to improve the Sovereign business and its efficiency and to grow that business in a manner that is in the best interests of the combined company, its depositors, customers, employees and other constituencies; | |
• | The transaction complies with Santander’s financial criteria for acquisitions, which are: (a) being accretive to shareholders in a reasonable period of time as determined by Santander and (b) to have a return on investment superior to Santander’s cost of capital. Santander expects to meet these objectives and to maintain at all times capital ratios above applicable regulatory requirements and in line with sector peers; | |
• | That Santander believed the transaction will benefit Sovereign’s depositors, customers and the communities in which Sovereign operates; |
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• | That Sovereign, as a result of general market conditions and matters specific to Sovereign’s condition (financial and otherwise), was having difficulty accessing the capital markets, and that absent the transaction this difficulty was expected to continue for the foreseeable future; and | |
• | That Sovereign experienced intermittent but significant deposit outflows that had reduced its cash available to fund its future operations, and that in light of volatile market conditions and recent experiences of Sovereign’s industry peers, there was a perceived significant risk that absent the transaction such deposit outflows could recur and intensify at any time. |
• | Paul A. Perrault. Incoming President and Chief Executive Officer (commencing not later than January 3, 2009). | |
• | Kirk W. Walters. Interim President, Interim Chief Executive Officer and Chief Financial Officer through January 2, 2009 (or, if earlier, the commencement of Mr. Perrault’s employment). Thereafter, Senior Executive Vice President, Chief Financial Officer and Chief Administrative Officer. | |
• | Salvatore J. Rinaldi. Executive Vice President and Chief of Staff to the Chief Executive Officer. | |
• | Patrick J. Sullivan. Managing Director of Commercial Banking. | |
• | M. Robert Rose. Credit Risk Management Officer and Executive Vice President of Sovereign and Regulation O Officer of Sovereign Bank. | |
• | Roy J. Lever. Managing Director of Retail Banking. | |
• | Matthew A. Kerin. Managing Director of Corporate Specialties Group. | |
• | Thomas D. Cestare. Executive Vice President and Chief Accounting Officer. | |
• | Cameron C. Troilo,Sr. Director. | |
• | P. Michael Ehlerman. Director. | |
• | Brian Hard. Director. | |
• | Andrew C. Hove, Jr. Director. |
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Executive Officer/Director | Vested | Unvested | Total | |||||||||
Mr. Perrault | 0 | 1,000,000 | 1,000,000 | |||||||||
Mr. Walters | 0 | 300,000 | 300,000 | |||||||||
Mr. Rinaldi | 89,026 | 0 | 89,026 | |||||||||
Mr. Sullivan | 26,250 | 0 | 26,250 | |||||||||
Mr. Rose | 24,726 | 4,731 | 29,457 | |||||||||
Mr. Kerin | 5,200 | 20,800 | 26,000 | |||||||||
Mr. Cestare | 0 | 26,250 | 26,250 | |||||||||
Mr. Troilo | 100,800 | 0 | 100,800 |
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• | three times his then-current base salary, | |
• | three times his target annual bonus, and | |
• | a pro-rata annual bonus based on (i) the number of days he was employed by Sovereign during the calendar year in which such termination occurred and (ii) the actual performance of Sovereign. |
• | three times his then-current base salary, |
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• | three times the greater of (i) his annual bonus earned for the most recently completed calendar year prior to such termination or (ii) the average of his annual bonuses earned for the three most recently completed calendar years prior to such termination (or, if not applicable, his target annual bonus), and | |
• | a pro-rata annual bonus based on (i) the number of days he was employed by Sovereign during the calendar year in which such termination occurred and (ii) the actual performance of Sovereign. |
• | the highest annualized base salary paid to him during the year of such termination or the immediately preceding two calendar years, and | |
• | the greater of (i) his target bonus for the year of such termination or (ii) the highest bonus paid to him with respect to one of the three calendar years immediately preceding the year of such termination. |
• | the highest annualized base salary paid to him during the year of such termination or the immediately preceding two calendar years, and | |
• | the greater of (i) his target bonus for the year of such termination or (ii) the highest bonus paid to him with respect to one of the three calendar years immediately preceding the year of such termination. |
• | the highest annualized base salary paid to him during the year of such termination or the immediately preceding two calendar years, and | |
• | the greater of (i) his target bonus for the year of such termination or (ii) the highest bonus paid to him with respect to one of the two calendar years immediately preceding the year of such termination. |
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Accelerated | ||||||||||||||||||||||||
Accelerated | Vesting of | |||||||||||||||||||||||
Vesting of | Deferred | Cash | Benefits | Excise Tax | ||||||||||||||||||||
Equity | Compensation | Severance | Continuation | Gross-Up | Total | |||||||||||||||||||
Executive Officer | ($) | ($) | ($)(1) | ($) | ($) | ($) | ||||||||||||||||||
Mr. Perrault(2) | ||||||||||||||||||||||||
Closing | 762,000 | (3) | — | — | — | — | 762,000 | |||||||||||||||||
Termination | — | — | 4,861,370 | 43,317 | 2,252,291 | (4) | 7,157,578 | |||||||||||||||||
Mr. Walters | ||||||||||||||||||||||||
Closing | 1,070,439 | — | — | — | — | 1,070,439 | ||||||||||||||||||
Termination | — | — | 4,257,534 | 43,317 | 2,359,795 | 6,660,646 | ||||||||||||||||||
Mr. Rinaldi | ||||||||||||||||||||||||
Closing | 316,737 | 20,100 | — | — | — | 336,837 | ||||||||||||||||||
Termination | — | — | 2,116,800 | 43,317 | 968,288 | 3,128,405 | ||||||||||||||||||
Mr. Sullivan | ||||||||||||||||||||||||
Closing | 278,020 | 36,607 | — | — | — | 314,627 | ||||||||||||||||||
Termination | — | — | 1,344,380 | 29,153 | — | 1,373,533 | ||||||||||||||||||
Mr. Rose | ||||||||||||||||||||||||
Closing | 142,806 | 20,420 | — | — | — | 163,226 | ||||||||||||||||||
Termination | — | — | 960,513 | 29,153 | — | 989,667 | ||||||||||||||||||
Mr. Lever | ||||||||||||||||||||||||
Closing | 167,107 | — | — | — | — | 167,107 | ||||||||||||||||||
Termination | — | — | 1,176,000 | 29,153 | — | 1,205,153 | ||||||||||||||||||
Mr. Kerin | ||||||||||||||||||||||||
Closing | 209,520 | — | — | — | — | 209,250 | ||||||||||||||||||
Termination | — | — | 1,344,751 | 29,153 | — | 1,373,904 | ||||||||||||||||||
Mr. Cestare | ||||||||||||||||||||||||
Closing | 105,148 | 8,854 | — | — | — | 114,002 | ||||||||||||||||||
Termination | — | — | 792,094 | 29,153 | — | 821,247 |
(1) | With respect to each of Messrs. Sullivan, Rose, Lever, Kerin and Cestare, the estimated amount of cash severance includes the estimated maximum additional payment (assuming that the transaction closes on January 31, 2009 at a per-share transaction price of $3.81 and that the executive officers’ employment will be terminated immediately thereafter) that the executive may receive in the event that the executive elects to be bound by non-competition restrictions under the circumstances described under “Excise TaxGross-Ups and Additional Payments,” above. |
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(2) | If the closing of the transaction occurs prior to the commencement of Mr. Perrault’s employment with Sovereign, Mr. Perrault’s employment agreement will not become effective and he will not be entitled to the amounts set forth in this table. Instead, he will be entitled to (i) an aggregate cash payment in an amount equal to the sum of his base salary and 100% of his target annual bonus and (ii) 66,667 shares of Sovereign common stock. The estimated amount of the cash payment is $1,600,000 and the estimated aggregate value of the Sovereign shares, assuming a per-share price of $3.81, is $254,001. | |
(3) | Under the terms of his employment agreement, Mr. Perrault will be granted a stock option upon commencement of his employment with Sovereign. The option will be granted at an exercise price equal to the fair market value of a share of Sovereign common stock as of the date of grant. As discussed above, prior to the grant of the option, it is not possible to determine whether Mr. Perrault will receive a cash payment upon cancellation of the option. Therefore, this estimated value of accelerated equity does not reflect the value of acceleration, if any, of the option. | |
(4) | As discussed in footnote 3, under the terms of his employment agreement, Mr. Perrault will be granted a stock option upon commencement of his employment with Sovereign. This estimatedgross-up amount assumes that the exercise price of the option is $3.81, the implied transaction price per share of Sovereign common stock as of October 10, 2008. |
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• | have been qualified by information set forth in confidential disclosure schedules exchanged by the parties in connection with signing the transaction agreement — the information contained in these schedules modifies, qualifies and creates exceptions to the representations and warranties in the transaction agreement; | |
• | have been qualified by information set forth in each party’s respective SEC reports; | |
• | will not survive consummation of the transaction and cannot be the basis for any claims under the transaction agreement by the other party after termination of the transaction agreement except if intentionally false as of the date of the transaction agreement; | |
• | may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties to the transaction agreement if those statements turn out to be inaccurate; and | |
• | are subject to the materiality and material adverse effect standards described in the transaction agreement, which may differ from what may be viewed as material by you. |
• | corporate matters, including due organization and qualification; |
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• | capitalization; | |
• | authority relative to execution and delivery of the transaction agreement and the absence of conflicts with, or violations of, organizational documents or other obligations as a result of the transaction; | |
• | governmental filings and consents necessary to complete the transaction; | |
• | financial statements; | |
• | brokers’ fees payable in connection with the transaction; | |
• | legal proceedings; and | |
• | the accuracy of information supplied in public filings, and for inclusion in this document and other similar documents. |
• | employee matters and benefit plans; | |
• | anti-money laundering and customer information security matters; | |
• | credit card accounts; | |
• | loans extended by Sovereign; | |
• | Sovereign’s allowance for losses; | |
• | the absence of undisclosed liabilities; | |
• | the absence of certain changes or events; | |
• | the receipt of a fairness opinion from one of its financial advisors; | |
• | derivative instruments; | |
• | insurance coverage; | |
• | compliance with applicable laws; | |
• | intellectual property; | |
• | tax matters; | |
• | the timely filing of regulatory reports; | |
• | matters relating to certain contracts; | |
• | investment securities; | |
• | real property; | |
• | environmental liabilities; | |
• | the inapplicability of state takeover laws and Sovereign’s rights agreement; and | |
• | the absence of related party transactions. |
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• | incur indebtedness for borrowed money or guarantees thereof other than in the ordinary course of business and in amounts and on terms consistent with past practices; | |
• | adjust, split, combine or reclassify any of its capital stock; | |
• | redeem, repurchase or otherwise acquire, or otherwise offer to redeem, repurchase or otherwise acquire any of its capital stock; | |
• | make, declare or pay any dividends or other distributions on any shares of its capital stock; | |
• | issue shares except pursuant to the exercise of Sovereign stock options outstanding as of the date of the transaction agreement and in accordance with the terms of such stock options as of the date of the transaction agreement, grant any stock options, restricted shares or other equity-based awards, or grant the right to acquire any of its shares, or amend the terms of any of its capital stock; | |
• | with certain exceptions, make any capital expenditures; | |
• | acquire any assets, securities, properties, interests or businesses, other than assets acquired in order to maintain and operate the business of Sovereign and its subsidiaries in the ordinary course of business and in a manner consistent with past practice; | |
• | make any loans or advances other than in the ordinary course of business consistent with past practice; | |
• | make any investments other than in (i) United States Treasury bonds, (ii) debt securities issued or guaranteed by an agency of the United States Government, and (iii) debt securities issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, in each case with a final maturity of less than 2 years from the date of any such investment; | |
• | with certain exceptions, (i) with respect to any current or former director, officer, employee or independent contractor, (A) grant or increase any severance or termination pay (or amend any existing severance or termination arrangement with), (B) enter into any employment, consultancy, deferred compensation, severance, change in control, retention, transaction bonus or incentive, retirement or other similar agreement or arrangement (or amend any such existing agreement or arrangement) or (C) except for increases in the ordinary course consistent with past practice with respect to any employee whose annual base salary does not exceed $150,000, increase compensation, bonus or other benefits payable to such employee, or (ii) establish, adopt or amend (except as required by applicable law) any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, equity-based compensation or other benefit plan or arrangement covering any director, officer, employee or independent contractor; | |
• | other than in the ordinary course of business consistent with past practice, sell, lease, transfer, mortgage, encumber or otherwise dispose of any assets or properties; | |
• | amend its certificate of incorporation or bylaws; | |
• | enter into any new line of business, exit any existing line of business, or materially change its lending, investment, underwriting, risk and asset liability management and other banking and operating policies, except as required by applicable law; | |
• | participate in the Troubled Asset Relief Program administered by the United States Department of the Treasury pursuant to the Emergency Economic Stabilization Act of 2008 or in any plan, order or proposal of, or offer by, any governmental authority that would result in the issuance by it of any capital stock, voting or non-voting securities (including warrants and debt securities) to a governmental authority or any other party or that would otherwise interfere with the ability of Santander to, directly or indirectly, control one hundred percent of the voting power of Sovereign and its subsidiaries and one |
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hundred percent of the outstanding shares of Sovereign Virginia common stock following the closing date; |
• | materially restructure or materially change its investment securities portfolio or its gap position except in the ordinary course of business consistent with past practice (and in consultation with Santander), through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported; | |
• | (i) settle, or offer or propose to settle, (A) any material litigation, investigation, arbitration, proceeding or other claim involving or against it, (B) any shareholder litigation or dispute against Sovereign or any of its officers or directors or (C) any litigation, arbitration, proceeding or dispute that relates to the transactions contemplated by the transaction agreement or (ii) enter into any consent order or decree; | |
• | change its accounting methods other than as required by generally accepted accounting principles or certain other regulatory guidelines, as agreed to by Sovereign’s independent public accountants; | |
• | make or change any material tax election, change any annual tax accounting period, adopt or change any method of material tax accounting, materially amend any tax returns or file claims for material tax refunds, enter into any material closing agreement, settle any material tax claim, audit or assessment, or surrender any right to claim a material tax refund, offset or other reduction in tax liability; | |
• | enter into certain specified types of contracts or agreements, or terminate, amend or modify in any material respect, any such contract or otherwise waive, release or assign any material rights, claims or benefits; or | |
• | agree, resolve or commit to do any of the actions prohibited by the preceding bullet points. |
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• | solicit, initiate, or take any action to facilitate or encourage the submission of any Acquisition Proposal (as defined below) by a third party or otherwise initiate any process that is intended to, or is reasonably likely to lead to the making of an Acquisition Proposal by any third party; | |
• | enter into or participate in any discussion or negotiations with, furnish any information relating to Sovereign or any of its subsidiaries or afford any access to the business, properties, assets, books or records of Sovereign or any of its subsidiaries to, otherwise cooperate in any way with, or knowingly assist, participate in, facilitate or encourage in any manner any effort by any third party that is seeking to make, or has made, an Acquisition Proposal; | |
• | fail to make, withdraw or modify in a manner adverse to Santander the recommendation by Sovereign’s board of directors that Sovereign’s shareholders adopt and approve the transaction agreement and the transactions contemplated thereby at a duly held meeting of such shareholders (or recommend an Acquisition Proposal made by a third party or take any action or make any statement inconsistent with such recommendation by Sovereign’s board of directors) (any of the foregoing referred to as an “adverse recommendation change”); | |
• | grant to any third party any waiver under, or any release from, any standstill or similar agreement concerning or relating to certain defensive measures (including (i) certain provisions of Sovereign’s charter and bylaws the purpose or effect of which is make more costly or burdensome the consummation of an Acquisition Proposal, and (ii) Sovereign’s rights agreement) or redeem, modify, repeal or otherwise diminish any such defensive measure other than for the benefit of Santander and its affiliates or permit to expire, fail to renew or otherwise fail to maintain in effect any such defensive measure; | |
• | exempt any transaction (except the transactions contemplated by the transaction agreement) or person (other then Santander or its affiliates) from any takeover statute; | |
• | enter into any agreement in principle, letter of intent, term sheet, merger agreement, purchase agreement, option agreement or other similar instrument relating to an Acquisition Proposal; or | |
• | agree or commit to take any of the actions described in the preceding bullet points. |
• | Sovereign may, following receipt of an unsolicited Acquisition Proposal that Sovereign’s board of directors determines, after consultation with financial and legal advisors, constitutes or is reasonably likely to result in, a Superior Proposal (as defined below), Sovereign may furnish nonpublic information to, or enter into discussions with the third party that has made such Acquisition Proposal so long as it enters into a confidentiality agreement containing confidentiality and standstill provisions that are not less restrictive on such third party than those contained in the confidentiality agreement between Sovereign and Santander and furnishes all such information to Santander; and |
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• | Sovereign’s board of directors may, following receipt of a Superior Proposal, make an adverse recommendation change, but only after notifying Santander of its intention to do so and, in the case of an adverse recommendation change proposed to be made in response to the receipt of a Superior Proposal, if Santander does not propose modifications to the transaction agreement or otherwise provide information to Sovereign that in the aggregate result in the transactions contemplated thereunder being at least as favorable to the shareholders of Sovereign (other than Santander) as such Superior Proposal. |
• | not to take any of the actions referred to in the two preceding bullet points unless Sovereign notifies Santander of its intention to take such action; | |
• | to notify Santander promptly (but in no event later than 24 hours) after receipt by Sovereign of any Acquisition Proposal, any indication that a third party is considering making an Acquisition Proposal or any request for information relating to Sovereign or any of its subsidiaries or for access to the business, properties, assets, books or records of Sovereign or any of its subsidiaries by any third party that may be considering making, or has made, an Acquisition Proposal; | |
• | to provide to Santander relevant information regarding any Acquisition Proposal or request for information; and | |
• | to cease any existing discussions or negotiations with any persons with respect to any Acquisition Proposal, and to use reasonable best efforts to cause all persons other than Santander who have been furnished with confidential information in connection with an Acquisition Proposal within 24 months prior to the date of the transaction agreement to return or destroy such information. |
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• | recognize such employees’ service with Sovereign prior to the transaction for purposes of eligibility to participate, vesting and benefit level with respect to vacation entitlement, severance benefits and other paid time off under such plans that are employee benefit plans to the same extent that such service was recognized under the comparable plans of Sovereign and its subsidiaries in which such employees participated prior to the transaction, | |
• | waive any pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods under any such plans that are welfare benefit plans maintained by Santander or subsidiaries, except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived under the comparable plan of Sovereign and its subsidiaries in which such employees participated prior to the transaction, and | |
• | to the extent that Sovereign employees commence participation in any such plans that are health benefit plans after the commencement of a calendar year, to the extent commercially practicable, recognize the dollar amount of all co-payments, deductibles and similar expenses incurred by such employees (and their eligible dependents) during such calendar year for purposes of satisfying such calendar year’s deductible and co-payment limitations under such plans. |
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• | the approval by the Santander shareholders meeting of the capital increase of Santander necessary for effecting the transaction and the approval and adoption of the transaction agreement by Sovereign shareholders; | |
• | the approval of the listing of Santander ADSs to be issued in the transaction on the NYSE, subject to official notice of issuance; | |
• | the effectiveness of the registration statement with respect to the Santander shares to be issued in the transaction under the Securities Act and the absence of any stop order or proceedings initiated or threatened by the SEC for that purpose; | |
• | a prospectus relating to the issuance of Santander shares having been verified by and registered with the CNMV; | |
• | the other party’s representations and warranties in the transaction agreement being true and correct, subject to certain materiality standards contained in the transaction agreement, and the performance by the other party in all material respects of its obligations under the transaction agreement; | |
• | the capital increase of Santander necessary for effecting the transaction having been granted before a Spanish public notary; | |
• | the receipt of the necessary reports of an expert designated by the Commercial Registry of Santander relating to the fair value of Sovereign common stock to be received by Santander in the transaction and of the auditor designated by such Commercial Registry relating to the abolishment of preemptive rights of Santander shareholders in connection with the issuance of Santander ordinary shares in the transaction; and | |
• | the absence of any order, injunction or decree having been issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transaction and the other transactions contemplated by the transaction agreement, and the absence of any statute, rule, regulation, order, injunction or decree having been enacted, entered, promulgated or enforced by any governmental entity that prohibits or makes illegal the consummation of the transaction. |
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• | neither Sovereign nor Sovereign Bank having become insolvent, or made an assignment for the benefit of creditors, or failed generally to pay its debts as they become due, or become the subject of the appointment of, or taking possession by, any conservator, custodian, trustee, receiver or liquidator of any or of all or a substantial part of its properties, businesses or assets; | |
• | no order having been issued or plan made or effected by any governmental authority that would result in the issuance of any Sovereign capital stock, voting securities or certain other types of securities to a governmental authority or would otherwise interfere with the ability of Santander to, control one hundred percent of the voting power of Sovereign and its subsidiaries and one hundred percent of Sovereign Virginia common stock following the effective time of the share exchange; | |
• | there not having occurred, since the date of the transaction agreement, any effect, change, circumstances, conditions or developments that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on Sovereign, excluding any effect resulting from certain specified factors, including changes in accounting principles, changes in laws, changes in political, economic or market conditions, the failure to meet earnings projects (but not the underlying causes), the impact of the transaction on relationships with customers or employees, the public disclosure of the transaction agreement and the transaction, any outbreak of war or hostilities, actions or omissions taken with the prior written consent of the other party to the transaction agreement, adverse events related to the deterioration of the credit markets; provided that any such change or event shall only be considered to the extent such change or event does not have a materially disproportionate effect on the relevant party and its subsidiaries, taken as a whole, compared to other companies engaged in the same industry as such party and its subsidiaries; and | |
• | certain regulatory approvals required to consummate the transactions contemplated by the transaction agreement having been obtained, and no such regulatory approval having resulted in the imposition of a requirement on Santander or Sovereign to take any action, or commit to take any action, or agree to any condition or restriction, that would reasonably be expected to have a material adverse effect (measured on a scale relative to Sovereign) on any of Sovereign, Santander or Sovereign Virginia. |
• | any order, injunction or decree is issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transaction and the other transactions contemplated by the transaction agreement, or any statute, rule, regulation, order, injunction or decree has been enacted, entered, promulgated or enforced by any governmental entity that prohibits or makes illegal the consummation of the transaction, and such action has become final and non-appealable; | |
• | the transaction is not completed by June 30, 2009 (other than because of a breach of the transaction agreement caused by the party seeking termination); |
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• | the other party breaches the transaction agreement in a way that would entitle the party seeking to terminate the agreement not to consummate the transaction, subject to the right of the breaching party to cure the breach within 30 days following written notice (unless it is not possible due to the nature or timing for the breach for the breaching party to cure the breach); or | |
• | approval of Santander’s shareholders of the capital increase, or approval of Sovereign’s shareholders of the transaction agreement, is not obtained. |
• | Sovereign breaches its “non-solicitation” obligations; | |
• | an adverse recommendation change occurs or Sovereign’s board of directors approves or determines to recommend to Sovereign’s shareholders that they approve, an Acquisition Proposal other than the reincorporation merger or the share exchange; | |
• | Sovereign’s board of directors fails to publicly confirm its recommendation of the transaction agreement within five business days of a written request by Santander that it do so; or | |
• | Sovereign’s board of directors fails to include and maintain until the closing of the transactions its recommendation of the transactions to the Sovereign shareholders in this document. |
• | both Santander and Sovereign will remain liable for any intentional breach of the transaction agreement; and | |
• | designated provisions of the transaction agreement, including those regarding the payment of fees and expenses, governing law and jurisdiction will survive the termination. |
• | If (i) the transaction agreement is terminated by Santander because (A) an adverse recommendation change occurs or Sovereign’s board of directors approves or determines to recommend to Sovereign’s shareholders that they approve, an Acquisition Proposal other than the reincorporation merger or the share exchange; (B) Sovereign’s board of directors fails to publicly confirm its recommendation of the transaction agreement within five business days of a written request by Santander that it do so; (C) Sovereign’s board of directors fails to include and maintain until the closing of the transactions its recommendation of the transactions to the Sovereign shareholders in this document; or (D) Sovereign breaches the transaction agreement in a way that would entitle Santander to terminate the agreement and not to consummate the transaction, (ii) prior to such termination, an Acquisition Proposal has been publicly announced or otherwise communicated to Sovereign’s board of directors or its shareholders, and (iii) within twelve months of the date of such termination, Sovereign or any of its subsidiaries enters into a definitive agreement with respect to, or consummates, an Acquisition Proposal. | |
• | If the transaction agreement is terminated by Santander because Sovereign intentionally breached its obligations under Section 8.03 of the transaction agreement. See “The Transaction Agreement — No Solicitation of Alternative Transactions.” |
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(a) | Spanish tax considerations of the Transaction |
(b) | Taxation of dividends |
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(c) | Taxation of capital gains |
(d) | Wealth Tax |
(e) | Inheritance and Gift Tax |
(f) | Transfer Tax and VAT |
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(g) | Compliance |
• | Continental Europe. This covers all retail banking business (including Banco Banif, S.A. (“Banif”), its specialized private bank), wholesale banking and asset management and insurance conducted in Europe, with the exception of Abbey. This segment includes the following units: the Santander Branch Network, Banco Español de Crédito, S.A. (“Banesto”), Santander Consumer Finance and Portugal. | |
• | United Kingdom (Abbey). This covers only Abbey’s business, mainly focused on retail banking in the UK. | |
• | Latin America. This embraces all the financial activities conducted via its subsidiary banks and other subsidiaries in Latin America. It also includes the specialized units in International Private Banking, as an independent globally managed unit. Its business in New York is also managed in this area. |
• | Retail Banking. This covers all customer banking businesses (except those of Corporate Banking, which are managed globally throughout the world). | |
• | Global Wholesale Banking. This business reflects the returns from Global Corporate Banking, Investment Banking and Markets worldwide, including all treasury activities under global management, as well as its equities business. |
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• | Asset Management and Insurance. This includes its units that design and manage mutual and pension funds and insurance. |
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BENEFICIAL OWNERS AND MANAGEMENT
Amount and | ||||||||
Nature of | ||||||||
Beneficial | Percentage of | |||||||
Ownership(1) | Common Stock | |||||||
Directors | ||||||||
Gonzalo de Las Heras | 0 | (2) | ||||||
P. Michael Ehlerman | 86,816 | |||||||
Brian Hard | 62,680 | |||||||
Marian L. Heard | 20,310 | |||||||
Andrew C. Hove, Jr. | 62,669 | (3) | ||||||
Gabriel Jaramillo | 0 | (4) | ||||||
William J. Moran | 48,139 | |||||||
Maria Fiorini Ramirez | 24,189 | |||||||
Cameron C. Troilo, Sr. | 922,173 | (5) | ||||||
Ralph V. Whitworth | 52,811,143 | (6) | 7.95 | % | ||||
Executive Officers | ||||||||
Joseph P. Campanelli | 641,775 | (7) | ||||||
Mark R. McCollom | 158,190 | (8) | ||||||
Kirk W. Walters | 1,386,201 | (9) | ||||||
Salvatore J. Rinaldi | 224,484 | (10) | ||||||
M. Robert Rose | 89,429 | (11) | ||||||
Patrick J. Sullivan | 151,128 | (12) | ||||||
James J. Lynch | 193,361 | (13) | ||||||
All Sovereign directors and executive officers as a group (21 persons) | 57,071,061 | (14) | 8.60 | % | ||||
Banco Santander, S.A. | 165,919,150 | (15) | 24.99 | % | ||||
c/o Banco Santander, S.A., New York Branch 45 East 53rd Street New York, NY 10022 | ||||||||
Relational Investors, LLC | 52,811,143 | (16) | 7.95 | % | ||||
12400 High Bluff Drive Suite 600 San Diego, CA 92130 |
(1) | Except as otherwise provided for herein, the table reflects data as of December 18, 2008 and as provided by each director and executive officer. The table also reflects shares of Sovereign common stock held by the trustee of the Sovereign Retirement Plan which have been allocated to the accounts of the executive officers identified in the table, and as a group. |
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(2) | Excludes 165,919,150 shares owned by Santander, as to which Mr. de Las Heras disclaims beneficial ownership. See footnote 15 to this table for more information regarding Santander’s ownership of Sovereign common stock. |
(3) | Includes 2,100 shares as to which Mr. Hove has shared voting or investment power. |
(4) | Excludes 165,919,150 shares owned by Santander, as to which Mr. Jaramillo disclaims beneficial ownership. See footnote 15 to this table for more information regarding Santander’s ownership of Sovereign common stock. |
(5) | Includes (a) 425,893 shares as to which Mr. Troilo has shared voting or investment power and (b) 100,800 shares issuable upon exercise of outstanding options. |
(6) | Mr. Whitworth is a Principal of Relational Investors, LLC. Based on Amendment No. 13 to the Schedule 13D filed with the SEC on November 25, 2008, Relational Investors, LLC directly holds 8,640,172 shares. Furthermore, Relational Investors, LLC is the sole general partner, or the sole managing member of the general partner of the following entities: (a) Relational Investors, L.P., which holds 8,063,673 shares, (b) Relational Fund Partners, L.P., which holds 254,735 shares, (c) Relational Coast Partners, L.P., which holds 599,598 shares, (d) Relational Partners, L.P., which holds 191,013 shares, (e) RH Fund 1, L.P., which holds 6,789,761 shares, (f) RH Fund 4, L.P., which holds 1,886,009 shares, (h) RH Fund 6, L.P., which holds 3,107,765 shares, (i) RH Fund 7, L.P., which holds 627,915 shares, (j) Relational Investors III, L.P., which holds 196,359 shares, (k) Relational Investors VIII, L.P., which holds 8,268,600 shares, (l) Relational Investors IX, L.P., which holds 1,880,966 shares, (m) Relational Investors X, L.P., which holds 5,058,131 shares, (n) Relational Investors XV, L.P., which holds 1,353,223 shares, (p) Relational Investors XVI, L.P., which holds 442,953 shares, (q) Relational Investors XX, L.P., which holds 1,168,740 shares, (r) Relational Investors XXII, L.P., which holds 1,448,393 shares, and (s) Relational Investors Alpha Fund I, L.P., which holds 2,854,248 shares. With respect to any of the foregoing shares, Mr. Whitworth disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein. Mr. Whitworth also directly owns 13,639 shares of Sovereign common stock. |
(7) | Based on Mr. Campanelli’s beneficial ownership as of September 30, 2008, which is the date of termination of his employment with Sovereign pursuant to a Separation and Consulting Agreement entered into by and between Mr. Campanelli and Sovereign, dated September 30, 2008. Includes: (a) 401,026 shares issuable upon exercise of outstanding options, (b) 25,234 shares held by the Retirement Plan which are allocated to Mr. Campanelli’s account and over which Mr. Campanelli exercises voting power, and (c) 29,125 shares of Sovereign common stock under the Sovereign Bonus Deferral Program. |
(8) | Based on Mr. McCollom’s beneficial ownership as of March 3, 2008, which is the date of termination of his employment with Sovereign pursuant to a Separation Agreement entered into by and between Mr. McCollom and Sovereign, dated February 20, 2008. Includes: (a) 89,745 shares issuable upon exercise of outstanding options, and (b) 25,321 shares held by the Retirement Plan which are allocated to Mr. McCollom’s account and over which Mr. McCollom exercises voting power. |
(9) | Includes: (a) 300,000 shares issuable upon exercise of outstanding options, (b) 100,000 shares of Sovereign common stock awarded as restricted stock under one or more of Sovereign’s stock incentive plans, (c) 5,246 shares held by the Retirement Plan which are allocated to Mr. Walters’ account and over which Mr. Walters exercises voting power, (e) 180,955 shares of restricted stock units, and (f) 700,000 shares of stock appreciation rights. |
(10) | Includes: (a) 89,026 shares issuable upon exercise of outstanding options, (b) 22,581 shares held by the Retirement Plan which are allocated to Mr. Rinaldi’s account and over which Mr. Rinaldi exercises voting power, (c) 83,133 shares of Sovereign common stock awarded as restricted stock under one or more of Sovereign’s stock incentive plans, and (d) 5,276 shares of Sovereign common stock under the Sovereign Bonus Deferral Program. |
(11) | Includes 105 shares as to which Mr. Rose has shared voting or investment power. Includes (a) 29,457 shares issuable upon exercise of outstanding options, (b) 3,774 shares held by the Retirement Plan which are allocated to Mr. Rose’s account and over which he exercises voting power, (c) 37,482 shares of Sovereign common stock awarded as restricted stock under one or more of |
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Sovereign’s stock incentive plans, and (d) 5,360 shares of Sovereign common stock under the Sovereign Bonus Deferral Program. |
(12) | Includes: (a) 26,250 shares issuable upon exercise of outstanding options, (b) 9,266 shares held by the Retirement Plan which are allocated to Mr. Sullivan’s account and over which he exercises voting power, (c) 72,971 shares of Sovereign common stock awarded as restricted stock under one or more of Sovereign’s stock incentive plans, and (d) 9,608 shares of Sovereign common stock under the Sovereign Bonus Deferral Program. |
(13) | Based on Mr. Lynch’s beneficial ownership as reported in the Form 4 filed by Mr. Lynch with the SEC on February 22, 2007, which was the last such report filed by Mr. Lynch prior to his resignation as of September 30, 2007. Includes 149,173 shares issuable upon exercise of outstanding options. |
(14) | In the aggregate, these persons hold shared voting or investment power over 57,071,061 shares. The number and percentage of shares beneficially owned by them include (a) 1,237,727 shares issuable upon exercise of outstanding options, (b) 95,772 shares held by the Retirement Plan which are allocated to the executive officers’ accounts and over which they exercise voting power, (c) 420,036 shares of Sovereign common stock awarded as restricted stock under one or more of Sovereign’s stock incentive plans, (d) 51,693 shares under the Sovereign Bonus Deferral Program, (e) 180,955 shares of restricted stock units, and (f) 700,000 shares of stock appreciation rights. |
(15) | Based on Amendment No. 11 to the Schedule 13D filed on November 25, 2008 with the SEC. |
(16) | See footnote 6 to this table for information regarding the ownership of Sovereign common stock by Relational Investors, LLC and affiliated entities. |
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COMMON SHARES AND YOUR RIGHTS AS A POTENTIAL HOLDER OF
SANTANDER ORDINARY SHARES OR SANTANDER ADSs
Sovereign | Santander | |
CORPORATE GOVERNANCE | ||
Sovereign’s amended and restated articles of incorporation, its amended bylaws and the BCL govern the rights of holders of Sovereign common stock. | Santander’s bylaws, Santander’s rules and regulations for the general shareholders’ meeting and the Spanish Corporation Law, as amended from time to time, govern the rights of holders of Santander ordinary shares. | |
AUTHORIZED CAPITAL STOCK | ||
Authorized Shares. At November 17, 2008, the total number of authorized shares of Sovereign capital stock was 807,500,000 shares, consisting of 800,000,000 shares of Sovereign common stock, no par value per share, and 7,500,000 shares of Sovereign preferred stock. | Issued Shares. At December 3, 2008, Santander’s share capital was €3,997,029,701.50 and consisted of 7,994,059,403 Santander ordinary shares, nominal value €0.50 per share. | |
The Sovereign board of directors is authorized to issue the shares of preferred stock in one or more series and to determine the voting rights, designations, preferences and other special rights of the series being issued. | ||
VOTING RIGHTS. ACTION BY WRITTEN CONSENT | ||
Voting Rights. The holders of Sovereign common stock are entitled to one vote per share on all matters presented to shareholders. | Voting Rights. Each Santander ordinary share entitles the holder to one vote at Santander’s general shareholders meeting. | |
Action by Written Consent.Sovereign’s amended and restated articles of incorporation do not permit shareholder action by either unanimous or partial written consent. | Action by Written Consent.Spanish Corporation Law does not permit actions reserved to the shareholders meeting without a meeting. |
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Sovereign | Santander | |
AMENDMENT TO THE ARTICLES OF INCORPORATION | ||
Under Pennsylvania law, amendments to a corporation’s articles of incorporation must be approved by a resolution of the board of directors and by the affirmative vote of a majority of the votes cast by all shareholders entitled to vote. If an amendment would make any changes in the preferences, limitations or special rights of the shares of a class adverse to the class, authorize a new class having a preference as to dividends or assets which are senior to the shares of a class, increase the number of authorized shares of any class having a preference as to dividends or assets which are senior in any respect to the shares of a class or make the outstanding shares of a class redeemable by a method that is not pro rata, by lot or otherwise equitable, then a majority of shares of that class must also approve the amendment. Pennsylvania law also permits a corporation to require in its articles of incorporation a greater proportion of voting power to approve a specified amendment. | Not applicable. Under the Spanish Corporation Law, the operative parts going forward of the articles of incorporation are reflected in the relevant company’s bylaws. | |
Sovereign’s amended and restated articles of incorporation contain various provisions that require a super-majority vote of shareholders to amend or repeal particular sections of such articles. Amendment or repeal of the provisions of Sovereign’s articles relating to noncumulative voting, the classification of directors, a super-majority vote of shareholders to approve mergers and other similar transactions with a person or entity (other than transactions receiving specified approval by the Sovereign board of directors), the requirement of holding meetings for shareholder action, amendments to the bylaws and the consideration of non-economic factors by Sovereign’s board of directors in evaluating an offer by another party to acquire an interest in Sovereign, all require either(i) the affirmative vote of 80% of the shares entitled to vote, or (ii) the affirmative vote of 80% of the members of Sovereign’s board of directors and the affirmative vote of shareholders entitled to cast at least a majority of votes which all shareholders are entitled to cast. |
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Sovereign | Santander | |
AMENDMENT TO THE BYLAWS | ||
The authority to amend or repeal Sovereign’s amended bylaws is vested in Sovereign’s board of directors, subject always to the power of the shareholders of Sovereign to change such action by the affirmative vote of shareholders holding at least 662/3% of the voting power (except that any amendment to the indemnification provisions set forth in the amended bylaws shall require the affirmative vote of 662/3% of the Sovereign board of directors or shareholders holding 80% of the votes that all shareholders are entitled to cast). | Under the Spanish Corporation Law, shareholders have the power to amend any provision of a company’s bylaws. The board of directors of a company is not authorized to change the company’s bylaws (except for very minor amendments, such as the change of the corporate domicile within the same municipality). Amendments (as well as other matters such as the issuance of bonds, the increase or reduction of the share capital, mergers and demergers) require (i) that at the relevant general shareholders meeting a quorum of shareholders representing 50% of the voting capital, if the meeting is held on first call, or a quorum of shareholders representing 25%, if the meeting is held on second call, is present or represented; and (ii) a simple majority of the voting capital present or represented at the meeting, unless the meeting is held on second call and less than 50% of the voting capital is present or represented, in which case, a two-thirds majority of the voting capital (either present or represented at the meeting) is required. | |
RIGHT TO DIVIDENDS | ||
Holders of Sovereign common stock are entitled to receive dividends ratably when, as and if declared by the Sovereign board of directors from funds legally available for the payment of dividends, after payment of all dividends on preferred stock, if any is outstanding. | Santander shareholders have the right to participate in any dividend distribution in proportion to the paid-in capital corresponding to their Santander ordinary shares. | |
APPRAISAL RIGHTS | ||
The holders of Sovereign common stock are not entitled to dissenters’ rights under the BCL. | Rights of Separation. Under the Spanish Corporation Law, shareholders do not generally have the right to require a company to purchase his or her shares in the company. As an exception, in very limited circumstances (such as the substitution of the corporate purpose or the transfer of the corporate domicile to another country), shareholders that have not voted in favor of the corresponding resolution have the right to request the company to purchase his or her shares (for listed shares, at the average market price of the shares over the last quarter). |
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Sovereign | Santander | |
PREEMPTIVE RIGHTS | ||
The holders of Sovereign common stock do not have preemptive rights to subscribe for a proportionate share of any additional securities issued by Sovereign before such securities are offered to others. | Each holder of Santander ordinary shares has a preferential right by operation of law to subscribe for shares in proportion to its shareholding in each new issue of Santander ordinary shares. Holders of Santander ordinary shares have the same right upon the issuance of convertible debt by Santander. Holders of convertible debt also have preemptive rights. However, preemptive rights of shareholders and holders of convertible debt may be excluded under certain circumstances by specific approval at the general shareholders meeting (or upon its delegation by the Santander board of directors) and preemptive rights are deemed excluded by operation of law in respect of certain issuances. | |
ATTENDANCE AND VOTING AT MEETINGS OF SHAREHOLDERS | ||
Every common shareholder of record as of the applicable record date has the right to notice of and to vote, in person or by proxy, at any shareholders’ meeting. | Each Santander ordinary share entitles the holder to one vote at Santander’s general shareholders meetings. Under both the Spanish Corporation Law and Santander’s bylaws, only holders of Santander ordinary shares who have their Santander ordinary shares duly registered in the appropriate records at least five days prior to the day on which a meeting is scheduled to be held may attend and vote at such meeting. | |
SPECIAL MEETINGS OF SHAREHOLDERS | ||
Special meetings of the shareholders may be called at any time by any of the following:(i) the Sovereign board of directors at a duly called and held meeting of the Sovereign board of directors or upon the unanimous written consent of the members of the Sovereign board of directors; or (ii) the Chairman of the board of directors or the Chief Executive Officer, but only upon receiving written direction of at least a majority of directors then in office. | Extraordinary general shareholders meetings may be called from time to time by Santander’s board of directors whenever the board considers it advisable for the company’s interests, and also if so requested by shareholders representing at least 5% of the outstanding share capital of Santander. |
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Sovereign | Santander | |
SHAREHOLDER PROPOSALS AND NOMINATIONS | ||
Sovereign’s amended bylaws establish procedures that shareholders must follow to nominate persons for election to the Sovereign board of directors. The shareholder making the nomination must provide notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of Sovereign not less than 90 days nor more than 120 days prior to any meeting of shareholders called for election of directors; provided, however, that if less than 21 days’ notice of the meeting is given to shareholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of Sovereign not later than the close of the seventh day following the day on which notice was mailed to shareholders. Other matters proposed by shareholders to be placed on the agenda for consideration at an annual meeting of shareholders must be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of Sovereign not less than 90 nor more than 150 days prior to the meeting; provided, however, that if less than 21 days’ notice of the meeting is given to shareholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of Sovereign not later than the close of the seventh day following the day on which notice was mailed to shareholders. The Chairman of a meeting of shareholders may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination or other matter shall be disregarded. | Santander shareholders representing at least 5% of Santander’s share capital may request the publication of a supplement to the call of a general shareholders meeting, including a request for one or more additional items to be put on the agenda. This right must be exercised by means of a verifiable notice which must be received at the registered office of Santander within five days of the publication of the original notice of the call to meeting. The supplement to the call shall be published at least 15 days in advance of the date set for the general shareholders meeting. In addition, under the Spanish Corporation Law, shareholders holding shares, in aggregate, equal to or greater than the result of dividing the total share capital by the number of directors, have the right to appoint a corresponding proportion of the members of the board of directors (disregarding the fractions). Shareholders who exercise this right may not vote on the appointment of other directors. | |
SHAREHOLDER SUITS | ||
Under Pennsylvania law, shareholders may bring derivative actions on behalf of the corporation to enforce the duties of the corporation’s directors. | Under the Spanish Corporation Law, a company is entitled to bring a corporate action for liability (acción social de responsabilidad) against its directors following a resolution passed by the company’s general shareholders meeting for such purposes. Such a resolution may be presented and voted on any general shareholders meeting even if it not on the agenda for the meeting. |
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Sovereign | Santander | |
Under the Spanish Corporation Law, however, shareholders representing at least 5% of the share capital of the company may also jointly initiate such action in any of the following circumstances: | ||
• the directors of the company have not called a general shareholders meeting to vote on such action following a request of shareholders representing at least 5% of the share capital of the company; | ||
• the company has not initiated the action within one month of the passing by the general shareholders meeting of the resolution approving such action; or | ||
• the general shareholders meeting has passed a resolution against bringing the corporate action for liability. | ||
The corporate action for liability can only be directed towards remedying or restoring the damage caused by the director(s) to the company and not towards compensating individual damages that might have been caused to shareholders. | ||
Under Spanish law class action suits are not available to shareholders pursuing claims against the directors of a company. Under the Spanish Corporation Law, each shareholder whose interests have been directly harmed by the acts or resolutions passed by the directors may only initiate individual proceedings against the directors seeking remedy or compensation for such direct individual damages(acción individual de responsabilidad). | ||
RIGHTS OF INSPECTION | ||
Under Pennsylvania law, shareholders have the right, for any proper purpose, to examine during usual business hours the share register, books and records of account and records of the proceedings of the shareholders and directors, and to make copies or extracts of such documents. Any shareholders desiring to make such an inspection must provide a written demand to do so under oath and must state the reason for the inspection. | Under Spanish law, a shareholder has the right to: • obtain a certificate of the resolutions adopted by the general shareholders meetings of the company, which must be duly recorded in the company’s books; |
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Sovereign | Santander | |
• request any information regarding the issues included in the agenda of a general shareholders meetings both: (i) in writing, up to and including the seventh day prior to the general shareholders meeting; and (ii) verbally during the meeting. Santander directors must provide the requested information unless it is inappropriate to do so in accordance with law and, in particular, if in the opinion of the Chairman of Santander the publicity of the requested information may damage the interests of Santander. However, Santander directors cannot rely on this exclusion if the request is supported by shareholders representing at least 25% of Santander’s share capital. As Santander is a listed company, shareholders may also request, up to and including the seventh day prior to the meeting, further details on any information available to the public that Santander has submitted to the CNMV since the last general shareholders meeting; | ||
• inspect the annual accounts that are to be approved at an annual general shareholders meeting; and | ||
• inspect the compulsory reports and information that the board of directors of the company must provide prior to certain actions (such as the merger or de-merger of the company or share capital increases). Apart from the general information right described above, the shareholders of a Spanish public company may not inspect the company’s documents, contracts, books or information. Notwithstanding the above, Santander’s bylaws give its shareholders the right to inspect the attendance list of the general shareholders meetings during the meeting. |
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Sovereign | Santander | |
BOARD OF DIRECTORS | ||
Size and Classification of Board of Directors | ||
Sovereign’s amended and restated articles of incorporation provide that the Sovereign board of directors shall consist of not less than six nor more than 25 members in number, as shall be fixed by the Sovereign board of directors from time to time. Currently, the Sovereign board of directors has 10 directors. Sovereign’s amended and restated articles of incorporation provides for a classified board of directors, dividing the Sovereign board of directors into three classes, with one class elected each year and with each director elected for a term of three years. Currently, four directors serve as Class I directors, four directors serve as Class II directors, and two directors serve as Class III directors. | Santander’s bylaws provide that the minimum number of directors is 14 and that the maximum is 22 and Santander’s board of directors currently consists of 19 directors. Santander’s bylaws provide that the term of office of a director is five years, however, directors may be reappointed. Santander’s bylaws also provide that every year the term of office of one fifth of the directors must lapse. The directors to retire are those who have been longest in office since their last appointment. | |
Election | ||
Sovereign’s directors are elected by a plurality of the votes of the shares present in person or represented by proxy at any meeting and entitled to vote on the election of directors. Each share of Sovereign common stock carries one vote per director to be elected. Holders of Sovereign common stock are not entitled to cumulate their votes in the election of directors. | Directors are generally appointed by the general shareholders meeting. Under Spanish law, shareholders holding shares, in aggregate, equal to or greater than the result of dividing the total share capital by the number of directors, have the right to appoint a corresponding proportion of the members of the board of directors (disregarding the fractions). Shareholders who exercise this right may not vote on the appointment of other directors. | |
Removal | ||
Under Sovereign’s amended and restated articles of incorporation, directors may not be removed from office by a vote of shareholders unless the votes of shareholders cast in favor of removal constitute a majority of the votes which all shareholders would be entitled to cast at an annual meeting. | Under Spanish law, shareholders may remove a director without cause at any time by passing the relevant resolution at a general shareholders meeting. | |
Vacancies | ||
Sovereign’s articles of incorporation and amended bylaws provide that any vacancy occurring in the Sovereign board of directors shall be filled by a majority of the remaining members (though less than a quorum of the Sovereign board of directors) and each person so elected shall be a director of the same class as his predecessor until his successor is elected by the shareholders. | The board of directors has the power to provisionally fill all vacancies on the board until the next general shareholders meeting, whereupon the shareholders may confirm or revoke such appointment. A director appointed to provisionally fill a vacancy must be a shareholder. If the board of directors fails to provisionally appoint a shareholder to fill a vacancy as described above, or if the shareholders resolve to revoke the appointment of a director provisionally appointed by the board, the shareholders may appoint another person as a director to fill such vacancy. |
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Sovereign | Santander | |
Director Liability and Indemnification | ||
Sovereign’s amended bylaws provide for indemnification of directors, officers and agents for certain litigation related liabilities and expenses. Directors, officers, employees and agents of Sovereign are entitled to indemnification in both third party actions and derivative actions to the fullest extent permitted by Pennsylvania law. The BCL prohibits indemnification where there is a court finding that the act or failure to act giving rise to the claim for indemnification constitutes willful misconduct or recklessness. | Under the Spanish Corporation Law and Santander’s bylaws, Santander directors are liable to Santander, its shareholders and its creditors for any damage that they may cause by acts or omissions contrary to applicable law or Santander’s bylaws or by any acts or omissions contrary to the duties inherent to the exercise of their office. Santander maintains an insurance policy that protects its directors and officers from civil liabilities incurred as a result of actions taken in their official capacity associated with any civil, criminal or administrative process. | |
ANTI-TAKEOVER PROVISIONS | ||
Business Combinations | ||
Sovereign is subject to the “business combination” provisions of the BCL which restrict Sovereign from being a party to certain transactions with a shareholder that owns shares entitled to cast 20% or more of the votes that all shareholders would be entitled to cast in an election of directors unless the transaction has received certain specified approvals and meets certain other tests relating to timing and the consideration to be paid to other shareholders. | Not applicable. | |
Mandatory Tender Offer | ||
Sovereign’s amended and restated articles of incorporation provide that any person or entity acquiring Sovereign capital stock with 25% or more of Sovereign’s total voting power is required to offer to purchase, for cash, all shares of Sovereign’s voting stock, at a price per share equal to the highest price paid by such person for each respective class of Sovereign’s voting stock within the preceding 12 months. | Under Spanish law, mandatory public tender offers at a regulated price set forth by Spanish law must be launched for all the shares of the target company or other securities that might directly or indirectly give the right to subscription thereto or acquisition thereof (including convertible and exchangeable bonds) when any person acquires control of a Spanish company listed on the Spanish Stock Exchanges. | |
For these purposes, control of a target company is deemed to have been obtained, individually or jointly, if: (i) any person or group of people directly or indirectly acquire 30% or more of the voting rights in the company; or (ii) any person or group of people directly or indirectly acquires less than 30% of the voting rights in the company and, within 24 months of the acquisition, that person or group of people has been responsible for the appointment of more than one-half of the target company’s board of directors. |
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Sovereign | Santander | |
Under Spanish law, where, following a tender offer for the shares of a listed company which has been accepted by 90% or more of the voting rights pertaining to the total shares to which the offer was addressed, the offeror holds 90% or more of the voting capital of the target company, holders of the outstanding ordinary shares may require the offeror to purchase all such outstanding shares, and the offeror may require all such holders to sell their shares to the offeror, at a regulated price set forth by Spanish law. | ||
DUTIES OF DIRECTORS | ||
Under Pennsylvania law, a corporation’s directors have a duty to act in good faith in a manner which they reasonably believe to be in the best interests of the corporation. In discharging that responsibility, directors owe a duty of care and a duty of loyalty to the corporation. | Under Spanish law, the board of directors of a company is responsible for the management and representation of the company, although certain matters are reserved to the general shareholders meeting. In accordance with Santander’s internal rules, which follow corporate governance best practice, the board of directors has a general duty of supervision. | |
Under Pennsylvania law, in considering the best interests of the corporation, directors may consider to the extent they deem appropriate, the effects of any action on all groups affected, including without limitation, shareholders, employees, customers, creditors, and communities, and the short-term and long-term interests of the corporation. Under Pennsylvania law, directors are required to act with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under such circumstances. Directors are required to exercise an informed business judgment in the performance of their duties. To do so, directors must have informed themselves of all material information reasonably available to them. | A director must comply with the duties set out in the law, in the company’s bylaws and in its regulations for the general shareholders meeting and the board of directors. These duties include the following: • to act diligently in his or her management of the company. In particular, the law establishes that he or she must carry out his or her duties with the diligence of an “orderly entrepreneur(ordenado empresario) and a faithful representative (representante leal)” and must diligently inform himself or herself of the company’s business development; • to comply with duties established by the law and the company’s bylaws, acting in the company’s best interests; |
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Sovereign | Santander | |
• to comply with duties of loyalty: (i) the directors shall not use the name of Santander or invoke their capacity as directors in order to carry out transactions for their own account or for the account of persons related to them; (ii) no director may make, either for his own benefit or for the benefit of any persons related to him, investments or transactions of any kind related to the assets of Santander which have come to the director’s attention during the performance of his duties as such, when the investment or transaction has been offered to Santander or Santander is interested in it, unless Santander has turned down such an investment or transaction and the director has not influenced Santander’s decision; (iii) the directors must notify the Santander board of directors of any direct or indirect conflict of interests which they have with the interests of Santander. If the conflict arises from a transaction with Santander, the director shall be prohibited from conducting such a transaction unless the Santander board of directors, following a report from the Appointments and Remuneration Committee, approves the transaction. In the event of conflict, the director involved shall not participate in the deliberations and decisions in respect of the transaction in which the conflict arises; (iv) the directors must notify the Santander board of directors, as soon as possible, of those circumstances affecting them which might prejudice the credit or reputation of Santander, and particularly the criminal cases with which they may be charged; and (v) the directors must disclose any interest that they hold in the capital of a company engaged in a line of business which is the same as or analogous or complementary to the business of Santander, as well as any offices held or duties performed therein and the conduct, for the director’s own account or for the account of another, of any kind of business that is the same as, analogous or complementary to the business that the corporate purpose of Santander consists of; | ||
• to maintain secrecy of confidential information, even after his or her retirement or removal as director, subject to certain exceptions; and | ||
• not to conduct, or suggest to any person that they conduct, transactions involving securities of Santander or any of its subsidiaries, affiliated or related companies in connection with which the directors have, by reason of their position, privileged or confidential information, so long as such information is not within the public domain. |
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In addition to the above, Spanish banking regulations impose on directors requirements relating to professional and commercial integrity and relevant knowledge and expertise. | ||
SANTANDER ADS PRE-RELEASE; VOTING OF SANTANDER ADSs; AMENDMENT OF DEPOSIT AGREEMENT | ||
Not applicable. | Santander ADS Pre-Release. In certain circumstances, the depositary may issue Santander ADSs before the deposit of Santander ordinary shares. | |
Voting of Santander ADSs. The depositary has agreed that upon receipt of notice in English of any meeting of holders of shares, as soon as practicable thereafter, it will mail a summary of the information contained in such notice of meeting to the record holders of ADSs. | ||
• The record holders of ADSs (as of the close of business on the date specified by the depositary in the notice to holders) are entitled, subject to applicable laws, the bylaws(estatutos) of Santander and the deposit agreement, to instruct the depositary as to the exercise of the voting rights, if any, pertaining to their holdings. | ||
• The depositary has agreed that it will endeavor, insofar as practicable, to have the shares voted so represented in accordance with any such written instructions of record holders of ADSs | ||
• The depositary has agreed not to vote any shares except in accordance with instructions from the record holders of ADSs. | ||
Amendment of Deposit Agreement. An amendment that increases certain charges or otherwise prejudices substantial existing rights of holders will not become effective until three months after notice of the amendment. |
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• | his or her appointment or ratification, removal, dismissal or withdrawal as director; | |
• | the institution of a corporate action for liability(acción social de responsabilidad) against him or her; or | |
• | the approval or ratification of transactions between Santander and the director in question, companies controlled or represented by him or her, or persons acting for his or her account. |
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• | issuance of bonds; | |
• | increase or reduction of share capital; | |
• | transformation of Santander (change in corporate nature); | |
• | merger, de-merger, split or spin-off; | |
• | any other amendment of Santander’s bylaws; and | |
• | dissolution. |
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• | capital increases following conversion of convertible debt into Santander shares; |
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• | capital increases because of the absorption of another company or of part of the spun-off assets of another company, when the new shares are issued in exchange for the new assets received; or | |
• | capital increases for the issuance of Santander securities in the context of a tender offer for other securities in which the Santander securities are being used as all or part of the consideration. |
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• | fully collateralized (marked to market daily) with cash or U.S. government securities; |
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• | preceded or accompanied by written representation and agreement from the person to whom Santander ADSs are to be delivered that the person, or its customer: |
• | owns the shares to be remitted; | |
• | assigns all beneficial rights, title and interest in such shares or Santander ADSs, as the case may be, to the depositary in its capacity as such, and for the benefit of the holders; and | |
• | will not take any action with respect to such shares or Santander ADSs, as the case may be, that is inconsistent with the transfer of beneficial ownership (including, without the consent of the depositary, disposing of such shares or Santander ADSs, as the case may be), other than in satisfaction of such pre-release. | |
• | terminable by the depositary on not more than five business days’ notice; and | |
• | subject to such further indemnities and credit regulations that JPMorgan Chase Bank, N.A. considers appropriate. |
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Santander SEC Filings | ||
(File No. 001-12518; CIK No. 0000891478) | Period or Date Filed | |
Annual Report onForm 20-F | Year ended December 31, 2007 (Filed on June 27, 2008) | |
Current Report onForm 6-K (which contains Santander’s results of operations, financial statements and other disclosure relating to the six months ended June 30, 2008) | Period of six months ended June 30, 2008 (Filed on October 29, 2008) | |
Current Report onForm 6-K | Period of nine months ended September 30, 2008 (Filed on November 10, 2008) | |
Current Report onForm 6-K | Filed December 15, 2008 |
Sovereign SEC Filings | ||
(File No. 1-16581; CIK No. 0000811830) | Period or Date Filed | |
Annual Report onForm 10-K | Year ended December 31, 2007 (Filed on February 29, 2008) | |
Quarterly Report onForm 10-Q | Quarter ended March 31, 2008 (Filed on May 8, 2008) | |
Quarter ended June 30, 2008 (Filed on July 31, 2008) | ||
Quarter ended September 30, 2008 (Filed on November 5, 2008) | ||
Current Reports onForm 8-K | January 14, 2008, January 24, 2008, January 29, 2008, February 21, 2008, April 17, 2008, April 23, 2008, April 28, 2008, May 12, 2008, May 13, 2008, May 20, 2008, July 18, 2008, July 23, 2008, September 8, 2008, September 19, 2008, September 30, 2008, October 7, 2008, October 14, 2008, October 16, 2008, November 17, 2008 (except for the portions of those documents not deemed to be filed) | |
Proxy Statement on Form 14A | Filed on March 24, 2008 | |
Form 425 | October 17, 2008, October 20, 2008, October 22, 2008, October 23, 2008, November 12, 2008, November 17, 2008, November 20, 2008 |
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ARTICLE 1 Definitions | ||||||
Section 1.01. | Definitions | A-1 | ||||
Section 1.02. | Other Definitional and Interpretative Provisions | A-8 | ||||
ARTICLE 2 [Left Blank Intentionally] | ||||||
ARTICLE 3 The Reincorporation Merger | ||||||
Section 3.01. | The Reincorporation Merger | A-9 | ||||
Section 3.02. | Effective Time | A-9 | ||||
Section 3.03. | Effect Of Reincorporation Merger | A-9 | ||||
Section 3.04. | Conversion Of Shares | A-9 | ||||
Section 3.05. | Options; Restricted Stock | A-10 | ||||
Section 3.06. | ESPP | A-10 | ||||
Section 3.07. | Articles of Incorporation | A-10 | ||||
Section 3.08. | Bylaws | A-10 | ||||
Section 3.09. | Board of Directors; Management | A-11 | ||||
Section 3.10. | Tax Consequences | A-11 | ||||
ARTICLE 4 The Share Exchange | ||||||
Section 4.01. | The Share Exchange | A-11 | ||||
Section 4.02. | Exchange Effective Time | A-11 | ||||
Section 4.03. | Effects of the Share Exchange | A-11 | ||||
Section 4.04. | Exchange Of Company Virginia Sub Common Stock | A-12 | ||||
Section 4.05. | Parent Capital Stock | A-12 | ||||
ARTICLE 5 Exchange Of Shares | ||||||
Section 5.01. | Deposit of Consideration | A-13 | ||||
Section 5.02. | Exchange Of Shares | A-13 | ||||
Section 5.03. | Withholding Rights | A-15 | ||||
ARTICLE 6 Representations and Warranties of the Company | ||||||
Section 6.01. | Corporate Existence and Power | A-15 | ||||
Section 6.02. | Corporate Authorization | A-15 | ||||
Section 6.03. | Governmental Authorization | A-16 | ||||
Section 6.04. | Non-contravention | A-16 | ||||
Section 6.05. | Capitalization | A-17 | ||||
Section 6.06. | Subsidiaries | A-17 | ||||
Section 6.07. | Company Virginia Sub | A-18 | ||||
Section 6.08. | SEC Filings and the Sarbanes-Oxley Act | A-19 | ||||
Section 6.09. | Financial Statements | A-20 | ||||
Section 6.10. | Disclosure Documents | A-20 | ||||
Section 6.11. | Absence of Certain Changes | A-20 |
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Section 6.12. | No Undisclosed Material Liabilities | A-21 | ||||
Section 6.13. | Compliance with Laws and Court Orders | A-21 | ||||
Section 6.14. | Litigation | A-21 | ||||
Section 6.15. | Properties | A-21 | ||||
Section 6.16. | Intellectual Property | A-21 | ||||
Section 6.17. | Taxes | A-22 | ||||
Section 6.18. | Employees and Employee Benefits Plans | A-23 | ||||
Section 6.19. | Environmental Matters | A-24 | ||||
Section 6.20. | Material Contracts | A-25 | ||||
Section 6.21. | Insurance | A-25 | ||||
Section 6.22. | Reports; Regulatory Matters | A-25 | ||||
Section 6.23. | Agreements With Regulatory Authorities | A-26 | ||||
Section 6.24. | Investment Securities | A-26 | ||||
Section 6.25. | Derivative Instruments | A-26 | ||||
Section 6.26. | Finders’ Fees | A-27 | ||||
Section 6.27. | Opinion of Financial Advisor | A-27 | ||||
Section 6.28. | Antitakeover Statutes and Rights Agreement | A-27 | ||||
Section 6.29. | Allowance For Losses | A-27 | ||||
Section 6.30. | Related Party Transactions | A-27 | ||||
Section 6.31. | Loans | A-27 | ||||
Section 6.32. | Anti-money Laundering and Customer Information Security | A-28 | ||||
Section 6.33. | Credit Card Accounts | A-28 | ||||
Section 6.34. | No Reliance | A-28 | ||||
ARTICLE 7 Representations and Warranties of Parent | ||||||
Section 7.01. | Corporate Existence and Power | A-28 | ||||
Section 7.02. | Capitalization | A-29 | ||||
Section 7.03. | Corporate Authorization | A-29 | ||||
Section 7.04. | Governmental Authorization | A-29 | ||||
Section 7.05. | Non-contravention | A-30 | ||||
Section 7.06. | Disclosure Documents | A-30 | ||||
Section 7.07. | Financial Statements | A-31 | ||||
Section 7.08. | Finders’ Fees | A-31 | ||||
Section 7.09. | No Reliance | A-31 | ||||
Section 7.10. | SEC Filings and the Sarbanes-Oxley Act | A-32 | ||||
Section 7.11. | Litigation | A-32 | ||||
ARTICLE 8 Covenants of the Company | ||||||
Section 8.01. | Conduct of the Company | A-32 | ||||
Section 8.02. | Access to Information | A-34 | ||||
Section 8.03. | No Solicitation; Change of Recommendation | A-35 | ||||
Section 8.04. | [Left Intentionally Blank] | A-37 | ||||
Section 8.05. | Litigation | A-37 | ||||
Section 8.06. | Company Virginia Sub Shareholder Vote | A-37 | ||||
Section 8.07. | Joinder Agreement | A-37 | ||||
Section 8.08. | Structure of the Transaction | A-37 |
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ARTICLE 9 Covenants of Parent | ||||||
Section 9.01. | Director and Officer Liability | A-37 | ||||
Section 9.02. | Employee Matters | A-38 | ||||
Section 9.03. | Santander Shares | A-39 | ||||
ARTICLE 10 Covenants of Parent and the Company | ||||||
Section 10.01. | Regulatory Matters | A-39 | ||||
Section 10.02. | Stockholder Meetings | A-41 | ||||
Section 10.03. | Public Announcements | A-41 | ||||
Section 10.04. | Further Assurances | A-41 | ||||
Section 10.05. | Notices of Certain Events | A-41 | ||||
Section 10.06. | Takeover Statutes | A-42 | ||||
Section 10.07. | Exemption From Liability Under Section 16(b) | A-42 | ||||
Section 10.08. | Incentive Bonus Program | A-42 | ||||
ARTICLE 11 Conditions to the Reincorporation Merger and the Share Exchange | ||||||
Section 11.01. | Conditions to the Obligations of Each Party | A-42 | ||||
Section 11.02. | Conditions to Obligations of Parent | A-43 | ||||
Section 11.03. | Condition to Obligations of the Company | A-43 | ||||
ARTICLE 12 Termination | ||||||
Section 12.01. | Termination | A-44 | ||||
Section 12.02. | Effect of Termination | A-45 | ||||
ARTICLE 13 Miscellaneous | ||||||
Section 13.01. | Notices | A-45 | ||||
Section 13.02. | Survival | A-46 | ||||
Section 13.03. | Amendments and Waivers | A-46 | ||||
Section 13.04. | Expenses | A-46 | ||||
Section 13.05. | Investment Agreement | A-47 | ||||
Section 13.06. | Disclosure Schedule References | A-47 | ||||
Section 13.07. | Binding Effect; Benefit; Assignment | A-47 | ||||
Section 13.08. | Governing Law | A-48 | ||||
Section 13.09. | Jurisdiction | A-48 | ||||
Section 13.10. | WAIVER OF JURY TRIAL | A-48 | ||||
Section 13.11. | Counterparts; Effectiveness | A-48 | ||||
Section 13.12. | Entire Agreement | A-48 | ||||
Section 13.13. | Severability | A-48 | ||||
Section 13.14. | Specific Performance | A-48 |
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Term | Section | |
Adverse Recommendation Change | Section 8.03 | |
Agreement | Preamble | |
Board Reports | 10.01 | |
Capital Increase | Section 7.05 | |
Closing | Section 3.01 | |
Closing Date | Section 3.01 | |
Code | Preamble | |
Commercial Registry | 4.03 | |
Company | Preamble | |
Company Board | Preamble | |
Company Board Recommendation | Section 6.02 | |
Company Committee | Section 8.02 | |
Company Common Certificate | 3.04 | |
Company Common Stock | 3.04 | |
Company Disclosure Documents | Section 6.10 | |
Company Employees | 9.02 | |
Company Requisite Regulatory Approvals | Section 11.03 | |
Company SEC Documents | Section 6.08 | |
Company Securities | Section 6.05 | |
Company Series C Certificate | Section 3.04 |
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Term | Section | |
Company Series C Stock | 3.04 | |
Company Stock Option | 3.05 | |
Company Shareholder Approval | Section 6.02 | |
Company Subsidiary Securities | Section 6.06 | |
Company Virginia Exchange Certificate | 4.02 | |
Company Virginia Sub | Preamble | |
Company Virginia Sub Articles | 3.07 | |
Company Virginia Sub Board | Preamble | |
Company Virginia Sub ByLaws | 3.08 | |
Company Virginia Sub Certificates | Section 3.04 | |
Company Virginia Sub Common Stock | Section 3.04 | |
Company Virginia Sub Series C Stock | Section 3.04 | |
Confidentiality Agreement | 8.02 | |
Continuing Employees | Section 9.02 | |
Credit Committee Representative | Section 8.02 | |
Deed of Capital Increase | 4.03 | |
Depositary | 5.01 | |
Depositary Agreement | 4.04 | |
Derivative Transactions | 6.25 | |
End Date | Section 12.01 | |
Equity Plans | 3.05 | |
ESPP | Section 3.06 | |
Exchange Agent | 5.01 | |
Exchange Effective Time | 4.02 | |
Exchange Fund | 5.01 | |
FINRA | Section 6.03 | |
Indemnified Person | Section 9.01 | |
Lease | 6.15 | |
Letter of Transmittal | 5.02 | |
Material Contract | Section 6.20 | |
Materially Burdensome Regulatory Condition | Section 10.01 | |
NSEC | 4.03 | |
Parent | Preamble | |
Parent ADSs | 4.04 | |
Parent Bylaws | 7.01 | |
Parent Ordinary Shares | 4.04 | |
Parent Representative | Section 8.02 | |
Parent Requisite Regulatory Approvals | 11.02 | |
Parent SEC Documents | Section 7.10 | |
Parent Shareholder Approval | 7.05 | |
Permits | Section 6.13 | |
Prospectus | 7.04 | |
Proxy Statement | Section 6.03 | |
Regulatory Agencies | 6.22 |
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Term | Section | |
Regulatory Agreement | 6.23 | |
Reincorporation Effective Time | 3.02 | |
Reincorporation Merger | Preamble | |
Reports | 6.22 | |
Representatives | 8.02 | |
SCL | 4.01 | |
Share Consideration | 4.04 | |
Share Exchange | Preamble | |
Subsidiaries | Section 6.19 | |
Superior Proposal | Section 8.03 | |
Surviving Corporation | Section 3.01 | |
Takeover Statutes | 6.02 | |
Tax | Section 6.17 | |
Taxing Authority | Section 6.17 | |
Tax Return | Section 6.17 | |
Tax Sharing Agreements | Section 6.17 | |
Transaction | Preamble | |
Transfer Agent | 4.03 | |
Voting Agreement | Preamble | |
Voting Debt | Section 7.02 | |
VSCA | Preamble | |
Termination Fee | Section 13.04 | |
USA Patriot Act | 6.32 |
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Ciudad Grupo Santander
Avda. de Cantabria, s/n
28660 Boadilla del Monte
Spain
Attention: Ignacio Benjumea, General Secretary
Facsimile No.:34-91-259-6634
Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attention: | Diane G. Kerr Joseph Rinaldi Facsimile No.:(212) 450-3800 |
75 State Street
Third Floor
Boston, Massachusetts 02109
Attention: CEO
Facsimile No.:(617) 757-5657
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1 Chase Manhattan Plaza
New York, New York 10005
Attention: Thomas C. Janson
Facsimile No.(212) 822-5921
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page is the signature page.]
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By: |
Title: |
By: |
Title: |
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745 Seventh Avenue New York, NY 10019 United States |
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• | As a result of general market conditions and matters specific to the Company’s condition (financial and otherwise), the Company currently is having difficulty accessing the capital markets, and this difficulty is expected to continue for the foreseeable future. | |
• | The Company has recently experienced intermittent but significant deposit outflows that have reduced its cash available to fund its future operations. The Company has concluded that, in light of volatile market conditions and recent experiences of the Company’s industry peers, there is a significant risk that such deposit outflows could recur and intensify at any time. There is substantial uncertainty as to whether the collateral available to obtain loans from the Federal Home Loan Bank and the Federal Reserve discount window will continue to be sufficient to meet the Company’s future liquidity needs. | |
• | Neither the Federal Reserve nor the Office of Thrift Supervision has offered any financial assistance to the Company on a stand-alone basis other than the Federal Home Loan Bank and Federal Reserve borrowings referred to above, and the Company does not expect that any such financial assistance, including any equity investment by any bank regulatory authority, will be available in the future. |
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MC 11900IR5
WYOMISSING, PA 19610
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | SVCOM1 | KEEP THIS PORTION FOR YOUR RECORDS | ||
DETACH AND RETURN THIS PORTION ONLY |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” MATTER NO. 1 AND NO. 2. | For | Against | Abstain | |||
MATTER NO. 1: | ||||||
TO APPROVE AND ADOPT THE TRANSACTION AGREEMENT, DATED AS OF OCTOBER 13, 2008, BETWEEN SOVEREIGN BANCORP, INC. AND BANCO SANTANDER, S.A. | o | o | o | |||
MATTER NO. 2: | ||||||
TO APPROVE AN ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, TO SOLICIT ADDITIONAL PROXIES. | o | o | o |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. |
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
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To vote by mail, please vote and sign on the other side.
AFTER COMPLETING, SIGNING AND DATING.
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Only The Charles Schwab Trust Company, the trustee of the Plan (the “Trustee”), can vote the Shares held by the Plan. However, under the terms of the Plan, each participant may act as a “Named Fiduciary” as defined in the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), for the purpose of voting Shares allocated to the participant’s account. The Trustee is required to follow proper instructions of named fiduciaries that are in accordance with the terms of the Plan and are not contrary to the fiduciary standards of ERISA. Fiduciaries under ERISA (including persons designated as “Named Fiduciaries”) are required to act prudently, solely in the interest of plan participants and beneficiaries, and for the exclusive purpose of providing benefits to plan participants and beneficiaries.
How you vote will not be revealed, directly or indirectly, to any officer, to any other employee, or any director of the Company or to anyone else, except as otherwise required by law. You should, therefore, feel completely free to instruct the Trustee to vote these Shares in the manner you think best.
Because of the time required to tabulate voting instructions from participants before the Special Meeting, the Trustee must establish a cut-off date for receiving your voting instructions. The cut-off date established by the Trustee is 5:00 P.M. Eastern Time on January 22, 2009. The Trustee cannot insure that instructions received after the cut-off date will be tabulated. Therefore, it is important that you act promptly and vote to insure the vote is received on or before January 22, 2009 by Internet, telephone or mail. If the Trustee does not receive timely instructions from you, the Trustee will vote these shares in accordance with the terms of the Plan and its related trust document.
If you have questions regarding this information, you may contact Sovereign Human Resources at (800) 210 -1426 between 8:00 A.M. and 5:00 P.M. Eastern Time, Monday through Friday (press Option 3 for Benefits, then Option 3 again for the retirement plans).