SOVEREIGN BANCORP, INC.
8 5/8 % Senior Notes due 2004
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SECOND SUPPLEMENTAL INDENTURE
Dated as of February 15, 2001
To Senior Indenture dated as of February 1, 1994
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BNY MIDWEST TRUST COMPANY,
Trustee
SECOND SUPPLEMENTAL INDENTURE dated as of February 15, 2001, to the
original senior indenture (the "Existing Indenture") dated as of February 1,
1994, between SOVEREIGN BANCORP, INC., a Pennsylvania corporation (the
"Company") and BNY MIDWEST TRUST COMPANY, successor to HARRIS TRUST AND SAVINGS
BANK, a an Illinois trust company, as Trustee (the "Trustee") (the Existing
Indenture as supplemented by this Second Supplemental Indenture, the
"Indenture").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's 8 5/8% Senior
Notes due 2004 (the "Securities"), to be issued, from time to time, as in this
Indenture provided.
WHEREAS, the Company and the Trustee have heretofore executed and
delivered the Existing Indenture to provide for the issuance of the Company's
securities in one or more registered series;
WHEREAS, Section 901 of the Existing Indenture provides, among other
things, that the Company and the Trustee may without the consent of Holders
enter into indentures supplemental to the Existing Indenture to, among other
things, change or eliminate any of the provisions of the Existing Indenture in
respect of one or more series of debt securities; provided, however, that any
such change or elimination (a) shall become effective only when there is no debt
security outstanding of any series created prior to the execution of such
supplemental indenture which is entitled to the benefit of such provision or (b)
shall not apply to any debt security outstanding;
WHEREAS, the Company desires to provide for the issuance of new series
of debt securities to be designated as the 8 5/8% Senior Notes due 2004, and to
set forth the terms that will be applicable thereto;
WHEREAS, all action on the part of the Company necessary to authorize
the issuance of the Securities under the Indenture has been duly taken; and
WHEREAS, all acts and things necessary to make the Securities, when
executed by the Company and authenticated and delivered by the Trustee as
provided in the Indenture, the legal, valid and binding obligations of the
Company, and to constitute these presents a valid and binding supplemental
indenture according to its terms binding on the Company, have been done and
performed, and the execution of this Second Supplemental Indenture and the
creation and issuance under the Indenture of the Securities have in all respects
been duly authorized, and the Company in the exercise of the legal right and
power vested in it, executes this Second Supplemental Indenture and proposes to
create, execute, issue and deliver the Securities.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
Solely for purposes of this Second Supplemental Indenture and the
Securities: (1) Articles One (except as provided in Section 1.01(b) below) Five,
Eight, Nine, Ten, Eleven, Thirteen and Seventeen of the Existing Indenture are
to be superseded by the provisions of this Second Supplemental Indenture and
shall have no effect with respect to the Securities, (2) Articles Four, Twelve,
Fourteen, Fifteen, Sixteen and Eighteen of the Existing Indenture shall not have
effect with respect to the Securities, and (3) Articles Two and Three of the
Existing Indenture shall be supplemented by and subject to the provisions of
Article II below.
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ARTICLE I
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DEFINITIONS AND INCORPORATION BY REFERENCE
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Section 1.01. Definitions.
(a) All capitalized terms used herein and not
otherwise defined below shall have the meanings ascribed thereto in the
Existing Indenture.
(b) The following are definitions used in this Second
Supplemental Indenture and to the extent that a term is defined both
herein and in the Existing Indenture, the definition in this Second
Supplemental Indenture shall govern.
"Adjusted Consolidated Net Worth" means, as of any date of
determination, the Consolidated Net Worth of the Company as of the end of the
most recent fiscal quarter of the Company ending at least 45 days prior to such
date of determination; provided, however, that pro forma effect shall be given
(x) to any of the following that shall have occurred since the end of the
relevant fiscal quarter or that shall occur simultaneously with or immediately
following the transaction giving rise to the need to calculate Adjusted
Consolidated Net Worth and (y) to the use of any proceeds of such transaction to
effect any of the following (in each case without duplication and as if the
following had occurred on the last day of such fiscal quarter):
(a) issuances and sales of Capital Stock by the
Company or any Subsidiary,
(b) Investments in (by merger or otherwise) or
acquisitions of any Subsidiary or any Person that becomes a Subsidiary
as a result of such Investment or acquisition or in Property which
constitutes all or substantially all of an operating unit of a
business,
(c) Restricted Payments and Permitted Investments,
and
(d) Asset Sales.
"Affiliate" of any specified Person means:
(a) any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control
with such specified Person, or
(b) any other Person who is a director or executive
officer of:
(1) such specified Person,
(2) any Subsidiary (or in the case of the
Company, any Subsidiary or Unrestricted Subsidiary) of such
specified Person, or
(3) any Person described in clause (a) above.
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For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of Section 4.07, "Affiliate"
shall also mean any beneficial owner of shares representing 5% or more of the
total voting power of the Voting Stock (on a fully diluted basis)of the Company
or of rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Sale" means any sale, lease, transfer, issuance or
other disposition (or series of related sales, leases, transfers, issuances or
dispositions) in excess of $5,000,000 taken individually (or with respect to a
series of related transactions taken as a whole) by the Company or any
Subsidiary, including any disposition by means of a merger, consolidation or
similar transaction, of:
(a) any shares of Capital Stock of a Subsidiary
(other than directors' qualifying shares), or
(b) any other assets of the Company or any Subsidiary
outside of the ordinary course of business of the Company or such
Subsidiary.
"Attributable Debt" in respect of a Sale and Leaseback
Transaction means, at any date of determination,
(a) if such Sale and Leaseback Transaction is a
Capital Lease Obligation, the amount of Debt represented thereby
according to the definition of "Capital Lease Obligation," and
(b) in all other instances, the greater of:
(1) the Fair Market Value of the Property subject
to such Sale and Leaseback Transaction, and
(2) the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the
total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale and
Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of any date of determination, with
respect to any Debt or Preferred Stock, the quotient obtained by dividing:
(a) the sum of the product of the numbers of years
(rounded to the nearest one-twelfth of one year) from the date of
determination to the dates of each successive scheduled principal
payment of such Debt or redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by
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(b) the sum of all such payments.
"Banking Business" means (i) owning the Capital Stock of
Sovereign Bank,(ii) engaging in, or owning the Capital Stock of any other
Subsidiaries or Unrestricted Subsidiaries engaged in, activities permissible for
subsidiaries of a bank holding company or a savings and loan holding company
under federal and state law at the time then applicable to the Company, its
Subsidiaries and Unrestricted Subsidiaries and (iii) the holding of Permitted
Investments.
"Board of Directors" means the Board of Directors of the
Company (or, in the case of Section 4.07(a)(2), the applicable Subsidiary) or
any committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification.
"Business Day" means each day that is not a Legal Holiday.
"Capital Lease Obligations" means any obligation under a lease
that is required to be capitalized for financial reporting purposes in
accordance with GAAP; and the amount of Debt represented by such obligation
shall be the capitalized amount of such obligations determined in accordance
with GAAP; and the Stated Maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
For purposes of Section 4.05, a Capital Lease Obligation shall be deemed secured
by a Lien on the Property being leased.
"Capital Stock" means, with respect to any Person, any shares
or other equivalents (however designated) of any class of corporate stock or
partnership interests or any other participations, rights, warrants, options or
other interests in the nature of an equity interest in such Person, including
Preferred Stock, but excluding any debt security convertible or exchangeable
into such equity interest.
"Capital Stock Sale Proceeds" means the aggregate cash
proceeds received by the Company from the issuance or sale (other than to a
Subsidiary or Unrestricted Subsidiary or an employee stock ownership plan or
trust established by the Company or any such Subsidiary or any such Unrestricted
Subsidiary for the benefit of their employees) by the Company of its Capital
Stock (other than Disqualified Stock) after November 15, 1999, net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Change of Control" means the occurrence of any of the
following events:
(a) if any "person" or "group" (as such terms are
used in Sections 13(d)and 14(d) of the Exchange Act or any successor
provisions to either of the foregoing), including any group acting for
the purpose of acquiring, holding, voting or disposing of securities
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within the meaning of Rule 13d-5(b)(1) under the Exchange Act, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act, except that a person will be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of
time), directly or indirectly, of 50% or more of the total voting power
of the Voting Stock of the Company (for purposes of this clause (a),
such person or group shall be deemed to beneficially own any Voting
Stock of a corporation held by any other corporation (the "parent
corporation") so long as such person or group beneficially owns,
directly or indirectly, in the aggregate a majority of the total voting
power of the Voting Stock of such parent corporation); or
(b) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
of Directors (together with any new directors whose election or
appointment by such Board or whose nomination for election by the
shareholders of the Company was approved by a vote of not less than
two-thirds of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors then in
office; or
(c) the shareholders of the Company shall have
approved any plan of liquidation or dissolution of the Company; or
(d) a sale, transfer, assignment, lease, conveyance
or other disposition, directly or indirectly (other than to the Company
or any Wholly Owned Subsidiary) in any one transaction or series of
transactions, in either case occurring outside the ordinary course of
business, of more than 75% of the assets or 75% of the deposit
liabilities of Sovereign Bank shown on the consolidated balance sheet
of Sovereign Bank as of the end of the most recent fiscal quarter
ending at least 45 days prior to such transaction (or the first
transaction in any such series of transactions); provided, however,
that for purposes of this clause (d) if the Company at any time holds
any assets other than (1) the Capital Stock of Sovereign Bank and (2)
Temporary Cash Investments, such other assets shall be deemed to be
assets of Sovereign Bank and to have been reflected on such
consolidated balance sheet; provided, further, that a pledge by the
Company of the shares of Sovereign Bank owned by the Company to secure
Debt Incurred under any Credit Facility or Debt existing on the date
hereof requiring security on a basis pari passu with any Credit
Facility will not, absent any action to realize such pledge, constitute
a Change of Control, provided such pledge and Incurrence is otherwise
in accordance with Section 4.03 and Section 4.05.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodity Price Protection Agreement" means, in respect of a
Person, any forward contract, commodity swap agreement, commodity option
agreement or other similar agreement or arrangement designed to protect such
Person against fluctuations in commodity prices.
"Company" means the party named as such in this Indenture
until a successor replaces it pursuant to the applicable provisions hereof and,
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thereafter, means the successor and, for purposes of any provision contained
herein and required by the TIA, each other obligor on the indenture securities.
"Consolidated Common Shareholders' Tangible Equity" means, as
of any date of determination, the total amount shown for shareholders' tangible
equity determined pursuant to Office of Thrift Supervision requirements and any
successor requirements thereto on a consolidated balance sheet of Sovereign Bank
and its Subsidiaries as at such date, less any amounts included therein
attributable to, without duplication, Preferred Stock held by Persons other than
the Company and its Subsidiaries.
"Consolidated Interest Coverage Ratio" means, as of any date
of determination, the ratio of:
(a) the aggregate amount of Earnings Available for
Fixed Charges for the most recent four consecutive fiscal quarters
ending at least 45 days prior to such determination date to
(b) Consolidated Interest Expense that is anticipated
to accrue during a period consisting of the fiscal quarter in which
such determination date occurs and the three fiscal quarters
immediately subsequent thereto (based upon the pro forma amount and
maturity of, and interest payments in respect of, Debt of the Company
and the Subsidiaries expected by the Company to be outstanding on such
determination date), assuming for the purposes of this measurement the
continuation of market interest rates prevailing on such determination
date and base interest rates in respect of floating interest rate
obligations equal to the base interest rates on such obligations in
effect as of such determination date, provided that, if the Company or
any of the Subsidiaries is a party to any Interest Rate Agreement that
would have the effect of changing the interest rate on any Debt of the
Company or any of the Subsidiaries for such four-quarter period (or a
portion thereof), the rate resulting therefrom shall be used for such
four-quarter period or portion thereof, provided further that any
Consolidated Interest Expense with respect to Debt so Incurred or
Repaid by the Company or any Subsidiary during the fiscal quarter in
which such determination date occurs shall be calculated on a pro forma
basis as if such Debt was Incurred or Repaid on the first day of such
fiscal quarter.
In addition, pro forma effect shall be given to any of the following that shall
have occurred since the beginning of the four quarter historical period so
preceding such determination date, or that shall occur simultaneously with or
immediately following the determination date, as if the following had occurred
on the first day of such period: (i) Investments in (by merger or otherwise) or
acquisitions of any Subsidiary or any Person that becomes a Subsidiary as a
result of such Investment or acquisition or in Property which constitutes all or
substantially all of an operating unit of a business and (ii) Asset Sales.
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Subsidiaries, plus,
to the extent not included in such total interest expense, and to the extent
Incurred by the Company or its Subsidiaries,
(a) interest expense attributable to leases
constituting part of a Sale and Leaseback Transaction and to Capital
Lease Obligations,
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(b) amortization of debt discount and debt issuance
cost, including commitment fees,
(c) capitalized interest,
(d) non-cash interest expense,
(e) commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance
financing,
(f) net costs associated with Hedging Obligations
(including amortization of fees),
(g) Disqualified Stock Dividends,
(h) Preferred Stock Dividends,
(i) interest Incurred in connection with Investments
in discontinued operations,
(j) interest accruing on any Debt of any other Person
to the extent such Debt is Guaranteed by the Company or any Subsidiary,
and
(k) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are
used by such plan or trust to pay interest or fees to any Person (other
than the Company) in connection with Debt Incurred by such plan or
trust.
Notwithstanding the foregoing, interest expense or other
amounts Incurred in the ordinary course of business by banking institutions or
Financial Services Subsidiaries shall not be included as part of Consolidated
Interest Expense.
"Consolidated Net Income" means, for any period, the net
income (loss) of the Company and its consolidated Subsidiaries and Unrestricted
Subsidiaries, less, without duplication, the amounts of Preferred Stock
Dividends declared or accrued during such period in respect of any Preferred
Stock of Subsidiaries and Unrestricted Subsidiaries held by Persons other than
the Company and its Wholly Owned Subsidiaries (to the extent not already
deducted from Consolidated Net Income); provided, however, that there shall not
be included in such Consolidated Net Income:
(a) any net income (loss) of any Person (other than
the Company) if such Person is not a Subsidiary, except that:
(1) subject to the exclusion contained in clause
(d) below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash distributed by
such Person during such period to the Company or a Subsidiary
as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Subsidiary, to the
limitations contained in clause (c) below), and
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(2) the Company's equity in a net loss of any
such Person (other than an Unrestricted Subsidiary) for such
period shall be included in determining such Consolidated Net
Income,
(b) for purposes of Section 4.04 only, any net income
(loss)of any Person acquired by the Company or any of its consolidated
Subsidiaries and Unrestricted Subsidiaries in a pooling of interests
transaction for any period prior to the date of such acquisition,
(c) any net income of any Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions, directly or
indirectly, to the Company (other than restrictions contained in any
Qualified Preferred Stock) except that:
(1) subject to the exclusion contained in clause
(d) below, the Company's equity in the net income of any such
Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash
distributed by such Subsidiary during such period (or, in the
case of a Depository Institution, that could as of such date
of determination be distributed with respect to such period,
provided that the Company is not aware of any foreseeable
negative changes to its ability to make such distributions) to
the Company or another Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other
distribution to another Subsidiary, to the limitation
contained in this clause), and
(2) the Company's equity in a net loss of any
such Subsidiary for such period shall be included in
determining such Consolidated Net Income,
(d) any gain (but not loss) realized upon the sale or
other disposition of any Property of the Company or any of its
consolidated Subsidiaries and Unrestricted Subsidiaries (including
pursuant to any Sale and Leaseback Transaction) that is not sold or
otherwise disposed of in the ordinary course of business (excluding,
solely for the purposes of Section 4.04, any gain in connection with a
sale of insured deposits),
(e) any extraordinary gain or loss,
(f) the cumulative effect of a change in accounting
principles,
(g) any non-cash compensation expense realized for
grants of performance shares, stock options or other rights to
officers, directors and employees of the Company or any Subsidiary,
provided that such shares, options or other rights can be redeemed at
the option of the holder only for Capital Stock of the Company (other
than Disqualified Stock), and
(h) for purposes of Section 4.04 only, any interest
payments made by the Company or any Subsidiary to a special purpose
trust that is a Subsidiary (and if such Subsidiary is not a Wholly
Owned Subsidiary such amount shall be on a pro rata basis) on Debt of
the Company or such Subsidiary to the extent such trust uses such
proceeds to make dividends, distributions or other payments which are
Restricted Payments.
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Notwithstanding the foregoing, for purposes of Section 4.04 only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under such Section pursuant
to clause (d)(4) thereof.
"Consolidated Net Worth" means, in respect of any Person, the
total of the amounts shown on the consolidated balance sheet of such Person and
its Subsidiaries as:
(a) the par or stated value of all outstanding
Capital Stock of such Person, plus
(b) paid-in capital or capital surplus relating to
such Capital Stock, plus
(c) any retained earnings or earned surplus, less:
(1) any accumulated deficit, and
(2) any amounts attributable to Disqualified
Stock.
"Consolidated Total Assets" means, in respect of any Person,
as of any date of determination, the amount that would appear on a consolidated
balance sheet of such Person and its consolidated Subsidiaries as the total
assets of such Person and its Subsidiaries.
"Credit Facilities" means, with respect to the Company or any
Subsidiary, one or more debt or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans or trade
letters of credit, in each case together with any extensions, revisions,
refinancings or replacements thereof by a lender or syndicate of lenders.
"Currency Exchange Protection Agreement" means, in respect of
a Person, any foreign exchange contract, currency swap agreement, currency
option or other similar agreement or arrangement designed to protect such Person
against fluctuations in currency exchange rates.
"Debt" means, with respect to any Person on any date of
determination (without duplication):
(a) the principal of and premium (if any and then
only to the extent then due and payable and without duplication) in
respect of:
(1) debt of such Person for money borrowed, and
(2) debt evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person
is responsible or liable;
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(b) all Capital Lease Obligations of such Person and
all Attributable Debt in respect of Sale and Leaseback Transactions
entered into by such Person;
(c) all obligations of such Person issued or assumed
as the deferred purchase price of Property, all conditional sale
obligations of such Person and all obligations of such Person under any
title retention agreement (but excluding trade accounts payable arising
in the ordinary course of business);
(d) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than
obligations described in clauses (a) through (c) above) entered into in
the ordinary course of business of such Person to the extent such
letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement
following payment on the letter of credit);
(e) the amount of all obligations of such Person with
respect to the Repayment of any Disqualified Stock or, with respect to
any Subsidiary of such Person, any Preferred Stock (but excluding, in
each case, any accrued dividends);
(f) all obligations of the type referred to in
clauses (a) through (e) of other Persons and all dividends of other
Persons for the payment of which, in either case, such Person is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee;
(g) all obligations of the type referred to in
clauses (a) through (f) of other Persons secured by any Lien on any
Property of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the
lesser of the value of such Property or the amount of the obligation so
secured; and
(h) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
The amount of Debt of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date. The amount of Debt represented by a
Hedging Obligation shall be equal to: (1) zero if such Hedging Obligation has
been Incurred solely for the purpose of managing risk in the ordinary course of
business and not for speculative purposes, including, (i) interest, currency,
commodity, liquidity, credit, prepayment and other risks, (ii) reducing
borrowing costs, or (iii) converting any elements of indebtedness from one form
to another (collectively, "Ordinary Course Hedges"), or (2) the notional amount
of such Hedging Obligation which is not an Ordinary Course Hedge.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
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"Depository Institution" shall have the meaning attributed
thereto in Section 3(c)(1) of the FDIA, 12 U.S.C. Section 1813(c)(1), or a
similar definition under any successor statute.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable, in either case at the option of
the holder thereof) or otherwise:
(a) matures or is mandatorily redeemable pursuant to
a sinking fund obligation or otherwise,
(b) is or may become redeemable or repurchasable at
the option of the holder thereof, in whole or in part, or
(c) is convertible or exchangeable at the option of
the holder thereof for Debt or Disqualified Stock,
on or prior to, in the case of clause (a), (b) or (c), the first anniversary of
the Stated Maturity of the Securities.
"Disqualified Stock Dividends" means all dividends with
respect to Disqualified Stock of the Company held by Persons other than a Wholly
Owned Subsidiary. The amount of any such dividend shall be equal to the quotient
of such dividend divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the Company.
"Earnings Available for Fixed Charges" means, for any period,
an amount equal to, for the Company and its consolidated Subsidiaries, the sum
of Consolidated Net Income for such period, plus the following to the extent
reducing Consolidated Net Income for such period:
(a) the provision for taxes based on income or
profits or utilized in computing net loss,
(b) Consolidated Interest Expense, and
(c) amortization of intangibles.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and amortization of, a Subsidiary shall be added to Consolidated Net
Income to compute Earnings Available for Fixed Charges only to the extent (and
in the same proportion) that the net income of such Subsidiary was included in
calculating Consolidated Net Income and only, in the case of any Subsidiary, if
a corresponding amount would be permitted at the date of determination to be
dividended or paid to the Company by such Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Subsidiary or its shareholders.
"Exchange Act" means the Securities Exchange Act of 1934.
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"Fair Market Value" means, with respect to any Property, the
price that could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair Market Value
shall be determined, except as otherwise provided, if such Property has a Fair
Market Value in excess of $50,000,000, by a majority of the Board of Directors
and evidenced by a Board Resolution, dated within 30 days of the relevant
transaction, delivered to the Trustee.
"FDIA" means the Federal Deposit Insurance Act or any
successor provision to such Act.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor organization.
"Financial Services Subsidiary" means any Subsidiary of the
Company (other than a Depository Institution or a Subsidiary of a Depository
Institution) which conducts any financial asset origination, securitization,
financing or servicing business or any other financial services business.
"Foreign Subsidiary" means any Subsidiary or Unrestricted
Subsidiary which is not organized under the laws of the United States of America
or any State thereof or the District of Columbia.
"GAAP" means United States generally accepted accounting
principles as in effect on November 15, 1999, including those set forth:
(a) in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified
Public Accountants,
(b) in the statements and pronouncements of the
Financial Accounting Standards Board,
(c) in such other statements by such other entity as
approved by a significant segment of the accounting profession, and
(d) the rules and regulations of the Commission
governing the inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be filed pursuant
to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written
statements from the accounting staff of the Commission.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Debt of any other Person and
any obligation, direct or indirect, contingent or otherwise, of such Person:
(a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt of such other Person (whether
12
arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay or to maintain financial statement conditions or
otherwise), or
(b) entered into for the purpose of assuring in any
other manner the obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not
include:
(1) endorsements for collection or deposit in the
ordinary course of business, or
(2) a contractual commitment by one Person to
invest in another Person for so long as such Investment is
reasonably expected to constitute a Permitted Investment under
clause (b) of the definition of "Permitted Investment."
The term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligation" of any Person means any obligation of
such Person pursuant to any Interest Rate Agreement, Currency Exchange
Protection Agreement, Commodity Price Protection Agreement or any other similar
agreement or arrangement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Security register described in Section 2.04.
"Incur" means, with respect to any Debt or other obligation of
any Person, to create, issue, incur (by merger, conversion, exchange or
otherwise), extend, assume, Guarantee or become liable in respect of such Debt
or other obligation or the recording, as required pursuant to GAAP, of any such
Debt or obligation on the balance sheet of such Person (and "Incurrence" and
"Incurred" shall have meanings correlative to the foregoing); provided, however,
that a change in GAAP that results in an obligation of such Person that exists
at such time, and is not theretofore classified as Debt, becoming Debt shall not
be deemed an Incurrence of such Debt; provided further, however, that any Debt
or other obligations of a Person existing at the time such Person becomes a
Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be
deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary;
and provided further, however, that solely for purposes of determining
compliance with Section 4.03, amortization of debt discount shall not be deemed
to be the Incurrence of Debt, provided that in the case of Debt sold at a
discount, the amount of such Debt Incurred shall at all times be the aggregate
principal amount at Stated Maturity.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Independent Financial Advisor" means an investment banking
firm of national standing or any third-party appraiser of national standing,
provided that such firm or appraiser is not an Affiliate of the Company.
13
"Interest Rate Agreement" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect against fluctuations in interest
rates.
"Investment" by any Person means any direct or indirect loan
(other than loans or advances to customers or suppliers in the ordinary course
of business that are recorded as accounts receivable or loans receivable on the
balance sheet of such Person), advance or other extension of credit or capital
contribution (by means of transfers of cash or other Property to others or
payments for Property or services for the account or use of others, or
otherwise) to, or Incurrence of a Guarantee of any obligation of, or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities or
evidence of Debt issued by, any other Person. For purposes of Section 4.04, 4.08
and the definition of "Restricted Payment," "Investment" shall include the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the Fair Market Value of the net assets of any Subsidiary of the Company at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Unrestricted Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary of an amount (if positive)
equal to:
(a) the Company's "Investment" in such Subsidiary at
the time of such redesignation, less
(b) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the Fair Market Value of the net
assets of such Subsidiary at the time of such redesignation.
In determining the amount of any Investment made by transfer
of any Property other than cash, such Property shall be valued at its Fair
Market Value at the time of such Investment.
"Investment Grade Rating" means a rating equal to or higher
than Baa3 (or the equivalent) by Moody's and BBB (or the equivalent) by S&P.
"Issue Date" means the date on which the Original Securities
are initially issued.
"Lien" means, with respect to any Property of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including any Capital
Lease Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing or any Sale and
Leaseback Transaction).
"Material Domestic Subsidiary" means any Significant
Subsidiary other than (a) a Foreign Subsidiary, (b) a Subsidiary or Unrestricted
Subsidiary of a Foreign Subsidiary or (c) an Unrestricted Subsidiary.
14
"Minimum Tangible Common Equity Amount" means, as of the end
of any fiscal quarter, an amount equal to $1.0 billion.
"Moody's" means Moody's Investors Service, Inc. or any
successor to the rating agency business thereof.
"Officer" means the Chief Executive Officer, the President,
the Chief Financial Officer, any Executive Vice President or the Principal
Accounting Officer (so long as such Principal Accounting Officer is at least a
Senior or Executive Vice President) of the Company.
"Officers' Certificate" means a certificate signed by two
Officers of the Company, at least one of whom shall be the principal executive
officer, principal financial officer or principal accounting officer (so long as
such principal accounting officer is at least a Senior or Executive Vice
President of the Company) of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company or the Trustee.
"OTS" means the Office of Thrift Supervision and any successor
governmental agency thereto.
"Permitted Investment" means any Investment by the Company or
a Subsidiary in:
(a) the Company, any Subsidiary, or any Person that
will, upon the making of such Investment, become a Subsidiary, provided
that the primary business of such Subsidiary is the Banking Business;
(b) any Person if as a result of such Investment such
Person is merged or consolidated with or into, or transfers or conveys
all or substantially all its Property to, the Company or a Subsidiary,
provided that such Person's primary business is Banking Business;
(c) Temporary Cash Investments;
(d) receivables owing to the Company or a Subsidiary,
if created or acquired in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade
terms as the Company or such Subsidiary deems reasonable under the
circumstances;
(e) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the
ordinary course of business;
(f) loans and advances to officers, directors and
employees made in the ordinary course of business consistent with past
15
practices of the Company or such Subsidiary, as the case may be,
provided that such loans and advances in the aggregate do not exceed
$25,000,000 at any one time outstanding;
(g) stock, obligations or other securities received
in settlement of debts created in the ordinary course of business and
owing to the Company or a Subsidiary or in satisfaction of judgments;
(h) Investments in the ordinary course of business by
any Subsidiary that is a banking institution or a Financial Services
Subsidiary or a Subsidiary of a banking institution or a Financial
Services Subsidiary (to the extent it would be permitted, under
applicable laws and regulations, to make such Investment) in any Person
other than an Affiliate of the Company (other than an Unrestricted
Affiliate, a Subsidiary of the Company or a Person that would become an
Unrestricted Affiliate or a Subsidiary as a result of such Investment);
and
(i) other Investments made for a price not greater
than Fair Market Value that do not exceed $50,000,000 outstanding at
any one time in the aggregate.
"Permitted Liens" means:
(a) Liens to secure Debt permitted to be Incurred
under clause (e) of Section 4.03, provided that any such Lien is
limited to the Capital Stock of Wholly Owned Subsidiaries, including
Sovereign Bank;
(b) Liens created under negative pledge provisions of
the indentures for the Company's senior notes outstanding on the Issue
Date, but only to the extent required by such provisions as in effect
on the Issue Date;
(c) Liens for taxes, assessments or governmental
charges or levies on the Property of the Company or any Subsidiary if
the same shall not at the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith and by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision that shall be
required in conformity with GAAP shall have been made therefor;
(d) Liens imposed by law, such as carriers',
warehousemen's and mechanics' Liens and other similar Liens, on the
Property of the Company or any Subsidiary arising in the ordinary
course of business and securing payment of obligations that are not
more than 60 days past due or are being contested in good faith and by
appropriate proceedings;
(e) Liens on the Property of the Company or any
Subsidiary Incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or regulatory
requirements, performance or return-of-money bonds, surety bonds or
other obligations of a like nature and Incurred in a manner consistent
with industry practice, in each case which are not Incurred in
connection with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of Property and
which do not in the aggregate impair in any material respect the use of
Property in the operation of the business of the Company and the
Subsidiaries taken as a whole;
16
(f) Liens on Property at the time the Company or any
Subsidiary acquired such Property, including any acquisition by means
of a merger or consolidation with or into the Company or any
Subsidiary; provided, however, that any such Lien may not extend to any
other Property of the Company or any Subsidiary; provided further,
however, that such Liens shall not have been Incurred in anticipation
of or in connection with the transaction or series of transactions
pursuant to which such Property was acquired by the Company or any
Subsidiary;
(g) Liens on the Property of a Person at the time
such Person becomes a Subsidiary; provided, however, that any such Lien
may not extend to any other Property of the Company or any other
Subsidiary that is not a direct Subsidiary of such Person; provided
further, however, that any such Lien was not Incurred in anticipation
of or in connection with the transaction or series of transactions
pursuant to which such Person became a Subsidiary;
(h) pledges or deposits by the Company or any
Subsidiary under workmen's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Debt) or leases
to which the Company or any Subsidiary is party, or deposits to secure
public or statutory obligations of the Company, or deposits for the
payment of rent, in each case Incurred in the ordinary course of
business;
(i) utility easements, building restrictions and such
other encumbrances or charges against real Property as are of a nature
generally existing with respect to properties of a similar character;
(j) Liens existing on November 15, 1999 not otherwise
described in clauses (a) through (i) above or clause (k), (m) or (n)
below;
(k) Liens not otherwise described in clauses (a)
through (j) above or clause (m) or (n) below on the Property of any
Subsidiary that is not a Subsidiary Guarantor to secure any Debt
permitted to be Incurred by such Subsidiary pursuant to Section 4.03
(including Liens to secure Debt permitted to be Incurred under such
covenant by a Depositary Institution) or to secure any other obligation
of such Subsidiary;
(l) Liens on the Property of the Company or any
Subsidiary to secure any Refinancing, in whole or in part, of any Debt
secured by Liens referred to in clause (f), (g), or (j) above;
provided, however, that any such Lien shall be limited to all or part
of the same Property that secured the original Lien (together with
improvements and accessions to such Property) and the aggregate
principal amount of Debt that is secured by such Lien shall not be
increased to an amount greater than the sum of:
17
(1) the outstanding principal amount, or, if
greater, the committed amount, of the Debt secured by Liens
described under clause (f), (g) or (j) above, as the case may
be, at the time the original Lien became a Permitted Lien
under the Indenture, and
(2) an amount necessary to pay any fees and
expenses, including premiums and defeasance costs, incurred by
the Company or such Subsidiary in connection with such
Refinancing; and
(m) Liens not otherwise described in clauses (a)
through (l) above or (n) below on the Property of a Financial Services
Subsidiary to secure any Debt permitted to be Incurred by such
Subsidiary pursuant to Section 4.03; and
(n) Liens securing Ordinary Course Hedges.
"Permitted Refinancing Debt" means any Debt that Refinances
any other Debt, including any successive Refinancings, so long as:
(a) such Debt is in an aggregate principal amount (or
if Incurred with original issue discount, an aggregate issue price) not
in excess of the sum of:
(1) the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted
value) then outstanding of the Debt being Refinanced, and
(2) an amount necessary to pay any fees and
expenses, including premiums and defeasance costs, related to
such Refinancing,
(b) the Average Life of such Debt is equal to or
greater than the Average Life of the Debt being Refinanced,
(c) the Stated Maturity of such Debt is no earlier
than the Stated Maturity of the Debt being Refinanced, and
(d) the new Debt shall not be senior in right of
payment to the Debt that is being Refinanced;
provided, however, that Permitted Refinancing Debt shall not include (x) Debt of
a Subsidiary or Unrestricted Subsidiary that is not a Subsidiary Guarantor that
Refinances Debt of the Company or a Subsidiary Guarantor or (y) Debt of the
Company or a Subsidiary that Refinances Debt of an Unrestricted Subsidiary.
"Person" means any individual, corporation, company (including
any limited liability company), association, partnership, joint venture, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
the payment of dividends, or as to the distribution of assets upon any voluntary
or involuntary liquidation or dissolution of such Person, over shares of any
other class of Capital Stock issued by such Person. Preferred Stock includes
18
Disqualified Stock, Qualified Preferred Stock, Trust Preferred Stock and any
other trust preferred securities issued by special purpose trusts.
"Preferred Stock Dividends" means all dividends with respect
to Preferred Stock of Subsidiaries held by Persons other than the Company or a
Wholly Owned Subsidiary. The amount of any such dividend except with respect to
Trust Preferred Stock or any other trust preferred securities issued by special
purpose trusts shall be equal to the quotient of such dividend divided by the
difference between one and the maximum statutory federal income rate (expressed
as a decimal number between 1 and 0) then applicable to the issuer of such
Preferred Stock..
"principal" of any Debt (including the Securities) means the
principal amount of such Debt plus the premium, if any, on such Debt.
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms hereof, a calculation performed in
accordance with Article 11 of Regulation S-X promulgated under the Securities
Act, as interpreted in good faith by the Board of Directors after consultation
with the independent certified public accountants of the Company, or otherwise a
calculation made in good faith by the Board of Directors after consultation with
the independent certified public accountants of the Company, as the case may be.
"Property" means, with respect to any Person, any interest of
such Person in any kind of property or asset, whether real, personal or mixed,
or tangible or intangible, including Capital Stock in, and other securities of,
any other Person. For purposes of any calculation required pursuant to the
Indenture, the value of any Property shall be its Fair Market Value.
"Qualified Preferred Stock" means any Preferred Stock of any
Subsidiary (other than Trust Preferred Stock and any other trust preferred
securities issued by special purpose trusts) which meets the requirements set
forth below:
(a) such Preferred Stock is not Disqualified Stock;
(b) the terms of such Preferred Stock do not impose
any consensual restriction on the ability of the issuer thereof to pay
dividends, in cash or otherwise, or make any other distributions on or
in respect of its Capital Stock, to the Company or any other
Subsidiary, except for restrictions to the effect that:
(i) dividends and distributions on common stock
or other capital stock of the issuer may not be declared or
paid or set apart for payment at any time when the issuer has
not declared and paid any dividends or distributions on such
Preferred Stock which are required to be declared and paid as
a precondition to dividends or distributions on other capital
stock of the issuer;
(ii) distributions upon the liquidation,
dissolution or winding up of the issuer, whether voluntary or
involuntary ("Liquidating Distributions"), may not be made on
the common stock or other capital stock of the issuer at any
time when such Preferred Stock is entitled to receive
Liquidating Distributions which have not been paid; and
19
(iii) dividends and distributions on common
stock or other capital stock of the issuer may not be declared
or paid or set apart for payment at any time when such
Preferred Stock is required to be, but has not been, redeemed,
repurchased, converted, exchanged or otherwise paid pursuant
to provisions which meet the requirements of clause (a) above;
and
(c) the terms of such Preferred Stock do not impose
any consensual restriction on the ability of the issuer thereof to: (i)
pay any Debt or other obligation owed to the Company or any other
Subsidiary, (ii) make any loans or advances to the Company or any other
Subsidiary or (iii) transfer any of its Property to the Company or any
other Subsidiary, except, in any such case, any restriction permitted
under Section 4.06 (other than under clause (2) thereof).
"Refinance" means, in respect of any Debt, to refinance,
extend, renew, refund, repay, prepay, repurchase, redeem, defease or retire, or
to issue other Debt, in exchange or replacement for, such Debt. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Repay" means, in respect of any Debt, to repay, prepay,
repurchase, redeem, legally defease or otherwise retire such Debt. "Repayment"
and "Repaid" shall have correlative meanings. Debt shall be considered to have
been repaid only to the extent the related loan commitment, if any, shall have
been permanently reduced in connection therewith.
"Restricted Payment" means:
(a) any dividend or distribution (whether made in
cash, securities or other Property) declared or paid on or with respect
to any shares of Capital Stock of the Company or any Subsidiary
(including any payment in connection with any merger or consolidation
with or into the Company or any Subsidiary), except for any dividend or
distribution that is made solely to the Company or a Subsidiary (and,
if such Subsidiary is not a Wholly Owned Subsidiary, to the other
shareholders of such Subsidiary on a pro rata basis or on a basis that
results in the receipt by the Company or a Subsidiary of dividends or
distributions of greater value than it would receive on a pro rata
basis) or any dividend or distribution or portion thereof payable
solely in shares of Capital Stock (other than Disqualified Stock) of
the Company;
(b) the purchase, repurchase, redemption, acquisition
or retirement for value of any Capital Stock (including Trust Preferred
Stock and any other trust preferred securities issued by special
purpose trusts or warrants issued by the Company in connection
therewith, and including redemptions in connection with a remarketing
of such securities) of the Company or any Subsidiary (other than from
the Company or a Subsidiary) or any securities exchangeable for or
convertible into any such Capital Stock, including the exercise of any
option to exchange any Capital Stock (other than for or into Capital
Stock of the Company that is not Disqualified Stock);
(c) the purchase, repurchase, redemption, acquisition
or retirement for value, prior to the date for any scheduled maturity,
sinking fund or amortization or other installment payment, of any
Subordinated Obligation (excluding the purchase, repurchase or other
acquisition of any Subordinated Obligation (other than a Subordinated
20
Obligation covered by clause (e) below) purchased in anticipation of
satisfying a scheduled maturity, sinking fund or amortization or other
installment obligation, in each case due within one year of the date of
acquisition);
(d) any Investment (other than Permitted Investments)
in any Person; or
(e) any payment or purchase, repurchase, redemption,
acquisition or retirement for value by the Company or any Subsidiary of
any Debt issued to any special purpose trust of the Company in
connection with the issuance by such trust of trust preferred
securities (including Trust Preferred Stock); provided however that if
the corresponding dividend, distribution or other payment by the trust
on its trust preferred securities of the proceeds so received from the
Company or such Subsidiary would otherwise constitute a Restricted
Payment, the amount of such proceeds shall only be counted once as a
Restricted Payment.
"S&P" means Standard & Poor's Ratings Service or any successor
to the rating agency business thereof.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement relating to Property now owned or hereafter acquired whereby the
Company or a Subsidiary transfers such Property to another Person and the
Company or a Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Significant Subsidiary" means any Subsidiary or Unrestricted
Subsidiary that would be a "Significant Subsidiary" of the Company within the
meaning of Rule 1-02 under Regulation S-X promulgated by the Commission or any
successor provision to such Rule.
"Sovereign Bank" means Sovereign Bank, a federal savings bank,
and any successor thereto.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred.
"Subordinated Obligation" means any Debt of the Company or any
Subsidiary Guarantor (whether outstanding on November 15, 1999 or thereafter
Incurred) that is subordinate or junior in right of payment to the Securities or
the applicable Subsidiary Guaranty pursuant to a written agreement to that
effect.
21
"Subsidiary" means, in respect of any Person, any corporation,
company (including any limited liability company), association, partnership,
joint venture or other business entity of which a majority of the total voting
power of the Voting Stock is at the time owned or controlled, directly or
indirectly, by:
(a) such Person,
(b) such Person and one or more Subsidiaries of such
Person, or
(c) one or more Subsidiaries of such Person.
Unless otherwise specified, or as required by the context in
the definition of the term "Investment", the term "Subsidiary" or "Restricted
Subsidiary" means any Subsidiary of the Company other than an Unrestricted
Subsidiary.
"Subsidiary Guarantor" means any Person that becomes a
Subsidiary Guarantor pursuant to Section 4.11.
"Subsidiary Guaranty" means a Guarantee on the terms set forth
in the Indenture by a Subsidiary Guarantor of the Company's obligations with
respect to the Securities.
"Tax Sharing Agreement" means the Tax Allocation Agreement
dated July 7, 1995, among Sovereign Bancorp, Inc., and Sovereign Bank, FSB,
Sovereign Investment Corporation, First Lancaster Financial Corporation, Land
Asset-303 Fairview Corporation, Land Asset-33 Sampson Corporation, Land
Asset-2-4 Gregory Court Corporation, 201 Associates, Inc., Sovereign Financial
Associates, Sovereign Financial Securities, Inc., Sovereign Financial Insurance
Agency, Inc., C.S. Service Corporation and Jersey Shore Financial Services,
Inc., as amended, waived or otherwise modified from time to time as permitted by
Section 4.12.
"Temporary Cash Investments" means any of the following:
(a) Investments in U.S. Government Obligations
maturing within 365 days of the date of acquisition thereof;
(b) Investments in time deposit accounts,
certificates of deposit and money market deposits maturing within 180
days of the date of acquisition thereof issued by a bank or trust
company organized under the laws of the United States of America or any
state thereof having capital, surplus and undivided profits aggregating
in excess of $250,000,000 and whose long-term debt is rated "A-3" or
"A-" or higher according to Moody's or S&P (or such similar equivalent
rating by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act));
(c) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause
(a) entered into with:
(1) a bank meeting the qualifications described
in clause (b) above, or
22
(2) any primary government securities dealer
reporting to the Market Reports Division of the Federal
Reserve Bank of New York;
(d) Investments in commercial paper, maturing not
more than 90 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America with a rating
at the time as of which any Investment therein is made of "P-1" (or
higher) according to Moody's or "A-1" (or higher) according to S&P (or
such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the
Securities Act)); and
(e) direct obligations (or certificates representing
an ownership interest in such obligations) of any state of the United
States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of such state is pledged
and which are not callable or redeemable at the issuer's option,
provided that:
(1) the long-term debt of such state is rated
"A-3" or "A-" or higher according to Moody's or S&P (or such
similar equivalent rating by at least one "nationally
recognized statistical rating organization" (as defined in
Rule 436 under the Securities Act)), and
(2) such obligations mature within 180 days of
the date of acquisition thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss.77aaa-77bbbb) as in effect on the date of this Indenture; provided,
however, that, in the event the TIA is amended after such date, "Trust Indenture
Act" means, to the extent required by any such amendments, the Trust Indenture
Act of 1939 as so amended.
"Trust Preferred Stock" means $100,000,000 of 9% trust
preferred securities of Sovereign Capital Trust I due April 1, 2027; $50,000,000
of 9.875% trust preferred securities of ML Capital Trust I due March 1, 2027;
and $287,500,000 of 7.50% trust preferred securities issued by Sovereign Capital
Trust II.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time. "Unrestricted Affiliate" means a
Person (other than a Subsidiary or Unrestricted Subsidiary of the Company)
controlled (as defined in the definition of "Affiliate") by the Company, in
which no Affiliate of the Company (other than (x) the Company, (y) a Wholly
Owned Subsidiary of the Company and (z) another Unrestricted Affiliate) has an
Investment.
23
"Unrestricted Subsidiary" means:
(a) any corporation, company (including any limited
liability company), association, partnership, joint venture or other
business entity of which a majority of the total voting power of the
Voting Stock is at the time owned or controlled, directly or
indirectly, by the Company or any Subsidiary that is designated after
November 15, 1999 as an Unrestricted Subsidiary as permitted or
required pursuant to Section 4.08 and not thereafter redesignated as a
Restricted Subsidiary as permitted pursuant thereto; and
(b) any corporation, company (including any limited
liability company), association, partnership, joint venture or other
business entity of which a majority of the total voting power of the
Voting Stock is at the time owned or controlled, directly or
indirectly, by an Unrestricted Subsidiary.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of any Person means all classes of Capital
Stock or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a Subsidiary all
the Voting Stock of which (except directors' qualifying shares) is at such time
owned, directly or indirectly, by the Company and its other Wholly Owned
Subsidiaries.
24
Section 1.02. Other Definitions.
Defined
Term in Section
- ---- ----------
"Affiliate Transaction"...................................... 4.07
"Bankruptcy Law"............................................. 6.01
"Change of Control Notice Date".............................. 4.10
"Change of Control Offer".................................... 4.10
"Change of Control Payment Date"............................. 4.10
"Change of Control Purchase Price"........................... 4.10
"Contributing Party"......................................... 10.02
"covenant defeasance option"................................. 8.01
"Custodian".................................................. 6.01
"Event of Default"........................................... 6.01
"Global Security"............................................ Appendix A
"legal defeasance option".................................... 8.01
"Legal Holiday".............................................. 11.08
"Obligations"................................................ 10.01
"OID"........................................................ 2.01
"Original Securities"........................................ 2.01
"Paying Agent"............................................... 2.04
"Registrar".................................................. 2.04
"Surviving Person"........................................... 5.01
"Suspended Covenants"........................................ 4.16
Section 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities and the Subsidiary
Guarantees.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company, each
Subsidiary Guarantor and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
25
Section 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has
the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without
limitation;
(5) words in the singular include the plural and
words in the plural include the singular;
(6) unsecured Debt shall not be deemed to be
subordinate or junior to secured Debt merely by virtue of its
nature as unsecured Debt;
(7) the principal amount of any non-interest
bearing or other discount security at any date shall be the
principal amount thereof that would be shown on a balance
sheet of the issuer dated such date prepared in accordance
with GAAP; and
(8) the principal amount of any Preferred Stock
shall be the greater of (i) the maximum liquidation value of
such Preferred Stock or (ii) the maximum mandatory redemption
or mandatory repurchase price with respect to such Preferred
Stock.
ARTICLE II
THE SECURITIES
--------------
Section 2.01. Amount of Securities; Issuable in Series. The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is $200,000,000. All Securities shall be
identical in all respects other than issue prices and issuance dates. The
Original Securities will be issued in separate series and additional Securities
may be issued in one or more series, which may be the same series as or
different series than the Original Securities; provided, however, that any
Securities issued with original issue discount ("OID") for Federal income tax
purposes shall not be issued as part of the same series as any Securities that
are issued with a different amount of OID or are not issued with OID. All
Securities of any one series shall be identical in all respects other than as to
denomination. Each series of Securities will vote as a separate series from
other series of debt securities and from one another on matters under the
Indenture.
Subject to Section 2.03, the Trustee shall authenticate
Securities for original issue on the Issue Date in the aggregate principal
amount of $175,000,000 (the "Original Securities"). With respect to any
Securities issued after February 20, 2001, (except for Securities authenticated
and delivered upon registration of transfer of, or in exchange for, or in lieu
of, Original Securities pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix
26
A), there shall be established in or pursuant to a resolution of the Board of
Directors, and subject to Section 2.03, set forth, or determined in the manner
provided in an Officers' Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of such Securities:
(1) whether such Securities shall be issued as
part of a new or existing series of Securities and the title
of such Securities (which shall distinguish the Securities of
the series from Securities of any other series);
(2) the aggregate principal amount of such
Securities that may be authenticated and delivered under this
Indenture, which shall be in an aggregate principal amount not
to exceed $25,000,000 (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities of the same series
pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A and
except for Securities which, pursuant to Section 2.03, are
deemed never to have been authenticated and delivered
hereunder);
(3) the issue price and issuance date of such
Securities, including the date from which interest on such
Securities shall accrue;
(4) if applicable, that such Securities shall be
issuable in whole or in part in the form of one or more Global
Securities and, in such case, the respective depositories for
such Global Securities, the form of any legend or legends that
shall be borne by any such Global Security and any
circumstances in addition to or in lieu of those set forth in
Section 2.3 of Appendix A in which any such Global Security
may be exchanged in whole or in part for Securities
registered, and any transfer of such Global Security in whole
or in part may be registered, in the name or names of Persons
other than the depository for such Global Security or a
nominee thereof; and
(5) whether such Securities shall be issued
pursuant to Rule 144A, Regulation S or Regulation D, under the
Securities Act (or any successor provisions thereto or other
exemptions thereof), whether any such Securities shall be
subject pursuant to a registration agreement to a subsequent
registered exchange offer or registration under a shelf
registration statement and whether such Securities shall be
subject to transfer restrictions and similar or related
provisions or other customary provisions.
If any of the terms of any series are established by action
taken pursuant to a resolution of the Board of Directors, a copy of an
appropriate record of such action shall be certified by the Secretary or any
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Officers' Certificate or the trust indenture supplemental
hereto setting forth the terms of the series.
Section 2.02. Form and Dating. Provisions relating to the
Securities of each series are set forth in Appendix A, which is hereby
incorporated in and expressly made part of this Indenture. The Securities of
each series and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to Appendix A which is hereby
incorporated in and expressly made a part of this Indenture. The Securities of
27
each series may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage,
provided that any such notation, legend or endorsement is in a form reasonably
acceptable to the Company. Each Security shall be dated the date of its
authentication. The terms of the Securities of each series set forth in Exhibit
1 to Appendix A are part of the terms of this Indenture.
Section 2.03. Execution and Authentication. Two Officers shall
sign the Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication, together with a
written order of the Company in the form of an Officers' Certificate for the
authentication and delivery of such Securities, and the Trustee in accordance
with such written order of the Company shall authenticate and deliver such
Securities.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
Section 2.04. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 607 of the
Existing Indenture. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer
agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
28
Section 2.05. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Wholly Owned Subsidiary acts as Paying Agent, it
shall segregate the money held by it as Paying Agent and hold it as a separate
trust fund. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
Section 2.06. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
Section 2.07. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that such
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
Section 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, then on and after that date such Securities (or portions thereof) cease
to be outstanding and interest on them ceases to accrue.
29
Section 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Securities
and deliver them in exchange for temporary Securities.
Section 2.10. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else shall
cancel and destroy (subject to the record retention requirements of the Exchange
Act) all such Securities surrendered for registration of transfer, exchange,
payment or cancellation in its customary manner and deliver a certificate of
such destruction to the Company unless the Company directs the Trustee to
deliver canceled Securities to the Company. The Company may not issue new
Securities to replace Securities it has redeemed, paid or delivered to the
Trustee for cancellation.
Section 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
Section 2.12. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that neither the Company nor the Trustee shall have
any responsibility for any defect in the "CUSIP" number that appears on any
Security, check, advice of payment or redemption notice, and any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company shall promptly notify
the Trustee of any change in the "CUSIP" numbers.
ARTICLE III
REDEMPTION
----------
[Intentionally omitted.]
30
ARTICLE IV
Covenants
---------
Section 4.01. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and in
the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee or
the Paying Agent holds in accordance with this Indenture money sufficient to pay
all principal and interest then due.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the rate borne by the Securities to the extent
lawful.
Section 4.02. SEC Reports. Notwithstanding that the Company
may not be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the Commission and provide the Trustee
and Holders of Securities with such annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such
information, documents and reports to be so filed and provided at the times
specified for the filing of such information, documents and reports under such
Sections; provided, however, that the Company shall not be so obligated to file
such information, documents and reports with the Commission if the Commission
does not permit such filings. The Company shall also comply with the other
provisions of TIA ss. 314(a). Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
Section 4.03. Limitation on Debt. The Company shall not, and
shall not permit any Subsidiary to, Incur, directly or indirectly, any Debt;
provided, however, that the foregoing shall not prohibit the Incurrence of the
following Debt:
(a) Debt of the Company evidenced by the Original
Securities and of any Subsidiary Guarantors evidenced by Subsidiary
Guarantees relating to the Original Securities;
(b) Debt outstanding on the Issue Date not otherwise
described in clause (a), (c), (d), (e), (g), (h), (i) or (j);
(c) Debt of the Company or any Subsidiary Guarantor
if, immediately after giving pro forma effect to the Incurrence of such
Debt and the application of the proceeds thereof, the outstanding
aggregate principal amount of Debt of the Company and its Subsidiaries
on a consolidated basis (other than Debt Incurred pursuant to clause
(j)) would not exceed an amount equal to the Adjusted Consolidated Net
Worth of the Company;
31
(d) Subordinated Obligations of the Company or any
Subsidiary Guarantor if, immediately after giving pro forma effect to
the Incurrence of such Debt and the application of the proceeds
thereof, the Consolidated Interest Coverage Ratio would be greater than
3.00 to 1.00; provided, however, that such Debt (A) shall have a Stated
Maturity that is no earlier than the Stated Maturity of the Securities
and (B) shall have an Average Life equal to or greater than the
remaining Average Life of the Securities;
(e) Debt under any Credit Facilities, provided that
the aggregate principal amount of all such Debt at any one time
outstanding shall not exceed $500,000,000; and provided further that
the aggregate principal balance of Debt that may be outstanding at any
one time under such Credit Facilities shall be permanently reduced to
the extent that the amount of credit available under such Credit
Facilities is, by the terms of any such Credit Facility then in effect,
permanently reduced as a result of one or more Asset Sales.
(f) Permitted Refinancing Debt Incurred in respect of
Debt Incurred pursuant to clause (a), (b), (c), (d), (g), or (h);
(g) Debt of a Subsidiary outstanding on the date on
which such Subsidiary was acquired by the Company or otherwise became a
Subsidiary (other than Debt Incurred as consideration in, or to provide
all or any portion of the funds or credit support utilized to
consummate, the transaction or series of transactions pursuant to which
such Subsidiary became a Subsidiary of the Company or was otherwise
acquired by the Company), provided that at the time such Subsidiary was
acquired by the Company or otherwise became a Subsidiary and after
giving pro forma effect to the Incurrence of such Debt, the Company
would have been able to Incur $1.00 of additional Debt pursuant to
clause (c) of this Section;
(h) Subordinated Obligations Incurred by the Company
and Debt Incurred by any special purpose trust pursuant to the issuance
by such special purpose trust of trust preferred securities (including
any Subordinated Obligations Incurred or trust preferred securities
issued pursuant to a remarketing of Debt permitted pursuant to this
clause (h), provided such remarketing is in accordance with the
original terms of such Debt);
(i) in the case of a Financial Services Subsidiary,
any Debt issued by such Financial Services Subsidiary in the ordinary
course of funding its assets if, immediately after giving pro forma
effect to the Incurrence of such Debt and the application of the
proceeds thereof, (A) the outstanding aggregate principal amount of
Debt Incurred by such Financial Services Subsidiary would not exceed an
amount equal to the Consolidated Total Assets of such Financial
Services Subsidiary, and (B) the amount of the Consolidated Total
Assets and Consolidated Net Worth of all the Financial Services
Subsidiaries on a combined basis would not exceed 2.5% of the Company's
Consolidated Total Assets and Consolidated Net Worth, respectively (all
determinations pursuant to this clause (i) shall be made as of the end
of the Company's most recent fiscal quarter ending at least 45 days
prior to the date of such Incurrence); and
32
(j) Debt of any Subsidiary that is a Depository
Institution or a Subsidiary of a Depository Institution, including
Sovereign Bank.
Notwithstanding anything to the contrary contained in this
section,
(1) the Company shall not, and shall not permit
any Subsidiary Guarantor to, Incur any Debt pursuant to this
Section if the proceeds thereof are used, directly or
indirectly, to Refinance any Subordinated Obligations unless
such Debt shall be subordinated to the Securities or the
applicable Subsidiary Guaranty, as the case may be, to at
least the same extent as such Subordinated Obligations, and
(2) the Company shall not permit any Subsidiary
that is not a Subsidiary Guarantor to Incur any Debt pursuant
to this Section if the proceeds thereof are used, directly or
indirectly, to Refinance any Debt of the Company or any
Subsidiary Guarantor.
Section 4.04. Limitation on Restricted Payments. The Company
shall not make, and shall not permit any Subsidiary to make, directly or
indirectly, any Restricted Payment if at the time of, and after giving effect
to, such proposed Restricted Payment:
(a) a Default or Event of Default shall have occurred
and be continuing, or
(b) any Subsidiary that is a Depository Institution
does not qualify as "well capitalized" under Section 28 of the FDIA (or
any successor provision) and the regulations of the OTS thereunder, or
(c) the Consolidated Common Shareholders' Tangible
Equity of Sovereign Bank as of the end of the most recent fiscal
quarter ending at least 45 days prior to the date of such Restricted
Payment was less than the Minimum Tangible Common Equity Amount as of
the end of such fiscal quarter, or
(d) the aggregate amount of such Restricted Payment
and all other Restricted Payments declared or made since November 15,
1999 (the amount of any Restricted Payment, if made other than in cash,
to be based upon Fair Market Value) would exceed an amount equal to the
sum of:
(1) 50% of the aggregate amount of Consolidated
Net Income accrued during the period (treated as one
accounting period) from October 1, 1999, to the end of the
most recent fiscal quarter ending at least 45 days prior to
the date of such Restricted Payment (or if the aggregate
amount of Consolidated Net Income for such period shall be a
deficit, minus 100% of such deficit), plus
(2) Capital Stock Sale Proceeds, plus
(3) the sum of:
33
(A) the aggregate net cash proceeds received by
the Company or any Subsidiary from the issuance or
sale after November 15, 1999 of convertible or
exchangeable Debt (excluding trust preferred
securities issued by Sovereign Capital Trust II) that
has been converted into or exchanged for Capital
Stock (other than Disqualified Stock) of the Company,
and
(B) the aggregate amount by which Debt (excluding
the trust preferred securities issued by Sovereign
Capital Trust II) of the Company or any Subsidiary is
reduced on the Company's consolidated balance sheet
on or after the Issue Date upon the conversion or
exchange of any Debt issued or sold on or prior to
the Issue Date that is convertible or exchangeable
for Capital Stock (other than Disqualified Stock) of
the Company, excluding, in the case of clause (A) or
(B):
(x) any such Debt issued or sold to the Company or a
Subsidiary or an Unrestricted Subsidiary or an employee stock ownership
plan or trust established by the Company or any Subsidiary or an
Unrestricted Subsidiary for the benefit of their employees, and
(y) the aggregate amount of any cash or other
Property distributed by the Company or any Subsidiary upon any such
conversion or exchange, plus
(4) an amount equal to the sum of:
(A) the net reduction in Investments in any
Person other than the Company or a Subsidiary
resulting from dividends, repayments of loans or
advances or cash proceeds from transfers of Property,
in each case to the Company or any Subsidiary from
such Person plus
(B) the portion (proportionate to the Company's
equity interest in such Unrestricted Subsidiary) of
the Fair Market Value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary;
provided, however, that the foregoing sum shall not
exceed, in the case of any Person, the amount of
Investments previously made (and treated as a
Restricted Payment) by the Company or any Restricted
Subsidiary in such Person.
Notwithstanding the foregoing limitation, the Company or any
Subsidiary or any Unrestricted Subsidiary may:
(a) pay dividends on Capital Stock of the Company
within 60 days of the declaration thereof if, on said declaration date,
such dividends could have been paid in compliance with the Indenture;
provided, however, that at the time of such payment, no other Default
or Event of Default shall have occurred and be continuing (or result
therefrom); provided further, however, that such payment shall be
included in the calculation of the amount of Restricted Payments;
34
(b) purchase, repurchase, redeem, legally defease,
acquire or retire for value (i) Capital Stock of the Company or
Subordinated Obligations in exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other
than Disqualified Stock and other than Capital Stock issued or sold to
a Subsidiary or an Unrestricted Subsidiary or an employee stock
ownership plan or trust established by the Company or any such
Subsidiary or Unrestricted Subsidiary for the benefit of their
employees) or (ii) trust preferred securities or related Subordinated
Obligations in connection with a remarketing and issuance of trust
preferred securities or related Subordinated Obligations in an
aggregate principal amount not greater than the original trust
preferred securities or related Subordinated Obligations; provided,
however, that, in the case of clause (i) or (ii):
(1) such purchase, repurchase, redemption, legal
defeasance, acquisition or retirement shall be excluded in the
calculation of the amount of Restricted Payments, and
(2) the Capital Stock Sale Proceeds from such
exchange or sale (other than from the exercise of warrants in
connection with a remarketing of trust preferred securities or
related Subordinated Obligations) shall be excluded from the
calculation pursuant to clause (d)(2) above;
(c) purchase, repurchase, redeem, legally defease,
acquire or retire for value any Subordinated Obligations in exchange
for, or out of the proceeds of the substantially concurrent sale of,
Permitted Refinancing Debt; provided, however, that such purchase,
repurchase, redemption, legal defeasance, acquisition or retirement
shall be excluded in the calculation of the amount of Restricted
Payments; and
(d) make other Restricted Payments, including
Restricted Payments of the type described in clauses (a), (b) and (c),
in an aggregate annual amount not to exceed $25,000,000; provided,
however, that at the time of such payment, no other Default or Event of
Default shall have occurred and be continuing (or result therefrom);
provided further, however, that such payment shall be included in the
calculation of the amount of Restricted Payments.
Section 4.05. Limitation on Liens. The Company shall not, and
shall not permit any Subsidiary to, directly or indirectly, Incur or suffer to
exist, any Lien (other than Permitted Liens) upon any of its Property (including
Capital Stock of a Subsidiary), whether owned at the Issue Date or thereafter
acquired, or any interest therein or any income or profits therefrom, unless it
has made or will make effective provision whereby the Securities or any
applicable Subsidiary Guaranty will be secured by such Lien equally and ratably
with (or prior to) all other Debt of the Company or any Subsidiary secured by
such Lien.
Section 4.06. Limitation on Restrictions on Distributions from
Subsidiaries. The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist any
consensual restriction on the right of any Subsidiary to:
35
(a) pay dividends, in cash or otherwise, or make any
other distributions on or in respect of its Capital Stock, or pay any
Debt or other obligation owed, to the Company or any other Subsidiary,
(b) make any loans or advances to the Company or any
other Subsidiary, or
(c) transfer any of its Property to the Company or
any other Subsidiary.
The foregoing limitations will not apply:
(1) with respect to clauses (a), (b) and (c), to
restrictions:
(A) in effect on the Issue Date,
(B) relating to Debt of a Subsidiary and existing
at the time it became a Subsidiary if such
restriction was not created in connection with or in
anticipation of the transaction or series of
transactions pursuant to which such Subsidiary became
a Subsidiary or was acquired by the Company, or
(C) that result from the Refinancing of Debt
Incurred pursuant to an agreement referred to in
clause (1)(A) or (B) above or in clause (3)(A) or (B)
below, provided such restriction is no less favorable
to the Holders of Securities than those under the
agreement evidencing the Debt so Refinanced, or
(D) imposed or effectively imposed by any
governmental agency having regulatory supervision
over Sovereign Bank or any other Subsidiary, or
(E) relating to Debt of a Financial Services
Subsidiary Incurred pursuant to clause (i) of Section
4.03,
(2) with respect to clause (a) only, to
restrictions relating to any Qualified Preferred Stock issued
after November 15, 1999, and
(3) with respect to clause (c) only, to
restrictions:
(A) relating to Debt that is permitted to be
Incurred and secured without also securing the
Securities or any applicable Subsidiary Guaranty
pursuant to Sections 4.03 and 4.05 that limit the
right of the debtor to dispose of the Property
securing such Debt,
(B) encumbering Property at the time such
Property was acquired by the Company or any
Subsidiary, so long as such restriction relates
solely to the Property so acquired and was not
created in connection with or in anticipation of such
acquisition,
36
(C) resulting from customary provisions
restricting subletting or assignment of leases or
customary provisions in other agreements that
restrict assignment of such agreements or rights
thereunder, or
(D) customary restrictions contained in asset
sale agreements limiting the transfer of such
Property pending the closing of such sale.
Section 4.07. Limitation on Transactions with Affiliates. The
Company shall not, and shall not permit any Subsidiary to, directly or
indirectly, conduct any business or enter into or suffer to exist any
transaction or series of transactions (including the purchase, sale, transfer,
assignment, lease, conveyance or exchange of any Property or the rendering of
any service) with, or for the benefit of, any Affiliate of the Company (an
"Affiliate Transaction"), unless:
(a) the terms of such Affiliate Transaction are:
(1) set forth in writing, and
(2) no less favorable to the Company or such
Subsidiary, as the case may be, than those that could be
obtained in a comparable arm's-length transaction with a
Person that is not an Affiliate of the Company,
(b) if such Affiliate Transaction involves aggregate
payments or value in excess of $5,000,000, the Board of Directors
(including a majority of the disinterested members of the Board of
Directors) approves such Affiliate Transaction and, in its good faith
judgment, believes that such Affiliate Transaction complies with clause
(a)(2) of this paragraph as evidenced by a Board Resolution promptly
delivered to the Trustee, and
(c) if such Affiliate Transaction involves aggregate
payments or value in excess of $25,000,000, the Company obtains a
written opinion from an Independent Financial Advisor to the effect
that the consideration to be paid or received in connection with such
Affiliate Transaction is fair, from a financial point of view, to the
Company and its Subsidiaries, taken as a whole.
Notwithstanding the foregoing limitation, the Company or any
Subsidiary may enter into or suffer to exist the following:
(a) any transaction or series of transactions between
the Company and one or more Subsidiaries or between two or more
Subsidiaries in the ordinary course of business, provided that no more
than 5% of the total voting power of the Voting Stock (on a fully
diluted basis) of any such Subsidiary is owned by an Affiliate of the
Company (other than a Subsidiary);
(b) any Restricted Payment permitted to be made
pursuant to Section 4.04 or any Permitted Investment;
(c) the payment of compensation (including amounts
paid pursuant to employee benefit plans) for the personal services of
officers, directors and employees of the Company or any of the
Subsidiaries, so long as the Board of Directors in good faith shall
37
have approved the terms thereof and deemed the services theretofore or
thereafter to be performed for such compensation to be fair
consideration therefor;
(d) loans and advances to employees made in the
ordinary course of business and consistent with the past practices of
the Company or such Subsidiary, as the case may be, provided that such
loans and advances do not exceed $25,000,000 in the aggregate at any
one time outstanding; and
(e) any transaction or series of transactions in
connection with a securitization of assets of the Company, any
Subsidiary or any Unrestricted Subsidiary, (i) between the Company and
one or more Subsidiaries or Unrestricted Subsidiaries, (ii) between two
or more Subsidiaries or Unrestricted Subsidiaries, or (iii) between one
or more Subsidiaries and Unrestricted Subsidiaries.
Section 4.08. Designation of Restricted and Unrestricted
Subsidiaries. For purposes of this Indenture, the term "Subsidiary" has the same
meaning as "Restricted Subsidiary," except for below and where otherwise
provided for in this Indenture. The Board of Directors may designate any
Subsidiary of the Company to be an Unrestricted Subsidiary if:
(a) the Subsidiary to be so designated does not own
any Capital Stock or Debt of, or own or hold any Lien on any Property
of, the Company or any other Restricted Subsidiary, and
(b) either:
(1) the Subsidiary to be so designated has total
assets of $1,000 or less, or
(2) such designation is effective immediately
upon such entity becoming a Subsidiary of the Company.
Unless so designated as an Unrestricted Subsidiary, any Person that becomes a
Subsidiary of the Company will be classified as a Restricted Subsidiary;
provided, however, that such Subsidiary shall not be designated a Restricted
Subsidiary and shall be automatically classified as an Unrestricted Subsidiary
if either of the requirements set forth in clauses (x) and (y) of the second
immediately following paragraph will not be satisfied after giving pro forma
effect to such classification or if such Person is a Subsidiary of an
Unrestricted Subsidiary.
Except as provided in the first sentence of the preceding
paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary. In addition, neither the Company nor any Restricted Subsidiary shall
at any time be directly or indirectly liable for any Debt that provides that the
holder thereof may (with the passage of time or notice or both) declare a
default thereon or cause the payment thereof to be accelerated or payable prior
to its Stated Maturity upon the occurrence of a default with respect to any
Debt, Lien or other obligation of any Unrestricted Subsidiary (including any
right to take enforcement action against such Unrestricted Subsidiary).
38
Upon designation of a Restricted Subsidiary as an Unrestricted
Subsidiary in compliance with this covenant, such Restricted Subsidiary shall,
by execution and delivery of a supplemental indenture in form satisfactory to
the Trustee, be released from any Subsidiary Guaranty previously made by such
Restricted Subsidiary.
The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma
effect to such designation,
(x) the Company could Incur at least $1.00 of
additional Debt pursuant to both clauses (c) and (d) of Section 4.03,
and
(y) no Default or Event of Default shall have
occurred and be continuing or would result therefrom.
Any such designation or redesignation by the Board of
Directors will be evidenced to the Trustee by filing with the Trustee a Board
Resolution giving effect to such designation or redesignation and an Officers'
Certificate that:
(a) certifies that such designation or redesignation
complies with the foregoing provisions, and
(b) gives the effective date of such designation or
redesignation, such filing with the Trustee to occur within 45 days
after the end of the fiscal quarter of the Company in which such
designation or redesignation is made (or, in the case of a designation
or redesignation made during the last fiscal quarter of the Company's
fiscal year, within 90 days after the end of such fiscal year).
Section 4.09. Limitation on Company's Business. The Company
shall not, and shall not permit any Subsidiary, to, directly or indirectly,
engage in any business other than the Banking Business.
Section 4.10. Change of Control.
(a) Upon the occurrence of a Change of Control, each
Holder of Securities shall have the right to require the Company to
repurchase all or any part of such Holder's Securities pursuant to the
offer described below (the "Change of Control Offer") at a purchase
price (the "Change of Control Purchase Price") equal to 101.0% of the
principal amount thereof, plus accrued and unpaid interest, if any, to
the purchase date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest
payment date).
(b) Within 45 days following any Change of Control
(the "Change of Control Notice Date"), the Company shall (i) cause a
notice of the Change of Control Offer to be sent at least once to the
Dow Jones News Service or similar business news service in the United
States and (ii) send, by first-class mail, with a copy to the Trustee,
to each Holder of Securities, at such Holder's address appearing in the
Security Register, a notice stating: (A) that a Change of Control Offer
is being made pursuant to this Section 4.10 and that all Securities
timely tendered will be accepted for payment; (B) the Change of Control
39
Purchase Price and the purchase date, which shall be, subject to any
contrary requirements of applicable law, a Business Day no earlier than
30 days nor later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"); (C) that any Security (or portion
thereof) accepted for payment (and duly paid on the Change of Control
Payment Date) pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date; (D) that any
Security (or portions thereof) not properly tendered will continue to
accrue interest; (E) the circumstances and relevant facts regarding the
Change of Control (including information with respect to pro forma
historical income, cash flow and capitalization after giving effect to
the Change of Control); and (F) the procedures that Holders of
Securities must follow in order to tender their Securities (or portions
thereof) for payment and the procedures that Holders of Securities must
follow in order to withdraw an election to tender Securities (or
portions thereof) for payment.
(c) Holders electing to have a Security purchased
shall be required to surrender the Security, with an appropriate form
duly completed, to the Company or its agent at the address specified in
the notice at least three Business Days prior to the Change of Control
Payment Date. Holders shall be entitled to withdraw their election if
the Trustee or the Company receives not later than one Business Day
prior to the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Security that was delivered for purchase by
the Holder and a statement that such Holder is withdrawing its election
to have such Security purchased.
(d) On or prior to the Change of Control Payment
Date, the Company shall irrevocably deposit with the Trustee or with
the Paying Agent (or, if the Company or any of its Wholly Owned
Subsidiaries is acting as the Paying Agent, segregate and hold in
trust) in cash an amount equal to the Change of Control Purchase Price
payable to the Holders entitled thereto, to be held for payment in
accordance with the provisions of this Section. On the Change of
Control Payment Date, the Company shall deliver to the Trustee the
Securities or portions thereof that have been properly tendered to and
are to be accepted by the Company for payment. The Trustee or the
Paying Agent shall, on the Change of Control Payment Date, mail or
deliver payment to each tendering Holder of the Change of Control
Purchase Price. In the event that the aggregate Change of Control
Purchase Price is less than the amount delivered by the Company to the
Trustee or the Paying Agent, the Trustee or the Paying Agent, as the
case may be, shall deliver the excess to the Company immediately after
the Change of Control Payment Date.
(e) The Company will comply, to the extent
applicable, with the requirements of Section 14(e) of the Exchange Act
and any other securities laws or regulations in connection with the
purchase of Securities pursuant to this Section. To the extent that the
provisions of any securities laws or regulations conflict with the
provisions of this Section, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached
its obligations under this Section by virtue thereof.
Section 4.11. Subsidiary Guarantors. The Company shall cause
each Material Domestic Subsidiary to execute and deliver to the Trustee a
40
supplemental indenture in the form of Exhibit A pursuant to which such
Subsidiary shall guarantee payment of the Securities as provided in Section
10.06, unless such Material Domestic Subsidiary is a banking institution, a
subsidiary of a banking institution or a special purpose trust established for
the purpose of issuing trust preferred securities. Notwithstanding the
foregoing, any Subsidiary that enters into a Guarantee or otherwise Incurs Debt
under a Credit Facility, in either case pursuant to clause (e) of Section 4.03,
shall, at such time, execute and deliver to the Trustee a supplemental indenture
in the form of Exhibit A obligating such Subsidiary as a Subsidiary Guarantor
under the Indenture and the Securities; provided, that, if such Subsidiary would
not otherwise have become a Subsidiary Guarantor but for the Credit Facility,
such Subsidiary Guaranty shall be effective only to the same extent and for so
long as such Subsidiary is so obligated under such Credit Facility.
Section 4.12. Tax Sharing Agreement. The Company shall not,
and shall not permit any Subsidiary to, terminate, amend, modify or waive any
provisions of the Tax Sharing Agreement or enter into any other tax allocation,
sharing or similar agreement; provided, however, that:
(a) any provision of the Tax Sharing Agreement may be
terminated, amended, modified or waived (i) to the extent required by
any governmental agency having regulatory supervision over Sovereign
Bank or any other Subsidiary of the Company or (ii) if such
termination, amendment, modification or waiver does not materially
adversely affect the Company, any Subsidiary Guarantor or their rights,
benefits or obligations under the Tax Sharing Agreement; and
(b) the Company or any Subsidiary may enter into such
other tax agreement with any direct or indirect shareholder of the
Company with respect to consolidated or combined tax returns including
the Company or any of its Subsidiaries or Unrestricted Subsidiaries but
only to the extent that amounts payable from time to time by the
Company or any such Subsidiary under any such agreement do not exceed
the corresponding tax payments that the Company or such Subsidiary
would have been required to make to any relevant taxing authority had
the Company or such Subsidiary not joined in such consolidated or
combined returns, but instead had filed returns including only the
Company and its Subsidiaries, provided that such agreement does not
materially adversely affect the Company, any Subsidiary Guarantor or
their rights, benefits or obligations under the Tax Sharing Agreement
as in effect at such time.
Section 4.13. Maintenance of Status of Subsidiaries as Insured
Depository Institutions; Capital Maintenance.
(a) The Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect the
status of each of its Subsidiaries that is a Depository Institution as
an insured depository institution and do all things necessary to ensure
that savings accounts of each such Subsidiary are insured by the FDIC
or any successor organization up to the maximum amount permitted by 12
U.S.C. Section 1811 et seq. and the regulations thereunder or any
succeeding federal law, except as to individual accounts or interests
in employee benefit plans that are not entitled to "pass-through"
insurance under 12 U.S.C. Section 1812(a)(1)(D).
41
(b) The Company shall cause Sovereign Bank to
maintain or exceed the status of a "well capitalized" institution as
defined in the FDIA and OTS regulations.
Section 4.14. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company an Officers' Certificate stating that in the course of the performance
by the signers of their duties as Officers of the Company they would normally
have knowledge of any Default and whether or not the signers know of any Default
that occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA ss. 314(a)(4).
Section 4.15. Further Instruments and Acts. Upon request of
the Trustee, the Company shall execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
Section 4.16. Covenant Suspension. During any period of time
that:
(a) the Securities have Investment Grade Ratings from
both S&P and Moody's and
(b) no Default or Event of Default has occurred and
is continuing under the Indenture, the Company and the Subsidiaries
will not be subject to the following provisions of the Indenture:
Sections 4.03, 4.04, 4.06, 4.07 and 4.09, clause (x) of the third
paragraph (and such clause (x) as referred to in the first paragraph)
of Section 4.08 and clauses (5) and (6) of Sections 5.01(a) and 5.02(a)
(collectively, the "Suspended Covenants").
In the event that the Company and the Subsidiaries are not
subject to the Suspended Covenants for any period of time as a result of the
preceding sentence and, subsequently, one or both of S&P and/or Moody's
withdraws its ratings or downgrades the ratings assigned to the Securities below
the required Investment Grade Ratings or a Default or Event of Default occurs
and is continuing, then the Company and the Subsidiaries will thereafter again
be subject to the Suspended Covenants and compliance with the Suspended
Covenants with respect to Restricted Payments made after the time of such
withdrawal, downgrade, Default or Event of Default will be calculated in
accordance with the terms of Section 4.04 as though, for purposes of determining
whether new Restricted Payments can be made after such time, such covenant had
been in effect during the entire period of time from the Issue Date.
ARTICLE V
SUCCESSOR COMPANY
-----------------
Section 5.01. (a) When Company May Merge or Transfer Assets.
The Company shall not merge, consolidate or amalgamate with or into any other
Person (other than a merger of a Wholly Owned Subsidiary into the Company) or
sell, transfer, assign, lease, convey or otherwise dispose of all or
substantially all its Property in any one transaction or series of transactions
unless:
42
(1) the Company shall be the surviving Person
(the "Surviving Person") or the Surviving Person (if other
than the Company) formed by such merger, consolidation or
amalgamation or to which such sale, transfer, assignment,
lease, conveyance or disposition is made shall be a
corporation organized and existing under the laws of the
United States of America, any State thereof or the District of
Columbia;
(2) the Surviving Person (if other than the
Company) expressly assumes, by supplemental indenture in form
satisfactory to the Trustee, executed and delivered to the
Trustee by such Surviving Person, the due and punctual payment
of the principal of, and premium, if any, and interest on, all
the Securities, according to their tenor, and the due and
punctual performance and observance of all the covenants and
conditions of the Indenture to be performed by the Company;
(3) in the case of a sale, transfer, assignment,
lease, conveyance or other disposition of all or substantially
all the Property of the Company, such Property shall have been
transferred as an entirety or virtually as an entirety to one
Person;
(4) immediately before and after giving effect to
such transaction or series of transactions on a pro forma
basis (and treating, for purposes of this clause (4) and
clauses (5) and (6) below, any Debt that becomes, or is
anticipated to become, an obligation of the Surviving Person
or any Subsidiary as a result of such transaction or series of
transactions as having been Incurred by the Surviving Person
or such Subsidiary at the time of such transaction or series
of transactions), no Default or Event of Default shall have
occurred and be continuing;
(5) immediately after giving effect to such
transaction or series of transactions on a pro forma basis,
the Company or the Surviving Person, as the case may be, would
be able to Incur at least $1.00 of additional Debt under both
clauses (c) and (d) of Section 4.03;
(6) immediately after giving effect to such
transaction or series of transactions on a pro forma basis,
the Surviving Person shall have an Adjusted Consolidated Net
Worth in an amount which is not less than the Adjusted
Consolidated Net Worth of the Company immediately prior to
such transaction or series of transactions;
(7) the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an
Opinion of Counsel, each stating that such transaction and the
supplemental indenture, if any, in respect thereto comply with
this covenant and that all conditions precedent herein
provided for relating to such transaction have been satisfied;
and
43
(8) the Surviving Person shall have delivered to
the Trustee an Opinion of Counsel to the effect that the
Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such transaction or series
of transactions and will be subject to Federal income tax on
the same amounts and at the same times as would be the case if
the transaction or series of transactions had not occurred.
(b) The Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of the Company
under the Indenture, but the predecessor Company in the case of:
(1) a sale, transfer, assignment, conveyance or
other disposition (unless such sale, transfer, assignment,
conveyance or other disposition is of all the assets of the
Company as an entirety or virtually as an entirety), or
(2) a lease,
shall not be released from any of the obligations or covenants under the
Indenture, including with respect to the payment of the Securities.
Section 5.02. (a) When Sovereign Bank or its Subsidiaries or a
Subsidiary Guarantor May Merge or Transfer Assets. The Company shall not permit
Sovereign Bank, or any of its Subsidiaries, or any Subsidiary Guarantor (each a
"Specified Party") to merge, consolidate or amalgamate with or into any other
Person (other than a merger of a Wholly Owned Subsidiary into such Specified
Party) or sell, transfer, assign, lease, convey or otherwise dispose of all or
substantially all its Property in any one transaction or series of transactions
(other than to the Company or any Subsidiary) unless:
(1) the Surviving Person (if not such Specified
Party) formed by such merger, consolidation or amalgamation or
to which such sale, transfer, assignment, lease, conveyance or
disposition is made shall be a corporation organized and
existing under the laws of the United States of America, any
State thereof or the District of Columbia;
(2) solely in the case of such a transaction
involving a Subsidiary Guarantor, the Surviving Person (if
other than such Subsidiary Guarantor) expressly assumes, by
Subsidiary Guaranty in form satisfactory to the Trustee,
executed and delivered to the Trustee by such Surviving
Person, the due and punctual performance and observance of all
the obligations of such Subsidiary Guarantor under its
Subsidiary Guaranty;
(3) in the case of a sale, transfer, assignment,
lease, conveyance or other disposition of all or substantially
all the Property of such Specified Party, such Property shall
have been transferred as an entirety or virtually as an
entirety to one Person;
44
(4) immediately before and after giving effect to
such transaction or series of transactions on a pro forma
basis (and treating, for purposes of this clause (4) and
clauses (5) and (6) below, any Debt that becomes, or is
anticipated to become, an obligation of the Surviving Person,
the Company or any Subsidiary as a result of such transaction
or series of transactions as having been Incurred by the
Surviving Person, the Company or such Subsidiary at the time
of such transaction or series of transactions), no Default or
Event of Default shall have occurred and be continuing;
(5) immediately after giving effect to such
transaction or series of transactions on a pro forma basis,
the Company would be able to Incur at least $1.00 of
additional Debt under both clauses (c) and (d) of Section
4.03;
(6) immediately after giving effect to such
transaction or series of transactions on a pro forma basis,
the Company shall have an Adjusted Consolidated Net Worth in
an amount which is not less than the Adjusted Consolidated Net
Worth of the Company immediately prior to such transaction or
series of transactions; and
(7) the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an
Opinion of Counsel, each stating that such transaction and
such Subsidiary Guaranty, if any, in respect thereto comply
with this covenant and that all conditions precedent herein
provided for relating to such transaction have been satisfied.
(b) Solely in the case of a transaction involving a
Subsidiary Guarantor, the Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of the
Subsidiary Guarantor under the Subsidiary Guaranty but the predecessor
Subsidiary Guarantor in the case of:
(1) a sale, transfer, assignment, conveyance or
other disposition (unless such sale, transfer, assignment,
conveyance or other disposition is of all the assets of the
Subsidiary Guarantor as an entirety or virtually as an
entirety), or
(2) a lease,
shall not be released from any of its obligations or covenants under the
Indenture, including with respect to the payment of the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
---------------------
Section 6.01. Events of Default. The following events shall be
"Events of Default":
45
(1) the Company defaults in any payment of
interest on any Security when the same becomes due and
payable, and such default continues for a period of 30 days;
(2) the Company defaults in the payment of the
principal of any Security when the same becomes due and
payable at its Stated Maturity, upon acceleration, required
repurchase or otherwise;
(3) the Company or any Subsidiary Guarantor or
Sovereign Bank or any of its Subsidiaries fails to comply with
Article 5;
(4) the Company fails to comply with any covenant
or agreement in the Securities or in this Indenture (other
than a failure that is the subject of the foregoing clause
(1), (2) or (3)) and such failure continues for 30 days after
written notice is given to the Company as specified below;
(5) a default by the Company or any Subsidiary
under any Debt of the Company or any Subsidiary which results
in acceleration of the maturity of such Debt, or the failure
to pay any such Debt at maturity, in an aggregate amount in
excess of $25,000,000 or its foreign currency equivalent at
the time;
(6) the Company or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of
it or for any substantial part of its property;
(D) makes a general assignment for the benefit of
its creditors; or
(E) takes any comparable action under any foreign
laws relating to insolvency;
(7) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of
its property; or
46
(C) orders the winding up or liquidation of the
Company or any Significant Subsidiary; or
(D) grants any similar relief under any foreign
laws;
and in each such case the order or decree remains unstayed and in effect for 30
days;
(8) any judgment or judgments for the payment of
money in an unsecured aggregate amount in excess of
$50,000,000 or its foreign currency equivalent at the time is
entered against the Company or any Subsidiary and shall not be
waived, satisfied or discharged for any period of 45
consecutive days during which a stay of enforcement shall not
be in effect;
(9) any Subsidiary Guaranty ceases to be in full
force and effect (other than in accordance with the terms of
this Indenture and such Subsidiary Guaranty) or any Subsidiary
Guarantor denies or disaffirms its obligations under its
Subsidiary Guaranty; or
(10) the failure of the Company or its Wholly
Owned Subsidiaries to own 100% of the Voting Stock or common
stock (or Capital Stock convertible into Voting Stock or
common stock) of Sovereign Bank ("the ownership provisions").
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (4) is not an Event of Default until
the Trustee or the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding notify the Company (and in the case of such notice
by Holders, the Trustee) of the Default and the Company does not cure such
Default within the time specified after receipt of such notice. Such notice must
specify the Default, demand that it be remedied and state that such notice is a
"Notice of Default."
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default and any event that with the giving of notice or the
lapse of time would become an Event of Default, its status and what action the
Company is taking or proposes to take with respect thereto.
Section 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 6.01(6) or (7) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in aggregate principal amount of the Securities then
47
outstanding by notice to the Company and the Trustee, may declare the principal
of and accrued and unpaid interest on all the Securities to be due and payable.
Upon such a declaration, such principal and interest shall be due and payable
immediately. If an Event of Default specified in Section 6.01(6) or (7) with
respect to the Company occurs, the principal of and accrued and unpaid interest
on all the Securities shall, automatically and without any action by the Trustee
or any Holder, become and be immediately due and payable. The Holders of a
majority in aggregate principal amount of the outstanding Securities by notice
to the Trustee and the Company may rescind any declaration of acceleration if
the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of the acceleration. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
Section 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.04. Waiver of Past Defaults. The Holders of a
majority in aggregate principal amount of the Securities then outstanding by
notice to the Trustee may waive an existing Default and its consequences except
(i) a Default in the payment of the principal of or interest on a Security or
(ii) a Default in respect of a provision that under Section 9.02 cannot be
amended without the consent of each Securityholder affected. When a Default is
waived, it is deemed cured, but no such waiver shall extend to any subsequent or
other Default or impair any consequent right.
Section 6.05. Control by Majority. The Holders of a majority
in aggregate principal amount of the Securities then outstanding may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee with
respect to the Securities. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Section 601
of the Existing Indenture, that the Trustee determines is prejudicial to the
rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to reasonable
indemnification against all losses, claims, liabilities, damages and expenses
(including reasonable legal fees and expenses) caused by taking or not taking
such action.
Section 6.06. Limitation on Suits. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities unless:
(1) such Holder shall have previously given to
the Trustee written notice of a continuing Event of Default;
48
(2) the Holders of at least 25% in aggregate
principal amount of the Securities then outstanding shall have
made a written request, and such Holder of or Holders shall
have offered reasonable indemnity, to the Trustee to pursue
such proceeding as trustee; and
(3) the Trustee has failed to institute such
proceeding and has not received from the Holders of at least a
majority in aggregate principal amount of the Securities
outstanding a direction inconsistent with such request, within
60 days after such notice, request and offer.
The foregoing limitations on the pursuit of remedies by a
Securityholder shall not apply to a suit instituted by a Holder of Securities
for the enforcement of payment of the principal of or interest on such Security
on or after the applicable due date specified in such Security. A Securityholder
may not use this Indenture to prejudice the rights of another Securityholder or
to obtain a preference or priority over another Securityholder.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 607 of the Existing Indenture.
Section 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
607 of the Existing Indenture.
Section 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 607 of the
Existing Indenture;
49
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
Section 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07
or a suit by Holders of more than 10% in aggregate principal amount of the
Securities.
Section 6.12. Waiver of Stay or Extension Laws. The Company
(to the extent it may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and shall not hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE VII
TRUSTEE
-------
Section 7.01. Trustee Provisions. Articles 6 and 7 of the
Existing Indenture shall (subject to any other provisions herein to the
contrary) apply in their entirety to this Indenture except that:
(1) references therein to Debt Securities shall
be references to the Securities covered by this Second
Supplemental Indenture;
(2) the principal amount of Outstanding Debt
Securities shall be the amount of Securities that would be
outstanding pursuant to Section 2.08 herein;
(3) the reference to Article Five in the final
paragraph of Section 607 shall be a reference to Article VI
herein;
50
(4) the reference to Section 514 in the final
paragraph of Section 610(d) and in Section 610(e) shall be a
reference to Section 6.11 herein;
(5) Registered Securities shall refer to
Securities registered pursuant to Section 2.04 herein;
(6) Section 614 shall be deleted;
(7) the Regular Record Dates for purposes of
Section 701 shall mean March 1 and September 1; and
(8) Section 7.4 shall be deleted.
ARTICLE VIII
Discharge of Indenture; Defeasance
----------------------------------
Section 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article III and the Company irrevocably deposits with the Trustee
funds sufficient to pay at maturity or upon redemption all outstanding
Securities, including interest thereon to maturity or such redemption date
(other than Securities replaced pursuant to Section 2.07), and if in either case
the Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 8.01(c), cease to be of further effect. The
Trustee shall acknowledge satisfaction and discharge of this Indenture on demand
of the Company accompanied by an Officers' Certificate and an Opinion of Counsel
and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company
at any time may terminate (i) all of its obligations under the
Securities and this Indenture ("legal defeasance option") or (ii) its
obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08,
4.09, 4.10, 4.11, 4.12 and 4.13 and the operation of Sections 6.01(5),
6.01(6), 6.01(7), 6.01(8), 6.01(9) and 6.01(10) (but, in the case of
Sections 6.01(6) and (7), with respect only to Subsidiaries) and the
limitations contained in Section 5.01(a)(5) and (6) and Section 5.02
("covenant defeasance option"). The Company may exercise its legal
defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Sections 6.01(4)
(with respect to the covenants of Article IV identified in the immediately
preceding paragraph), 6.01(5), 6.01(6), 6.01(7), 6.01(8), 6.01(9) and 6.01(10)
(with respect only to Subsidiaries in the case of Sections 6.01(6) and 6.01(7))
or because of the failure of the Company to comply with the limitations
contained in Section 5.01(a)(5) or (6) or Section 5.02. If the Company exercises
its legal defeasance option or its covenant defeasance option, each Subsidiary
Guarantor, if any, shall be released from all its obligations under its
Subsidiary Guarantee.
51
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the
Company's obligations in Sections 2.04, 2.05, 2.06, 2.07, 8.05 and 8.06
and Sections 607 and 610 of the Existing Indenture shall survive until
the Securities have been paid in full. Thereafter, the Company's
obligations in Section 8.05 and Section 607 of the Existing Indenture
shall survive such satisfaction and discharge.
Section 8.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust
with the Trustee money or U.S. Government Obligations for the
payment of principal of and interest on the Securities to
maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a
certificate from a nationally recognized firm of independent
accountants expressing their opinion that the payments of
principal and interest when due and without reinvestment on
the deposited U.S. Government Obligations plus any deposited
money without investment will provide cash at such times and
in such amounts as will be sufficient to pay principal and
interest when due on all the Securities to maturity or
redemption, as the case may be;
(3) 123 days pass after the deposit is made and
during the 123-day period no Default specified in Section
6.01(6) or (7) with respect to the Company occurs that is
continuing at the end of the period;
(4) the deposit does not constitute a default
under any other agreement binding on the Company;
(5) the Company delivers to the Trustee an
Opinion of Counsel to the effect that the trust resulting from
the deposit does not constitute, or is qualified as, a
regulated investment company under the Investment Company Act
of 1940;
(6) in the case of the legal defeasance option,
the Company shall have delivered to the Trustee an Opinion of
Counsel stating that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Securityholders will not
recognize income, gain or loss for Federal income tax purposes
as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had
not occurred;
52
(7) in the case of the covenant defeasance
option, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Securityholders will
not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be
subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if
such covenant defeasance had not occurred; and
(8) the Company delivers to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent to the defeasance and discharge
of the Securities as contemplated by this Article VIII have
been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III.
Section 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
this Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities.
Section 8.04. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon written request therefor any
excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon written request therefor any
money held by them for the payment of principal or interest that remains
unclaimed for two years, and, thereafter, Securityholders entitled to the money
must look to the Company for payment as general creditors.
Section 8.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
Section 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if
the Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
53
ARTICLE IX
AMENDMENTS
----------
Section 9.01. Without Consent of Holders. The Company, the
Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities
without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in
addition to or n place of certificated Securities; provided,
however, that the uncertificated Securities are issued in
registered form for purposes of Section 163(f) of the Code or
in a manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Code;
(4) to add Guarantees with respect to the
Securities or to release Subsidiary Guarantors from Subsidiary
Guarantees as provided by the terms herein or to secure the
Securities;
(5) to add to the covenants of the Company for
the benefit of the Holders or to surrender any right or power
herein conferred upon the Company;
(6) to comply with any requirements of the SEC in
connection with qualifying, or maintaining the qualification
of, this Indenture under the TIA;
(7) to make any change that does not adversely
affect the rights of any Securityholder; or
(8) to provide for the issuance of additional
Securities as permitted herein.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
Section 9.02. With Consent of Holders. The Company, the
Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities
without notice to any Securityholder but with the written consent of the Holders
of at least a majority in aggregate principal amount of the Securities then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Securities). However, without the consent of each
Securityholder affected thereby, an amendment may not:
(1) reduce the amount of Securities whose Holders
must consent to an amendment or waiver;
54
(2) reduce the rate of or extend the time for
payment of interest on any Security;
(3) reduce the principal of or extend the Stated
Maturity of any Security;
(4) impair the right of any Holder to receive
payment of principal of and interest on such Holder's
Securities on or after the due dates therefor or to institute
suit for the enforcement of any payment on or with respect to
such Holder's Securities or any Subsidiary Guaranty;
(5) subordinate the Securities or any Subsidiary
Guaranty to any other obligation of the Company or the
applicable Subsidiary Guarantor;
(6) reduce the amount payable upon the repurchase
of any Security upon a Change of Control Offer or, at any time
after a Change of Control has occurred, change the time at
which any Change of Control Offer must be made or at which the
Securities must be repurchased pursuant to such Change of
Control Offer;
(7) make any Security payable in money other than
that stated in the Security;
(8) make any change in any Subsidiary Guaranty
that would adversely affect the Securityholders;
(9) release any security interest that may have
been granted in favor of the Holders other than pursuant to
the terms of such security interest; or
(10) make any change in Section 6.04 or 6.07 or
the second sentence of this Section.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
Section 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
Section 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
55
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
Section 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver such Security to the Trustee. The Trustee may place an
appropriate notation on the Security regarding the changed terms and return such
Security to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms. Failure to
make the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
Section 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article IX if the amendment does
not affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 601 of the Existing Indenture) shall be
fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Indenture.
Section 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE X
Subsidiary Guarantees
---------------------
Section 10.01. Subsidiary Guarantees. Each Subsidiary
Guarantor hereby unconditionally guarantees, jointly and severally, to each
Holder and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of and interest on the Securities when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under this Indenture and the Securities and
(b) the full and punctual performance within applicable grace periods of all
other obligations of the Company under this Indenture and the Securities (all
56
the foregoing being hereinafter collectively called the "Obligations"). Each
Subsidiary Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Subsidiary Guarantor, and that such Subsidiary Guarantor will remain bound under
this Article X notwithstanding any extension or renewal of any Obligation.
Each Subsidiary Guarantor waives presentation to, demand of,
payment from and protest to the Company of any of the Obligations and also
waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice
of any default under the Securities or the Obligations. The obligations of each
Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Company or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Securities or any other agreement;
(d) the release of any security held by any Holder or the Trustee for the
Obligations or any of them; (e) the failure of any Holder or the Trustee to
exercise any right or remedy against any other guarantor of the Obligations; or
(f) any change in the ownership of such Subsidiary Guarantor.
Subject to Section 5.02, if the Company sells or otherwise
disposes of either (1) its ownership interest in any Subsidiary Guarantor, or
(2) all or substantially all the assets of any Subsidiary Guarantor, such
Subsidiary Guarantor shall be released from all of its obligations under its
Subsidiary Guaranty.
Each Subsidiary Guarantor further agrees that its Subsidiary
Guaranty herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.
Except as expressly set forth in Sections 4.08, 4.11, 5.02 and
8.01(b), the obligations of each Subsidiary Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Guaranteed Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of each Subsidiary Guarantor
herein shall not be discharged or impaired or otherwise affected by the failure
of any Holder or the Trustee to assert any claim or demand or to enforce any
remedy under this Indenture, the Securities or any other agreement, by any
waiver or modification of any thereof, by any default, failure or delay, willful
or otherwise, in the performance of the obligations, or by any other act or
thing or omission or delay to do any other act or thing which may or might in
any manner or to any extent vary the risk of such Subsidiary Guarantor or would
otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law
or equity.
Each Subsidiary Guarantor further agrees that its Subsidiary
Guaranty herein shall continue to be effective or be reinstated, as the case may
be, if at any time payment, or any part thereof, of principal of or interest on
any Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.
57
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay
the principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Subsidiary Guarantor hereby
promises to and will, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid amount of such Obligations, (ii) accrued and unpaid
interest on such Obligations (but only to the extent not prohibited by law) and
(iii) all other monetary Obligations of the Company to the Holders and the
Trustee.
Each Subsidiary Guarantor agrees that it shall not be entitled
to any right of subrogation in respect of any Obligations guaranteed hereby
until payment in full in cash of all Obligations. Each Subsidiary Guarantor
further agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Obligations guaranteed
hereby may be accelerated as provided in Article VI for the purposes of such
Subsidiary Guarantor's Subsidiary Guaranty herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article VI, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Subsidiary Guarantor for the purposes of this Section.
Each Subsidiary Guarantor also agrees to pay any and all costs
and expenses (including reasonable attorneys' fees) incurred by the Trustee or
any Holder in enforcing any rights under this Section 10.01.
Section 10.02. Contribution. Each of the Company and any
Subsidiary Guarantor (a "Contributing Party") agrees that, in the event a
payment shall be made by any other Subsidiary Guarantor under any Subsidiary
Guaranty (the "Claiming Guarantor"), the Contributing Party shall indemnify the
Claiming Guarantor in an amount equal to the amount of such payment multiplied
by a fraction, the numerator of which shall be the net worth of the Contributing
Party on the date hereof and the denominator of which shall be the aggregate net
worth of the Company and all the Subsidiary Guarantors on the date hereof (or,
in the case of any Subsidiary Guarantor becoming a party hereto pursuant to
Section 10.06, the date of the supplemental indenture executed and delivered by
such Subsidiary Guarantor).
Section 10.03. Successors and Assigns. This Article X shall be
binding upon each Subsidiary Guarantor and its successors and assigns and shall
inure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
Section 10.04. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article X shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article X at
law, in equity, by statute or otherwise.
58
Section 10.05. Modification. No modification, amendment or
waiver of any provision of this Article X, nor the consent to any departure by
any Subsidiary Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Subsidiary Guarantor in any case
shall entitle such Subsidiary Guarantor to any other or further notice or demand
in the same, similar or other circumstances.
Section 10.06. Execution of Supplemental Indenture for Future
Subsidiary Guarantors. Each Subsidiary which is required to become a Subsidiary
Guarantor pursuant to Section 4.11 shall promptly execute and deliver to the
Trustee a supplemental indenture in the form of Exhibit A hereto pursuant to
which such Subsidiary shall become a Subsidiary Guarantor under this Article X
and shall guarantee the Obligations. Concurrently with the execution and
delivery of such supplemental indenture, the Company shall deliver to the
Trustee an Opinion of Counsel to the effect that such supplemental indenture has
been duly authorized, executed and delivered by such Subsidiary and that,
subject to the application of bankruptcy, insolvency, moratorium, fraudulent
conveyance or transfer and other similar laws relating to creditors' rights
generally and to the principles of equity, whether considered in a proceeding at
law or in equity, the Subsidiary Guaranty of such Subsidiary Guarantor is a
legal, valid and binding obligation of such Subsidiary Guarantor, enforceable
against such Subsidiary Guarantor in accordance with its terms.
ARTICLE XI
Miscellaneous
-------------
Section 11.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision that is
required to be included in this Indenture by the TIA, the required provision
shall control.
Section 11.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail or sent by
facsimile (with a hard copy delivered in person or by mail promptly thereafter)
and addressed as follows:
if to the Company:
Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, Pennsylvania 19610
Attention of: Secretary
59
with a copy to:
Stevens & Lee
111 North Sixth Street
Reading, PA 19603
Attention: Joseph Harenza
if to the Trustee:
BNY Midwest Trust Company
Suite 1020
2 North LaSalle Street
Chicago, IL 60602
Attention of: Indenture Trust Department
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Section 11.03. [Intentionally Left Blank]
Section 11.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and
substance reasonably satisfactory to the Trustee stating that,
in the opinion of the signers, all conditions precedent, if
any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of such counsel, all such conditions precedent have
been complied with.
Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope
of the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such
individual, he has made such examination or investigation as
is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been complied
with; and
60
(4) a statement as to whether or not, in the
opinion of such individual, such covenant or condition has
been complied with.
Section 11.06. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company,
any Subsidiary Guarantor or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
Subsidiary Guarantor shall be disregarded and deemed not to be outstanding,
except that, for the purpose of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Securities
that the Trustee knows are so owned shall be so disregarded. Also, subject to
the foregoing, only Securities outstanding at the time shall be considered in
any such determination.
Section 11.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent or co-registrar may make
reasonable rules for their functions.
Section 11.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to be
open in the State of New York or Pennsylvania. If a payment date is a Legal
Holiday, payment shall be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If a regular
record date is a Legal Holiday, the record date shall not be affected.
Section 11.09. Governing Law. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
Section 11.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.
Section 11.11. Successors. All agreements of the Company and
each Subsidiary Guarantor in this Indenture and the Securities shall bind its
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section 11.12. Multiple Originals. The parties may sign any
number of copies of this Second Supplemental Indenture. Each signed copy shall
be an original, but all of them together represent the same agreement. One
signed copy is enough to prove this Second Supplemental Indenture.
Section 11.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
61
IN WITNESS WHEREOF, the parties have caused this Second
Supplemental Indenture to be duly executed as of the date first written above.
SOVEREIGN BANCORP, INC.
By:_____________________________________
Dennis S. Marlo
Chief Financial Officer and Treasurer
BNY MIDWEST TRUST COMPANY
By:_____________________________________
Name:
Title:
62
APPENDIX A
PROVISIONS RELATING TO SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall
have the meanings indicated below:
"2004 Securities" means the 8 5/8% Senior Notes due
2004.
"Cedel" means Cedel Bank, S.A., or any successor
securities clearing agency.
"Definitive Security" means a certificated Security.
"Depository" means The Depository Trust Company, its
nominees and their respective successors.
"Euroclear" means the Euroclear Clearance System or
any successor securities clearing agency.
"Original Securities" means Securities in the
aggregate principal amount of $175,000,000 issued on February 20, 2001.
"Securities" means the 2004 Securities to be issued
from time to time, in one or more series as provided for in this
Indenture.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Custodian" means the custodian with
respect to a Global Security (as appointed by the Depository) or any
successor person thereto, who shall initially be the Trustee.
"Underwriting Agreement" means the Underwriting
Agreement dated as of February 9, 2001, among the Company and the
Underwriters relating to the Original Securities, or any similar
agreement relating to any future sale of Securities by the Company.
"Underwriters" means Lehman Brothers Inc.
1.2 Other Definitions
Defined in
Term Section
---- ----------
"Agent Members" 2.1(b)
"Global Security" 2.1(a)
63
2. The Securities
2.1 Form and Dating
The Securities will be offered and sold by the Company, from
time to time, pursuant to one or more Underwriting Agreements.
(a) Global Securities. Securities shall be issued in the form
of one or more permanent global Securities in definitive, fully registered form
(collectively, the "Global Securities") without interest coupons and with the
global securities legend set forth in Exhibit 1 hereto, which shall be deposited
on behalf of the purchasers of the Securities represented thereby with the
Securities Custodian, and registered in the name of the Depository or a nominee
of the Depository, duly executed by the Company and authenticated by the Trustee
as provided in this Indenture. The aggregate principal amount of the Global
Securities may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depository or its nominee as hereinafter
provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in
accordance with this Section 2.1(b) and pursuant to an order of the Company,
authenticate and deliver initially one or more Global Securities that (a) shall
be registered in the name of the Depository for such Global Security or Global
Securities or the nominee of such Depository and (b) shall be delivered by the
Trustee to such Depository or pursuant to such Depository's instructions or held
by the Trustee as Securities Custodian.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository or by the Trustee as Securities
Custodian or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices of such Depository governing the
exercise of the rights of a holder of a beneficial interest in any Global
Security.
(c) Definitive Securities. Except as provided in Section 2.3
or 2.4, owners of beneficial interests in Global Securities will not be entitled
to receive physical delivery of Definitive Securities.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Original Securities for original issue representing in an aggregate principal
amount of $175,000,000 of the 2004 Securities (2) additional Securities, if and
when issued, in an aggregate principal amount of up to $25,000,000, upon a
written order of the Company signed by two Officers or by an Officer and either
64
an Assistant Treasurer or an Assistant Secretary of the Company. Such order
shall specify the amount of the Securities to be authenticated and the date on
which the issue of Securities is to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed $200,000,000 except
as provided in Sections 2.01 and 2.08 of this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive
Securities; or
(y) to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of other authorized
denominations, the Registrar or co-registrar shall register the transfer or make
the exchange as requested if its reasonable requirements for such transaction
are met; provided, however, that the Definitive Securities surrendered for
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company and the
Registrar or co-registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing.
(b) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depository therefor. A transferor of a beneficial interest in a Global
Security shall deliver a written order given in accordance with the Depository's
procedures containing information regarding the participant account of the
Depository to be credited with a beneficial interest in the Global Security and
such account shall be credited in accordance with such instructions with a
beneficial interest in the Global Security and the account of the Person making
the transfer shall be debited by an amount equal to the beneficial interest in
the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix
A (other than the provisions set forth in Section 2.4), a Global Security may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(c) Cancellation or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for Definitive Securities, redeemed, repurchased or canceled, such Global
Security shall be returned by the Depository to the Trustee for cancellation or
retained and canceled by the Trustee. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for Definitive
Securities, redeemed, repurchased or canceled, the principal amount of
Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
(d) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall authenticate
Definitive Securities and Global Securities at the Registrar's or co-registrar's
request.
(ii) No service charge shall be made for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer taxes,
assessments or similar governmental charge payable upon exchange or transfer
pursuant to Sections 3.06, 4.10 and 9.05 of this Indenture).
(iii) The Registrar or co-registrar shall not be
required to register the transfer of or exchange of any Security for a period
beginning 15 days before the mailing of a notice of redemption or an offer to
repurchase Securities or 15 days before an interest payment date.
(iv) Prior to the due presentation for registration
of transfer of any Security, the Company, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose name a
Security is registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and none of
the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar
shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or
exchange pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(e) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Security, a member of, or a
participant in the Depository or any other Person with respect to the accuracy
of the records of the Depository or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Securities or with
respect to the delivery to any participant, member, beneficial owner or other
Person (other than the Depository) of any notice (including any notice of
redemption or repurchase) or the payment of any amount, under or with respect to
such Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or made
only to the registered Holders (which shall be the Depository or its nominee in
the case of a Global Security). The rights of beneficial owners in any Global
Security shall be exercised only through the Depository subject to the
applicable rules and procedures of the Depository. The Trustee may rely and
shall be fully protected in relying upon information furnished by the Depository
with respect to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between or
among Depository participants, members or beneficial owners in any Global
Security) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Indenture, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
2.4 Definitive Securities
(a) A Global Security deposited with the Depository or with
the Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred
to the beneficial owners thereof in the form of Definitive Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer complies
with Section 2.3 and (i) the Depository notifies the Company that it is
unwilling or unable to continue as a Depository for such Global Security or if
at any time the Depository ceases to be a "clearing agency" registered under the
Exchange Act, and a successor Depository is not appointed by the Company within
90 days of such notice, or (ii) a Default or an Event of Default has occurred
and is continuing or (iii) the Company, in its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Definitive Securities
under this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section 2.4 shall be surrendered by the
Depository to the Trustee, to be so transferred, in whole or from time to time
in part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Security, an equal aggregate
principal amount of Definitive Securities of authorized denominations.
Definitive Securities issued in exchange for any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depository shall direct. Any Definitive Security
delivered in exchange for an interest in the Global Security shall, except as
otherwise provided by Section 2.3(d), bear the restricted securities legend set
forth in Exhibit 1 hereto.
(c) The registered Holder of a Global Security may grant
proxies and otherwise authorize any Person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action that a Holder
is entitled to take under this Indenture or the Securities.
(d) In the event of the occurrence of any of the events
specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make
available to the Trustee a reasonable supply of Definitive Securities in
definitive, fully registered form without interest coupons.
EXHIBIT 1 to
APPENDIX A
[FORM OF FACE OF SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Definitive Securities Legend]
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.]
[FORM OF FACE OF SECURITY]
No. [up to]**$__________
_____% Senior Note due 2004***
[CUSIP No. ______]
Sovereign Bancorp, Inc., a Pennsylvania corporation, promises
to pay to [Cede & Co.]**, or registered assigns, the principal sum [of
Dollars](1) [as set forth on the Schedule of Increases or Decreases annexed
hereto](2) on [ ], [2004](3).
Interest Payment Dates: [ ] and [ ].
Record Dates: [ ] and [ ].
- --------
(1) Insert for Definitive Securities
(2) Insert for Global Securities
(3) Insert for 2004 Security
Additional provisions of this Security are set forth on the
other side of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to
be duly executed.
SOVEREIGN BANCORP, INC.
By_____________________________________
Dennis S. Marlo
Chief Financial Officer and Treasurer
By______________________________________
David A. Silverman
Assistant Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
Dated:
BNY MIDWEST TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:___________________________
Authorized Signatory
[FORM OF REVERSE SIDE OF SECURITY]
8 5/8% Senior Note due 2004***
1. Interest
SOVEREIGN BANCORP, INC., a Pennsylvania corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will pay
interest semiannually on March 15 and September 15 of each year, commencing
September 15, 2001. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
February 20, 2001. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months. The Company shall pay interest on overdue principal at the
rate borne by the Securities plus 1% per annum, and it shall pay interest on
overdue installments of interest at the rate borne by the Securities to the
extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the March 1 or September 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments in
respect of a Definitive Security (including principal, premium and interest), by
mailing a check to the registered address of each Holder thereof; provided,
however, that payments on the Securities may also be made, in the case of a
Holder of at least $1,000,000 aggregate principal amount of Securities, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, BNY MIDWEST TRUST COMPANY, an Illinois trust company (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under a Senior Indenture dated as of
February 1, 1994 (the "Existing Indenture") as supplemented by the Second
Supplemental Indenture dated as of February 15, 2001 (the "Second Supplemental
Indenture" and collectively with the Existing Indenture, the "Indenture"),
between the Company and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the
date of the Indenture (the "TIA"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the TIA for a statement of those terms.
The Securities are senior unsecured obligations of the Company limited
to $200,000,000 aggregate principal amount at any one time outstanding (subject
to Sections 2.01 and 2.08 of the Indenture). This Security is one of the
Original Securities referred to in the Indenture issued in an aggregate
principal amount of $175,000,000. Original Securities and up to an aggregate
principal amount of $25,000,000 additional Securities of the same series as or
different series from the Original Series may be issued under the Indenture. The
Indenture imposes certain limitations on the ability of the Company and its
Subsidiaries to, among other things, make certain Investments and other
Restricted Payments, pay dividends and other distributions, Incur Debt, enter
into consensual restrictions upon the payment of certain dividends and
distributions by such Subsidiaries, enter into or permit certain transactions
with Affiliates and create or incur Liens. The Indenture also imposes
limitations on the ability of the Company to consolidate or merge with or into
any other Person or sell, transfer, assign, lease, convey or otherwise dispose
of all or substantially all of the Property of the Company.
To guarantee the due and punctual payment of the principal and interest
on the Securities and all other amounts payable by the Company under the
Indenture and the Securities when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, certain Subsidiaries of the Company may be
required, pursuant to Section 4.11 of the Indenture, to enter into supplemental
indentures whereby such Subsidiaries will jointly and severally unconditionally
guarantee the Obligations on a senior basis pursuant to the terms of the
Indenture.
5. Sinking Fund
The Securities are not subject to any sinking fund.
6. Repurchase of Securities at the Option of Holders upon Change of Control
Upon a Change of Control, any Holder of Securities will have the right,
subject to certain conditions specified in the Indenture, to cause the Company
to repurchase all or any part of the Securities of such Holder at a purchase
price equal to 101% of the principal amount of the Securities to be repurchased
plus accrued and unpaid interest, if any, to the date of purchase (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date that is on or prior to the date of
purchase) as provided in, and subject to the terms of, the Indenture.
7. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed or 15 days before an interest payment
date.
8. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of
it for all purposes.
9. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the Company
at its written request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
10. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
11. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities and (ii)
any default or noncompliance with any provision may be waived with the written
consent of the Holders of at least a majority in aggregate principal amount of
the outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company and the
Trustee may amend the Indenture or the Securities (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to comply with Article V of the
Indenture; (iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities; (iv) to add Guarantees with respect to the
Securities, or to release Subsidiary Guarantors from Subsidiary Guarantees as
provided by the terms of the Indenture; (v) to secure the Securities; (vi) to
add additional covenants or to surrender rights and powers conferred on the
Company; (vii) to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the TIA;(viii) to make any
change that does not adversely affect the rights of any Securityholder or (ix)
to provide for the issuance of additional Securities as provided in Paragraph 4
and in the Indenture.
12. Defaults and Remedies
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of the Securities then
outstanding, subject to certain limitations, may declare all the Securities to
be immediately due and payable. Certain events of bankruptcy or insolvency are
Events of Default and shall result in the Securities being immediately due and
payable upon the occurrence of such Events of Default without any further act of
the Trustee or any Holder.
Holders of Securities may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in aggregate principal
amount of the Securities then outstanding may direct the Trustee in its exercise
of any trust or power under the Indenture. The Holders of a majority in
aggregate principal amount of the Securities then outstanding, by written notice
to the Company and the Trustee, may rescind any declaration of acceleration and
its consequences if the rescission would not conflict with any judgment or
decree, and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration.
13. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
14. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
or any Subsidiary Guarantor shall not have any liability for any obligations of
the Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
15. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
16. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
17. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder of Securities upon written
request and without charge to the Holder a copy of the Indenture which has in it
the text of this Security.
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The agent
may substitute another to act for him.
- ------------------------------------------------------------
Date: ____________ Your Signature: _______________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
_________________________________
Your Signature
Signature Guarantee:
Date: ______________________ ________________________________
Signature must be guaranteed Signature of Signature Guarantee
by a participant in a
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
________________________________________________________________________________
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.10 (Change of Control) of the Indenture, check the
box:
/ /
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.10 of the Indenture, state the
amount:
$
Date: ________________ Your Signature: ____________________
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee: ___________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Trustee.
EXHIBIT A
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this
"Supplemental Indenture") dated as of ,
among [GUARANTOR] (the "New Subsidiary
Guarantor"), a subsidiary of SOVEREIGN
BANCORP, INC. (or its successor), a
[Pennsylvania] corporation (the "Company"),
SOVEREIGN BANCORP, INC.[, on behalf of
itself and the Subsidiary Guarantors (the
"Existing Subsidiary Guarantors") under the
indenture referred to below,] and a [ ]
banking association, as trustee under the
indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company [and the Existing Subsidiary Guarantors]
has heretofore executed and delivered [or become obligated under] an Indenture
(the "Existing Indenture") dated as of February 1, 1994, as supplemented by the
Second Supplemental Indenture dated as of February 15, 2001 (the "Second
Supplemental Indenture", and collectively with the Existing Indenture and any
other amendments, waivers or other modifications thereto, the "Indenture")
providing for the issuance of an aggregate principal amount of up to
$175,000,000 of 8 5/8% Senior Notes due 2004 (the "Securities");
WHEREAS Section 4.11 of the Indenture provides that under
certain circumstances the Company is required to cause the New Subsidiary
Guarantor to execute and deliver to the Trustee a supplemental indenture
pursuant to which the New Subsidiary Guarantor shall unconditionally guarantee
all the Company's obligations under the Securities pursuant to a Subsidiary
Guaranty on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 10.06 of the Indenture, the
Trustee, the Company and the Existing Subsidiary Guarantors are authorized to
execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the New Subsidiary Guarantor, the Company, the Existing Subsidiary Guarantors
and the Trustee mutually covenant and agree for the equal and ratable benefit of
the holders of the Securities as follows:
1. Agreement to Guarantee. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to
unconditionally guarantee the Company's obligations under the Securities on the
terms and subject to the conditions set forth in Article 10 of the Indenture and
to be bound by all other applicable provisions of the Indenture.
2. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
4. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
5. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
6. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
[NEW SUBSIDIARY GUARANTOR]
By _____________________________________
Name:
Title:
SOVEREIGN BANCORP, INC., [on behalf of
itself and the Existing Subsidiary
Guarantors,]
By _____________________________________
Dennis S. Marlo
Chief Financial Officer and Treasurer
[[EXISTING SUBSIDIARY GUARANTORS]
By ______________________________________
Name:
Title:]
[TRUSTEE], as Trustee,
By ______________________________________
Name:
Title: