--------------------------------------------------------------------------------
TRUST PIERS GUARANTEE AGREEMENT
Sovereign Bancorp, Inc.
Dated as of February 26, 2004
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01. Definitions and Interpretation................................................... 1
ARTICLE II
TRUST INDENTURE ACT
Section 2.01. Trust Indenture Act; Application................................................. 5
Section 2.02. Lists of Holders of Securities................................................... 5
Section 2.03. Reports by the Trust PIERS Guarantee Trustee..................................... 5
Section 2.04. Periodic Reports to Trust PIERS Guarantee Trustee................................ 5
Section 2.05. Evidence of Compliance with Conditions Precedent................................. 6
Section 2.06. Events of Default; Waiver........................................................ 6
Section 2.07. Event of Default; Notice......................................................... 6
Section 2.08. Conflicting Interests............................................................ 6
ARTICLE III
POWERS, DUTIES AND RIGHTS OF TRUST PIERS GUARANTEE TRUSTEE
Section 3.01. Powers and Duties of the Trust PIERS Guarantee Trustee........................... 7
Section 3.02. Certain Rights of Trust PIERS Guarantee Trustee.................................. 8
Section 3.03. Not Responsible for Recitals or Issuance of Trust PIERS Guarantee................ 11
ARTICLE IV
TRUST PIERS GUARANTEE TRUSTEE
Section 4.01. Trust PIERS Guarantee Trustee; Eligibility....................................... 11
Section 4.02. Appointment, Removal and Resignation of Trust PIERS Guarantee Trustee............ 11
ARTICLE V
GUARANTEE
Section 5.01. Guarantee........................................................................ 12
Section 5.02. Waiver of Notice and Demand...................................................... 12
Section 5.03. Obligations Not Affected......................................................... 13
Section 5.04. Rights of Holders................................................................ 13
Section 5.05. Guarantee of Payment............................................................. 14
Section 5.06. Subrogation...................................................................... 14
Section 5.07. Independent Obligations.......................................................... 14
i
TABLE OF CONTENTS CON'TD
Page
----
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 6.01. Limitation of Transactions....................................................... 14
Section 6.02. Ranking.......................................................................... 15
ARTICLE VII
TERMINATION
Section 7.01. Termination...................................................................... 16
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Exculpation...................................................................... 16
Section 8.02. Indemnification.................................................................. 16
ARTICLE IX
MISCELLANEOUS
Section 9.01. Successors and Assigns........................................................... 17
Section 9.02. Amendments....................................................................... 17
Section 9.03. Notices.......................................................................... 17
Section 9.04. Benefit.......................................................................... 18
Section 9.05. Governing Law.................................................................... 18
ii
TRUST PIERS GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Trust PIERS Guarantee"), dated as of
February 26, 2004, is executed and delivered by Sovereign Bancorp, Inc., a
Pennsylvania corporation (the "Guarantor"), and The Bank of New York, a New York
banking corporation, as trustee (the "Trust PIERS Guarantee Trustee"), for the
benefit of the Holders (as defined herein) from time to time of the Trust PIERS
(as defined herein) of Sovereign Capital Trust IV, a Delaware statutory business
trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Trust Agreement"), dated as of February 26, 2004, among the trustees of the
Issuer, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof 14,000,000 capital securities, or up to 16,000,000
capital securities in the event the Underwriters (as defined herein) exercise
their option to purchase additional capital securities, having an aggregate
liquidation amount of $700,000,000, or up to $800,000,000 in the event the
underwriters exercise their option to purchase additional capital securities,
such capital securities being designated the 4.375% Contingent Convertible Trust
Preferred Income Equity Redeemable Securities (collectively, the "Trust PIERS").
WHEREAS, as incentive for the Holders to purchase the Trust PIERS, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth in this Trust PIERS Guarantee, to pay to the Holders the Guarantee
Payments (as defined below). The Guarantor agrees to make certain other payments
on the terms and conditions set forth herein.
WHEREAS, the Guarantor is executing and delivering a guarantee
agreement (the "Common Securities Guarantee"), with substantially identical
terms to this Trust PIERS Guarantee, for the benefit of the holders of the
Common Securities (as defined herein), except that if an Event of Default (as
defined in the Trust Agreement) has occurred and is continuing, the rights of
holders of the Common Securities to receive Guarantee Payments under the Common
Securities Guarantee are subordinated, to the extent and in the manner set forth
in the Common Securities Guarantee, to the rights of holders of Trust PIERS to
receive Guarantee Payments under this Trust PIERS Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder, which
purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the
Guarantor executes and delivers this Trust PIERS Guarantee for the benefit of
the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions and Interpretation.
In this Trust PIERS Guarantee, unless the context otherwise
requires:
(a) Capitalized terms used in this Trust PIERS Guarantee
but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.01;
(b) Terms defined in the Trust Agreement as at the date
of execution of this Trust PIERS Guarantee have the same meaning when
used in this Trust PIERS Guarantee unless otherwise defined in this
Trust PIERS Guarantee;
(c) a term defined anywhere in this Trust PIERS Guarantee
has the same meaning throughout;
(d) all references to "the Trust PIERS Guarantee" or
"this Trust PIERS Guarantee" are to this Trust PIERS Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Trust PIERS Guarantee to
Articles and Sections are to Articles and Sections of this Trust PIERS
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the
same meaning when used in this Trust PIERS Guarantee, unless otherwise
defined in this Trust PIERS Guarantee or unless the context otherwise
requires; and
(g) a reference to the singular includes the plural and
vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405
under the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a Saturday or a Sunday, or a
day on which banking institutions in The City of New York are authorized or
required by law or executive order to close.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the Trust PIERS Guarantee
Trustee at which the corporate trust business of the Trust PIERS Guarantee
Trustee shall, at any particular time, be principally administered, which office
at the date of execution of this Agreement is located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"Covered Person" means any Holder or beneficial owner of Trust PIERS.
"Debentures" means the series of subordinated debt securities of the
Guarantor designated the 4.375% Junior Subordinated Deferrable Interest
Debentures due March 1, 2034 held by the Property Trustee (as defined in the
Trust Agreement) of the Issuer.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Trust PIERS Guarantee.
2
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Trust PIERS, to the extent not paid or
made by the Issuer: (i) any accumulated and unpaid Distributions (as defined in
the Trust Agreement), including Contingent Distributions (as defined in the
Trust Agreement) if any, that are required to be paid on such Trust PIERS to the
extent the Issuer has funds on hand legally available therefor at such time,
(ii) the redemption price, including all accumulated and unpaid Distributions to
the date of redemption (the "Redemption Price") to the extent the Issuer has
funds on hand legally available therefor at such time, with respect to any Trust
PIERS called for redemption by the Issuer, and (iii) upon a voluntary or
involuntary termination and liquidation of the Issuer (other than in connection
with the distribution of Debentures and Warrants to the Holders in exchange for
Trust PIERS or the redemption of all the Trust PIERS as provided in the Trust
Agreement), the lesser of (a) the aggregate of the liquidation amount and all
accumulated and unpaid Distributions, including Contingent Distributions, on the
Trust PIERS to the date of payment, to the extent the Issuer has funds on hand
legally available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer. If an Event
of Default has occurred and is continuing, no Guarantee Payments under the
Common Securities Guarantee with respect to the Common Securities or any
guarantee payment under any Other Common Securities Guarantees shall be made
until the Holders shall be paid in full the Guarantee Payments to which they are
entitled under this Trust PIERS Guarantee.
"Holder" shall mean any holder, as registered on the books and records
of the Issuer, of any Trust PIERS; provided, however, that, in determining
whether the holders of the requisite percentage of Trust PIERS have given any
request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Trust PIERS Guarantee Trustee, any
Affiliate of the Trust PIERS Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Trust PIERS Guarantee Trustee.
"Indenture" means the Indenture dated as of September 1, 1999, among
the Guarantor (the "Debenture Issuer") and The Bank of New York, as trustee, as
amended by the Third Supplemental Indenture dated as of February 26, 2004,
pursuant to which the Debentures are to be issued to the Property Trustee of the
Issuer.
"Indenture Event of Default" shall mean any event specified in Section
5.01 of the Indenture.
"Majority in liquidation amount of the Trust PIERS " means, except as
provided by the Trust Indenture Act, a vote by Holder(s) of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting percentages are determined) of all Trust
PIERS.
"Officers' Certificate" means, with respect to any person, a
certificate signed by the Chairman, a Vice Chairman, the Chief Executive
Officer, the President, a Vice President, the Comptroller, the Secretary or an
Assistant Secretary of the Guarantor. Any Officers' Certificate
3
delivered with respect to compliance with a condition or covenant provided for
in this Trust PIERS Guarantee (other than pursuant to Section 314(a)(4) of the
Trust Indenture Act) shall include:
(i) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(ii) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iii) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied with.
"Other Common Securities Guarantees" shall have the same meaning as
"Other Guarantees" as defined in the Common Securities Guarantee.
"Other Debentures" means all junior subordinated debentures issued by
the Guarantor from time to time and sold to any other trust, partnership or
other entity affiliated with the Guarantor that is a financing vehicle of the
Guarantor (if any), in each case similar to the Issuer.
"Other Guarantees" means all guarantees to be issued by the Guarantor
with respect to capital securities (if any) similar to the Trust PIERS issued by
any other trust, partnership or other entity affiliated with the Guarantor that
is a financing vehicle of the Guarantor (if any), in each case similar to the
Issuer.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means any officer within the Corporate Trust
Office of the Trust PIERS Guarantee Trustee, including any vice president, any
assistant vice president, the treasurer, any assistant treasurer or other
officer of the Corporate Trust Office of the Trust PIERS Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject and who shall
have direct responsibility for the administration of this Trust PIERS Guarantee.
"Successor Trust PIERS Guarantee Trustee" means a successor Trust PIERS
Guarantee Trustee possessing the qualifications to act as Trust PIERS Guarantee
Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
4
"Trust PIERS Guarantee Trustee" means The Bank of New York, a New York
banking corporation, until a Successor Trust PIERS Guarantee Trustee has been
appointed and has accepted such appointment pursuant to the terms of this Trust
PIERS Guarantee and thereafter means each such Successor Trust PIERS Guarantee
Trustee.
"Trust Securities" means the Common Securities and the Trust PIERS,
collectively.
"Underwriters" means the entities acting as underwriters of the Trust
PIERS.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application.
(a) This Trust PIERS Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of
this Trust PIERS Guarantee and shall, to the extent applicable, be
governed by such provisions; and
(b) if and to the extent that any provision of this Trust
PIERS Guarantee limits, qualifies or conflicts with the duties imposed
by Section 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
SECTION 2.02. Lists of Holders of Securities.
(a) The Guarantor shall provide the Trust PIERS Guarantee
Trustee (unless the Trust PIERS Guarantee Trustee is otherwise the
registrar of the Trust PIERS) with a list, in such form as the Trust
PIERS Guarantee Trustee may reasonably require, of the names and
addresses of the Holders ("List of Holders") as of such date, (i)
within one Business Day after March 15, June 15, September 15 and
December 15 of each year, and (ii) at any other time within 30 days of
receipt by the Guarantor of a written request for a List of Holders as
of a date no more than 14 days before such List of Holders is given to
the Trust PIERS Guarantee Trustee, provided, that the Guarantor shall
not be obligated to provide such List of Holders at any time the List
of Holders does not differ from the most recent List of Holders given
to the Trust PIERS Guarantee Trustee by the Guarantor. The Trust PIERS
Guarantee Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.
(b) The Trust PIERS Guarantee Trustee shall comply with
its obligations under Sections 311(a), 311(b) and Section 312(b) of the
Trust Indenture Act.
SECTION 2.03. Reports by the Trust PIERS Guarantee Trustee.
Within 60 days after May 15 of each year, commencing May 15,
2002, the Trust PIERS Guarantee Trustee shall provide to the Holders such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Trust PIERS Guarantee Trustee shall also comply with the other requirements
of Section 313 of the Trust Indenture Act.
5
SECTION 2.04. Periodic Reports to Trust PIERS Guarantee
Trustee.
The Guarantor shall provide to the Trust PIERS Guarantee
Trustee such documents, reports and information as required by Section 314 (if
any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act provided that such compliance certificate shall
be delivered on or before 120 days after the end of each fiscal year of the
Guarantor. Delivery of such reports, information and documents to the Trust
PIERS Guarantee Trustee is for informational purposes only and the Trust PIERS
Guarantee Trustee's receipt of such shall not constitute constructive notice of
any information contained therein or determinable from information contained
therein, including the Guarantor's compliance with any of its covenants
hereunder (as to which the Trust PIERS Guarantee Trustee is entitled to rely
exclusively on Officers' Certificates).
SECTION 2.05. Evidence of Compliance with Conditions
Precedent.
The Guarantor shall provide to the Trust PIERS Guarantee
Trustee such evidence of compliance with any conditions precedent, if any,
provided for in this Trust PIERS Guarantee that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
SECTION 2.06. Events of Default; Waiver.
The Holders of a Majority in liquidation amount of Trust PIERS
may, by vote, on behalf of all Holders, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Trust PIERS Guarantee, but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any right
consequent thereon.
SECTION 2.07. Event of Default; Notice.
(a) The Trust PIERS Guarantee Trustee shall, within 90
days after the occurrence of a default with respect to this Trust PIERS
Guarantee, mail by first class postage prepaid, to all Holders, notices
of all defaults actually known to a Responsible Officer, unless such
defaults have been cured before the giving of such notice, provided,
that, except in the case of default in the payment of any Guarantee
Payment, the Trust PIERS Guarantee Trustee shall be protected in
withholding such notice if and so long as the board of directors, the
executive committee, or a trust committee of directors of the Trust
PIERS Guaranty Trustee and/or a Responsible Officer in good faith
determines that the withholding of such notice is in the interests of
the Holders.
(b) The Trust PIERS Guarantee Trustee shall not be deemed
to have knowledge of any Event of Default unless the Trust PIERS
Guarantee Trustee shall have received written notice from the
Guarantor, or a Responsible Officer charged with the administration of
the Trust Agreement shall have obtained actual knowledge, of such Event
of Default.
6
SECTION 2.08. Conflicting Interests.
The Trust Agreement shall be deemed to be specifically
described in this Trust PIERS Guarantee for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
TRUST PIERS GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Trust PIERS Guarantee
Trustee.
(a) This Trust PIERS Guarantee shall be held by the Trust
PIERS Guarantee Trustee for the benefit of the Holders, and the Trust
PIERS Guarantee Trustee shall not transfer this Trust PIERS Guarantee
to any Person except a Holder exercising his or her rights pursuant to
Section 5.04(b) or to a Successor Trust PIERS Guarantee Trustee on
acceptance by such Successor Trust PIERS Guarantee Trustee of its
appointment to act as Successor Trust PIERS Guarantee Trustee. The
right, title and interest of the Trust PIERS Guarantee Trustee shall
automatically vest in any Successor Trust PIERS Guarantee Trustee, and
such vesting and succession of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Trust PIERS Guarantee Trustee.
(b) If an Event of Default actually known to a
Responsible Officer has occurred and is continuing, the Trust PIERS
Guarantee Trustee shall enforce this Trust PIERS Guarantee for the
benefit of the Holders.
(c) The Trust PIERS Guarantee Trustee, before the
occurrence of any Event of Default and after the curing of all Events
of Default that may have occurred, shall undertake to perform only such
duties as are specifically set forth in this Trust PIERS Guarantee, and
no implied covenants shall be read into this Trust PIERS Guarantee
against the Trust PIERS Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section
2.06) and is actually known to a Responsible Officer, the Trust PIERS
Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Trust PIERS Guarantee, and use the same degree of care
and skill in its exercise thereof, as a prudent person would exercise
or use under the circumstances in the conduct of his or her own
affairs.
(d) No provision of this Trust PIERS Guarantee shall be
construed to relieve the Trust PIERS Guarantee Trustee from liability
for its own negligent action, its own negligent failure to act, or its
own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Trust PIERS
Guarantee Trustee shall be determined solely by the express provisions
of this Trust PIERS Guarantee, and the Trust
7
PIERS Guarantee Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth in this
Trust PIERS Guarantee, and no implied covenants or obligations shall be
read into this Trust PIERS Guarantee against the Trust PIERS Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the Trust
PIERS Guarantee Trustee, the Trust PIERS Guarantee Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trust PIERS Guarantee Trustee and conforming
to the requirements of this Trust PIERS Guarantee; but in the case of
any such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Trust PIERS Guarantee
Trustee, the Trust PIERS Guarantee Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Trust PIERS Guarantee;
(ii) the Trust PIERS Guarantee Trustee shall not be liable
for any error of judgment made in good faith by a Responsible Officer,
unless it shall be proved that the Trust PIERS Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Trust PIERS Guarantee Trustee shall not be liable
with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of a Majority in
liquidation amount of the Trust PIERS relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trust PIERS Guarantee Trustee, or exercising any trust or power
conferred upon the Trust PIERS Guarantee Trustee under this Trust PIERS
Guarantee; and
(iv) no provision of this Trust PIERS Guarantee shall
require the Trust PIERS Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Trust PIERS Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this Trust
PIERS Guarantee or indemnity, reasonably satisfactory to the Trust
PIERS Guarantee Trustee, against such risk or liability is not
reasonably assured to it.
SECTION 3.02. Certain Rights of Trust PIERS Guarantee Trustee.
(a) Subject to the provisions of Section 3.01:
(i) The Trust PIERS Guarantee Trustee may conclusively
rely, and shall be fully protected in acting or refraining from acting,
upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed, sent or presented
by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Trust PIERS Guarantee may be sufficiently evidenced by an
Officers' Certificate.
8
(iii) Whenever, in the administration of this Trust PIERS
Guarantee, the Trust PIERS Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or
omitting any action hereunder, the Trust PIERS Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and conclusively rely upon an
Officers' Certificate which, upon receipt of such request, shall be
promptly delivered by the Guarantor.
(iv) The Trust PIERS Guarantee Trustee shall have no duty
to see to any recording, filing or registration of any instrument (or
any rerecording, refiling or reregistration thereof).
(v) The Trust PIERS Guarantee Trustee may consult with
counsel of its selection, and the advice or opinion of such counsel
with respect to legal matters shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with such advice or
opinion. Such counsel may be counsel to the Guarantor or any of its
Affiliates and may include any of its employees. The Trust PIERS
Guarantee Trustee shall have the right at any time to seek instructions
concerning the administration of this Trust PIERS Guarantee from any
court of competent jurisdiction.
(vi) The Trust PIERS Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Trust PIERS Guarantee at the request or direction of any Holder, unless
such Holder shall have provided to the Trust PIERS Guarantee Trustee
such security and indemnity, reasonably satisfactory to the Trust PIERS
Guarantee Trustee, against the costs, expenses (including attorneys'
fees and expenses and the expenses of the Trust PIERS Guarantee
Trustee's agents, nominees or custodians) and liabilities that might be
incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Trust PIERS
Guarantee Trustee; provided that, nothing contained in this Section
3.02(a)(vi) shall be taken to relieve the Trust PIERS Guarantee
Trustee, upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this Trust PIERS
Guarantee.
(vii) The Trust PIERS Guarantee Trustee shall not be bound
to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Trust PIERS Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(viii) The Trust PIERS Guarantee Trustee may execute any of
the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys,
and the Trust PIERS Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder.
9
(ix) Any action taken by the Trust PIERS Guarantee Trustee
or its agents hereunder shall bind the Holders, and the signature of
the Trust PIERS Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No third party
shall be required to inquire as to the authority of the Trust PIERS
Guarantee Trustee to so act or as to its compliance with any of the
terms and provisions of this Trust PIERS Guarantee, both of which shall
be conclusively evidenced by the Trust PIERS Guarantee Trustee's or its
agent's taking such action.
(x) Whenever in the administration of this Trust PIERS
Guarantee the Trust PIERS Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Trust PIERS Guarantee Trustee
(i) may request instructions from the Holders of a Majority in
liquidation amount of the Trust PIERS, (ii) may refrain from enforcing
such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in conclusively
relying on or acting in accordance with such instructions.
(xi) The Trust PIERS Guarantee Trustee shall not be liable
for any action taken, suffered, or omitted to be taken by it in good
faith, without negligence, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Trust PIERS Guarantee.
(xii) In no event shall the Property Trustee be responsible
or liable for special, indirect, or consequential loss or damage of any
kind whatsoever (including, but not limited to, loss of profit)
irrespective of whether the Property Trustee has been advised of the
likelihood of such loss or damage and regardless of the form of action.
(xiii) The Property Trustee shall not be deemed to have
notice of any Default or Event of Default unless a Responsible Officer
of the Property Trustee has actual knowledge thereof or unless written
notice of any event which is in fact such a Default is received by the
Property Trustee at the Corporate Trust Office of the Property Trustee,
and such notice references the Securities and the Indenture.
(xiv) The rights, privileges, protections, immunities and
benefits given to the Property Trustee, including, without limitation,
its right to be indemnified, are extended to, and shall be enforceable
by, the Property Trustee in each of its capacities hereunder, and each
agent, custodian and other Person employed to act hereunder.
(b) No provision of this Trust PIERS Guarantee shall be
deemed to impose any duty or obligation on the Trust PIERS Guarantee
Trustee to perform any act or acts or exercise any right, power, duty
or obligation conferred or imposed on it in any jurisdiction in which
it shall be illegal, or in which the Trust PIERS Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power,
duty or obligation. No permissive power or authority available to the
Trust PIERS Guarantee Trustee shall be construed to be a duty.
10
SECTION 3.03. Not Responsible for Recitals or Issuance of
Trust PIERS Guarantee.
The recitals contained in this Trust PIERS Guarantee shall be
taken as the statements of the Guarantor, and the Trust PIERS Guarantee Trustee
does not assume any responsibility for their correctness. The Trust PIERS
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Trust PIERS Guarantee.
ARTICLE IV
TRUST PIERS GUARANTEE TRUSTEE
SECTION 4.01. Trust PIERS Guarantee Trustee; Eligibility.
(a) There shall at all times be a Trust PIERS Guarantee
Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined capital
and surplus of at least 50 million U.S. dollars ($50,000,000), and
subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to above, then, for
the purposes of this Section 4.01(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Trust PIERS Guarantee Trustee
shall cease to be eligible to so act under Section 4.01(a), the Trust
PIERS Guarantee Trustee shall immediately resign in the manner and with
the effect set out in Section 4.02(c).
(c) If the Trust PIERS Guarantee Trustee has or shall
acquire any "conflicting interest" within the meaning of Section 310(b)
of the Trust Indenture Act, the Trust PIERS Guarantee Trustee and
Guarantor shall in all respects comply with the provisions of Section
310(b) of the Trust Indenture Act.
SECTION 4.02. Appointment, Removal and Resignation of Trust
PIERS Guarantee Trustee.
(a) Subject to Section 4.02(b), the Trust PIERS Guarantee
Trustee may be appointed or removed without cause at any time by the
Guarantor except during an Event of Default.
(b) The Trust PIERS Guarantee Trustee shall not be
removed in accordance with Section 4.02(a) until a Successor Trust
PIERS Guarantee Trustee has been
11
appointed and has accepted such appointment by written instrument
executed by such Successor Trust PIERS Guarantee Trustee and delivered
to the Guarantor.
(c) The Trust PIERS Guarantee Trustee shall hold office
until a Successor Trust PIERS Guarantee Trustee shall have been
appointed or until its removal or resignation. The Trust PIERS
Guarantee Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument in writing executed by the
Trust PIERS Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Trust PIERS
Guarantee Trustee has been appointed and has accepted such appointment
by instrument in writing executed by such Successor Trust PIERS
Guarantee Trustee and delivered to the Guarantor and the resigning
Trust PIERS Guarantee Trustee.
(d) If no Successor Trust PIERS Guarantee Trustee shall
have been appointed and accepted appointment as provided in this
Section 4.02 within 60 days after delivery of an instrument of removal
or resignation, the Trust PIERS Guarantee Trustee resigning or being
removed may petition any court of competent jurisdiction for
appointment of a Successor Trust PIERS Guarantee Trustee. Such court
may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Trust PIERS Guarantee Trustee.
(e) No Trust PIERS Guarantee Trustee shall be liable for
the acts or omissions to act of any Successor Trust PIERS Guarantee
Trustee.
(f) Upon termination of this Trust PIERS Guarantee or
removal or resignation of the Trust PIERS Guarantee Trustee pursuant to
this Section 4.02, the Guarantor shall pay to the Trust PIERS Guarantee
Trustee all amounts due to the Trust PIERS Guarantee Trustee accrued to
the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.01. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.02. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Trust
PIERS Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the
12
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 5.03. Obligations Not Affected.
The obligations, covenants, agreements and duties of the
Guarantor under this Trust PIERS Guarantee shall in no way be affected
or impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the Issuer of any
express or implied agreement, covenant, term or condition relating to
the Trust PIERS to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer
of all or any portion of the Distributions, Redemption Price,
Liquidation Distribution or any other sums payable under the terms of
the Trust PIERS or the extension of time for the performance of any
other obligation under, arising out of, or in connection with, the
Trust PIERS (other than an extension of time for payment of
Distributions, Redemption Price, Liquidation Distribution or other sum
payable that results from the extension of any interest payment period
on the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on
the part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Trust PIERS, or any action on the part of the Issuer
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of debt of, or other similar
proceedings affecting, the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the
Trust PIERS;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a
guarantor, it being the intent of this Section 5.03 that the
obligations of the Guarantor with respect to the Guarantee Payments
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of
any of the foregoing.
SECTION 5.04. Rights of Holders.
(a) The Holders of a Majority in liquidation amount of
the Trust PIERS have the right to direct the time, method and place of
conducting any proceeding for any
13
remedy available to the Trust PIERS Guarantee Trustee in respect of
this Trust PIERS Guarantee or exercising any trust or power conferred
upon the Trust PIERS Guarantee Trustee under this Trust PIERS
Guarantee.
(b) If the Trust PIERS Guarantee Trustee fails to enforce
such Trust PIERS Guarantee, any Holder may institute a legal proceeding
directly against the Guarantor to enforce the Trust PIERS Guarantee
Trustee's rights under this Trust PIERS Guarantee, without first
instituting a legal proceeding against the Issuer, the Trust PIERS
Guarantee Trustee or any other person or entity. The Guarantor waives
any right or remedy to require that any action be brought first against
the Issuer or any other person or entity before proceeding directly
against the Guarantor.
SECTION 5.05. Guarantee of Payment.
This Trust PIERS Guarantee creates a guarantee of payment and not of
collection.
SECTION 5.06. Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Trust PIERS Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Trust PIERS Guarantee, if, at the time of any
such payment, any amounts are due and unpaid under this Trust PIERS Guarantee.
If any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.
SECTION 5.07. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Trust PIERS,
and that the Guarantor shall be liable as principal and as debtor hereunder to
make Guarantee Payments pursuant to the terms of this Trust PIERS Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (h), inclusive, of Section 5.03 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01. Limitation of Transactions.
So long as any Trust PIERS remain outstanding, the Guarantor shall not
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Guarantor's
capital stock (which includes common stock and preferred stock) or (ii) make any
payment of principal of or premium, if any, or interest on or repay, repurchase
or redeem any debt securities of the Guarantor (including any Other Debentures)
that rank pari passu with or junior in right of payment to the Debentures or
(iii) make any guarantee
14
payments with respect to any guarantee by the Guarantor of the debt securities
of any subsidiary of the Guarantor (including Other Guarantees) if such
guarantee ranks pari passu with or junior in right of payment to the Debentures
(other than (a) dividends or distributions in shares of, or options, warrants,
or rights to subscribe for or purchase shares of, common stock of the Guarantor,
or repurchases or redemptions of capital stock solely from the issuance or
exchange of capital stock, (b) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under this Trust PIERS Guarantee, (d) as a
result of a reclassification of the Guarantor's capital stock or the exchange or
the conversion of one class or series of the Guarantor's capital stock for
another class or series of the Guarantor's capital stock, (e) the purchase of
fractional interests in shares of the Guarantor's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (f) purchases of common stock related to the issuance of
common stock or rights under any of the Guarantor's benefit plans for its
directors, officers or employees or any of the Guarantor's dividend reinvestment
plans, (g) the payment of any dividend within 60 days after the date of
declaration of the dividend if, at the date of declaration (x) if paid on that
date, the payment of the dividend would not have been prohibited by an election
to defer interest payments and (y) the declaration was in accordance with the
Guarantor's dividend policy in effect immediately prior to its declaration of
the dividend, and (h) repurchases of Guarantor's common stock in connection with
acquisitions of businesses made by the Guarantor or any of its subsidiaries,
which repurchases are made in connection with the satisfaction of
indemnification obligations of the sellers of such businesses) if at such time
(i) there shall have occurred any event of which the Guarantor has actual
knowledge that (a) is, or with the giving of notice or the lapse of time, or
both, would be an Indenture Event of Default and (b) in respect of which the
Guarantor shall not have taken reasonable steps to cure, (ii) if such Debentures
are held by the Property Trustee, the Guarantor shall be in default with respect
to its payment of any obligations under this Trust PIERS Guarantee or (iii) the
Guarantor shall have given notice of its election of the exercise of its right
to extend the interest payment period pursuant to Section 16.01 of the Indenture
and any such extension shall be continuing.
SECTION 6.02. Ranking.
This Trust PIERS Guarantee will constitute an unsecured obligation of
the Guarantor and will rank (i) subordinate and junior in right of payment to
Senior Indebtedness (as defined in the Indenture), to the same extent and in the
same manner that the Debentures are subordinated to Senior Indebtedness pursuant
to the Indenture (except as indicated below), it being understood that the terms
of Article XV of the Indenture shall apply to the obligations of the Guarantor
under this Common Securities Guarantee as if (x) such Article XV were set forth
herein in full and (y) such obligations were substituted for the term
"Securities" appearing in such Article XV, except that with respect to Section
15.03 of the Indenture only, the term "Senior Indebtedness" shall mean all
liabilities of the Guarantor, whether or not for money borrowed (other than
obligations in respect of Other Guarantees), (ii) pari passu with the most
senior preferred or preference stock now or hereafter issued by the Guarantor,
any guarantee now or hereafter entered into by the Guarantor in respect of any
preferred or preference stock of any Affiliate of the Guarantor, any Other
Guarantee and any Other Common Securities Guarantee, and (iii) senior to the
Guarantor's capital stock.
15
ARTICLE VII
TERMINATION
SECTION 7.01. Termination.
This Trust PIERS Guarantee shall terminate (i) upon full payment of the
Redemption Price (as defined in the Trust Agreement) of all Trust PIERS, (ii)
upon distribution of all the assets of the Trust to the Holders, (iii) upon
liquidation of the Issuer and the full payment of the amounts payable in
accordance with the Trust Agreement, or (iv) upon the distribution by the
Guarantor of common stock of the Guarantor to Holders in respect of conversion
of all outstanding Trust PIERS into such common stock of the Guarantor.
Notwithstanding the foregoing, this Trust PIERS Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid under the Trust PIERS or under this Trust
PIERS Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered
Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith
in accordance with this Trust PIERS Guarantee and in a manner that such
Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Trust PIERS
Guarantee or by law, except that an Indemnified Person shall be liable
for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to
such acts or omissions.
(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the Guarantor and upon such
information, opinions, reports or statements presented to the Guarantor
by any Person as to matters the Indemnified Person reasonably believes
are within such other Person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the
Guarantor, including information, opinions, reports or statements as to
the value and amount of the assets, liabilities, profits, losses, or
any other facts pertinent to the existence and amount of assets from
which Distributions to Holders might properly be paid.
SECTION 8.02. Indemnification.
The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss, liability,
damage, claim or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the
16
acceptance or administration of the trust or trusts hereunder, including the
costs and expenses (including reasonable legal fees and expenses) of defending
itself against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The obligation
to indemnify as set forth in this Section 8.02 shall survive the termination of
this Trust PIERS Guarantee and the resignation or removal of the Trust PIERS
Guarantee Trustee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Successors and Assigns.
All guarantees and agreements contained in this Trust PIERS
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
then outstanding.
SECTION 9.02. Amendments.
Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Trust PIERS Guarantee may only be amended with the prior
approval of the Holders of a Majority in liquidation amount of the Securities
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined). The provisions of the Trust Agreement with
respect to consents to amendments thereof (whether at a meeting or otherwise)
shall apply to the giving of such approval.
SECTION 9.03. Notices.
All notices provided for in this Trust PIERS Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:
(a) If given to the Issuer, in care of the Administrative
Trustee at the Issuer's mailing address set forth below (or such other
address as the Issuer may give notice of to the Holders and the Trust
PIERS Guarantee Trustee):
Sovereign Capital Trust IV
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Administrative Trustee
Telecopy: (302) 652 - 8667
(b) If given to the Trust PIERS Guarantee Trustee, at the
Trust PIERS Guarantee Trustee's mailing address set forth below (or
such other address as the Trust PIERS Guarantee Trustee may give notice
of to the Holders and the Issuer):
▇▇
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust
Administration
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may
give notice of to the Holders and the Trust PIERS Guarantee Trustee):
Sovereign Bancorp, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(d) If given to any Holder, at the address set forth on
the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by
first class mail, postage prepaid except that if a notice or other
document is refused delivery or cannot be delivered because of a
changed address of which no notice was given, such notice or other
document shall be deemed to have been delivered on the date of such
refusal or inability to deliver.
SECTION 9.04. Benefit.
This Trust PIERS Guarantee is solely for the benefit of the
Holders and, subject to Section 3.01(a), is not separately transferable from the
Trust PIERS.
SECTION 9.05. Governing Law.
THIS TRUST PIERS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
[SIGNATURES ON FOLLOWING PAGE]
18
[SIGNATURES FROM PRECEDING PAGE]
THIS TRUST PIERS GUARANTEE is executed as of the day and year first
above written.
SOVEREIGN BANCORP, INC., as Guarantor
By: ___________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President
THE BANK OF NEW YORK, as Trust PIERS
Guarantee Trustee
By: ___________________________________
Name:
Title: Authorized Signatory