EX-10.20 MERGE AGREEMENT



 





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



 









 







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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