_________________, 1997
The Bank of New York
Corporate Trust Administration
101 Barclay Street
New York, New York 10286
Ladies and Gentlemen:
Sovereign Capital Trust I, a trust formed under the laws of
the State of Delaware (the "Trust") proposes to make an offer
(the "Exchange Offer") to exchange any and all of its outstanding
9.00% Subordinated Capital Income Securities (Liquidation Amount
$1,000 per Capital Security) (the "Original Capital Securities")
for its 9.00% Exchange Subordinated Capital Income Securities
(Liquidation Amount $1,000 per Capital Security) (the "Exchange
Capital Securities"). All of the beneficial interests
represented by common securities of the Trust are owned by
Sovereign Bancorp, Inc., a Pennsylvania corporation (the
"Corporation"). The terms and conditions of the Exchange Offer
as currently contemplated are set forth in a prospectus, dated
____________, 1997 (the "Prospectus"), to be distributed to all
record holders of the Original Capital Securities. A copy of the
Prospectus is attached hereto as Exhibit A. The Original Capital
Securities and the Exchange Capital Securities are collectively
referred to herein as the "Securities." Capitalized terms used
but not defined herein shall have the same meaning given them in
the Prospectus.
A copy of each of the form of the Letter of Transmittal, the
form of the Notice of Guaranteed Delivery, the form of letter to
brokers and the form of letter to clients are attached hereto as
Exhibit B.
The Trust hereby appoints The Bank of New York to act as
exchange agent (the "Exchange Agent") in connection with the
Exchange Offer. References hereinafter to "you" shall refer to
The Bank of New York.
The Exchange Offer is expected to be commenced by the Trust
on or about _____________, 1997. The Letter of Transmittal
accompanying the Prospectus (or in the case of book entry
securities, the ATOP system) is to be used by the holders of the
Original Capital Securities to accept the Exchange Offer and
contains instructions with respect to (i) the delivery of
certificates for Original Capital Securities tendered in
connection therewith and (ii) the book entry transfer of
Securities to the Exchange Agent's account.
The Exchange Offer shall expire at 5:00 p.m., New York City
time, on ________________, 1997 or on such later date or time to
which the Trust may extend the Exchange Offer (the "Expiration
Date"). Subject to the terms and conditions set forth in the
Prospectus, the Trust expressly reserves the right to extend the
Exchange Offer from time to time by giving oral (to be confirmed
in writing) or written notice to you before 9:00 a.m., New York
City time, on the Business Day following the previously scheduled
Expiration Date.
The Trust expressly reserves the right to amend or terminate
the Exchange Offer, and not to accept for exchange any Original
Capital Securities not theretofore accepted for exchange, upon
the occurrence of any of the conditions of the Exchange Offer
specified in the Prospectus under the caption "The Exchange Offer
- -- Conditions to the Exchange Offer." The Trust will give you
prompt oral (confirmed in writing) or written notice of any
amendment, termination or nonacceptance of Original Capital
Securities.
In carrying out your duties as Exchange Agent, you are to
act in accordance with the following instructions:
1. You will perform such duties and only such duties as
are specifically set forth in the section of the Prospectus
captioned "The Exchange Offer" or as specifically set forth
herein; provided, however, that in no way will your general duty
to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the
Original Capital Securities at The Depository Trust Company (the
"Book-Entry Transfer Facility") for purposes of the Exchange
Offer within two Business Days after the date of the Prospectus,
and any financial institution that is a participant in the Book-
Entry Transfer Facility's system may make book-entry delivery of
the Original Capital Securities by causing the Book-Entry
Transfer Facility to transfer such Original Capital Securities
into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal
and certificates for Original Capital Securities (or confirmation
of book-entry transfer into your account at the Book-Entry
Transfer Facility) and any other documents delivered or mailed to
you by or for holders of the Original Capital Securities to
ascertain whether: (i) the Letters of Transmittal and any such
other documents are duly executed and properly completed in
accordance with instructions set forth therein and (ii) the
Original Capital Securities have otherwise been properly
tendered. In each case where the Letter of Transmittal or any
other document has been improperly completed or executed or any
of the certificates for Original Capital Securities are not in
proper form for transfer or some other irregularity in connection
with the acceptance of the Exchange Offer exists, you will
endeavor to inform such holders of the need for fulfillment of
all requirements and to take any other action as may be necessary
or advisable to cause such irregularity to be corrected.
4. With the approval of any Administrative Trustee of the
Trust or any person designated in writing by the Corporation (a
"Designated Officer") (such approval, if given orally, to be
confirmed in writing) or any other party designated by any such
Administrative Trustee or Designated Officer in writing, you are
authorized to waive any irregularities in connection with any
tender of Original Capital Securities pursuant to the Exchange
Offer.
5. Tenders of Original Capital Securities may be made only
as set forth in the Letter of Transmittal and in the section of
the Prospectus captioned "The Exchange Offer -- Procedures for
Tendering Original Capital Securities," and Original Capital
Securities shall be considered properly tendered to you only when
tendered in accordance with the procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Original
Capital Securities which any Administrative Trustee of the Trust
or Designated Officer of the Corporation shall approve as having
been properly tendered shall be considered to be properly
tendered. Such approval, if given orally, shall be confirmed in
writing.
6. You shall advise the Trust and the Corporation with
respect to any Original Capital Securities received subsequent to
the Expiration Date and accept their instructions with respect to
disposition of such Original Capital Securities.
7. You shall accept tenders:
(a) in cases where the Original Capital Securities are
registered in two or more names only if signed by all named
holders;
(b) in cases where the signing person (as indicated on
the Letter of Transmittal) is acting in a fiduciary or a
representative capacity only when proper evidence of such
person's authority so to act is submitted; and
(c) from persons other than the registered holder of
Original Capital Securities provided that customary transfer
requirements, including satisfaction of any applicable transfer
taxes, are fulfilled.
You shall accept partial tenders of Original Capital
Securities where so indicated and as permitted in the Letter of
Transmittal and deliver certificates for Original Capital
Securities to the transfer agent for division and return any
untendered Original Capital Securities to the holder (or such
other person as may be designated in the Letter of Transmittal)
as promptly as practicable after expiration or termination of the
Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to
the Exchange Offer, the Trust will notify you (such notice, if
given orally, to be confirmed in writing) of its acceptance,
promptly after the Expiration Date, of all Original Capital
Securities properly tendered and you, on behalf of the Trust,
will exchange such Original Capital Securities for Exchange
Capital Securities and cause such Original Capital Securities to
be canceled. Delivery of Exchange Capital Securities will be
made on behalf of the Trust by you at the rate of $1,000
liquidation amount of Exchange Capital Securities for each $1,000
liquidation amount of the corresponding series of Original
Capital Securities tendered promptly after notice (such notice,
if given orally, to be confirmed in writing) of acceptance of
said Original Capital Securities by the Trust; provided, however,
that in all cases, Original Capital Securities tendered pursuant
to the Exchange Offer will be exchanged only after timely receipt
by you of certificates for such original Capital Securities (or
confirmation of book-entry transfer into your account at the
Book-Entry Transfer Facility), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any
required signature guarantees and any other required documents.
You shall issue Exchange Capital Securities only in denominations
of $100,000 and integral multiples of $1,000 in excess thereof.
Original Capital Securities may be tendered in whole or in part
in denominations of $100,000 and integral multiples of $1,000 in
excess thereof, provided that if any Original Capital Securities
are tendered for exchange in part, the untendered principal
amount thereof must be $100,000 or any integral multiple of
$1,000 in excess thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and upon the conditions set
forth in the Prospectus and the Letter of Transmittal, Original
Capital Securities tendered pursuant to the Exchange Offer may be
withdrawn at any time on or prior to the Expiration Date.
10. The Trust shall not be required to exchange any
Original Capital Securities tendered if any of the conditions set
forth in the Exchange Offer are not met. Notice of any decision
by the Trust not to exchange any Original Capital Securities
tendered shall be given orally (and confirmed in writing) by the
Trust to you.
11. If, pursuant to the Exchange Offer, the Trust does not
accept for exchange all or part of the Original Capital
Securities tendered because of an invalid tender, the occurrence
of certain other events set forth in the Prospectus under the
caption "The Exchange Offer -- Conditions to the Exchange Offer"
or otherwise, you shall promptly after the expiration or
termination of the Exchange Offer return those certificates for
unaccepted Original Capital Securities (or effect appropriate
book-entry transfer), together with any related required
documents and the Letters of Transmittal relating thereto that
are in your possession, to the persons who deposited them.
12. All certificates for reissued Original Capital
Securities, unaccepted Original Capital Securities or for
Exchange Capital Securities shall be forwarded (a) by first-class
mail, under a blanket surety bond protecting you and the Trust
from loss or liability arising out of the non-receipt or non-
delivery of such certificates; or (b) by effectuating appropriate
book-entry transfer.
13. You are not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker,
dealer, bank or other persons or to engage or utilize any person
to solicit tenders.
14. As Exchange Agent hereunder, you:
(a) shall have no duties or obligations other than
those specifically set forth herein or as may be subsequently
agreed to in writing by you and the Trust;
(b) will be regarded as making no representations and
having no responsibilities as to the validity, sufficiency, value
or genuineness of any of the certificates or the Original Capital
Securities represented thereby deposited with you pursuant to the
Exchange Offer, and will not be required to and will make no
representation as to the validity, value or genuineness of the
Exchange Offer or the Letter of Transmittal or any other
disclosure materials delivered in connection therewith;
(c) shall not be obligated to take any legal action
hereunder which might in your reasonable judgment involve any
expense or liability, unless you shall have been furnished with
indemnity reasonably satisfactory to you;
(d) may reasonably rely on and shall be protected in
acting in reliance upon any certificate, instrument, opinion,
notice, letter, telegram or other document or security delivered
to you and reasonably believed by you to be genuine and to have
been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement,
request, agreement or other instrument whatsoever not only as to
its due execution and validity and effectiveness of its
provisions, but also as to the truth and accuracy of any
information contained therein, which you shall in good faith
believe to be genuine or to have been signed or represented by a
proper person or persons;
(f) may rely on and shall be protected in acting upon
written or oral instructions from any Administrative Trustee of
the Trust or from any Designated Officer of the Corporation;
(g) may consult with counsel satisfactory to you,
including counsel for the Trust, with respect to any questions
relating to your duties and responsibilities and the advice or
opinion of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or
omitted to be taken by you hereunder in good faith and in
accordance with the advice or opinion of such counsel, provided
that you shall promptly notify the Corporation of any action
taken or omitted by you in reliance upon such advice or opinion;
and
(h) shall not advise any person tendering Original
Capital Securities pursuant to the Exchange Offer as to the
wisdom of making such tender or as to the market value or decline
or appreciation in market value of any Original Capital
Securities.
15. You shall take such action as may from time to time be
requested by the Trust or its counsel or any Designated Officer
of the Corporation (and such other action as you may reasonably
deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery or such other
forms as may be approved from time to time by the Trust or the
Corporation, to all persons requesting such documents and to
accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information
shall relate only to the procedures for accepting (or withdrawing
from) the Exchange Offer. The Trust will furnish you with copies
of such documents at your request. All other requests for
information relating to the Exchange Offer shall be directed to
the Trust, Attention: Mark McCollom.
16. You shall advise by facsimile transmission or
telephone, and promptly thereafter confirm in writing to Mark
McCollom of the Trust, and such other person or persons as the
Trust or the Corporation may request, daily (and more frequently
during the week immediately preceding the Expiration Date and if
otherwise requested) up to and including the Expiration Date, as
to the number of Original Capital Securities which have been
tendered pursuant to the Exchange Offer and the items received by
you pursuant to this Agreement, separately reporting and giving
cumulative totals as to items properly received and items
improperly received. In addition, you will also inform, and
cooperate in making available to, the Trust or the Corporation or
any such other person or persons, upon oral request made from
time to time on or prior to the Expiration Date, such other
information as it or such person reasonably requests. Such
cooperation shall include, without limitation, the granting by
you to the Trust or the Corporation, and such person as the Trust
or the Corporation may request, of access to those persons on
your staff who are responsible for receiving tenders, in order to
ensure that immediately prior to the Expiration Date the Trust or
the Corporation shall have received information in sufficient
detail to enable it to decide whether to extend the Exchange
Offer. You shall prepare a final list of all persons whose
tenders were accepted, the aggregate principal amount of Original
Capital Securities tendered, the aggregate principal amount of
Original Capital Securities accepted and deliver said list to the
Trust promptly after the Expiration Date.
17. Letters of Transmittal and Notices of Guaranteed
Delivery shall be stamped by you as to the date and the time of
receipt thereof and shall be preserved by you for a period of
time at least equal to the period of time you preserve other
records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus
materials by returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or
right of set-off whatsoever that you may have with respect to
funds deposited with you for the payment of transfer taxes by
reasons of amounts, if any, borrowed by the Trust, or any of its
subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you
shall be entitled to the compensation set forth on Schedule I
attached hereto, plus reasonable out-of-pocket expenses and
reasonable attorneys' fees, incurred in connection with your
services hereunder, within thirty days following receipt by the
Corporation of an itemized statement of such expenses and fees in
reasonable detail.
20. (a) The Trust covenants and agrees to indemnify and
hold you harmless in your capacity as Exchange Agent hereunder
against any loss, liability, cost or expense, including
attorneys' fees and expenses, arising out of or in connection
with any act, omission, delay or refusal made by you in reliance
upon any signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or document
reasonably believed by you to be valid, genuine and sufficient
and in accepting any tender or effecting any transfer of Original
Capital Securities reasonably believed by you in good faith to be
authorized, and in delaying or refusing in good faith to accept
any tenders or effect any transfer of Original Capital
Securities; provided, however, that the Trust shall not be liable
for indemnification or otherwise for any loss, liability, cost or
expense to the extent arising out of your gross negligence or
willful misconduct. In no case shall the Trust be liable under
this indemnity with respect to any claim against you unless the
Trust shall be notified by you, by letter or by facsimile
confirmed by letter, of the written assertion of a claim against
you or of any other action commenced against you, promptly after
you shall have received any such written assertion or notice of
commencement of action. The Trust shall be entitled to
participate at its own expense in the defense of any such claim
or other action, and, if the Trust so elects, the Trust shall
assume the defense of any suit brought to enforce any such claim.
In the event that the Trust shall assume the defense of any such
suit, the Trust shall not be liable for the fees and expenses of
any additional counsel thereafter retained by you so long as the
Trust shall retain counsel satisfactory to you to defend such
suit, and so long as you have not determined, in your reasonable
judgment, that a conflict of interest exists between you and the
Trust.
(b) You agree that, without the prior written consent
of the Trust (which consent shall not be unreasonably withheld),
you will not settle, compromise or consent to the entry of any
pending or threatened claim, action, or proceeding in respect of
which indemnification could be sought in accordance with the
indemnification provisions of this Agreement (whether or not you
or the Trust or any of its trustees or controlling persons is an
actual or potential party to such claim, action or proceeding),
unless such settlement, compromise or consent includes an
unconditional release of the Trust and its trustees and
controlling persons from all liability arising out of such claim,
action or proceeding.
21. You shall arrange to comply with all requirements under
the tax laws of the United States, including those relating to
missing Tax Identification Numbers, and shall file any
appropriate reports with the Internal Revenue Service. The Trust
understands that you are required in certain instances to deduct
31% of the amounts to be paid with respect to interest paid on
the Exchange Capital Securities and proceeds from the sale,
exchange, redemption or retirement of the Exchange Capital
Securities from holders who have not supplied their correct
Taxpayer Identification Number or required certification. Such
funds will be turned over to the Internal Revenue Service in
accordance with applicable regulations.
22. You shall notify the Trust of the amount of any
transfer taxes payable in respect of the exchange of Original
Capital Securities and, upon receipt of written approval from the
Trust, you shall deliver or cause to be delivered, in a timely
manner to each governmental authority to which any transfer taxes
are payable in respect of the exchange of Original Capital
Securities, your check in the amount of all transfer taxes so
payable, and the Trust shall reimburse you for the amount of any
and all transfer taxes payable in respect of the exchange of
Original Capital Securities; provided, however, that you shall
reimburse the Trust for amounts refunded to you in respect of
your payment of any such transfer taxes, at such time as such
refund is received by you.
23. This Agreement and your appointment as Exchange Agent
hereunder shall be construed and enforced in accordance with the
laws of the State of New York applicable to agreements made and
to be performed entirely within such state, and without regard to
conflict of laws principles, and shall inure to the benefit of,
and the obligations created hereby shall be binding upon, the
successors and assigns of each of the parties hereto, and no
other person shall have any rights hereunder.
24. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
25. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
26. This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in
part, except by a written instrument signed by a duly authorized
representative of the party to be charged. This Agreement may
not be modified orally.
27. Unless otherwise provided herein, all notices, requests
and other communications to any party hereunder shall be in
writing (including facsimile or similar writing) and shall be
given to such party, addressed to it, at its address or facsimile
number set forth below:
If to the Trust:
Sovereign Capital Trust I
c/o Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, Pennsylvania 19610
Facsimile: (610) 208-6143
Attention: Mark McCollom
If to the Exchange Agent:
The Bank of New York
Floor 21 West
101 Barclay Street
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Administration
28. Unless terminated earlier by the parties hereto, this
Agreement shall terminate 180 days following the Expiration Date.
Notwithstanding the foregoing, Paragraphs 19, 20 and 22 shall
survive the termination of this Agreement. Upon any termination
of this Agreement, you shall promptly deliver to the Trust any
certificates for Securities, funds or property then held by you
as Exchange Agent under this Agreement.
29. This Agreement shall be binding and effective as of the
date hereof.
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the
enclosed copy.
SOVEREIGN CAPITAL TRUST I
By_________________________________
Name: Mark McCollom
Title: Administrative Trustee
Accepted as the date
first above written:
THE BANK OF NEW YORK, as Exchange
Agent
By_________________________________
Name: ___________________
Title: __________________
SCHEDULE I
FEES
THE BANK OF NEW YORK
CORPORATE FINANCE UNIT
SCHEDULE OF FEES
FOR
SOVEREIGN CAPITAL TRUST I
9.00% EXCHANGE SUBORDINATED CAPITAL INCOME SECURITIES
I. EXCHANGE AGENT $________
Covers review of the Letter of Transmittal, the Exchange
Agent Agreement and other related documentation; establishment of
accounts and systems link with depositories; operational and
administrative charges and time spent in connection with the
review, receipt and processing of Letters of Transmittal, Agent's
Messages and Notices of Guaranteed Delivery.
Note: The fees set forth in this schedule are subject to
review of documentation and our internal credit and conflict
review. The fees are also subject to change should circumstances
warrant. Out-of-pocket expenses and disbursements, including
counsel fees, incurred in the performance of our duties will be
added to the billed fees. We may place orders to buy/sell
financial instruments with outside broker-dealers that we select,
as well as The Bank of New York or its affiliates. These
transactions (for which normal and customary spreads will be
earned in addition to the charges quoted above) will be executed
on a riskless principal basis solely for your account(s) and
without recourse to us or our affiliates. If you choose to
invest in any mutual fund, The Bank of New York and/or our
affiliates may earn service fees/expenses associated with these
funds as disclosed in the mutual fund prospectus provided to you,
in addition to the charges quoted above. We will provide
periodic account statements describing transactions executed for
your account(s). Trade confirms will be available upon your
request at no additional charge. If a deal should fail to close
for reasons beyond our control, we reserve the right to charge
our acceptance fee plus reimbursement for legal fees incurred.
Fees for any services not specifically covered in this or
other applicable schedules will be based on an appraisal of
services rendered.