Document:

EXHIBIT
10.2

CONTINUING
GUARANTY

FOR VALUE RECEIVED, the sufficiency of which is hereby
acknowledged, and in consideration of credit and/or financial accommodation
heretofore or hereafter from time to time made or granted to INTERNATIONAL
RECTIFIER SOUTHEAST ASIA PTE. LTD. (the “Borrower”) pursuant to the Credit
Agreement (as defined below) with BANK OF AMERICA, N.A., as Administrative
Agent, and the other Lenders party thereto (Agent and Lenders being
collectively referred to herein as the “Lender”), the undersigned
Guarantor (the “Guarantor”) hereby furnishes its guaranty of the
Guaranteed Obligations (as hereinafter defined) as follows:

1.             Guaranty. The Guarantor hereby absolutely and
unconditionally guarantees, as a guaranty of payment and performance and not
merely as a guaranty of collection, prompt payment when due, whether at stated
maturity, by required prepayment, upon acceleration, demand or otherwise, and
at all times thereafter, of any and all existing and future indebtedness and
liabilities of every kind, nature and character, direct or indirect, absolute
or contingent, liquidated or unliquidated, voluntary or involuntary and whether
for principal, interest, premiums, fees indemnities, damages, costs, expenses
or otherwise, of the Borrower to the Lender, arising
under that certain Credit Agreement dated June 27, 2006 between the
Borrower and the Lender (the “Credit Agreement”) and any of the other
Loan Documents (as defined therein) (including all renewals, extensions,
amendments, refinancings and other modifications thereof and all costs,
attorneys’ fees and expenses incurred by the Lender in connection with the
collection or enforcement thereof), and whether recovery upon such indebtedness
and liabilities may be or hereafter become unenforceable or shall be an allowed
or disallowed claim under any proceeding or case
commenced by or against the Guarantor or the Borrower under the Bankruptcy Code
(Title 11, United States Code), any successor statute or any other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief laws of the United States or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally
(collectively, “Debtor Relief Laws”), and including interest that
accrues after the commencement by or against the Borrower of any proceeding
under any Debtor Relief Laws (collectively, the “Guaranteed Obligations”).
The Lender’s books and records showing the amount of the Guaranteed Obligations
shall be admissible in evidence in any action or proceeding, and shall be
binding upon the Guarantor and conclusive for the purpose of establishing the
amount of the Guaranteed Obligations. This Guaranty shall not be affected by
the genuineness, validity, regularity or enforceability of the Guaranteed
Obligations or any instrument or agreement evidencing any Guaranteed
Obligations, or by the existence, validity, enforceability, perfection, non-perfection
or extent of any collateral therefor, or by any fact or circumstance relating
to the Guaranteed Obligations which might otherwise constitute a defense to the
obligations of the Guarantor under this Guaranty, and the Guarantor hereby
irrevocably waives any defenses it may now have or hereafter acquire in any way
relating to any or all of the foregoing.

2.             No Setoff or Deductions; Taxes; Payments. The Guarantor
represents and warrants that it is organized and resident in the United States
of America. The Guarantor shall make all payments hereunder without setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by 

 

any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless the Guarantor is compelled by law
to make such deduction or withholding. If any such obligation (other than one
arising with respect to (a) taxes imposed on or measured by the Lender’s
overall net income, gross receipts or capital (however denominated), and
franchise taxes, excise taxes, net worth and similar levies (in lieu of taxes
on overall net income, gross receipts or capital), or (b) any branch
profits taxes imposed by the United States or any similar tax imposed by any
jurisdiction in which the Borrower is located) is imposed upon the Guarantor
with respect to any amount payable by it hereunder, the Guarantor will pay to
the Lender, on the date on which such amount is due and payable hereunder, such
additional amount in U.S. dollars as shall be necessary to enable the Lender to
receive the same net amount which the Lender would have received on such due
date had no such obligation been imposed upon the Guarantor. The Guarantor will
deliver promptly to the Lender upon request evidence of all withholding taxes
paid by it with respect to payments made by the Guarantor hereunder. The obligations of the Guarantor under this paragraph
shall survive the payment in full of the Guaranteed Obligations and termination of this Guaranty. At the Lender’s
option, all payments under this Guaranty shall be made in the United States. The
obligations hereunder shall not be affected by any acts of any legislative body
or governmental authority affecting the Borrower, including but not limited to,
any restrictions on the conversion of currency or repatriation or control of
funds or any total or partial expropriation of the Borrower’s property, or by
economic, political, regulatory or other events in the countries where the
Borrower is located.

3.             Rights of Lender. The Guarantor consents and agrees
that the Lender may, at any time and from time to time, without notice or
demand, and without affecting the enforceability or continuing effectiveness
hereof:  (a) amend, extend, renew,
compromise, discharge, accelerate or otherwise change the time for payment or
the terms of the Guaranteed Obligations or any part thereof; (b) take,
hold, exchange, enforce, waive, release, fail to perfect, sell, or otherwise
dispose of any security for the payment of this Guaranty or any Guaranteed
Obligations; (c) apply such security and direct the order or manner of
sale thereof as the Lender in its sole discretion may determine; and (d) release
or substitute one or more of any endorsers or other guarantors of any of the
Guaranteed Obligations. Without limiting the generality of the foregoing, the
Guarantor consents to the taking of, or failure to take, any action which might
in any manner or to any extent vary the risks of the Guarantor under this
Guaranty or which, but for this provision, might operate as a discharge of the
Guarantor.

4.             Certain Waivers. The Guarantor waives (a) any
defense arising by reason of any disability or other defense of the Borrower or
any other guarantor, or the cessation from any cause whatsoever (including any
act or omission of the Lender) of the liability of the Borrower; (b) any
defense based on any claim that the Guarantor’s obligations exceed or are more
burdensome than those of the Borrower; (c) the benefit of any statute of
limitations affecting the Guarantor’s liability hereunder; (d) any right
to require the Lender to proceed against the Borrower, proceed against or exhaust
any security for the Guaranteed Obligations, or pursue any other remedy in the
Lender ‘s power whatsoever; (e) any benefit of and any right to
participate in any security now or hereafter held by the Lender; and (f) to
the fullest extent permitted by law, any and all other defenses or benefits
that may be derived from or afforded by applicable law limiting the liability
of or exonerating guarantors or sureties. The Guarantor expressly waives all
setoffs and counterclaims and all presentments, demands for payment or
performance, notices of nonpayment or nonperformance, protests, notices of
protest, notices of dishonor and all other 

 

notices or demands of any kind or nature whatsoever
with respect to the Guaranteed Obligations, and all notices of acceptance of
this Guaranty or of the existence, creation or incurrence of new or additional
Guaranteed Obligations.

5.             Obligations Independent. The obligations of the
Guarantor hereunder are independent of the Guaranteed Obligations and the
obligations of any other guarantor, and a separate action may be brought
against the Guarantor to enforce this Guaranty whether or not the Borrower or
any other person or entity is joined as a party.

6.             Subrogation. The Guarantor shall not exercise any right
of subrogation, contribution, indemnity, reimbursement or similar rights with
respect to any payments it makes under this Guaranty until all of the
Guaranteed Obligations and any amounts payable under this Guaranty have been
indefeasibly paid and performed in full and any commitments of the Lender or
facilities provided by the Lender with respect to the Guaranteed Obligations
are terminated. If any amounts are paid to the Guarantor in violation of the
foregoing limitation, then such amounts shall be held in trust for the benefit
of the Lender and shall forthwith be paid to the Lender to reduce the amount of
the Guaranteed Obligations, whether matured or unmatured.

7.             Termination; Reinstatement. This Guaranty is a
continuing and irrevocable guaranty of all Guaranteed Obligations now or
hereafter existing and shall remain in full force and effect until all
Guaranteed Obligations and any other amounts payable under this Guaranty are
indefeasibly paid in full in cash and any commitments of the Lender or
facilities provided by the Lender with respect to the Guaranteed Obligations
are terminated. Notwithstanding the foregoing, this Guaranty shall continue in full force and effect or be revived, as the case may be, if any payment by or on behalf of the Borrower or the
Guarantor is made, or the Lender exercises its right of setoff, in respect of
the Guaranteed Obligations and such payment or the proceeds of such setoff or
any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Lender in its discretion) to be repaid to a trustee,
receiver or any other party, in connection with any proceeding under any Debtor
Relief Laws or otherwise, all as if such payment had not been made or such setoff had not occurred and whether or
not the Lender is in possession of or has released this Guaranty and regardless
of any prior revocation, rescission, termination or reduction. The obligations of the Guarantor under this paragraph
shall survive termination of this Guaranty.

8.             Subordination. The
Guarantor hereby subordinates the payment of all obligations and indebtedness
of the Borrower owing to the Guarantor, whether now existing or hereafter
arising, including but not limited to any obligation of the Borrower to the
Guarantor as subrogee of the Lender or resulting from the Guarantor’s
performance under this Guaranty, to the indefeasible payment in full in cash of
all Guaranteed Obligations; provided, that unless and until an Event of Default
has occurred and is continuing under the Credit Agreement, Guarantor may take
and receive any payments from the Borrower not otherwise prohibited by the
Credit Agreement. If the Lender so requests after an Event of Default has
occurred under the Credit Agreement and while it is continuing, any such obligation or indebtedness of the Borrower to the
Guarantor shall be enforced and performance received by the Guarantor as
trustee for the Lender and the proceeds thereof shall be paid over to the
Lender on account of the Guaranteed 

 

Obligations, but without reducing or
affecting in any manner the liability of the Guarantor under this Guaranty.

9.             Stay of Acceleration. In the event that acceleration of the time for
payment of any of the Guaranteed Obligations is stayed, in connection with any
case commenced by or against the Guarantor or the Borrower under any Debtor
Relief Laws, or otherwise, all such amounts shall nonetheless be payable by the
Guarantor immediately upon demand by the Lender.

10.          Expenses. The Guarantor shall pay on demand all out-of-pocket
expenses (including attorneys’ fees and expenses and the allocated cost and
disbursements of internal legal counsel) in any way relating to the enforcement
or protection of the Lender’s rights under this Guaranty or in respect of the
Guaranteed Obligations, including any incurred during any “workout” or
restructuring in respect of the Guaranteed Obligations and any incurred in the
preservation, protection or enforcement of any rights of the Lender in any
proceeding any Debtor Relief Laws. The obligations of the Guarantor under this
paragraph shall survive the payment in full of the Guaranteed
Obligations and termination of this Guaranty.

11.          Miscellaneous. No provision of this Guaranty may be
waived, amended, supplemented or modified, except by a written instrument
executed by the Lender and the Guarantor. No failure by the Lender to exercise,
and no delay in exercising, any right, remedy or power hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
remedy or power hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law or in equity. The
unenforceability or invalidity of any provision of this Guaranty shall not
affect the enforceability or validity of any other provision herein. Unless
otherwise agreed by the Lender and the Guarantor in writing, this Guaranty is
not intended to supersede or otherwise affect any other guaranty now or
hereafter given by the Guarantor for the benefit of the Lender or any term or
provision thereof.

12.          Condition of Borrower. The
Guarantor acknowledges and agrees that it has the sole responsibility for, and
has adequate means of, obtaining from the Borrower and any other guarantor such
information concerning the financial condition, business and operations of the
Borrower and any such other guarantor as the Guarantor requires, and that the
Lender has no duty, and the Guarantor is not relying on the Lender at any time,
to disclose to the Guarantor any information relating to the business,
operations or financial condition of the Borrower or any other guarantor (the
guarantor waiving any duty on the part of the Lender to disclose such
information and any defense relating to the failure to provide the same).

13.          Setoff. If and to the extent any payment is not made
when due hereunder, the Lender may setoff and charge from time to time any
amount so due against any or all of the Guarantor’s accounts or deposits with
the Lender.

14.          Representations and Warranties. The Guarantor
represents and warrants that (a) it is duly organized and in good standing
under the laws of the jurisdiction of its organization and has full capacity
and right to make and perform this Guaranty, and all necessary authority has
been obtained; (b) this Guaranty constitutes its legal, valid and binding
obligation enforceable in accordance with its terms, except as such enforcement
may be limited by 

 

applicable bankruptcy, insolvency, reorganization or
other similar laws relating to or limiting creditors’ rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law; (c) the making and performance of this
Guaranty does not and will not violate the provisions of any applicable law,
regulation or order, and does not and will not result in the breach of, or
constitute a default or require any consent under, any material agreement,
instrument, or document to which it is a party or by which it or any of its
property may be bound or affected; and (d) all consents, approvals,
licenses and authorizations of, and filings and registrations with, any
governmental authority required under applicable law and regulations for the
making and performance of this Guaranty have been obtained or made and are in
full force and effect.

15.          Guarantor’s Covenants. Guarantor
covenants and agrees to comply with all of its financial and other covenants
contained in Article V of that certain Credit Agreement dated as of November 7,
2003, as amended by that certain Amendment to the Credit Agreement, dated June 5,
2006, among Guarantor, the banks, financial institutions and other
institutional lenders signatory thereto, and BNP Paribas, as administrative
agent for the Lender Parties (as defined therein), and as at any time further
amended (the “Parent Credit Agreement”), the terms of which Parent Credit
Agreement are incorporated herein by reference, all as if made directly in
favor of Lender, other than the covenants contained in Sections 5.01(j) and
5.01(l) (together, the “Collateral Covenants”) and Sections 5.02(a) and
5.02(j) (together, the “Negative Pledge Covenants”). In the event
that the Parent Credit Agreement is either amended and restated, or replaced by
another financing and in either case, either (w) Lender is also a party
thereto, or (x) Lender is not a party thereto but such financing is in an
amount not less than $100,000,000 and is provided by not less than four
separate lenders, then Guarantor shall instead comply with all covenants in the
Parent Credit Agreement as so amended and restated or with all of the covenants
contained in any such replacement facility. If, as of any date, the Parent
Credit Agreement is (y) terminated and has not yet been replaced,  or (z) replaced by a financing which
does not qualify under clause (x) of the preceding paragraph, then
Guarantor shall continue to comply with all of the covenants contained in Article V
of the Parent Credit Agreement (other than the Collateral Covenants, but in
this case including the Negative Pledge Covenants) which are in effect as of
the date immediately prior to such termination or replacement. At all times
that the Parent Credit Agreement is outstanding, the Guarantor shall first
obtain the consent of the Lender to any amendments or modifications to Section 5.02(a) of
the Parent Credit Agreement prior to the effectiveness of any such amendment or
modification.

16.          Indemnification and Survival. Without limitation on any
other obligations of the Guarantor or remedies of the Lender under this
Guaranty, the Guarantor shall, to the fullest extent permitted by law,
indemnify, defend and save and hold harmless the Lender from and against, and
shall pay on demand, any and all damages, losses, liabilities and expenses
(including attorneys’ fees and expenses and the allocated cost and
disbursements of internal legal counsel) that may be suffered or incurred by
the Lender in connection with or as a result of any failure of any Guaranteed
Obligations to be the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms. The obligations of the Guarantor under this paragraph
shall survive the payment in full of the Guaranteed Obligations and termination of this Guaranty.

 

 

17.          Governing Law; Assignment; Jurisdiction; Notices. This
Guaranty shall be governed by, and construed in accordance with, the internal
laws of the State of New York. This Guaranty shall (a) bind the Guarantor
and its successors and assigns, provided that the Guarantor may not assign its
rights or obligations under this Guaranty without the prior written consent of
the Lender (and any attempted assignment without such consent shall be void),
and (b) inure to the benefit of the Lender and its successors and assigns.
The Guarantor hereby irrevocably (i) submits to the non-exclusive
jurisdiction of any United States Federal or State court sitting in New York
City, New York in any action or proceeding arising out of or relating to this
Guaranty, and (ii) waives to the fullest extent permitted by law any
defense asserting an inconvenient forum in connection therewith. Service of
process by the Lender in connection with such action or proceeding shall be
binding on the Guarantor if sent to the Guarantor by registered or certified
mail at its address specified below or such other address as from time to time
notified by the Guarantor. The Guarantor agrees that the Lender may disclose to
any assignee of or participant in, or any prospective assignee of or
participant in, any of its rights or obligations of all or part of the
Guaranteed Obligations any and all information in the Lender’s possession
concerning the Guarantor or this Guaranty. All notices and other communications
to the Guarantor under this Guaranty shall be in writing and shall be delivered
by hand or overnight courier service, mailed by certified or registered mail or
sent by telecopier to the Guarantor at its address set forth below or at such
other address in the United States as may be specified by the Guarantor in a
written notice delivered to the Lender at such office as the Lender may
designate for such purpose from time to time in a written notice to the
Guarantor.

18.          WAIVER OF JURY TRIAL; FINAL AGREEMENT. TO THE EXTENT
ALLOWED BY APPLICABLE LAW, THE GUARANTOR AND THE LENDER EACH IRREVOCABLY WAIVES
TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING ON, ARISING
OUT OF OR RELATING TO THIS GUARANTY OR THE GUARANTEED OBLIGATIONS. THIS
GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.

19.           Foreign Currency. If any claim arising
under or related to this Guaranty is reduced to judgment denominated in a
currency (the “Judgment Currency”) other than the currencies in which the
Guaranteed Obligations are denominated or the currencies payable hereunder
(collectively the “Obligations Currency”), the judgment shall be for the
equivalent in the Judgment Currency of the amount of the claim denominated in
the Obligations Currency included in the judgment, determined as of the date of
judgment. The equivalent of any Obligations Currency amount in any Judgment
Currency shall be calculated at the spot rate for the purchase of the
Obligations Currency with the Judgment Currency quoted by the Lender in the
place of the Lender’s choice at or about 8:00 a.m. on the date for
determination specified above. The Guarantor shall indemnify the Lender and
hold the Lender harmless from and against all loss or damage resulting from any
change in exchange rates between the date any claim is reduced to judgment and
the date of payment thereof by the Guarantor or any failure of the amount of
any such judgment to be calculated as provided in this paragraph.

[signature page follows]

 

 

Executed this 27th day of June, 2006.

INTERNATIONAL RECTIFIER CORPORATION

By:/s/ Michael P.
McGee

Name: Michael P. McGee

Title: Executive Vice President and Chief Financial
Officer

Address:                101 North Sepulveda Blvd.
                                El
Segundo, CA 90245
                                Attn:
Global Treasury &
                                Risk
Management Dept.
                                Phone: 310-252-7181
                                Fax: 310-726-8597Prepared and Filed by St Ives Financial

  

   

  Exhibit 4.1
  

     

    INVESTMENT
      AGREEMENT

     

    dated
      as of

     

    October
      24, 2005

     

    between

     

    BANCO
      SANTANDER CENTRAL HISPANO, S.A.

     

    and

     

    SOVEREIGN
      BANCORP, INC.

     

    
      
        
        

      

        
        

        

  

        
          
          

        

     

    
      TABLE
        OF CONTENTS

      
    

    
 

    

    

  	 	 	 	 	
        PAGE

      
	

            	 	
        ARTICLE
                1

              
                

            DEFINITIONS

                

              

            	 	 
	 	 	 	 	 
	
        Section
                1.01.
                

            	 	
        Definitions

            	 	
        1

            
	
        Section
                1.02.
                

            	 	
        Other
                Definitional and Interpretative Provisions

            	 	
        14

            
	 	 	 	 	 
	

            	 	
        ARTICLE
                2

              

          PURCHASE
            AND SALE

              

            	 	
         

            
	 	 	 	 	 
	
        Section
                2.01.
                

            	 	
        Purchase
                and Sale

            	 	
        14

            
	
        Section
                2.02

            	 	
        Closing

            	 	
        15

            
	
        Section
                2.03.
                

            	 	
        Additional
                Purchases by Buyer

            	 	
        15

            
	
        Section
                2.04.

            	 	
        Gross
                Up Rights

            	 	
        17

            
	 	 	 	 	 
	 	 	
        ARTICLE
                3

              

          REPRESENTATIONS
            AND WARRANTIES OF THE COMPANY

              

            	 	
         

            
	 	 	 	 	 
	
        Section
                3.01.
                

            	 	
        Organization.

            	 	
        20

            
	
        Section
                3.02.
                

            	 	
        Capitalization

            	 	
        21

            
	
        Section
                3.03.
                

            	 	
        Authority

            	 	
        22

            
	
        Section
                3.04.
                

            	 	
        Non-Contravention

            	 	
        23

            
	
        Section
                3.05.
                

            	 	
        Consents

            	 	
        23

            
	
        Section
                3.06.
                

            	 	
        Financial
                Statements

            	 	
        24

            
	
        Section
                3.07.
                

            	 	
        Taxes

            	 	
        24

            
	
        Section
                3.08. 

            	 	
        SEC
                Filings and the Sarbanes-Oxley Act

            	 	
        25

            
	
        Section
                3.09. 

            	 	
        Absence
                of Certain Changes

            	 	
        26

            
	
        Section
                3.10.
                

            	 	
        Contracts

            	 	
        28

            
	
        Section
                3.11.
                

            	 	
        No
                Undisclosed Material Liabilities

            	 	
        30

            
	
        Section
                3.12.
                

            	 	
        Ownership
                of Property; Insurance Coverage

            	 	
        30

            
	
        Section
                3.13.
                

            	 	
        Legal
                Proceedings

            	 	
        31

            
	
        Section
                3.14.
                

            	 	
        Compliance
                with Applicable Law

            	 	
        32

            
	
        Section
                3.15.
                

            	 	
        Employee
                Benefit Plans

            	 	
        32

            
	
        Section
                3.16.
                

            	 	
        Brokers,
                Finders and Financial Advisors

            	 	
        33

            
	
        Section
                3.17. 

            	 	
        Environmental
                Matters

            	 	
        34

            
	
        Section
                3.18.
                

            	 	
        Allowance
                for Losses

            	 	
        34

            
	
        Section
                3.19.
                

            	 	
        Related
                Party Transactions

            	 	
        34

            
	
        Section
                3.20.
                

            	 	
        Loans

            	 	
        35

            
	
        Section
                3.21.
                

            	 	
        Labor
                Matters

            	 	
        35

            
	
        Section
                3.22. 

            	 	
        Risk
                Management Instruments

            	 	
        35

            
	
        Section
                3.23. 

            	 	
        Community
                Reinvestment Act, Anti-Money Laundering and Customer Information
                Security

            	 	
        36

            

    

    

        i

  

        
          
          

        

    
      	
              Section
                3.24. 

            	 	
              Credit
                Card Accounts

            	 	
              36

            
	
              Section
                3.25.  

            	 	
              Agreements
                with Regulatory Authorities

            	 	
              36

            
	
              Section
                3.26. 

            	 	
              Regulatory
                Capital

            	 	
              37

            
	
              Section
                3.27.
                

            	 	
              Regulatory
                Probability

            	 	
              37

            
	
              Section
                3.28.
                

            	 	
              Directors’
                and Officers’ Insurance

            	 	
              37

            
	
              Section
                3.29. 

            	 	
              Rights
                Plan

            	 	
              37

            
	 	 	 	 	 
	 	 	
              ARTICLE
                4

              

          REPRESENTATIONS
            AND WARRANTIES
            OF BUYER

              

            	 	 
	 	 	 	 	 
	
              Section
                4.01. 

            	 	
              Organization

            	 	
              38

            
	
              Section
                4.02. 

            	 	
              Authority

            	 	
              38

            
	
              Section
                4.03.
                

            	 	
              Non-Contravention

            	 	
              38

            
	
              Section
                4.04. 

            	 	
              Financing

            	 	
              39

            
	
              Section
                4.05. 

            	 	
              Purchase
                for Investment

            	 	
              39

            
	
              Section
                4.06. 

            	 	
              Finders’
                Fees

            	 	
              39

            
	
              Section
                4.07.
                

            	 	
              Ownership
                of the Company

            	 	
              39

            
	
              Section
                4.08.
                

            	 	
              Compliance
                with Applicable Law

            	 	
              39

            
	
              Section
                4.09.
                

            	 	
              Absence
                of Certain Changes

            	 	
              40

            
	
              Section
                4.10.
                

            	 	
              Regulatory
                Probability

            	 	
              40

            
	 	 	 	 	 
	 	 	
              ARTICLE
                5

              

          COVENANTS
            OF THE COMPANY

              

            	 	 
	 	 	 	 	 
	
              Section
                5.01.
                

            	 	
              Conduct
                of the Company

            	 	
              40

            
	
              Section
                5.02. 

            	 	
              Access
                to Information; Reports

            	 	
              41

            
	
              Section
                5.03. 

            	 	
              Notices
                of Certain Events

            	 	
              43

            
	
              Section
                5.04.
                

            	 	
              Certain
                Change in Control Provisions

            	 	
              43

            
	
              Section
                5.05.
                

            	 	
              Takeover
                Laws

            	 	
              44

            
	
              Section
                5.06.
                

            	 	
              Other
                Defensive Measures

            	 	
              45

            
	
              Section
                5.07.
                

            	 	
              Regulatory
                Matters

            	 	
              46

            
	
              Section
                5.08.
                

            	 	
              Certain
                Payments

            	 	
              46

            
	
              Section
                5.09.
                

            	 	
              FIRPTA

            	 	
              46

            
	 	 	 	 	 
	 	 	
              ARTICLE
                6

              

          COVENANTS
            OF BUYER

              

            	 	 
	 	 	 	 	 
	
              Section
                6.01. 

            	 	
              Confidentiality

            	 	
              46

            
	
              Section
                6.02.
                

            	 	
              Right
                of First Purchase

            	 	
              47

            
	
              Section
                6.03.

            	 	
              Voting
                Trust Agreement

            	 	
              48

            
	
              Section
                6.04.
                

            	 	
              Tier
                1 Capital; Debt Financing

            	 	
              48

            

    

    

        ii

  

        
          
          

        

    
      	 	 	
              ARTICLE
                7

        COVENANTS
          OF BUYER
          AND THE
          COMPANY

            	 	 
	 	 	 	 	 
	
              Section
                7.01.  

            	 	
              Reasonable
                Best Efforts; Further Assurances

            	 	
              49

            
	
              Section
                7.02.
                

            	 	
              Certain
                Filings

            	 	
              49

            
	
               

            	 	
              Section
                7.03. Public
                Announcements

            	 	
              49

            
	
              Section
                7.04. 

            	 	
              Trademarks

            	 	
              50

            
	
              Section
                7.05.
                

            	 	
              Exchange
                of Management

            	 	
              50

            
	
              Section
                7.06.
                

            	 	
              Public
                Subsidiary Stock

            	 	
              51

            
	 	 	 	 	 
	 	 	
              ARTICLE
                8

              

          INVESTOR
            RELATED
            COVENANTS

              

            	 	 
	 	 	 	 	 
	
              Section
                8.01.
                

            	 	
              Standstill

            	 	
              51

            
	
              Section
                8.02.
                

            	 	
              Transfer
                Restrictions

            	 	
              52

            
	
              Section
                8.03.
                

            	 	
              Pre-Closing
                Period

            	 	
              55

            
	
              Section
                8.04.
                

            	 	
              General
                Restrictions

            	 	
              56

            
	
              Section
                8.05. 

            	 	
              First
                Standstill Period

            	 	
              57

            
	
              Section
                8.06. 

            	 	
              Second
                Standstill Period

            	 	
              58

            
	
              Section
                8.07.
                

            	 	
              Third
                Standstill Period

            	 	
              62

            
	
              Section
                8.08.
                

            	 	
              First
                Look and Last Look Rights

            	 	
              65

            
	
              Section
                8.09.
                

            	 	
              Post-Standstill
                Period

            	 	
              66

            
	
              Section
                8.10.
                

            	 	
              Tender
                Offer Option

            	 	
              66

            
	
              Section
                8.11.
                

            	 	
              Board
                Representation

            	 	
              67

            
	
              Section
                8.12.
                

            	 	
              Approval
                Rights

            	 	
              69

            
	
              Section
                8.13.
                

            	 	
              Certain
                Actions

            	 	
              69

            
	
              Section
                8.14.
                

            	 	
              Voting
                Arrangements

            	 	
              69

            
	 	 	 	 	 
	 	 	
              ARTICLE
                9

              

          POST
            ACQUISITION COVENANTS

              

            	 	 
	 	 	 	 	 
	
              Section
                9.01. 

            	 	
              Company
                Headquarters

            	 	
              70

            
	
              Section
                9.02.
                

            	 	
              The
                Company Board

            	 	
              70

            
	
              Section
                9.03.
                

            	 	
              Exclusive
                Acquisition Vehicle

            	 	
              71

            
	
              Section
                9.04.
                

            	 	
              Change
                in Control

            	 	
              71

            
	 	 	 	 	 
	 	 	
              ARTICLE
                10

              

          CONDITIONS
            TO CLOSING

              

            	 	 
	 	 	 	 	 
	
              Section
                10.01.
                

            	 	
              Conditions
                to Obligations of Buyer and the Company

            	 	
              71

            
	
              Section
                10.02. 

            	 	
              Conditions
                to Obligation of Buyer

            	 	
              72

            
	
              Section
                10.03. 

            	 	
              Conditions
                to Obligation of the Company

            	 	
              72

            

    

    

        iii

  

        
          
          

        

    
      	 	 	
              ARTICLE
                11

              

          SURVIVAL

              

            	 	 
	 	 	 	 	 
	
              Section
                11.01. 

            	 	
              Survival

            	 	
              73

            
	 	 	 	 	 
	 	 	
              ARTICLE
                12

        TERMINATION

            	 	
               

            
	 	 	 	 	 
	
              Section
                12.01.
                

            	 	
              Grounds
                for Termination

            	 	
              73

            
	
              Section
                12.02. 

            	 	
              Effect
                of Termination

            	 	
              75

            
	 	 	 	 	 
	 	 	
              ARTICLE
                13

              

          MISCELLANEOUS

              

            	 	 
	 	 	 	 	 
	
              Section
                13.01.

            	 	
              Notices

            	 	
              75

            
	
              Section
                13.02. 

            	 	
              Amendments
                and Waivers

            	 	
              76

            
	
              Section
                13.03.
                

            	 	
              Disclosure
                Schedule References

            	 	
              77

            
	
              Section
                13.04. 

            	 	
              Expenses

            	 	
              77

            
	
              Section
                13.05. 

            	 	
              Successors
                and Assigns

            	 	
              77

            
	
              Section
                13.06. 

            	 	
              Governing
                Law

            	 	
              77

            
	
              Section
                13.07. 

            	 	
              Jurisdiction

            	 	
              77

            
	
              Section
                13.08. 

            	 	
              WAIVER
                OF JURY TRIAL

            	 	
              78

            
	
              Section
                13.09. 

            	 	
              Counterparts;
                Effectiveness; Third-Party Beneficiaries

            	 	
              78

            
	
              Section
                13.10. 

            	 	
              Entire
                Agreement

            	 	
              78

            
	
              Section
                13.11. 

            	 	
              Severability

            	 	
              78

            
	
              Section
                13.12. 

            	 	
              Specific
                Performance

            	 	
              78

            
	
              Section
                13.13.
                

            	 	
              Immaterial
                Breaches

            	 	
              79

            
	
              Exhibit
                A

            	 	
              Form
                of Voting Trust Agreement

            	 	 

    

    

        iv

  

        
          
          

        

    INVESTMENT
      AGREEMENT

     

    AGREEMENT
      (this “Agreement”)
      dated
      as of October 24, 2005 between Banco Santander Central Hispano, S.A., a Spanish
      sociedad
      anónima
      (“Buyer”),
      and
      Sovereign Bancorp, Inc., a Pennsylvania corporation (the “Company”).

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      the Company desires to sell the Shares to Buyer, and Buyer desires to purchase
      the Shares from the Company, upon the terms and subject to the conditions
      hereinafter set forth;

     

    The
      parties hereto agree as follows:

     

    ARTICLE
      1 

    

  DEFINITIONS

    

     

Section
  1.01. Definitions. (a) The following terms,
  as used herein, have the following meanings:

     

    “Acquisition
      Proposal”
means
      any offer, proposal or inquiry relating to, or any indication of interest by
      any
      Person or Group in (A) any acquisition or purchase, direct or indirect, of
      all
      or substantially all of the assets of the Company or any Material Subsidiary
      or
      over 25% of any class of equity or voting securities of the Company or any
      Material Subsidiary, (B) any tender offer by any Person or Group (other than
      the
      Company) or exchange offer that, if consummated, would result in such Person
      or
      Group beneficially owning 25% or more of any class of equity or voting
      securities of the Company or any Material Subsidiary, (C) a merger,
      consolidation, share exchange, business combination, reorganization,
      recapitalization, liquidation, dissolution or other similar transaction
      involving the Company or any Material Subsidiary, or (D) any proposition to
      nominate or elect as directors of the Company Persons other than those proposed
      by the Board or the Nominating Committee thereof, the effect of which, if
      approved by the Company’s shareholders, would cause a majority of the members of
      the Board to be Persons who are not (i) in the case of any Acquisition Proposal
      made prior to the Closing, directors of the Company as of the date hereof or
      (ii) in the case of any Acquisition Proposal made after the Closing Date,
      Persons who are directors of the Company after giving effect to Section
      8.11(a)
      or
      successors to such directors who have been nominated by the Company or its
      Nominating Committee or elected by the Board to fill a vacancy in the Board;
      provided
      that,
      (i) a Surviving Company Merger shall not constitute an Acquisition Proposal
      and
      (ii) for purposes of Article
      8,
      actions
      and transactions described in clauses (A) through (D) above will not constitute
      an Acquisition Proposal until such time as the Person or Group taking such
      actions or engaging in such transactions, or proposing to do so, shall have
      made
      a reasonably specific bona fide offer or proposal (and not simply an inquiry
      as
      to whether the Company or its Subsidiaries would be interested in discussing
      a
      possible Acquisition Transaction, whether made publicly or privately and whether
      made orally or in writing).

     

    
      
        
        

      

        
        

        

  

        
          
          

        

     

    “Additional
      Shares”
means
      any shares of Voting Securities purchased by Buyer pursuant to Section
      2.03
      or
Section
      2.04.

     

    “Affiliate”
means,
      with respect to any Person at any time, any other Person directly or indirectly
      controlling, controlled by, or under common control with such Person as of
      such
      time; provided
      that,
      (i) prior to Closing, Independence will not be deemed to be an Affiliate of
      the Company and effective as of the Closing, Independence will be deemed to
      be
      an Affiliate of the Company, (ii) the Voting Trustee (solely in its
      capacity as the Trustee under the Voting Trust Agreement) will be deemed to
      be
      an Affiliate of Buyer, and (iii) neither the Company nor its Subsidiaries shall
      be deemed to be an Affiliate of Buyer prior to the consummation of a 100%
      Acquisition Proposal by Buyer.

     

    “Applicable
      Law”
means,
      with respect to any Person, any foreign, federal, state or local law (statutory,
      common or otherwise), constitution, treaty, convention, ordinance, code, rule,
      regulation, order, injunction, judgment, decree, ruling or other similar
      requirement enacted, adopted, promulgated or applied by a Governmental Authority
      that is binding upon or applicable to such Person, as amended unless expressly
      specified otherwise.

     

    “Balance
      Sheet Date”
means
      December 31, 2004.

     

    “Bank”
means
      Sovereign Bank.

     

    “Beneficial
      Ownership”
by
      a
      Person of any securities includes ownership by any Person who, directly or
      indirectly, through any contract, arrangement, understanding, relationship
      or
      otherwise, has or shares (i)
      voting
      power which includes the power to vote, or to direct the voting of, such
      security; and/or (ii)
      investment power which includes the power to dispose, or to direct the
      disposition, of such security; and shall otherwise be interpreted in accordance
      with the term “beneficial ownership” as defined in Rule 13d-3 adopted by
      the SEC under the Exchange Act; provided
      that
      for
      purposes of determining Beneficial Ownership, a Person shall be deemed to be
      the
      Beneficial Owner of any securities which may be acquired by such Person pursuant
      to any agreement, arrangement or understanding or upon the exercise of
      conversion rights, exchange rights, warrants or options, or otherwise
      (irrespective of whether the right to acquire such securities is exercisable
      immediately or only after the passage of time, including the passage of time
      in
      excess of 60 days, the satisfaction of any conditions, the occurrence of
      any event or any combination of the foregoing), except that in no event will
      Buyer or any of its Affiliates be deemed to Beneficially Own any securities
      which it has the right to acquire pursuant to this Agreement unless, and then
      only to the extent that, Buyer or such Affiliate shall have actually exercised
      such right. For purposes of this Agreement, a Person shall be deemed to
      Beneficially Own any securities Beneficially Owned by its Affiliates or any
      Group of which such Person or any such Affiliate is or becomes a member.
      Notwithstanding the foregoing, securities Beneficially Owned by Buyer and its
      Affiliates shall not include, for any purpose under this Agreement, any Voting
      Securities or other securities held by Buyer and its Subsidiaries in trust
      for
      the benefit of persons other than Buyer and its Affiliates, managed, brokerage,
      custodial, nominee or other customer accounts; in mutual funds, open- or
      closed-end investment funds or other pooled investment vehicles sponsored,
      managed and/or advised or subadvised by Buyer or its Affiliates; or by
      Affiliates of Buyer (or any division thereof) which are broker-dealers or
      otherwise engaged in the securities business, provided
      that in
      each case, such securities were acquired in the ordinary course of business
      of
      their respective banking, investment management and securities business and
      not
      with the intent or purpose on the part of Buyer or its Affiliates of influencing
      control of the Company or avoiding the provisions of this Agreement. The term
      “Beneficially
      Own”
shall
      have a correlative meaning.

    

        2

  

        
          
          

        

     

    “BHC
      Act”
means
      the United States Bank Holding Company Act of 1956.

     

    “Board” means
      the
      Board of Directors of the Company.

     

    “Business
      Day”
means
      a
      day, other than Saturday, Sunday or other day on which commercial banks in
      New
      York, New York or Madrid, Spain are authorized or required by Applicable Law
      to
      close.

     

    “Buyer
      Change in Control”
means
      any Majority Board Change with respect to Buyer.

     

    “Buyer
      Disclosure Schedule”
means
      a
      disclosure schedule delivered by Buyer to the Company pursuant to this
      Agreement.

     

    “Buyer
      Material Adverse Effect”
means
      a
“Material Adverse Effect” as defined in this Agreement but with respect to Buyer
      rather than the Company.

     

    “Bylaws”
means
      the corporate bylaws of the Company as amended from time to time in accordance
      with the terms thereof, Applicable Law and this Agreement.

     

    “capital
      stock”
means,
      with respect to any Person at any time, any and all shares, interests,
      participations or other equivalents (however designated, whether voting or
      non-voting) of capital stock, partnership interests (whether general or limited)
      or equivalent ownership interests in or issued by such Person.

        

        3

        

        
          
          

        

    

     

    “Change
      in Control”
means,
      with respect to any Person other than Buyer, (i) any acquisition or purchase,
      direct or indirect, by a third party, of 50% or more of the consolidated assets
      of such Person and its subsidiaries or over 50% of the voting securities of
      such
      Person or (ii) any Majority Board Change of such Person. 

     

    “Charter”
means
      the Articles of Incorporation of the Company as amended from time to time in
      accordance with the terms thereof and Applicable Law.

     

    “Closing
      Date”
means
      the date of the Closing.

     

    “Code”
means
      the U.S. Internal Revenue Code of 1986.

     

    “Common
      Stock”
means
      the common stock of the Company.

     

    “Company
      Disclosure Schedule”
means
      a
      disclosure schedule delivered by the Company to Buyer pursuant to this
      Agreement.

     

    “Company
      Financials”
means
      (i) the audited consolidated financial statements of the Company as of December
      31, 2004 (or, as of the Closing Date, as of December 31, 2005) and for the
      three
      years ended December 31, 2004 (or, as of the Closing Date, for the three years
      ending December 31, 2005), including the notes thereto, (ii) the unaudited
      interim consolidated financial statements of the Company as of each calendar
      quarter thereafter included in the Company SEC Documents filed by the Company,
      including the notes thereto.

     

    “Company
      Regulatory Reports”
means
      the annual or quarterly reports, and accompanying schedules, of the Company,
      the
      Bank and, after the Closing, of Independence Community Bank, filed with the
      OTS,
      Federal Reserve Board, the New York Banking Department, or the FDIC since
      December 31, 2002.

     

    “Company
      Subsidiary”
means
      (i) the Bank, (ii) any corporation or business trust or other entity, 50% or
      more of the capital stock or equity interests of which are owned, either
      directly or indirectly, by the Company, except any corporation the stock of
      which is held as security for loans made in the ordinary course of the lending
      activities of the Bank.

     

    “Competing
      Business”
means
      a
      business (a) whose principal activities are those of (i) an FDIC-insured bank
      the principal business of which is that of a deposit-taking financial
      institution or branch-based commercial lending, (ii) non-bank lending, including
      consumer finance, (iii) mortgage brokerage, (iv) insurance agency, brokerage
      or
      service, and (v) asset or investment management and advice and (b) that has
      substantial operations in the Designated Area; provided
      that,
      none of the following shall constitute a “Competing Business”: (A) any of the
      businesses referred to in clauses (ii), (iii), (iv) or (v) of this definition
      that have an equity value of more than $300 million, or (B) any business which
      would otherwise be a Competing Business but which constitutes part of the
      business of a U.S. or foreign financial institution and is not the primary
      business of such financial institution.

        

        4

        

        
          
          

        

     

    “Convertible Rights”
means
      warrants, options, rights, convertible securities and any other securities
      or
      instruments that obligate an entity to issue capital stock, including the PIERS
      Instruments and any options, stock appreciation rights or restricted stock
      granted under the Employee Plans.

     

    “Defensive
      Measure”
means
      (i) any provision of the Charter or Bylaws the purpose or effect of which is,
      in
      whole or in part, to defer, delay or make more costly or burdensome, the
      consummation of an Acquisition Proposal involving the Company, including
      Articles 8, 11, 15, 16 and 17 of the Charter and Sections 4.03, 4.04, 10.01
      and
      11.01 of the Bylaws, (ii) any shareholder rights plan or “poison pill” including
      the Rights Agreement, (iii) any employment or severance agreement and any
      Employee Plan that provides for enhanced benefits to officers, directors or
      employees of the Company or any of its Subsidiaries or any acceleration of
      any
      such benefits in connection with the consummation of an Acquisition Proposal
      involving the Company or any of its Subsidiaries, including the Employee
      Agreements and the Employee Plans, (iv) any contract or agreement to which
      the
      Company is a party that imposes on the Company or any of its Subsidiaries a
      material cost, or deprives the Company or any of its Subsidiaries of a material
      asset or benefit, in either case, in connection with the consummation of an
      Acquisition Proposal involving the Company or any of its Subsidiaries, (v)
      any
      Applicable Law, the effect of which is to provide special rights, including
      economic and voting rights, in connection with the consummation of an
      Acquisition Proposal involving the Company or any of its Subsidiaries, including
      the Pennsylvania Law and (vi) any act by the Board, the Company or any of its
      Subsidiaries that is intended to have or has any of the effects described in
      clauses (i) through (iv) above.

     

    “Designated
      Area”
means
      the states of Maine, Vermont, New Hampshire, Massachusetts, Rhode Island,
      Connecticut, New York, New Jersey, Pennsylvania, Ohio, Delaware, Maryland,
      West
      Virginia, Kentucky, Virginia and North Carolina and the District of
      Columbia.

     

    “Environmental
      Law”
means
      any foreign, federal, state or local law (including common law), statute,
      ordinance, rule, regulation, code, license, permit, authorization, approval,
      consent, order, judgment, decree, injunction requirement or restriction or
      agreement with any Governmental Authority relating to (i) the protection,
      preservation or restoration of the environment (including, without limitation,
      air, water vapor, surface water, groundwater, drinking water supply, surface
      soil, subsurface soil, plant and animal life or any other natural resource),
      (ii) the use, storage, recycling, treatment, generation, transportation,
      processing, handling, labeling, production, release or disposal of any substance
      presently listed, defined, designated or classified as hazardous, toxic,
      radioactive or dangerous, or otherwise regulated, whether by type or by
      quantity, including any material containing any such substance as a component,
      and/or (iii) employee health and safety matters.

        

        5

        

        
          
          

        

     

    “ERISA”
means
      the Employee Retirement Income Security Act of 1974.

     

    “ERISA
      Affiliate”
of
      any
      entity means any other entity which, together with such entity, would be treated
      as a single employer under Section 414 of the Code.

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934.

     

    “Exclusive
      Agreement”
means
      a
      legally binding merger, acquisition or similar agreement relating to a 100%
      Acquisition Proposal pursuant to which the Board is prohibited from soliciting
      Acquisition Proposals, entertaining any Unsolicited Acquisition Proposals from
      Persons who are not a party to such agreement and not permitting the Company
      or
      the Board to terminate such agreement based on the receipt of any other
      Acquisition Proposal.

     

    “FDIA”
means
      the Federal Deposit Insurance Act, as amended.

     

    “FDIC”
means
      the Federal Deposit Insurance Corporation.

     

    “Federal
      Reserve Board”
means
      the Board of Government of the Federal Reserve System.

     

    “First
      Standstill Period”
means
      the 24-month period commencing on the Closing Date.

     

    “GAAP”
means
      generally accepted accounting principles in the United States as in effect
      from
      time to time.

     

    “Governmental
      Authority”
means
      any transnational, domestic or foreign federal, state or local, governmental
      authority, department, court, agency or official, including any political
      subdivision thereof.

     

    “Group”
has
      the
      meaning assigned to it in Section 13(d)(3) of the Exchange Act.

     

    “HOLA”
means
      the Home Owners’ Loan Act of 1933.

     

    “Hostile
      Action”
means
      (i) with respect to Voting Securities, any unsolicited offer, tender offer
      or
      other acquisition proposal or acquisition of Voting Securities made without
      the
      prior consent or invitation of the Board, (ii) any initiation of or
      participation in any Proxy Solicitation against any action approved by a
      majority of the Unaffiliated Directors or for any action opposed by the
      Unaffiliated Directors, or (iii) a failure to vote in favor of the slate of
      Board nominees recommended by the Board at any time after the PA Law Termination
      Date; provided
      that
      Acquisition Proposals that Buyer is permitted to make under the terms of this
      Agreement shall not constitute Hostile Actions.

        

        6

        

        
          
          

        

     

    “Independence”
means
      Independence Community Bank Corp.

     

    “Independence
      Agreement”
means
      the Agreement and Plan of Merger dated as of the date hereof by and among the
      Company, Independence and Iceland Acquisition Corp., as in effect on the date
      hereof.

     

    “Independence
      Transaction”
means
      the transactions contemplated by the Independence Agreement.

     

    “Knowledge”
of
      any
      Person that is not an individual means the actual knowledge of such Person’s
      officers after reasonable inquiry.

     

    “Lien”
means,
      with respect to any property or asset, any mortgage, lien, pledge, charge,
      security interest, encumbrance or other adverse claim of any kind in respect
      of
      such property or asset. For the purposes of this Agreement, a Person shall
      also
      be deemed to own, subject to a Lien, any property or asset which it has acquired
      or holds subject to the interest of a vendor or lessor under any conditional
      sale agreement, capital lease or other title retention agreement relating to
      such property or asset.

     

    “Majority
      Board Change”
means
      as to any Person, any action, event, transaction or set of circumstances that
      results in a majority of the members of the board of directors of such Person
      being persons who were not members of such board of directors (the “Pre-existing
      Directors”)
      before
      such action, event, transaction or set of circumstances, or successors to such
      Pre-existing Directors who were nominated for election by such board of
      directors (or any Nominating Committee thereof) or elected by such board of
      directors to fill a vacancy in such board of directors.

     

    “Material
      Adverse Effect”
shall
      mean, with respect to the Company, any material adverse effect on its business,
      financial condition or results of operations of the Company and its
      Subsidiaries, taken as a whole; provided
      that in
      determining whether a Material Adverse Effect has occurred, there shall be
      excluded any effect resulting from, or attributable to, (i) any change in
      interest rates generally, (ii) any change occurring after the date hereof in
      any
      federal or state law, rule or regulation (or in any interpretation of the
      foregoing) or in GAAP or applicable regulatory accounting principles, which
      change affects banking institutions (or their holding companies) generally,
      (iii) changes in general economic or political conditions affecting banking
      institutions (or their holding companies) generally, (iv) this Agreement or
      the
      Independence Agreement, including the announcement of the transactions
      contemplated by this Agreement or of the Independence Transaction, (v) expenses
      (including legal fees, costs and expenses relating to any litigation) and costs
      arising as a result of the transactions contemplated by this Agreement or the
      Independence Agreement, (vi) actions or omissions of the Company or any of
      its
      Subsidiaries with the prior written consent of Buyer in furtherance of the
      transactions contemplated hereby or by the Independence Agreement or otherwise
      required to be taken by the Company or any of its Subsidiaries hereunder or
      under the Independence Agreement or (vii) actions taken by Buyer or its
      Affiliates in breach of Buyer’s obligations hereunder; and provided
      further
      that, a
      decrease in the trading or market price of the Common Stock shall not be
      considered by itself and without regard to matters affecting the business,
      financial condition or results of operations of the Company or its Subsidiaries,
      to constitute a Material Adverse Effect.

        

        7

        

        
          
          

        

     

    “Material
      Subsidiary”
means
      any Subsidiary whose assets constitute more than 10% of the total consolidated
      assets of the Company and its Subsidiaries.

     

    “100%
      Acquisition Proposal”
means
      any Acquisition Proposal, whether payable in cash, securities or a combination
      thereof, by any Person or Group to acquire Beneficial Ownership of 100% of
      the
      equity securities (including those issuable pursuant to Convertible Rights)
      of
      the Company that are not already Beneficially Owned by such Person or
      Group.

     

    “OTS”
means
      the Office of Thrift Supervision.

     

    “Ownership
      Percentage”
means,
      at any time, (a) with respect to Voting Securities Beneficially Owned by Buyer
      or its Affiliates, the quotient, expressed as a percentage, of (i) the Total
      Voting Power of all Voting Securities Beneficially Owned by Buyer and its
      Affiliates divided
      by
      (ii) the Total Voting Power of all Voting Securities then outstanding and
      (b) with respect to any Participating Preferred Stock, the greater of (x) the
      Ownership Percentage of the Voting Securities Beneficially Owned by Buyer and
      its Affiliates at such time and (y) the quotient, expressed as a percentage,
      of
      (A) the total number of Participating Preferred Shares owned by Buyer and its
      Affiliates at such time divided
      by
      (B) the
      total number of all shares of Participating Preferred Stock outstanding at
      such
      time; provided
      that, to
      the extent that the Ownership Percentage of Buyer or its Affiliates is reduced
      as a result of actions taken by the Company or the Company Subsidiaries or
      by
      holders of Convertible Rights and such Ownership has not been fully restored
      pursuant to Section
      2.04
      to the
      Ownership Percentage of Buyer or its Affiliates prior to such actions other
      than
      as a result of a failure by Buyer to exercise its rights thereunder, then for
      purposes of Sections 5.02(b),
      6.02(b),
      8.04,
      8.09
      and
8.11
      and for
      purposes of the Registration Rights Agreement, Buyer’s Ownership Percentage
      shall be calculated without giving effect to the dilution in such Ownership
      Percentage arising out of such actions and before giving effect to any actions
      taken by Buyer or the Company pursuant to Section
      2.04.

        

        8

        

        
          
          

        

     

    “PA
      Law Termination Date”
means
      the first date on which the Pennsylvania Law shall have become inapplicable
      to
      the transactions contemplated by this Agreement or inapplicable to the Company
      in accordance with Applicable Law and the Charter.

     

    “Participating
      Preferred Stock”
means
      any preferred stock of the Company, whether or not Voting Securities, that
      has
      the right to participate together with the Common Stock in connection with
      distributions of dividends.

     

    “Pennsylvania
      Law”
means
      Subchapter E of Chapter 25 of the Pennsylvania Business Corporation Law of
      1988,
      as amended, 15 Pa. C.S. Sections 2541-2548.

     

    “Person”
means
      an individual, corporation, partnership, limited liability company, association,
      trust or other entity or organization, including a Governmental
      Authority.

     

    “PIERS
      Instruments”
means
      the Contingent Convertible Trust Preferred Income Equity Redeemable Securities
      issued by Sovereign Capital Trust IV.

     

    “Pre-closing
      Period”
means
      the period commencing on the date hereof and ending on the Closing
      Date.

     

    “Prevailing Fair
      Market Value”
means,
      (i) as to any securities (other than Publicly Traded Securities) or other
      property, the cash price at which a willing seller would sell and a willing
      buyer would buy such securities or property in an arm’s length negotiated
      transaction without time constraints, as determined by an internationally
      recognized investment banking firm selected by mutual agreement of Buyer and
      the
      Company, and (ii) with respect to Publicly Traded Securities, as of any date,
      the arithmetic average weighted by reference to the daily trading volume of
      the
      closing prices of such securities on their principal exchange or quotation
      system for the 20 consecutive trading days immediately preceding the applicable
      date of determination.

     

    “Proxy
      Solicitation”
means
      any solicitation of proxies (as such words are defined in Rule 14a-1 of
      Regulation 14A promulgated pursuant to the Exchange Act disregarding clause
      (iv)
      of Rule 14a-1(1)(2) and including exempt solicitations pursuant to Rule
      14a-2(b)(1)).

        

        9

        

        
          
          

        

     

    “Publicly
      Traded Securities”
means
      any securities that are listed and regularly traded on a national securities
      exchange (including the New York Stock Exchange and the Madrid Stock Exchange)
      or quoted on the NASDAQ National Market or the NASDAQ Small Cap
      systems.

     

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement dated as of the date hereof between Buyer
      and
      the Company.

     

    “Regulatory
      Approvals”
means
      any approvals, consents, or waivers required by law from, or any filing with,
      the Bank of Spain, the Federal Reserve Board or any other Regulatory Authority
      and any change-in-control filings with any state insurance regulatory
      authority.

     

    “Regulatory
      Authority”
means
      any banking agency or department of any foreign, U.S. federal or state
      government, including the OTS, the Federal Reserve Board, the FDIC or the
      respective staffs thereof.

     

    “Required
      Purchase”
means
      any purchase by Buyer of Common Stock or other securities of the Company or
      any
      other capital contribution by Buyer as may be required by any laws or
      regulations applicable to bank or thrift holding companies or by any
      Governmental Authority, including any purchase or capitalization as may be
      required to maintain Buyer’s FHC status.

     

    “Rights”
means
      the preferred share purchase rights of the Company issued pursuant to the Rights
      Agreement.

     

    “Rights
      Agreement”
means
      the Second Amended and Restated Rights Agreement dated as of January 19, 2005,
      between the Company and Mellon Investor Services LLC, a New Jersey Limited
      Liability Company, as Rights Agent.

     

    “Sarbanes-Oxley
      Act”
means
      the Sarbanes-Oxley Act of 2002.

     

    “SEC”
means
      the United States Securities and Exchange Commission.

     

    “Second
      Standstill Period”
means
      the 12-month period commencing on the day following the end of the First
      Standstill Period.

     

    “Securities
      Act”
means
      the Securities Act of 1933.

     

    “Shares”
means
      the Initial Shares, any shares of Common Stock acquired by Buyer pursuant to
      Section
      2.03
      or
Section
      2.04
      and any
      such shares acquired as a result of a Required Purchase.

     

    “Standstill
      Period”
means
      the period commencing on the date of this Agreement and ending on the Standstill
      Termination Date.

        

        10

        

        
          
          

        

     

    “Subsidiary”
means
      any entity of which securities or other ownership interests having ordinary
      voting power to elect a majority of the board of directors or other persons
      performing similar functions are at the time directly or indirectly owned by
      the
      Company.

     

    “Substantial
      Competitor”
means
      any deposit-taking financial institution that holds more than 50% of its
      aggregate U.S. deposits in the Designated Area.

     

    “Surviving
      Company Merger”
means,
      at any time, any merger (including any reorganization, consolidation, share
      exchange or similar business combination) to which the Company is a party where
      (i) the then current chief executive officer of the Company remains as the
      sole
      chief executive officer of the surviving public corporation with a substantially
      similar role and responsibilities, (ii) the Company’s shareholders immediately
      prior to the effective date of such transaction own, after giving effect to
      such
      transaction, a majority of the Voting Securities, and (iii) there has not
      occurred, as a result of such transaction, a Majority Board Change of the
      Company as measured against the board of directors in office immediately prior
      to the such transaction.

     

    “Tax”
means
      any tax, governmental fee, duty, charge, levy, impost or other like assessment
      or charge of any kind whatsoever, together with any interest, penalty, addition
      to tax or additional amount imposed by any Governmental Authority responsible
      for the imposition of any such tax (domestic or foreign), and any liability
      for
      any of the foregoing as transferee or as a result of any existing express or
      implied agreement or arrangement.

     

    “Third
      Party”
means
      any Person other than Buyer, the Company and their respective
      Affiliates.

     

    “Third
      Standstill Period”
means
      the 24-month period commencing on the first day following the end of the Second
      Standstill Period.

     

    “Total
      Voting Power”
means
      the aggregate number of votes which may be cast by holders of outstanding Voting
      Securities.

     

    “Treasury
      Stock”
means
      shares of Common Stock that are classified as treasury stock in accordance
      with
      GAAP.

     

    “Unaffiliated
      Directors”
means
      the members of the Board other than those members who are Affiliates of
      Buyer.

     

    “Voting
      Securities”
means
      (i) all the securities of the Company entitled, in the ordinary course, to
      vote in the election of Directors of the Company and (ii) all securities of
      the Company that are convertible into, exchangeable for, or otherwise entitle
      the holder thereof to receive or purchase, at any time, securities of
      the
      Company having such voting power including, without limitation, for purposes
      of
      this Agreement, the PIERS Instruments and (iii) any Shares held by the Voting
      Trustee (notwithstanding the fact that Buyer shall not have any voting rights
      with respect to Shares held by the Voting Trustee); provided
      that for
      purposes of determining, as of any time, the Voting Securities Beneficially
      Owned by any Person or Total Voting Power, the securities described in clause
      (ii) shall be taken into account only to the extent that such securities have
      been converted or exchanged or the holder thereof has received or purchased
      the
      securities having such voting power.

        

        11

        

        
          
          

        

     

    “Voting
      Trust Agreement”
means
      a
      Voting Trust Agreement substantially in the form of Exhibit A executed and
      delivered by Buyer and the Voting Trustee pursuant to Section
      6.03.

     

    (b)  Each
      of
      the following terms is defined in the Section set forth opposite such
      term:

     

    
	
              Term

            	 	
              Section

            
	
              Acquisition
                Proposal Notice

            	 	
              8.08(a)

            
	
              Agreement

            	 	
              Preamble

            
	
              Agreement
                Actions

            	 	
              8.03(iv)

            
	
              Appraisal
                Price

            	 	
              8.06(d)

            
	
              Appraisal
                Process

            	 	
              8.06(e)

            
	
              Buyer

            	 	
              Preamble

            
	
              Buyer
                Acquisition Transactions

            	 	
              5.05(a)

            
	
              Buyer
                Deferral Period

            	 	
              8.07(d)

            
	
              Buyer
                Trademarks

            	 	
              7.04

            
	
              Capital
                Investments

            	 	
              6.04

            
	
              Closing

            	 	
              2.02

            
	
              Company

            	 	
              Preamble

            
	
              Company
                Deferral Period

            	 	
              8.07(b)

            
	
              Company
                Regulatory Agreement

            	 	
              3.25

            
	
              Company
                Representatives

            	 	
              8.03

            
	
              Company
                SEC Documents

            	 	
              3.08

            
	
              Company
                Securities

            	 	
              3.02(b)

            
	
              D&O
                Insurance

            	 	
              3.28

            
	
              Defense
                Removal Actions

            	 	
              8.03(iii)

            
	
              Derivatives
                Contract

            	 	
              3.22

            
	
              e-mail

            	 	
              13.01

            
	
              Employee
                Plans

            	 	
              3.15(a)

            
	
              Equalized
                Percentage

            	 	
              2.04(c)

            
	
              Fair
                Market Value of the Company

            	 	
              8.06(f)

            
	
              FDIA
                Limitations

            	 	
              3.03

            
	
              FHC
                status

            	 	
              5.07

            

    

    

    

        12

  

        
          
          

        

    

    
  	Term	 	
         Section

      
	
        First
          Appraiser

      	 	
        8.06(e)

      
	
        First
          Purchase Notice

      	 	
        6.02(c)

      
	
        First
          Purchase Period

      	 	
        6.02(b)

      
	
        High
          Value

      	 	
        8.06(e)

      
	
        Incumbent
          Directors

      	 	
        9.02(a)

      
	
        Initial
          Buyer Percentage

      	 	
        2.01

      
	
        Initial
          Shares

      	 	
        2.01

      
	
        internal
          controls

      	 	
        3.08(f)

      
	
        Low
          Value

      	 	
        8.06(e)

      
	
        Majority
          of the Minority Vote

      	 	
        8.06(d)

      
	
        Mid-Range

      	 	
        8.06(e)

      
	
        Multiemployer
          Plan

      	 	
        3.15(b)

      
	
        Offer

      	 	
        8.02(b)(ii)

      
	
        Offer
          Notice

      	 	
        8.02(b)(i)

      
	
        Offer
          Period

      	 	
        8.02(b)(ii)

      
	
        Offer
          Price

      	 	
        8.02(b)(i)

      
	
        Offered
          Securities

      	 	
        8.02(b)(i)

      
	
        Opt
          Out Proposal

      	 	
        5.05(b)

      
	
        Permitted
          Consideration

      	 	
        5.06(e)

      
	
        Permitted
          Limit

      	 	
        2.03(a)

      
	
        Post-Standstill
          Period

      	 	
        8.09

      
	
        Purchase
          Price

      	 	
        2.01

      
	
        Purchase
          Response Notice

      	 	
        6.02(c)

      
	
        Restricted
          Buyer Persons

      	 	
        8.01

      
	
        Sale
          Restriction Termination Date

      	 	
        8.01

      
	
        Second
          Appraiser

      	 	
        8.06(e)

      
	
        Second
          Period Accepted Acquisition Proposal

      	 	
        8.06(d)

      
	
        Solicitation
          Actions

      	 	
        8.03(i)

      
	
        Solicitation
          Response Actions

      	 	
        8.03(ii)

      
	
        Standstill
          Termination Date

      	 	
        8.01

      
	
        Start
          Date

      	 	
        8.06(e)

      
	
        Stock
          Currency

      	 	
        8.04(d)

      
	
        Takeover
          Laws

      	 	
        5.05(a) 

      
	
        Third
          Appraiser

      	 	
        8.06(e)

      
	
        Third-Party
          Transaction Market Check

      	 	
        8.06(g)

      
	
        Third
          Period Accepted Acquisition Proposal

      	 	
        8.07(c)

      
	
        Third
          Value

      	 	
        8.06(e)

      
	
        Title
          IV Plan

      	 	
        3.15(b)

      
	
        Trademark
          License Agreement

      	 	
        7.04

      
	
        Transfer

      	 	
        8.01(d)

      
	
        Unsolicited
          Acquisition Proposal

      	 	
        8.05(c)

      
	
        USA
          Patriot Act

      	 	
        3.23

      
	
        USRPHC

      	 	
        5.09

      
	
        Voting
          Trustee

      	 	
        6.03

      

    

    

    

        13

  

        
          
          

        

    

 

    Section
      1.02.
      Other Definitional and Interpretative Provisions.The
      words
“hereof”, “herein” and “hereunder” and words of like import used in this
      Agreement shall refer to this Agreement as a whole and not to any particular
      provision of this Agreement. The captions herein are included for convenience
      of
      reference only and shall be ignored in the construction or interpretation
      hereof. References to Articles, Sections, Exhibits and Schedules are to
      Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise
      specified. Any capitalized terms used in any Exhibit or Schedule but not
      otherwise defined therein, shall have the meaning as defined in this Agreement.
      Any singular term in this Agreement shall be deemed to include the plural,
      and
      any plural term the singular. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
      the words “without limitation”, whether or not they are in fact followed by
      those words or words of like import. “Writing”, “written” and comparable terms
      refer to printing, typing and other means of reproducing words (including
      electronic media) in a visible form. References to any agreement or contract
      are
      to that agreement or contract as amended, modified or supplemented from time
      to
      time in accordance with the terms hereof and thereof; provided
      that
      with respect to any agreement or contract listed on any schedules hereto, all
      such amendments, modifications or supplements must also be listed in the
      appropriate schedule. References to any Person include the successors and
      permitted assigns of that Person. References from or through any date mean,
      unless otherwise specified, from and including or through and including,
      respectively. References to “law”, “laws” or to a particular statute or law
      shall be deemed also to include any and all Applicable Law.

     

    ARTICLE
      2 

    

  PURCHASE
    AND SALE

    

     

    Section
      2.01.
      Purchase and Sale.Upon
      the
      terms and subject to the conditions of this Agreement, the Company agrees to
      sell to Buyer (or to any of its Affiliates), and Buyer agrees to purchase from
      the Company, that number of shares of Common Stock such that, after giving
      effect to such purchase and sale, Buyer shall own 19.80% of the total number
      of
      shares of Common Stock outstanding on the Closing Date (the “Initial
      Buyer Percentage”)
      (together with the Rights attached thereto, the “Initial
      Shares”);
      provided
      that
      such purchase and sale shall be effected by (a)
      the sale
      to Buyer of newly issued shares equal to the lesser of (i)
      the
      maximum number of shares that can be issued to Buyer without requiring that
      the
      issuance be approved by the Company’s shareholders under NYSE Rule 312.03 and
(ii)
      to the
      extent applicable, the maximum number of shares that can be issued to Buyer
      without causing Buyer to have any obligation to the Company’s shareholders under
      the Pennsylvania Law and (a)
      the sale
      to Buyer of the number of shares of Treasury Stock necessary to cause Buyer
      to
      own the Initial Buyer Percentage. The purchase price for the Initial Shares
      is
(i)
      $27.00
      multiplied by (ii)
      the
      number of Initial Shares (the “Purchase
      Price”).
      The
      Purchase Price shall be paid as provided in Section
      2.02.

     

    

        14

  

        
          
          

        

     

    Section
      2.02.Closing.
      The
      closing (the “Closing”)
      of the
      purchase and sale of the Initial Shares hereunder shall take place at the
      offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York,
      as soon as possible, but in no event later than ten Business Days after
      satisfaction of the conditions set forth in Article
      10,
      or at
      such other time or place as Buyer and the Company may agree. At the
      Closing:

     

    (a)  Buyer
      or
      any of its Affiliates shall deliver to the Company
      the
      Purchase Price in immediately available funds by wire transfer to an account
      of
      the Company designated by the Company, by notice to Buyer, which notice shall
      be
      delivered not later than two Business Days prior to the Closing Date (or if
      not
      so designated, then by certified or official bank check payable in immediately
      available funds to the order of the Company in such amount); and

     

    (b)  the
      Company shall issue or transfer the Initial Shares to Buyer through the delivery
      of certificates for the Initial Shares duly endorsed or accompanied by stock
      powers duly endorsed in blank, with any required transfer stamps affixed
      thereto, or by means of a customary DTC electronic transfer, as
      applicable.

     

    Section
      2.03. Additional
      Purchases by Buyer. (a)
      At any
      time after the Closing, Buyer and its Affiliates shall have the right to
      purchase and/or to cause the Voting Trustee to purchase, in the manner described
      below, additional shares of Common Stock; provided
      that,
      subject to Article
      8,
      until
      the Standstill Termination Date, the Voting Securities Beneficially Owned by
      Buyer and its Affiliates immediately after giving effect to such purchases
      shall
      not exceed the sum of (i)
      24.99%
      of the Total Voting Power and (ii)
      any
      Voting Securities Beneficially Owned by Buyer as a result of a Required Purchase
      (the “Permitted
      Limit”);
      provided
      that
      Buyer shall not be deemed to have exceeded the Permitted Limit to the extent
      that any such excess arises out of a recapitalization of the Company, a
      repurchase or redemption of Securities by the Company or any other action taken
      by the Company.

     

    (b)  Until
      the
      PA Law Termination Date, Buyer and its Affiliates shall cause all purchases
      which would result in Buyer and its Affiliates owning more than 19.99% of the
      outstanding Common Stock that are permitted to be made pursuant to this
Section
      2.03
      to be
      made by the Voting Trustee.

        

        15

        

        
          
          

        

     

    (c)  If
      Buyer
      determines to make, or cause its Affiliates or the Voting Trustee to make,
      any
      purchase of Common Stock under this Section
      2.03,
      Buyer
      will, or will cause its Affiliates or the Voting Trustee to, purchase such
      Common Stock in the following manner and in the following order of
      priorities:

     

        (i)  first,
      subject to the Permitted Limit, Buyer shall notify the Company as to the number
      of shares of Common Stock that it or its Affiliates desire to purchase or that
      Buyer desires to cause the Voting Trustee to purchase;

     

        (ii)  second,
      the Company will sell to Buyer, Buyer’s Affiliates or the Voting Trustee, as
      applicable, and Buyer, Buyer’s Affiliates or the Voting Trustee, as applicable,
      will purchase from the Company the number of shares of Treasury Stock equal
      to
      the lesser of the number of shares requested by Buyer and the number of shares
      of Treasury Stock held by the Company on the date of Buyer’s
      notice;

     

        (iii)  third,
      to
      the extent that the number of Shares of Treasury Stock available to the Company
      on such date is less than the number of shares requested by Buyer, the Company
      shall sell to Buyer, Buyer’s Affiliates or the Voting Trustee, as applicable,
      and Buyer, Buyer’s Affiliates or the Voting Trustee, as applicable, shall
      purchase from the Company newly issued shares of Common Stock; provided
      that,
(A)
      Buyer
      shall not purchase newly issued shares from the Company unless Buyer receives
      an
      opinion of its counsel to the effect that Rule 312.03 of the NYSE does not
      require that the shareholders of the Company approve the issuance and sale
      of
      such shares, and (B)
      the
      Company shall not sell to Buyer, its Affiliates or the Voting Trustee any newly
      issued shares pursuant to this Section
      2.03
      unless
      the Company receives an opinion of its counsel to the effect that Rule 312.03
      of
      the NYSE does not require that shareholders of the Company approve the issuance
      and sale of such shares to Buyer, its Affiliates or the Voting Trustee;
      and 

     

        (iv)  fourth,
      to the extent that the total number of shares of Common Stock sold to Buyer,
      its
      Affiliates or the Voting Trustee under clauses (ii)
      and
(iii)
      is less
      than the number of shares requested by Buyer, then, subject to Applicable Law,
      Buyer, its Affiliates or the Voting Trustee may buy shares of Common Stock
      in
      open market transactions or from Third Parties until Buyer, its Affiliates
      or
      the Voting Trustee, as applicable, shall have purchased, in the aggregate,
      the
      number of shares specified in Buyer’s notice.

     

    (d)  If
      Buyer,
      its Affiliates or the Voting Trustee purchase Treasury Stock or newly issued
      shares of Common Stock from the Company, such purchases and sales shall be
      consummated as promptly as practicable after the date of delivery of Buyer’s
      notice and in any event no later than ten Business Days after such
      date.

        

        16

        

        
          
          

        

     

     

    (e)  If
      Buyer,
      its Affiliates or the Voting Trustee purchase shares of Treasury Stock or newly
      issued shares of Common Stock from the Company, the price payable by Buyer,
      its
      Affiliates or the Voting Trustee to the Company for each such share of Common
      Stock shall be equal to the Prevailing Fair Market Value per
      share
      of Common Stock on the date of purchase.

     

    Section
      2.04.
      Gross Up Rights. (a) If
      at any
      time after Closing, the Company issues or proposes to issue any Voting
       Securities or any Participating Preferred Stock, whether (i)
      for
      financing, (ii)
      in
      connection with mergers and acquisitions, (iii)
      in
      connection with the exercise of Convertible Rights, (iv)
      upon the
      exercise of any option, warrant, stock appreciation right or other similar
      instrument granted to officers, directors, employees, consultants or others,
      (v)
      in the
      form of restricted shares or similar instruments, (vi)
      or
      otherwise, Buyer shall have the option and right to acquire such Voting
       Securities so that immediately after such issuance Buyer shall Beneficially
      Own
      the same Ownership Percentage of such Voting Securities as was Beneficially
      Owned by Buyer and its Affiliates before such issuance and to acquire its

      Ownership Percentage of any such Participating Preferred Stock in the manner
      described below; provided
      that any
      capital stock acquired by Buyer or its Affiliates in connection with any
       Required Purchase shall not be taken into account for purposes of the

      calculations required by this Section
      2.04(a);
      and
provided further
      that, in
      the case of any securities (except for any Participating Preferred Stock
      which are also Voting Securities) described in clause (ii) of the definition
      of Voting
      Securities, Buyer’s rights under this Section shall arise upon any
      conversion or  exchange of such Voting Securities for securities entitled,
      in the ordinary
      course, to vote in the election of Directors of the Company, rather than
      upon the issuance thereof.

     

    (b)  Prior
      to
      issuing any Voting Securities or Participating Preferred Stock (other than
      issuances pursuant to clauses (iii),
      (iv)
      and
(v)
      of
Section
      2.04(a)),
      the
      Company shall provide Buyer with ten Business Days’ prior written notice (or if
      such notice period is not possible under the circumstances, such prior notice
      as
      is practicable) of the proposed issuance. Buyer, acting directly or through
      its
      Affiliates, shall have the right, exercisable by providing written notice to
      the
      Company of the exercise of its rights within ten days after receipt of the
      Company’s notice, to purchase for cash directly from the Company (i)
      up to a
      sufficient number of such Voting Securities so that, after giving effect to
      such
      issuance, Buyer and its Affiliates will Beneficially Own the same Ownership
      Percentage as was Beneficially Owned by Buyer and its Affiliates immediately
      prior to the issuance of such Voting Securities or (ii)
      its
      Ownership Percentage of such Participating Preferred Stock (or to maintain
      its
      Ownership Percentage of any class of Participating Preferred Stock previously
      issued by the Company and purchased by Buyer or its Affiliates). The purchase
      price for any Voting Securities purchased by Buyer or its Affiliates pursuant
      to
      this Section
      2.04(b)
      will be
(A)
      in the
      case of an issuance of Voting Securities or Participating Preferred Stock other
      than in connection with mergers and acquisitions, the lesser of (x) the
      Prevailing Fair Market Value of such Voting Securities or Participating
      Preferred Stock on the date of issuance thereof or (y) the price (including
      any
      assumed indebtedness which is part of the purchase price and valuing any
      non-cash consideration at Prevailing Fair Market Value) at which the Company
      issues such Voting Securities or Participating Preferred Stock to other
      shareholders or Third Parties and (B)
      in the
      case of an issuance of Voting Securities or Participating Preferred Stock in
      connection with any merger or acquisition the arithmetic average, weighted
      by
      reference to daily trading volume, of the closing prices of such Voting
      Securities or Participating Preferred Stock during the 30 trading day period
      ending immediately prior to the closing of such merger or acquisition. The
      Company shall provide such information, to the extent reasonably available,
      relating to any non-cash consideration as Buyer may reasonably request in order
      to evaluate any non-cash consideration paid in respect of any issuance pursuant
      to this Section
      2.04(b).
      If, in
      connection with any issuance by the Company covered by this Section
      2.04(b),
      Buyer
      gives notice of its intent to exercise its option under this Section
      2.04(b)
      but has
      not purchased the securities subject thereto within 60 days thereafter for
      reasons not primarily related to actions or omissions of the Company or the
      absence of any approvals or consents or the taking of any other actions required
      to be taken under Applicable Law or the prohibition on purchasing such
      securities during such period imposed by applicable securities laws, Buyer
      shall
      be deemed to have waived its rights to purchase such securities under this
      Section
      2.04
      with
      respect to such issuance of Voting Securities or Participating Preferred
      Stock.

    
      
        
        

      

        17

  

        
          
          

        

     

    (c)  No
      later
      than 15 days after the end of each of its fiscal quarters, the Company shall
      give Buyer notice of the aggregate number of Voting Securities issued during
      the
      preceding fiscal quarter under clauses (iii),
      (iv)
      and
(v)
      of
Section
      2.04(a).
      Within
      ten days of the receipt of such notice Buyer shall have the right to take or
      cause to be taken the following actions, in the following order of priorities,
      in order to ensure that, after giving effect to such actions, Buyer and its
      Affiliates will Beneficially Own the same Ownership Percentage as was
      Beneficially Owned by Buyer and its Affiliates immediately before the beginning
      of such fiscal quarter (the “Equalized
      Percentage”):

     

        (i)  first,
      Buyer, acting directly or through its Affiliates, shall have a right to purchase
      from the Company the number of shares of Treasury Stock necessary to reach
      the
      Equalized Percentage;

     

        (ii)  second,
      to the extent that the Company does not have available enough shares of Treasury
      Stock to permit Buyer and its Affiliates to reach the Equalized Percentage,
      the
      Company shall, unless prohibited by Applicable Law, and subject to the receipt
      of any required regulatory approval, use its reasonable best efforts to
      repurchase in the open market within 15 days after the delivery of the notice
      to
      Buyer, the number of shares necessary to allow Buyer and its Affiliates to
      achieve the Equalized Percentage after giving effect to any purchases pursuant
      to clause (i);

    
      
        
        

      

        18

  

        
          
          

        

     

        (iii)  third,
      at
      the Company’s reasonable election (provided that the Company shall have acted
      reasonably in making its election), to the extent that the combination of the
      actions contemplated by clauses (i)
      and
(ii)
      are not
      adequate to allow Buyer and its Affiliates to reach the Equalized Percentage,
      Buyer, acting directly or through its Affiliates, shall have the right to
      purchase from the Company newly issued shares; provided
      that,
(A)
      to the
      extent that the approval of the Company’s shareholders is required in connection
      with such issuance, upon Buyer’s request the Company will convene a
      shareholders’ meeting to approve such issuance and (B)
      unless
      such meeting can be held within 90 days of Buyer’s request or if such meeting is
      held and approval is not obtained, Buyer and its Affiliates shall have the
      option of proceeding to make the purchases contemplated by clause (iv);
      and

     

        (iv)  fourth,
      to the extent that the combination of the actions contemplated by clauses
(i)
      through
(iii)
      are not
      adequate to allow Buyer and its Affiliates to reach the Equalized Percentage,
      Buyer and its Affiliates shall have the right, subject to Applicable Law, to
      purchase in open market transactions or from third parties, the number of Voting
      Securities necessary to allow them to reach the Equalized
      Percentage. 

     

    (d)  If
      Buyer
      or its Affiliates purchase Treasury Stock or newly issued Common Stock pursuant
      to Section
      2.04(c),
      the
      purchase price for such Treasury Stock or newly issued Common Stock will be
      the
      Prevailing Fair Market Value of the Common Stock on the date of issuance of
      newly issued Common Stock or purchase of Treasury Stock, as the case may be;
      provided
      that, to
      the extent that the event giving rise to Buyer’s and its Affiliates’ rights
      under Section
      2.04(c)
      is the
      conversion of the PIERS Instruments, Buyer and its Affiliates shall be required
      to purchase such shares of Common Stock at the conversion price under the
      applicable PIERS Instruments.

     

    (e)  If,
      at
      the time of any purchase by Buyer of Voting Securities pursuant to this
Section
      2.04,
      the
      Voting Trustee shall hold any Voting Securities, the Buyer will cause the Voting
      Trustee to purchase the number of Voting Securities that is determined by
      multiplying the number of Voting Securities to be purchased by Buyer pursuant
      to
      this Section
      2.04
      by a
      fraction, the numerator of which is the number of Voting Securities held by
      the
      Voting Trustee immediately before such purchase and the denominator of which
      is
      the total number of Voting Securities held by Buyer and its Affiliates
      (including the Voting Trustee) immediately before such
      purchase.

    
      
        
        

      

        19

  

        
          
          

        

     

    ARTICLE
      3

    

  REPRESENTATIONS
    AND WARRANTIES
    OF THE
    COMPANY

    

     

    Subject
      to Section
      13.03,
      except
      as set forth in the Company Disclosure Schedule, the Company represents and
      warrants to Buyer as of the date hereof and as of the Closing Date
      that:

     

Section
  3.01. Organization.
  (a) The Company is a corporation
  duly organized, validly existing and in good standing under the laws of the
  Commonwealth of Pennsylvania. The Company is a savings and loan holding company
  duly registered under the HOLA. The Company has the corporate power and authority
  to carry on its business and operations as now being conducted and to own and
  operate the properties and assets now owned and being operated by it. The Company
  and each Company Subsidiary are qualified or licensed to do business as a foreign
  corporation in each jurisdiction in which it is required to be so qualified
  or licensed as the result of the ownership or leasing of property or the conduct
  of its business except where the failure to be so qualified or licensed has
  not had, and would not reasonably be expected to have, individually or in the
  aggregate, a Material Adverse Effect. Each Company Subsidiary is duly organized,
  validly existing, and in good standing under the laws of the jurisdiction of
  its incorporation and each possesses full corporate power and authority to carry
  on its respective business and to own, lease and operate its properties as presently
  conducted. The Company Disclosure Schedule identifies
  each State in which the Company and each Company Subsidiary is qualified to
  do business as a foreign corporation.

     

    (b)  The
      Bank
      is a federal savings bank, duly organized and validly existing under the laws
      of
      the United States of America.

     

    (c)  There
      are
      no Company Subsidiaries other than the Bank, Iceland Acquisition Corp. and
      those
      identified in the Company SEC Documents.

     

    (d)  The
      Bank
      is a qualified thrift lender pursuant to Section 10(m) of the HOLA and a member
      in good standing of the Federal Home Loan Bank of Pittsburgh. The deposits
      of
      the Bank are insured by the FDIC to the fullest extent permitted in the FDIA,
      and all premiums and assessments required to be paid in connection therewith
      have been paid when due.

     

    (e)  The
      respective minute books of the Company, the Bank and each other Company
      Subsidiary accurately reflect all material corporate actions of their respective
      shareholders and boards of directors (including committees).

    
      
        
        

      

        20

  

        
          
          

        

     

    (f)  Prior
      to
      the date of this Agreement, the Company has made available to Buyer true and
      correct copies of the articles of incorporation and bylaws of the Company and
      the Bank, each as in effect on the date hereof.

     

    Section
      3.02.
      Capitalization.(a) The
      authorized capital stock of the Company consists of (i)
      800,000,000 shares of Common Stock, of which, at the date of this Agreement,
      360,388,527 shares were issued and outstanding and 22,050,315 shares were held
      by the Company as Treasury Stock, and (ii)
      7,500,000 shares of preferred stock, no par value, of which, at the date of
      this
      Agreement, no shares are issued or outstanding. All of the Company’s outstanding
      shares of Common Stock are validly issued, fully paid and non-assessable, and
      none of such shares were issued in violation of any preemptive rights. All
      of
      the Common Stock that is held by the Company as Treasury Stock is validly issued
      and none of such Common Stock was issued in violation of any preemptive rights.
      The Company has no Convertible Rights authorized, issued or outstanding, other
      than (A)
      the
      Rights, (B)
      as of
      the date hereof options or other rights to acquire an aggregate of 16,618,037
      shares of Common Stock under the Company’s stock option plans, non-employee
      directors compensation plan, employee stock ownership plan, employee stock
      purchase plan, and dividend reinvestment and stock purchase plan, and other
      employee benefit and stock-based benefit plans, and (C) the
      PIERS
      Instruments which are convertible, in accordance with the terms thereof, into
      26,111,395 shares of Common Stock in the aggregate.

     

    (b)  Except
      as
      set forth in Section
      3.02,
      there
      are no outstanding (i)
      shares
      of capital stock of, or other voting securities or ownership interests in,
      the
      Company, (ii)
      securities of the Company convertible into or exchangeable for shares of capital
      stock or other voting securities or ownership interests in the
      Company, (iii)
      options
      or other rights to acquire from the Company, or other obligation of the Company
      to issue, any capital stock or other voting securities or ownership interests
      in
      or any securities convertible into or exchangeable for capital stock or other
      voting securities or ownership interests in the Company or (iv)
      any
      other Convertible Rights (the items in clauses (i),
      (ii),
      (iii)
      and
(iv)
      being
      referred to collectively as the “Company
      Securities”).
      Except as set forth in Section
      2.04,
      there
      are no outstanding obligations of the Company or any Company Subsidiary to
      repurchase, redeem or otherwise acquire any of the Company
      Securities.

     

    (c)  The
      authorized capital stock of the Bank consists of (i)
      15,000,000 shares of common stock, $1.00 par value, of which 1,000 shares are
      outstanding, and (ii)
      7,500,000 shares of preferred stock, no par value, of which no shares are
      outstanding, validly issued, fully paid, nonassessable, free of preemptive
      rights, all of which are owned by the Company free and clear of any Liens.
      Neither the Company nor any Company Subsidiary has been or is bound by any
      subscription, option, warrant, call, commitment, agreement or other right of
      any
      character relating to the purchase, sale or issuance or voting of, or right
      to
      receive dividends or other distributions on any shares of the capital stock
      of
      any Company Subsidiary or any other security of any Company Subsidiary or any
      securities representing the right to vote, purchase or otherwise receive any
      shares of the capital stock or any other security of any Company Subsidiary.
      The
      Company owns, directly or indirectly, all of the outstanding shares of capital
      stock of each other Company Subsidiary free and clear of any
      Liens.

    
      
        
        

      

        21

  

        
          
          

        

     

    (d)  Except
      for the Company Subsidiaries, none of (i)
      the
      Company, (ii)
      the
      Bank, or (iii)
      any
      other Company Subsidiary, owns any equity interest, directly or indirectly,
      in
      any other Person or controls any other Person, except for equity interests
      held
      in the investment portfolios of Company Subsidiaries, equity interests held
      by
      Company Subsidiaries in a fiduciary capacity, equity interests held in
      connection with the commercial loan activities of Company Subsidiaries, or
      other
      securities and interests held in a fiduciary capacity and beneficially owned
      by
      third parties or taken in consideration of debts previously contracted. There
      are no subscription rights, options, warrants, calls, commitments, agreements
      or
      other Convertible Rights outstanding and held by the Company or the Bank with
      respect to the capital stock or the equity of any other Person.

     

    (e)  To
      the
      best of the Company’s Knowledge, except as disclosed in the Company’s proxy
      statement dated March 22, 2005, or in any subsequent Schedule 13D or 13G filed
      with the SEC, no person or Group Beneficially Owns 5% or more of the outstanding
      shares of Common Stock.

     

    (f)  Each
      of
      the shares of Common Stock to be issued by the Company to Buyer or, in the
      case
      of Treasury Stock, to be sold and transferred to Buyer, pursuant to the terms
      of
      this Agreement will be, upon such issuance, sale or transfer duly authorized,
      validly issued, fully paid and nonassessable and will be free and clear of
      any
      Lien.

     

    Section
      3.03.
      Authority. The
      Company has requisite corporate power and authority to execute and deliver
      this
      Agreement and the Registration Rights Agreement and to complete the transactions
      contemplated hereby subject to receipt of all Regulatory Approvals. The
      execution and delivery of this Agreement and the Registration Rights Agreement
      by the Company and the completion by the Company of the transactions
      contemplated hereby and thereby have been duly and validly approved by the
      Board
      and no other corporate proceedings on the part of the Company are necessary
      to
      complete the transactions contemplated hereby. This Agreement has been, and
      the
      Registration Rights Agreement, upon the execution and delivery thereof by the
      Company, will have been, duly and validly executed and delivered by the Company
      and, subject to receipt of the Regulatory Approvals and compliance therewith,
      constitutes the valid and binding obligations of the Company, enforceable
      against the Company in accordance with their terms (except as enforceability
      may
      be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
      fraudulent transfer and similar laws of general applicability relating to or
      affecting creditors’ rights, general equity principles or by applicable
      conservatorship or receivership provisions of the FDIA (“FDIA
      Limitations”)).

    

    
      
        
        

      

        22

  

        
          
          

        

     

    Section
      3.04. 
      Non-Contravention. Subject
      to receipt of the Regulatory Approvals and the Company’s compliance with any
      conditions contained therein (including the expiration of related waiting
      periods), none of (i)
      the
      execution and delivery of this Agreement or the Registration Rights Agreement
      by
      the Company, or the completion of the transactions contemplated hereby or
      thereby, and (ii)
      compliance by the Company or the Bank with any of the terms or provisions hereof
      or thereof, will (A)
      conflict
      with or result in a breach of any provision of the articles of incorporation
      or
      bylaws of the Company or the Bank; (B)
      conflict
      with or result in a breach of any provision of the articles of incorporation
      or
      bylaws of any Company Subsidiary (excluding the Bank); (C)
      violate
      any statute, code, ordinance, rule, regulation, judgment, order, writ, decree
      or
      injunction applicable to the Company or any Company Subsidiary or any of their
      respective properties or assets; or (D)
      violate,
      conflict with, result in a breach of any provisions of, constitute a default
      (or
      an event which, with notice or lapse of time, or both, would constitute a
      default) under, result in the termination of, accelerate the performance
      required by, or result in a right of termination or acceleration or the creation
      of any Lien upon any of the properties or assets of the Company or any Company
      Subsidiary under, any of the terms, conditions or provisions of any note, bond,
      mortgage, indenture, deed of trust, license, lease, agreement, commitment or
      other instrument or obligation to which the Company or any Company Subsidiary
      is
      a party, or by which they or any of their respective properties or assets may
      be
      subject except, in the case of clauses (B),
      (C)
      (other
      than with respect to the Company), and (D),
      any
      such violations, conflicts, breaches, defaults, terminations, accelerations
      or
      creations of Liens as have not had and would not reasonably be expected to
      have,
      individually or in the aggregate, a Material Adverse Effect.

     

Section
  3.05. Consents.(a)
  Except for (i) Regulatory Approvals
  and compliance with any conditions contained therein and (ii)
  compliance with any applicable requirements of the Securities Act, the Exchange
  Act and any other applicable U.S. state or federal securities laws, no consents
  or approvals of, or filings or registrations with, any Governmental Authority
  are necessary, and no consents or approvals or waivers of any third parties
  are necessary, or will be, in connection with (A)
  the execution and delivery of this Agreement or the Registration Rights Agreement
  by the Company, or (B) the completion
  by the Company of the transactions contemplated hereby or thereby. As of the
  date hereof, the Company has no reason to believe that the consents and approvals
  set forth above will not be received or will be received with conditions, limitations
  or restrictions that would reasonably be expected to have a Material Adverse
  Effect or which would adversely impact the Company’s ability to complete
  the transactions contemplated by this Agreement.

    
      
        
        

      

        23

  

        
          
          

        

     

    (b)  No
      approval or other action by the shareholders of the Company is required in
      connection with the execution, delivery and performance by the Company of this
      Agreement or the Registration Rights Agreement or the consummation of the
      Closing or the purchase by the Buyer of the Additional Shares.

     

    Section
      3.06.
      Financial Statements.(a)
      The
      Company has previously made available or will make available to Buyer the
      Company Regulatory Reports. The Company Regulatory Reports have been, or will
      be, prepared in all respects in accordance with applicable regulatory accounting
      principles and practices, including, but not limited to, all applicable rules,
      regulations and pronouncements of applicable Regulatory Authorities, throughout
      the periods covered by such statements, and fairly present, or will fairly
      present in all respects, the financial position, results of operations and
      changes in shareholders’ equity of the Company as of and for the periods ended
      on the dates thereof, in accordance with applicable regulatory accounting
      principles, including, but not limited to, all applicable rules, regulations
      and
      pronouncements of applicable Regulatory Authorities, applied on a consistent
      basis.

     

    (b)  The
      Company has previously made available to Buyer the Company Financials filed
      by
      it with the SEC. The Company Financials have been, or will be, prepared in
      accordance with GAAP applied on a consistent basis throughout the periods
      covered by such statements, except as noted therein, and fairly present, or
      will
      fairly present, in all material respects, the consolidated financial position,
      results of operations and cash flows of the Company as of and for the periods
      ended on the dates thereof, in accordance with GAAP applied on a consistent
      basis, except as noted therein.

     

    (c)  At
      the
      date of each balance sheet included in the Company Financials or Company
      Regulatory Reports, neither the Company nor the Bank (as the case may be) had,
      or will have, any liabilities, obligations or loss contingencies of any nature
      (whether absolute, accrued, contingent or otherwise) of a type required to
      be
      reflected in such Company Financials or Company Regulatory Reports or in the
      footnotes thereto which are not appropriately reflected or reserved against
      therein or appropriately disclosed in a footnote thereto, except for
      liabilities, obligations and loss contingencies which are not material in the
      aggregate and which are incurred in the ordinary course of business, consistent
      with past practice and, in the case of any unaudited statements, to normal,
      recurring audit adjustments and the absence of footnotes.

     

Section
  3.07. 
  Taxes. The Company and the Company Subsidiaries are
  members of the same affiliated group within the meaning of Section 1504(a) of
  the Code. The Company has duly filed, and will file, all Tax returns required
  to be filed by or with respect to the Company and all Company Subsidiaries on
  or prior to the Closing Date (taking into account any extensions of time within
  which to file which have not expired) (all such returns being or will be true
  and complete in all respects) and has duly paid or will pay, or made or will
  make provisions and related balance sheet accruals (if required) for the payment
  of, all Taxes which have been incurred by or are due or claimed to be due from
  the Company and any Company Subsidiary by any taxing authority or pursuant to
  any Tax sharing agreement or arrangement (written or oral) on or prior to the
  Closing Date other than Taxes which (a)
  are not delinquent or (b) are being
  contested in good faith (which are described on the Company Disclosure Schedule).
  Neither the Company nor any Company Subsidiary has (i)
  any audits pending or proposed in writing, or (ii)
  waived or extended any statute of limitations for Tax purposes.

    
      
        
        

      

        24

  

        
          
          

        

     

    Section
      3.08.
      SEC
      Filings
      and
      the Sarbanes-Oxley Act. (a)
      The
      Company has delivered to Buyer (i)
      the
      Company’s annual reports on Form 10-K for its fiscal years ended December 31,
      2004, 2003 and 2002, (ii)
      its
      quarterly reports on Form 10-Q for its fiscal quarters ending March 31, 2005
      and
      June 30, 2005, (iii)
      its
      proxy or information statements relating to meetings of the shareholders of
      the
      Company held (or actions taken without a meeting by such stockholders) since
      December 31, 2004, and (iv)
      all of
      its other reports, statements, schedules and registration statements filed
      with
      the SEC since December 31, 2004 (the documents referred to in this Section
      3.08(a)
      and the
      Form 10-K, Form 10-Q, proxy or information statement and other reports,
      schedules and registration statements filed with the SEC after the date hereof
      and before the Closing, collectively, the “Company
      SEC Documents”).

     

        (b)  As
      of its
      filing date, each Company SEC Document complied, and each such Company SEC
      Document filed subsequent to the date hereof will comply, as to form in all
      material respects with the applicable requirements of the Securities Act and
      the
      Exchange Act, as the case may be.

     

        (c)  As
      of its
      filing date, each Company SEC Document filed pursuant to the Exchange Act did
      not, and each such Company SEC Document filed subsequent to the date hereof
      will
      not, contain any untrue statement of a material fact or omit to state any
      material fact necessary in order to make the statements made therein, in the
      light of the circumstances under which they were made, not
      misleading.

     

        (d)  Each
      Company SEC Document that is a registration statement, as amended or
      supplemented, if applicable, filed pursuant to the Securities Act, as of the
      date such statement or amendment became effective, did not contain (or, in
      the
      case of any registration statement, as amended or supplemented, if applicable,
      filed by the Company prior to the Closing Date, as of the date such registration
      statement or amendment becomes effective, will not contain any untrue statement
      of a material fact or omit to state any material fact required to be stated
      therein or necessary to make the statements therein not
      misleading.

    
      
        
        

      

        25

  

        
          
          

        

     

        (e)  The
      Company has established and maintains disclosure controls and procedures (as
      defined in Rule 13a-15 under the Exchange Act). Such disclosure controls and
      procedures are designed to ensure that material information relating to the
      Company, including its consolidated Company Subsidiaries, is made known to
      the
      Company’s principal executive officer and its principal financial officer by
      others within those entities, particularly during the periods in which the
      periodic reports required under the Exchange Act are being prepared. Such
      disclosure controls and procedures are effective in timely alerting the
      Company’s principal executive officer and principal financial officer to
      material information required to be included in the Company’s periodic reports
      required under the Exchange Act. 

     

        (f)  The
      Company and the Company Subsidiaries have established and maintained a system
      of
      internal control over financial reporting (as defined in Rule 13a-15 under
      the
      1934 Exchange) (“internal
      controls”).
      Such
      internal controls are sufficient to provide reasonable assurance regarding
      the
      reliability of the Company’s financial reporting and the preparation of Company
      financial statements for external purposes in accordance with GAAP. The Company
      has disclosed, based on its most recent evaluation of internal controls prior
      to
      the date hereof, to the Company’s auditors and audit committee (x) any
      significant deficiencies and material weaknesses in the design or operation
      of
      internal controls which are reasonably likely to adversely affect the Company’s
      ability to record, process, summarize and report financial information and
      (y)
      any fraud, whether or not material, that involves management or other employees
      who have a significant role in internal controls. The Company has made available
      to Buyer a summary of any such disclosure made by management to the Company’s
      auditors and its audit committee.

     

        (g)  The
      Company has not, since the enactment of the Sarbanes-Oxley Act, taken any action
      prohibited by Section 402 of the Sarbanes-Oxley Act.

     

Section
  3.09. Absence of Certain Changes.
  Since the Balance Sheet Date, the business of the Company and each Company Subsidiary
  has been conducted in the ordinary course consistent with past practices and
  there has not been (other than as disclosed in the Company Regulatory Reports,
  the Company SEC Documents or the Company Financials, in each case as filed as
  of the date hereof):

     

        (a)  any
      event, occurrence, development or state of circumstances or facts that has
      had
      or would reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect;

    
      
        
        

      

        26

  

        
          
          

        

     

        (b)  any
      declaration, setting aside or payment of any dividend or other distribution
      with
      respect to any shares of capital stock of the Company, or any repurchase,
      redemption or other acquisition by the Company or any Company Subsidiary of
      any
      outstanding shares of capital stock or other securities of, or other ownership
      interests in, the Company;

     

        (c)  any
      amendment of any material term of any outstanding security of the Company or
      any
      Company Subsidiary (other than outstanding securities held only by wholly owned
      direct or indirect Subsidiaries of the Company);

     

        (d)  any
      incurrence, assumption or guarantee by the Company or any Company Subsidiary
      of
      any indebtedness for borrowed money other than in the ordinary course of
      business and in amounts and on terms consistent with past
      practices;

     

        (e)  any
      creation or other incurrence by the Company or any Company Subsidiary of any
      Lien on any material asset other than in the ordinary course of business
      consistent with past practices;

     

        (f)  any
      making of any loan, advance or capital contributions to or investment in any
      Person other than loans, advances or capital contributions to or investments
      made in the ordinary course of business consistent with past
      practices;

     

        (g)  any
      damage, destruction or other casualty loss (whether or not covered by insurance)
      affecting the business or assets of the Company or any Company Subsidiary that
      has had or would reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect on the Company;

     

        (h)  any
      transaction or commitment made, or any contract or agreement entered into,
      by
      the Company or any Company Subsidiary relating to its assets or business
      (including the acquisition or disposition of any assets) or any relinquishment
      by the Company or any Company Subsidiary of any contract or other right, in
      either case, material to the Company or any Company Subsidiary, taken as a
      whole, other than transactions and commitments in the ordinary course of
      business consistent with past practices and those contemplated by this Agreement
      and the Independence Agreement;

     

        (i)  any
      change in any method of accounting or accounting principles or practice by
      the
      Company or any Company Subsidiary, except for any such change required by reason
      of a concurrent change in GAAP or Regulation S-X under the Exchange
      Act;

     

        (j)  other
      than in the ordinary course consistent with past practice,
      any (i)
      grant of
      any severance or termination pay to (or amendment to any existing arrangement
      with) any director, officer or employee of the Company or any Company
      Subsidiary, (ii)
      increase
      in benefits payable under any existing severance or termination pay policies
      or
      employment agreements, (iii)
      any
      entering into any employment, deferred compensation or other similar agreement
      (or any amendment to any such existing agreement) with any director, officer
      or
      employee of the Company or any Company Subsidiary, (iv) establishment,
      adoption or amendment (except as required by applicable law) of any collective
      bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred
      compensation, compensation, stock option, restricted stock or other benefit
      plan
      or arrangement covering any director, officer or employee of the Company or
      any
      Company Subsidiary or (v)
      increase
      in compensation, bonus or other benefits payable to any director, officer or
      employee of the Company or any Company Subsidiary;

    
      
        
        

      

        27

  

        
          
          

        

     

        (k)  any
      labor
      dispute, other than routine individual grievances, or any activity or proceeding
      by a labor union or representative thereof to organize any employees of the
      Company or any Company Subsidiary, which employees were not subject to a
      collective bargaining agreement at the Balance Sheet Date, or any lockouts,
      strikes, slowdowns, work stoppages or threats thereof by or with respect to
      such
      employees; or

     

        (l)  any
      Tax
      election made or changed, any annual tax accounting period changed, any method
      of tax accounting adopted or changed, any amended Tax returns or claims for
      Tax
      refunds filed, any closing agreement entered into, any Tax claim, audit or
      assessment settled, or any right to claim a Tax refund, offset or other
      reduction in Tax liability surrendered.

     

Section
  3.10. Contracts. (a)
  Except for documents listed as exhibits to the Company SEC Documents or listed
  in the Company Disclosure Schedule, neither the Company nor any Company Subsidiary
  is a party to or subject to:

     

        (i)  any
      material employment, consulting or severance contract or arrangement with any
      past or present officer, director or employee of the Company or any Company
      Subsidiary, except for “at will” arrangements;

     

        (ii)  any
      plan,
      arrangement or contract providing for bonuses, pensions, options, deferred
      compensation, retirement payments, profit sharing or similar arrangements for
      or
      with any past or present officers, directors or employees of the Company or
      any
      Company Subsidiary;

     

        (iii)  any
      collective bargaining agreement with any labor union relating to employees
      of
      the Company or any Company Subsidiary;

    
      
        
        

      

        28

  

        
          
          

        

     

        (iv)  any
      agreement which by its terms limits the payment of dividends by the Company
      or
      any Company Subsidiary;

     

        (v)  any
      instrument evidencing or related to indebtedness for borrowed money, whether
      directly or indirectly, by way of purchase money obligation, conditional sale,
      lease purchase, guaranty or otherwise, in respect of which the Company or any
      Company Subsidiary is an obligor to any person, which instrument evidences
      or
      relates to indebtedness or which contains financial covenants or other
      restrictions (other than those relating to the payment of principal and interest
      when due) which would be applicable on or after the Closing Date to Buyer or
      any
      Affiliate thereof, other than deposits, repurchase agreements, the junior
      subordinated debentures relating to First Essex Capital Trust I, First Essex
      Capital Trust II, ML Capital Trust I, Seacoast Capital Trust I, Seacoast Capital
      Trust II, Sovereign Capital Trust I, Sovereign Capital Trust III, Sovereign
      Capital Trust IV, Waypoint Capital Trust I, Waypoint Capital Trust II, and
      Waypoint Statutory Trust III borrowings referred to in the Company SEC Documents
      or the Company Financials, bankers’ acceptances and “treasury tax and loan”
accounts established in the ordinary course of business and transactions in
      “federal funds”; or

     

        (vi)  any
      contract limiting the freedom of the Company or any Company Subsidiary to engage
      in any type of banking or bank-related business permissible under
      law.

     

        (b)  True
      and
      correct copies of agreements, plans, arrangements and instruments referred
      to in
Section
      3.10(a)
      have
      been made available to Buyer on or before the date hereof, are listed as
      exhibits to the Company SEC Documents or are listed on the Company Disclosure
      Schedule and are in full force and effect on the date hereof and neither the
      Company nor any Company Subsidiary (nor, to the Knowledge of the Company, any
      other party to any such contract, plan, arrangement or instrument) has breached
      any material provision of, or is in default in any respect under any material
      term of, any such contract, plan, arrangement or instrument. Except as listed
      in
      the Company SEC Documents (with respect to (iii)
      and
(iv)
      only) or
      as listed on the Company Disclosure Schedule, (i)
      no party
      to any material contract, plan, arrangement or instrument will have the right
      to
      terminate any or all of the provisions of any such contract, plan, arrangement
      or instrument as a result of the transactions contemplated by this Agreement
      or
      the Registration Rights Agreement, (ii)
      none of
      the employees (including officers) of the Company or any Company Subsidiary,
      possess the contractual right to terminate their employment as a result of
      the
      execution of this Agreement or the Registration Rights Agreement, and each
      contract with any director, officer and employee is listed as exhibits to the
      Company SEC Documents or listed on the Company Disclosure Schedule, (iii)
      no
      material plan, employment agreement, termination agreement, or similar agreement
      or arrangement to which the Company or any Company Subsidiary is a party or
      under which the Company or any Company Subsidiary may be liable contains
      provisions which permit an employee or independent contractor to terminate
      it
      without cause and continue to accrue future benefits thereunder, and
(iv)
      no such
      agreement, plan or arrangement (A)
      provides
      for acceleration in the vesting of benefits or payments due thereunder upon
      the
      occurrence of a change in ownership or control of the Company or any Company
      Subsidiary absent the occurrence of a subsequent event; (B)
      provides
      for benefits which may cause the disallowance of a federal income tax deduction
      under Section 280G of the Code; or (C)
      requires
      the Company or any Company Subsidiary to provide a benefit in the form of Common
      Stock or determined by reference to the value of Common Stock.

    
      
        
        

      

        29

  

        
          
          

        

     

Section
  3.11. No Undisclosed Material Liabilities.
  There are no liabilities or obligations of the Company or any Company Subsidiary
  of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable
  or otherwise, and there is no existing condition, situation or set of circumstances
  that would reasonably be expected to result in such a liability, other than:

     

        (a)  liabilities
      or obligations disclosed and provided for in the balance sheet of the Company
      as
      of the Balance Sheet Date or in the notes thereto or in the Company SEC
      Documents; and

     

        (b)  liabilities
      or obligations incurred in the ordinary course of business consistent with
      past
      practices since the Balance Sheet Date that would not reasonably be expected
      to
      have, individually or in the aggregate, a Material Adverse Effect on the
      Company.

     

    Section
  3.12. Ownership of Property; Insurance Coverage. (a)
  The Company and the Company Subsidiaries have, or will have, as to property
  acquired after the date hereof, good and, as to real property, marketable title
  to all assets and properties owned by the Company or any Company Subsidiary
  in the conduct of their businesses, whether such assets and properties are real
  or personal, tangible or intangible, including assets and property reflected
  in the balance sheets contained in the Company Regulatory Reports and in the
  Company Financials or acquired subsequent thereto (except to the extent that
  such assets and properties have been disposed of for fair value, in the ordinary
  course of business, since the date of such balance sheets), subject to no Liens,
  except (i) statutory Liens for amounts
  not yet delinquent or which are being contested in good faith, (ii)
  pledges to secure deposits and other Liens incurred in the ordinary course of
  its banking business, (iii) such
  imperfections of title, easements and encumbrances, if any, as are not material
  in character, amount or extent and (iv)
  as reflected on the consolidated statement of the financial condition of the
  Company included in the Company SEC Documents or Company Financials.

    
      
        
        

      

        30

  

        
          
          

        

     

        (b)  The
      Company and the Company Subsidiaries, as lessee, have the right under valid
      and
      subsisting leases of real and personal properties used by the Company and its
      Subsidiaries in the conduct of their businesses to occupy or use all such
      properties as presently occupied and used by each of them. Such existing leases
      and commitments to lease constitute or will constitute operating leases for
      both
      tax and financial accounting purposes and the lease expense and minimum rental
      commitments with respect to such leases and lease commitments are as disclosed
      in the notes to the Company Financials.

     

        (c)  With
      respect to all agreements pursuant to which the Company or any Company
      Subsidiary has purchased securities subject to an agreement to resell, if any,
      the Company or such Company Subsidiary, as the case may be, has a valid,
      perfected first lien or security interest in the securities or other collateral
      securing the repurchase agreement, and the value of such collateral equals
      or
      exceeds the amount of the debt secured thereby.

     

        (d)  The
      Company and the Company Subsidiaries currently maintain insurance considered
      by
      the Company to be reasonably prudent for their respective operations in
      accordance with industry practice. Neither the Company nor any Company
      Subsidiary has received notice from any insurance carrier that (i)
      such
      insurance will be canceled or that coverage thereunder will be reduced or
      eliminated or (ii)
      premium
      costs with respect to such policies of insurance will be substantially increased
      (except with respect to industry-wide increases in officers’ and directors’
liability insurance and employment law liability insurance). Except with regard
      to ordinary course claims under the Company’s medical insurance plans, there are
      presently no material claims pending under such policies. All such insurance
      is
      valid and enforceable and in full force and effect, and within the last three
      years the Company, the Bank and each Company Subsidiary has received each type
      of insurance coverage for which they have applied and during such periods have
      not been denied indemnification for any claims submitted under any of their
      insurance policies.

     

    Section
  3.13. Legal
  Proceedings. Neither the Company nor any Company
  Subsidiary is a party to any, and there are no pending or, to the best of the
  Company’s Knowledge, threatened legal, administrative, arbitration or
  other proceedings, claims (whether asserted or unasserted), actions or governmental
  investigations or inquiries of any nature (a)
  against the Company or any Company Subsidiary or (b)
  to which the Company’s or any Company Subsidiary’s assets are or
  may be subject, (c) challenging
  the validity or propriety of any of the transactions contemplated by this Agreement
  or the Registration Rights Agreement, or (d)
  which would reasonably be expected to materially and adversely affect the ability
  of the Company to perform under this Agreement or the Registration Rights Agreement,
  except for any proceedings, claims, actions, investigations or inquiries referred
  to in clauses (a) or (b)
  which, if adversely determined, individually or in the aggregate, would not
  be reasonably expected to have a Material Adverse Effect on the Company.

    
      
        
        

      

        31

  

        
          
          

        

     

    Section
      3.14 .
      Compliance with Applicable Law. (a)
      The
      Company and Company Subsidiaries and their employees hold all licenses,
      franchises, permits and authorizations necessary for the lawful conduct of
      the
      businesses of the Company and Company Subsidiaries under, and have complied
      in
      all respects with, applicable laws, statutes, orders, rules or regulations
      of
      any federal, state or local governmental authority relating to
      them.

     

        (b)  The
      Company and each Company Subsidiary are in substantial compliance with all
      of
      the statutes, regulations or ordinances which each Regulatory Authority
      applicable to them enforces. Since December 31, 2002, no Regulatory Authority
      has threatened to revoke any license, franchise, permit or governmental
      authorization which is material to the Company or any Company
      Subsidiary.

     

    Section
      3.15 .
      Employee Benefit Plans. (a)
      The
      Company has previously delivered or made available to Buyer (i)
      true and
      complete copies of all employee pension benefit plans within the meaning of
      ERISA Section 3(2), including profit sharing plans, employee stock ownership
      plans, employee stock purchase plans, deferred compensation and supplemental
      income plans, supplemental executive retirement plans, material employment
      agreements, annual executive and material administrative incentive plans or
      long-term incentive plans (including without limitation plans providing for
      the
      granting of stock options, restricted stock and other equity-based awards),
      severance, severance protection and severance benefit plans, policies and
      agreements, group insurance plans, and all employee welfare benefit plans within
      the meaning of ERISA Section 3(1) (including vacation pay, sick leave,
      short-term disability, long-term disability, and medical plans) and all other
      employee benefit plans, policies, programs, agreements and arrangements
      (collectively, the “Employee
      Plans”),
      all
      of which are set forth in the Company Disclosure Schedule, (ii)
      the most
      recent actuarial and valuation reports (if any) and financial reports relating
      to those plans, (iii)
      the most
      recent annual reports relating to such plans filed by them, respectively, with
      any government agency, and (iv)
      the most
      recent determination letters and any pending request for a determination letter
      pertaining to any such plans.

     

        (b)  Except
      as
      listed on the Company Disclosure Schedule, none of the Company, any ERISA
      Affiliate and any predecessor thereof (i)
      sponsors, maintains or contributes to any Employee Plan subject to Title IV
      of
      ERISA (a “Title
      IV Plan”),
      (ii)
      contributes to, or has in the past contributed to, any multiemployer plan,
      as
      defined in Section 3(37) of ERISA (a “Multiemployer
      Plan”),
      (iii)
      has or
      would reasonably be expected to have any liability with respect to any Title
      IV
      Plan or any Multiemployer Plan, whether pursuant to Title IV of ERISA or
      otherwise or (iv)
      has any
      current or projected material liability in respect of post-employment or
      post-retirement health or medical or life insurance benefits for retired, former
      or current employees of the Company or any Subsidiary, except as required to
      avoid excise tax under Section 4980B of the Code.

    
      
        
        

      

        32

  

        
          
          

        

     

         (c)  To
      the
      Knowledge of the Company, all “employee benefit plans,” as defined in ERISA
      Section 3(3), comply and within the past six years have complied in all material
      respects with (i)
      relevant
      provisions of ERISA and (ii)
      in the
      case of plans intended to qualify for favorable income tax treatment, provisions
      of the Code relevant to such treatment. To the Knowledge of the Company, after
      appropriate inquiry, no prohibited transaction (which shall mean any transaction
      prohibited by ERISA Section 406 and not exempt under ERISA Section 408 or any
      transaction prohibited under Code Section 4975) has occurred and not been
      corrected within the past six years with respect to any employee benefit plan
      maintained by the Company or any Company Subsidiary which would result in the
      imposition, directly or indirectly, of an excise tax under Code Section 4975
      or
      other penalty under ERISA or the Code.

     

        (d)  Each
      Employee Plan has been maintained in material compliance with its terms and
      with
      the requirements prescribed by any and all applicable statutes, orders, rules
      and regulations, including ERISA and the Code, which are applicable to such
      Employee Plan. 

     

        (e)  There
      has
      been no amendment to, written interpretation of or announcement (whether or
      not
      written) by the Company or any of its Affiliates or relating to, or change
      in
      employee participation or coverage under, any Employee Plan that would
      materially increase the expense of maintaining such Employee Plan above the
      level of the expense incurred in respect thereof for the most recent fiscal
      year
      ended prior to the date hereof.

     

        (f)  There
      are
      no outstanding loans or other extensions of credit made by the Company or any
      of
      its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the
      Exchange Act) or directors of the Company. The Company has not, since the
      enactment of the Sarbanes-Oxley Act, taken any action prohibited by Section
      402
      of the Sarbanes-Oxley Act.

     

        (g)  Except
      as
      disclosed on the Company Disclosure Schedule, there is no action, suit,
      investigation, audit or proceeding pending against or involving or, to the
      Knowledge of the Company, threatened against or involving any Employee Plan
      before any arbitrator or any Governmental
      Authority.

     

Section
  3.16. Brokers, Finders and Financial Advisors. Except
  for Citigroup and any other financial advisor to the Company in connection with
  this Agreement, each of whose fees will be paid by the Company, neither the
  Company nor any Company Subsidiary, nor any of their respective officers, directors,
  employees or agents, has employed any broker, finder or financial advisor in
  connection with the transactions contemplated by this Agreement, the Registration
  Rights Agreement or the Independence Agreement, or incurred any liability or
  commitment for any fees or commissions to any such person in connection with
  the transactions contemplated by this Agreement, the Registration Rights Agreement
  or the Independence Agreement, which has not been reflected in the Company Financials.

    
      
        
        

      

        33

  

        
          
          

        

     

    Section
      3.17. 
      Environmental Matters.
      To the
      Knowledge of the Company, neither the Company nor any Company Subsidiary, nor
      any properties operated by the Company or any Company Subsidiary during the
      Company’s use or ownership, has been or is in violation of, or liable under or
      in connection with, any Environmental Law that would reasonably be expected
      to
      have a Material Adverse Effect on the Company. There are no actions, suits
      or
      proceedings, or demands, claims, notices (including without limitation notices,
      demand letters or requests for information from any environmental agency) or,
      to
      the Knowledge of the Company, investigations instituted or pending, or to the
      knowledge of the Company, overtly threatened, relating to the liability of
      the
      Company or any Company Subsidiary under any Environmental Law that would
      reasonably be expected to have a Material Adverse Effect on the
      Company.

     

Section
  3.18. Allowance for Losses. The
  allowance for loan losses reflected, and to be reflected, in the Company Regulatory
  Reports each has been, and will be, established in compliance with the requirements
  of all applicable regulatory criteria, and the allowance for loan losses shown,
  and to be shown, on the balance sheets contained in the Company Financials have
  been, and will be, established in compliance with the applicable requirements
  of GAAP.

     

Section
  3.19. Related Party Transactions. Except
  as disclosed in the Company SEC Documents or in the footnotes to the Company
  Financials, Company Regulatory Reports, the Company is not a party to any transaction
  (including any loan or other credit accommodation, but excluding deposits in
  the ordinary course of business) with any Affiliate of the Company (except a
  Company Subsidiary). All such transactions (a)
  were made in the ordinary course of business, (b)
  were made on substantially the same terms, including interest rates and collateral,
  as those prevailing at the time for comparable transactions with other Persons,
  and (c) did not involve more than
  the normal risk of collectibility or present other risks or unfavorable features.
  No loan or credit accommodation to any Affiliate of the Company is presently
  in default or, during the three-year period prior to the date of this Agreement,
  has been in default or has been restructured, modified or extended. Neither
  the Company nor the Bank has been notified that principal and interest with
  respect to any such loan or other credit accommodation will not be paid when
  due or that the loan grade classification accorded such loan or credit accommodation
  by the Bank is inappropriate.

    
      
        
        

      

        34

  

        
          
          

        

     

Section
  3.20. Loans. Each loan
  reflected as an asset in the Company Financials (a)
  was originated, underwritten, approved, documented and periodically approved
  in all material respects in accordance with prudent lending standards generally
  accepted in the banking business and, to the Knowledge of the Company, after
  appropriate inquiry, did not deviate in any material respect from the Company’s
  policies and procedures currently in effect, and (b)
  is the legal, valid and binding obligation of the obligor named therein, enforceable
  in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
  conveyance and other laws of general applicability relating to or affecting
  creditors’ rights and to general equity principles (except as enforceability
  may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
  fraudulent transfer and similar laws of general applicability relating to the
  affecting creditors’ rights or by general equity principles or FDIA Limitations).
  Each extension of credit made by the Bank to an “insider” (as such
  term is defined in the Federal Reserve Board’s Regulation O) of the Bank
  or the Company complies with the Federal Reserve Board’s Regulation O,
  as made applicable to the Bank by 12 C.F.R. § 563.43.

     

Section
  3.21. Labor
  Matters. No key employee of the Company or any Company
  Subsidiary has indicated to the Company or to the Company Subsidiary, as the
  case may be, that he intends to resign or retire as a result of the transactions
  contemplated by this Agreement or otherwise within one year after the Closing
  Date. The Company and the Company Subsidiaries are in compliance with all currently
  Applicable Laws respecting employment and employment practices, terms and conditions
  of employment and wages and hours, and are not engaged in any unfair labor practice.
  There is no unfair labor practice complaint pending or, to the Knowledge of
  the Company, threatened against the Company or any Company Subsidiary before
  the National Labor Relations Board. Neither the Company nor any Company Subsidiary
  is a party to or bound by any collective bargaining agreement.

     

    Section
      3.22. Risk
      Management Instruments.
      Except
      as disclosed in the Company Financials, neither the Company nor any of the
      Company Subsidiaries is a party to or has agreed to enter into an exchange
      traded or over-the-counter equity, interest rate, foreign exchange or other
      swap, forward, future, option, cap, floor or collar or any other contract that
      is not included on the balance sheet and is a derivatives contract (including
      various combinations thereof) (each, a “Derivatives
      Contract”)
      or
      owns securities that (a)
      are
      referred to generically as “structured notes,” “high risk mortgage derivatives,”
“capped floating rate notes” or “capped floating rate mortgage derivatives” or
(b)
      are
      likely to have changes in value as a result of interest or exchange rate changes
      that significantly exceed normal changes in value attributable to interest
      or
      exchange rate changes, except for those Derivatives Contracts and other
      instruments legally purchased or entered into in the ordinary course of
      business, consistent with safe and sound banking principles and regulatory
      guidance. All of such Derivatives Contracts or other instruments, are legal,
      valid and binding obligations of the Company or any of the Company Subsidiaries
      enforceable in accordance with their terms (except as enforcement may be limited
      by general principles of equity whether applied in a court of law or a court
      of
      equity and by bankruptcy, insolvency and similar laws affecting creditors’
rights and remedies generally), and are in full force and effect. The Company
      and the Company Subsidiaries have duly performed in all respects all of their
      obligations thereunder to the extent that such obligations to perform have
      accrued, and, to the Company’s Knowledge, there are no breaches, violations or
      defaults or allegations or assertions of such by any party thereunder which
      would have or would reasonably be expected to have a Material Adverse Effect
      on
      the Company.

    
      
        
        

      

        35

        

        
          
          

        

       

      Section
        3.23. Community
        Reinvestment Act, Anti-Money Laundering and Customer Information
        Security.
        Neither
        the Company nor the Bank is aware of, has been advised of, or has reason
        to
        believe that any facts or circumstances exist, which would cause the Bank
        (a) to
        be deemed not to be in satisfactory compliance in any material respect with
        the
        Community Reinvestment Act, and the regulations promulgated thereunder, or
        to be
        assigned a rating for Community Reinvestment Act purposes by federal or state
        bank regulators of lower than “satisfactory,” or (b) to be deemed to be
        operating in violation in any respect of the federal Bank Secrecy Act, as
        amended, and its implementing regulations (31 C.F.R. Part 103), the USA Patriot
        Act of 2001, Public Law 107-56 (the “USA
        Patriot Act”),
        and
        the regulations promulgated thereunder, any order issued with respect to
        anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign
        Assets Control, or any other applicable anti-money laundering statute, rule
        or
        regulation, or (c) to be deemed not to be in satisfactory compliance in any
        respect with the applicable privacy of customer information requirements
        contained in any federal and state privacy laws and regulations, including,
        without limitation, in Title V of the Gramm-Leach-Bliley Act of 1999 and
        regulations promulgated thereunder, as well as the provisions of the information
        security program adopted by the Bank pursuant to 12 C.F.R. Part 364. The
        board
        of directors of the Bank has adopted and implemented an anti-money laundering
        program that contains adequate and appropriate customer identification
        certification procedures that has not been deemed ineffective in any material
        respects by any Regulatory Authority and that meets the requirements in all
        material respects of Section 352 of the USA Patriot Act and the regulations
        thereunder.

       

      Section
        3.24. Credit
        Card Accounts.
        Neither
        the Company nor any Company Subsidiary originates, maintains or administers
        credit card accounts.

       

      Section
        3.25. Agreements
        with Regulatory Authorities.
        Neither
        the Company nor any Company Subsidiary is subject to any presently pending
        cease-and-desist or other order or enforcement action issued by or is a party
        to
        any written agreement, consent agreement or memorandum of understanding with,
        or
        is a party to any commitment letter or similar undertaking to, or is subject
        to
        any order or directive by, or has been ordered to pay any civil money penalty
        by, or has been since January 1, 2003, a recipient of any supervisory letter
        from, or since January 1, 2003, has adopted any policies, procedures or board
        resolutions at the request or suggestion of any Regulatory Authority or other
        governmental entity that currently restricts in any material respect the
        conduct
        of its business or that in any manner relates to its capital adequacy, its
        ability to pay dividends, its credit or risk management policies, its management
        or its business (each item in this sentence, whether or not set forth in
        the
        Company Disclosure Schedule, a “Company
        Regulatory Agreement”),
        nor
        has the Company or any Company Subsidiary been advised since December 31,
        2002
        by any Regulatory Authority or other governmental entity that it is considering
        issuing, initiating, ordering, or requesting any such Company Regulatory
        Agreement.

          

        36

        

        
          
          

        

       

      Section
        3.26. Regulatory
        Capital.
        The
        Company and the Bank meet or exceed all applicable regulatory capital
        requirements, and the Bank is deemed “well capitalized”
        under such regulatory requirements.

       

      Section
        3.27.
        Regulatory Probability. As
        of the
        date hereof, the Company has no Knowledge of any fact or circumstance that
        would
        reasonably be expected to result in the denial to the Company or a Company
        Subsidiary of any Regulatory Approval or that any such Regulatory Approval
        will
        contain any condition or requirement that would reasonably be expected to
        have a
        Material Adverse Effect.

       

      Section
        3.28.
        Directors’ and Officers’ Insurance. The
        Company and the Bank currently provide, and have for the preceding five years
        provided, customary directors’ and officers’ liability insurance coverage
        (“D&O
        Insurance”).
        The
        D&O Insurance policies are legal, valid, binding and in full force and
        effect in accordance with their terms, and neither the Company nor the Bank
        is
        in breach or default with respect to its obligations thereunder (including
        with
        respect to payment of premiums). The D&O Insurance policies contain market
        terms (including with respect to premiums, coverage and deductibles) that
        are
        typical of policies maintained by publicly traded U.S. companies in the industry
        in which the Company operates.

       

      Section
        3.29.
        Rights Plan. The
        Company has taken all actions necessary to render the Rights issued pursuant
        to
        the terms of the Rights Agreement inapplicable to this Agreement and the
        transactions contemplated hereby.

       

      ARTICLE
        4

      

    REPRESENTATIONS
      AND WARRANTIES OF BUYER

      

      Buyer
        represents and warrants to the Company as of the date hereof and as of the
        Closing Date that:

          

        37

        

        
          
          

        

       

      Section
        4.01.  Organization.
        Buyer
        is
        a corporation duly organized, validly existing and in good standing under
        the
        laws of Spain. Buyer has the corporate power and authority to carry on its
        business and operations as now being conducted and to own and operate the
        properties and assets now owned and being operated by it. Buyer is qualified
        or
        licensed to do business as a foreign corporation in each jurisdiction in
        which
        it is required to be so qualified or licensed as the result of the ownership
        or
        leasing of property or the conduct of its business.

       

      Section
        4.02.  Authority.
        Buyer
        has
        requisite corporate power and authority to execute and deliver this Agreement
        and the Registration Rights Agreement and the Voting Trust Agreement and
        to
        complete the transactions contemplated hereby and thereby, subject to receipt
        of
        all necessary approvals of Governmental Authorities. The execution and delivery
        of this Agreement and the Registration Rights Agreement and the Voting Trust
        Agreement by Buyer and the completion by Buyer of the transactions contemplated
        hereby have been duly and validly approved by the Board of Directors or the
        appropriate committee thereof of Buyer and no other corporate proceedings
        on the
        part of Buyer are necessary to complete the transactions contemplated hereby
        or
        thereby. Subject to receipt of the Regulatory Approvals and compliance
        therewith, this Agreement has been duly and validly executed and delivered
        by
        Buyer and constitutes, and the Registration Rights Agreement and the Voting
        Trust Agreement, upon the execution and delivery thereof, by Buyer will be
        duly
        and validly executed and delivered by Buyer and will constitute, a valid
        and
        binding obligation of Buyer, enforceable against Buyer in accordance with
        its
        terms (except as enforceability may be limited by applicable bankruptcy,
        insolvency, reorganization, moratorium, fraudulent transfer and similar laws
        of
        general applicability relating to or affecting creditors’ rights and general
        equity principles).

       

      Section
        4.03.
        Non-Contravention. None
        of
        (i) the execution and delivery of this Agreement, the Registration Rights
        Agreement or the Voting Trust Agreement by Buyer, (ii) subject to receipt
        of the
        Regulatory Approvals and the Company’s compliance with any conditions contained
        therein (including the expiration of related waiting periods), the completion
        of
        the transactions contemplated hereby or thereby, and (iii) compliance by
        Buyer
        with any of the terms or provisions hereof and thereof, will (A) conflict
        with
        or result in a breach of any provision of the articles of incorporation or
        bylaws of Buyer; (B) violate any statute, code, ordinance, rule, regulation,
        judgment, order, writ, decree or injunction applicable to Buyer or any of
        its
        properties or assets; or (C) violate, conflict with, result in a breach of
        any
        provisions of, constitute a default (or an event which, with notice or lapse
        of
        time, or both, would constitute a default) under, result in the termination
        of,
        accelerate the performance required by, or result in a right of termination
        or
        acceleration or the creation of any Lien upon any of the properties or assets
        of
        Buyer under, any of the terms, conditions or provisions of any note, bond,
        mortgage, indenture, deed of trust, license, lease, agreement, commitment
        or
        other instrument or obligation to which Buyer is a party, or by which its
        properties or assets may be subject except, in the case of clause (C), for
        such
        violations, conflicts, breaches, defaults, terminations, accelerations and
        creations of Liens as have not had, and would not reasonably be expected
        to
        have, a Material Adverse Effect or impair the ability of Buyer to fulfill
        its
        obligations under this Agreement, the Voting Trust Agreement or the Registration
        Rights Agreement.

          

        38

        

        
          
          

        

       

      Section
        4.04.  Financing.
        Buyer
        has, or will have prior to the Closing, sufficient cash, available lines
        of
        credit or other sources of immediately available funds to enable it to make
        payment of the Purchase Price and any other amounts to be paid by it
        hereunder.

       

      Section
        4.05.  Purchase
        for Investment.
        Buyer
        is purchasing the Shares for investment for its own account and not with
        a view
        to, or for sale in connection with, any distribution thereof. Buyer (either
        alone or together with its advisors) has sufficient knowledge and experience
        in
        financial and business matters so as to be capable of evaluating the merits
        and
        risks of its investment in the Shares and is capable of bearing the economic
        risks of such investment.

       

      Section
        4.06.  Finders’
        Fees.
        Except
        for bankers, whose fees and expenses will be paid by Buyer, there is no
        investment banker, broker, finder or other intermediary which has been retained
        by or is authorized to act on behalf of Buyer who might be entitled to any
        fee
        or commission in connection with the transactions contemplated by this
        Agreement.

       

      Section
        4.07.
        Ownership of the Company. As
        of the
        date hereof, Buyer does not beneficially own any shares of Common Stock (other
        than in connection with its brokerage, investment advisory or management,
        trust
        and fiduciary, arbitrage, trading and lending activities in the normal and
        usual
        course of business).

       

      Section
        4.08.
        Compliance with Applicable Law. (a)
        Buyer
        and its employees hold all licenses, franchises, permits and authorizations
        necessary for the lawful conduct of the businesses of Buyer under, and have
        complied in all respects with, applicable laws, statutes, orders, rules or
        regulations of any federal, state or local governmental authority relating
        to
        them.

       

      (b) Buyer
        is
        in substantial compliance with all of the statutes, regulations or ordinances
        which each Regulatory Authority applicable to it enforces. Since December
        31,
        2002, no Regulatory Authority has threatened to revoke any license, franchise,
        permit or governmental authorization which is material to Buyer.

          

        39

        

        
          
          

        

       

      Section
        4.09.
        Absence of Certain Changes. Since
        December 31, 2004, the business of Buyer has been conducted in the ordinary
        course consistent with past practices and there has not been (other than
        as
        disclosed in Buyer’s regulatory or SEC documents or in its financial statements,
        in each case as of the date hereof) any event, occurrence, development or
        state
        of circumstances or facts that has had or would reasonably be expected to
        have,
        individually or in the aggregate, a Material Adverse Effect. 

       

      Section
        4.10.
        Regulatory Probability. As
        of the
        date hereof, Buyer has no Knowledge of any fact or circumstance that would
        reasonably be expected to result in the denial to Buyer of any Regulatory
        Approval or that any such Regulatory Approval will contain any condition
        or
        requirement that would reasonably be expected to have a Buyer Material Adverse
        Effect.

       

      ARTICLE
        5

      
        COVENANTS OF THE COMPANY

      

      The
        Company agrees that:

       

      Section
        5.01.
        Conduct
        of the Company. (a)
        From
        the date hereof until the Closing Date, the Company will, and will cause
        each
        Company Subsidiary to, conduct its businesses in the ordinary course consistent
        with past practice and to use its best reasonable efforts to preserve intact
        its
        business organizations and relationships with third parties and to keep
        available the services of its present officers and employees. Without limiting
        the generality of the foregoing, from the date hereof until the Closing Date,
        the Company shall
        not, and shall not permit any Company Subsidiary to, except as contemplated
        by
        this Agreement and the Independence Agreement:

       

  (i)  adopt
    or propose any change in its certificate of incorporation or bylaws;

       

  (ii)  merge
    or consolidate with any other Person or acquire a material amount of assets
    from any other Person;

       

  (iii)  sell,
    lease, license or otherwise dispose of any material assets or property except
    (A) pursuant to existing contracts or commitments and (B) in the ordinary
    course consistent with past practice;

       

  (iv)  amend
    or modify, in any material respect, the Independence Agreement, waive any
    material rights of the Company thereunder, or waive any conditions to the
    obligation of the Company to consummate the transactions contemplated by the
    Independence Agreement; 

          

        40

        

        
          
          

        

       

  (v)  issue
    any Voting Securities or sell any shares of Treasury Stock, other than under
    the Company’s Direct Stock Purchase Plan, Non-Employee Director Compensation
    Plan, Employee Stock Purchase Plan, Retirement Plan, Advisory Board compensation
    programs or pursuant to Convertible Rights outstanding on the date hereof
    or pursuant to employee stock options granted after the date hereof in the
    ordinary course of business consistent with past practice; or

       

  (vi)  agree
    or commit to do any of the foregoing.

       

      (b) From
        the
        date hereof until the Closing Date, the Company shall not, and shall not
        permit
        any Company Subsidiary to:

       

  (i)  take
    or agree or commit to take any action that would make any representation or
    warranty of the Company hereunder inaccurate in any respect at, or as of any
    time prior to, the Closing Date; or

       

  (ii)  omit
    or agree or commit to omit to take any action necessary to prevent any such
    representation or warranty from being inaccurate in any respect at any such
    time.

       

      Section
        5.02.  Access
        to Information; Reports.
        (a)
        From
        the date hereof until the Closing Date, the Company will (i) give, and will
        cause each Subsidiary to give, Buyer, its counsel, financial advisors, auditors
        and other authorized representatives full access to the offices, properties,
        books and records of the Company and the Subsidiaries, (ii) furnish, and
        will
        cause each Subsidiary to furnish, to Buyer, its counsel, financial advisors,
        auditors and other authorized representatives such financial and operating
        data
        and other information relating to the Company or any Subsidiary as such Persons
        may reasonably request, and (iii) instruct the employees, counsel and financial
        advisors of the Company or any Subsidiary to cooperate with Buyer in its
        investigation of the Company or any Subsidiary. No investigation by Buyer
        or
        other information received by Buyer shall operate as a waiver or otherwise
        affect any representation, warranty or agreement given or made by the Company
        hereunder.

       

  (b)  From
    the Closing Date until the earliest of (x) the date on which Buyer and its
    Affiliates no longer own 10% or more of the Total Voting Power or (y) the
    date of termination of this Agreement pursuant to Section 12.01, the Company
    agrees to provide to Buyer:

       

  (i)  access
    to, upon reasonable prior notice to the Company, (A) the Company’s auditors
    and the auditors of all the Company’s Subsidiaries, (B) any materials
    relating to, or correspondence to or from, any agency that regulates, or proposes
    to regulate, any of the activities, operations or assets of the Company or
    any of its Subsidiaries, and (C) the senior officers of the Company and any
    of its Subsidiaries;

          

        41

        

        
          
          

        

       

  (ii)  access,
    upon reasonable prior notice to the Company, by any agency that regulates
    or audits, or proposes to regulate or audit, any of the activities, operations
    or assets of Buyer or any of its Subsidiaries, to (A) all financial, operating
    and legal records and information of the Company and its Subsidiaries, and
    (B) the senior officers of the Company and any of Company Subsidiaries;

       

  (iii)  as
    soon as practicable and, in any event, within ten Business Days (or such earlier
    date that the information is available to the Company) after the end of each
    month, the unaudited consolidated balance sheet and statement of shareholder
    equity of the Company and its Subsidiaries as at the end of such month and
    the related unaudited statement of income for such month and for the portion
    of the fiscal year then ended;

       

  (iv)  as
    soon as practicable and, in any event, within 40 days (or such earlier date
    that the information is available to the Company) after the end of each of
    the first three fiscal quarters, (A) the unaudited consolidated balance sheet
    and statement of shareholder equity of the Company and its Subsidiaries as
    at the end of such quarter and the related unaudited statement of income and
    statement of cash flows and changes in financial condition for such quarter
    and for the portion of the fiscal year then ended, and (B) the Company’s
    quarterly operating budget, projections and business plan for the coming quarter;

       

  (v)  as
    soon as practicable and, in any event, within 75 days (or such earlier date
    that the information is available to the Company) after the end of each fiscal
    year, (A) the audited consolidated balance sheet and statement of shareholder
    equity of the Company and its Subsidiaries as at the end of such fiscal year
    and the related audited statement of income and statement of cash flows and
    changes in financial condition for such fiscal year, in each case prepared
    in accordance with generally accepted accounting principles, consistently
    applied and certified by the Company’s accountant or another firm of
    independent public accountants of internationally recognized standing, together
    with a comparison of the figures in such financial statements with the figures
    for the previous fiscal year and the figures in the Company’s annual
    operating budget, (B) any management letters or other correspondence from
    such accountants and (C) the Company’s annual operating budget, projections,
    and business plan for the coming fiscal year; and

       

      

        42

  

        
          
          

        

       

  (vi)  promptly
    following the preparation thereof, a copy of any revisions to the annual operating
    budget delivered pursuant to clause (iv).

       

      Section
        5.03.  Notices
        of Certain Events.
        The
        Company shall promptly notify Buyer of:

       

  (a)  any
    notice or other communication from any Person alleging that the consent of
    such Person is or may be required in connection with the transactions contemplated
    by this Agreement;

       

  (b)  any
    notice or other communication from any Governmental Authority in connection
    with the transactions contemplated by this Agreement or the Independence Agreement;
    

       

  (c)  any
    actions, suits, claims, investigations or proceedings commenced or, to its
    Knowledge threatened against, relating to or involving or otherwise affecting
    the Company or any Subsidiary that, if pending on the date of this Agreement,
    would have been required to have been disclosed pursuant to Section 3.13 or
    that relate to the consummation of the transactions contemplated by this Agreement
    or the Independence Agreement;

       

  (d)  any
    inaccuracy of any representation or warranty contained in this Agreement at
    any time during the term hereof that would reasonably be expected to cause
    any of the conditions set forth in Section 10.01 or Section 10.02 not to be
    satisfied; and

       

  (e)  any
    failure of the Company to comply with or satisfy any covenant, condition or
    agreement to be complied with or satisfied by it hereunder;

       

      provided
        that
        the
        delivery of any notice pursuant to this Section 5.03 shall not limit or
        otherwise affect the remedies available hereunder to the party receiving
        that
        notice; and provided further
        that any
        noncompliance with the foregoing provisions of this Section 5.03 shall not
        constitute failure of a condition set forth in Section 10.01 or Section 10.02
        or
        give rise to any right of termination under Article 12 unless the underlying
        change or event shall independently constitute such a failure or give rise
        to
        such a right.

       

      Section
        5.04.
        Certain Change in Control Provisions. Prior
        to
        Closing the Company shall take such actions as may be required so that the
        Buyer
        Acquisition Transactions (other than those contemplated in Sections 8.06
        through
        8.08 and Section 8.10) will not constitute a “change of control” or “change in
        control” under any of the employment agreements or employee severance protection
        agreements (including without limitation all employee letter agreements or
        other
        binding agreements) or under any of the Employee Plans. The Company shall
        have
        the right to determine the manner and method for achieving the result required
        by this Section 5.04; provided
        that
        such manner and method must be reasonably acceptable to Buyer.

          

        43

        

        
          
          

        

       

      Section
        5.05.
        Takeover Laws. (a)
        In
        addition to the actions to be taken by the Company pursuant to Section
        5.05(b)-(c) below in respect of the Pennsylvania Law, prior to the Closing
        Date
        the Company shall take all action required to be taken by it in order to
        exempt
        this Agreement, and all acquisitions of Voting Securities by Buyer contemplated
        or permitted by this Agreement, including those acquisitions contemplated
        or
        permitted under Sections 2.01, 2.03, 2.04, 2.05, 8.05, 8.06,
        8.07, 8.08
        and 8.10
        and any Required Purchases, and any Transfers of Voting Securities by Buyer
        that
        are contemplated or permitted hereunder including those permitted under Section
        8.02 (but excluding any acquisitions or Transfers of Voting Securities by
        any
        Transferee after the initial acquisition of Voting Securities from Buyer)
        (collectively, the “Buyer
        Acquisition Transactions”),
        from
        the requirements of any “moratorium,” “control share,” “fair price,”
“shareholder approval of transactions with interested Persons,” “affiliate
        transaction,” “business combination,” or other antitakeover laws and regulations
        of any jurisdiction (collectively, the “Takeover
        Laws”).

       

  (b)  The
    Company shall use commercially reasonable efforts to cause the Buyer Acquisition
    Transactions to be exempt from or not subject to the Pennsylvania Law; provided
    that if the Company shall not have otherwise achieved such exemption or inapplicability
    prior to December 31, 2006, the Company shall (after the Closing): (i) take
    action by the affirmative vote of at least 80% of the members of the Board
    to recommend to the shareholders of the Company that the Charter be amended
    to provide that the Pennsylvania Law be inapplicable to the Company (the “Opt
    Out Proposal”), (ii) call and hold a meeting
    of the Company’s shareholders for the purpose of approving the Opt Out
    Proposal, such meeting to take place no later than June 30, 2007, (iii) actively
    solicit proxies in favor of the Opt Out Proposal, and (iv) if the Opt Out
    Proposal is approved by the vote of shareholders of the Company entitled to
    cast at least a majority of the votes that all shareholders of the Company
    are entitled to cast on the proposal, cause to be filed, within one business
    day of such approval, an amendment to the Charter reflecting the amendment
    so approved. 

       

  (c)  After
    Closing, the Company shall not take any action, including by way of recapitalization,
    redemption or repurchase of Common Stock or otherwise that will require Buyer
    to comply with the requirements of the Pennsylvania Law.

       

  (d)  Nothing
    in this Section 5.05 shall require a shareholder vote of the Company prior
    to Closing.

          

        44

        

        
          
          

        

       

      Section
        5.06.
        Other Defensive Measures. (a) Prior
        to
        the Closing Date, the Company shall take all actions necessary so that the
        provisions of Articles 8, 11, 15, 16 and 17 of the Charter and Sections 4.03,
        4.04, 10.01 and 11.01 of the Bylaws are rendered inapplicable to, or otherwise
        consistent with, and unable to prevent Buyer from exercising its rights under
        this Agreement or making it more difficult to obtain the approval of the
        Board
        or the shareholders of the Company than it would be in the absence of such
        provision, and the Buyer Acquisition Transactions
        so long
        as the Buyer Acquisition Transactions are consummated in accordance with
        the
        terms of this Agreement. For the avoidance of doubt, the Company shall not
        be
        required to take any action that would render such provisions of the Charter
        and
        Bylaws inapplicable to any other transaction effected by Buyer or to any
        action
        that might be taken by any Transferee of any of the Shares.

       

  (b)  To
    the extent not taken prior to the date hereof, prior to the Closing Date,
    the Company shall take all actions necessary to render the rights issued pursuant
    to the terms of the Rights Agreement inapplicable to this Agreement and the
    transactions contemplated hereby, including the Buyer Acquisition Transactions
    so long as such transactions are consummated in accordance with this Agreement.

       

  (c)  Prior
    to the Closing Date, the Company shall take all actions necessary so that
    any other Defensive Measures are rendered inapplicable to, or are otherwise
    consistent with, and do not prevent Buyer from exercising its rights under,
    this Agreement and the transactions contemplated hereby, including the Buyer
    Acquisition Transactions, so long as such transactions are consummated in
    accordance with this Agreement.

       

  (d)  Provided
    that Buyer has complied with its obligations under Article 8, the Company
    shall not at any time during the term of this Agreement rescind or otherwise
    render ineffective any of the actions required to be taken by Sections 5.04,
    5.05 and 5.06, nor will it impose any additional Defensive Measures applicable
    to the Buyer Acquisition Transactions.

       

  (e)  From
    the Closing Date until the termination of this Agreement in accordance with
    Section 12.01, the Company shall not take any Defense Removal Action for the
    benefit of any Third Party except in connection with a 100% Acquisition Proposal
    providing for consideration that consists only of cash and/or capital stock
    that is listed and traded on the NYSE, quoted on the NASDAQ National Market
    System or on the principal stock exchange of any country that is a member
    of the Organization for Economic Cooperation and Development, including American
    Depositary Receipts or other similar instruments representing such capital
    stock (“Permitted Consideration”)
    that the Company is permitted to accept under Article 8 and shall not take
    any Defense Removal Action for the benefit of a Third Party in a manner that
    is more favorable to such Third Party than to Buyer.

          

        45

        

        
          
          

        

       

  (f)  Nothing
    in this Section 5.06 shall require a shareholder vote of the Company prior
    to Closing.

       

      Section
        5.07.
        Regulatory Matters. Notwithstanding
        any other provision in this Agreement to the contrary, the Company shall
        (a)
        promptly notify Buyer of any deficiencies at the Company or any depository
        institution Subsidiary of the Company that could be expected to affect adversely
        Buyer’s status as a U.S. financial holding company (“FHC
        status”),
        (b)
        take all actions that Buyer may reasonably request and cooperate with Buyer
        to
        cause any such deficiencies to be promptly remedied, and (c) not intentionally
        engage in any transaction that would be expected to affect adversely Buyer’s FHC
        status. The Company shall comply, and cause any Subsidiary to comply, with
        all
        conditions imposed by any Regulatory Authority (including conditions relating
        to
        the divestiture of impermissible investments) in any order approving the
        transaction contemplated by this Agreement and any transaction in which the
        Company acquires a depositary institution
        so long
        as compliance with such conditions would not reasonably be expected to have
        a
        Material Adverse Effect or be otherwise unreasonably burdensome.

       

      Section
        5.08.
        Certain Payments. In
        the
        event the Company shall
        receive any Termination Fee under the terms of, and as defined in the
        Independence Agreement, the Company shall immediately pay 50% of the amount
        received to Buyer by wire transfer of immediately available funds to such
        account of Buyer as Buyer may designate.

       

      Section
        5.09.
        FIRPTA.
        In
        connection with any disposition by Buyer of any Common Stock, upon the written
        request of Buyer the Company shall (a) in accordance with Treasury Regulation
        Section 1.897-2, determine whether it is or has been a “U.S. real property
        holding corporation” (“USRPHC”)
        within
        the meaning of Section 897 of the Code during the relevant period, and (b)
        if
        the Company so determines that it is not and has not been a USRPHC during
        such
        period, deliver to Buyer a statement to such effect in accordance with Treasury
        Regulation Section 1.897-2(g)(1).

       

       

      ARTICLE
        6

      

    COVENANTS
      OF BUYER

      

       

      Buyer
        agrees that:

       

      Section
        6.01.  Confidentiality.
        Prior
        to the Closing Date and after any termination of this Agreement, Buyer and
        its
        Affiliates will hold, and will use their best efforts to cause their respective
        officers, directors, employees, accountants, counsel, consultants, advisors
        and
        agents to hold, in confidence, unless compelled to disclose by judicial or
        administrative process or by other requirements of law, all confidential
        documents and information concerning the Company or any Subsidiary furnished
        to
        Buyer or its Affiliates in connection with the transactions contemplated
        by this
        Agreement, except to the extent that such information can be shown to have
        been
        (a) previously known on a nonconfidential basis by Buyer, (b) in the public
        domain through no fault of Buyer or (c) later lawfully acquired by Buyer
        from
        sources other than the Company or any Subsidiary; provided
        that
        Buyer may disclose such information to its officers, directors, employees,
        accountants, counsel, consultants, advisors and agents in connection with
        the
        transactions contemplated by this Agreement, so long as such Persons are
        informed by Buyer of the confidential nature of such information and are
        directed by Buyer to treat such information confidentially. The obligation
        of
        Buyer and its Affiliates to hold any such information in confidence shall
        be
        satisfied if they exercise the same care with respect to such information
        as
        they would take to preserve the confidentiality of their own similar
        information.

          

        46

        

        
          
          

        

       

      Section
        6.02.
        Right of First Purchase. (a)
        The
        Company recognizes that Buyer and its Affiliates are currently engaged and
        may
        in the future engage in the same or similar activities or lines of business
        as
        the Company’s and its Subsidiaries’ business, which activities or lines of
        business may compete with the Company’s and its Subsidiaries’ business, and that
        Buyer and its Affiliates will continue in such businesses following the date
        hereof. Accordingly, subject only to Section 6.02(b) and the provisions of
        any
        employment agreement, consulting agreement or other written agreement with
        the
        Company, Buyer, its Affiliates, and any agent, representative, officer,
        director, employee of Buyer or any of its Affiliates, may engage in, or possess
        an interest in, other business ventures of every nature and description,
        independently or with others, whether or not such other enterprises shall
        be in
        competition with or operating the same or similar businesses as the Company
        or
        any of its Subsidiaries, and no such Person shall have any obligation or
        duty to
        bring business opportunities to the attention of the Company or any of its
        Subsidiaries, other than those business opportunities that were offered to
        or
        intended to be directed towards the Company or its Subsidiaries or were made
        aware or available to such Person solely as a result of such Person’s position
        with, or during the course of the performance of such Person’s duties to, the
        Company or any of its Subsidiaries.

       

  (b)  From
    the date hereof until the earliest of (i) the first date upon which Buyer
    and its Affiliates no longer Beneficially Own Voting Securities representing
    at least 15% of the Total Voting Power, (ii) the date of consummation by Buyer
    of any 100% Acquisition Proposal permitted under the terms of this Agreement
    and (iii) any termination of this Agreement pursuant to Section 12.01 (the
    “First Purchase Period”),
    Buyer agrees that it will not and will not permit any of its Affiliates to
    acquire, directly or indirectly, for its own account, solely or jointly with
    others, control of any Competing Business without first offering to the Company
    the right to acquire such Competing Business in the manner provided in Section
    6.02(c) below.

          

        47

        

        
          
          

        

       

  (c)  If,
    at any time during the First Purchase Period, Buyer desires to acquire control
    of a Competing Business, it shall deliver a written notice to the Company
    (the “First Purchase Notice”)
    identifying the Competing Business and setting forth, to the extent then known
    by Buyer, the material terms upon which such acquisition is proposed to be
    made. Not later than ten Business Days after receipt of a First Purchase Notice,
    the Company shall deliver to Buyer a written response (a “Purchase
    Response Notice”) indicating whether the Company
    desires to make the proposed acquisition. If the Company expresses an interest
    in making the proposed acquisition, Buyer will use all commercially reasonable
    efforts (which shall not include the expenditure of monies or the incurrence
    of liabilities except to the extent reimbursed or guaranteed by the Company)
    to facilitate the acquisition by the Company. If (i) the Company rejects the
    acquisition opportunity in the Purchase Response Notice, (ii) the Company
    indicates in the Purchase Response Notice an interest in making the proposed
    acquisition but fails to enter into a definitive agreement with respect to
    the proposed acquisition within 60 days after delivery of the Purchase Response
    Notice or (iii) the Company fails to deliver a Purchase Response Notice within
    the ten Business Day period specified above, then the Company shall be deemed
    to have rejected the opportunity to acquire the Competing Business and Buyer
    shall thereafter be free to acquire control of the Competing Business for
    its own account.

       

      Section
        6.03.
        Voting Trust Agreement. At
        or
        prior to the Closing, Buyer shall enter into the Voting Trust Agreement with
        a
        financial institution with no material relationship with Buyer (to act in
        the
        capacity of Trustee) selected by Buyer and approved by the Company (the
“Voting
        Trustee”),
        which
        approval shall not be unreasonably withheld or delayed. 

       

      Section
        6.04.
        Tier 1 Capital; Debt Financing. To
        the
        extent that the aggregate purchase price for the Shares payable at the Closing
        is less than the purchase price in the Independence Transaction, Buyer shall
        purchase, upon the request of the Company, non-voting preferred shares/Tier
        1
        qualifying instruments of the Company (the “Capital
        Instruments”)
        and
        will provide debt financing to the Company, in each case, on market terms
        and
        pricing in effect at the date of issuance, the proceeds of which will be
        sufficient to enable the Company to pay such difference; provided
        that
        Buyer shall not be obligated to purchase Capital Instruments for an aggregate
        purchase price exceeding $600 million and Buyer shall not be obligated under
        this Section 6.04 for any amount in excess of $1.2 billion.

          

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      ARTICLE
        7

      

    COVENANTS
      OF BUYER
      AND THE COMPANY

      

       

      Buyer
        and
        the Company agree that:

       

      Section
        7.01. Reasonable
        Best Efforts; Further Assurances.
        Subject
        to the terms and conditions of this Agreement, Buyer and the Company will
        use
        their reasonable best efforts to take, or cause to be taken, all actions
        and to
        do, or cause to be done, all things necessary or desirable under Applicable
        Laws
        to consummate the transactions contemplated by this Agreement, including,
        without limitation, all of the Buyer Acquisition Transactions, including
        (i)
        preparing and filing as promptly as practicable with any Governmental Authority
        or other third party all documentation to effect all necessary filings, notices,
        petitions, statements, registrations, submissions of information, applications
        and other documents; (ii) obtaining and maintaining all approvals, consents,
        registrations, permits, authorizations and other confirmations required to
        be
        obtained from any Governmental Authority or other third party that are
        necessary, proper or advisable to consummate the transactions contemplated
        by
        this Agreement, including, without limitation, all of the Buyer Acquisition
        Transactions; and (iii) in the case of the Company, using its best efforts
        to
        cause the transactions contemplated by the Independence Agreement to be
        consummated pursuant to the terms thereof. The Company and Buyer agree, and
        the
        Company agrees to cause each Subsidiary, to execute and deliver such other
        documents, certificates, agreements and other writings and to take such other
        actions as may be necessary or desirable in order to consummate or implement
        expeditiously the transactions contemplated by this Agreement, including,
        without limitation, all of the Buyer Acquisition Transactions so long as
        such
        transactions are consummated in accordance with this Agreement.

       

      Section
        7.02.
        Certain Filings. The
        Company and Buyer shall cooperate with one another (a) in determining whether
        any action by or in respect of, or filing with, any Governmental Authority
        is
        required, or any actions, consents, approvals or waivers are required to
        be
        obtained from parties to any material contracts, in connection with the
        consummation of the transactions contemplated by this Agreement, including,
        without limitation, the Regulatory Approvals and (b) in taking such actions
        or
        making any such filings, furnishing information required in connection therewith
        and seeking timely to obtain any such actions, consents, approvals or
        waivers.

       

      Section
        7.03.  Public
        Announcements.
        The
        parties agree to consult with each other before issuing any press release
        or
        making any public statement with respect to this Agreement or the transactions
        contemplated hereby or by the Independence Agreement and, except for any
        press
        releases and public statements the making of which may be required by Applicable
        Law or any listing agreement with any national securities exchange, will
        not
        issue any such press release or make any such public statement prior to such
        consultation.

          

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      Section
        7.04.  Trademarks.
        Effective as of the Closing, Buyer shall grant the Company a royalty-free,
        non-exclusive, non-transferable license to use the marks set forth on Schedule
        7.04 of the Buyer Disclosure Schedule (collectively or individually as the
        context requires, the “Buyer
        Trademarks”)
        solely
        in connection with the conduct of the business of the Company as conducted
        as of
        the Closing Date (or as otherwise permitted by Buyer in writing) within the
        Designated Area until the earlier to occur of any of the following: (a) the
        fifth anniversary of the Closing Date, (b) the date on which Buyer and its
        Affiliates own less than 15% of the Voting Securities, (c) any breach of
        any
        obligation or covenants of the Company under the Trademark License Agreement
        or
        this Agreement, (d) any termination of this Agreement pursuant to Section
        12.01
        and (e) any damages are incurred or reasonably expected to be incurred or
        suffered by Buyer and its Affiliates in connection with the Trademark License
        Agreement or the Company’s use of the Buyer Trademarks. The Company agrees that:
        (i) the Buyer Trademarks may be used only in the form and in the manner
        stipulated by Buyer and the Company shall conform to and observe such standards
        as Buyer from time to time prescribes, (ii) all services performed under
        the
        Buyer Trademarks and all goods to which the Buyer Trademarks are applied
        shall
        at all times be in compliance with applicable laws, and such services performed
        or goods supplied shall in each case be effected in a manner so as not to
        bring
        discredit upon the Buyer Trademarks, (iii) any use of the Buyer Trademarks
        by
        the Company shall inure to the benefit of Buyer, and (iv) the Company will
        promptly notify Buyer of any action, suit or proceeding asserted or threatened
        against the Company or its Affiliates relating to the Buyer Trademarks, use
        its
        best efforts to defend such action, suit or proceeding and permit Buyer to
        either (x) control the defense of such action, suit or proceeding or (y)
        participate in such defense. In addition, the Company agrees not to do or
        permit
        any act which may directly or indirectly impair or prejudice Buyer’s right,
        title or interest in and to the Buyer Trademarks or be detrimental to the
        reputation and goodwill of Buyer, including any act which may assist or give
        rise to any application to remove or de-register any of the Buyer Trademarks.
        These and other terms and conditions shall be set forth in more detail in
        a
        Trademark License Agreement
        to be
        entered into between the Company and Buyer on or before the Closing Date
        (the
“Trademark
        License Agreement”).

       

      Section
        7.05.
        Exchange of Management. Each
        of
        Buyer and the Company agree that from the Closing Date until the earlier
        of (a)
        termination of this Agreement pursuant to Section 12.01, (b) the date on
        which
        Buyer and its Affiliates own less than 10% of the Total Voting Power and
        (c) a
        Change in Control of the Company, it will appoint at least one of the other
        party’s employees to at least one position with direct reporting to the
        department head within each of its financial control department, internal
        audit
        department and risk management department; provided
        that the
        individual or individuals will not, in any case, be appointed to the most
        senior
        position in any such department and will be reasonably acceptable to such
        appointing party.

          

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      Section
        7.06.
        Public Subsidiary Stock. To
        the
        extent requested by either Buyer or the Company in connection with any
        Acquisition Proposal by Buyer that is approved by the Board, Buyer and the
        Company will negotiate in good faith to agree upon a structure for such
        Acquisition Proposal that will result in Persons other than Buyer holding
        equity
        securities representing approximately 10% of the Voting Power of the Company
        after giving effect to such Acquisition Proposal and/or an economic interest
        in
        the Company of approximately 10%; provided
        that in
        no event shall this Section 7.06 qualify or modify the provisions of Article
        8.

       

       

      ARTICLE
        8

      

    INVESTOR
      RELATED
      COVENANTS

      

       

      Section
        8.01.
        Standstill. Buyer
        agrees that, except as contemplated by Section 8.02, from the date hereof
        until
        the earlier of (a)
        the
        five year anniversary of the Closing Date, (b) the date on which the Company
        either accepts or enters into an agreement, an agreement in principle or
        other
        similar document with respect to an Acquisition Proposal made by any Person
        other than Buyer (or announces an intention to do so), (c) the date on which
        the
        Company rejects or fails to accept a 100% Acquisition Proposal from Buyer
        that
        Buyer is permitted to make under the terms of this Article 8 and that the
        Company is required to accept under the terms of this Agreement, or (d) the
        date
        of any breach by the Company or any of its Affiliates of any obligation under
        this Agreement as set forth in Sections 8.03 through 8.13 (the earliest of
        such
        dates the “Sale
        Restriction Termination Date”),
        Buyer
        shall not, and shall not permit its Affiliates to, acting either alone or
        in
        concert with any other Person or Group, directly or indirectly (collectively,
        the “Restricted
        Buyer Persons”)
        take
        any of the actions listed in Section 8.01(d) below. Buyer agrees that, except
        as
        contemplated by the Buyer Acquisition Transactions, from the date hereof
        until
        the earlier of (i) the five year anniversary of the Closing Date, (ii) the
        date
        on which the Company consummates an Acquisition Proposal made by a Person
        or
        Group other than Buyer, (iii) the date on which the Company rejects or fails
        to
        accept a 100% Acquisition Proposal from Buyer that Buyer is permitted to
        make
        under the terms of this Article 8 and that the Company is required to accept
        under the terms of this Agreement and (iv) the date of any breach by the
        Company
        or any of its Affiliates of any obligation under this Agreement as set forth
        in
        Sections 8.03 through 8.13 (the earliest of such dates, the “Standstill
        Termination Date”),
        the
        Restricted Buyer Persons shall not take any of the actions listed in Sections
        8.01(a), (b) or (c) below; provided
        that the
        Restricted Buyer Persons shall be bound by the provisions of Section 8.09
        after
        the Standstill Termination Date.
        During
        the periods and to the extent set forth above, the Restricted Buyer Persons
        shall not:

          

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  (a)  acquire
    or offer, seek, propose or agree to acquire, by any means whatsoever, including
    by means of any purchase or exchange of shares or any business combination,
    Beneficial Ownership of any Voting Securities or any assets of the Company
    or any Subsidiary;

       

  (b)  make
    any Acquisition Proposal;

       

  (c)  commence,
    engage in, encourage, facilitate or otherwise participate in any Proxy Solicitation,
    agree or announce its intention to vote with any Person engaging in any such
    solicitation, or seek to influence, advise or direct the vote of any holder
    of Voting Securities in connection with any such solicitation; or

       

  (d)  sell,
    pledge, encumber or otherwise transfer or agree to transfer (a “Transfer”),
    directly or indirectly, any Voting Securities Beneficially Owned by Buyer
    or its Affiliates or any Voting Securities held by the Voting Trust except
    (i) pursuant to any merger, consolidation, reorganization, recapitalization,
    tender offer, exchange offer, or other similar transaction approved by a majority
    of Unaffiliated Directors, or a self-tender of the Company, (ii) to an Affiliate
    of Buyer who agrees in writing to be bound by the terms of this Agreement
    and (iii) pursuant to a bona fide pledge to a financial institution.

       

      Notwithstanding
        anything in the foregoing to the contrary, it is agreed that the restrictions
        set forth in this Section 8.01 will not prevent Buyer or its Affiliates or
        its
        representatives from engaging in brokerage, investment advisory or management,
        trust and fiduciary, arbitrage, trading and lending activities in the normal
        and
        usual course of business.

       

      Section
        8.02.
        Transfer Restrictions. (a)
        Buyer
        agrees that, at any time following the Sale Restriction Termination Date,
        it
        will not, and will not permit its Affiliates to Transfer, or agree to Transfer,
        directly or indirectly, any shares of Voting Securities, except:

       

  (i)  to
    an Affiliate of Buyer who agrees in writing to be bound by the terms of this
    Agreement;

       

  (ii)  pursuant
    to a distribution to the public, registered under the Securities Act, in which
    Buyer and its Affiliates use their commercially reasonable efforts to effect
    a distribution of such shares of Common Stock in a manner that would not reasonably
    be expected to cause a material disruption in the market for such shares of
    Common Stock and to minimize the possibility that any Person who purchases
    such shares of Common Stock will become the holder of 5% or more of the outstanding
    shares of Common Stock as a result of such purchase;

          

        52

        

        
          
          

        

       

  (iii)  in
    a sale in the public market, pursuant to Rule 144 of the General Rules and
    Regulations of the Securities Act or otherwise in compliance with applicable
    securities laws, in which sale Buyer and its Affiliates use their commercially
    reasonable efforts to effect such sale or transfer in a manner that would
    not reasonably be expected to cause a material disruption in the market for
    such shares of Common Stock and to minimize the possibility that any Person
    who purchases such shares of Common Stock will become the holder of 5% or
    more of the outstanding shares of Common Stock as a result of such purchase;

       

  (iv)  subject
    to compliance with the Company’s right of first offer set forth in Section
    8.02(b) below and, if applicable, to the Company’s right of last look
    set forth in Section 8.02(c), to any Third Party that is not a Substantial
    Competitor and is not listed on the prohibited purchaser list provided pursuant
    to Section 8.07(f);

       

  (v)  in
    connection with a merger, consolidation, reorganization, recapitalization,
    tender offer, exchange offer, other similar transaction approved by a majority
    of Unaffiliated Directors, or a self-tender of the Company;

       

  (vi)  as
    a bona fide pledge to a financial institution; or

       

  (vii)  with
    the prior written consent of the Company.

       

  (b)  (i)
    If, at any time following the Sale Restriction Termination Date, Buyer (or
    any of its Affiliates) desires to Transfer any shares of Common Stock to any
    Third Party pursuant to the provisions of Section 8.02(a)(iv), Buyer shall
    give notice (an “Offer Notice”)
    to the Company that Buyer desires to make such a Transfer and that sets forth
    the number of shares of Common Stock proposed to be Transferred by Buyer (the
    “Offered Securities”),
    the cash price per share that Buyer proposes to be paid for such Offered Securities
    (the “Offer Price”)
    and any other material terms sought by Buyer.

       

  (ii)  The
    giving of an Offer Notice to the Company shall constitute an offer (the “Offer”)
    by Buyer to Transfer the Offered Securities to the Company for cash at the
    Offer Price and on the other terms set forth in the Offer Notice. The Company
    shall have a 30 day period (the “Offer Period”)
    in which to accept such Offer as to all of the Offered Securities by giving
    a notice of acceptance to Buyer prior to the expiration of such Offer Period.
    If the Company fails to notify Buyer prior to the expiration of the Offer
    Period, it shall be deemed to have declined such Offer. 

          

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    (iii)  If
      the Company elects to purchase the Offered Securities, the Company shall
      purchase and pay, in immediately available funds by wire transfer to an
      account of Buyer designated by Buyer, by notice to the Company, for the
      Offered Securities within 20 Business Days after the date on which all such
      Offered Securities have been accepted; provided
      that, if the Transfer of such Offered Securities is subject to any prior
      regulatory approval, subject to Section 8.02(b)(iv)(C), the time period
      during which such Transfer may be consummated shall be extended until the
      expiration of five Business Days after all such approvals shall have been
      received, but in no event shall such period be extended for more than an
      additional 120 days.

      

       

  (iv)  Upon
    the earlier to occur of (A) full rejection of the Offer by the Company, (B)
    the expiration of the Offer Period without the Company electing to purchase
    all of the Offered Securities and (C) the failure to obtain any required consent
    or regulatory approval for the purchase of all of the Offered Securities by
    the Company within 150 days of full acceptance of the Offer, Buyer shall have
    a 60-day period during which to effect a Transfer of any or all of the Offered
    Securities on substantially the same or more favorable (as to Buyer) terms
    and conditions as were set forth in the Offer Notice at a price not less than
    the Offer Price; provided
    that, if the Transfer is subject to regulatory approval, such 60-day period
    shall be extended until the expiration of five Business Days after all such
    approvals shall have been received. 

       

      Buyer
        may
        Transfer Offered Securities in accordance with this Section 8.02(b) for
        consideration other than cash only if Buyer has first obtained and delivered
        to
        the Company a representation in writing that the fair market value of the
        non-cash consideration that Buyer proposes to accept as consideration for
        such
        Offered Securities, together with any cash consideration, is at least equal
        to
        100% of the Offer Price.

       

  (c)  If
    at any time following the Sale Restriction Termination Date, Buyer desires
    to Transfer any shares of Common Stock to any Third Party pursuant to the
    provisions of Section 8.02(a)(iv) and the Buyer knows or has reason to know
    that after giving effect to such sale the Transferee of such shares will have
    Beneficial Ownership of more than 5% of the Voting Securities of the Company,
    then after complying with Buyer’s obligations under Section 8.02(b)
    and after receiving an offer by a Third Party to purchase the Offered Securities
    with respect to which the provisions of Section 8.02(b) were applied but before
    consummating any sale of such Offered Securities to such Third Party, Buyer
    will give the Company a second right to purchase the Offered Securities in
    accordance with the following procedures: After obtaining the Third Party
    offer, Buyer shall give the Company written notice of all of the material
    terms of such offer and shall provide the Company with a last opportunity
    to buy such Offered Securities at the same price and on the same terms set
    forth in Buyer’s notice. The Company shall deliver to Buyer a response
    notice within ten days of receipt of Buyer’s notice indicating whether
    the Company desires to purchase all of the Offered Securities at such price
    and on such terms and conditions. If the Company delivers a notice indicating
    a desire to purchase all of the Offered Securities within the ten day period,
    then Buyer shall sell such Offered Securities to the Company and the Company
    shall purchase such Offered Securities from Buyer at such price and on such
    terms. The closing of this sale and purchase shall take place within 20 Business
    Days after receipt by Buyer of the Company’s response notice. If the
    Company rejects the opportunity to buy all of the Offered Securities or fails
    to deliver a response notice to Buyer within the ten day period specified
    above, then Buyer shall be permitted to consummate the proposed sale with
    such Third Party on the terms set forth in Buyer’s notice to the Company
    or on any other terms that are less favorable to the Third Party than those
    set forth in such notice.

          

        54

        

        
          
          

        

       

      Section
        8.03.
        Pre-Closing Period. During
        the Pre-Closing Period the Company shall not, and shall not permit any of
        its
        Subsidiaries or any of its or their officers, directors, employees, investment
        bankers, attorneys, accountants, consultants or other agents or advisors
        (such
        Subsidiaries, officers, directors, employees, investment bankers, attorneys,
        accountants, consultants, agents and advisors, collectively, the “Company
        Representatives”)
        to,
        directly or indirectly:

       

  (i)  solicit,
    initiate, or take any action to facilitate or encourage the submission of
    any Acquisition Proposal by a Third Party or otherwise initiate any process
    that is intended to, or is reasonably likely to lead to the making of an Acquisition
    Proposal by any Third Party (collectively, “Solicitation
    Actions”),

       

  (ii)  enter
    into or participate in any discussion or negotiations with, furnish any information
    relating to the Company or any of its Subsidiaries or afford any access to
    the business, properties, assets, books or records of the Company or any of
    its Subsidiaries to, otherwise cooperate in any way with, or knowingly assist,
    participate in, facilitate or encourage in any manner any effort by any Third
    Party that is seeking to make, or has made, an Acquisition Proposal (collectively,
    “Solicitation Response Actions”),

       

      (iii) grant
        to
        any Third Party any waiver under or any release or any standstill or similar
        agreement or any Defensive Measure or redeem, modify, repeal or otherwise
        diminish any Defensive Measure for the benefit of any Third Party (collectively,
        “Defense
        Removal Actions”), 

          

        55

        

        
          
          

        

       

  (iv)  enter
    into any agreement, agreement in principle, letter of intent, term sheet or
    other similar instrument relating to any Acquisition Proposal by any Third
    Party (collectively, “Agreement Actions”),
    or

       

  (v)  agree
    or commit to take any of the actions described in this Section 8.03.

       

  Section
    8.04. General Restrictions. (a) Notwithstanding anything
    to the contrary contained herein and in addition to any other restrictions
    set forth herein, until the earlier of (i) the Standstill Termination Date
    or (ii) such time as Buyer and its Affiliates Beneficially Own less than 19.8%
    of the outstanding shares of Common Stock, the Company will not and will not
    permit any Company Representative to, directly or indirectly, take any of
    the actions described in clauses (i) through (v) of Section 8.03 in respect
    of any Acquisition Proposal from a Third Party other than a 100% Acquisition
    Proposal payable in Permitted Consideration and that is approved by the Board
    after compliance with the terms of Article 8, as applicable. For purposes
    of the calculations of the percentage of ownership by Buyer and its Affiliates
    of outstanding shares of Common Stock effected pursuant to this Section 8.04(a),
    shares of Common Stock issued at any time after Closing, to any Person other
    than Buyer or any of its Affiliates, shall be excluded from such calculations,
    unless Buyer is entitled, pursuant to Section 2.04, to purchase additional
    securities of the Company in connection with such issuance, and, in each such
    case, until Buyer shall have had the opportunity to exercise its rights to
    purchase such additional securities pursuant to Section 2.04 and, in the event
    of such exercise, shall have completed such purchase.

       

  (b)  Notwithstanding
    anything to the contrary contained herein, if the Company accepts any Acquisition
    Proposal from Buyer where the consideration consists, in whole or in part,
    of securities of Buyer, (i) the Company will be granted the opportunity, prior
    to signing a definitive agreement with Buyer, to perform a customary due diligence
    review of Buyer, (ii) the definitive agreement will provide that the Company
    will have customary access to books, records and management of Buyer during
    the period between the signing of the definitive agreement and closing, (iii)
    the definitive agreement would include representations and warranties relating
    to Buyer that are customary for public company merger or acquisition agreements
    and customary conditions including a material adverse change condition.

       

  (c)  If,
    after the application of all of the procedures outlined in Sections 8.03 through
    8.08 and compliance by the Company and the Board with the terms thereof, the
    Company accepts a Third-Party Acquisition Proposal that it has the right to
    accept hereunder, Buyer and its Affiliates will vote all of their Voting Securities
    for and against the Third-Party Acquisition Proposal in the same proportions
    as votes are cast by shareholders other than Buyer with respect to such Third-Party
    Acquisition Proposal.

          

        56

        

        
          
          

        

       

  (d)  For
    purposes of this Article 8 (including for purposes of comparing Acquisition
    Proposals and determining whether Buyer has matched another Acquisition Proposal)
    if any Acquisition Proposal is payable, in whole or in part in Permitted Consideration
    other than cash (the “Stock Currency”),
    the Stock Currency in such Acquisition Proposal will be valued at the arithmetic
    average of the weighted, by reference to daily trading volumes, average closing
    prices of such Stock Currency during the 20 trading day period ending prior
    to the date of the submission of such Acquisition Proposal to the Company.

       

      Section
        8.05. First
        Standstill Period.
        During
        the First Standstill Period the following provisions shall apply:

       

  (a)  The
    Company shall not, and shall not permit any Company Representative to, take
    any Solicitation Action, Solicitation Response Action,
    Defense Removal Action or Agreement Action except as permitted by Section
    8.05(c).

       

  (b)  The
    Company may, but shall have no obligation to, invite Buyer to make an Acquisition
    Proposal and if so invited then, notwithstanding Section 8.01, Buyer may,
    but shall have no obligation to, submit an Acquisition Proposal. The Company
    may specify in its invitation any terms or conditions which Buyer would have
    to satisfy if it were to make an Acquisition Proposal. Both the Company and
    Buyer shall have the right, at any time to terminate, for any reason or no
    reason, any negotiations or other discussions that result from the Company’s
    invitation. Regardless of whether the Company issues an invitation or whether
    Buyer makes an Acquisition Proposal, the Company shall continue to be bound
    by its obligations under Section 8.05(a).

       

  (c)  If
    the Company receives an Acquisition Proposal from a Third Party and the Company
    has not breached its obligations under Section 8.05(a) (any such Acquisition
    Proposal being referred to herein as an “Unsolicited
    Acquisition Proposal”), then, subject to compliance
    with Section 8.04 and Section 8.08 and after having negotiated in good faith
    with the Buyer for a period of at least 30 days on an exclusive basis to determine
    whether it is possible to reach a mutually acceptable definitive agreement
    relating to a 100% Acquisition Proposal by Buyer, then and only then, the
    Company may, and may permit the Company Persons to take Solicitation Response
    Actions, Defense Removal Actions and Agreement Actions in connection with
    that Unsolicited Acquisition Proposal; provided
    that if the Company takes any Defense Removal Actions or Agreement Actions
    with respect to any Unsolicited Acquisition Proposal, the Sale Restriction
    Termination Date shall occur immediately. The Company (i) may reject all Acquisition
    Proposals made by Third Parties and Buyer but (ii) may not accept an Unsolicited
    Acquisition Proposal unless such Unsolicited Acquisition Proposal is higher
    than Buyer’s best offer after full compliance with Section 8.08.

          

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  (d)  If
    the Company accepts an Acquisition Proposal from Buyer whether as a result
    of the invitation process in Section 8.05(b) or otherwise, (i) the Company
    shall sign an Exclusive Agreement with Buyer; (ii) the Board will take all
    action required by it under the Charter, the Bylaws and Applicable Law to
    approve such Exclusive Agreement and will vote to approve Buyer’s Acquisition
    Proposal; (iii) the Board will convene a meeting of the Company’s shareholders
    and submit Buyer’s Acquisition Proposal to the shareholders for approval;
    (iv) subject to its fiduciary duty, the Board will recommend that the shareholders
    vote in favor of Buyer’s Acquisition; provided
    that, if the Board does not recommend that shareholders vote in favor of the
    Acquisition Proposal, the Board will express no opinion on the Acquisition
    Proposal; (v) Buyer shall be entitled to vote all of the Voting Securities
    Beneficially Owned by it (other than any Voting Securities that may be held
    by the Voting Trustee) in favor of Buyer’s Acquisition Proposal; and
    (vi) a Majority of the Minority Vote shall be required to approve Buyer’s
    Acquisition Proposal.

       

      Section
        8.06. Second
        Standstill Period.
        During
        the Second Standstill Period, the following provisions shall apply:

       

  (a)  The
    Company shall not, and shall not permit any Company Person to, take any Solicitation
    Action, Solicitation Response Action, Defense Removal Action or Agreement
    Action except as provided in this Section 8.06.

       

  (b)  Buyer
    may, at any time in its sole discretion, make a 100% Acquisition Proposal
    at any price that is greater than $40 per share of Common Stock (as adjusted
    for any stock dividends, combinations, splits, recapitalizations and the like
    after the date hereof); provided
    that, in making any such Acquisition Proposal, Buyer shall use reasonable
    best efforts (consistent with Applicable Law) to do so on a basis that would
    not require public disclosure of the fact or terms of the Acquisition Proposal.
    Upon receipt of any such 100% Acquisition Proposal, the Company and Buyer
    shall negotiate in good faith, and on an exclusive basis, for a period of
    30 days to determine whether it is possible to reach a mutually acceptable
    definitive agreement relating to the 100% Acquisition Proposal made by Buyer. 

       

  (c)  If
    the Company and Buyer reach such an agreement, then the provisions of clauses
    (B) through (E) in Section 8.06(d) below shall apply to such agreement. If,
    during such 30-day period, the Company and Buyer are not able to reach an
    agreement, then the Company shall either (i) conduct an Appraisal Process
    (as defined below) or (ii) conduct a Third-Party Transaction Market Check
    (as defined below).

       

  (d)  If
    (i) the Company decides to use the Appraisal Process and such Appraisal Process
    results in the determination of an appraisal price (the “Appraisal
    Price”), and Buyer agrees to pay the higher
    of the Appraisal Price or $40 per share (adjusted as provided above), (ii)
    the Company selects the Third-Party Transaction Market Check, and Buyer agrees
    to pay the higher of (x) the best price resulting from the Third-Party Transaction
    Market Check after giving effect to Buyer’s rights under Section 8.08
    or (y) $40 per share (adjusted as provided above), (iii) the Company and Buyer
    reach agreement on the terms of a 100% Acquisition Proposal by Buyer without
    engaging in an Appraisal Process or a Third-Party Transaction Market Check
    or (iv) the Company engages in an Appraisal Process or a Third-Party Transaction
    Market Check as permitted above and Buyer does not match the price resulting
    from such Appraisal Process or Third-Party Transaction Market Check but the
    Board nonetheless accepts a 100% Acquisition Proposal by Buyer at a price
    lower than the price resulting from the Appraisal Process or Third-Party Transaction
    Market Check, then (A) the Company and Buyer shall enter into an Exclusive
    Agreement relating to the 100% Acquisition Proposal on the terms determined
    pursuant to clause (i), (ii), (iii) or (iv) above, as applicable (any such
    100% Acquisition Proposal, a “Second Period Accepted
    Acquisition Proposal”), (B) the Board will
    take all action required of it under the Charter, the Bylaws and Applicable
    Law to approve such Exclusive Agreement and will vote to approve the Second
    Period Accepted Acquisition, (C) the Board will convene a meeting of the Company’s
    shareholders to approve the Second Period Accepted Acquisition Proposal and,
    subject to its fiduciary duties, will recommend that the shareholders vote
    in favor of the Second Period Accepted Acquisition Proposal; provided
    that, if the Board does not recommend that the shareholders vote in favor
    of Buyer’s 100% Acquisition Proposal, the Board will express no opinion
    on the Acquisition Proposal, (D) Buyer shall be entitled to vote all of the
    Voting Securities Beneficially Owned by it (other than any such Voting Securities
    as may be held by the Voting Trustee) in favor of the Second Period Accepted
    Acquisition Proposal, and (E) a vote in favor of the Second Period Accepted
    Acquisition Proposal by the holders of (x) a majority of all outstanding Voting
    Securities and (y) by the holders of a majority of the Voting Securities held
    by persons other than Buyer and its Affiliates that are present and voting
    at the meeting (a “Majority of the Minority
    Vote”) shall be required to approve such 100%
    Acquisition Proposal.

          

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      (e) For
        purposes of this Agreement, “Appraisal
        Process”
means
        taking the following steps: (1) the Company shall notify Buyer no later than
        ten
        Business Days after completion of the 30-day exclusive negotiating period
        referenced in Section 8.06(b), (2) no later than ten Business Days after
        delivery of the notice of the Company’s intention, the Unaffiliated Directors
        will select and identify to Buyer an internationally recognized investment
        banker or appraiser (the “First
        Appraiser”)
        and
        Buyer will select and identify to the Company a different internationally
        recognized investment banker or appraiser (the “Second
        Appraiser”),
        (3)
        the date on which both the First Appraiser and the Second Appraiser have
        been
        selected and identified will be considered to be the “Start
        Date”
(4)
        the
        Company and Buyer will cooperate with the First Appraiser and the Second
        Appraiser and will share with each of such appraisers all information relevant
        to a valuation of the Company, (5) within 30 Business Days after the Start
        Date,
        the First Appraiser and the Second Appraiser will each determine its preliminary
        view of the Fair Market Value of the Company (as defined below) and will
        consult
        with each other with respect to their respective preliminary values, (6)
        on or
        prior to the 45th Business Day after the Start Date, the First Appraiser
        and the
        Second Appraiser will each render to the Board and the Buyer their respective
        written reports on the Fair Market Value of the Company; provided
        that if
        either the First Appraiser, the Second Appraiser or the Third Appraiser (as
        defined below), if any, delivers a range of values rather than a specific
        value,
        then that appraiser’s Fair Market Value of the Company shall be deemed to be the
        midpoint of the range specified by such appraiser, (7) if the higher of the
        two
        Fair Market Values of the Company determined (or deemed to be determined
        pursuant to the proviso set forth in clause (6) above) by the First Appraiser
        or
        Second Appraiser (the “High
        Value”)
        is not
        more than 110% of the lower of the two Fair Market Values of the Company
        determined (or deemed to be determined pursuant to the proviso in clause
        (6)
        above) by the First Appraiser and the Second Appraiser (the “Low
        Value”),
        then,
        the Fair Market Value of the Company determined by such appraisers will be
        the
        average of the High Value and the Low Value, (8) if the High Value is more
        than
        110% of the Low Value, then, not more than 60 Business Days after the Start
        Date, the First Appraiser and the Second Appraiser will together designate
        another internationally recognized investment banker or appraiser that has
        no
        current material business relationship with either the Company or Buyer (the
        “Third
        Appraiser”),
        who
        will not be informed of the value determined (or deemed to be determined
        pursuant to the proviso in clause (6) above) by the First Appraiser and Second
        Appraiser, (9) the Third Appraiser will make a determination of the Fair
        Market
        Value of the Company and deliver its written report to the Unaffiliated
        Directors and Buyer (the “Third
        Value”)
        not
        more than 30 Business Days after the Third Appraiser is designated, (10)
        if the
        Third Value is within the middle one third of the range of values between
        the
        High Value and the Low Value (the “Mid-Range”),
        the
        Fair Market Value of the Company will be the Third Value, and (11) if the
        Third
        Value does not fall within the Mid-Range, the Fair Market Value of the Company
        will be the average of (A) the Third Value and (B) either (x) the High Value
        or
        (y) the Low Value, whichever is closest to the Third Value; provided
        that the
        Fair Market Value of the Company shall not be less than the Low Value nor
        greater than the High Value. 

          

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      (f) For
        purposes of this Agreement “Fair
        Market Value of the Company”
means
        the price that would be paid for all of the Company’s capital stock by a willing
        buyer to a willing seller, in an arm’s length transaction, as if the Company did
        not have a shareholder owning 10% or more of the outstanding Common Stock
        and
        the buyer was acquiring all of such Company’s capital stock, and assuming that
        the Company was being sold in a manner designed to attract all possible
        participants to the sales process (including Buyer), and to maximize shareholder
        value, with both buyer and seller in possession of all material facts concerning
        the Company and its business; provided
        that, in
        all cases, (i) the Fair Market Value of the Company will include a control
        premium and there will be no minority illiquidity discount, (ii) the Fair
        Market
        Value of the Company shall be determined on the assumption that in a competitive
        acquisition market with Buyer and other prospective buyers, the Company would
        be
        at least as valuable to other prospective buyers as to Buyer, (iii) the Fair
        Market Value of the Company will take into consideration (xx) the trading
        activity (volume and price) and history of the Company’s stock, and (yy) the
        Company’s most recent “unaffected” public market stock price, (iv) in making the
        determination of Fair Market Value of the Company, there will be no discount
        included in any valuation of the Company due to the fact that there may be
        few
        potential buyers for the Company due to any real or perceived restrictions
        placed on the Company because of this Agreement (including Buyer’s right of last
        look) or the fact that Buyer owns more than 10% of the outstanding Common
        Stock
        of the Company; and provided
        further
        that no
        solicitation of Third Parties shall be permitted in determining Fair Market
        Value of the Company. Upon the final determination of the Fair Market Value
        of
        the Company in accordance with this Section, Buyer shall have 15 Business
        Days
        to revise its previously submitted 100% Acquisition Proposal so that the
        purchase price contained therein, as so revised, meets or exceeds the higher
        of
        (i) Fair Market Value of the Company determined in accordance with this Section
        8.06 and (ii) $40 per share.

          

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      (g) For
        purposes of this Agreement “Third-Party
        Transaction Market Check”
means
        the solicitation from Third Parties of firm offers with respect to a 100%
        Acquisition Proposal which process shall not take longer than 60 days and
        which
        will require all such Third Parties approached to sign customary confidentiality
        and standstill agreements.

       

      (h) If
        the
        Company receives an Unsolicited Acquisition Proposal at any time before Buyer
        makes a 100% Acquisition Proposal permitted under Section 8.06(b), the Company
        shall deliver to Buyer a written notice indicating that it has received such
        Unsolicited Acquisition Proposal, identifying all material terms of such
        Unsolicited Acquisition Proposal and stating that, as a result thereof, Buyer
        has a right to make a 100% Acquisition Proposal to the Company as contemplated
        by Section 8.06(b). If, within ten Business Days after receipt of such notice,
        Buyer submits a 100% Acquisition Proposal at a price per share in excess
        of $40
        (adjusted as provided above), the Company shall be obligated to complete
        the
        procedure contemplated by Section 8.06(b) through (d) in its entirety before
        taking any Solicitation Response Action, Defense Removal Action or Agreement
        Action with respect to the Unsolicited Acquisition Proposal. In the event
        that
        either (i) Buyer does not submit a 100% Acquisition Proposal during such
        ten
        Business Day period or (ii) Buyer does submit a 100% Acquisition Proposal
        during
        such period and the application of the procedure set forth in Section 8.06(b)
        does not result in a Second Period Accepted Acquisition Proposal and the
        Company
        shall have complied with Sections 8.04, 8.06(h) and 8.08 then, and only then,
        shall the Company be permitted to take any Solicitation Response Action,
        Defense
        Removal Action or Agreement Action in connection with any Unsolicited
        Acquisition Proposal; provided
        that the
        Company shall not be permitted to take any such actions unless (x) the
        Unsolicited Acquisition Proposal is at a price in excess of $40 per share
        (adjusted as provided above) and (y) the Company has given effect to Buyer’s
        rights under Section 8.08. If the application of the procedure set forth
        in
        Section 8.06(b) through (d) results in a Second Period Accepted Acquisition
        Proposal, then the Company and Buyer shall take the actions in respect thereof
        contemplated by Section 8.06(d)(A) through (E).
        For the
        avoidance of doubt, in no event shall the Company be required to accept any
        100%
        Acquisition Proposal from Buyer or any Third Party during the Second Standstill
        Period at a price less than $40 per share (adjusted as provided
        above).

          

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      (i) If
        Buyer
        makes an Acquisition Proposal under this Section 8.06 and the Company fulfills
        all of its obligations under this Section 8.06 but the application of all
        of the
        provisions hereof does not result in the acceptance of an Acquisition Proposal
        by the Company, the Buyer shall have the right to initiate the process
        contemplated by this section by making an Acquisition Proposal only one more
        time during the Second Standstill Period.

       

      Section
        8.07.
        Third Standstill Period. During
        the Third Standstill Period, the following provisions shall apply:

       

      (a) Except
        as
        permitted pursuant to Section 8.07(b) or Section 8.07(d), the Company shall
        not,
        and shall not permit any Company Representative to, take any Solicitation
        Action, Solicitation Response Action, Defense Removal Action or Agreement
        Action.

       

      (b) Buyer
        may, at any time and in its sole discretion, make a 100% Acquisition Proposal;
        provided
        that, in
        making any such 100% Acquisition Proposal, Buyer shall use reasonable best
        efforts (consistent with Applicable Law) to do so on a basis that would not
        require public disclosure of the fact or terms of the 100% Acquisition Proposal.
        Upon receipt of any such 100% Acquisition Proposal, the Company shall have
        the
        right, in its sole discretion, and exercisable by delivering written notice
        to
        Buyer no later than ten Business Days after receipt of Buyer’s 100% Acquisition
        Proposal to require that Buyer delay making its Acquisition Proposal for
        a
        period of up to 270 days and, if the Company makes such request Buyer shall
        withdraw its request and shall not make another Acquisition Proposal until
        the
        end of such 270-day period (or such shorter period as the Company may have
        requested) (the “Company
        Deferral Period”);
        provided
        that (i)
        the Company shall only be entitled to exercise this right once during the
        Third
        Standstill Period, (ii) the Company Deferral Period shall not in any event
        extend beyond the date that is three months from the end of the Third Standstill
        Period, and (iii) if the Company exercises this right at a time during the
        Third
        Standstill Period when either the deferral requested will not expire until
        after
        the expiration of the Third Standstill Period, or after the end of the Company
        Deferral Period there shall remain less than six months in the Third Standstill
        Period, then, at Buyer’s request, the Third Standstill Period shall be extended
        to the date which is six months after the expiration of the Company Deferral
        Period.

          

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      (c) Upon
        the
        receipt of any 100% Acquisition Proposal after the expiration of the Company
        Deferral Period or as to which no deferral is requested, the Company and
        Buyer
        shall negotiate in good faith, and on an exclusive basis, for a period of
        90
        days to determine if it is possible to reach a mutually acceptable definitive
        agreement relating to the 100% Acquisition Proposal made by Buyer. If the
        Company and Buyer reach such an agreement then the provisions of clauses
        (B)
        through (E) below shall apply to such Agreement. If, during such 90 day period,
        the Company and Buyer are not able to reach an agreement then the Company
        shall
        either (i) conduct an Appraisal Process and, as a result thereof determine
        the
        Appraisal Price or (ii) conduct a Third-Party Transaction Market Check. If
        (i)
        the Company uses the Appraisal Process and Buyer matches the Appraisal Price,
        (ii) the Company selects the Third-Party Transaction Market Check and Buyer
        matches the best price resulting from such Third-Party Transaction Market
        Check,
        (iii) the Company and Buyer reach agreement on the terms of a definitive
        agreement without engaging in an Appraisal Process or a Third-Party Market
        Transaction Check or (iv) the Company engages in either an Appraisal Process
        or
        a Third-Party Transaction Market Check, Buyer does not match the Appraisal
        Price
        or the best price resulting from the Third-Party Transaction Market Check,
        as
        applicable, but the Board nonetheless accepts Buyer’s 100% Acquisition Proposal,
        (A) the Company and Buyer shall enter into an Exclusive Agreement relating
        to
        the 100% Acquisition Proposal on the terms determined pursuant to clause
        (i),
        (ii), (iii) or (iv), as applicable (any such Acquisition Proposal, a
“Third
        Period Accepted Acquisition Proposal”),
        (B)
        the Board will take all action required of it under the Charter, the Bylaws
        and
        Applicable Law to approve such Exclusive Agreement and will vote to approve
        the
        Third Period Accepted Acquisition Proposal, (C) the Board will convene a
        meeting
        of the Company’s shareholders to approve such Third Period Accepted Acquisition
        Proposal and, subject to its fiduciary duties, will recommend that the
        shareholders vote in favor of such Third Period Accepted Acquisition Proposal;
        provided
        that if
        the Board does not recommend that the shareholders vote in favor of Buyer’s 100%
        Acquisition Proposal, the Board will express no opinion on the Acquisition
        Proposal, (D) Buyer shall be entitled to vote all of the Voting Securities
        Beneficially Owned by it (other than any such Voting Securities as may be
        held
        by the Voting Trustee) in favor of such Third Period Accepted Acquisition
        Proposal, and (E) a vote in favor of such Third Period Accepted Acquisition
        Proposal by the holders of (x) a majority of all outstanding Voting Securities
        and (y) a Majority of the Minority Vote shall be required to approve such
        Third
        Period Accepted Acquisition Proposal. 

          

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      (d) The
        Company shall have a right at any time during the Third Standstill Period
        to
        initiate a process intended to, or reasonably likely to lead to, the making
        of
        an Acquisition Proposal by a Third Party or otherwise take a Solicitation
        Action
        provided that it first follows the following procedure. First, the Company
        must
        deliver to Buyer a written notice inviting Buyer to make a 100% Acquisition
        Proposal. Buyer shall have the same deferral rights with respect to the
        Company’s invitation as the Company has with respect to Buyer’s Acquisition
        Proposal under Section 8.07(b). If, within ten Business Days after the end
        of
        any deferral period not exceeding 270 days selected by Buyer (the “Buyer
        Deferral Period”)
        or
        within ten Business Days after receipt of the Company’s invitation if Buyer does
        not exercise its deferral rights, Buyer makes a 100% Acquisition Proposal,
        then
        the provisions of Sections 8.07(b) and 8.07(c) shall apply. If Buyer does
        not
        make an Acquisition Proposal within such ten-day period, then, and only then,
        and subject to Section 8.04 and Section 8.08, the Company shall be permitted
        to
        take Solicitation Actions, Solicitation Response Actions, Defense Removal
        Actions and Agreement Actions in connection with any 100% Acquisition Proposal
        from any Third Party.

       

      (e) If
        the
        Company receives an Unsolicited Acquisition Proposal at any time (i) before
        Buyer makes (taking into account any deferral right exercised by the Company)
        a
        100% Acquisition Proposal permitted under Section 8.07, (ii) before the Company
        delivers any notice under Section 8.07(d) or (iii) after the delivery by
        the
        Company of the notice contemplated by Section 8.07(d) but before the expiration
        of the ten Business Day time period during which Buyer may respond to such
        notice, then in such event, the Company shall deliver to Buyer a written
        notice
        indicating that it has received such Unsolicited Acquisition Proposal,
        identifying all material terms of such Unsolicited Acquisition Proposal and
        stating that, as a result thereof, Buyer has a right to make a 100% Acquisition
        Proposal to the Company as contemplated by Section 8.07(b). If, within ten
        Business Days after receipt of such notice, Buyer submits a 100% Acquisition
        Proposal, the Company and Buyer shall be obligated to complete the procedure
        contemplated by Section 8.07(b) and 8.07(c) in its entirety. Only in the
        event
        either that (i) Buyer does not submit a 100% Acquisition Proposal during
        such
        ten Business Day period or (ii) Buyer does submit a 100% Acquisition Proposal
        during such period and the application of the procedure set forth in Section
        8.07(b) and 8.07(c) does not result in a Third Period Accepted Acquisition
        Proposal, then, and only then, shall the Company be permitted to take any
        Solicitation Response Action, Defense Removal Action or Agreement Action
        in
        connection with such Unsolicited Acquisition Proposal. If the application
        of the
        procedure set forth in Section 8.07(b) and 8.07(c) results in a Third Period
        Accepted Acquisition Proposal, then the Company and Buyer shall take the
        actions
        in respect thereof contemplated by clauses (A) through (E) of Section
        8.07(c).

          

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      (f) Within
        30
        days of the earlier to occur of the Standstill Restriction Termination Date
        and
        the Sale Restriction Termination Date, the Company shall deliver to Buyer
        a list
        of prohibited purchasers containing no more than five prohibited purchasers
        as
        contemplated by Section 8.02.

       

      Section
        8.08.
        First Look and Last Look Rights. (a)
        Notwithstanding anything to the contrary in this Agreement, from the date
        hereof
        until the earlier of (i) the end of the Third Standstill Period or (ii) the
        date
        on which the Company consummates an Acquisition Proposal made by a Person
        or
        Group other than Buyer, the Company shall notify Buyer promptly (but in no
        event
        later than 24 hours) after receipt by the Company (or any Company
        Representative) of any Acquisition Proposal, any indication that a Third
        Party
        is considering making an Acquisition Proposal or of any request for information
        relating to the Company or any of its Subsidiaries or for access to the
        business, properties, assets, books or records of the Company or any of its
        Subsidiaries by any Third Party that may be considering making, or has made,
        an
        Acquisition Proposal. The Company shall provide such notice orally and in
        writing (the “Acquisition
        Proposal Notice”)
        and
        shall identify the Third Party making, and the terms and conditions of, any
        such
        Acquisition Proposal, indication or request. The Company shall keep Buyer
        fully
        informed, on a current basis, of the status and details of any such Acquisition
        Proposal, indication or request.

       

  (b) Upon
    the receipt by Buyer, at any time during the First Standstill Period, the
    Second Standstill Period or the Third Standstill Period, of any Acquisition
    Proposal Notice, Buyer shall have, in addition to the specific rights set
    forth in Sections 8.05, 8.06 and 8.07 and after the application thereof, the
    exclusive right to negotiate with the Company with respect to the 100% Acquisition
    Proposal for a period of 30 days. During such 30-day period, the Company may
    not take any Solicitation Response Actions, Defense Removal Actions or Agreement
    Actions in connection with Acquisition Proposals made by Persons other than
    Buyer. At the end of such 30-day period, if Buyer has not made a 100% Acquisition
    Proposal that is at least as favorable to the stockholders of the Company
    (other than Buyer) as the unsolicited 100% Acquisition Proposal, the Company
    may take Solicitation Response Actions in connection with such unsolicited
    100% Acquisition Proposal but only concurrently with providing Buyer written
    notice advising Buyer that it intends to take such actions. The Company shall
    continue to advise Buyer after taking such actions. If the Company subsequently
    intends to take a Defense Removal Action or an Agreement Action concerning
    such unsolicited 100% Acquisition Proposal, the Company shall notify Buyer
    promptly of its intention to take such action, attaching the most recent version
    of the relevant agreement, agreement in principle, letter of intent, term
    sheet or similar instrument (or a description of all material terms and conditions
    thereof), and shall not enter into any such agreement, letters, term sheets
    or instruments with any Person unless Buyer has failed to make a 100% Acquisition
    Proposal that is at least as favorable to the stockholders of the Company
    as the 100% Acquisition Proposal (or description thereof) delivered to Buyer
    within 30 days. If Buyer has made such a 100% Acquisition Proposal within
    such 30-day period, then (A) Buyer and the Company shall enter into an Exclusive
    Agreement with respect to such proposal, (B) the Board will take all action
    required of it under the Charter, the Bylaws and Applicable Law to approve
    such Exclusive Agreement and vote to approve such proposal, (C) the Board
    will convene a meeting of the Company’s shareholders to approve such
    proposal and, subject to its fiduciary duties, will recommend that the shareholders
    vote in favor of such proposal; provided that if the Board does not
    recommend that the shareholders vote in favor of Buyer’s 100% Acquisition
    Proposal, the Board will express no opinion on the Acquisition Proposal, (D)
    Buyer shall be entitled to vote all of the Voting Securities Beneficially
    Owned by it (other than any such Voting Securities as may be held by the Voting
    Trustee) in favor of such proposal, and (E) a vote in favor of such proposal
    by the holders of (x) a majority of all outstanding Voting Securities and
    (y) a Majority of the Minority Vote shall be required to approve such proposal.
    For the avoidance of doubt, in no event shall the Company be required to accept
    any 100% Acquisition Proposal from Buyer or any Third Party during the Second
    Standstill Period at a price less than $40 per share (adjusted as provided
    above).

          

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      Section
        8.09.
        Post-Standstill Period. During
        the period commencing on the day after the last day of the Standstill Period
        and
        ending on the first day on which Buyer and its Affiliates no longer Beneficially
        Own 10% of the outstanding Common Stock and no representative of Buyer is
        a
        member of the Board (the “Post-Standstill
        Period”),
        Buyer
        shall not, and shall not permit any of its Affiliates to, take any Hostile
        Action.

       

      Section
        8.10.
        Tender Offer Option. If,
        but
        only if, the Board breaches its commitments under Sections 8.04, 8.05, 8.06,
        8.07 or 8.08 to approve the Exclusive Agreements referred to therein and
        to
        cause such Exclusive Agreements to be executed by the Company to take all
        action
        required of it under the Charter, the Bylaws and Applicable Law to approve
        such
        Exclusive Agreement, to vote in favor of a Buyer Acquisition Proposal that
        is
        required to be accepted by the Company in accordance with the terms of such
        sections, to convene a meeting of the Company’s shareholders to approve such a
        Buyer Acquisition Proposal and, subject to its fiduciary duty, to recommend
        that
        the shareholders of the Company vote in favor of such Buyer Acquisition
        Proposal, then Buyer shall be permitted to commence a tender offer for shares
        of
        the Common Stock; provided
        that (a)
        the offer price and consideration in such tender offer shall be the same
        (both
        in amount and in form of consideration) as the price that would otherwise
        have
        been reflected in the Exclusive Agreement contemplated by the terms of Sections
        8.05, 8.06, 8.07 or 8.08, as the case may be, (b) the offer shall be an offer
        for all of the outstanding shares of Common Stock, (c) the offer shall be
        subject to the requirement that holders of at least a majority of the
        outstanding shares not owned by Buyer tender their shares in the offer and
        (d)
        subject to obtaining any required approval of the Board, the offer will obligate
        Buyer, after completion of the tender offer, to complete a merger in which
        all
        holders of Common Stock who did not tender in the offer will receive the
        same
        price and consideration per share (both in amount and in form of consideration)
        as the price and consideration per share paid in the offer.

          

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      Section
        8.11.
        Board Representation.
        (a) Upon
        the Closing, the Company shall increase the size of the Board by two directors
        so that upon such increase, (i) the Board shall consist of ten Directors
        (taking
        into account the closing under the Independence Transaction) and (ii) the
        Board
        shall elect as directors to fill these two vacancies two persons designated
        by
        Buyer who shall be reasonably acceptable to the Company and to the Board.
        Subject to Section 8.11(b) below, one such person shall serve as a director
        in
        the class of directors whose term expires in 2007 and the other such person
        shall serve as a director in the class of directors whose term expires in
        2008.

       

  (b) So
    long as Buyer and its Affiliates Beneficially Own at least 19.8% and not more
    than 24.9% of the outstanding shares of Common Stock, the Company shall continue
    to nominate and recommend for election two persons designated by Buyer to
    serve as directors on the Board who shall be nominated to serve in the respective
    class of their respective predecessors; provided that, upon any increase
    in the size of the Board, the Board shall elect as directors to fill such
    newly created vacancies persons designated by Buyer in sufficient number so
    that the number of directors serving on the Board who have been designated
    by Buyer shall in no event represent less than 20% or more than 25% of the
    total number of directors, and the Company shall continue to nominate and
    recommend for election such persons designated by Buyer. So long as Buyer
    and its Affiliates Beneficially Own less than 19.8% but more than 10% of the
    outstanding shares of Common Stock, the Company shall continue to nominate
    and recommend for election one person designated by Buyer to serve as a director
    on the Board. If Buyer and its Affiliates beneficially own more than 24.9%
    of the outstanding shares of Common Stock and Buyer has not breached any of
    its obligations hereunder, Buyer shall be entitled to Board representation
    proportional to its ownership. Upon the death, disability, retirement, resignation
    or other removal of a director designated by Buyer, the Board shall elect
    as a director to fill the vacancy so created a person designated by Buyer
    to fill such vacancy. For purposes of the calculations of the percentage of
    ownership by Buyer and its Affiliates of outstanding shares of Common Stock
    effected pursuant to this Section 8.11(b), shares of Common Stock issued at
    any time after Closing, to any Person other than Buyer or any of its Affiliates,
    shall be excluded from such calculations, unless Buyer is entitled, pursuant
    to Section 2.04, to purchase additional securities of the Company in connection
    with such issuance, and, in each such case, until Buyer shall have had the
    opportunity to exercise its rights to purchase such additional securities
    pursuant to Section 2.04 and, in the event of such exercise, shall have completed
    such purchase. Under the circumstances described in this paragraph in which
    Buyer is not entitled to designate persons to serve as directors on the Board,
    Buyer shall cause such designated persons to resign as members of the Board.

          

        67

        

        
          
          

        

       

      (c) Promptly
        following the Closing, the Company shall appoint at least one of the directors
        designated by Buyer to each committee of the Board; provided
        that a
        director designated by Buyer shall not be appointed to a committee of the
        Board
        if counsel to the Company advises the Company and Buyer that the appointment
        of
        such designee to a committee of the Board would violate Applicable Law, any
        rule
        or regulation of a stock exchange on which the Company’s Common Stock is listed
        or the Company’s written “Corporate Governance Guidelines” and committee
        charters (true and complete copies of which have been provided to Buyer)
        as in
        effect on the date hereof (with such amendments as are required by Applicable
        Law or approved by the affirmative vote of the Board including at least one
        director designated by Buyer). To the extent no director designated by Buyer
        is
        permitted to serve on a particular committee under Applicable Law, such rules
        and regulations or charter, the Company shall take all necessary action to
        permit a director to attend each meeting of such committee as a non-voting
        observer to the extent permitted by Applicable Law or such rules and
        regulations.

       

      (d) Promptly
        following the Closing, the Company shall appoint at least one of the directors
        designated by Buyer to the Board of Directors of the Bank to serve as long
        as
        Buyer is entitled to designate one or more persons to serve on the
        Board.

       

      (e) Upon
        the
        Closing, Buyer shall appoint the Chief Executive Officer of the Company to
        the
        Board of Directors of Buyer. Upon the death, disability, retirement, resignation
        or other removal of any person from the position as Chief Executive Officer
        of
        the Company, the Company shall cause such person to resign, or Buyer shall
        remove such person, as applicable, from the Board of Directors of Buyer and
        the
        successor Chief Executive Officer of the Company (if reasonably acceptable
        to
        Buyer) shall thereafter be appointed to the Board of Directors of Buyer.
        The
        obligations of Buyer under this Section 8.11(e) shall terminate upon the
        earlier
        of (i) Buyer owning less than 10% of the outstanding shares of Common Stock
        and
        (ii) the Company breaching any of its obligations or covenants under this
        Agreement. Under the circumstances described in clauses (i) and (ii) in the
        immediately preceding sentence, the Company shall cause its Chief Executive
        Officer to resign as a director of the Board of Directors of Buyer and such
        person shall no longer serve as a director of the Board of Directors of
        Buyer.

          

        68

        

        
          
          

        

       

      Section
        8.12.
        Approval Rights. From
        the
        Closing Date until the expiration of the Standstill Period, each of the
        following actions of the Board shall require the affirmative vote of the
        Board,
        such approval to include the affirmative vote or consent of at least one
        of the
        directors designated by Buyer:

       

      (a) Removal
        of the Chief Executive Officer of the Company; provided
        that the
        Board shall consult with Buyer in good faith before selecting any new chief
        executive officer and the chief executive officer selected by the Board must
        be
        reasonably acceptable to Buyer;

       

      (b) Expansion
        in the size of the Board to over 12 directors; and 

       

      (c) Any
        amendments to the Bylaws other than modifications referred to in Section
        8.13
        effected in order to give effect to the terms set forth in this Section 8.12.
        

       

      Section
        8.13.
        Certain Actions. The
        Company and the Board shall, from the date hereof until the termination of
        this
        Agreement pursuant to Section 12.01, take or cause to be taken all lawful
        action
        necessary or appropriate, including, without limitation, by modifying the
        bylaws
        or other organizational documents of the Company or any Company Subsidiary
        to
        ensure that at all such times the provisions of the bylaws and of any
        organizational documents of the Company and any applicable Company Subsidiary
        (a)
        facilitate and do not at any time conflict with any provision of this Agreement,
        including Sections 8.05 and 8.06 and (b) permit Buyer to receive the benefits
        to
        which Buyer is entitled under this Agreement, including Sections 8.05 and
        8.06.

       

      Section
        8.14.
        Voting Arrangements. (a)
        In
        addition to the provisions of Section 8.04(d), provided that the Company
        has not
        breached any of its obligations set forth in Section 8.11, during the period
        commencing on the PA Law Termination Date and ending on the Standstill
        Termination Date, Buyer shall vote and cause to be voted all Voting Securities
        (other than any Voting Securities deposited with the Voting Trustee)
        Beneficially Owned by Buyer and its Affiliates (i) for persons nominated
        and
        recommended by the Board for election as directors of the Board (so long
        as
        Buyer’s designees have been nominated and recommended) and against any person
        nominated for election as a director by any other Person and (ii) as directed
        by
        the Board with respect to an Acquisition Proposal (other than an Acquisition
        Proposal made by Buyer) opposed by the Board; provided
        that
        Buyer shall vote its Voting Securities in connection with an Acquisition
        Proposal by a Third Party in proportion to the votes cast by shareholders
        of the
        Company other than Buyer, its Affiliates or the Voting Trustee to the extent
        provided in Section 8.04(c) and otherwise may vote its Voting Securities
        against
        an Acquisition Proposal by a Third Party that the Board recommends to
        shareholders.

          

        69

        

        
          
          

        

       

      (b) Except
        as
        provided in Section 8.14(a), Buyer and its Affiliates may vote all of their
        Voting Securities (other than any Voting Securities deposited with the Voting
        Trustee) in their sole discretion.

       

       

      ARTICLE
        9

      

    POST
      ACQUISITION
      COVENANTS

      

       

      Section
        9.01.  Company
        Headquarters. The
        Company agrees to maintain the headquarters office of the Company in the
        city in
        which it is located as of the date of this Agreement or in another location
        mutually agreed by the Company and Buyer until at least the earlier of (a)
        the
        date of acquisition by Buyer of all the Voting Securities of the Company,
        (b)
        the date of termination of this Agreement pursuant to Section 12.01 or (c)
        a
        Change in Control of the Company (other than as a result of an acquisition
        by
        Buyer of all the Voting Securities of the Company).
        Buyer
        agrees that, if it acquires 100% of the Voting Securities of the Company,
        Buyer
        will maintain the headquarters office of the Company in its present or in
        another location reasonably acceptable to Buyer and the Incumbent Directors
        for
        a period of five years after completion of such acquisition.

       

      Section
        9.02.
        The
        Company Board. (a) Subject
        to any requirement for shareholder approval to increase the size of the Board
        to
        the number required to give effect to this Section 9.02, promptly after any
        consummation of any 100% Acquisition Proposal by Buyer, Buyer will cause
        the
        Company and the Board to take such action as may be required to increase
        the
        size of the Board to a number of members such that (i) all of the individuals
        who are members of the Board at the time of the consummation of the 100%
        Acquisition Proposal (the “Incumbent
        Directors”)
        may
        continue to be members of the Board and (ii) individuals designated or nominated
        by Buyer shall constitute a majority (or, if at such time under the terms
        of the
        Charter or Bylaws or under Applicable Law, any higher percentage of the members
        of the Board is required to take any Board action, then such that the number
        of
        the individuals designated or nominated by Buyer constitutes that higher
        percentage of the Board members). For a period of ten years after consummation
        of the 100% Acquisition Proposal by Buyer, subject to Applicable Law, Buyer
        will
        continue to nominate Incumbent Directors (or successors selected by Incumbent
        Directors) for reelection to the Board upon the expiration of the term of
        office
        of any Incumbent Director and will vote all Voting Securities held by it
        in
        favor of the election of the Incumbent Director so nominated.

       

      (b) The
        Incumbent Directors (other than those designated by Buyer) shall have the
        right
        to enforce, including by specific performance as set forth in Section 13.12,
        the
        Obligations of Buyer set forth in this Article 9 with respect to the Company
        after the consummation of the 100% Acquisition Proposal by Buyer.

          

        70

        

        
          
          

        

       

      Section
        9.03.
        Exclusive Acquisition Vehicle. Following
        the acquisition by Buyer of 100% of the Voting Securities of the Company,
        subject to Applicable Law, the Buyer will contribute to the Company any
        businesses in the U.S. and its territories that Buyer or its Affiliates may
        have
        acquired since the Closing Date, and for a period of ten years after the
        acquisition by Buyer of 100% of the Voting Securities of the Company, the
        Company shall be the exclusive vehicle for acquisitions by Buyer and its
        Affiliates in the U.S.; provided
        that, if
        such contribution to the Company or acquisition by the Company would cause
        materially adverse tax consequences for Buyer, Buyer and the Company will
        work
        together to find a solution so the contribution or acquisition can be done
        to or
        by the Company without creating materially adverse tax consequences for
        Buyer. 

       

      Section
        9.04.
        Change in Control. Notwithstanding
        the other provisions of this Article 9, at any time after consummation of
        a 100%
        Acquisition Proposal by Buyer, Buyer’s obligations under Sections 9.01, 9.02 and
        9.03 shall expire at such time, if any, as Buyer no longer owns at least
        a
        majority of the Company’s Voting Securities or if Buyer’s representatives no
        longer constitute a majority of the members of the Board.

       

      ARTICLE
        10

      

    CONDITIONS
      TO CLOSING

      

       

      Section
        10.01.
        Conditions to Obligations of Buyer and the Company.
        The
        obligations of Buyer and the Company to consummate the Closing are subject
        to
        the satisfaction of the following conditions:

       

      (a) No
        provision of any Applicable Law shall prohibit the consummation of the
        Closing.

       

      (b) All
        actions by or in respect of or filings with any Governmental Authority required
        to permit the consummation of the Closing shall have been taken, made or
        obtained, including the approval of the Bank of Spain, the approval of the
        Federal Reserve Board under Section 4(j) of the BHC Act and any
        change-in-control filings with any state insurance regulatory authority,
        and no
        approval shall contain any condition or requirement that would reasonably
        be
        expected to have a Material Adverse Effect or Buyer Material Adverse
        Effect.

       

      (c) All
        of
        the conditions to closing under the Independence Agreement shall have been
        satisfied or waived (with the consent of Buyer to the extent any such waiver
        was
        granted by the Company) in accordance with the terms of the Independence
        Agreement such that the closing of the transactions contemplated by this
        Agreement and the closing of the transactions contemplated by the Independence
        Agreement shall occur substantially simultaneously.

          

        71

        

        
          
          

        

       

      Section
        10.02. Conditions
        to Obligation of Buyer.
        The
        obligation of Buyer to consummate the Closing is subject to the satisfaction
        of
        the following further conditions:

   
    

    (a) the
      Company shall have performed in all material respects all of its obligations
      hereunder required to be performed by it on or prior to the Closing Date
      other than its obligations under Section 5.01(b);

     

    (b) the
      Company shall have performed all of its obligations under Section 5.01(b)
      except to the extent that its failure to do so would not reasonably be expected,
      individually or in the aggregate, to have a Material Adverse Effect; and

     

    (c) the
      representations and warranties of the Company contained in this Agreement
      and in any certificate or other writing delivered by the Company pursuant
      hereto shall be true in all respects at and as of the Closing Date as if
      made at and as of such time (unless any such representation and warranty
      speaks as of an earlier specified date, in which event such representation
      and warranty shall be true in all respects as of such specified date); provided,
      however, that for purposes
      of determining the satisfaction of this condition, no effect shall be given
      to any exception in such representations and warranties (other than the
      representation and warranty set forth in Section 3.09(a)) relating to materiality
      or a Material Adverse Effect; and provided further,
      that for purposes of this condition, such representations and warranties
      (other than the representation and warranty set forth in Section 3.09(a),
      which shall be true in all respects) shall be deemed to be true in all respects
      unless the failure or failures of such representations and warranties to
      be so true and correct, individually or in the aggregate, has had or would
      reasonably be expected to have a Material Adverse Effect and Buyer shall
      have received a certificate signed by the Chief Executive Officer of the
      Company to the foregoing effect.

  

       

      Section
        10.03. Conditions
        to Obligation of the Company.
        The
        obligation of the Company to consummate the Closing is subject to the
        satisfaction of the following further conditions:

       

      (a) Buyer
        shall have performed in all material respects all of its obligations hereunder
        required to be performed by it at or prior to the Closing Date;

       

      (b) the
        representations and warranties of Buyer contained in this Agreement and in
        any
        certificate or other writing delivered by Buyer pursuant hereto shall be
        true in
        all material respects at and as of the Closing Date as if made at and as
        of such
        date; and 

          

        72

        

        
          
          

        

       

      (c) the
        Company shall have received a certificate signed by the General Secretary
        of
        Buyer to the foregoing effect.

       

      ARTICLE
        11

      
        SURVIVAL

      

      Section
        11.01.  Survival.
        The
        covenants, agreements, representations and warranties of the parties
        hereto contained in this Agreement or in any certificate or other writing
        delivered
        pursuant hereto or in connection herewith shall survive the Closing.
        The representations and warranties of the parties hereto contained in
        this Agreement
        shall be deemed made only as of the date hereof and as of the Closing
        Date, in
        each case unless a different date is specified in the representation
        and warranty.

       

      ARTICLE
        12

      
        TERMINATION

      

       

      Section
        12.01.
        Grounds for Termination.
        This
        Agreement may be terminated at any time:

       

      (a) by
        mutual
        written agreement of the Company and Buyer;

       

      (b) by
        either
        the Company or Buyer if the Closing shall not have been consummated on or
        before
        September 30, 2006, unless the failure of the Closing to be consummated by
        such
        date shall be due to the failure of the party seeking to terminate this
        Agreement to perform or observe any of its covenants or agreements set forth
        herein or, in the case of the Company, in the Independence
        Agreement;

       

      (c) by
        either
        the Company or Buyer if there shall be any Applicable Law that makes
        consummation of the transactions contemplated hereby illegal or otherwise
        prohibited or if consummation of the transactions contemplated hereby would
        violate any nonappealable final order, decree or judgment of any Governmental
        Authority having competent jurisdiction;

       

      (d) by
        either
        the Company or Buyer, if the Independence Agreement shall have been
        terminated;

       

      (e) by
        Buyer
        upon the occurrence of any of the following:

          

        73

        

        
          
          

        

       

      (i) any
        Person (other than Buyer and its Affiliates) shall have acquired Beneficial
        Ownership of shares of Common Stock representing more than 10% of all
        outstanding shares of Common Stock other than as a result of any Transfer
        by
        Buyer or its Affiliates pursuant to Section 8.02;

       

      (ii) the
        Board
        approves or the Company enters into a definitive agreement or agreement in
        principle with respect to an Acquisition Proposal made by a Person other
        than
        Buyer or announces an intention to accept such an Acquisition Proposal or
        enter
        into such agreement;

       

      (iii) prior
        to
        Closing, a breach of any representation or warranty or failure to perform
        any
        covenant or agreement on the part of the Company set forth in this Agreement
        shall have occurred that would cause the condition set forth in Section 10.02(a)
        not to be satisfied, and such condition is incapable of being satisfied by
        September 30, 2006 and Buyer shall have given the Company 30 days’ prior written
        notice specifying in reasonable detail the nature of such breach; provided
        that
        Buyer has not materially breached its obligations hereunder;

       

      (iv) following
        Closing, a material breach of any covenant or agreement required to be performed
        under this Agreement or any of the agreements contemplated by this Agreement
        by
        the Company; or

       

      (v) the
        members of the Board who hold such office on the date of this Agreement and
        such
        persons nominated or appointed to the Board or recommended for election by
        a
        majority of such members after the date of this Agreement shall cease to
        constitute a majority of the Board; or

       

      (f) by
        the
        Company upon the occurrence of any of the following:

       

      (i) prior
        to
        Closing, a breach of any representation or warranty or failure to perform
        any
        covenant or agreement on the part of Buyer set forth in this Agreement shall
        have occurred that would cause the condition set forth in Section 10.03(a)
        not
        to be satisfied, and such condition is incapable of being satisfied by September
        30, 2006 and the Company shall have given Buyer 30 days’ prior written notice
        specifying in reasonable detail the nature of such breach; provided
        that the
        Company has not materially breached its obligations hereunder;

          

        74

        

        
          
          

        

       

      (ii) following
        Closing, a material breach of any covenant or agreement required to be performed
        under this Agreement by Buyer; or

       

      (iii) upon
        the
        occurrence of a Buyer Change in Control.

       

      The
        party
        desiring to terminate this Agreement pursuant to Section 12.01 shall give
        notice
        of such termination to the other party.

       

      Section
        12.02. Effect
        of Termination.
        If
        this
        Agreement is terminated as permitted by Section 12.01, such termination shall
        be
        without liability of either party (or any stockholder, director, officer,
        employee, agent, consultant or representative of such party) to the other
        party
        to this Agreement; provided
        that if
        such termination shall result from the (a) willful failure of either party
        to
        fulfill a condition to the performance of the obligations of the other party,
        (b) failure to perform a covenant or agreement of this Agreement or (c) breach
        by either party hereto of any representation or warranty or agreement contained
        herein, such party shall be fully liable for any and all Damages incurred
        or
        suffered by the other party as a result of such failure or breach. The
        provisions of Sections 5.07, 5.08, 6.01, 7.03, 8.01 (solely in the case of
        a
        termination under Section 12.01(e)(ii) until consummation of such Acquisition
        Proposal with respect to the restrictions in clauses (a), (b) and (c)), 8.04(c)
        (solely in the case of a termination under Section 12.01(e)(ii) with respect
        to
        such Acquisition Proposal and in the case of a termination under Section
        12.01(f)(ii)), 8.09, 13.01, 13.04, 13.06, 13.07 and 13.08 shall survive any
        termination hereof pursuant to Section 12.01.

       

       

      ARTICLE
        13

      MISCELLANEOUS

       

      Section
        13.01.  Notices.
        All
        notices, requests and other communications to any party hereunder shall be
        in
        writing (including facsimile transmission and electronic mail (“e-mail”)
        transmission, so long as a receipt of such e-mail is requested and received)
        and
        shall be given,

       

      if
        to
        Buyer, to:

       

      Banco
        Santander Central Hispano, S.A.

      Ciudad
        Grupo Santander

      Avda.
        de
        Cantabria, s/n-28660

      Boadilla
        del Monte

      Madrid,
        Spain

      Attention:
        Ignacio Benjumea, General Secretary

      Facsimile
        No.: 34-91-259-6634

          

        75

        

        
          
          

        

       

      with
        a
        copy to:

       

      Davis
        Polk & Wardwell

      450
        Lexington Avenue

      New
        York,
        New York 10017

      Attention:
        Diane G. Kerr

      Facsimile
        No.: 212-450-3800

      E-mail:
        diane.kerr@dpw.com

       

      if
        to the
        Company, to:

       

      Sovereign
        Bancorp, Inc.

      1130
        Berkshire Boulevard

      Wyomissing,
        Pennsylvania 19610

      Attention:
        President

      Facsimile
        No.: 610-208-6143

       

      with
        a
        copy to:

       

      Stevens
        & Lee

      111
        North
        Sixth Street

      P.O.
        Box
        679

      Reading,
        Pennsylvania 19603

      Attention:
        Joseph M. Harenza

      Facsimile
        No.: 610-376-5610

      E-mail:
        jmh@stevenslee.com

       

      or
        such
        other address or facsimile number as such party may hereafter specify for
        the
        purpose by notice to the other parties hereto. All such notices, requests
        and
        other communications shall be deemed received on the date of receipt by the
        recipient thereof if received prior to 5:00 p.m. in the place of receipt
        and
        such day is a Business Day in the place of receipt. Otherwise, any such notice,
        request or communication shall be deemed not to have been received until
        the
        next succeeding Business Day in the place of receipt.

       

      Section
        13.02. Amendments
        and Waivers.
        (a) Any
        provision of this Agreement may be amended or waived if, but only if, such
        amendment or waiver is in writing and is signed, in the case of an amendment,
        by
        each party to this Agreement, or in the case of a waiver, by the party against
        whom the waiver is to be effective.

       

      (b) No
        failure or delay by any party in exercising any right, power or privilege
        hereunder shall operate as a waiver thereof nor shall any single or partial
        exercise thereof preclude any other or further exercise thereof or the exercise
        of any other right, power or privilege. The rights and remedies herein provided
        shall be cumulative and not exclusive of any rights or remedies provided
        by
        law.

          

        76

        

        
          
          

        

       

      Section
        13.03.
        Disclosure Schedule References. The
        parties hereto agree that any reference in a particular Section of the Company
        Disclosure Schedule shall only be deemed to be an exception to (or, as
        applicable, a disclosure for purposes of) the representations and warranties
        (or
        covenants, as applicable) of the relevant party that are contained in the
        corresponding Section of this Agreement.

       

      Section
        13.04.  Expenses.
        Except
        as otherwise provided herein, all costs and expenses incurred in connection
        with
        this Agreement shall be paid by the party incurring such cost or
        expense.

       

      Section
        13.05.  Successors
        and Assigns.
        The
        provisions of this Agreement shall be binding upon and inure to the benefit
        of
        the parties hereto and their respective successors and assigns; provided
        that no
        party may assign, delegate or otherwise transfer any of its rights or
        obligations under this Agreement without the consent of each other party
        hereto;
        except that Buyer may transfer or assign its rights and obligations under
        this
        Agreement, in whole or from time to time in part, to (a) one or more of its
        Affiliates at any time and (b) after the Closing Date, to any Person;
provided
        that no
        such transfer or assignment shall relieve Buyer of its obligations hereunder
        or
        enlarge, alter or change any obligation of any other party hereto or due
        to
        Buyer.

       

      Section
        13.06.  Governing
        Law.
        This
        Agreement shall be governed by and construed in accordance with the law of
        the
        State of New York, without regard to the conflicts of law rules of such state,
        except to the extent that Pennsylvania law applies to corporations incorporated
        in Pennsylvania.

       

      Section
        13.07. Jurisdiction.
        The
        parties hereto agree that any suit, action or proceeding seeking to enforce
        any
        provision of, or based on any matter arising out of or in connection with,
        this
        Agreement or the transactions contemplated hereby shall be brought in the
        United
        States District Court for the Southern District of New York or any New York
        State court sitting in New York City, so long as one of such courts shall
        have
        subject matter jurisdiction over such suit, action or proceeding, and that
        any
        cause of action arising out of this Agreement shall be deemed to have arisen
        from a transaction of business in the State of New York, and each of the
        parties
        hereby irrevocably consents to the jurisdiction of such courts (and of the
        appropriate appellate courts therefrom) in any such suit, action or proceeding
        and irrevocably waives, to the fullest extent permitted by law, any objection
        that it may now or hereafter have to the laying of the venue of any such
        suit,
        action or proceeding in any such court or that any such suit, action or
        proceeding brought in any such court has been brought in an inconvenient
        forum.
        Process in any such suit, action or proceeding may be served on any party
        anywhere in the world, whether within or without the jurisdiction of any
        such
        court. Without limiting the foregoing, each party agrees that service of
        process
        on such party as provided in Section 13.01 shall be deemed effective service
        of
        process on such party.

          

        77

        

        
          
          

        

       

      Section
        13.08.  WAIVER
        OF JURY TRIAL.
        EACH OF
        THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
        JURY
        IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
        TRANSACTIONS CONTEMPLATED HEREBY.

       

      Section
        13.09.  Counterparts;
        Effectiveness; Third-Party Beneficiaries.
        This
        Agreement may be signed in any number of counterparts, each of which shall
        be an
        original, with the same effect as if the signatures thereto and hereto were
        upon
        the same instrument. This Agreement shall become effective when each party
        hereto shall have received a counterpart hereof signed by all of the other
        parties hereto. Until and unless each party has received a counterpart hereof
        signed by the other party hereto, this Agreement shall have no effect and
        no
        party shall have any right or obligation hereunder (whether by virtue of
        any
        other oral or written agreement or other communication). No provision of
        this
        Agreement is intended to confer any rights, benefits, remedies, obligations,
        or
        liabilities hereunder upon any Person other than the parties hereto and their
        respective successors and assigns.

       

      Section
        13.10.  Entire
        Agreement.
        This
        Agreement, the Registration Rights Agreement and the Voting Trust Agreement
        constitute the entire agreement between the parties with respect to the subject
        matter hereof and thereof and supersede all prior agreements and understandings,
        both oral and written, between the parties with respect to the subject matter
        of
        this Agreement.

       

      Section
        13.11.
        Severability. If
        any
        term, provision, covenant or restriction of this Agreement is held by a court
        of
        competent jurisdiction or other Governmental Authority to be invalid, void
        or
        unenforceable, the remainder of the terms, provisions, covenants and
        restrictions of this Agreement shall remain in full force and effect and
        shall
        in no way be affected, impaired or invalidated so long as the economic or
        legal
        substance of the transactions contemplated hereby is not affected in any
        manner
        materially adverse to any party. Upon such a determination, the parties shall
        negotiate in good faith to modify this Agreement so as to effect the original
        intent of the parties as closely as possible in an acceptable manner in order
        that the transactions contemplated hereby be consummated as originally
        contemplated to the fullest extent possible.

       

      Section
        13.12.
        Specific Performance. The
        parties hereto agree that irreparable damage would occur if any provision
        of
        this Agreement were not performed in accordance with the terms hereof and
        that
        the parties (including Incumbent Directors (other than those designated by
        Buyer) in accordance with Section 9.02(b)) shall be entitled to an injunction
        or
        injunctions to prevent breaches of this Agreement or to enforce specifically
        the
        performance of the terms and provisions hereof in the United States District
        Court for the Southern District of New York or any New York State court sitting
        in New York City, in addition to any other remedy to which they are entitled
        at
        law or in equity.

          

        78

        

        
          
          

        

       

      Section
        13.13.
        Immaterial Breaches. If
        either
        party unintentionally fails to comply with a notice or other similar time
        period
        provision in this Agreement, such failure does not adversely prejudice the
        other
        party in any way and is promptly cured, such failure shall not be deemed
        to be a
        breach of such provision.

          

        79

        

        
          
          

        

       

      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
        executed by their respective authorized officers as of the day and year first
        above written.

       

      
        	 	 	 
	 	
                BANCO
                  SANTANDER CENTRAL 

                HISPANO,
                  S.A.

              
	 
 	 
 	 
 
	 	By:  	 /s/ Juan Rodriguez Inciarte
	 	
          

          Name:
          Juan Rodriguez Inciarte

              
	 	
                Title:
                Director General

              

      

       

        	 	 	 
	 	
                SOVEREIGN
                  BANCORP, INC.

              
	 
 	 
 	 
 
	 	By:  	 /s/ Jay S. Sidhu
	 	
          

          Name:
          Jay S. Sidhu

              
	 	
                Title:
                    Chairman, President & CEO

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