Exhibit 10.20
MERGER AGREEMENT
     MERGER AGREEMENT dated as of October 15, 2007 (the “Agreement” or “Merger
Agreement”), among BANCO SANTANDER PUERTO RICO (the “Bank”), a bank organized
under the laws of the Commonwealth of Puerto Rico (the “Commonwealth”) and
SANTANDER MORTGAGE CORPORATION (“Santander Mortgage”), a corporation organized
under the laws of the Commonwealth and a wholly-owned subsidiary of the Bank.
     WHEREAS, the Bank is a bank organized under the Banking Law of the
Commonwealth, Act No. 55 of May 12, 1933, as amended (the “Banking Law”), with
its principal office and place of business at 207 Ponce de Leon Avenue, San
Juan, Puerto Rico, with an authorized capital of 200,000,000 shares of common
stock, par value $2.50 per share, and 10,000,000 shares of preferred stock, par
value $25.00 per share;
     WHEREAS, Santander Mortgage is corporation organized under the laws of the
Commonwealth that is duly licensed to engage in mortgage banking in the
Commonwealth of Puerto Rico, and having an authorized capital of 120,000 shares
of common stock, par value $100.00 per share; and
     WHEREAS, Section 15(a) (7 L.P.R.A. sec. 91a) of the Puerto Rico Banking
Law, as amended (the “Banking Law”), provides that if a Puerto Rico bank owns
more than ninety percent (90%) of the issued and outstanding stock of a
corporation, said corporation may be merged with and into the bank;
     WHEREAS, the Bank owns one hundred percent (100%) of the issued and
outstanding common stock of Santander Mortgage;
     WHEREAS, the Boards of Directors of the Bank and Santander Mortgage have
determined that is in the best interests of the Bank and Santander Mortgage and
of their respective stockholders that Santander Mortgage be merged with and into
the Bank (the “Merger”) and that the Bank continues with all of the existing
operations of Santander Mortgage after the effective date of the Merger;
     NOW, THEREFORE, in consideration of the premises, the Bank and Santander
Mortgage hereby make this Agreement and prescribe the terms and conditions of
the Merger and the mode of carrying it into effect as follows:
ARTICLE I
DEFINITIONS
     Section 1.01 Definitions. The following terms, as used herein, have the
following respective meanings:
“Bank” means Banco Santander Puerto Rico prior to the Effective Date, and Banco
Santander Puerto Rico (including all of the assets and liabilities of Santander

 

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Mortgage) on and after the Effective Date.
“Banking Law” means the Banking Law of the Commonwealth, Act No. 55 of May 12,
1933, as amended.
“Bank Shares” means the shares of common stock of the Bank, par value $2.50 per
share.
“Commissioner” means the Commissioner of Financial Institutions of the
Commonwealth.
“Commonwealth” means the Commonwealth of Puerto Rico.
“Effective Date” shall have the meaning set forth in Section 4.02.
“FDIC” means the Federal Deposit Insurance Corporation.
“Regulatory Approvals” shall have the meaning set forth in Section 3.03.
“Santander Mortgage” means Santander Mortgage Corporation, a corporation
organized under the laws of the Commonwealth and a wholly-owned subsidiary of
the Bank prior to the Effective Date.
“Santander Mortgage Shares” means the shares of common stock of the Santander
Mortgage, par value $100.00 per share.
ARTICLE II
THE MERGER
     Section 2.01 Merger. On the Effective Date, Santander Mortgage shall be
merged with and into the Bank and the Bank shall receive into itself Santander
Mortgage pursuant to the provisions of and with the effects provided in Section
15(a) of the Banking Law.
     Section 2.02 Conversion. Upon the Effective Date:
     (a) Each Bank Share issued and outstanding immediately prior to the
Effective Date shall not be affected by the Merger and shall remain issued in
the name of Santander BanCorp, without any further action on the part of the
Bank, Santander Mortgage or any other person.
     (b) Each share of Santander Mortgage issued prior to the Effective Date
shall be cancelled.

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     Section 2.03 Certificates after the Effective Date.
     (a) Upon the Effective Date, each outstanding certificate that prior to the
Effective Date had represented Bank Shares shall remain issued and outstanding,
and shall continue to represent the number of issued and outstanding Bank Shares
stated in such certificate.
     Section 2.04 Effects of the Merger. Upon the Effective Date:
     (a) The name of the Bank after the Effective Date shall continue to be
Banco Santander Puerto Rico. The main office, principal place of business,
officers and other personnel of the Bank after the Effective Date shall be the
same as the main office, principal place of business, officers and other
personnel of the Bank immediately prior to the Effective Date;
     (b) The articles of incorporation of the Bank after the Effective Date
shall be the articles of incorporation of the Bank prior to the Effective Date,
and the by-laws of the Bank after the Effective Date shall be the by-laws of the
Bank prior to the Effective Date. The authorized capital of the Bank after the
Effective Date shall be authorized capital of the Bank prior to the Effective
Date, consisting of 200,000,000 shares of common stock, par value $2.50 per
share, and 10,000,000 shares of preferred stock, par value $25.00 per share;
     (c) The Bank and Santander Mortgage shall be considered as one sole
corporate entity under the name of the Bank after the Effective Date, and the
Bank shall enjoy after the Effective Date all the rights, privileges and
franchises and shall be subject to all the restrictions, obligations and duties
of the Bank and Santander Mortgage prior to the Effective Date;
     (d) Each and all the property, shares, rights, franchises, powers and
privileges of the Bank and Santander Mortgage prior to the Effective Date shall
be the property of the Bank after the Effective Date, and the Bank after the
Effective Date shall have, as regards such property, shares, rights, franchises,
powers and privileges, the same rights as Santander Mortgage and the Bank each
possessed prior to the Effective Date;
     (e) The Bank after the Effective Date shall assume each and every
obligation of the Bank and Santander Mortgage prior to the Effective Date, and
shall have all the obligations and shall be liable for all debts and the
fulfillment of all contracts and obligations of the Bank and Santander Mortgage,
just as they were prior to the Effective Date. Any reference to the Bank or
Santander Mortgage in any contract, will or document, whether executed or taking
effect before or after the Merger, shall be considered a reference to the Bank
after the Effective Date if not

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inconsistent with the other provision of the contract, will or document;
     (f) All suits, actions or other proceedings pending in any court on the
Effective Date shall continue to their termination just as if no merger had
taken place; provided, however, that the Bank after the Effective Date may be
substituted in place of Santander Mortgage by order of the court taking
cognizance of the proceedings;
     (g) Any employees of Santander Mortgage immediately prior to the Effective
Date shall become employees of the Bank on the Effective Date; and
     (h) The directors and senior executive officers of the Bank after the
Effective Date shall consist of the directors and senior executive officers of
the Bank on and as of the Effective Date (the names and addresses of the current
directors and senior executive officers of the Bank as of the date hereof are
listed in Appendix I attached hereto), which directors and senior executive
officers shall continue to hold office in the Bank after the Effective Date,
unless sooner removed or disqualified, until their successors are elected at the
next annual meeting of the stockholders of the Bank or are appointed in
accordance with the by-laws of the Bank and have been qualified.
ARTICLE III
UNDERTAKINGS
     Section 3.01. Bank Stockholder Approval. The Bank undertakes to submit this
Agreement for consideration and approval by its sole shareholder, Santander
BanCorp, pursuant to Section 15 of the Banking Law, or in any other manner
permitted or required by law.
     Section 3.02. Santander Mortgage Stockholder Approval. The Bank, as the
sole shareholder of Santander Mortgage, agrees to vote all of its shares of
common stock of Santander Mortgage in favor of the approval of this Agreement or
otherwise approve or consent in writing to the approval of this Agreement.
     Section 3.03. Regulatory Approvals. Each of the Bank and Santander Mortgage
shall (i) proceed expeditiously and cooperate fully in determining which filings
are required to be made prior to the Effective Date with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the
Effective Date from governmental or regulatory authorities of the Commonwealth
and the United States, including the approvals of the Commissioner and the FDIC
(collectively, the “Regulatory Approvals”) in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby; and (ii) timely make all such filings and timely seek all Regulatory
Approvals; and take all other action and do all things necessary, prior or
appropriate to consummate and make effective all transactions contemplated by
this Agreement as soon as possible.
     Section 3.04. Other Undertakings. If at any time (whether before or after
the Effective

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Date) the Bank considers that any further assignments, conveyances or assurances
in law are necessary or desirable to vest, perfect or confirm of record in the
Bank after the Effective Date the title to any property or rights of Santander
Mortgage, or otherwise to carry out the provisions hereof, the Bank and
Santander Mortgage hereby undertake through their proper officers and directors
to execute and deliver immediately any and all proper deeds, assignments and
assurances on law, and to do all things necessary or proper to vest, perfect or
confirm title to such property or rights in the Bank after the Effective Date
and otherwise to carry out the provisions hereof.
ARTICLE IV
CONDITIONS PRECEDENT
     Section 4.01 Conditions Precedent to the Merger. The consummation of the
Merger contemplated by this Agreement is subject to the satisfaction of the
following conditions:
     (a) The approval of the shareholders of the Bank and Santander Mortgage
shall have been obtained;
     (b) All Regulatory Approvals (or waiver or exemption therefrom) and
satisfaction of all other requirements prescribed by law which are necessary to
the consummation of the transactions contemplated by this Agreement shall have
been obtained and all statutory waiting periods shall have expired, without the
imposition of any condition or requirements that would materially and adversely
affect the operations or business prospects of the Bank following the Effective
Date so as to render inadvisable the consummation of such transaction.
     Section 4.02 Effective Date. The Merger provided for herein shall become
effective on the date as soon as practicable after each condition precedent
listed in Section 4.01 shall have been satisfied. The Merger shall become
effective at the time this Agreement is properly perfected and filed together
with the required Certificate of Title of Ownership and Merger with the Puerto
Rico State Department in accordance with the applicable requirements of Section
15(a) of the Banking Law (the “Effective Date”).
ARTICLE V
TERMINATION AND DEFERRAL
     Section 5.01 Termination of the Merger. Prior to the Effective Date, this
Agreement may be terminated at any time by written notice by either the Bank or
Santander Mortgage to the other that its Board of Directors is of the opinion
that:
     (a) Any action, suit, proceeding, or claim is commenced or threatened or
any claim is made that could make consummation of the Merger, in the sole
opinion of such Board of Directors, inadvisable;

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     (b) It is likely that a Regulatory Approval, in the sole opinion of such
Board of Directors, will not be obtained, or if obtained, will contain or impose
any condition or requirement that would materially and adversely affect the
operations or business prospects of the Bank following the Effective Date so as
to render inadvisable the consummation of the Merger; or
     (c) Any other reason exists that makes consummation of the Merger in the
sole opinion of such Board of Directors, inadvisable.
     Upon such determination, this Agreement shall be void and there shall be no
liability hereunder or on account of such termination on the part of the Bank or
Santander Mortgage or the directors, officers, employees, agents or stockholders
or any of them.
     Section 5.02 Deferral of Effective Date. Consummation of the Merger herein
provided may be deferred by the Board of Directors of the Bank for a reasonable
period of time if the Board of Directors of the Bank determines, in its sole
discretion, that such deferral would be in the best interest of the Bank and the
shareholder of the Bank.
ARTICLE VI
MISCELLANEOUS
     Section 6.01 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Puerto Rico.
     Section 6.02 Amendment. This Agreement and Appendix I hereto may be amended
by the parties hereto, by action taken by or on behalf of their respective Board
of Directors at any time before or after approval by the stockholders of the
parties.
     Section 6.03 Counterparts. For the convenience of the parties, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
document.
     Section 6.04 Severability. If any provision of this Agreement shall be held
invalid under any applicable law, such invalidity shall not affect any other
provision of this Agreement, and, to this end, the provisions hereof are
severable.
     Section 6.05 Headings. The headings of the various Articles and Sections of
this Agreement have been included for convenience of reference only and shall
not affect in any way the express provisions of this Agreement.
     IN WITNESS WHEREOF, the Bank and Santander Mortgage have caused this Merger
Agreement to be executed by their duly authorized officers as of the date first
above written.

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                              BANCO SANTANDER PUERTO RICO       SANTANDER
MORTGAGE CORPORATION    
 
                            By:   \s\ José R. González       By:   \s\ María
Calero                          
 
  Name:   José R. González           Name:   María Calero    
 
  Title:   President and Chief Executive Officer           Title:   Executive
Vice President    
 
                            By:   \s\ Carlos M. García       By:   \s\ Rafael S.
Bonilla                          
 
  Name:   Carlos M. García           Name:   Rafael S. Bonilla    
 
  Title:   Senior Executive Vice President           Title:   Senior Vice
President    

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APPENDIX I
Banco Santander Puerto Rico
Directors and Senior Executive Officers

      Name and Title   Address
 
   
Gonzalo de las Heras
   
Chairman of the Board of Directors
Occupation: General Director
Banco Santander, S.A
  333 East 57th St. Apt. 3A
New York, NY 10022
 
   
Roberto H. Valentín
   
Director
Occupation: Private Investor
President & Chairman

Puerto Rico Box Corp
Eric’s Products, Inc.
VIE Development Corp.
Dianissa Development Corp.
RHV Investment Co.
Desarrolladora Roosevelt, Inc.
Costa Córcega S.E.
Nico Development Corp
  Urb. Garden Hills GA-21
Paseo del Parque
Guaynabo, PR 00966
 
   
Jesús M. Zabalza
   
Director
Occupation: Director Banco Santander S.A
  Urb. La Finca Pº Del Rio Nº 4 Chalet 12 28223
Somosagua Pozuelo
Madrid, España
 
   
José R. González
   
Director
President
Chief Executive Officer
  Parque de Santa Maria
Q8 Calle Petunia
San Juan, PR 00927
 
   
Carlos M. García
   
Director
Senior Executive Vice President and
Chief Operating Officer
  Villas Reales
333 Via Louvre
Guaynabo, PR 00969
 
   
María Calero
   
Director
Executive Vice President and
Chief Accounting Officer
  Urb. Paseo del Parque
14 Parque Las Ramblas
San Juan, PR 00926
 
   
José Alvarez
   
Executive Vice President
  Urb. Paseo del Parque
13 Parque Las Ramblas
San Juan, PR 00926
 
   
Tomás E. Torres
  Urb. Mansión del Mar

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      Name and Title   Address
Executive Vice President
  Calle Pelicano MM 111
Toa Baja, PR 00949

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