exv4w6



 







Exhibit 4.6



 




CAPITAL SECURITIES GUARANTEE AGREEMENT




SOVEREIGN BANCORP, INC.




Dated as of May 22, 2006



 





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS AND INTERPRETATION
	 	 	3	 
	 
	 	 	 	 
	SECTION 1.1. Interpretation
	 	 	3	 
	SECTION 1.2. Definitions
	 	 	4	 
	 
	 	 	 	 
	ARTICLE II TRUST INDENTURE ACT
	 	 	7	 
	 
	 	 	 	 
	SECTION 2.1. Trust Indenture Act; Application
	 	 	7	 
	SECTION 2.2. Lists of Holders of Securities
	 	 	7	 
	SECTION 2.3. Reports by the Capital Securities Guarantee Trustee
	 	 	7	 
	SECTION 2.4. Periodic Reports to Capital Securities Guarantee Trustee
	 	 	8	 
	SECTION 2.5. Evidence of Compliance with Conditions Precedent
	 	 	8	 
	SECTION 2.6. Events of Default; Waiver
	 	 	8	 
	SECTION 2.7. Event of Default; Notice
	 	 	8	 
	SECTION 2.8. Conflicting Interests
	 	 	9	 
	 
	 	 	 	 
	ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL SECURITIES GUARANTEE TRUSTEE
	 	 	9	 
	 
	 	 	 	 
	SECTION 3.1. Powers and Duties of the Capital Securities Guarantee Trustee
	 	 	9	 
	SECTION 3.2. Certain Rights of Capital Securities Guarantee Trustee
	 	 	10	 
	SECTION 3.3. Not Responsible for Recitals or Issuance of Capital Securities Guarantee
	 	 	12	 
	 
	 	 	 	 
	ARTICLE IV CAPITAL SECURITIES GUARANTEE TRUSTEE
	 	 	13	 
	 
	 	 	 	 
	SECTION 4.1. Capital Securities Guarantee Trustee; Eligibility
	 	 	13	 
	SECTION 4.2. Appointment, Removal and Resignation of Capital Securities Guarantee Trustee
	 	 	13	 
	 
	 	 	 	 
	ARTICLE V GUARANTEE
	 	 	14	 
	 
	 	 	 	 
	SECTION 5.1. Guarantee
	 	 	14	 
	SECTION 5.2. Waiver of Notice and Demand
	 	 	14	 
	SECTION 5.3. Obligations Not Affected
	 	 	14	 
	SECTION 5.4. Rights of Holders
	 	 	15	 
	SECTION 5.5. Guarantee of Payment
	 	 	16	 
	SECTION 5.6. Subrogation
	 	 	16	 
	SECTION 5.7. Independent Obligations
	 	 	16	 
	 
	 	 	 	 
	ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION
	 	 	16	 
	 
	 	 	 	 
	SECTION 6.1. Limitation of Transactions
	 	 	16	 
	SECTION 6.2. Ranking
	 	 	18	 
	 
	 	 	 	 
	ARTICLE VII TERMINATION
	 	 	18	 
	 
	 	 	 	 
	SECTION 7.1. Termination
	 	 	18	 






 









 






	 	 	 	 	 
	 	 	Page	 
	ARTICLE VIII INDEMNIFICATION
	 	 	19	 
	 
	 	 	 	 
	SECTION 8.1. Exculpation
	 	 	19	 
	SECTION 8.2. Indemnification
	 	 	19	 
	 
	 	 	 	 
	ARTICLE IX MISCELLANEOUS
	 	 	19	 
	 
	 	 	 	 
	SECTION 9.1. Successors and Assigns
	 	 	19	 
	SECTION 9.2. Amendments
	 	 	20	 
	SECTION 9.3. Notices
	 	 	20	 
	SECTION 9.4. Benefit
	 	 	21	 
	SECTION 9.5. Governing Law
	 	 	21	 






(ii)









 






CAPITAL SECURITIES GUARANTEE AGREEMENT




          This GUARANTEE AGREEMENT (the “Capital Securities Guarantee”), dated as of May 22, 2006, 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 “Capital Securities
Guarantee Trustee”), for the benefit of the Holders (as defined herein) from time to time of the
Capital Securities (as defined herein) of Sovereign Capital Trust V, a Delaware statutory business
trust (the “Issuer”).




          WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the “Trust Agreement”),
dated as of May 22, 2006, 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 up to 7,360,000 capital securities, representing undivided preferred
beneficial interests in the assets of the Issuer and having an aggregate liquidation amount of
up to $184,000,000, such capital securities being designated the 7.75% Capital Securities (the “Capital
Securities”).




          WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor
desires irrevocably and unconditionally to agree, to the extent set forth in this Capital
Securities 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 terms similar to this Capital Securities 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 Capital Securities to receive Guarantee Payments under this Capital Securities 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 Capital
Securities Guarantee for the benefit of the Holders.




ARTICLE I

DEFINITIONS AND INTERPRETATION




     SECTION 1.1. Interpretation



          In this Capital Securities Guarantee, unless the context otherwise requires:




          (a) Capitalized terms used in this Capital Securities Guarantee but not defined in the
preamble above have the respective meanings assigned to them in Section 1.2;




          (b) Terms defined in the Trust Agreement as at the date of execution of this Capital
Securities Guarantee have the same meaning when used in this Capital Securities Guarantee unless
otherwise defined in this Capital Securities Guarantee;




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          (c) a term defined anywhere in this Capital Securities Guarantee has the same meaning
throughout;




          (d) all references to “the Capital Securities Guarantee” or “this Capital Securities
Guarantee” are to this Capital Securities Guarantee as modified, supplemented or amended from time
to time;




          (e) all references in this Capital Securities Guarantee to Articles and Sections are to
Articles and Sections of this Capital Securities Guarantee, unless otherwise specified;




          (f) a term defined in the Trust Indenture Act has the same meaning when used in this Capital
Securities Guarantee, unless otherwise defined in this Capital Securities Guarantee or unless the
context otherwise requires; and




          (g) a reference to the singular includes the plural and vice versa.




     SECTION 1.2. Definitions



          (a) “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.




          (b) “Business Day” means any day other than a Saturday or a Sunday, or a day on which
banking institutions in New York, New York or Philadelphia, Pennsylvania are authorized or required
by law or regulation to close.




          (c) “Capital Securities Guarantee Trustee” means The Bank of New York, a New York
banking corporation, until a Successor Capital Securities Guarantee Trustee has been appointed and
has accepted such appointment pursuant to the terms of this Capital Securities Guarantee and
thereafter means each such Successor Capital Securities Guarantee Trustee.




          (d) “Common Securities” means the securities representing common undivided beneficial
interests in the assets of the Issuer.




          (e) “Corporate Trust Office” means the office of the Capital Securities Guarantee
Trustee at which the corporate trust business of the Capital Securities Guarantee Trustee shall, at
any particular time, be principally administered, which office at the date of execution of this
Agreement is located at 101 Barclay Street, 21st Floor, New York, New York 10286.




          (f) “Covered Person” means any Holder or beneficial owner of Capital Securities.




          (g) “Event of Default” means a default by the Guarantor on any of its payment or other
obligations under this Capital Securities Guarantee.




          (h) “Guarantee Payments” means the following payments or distributions, without
duplication, with respect to the Capital Securities, to the extent not paid or made by the




4









 







Issuer: (i) any accrued and unpaid Distributions (as defined in the Trust Agreement) that are
required to be paid on such Capital Securities to the extent the Issuer has funds available
therefor at such time, (ii) the Redemption Price to the extent the Issuer has funds available
therefor at such time, with respect to any Capital Securities called for redemption by the Issuer,
and (iii) upon a voluntary or involuntary dissolution, winding up or termination of the Issuer
(other than in connection with the distribution of Notes to the Holders in exchange for Capital
Securities as provided in the Trust Agreement), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Capital Securities to the date of payment,
to the extent the Issuer has funds 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 Capital Securities Guarantee.




          (i) “Holder” shall mean any holder, as registered on the books and records of the
Issuer, of any Capital Securities; provided, however, that, in determining whether
the holders of the requisite percentage of Capital Securities have given any request, notice,
consent or waiver hereunder, “Holder” shall not include the Guarantor or any Affiliate of the
Guarantor.




          (j) “Indemnified Person” means the Capital Securities Guarantee Trustee, any Affiliate
of the Capital Securities Guarantee Trustee, and any officers, directors, shareholders, members,
partners, employees, representatives, nominees, custodians or agents of the Capital Securities
Guarantee Trustee.




          (k) “Indenture” means the Indenture dated as of September 1, 1999, among the Guarantor
(the “Note Issuer”) and BNY Midwest Trust Company, as trustee, as amended by the Fourth
Supplemental Indenture dated as of May 22, 2006, pursuant to which the Notes are to be issued to
the Property Trustee of the Issuer.




          (l) “Indenture Event of Default” shall mean any event specified in Section 5.01 of the
Indenture or Section 2.7 of the Fourth Supplemental Indenture dated as of May 22, 2006.




          (m) “Majority in liquidation amount of the Capital Securities ” 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,
dissolution or otherwise, plus accrued and unpaid Distributions to the date upon which the voting
percentages are determined) of all Capital Securities then outstanding.




          (n) “Notes” means the series of junior subordinated debt securities of the Guarantor
designated the 7.75% Junior Subordinated Notes due 2036 held by the Property Trustee (as defined in
the Trust Agreement) of the Issuer on behalf of the Trust.




          (o) “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
Treasurer, the Chief Accounting Officer, the Secretary or an Assistant Secretary of




5









 







the Guarantor. Any Officers’ Certificate delivered with respect to compliance with a
condition or covenant provided for in this Capital Securities 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 brief statement of the nature and scope of the examination or investigation
undertaken by such officer in rendering the Officers’ Certificate;




     (iii) 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




     (iv) a statement as to whether, in the opinion of each such officer, such condition or
covenant has been complied with.



          (p) “Other Common Securities Guarantees” means all guarantees to be issued by the
Guarantor with respect to common securities (if any) similar to the Common Securities 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.




          (q) “Other Notes” means all junior subordinated notes or similar obligations 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.




          (r) “Other Guarantees” means all guarantees to be issued by the Guarantor with respect
to capital securities (if any) similar to the Capital Securities 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.




          (s) “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.




          (t) “Redemption Price” means the redemption price as defined in the Trust Agreement
and including all accrued and unpaid Distributions to the date of redemption.




          (u) “Responsible Officer” means any officer within the Corporate Trust Office of the
Capital Securities Guarantee Trustee, including any vice president, any assistant vice president,
any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate
Trust Office of the Capital Securities 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.




6









 








          (v) “Successor Capital Securities Guarantee Trustee” means a successor Capital
Securities Guarantee Trustee possessing the qualifications to act as Capital Securities Guarantee
Trustee under Section 4.1.




          (w) “Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.




          (x) “Trust Securities” means the Common Securities and the Capital Securities,
collectively.




ARTICLE II

TRUST INDENTURE ACT




     SECTION 2.1. Trust Indenture Act; Application



          (a) This Capital Securities Guarantee is subject to the provisions of the Trust Indenture Act
that are required to be part of this Capital Securities Guarantee and shall, to the extent
applicable, be governed by such provisions.




          (b) If and to the extent that any provision of this Capital Securities Guarantee limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust
Indenture Act, such imposed duties shall control.




     SECTION 2.2. Lists of Holders of Securities



          (a) Each of the Guarantor and the Administrative Trustees on behalf of the Trust shall provide
the Capital Securities Guarantee Trustee, unless the Capital Securities Guarantee Trustee is
Registrar for the Securities, (i) within 14 days after each record date for payment of
Distributions, a list, in such form as the Capital Securities Guarantee Trustee may reasonably
require, of the names and addresses of the Holders (“List of Holders”) as of such record date,
provided that neither the Guarantor nor the Administrative Trustees on behalf of the Trust
shall 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 Capital Securities Guarantee Trustee by the
Guarantor and the Administrative Trustees on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust 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 Capital Securities Guarantee Trustee.
The Capital Securities Guarantee Trustee shall preserve, in as current a form as is reasonably
practicable, all information contained in Lists of Holders given to it or which it receives in the
capacity as Paying Agent (if acting in such capacity), provided that the Capital Securities
Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List
of Holders.




          (b) The Capital Securities Guarantee Trustee shall comply with its obligations under Sections
311(a), 311(b) and 312(b) of the Trust Indenture Act.




     SECTION 2.3. Reports by the Capital Securities Guarantee Trustee



          Within 60 days after May 30th of each year, commencing May 30, 2007, the Capital Securities
Guarantee Trustee shall provide to the Holders such reports as are required by




7









 







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 Capital Securities Guarantee Trustee shall also comply
with the other requirements of Section 313 of the Trust Indenture Act.




     SECTION 2.4. Periodic Reports to Capital Securities Guarantee Trustee



          The Guarantor shall provide to the Capital Securities Guarantee Trustee such documents,
reports and information 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 Capital Securities Guarantee Trustee is for informational
purposes only, and the Capital Securities 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
Capital Securities Guarantee Trustee is entitled to rely exclusively on Officers’ Certificates).




     SECTION 2.5. Evidence of Compliance with Conditions Precedent



          The Guarantor shall provide to the Capital Securities Guarantee Trustee such evidence of
compliance with any conditions precedent, if any, provided for in this Capital Securities 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 2.6. Events of Default; Waiver



          The Holders of a Majority in liquidation amount of Capital Securities 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 Capital Securities Guarantee, but no such waiver
shall extend to any subsequent or other default or Event of Default or impair any right consequent
thereon.




     SECTION 2.7. Event of Default; Notice



          (a) The Capital Securities Guarantee Trustee shall, within 90 days after the occurrence of a
default with respect to this Capital Securities 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 Capital Securities 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 Capital Securities Guarantee Trustee and/or a Responsible
Officer in good faith determines that the withholding of such notice is in the interests of the
Holders.




8









 








          (b) The Capital Securities Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Capital Securities 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.




     SECTION 2.8. Conflicting Interests



          The Trust Agreement shall be deemed to be specifically described in this Capital Securities
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

CAPITAL SECURITIES GUARANTEE TRUSTEE




     SECTION 3.1. Powers and Duties of the Capital Securities Guarantee Trustee



          (a) This Capital Securities Guarantee shall be held by the Capital Securities Guarantee
Trustee for the benefit of the Holders, and the Capital Securities Guarantee Trustee shall not
transfer this Capital Securities Guarantee to any Person except a Holder exercising his or her
rights pursuant to Section 5.4(b) or to a Successor Capital Securities Guarantee Trustee on
acceptance by such Successor Capital Securities Guarantee Trustee of its appointment to act as
Successor Capital Securities Guarantee Trustee. The right, title and interest of the Capital
Securities Guarantee Trustee shall automatically vest in any Successor Capital Securities 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 Capital
Securities Guarantee Trustee.




          (b) If an Event of Default actually known to a Responsible Officer has occurred and is
continuing, the Capital Securities Guarantee Trustee shall enforce this Capital Securities
Guarantee for the benefit of the Holders.




          (c) The Capital Securities 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 Capital Securities Guarantee, and no implied
covenants shall be read into this Capital Securities Guarantee against the Capital Securities
Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6) and is actually known to a Responsible Officer, the Capital Securities
Guarantee Trustee shall exercise such of the rights and powers vested in it by this Capital
Securities 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 Capital Securities Guarantee shall be construed to relieve the
Capital Securities Guarantee Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:




9









 









     (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 Capital Securities Guarantee Trustee
shall be determined solely by the express provisions of this Capital Securities
Guarantee, and the Capital Securities Guarantee Trustee shall not be liable except
for the performance of such duties and obligations as are specifically set forth in
this Capital Securities Guarantee, and no implied covenants or obligations shall be
read into this Capital Securities Guarantee against the Capital Securities Guarantee
Trustee; and




     (B) in the absence of bad faith on the part of the Capital Securities Guarantee
Trustee, the Capital Securities 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 Capital Securities Guarantee Trustee
and conforming to the requirements of this Capital Securities Guarantee; but in the
case of any such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Capital Securities Guarantee Trustee,
the Capital Securities Guarantee Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this Capital
Securities Guarantee;




     (ii) the Capital Securities 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
Capital Securities Guarantee Trustee was negligent in ascertaining the pertinent facts upon
which such judgment was made;




     (iii) the Capital Securities 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 Capital Securities relating to the
time, method and place of conducting any proceeding for any remedy available to the Capital
Securities Guarantee Trustee, or exercising any trust or power conferred upon the Capital
Securities Guarantee Trustee under this Capital Securities Guarantee; and




     (iv) no provision of this Capital Securities Guarantee shall require the Capital
Securities 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 Capital Securities 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 Capital Securities Guarantee or indemnity, reasonably satisfactory
to the Capital Securities Guarantee Trustee, against such risk or liability is not
reasonably assured to it.



     SECTION 3.2. Certain Rights of Capital Securities Guarantee Trustee



          (a) Subject to the provisions of Section 3.1:




10









 









     (i) The Capital Securities 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 Capital Securities
Guarantee may be sufficiently evidenced by an Officers’ Certificate.




     (iii) Whenever, in the administration of this Capital Securities Guarantee, the Capital
Securities Guarantee Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the Capital Securities 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 Capital Securities 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 Capital Securities 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 Capital Securities Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Capital Securities Guarantee from any
court of competent jurisdiction.




     (vi) The Capital Securities Guarantee Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Capital Securities Guarantee at the request
or direction of any Holder, unless such Holder shall have provided to the Capital Securities
Guarantee Trustee such security and indemnity, reasonably satisfactory to the Capital
Securities Guarantee Trustee, against the costs, expenses (including attorneys’ fees and
expenses and the expenses of the Capital Securities 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 Capital Securities
Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(vi) shall be
taken to relieve the Capital Securities Guarantee Trustee, upon the occurrence of an Event
of Default, of its obligation to exercise the rights and powers vested in it by this Capital
Securities Guarantee.




     (vii) The Capital Securities 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,



11









 






note, other evidence of indebtedness or other paper or document, but the Capital
Securities Guarantee Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.




     (viii) The Capital Securities 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 Capital Securities 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.




     (ix) Any action taken by the Capital Securities Guarantee Trustee or its agents
hereunder shall bind the Holders, and the signature of the Capital Securities 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 Capital Securities
Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of
this Capital Securities Guarantee, both of which shall be conclusively evidenced by the
Capital Securities Guarantee Trustee’s or its agent’s taking such action.




     (x) Whenever in the administration of this Capital Securities Guarantee the Capital
Securities Guarantee Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the Capital Securities
Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation
amount of the Capital Securities, (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 Capital Securities 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 Capital Securities Guarantee.



          (b) No provision of this Capital Securities Guarantee shall be deemed to impose any duty or
obligation on the Capital Securities 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 Capital Securities 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 Capital
Securities Guarantee Trustee shall be construed to be a duty.




     SECTION 3.3. Not Responsible for Recitals or Issuance of Capital Securities Guarantee



          The recitals contained in this Capital Securities Guarantee shall be taken as the statements
of the Guarantor, and the Capital Securities Guarantee Trustee does not assume any responsibility
for their correctness. The Capital Securities Guarantee Trustee makes no representation as to the
validity or sufficiency of this Capital Securities Guarantee.




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ARTICLE IV

CAPITAL SECURITIES GUARANTEE TRUSTEE




     SECTION 4.1. Capital Securities Guarantee Trustee; Eligibility



          (a) There shall at all times be a Capital Securities 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 4.1(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 Capital Securities Guarantee Trustee shall cease to be eligible to so
act under Section 4.1(a), the Capital Securities Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2(c).




          (c) If the Capital Securities Guarantee Trustee has or shall acquire any “conflicting
interest” within the meaning of Section 310(b) of the Trust Indenture Act, the Capital Securities
Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act.




     SECTION 4.2. Appointment, Removal and Resignation of Capital Securities Guarantee
Trustee



          (a) Subject to Section 4.2(b), the Capital Securities Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor except during an Event of Default.




          (b) The Capital Securities Guarantee Trustee shall not be removed in accordance with Section
4.2(a) until a Successor Capital Securities Guarantee Trustee has been appointed and has accepted
such appointment by written instrument executed by such Successor Capital Securities Guarantee
Trustee and delivered to the Guarantor.




          (c) The Capital Securities Guarantee Trustee shall hold office until a Successor Capital
Securities Guarantee Trustee shall have been appointed or until its removal or resignation. The
Capital Securities Guarantee Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Capital Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a




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Successor Capital Securities Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Capital Securities Guarantee
Trustee and delivered to the Guarantor and the resigning Capital Securities Guarantee Trustee.




          (d) If no Successor Capital Securities Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument
of removal or resignation, the Capital Securities Guarantee Trustee resigning or being removed may
petition any court of competent jurisdiction for appointment of a Successor Capital Securities
Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Capital Securities Guarantee Trustee.




          (e) No Capital Securities Guarantee Trustee shall be liable for the acts or omissions to act
of any Successor Capital Securities Guarantee Trustee.




          (f) Upon termination of this Capital Securities Guarantee or removal or resignation of the
Capital Securities Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the
Capital Securities Guarantee Trustee all amounts due to the Capital Securities Guarantee Trustee
accrued to the date of such termination, removal or resignation.




ARTICLE V

GUARANTEE




     SECTION 5.1. 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 5.2. Waiver of Notice and Demand



          The Guarantor hereby waives notice of acceptance of this Capital Securities 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
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.




     SECTION 5.3. Obligations Not Affected



          The obligations, covenants, agreements and duties of the Guarantor under this Capital
Securities 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
Capital Securities to be performed or observed by the Issuer;




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          (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 Capital Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Capital Securities (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 Notes 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 Capital Securities, 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 Capital Securities;




          (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 5.3 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 5.4. Rights of Holders



          (a) The Holders of a Majority in liquidation amount of the Capital Securities have the right
to direct the time, method and place of conducting any proceeding for any remedy available to the
Capital Securities Guarantee Trustee in respect of this Capital Securities Guarantee or exercising
any trust or power conferred upon the Capital Securities Guarantee Trustee under this Capital
Securities Guarantee.




          (b) If the Capital Securities Guarantee Trustee fails to enforce such Capital Securities
Guarantee, any Holder may institute a legal proceeding directly against the Guarantor to enforce
the Holder’s rights under this Capital Securities Guarantee, without first instituting a legal
proceeding against the Issuer, the Capital Securities 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.




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     SECTION 5.5. Guarantee of Payment



          This Capital Securities Guarantee creates a guarantee of payment and not of collection.




     SECTION 5.6. 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 Capital Securities
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 Capital Securities Guarantee, if, at the time of any such payment, any amounts
are due and unpaid under this Capital Securities 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 5.7. Independent Obligations



          The Guarantor acknowledges that its obligations hereunder are independent of the obligations
of the Issuer with respect to the Capital Securities, and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Capital
Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.




ARTICLE VI

LIMITATION OF TRANSACTIONS; SUBORDINATION




     SECTION 6.1. Limitation of Transactions



          (a) If (1) the Guarantor has exercised its right to defer payments of interest on the Notes or
(2) the Notes are held by the Trust and remain outstanding and either (a) there shall have occurred
and be continuing an Event of Default under the Indenture, or any payment default on the Notes, or
(b) the Guarantor shall be in default relating to its payment of any obligations under this Capital
Securities Guarantee or the Common Securities Guarantee, then the Guarantor shall not:





     (i) declare or pay any dividend on, make any distributions with respect to, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any shares of the
Guarantor’s capital stock or make any guarantee payment with respect to the foregoing; or




     (ii) make any payment of interest, principal, or premium, if any, on or repay,
repurchase, or redeem any debt securities (including guarantees) issued by the Guarantor
that rank equally with or junior to the Notes;



          other than:




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     (A) purchases by the Guarantor of its capital stock required in connection with
employee, director or agent benefit plans or under any dividend reinvestment or
stock purchase plan;




     (B) in connection with the Guarantor’s reclassification of any class or series
of the Guarantor’s capital stock, or the Guarantor’s exchange or conversion of one
class or series of the Guarantor’s capital stock for or into another class or series
of the Guarantor’s capital stock;




     (C) the Guarantor’s payment of any dividend within 60 days after the date of
declaration of the dividend if, at the date of declaration, (a) the payment of the
dividend would not have been prohibited by an election to defer interest payments
and (b) the declaration was in accordance with the Guarantor’s dividend policy in
effect immediately prior to the declaration of the dividend;




     (D) the Guarantor’s purchase of fractional interests in shares of its capital
stock in connection with the conversion or exchange provisions of that capital stock
or the security being converted or exchanged;




     (E) dividends or distributions payable in the capital stock of the Guarantor,
or options, warrants or rights to acquire capital stock of the Guarantor, or
repurchases or redemptions of capital stock of the Guarantor solely from the
issuance or exchange of capital stock of the Guarantor;




     (F) payments under this Capital Securities Guarantee and the Common Securities
Guarantee;




     (G) any declaration of a dividend by the Guarantor in connection with the
implementation of a shareholders’ rights plan, or issuances of stock under any such
plan in the future, or redemptions or repurchases of any such rights pursuant to any
such shareholders’ rights plan; or




     (H) repurchases by the Guarantor of its common stock in connection with the
Guarantor’s acquisitions of businesses or any of the Guarantor’s subsidiaries (which
repurchases are made in connection with the satisfaction of indemnification
obligations of the sellers of such businesses).



          (b) In addition, so long as the Capital Securities remain outstanding, the Guarantor shall:





     (i) maintain 100% direct or indirect ownership of the Common Securities, unless a
permitted successor of the Guarantor succeeds to its ownership of the Common Securities;




     (ii) use its reasonable efforts to cause the Trust to:




     (A) remain a statutory trust, except in connection with the distribution of the
Notes to the Holders of the Capital Securities and the Common



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Securities in liquidation of the Trust, the redemption of all of the Capital
Securities and the Common Securities of the Trust, or certain mergers,
consolidations, or amalgamations, each as permitted by the Trust Agreement;




     (B) ensure that the Trust will not be an “investment company” required to be
registered under the Investment Company Act of 1940, as amended; and




     (C) otherwise continue not to be treated as an association taxable as a
corporation or partnership for United States federal income tax purposes; and




     (iii) use its reasonable efforts to cause each Holder of the Capital Securities and the
Common Securities to be treated as owning an undivided beneficial interest in the
corresponding Notes.



     SECTION 6.2. Ranking



          This Capital Securities Guarantee will constitute an unsecured obligation of the Guarantor and
will rank (i) subordinate and junior in right of payment to Senior Debt (as defined in the
Indenture), to the same extent and in the same manner that the Notes are subordinated to Senior
Debt pursuant to the Indenture (except as indicated below), it being understood that the terms of
Article Eighteen of the Indenture shall apply to the obligations of the Guarantor under this Common
Securities Guarantee as if (x) such Article Eighteen were set forth herein in full and (y) such
obligations were substituted for the term “Debt Securities” appearing in such Article Eighteen,
except that with respect to Section 1801 of the Indenture only, the term “Senior Debt” 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 any other junior subordinated obligations now
outstanding or hereafter issued by the Guarantor, any guarantee now outstanding or hereafter
entered into by the Guarantor in respect of any preferred securities (including trust preferred
securities) of any Affiliate of the Guarantor, any Other Guarantee and any Other Common Securities
Guarantee, (iii) pari passu with the Common Securities Guarantee, except that if an Event of
Default (as defined in the Trust Agreement) occurs and is continuing, the rights of Holders to
receive Guarantee Payments under this Capital Securities Guarantee shall be senior to the rights of
holders of Common Securities to receive guarantee payments under the Common Securities Guarantee,
and (iv) senior to the Guarantor’s capital stock.




ARTICLE VII

TERMINATION




     SECTION 7.1. Termination



          This Capital Securities Guarantee shall terminate (i) upon full payment of the Redemption
Price of all Capital Securities, or (ii) upon liquidation of the Issuer, the full payment of the
amounts payable in accordance with the Trust Agreement, or (iii) upon the distribution of the Notes
to the Holders. Notwithstanding the foregoing, this Capital Securities Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any Holder must




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restore payment of any sums paid under the Capital Securities or under this Capital Securities
Guarantee.




ARTICLE VIII

INDEMNIFICATION




     SECTION 8.1. 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
Capital Securities 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 Capital Securities
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 8.2. 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 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 8.2 shall survive the termination of this
Capital Securities Guarantee.




ARTICLE IX

MISCELLANEOUS




     SECTION 9.1. Successors and Assigns



          All guarantees and agreements contained in this Capital Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor and of the Capital
Securities Guarantee Trustee and shall inure to the benefit of the Holders of the then outstanding
Capital Securities and the Capital Securities Guarantee Trustee.




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     SECTION 9.2. 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 Capital Securities 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 9.3. Notices



          All notices provided for in this Capital Securities Guarantee shall be in writing, duly signed
by the party giving such notice, and shall be delivered, faxed or mailed by first class mail, as
follows:




          (a) If given to the Issuer, in care of the Administrative Trustees 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 Capital Securities Guarantee Trustee):



Sovereign Capital Trust V

1105 North Market Street

7th Floor

Wilmington, Delaware 19801

Attention: Administrative Trustees

Fax: (610) 208-6316




          (b) If given to the Capital Securities Guarantee Trustee, at the Capital Securities Guarantee
Trustee’s mailing address set forth below (or such other address as the Capital Securities
Guarantee Trustee may give notice of to the Holders and the Issuer):



The Bank of New York

101 Barclay Street,

21st Floor

New York, New York 10286

Attention: Corporate Trust Trustee

                 Administration

Fax: (212) 815-5915




          (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 Capital Securities
Guarantee Trustee):



Sovereign Bancorp, Inc.

1130 Berkshire Boulevard

Wyomissing, PA 19610




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Attention: Chief Financial Officer

Fax: (610) 320-8448




          (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, Faxed 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 9.4. Benefit



          This Capital Securities Guarantee is solely for the benefit of the Holders and, subject to
Section 3.1(a), is not separately transferable from the Capital Securities.




     SECTION 9.5. Governing Law



          THIS CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
THEREOF.




[SIGNATURES ON FOLLOWING PAGE]




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          THIS CAPITAL SECURITIES GUARANTEE is executed as of the day and year first above written.




	 	 	 	 	 
	 	SOVEREIGN BANCORP, INC., as Guarantor

 	 
	 	By:  	/s/
Thomas R. Brugger	 
	 	 	Thomas R. Brugger, 	 
	 	 	Treasurer and Senior Vice President 	 
	 



	 	 	 	 	 
	 	THE BANK OF NEW YORK, as Capital Securities Guarantee Trustee

 	 
	 	By:  	/s/
Mary LaGumina	 
	 	 	Name:  	Mary LaGumina	 
	 	 	Title:  	Authorized Signatory 	 
	 




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