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MERGER AGREEMENT
 MERGER AGREEMENT BANCO SANTANDER PUERTO RICO SANTANDER MORTGAGE CORPORATION
 WHEREAS
 WHEREAS
 WHEREAS
 WHEREAS
 WHEREAS
 NOW, THEREFORE
 ARTICLE I
DEFINITIONS
 Section 1.01 Definitions
 Bank




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Banking Law
 Bank Shares
 Commissioner
 Commonwealth
 Effective Date
 FDIC
 Regulatory Approvals
 Santander Mortgage
 Santander Mortgage Shares
 ARTICLE II
THE MERGER
 Section 2.01 Merger
 Section 2.02 Conversion
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Section 2.03 Certificates after the Effective Date
  Section 2.04 Effects of the Merger
      3




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ARTICLE III
UNDERTAKINGS
 Section 3.01 Bank Stockholder Approval
 Section 3.02 Santander Mortgage Stockholder Approval
 Section 3.03 Regulatory Approvals
 Section 3.04 Other Undertakings
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ARTICLE IV
CONDITIONS PRECEDENT
 Section 4.01 Conditions Precedent to the Merger
   Section 4.02 Effective Date
 ARTICLE V
TERMINATION AND DEFERRAL
 Section 5.01 Termination of the Merger
  5




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Section 5.02 Deferral of Effective Date
 ARTICLE VI
MISCELLANEOUS
 Section 6.01 Governing Law
 Section 6.02 Amendment
 Section 6.03 Counterparts
 Section 6.04 Severability
 Section 6.05 Headings
 IN WITNESS WHEREOF
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BANCO SANTANDER PUERTO RICO
    
    
    
    SANTANDER MORTGAGE CORPORATIONBy:
    
    \s\ José R. González
    
    
    
    By:
    
    \s\ María CaleroName:
    
    José R. González
    
    
    
    
    
    Name:
    
    María CaleroTitle:
    
    President and Chief Executive Officer
    
    
    
    
    
    Title:
    
    Executive Vice PresidentBy:
    
    \s\ Carlos M. García
    
    
    
    By:
    
    \s\ Rafael S. BonillaName:
    
    Carlos M. García
    
    
    
    
    
    Name:
    
    Rafael S. BonillaTitle:
    
    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
    
    AddressGonzalo de las HerasChairman of the Board of Directors 
Occupation: General Director 
Banco Santander, S.A
    
    333 East 57th St. Apt. 3A 
New York, NY 10022Roberto H. ValentínDirector 
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 00966Jesús M. ZabalzaDirector 
Occupation: Director Banco Santander S.A
    
    Urb. La Finca Po Del Rio No 4 Chalet 12 28223 Somosagua Pozuelo 
Madrid, EspañaJosé R. GonzálezDirector 
President 
Chief Executive Officer
    
    Parque de Santa Maria
Q8 Calle Petunia
San Juan, PR 00927Carlos M. GarcíaDirector 
Senior Executive Vice President and
Chief Operating Officer
    
    Villas Reales
333 Via Louvre
Guaynabo, PR 00969María CaleroDirector 
Executive Vice President and Chief
Accounting Officer
    
    Urb. Paseo del Parque 
14 Parque Las Ramblas 
San Juan, PR 00926José AlvarezExecutive Vice President
    
    Urb. Paseo del Parque 13 Parque Las Ramblas San Juan, PR 00926Tomás E. Torres
    
    Urb. Mansión del Mar
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Name and Title
    
    AddressExecutive Vice President
    
    Calle Pelicano MM 111 Toa Baja, PR 00949
 9