(FORM OF FACE OF SECURITY)
[IF THE SECURITY IS A GLOBAL SECURITY, INSERT: - THIS
SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.]
No. R-1 CUSIP No. ______
SOVEREIGN BANCORP, INC.
Series B 9.00% EXCHANGE JUNIOR SUBORDINATED
DEFERRABLE INTEREST DEBENTURE
DUE April 1, 2027
Sovereign Bancorp, Inc., a Pennsylvania corporation
(the "Company", which term includes any successor Person under
the Indenture hereinafter referred to), for value received,
hereby promises to pay to _____________ or registered assigns,
the principal sum of _______________ Dollars on April 1, 2027
(the "Maturity Date"), unless previously redeemed, and to pay
interest on the outstanding principal amount hereof from
March 24, 1997, or from the most recent interest payment date
(each such date, an "Interest Payment Date") to which interest
has been paid or duly provided for, semi-annually (subject to
deferral as set forth herein) in arrears on April 1 and October 1
of each year, commencing October 1, 1997, at the rate of 9.00%
per annum until the principal hereof shall have become due and
payable, and on any overdue principal and premium, if any, and
(without duplication and to the extent that payment of such
interest is enforceable under applicable law) on any overdue
installment of interest at the same rate per annum compounded
semi-annually. The amount of interest payable on any Interest
Payment Date shall be computed on the basis of a 360-day year of
twelve 30-day months and, for any period less than a full
calendar month, the number of days elapsed in such month. In the
event that any date on which the principal of (or premium, if
any) or interest on this Security is payable is not a Business
Day, then the payment payable on such date will be made on the
next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except
that if such next succeeding Business Day falls in the next
succeeding calendar year, then such payment shall be made on the
immediately preceding Business Day, in each case with the same
force and effect as if made on such date. Pursuant to the
Indenture, in certain circumstances the Company will be required
to pay Additional Sums and Compound Interest (each as defined in
the Indenture) with respect to this Security.
The interest installment so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities, as defined
in said Indenture) is registered at the close of business on the
regular record date for such interest installment, which shall be
the 15th day of the month preceding the month in which the rele-
vant interest payment date falls. Any such interest installment
not punctually paid or duly provided for shall forthwith cease to
be payable to the holders on such regular record date and may be
paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
a special record date to be fixed by the Trustee for the payment
of such defaulted interest, notice whereof shall be given to the
holders of Securities not less than 10 days prior to such special
record date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully
provided in the Indenture.
The principal of (and premium, if any) and interest
(including Additional Sums and Compounded Interest, if any) on
this Security shall be payable at the office or agency of the
Trustee maintained for that purpose in any coin or currency of
the United States of America that at the time of payment is legal
tender for payment of public and private debts; provided,
however, that, payment of interest may be made at the option of
the Company by (i) check mailed to the holder at such address as
shall appear in the Security Register or (ii) by transfer to an
account maintained by the Person entitled thereto, provided that
proper written transfer instructions have been received by the
relevant record date. Notwithstanding the foregoing, so long as
the Holder of this Security is the Property Trustee, the payment
of the principal of (and premium, if any) and interest (including
Additional Sums and Compounded Interest, if any) on this Security
will be made at such place and to such account as may be
designated by the Property Trustee.
The indebtedness evidenced by this Security is, to the
extent provided in the Indenture, subordinate and junior in right
of payment to the prior payment in full of all Senior Indebted-
ness, and this Security is issued subject to the provisions of
the Indenture with respect thereto. Each holder of this Securi-
ty, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on his or
her behalf to take such action as may be necessary or appropriate
to acknowledge or effectuate the subordination so provided and
(c) appoints the Trustee his or her attorney-in-fact for any and
all such purposes. Each holder hereof, by his or her acceptance
hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by
each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon
said provisions.
This Security shall not be entitled to any benefit
under the Indenture hereinafter referred to, be valid or become
obligatory for any purpose until the Certificate of
Authentication hereon shall have been signed by or on behalf of
the Trustee.
By acceptance of this Security, the holder agrees to
treat, for United States federal income tax purposes, this
Security as indebtedness.
The provisions of this Security are continued on the
reverse side hereof and such provisions shall for all purposes
have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has executed this
certificate this _____ day of _____________________, _______.
SOVEREIGN BANCORP, INC.
By________________________________
Name:
Title:
Attest:___________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated: __________, _______
THE BANK OF NEW YORK, as Trustee
By________________________________
Authorized Signatory
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Company
(herein sometimes referred to as the "Securities"), specified in
the Indenture, all issued or to be issued under and pursuant to
an Indenture, dated as of March 1, 1997 (the "Indenture"), duly
executed and delivered between the Company and The Bank of New
York, as Trustee (the "Trustee"), to which Indenture reference is
hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Securities.
Upon the occurrence and continuation of a Special Event
prior to April 1, 2007 (the "Initial Optional Redemption Date"),
the Company shall have the right, at any time within 90 days
following the occurrence of such Special Event, to redeem this
Security in whole (but not in part) at the Special Event Redemp-
tion Price. "Special Event Redemption Price" shall mean, with
respect to any redemption of the Securities following a Special
Event, an amount in cash equal to the greater of (i) 100% of the
principal amount to be redeemed or (ii) the sum, as determined by
a Quotation Agent, of the present values of the principal amount
and premium payable with respect to an Optional Redemption (as
defined below) of this Security on the Initial Optional Redemp-
tion Date, together with scheduled payments of interest on this
Security from the prepayment date to and including the Initial
Optional Redemption Date, discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Adjusted Treasury Rate, plus, in the case
of each of clauses (i) and (ii), any accrued but unpaid interest
thereon (including Compounded Interest and Additional Sums, if
any) to the date of such redemption.
In addition, the Company shall have the right to redeem
this Security, in whole or in part, at any time on or after the
Initial Optional Redemption Date (an "Optional Redemption"), at
the redemption prices set forth below (expressed as percentages
of principal to be redeemed) plus, in each case, accrued and
unpaid interest thereon (including Additional Sums and Compounded
Interest, if any) to the applicable date of redemption (the
"Optional Redemption Price") if redeemed during the 12-month
period beginning April 1 of the years indicated below.
Year Percentage
2007 103.8750%
2008 103.4875%
2009 103.1000%
2010 102.7125%
2011 102.3250%
2012 101.9375%
2013 101.5500%
2014 101.1625%
2015 100.7750%
2016 100.3875%
2017 and thereafter 100.0000%
The optional Redemption Price or the Special Event
Redemption Price, as the case requires, shall be paid prior to
12:00 noon, New York time, on the date of such redemption or at
such earlier time as the Company determines, provided, that the
Company shall deposit with the Trustee an amount sufficient to
pay the applicable Redemption Price by 10:00 a.m., New York City
time, on the date such Redemption Price is to be paid. Any re-
demption pursuant to this paragraph will be made upon not less
than 30 days nor more than 60 days notice. If the Securities are
only partially redeemed by the Company pursuant to an Optional
Redemption, the Securities will be redeemed pro rata or by lot or
by any other method utilized by the Trustee; provided that if, at
the time of redemption, the Securities are registered as a Global
Security, the Depositary shall determine the particular
Securities to be redeemed in accordance with its procedures.
In the event of redemption of this Security in part
only, a new Security or Securities for the unredeemed portion
hereof will be issued in the name of the holder hereof upon the
cancellation hereof.
Notwithstanding the foregoing, any redemption of
Securities by the Company shall be subject to the Company having
received any required regulatory approval.
In case an Event of Default, as defined in the Inden-
ture, shall have occurred and be continuing, the principal of all
of the Securities may be declared, and upon such declaration
shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the
Company and the Trustee, with the consent of the holders of a
majority in aggregate principal amount of the Securities at the
time outstanding, as defined in the Indenture, to execute supple-
mental indentures for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the
holders of the Securities; provided, however, that no such
supplemental indenture shall, without the consent of each holder
of Securities then outstanding and affected thereby, (i) change
the Maturity Date of any Securities, or reduce the principal
amount thereof, or reduce any amount payable on redemption
thereof, or reduce the rate or extend the time of payment of
interest thereon (subject to Article XVI of the Indenture), or
make the principal of, or interest or premium on, the Securities
payable in any coin or currency other than U.S. dollars, or
impair or affect the right of any holder of Securities to insti-
tute suit for the payment thereof, or (ii) reduce the aforesaid
percentage of Securities, the holders of which are required to
consent to any such supplemental indenture. The Indenture also
contains provisions permitting the holders of a majority in
aggregate principal amount of the Securities at the time out-
standing affected thereby, on behalf of all of the holders of the
Securities, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established
pursuant to the Indenture, and its consequences, except a default
in the payment of the principal of or premium, if any, or inter-
est on any of the Securities or a default in respect of any
covenant or provision under which the Indenture cannot be modi-
fied or amended without the consent of each holder of Securities
then outstanding. Any such consent or waiver by the holder of
this Security (unless revoked as provided in the Indenture) shall
be conclusive and binding upon such Holder and upon all future
holders and owners of this Security and of any Security issued in
exchange herefor or in place hereof (whether by registration of
transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision
of this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and premium, if any, and interest (in-
cluding Compounded Interest and Additional Sums, if any) on this
Security at the time and place and at the rate and in the money
herein prescribed.
So long as no Event of Default shall have occurred and
be continuing, the Company shall have the right, at any time and
from time to time during the term of the Securities, to defer
payments of interest by extending the interest payment period of
such Securities for a period not exceeding 10 consecutive semi-
annual periods, including the first such semi-annual period
during such extension period, and not extending beyond the
Maturity Date of the Securities (an "Extended Interest Payment
Period") or ending on a date other than an Interest Payment Date,
at the end of which period the Company shall pay all interest
then accrued and unpaid (together with interest thereon at the
rate specified for the Securities to the extent that payment of
such interest is enforceable under applicable law). Before the
termination of any such Extended Interest Payment Period, the
Company may further defer payments of interest by further extend-
ing such Extended Interest Payment Period, provided that such
Extended Interest Payment Period, together with all such previous
and further extensions within such Extended Interest Payment
Period, (i) shall not exceed 10 consecutive semi-annual periods,
including the first semi-annual period during such Extended
Interest Payment Period, (ii) shall not end on any date other
than an Interest Payment Date, and (iii) shall not extend beyond
the Maturity Date of the Securities. Upon the termination of any
such Extended Interest Payment Period and the payment of all
accrued and unpaid interest and any additional amounts then due,
the Company may commence a new Extended Interest Payment Period,
subject to the foregoing requirements.
The Company has agreed that it will not (i) declare or
pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of
the Company's capital stock (which includes common and preferred
stock) or (ii) make any payment of principal, interest or premi-
um, if any, on or repay or repurchase or redeem any debt securi-
ties of the Company that rank pari passu with or junior in right
of payment to the Securities or (iii) make any guarantee payments
with respect to any guarantee by the Company of the debt securi-
ties of any Subsidiary of the Company (including any Other
Guarantees) if such guarantee ranks pari passu or junior in right
of payment to the Securities (other than (a) dividends or distri-
butions in shares of, or options, warrants or rights to subscribe
for or purchase shares of, Common Stock of the Company, (b) any
declaration of a dividend in connection with the implementation
of a stockholder's rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of
any such rights pursuant thereto, (c) payments under the Capital
Securities Guarantee, (d) as a result of a reclassification of
the Company's capital stock or the exchange or the conversion of
one class or series of the Company's capital stock, for another
class or series of the Company's capital stock, (e) the purchase
of fractional interests in shares of the Company's capital stock
pursuant to the exchange or conversion of such capital stock or
the security being exchanged or converted, and (f) purchases of
Common Stock related to the issuance of Common Stock or rights
under any of the Company's benefit plans for its directors,
officers or employees or any of the Company's dividend reinvest-
ment plans) if at such time (i) there shall have occurred any
event of which the Company has actual knowledge that (a) is or,
with the giving of notice or the lapse of time, or both, would
be, an Event of Default and (b) in respect of which the Company
shall not have taken reasonable steps to cure, (ii) if the
Securities are held by Sovereign Capital Trust, the Company shall
be in default with respect to its payment obligations under the
Capital Securities Guarantee or (iii) the Company shall have
given notice of its election of the exercise of its right to
extend the interest payment period and any such extension shall
be continuing.
Subject to (i) the receipt by the Company of any
required regulatory approval and (ii) the receipt by the Company
of an opinion of counsel to the effect that such distribution
will not be a taxable event to holders of Capital Securities, the
Company will have the right at any time to liquidate the Sover-
eign Capital Trust and cause the Securities to be distributed to
the holders of the Trust Securities in liquidation of the Trust.
The Securities are issuable only in registered form
without coupons in denominations of $1,000.00 and any integral
multiple thereof. As provided in the Indenture and subject to
certain limitations as may be contained herein and therein from
time to time, this Security is transferable by the holder hereof
on the Security Register of the Company, upon surrender of this
Security for registration of transfer at the office or agency of
the Company in the City and State of New York accompanied by a
written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the
holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of authorized denominations
and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service
charge will be made for any such transfer, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer
of this Security, the Company, the Trustee, any authenticating
agent, any paying agent, any transfer agent and the registrar may
deem and treat the holder hereof as the absolute owner hereof
(whether or not this Security shall be overdue and notwithstand-
ing any notice of ownership or writing hereon made by anyone
other than the Security Registrar) for the purpose of receiving
payment of or on account of the principal hereof and premium, if
any, and (subject to the Indenture) interest due hereon and for
all other purposes, and neither the Company nor the Trustee nor
any authenticating agent nor any paying agent nor any transfer
agent nor any registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the princi-
pal of or premium, if any, or interest on this Security, or for
any claim based hereon, or otherwise in respect hereof, or based
on or in respect of the Indenture, against any incorporator,
stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor Person,
whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the
consideration for the issuance hereof, expressly waived and
released.
All terms used in this Security that are defined in the
Indenture shall have the meanings assigned to them in the Inden-
ture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.