Banco Santander Option Agreement For Executives in Puerto Rico
EXHIBIT
99.1
Banco
Santander Option Agreement For Executives in Puerto
Rico
This
agreement is
executed on December ____, 2007, by and between _____________ (the
“Subsidiary”), a corporation chartered under the laws of the Commonwealth of
Puerto Rico, represented by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, in their
capacities as President and First Senior Vice President, respectively, and
___________ (the “Executive”), and amends and replaces the “Benefits Coverage
Agreement for Grupo Santander Executives,” dated XX, YYYYYYY, 2007.
The
parties mutually
acknowledge that they have sufficient legal capacity to execute this Agreement,
and make the following warranties and representations:
I. As
part of the Human Resources policy for Executive compensation, Banco Santander,
S.A. (“Santander”) has designed a compensation plan linked to the market
performance and earnings per share of Santander shares (the
“Plan”).
II.
For the period 2003-2006, without assuming continuation in subsequent years,
the
aforementioned Plan will be implemented, in the case of the Subsidiary, by
granting the right to receive American Depositary Shares (“ADS”) of Santander,
dependent upon the existence of certain conditions specified in the Agreement
between the Subsidiary and the Executive, the most important of which is the
market performance and earnings per share of Santander’s stock.
III. The
Subsidiary has decided to grant the benefits of the aforementioned plan as
described in this Agreement and subject to its terms and
conditions.
IV. The
Parties to this Agreement have decided to modify the “Benefits Coverage
Agreement for Grupo Santander Executives” that was signed on
___ ____, 2007, and execute the agreement herein subject to the
following
Terms
and
Conditions
FIRST. PURPOSE
OF AGREEMENT
The
purpose of this
Agreement is to regulate the conditions under which the Subsidiary grants to
the
Executive a certain number of options to acquire Santander ADS pursuant to
the
terms and conditions of this Agreement.
SECOND. NUMBER
OF OPTIONS
The
Executive is
assigned, and accepts, a total of ____ options for the purchase of Santander
ADS, each of which confers the rights recognized in this
instrument.
Each
of these
purchase options means the right to purchase a particular number of Santander
ADS by means of Exercise by Difference, as described in this instrument, at
the
weighted average trading price on the Madrid Stock Exchange [▇▇▇▇▇▇▇
Continuo de Madrid] in the first 15 sessions of 2005 (Exercise
Price).
THIRD. CONDITIONS
FOR EXERCISE
Exercise
of the
options to acquire Santander ADS assigned to the Executive will be subject
to
the following conditions relating to the price and earnings of the Santander
share.
|
A.
|
The
revaluation of a Santander share – using the weighted average price of the
first 15 sessions of the Madrid Stock Exchange for 2005 as the initial
price, and the weighted average of the 15 first sessions of that
market
for 2007 as the final price – must be greater than the corresponding
revaluations of at least 20 of the 29 shares of the international
financial entities listed in the paragraph [sic]
of this Agreement, weighted under the same
conditions. In order to calculate the aforementioned
revaluation, the gross amount of dividends and other distributions
produced by each share will be deemed to have been reinvested at
the
closing market price on the date on which they are paid. Accordingly,
the
following formula will be used for the calculation of the
revaluation:
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|
REV =
|
(PF
–
PI)
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x
NAR
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|
PI
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In
which:
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||
| REV = |
Revaluation
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|
| PF = |
weighted
average price for the first 15 sessions in the principal trading
market of
each entity for 2007
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|
| PI = |
weighted
average price for the first 15 sessions in the principal trading
market of
each entity for 2005
|
|
| NAR = |
1
+ D1
/ P1
+ D2
/ P2
+ ▇▇
/ ▇▇
▇……………….▇
▇▇
/
▇▇
|
|
|
Where:
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||
| D1 = |
The
first
gross dividend (or any other distribution deriving from the ownership
of
the first share)
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|
|
D2
=
|
Second
gross
dividend (or any other distribution deriving from the ownership of
the
first share)
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|
2
|
Dn
=
|
The
nth
gross
dividend (or any other distribution deriving from the ownership of
the
first share) whose payment date is prior to January 1,
2007
|
|
|
P1
=
|
Closing
Price
of the share in its principal trading market on the payment date
of D1
|
|
|
P2
=
|
Closing
Price
of the share in its principal trading market on the payment date
of D2
|
|
|
Pn
=
|
Closing
Price
of the share in its principal trading market on the payment date
of Dn
|
|
| For the purposes of revaluation of each share, the benchmark prices will be those of the prices corresponding to the principal trading market of each entity. The revaluation will be expressed in the currency in which each entity publishes its earnings. | ||
|
B.
|
The
growth of
Santander’s Earnings per Share (EPS), calculated by dividing the Grupo
Santander’s results for one fiscal year by the average number of
outstanding shares for that year – must be greater than the growth of
earnings per share for 20 of the 29 international financial entities
listed in the paragraph [sic] of this Agreement,
measured by the same standards.
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|
|
In
the case of
Santander, the results will be deemed to be those results reflected
in the
income statement in the audited Annual Consolidated Financial Statements
for Santander and the companies that are members of the Grupo Santander
during each fiscal year; for the other entities, the benchmark will
be
based on the results found in the equivalent legal
documentation.
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||
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For
the
purposes of EPS growth, the benchmark will be based on the difference
between the 2003 period (in the case of Santander, € 0.55) and the 2006
period. The EPS growth for each entity will be measured in the currency
in
which it publishes its earnings.
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||
| For the purposes of the condition regarding the revaluation of the shares and EPS growth, those entities that are acquired by others or cease to exist as such as the result of a merger or for any other reason will be deemed to have been surpassed. | ||
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C.
|
The
entities
and/or shares referred to in the clauses of this instrument are the
following:
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-
CITIGROUP
|
-
UBS
|
|
|
-
BANK OF
AMERICA
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-
CREDIT
SUISSE FIRST BOSTON
|
|
|
-
▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
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-
BNP
PARIBAS
|
|
|
-
▇▇▇▇▇
FARGO
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-
SOCIETE
GENERALE
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|
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-
WACHOVIA
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-
CREDIT
AGRICOLE
|
|
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-
US
BANCORP
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-
DEXIA
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3
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-
FIFTH THIRD
BANCORP
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-
BBVA
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-
HSBC
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-
DEUTSCHE
BANK
|
|
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-
ROYAL BANK
OF SCOTLAND
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-
ABN
AMRO
|
|
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-
BARCLAYS
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-
UNICREDITO
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|
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-
HBOS
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-
BANCA
INTESA
|
|
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-
LLOYDS
TSB
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-
SANPAOLO
IMI
|
|
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-
ROYAL BANK
OF CANADA
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-
NORDEA BANK
AB
|
|
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-
BANK OF NOVA
SCOTIA
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||
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-
NATIONAL
AUSTRALIA BANK
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||
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-
COMMONWEALTH
BANK OF AUSTRALIA
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FOURTH. DEADLINE FOR EXERCISE
The
options granted
may not be exercised by the Executive prior to January 15, 2008 (Blackout
Period).
The
period of 12
months from the conclusion of the Blackout Period is set as the deadline for
the
exercise of options, that is, from January 15, 2008 through January 15, 2009
(Exercise Period).
Once
the Blackout
Period has elapsed, the Executive may exercise the rights granted in the
agreement executed between the Executive and the Subsidiary, throughout the
entire Exercise Period.
After
the final day
of the Exercise Period, the options that have not been exercised will be void,
and may no longer be exercised, and will grant no rights to their
holder.
FIFTH. EXERCISE
OF OPTIONS
The
options granted
herein may be exercised, wholly or in part, during the Exercise Period by means
of Exercise by Difference, as described below.
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To
exercise
the options using Exercise by Difference, each Executive must notify
the
Subsidiary of his decision to exercise all or part of his current
options
and the Subsidiary must send a copy of the Executive’s notice to Santander
within two business days of its receipt. Santander will deliver
to the Subsidiary, no later than the fourth business day from the
date
upon which Santander received the notice from the Executive, and
the
Subsidiary will deliver to the Executive, no later than the tenth
business
day following the receipt of the notice, and at no charge, the number
of
Santander ADS determined by the following
formula:
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N.A. =
|
(P.A.
–
P.E.) x N.O. – IRPF
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P.A.
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In
which:
4
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N.A. =
|
Number
of ADS
to be delivered to the Executive. If it is a decimal fraction, it
must be
rounded up to the next whole
number.
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P.A.
=
|
Opening
Price
of the Santander share in its principal trading market on the second
business day following the receipt of the exercise
notice.
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P.E.
=
|
Weighted
average share price for the first 15 sessions of 2005 on the Madrid
Stock
Exchange [▇▇▇▇▇▇▇ Continuo de
Madrid].
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N.O.
=
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Number
of
options exercised.
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IRPF=
|
The
amount
corresponding to the Spanish non-resident income tax due on the
OPTION AGREEMENT FOR THE PURCHASE OF AMERICAN
DEPOSITARY SHARES (“ADS”) OF SANTANDER, between Santander and
[name of Subsidiary], as well as the deposit in the Income Tax (or
equivalent) or Federal Social Security account that are in effect
in
Puerto Rico and are applicable to the amount received by the employee
as a
result of this agreement.
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The
Executive will
have no shareholder rights with respect to any share which he may purchase
with
the options granted herein, until such options are exercised pursuant to the
terms and conditions of this Agreement.
SIXTH. COMMITMENT
TO MAKE THE SHARES AVAILABLE
Starting
from the
time at which the purchase options may be exercised, Santander agrees to
facilitate the acquisition of shares in a number sufficient to make it possible
to exercise the rights recognized in this Agreement.
SEVENTH. CAPITAL
DILUTION DURING THE PERIOD WHEN THE OPTIONS ARE GRANTED
In
the event that
any dilution of the capital stock occurs because of a stock
split during the period starting from the date of this Agreement and
ending with the last day of the Exercise Period, Santander agrees, with respect
to the unexercised options, to adjust the option price downwards with respect
to
its corresponding theoretical value and, if necessary, to adjust upwards the
number of options to be exercised.
Excluded
from the
guarantee in the preceding paragraph are the dilutive effects following
increases to capital that may be associated with concurrent and previous
reductions to capital intended to balance the equity account of the company
as a
result of losses.
5
EIGHTH. TRANSFER
OF THE OPTIONS
The
purchase options
are not transferable to third parties, with the exception of those described
in
the NINTH clause.
NINTH. PERSONAL
AND EMPLOYMENT CIRCUMSTANCES OF THE OPTION HOLDER THAT MAY INFLUENCE THE
PURCHASE OPTION
The
termination of
the employment relationship at the choice of the Executive or for lawful
dismissal because of disciplinary or objective reasons will automatically result
in the loss of the right to the options.
When
termination of
the employment relationship occurs because of retirement or pre-retirement,
at
the Initiative of Santander or the member of the Group that is the employer,
or
because of permanent disability, the Executive will not lose his option rights,
which he may exercise subject to the terms, deadlines and conditions under
which
they were granted.
The
termination of
the employment relationship resulting from retirement or pre-retirement at
the
initiative of the Executive will automatically result in the loss of the right
to exercise the options.
In
the event that
the Executive requests a leave, and it is granted to him by the Entity, if
the
Blackout Period has passed, he must exercise the purchase option in the 15
days
following the granting of the leave. If the leave occurs prior to the beginning
of the Exercise Period, unless the leave is not voluntary or is a special leave
for transfer to a Company in the Group, the Executive will lose any option
rights.
If
the leave is not
voluntary and occurs prior to the beginning of the Exercise Period, the
Executive must exercise his options in the period of 15 days following the
conclusion of the Blackout Period.
In
the case of a
special leave because of transfer to a company of the Grupo Santander, the
provisions of this Agreement will remain in effect in the new position to which
the Executive has transferred.
In
the event of the
death of an Executive prior to the exercise of the purchase option, his legal
heirs may substitute for him and exercise the stock options subject to the
terms, deadlines and conditions under which they were granted to
him.
Removal
from the
position of Executive will not mean the loss of the rights established in this
Agreement, unless it involves the termination of the contract as described
in
the preceding paragraphs.
6
TENTH.
EXPIRATION OF THE PURCHASE OPTION
The
options granted
in this agreement expire in the following circumstances:
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a)
|
They
have been
fully exercised in the periods
established.
|
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b)
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The
Exercise
Period has elapsed without the Executive or his heirs having given
notice
of their decision to exercise the
options.
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c)
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Upon
the
express decision of the Grupo Santander’s Corporate Committee on
Evaluation and Bonuses, when:
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-
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The
individual
evaluation of the Executive, in the two intervening periods of 2005
and
2006 during which the Plan is in operation, rates him as Needing
Improvement; or when
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-
|
The
Unit,
Department or Company for which the Executive works achieves results
for
the 2005 and 2006 fiscal years that are lower than 80% of the budgeted
results.
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d)
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Because
of
termination of the employment relationship, except for certain cases
described in clause NINTH to this
Agreement.
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e)
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For
the
general grounds for discharge of
obligations.
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ELEVENTH.
JURISDICTION.
Any
dispute arising
from this Agreement, which is governed by the laws of the Commonwealth of Puerto
Rico, will be subject to the San ▇▇▇▇ District Court.
In
witness whereof,
this agreement is executed in duplicate at the date and place given
above.
7
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BANCO SANTANDER
PUERTO RICO
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Executive
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By:
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By:
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Name:
▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
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Name:
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Title:
President
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Title:
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By:
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Name:
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
|
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Title:
First
Senior Vice President
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8