Document:

exv4w2

Exhibit 4.2

 

FISCAL AGENCY AGREEMENT

 

SOVEREIGN BANCORP, INC.,

as Issuer

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Fiscal Agent

 

Dated as of December 22, 2008

2.50% Senior Notes Due 2012

Guaranteed under the FDIC’s Temporary Liquidity Guarantee Program

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	1. The Securities
	 	 	1	 
	2. Appointment of Agents
	 	 	2	 
	3. Authenticating Duties
	 	 	3	 
	4. Registration of the Securities
	 	 	3	 
	5. Duties of Fiscal Agent
	 	 	6	 
	6. Events of Default
	 	 	7	 
	7. Covenants of the Issuer
	 	 	8	 
	8. Consolidation, Merger, Conveyance, Transfer or Lease
	 	 	10	 
	9. FDIC Guarantee Provisions
	 	 	11	 
	10. Conditions of Fiscal Agent’s Obligations
	 	 	13	 
	11. Resignation or Termination; Appointment of Successor
	 	 	16	 
	12. Governing Law
	 	 	18	 
	13. Modification, Amendment and Waiver
	 	 	18	 
	14. Meetings of Holders of Securities
	 	 	19	 
	15. Notices
	 	 	22	 
	16. Defeasance
	 	 	23	 
	17. Severability
	 	 	24	 
	18. Counterparts
	 	 	24	 
	19. Certain Definitions
	 	 	24	 
	 
	 	 	 	 
	Exhibit A Form of Security
	 	 	 	 
	 
	 	 	 	 
	Exhibit B Form of Certificate of Exchange
	 	 	 	 
	 
	 	 	 	 
	Annex A Form of FDIC Assignment
	 	 	 	 

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     FISCAL AGENCY AGREEMENT (this “Agreement”), dated as of December 22, 2008, by and
between Sovereign Bancorp, Inc., a Pennsylvania corporation (the “Issuer”) and The Bank of
New York Mellon Trust Company, N.A., a national banking association, as Fiscal Agent. Certain
terms in this Agreement are defined in Section 19.

     1. The Securities

          (a) General. There is hereby authorized 2.50% Senior Notes Due 2012 (the
“Securities”) to be issued pursuant to this Agreement. The aggregate principal amount of
Securities that may be authenticated and delivered under this Agreement is limited to a total
principal amount of $250,000,000. The Securities are unsecured senior obligations of the Issuer.
The Securities are guaranteed under the Temporary Liquidity Guarantee Program of the Federal
Deposit Insurance Corporation (the “FDIC”) and are backed by the full faith and credit of
the United States, as set forth in Section 9 hereof. The Securities shall mature on June 15, 2012.
The Issuer may not redeem the Securities prior to their maturity and shall not be obligated to
repay the Securities prior to maturity at the option of the Holders. The Securities shall be senior
unsecured obligations of the Issuer and shall rank equally with all of the Issuer’s existing and
future senior unsecured indebtedness.

          (b) Form. The Securities shall be issued as one or more fully-registered global
security (the “Global Security”) substantially in the form of Exhibit A hereto, which shall
be deposited with, or on behalf of, The Depository Trust Company (“DTC”) as the depositary
designated by the Issuer (the “Depositary”). The Global Security shall be registered, at
the request of DTC, in the name of Cede & Co., in accordance with the rules of DTC and upon the
delivery to DTC pursuant to DTC’s instructions of such certifications by the Issuer as DTC may
require. Global Securities shall represent and be denominated in an aggregate amount equal to the
aggregate principal or face amount of the Outstanding Securities to be represented by such Global
Security or Securities and be delivered by the Fiscal Agent to DTC or pursuant to DTC’s
instructions. Beneficial interests in the Global Securities shall be held in denominations of
$2,000 and multiples of $1,000 in excess thereof. Any Global Security may bear a legend relating
to limitations on the transferability of such Global Security in such form as may be required by
DTC. Any endorsement of a Global Security to reflect the amount, or any increase or decrease in
the amount, of Outstanding Securities represented thereby shall be made in such manner and upon
instructions given by such Person or Persons as shall be specified therein or in the Issuer Order
to be delivered to the Fiscal Agent.

     So long as DTC or its nominee is the registered owner of such Global Security or Securities,
DTC or its nominee, as the case may be, shall for all purposes of such Global Security or
Securities and this Agreement be considered the sole owner or Holder of such Global Security or
Securities. Notwithstanding the foregoing, nothing herein shall impair, as between DTC and its
participants, the operation of customary practices governing the exercise of the rights of a holder
of a beneficial interest in any Global Security.

          (c) Execution. The Securities shall be executed on behalf of the Issuer by its
Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, or
any Vice President, and by its Treasurer or one of its Assistant Treasurers or its Secretary or one
of its Assistant Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.

     Securities bearing the manual or facsimile signatures of individuals who were at any time the
proper officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities. Securities shall be dated
the date of their authentication.

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          (d) Authentication. At any time and from time to time after the execution and
delivery of this Agreement, Securities may be executed by the Issuer and delivered to the Fiscal
Agent for authentication, and, except as otherwise provided in this Section, shall thereupon be
authenticated and delivered by the Fiscal Agent upon Issuer Order, without any further action by
the Issuer. Only such Securities as shall bear thereon a certificate of authentication (a
“Certificate of Authentication”), executed by the Fiscal Agent (as defined below) by manual
signature of one of its authorized signatories, shall be entitled to the benefits of this Agreement
or be valid or obligatory for any purpose. Such certificate by the Fiscal Agent upon any Security
executed by the Issuer shall be conclusive evidence that the Security so authenticated has been
duly authenticated and delivered hereunder. Each Security shall be dated the date of its
authentication.

          (e) Temporary Securities. At any time when Securities in definitive form shall be
required or permitted by the terms thereof to be delivered, and until definitive Securities shall
have been prepared, the Issuer may execute, and there shall be authenticated, delivered and
registered in the name of the respective Holders, in accordance with the provisions of this
Agreement (in lieu of definitive Securities), temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, substantially of the terms referred to above.
Temporary Securities shall be subject to the same limitations and conditions and entitled to the
same rights and benefits as definitive Securities, except as provided herein or therein. Temporary
Securities shall be exchangeable at the Corporate Trust Office (as defined below) of the Fiscal
Agent (or at such other office as shall be specified in the text of such temporary Securities) for
definitive Securities when the latter shall be ready for delivery; and upon the surrender for
exchange at said office of such temporary Securities, the Issuer, at its own expense, shall
execute, and there shall be authenticated and delivered, in accordance with the provisions of
Section 3 hereof, in exchange for such temporary Securities a like aggregate principal amount of
definitive Securities in the appropriate form and denomination. Temporary Securities shall
incorporate the appropriate legend.

          (f) Interest. The Securities shall bear interest at the rate of 2.50% per year from
December 22, 2008.

     The Issuer shall pay interest on the Securities on each June 15 and December 15 of each year,
commencing June 15, 2009, and at maturity (each, an “Interest Payment Date”). If any
Interest Payment Date or the date of maturity would fall on a day that is not a Business Day, the
related payment of principal or interest on the Securities shall be postponed to the following day
that is a Business Day, and no interest shall accrue on the amount so payable from and after such
Interest Payment Date or date of maturity, as the case may be. Interest on a Security shall be
paid to the Person in whose name such Security was registered at the close of business on the
preceding June 1 or December 1, as the case may be, whether or not a Business Day, prior to the
applicable Interest Payment Date. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.

     2. Appointment of Agents

          (a) Fiscal Agent. The Issuer hereby appoints The Bank of New York Mellon Trust
Company, N.A., at present having a corporate trust office at 2 North LaSalle Street, Suite 1020,
Chicago, IL 60602 (such office or its successor location in Chicago, the “Corporate Trust
Office”), as fiscal agent of the Issuer in respect of the Securities upon the terms and subject
to the conditions herein set forth (such fiscal agent and its successor or successors as such
fiscal agent qualified and appointed in accordance with Section 11 hereof are herein referred to as
the “Fiscal Agent”), and The Bank of New York Mellon Trust Company, N.A. hereby accepts
such appointment. The Fiscal Agent shall have the powers and authority granted to and conferred
upon it hereby and in the Securities and such further powers and
authority to act on behalf of the Issuer as the Issuer may hereafter grant to or confer upon
it with the written concurrence of the Fiscal Agent. The Fiscal Agent shall also be the initial
Paying Agent.

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          (b) Additional Agents. The Issuer reserves the right to appoint, at its discretion,
additional agents for the payment of principal of, and interest on, the Securities at such place or
places as the Issuer may determine. The Issuer shall notify the Fiscal Agent of the appointment,
or termination of appointment, of any such agent.

     3. Authenticating Duties

          (a) Original Issue. The Fiscal Agent shall, upon delivery to it by the Issuer of the
Securities, executed on behalf of the Issuer as provided in such Securities, and upon Issuer Order,
authenticate, by execution of the Certificate of Authentication appearing on each such Security, an
aggregate principal amount of such Securities not in excess of the maximum amount specified in
Section 1(a) hereof and shall deliver such Securities to or upon Issuer Order.

          (b) Transfers, Exchanges and Replacements. At the times and in the manner specified
in Section 4(b) hereof, upon presentation by the Issuer to the Fiscal Agent of the new Securities
to be delivered upon transfer or exchange, or replacement Securities to be delivered in the event
of mutilation, destruction, loss or theft, the Fiscal Agent shall authenticate such Securities by
execution of the Certificate of Authentication thereon, and shall thereupon deliver such Securities
to the Holders thereof.

     4. Registration of the Securities

          (a) Securities Register. The Fiscal Agent, as agent of the Issuer, shall maintain, at
its Corporate Trust Office, a register for registration of the Securities (the “Securities
Register”). The Issuer and the Fiscal Agent may deem and treat the Holder of any Security as
the absolute owner thereof (notwithstanding any notice of ownership or other writing thereon) for
the purposes of receiving payment thereon or on account thereof and for all other purposes, whether
or not such Security shall be overdue.

          (b) Transfers, Exchanges and Replacements. The Holders of the Securities shall
present directly to the Corporate Trust Office of the Fiscal Agent all requests for
(1) registration of transfer of the Securities; (2) exchange of such Securities for new Securities
in authorized denominations; and (3) replacement of Securities in the case of mutilation,
destruction, loss or theft. The Fiscal Agent shall follow the procedures set forth in
Subsections (i) through (vi) below with respect to such requests.

          (i) Exchange of Interests in Global Securities for Individual Definitive Certificates.

          (1) In the event that (A) the Depositary notifies the Issuer in writing that it
is at any time unwilling or unable to continue as depositary for a Global Security
or ceases to be a “clearing agency” registered under the Securities Exchange Act
of 1934, as amended, (the “Exchange Act”) (in the case of DTC and the Issuer
does not appoint a qualified successor within 90 days of receiving notice or
becoming aware of such ineligibility, (B) the Issuer in its sole discretion
determines that the Global Security will be exchangeable for definitive Securities
and notifies the Fiscal Agent of its decision, or (C) the Securities have become
immediately due and payable pursuant to Section 6 of this Agreement, then the Issuer
shall cause individual definitive certificates (“Certificates”) to be
executed and delivered to the Fiscal Agent in sufficient quantities and
authenticated by the Fiscal Agent for dispatch to Holders of all Securities in
accordance with this Agreement and Subsection (b)(i)(2) below.

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          (2) A beneficial owner of an interest in a Global Security must provide the
Depositary with:

          (A) a written notice containing such information as the Issuer and the
Fiscal Agent may require to complete, execute and deliver such individual
definitive Certificates; and

          (B) a fully completed, signed certification substantially in the form
attached hereto as Exhibit B to the effect that the exchanging Holder is not
transferring its Security at the time of such exchange.

          (3) Upon receipt of the documents referred to in Subsection (b)(i)(2)(A) and
Subsection (b)(i)(2)(B), the Fiscal Agent shall arrange for the authentication and
delivery to the Person or Persons named in a written order of the Depositary of an
individual definitive Certificate representing Securities registered in the name or
upon the order of the Person or Persons named in such order and shall alter the
entries in the Securities Register in respect of the Global Securities accordingly.

          (ii) Exchange and Transfer of Securities Certificates. Subject to this
Section 4 and such reasonable regulations as the Issuer may prescribe after consultation
with the Fiscal Agent, individual definitive Certificates may, at the option of the Holder,
be exchanged for a like aggregate principal amount of other individual definitive
Certificates of authorized denominations representing Securities, at the office of the
Fiscal Agent in New York City.

     Every Certificate presented or surrendered for registration of transfer or for exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Fiscal Agent, duly executed by the Holder thereof or his
attorney duly authorized in writing.

     Subject to the foregoing, whenever one or more Certificates shall be surrendered at the
office of the Fiscal Agent for exchange for one or more Certificates representing
Securities, together with an executed instrument of assignment and transfer and a written
request for the exchange, the Fiscal Agent shall authenticate and deliver or cause to be
delivered a Certificate or Certificates in a like aggregate principal amount and in such
authorized denomination or denominations and representing Securities as may be requested at
the office of the Fiscal Agent or by mail (at the request, risk and expense of the Holder)
to the address appearing in the Securities Register.

          (iii) Replacements. If any Security shall at any time become mutilated or
destroyed or stolen or lost, then, provided that such Security or evidence of the
destruction, theft or loss thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required by the Issuer and the Fiscal Agent) shall
be delivered to the Corporate Trust Office of the Fiscal Agent, a replacement Security,
tenor and principal amount shall be issued by the Issuer and, at its written request,
authenticated by the Fiscal Agent and delivered by the Fiscal Agent at its Corporate Trust
Office, in exchange for the Security so mutilated, or in lieu of the Security so destroyed
or stolen or lost; provided further, that, in the case of destroyed, stolen
or lost Securities, (A) neither the Issuer nor the Fiscal Agent shall have notice that such
Securities have been acquired by a bona fide purchaser, and (B) the Issuer and the Fiscal
Agent shall have received evidence satisfactory to them that such Securities were destroyed,
stolen or lost, and the Issuer and the Fiscal Agent shall have received an indemnity
satisfactory to each of them. All expenses and reasonable charges associated with procuring
such indemnity, and the cost of the preparation and issue of a replacement for any Security
mutilated, destroyed, stolen or

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lost, shall be paid by the Holder of such Security. In case such mutilated, destroyed,
stolen or lost Security has become or is about to become due and payable, the Issuer in its
discretion may, instead of issuing a new Security, pay or cause to be paid such Security.
Every new Security issued pursuant to this Subsection (iii) in exchange for or in lieu of
any mutilated, destroyed, stolen or lost Security, shall constitute an additional original
contractual obligation of each of the Issuer, whether or not the mutilated, destroyed,
stolen or lost Security shall be at any time enforceable by anyone. To the extent permitted
by law, the provisions of this Subsection (iii) are exclusive and shall preclude all other
rights and remedies with respect to the replacement or payment of mutilated, destroyed,
stolen or lost Securities.

          (iv) Delivery. All Securities issued pursuant to Subsections (i) – (iii) of
this Section 4(b) shall be delivered to the Holder at the Corporate Trust Office of the
Fiscal Agent or (at the request, risk and expense of the Holder) sent by mail to such
address as may be specified by the Holder in the request for transfer, exchange or
replacement. The Issuer may require payment of a sum sufficient to cover any stamp tax or
other governmental charge in connection with any such transfer, exchange or replacement, but
no service charge shall be made in connection with any such registration of transfer or
exchange (except for the expenses of delivery other than by regular mail). All Securities
issued upon any registration of transfer or exchange of Securities shall be the valid
obligations of the Issuer, evidencing the same debt, and entitled to the same benefits, as
the Securities surrendered upon such registration of transfer or exchange. Any new Security
delivered pursuant to this Section 4 shall be so dated that neither gain nor loss of
interest shall result from such transfer, exchange or replacement.

          (v) Global Securities. Notwithstanding any other provision of this Section 4,
a Global Security may not be transferred, except as a whole, to the Depositary, a nominee of
the Depositary, a successor Depositary or a nominee of a successor Depositary.

     Unless (A) a Global Security is presented by an authorized representative of the
Depositary to the Issuer or its agent for registration of transfer, exchange or payment, and
(B) any Security issued is registered in the name of the Depositary or a nominee of the
Depositary and any payment is made to such Depositary or nominee, except as otherwise
provided in this Section 4 or Section 9, any transfer, pledge or other use of any Global
Security for value or otherwise shall be wrongful since the registered owner of such Global
Security, the nominee of the Depositary, has an interest in such Global Security.

          (c) Information to the Issuer. At such times as the Issuer shall reasonably request,
the Fiscal Agent shall provide the Issuer with a list of the names and addresses of the Holders.

          (d) Cancellation and Retirement. Upon surrender to the Fiscal Agent of a Security
pursuant to Subsection (b) of this Section 4, the Fiscal Agent shall cancel such Security, and all
canceled Securities shall be retired by the Fiscal Agent. No Security shall be deemed to be
retired hereunder until retired by the Fiscal Agent; provided that Securities in lieu of
which, or in substitution for which, other Securities shall have been authenticated and delivered
pursuant to the terms of Section 4(b)(iii) hereof shall not be deemed to be Outstanding (unless
proof satisfactory to the Fiscal Agent is made that any such Security is held by a Person in whose
hands such Security constitutes a valid obligation of the Issuer). All Securities canceled and
retired by the Fiscal Agent pursuant to this Section 4(d) or Section 5(d) hereof may be destroyed
from time to time in a manner consistent with the Fiscal Agent’s securities destruction policy.
The Fiscal Agent shall certify the cancellation and retirement of any Securities to the Issuer.

          (e) Retirement of Securities Paid or Surrendered by the Issuer. Upon delivery to the
Fiscal Agent of any Security canceled pursuant to Section 5(d) hereof, the Fiscal Agent shall
retire such Security in accordance with Section 4(d) hereof, and no Security shall be issued in
replacement therefor.

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The acquisition of any Securities by the Issuer shall not be deemed to be a satisfaction of
the indebtedness represented by such Securities unless and until the same shall have been delivered
by the Issuer to the Fiscal Agent for cancellation in accordance with Section 5(d) hereof and
retired by the Fiscal Agent hereunder.

     5. Duties of Fiscal Agent

          (a) Payments. Payment of the principal of and interest on the Securities shall be
made by the Fiscal Agent on the Interest Payment Dates, in the manner set forth in the Securities,
out of monies deposited for such payments by the Issuer with the Fiscal Agent as provided in
Section 5(b) hereof.

          (b) Payments by the Issuer. The Issuer shall deposit funds in the amounts described
below into the corporate trust account of the Fiscal Agent in such form as shall be immediately
available by 11:00 A.M. (at the place of payment or at such other time as may be specified in such
Securities) or, in the case of payment of the principal amount of the Securities at stated
maturity, by 12:00 noon (at the place of payment or at such other time as may be specified in such
Securities) on the applicable Payment Date. If a Payment Date occurs in any place of payment on
the Securities on a day that is not a Business Day, the Issuer shall deposit funds on the last
preceding day that is a Business Day. Funds deposited pursuant to this Section 5(b) shall be
deposited in Dollars in the following amounts:

          (i) Amounts sufficient to pay the interest becoming due on such Securities on each
related Payment Date therefor (each, an “Interest Payment Date”). The Fiscal Agent
shall apply such amounts to the payment of such interest in accordance with the terms of the
Securities. Interest payable on the Securities on an Interest Payment Date shall (except as
provided in Section 5(c) hereof) be paid to each Holder of the Securities at the close of
business on the Record Date (as defined below) for such Interest Payment Date by check
mailed by the Fiscal Agent to the last address for such Holder appearing on the register of
Securities (or in the case of the Holder of a Global Security or at the option of each
Holder of at least $10,000,000 in aggregate principal amount of Securities, by wire transfer
to a bank account designated by the Holder in writing (such designation to be signed by two
authorized officers of such Holder if it is not an individual) to the Fiscal Agent at least
10 days prior to such Interest Payment Date). If for any reason the amounts paid to the
Fiscal Agent pursuant to this paragraph are insufficient to satisfy all such claims for
interest payable in respect of all Securities, the Fiscal Agent shall not be obliged to pay
any such claims until the Fiscal Agent has received the full amount of the monies then due
and payable; and

          (ii) An amount which shall equal the principal amount of all the Securities Outstanding
at the maturity date. The Fiscal Agent shall apply such amount to the payment of the
principal of the Securities in accordance with the terms thereof. However, unless and until
the full amount of the principal amount has been made to the Fiscal Agent, the Fiscal Agent
shall not be bound to make such payments.

          (c) Record Dates. The Persons in whose names the Securities are registered at the
close of business on the preceding June 1 or December 1, as the case may be, whether or not a
Business Day, prior to the applicable Interest Payment Date (each, a “Record Date”) shall
be entitled to receive the interest, if any, payable on such Interest Payment Date notwithstanding
any transfer or exchange subsequent to the record date and prior to such Interest Payment Date,
except if and to the extent the Issuer shall default in the payment of the interest due on such
Interest Payment Date, in which case such defaulted interest shall (unless paid together with
principal of the Securities in full other than on an Interest Payment Date) be paid to the Persons
in whose names the Securities are registered at the close of business on a subsequent record date
(which shall be not less than five Business Days prior to the date of
payment of such defaulted interest) established by notice given by mail by or on behalf of the
Issuer to the Holders of the Securities not less than 15 days preceding such subsequent record
date.

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          (d) Cancellation of Securities Paid or Surrendered by the Issuer. Upon payment by the
Fiscal Agent of the principal of the Securities presented to it for payment at maturity or upon
surrender to the Fiscal Agent of any Securities acquired by the Issuer, the Fiscal Agent shall
cancel and retire such Securities.

          (e) Notices to the Issuer. The Fiscal Agent shall promptly notify the Issuer by
facsimile, telex or telephone confirmed in writing (with copies of such written confirmation to
each of the other agents), if the Fiscal Agent shall receive from the Holder of a Security any
written notice of any default thereunder or any written demand for payment of any principal of or
interest on any of the Securities due on any Interest Payment Date and not paid thereon in
accordance with the terms of such Securities, of any acceleration of such Securities pursuant to
the terms thereof and of any rescission and annulment of any such acceleration. Such notice shall
be given in accordance with Section 15 hereof.

          (f) Notices to Holders. The Fiscal Agent shall give notice to the Holders of the
Securities by mail and by publication as provided in Section 15, of any change in the Fiscal Agent,
of any acceleration of such Securities pursuant to the terms thereof and of any rescission and
annulment of any such acceleration. In addition, the Fiscal Agent shall, within 90 days after the
occurrence of a default with respect to Securities known to it, give to Holders of the Securities
notice of such default if not cured or waived; except in the case of a default in the payment of
principal of or interest on the Securities, the Fiscal Agent shall be protected in withholding such
notice if it determines in good faith that the withholding of such notice is in the interest of
Holders of the Securities; provided, however, except as provided in Section 9 and
without limiting any obligations of the Fiscal Agent to take actions in its capacity as
Representative (as defined below) specifically provided for in this Agreement, the Fiscal Agent
shall have no duty to enforce remedies with respect to any such default.

     6. Events of Default

          (a) The occurrence and continuance of the following shall constitute events of default with
respect to the Securities (each, an “Event of Default”) (whatever the reason for such Event
of Default and whether it shall be voluntary or involuntary or be effected by operation of law,
pursuant to any judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

          (1) default in the payment of any interest upon any Security when it becomes due and
payable, and continuance of such default for a period of 30 days; or

          (2) default in the payment of the principal of any Security at its maturity; or

          (3) default in the performance, or breach, of any covenant or warranty of the Issuer in
this Agreement, and continuance of such default or breach for a period of 90 days after
there has been given by registered or certified mail, to the Issuer by the Fiscal Agent, or
to the Issuer and the Fiscal Agent by the Holders of at least 25% in principal amount of the
Outstanding Securities, a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a “Notice of Default” hereunder; or

          (4) the entry of a decree or order for relief in respect of the Issuer or Sovereign
Bank, a federal savings bank and any successors to any substantial part of the present
business thereof (the “Bank”), by a court having jurisdiction in the premises in an
involuntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any
other applicable

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Federal or State bankruptcy, insolvency or other similar law, or appointing a receiver,
liquidator, assignee, custodian, Issuer, sequestrator (or other similar official) of the
Issuer or the Bank or of any substantial part of the property of either, or ordering the
winding up or liquidation of the affairs of either, and the continuance of any such decree
or order unstayed and in effect for a period of 60 consecutive days; or

          (5) the commencement by the Issuer or the Bank of a voluntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or State
bankruptcy, insolvency or other similar law, or the consent by the Issuer or the Bank to the
entry of a decree or order for relief in an involuntary case under any such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official of either of the foregoing or of any substantial part of the property of
either, or the making by the Issuer or the Bank of an assignment for the benefit of
creditors, or the admission by the Issuer or the Bank in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by the Issuer or the
Bank in furtherance of any such action; or

          (6) a default by the Issuer under any mortgage, indenture, this Agreement or other
instrument under which any debt of the Issuer shall be outstanding, which default results in
acceleration of the maturity of such debt, or the failure to pay any such debt at maturity,
in an aggregate amount in excess of $300,000,000 or its foreign currency equivalent at the
time.

     If an Event of Default occurs and is continuing, then and in every such case the Holders of
not less than 25% in principal amount of Outstanding Securities may declare the principal amount of
and all accrued but unpaid interest on all the Securities to be due and payable immediately, by a
notice in writing to the Issuer at the office of the Fiscal Agent (with a copy of such notice being
also sent directly to the Issuer), and upon any such declaration such principal amount (or
specified amount) shall become immediately due and payable; provided, however, such
remedy shall not be available to the Holders if the FDIC makes timely Guarantee Payments (as
defined in Section 9(e)) as set forth in Section 9. Upon payment by the Issuer of such amount, all
obligations of the Issuer in respect of the payment of principal of the Securities shall terminate.

          (b) Waiver of Past Default. Except as set forth in Section 6(a), the Holders of not
less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders
of all the Securities waive any past default hereunder and its consequences, except a default (1)
in the payment of the principal of or interest on any Security, or (2) in respect of an obligation,
covenant or provision hereof which under Section 13 cannot be modified or amended without the
consent of the Holder of each Outstanding Security affected.

     Upon any such waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this Agreement; but no such
waiver shall extend to any subsequent or other default or impair any right consequent thereon.

     No such rescission shall affect any subsequent default or impair any right consequent thereon.

     7. Covenants of the Issuer 

          (a) Payment of Principal and Interest. The Issuer covenants and agrees for the
benefit of the Holders that it shall duly and punctually pay the principal of and interest on the
Securities in accordance with the terms of the Securities and this Agreement.

          (b) Maintenance of Office or Agency. The Issuer shall maintain in the Borough of
Manhattan, The City of New York an office or agency where Securities may be presented or
surrendered

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for payment, where Securities may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Issuer in respect of the Securities and this Agreement may
be served. The Issuer shall give prompt written notice to the Fiscal Agent of the location, and
any change in the location, of any such office or agency. If at any time the Issuer shall fail to
maintain any such required office or agency or shall fail to furnish the Fiscal Agent with the
address thereof, such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Fiscal Agent and the Issuer hereby appoints the Fiscal Agent its
agent to receive all presentations, surrenders, notices and demands.

     The Issuer may also from time to time designate one or more other offices or agencies (in or
outside of the Borough of Manhattan, The City of New York) where the Securities may be presented or
surrendered for any or all such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Issuer of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York for the Securities for such purposes. The Issuer shall give prompt written
notice to the Fiscal Agent of any such designation and any change in the location of any such other
office or agency.

          (c) Money for Securities Payments to Be Held in Trust. If the Issuer shall at any
time act as its own Paying Agent with respect to the Securities, it will, on or before each due
date of the principal of or interest on the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal or interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and
shall promptly notify the Fiscal Agent of its action or failure so to act.

     Whenever the Issuer shall have one or more Paying Agents with respect to the Securities, it
will, prior to each due date of the principal of or interest on any Securities, deposit with a
Paying Agent a sum sufficient to pay the principal on interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal or interest, and (unless such
Paying Agent is the Fiscal Agent) the Issuer shall promptly notify the Fiscal Agent of its action
or failure so to act.

     The Issuer shall cause each Paying Agent with respect to the Securities other than the Fiscal
Agent to execute and deliver to the Fiscal Agent an instrument in which such Paying Agent shall
agree with Fiscal Agent, subject to the provisions of this Section, that such Paying Agent will:

     (1) hold all sums held by it for the payment of the principal of or interest on
Securities in trust for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;

     (2) give the Fiscal Agent notice of any default by the Issuer (or any other obligor
upon the Securities) in the making of any payment of principal of or interest on the
Securities; and

     (3) at any time during the continuance of any such default, upon the written request of
the Fiscal Agent, forthwith pay to the Fiscal Agent all sums so held in trust by such Paying
Agent.

     The Issuer may at any time, for the purpose of terminating its obligations under this
Agreement or for any other purpose, pay, or by Issuer Order direct any Paying Agent to pay, to the
Fiscal Agent all sums held in trust by the Issuer or such Paying Agent, such sums to be held by the
Fiscal Agent upon the same trusts as those upon which such sums were held by the Issuer or such
Paying Agent; and, upon such payment by any Paying Agent to the Fiscal Agent, such Paying Agent
shall be released from all further liability with respect to such money.

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     Any principal and interest received on the Eligible Instruments deposited with the Fiscal
Agent or any money deposited with the Fiscal Agent or any Paying Agent, or then held by the Issuer,
in trust for the payment of the principal of or interest on any Security and remaining unclaimed
for two years after such principal or interest has become due and payable shall be paid to the
Issuer, or (if then held by the Issuer) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the Issuer for payment
thereof, and all liability of the Fiscal Agent or such Paying Agent with respect to such trust
money (including the principal and interest received on Eligible Instruments deposited with the
Fiscal Agent), and all liability of the Issuer as trustee thereof, shall thereupon cease.

          (d) Limitation on Disposition of Voting Stock of, and Merger and Sale of Assets by, the
Bank. The Issuer shall not:

          (1) sell, transfer or otherwise dispose of any shares of Voting Stock of the Bank or
permit the Bank to issue, sell, or otherwise dispose of any shares of its Voting Stock,
unless, after giving effect to any such transaction, the Bank remains a Controlled
Subsidiary; or

          (2) permit the Bank to:

          (A) merge or consolidate, unless the surviving corporation is a Controlled
Subsidiary; or

          (B) convey or transfer its properties and assets substantially as an entirety
to any Person, except to a Controlled Subsidiary.

          (e) Officers’ Certificate as to Default. The Issuer shall deliver to the Fiscal
Agent, on or before a date not more than 120 days after the end of each fiscal year of the Issuer
(which on the date hereof is the calendar year) ending after the date hereof, an Officers’
Certificate, one of the signers of which shall be the principal executive officer, principal
financial officer or principal accounting officer of the Issuer, stating whether or not to the best
knowledge of the signers thereof the Issuer is in default in the performance and observance of any
of the terms, provisions and conditions of this Agreement, and, if the Issuer shall be in default,
specifying all such defaults and the nature thereof of which they may have knowledge.

     The Issuer shall deliver to the Fiscal Agent, as soon as possible and in any event within five
days after the Issuer becomes aware of the occurrence of any Event of Default or an event which,
with notice or the lapse of time or both, would constitute an Event of Default, or default in the
performance of any of its obligations hereunder, an Officers’ Certificate setting forth the details
of such Event of Default or default and the action which the Issuer proposes to take with respect
thereto.

          (f) Compliance with the Master Agreement. The Issuer shall comply with the terms of
the Master Agreement.

     8. Consolidation, Merger, Conveyance, Transfer or Lease

          (a) Issuer May Consolidate, etc., Only on Certain Terms. The Issuer
shall not consolidate with or merge into any other corporation or convey, transfer or lease its
properties and assets substantially as an entirety to any Person, unless:

          (1) the corporation formed by such consolidation or into which the Issuer is merged or
the Person which acquires by sale, conveyance or transfer, or which leases of the properties
and assets of the Issuer substantially as an entirety shall be a corporation organized and

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existing under the laws of the United States of America or any State or any political
subdivision thereof and shall expressly assume, by an agreement supplemental hereto,
executed and delivered to the Fiscal Agent, in form satisfactory to the Fiscal Agent, the
due and punctual payment of the principal of and interest on all the Securities and the
performance of every covenant of this Agreement on the part of the Issuer to be performed or
observed;

          (2) immediately after giving effect to such transaction, no Event of Default, and no
event which, after notice or lapse of time, or both, would become an Event of Default, shall
have happened and be continuing;

          (3) the Issuer has delivered to the Fiscal Agent an Officers’ Certificate and an
Opinion of Counsel each stating that such consolidation, merger, conveyance, transfer or
lease and, such supplemental agreement comply with this Section and that all conditions
precedent herein provided for relating to such transaction have been met.

          (b) Successor Corporation Substituted. Upon any consolidation with or merger into any
other corporation, or any conveyance, transfer or lease of the properties and assets of the Issuer
substantially as an entirety in accordance with Section 8(a), the successor corporation formed by
such consolidation or into which the Issuer is merged or to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every right and power of,
the Issuer under this Agreement with the same effect as if such successor had been named as the
Issuer herein, and thereafter, except in the case of a lease, the Issuer (which term for this
purpose shall mean the Person named as the “Issuer” in the first paragraph of this instrument or
any successor corporation which shall theretofore have become such in the manner presented in this
Section) shall be released from further obligations and covenants under this Agreement and the
Securities.

     9. FDIC Guarantee Provisions

          (a) Acknowledgement of the FDIC’s Debt Guarantee Program. The parties to this
Agreement acknowledge that the Issuer has not opted out of the debt guarantee program (the
“Debt Guarantee Program”) established by the FDIC under its Temporary Liquidity Guarantee
Program on November 21, 2008 pursuant to the FDIC’s Final Rule, 12 C.F.R. Part 370 (as may be
amended or supplemented from time to time, the “Rule”). As a result, this debt is
guaranteed under the FDIC Temporary Liquidity Guarantee Program and is backed by the full faith and
credit of the United States. The details of the FDIC guarantee are provided in the FDIC’s
regulations, 12 CFR Part 370, and at the FDIC’s website, www.fdic.gov/tlgp. The expiration date of
the FDIC’s guarantee is the earlier of the maturity date of this debt or June 30, 2012.

     The security certificate, note or other instrument evidencing each Security shall bear a
legend, upon which the Representative (as defined below) shall be entitled to conclusively rely, to
the effect that such security certificate, note or other instrument is guaranteed by the FDIC under
the Debt Guarantee Program.

          (b) Fiscal Agent as Representative of Holders; Holders Not Represented by a
Representative. The Fiscal Agent is designated under this Agreement as the duly authorized
representative of the Holders for purposes of making claims and taking other permitted or required
actions under the Debt Guarantee Program (the “Representative”). Any Holder may elect not
to be represented by the Representative by providing written notice of such election to the
Representative (it being understood that such election shall not affect the Fiscal Agent’s capacity
hereunder except as the representative of such Holder under the Debt Guarantee Program).

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          (c) Making a Claim upon Payment Default. Upon the Issuer’s uncured failure to make a
timely payment of principal or interest on the notes (a “Payment Default”), the
Representative, on behalf of all Holders of the Securities that are represented by the
Representative, shall submit to the FDIC a demand for payment by the FDIC of such unpaid principal
and interest (i) in the case of any payment due by the Issuer prior to the final maturity of the
Securities, on the earlier of the date that the applicable cure period ends (or if such date is not
a Business Day, the immediately succeeding Business Day) and 60 days following such Payment Default
and (ii) in the case of any payment due by the Issuer on the final maturity date, on such final
maturity date (or if such date is not a Business Day, the immediately succeeding Business Day).
Such demand shall be accompanied by a proof of claim, which shall include evidence, to the extent
not previously provided in the Master Agreement in form and content satisfactory to the FDIC, of:
(A) the Representative’s financial and organizational capacity to act as Representative; (B) the
Representative’s exclusive authority to act on behalf of the Holder and its fiduciary
responsibility to the Holder when acting as such, as established by the terms of such Holder’s
Security and this Agreement; (C) the occurrence of a Payment Default; and (D) the authority to make
an assignment of the Holder’s right, title, and interest in such Holder’s Security to the FDIC and
to effect the transfer to the FDIC of the Holder’s claim in any insolvency proceeding. Such
assignment shall include the right of the FDIC to receive any and all distributions on this
Security from the proceeds of the receivership or bankruptcy estate. Any demand under this
paragraph shall be made in writing and directed to the Director, Division of Resolutions and
Receiverships, Federal Deposit Insurance Corporation, Washington, D.C., and shall include all
supporting evidences as provided in this paragraph, and shall certify to the accuracy thereof.

     If the Holder has elected not to have the Representative act as its authorized representative,
it may make demand for payment under the Debt Guarantee Program in the circumstances described in
the preceding paragraph.

          (d) Subrogation. The FDIC shall be subrogated to all of the rights of the Holders and
the Representative under this Agreement against the Issuer in respect of any amounts paid to the
Holders, or for the benefit of the Holders, by the FDIC pursuant to the Debt Guarantee Program. In
addition, the Fiscal Agent shall assign the rights of all Holders of the Securities to the FDIC as
well as any claims in insolvency proceeding arising in connection with ownership of FDIC-guaranteed
debt. In such a case, if any Holder of the Securities has received any distribution from the
receivership or bankruptcy estate prior to the FDIC’s payment under the Debt Guarantee Program, the
guaranteed amount paid by the FDIC to such Holder shall be reduced by the amount the Holder has
received in the distribution from the receivership or bankruptcy estate.

          (e) Assignment upon Guarantee Payment. The Holders, by their acceptance of the
Securities, authorize the Representative, at such time as the FDIC shall commence making any
guarantee payments to the Representative for the benefit of the Holders pursuant to the Debt
Guarantee Program (each, a “Guarantee Payment”), to execute an assignment in the form
attached hereto as Annex A, pursuant to which the Representative shall assign to the FDIC its right
as Representative to receive any and all payments from the Issuer under this Agreement on behalf of
the Holders.

     If a Holder has exercised its right not to be represented by the Representative, such Holder
of Securities, by its acceptance of the Securities, agrees that, at such time as the FDIC shall
commence making any Guarantee Payments to the Holder pursuant to the Debt Guarantee Program, such
Holder shall execute an assignment in the form attached hereto as Annex A, pursuant to which such
Holder shall assign to the FDIC its right to receive any and all payments from the Issuer under
this Agreement.

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     The Issuer hereby consents and agrees that the FDIC is an acceptable transferee for all or any
portion of the Securities for all purposes of this Agreement and upon any such assignment, the FDIC
shall be deemed a Holder under this Agreement for all purposes hereof, and the Issuer hereby agrees
to take such reasonable steps as are necessary to comply with any relevant provision of this
Agreement as a result of such assignment.

          (f) Surrender of Securities to the FDIC. If, at any time on or prior to the
expiration of the period during which the Securities are guaranteed by the FDIC under the Debt
Guarantee Program (the “Effective Period”), payment in full hereunder shall be made
pursuant to the Debt Guarantee Program on the outstanding principal and accrued interest to such
date of payment with respect to any Securities, the Holder of such Securities shall, or the Holder
of such Securities shall cause the person or entity in possession of such Securities to, promptly
surrender to the FDIC the security certificate, note or other instrument evidencing such
Securities, if any.

          (g) Notice Obligations to FDIC of Payment Default. If, at any time prior to the
earlier of (a) full satisfaction of the payment obligations hereunder, or (b) expiration of the
Effective Period, the Issuer is in default of any payment obligation hereunder, including timely
payment of any accrued and unpaid interest, without regard to any cure period, the Representative
covenants and agrees that it shall provide written notice to the FDIC within one Business Day of
such payment default.

          (h) FDIC’s Determinations of Amount. The FDIC shall make all determinations as to
amounts payable under the Debt Guarantee Program. The FDIC’s determinations shall be final and
binding on all Persons, including Holders of the Securities, subject only to the right of a Holder
or other interested party to seek judicial review by commencing an action in the U.S. District
Court for the District of Columbia or the Southern District of New York within 60 days after the
FDIC makes its final determination.

          (i) Ranking. Any indebtedness of the Issuer to the FDIC arising under Section 2.03 of
the Master Agreement will constitute a senior unsecured general obligation of the Issuer, ranking
pari passu with any indebtedness under this Agreement.

          (j) No Event of Default During Time of Timely FDIC Guarantee Payments. Without
affecting the limitations on Events of Default set forth in Section 6, if the FDIC is making timely
Guarantee Payments, for the avoidance of doubt, there shall not be deemed to be an Event of Default
under this Agreement which would permit or result in the acceleration of amounts due hereunder, if
such an Event of Default is due solely to the failure of the Issuer to make timely payment on the
Securities provided that the FDIC is making timely Guarantee Payments with respect to such
Securities in accordance with the Rule. Subject to the terms of the Master Agreement, under the
terms of the Securities, no Event of Default, including any resulting from an insolvency event,
shall result in the automatic acceleration of the Securities.

          (k) No Modifications without FDIC Consent. Without the express written consent of the
FDIC, the parties hereto agree not to amend, modify, supplement or waive any provision in this
Agreement that is related to the principal, interest, payment, default or ranking of the Securities
or that is required to be included herein pursuant to the Master Agreement or the amendment of
which would require the consent of the Holders of any or all of the Securities.

     10. Conditions of Fiscal Agent’s Obligations

     The Fiscal Agent accepts its obligations herein set forth, upon the terms and conditions
hereof, including the following, to all of which the Issuer agrees and to all of which the rights
hereunder of the Holders from time to time of the Securities shall be subject:

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          (a) Compensation and indemnification; Disclaimer of Liability. The Issuer agrees:

          (i) to pay the Fiscal Agent from time to time such compensation as shall be agreed in
writing between the Issuer and the Fiscal Agent for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);

          (ii) except as otherwise expressly provided herein, to reimburse the Fiscal Agent upon
its request for all reasonable expenses, disbursements and advances incurred or made by the
Fiscal Agent in accordance with any provision of this Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as shall be determined to have been caused by its own gross
negligence or willful misconduct; and

          (iii) to indemnify each of the Fiscal Agent and any predecessor Fiscal Agent for, and
to hold it harmless against, any and all loss, liability, damage, claim or expense incurred
without gross negligence or willful misconduct on its part, arising out of or in connection
with the acceptance or administration of this trust or performance of its duties hereunder,
including the costs and expenses of defending itself against any claim (whether asserted by
the Issuer, a Holder or any other Person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder.

     When the Fiscal Agent incurs expenses or renders services in connection with an Event of
Default, the expenses (including reasonable fees and expenses of its counsel) and the compensation
for the services in connection therewith are intended to constitute expenses of administration
under applicable bankruptcy and insolvency laws.

     The provisions of this Section shall survive the termination of this Agreement and resignation
or removal of the Fiscal Agent.

          (b) Agent of the Issuer. In acting under this Agreement and in connection with the
Securities, except as specifically set forth in Section 9 hereof, the Fiscal Agent is acting solely
as agent of the Issuer and does not assume any fiduciary obligation or relationship of agency or
trust for or with any of the owners or Holders of the Securities, except that all funds held by the
Fiscal Agent for payment of the principal of, and interest on, any Outstanding Securities shall be
held in trust, but need not be segregated from other funds of the Fiscal Agent except as required
by applicable law, and shall be applied as set forth herein and in such Securities;
provided, however, that monies held by the Fiscal Agent in respect of the principal
of, or interest on, Securities remaining unclaimed at the end of two years after such principal or
interest shall have become due and payable shall be returned to the Issuer. Upon such repayment,
the aforesaid trust with respect to such monies shall terminate and all liability of the Fiscal
Agent with respect to such monies shall thereupon cease, and the Holders of such Securities shall
thereafter look only to the Issuer for payment thereof.

          (c) Counsel. The Fiscal Agent may consult with counsel satisfactory to it, who may be
counsel to the Issuer, and the advice or opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or omitted to be taken or suffered by
it hereunder in good faith and in accordance with the opinion of such counsel.

          (d) Documents. The Fiscal Agent shall be protected and shall incur no liability for
or in respect of any action taken or thing suffered by it in reliance upon any Security, notice,
direction, consent, certificate, affidavit, statement or other paper or document reasonably
believed by it to be genuine and to have been signed by the proper parties.

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          (e) Certain Transactions. The Fiscal Agent and any other agent appointed pursuant to
Section 2 hereof may become the owner of, or acquire any interest in, any Securities, with the same
rights that it would have if it were not the Fiscal Agent or such other agent, as the case may be,
hereunder, and may engage or be interested in any financial or other transaction with the Issuer
and may act on, or as depositary, trustee or agent for, any committee or body of Holders of
Securities or other obligations of the Issuer as freely as if it were not the Fiscal Agent or such
other agent, as the case may be, hereunder. The foregoing provisions of this Subsection (e) shall
also apply to any officer, director or employee of the Fiscal Agent or of any other agent appointed
pursuant to Section 2 hereof as if such officer, director or employee were not an officer, director
or employee of the Fiscal Agent or such other agent, as the case may be.

          (f) No Liability for Interest. The Fiscal Agent shall not be under any liability for
interest on any monies at any time received or held by it pursuant to any of the provisions of this
Agreement or of any of the Securities unless otherwise agreed in writing between the Fiscal Agent
and the Issuer.

          (g) No Liability for Invalidity. Except as to the enforceability against the Fiscal
Agent of the terms of this Agreement, and provided that the Fiscal Agent shall not be relieved of
its duty to authenticate Securities as authorized herein, the Fiscal Agent makes no representation
as to the validity or sufficiency of this Agreement, any offering document or any of the
Securities.

          (h) No Responsibility for Representations. The Fiscal Agent shall not be responsible
for any of the recitals or representations herein or in any offering document or in any of the
Securities (except its Certificate of Authentication thereon), all of which are made solely by the
Issuer.

          (i) No Implied Obligations. The Fiscal Agent shall be obligated to perform such
duties and only such duties as are herein and in the Securities specifically set forth, and no
implied duties or obligations shall be read into this Agreement or any of the Securities against
the Fiscal Agent. The Fiscal Agent shall not be accountable or under any duty or responsibility
for the use by the Issuer of any of the Securities authenticated and delivered to the Issuer
pursuant to this Agreement or for the application by the Issuer of the proceeds of any of the
Securities. The Fiscal Agent shall not have any duty or responsibility in case of any default by
either the Issuer in the performance of its covenants or agreements contained in the Securities or
in the case of the receipt of any written demand from a Holder of a Security with respect to such
default, including, without limiting the generality of the foregoing, any duty or responsibility to
accelerate the maturity of any of the Securities or to initiate or attempt to initiate any
proceedings at law or otherwise, or, except as provided in Section 5(e) or Section 10(j) hereof, to
make any demand for the payment thereof upon the Issuer.

          (j) Forwarding of Notices. If the Fiscal Agent shall receive any notice or demand
addressed to either the Issuer by the Holder of a Security pursuant to the provisions of the
Securities, the Fiscal Agent shall promptly forward such notice or demand to the Issuer.

          (k) No Obligation to Risk Funds. The Fiscal Agent shall not be required to take any
action involving the expenditure or risk of its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise of any of its rights
or powers.

          (l) Disclaimer of Liability. Neither the Fiscal Agent nor any of its directors,
officers, attorneys, agents or employees shall be liable to the Issuer, to the Holder of any
Security or to any other person or entity whatsoever for any action taken or omitted to be taken by
it, or by them on its behalf, as the Fiscal Agent under this Agreement or otherwise in connection
with any of the foregoing, except for its or their own gross negligence or willful misconduct. In
particular, and without limiting the generality of the foregoing, neither the Fiscal Agent nor any
of its directors, officers, attorneys, agents or

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employees shall be liable to the Issuer, to the Holder of any Security or to any other person
or entity whatsoever (i) for any payment due on any Security, except as specified in Section 10(b)
hereof, (ii) for any act or omission that was made in good faith and that was not the result of the
Fiscal Agent’s own gross negligence, (iii) with respect to any nonperformance or delay in
performance hereunder by reason of any provision of any present or future law or regulation or any
action of any governmental authority, or by reason of any act of God or war or other circumstance
beyond its control which prevents or forbids the Fiscal Agent from, or subjects the Fiscal Agent to
any actual or potential civil or criminal penalty on account of, doing or performing any act which
is to be performed by it hereunder or (iv) with respect to any failure to take any action which
(x) is contrary to this Agreement or applicable law or (y) exposes the Fiscal Agent or any of its
directors, officers, attorneys, agents or employees to personal liability. In no event shall the
Fiscal Agent be responsible or liable for special, indirect, or consequential loss or damage of any
kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Fiscal
Agent has been advised of the likelihood of such loss or damage and regardless of the form of
action. The rights, privileges, protections, immunities and benefits given to the Fiscal Agent,
including, without limitation, its right to be indemnified, are extended to, and shall be
enforceable by, the Fiscal Agent in each of its capacities hereunder, and each agent, custodian and
other Person employed to act hereunder.

          (m) Subagents. The Fiscal Agent may employ agents and attorneys in fact and shall not
be answerable, except as provided above, as to monies or securities received by it or its
authorized agents, for the default or misconduct of any such agents or attorneys in fact selected
by it in good faith.

     11. Resignation or Termination; Appointment of Successor

          (a) Fiscal Agent Required; Eligibility. There shall at all times be a Fiscal Agent
hereunder which shall be a corporation organized and doing business under the laws of the United
States, any State thereof or the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject
to supervision or examination by Federal or State authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section, 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. Neither the Issuer nor any Person directly or indirectly
controlling, controlled by or under common control with the Issuer may serve as Fiscal Agent. If
at any time the Fiscal Agent shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect hereinafter specified in
this Section.

          (b) Appointment and Termination of Additional Agents. The Issuer may at any time and
from time to time vary or terminate the appointment of any agent appointed pursuant to Section 2
hereof or appoint any additional agents for any or all of the purposes stated therein;
provided, however, that until the Termination Date, the Issuer shall at all times
maintain an office or agency in the Borough of Manhattan, the City of New York, where the
Securities may be presented or surrendered for payment, registration of transfer or exchange, as
provided in the Securities, and where notices and demands to or upon the Issuer in respect of the
Securities and this Agreement may be served. The Issuer shall give prompt written notice to the
Fiscal Agent of the appointment or termination of any such agent and the location and any change in
the location of any such office or agency and shall give notice thereof to Holders of the affected
Securities in accordance with the terms of such Securities.

          (c) Resignation and Removal of Fiscal Agent; Appointment of Successor. No resignation
or removal of the Fiscal Agent and no appointment of a successor Fiscal Agent pursuant to this
Section shall become effective until the acceptance of appointment by the successor Fiscal Agent
under Section 11(e).

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     The Fiscal Agent may resign at any time with respect to the Securities by giving written
notice thereof to the Issuer. If an instrument of acceptance by a successor Fiscal Agent shall not
have been delivered to the Fiscal Agent within 30 days after the giving of such notice of
resignation, the resigning Fiscal Agent may petition, at the expense of the Issuer, any court of
competent jurisdiction for the appointment of a successor Fiscal Agent with respect to the
Securities.

     The Fiscal Agent may be removed at any time with respect to the Fiscal Agent by Act of the
Holders of not less than a majority in principal amount of the Outstanding Securities, delivered to
the Fiscal Agent and to the Issuer. If an instrument of acceptance by a successor Fiscal Agent
shall not have been delivered to the Fiscal Agent within 30 days after the giving of such notice of
removal, the Fiscal Agent being removed may petition, at the expense of the Issuer, any court of
competent jurisdiction for the appointment of a successor Fiscal Agent with respect to the
Securities.

     If at any time:

     (i) the Fiscal Agent shall cease to be eligible under Section 11(a) and shall fail to
resign after written request therefor by the Issuer or by any such Holder, or

     (ii) the Fiscal Agent shall become incapable of acting with respect to Securities or a
decree or order for relief by a court having jurisdiction in the premises shall have been
entered in respect of the Fiscal Agent in an involuntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or State bankruptcy,
insolvency or similar law; or a decree or order by a court having jurisdiction in the
premises shall have been entered for the appointment of a receiver, custodian, liquidator,
assignee, trustee, sequestrator or other similar official of the Fiscal Agent or of its
property or affairs, or any public officer shall take charge or control of the Fiscal Agent
or of its property or affairs for the purpose of rehabilitation, conservation, winding up or
liquidation, or

     (iii) the Fiscal Agent shall commence a voluntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or State bankruptcy,
insolvency or similar law or shall consent to the appointment of or taking possession by a
receiver, custodian, liquidator, assignee, trustee, sequestrator or other similar official
of the Fiscal Agent or its property or affairs, or shall make an assignment for the benefit
of creditors, or shall admit in writing its inability to pay its debts generally as they
become due, or shall take corporate action in furtherance of any such action, then, in any
such case, the Issuer by a Board Resolution may remove the Fiscal Agent.

     If the Fiscal Agent shall resign, be removed or become incapable of acting, or if a vacancy
shall occur in the office of Fiscal Agent for any cause, the Issuer, by a Board Resolution, shall
promptly appoint a successor Fiscal Agent and shall comply with the applicable requirements of
Section 11(d).

     The Issuer shall give notice of each resignation and each removal of the Fiscal Agent and each
appointment of a successor Fiscal Agent by mailing written notice of such event by first-class
mail, postage prepaid, to the Holders of registered Securities, if any, as their names and
addresses appear in the Securities Register. Each notice shall include the name of the successor
Fiscal Agent and the address of its Corporate Trust Office.

          (d) Acceptance of Appointment of Successor. The Issuer shall give prompt written
notice to each other agent named pursuant to Section 2 hereof of the appointment of a successor
Fiscal Agent and shall give prompt notice to Holders of the affected Securities as provided in such
Securities.

17

 

     In the case of an appointment hereunder of a successor Fiscal Agent, every such successor
Fiscal Agent so appointed shall execute, acknowledge and deliver to the Issuer and to the retiring
Fiscal Agent an instrument accepting such appointment, and thereupon the resignation or removal of
the retiring Fiscal Agent shall become effective and such successor Fiscal Agent, without any
further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Fiscal Agent; but, on request of the Issuer or the successor Fiscal Agent, such
retiring Fiscal Agent shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Fiscal Agent all the rights, powers and trusts of the retiring
Fiscal Agent, and shall duly assign, transfer and deliver to such successor Fiscal Agent all
property and money held by such retiring Fiscal Agent hereunder.

     Upon request of any such successor Fiscal Agent, the Issuer shall execute any and all
instruments for more fully and certainly vesting in and confirming to such successor Fiscal Agent
all such rights, powers and trusts referred to in the first paragraph of this Subsection (d).

     No successor Fiscal Agent shall accept its appointment unless at the time of such acceptance
such successor Fiscal Agent shall be qualified and eligible under this Section.

          (e) Merger, Conversion, Consolidation or Succession to Business. Any corporation into
which the Fiscal Agent may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the Fiscal Agent shall
be a party, or any corporation succeeding to all or substantially all of the corporate trust
business of the Fiscal Agent , shall be the successor of the Fiscal Agent hereunder, provided such
corporation shall be otherwise qualified and eligible under this Section, without the executing or
filing of any paper or any further act on the part of any of the parties hereto. In case any
Security shall have been authenticated, but not delivered, by the Fiscal Agent then in office, any
successor by merger, conversion or consolidation to such authenticating Fiscal Agent may adopt such
authentication and deliver the Securities so authenticated with the same effect as if such
successor Fiscal Agent had itself authenticated such Securities. In case any Securities shall not
have been authenticated by such predecessor Fiscal Agent, any such successor Fiscal Agent may
authenticate and deliver such Securities, in either its own name or that of its predecessor Fiscal
Agent, with the full force and effect which this Agreement provides for the certificate of
authentication of the Fiscal Agent.

     12. Governing Law 

     This Agreement and the Securities shall be governed by, and construed in accordance with, the
laws of the State of New York.

     13. Modification, Amendment and Waiver

          (a) Without the Consent of Holders. Without the consent of any Holders, the Issuer,
when authorized by a Board Resolution, and the Fiscal Agent, at any time and from time to time, may
amend this Agreement for any of the following purposes:

          (1) to evidence the succession of another corporation to the Issuer in accordance with
the terms of this Agreement, and the assumption by such successor of the obligations and
covenants of the Issuer herein and in the Securities contained; or

          (2) to add to the covenants of the Issuer for the benefit of the Holders of all
Securities or to surrender any right or power herein conferred upon the Issuer; or

          (3) to evidence and provide for the acceptance of appointment hereunder by a successor
Fiscal Agent with respect to the Securities; or

18

 

          (4) to cure any ambiguity, to correct or supplement any provision herein to cure any
ambiguity, to correct or supplement any provision herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions with respect
to matters or questions arising under this Agreement; provided that such provision does not
adversely affect the interests of the Holders of the Securities.

     After an amendment under this Section becomes effective, the Issuer shall mail to Holders a
notice briefly describing such amendment. The failure to give such notice to all Holders, or any
defect therein, shall not impair or affect the validity of an amendment under this Section.

          (b) With the Consent of Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Issuer and the Fiscal Agent, the Issuer, when authorized by a Board Resolution,
and the Fiscal Agent may amend this Agreement and the Securities for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders under this Agreement of such Securities;
provided, however, that no such supplemental agreement shall, without the consent
of the Holder of each Outstanding Security,

          (1) change the stated maturity of the principal or any installment of principal of, or
any installment of interest on, any Security, or reduce the principal amount thereof or the
interest thereon, or change any place of payment, or the coin or currency in which principal
or interest is payable, or impair the right of any Holder to institute suit of the
enforcement of any payment of principal and interest, or

          (2) reduce the percentage in principal amount of the Outstanding Securities, the
consent of whose Holders is required for any modification or amendment of this Agreement, or
the consent of whose Holders is required for any waiver (of compliance with certain
provisions of this Agreement or certain defaults hereunder and their consequences) provided
for in this Agreement, or reduce the requirements for quorum or voting, or

          (3) modify any of the provisions of this Section or Section 6(b) except to increase any
percentage of Holder consents required or to provide that certain other provisions of this
Agreement cannot be modified or waived without the consent of the Holder of each Outstanding
Security affected thereby.

     In addition to the foregoing, without the express written consent of the FDIC, the parties
hereto agree not to amend, modify, supplement or waive any provision in this Agreement that is
related to the principal, interest, payment, default or ranking of the Securities, that is required
to be included herein pursuant to the Master Agreement or the amendment of which would require the
consent of the Holders of any or all of the Securities.

     It shall not be necessary for any Act of Holders of the Securities under this Section to
approve the particular form of any proposed supplemental agreement to this Agreement, but it shall
be sufficient if such Act shall approve the substance thereof.

     14. Meetings of Holders of Securities

          (a) Purpose for Which Meetings May Be Called. A meeting of Holders may be called at
any time and from time to time pursuant to this Section to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other Act provided by the Agreement to be
made, given or taken by Holders.

19

 

     The Issuer may, but shall not be obligated to, fix a record date for the purpose of
determining the Holders entitled to give their consent or take any other action described above or
required or permitted to be taken pursuant to the Agreement. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be entitled to give such
consent or to revoke any consent previously given or to take any such action, whether or not such
Persons continue to be Holders after such record date. No such consent shall be valid or effective
for more than 120 days after such record date.

          (b) Call, Notice and Place of Meetings.

          (i) The Issuer may at any time call a meeting of Holders for any purpose specified in
Section 14(a), to be held at such time and at such place in the Borough of Manhattan, the
City of New York, or in London as the Fiscal Agent shall determine. Upon a request in
writing made by the Holders of not less than 10 percent of the aggregate outstanding
principal amount of the Securities after such Securities shall have become due and payable
due to a default, the Fiscal Agent shall promptly convene a meeting of the Holders for any
purpose specified in Section 14(a), such meeting to be held at such time and such place as
the Fiscal Agent shall determine. Notice of every meeting of Holders, setting forth the
time and the place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be given, in the manner provided in Section 5(f), not less than 21 not
more than 180 days prior to the date fixed for the meeting.

          (ii) In case at any time the Issuer, pursuant to a Board Resolution, or the Holders of
at least 10 percent in principal amount of the Outstanding Securities shall have requested
the Fiscal Agent to call a meeting of the Holders for any purpose specified in
Section 14(a), by written request setting forth in reasonable detail the action proposed to
be taken at the meeting, and the Fiscal Agent shall not have made the first publication of
the notice of such meeting within 21 days after receipt of such request or shall thereafter
proceed to cause the meeting to be held as provided herein, then the Issuer or the Holders
in the amount above specified, as the case may be, may determine the time and the place in
the Borough of Manhattan, the City of New York, or in London for such meeting and may call
such meeting for such purposes by giving notice thereof as provided in the preceding
paragraph of this Section.

          (c) Persons Entitled to Vote at Meetings. To be entitled to vote at any meeting of
Holders, a Person shall be (1) a Holder of one or more Outstanding Securities, or (2) a Person
appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding
Securities by such Holder or Holders. The only Persons who shall be entitled to be present or to
speak at any meeting of Holders of Securities shall be the Persons entitled to vote at such meeting
and their counsel, any representatives of the Fiscal Agent and its counsel and any representatives
of the Issuer and its counsel.

          (d) Quorum; Action. The Persons entitled to vote a majority in principal amount of
the Outstanding Securities shall constitute a quorum for a meeting of Holders of Securities. In
the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting
shall, if convened at the request of Holders of Securities be dissolved. In the absence of a
quorum in any other case the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence
of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a
period of not less than 10 days as determined by the chairperson of the meeting prior to the
adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be
given as provided in Section 14(b)(i), except that such notice need be given only once not less
than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the
reconvening of an adjourned meeting shall state expressly the
percentage, as provided above, of the principal amount of the Outstanding Securities which
shall constitute a quorum.

20

 

     Except as limited by the provisos to Section 13(b), any resolution presented to a meeting or
adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted only by
the affirmative vote of the Holders of a majority in principal amount of the Outstanding
Securities. Any resolution with respect to any demand, consent, waiver or other action which may
be made, given or taken by the Holders of a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities may be adopted at a meeting or adjourned meeting at
which a quorum is present by the affirmative vote of the Holders of the specified percentage in
principal amount of the Oustanding Securities.

     Any resolution passed or decision taken at any meeting of Holders of Securities duly held in
accordance with this Section shall be binding on all the Holders of Securities, whether or not
present or represented at the meeting.

     The Holders may also take action by written consent in lieu of meetings.

          (e) Determination of Voting Rights; Conduct and Adjournment of Meetings.
 Notwithstanding any other provisions of this Agreement, the Issuer may make such reasonable
regulations as it may deem advisable for any meeting of Holders in regard to proof of the holding
of the Securities and of the appointment of proxies and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such regulations, the holding of
Securities shall be proved by the Securities Register and the appointment of any proxy shall be
proved by proof of execution of a writing appointing such agent. Such regulations may provide that
written instruments appointing proxies, regular on their face, may be presumed valid and genuine
without the proof.

     The Issuer shall, by an instrument in writing, appoint a temporary chairperson of the meeting,
unless the meeting shall have been called by the Fiscal Agent on the request of the Holders or by
the Holders as provided in Section 14(b)(ii), in which case the Fiscal Agent or the Holders of
Securities calling the meeting, shall in like manner appoint a temporary chairperson. A permanent
chairperson and a permanent secretary of the meeting shall be elected by vote of the Persons
entitled to vote a majority in principal amount of the Outstanding Securities represented at the
meeting.

     At any meeting each Holder of a Security or proxy shall be entitled to one vote for each
$1,000 principal amount of Securities held or represented by him, provided,
however, that no vote shall be cast or counted at any meeting in respect of any Security
challenged as not Outstanding and ruled by the chairperson of the meeting not to be Outstanding.
The chairperson of the meeting shall have no right to vote, except as a Holder of a Security or
proxy.

     Any meeting of Holders of Securities duly called pursuant to Section 14(b) at which a quorum
is present may be adjourned from time to time by Persons entitled to vote a majority in principal
amount of the Outstanding Securities represented at the meeting; and the meeting may be held as so
adjourned without further notice.

          (f) Counting Votes and Recording Action of Meetings. The vote upon any resolution
submitted to any meeting of Holders of Securities shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities or of their representatives by proxy and the
principal amounts of the Outstanding Securities held or represented by them. The permanent
chairperson of the meeting shall appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any

21

 

resolution and who shall make and file with the secretary of the meeting their verified
written reports in triplicate of all votes cast at the meeting. A record, at least in triplicate,
of the proceedings of each meeting of Holders of Securities shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of
the facts setting forth a copy of the notice of the meeting and showing that said notice was given
as provided in Section 14(b) and, if applicable, Section 14(d). Each copy shall be signed and
verified by the affidavits of the permanent chairperson and secretary of the meeting and one such
copy shall be delivered to the Issuer, and another to the Fiscal Agent to be preserved by the
Fiscal Agent, the latter to have attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.

     15. Notices

          (a) Provision of Notices. All notices or communications hereunder to the Issuer and
to the Fiscal Agent, except as herein otherwise specifically provided, shall be in writing, in the
English language, and shall be deemed to have been given upon actual receipt thereof (unless
received after business hours, in which case such notice shall be deemed to have been given the
next Business Day of the recipient), and shall be delivered, transmitted by facsimile (confirmed by
overnight courier) to any party hereto as follows:

if to the Issuer:

Sovereign Bancorp, Inc.

1500 Market Street

Philadelphia, Pennsylvania 19102

Attention of: Treasurer

Fax No. (610) 371 - 5404

with a copy to:

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, New York 10005

Attention: Douglas A. Tanner

Fax No. (212) 822-5505

if to the Fiscal Agent:

The Bank of New York Mellon Trust Company, N.A.

2 North LaSalle Street

Chicago, IL 60602

Attention: Corporate Trust Administration

Fax No. 312-827-8542

     The foregoing addresses for notices or communications may be changed by written notice given
by the addressee to each party hereto, and the addressee’s address shall be deemed changed for all
purposes from and after the giving of such notice.

          (b) Notice to Holders; Sufficiency of Notices. Except as otherwise expressly provided
herein, where this Agreement provides for notice to Holders of any event, such notice shall be
sufficiently given to Holders if in writing and mailed, first-class postage prepaid, to each Holder
affected
by such event, at such Holder’s address as it appears in the Securities Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the giving of such
notice.

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     In case, by reason of the suspension of or irregularities in regular mail service or for any
other reason, it shall be impossible or impracticable to mail notice of any event to Holders when
said notice is required to be given pursuant to any provision of this Agreement or of the
Securities, then any manner of giving such notice as shall be satisfactory to the Fiscal Agent
shall be deemed to be a sufficient giving of such notice. In any case where notice to Holders is
to be given by mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other
Holders given as provided above.

     Where this Agreement provides for notice in any manner, such notice may be waived in writing
by the Person entitled to receive such notice, either before or after the event, and such waiver
shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the
Fiscal Agent, but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.

     Any request, demand, authorization, direction, notice, consent, election, waiver or other Act
required or permitted under this Agreement shall be in the English language, except that any
published notice may be in an official language of the country of publication.

     Notwithstanding anything to the contrary, notices to be given to Holders of a Global Security
shall be given only to the Depositary, in accordance with its applicable policies as in effect from
time to time. Notices to be given to Holders of Securities not in global form shall be sent by
mail to the respective addresses of the Holders as they appear in the Fiscal Agent’s records.
Neither the failure to give any notice to a particular Holder, nor any defect in a notice given to
a particular Holder, shall affect the sufficiency of any notice given to another Holder.

          (c) Notice to Fiscal Agent. If the Fiscal Agent shall receive any notice or demand
addressed to the Issuer by the Holder of any Security, the Fiscal Agent shall promptly forward such
notice or demand to the Issuer.

     16. Covenant Defeasance

          (a) Termination of Issuer’s Obligations. If the Issuer deposits irrevocably in trust
with the Fiscal Agent money and/or Eligible Instruments the payments of principal and interest on
which when due (and without reinvestment and providing no tax liability will be imposed upon the
Fiscal Agent or the Holders) will provide money in such amounts as will (together with any money
irrevocably deposited in trust with the Fiscal Agent, without investment) be sufficient to pay
principal and interest when due on the Securities or analogous payments thereon on the scheduled
due dates therefor at the maturity thereof, the Issuer’s obligations under Section 7(d) shall
terminate with respect to the Securities for which such deposit was made; provided,
however, that (i) no Event of Default with respect to the Securities of such series under
Section 6(a)(4) or 6(a)(5) or event that with notice or lapse of time or both would constitute such
an Event of Default shall have occurred and be continuing on such date and (ii) such termination
shall not relieve the Issuer of its obligations under the Securities and this Agreement to pay when
due the principal of and interest on such Securities if such amounts are not paid (or payment is
not provided for) when due from the money and Eligible Instruments (and the proceeds thereof) so
deposited.

     It shall be a condition to the deposit of cash and/or Eligible Instruments and the termination
of the Issuer’s obligations with respect to the Securities under Section 7(d) pursuant to the
provisions of this Section that the Issuer deliver to the Fiscal Agent (i) an opinion of nationally
recognized independent tax counsel to the effect that: (a) Holders of will not recognize income,
gain or loss for Federal income tax

23

 

purposes as a result of such deposit and termination and (b) such Holders (and future Holders)
will be subject to tax in the same amount, manner and timing as if such deposit and termination has
not occurred and (ii) an Officers’ Certificate to the effect that under the laws in effect on the
date such money and/or Eligible Instruments are deposited with the Fiscal Agent, the amount thereof
will be sufficient, after payment of all Federal, state and local taxes in respect thereof payable
to the Fiscal Agent, to pay principal and interest when due on the Securities.

     After a deposit as provided herein, the Fiscal Agent shall, upon Issuer Request, acknowledge
in writing the discharge of the Issuer’s obligations with respect to the Securities under Section
7(d) pursuant to the provisions of this Section.

          (b) Repayment to the Issuer. The Fiscal Agent and any Paying Agent shall promptly pay
to the Issuer upon Issuer Request any money or Eligible Instruments not required for the payment of
the principal of and interest on the Securities for which money of Eligible Instruments have been
deposited pursuant to Section 16(a) held by them at any time.

     The Fiscal Agent and Paying Agent shall pay to the Issuer upon Issuer Request any money held
by them for the payment of principal and interest that remains unclaimed for two years after the
maturity of the Securities for which a deposit has been made pursuant to Section 16(a). After such
payment to the Issuer, the Holders shall thereafter, as unsecured general creditors, look only to
the Issuer for the payment thereof.

          (c) Indemnity for Eligible Instruments. The Issuer shall pay and shall indemnify the
Fiscal Agent against any tax, fee or other charge imposed on or assesses against the deposited
Eligible Instruments or the principal or interest received on such Eligible Instruments.

     17. Severability

     In case any provision in this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

     18. Counterparts

     This Agreement may be executed in separate counterparts, and by each party separately on a
separate counterpart, each such counterpart, when so executed and delivered, to be an original.
Such counterparts shall together constitute but one and the same instrument.

     19. Certain Definitions

     As used in this Agreement, the following definitions shall apply:

     (1) “Act” of the Holders means an act of the Holders signing an instrument or
instruments and voting at a meeting or signing an instrument or instruments by written
consent in lieu of a meeting;

     (2) “Affiliate” of any specified Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with such specified
Person.

     (3) “Board of Directors” means either the board of directors of the Issuer, or the
executive or any other committee of that board duly authorized to act in respect hereof.

24

 

     (4) “Board Resolution” means a copy of a resolution certified by the Secretary or an
Assistant Secretary of the Issuer to have been duly adopted by the Board of Directors and to
be in full force and effect on the date of such certification, and delivered to the Fiscal
Agent.

     (5) “Business Day” means a day other than a Saturday, Sunday or any other day on which
banking institutions in New York, New York are authorized or required by law or executive
order to remain closed.

     (6) “Controlled Subsidiary” means any corporation more than 80% of the outstanding
 shares of Voting Stock, except for directors’ qualifying shares, of which shall at the time
be owned directly by the Issuer.

     (7) “Dollar” or “$” means the coin or currency of the United States of America as at
the time of payment is legal tender for the payment of public and private debts.

     (8) “Eligible Instruments” means monetary assets, money market instruments and
securities that are payable in Dollars only and essentially risk free as to collection of
principal and interest, including U.S. Government Obligations.

     (9) “Holders” means the registered holders of the Securities.

     (10) “Issuer Request” and “Issuer Order” mean, respectively, a written request or order
signed in the name of the Issuer by the Chairman of the Board, the Chief Executive Officer,
the President, the Chief Financial Officer, or any Vice President (any reference to a Vice
President of the Issuer herein shall be deemed to include any Vice President of the Issuer
whether or not designated by a number or word or words added before or after the title ”Vice
President”), and by the Treasurer, Assistant Treasurer, Secretary or an Assistant Secretary
of the Issuer, and delivered to the Fiscal Agent.

     (11) “Master Agreement” means the Master Agreement dated as of December 4, 2008 entered
into by the Issuer and the FDIC in connection with the Debt Guarantee Program.

     (12) “Officers’ Certificate” means a certificate signed by the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Financial Officer, or any Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Issuer, and delivered to the Fiscal Agent.

     (13) “Opinion of Counsel” means a written opinion of counsel, who may (except as
otherwise expressly provided in this Agreement) be counsel for the Issuer, which is
delivered to the Fiscal Agent.

     (14) “Outstanding,” when used with respect to Securities means, as of the date of
determination, all Securities theretofore authenticated and delivered under this Agreement,
except: (i) Securities theretofore cancelled by the Fiscal Agent or delivered to the Fiscal
Agent for cancellation and (ii) Securities in exchange for in lieu of which other Securities
have been authenticated and delivered, or which have been paid, pursuant to this Agreement,
provided, however, that in determining whether the Holders of the requisite
principal amount of Securities Outstanding have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Securities owned by the Issuer or any
Affiliate of the Issuer shall be disregarded and deemed not to be Outstanding, except that,
in determining whether the Fiscal Agent shall be protected in relying upon such request,
demand, authorization, direction, notice, consent or waiver, only Securities which the
Fiscal Agent knows to be so owned shall be disregarded.

25

 

Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Fiscal Agent the pledgee’s
right so to act with respect to such Securities and that the pledgee is not the Issuer or
any Affiliate of the Issuer. For the purposes of this definition, “control” when used with
respect to any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

     (15) “Paying Agent” means any Person authorized by the Issuer to pay the principal of
or interest on any Securities on behalf of the Issuer.

     (16) “Person” means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited liability
company, or government or any agency or political subdivision thereof.

     (17) “Voting Stock,” as applied to the stock (or the equivalent thereof) of any
corporation, means stock (or the equivalent thereof) of any class or classes, however
designated, having ordinary voting power for the election of a majority of the directors of
such corporation, other than stock (or such equivalent) having such power only by reason of
the happening of a contingency.

     (18) “U.S. Government Obligations” means direct obligations of the United States for
the payment of which its full faith and credit is pledged, or obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the United States
the timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States.

26

 

     IN WITNESS WHEREOF, the parties hereto have executed this Fiscal Agency Agreement as of the
date first above written.

	 	 	 	 	 	 	 
	 	 	SOVEREIGN BANCORP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By

Name:
	 	/s/ Kirk Walters
 

Kirk Walters
	 	 
	 

	 	Title:
	 	Chief Financial Officer, Interim President

and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

as Fiscal Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By

Name:
	 	/s/ D. G. Donovan
 

D. G. Donovan
	 	 
	 

	 	Title:
	 	Vice President	 	 

27

 

EXHIBIT A

     THE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OF SOVEREIGN BANCORP, INC. (THE “ISSUER”)
OR ITS SUBSIDIARIES AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (“FDIC”) OR
ANY OTHER GOVERNMENT AGENCY OR INSURER.

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE
& CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE FISCAL AGENCY AGREEMENT REFERRED TO ON THE REVERSE HEREOF.

     This debt is guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity
Guarantee Program and is backed by the full faith and credit of the United States. The details of
the FDIC guarantee are provided in the FDIC’s regulations, 12 CFR Part 370, and at the FDIC’s
website, www.fdic.gov/tlgp. The expiration date of the FDIC’s guarantee is the earlier of the
maturity date of this debt or June 30, 2012.

A -  1 

 

SOVEREIGN BANCORP, INC.

			
	Registered No. 1
	 	$250,000,000

2.50% Senior Notes Due 2012

Guaranteed under the FDIC’s Temporary Liquidity Guarantee Program

CUSIP No. 846042 AB5

ISIN No. US846042 AB52

     Sovereign Bancorp, Inc., a Pennsylvania corporation, for value received, hereby promises to
pay to Cede & Co., or registered assigns, the principal sum of Two Hundred Fifty Million Dollars
($250,000,000) on June 15, 2012 (the “Maturity Date”) and to pay interest thereon as herein
provided.

     Interest Payment Dates: June 15 and December 15.

     Record Dates: June 1 and December 1.

A - 2 

 

     Additional provisions of this Security are set forth on the other side of this Security.

     IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

	 	 	 	 	 
	 	 	SOVEREIGN BANCORP, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

FISCAL AGENT’S CERTIFICATE OF
AUTHENTICATION

Dated: December 22, 2008

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Fiscal Agent,
certifies that this is one
of 
the Securities
referred to in 

the Fiscal
Agency Agreement.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Authorized Signatory
	 	 

A - 3 

 

2.50% Senior Notes Due 2012

Guaranteed under the FDIC’s Temporary Liquidity Guarantee Program

1. Interest

     SOVEREIGN BANCORP, INC., a Pennsylvania corporation (such corporation, and its successors and
assigns under the Fiscal Agency Agreement hereinafter referred to, being herein referred to as the
“Issuer”), promises to pay interest on the principal amount of this Security as set forth below
until payment of the principal amount hereof has been made or duly provided for.

     The Securities shall bear interest at the rate of 2.50% per year from December 22, 2008.

     The Issuer shall pay interest on the Securities on each June 15 and December 15 of each year,
commencing June 15, 2009, and at maturity (each, an “Interest Payment Date”). If any
Interest Payment Date or the date of maturity would fall on a day that is not a Business Day, the
related payment of principal or interest on the Securities shall be postponed to the following day
that is a Business Day, and no interest shall accrue on the amount so payable from and after such
Interest Payment Date or date of maturity, as the case may be. Interest on a Security shall be
paid to the Person in whose name such Security was registered at the close of business on the
preceding June 1 or December 1 (each, a “Regular Record Date”), as the case may be, whether or not
a Business Day, prior to the applicable Interest Payment Date. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Interest on the Securities shall accrue
from the most recent date to which interest has been paid or, if no interest has been paid, from
the date of issuance; provided that if this Security is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date.

2. Method of Payment

     The Issuer will pay interest on the Securities (except defaulted interest) to the Persons who
are Holders of Securities at the close of business on the Regular Record Date immediately preceding
the applicable Interest Payment Date even if Securities are canceled after the Regular Record Date
and on or before the Interest Payment Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Issuer will pay principal and interest in money of the United
States of America that at the time of payment is legal tender for payment of public and private
debts. Payments in respect of the Securities represented by a Global Security (including principal
and interest) will be made by wire transfer of immediately available funds to the accounts
specified by DTC. The Issuer will make all payments in respect of a definitive Security (including
principal and interest), by mailing a check to the registered address of each Holder thereof;
provided, however, that payments on the Securities shall be made, in the case of a Holder of at
least $10,000,000 in aggregate principal amount of Securities, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder elects payment by
wire transfer by giving written notice to the Fiscal Agent or the Paying Agent to such effect
designating such account no later than the Regular Record Date prior to the applicable Interest
Payment Date (or such other later date as the Fiscal Agent may accept in its discretion).

3. Fiscal Agent, Paying Agent and Registrar

     Initially, The Bank of New York Mellon Trust Company, N.A. (the “Fiscal Agent”) will act as
Paying Agent and Registrar. The Issuer may appoint and change any Paying Agent, Registrar or
co-registrar without notice. The Issuer may act as Paying Agent, Registrar or co-registrar.

4. Fiscal Agency Agreement

A - 4 

 

     The Securities are issued pursuant to a Fiscal Agency Agreement dated as of December 22, 2008
(the “Fiscal Agency Agreement”) between the Issuer and the Fiscal Agent. The terms of the
Securities include those stated in the Fiscal Agency Agreement. Terms defined in the Fiscal Agency
Agreement and not defined herein have the meanings ascribed thereto in the Fiscal Agency Agreement.
The Securities are subject to all such terms, and Holders are referred to the Fiscal Agency
Agreement for a statement of those terms. Copies of the Fiscal Agency Agreement are on file and
available for inspection at the Corporate Trust Office of the Fiscal Agent, and reference thereto
is made for a description of the rights and limitations of rights thereunder of the Holders of the
Securities and the duties and immunities of the Fiscal Agent. In acting under the Fiscal Agency
Agreement, the agents appointed by the Issuer thereunder are acting solely as agents for the Issuer
and do not assume any obligation or relationship of agency or trust for or with the Holders of the
Securities except as specifically described below or in the Fiscal Agency Agreement with respect to
the Fiscal Agent.

5. Unsecured Obligations

     The Securities are senior unsecured obligations of the Issuer initially limited to
$250,000,000 aggregate principal amount at any one time outstanding. The Securities are not
secured by the assets of the Issuer or any of its affiliates.

6. FDIC Guarantee

     Pursuant to the Fiscal Agency Agreement, the Issuer and the Fiscal Agent acknowledged that the
Issuer has not opted out of the debt guarantee program (the “Debt Guarantee Program”) established
by the FDIC under its Temporary Liquidity Guarantee Program on November 21, 2008 pursuant to the
FDIC’s Final Rule, 12 C.F.R. Part 370 (as may be amended or supplemented from time to time, the
“Rule”). As a result, this debt is guaranteed under the FDIC Temporary Liquidity Guarantee Program
and is backed by the full faith and credit of the United States. The details of the FDIC guarantee
are provided in the FDIC’s regulations, 12 CFR Part 370, and at the FDIC’s website,
www.fdic.gov/tlgp. The expiration date of the FDIC’s guarantee is the earlier of the maturity date
of this debt or June 30, 2012.

     The Fiscal Agent is designated under the Fiscal Agency Agreement as the duly authorized
representatives of the Holders for purposes of making claims and taking other permitted or required
actions under the Debt Guarantee Program (the “Representative”). Any Holder may elect not to be
represented by the Representative by providing written notice of such election to the
Representative (it being understood that such election shall not affect the Fiscal Agent’s capacity
hereunder except as the representative of such Holder under the Debt Guarantee Program).

     Upon the Issuer’s uncured failure to make a timely payment of principal or interest on the
notes (a “Payment Default”), the Representative, on behalf of all Holders of the Securities that
are represented by the Representative, shall submit to the FDIC a demand for payment in accordance
with the Fiscal Agency Agreement.

     If the Holder has elected not to have the Representative act as its authorized representative,
it may make demand for payment under the Debt Guarantee Program in the circumstances described in
the preceding paragraph.

     The FDIC shall be subrogated to all of the rights of the Holders and the Representative under
the Fiscal Agency Agreement against the Issuer in respect of any amounts paid to the Holders, or
for the benefit of the Holders, by the FDIC pursuant to the Debt Guarantee Program. In addition,
the Fiscal Agent shall assign the rights of all Holders of the Securities to the FDIC as well as
any claims in insolvency proceeding arising in connection with ownership of FDIC-guaranteed debt.
In such a case, if any Holder of the Securities has received any distribution from the receivership
or bankruptcy estate prior

A  - 5 

 

to the FDIC’s payment under the Debt Guarantee Program, the guaranteed amount paid by the FDIC
to such Holder shall be reduced by the amount the Holder has received in the distribution from the
receivership or bankruptcy estate.

     The Holders, by their acceptance of the Securities, authorize the Representative, at such time
as the FDIC shall commence making any guarantee payments to the Representative for the benefit of
the Holders pursuant to the Debt Guarantee Program (each, a “Guarantee Payment”), to execute an
assignment in the form attached to the Fiscal Agency Agreement as Annex A, pursuant to which the
Representative shall assign to the FDIC its right as Representative to receive any and all payments
from the Issuer under the Fiscal Agency Agreement on behalf of the Holders.

     If a Holder has exercised its right not to be represented by the Representative, such Holder
of Securities, by its acceptance of the Securities, agrees that, at such time as the FDIC shall
commence making any Guarantee Payments to the Holder pursuant to the Debt Guarantee Program, such
Holder shall execute an assignment in the form attached to the Fiscal Agency Agreement as Annex A,
pursuant to which such Holder shall assign to the FDIC its right to receive any and all payments
from the Issuer under the Fiscal Agency Agreement.

     The Issuer hereby consents and agrees that the FDIC is an acceptable transferee for all or any
portion of the Securities for all purposes of the Fiscal Agency Agreement and upon any such
assignment, the FDIC shall be deemed a Holder under the Fiscal Agency Agreement for all purposes
hereof, and the Issuer hereby agrees to take such reasonable steps as are necessary to comply with
any relevant provision of the Fiscal Agency Agreement as a result of such assignment.

     If, at any time on or prior to the expiration of the period during which the Securities are
guaranteed by the FDIC under the Debt Guarantee Program (the “Effective Period”), payment in full
hereunder shall be made pursuant to the Debt Guarantee Program on the outstanding principal and
accrued interest to such date of payment with respect to any Securities, the Holder of such
Securities shall, or the Holder of such Securities shall cause the person or entity in possession
of such Securities to, promptly surrender to the FDIC the security certificate, note or other
instrument evidencing such Securities, if any.

     If, at any time prior to the earlier of (a) full satisfaction of the payment obligations
hereunder, or (b) expiration of the Effective Period, the Issuer is in default of any payment
obligation hereunder, including timely payment of any accrued and unpaid interest, without regard
to any cure period, the Representative covenants and agrees that it shall provide written notice to
the FDIC within one Business Day of such payment default.

     The FDIC shall make all determinations as to amounts payable under the Debt Guarantee Program.
The FDIC’s determinations shall be final and binding on all Persons, including Holders of the
Securities, subject only to the right of a Holder or other interested party to seek judicial review
by commencing an action in the U.S. District Court for the District of Columbia or the Southern
District of New York within 60 days after the FDIC makes its final determination.

     Any indebtedness of the Issuer to the FDIC arising under Section 2.03 of the Master Agreement
in connection with the Debt Guarantee Program will constitute a senior unsecured general obligation
of the Issuer, ranking pari passu with any indebtedness under the Fiscal Agency Agreement.

     Without affecting the limitations on Events of Default set forth in Section 6 of the Fiscal
Agency Agreement, if the FDIC is making timely Guarantee Payments, for the avoidance of doubt,
there shall not be deemed to be an Event of Default under the Fiscal Agency Agreement which would
permit or result in the acceleration of amounts due hereunder, if such an Event of Default is due
solely to the failure of the

A - 6 

 

Issuer to make timely payment on the Securities provided that the FDIC is making timely
Guarantee Payments with respect to such Securities in accordance with the Rule. Subject to the
terms of the Master Agreement, under the terms of the Securities, no Event of Default, including
any resulting from an insolvency event, shall result in the automatic acceleration of the
Securities.

7. Sinking Fund

     The Securities are not subject to any sinking fund.

8. Denominations; Transfer; Exchange

     The Securities are in registered form without coupons in denominations of $2,000 and whole
multiples of $1,000 in excess thereof. A Holder may transfer or exchange Securities in accordance
with the Fiscal Agency Agreement. Upon any transfer or exchange, the Fiscal Agent may require a
Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay
any taxes required by law or permitted by the Fiscal Agency Agreement.

9. Persons Deemed Owners

     The Holder of this Security may be treated as the owner of it for all purposes.

10. Unclaimed Money

     If money for the payment of principal or interest remains unclaimed for two years, the Fiscal
Agent or Paying Agent shall pay the money back to the Issuer at its written request unless an
abandoned property law designates another Person. After any such payment, Holders entitled to the
money must look only to the Issuer and not to the Fiscal Agent for payment.

11. Amendment and Waiver

     Subject to certain exceptions set forth in the Fiscal Agency Agreement, (i) the Fiscal Agency
Agreement or the Securities may be amended with the written consent of the Holders of at least a
majority in aggregate principal amount of the Outstanding Securities and (ii) any default with any
provision may be waived with the written consent of the Holders of at least a majority in aggregate
principal amount of the Outstanding Securities.

     Without the express written consent of the FDIC, the Issuer and the Fiscal Agent may not
amend, modify, supplement or waive any provision in the Fiscal Agency Agreement that is related to
the principal, interest, payment, default or ranking of the Securities, that is required to be
included in the Fiscal Agency Agreement pursuant to the Master Agreement or the amendment of which
would require the consent of the Holders of any or all of the Securities.

12. Defaults and Remedies

     In case an Event of Default shall occur and be continuing, the principal hereof shall
immediately become due and payable, in the manner, with the effect and subject to the conditions
and limitations provided in the Fiscal Agency Agreement, including without limitation Section 6
thereof; provided, however, such remedy shall not be available to the Holders if
the FDIC makes timely Guarantee Payments as set forth in Section 9 of the Fiscal Agency Agreement.
Upon the occurrence of a “default” under the Fiscal Agency Agreement, the Holders of the Securities
may enforce the rights of Holders hereunder in the manner, with the effect and subject to the
conditions and limitations provided in the Fiscal Agency Agreement.

A - 7 

 

13. Fiscal Agent Dealings with the Issuer

     Subject to applicable law, the Fiscal Agent under the Fiscal Agency Agreement, in its
individual or any other capacity, may become the owner or pledgee of Securities and may otherwise
deal with and collect obligations owed to it by the Issuer or its Affiliates and may otherwise deal
with the Issuer or its Affiliates with the same rights it would have if it were not Fiscal Agent.

14. Covenant Defeasance

     The Securities are subject to covenant defeasance as set forth in Section 16 of the Fiscal
Agency Agreement.

15. No Recourse Against Others

     A director, officer, employee, agent, or stockholder, as such, of the Issuer shall not have
any liability for any obligations of the Issuer under the Securities or the Fiscal Agency Agreement
or for any claim based on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Holder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.

16. Authentication

     This Security shall not be valid until an authorized signatory of the Fiscal Agent manually
signs the certificate of authentication on the other side of this Security.

17. Governing Law

     This Security shall be governed by, and construed in accordance with, the laws of the State of
New York.

18. CUSIP Numbers

     Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification
Procedures, the Issuer has caused a CUSIP number to be printed on the Securities and has directed
the Fiscal Agent to use the CUSIP number as a convenience to Holders of Securities. No
representation is made as to the accuracy of such numbers as printed on the Securities and reliance
may be placed only on the other identification numbers placed thereon.

     The Issuer will furnish to any Holder upon written request and without charge to the Holder a
copy of the Fiscal Agency Agreement which has in it the text of this Security.

A - 8 

 

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

     (Print or type assignee’s name, address and zip code)

     (Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint ___agent to

transfer this Security on the books of the Issuer.

The agent may substitute another to act for him.

	 	 	 	 	 	 	 	 	 
	 
	 
	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	Your Signature:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

Sign exactly as your name appears on the other side of this Security.

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Your Signature
	 
	 	 	 	 	 	 	 	 
	 	 	Signature Guarantee:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 	 	 
	 

	 	 	 	 
	 	 	 	 
	 
	 	 	Signature must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guarantor acceptable to the Fiscal Agent	 	 	 	Signature of Signature Guarantee 

A - 9 

 

EXHIBIT B

FORM OF CERTIFICATE OF EXCHANGE

SOVEREIGN BANCORP, INC. (the “Issuer”)

2.50% Senior Notes Due 2012 (the “Securities”)

                                              (the “Holder”) owns and wishes to exchange its interest in a Global
Security representing the Securities (the “Global Security”) in accordance with
Section 4(b)(i)(2)(B) of the Fiscal Agency Agreement, in the principal amount of US$ [___] in such
Global Security for a definitive certificate in an equal principal amount (the “Exchange”).
In connection with the Exchange, the Holder hereby certifies that:

     (i) the Global Securities are being acquired for the Holder’s own account without transfer;
and

     (ii) such exchange has been effected in compliance with the transfer restrictions applicable
to the Global Securities and pursuant to and in accordance with the United States Securities Act
of 1933, as amended (the “Securities Act”), and in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the proposed exchange, the
definitive certificate issued will be subject to the restrictions on transfer enumerated in the
legend printed on the Global Securities, if any, and the Securities Act.

	 	 	 	 	 	 	 	 	 	 	 
	[Insert Name of Transferor]	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	Name:	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 	 	 
	 
	Dated:

	 	 

	,	 	 

	 	 	 	 	 

B - 1 

 

ANNEX A

FORM OF FDIC ASSIGNMENT

     This Assignment is made pursuant to the terms of the 2.50% Senior Notes Due 2012 (CUSIP No.
846042 AB5) (the “Note”) and Section 9(e) of the Fiscal Agency Agreement, dated as of
December 22, 2008, as amended from time to time (the “Fiscal Agency Agreement”), between
The Bank of New York Mellon Trust Company, N.A. (the “Representative”), acting on behalf of
the holders of the Notes issued under the Fiscal Agency Agreement who have not opted out of
representation by the Representative (the “Holders”) and Sovereign Bank (the
“Issuer”) with respect to the Note. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned thereto in the Fiscal Agency Agreement.

     For value received, the Representative, on behalf of the Holders (the “Assignor”),
hereby assigns to the Federal Deposit Insurance Corporation (the “FDIC”), without recourse,
all of the Assignor’s respective rights, title and interest in and to: (a) the Note; (b) the
Fiscal Agency Agreement pursuant to which the Note was issued; and (c) any other instrument or
agreement executed by the Issuer regarding obligations of the Issuer under the Note or the Fiscal
Agency Agreement (collectively, the “Assignment”).

     The Assignor hereby certifies that:

     1. Without the FDIC’s prior written consent, the Assignor has not:

          (a) agreed to any material amendment of the Note or the Fiscal Agency Agreement to the extent
relating to the Note or to any material deviation from the provisions thereof; or

          (b) accelerated the maturity of the Note.

[Instructions to the Assignor: If the Assignor has not assigned or transferred any interest in the
Note and related documentation, such Assignor must include the following representation.]

     2. The Assignor has not assigned or otherwise transferred any interest in the Note or the
Fiscal Agency Agreement to the extent relating to the Note;

[Instructions to the Assignor: If the Assignor has assigned a partial interest in the Note and
related documentation, the Assignor must include the following representation.]

     2. The Assignor has assigned part of its rights, title and interest in the Note and the Fiscal
Agency Agreement to the extent relating to the Note to                      pursuant to the                      agreement,
dated as of                     , 20___between                     , as assignor, and                     , as assignee, an
executed copy of which is attached hereto.

     The Assignor acknowledges and agrees that this Assignment is subject to the Fiscal Agency
Agreement and to the following:

     1. In the event the Assignor receives any payment under or related to the Note or the Fiscal
Agency Agreement from a party other than the FDIC (a “Non-FDIC Payment”):

          (a) after the date of demand for a guarantee payment on the FDIC pursuant to 12 CFR Part 370,
but prior to the date of the FDIC’s first guarantee payment under the Fiscal Agency Agreement
pursuant to 12 CFR Part 370, the Assignor shall promptly but in no event later than five Business
Days after receipt notify the FDIC of the date and the amount of such Non-FDIC Payment and

Annex A - 1 

 

shall apply such payment as payment made by the Issuer, and not as a guarantee payment made by
the FDIC, and therefore, the amount of such payment shall be excluded from this Assignment; and

          (b) after the FDIC’s first guarantee payment under the Fiscal Agency Agreement, the Assignor
shall forward promptly to the FDIC such Non-FDIC Payment in accordance with the payment
instructions provided in writing by the FDIC.

     2. Acceptance by the Assignor of payment pursuant to the Debt Guarantee Program on behalf of
the Holders shall constitute a release by such Holders of any liability of the FDIC under the Debt
Guarantee Program with respect to such payment.

     The Person who is executing this Assignment on behalf of the Assignor hereby represents and
warrants to the FDIC that he/she/it is duly authorized to do so.

     IN WITNESS WHEREOF, the Assignor has caused this instrument to be executed and delivered this
                     day of                     , 20___.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	[ASSIGNOR]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	(Signature)
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	 	 	(Print)
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 

	 	 	 	(Print)

Consented to and acknowledged by this ___ day of ___, 20___:

THE FEDERAL DEPOSIT INSURANCE CORPORATION

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

(Signature)
	 	 
	 
	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	 

	 	(Print)	 	 
	 
	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 
	 

	 	(Print)	 	 

Annex A - 2ex9_01.htm

    
       

        
          

        

      

Exhibit 10.1

      LOAN
AGREEMENT

       

       

      This
Agreement dated as of December 10, 2008, is between BANK OF AMERICA, N.A., a
national banking association (the "Bank") and KEY TECHNOLOGY, INC., an
Oregon corporation (the "Borrower").

       

      
        	
                1.

              	
                FACILITY
      NO. 1:  REVOLVING LINE OF CREDIT AMOUNT AND
  TERMS

              

      

       

      
        	
                1.1

              	
                Line of Credit
      Amount.

              

      

       

      
        	
                (a)

              	
                During
      the availability period described below, the Bank will provide a line of
      credit to the Borrower.  The amount of the line of credit (the
      "Facility No. 1 Commitment") is Ten Million and No/ Dollars
      ($10,000,000.00).

              

      

       

      
        	
                (b)

              	
                This
      is a revolving line of credit.  During the availability period,
      the Borrower may repay principal amounts and reborrow
  them.

              

      

       

      (c)           The
Borrower agrees not to permit the principal balance outstanding to exceed the
Facility No. 1Commitment.  If the Borrower exceeds this limit, the
Borrower will immediately pay the excess tothe Bank upon the Bank's
demand.

       

      
        	
                1.2

              	
                Availability
      Period.

              

      

       

      The line
of credit is available between the date of this Agreement and December 1, 2009,
or such earlier date as the availability may terminate as provided in this
Agreement (the "Facility No. 1 Expiration Date").

       

      1.3           Repayment
Terms.

       

      
        	
                 (a)

              	
                The
      Borrower will pay interest on February 2, 2009, and then on the first day
      of each month thereafter until payment in full of any principal
      outstanding under this facility.

              

      

       

      
        	
                (b)

              	
                The
      Borrower will repay in full any principal, interest or other charges
      outstanding under this facility no later than the Facility No. 1
      Expiration Date. Any interest period for an optional interest rate (as
      described below) shall expire no later than the Facility No. 1 Expiration
      Date.

              

      

       

      
        	
                1.4

              	
                Interest
      Rate.

              

      

      

      
        	
                (a)

              	
                The
      interest rate is a rate per year equal to the Bank's Prime Rate minus one
      and three-quarter  (-1.75%) percentage
  points.

              

      

       

      
        	
                (b)

              	
                The
      Prime Rate is the rate of interest publicly announced from time to time by
      the Bank as its Prime Rate.  The Prime Rate is set by the Bank
      based on various factors, including the Bank’s costs and desired return,
      general economic conditions and other factors, and is used as a reference
      point for pricing some loans.  The Bank may price loans to its
      customers at, above, or below the Prime Rate.  Any change in the
      Prime Rate shall take effect at the opening of business on the day
      specified in the public announcement of a change in the Bank's Prime
      Rate.

              

      

       

      
        	
                1.5

              	
                Optional Interest
      Rate.

              

      

       

      
        	
                (a)

              	
                Instead
      of the interest rate based on the rate stated in Paragraph 1.4 entitled
      “Interest Rate” above, the Borrower may elect the optional interest rates
      listed below for this Facility No. 1 during interest periods agreed to by
      the Bank and the Borrower.  The optional interest rate shall be
      subject to the terms and conditions described later in this
      Agreement.  Any principal amount bearing interest at an optional
      rate under this Agreement is referred to as a "Portion."  The
      following optional interest rate is available:  The interest
      rate is a rate per year equal to the BBA LIBOR Rate (Adjusted
      Periodically) plus one (1.0%) percentage
point.

              

      

       

      
        
          
          

        

        
          1    
Loan Agreement

          
            

          

        

        
          
          

        

         

      

      
        	
                (b)

              	
                The
      interest rate will be adjusted on any day of the month (the “Adjustment
      Date”) and remain fixed until the next Adjustment Date.  If the
      Adjustment Date in any particular month would otherwise fall on a day that
      is not a banking day then, at the Bank’s option, the Adjustment Date for
      that particular month will be the first banking day immediately following
      thereafter.

              

      

       

      
        	
                (c)

              	
                The
      BBA LIBOR Rate (Adjusted Periodically) is a rate of interest equal to the
      rate per annum equal to the British Bankers Association LIBOR Rate (“BBA
      LIBOR”), as published by Reuters (or other commercially available source
      providing quotations of BBA LIBOR as selected by the Bank from time to
      time) as determined for each Adjustment Date at approximately 11:00 a.m.
      London time two (2) London Banking Days prior to the Adjustment Date, for
      U.S. Dollar deposits (for delivery on the first day of such interest
      period) with a term of one month, as adjusted from time to time in the
      Bank’s sole discretion for reserve requirements, deposit insurance
      assessment rates and other regulatory costs.  If such rate is
      not available at such time for any reason, then the rate for that interest
      period will be determined by such alternate method as reasonably selected
      by the Bank.  A "London Banking Day" is a day on which banks in
      London are open for business and dealing in offshore
    dollars.

              

      

       

      
        	
                (d)

              	
                Each
      prepayment of an amount bearing interest at the rate provided by this
      paragraph, whether voluntary, by reason of acceleration or otherwise, will
      be accompanied by the amount of accrued interest on the amount prepaid,
      and a prepayment fee as described below.  A "prepayment" is a
      payment of an amount on a date other than an Adjustment
    Date.

              

      

       

      
        	
                (e)

              	
                The
      prepayment fee shall be in an amount sufficient to compensate the Bank for
      any loss, cost or expense incurred by it as a result of the prepayment,
      including any loss of anticipated profits and any loss or expense arising
      from the liquidation or reemployment of funds obtained by it to maintain
      the amount prepaid or from fees payable to terminate the deposits from
      which such funds were obtained.  The Borrower shall also pay any
      customary administrative fees charged by the Bank in connection with the
      foregoing.  For purposes of this paragraph, the Bank shall be
      deemed to have funded each prepaid amount by a matching deposit or other
      borrowing in the applicable interbank market, whether or not the amount
      was in fact so funded.

              

      

      

      
        	
                1.6

              	
                Letters of
      Credit.

              

      

      

      
        	
                (a)

              	
                During
      the availability period, at the request of the Borrower, the Bank will
      issue standby letters of credit with a maximum maturity not to extend more
      than 365 days beyond the Facility No. 1 Expiration
  Date.

              

      

      

      
        	
                (b)

              	
                The
      amount of the letters of credit outstanding at any one time (including the
      drawn and unreimbursed amounts of the letters of credit) may not exceed
      Six Million and No/100 Dollars
  ($6,000,000.00).  

              

      

       

      
        	
                (c)

              	
                In
      calculating the principal amount outstanding under the Facility No. 1
      Commitment, the calculation shall include the amount of any letters of
      credit outstanding, including amounts drawn on any letters of credit and
      not yet reimbursed.

              

      

       

      
        	
                (d)

              	
                The
      Borrower agrees:

              

      

       

      
        	
                 
      

              	
                (i)

              	
                Any
      sum drawn under a letter of credit may, at the option of the Bank, be
      added to the principal amount outstanding under this
      Agreement.  The amount will bear interest and be due as
      described elsewhere in this
Agreement.

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                If
      there is a default under this Agreement, to immediately prepay and make
      the Bank whole for any outstanding letters of
  credit.

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                The
      issuance of any letter of credit and any amendment to a letter of credit
      is subject to the Bank's written approval and must be in form and content
      satisfactory to the Bank and in favor of a beneficiary acceptable to the
      Bank.

              

      

       

      
        
          
          

        

        
          2     
Loan Agreement

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (iv)

              	
                To
      pay any issuance and/or other fees that the Bank notifies the Borrower
      will be charged for issuing and processing letters of credit for the
      Borrower.

              

      

       

      
        	
                 
      

              	
                (v)

              	
                To
      allow the Bank to automatically charge its checking account for applicable
      fees, discounts, and other charges.

              

      

       

      
        	
                2.

              	
                FACILITY
      NO. 2:  VARIABLE RATE TERM LOAN AMOUNT AND
  TERMS

              

      

       

      
        	
                2.1

              	
                Loan
      Amount.

              

      

       

      The Bank
agrees to provide a term loan to the Borrower in the amount of Six Million Four
Hundred Thousand and No/100 Dollars ($6,400,000.00) (the "Facility No. 2
Commitment").

       

      
        	
                2.2

              	
                Availability
      Period.

              

      

       

      The loan
is available in one disbursement from the Bank between the date of this
Agreement and December 23, 2008, unless the Borrower is in default.

       

      
        	
                2.3

              	
                Repayment
      Terms.

              

      

       

      
        	
                (a)

              	
                The
      Borrower will repay principal and interest in equal combined installments
      beginning on February 2, 2009, and on the first day of each month
      thereafter, and ending on January 2, 2024 (the “Repayment
      Period”).  Each installment shall be in an amount sufficient to
      fully amortize principal and interest over the Repayment Period, based on
      the assumption that the interest rate would remain
      unchanged.  In any event, on the last day of the Repayment
      Period, the Borrower will repay the remaining principal balance plus any
      interest then due.  Each installment, when paid, will be applied
      first to the payment of interest accrued.  The amount of
      interest due, and the portion of each installment which is applied to
      interest, will change from time to time if there are changes in the
      applicable interest rate.  The balance, if any, of each
      installment will be applied to the repayment of principal.  If
      the accrued interest owing exceeds the amount of any installment, the
      Borrower will pay the excess in addition to the
      installment.  The excess accrued interest will be paid on the
      due date of the installment.

              

      

       

      
        	
                (b)

              	
                The
      Borrower may prepay the loan in full or in part at any
      time.  The prepayment will be applied to the most remote payment
      of principal due under this
Agreement.

              

      

      

      
        	
                2.4

              	
                Interest
      Rate.

              

      

      

      
        	
                (a)

              	
                The
      interest rate is a rate per year equal to the BBA LIBOR Rate (Adjusted
      Periodically) plus one and four-tenths (1.4%) percentage
      points.

              

      

       

      
        	
                (b)

              	
                The
      interest rate will be adjusted on the first day of each month (the
      “Adjustment Date”) and remain fixed until the next Adjustment
      Date.  If the Adjustment Date in any particular month would
      otherwise fall on a day that is not a banking day then, at the Bank’s
      option, the Adjustment Date for that particular month will be the first
      banking day immediately following
thereafter.

              

      

       

      
        	
                (c)

              	
                The
      BBA LIBOR Rate (Adjusted Periodically) is a rate of interest equal to the
      rate per annum equal to the British Bankers Association LIBOR Rate (“BBA
      LIBOR”), as published by Reuters (or other commercially available source
      providing quotations of BBA LIBOR as selected by the Bank from time to
      time) as determined for each Adjustment Date at approximately 11:00 a.m.
      London time two (2) London Banking Days prior to the Adjustment Date, for
      U.S. Dollar deposits (for delivery on the first day of such interest
      period) with a term of one month, as adjusted from time to time in the
      Bank’s sole discretion for reserve requirements, deposit insurance
      assessment rates and other regulatory costs.  If such rate is
      not available at such time for any reason, then the rate for that interest
      period will be determined by such alternate method as reasonably selected
      by the Bank.  A "London Banking Day" is a day on which banks in
      London are open for business and dealing in offshore
    dollars.

              

      

       

      
        
          
          

        

        
          3     
Loan Agreement

          
            

          

        

        
          
          

        

         

      

      
        	
                (d)

              	
                Each
      prepayment of an amount bearing interest at the rate provided by this
      paragraph, whether voluntary, by reason of acceleration or otherwise, will
      be accompanied by the amount of accrued interest on the amount prepaid,
      and a prepayment fee as described below.  A "prepayment" is a
      payment of an amount on a date other than an Adjustment
    Date.

              

      

       

      
        	
                (e)

              	
                The
      prepayment fee shall be in an amount sufficient to compensate the Bank for
      any loss, cost or expense incurred by it as a result of the prepayment,
      including the break-funding or contract breakage fees and costs for any
      LIBOR contracts.  The Borrower shall also pay any customary
      administrative fees, if any, charged by the Bank in connection with the
      foregoing.

              

      

      

      
        	
                3.

              	
                FEES
      AND EXPENSES

              

      

      

      
        	
                3.1

              	
                Fees.

              

      

      

      
        	
                (a)

              	
                Facility No. 1 Loan
      Fee.  The Borrower agrees to pay a loan fee in the amount
      of Five Thousand and No/100 Dollars ($5,000.00) for Facility
      1.  This fee is due on the date of this
    Agreement.

              

      

      

      
        	
                (b)

              	
                Facility No. 2 Loan
      Fee.  The Borrower agrees to pay a loan fee in the amount
      of Twenty-Four Thousand and No/100 Dollars ($24,000.00) for Facility
      2.  This fee is due on the date of this
    Agreement.

              

      

       

      
        	
                (c)

              	
                Unused Commitment
      Fee.  The Borrower agrees to pay a fee on any difference
      between the Facility No. 1 Commitment and the amount of credit it actually
      uses, determined by the average of the daily amount of credit outstanding
      during the specified period.  The fee will be calculated at
      one-eighth of one (0.125%) percent per year.  This fee is due on
      the final day of the availability
period.

              

      

       

      
        	
                (d)

              	
                Waiver
      Fee.  If the Bank, at its discretion, agrees to waive or
      amend any terms of this Agreement, the Borrower will, at the Bank's
      option, pay the Bank a fee for each waiver or amendment in an amount
      advised by the Bank at the time the Borrower requests the waiver or
      amendment.  Nothing in this paragraph shall imply that the Bank
      is obligated to agree to any waiver or amendment requested by the
      Borrower.  The Bank may impose additional requirements as a
      condition to any waiver or
amendment.

              

      

      

      
        	
                (e)

              	
                Late
      Fee.  To the extent permitted by law, the Borrower agrees
      to pay a late fee in an amount not to exceed four percent (4%) of any
      payment that is more than fifteen (15) days late.  The
      imposition and payment of a late fee shall not constitute a waiver of the
      Bank’s rights with respect to the
default.

              

      

       

      
        	
                (f)

              	
                Fee for Late Financial
      Statements.  The Borrower agrees to pay a late fee of
      Five Hundred and No/100 Dollars ($500.00) if any of the financial
      information required by this Agreement is not provided to the Bank within
      the time limits provided in this Agreement. The imposition and payment of
      a late fee shall not constitute a waiver of the Bank’s rights with respect
      to the default.

              

      

       

      
        	
                (g)

              	
                Letters of Credit
      Fee.  Letters of credit fees shall be payable in advance
      and will be equal to, on a per annum basis, one (1.00%) percent of the
      face amount of the letters of
credit.

              

      

       

      
        	
                3.2

              	
                Expenses.

              

      

       

      The
Borrower agrees to immediately repay the Bank for expenses that include, but are
not limited to, filing, recording and search fees, appraisal fees, title report
fees, and documentation fees.

       

      
        	
                3.3

              	
                Reimbursement
      Costs.

              

      

       

      
        	
                (a)

              	
                The
      Borrower agrees to reimburse the Bank for any expenses it incurs in the
      preparation of this Agreement and any agreement or instrument required by
      this Agreement.  Expenses include, but are not limited to,
      reasonable attorneys' fees, including any allocated costs of the Bank's
      in-house counsel to the extent permitted by applicable
  law.

              

      

       

      
        
          
          

        

        
          4     
Loan Agreement

          
            

          

        

        
          
          

        

         

      

      
        	
                (b)

              	
                The
      Borrower agrees to reimburse the Bank for the cost of periodic field
      examinations of the Borrower’s books, records and collateral, and
      appraisals of the collateral, at such intervals as the Bank may reasonably
      require.  The actions described in this paragraph may be
      performed by employees of the Bank or by independent
      appraisers.

              

      

       

      
        	
                4.

              	
                COLLATERAL

              

      

      

      
        	
                4.1

              	
                Personal
      Property.

              

      

      

      The
personal property listed below now owned or owned in the future by the parties
listed below will secure the Borrower’s obligations to the Bank under Facility
No. 1 under this Agreement.  The collateral is further defined in
security agreement(s) executed by the owners of the collateral. In addition, all
personal property collateral owned by the Borrower securing this Agreement shall
also secure all other present and future obligations of the Borrower to the Bank
(excluding any consumer credit covered by the federal Truth in Lending law,
unless the Borrower has otherwise agreed in writing or received written notice
thereof).  All personal property collateral securing any other present
or future obligations of the Borrower to the Bank shall also secure this
Agreement.  Personal property collateral to exclude the Borrower's
European assets securing the Borrower's Abn Amro bank guarantee
facility.

      

       (a)           Equipment
and fixtures owned
by Borrower.

       

      (b)           Inventory
owned by Borrower.

       

      (c)           Receivables
owned by Borrower.

      

      
        	
                4.2

              	
                Real
      Property.

              

      

      

      
        	
                (a)

              	
                The
      Borrower's obligations to the Bank under Facility No. 2 under this
      Agreement will be secured by a lien covering the following real property
      owned by Borrower:  150 Avery Street, Walla Walla, WA 99362 (the
      “Real Property”).  The Bank's lien will be evidenced by a Deed
      of Trust (the “Deed of Trust”) executed by Borrower in favor of
      Bank.  The Deed of Trust covering the Real Property securing
      Facility No. 2 contains provisions that, under certain conditions, give
      the Bank the right to declare the Facility No. 2 Commitment immediately
      due and payable.

              

      

      

      
        	
                (b)

              	
                The
      Bank may require an appraisal or inspections for infestation, structural
      soundness, environmental hazards, ground stability or other matters
      relating to the condition of the real property, as required elsewhere in
      this Agreement or as separately communicated to the
      Borrower.  The Bank's decisions on whether to approve or deny
      the Borrower's request for credit, or to require or not require appraisals
      or inspections, should not be relied upon by the Borrower or any other
      party to determine the fair market value of the property or the condition
      of the property.  The Bank assumes no liability for the accuracy
      of any appraisal or inspection and makes no warranty of any kind about the
      condition or value of the property.  The Borrower and any other
      party should consult with appropriate professionals for an assessment of
      the value and condition of the
property.

              

      

       

      
        	
                 
      

              	
                5.

              	
                DISBURSEMENTS,
      PAYMENTS AND COSTS

              

      

       

      
        	
                 
      

              	
                5.1

              	
                Disbursements and
      Payments.

              

      

       

      
        	
                (a)

              	
                Each
      payment by the Borrower will be made in U.S. Dollars and immediately
      available funds by debit to a deposit account, as described in this
      Agreement or otherwise authorized by the Borrower.  For payments
      not made by direct debit, payments will be made by mail to the address
      shown on the Borrower’s statement or at one of the Bank’s banking centers
      in the United States, or by such other method as may be permitted by the
      Bank.

              

      

       

      
        	
                (b)

              	
                The Bank may honor instructions
      for advances or repayments given by the Borrower (if an individual), or by
      any one of the individuals authorized to sign loan agreements on behalf of
      the Borrower, or any other individual designated by any one of such
      authorized signers (each an “Authorized
    Individual”).

              

      

       

      
        
          
          

        

        
          5     
Loan Agreement

          
            

          

        

        
          
          

        

         

      

      
        	
                (c)

              	
                For
      any payment under this Agreement made by debit to a deposit account, the
      Borrower will maintain sufficient immediately available funds in the
      deposit account to cover each debit.  If there are insufficient
      immediately available funds in the deposit account on the date the Bank
      enters any such debit authorized by this Agreement, the Bank may reverse
      the debit.

              

      

       

      
        	
                (d)

              	
                Each
      disbursement by the Bank and each payment by the Borrower will be
      evidenced by records kept by the Bank.  In addition, the Bank
      may, at its discretion, require the Borrower to sign one or more
      promissory notes.

              

      

       

      
        	
                (e)

              	
                Prior
      to the date each payment of principal and interest and any fees from the
      Borrower becomes due (the "Due Date"), the Bank will mail to the Borrower
      a statement of the amounts that will be due on that Due Date (the "Billed
      Amount").  The calculations in the bill will be made on the
      assumption that no new extensions of credit or payments will be made
      between the date of the billing statement and the Due Date, and that there
      will be no changes in the applicable interest rate.  If the
      Billed Amount differs from the actual amount due on the Due Date (the
      "Accrued Amount"), the discrepancy will be treated as
    follows:

              

      

       

      
        	
                 
      

              	
                (i)

              	
                If
      the Billed Amount is less than the Accrued Amount, the Billed Amount for
      the following Due Date will be increased by the amount of the
      discrepancy.  The Borrower will not be in default by reason of
      any such discrepancy.

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                If
      the Billed Amount is more than the Accrued Amount, the Billed Amount for
      the following Due Date will be decreased by the amount of the
      discrepancy.

              

      

       

      Regardless of any such discrepancy,
interest will continue to accrue based on the actual amount of principal
outstanding without compounding.  The Bank will not pay the Borrower
interest on any overpayment.

       

      
        	
                 

              	
                5.2

              	
                Telephone and Telefax
      Authorization.

              

      

       

      
        	
                (a)

              	
                The
      Bank may honor telephone or telefax instructions for advances or
      repayments given, or purported to be given, by any one of the Authorized
      Individuals.

              

      

       

      
        	
                (b)

              	
                Advances
      will be deposited in and repayments will be withdrawn from account number
      485005354897 owned by the Borrower, or such other of the Borrower’s
      accounts with the Bank as designated in writing by the
      Borrower.

              

      

       

      
        	
                (c)

              	
                The
      Borrower will indemnify and hold the Bank harmless from all liability,
      loss, and costs in connection with any act resulting from telephone or
      telefax instructions the Bank reasonably believes are made by any
      Authorized Individual.  This paragraph will survive this
      Agreement's termination, and will benefit the Bank and its officers,
      employees, and agents.

              

      

       

      
        	
                 
      

              	
                5.3

              	
                Direct
      Debit.

              

      

       

      The
Borrower agrees that on the Due Date the Bank will debit the Billed Amount from
deposit account number 485005354897 owned by the Borrower,
or such other of the Borrower’s accounts with the Bank as designated in writing
by the Borrower (the "Designated Account").

       

      
        	
                 
      

              	
                5.4

              	
                Banking
      Days.

              

      

       

      Unless
otherwise provided in this Agreement, a banking day is a day other than a
Saturday, Sunday or other day on which commercial banks are authorized to close,
or are in fact closed, in the state where the Bank's lending office is located,
and, if such day relates to amounts bearing interest at an offshore rate (if
any), means any such day on which dealings in dollar deposits are conducted
among banks in the offshore dollar interbank market.  All payments and
disbursements which would be due on a day which is not a banking day will be due
on the next banking day.  All payments received on a day which is not
a banking day will be applied to the credit on the next banking
day.

       

      
        
          
          

        

        
          6 Loan
Agreement

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                5.5

              	
                Interest
      Calculation.

              

      

       

      Except as
otherwise stated in this Agreement, all interest and fees, if any, will be
computed on the basis of a 360-day year and the actual number of days
elapsed.  This results in more interest or a higher fee than if a
365-day year is used.  Installments of principal which are not paid
when due under this Agreement shall continue to bear interest until
paid.

       

      
        	
                 
      

              	
                5.6

              	
                Default
      Rate.

              

      

       

      Upon the
occurrence of any default or after maturity or after judgment has been rendered
on any obligation under this Agreement, all amounts outstanding under this
Agreement, including any interest, fees, or costs which are not paid when due,
will at the option of the Bank bear interest at a rate which is 6.0 percentage
point(s) higher than the rate of interest otherwise provided under this
Agreement.  This may result in compounding of
interest.  This will not constitute a waiver of any
default.

       

      
        	
                 
      

              	
                6.

              	
                CONDITIONS

              

      

       

      Before
the Bank is required to extend any credit to the Borrower under this Agreement,
it must receive any documents and other items it may reasonably require, in form
and content acceptable to the Bank, including any items specifically listed
below.

       

      
        	
                 
      

              	
                6.1

              	
                Authorizations.

              

      

       

      If the
Borrower or any guarantor is anything other than a natural person, evidence that
the execution, delivery and performance by the Borrower and/or such guarantor of
this Agreement and any instrument or agreement required under this Agreement
have been duly authorized.

       

      
        	
                 
      

              	
                6.2

              	
                Governing
      Documents.

              

      

       

      If
required by the Bank, a copy of the Borrower's organizational
documents.

       

      
        	
                 
      

              	
                6.3

              	
                Security
      Agreement.

              

      

       

      
        	
                 
      

              	
                 Signed
      original security agreement covering the personal property collateral
      which the Bank requires.

              

      

       

      
        	
                 
      

              	
                6.4

              	
                Perfection and
      Evidence of Priority.

              

      

       

      Evidence
that the security interests and liens in favor of the Bank are valid,
enforceable, properly perfected in a manner acceptable to the Bank and prior to
all others' rights and interests, except those the Bank consents to in
writing.  All title documents for motor vehicles which are part of the
collateral must show the Bank's interest.

       

      
        	
                 
      

              	
                6.5

              	
                Payment of
      Fees.

              

      

       

      Payment
of all fees and other amounts due and owing to the Bank, including without
limitation payment of all accrued and unpaid expenses incurred by the Bank as
required by the paragraph entitled "Reimbursement Costs."

       

      
        	
                 
      

              	
                6.6

              	
                Good
      Standing.

              

      

       

      Certificates
of good standing for the Borrower from its state of formation and from any other
state in which the Borrower is required to qualify to conduct its
business.

       

      
        	
                 
      

              	
                6.7

              	
                Insurance.

              

      

       

      Evidence
of insurance coverage, as required in the "Covenants" section of this
Agreement.

       

      
        
          
          

        

        
          7     
Loan Agreement

          
            

          

        

        
          
          

        

      

      

      
        	
                 
      

              	
                6.8

              	
                Environmental
      Information.

              

      

       

      An
environmental site assessment prepared by a qualified third party consultant
approved by the Bank concerning any potential toxic or hazardous condition with
respect to the real property collateral, together with a certification signed by
the Borrower regarding the environmental information provided to the
Bank.

       

      6.9           
Environmental
Indemnification.

       

      An
Environmental Indemnity Agreement executed by the Borrower.

       

      
        	
                 
      

              	
                6.10

              	
                Deed of
      Trust.

              

      

       

      Signed
and acknowledged original Deed of Trust, as required by the Bank, encumbering
the real property collateral.

       

      
        	
                 
      

              	
                6.11

              	
                Title
      Insurance.

              

      

       

      An ALTA
lender's title insurance policy (on a form acceptable to the Bank and from a
title company acceptable to the Bank), for at least Six Million Four Hundred
Thousand and No/100 Dollars ($6,400,000.00), insuring the Bank's interest in the
real property collateral, with only such exceptions as may be approved by the
Bank and together
with such endorsements as the Bank may require.

       

      
        	
                6.12

              	
                Other Required
      Documentation.

              

      

       

      Any other
items that the Bank reasonably requires.

       

      
        	
                 
      

              	
                7.

              	
                REPRESENTATIONS
      AND WARRANTIES

              

      

       

      When the
Borrower signs this Agreement, and until the Bank is repaid in full, the
Borrower makes the following representations and warranties.  Each
request for an extension of credit constitutes a renewal of these
representations and warranties as of the date of the request:

       

      
        	
                 
      

              	
                7.1

              	
                Formation.

              

      

       

      If the
Borrower is anything other than a natural person, it is duly formed and existing
under the laws of the state or other jurisdiction where organized.

       

      
        	
                 
      

              	
                7.2

              	
                Authorization.

              

      

       

      This
Agreement, and any instrument or agreement required hereunder, are within the
Borrower's powers, have been duly authorized, and do not conflict with any of
its organizational papers.

       

      
        	
                 
      

              	
                7.3

              	
                Enforceable
      Agreement.

              

      

       

      This
Agreement is a legal, valid and binding agreement of the Borrower, enforceable
against the Borrower in accordance with its terms, and any instrument or
agreement required hereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable.

       

      
        	
                 
      

              	
                7.4

              	
                Good
      Standing.

              

      

       

      In each
state in which the Borrower does business, it is properly licensed, in good
standing, and, where required, in compliance with fictitious name
statutes.

       

      
        	
                 
      

              	
                7.5

              	
                No
      Conflicts.

              

      

       

      This
Agreement does not conflict with any law, agreement, or obligation by which the
Borrower is bound.

       

      
        
          
          

        

        
          8     
Loan Agreement

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                7.6

              	
                Financial
      Information.

              

      

       

      All
financial and other information that has been or will be supplied to the Bank is
sufficiently complete to give the Bank accurate knowledge of the Borrower's (and
any guarantor's) financial condition, including all material contingent
liabilities.  Since the date of the most recent financial statement
provided to the Bank, there has been no material adverse change in the business
condition (financial or otherwise), operations, properties or prospects of the
Borrower (or any guarantor).  If the Borrower is comprised of the
trustees of a trust, the foregoing representations shall also pertain to the
trustor(s) of the trust.

       

      
        	
                 
      

              	
                7.7

              	
                Lawsuits.

              

      

       

      There is
no lawsuit, tax claim or other dispute pending or threatened against the
Borrower which, if lost, would impair the Borrower's financial condition or
ability to repay the loan, except as have been disclosed in writing to the
Bank.

       

      
        	
                 
      

              	
                7.8

              	
                Collateral.

              

      

       

      All
collateral required in this Agreement is owned by the grantor of the security
interest free of any title defects or any liens or interests of others, except
those which have been approved by the Bank in writing.

       

      
        	
                 
      

              	
                7.9

              	
                Permits,
      Franchises.

              

      

       

      The
Borrower possesses all permits, memberships, franchises, contracts and licenses
required and all trademark rights, trade name rights, patent rights, copyrights,
and fictitious name rights necessary to enable it to conduct the business in
which it is now engaged.

       

      
        	
                 
      

              	
                7.10

              	
                Other
      Obligations.

              

      

       

      The
Borrower is not in default on any obligation for borrowed money, any purchase
money obligation or any other material lease, commitment, contract, instrument
or obligation, except as have been disclosed in writing to the
Bank.

       

      
        	
                 
      

              	
                7.11

              	
                Tax
      Matters.

              

      

       

      The
Borrower has no knowledge of any pending assessments or adjustments of its
income tax for any year and all taxes due have been paid, except as have been
disclosed in writing to the Bank.

      

      
        	
                 
      

              	
                7.12

              	
                No Event of
      Default.

              

      

      

      There is
no event which is, or with notice or lapse of time or both would be, a default
under this Agreement.

      

      
        	
                 
      

              	
                7.13

              	
                Insurance.

              

      

       

      The
Borrower has obtained, and maintained in effect, the insurance coverage required
in the "Covenants" section of this Agreement.

      

      
        	
                 
      

              	
                8.

              	
                COVENANTS

              

      

      

      The
Borrower agrees, so long as credit is available under this Agreement and until
the Bank is repaid in full:

      

      
        	
                 
      

              	
                8.1

              	
                Use of
      Proceeds.

              

      

       

      To use
the proceeds of Facility Nos. 1 and 2 only for working capital, general
corporate purposes, and purchase of real property.

       

      
        
          
          

        

        
          9     
Loan Agreement

          
            

          

        

        
          
          

        

      

      

      
        	
                 
      

              	
                8.2

              	
                Financial
      Information.

              

      

      

      To
provide the following financial information and statements in form and content
acceptable to the Bank, and such additional information as requested by the Bank
from time to time. The Bank reserves the right, upon written notice to the
Borrower, to require the Borrower to deliver financial information and
statements to the Bank more frequently than otherwise provided below, and to use
such additional information and statements to measure any applicable financial
covenants in this Agreement.

      

      
        	
                (a)

              	
                Copies
      of the Form 10-K Annual Report and Form 10-Q Quarterly Report for Borrower
      within one hundred-twenty (120) after the date of filing with the
      Securities and Exchange Commission for the Annual Report and forty-five
      (45) days after the date of filing with the Securities and Exchange
      Commission for the Quarterly
Report.

              

      

       

      
        	
                (b)

              	
                Within
      forty-five (45) days of the filing of the Form 10-K and  each
      10-Q, as the case may be, a compliance certificate of the Borrower, signed
      by an authorized financial officer and setting forth (i) the information
      and computations (in sufficient detail) to establish compliance with all
      financial covenants at the end of the period covered by the financial
      statements then being furnished and (ii) whether there existed as of the
      date of such financial statements and whether there exists as of the date
      of the certificate, any default under this Agreement and, if any such
      default exists, specifying the nature thereof and the action the
      Borrower is
      taking and proposes to take with respect
  thereto.

              

      

       

      
        	
                (c)

              	
                Promptly
      upon the Bank's request, such other books, records, statements, lists of
      property and accounts, budgets, forecasts or reports as to the Borrower
      and as to each guarantor of the Borrower's obligations to the Bank as the
      Bank may request.

              

      

       

      
        	
                 
      

              	
                8.3

              	
                Working
      Capital.

              

      

       

      To
maintain on a consolidated basis current assets in excess of current liabilities
of at least Ten Million and No/100 Dollars ($10,000,000.00), measured
quarterly.

      

      
        	
                 
      

              	
                8.4

              	
                Funded Debt to EBITDA
      Ratio.

              

      

      

      To
maintain on a consolidated basis a ratio of Funded Debt to EBITDA not exceeding
3.50:1.0, measured quarterly.

      

      “Funded
Debt” means all outstanding liabilities for borrowed money and other
interest-bearing liabilities, including current and long term debt, less the
non-current portion of Subordinated Liabilities.

       

      “EBITDA"
means net income, less income or plus loss from discontinued operations and
extraordinary items, plus income taxes, plus interest expense, plus
depreciation, depletion, amortization and other non-cash
charges.  EBITDA will not include any positive or negative
mark-to-market adjustments from derivatives, futures or otherwise, including
gains or losses from foreign exchanges.  This ratio will be calculated
at the end of each reporting period for which the Bank requires financial
statements from Borrower, using the results of the twelve-month period ending
with that reporting period.

       

      “Subordinated
Liabilities” means liabilities subordinated to the Borrower’s obligations to the
Bank in a manner acceptable to the Bank in its sole discretion.

       

      
        	
                 
      

              	
                8.5

              	
                Basic Fixed Charge
      Coverage Ratio.

              

      

       

      To
maintain on a consolidated basis a Basic Fixed Charge Coverage Ratio of at least
1.25:1.0, measured quarterly.

       

      "Basic
Fixed Charge Coverage Ratio" means the ratio of (a) the sum of EBITDA plus lease
expense and rent expense, minus the sum of taxes and dividends, to (b) the sum
of interest expense, lease expense, rent expense, the current portion of long
term debt and the current portion of capitalized lease obligations.

       

      
        
          
          

        

        
          10     
Loan Agreement

          
            

          

        

        
          
          

        

         

      

      "EBITDA"
means net income, less income or plus loss from discontinued operations and
extraordinary items, plus income taxes, plus interest expense, plus
depreciation, depletion, amortization and other non-cash
charges.  EBITDA will not include any positive or negative
mark-to-market adjustments from derivatives, futures or otherwise, including
gains or losses from foreign exchanges.

       

      This
ratio will be calculated at the end of each reporting period for which the Bank
requires financial statements from Borrower, using the results of the
twelve-month period ending with that reporting period.  The current
portion of long-term liabilities will be measured as of the date twelve (12)
months prior to the current financial statement.

      

      
        	
                 
      

              	
                8.6

              	
                Capital
      Expenditures.

              

      

      

      Not to
spend or incur obligations (including the total amount of any capital leases) to
acquire fixed assets for more than Ten Million and No/100 Dollars
($10,000,000.00) in any single fiscal year on a consolidated
basis.  The purchase of the Real Property will not be included in this
calculation.

      

      
        	
                 
      

              	
                8.7

              	
                Intentionally Omitted.
      

              

      

      

      
         8.8           
Intentionally
Omitted.

      

      

      
        	
                 
      

              	
                8.9

              	
                Other
      Debts.

              

      

      

      Not to
have outstanding or incur any direct or contingent liabilities (“Indebtedness”)
or lease obligations (other than those to the Bank), or become liable for the
liabilities of others, without the Bank's written consent.  This does
not prohibit:

      

      
        	
                (a)

              	
                Acquiring
      goods, supplies, or merchandise on normal trade
  credit.

              

      

      
        	
                (b)

              	
                Endorsing
      negotiable instruments received in the usual course of
      business.

              

      

      
        	
                (c)

              	
                Obtaining
      surety bonds in the usual course of
business.

              

      

      
        	
                (d)

              	
                Liabilities,
      lines of credit and leases in existence on the date of this Agreement
      disclosed in writing to the Bank.

              

      

      
        	
                (e)

              	
                Additional
      Indebtedness and lease obligations for the acquisition of fixed assets, to
      the extent permitted elsewhere in this
  Agreement.

              

      

      
        	
                (f)

              	
                Additional
      Indebtedness and lease obligations for business purposes which, together
      with the debts permitted under subparagraphs (a)-(e), above, so long as
      such aggregate Indebtedness, obligations and/or liabilities outstanding at
      any one time do not exceed Borrower’s then available working capital in
      excess of the minimum required working capital of Ten Million and No/100
      Dollars ($10,000,000.00).

              

      

      
        	
                (g)

              	
                Borrower's
      Euro Abn Amro Bank debt in the amount of Two Million Five Hundred Thousand
      Euros (2,500,000).

              

      

      (h)           Existing
operating leases approved by Bank.

      
        	
                (i)

              	
                New
      operating leases so long as the obligations thereunder do not exceed One
      Million
      and                                                No/100
      Dollars ($1,000,000.00) in the
aggregate.

              

      

      

      
        	
                 
      

              	
                8.10

              	
                Other
      Liens.

              

      

      

      Not to
create, assume, or allow any security interest or lien (including judicial
liens) on property the Borrower now or later owns, except:

      

      
        	
                (a)

              	
                Liens
      and security interests in favor of the
Bank.

              

      

      

      
        	
                (b)

              	
                Liens
      for taxes not yet due.

              

      

      

      
        	
                (c)

              	
                Liens
      outstanding on the date of this Agreement disclosed in writing to the
      Bank.

              

      

      

      
        	
                (d)

              	
                Additional
      purchase money security interests in assets acquired after the date of
      this Agreement.

              

      

       

      
        
          
          

        

        
          11     
Loan Agreement

          
            

          

        

        
          
          

        

      

      

      
        	
                 
      

              	
                8.11

              	
                Maintenance of
      Assets.

              

      

      

      
        	
                (a)

              	
                Not
      to sell, assign, lease, transfer or otherwise dispose of any part of the
      Borrower's business or the Borrower's assets except in the ordinary course
      of the Borrower's business.

              

      

      

      
        	
                (b)

              	
                Not
      to sell, assign, lease, transfer or otherwise dispose of any assets for
      less than fair market value, or enter into any agreement to do
      so.

              

      

       

      
        	
                (c)

              	
                Not
      to enter into any sale and leaseback agreement covering any of its fixed
      assets.

              

      

       

      
        	
                (d)

              	
                To
      maintain and preserve all rights, privileges, and franchises the Borrower
      now has.

              

      

       

      
        	
                (e)

              	
                To
      make any repairs, renewals, or replacements to keep the Borrower's
      properties in good working
condition.

              

      

      

      
        	
                 
      

              	
                8.12

              	
                Investments.

              

      

      

      Not to
have any existing, or make any new, investments in any individual or entity, or
make any capital contributions or other transfers of assets to any individual or
entity, except for:

      

      
        	
                (a)

              	
                Existing
      investments disclosed to the Bank in
writing.

              

      

       

      
        	
                (b)

              	
                Investments
      in the Borrower’s current
subsidiaries.

              

      

       

      
        	
                (c)

              	
                Investments
      in any of the following:

              

      

       

      
        	
                 
      

              	
                (i)

              	
                certificates
      of deposit;

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                U.S.
      treasury bills and other obligations of the federal
      government;

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                readily
      marketable securities (including commercial paper, but excluding
      restricted stock and stock subject to the provisions of Rule 144 of the
      Securities and Exchange
Commission).

              

      

       

      
        	
                (d)

              	
                The
      buy back of up to 750,000 shares in Borrower as authorized under any
      current or future stock   repurchase plan approved in
      writing by Borrower’s board of
directors.

              

      

       

      
        	
                 
      

              	
                8.13

              	
                Loans.

              

      

       

      Not to
make any loans, advances or other extensions of credit to any individual or
entity, except for:

       

      
        	
                (a)

              	
                Existing
      extensions of credit disclosed to the Bank in
  writing.

              

      

       

      
        	
                (b)

              	
                Extensions
      of credit to the Borrower’s current
  subsidiaries.

              

      

       

      
        	
                (c)

              	
                Extensions
      of credit in the nature of accounts receivable or notes receivable arising
      from the sale or lease of goods or services in the ordinary course of
      business to non-affiliated
entities.

              

      

       

      (d)           Extensions
of credit that do not exceed an aggregate amount
of                                                                                                                     One
Million and No/100 Dollars($1,000,000.00) outstanding at any one
time.

      

      

      
        	
                 
      

              	
                8.14

              	
                Additional Negative
      Covenants.

              

      

      

      Not to,
without the Bank's written consent:

      

      
        	
                (a)

              	
                Enter
      into any consolidation, merger, or other combination, or become a partner
      in a partnership, a member of a joint venture, or a member of a limited
      liability company.

              

      

       

      
        
          
          

        

        
          12     
Loan Agreement

          
            

          

        

        
          
          

        

         

      

      
        	
                (b)

              	
                Acquire
      or purchase a business or its
assets.

              

      

       

      
        	
                (c)

              	
                Engage
      in any business activities substantially different from the Borrower's
      present business.

              

      

       

      
        	
                (d)

              	
                Liquidate
      or dissolve the Borrower's
business.

              

      

       

      
        	
                (e)

              	
                Voluntarily
      suspend its business for more than ten (10) days in any three hundred
      sixty-five (365) day period.

              

      

       

      Notwithstanding
subparagraphs (a) and (b), above, Borrower may enter into mergers and
acquisitions without the Bank’s prior written consent so long as (i) the
aggregate amounts of the same do not exceed the lesser of (Y) Fifteen Million
and No/100 Dollars ($15,000,000.00) in any single calendar year, or (Z) Fifty
Million and No/100 Dollars ($50,000,000.00) in the aggregate, and (ii) Borrower
is in compliance, and pro-forma compliance post merger, with the covenants
contained in this Agreement.

       

      
        	
                 
      

              	
                8.15

              	
                Notices to
      Bank.

              

      

       

      To
promptly notify the Bank in writing of:

       

      
        	
                (a)

              	
                Any
      lawsuit over One Million and No/100 Dollars ($1,000,000.00) against the
      Borrower or any Obligor.

              

      

       

      
        	
                (b)

              	
                Any
      substantial dispute between any governmental authority and the Borrower or
      any Obligor.

              

      

       

      
        	
                (c)

              	
                Any
      event of default under this Agreement, or any event which, with notice or
      lapse of time or both, would constitute an event of
    default.

              

      

       

      
        	
                (d)

              	
                Any
      material adverse change in the Borrower's or any Obligor’s business
      condition (financial or otherwise), operations, properties or prospects,
      or ability to repay the credit.

              

      

       

      
        	
                (e)

              	
                Any
      change in the Borrower's or any Obligor’s name, legal structure, principal
      residence (for an individual), state of registration (for a registered
      entity), place of business, or chief executive office if the Borrower or
      any Obligor has more than one place of
business.

              

      

       

      
        	
                (f)

              	
                Any
      actual contingent liabilities of the Borrower or any Obligor, and any such
      contingent liabilities which are reasonably foreseeable, where such
      liabilities are in excess of One Million and No/100 Dollars
      ($1,000,000.00) in the aggregate.

              

      

       

      For
purposes of this Agreement, “Obligor” shall mean any guarantor, any party
pledging collateral to the Bank, or, if the Borrower is comprised of the
trustees of a trust, any trustor.

       

      
        	
                 
      

              	
                8.16

              	
                Insurance.

              

      

      

      
        	
                (a)

              	
                General Business
      Insurance.  To maintain insurance satisfactory to the
      Bank as to amount, nature and carrier covering property damage (including
      loss of use and occupancy) to any of the Borrower's properties, business
      interruption insurance, public liability insurance including coverage for
      contractual liability, product liability and workers' compensation, and
      any other insurance which is usual for the Borrower's
      business.  Each policy shall provide for at least thirty (30)
      days prior notice to the Bank of any cancellation
  thereof.

              

      

      

      
        	
                (b)

              	
                Insurance Covering
      Collateral.  To maintain all risk property damage
      insurance policies (including without limitation windstorm coverage, and
      hurricane coverage as applicable) covering the tangible property
      comprising the collateral.  Each insurance policy must be in an
      amount acceptable to the Bank.  The insurance must be issued by
      an insurance company acceptable to the Bank and must include a lender's
      loss payable endorsement in favor of the Bank in a form acceptable to the
      Bank.  Notwithstanding the foregoing, Bank is not currently
      requiring windstorm or hurricane coverage.  However, Borrower
      agrees to provide such coverages required by the Bank’s internal insurance
      group so long as such coverages are, at such time, commercially reasonable
      and available.  This provision shall prevail over any
      conflicting provisions, if any, in the other loan
    documents.

              

      

       

      
        
          
          

        

        
          13     
Loan Agreement

          
            

          

        

        
          
          

        

         

      

      
        	
                (c)

              	
                Evidence of
      Insurance.  Upon the request of the Bank, to deliver to
      the Bank a copy of each insurance policy, or, if permitted by the Bank, a
      certificate of insurance listing all insurance in
  force.

              

      

       

      
        	
                 
      

              	
                8.17

              	
                Compliance with
      Laws.

              

      

       

      To comply
with the laws (including any fictitious or trade name statute), regulations, and
orders of any government body with authority over the Borrower's
business.  The Bank shall have no obligation to make any advance to
the Borrower except in compliance with all applicable laws and regulations and
the Borrower shall fully cooperate with the Bank in complying with all such
applicable laws and regulations.

       

      
        	
                 
      

              	
                8.18

              	
                ERISA
      Plans. 

              

      

       

      Promptly
during each year, to pay and cause any subsidiaries to pay contributions
adequate to meet at least the minimum funding standards under ERISA with respect
to each and every Plan; file each annual report required to be filed pursuant to
ERISA in connection with each Plan for each year; and notify the Bank within ten
(10) days of the occurrence of any Reportable Event that might constitute
grounds for termination of any capital Plan by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States District
Court of a trustee to administer any Plan.  "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended from time to
time.  Capitalized terms in this paragraph shall have the meanings
defined within ERISA.

      

      
        	
                 
      

              	
                8.19

              	
                Books and
      Records.

              

      

      

      To
maintain adequate books and records.

       

      
        	
                 
      

              	
                8.20

              	
                Audits.

              

      

       

      To allow
the Bank and its agents to inspect the Borrower's properties and examine, audit,
and make copies of books and records at any reasonable time.  If any
of the Borrower's properties, books or records are in the possession of a third
party, the Borrower authorizes that third party to permit the Bank or its agents
to have access to perform inspections or audits and to respond to the Bank's
requests for information concerning such properties, books and
records.

       

      
        	
                 
      

              	
                8.21

              	
                Perfection of
      Liens.

              

      

       

      To help
the Bank perfect and protect its security interests and liens, and reimburse it
for related costs it incurs to protect its security interests and
liens.

       

      
        	
                 
      

              	
                8.22

              	
                Cooperation.

              

      

      

      To take
any action reasonably requested by the Bank to carry out the intent of this
Agreement.

      

      
        	
                 
      

              	
                8.23

              	
                Flood and Other
      Insurance.

              

      

      

      If any
improved real property collateral is located in a designated flood hazard area,
or becomes located in a designated flood hazard area after the date of this
Agreement as a result of any re-mapping of flood insurance maps by the Federal
Emergency Management Agency, the Borrower will be required to maintain flood
insurance on the real property and on any tangible personal property collateral
located on the real property.  In addition, the Borrower shall
maintain such other insurance as the Bank may require to comply with the Bank’s
regular requirements and practices in similar transactions, which may include
earthquake insurance and insurance covering acts of
terrorism.  Notwithstanding the foregoing, Bank is not currently
requiring earthquake or terrorism coverage.  However, Borrower agrees
to provide such coverages required by the Bank’s internal insurance group so
long as such coverages are, at such time, commercially reasonable and
available.  This provision shall prevail over any conflicting
provisions, if any, in the other loan documents.

       

      
        
          
          

        

        
          14     
Loan Agreement

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                8.24

              	
                Inspections and
      Appraisals of Real Property.

              

      

       

      To allow
the Bank and its agents to visit the real property collateral at any reasonable
time for the purpose of inspecting the real property and conducting appraisals,
and deliver to the Bank any financial or other information concerning the real
property as the Bank may request.

       

      
        	
                 
      

              	
                8.25

              	
                Use or Leasing of the
      Real Property Collateral.

              

      

       

      To occupy
the Real Property collateral for the conduct of its regular
business.  Borrower will not change its intended use of the Real
Property without the Bank's prior written approval.  If the Real
Property is leased to an affiliate, the lease will be fully subordinated to the
Bank's lien.  All terms, covenants, representations, and provisions of
this Agreement which pertain or apply to the Borrower will pertain or apply to
an affiliate in addition to, or in lieu of, the Borrower, as the context may
require

       

      
        	
                 
      

              	
                8.26

              	
                Indemnity Regarding
      Use of Real Property.

              

      

       

      To
indemnify, defend with counsel acceptable to the Bank, and hold the Bank
harmless from and against all liabilities, claims, actions, damages, costs and
expenses (including all legal fees and expenses of Bank's counsel) arising out
of or resulting from the construction of any improvements on the real property
collateral, or the ownership, operation, or use of the real property collateral,
whether such claims are based on theories of derivative liability, comparative
negligence or otherwise.  The Borrower's obligations to the Bank under
this Paragraph shall survive termination of this Agreement and repayment of the
Borrower's obligations to the Bank under this Agreement, and shall also survive
as unsecured obligations after any acquisition by the Bank of the real property
collateral or any part of it by foreclosure or any other means.

      

      9.             
HAZARDOUS SUBSTANCES - REAL PROPERTY SECURITY

       

      9.1            Indemnity Regarding
Hazardous Substances.

       

      The
Borrower agrees to indemnify and hold the Bank harmless from and against all
liabilities, claims, actions, foreseeable and unforeseeable consequential
damages, costs and expenses (including sums paid in settlement of claims and all
consultant, expert and legal fees and expenses of the Bank's counsel) or loss
directly or indirectly arising out of or resulting from any of the
following:

       

      (a)           Any
hazardous substance being present at any time, whether before, during or after
any construction, in or around any part of the Real Property collateral securing
this Agreement, or in the soil, groundwater or soil vapor on or under the Real
Property, including those incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work, or any
resulting damages or injuries to the person or property of any third parties or
to any natural resources.

       

      (b)           Any
use, generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence of a hazardous substance.  This
indemnity will apply whether the hazardous substance is on, under or about any
of the Borrower's property or operations or property leased to the Borrower,
whether or not the property has been taken by the Bank as
collateral.

       

      Upon
demand by the Bank, the Borrower will defend any investigation, action or
proceeding alleging the presence of any hazardous substance in any such
location, which affects the Real Property or which is brought or commenced
against the Bank, whether alone or together with the Borrower or any other
person, all at the Borrower's own cost and by counsel to be approved by the Bank
in the exercise of its reasonable judgment.  In the alternative, the
Bank may elect to conduct its own defense at the expense of the
Borrower.  The Borrower's obligations to the Bank under this Article,
except the obligation to give notices to the Bank, shall survive termination of
this Agreement, repayment of the Borrower's obligations to the Bank under this
Agreement, and foreclosure of the deed of trust or mortgage encumbering the Real
Property or similar proceedings.

       

      
        
          
          

        

        
          15     
Loan Agreement

          
            

          

        

        
          
          

        

      

       

      9.2            Representation and Warranty
Regarding Hazardous Substances.

       

      Before
signing this Agreement, the Borrower researched and inquired into the previous
uses and ownership of the Real Property.  Based on that due diligence,
the Borrower represents and warrants that to the best of its knowledge, no
hazardous substance has been disposed of or released or otherwise exists in, on,
under or onto the Real Property, except (a) for hazardous substances in de
minimis amounts not in violation of any Environmental Laws (as hereinafter
defined), or (b) as the Borrower has disclosed to the Bank in
writing.

       

      9.3            Compliance Regarding
Hazardous Substances.

       

      The
Borrower has complied, and will comply and cause all occupants of the Real
Property to comply, with all current and future laws, regulations and ordinances
or other requirements of any governmental authority relating to or imposing
liability or standards of conduct concerning protection of health or the
environment or hazardous substances ("Environmental Laws").  The
Borrower shall promptly, at the Borrower’s sole cost and expense, take all
reasonable actions with respect to any hazardous substances or other
environmental condition at, on, or under the Real Property necessary to (i)
comply with all applicable Environmental Laws; (ii) allow continued use,
occupation or operation of the Real Property; or (iii) maintain the fair market
value of the Real Property.  The Borrower acknowledges that hazardous
substances may permanently and materially impair the value and use of the Real
Property.

       

      9.4            Notices Regarding Hazardous
Substances.

       

      Until
full repayment of the loan, the Borrower will promptly notify the Bank in
writing if it knows, suspects or believes (a) there may be any hazardous
substance in or around the Real Property, or in the soil, groundwater or soil
vapor on or under the Real Property,  except for hazardous substances
in de minimis amounts not in violation of any Environmental Laws,  or
(b) that the Borrower or the Real Property may be subject to any threatened or
pending investigation by any governmental agency under any current or future
law, regulation or ordinance pertaining to any hazardous substance.

       

      9.5            Site Visits, Observations
and Testing.

       

      The Bank
and its agents and representatives will have the right at any reasonable time,
after giving reasonable notice to the Borrower, to enter and visit the Real
Property and any other locations where any personal property collateral securing
this Agreement is located, for the purposes of observing the Real Property and
the personal property collateral, taking and removing environmental samples, and
conducting tests on any part of the Real Property.  The Borrower shall
reimburse the Bank on demand for the costs of any such environmental
investigation and testing, and upon such reimbursement the Bank shall provide
the Borrower with a copy of all reports and supporting documentation relating to
such investigation and testing.  The Bank will make reasonable efforts
during any site visit, observation or testing conducted pursuant this paragraph
to avoid interfering with the Borrower’s use of the Real Property and the
personal property collateral.  The Bank is under no duty, however, to
visit or observe the Real Property or the personal property collateral or to
conduct tests, and any such acts by the Bank will be solely for the purposes of
protecting the Bank's security and preserving the Bank's rights under this
Agreement.  No site visit, observation or testing or any report or
findings made as a result thereof ("Environmental Report") (i) will result in a
waiver of any default of the Borrower; (ii) impose any liability on the Bank; or
(iii) be a representation or warranty of any kind regarding the Real Property or
the personal property collateral (including its condition or value or compliance
with any laws) or the Environmental Report (including its accuracy or
completeness).  In the event the Bank has a duty or obligation under
applicable laws, regulations or other requirements to disclose an Environmental
Report to the Borrower or any other party, the Borrower authorizes the Bank to
make such a disclosure.  The Bank may also disclose an Environmental
Report to any regulatory authority, and to any other parties as necessary or
appropriate in the Bank’s judgment.  The Borrower further understands
and agrees that any Environmental Report or other information regarding a site
visit, observation or testing that is disclosed to the Borrower by the Bank or
its agents and representatives is to be evaluated (including any reporting or
other disclosure obligations of the Borrower) by the Borrower without advice or
assistance from the Bank.

       

      
        
          
          

        

        
          16     
Loan Agreement

          
            

          

        

        
          
          

        

      

       

      9.6             Definition of Hazardous
Substance.

       

      "Hazardous
substance" means any substance, material or waste that is or becomes designated
or regulated as "toxic," "hazardous," "pollutant," or "contaminant" or a similar
designation or regulation under any current or future federal, state or local
law (whether under common law, statute, regulation or otherwise) or judicial or
administrative interpretation of such, including without limitation petroleum or
natural gas.

      

      
        	
                 
      

              	
                10.

              	
                DEFAULT
      AND REMEDIES

              

      

      If any of
the following events of default occurs, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice.  If an event which, with notice
or the passage of time, will constitute an event of default has occurred and is
continuing, the Bank has no obligation to make advances or extend additional
credit under this Agreement.  In addition, if any event of default
occurs, the Bank shall have all rights, powers and remedies available under any
instruments and agreements required by or executed in connection with this
Agreement, as well as all rights and remedies available at law or in
equity.  If an event of default occurs under the paragraph entitled
"Bankruptcy," below, with respect to the Borrower, then the entire debt
outstanding under this Agreement will automatically be due
immediately.

       

      
        	
                 
      

              	
                10.1

              	
                Failure to
      Pay.

              

      

      

      The
Borrower fails to make a payment under this Agreement when due.

      

      
        	
                 
      

              	
                10.2

              	
                Other Bank
      Agreements.

              

      

      

      Any
non-monetary default occurs under any other agreement the Borrower (or any
Obligor) or any of the Borrower's related entities or affiliates has with the
Bank or any affiliate of the Bank, and is not cured within ten (10) days of the
occurrence of the default.

      

      
        	
                 
      

              	
                10.3

              	
                Cross-default.

              

      

      

      Any
non-monetary default occurs under any agreement in connection with any
Indebtedness the Borrower (or any Obligor) or any of the Borrower's related
entities or affiliates has obtained from anyone else or which the Borrower (or
any Obligor) or any of the Borrower's related entities or affiliates has
guaranteed, and is not cured within ten (10) days of the occurrence of the
default.

      

      
        	
                 
      

              	
                10.4

              	
                False
      Information.

              

      

      

      The
Borrower or any Obligor has given the Bank materially false or misleading
information or representations.

      

      
        	
                 
      

              	
                10.5

              	
                Bankruptcy.

              

      

      

      The
Borrower, any Obligor, or any general partner of the Borrower or of any Obligor
files a bankruptcy petition, a bankruptcy petition is filed against any of the
foregoing parties, or the Borrower, any Obligor, or any general partner of the
Borrower or of any Obligor makes a general assignment for the benefit of
creditors.

      

      
        	
                 
      

              	
                10.6

              	
                Receivers.

              

      

       

      A
receiver or similar official is appointed for a substantial portion of the
Borrower's or any Obligor's business, or the business is terminated, or, if any
Obligor is anything other than a natural person, such Obligor is liquidated or
dissolved.

       

      
        
          
          

        

        
          17     
Loan Agreement

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                10.7

              	
                Lien
      Priority.

              

      

      

      The Bank
fails to have an enforceable first lien (except for any prior liens to which the
Bank has consented in writing) on or security interest in any property given as
security for this Agreement (or any guaranty).

      

      
        	
                 
      

              	
                10.8

              	
                Lawsuits.

              

      

       

      Any
lawsuit or lawsuits are filed on behalf of one or more trade creditors against
the Borrower or any Obligor in an aggregate amount of One Million and No/100
Dollars ($1,000,000,00) or more in excess of any insurance
coverage.  Notwithstanding the foregoing such lawsuit(s) shall not
constitute a default or event of default unless or until (a) either of the loans
described herein is otherwise in default, (b) Borrower fails to keep Bank
apprised of the status of the lawsuit(s), and/or (c)  Bank reasonably
determines that the lawsuit(s) may, with the passage of time, create a
default.

       

      
        	
                 
      

              	
                10.9

              	
                Judgments.

              

      

       

      Any
judgments or arbitration awards are entered against the Borrower or any Obligor,
or the Borrower or any Obligor enters into any settlement agreements with
respect to any litigation or arbitration, in an aggregate amount of One Million
and No/100 Dollars ($1,000,000.00) or more in excess of any insurance coverage,
and the same remains unsatisfied for thirty (30) days or more without being
promptly appealed by Borrower or Obligor, as the case may be.

       

      
        10.10        
Material Adverse
Change.

      

      

      Bank
reasonably determines that a material adverse change occurs, or is reasonably
likely to occur, in the Borrower's (or any Obligor's) business condition
(financial or otherwise), operations, properties or prospects, or ability to
repay the credit; or the Bank reasonably determines that it is insecure for any
other reason.

      

      
        10.11        
Government
Action.

      

      

      Any
government authority takes action that the Bank reasonably believes materially
adversely affects the Borrower's or any Obligor's financial condition or ability
to repay.

      

      
        10.12        
Default under Related
Documents.

      

       

      Any
default occurs under any guaranty, subordination agreement, security agreement,
deed of trust, mortgage, or other document required by or delivered in
connection with this Agreement or any such document is no longer in effect, or
any guarantor purports to revoke or disavow the guaranty.

      

      
        10.13        
ERISA
Plans.

      

      

      Any one
or more of the following events occurs with respect to a Plan of the Borrower
subject to Title IV of ERISA, provided such event or events could reasonably be
expected, in the judgment of the Bank, to subject the Borrower to any tax,
penalty or liability (or any combination of the foregoing) which, in the
aggregate, could have a material adverse effect on the financial condition of
the Borrower:

      

      
        	
                (a)

              	
                A
      reportable event shall occur under Section 4043(c) of ERISA with respect
      to a Plan.

              

      

       

      
        	
                (b)

              	
                Any
      Plan termination (or commencement of proceedings to terminate a Plan) or
      the full or partial withdrawal from a Plan by the Borrower or any ERISA
      Affiliate.

              

      

       

      
        	
                 
      

              	
                10.14

              	
                Other Breach Under
      Agreement.

              

      

       

      A default
occurs under any other term or condition of this Agreement not specifically
referred to in this Article.  This includes any failure or anticipated
failure by the Borrower (or any other party named in the Covenants section) to
comply with any financial covenants set forth in this Agreement, whether such
failure is evidenced by financial statements delivered to the Bank or is
otherwise known to the Borrower or the Bank.

       

      
        
          
          

        

        
          18     
Loan Agreement

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                11.

              	
                ENFORCING
      THIS AGREEMENT; MISCELLANEOUS

              

      

       

      
        	
                 
      

              	
                11.1

              	
                GAAP.

              

      

       

      Except as
otherwise stated in this Agreement, all financial information provided to the
Bank and all financial covenants will be made under generally accepted
accounting principles, consistently applied.

      

      
        	
                 
      

              	
                11.2

              	
                Governing
      Law.

              

      

      

      This
Agreement shall be governed by and construed in accordance with the laws of
Washington.  To the extent that the Bank has greater rights or
remedies under federal law, whether as a national bank or otherwise, this
paragraph shall not be deemed to deprive the Bank of such rights and remedies as
may be available under federal law.

      

      
        	
                 
      

              	
                11.3

              	
                Successors and
      Assigns.

              

      

       

      This
Agreement is binding on the Borrower's and the Bank's successors and
assignees.  The Borrower agrees that it may not assign this Agreement
without the Bank's prior consent.  The Bank may sell participations in
or assign this loan, and may exchange information about the Borrower (including,
without limitation, any information regarding any hazardous substances) with
actual or potential participants or assignees.  If a participation is
sold or the loan is assigned, the purchaser will have the right of set-off
against the Borrower.

      

      
        	
                 
      

              	
                11.4

              	
                Dispute Resolution
      Provision.

              

      

      

      This
paragraph, including the subparagraphs below, is referred to as the “Dispute
Resolution Provision.”  This Dispute Resolution Provision is a
material inducement for the parties entering into this agreement.

      

      
        	
                (a)

              	
                This
      Dispute Resolution Provision concerns the resolution of any controversies
      or claims between the parties, whether arising in contract, tort or by
      statute, including but not limited to controversies or claims that arise
      out of or relate to: (i) this agreement (including any renewals,
      extensions or modifications); or (ii) any document related to this
      agreement (collectively a "Claim").  For the purposes of this
      Dispute Resolution Provision only, the term “parties” shall include any
      parent corporation, subsidiary or affiliate of the Bank involved in the
      servicing, management or administration of any obligation described or
      evidenced by this agreement.

              

      

      

      
        	
                (b)

              	
                At
      the request of any party to this agreement, any Claim shall be resolved by
      binding arbitration in accordance with the Federal Arbitration Act (Title
      9, U.S. Code) (the "Act").  The Act will apply even though this
      agreement provides that it is governed by the law of a specified
      state.

              

      

       

      
        	
                (c)

              	
                Arbitration
      proceedings will be determined in accordance with the Act, the
      then-current rules and procedures for the arbitration of financial
      services disputes of any arbitration service agreed upon in writing by
      both Borrower and Bank or in the absence of such written agreement, then
      the American Arbitration Association or any successor thereof ("AAA"), and
      the terms of this Dispute Resolution Provision.  In the event of
      any inconsistency, the terms of this Dispute Resolution Provision shall
      control.  If AAA is unwilling or unable to (i) serve as the
      provider of arbitration or (ii) enforce any provision of this arbitration
      clause, the Bank may designate another arbitration organization with
      similar procedures to serve as the provider of arbitration.  All
      references herein made to “AAA” shall mean the alternative arbitration
      service if one is so agreed upon in writing by both Bank and
      Borrower.

              

      

       

      
        	
                (d)

              	
                The
      arbitration shall be administered by AAA and conducted, unless otherwise
      required by law, in any U.S. state where real or tangible personal
      property collateral for this credit is located or if there is no such
      collateral, in the state specified in the governing law section of this
      agreement.  All Claims shall be determined by one arbitrator;
      however, if Claims exceed Five Million Dollars ($5,000,000), upon the
      request of any party, the Claims shall be decided by three
      arbitrators.  All arbitration hearings shall commence within
      ninety (90) days of the demand for arbitration and close within ninety
      (90) days of commencement and the award of the arbitrator(s) shall be
      issued within thirty (30) days of the close of the
      hearing.  However, the arbitrator(s), upon a showing of good
      cause, may extend the commencement of the hearing for up to an additional
      sixty (60) days.  The arbitrator(s) shall provide a concise
      written statement of reasons for the award.  The arbitration
      award may be submitted to any court having jurisdiction to be confirmed
      and have judgment entered and
enforced.

              

      

       

      
        
          
          

        

        
          19     
Loan Agreement

          
            

          

        

        
          
          

        

      

       

      
        	
                (e)

              	
                The
      arbitrator(s) will give effect to statutes of limitation in determining
      any Claim and may dismiss the arbitration on the basis that the Claim is
      barred. For purposes of the application of any statutes of limitation, the
      service on AAA under applicable AAA rules of a notice of Claim is the
      equivalent of the filing of a lawsuit.  Any dispute concerning
      this arbitration provision or whether a Claim is arbitrable shall be
      determined by the arbitrator(s), except as set forth at subparagraph (h)
      of this Dispute Resolution Provision.  The arbitrator(s) shall
      have the power to award legal fees pursuant to the terms of this
      agreement.

              

      

       

      
        	
                (f)

              	
                This
      paragraph does not limit the right of any party to: (i) exercise self-help
      remedies, such as but not limited to, setoff; (ii) initiate judicial or
      non-judicial foreclosure against any real or personal property collateral;
      (iii) exercise any judicial or power of sale rights, or (iv) act in a
      court of law to obtain an interim remedy, such as but not limited to,
      injunctive relief, writ of possession or appointment of a receiver, or
      additional or supplementary
remedies.

              

      

       

      
        	
                (g)

              	
                The
      filing of a court action is not intended to constitute a waiver of the
      right of any party, including the suing party, thereafter to require
      submittal of the Claim to
arbitration.

              

      

       

      
        	
                (h)

              	
                Any
      arbitration or trial by a judge of any Claim will take place on an
      individual basis without resort to any form of class or representative
      action (the “Class Action Waiver”).  Regardless of anything else
      in this Dispute Resolution Provision, the validity and effect of the Class
      Action Waiver may be determined only by a court and not by an
      arbitrator.  The parties to this Agreement acknowledge that the
      Class Action Waiver is material and essential to the arbitration of any
      disputes between the parties and is nonseverable from the agreement to
      arbitrate Claims. If the Class Action Waiver is limited, voided or found
      unenforceable, then the parties’ agreement to arbitrate shall be null and
      void with respect to such proceeding, subject to the right to appeal the
      limitation or invalidation of the Class Action Waiver.  The Parties acknowledge and
      agree that under no circumstances will a class action be
      arbitrated.

              

      

      

      
        	
                (i)

              	
                By
      agreeing to binding arbitration, the parties irrevocably and voluntarily
      waive any right they may have to a trial by jury in respect of any
      Claim.  Furthermore, without intending in any way to limit this
      agreement to arbitrate, to the extent any Claim is not arbitrated, the
      parties irrevocably and voluntarily waive any right they may have to a
      trial by jury in respect of such Claim.  This waiver of jury
      trial shall remain in effect even if the Class Action Waiver is limited,
      voided or found unenforceable.  WHETHER THE CLAIM IS DECIDED BY
      ARBITRATION OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT
      THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL
      BY JURY TO THE EXTENT PERMITTED BY
LAW.

              

      

      

      
        	
                 
      

              	
                11.5

              	
                Severability;
      Waivers.

              

      

       

      If any
part of this Agreement is not enforceable, the rest of the Agreement may be
enforced.  The Bank retains all rights, even if it makes a loan after
default.  If the Bank waives a default, it may enforce a later
default.  Any consent or waiver under this Agreement must be in
writing.

       

      
        	
                 
      

              	
                11.6

              	
                Attorneys’
      Fees.

              

      

       

      The
Borrower shall reimburse the Bank for any reasonable costs and attorneys' fees
incurred by the Bank in connection with the enforcement or preservation of any
rights or remedies under this Agreement and any other documents executed in
connection with this Agreement, and in connection with any amendment, waiver,
"workout" or restructuring under this Agreement.  In the event of a
lawsuit or arbitration proceeding, the prevailing party is entitled to recover
costs and reasonable attorneys' fees incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator.  In
the event that any case is commenced by or against the Borrower under the
Bankruptcy Code (Title 11, United States Code) or any similar or successor
statute, the Bank is entitled to recover costs and reasonable attorneys' fees
incurred by the Bank related to the preservation, protection, or enforcement of
any rights of the Bank in such a case.  As used in this paragraph,
"attorneys' fees" includes the allocated costs of the Bank's in-house
counsel.

       

      
        
          
          

        

        
          20     
Loan Agreement

          
            

          

        

        
          
          

        

      

      

      
        	
                 
      

              	
                11.7

              	
                Set-Off.

              

      

      

      
        	
                (a)

              	
                In
      addition to any rights and remedies of the Bank provided by law, upon the
      occurrence and during the continuance of any event of default under this
      Agreement, the Bank is authorized, at any time, to set off and apply any
      and all Deposits of the Borrower or any Obligor held by the Bank against
      any and all Obligations owing to the Bank.  The set-off may be
      made irrespective of whether or not the Bank shall have made demand under
      this Agreement or any guaranty, and although such Obligations may be
      contingent or unmatured or denominated in a currency different from that
      of the applicable Deposits.

              

      

      
        	
                (b)

              	
                The
      set-off may be made without prior notice to the Borrower or any other
      party, any such notice being waived by the Borrower (on its own behalf and
      on behalf of each Obligor) to the fullest extent permitted by
      law.  The Bank agrees promptly to notify the Borrower after any
      such set-off and application; provided, however, that
      the failure to give such notice shall not affect the validity of such
      set-off and application.

              

      

       

      
        	
                (c)

              	
                For
      the purposes of this paragraph, “Deposits” means any deposits (general or
      special, time or demand, provisional or final, individual or joint) and
      any instruments owned by the Borrower or any Obligor which come into the
      possession or custody or under the control of the
      Bank.  “Obligations” means all obligations, now or hereafter
      existing, of the Borrower to the Bank under this Agreement and under any
      other agreement or instrument executed in connection with this Agreement,
      and the obligations to the Bank of any
Obligor.

              

      

       

      
        	
                 
      

              	
                11.8

              	
                One
      Agreement.

              

      

       

      This
Agreement and any related security or other agreements required by this
Agreement, collectively:

       

      
        	
                (a)

              	
                represent
      the sum of the understandings and agreements between the Bank and the
      Borrower concerning this credit;

              

      

       

      
        	
                (b)

              	
                replace
      any prior oral or written agreements between the Bank and the Borrower
      concerning this credit; and

              

      

       

      
        	
                (c)

              	
                are
      intended by the Bank and the Borrower as the final, complete and exclusive
      statement of the terms agreed to by
them.

              

      

       

      In the
event of any conflict between this Agreement and any other agreements required
by this Agreement, this Agreement will prevail.  Any reference in any
related document to a “promissory note” or a “note” executed by the Borrower and
dated as of the date of this Agreement shall be deemed to refer to this
Agreement, as now in effect or as hereafter amended, renewed, or
restated.

       

      
        	
                 
      

              	
                11.9

              	
                Indemnification.

              

      

       

      The
Borrower will indemnify and hold the Bank harmless from any loss, liability,
damages, judgments, and costs of any kind relating to or arising directly or
indirectly out of (a) this Agreement or any document required hereunder, (b) any
credit extended or committed by the Bank to the Borrower hereunder, and (c) any
litigation or proceeding related to or arising out of this Agreement, any such
document, or any such credit.  This indemnity includes but is not
limited to attorneys' fees (including the allocated cost of in-house
counsel).  This indemnity extends to the Bank, its parent,
subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys, and assigns.  This indemnity will survive
repayment of the Borrower's obligations to the Bank.  All sums due to
the Bank hereunder shall be obligations of the Borrower, due and payable
immediately without demand.

       

      
        
          
          

        

        
          21     
Loan Agreement

          
            

          

        

        
          
          

        

      

       

      
        	
                11.10

              	
                Notices.

              

      

       

      Unless
otherwise provided in this Agreement or in another agreement between the Bank
and the Borrower, all notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, or by overnight courier,
to the addresses on the signature page of this Agreement, or sent by facsimile
to the fax numbers listed on the signature page, or to such other addresses as
the Bank and the Borrower may specify from time to time in
writing.  Notices and other communications shall be effective (i) if
mailed, upon the earlier of receipt or five (5) days after deposit in the U.S.
mail, first class, postage prepaid, (ii) if telecopied, when transmitted, or
(iii) if hand-delivered, by courier or otherwise (including telegram, lettergram
or mailgram), when delivered.

       

      
        	
                11.11

              	
                Headings.

              

      

       

      Article
and paragraph headings are for reference only and shall not affect the
interpretation or meaning of any provisions of this Agreement.

       

      
        	
                11.12

              	
                Counterparts.

              

      

       

      This
Agreement may be executed in as many counterparts as necessary or convenient,
and by the different parties on separate counterparts each of which, when so
executed, shall be deemed an original but all such counterparts shall constitute
but one and the same agreement.

       

      
        	
                11.13

              	
                Borrower Information;
      Reporting to Credit Bureaus.

              

      

       

      The
Borrower authorizes the Bank at any time to verify or check any information
given by the Borrower to the Bank, check the Borrower’s credit references,
verify employment, and obtain credit reports.  The Borrower agrees
that the Bank shall have the right at all times to disclose and report to credit
reporting agencies and credit rating agencies such information pertaining to the
Borrower and/or all guarantors as is consistent with the Bank's policies and
practices from time to time in effect.

       

      This
Agreement is executed as of the date stated at the top of the first
page.

      

      BANK
OF AMERICA,
N.A.,                                                                           KEY
TECHNOLGY, INC.

      a
national banking
association                                                                       an
Oregon corporation

      

      By:_____________________                                                                      By: 
/s/ David M. Camp

      

      Its:______________________                                                                    Its:
 President and Chief Executive Officer

      

      

      Address
where notices
to                                                                               
Address where notices to

      the Bank
are to be
sent:                                                                                   
the Borrower are to be sent:

      Bank of
America,
N.A.                                                                                     
150 Avery Street

      1075 Main
Street, 2nd
Floor                                                                              Walla
Walla, Washington 99362

      Waltham,
MA 02451

       

      Federal
law requires Bank of America, N.A. (the “Bank”) to provide the
following notice. The notice is not part of the foregoing agreement or
instrument and may not be altered.  Please read the notice
carefully.

      

      USA
PATRIOT ACT NOTICE

      Federal
law requires all financial institutions to obtain, verify and record information
that identifies each person who opens an account or obtains a
loan.  The Bank will ask for the Borrower’s legal name, address, tax
ID number or social security number and other identifying
information.  The Bank may also ask for additional information or
documentation or take other actions reasonably necessary to verify the identity
of the Borrower, guarantors or other related persons.

       

      22     Loan Agreement

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00151-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00151-of-00352.parquet"}]]