Exhibit 10.21
Sovereign Bancorp, Inc.
2001 Stock Incentive Plan
(as amended by Amendments #1, #2, #3, and #4)

 

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Sovereign Bancorp, Inc.
2001 Stock Incentive Plan
TABLE OF CONTENTS

          ARTICLE   PAGE  
ARTICLE 1. PURPOSE OF THE PLAN; TYPES OF AWARDS
    1  
 
       
ARTICLE 2. DEFINITIONS
    1  
 
       
ARTICLE 3. ADMINISTRATION
    4  
 
       
ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN
    5  
 
       
ARTICLE 5. ELIGIBILITY
    6  
 
       
ARTICLE 6. STOCK OPTIONS IN GENERAL
    6  
 
       
ARTICLE 7. TERM, VESTING AND EXERCISE OF OPTIONS
    8  
 
       
ARTICLE 8. EXERCISE OF OPTIONS FOLLOWING TERMINATION OF EMPLOYMENT
    9  
 
       
ARTICLE 9. RESTRICTED STOCK
    11  
 
       
ARTICLE 10. ADJUSTMENT PROVISIONS
    12  
 
       
ARTICLE 11. GENERAL PROVISIONS
    13  

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ARTICLE 1. PURPOSE OF THE PLAN; TYPES OF AWARDS
     1.1 Purpose. The Sovereign Bancorp, Inc. 2001 Stock Incentive Plan is
intended to provide selected Employees of Sovereign Bancorp, Inc. and its
Subsidiaries with an opportunity to acquire Common Stock of the Corporation. The
Plan is designed to help the Corporation attract, retain and motivate selected
Employees to make substantial contributions to the success of the Corporation’s
business and the businesses of its Subsidiaries. Awards will be granted under
the Plan based, among other things, on the Participant’s level of responsibility
and performance within the Corporation.
     1.2 Authorized Plan Awards. Incentive Stock Options, Nonqualified Stock
Options and Restricted Stock may be awarded within the limitations of the Plan
herein described.
ARTICLE 2. DEFINITIONS
     2.1 “Agreement.” A written instrument evidencing the grant of an Award. A
Participant may be issued one or more Agreements from time to time, reflecting
one or more Awards.
     2.2 “Award.” The grant of an Option or Restricted Stock.
     2.3 “Board.” The Board of Directors of the Corporation.
     2.4 “Change in Control.” Except as otherwise provided in an Agreement, the
first to occur of any of the following events:
     (a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), except for any of the Corporation’s employee benefit plans, or
any entity holding the Corporation’s voting securities for, or pursuant to, the
terms of any such plan (or any trust forming a part thereof) (the “Benefit
Plan(s)”), is or becomes the beneficial owner, directly or indirectly, of the
Corporation’s securities representing 19.9% or more of the combined voting power
of the Corporation’s then outstanding securities other than pursuant to a
transaction excepted in Clause (c) or (d); or (ii) pursuant to a Buyer
Acquisition Transaction (as defined in the Investment Agreement (the “Investment
Agreement”), between the Corporation and Banco Santander Central Hispano, S.A.,
dated as of October 24, 2005, as it may be thereafter amended) effectuated in
accordance with the terms of the Investment Agreement other than a Buyer
Acquisition Transaction contemplated in Sections 8.06 through 8.08 and 8.10 of
the Investment Agreement;
     (b) there occurs a contested proxy solicitation of the Corporation’s
shareholders that results in the contesting party obtaining the ability to vote
securities representing 19.9% or more of the combined voting power of the
Corporation’s then outstanding securities;
     (c) a binding written agreement is executed (and, if legally required,
approved by the Corporation’s shareholders) providing for a sale, exchange,
transfer, or other disposition of all or substantially all of the assets of the
Corporation or of Sovereign Bank, a Federal Savings Bank to another entity,
except to an entity controlled directly or indirectly by the Corporation;

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     (d) the shareholders of the Corporation approve a merger, consolidation, or
other reorganization of the Corporation, unless:
     (i) under the terms of the agreement approved by the Corporation’s
shareholders providing for such merger, consolidation, or reorganization, the
shareholders of the Corporation immediately before such merger, consolidation,
or reorganization, will own, directly or indirectly immediately following such
merger, consolidation, or reorganization, at least 51% of the combined voting
power of the outstanding voting securities of the Corporation resulting from
such merger, consolidation, or reorganization (the “Surviving Corporation”) in
substantially the same proportion as their ownership of the voting securities
immediately before such merger, consolidation, or reorganization;
     (ii) under the terms of the agreement approved by the Corporation’s
shareholders providing for such merger, consolidation, or reorganization, the
individuals who were members of the Board immediately prior to the execution of
such agreement will constitute at least 51% of the members of the board of
directors of the Surviving Corporation after such merger, consolidation, or
reorganization; and
     (iii) based on the terms of the agreement approved by the Corporation’s
shareholders providing for such merger, consolidation, or reorganization, no
Person (other than (A) the Corporation or any Subsidiary, (B) any Benefit Plan,
(C) the Surviving Corporation or any subsidiary of the Surviving Corporation, or
(D) any Person who, immediately prior to such merger, consolidation, or
reorganization had beneficial ownership of 19.9% or more of the then outstanding
voting securities) will have beneficial ownership of 19.9% or more of the
combined voting power of the Surviving Corporation’s then outstanding voting
securities;
     (e) a plan of liquidation or dissolution of the Corporation, other than
pursuant to bankruptcy or insolvency laws, is adopted;
     (f) during any period of two consecutive years, individuals, who at the
beginning of such period, constituted the Board cease for any reason to
constitute at least a majority of the Board unless the election, or the
nomination for election by the Corporation’s shareholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period; or
     (g) the occurrence of a Triggering Event within the meaning of the Second
Amended Rights Agreement between the Corporation and Mellon Investor Services
LLC, as rights agent, dated as of January 19, 2005, as amended on October 24,
2005, and as it may be amended from time to time.
     Notwithstanding Clause (a), a Change in Control shall not be deemed to have
occurred if a Person becomes the beneficial owner, directly or indirectly, of
the Corporation’s securities representing 19.9% or more of the combined voting
power of the Corporation’s then outstanding securities solely as a result of an
acquisition by the Corporation of its voting securities which, by

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reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 19.9% or more of the combined voting
power of the Corporation’s then outstanding securities; provided, however, that
if a Person becomes a beneficial owner of 19.9% or more of the combined voting
power of the Corporation’s then outstanding securities by reason of share
purchases by the Corporation and shall, after such share purchases by the
Corporation, become the beneficial owner, directly or indirectly, of any
additional voting securities of the Corporation (other than as a result of a
stock split, stock dividend, or similar transaction), then a Change in Control
of the Corporation shall be deemed to have occurred with respect to such Person
under Clause (a). In no event shall a Change in Control of the Corporation be
deemed to occur under Clause (a) with respect to Benefit Plans.
     2.5 “Code.” The Internal Revenue Code of 1986, as amended.
     2.6 “Committee.” The committee which the Board appoints to administer the
Plan.
     2.7 “Common Stock.” The common stock of the Corporation (no par value) as
described in the Corporation’s Articles of Incorporation, or such other stock as
shall be substituted therefor.
     2.8 “Corporation.” Sovereign Bancorp, Inc., a Pennsylvania corporation.
     2.9 “Employee.” Any common law employee of the Corporation or a Subsidiary.
     2.10 “Exchange Act.” The Securities Exchange Act of 1934, as amended.
     2.11 “Incentive Stock Option.” A Stock Option intended to satisfy the
requirements of Code Section 422(b).
     2.12 “Nonqualified Stock Option.” A Stock Option other than an Incentive
Stock Option.
     2.13 “Optionee.” A Participant who is awarded a Stock Option pursuant to
the provisions of the Plan.
     2.14 “Participant.” An Employee to whom an Award has been granted and
remains outstanding.
     2.15 “Performance Criteria.” Any objective test based on one or more of the
following areas of performance of the Corporation, a Subsidiary, or any
division, department or group of either: (a) earnings, (b) cash flow,
(c) revenue, (d) financial ratios, (e) market performance, (f) shareholder
return, (g) operating profits (including earnings before interest, taxes,
depreciation and amortization), (h) earnings per share, (i) return on assets,
(j) return on equity, (k) return on investment (l) stock price and (m) expense
reduction. Performance Criteria shall be derived from the financial statements
of the Corporation and its Subsidiaries prepared in accordance with generally
accepted accounting principles consistently applied, or, for Performance
Criteria that cannot be so derived, under a methodology established by the
Committee prior to the issuance of a Performance Grant that is consistently
applied.
     2.16 “Performance Goal.” A goal established by the Committee, with respect
to an Award intended to constitute a Performance Grant, that relates to one or
more Performance

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Criteria. A Performance Goal shall relate to such period of time, not less than
one year (unless coupled with a vesting schedule of at least one year) or more
than three years, as may be specified by the Committee at the time of the
awarding of a Performance Grant.
     2.17 “Performance Grant.” An Award, the vesting or receipt without
restriction of which, is conditioned on the satisfaction of one or more
Performance Goals.
     2.18 “Plan.” The Sovereign Bancorp, Inc. 2001 Stock Incentive Plan.
     2.19 “Restricted Stock.” A grant of Common Stock pursuant to the provisions
of the Plan, which grant is subject to such restrictions and other conditions as
may be specified by the Committee at the time of such grant.
     2.20 “Retirement.” The termination of a Participant’s employment following
the first day of the month coincident with or next following attainment of age
65, as the term “Normal Retirement Date” is defined in the Sovereign Bancorp,
Inc. Employee Stock Ownership Plan, or attainment of age 55 and the completion
of five (5) years service, as the term “Early Retirement Date” is defined in the
Sovereign Bancorp, Inc. Employee Stock Ownership Plan.
     2.21 “Securities Act.” The Securities Act of 1933, as amended.
     2.22 “Stock Option” or “Option.” A grant of a right to purchase Common
Stock pursuant to the provisions of the Plan.
     2.23 “Subsidiary.” A subsidiary corporation, as defined in Code
Section 424(f), that is a subsidiary of a relevant corporation.
ARTICLE 3. ADMINISTRATION
     3.1 The Committee. The Plan shall be administered by a committee of the
Board composed of two or more members of the Board, all of whom are (a)
”non-employee directors” as such term is defined under the rules and regulations
adopted from time to time by the Securities and Exchange Commission pursuant to
Section 16(b) of the Exchange Act, and (b) ”outside directors” within the
meaning of Code Section 162(m). The Board may from time to time remove members
from, or add members to, the Committee. Vacancies on the Committee, howsoever
caused, shall be filled by the Board.
     3.2 Powers of the Committee.
     (a) The Committee shall be vested with full authority to make such rules
and regulations as it deems necessary or desirable to administer the Plan and to
interpret the provisions of the Plan, unless otherwise determined by a majority
of the disinterested members of the Board. Any determination, decision or action
of the Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final, conclusive and binding
upon all Participants and any person claiming under or through a Participant,
unless otherwise determined by a majority of the disinterested members of the
Board.

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     (b) Subject to the terms, provisions and conditions of the Plan and subject
to review and approval by a majority of the disinterested members of the Board,
the Committee shall have exclusive jurisdiction to:
     (i) determine and select the Employees to be granted Awards (it being
understood that more than one Award may be granted to the same person);
     (ii) determine the number of shares subject to each Award;
     (iii) determine the date or dates when the Awards will be granted;
     (iv) determine the exercise price of shares subject to Options in
accordance with Article 6;
     (v) determine the date or dates when an Option may be exercised within the
term of the Option specified pursuant to Article 7;
     (vi) determine whether an Option constitutes an Incentive Stock Option or a
Nonqualified Stock Option; and
     (vii) prescribe the form, which shall be consistent with the Plan document,
of the Agreement evidencing any Awards granted under the Plan.
     3.3 Liability. No member of the Board or the Committee shall be liable for
any action or determination made in good faith by the Board or the Committee
with respect to this Plan or any Awards granted under this Plan.
     3.4 Establishment and Certification of Performance Goals. The Committee
shall establish, prior to grant, Performance Goals with respect to each Award
intended to constitute a Performance Grant. Notwithstanding anything herein to
the contrary, no Option that is intended to constitute a Performance Grant may
be exercised until the Performance Goal or Goals applicable thereto is or are
certified as having been satisfied by the Committee, nor shall any share of
Restricted Stock that is intended to constitute a Performance Grant be released
to a Participant until such certification is made.
     3.5 Performance Grants Not Mandatory. Nothing herein shall be construed as
requiring that any Award be made a Performance Grant.
ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN
     4.1 Common Stock Authorized.
     (a) Stock Options. The aggregate number of shares of Common Stock for which
Options may be awarded under the Plan shall not exceed 7,500,000. The limitation
established by the preceding sentence shall be subject to adjustment as provided
in Article 10.
     (b) Restricted Stock. The aggregate number of shares of Common Stock for
which Restricted Stock may be awarded under the Plan shall not exceed 2,500,000.
The

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limitation established by the preceding sentence shall be subject to adjustment
as provided in Article 10.
     4.2 Shares Available. The Common Stock to be issued under the Plan shall be
the Corporation’s Common Stock which shall be made available at the discretion
of the Board, either from authorized but unissued Common Stock or from Common
Stock acquired by the Corporation, including shares purchased in the open
market. In the event that any outstanding Award under the Plan for any reason
expires, terminates or is forfeited, the shares of Common Stock allocable to
such expiration, termination or forfeiture may thereafter again be made subject
to an Award under the Plan.
ARTICLE 5. ELIGIBILITY
     5.1 Participation. Awards shall be granted by the Committee only to persons
who are Employees and shall be ratified by a majority of the disinterested
members of the Board.
     5.2 Incentive Stock Option Eligibility. Notwithstanding any other provision
of the Plan to the contrary, an individual who owns more than ten percent of the
total combined voting power of all classes of outstanding stock of the
Corporation shall not be eligible for the grant of an Incentive Stock Option,
unless the special requirements set forth in Sections 6.1 and 7.1 are satisfied.
For purposes of this section, in determining stock ownership, an individual
shall be considered as owning the stock owned, directly or indirectly, by or for
his brothers and sisters (whether by the whole or half blood), spouse, ancestors
and lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be considered as being owned
proportionately by or for its shareholders, partners or beneficiaries.
“Outstanding stock” shall include all stock actually issued and outstanding
immediately before the grant of the Option. “Outstanding stock” shall not
include shares authorized for issue under outstanding Options held by the
Optionee or by any other person.
ARTICLE 6. STOCK OPTIONS IN GENERAL
     6.1 Exercise Price. The exercise price of an Option to purchase a share of
Common Stock shall be, in the case of an Incentive Stock Option, not less than
100% of the fair market value of a share of Common Stock on the date the Option
is granted, except that the exercise price shall be not less than 110% of such
fair market value in the case of an Incentive Stock Option granted to any
individual described in Section 5.2. The exercise price of an Option to purchase
a share of Common Stock shall be, in the case of a Nonqualified Stock Option,
not less than 100% of the fair market value of a share of Common Stock on the
date the Option is granted. The exercise price shall be subject to adjustment as
provided in Article 10.
     6.2 Limitation on Incentive Stock Options. The aggregate fair market value
(determined as of the date an Option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
any individual in any calendar year (under the Plan and all other plans
maintained by the Corporation and Subsidiaries) shall not exceed $100,000.
     6.3 Determination of Fair Market Value.
     (a) During such time as the Common Stock is not listed on an established
stock exchange or exchanges but is quoted on the NASDAQ National Market System,
the

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fair market value per share of the Common Stock shall be the closing sale price
for such a share on the relevant day. If no sale of Common Stock has occurred on
that day, the fair market value shall be determined by reference to such price
for the next preceding day on which a sale occurred.
     (b) During such time as the Common Stock is not listed on an established
stock exchange or quoted on the NASDAQ National Market System, the fair market
value per share of the Common Stock shall be the mean between the closing “bid”
and “asked” prices for such a share on the relevant day. If no closing “bid” and
“asked” prices are quoted for that day, the fair market value shall be
determined by reference to such prices for the next preceding day on which such
closing prices were quoted.
     (c) If the Common Stock is listed on an established stock exchange or
exchanges, the fair market value per share of the Common Stock shall be the
composite closing sale price for such a share on the relevant day. If no sale of
Common Stock has occurred on that day, the fair market value shall be determined
by reference to such price for the next preceding day on which a sale occurred.
     (d) In the event that the Common Stock is not traded on an established
stock exchange or quoted on the NASDAQ National Market System, and no closing
“bid” and “asked” prices are available on a relevant day, then the fair market
value per share of Common Stock will be the price established by the Committee
in good faith.
     In connection with determining the fair market value of a share of Common
Stock on any relevant day, the Committee may use any source deemed reliable; and
its determination shall be final and binding on all affected persons, absent
clear error.
     6.4 Limitation on Option Awards. Commencing January 1, 2001, grants under
this Plan (and any plan of the Corporation or a Subsidiary providing for stock
option awards) to an Employee described in Code Section 162(m)(3) shall not
exceed, in the aggregate, Options to acquire 300,000 shares of Common Stock
during any period of 12 consecutive months. Such limitation shall be subject to
adjustment in the manner described in Article 10.
     6.5 Transferability of Options.
     (a) Except as provided in Subsection (b), an Option granted hereunder shall
not be transferable other than by will or the laws of descent and distribution,
and such Option shall be exercisable, during the Optionee’s lifetime, only by
him or her.
     (b) An Optionee may, with the prior approval of the Committee, transfer a
Nonqualified Stock Option for no consideration to or for the benefit of one or
more members of the Optionee’s “immediate family” (including a trust,
partnership or limited liability company for the benefit of one or more of such
members), subject to such limits as the Committee may impose, and the transferee
shall remain subject to all terms and conditions applicable to the Option prior
to its transfer. The term “immediate family” shall mean an Optionee’s spouse,
parents, children, stepchildren, adoptive relationships, sisters, brothers and
grandchildren (and, for this purpose, shall also include the Optionee).

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ARTICLE 7. TERM, VESTING AND EXERCISE OF OPTIONS
     7.1 Term and Vesting. Each Option granted under the Plan shall terminate on
the date determined by the Committee and approved by a majority of the
disinterested members of the Board, and specified in the Agreement; provided,
however, that (i) each intended Incentive Stock Option granted to an individual
described in Section 5.2 shall terminate not later than five years after the
date of the grant, (ii) each other intended Incentive Stock Option shall
terminate not later than ten years after the date of grant, and (iii) each
Option granted under the Plan which is intended to be a Nonqualified Stock
Option shall terminate not later than ten years and one month after the date of
grant. Each Option granted under the Plan shall be exercisable (i.e., become
vested) only after the earlier of the date on which (i) the Optionee has
completed one year of continuous employment with the Corporation or a Subsidiary
immediately following the date of the grant of the Option (or such later date as
may be specified in an Agreement, including a date that may be tied to the
satisfaction of one or more Performance Goals) or (ii) unless otherwise provided
in an Agreement, a Change in Control occurs. An Option may be exercised only
during the continuance of the Optionee’s employment, except as provided in
Article 8.
     7.2 Exercise.
     (a) A person electing to exercise an Option shall give written notice to
the Corporation of such election and of the number of shares he or she has
elected to purchase, in such form as the Committee shall have prescribed or
approved, and shall at the time of exercise tender the full exercise price of
the shares he or she has elected to purchase. The exercise price shall be paid
in full, in cash, upon the exercise of the Option; provided, however, that in
lieu of cash, with the approval of the Committee at or prior to exercise, an
Optionee may exercise an Option by tendering to the Corporation shares of Common
Stock owned by him or her and having a fair market value equal to the cash
exercise price applicable to the Option (with the fair market value of such
stock to be determined in the manner provided in Section 6.3) or by delivering
such combination of cash and such as the Committee in its sole discretion may
approve. Notwithstanding the foregoing, Common Stock acquired pursuant to the
exercise of an Incentive Stock Option may not be tendered as payment unless the
holding period requirements of Code Section 422(a)(1) have been satisfied, and
Common Stock not acquired pursuant to the exercise of an Incentive Stock Option
may not be tendered as payment unless it has been held, beneficially and of
record, for at least six months (or such longer time as may be required by
applicable securities law or accounting principles to avoid adverse consequences
to the Corporation or a Participant).
     (b) A person holding more than one Option at any relevant time may, in
accordance with the provisions of the Plan, elect to exercise such Options in
any order.
     (c) At the request of the Participant and to the extent permitted by
applicable law, the Committee may, in its sole discretion, selectively approve
arrangements whereby the Participant irrevocably authorizes a third party to
sell shares of Common Stock (or a sufficient portion of the shares) acquired
upon the exercise of an Option and to remit to the Corporation a sufficient
portion of the sales proceeds to pay the entire exercise price and any tax
withholding required as a result of such exercise.

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     7.3 Deferred Delivery of Nonqualified Stock Option Shares. The Committee
may approve an arrangement whereby an Optionee may elect to defer receipt of
Common Stock otherwise issuable to him or her upon exercise of a Nonqualified
Stock Option. Any such arrangement, if approved at all, shall be subject to such
terms and conditions as the Committee, in its sole discretion, may specify,
which terms and conditions may (but need not) include provision for the award of
additional shares to take into account dividends paid subsequent to exercise of
the Option.
ARTICLE 8. EXERCISE OF OPTIONS FOLLOWING TERMINATION OF EMPLOYMENT
     8.1 Retirement. In the event of an Optionee’s termination of employment due
to Retirement, his or her Option shall lapse at the earlier of the expiration of
the term of the Option or:
     (a) in the case of an Incentive Stock Option, three months from the date of
Retirement; and
     (b) in the case of a Nonqualified Stock Option, up to 24 months from the
date of Retirement (as specified in the relevant Agreement).
     8.2 Death or Total and Permanent Disability. In the event of termination of
an Optionee’s employment due to death or being “disabled” (within the meaning of
Code Section 22(e)(3)), his or her Option shall lapse at the earlier of (a) the
expiration of the term of the Option, or (b) one year after termination due to
such a cause.
     8.3 Termination For Cause. In the event of an Optionee’s termination of
employment “for cause,” his or her Option shall lapse on the date of such
termination. Termination “for cause” shall mean the Optionee was terminated
after:
     (a) the Office of Thrift Supervision or any other government regulatory
agency recommends or orders in writing that the Corporation or a Subsidiary
terminate the employment of the Optionee or relieve him or her of his or her
duties;
     (b) the Optionee is convicted of or enters a plea of guilty or nolo
contendere to a felony, a crime of falsehood, or a crime involving fraud or
moral turpitude, or the actual incarceration of the Optionee for a period of 45
consecutive days;
     (c) the Optionee willfully fails to follow the lawful instructions of the
Board or any officer of the Corporation or a Subsidiary after Optionee’s receipt
of written notice of such instructions, other than a failure resulting from the
Optionee’s incapacity because of physical or mental illness;
     (d) the willful or continued failure by the Optionee to substantially and
satisfactorily perform his duties with the Corporation or a Subsidiary (other
than any such failure resulting from the Optionee’s being disabled or as a
result of physical or mental illness), within a reasonable period of time after
a demand for substantial performance or notice of lack of substantial or
satisfactory performance is delivered to the Optionee, which demand identifies
the manner in which the Optionee has not substantially or satisfactorily
performed his duties; or

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     (e) the failure by the Optionee to conform to the Corporation’s Code of
Conduct.
     For purposes of the Plan, no act, or failure to act, on the Optionee’s part
shall be deemed “willful” unless done, or omitted to be done, by the Optionee
not in good faith and without reasonable belief that the Optionee’s action or
omission was in the best interest of the Corporation or a Subsidiary.
     The term “Code of Conduct” shall mean: (a) the Sovereign Bancorp, Inc. Code
of Conduct and Ethics, (b) Code of Ethics For Senior Financial Officers of
Sovereign Bancorp, Inc. and Sovereign Bank, (c) the Sovereign Bancorp, Inc.
Policy on Personal Securities Transactions, and (d) the policies and procedures
related to employment of the Optionee by the Corporation or a Subsidiary set
forth in the Sovereign Bank Team Member Handbook. The Code of Conduct may be
amended and updated at any time. The term “Code of Conduct” shall also include
any other policy or procedure that may be adopted by the Corporation or a
Subsidiary and communicated to Employees of the Corporation or a Subsidiary.
     8.4 Special Termination Provisions.
     (a) In the case of a corporate downsizing, the Retirement of an Optionee or
other circumstances where it is deemed equitable to do so, the Committee may, in
its discretion and subject to the approval of a majority of the disinterested
members of the Board, waive the one-year (or other) continuous service
requirement for vesting specified in an Agreement pursuant to Section 7.1 and
permit the exercise of an Option held by an Optionee prior to the satisfaction
of such requirement. Any such waiver may be made with retroactive effect,
provided it is made within 60 days following the Optionee’s termination of
employment.
     (b) In the event the Committee waives the continuous service requirement
with respect to an Option and the circumstance of an Optionee’s termination of
employment is described in Section 8.1 or 8.2, the affected Option will lapse as
otherwise provided in the relevant section.
     (c) In the case of a corporate downsizing or other circumstances where it
is deemed equitable to do so, the Committee may, in its discretion and subject
to the approval of a majority of the disinterested members of the Board, waive
the otherwise applicable lapse provision of the Option of a Participant and
permit its exercise until a date which is the earlier of the expiration of the
term of the Option or:
     (i) in the case of an Incentive Stock Option, three months from the date of
termination of employment; and
     (ii) in the case of a Nonqualified Stock Option, up to 24 months from the
date of termination of employment (as specified in the relevant resolution).
     (d) No exercise of discretion under this section with respect to an event
or person shall create an obligation to exercise such discretion in any similar
or same circumstance.

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     8.5 Other Termination By the Corporation or Optionee. Except as otherwise
provided elsewhere in this article, (a) in the event of an Optionee’s
termination of employment at the election of the Corporation, his or her Option
shall lapse at the earlier of (i) the expiration of the term of the Option, or
(ii) three months after such termination; and (b) in the event of termination of
employment at the election of an Optionee, his or her Option shall lapse on the
date of such termination.
ARTICLE 9. RESTRICTED STOCK
     9.1 In General. Restricted Stock Awards shall be subject to such terms and
conditions as may be specified in the Agreement issued to a Participant to
evidence the grant of such Award. Among other things, a Restricted Stock Award
shall be subject to a vesting schedule or Performance Goals, or both.
     9.2 Minimum Vesting Period for Certain Awards. In the case of a Restricted
Stock Award that is not intended to constitute a Performance Grant, such Award
shall not fully vest over a period of less than three years; provided, however,
that this minimum vesting period shall not be construed as precluding terms in
an Agreement that may accelerate vesting of an Award by reason of death,
“disability” (within the meaning of Code Section 22(e)(3)), Retirement, or the
occurrence of a Change in Control.
     9.3 Limitation on Restricted Stock Awards. Commencing January 1, 2001,
grants under this Plan (and any other plan of the Corporation or a Subsidiary
providing for restricted stock awards) to any Employee described in Code
Section 162(m)(3) shall not exceed, in the aggregate, Restricted Stock Awards
for 100,000 shares of Common Stock during any period of 12 consecutive months.
Such limitation shall be subject to adjustment in the manner described in
Article 10.
     9.4 Issuance and Retention of Share Certificates By Corporation. One or
more share certificates shall be issued upon the grant of a Restricted Stock
Award; but until such time as the Restricted Stock shall vest or otherwise
become distributable by reason of satisfaction of one or more Performance Goals,
the Corporation shall retain such share certificates.
     9.5 Stock Powers. At the time of the grant of a Restricted Stock Award, the
Participant to whom the grant is made shall deliver such stock powers, endorsed
in blank, as may be requested by the Corporation.
     9.6 Release of Shares. Within 30 days following the date on which a
Participant becomes entitled under an Agreement to receive shares of previously
Restricted Stock, the Corporation shall deliver to him or her a certificate
evidencing the ownership of such shares, together with an amount of cash
(without interest) equal to the dividends that have been paid on such shares
with respect to record dates occurring on and after the date of the related
Award.
     9.7 Forfeiture of Restricted Stock Awards. In the event of the forfeiture
of a Restricted Stock Award, by reason of the termination of employment prior to
vesting, the failure to achieve a Performance Goal or otherwise, the Corporation
shall take such steps as may be necessary to cancel the affected shares and
return the same to its treasury.
     9.8 Assignment, Transfer, Etc. of Restricted Stock Rights. The potential
rights of a Participant to shares of Restricted Stock may not be assigned,
transferred, sold, pledged,

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hypothecated or otherwise encumbered or disposed of until such time as
unrestricted certificates for such shares are received by him or her; provided,
however, that the Committee may permit a transfer of a type described in
Section 6.5(b).
     9.9 Deferred Delivery of Formerly Restricted Stock. The Committee may
approve an arrangement whereby a Participant may elect to defer receipt of
Restricted Stock beyond the date on which a restriction terminates or a
Performance Goal is satisfied with respect thereto. Any such arrangement, if
approved at all, shall be subject to such terms and conditions as the Committee,
in its sole discretion, may specify, including terms covering the accumulation
or distribution of dividends previously paid with respect to the subject shares
and those that may thereafter be paid.
ARTICLE 10. ADJUSTMENT PROVISIONS
     10.1 Share Adjustments.
     (a) In the event that the shares of Common Stock of the Corporation, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares of stock or other securities of the Corporation, or if the
number of such shares of Common Stock shall be changed through the payment of a
stock dividend, stock split or reverse stock split, then (i) the shares of
Common Stock authorized hereunder to be made the subject of Awards, (ii) the
shares of Common Stock then subject to outstanding Awards and the exercise price
thereof (where relevant), (iii) the maximum number of Awards that may be granted
within a 12-month period and (iv) the nature and terms of the shares of stock or
securities subject to Awards hereunder shall be increased, decreased or
otherwise changed to such extent and in such manner as may be necessary or
appropriate to reflect any of the foregoing events.
     (b) If there shall be any other change in the number or kind of the
outstanding shares of the Common Stock of the Corporation, or of any stock or
other securities into which such Common Stock shall have been changed, or for
which it shall have been exchanged, and if a majority of the disinterested
members of the Board shall, in its sole discretion, determine that such change
equitably requires an adjustment in any Award which was theretofore granted or
which may thereafter be granted under the Plan, then such adjustment shall be
made in accordance with such determination.
     (c) The grant of an Award pursuant to the Plan shall not affect in any way
the right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge, to
consolidate, to dissolve, to liquidate or to sell or transfer all or any part of
its business or assets.
     10.2 Corporate Changes. A liquidation or dissolution of the Corporation, a
merger or consolidation in which the Corporation is not the surviving
Corporation or a sale of all or substantially all of the Corporation’s assets,
shall cause each outstanding Award to terminate, except to the extent that
another corporation may and does, in the transaction, assume and continue the
Award or substitute its own awards.

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     10.3 Fractional Shares. Fractional shares resulting from any adjustment in
Awards pursuant to this article may be settled as a majority of the
disinterested members of the Board shall determine.
     10.4 Binding Determination. To the extent that the foregoing adjustments
relate to stock or securities of the Corporation, such adjustments shall be made
by a majority of the disinterested members of the Board, whose determination in
that respect shall be final, binding and conclusive. Notice of any adjustment
shall be given by the Corporation to each holder of an Award which shall have
been so adjusted.
ARTICLE 11. GENERAL PROVISIONS
     11.1 Effective Date. The Plan shall become effective upon its adoption by
the Board (January 18, 2001), provided that any grant of an Award is subject to
the approval of the Plan by the shareholders of the Corporation within 12 months
of adoption by the Board.
     11.2 Termination of the Plan. Unless previously terminated by the Board,
the Plan shall terminate on, and no Award shall be granted after, the day
immediately preceding the tenth anniversary of its adoption by the Board.
     11.3 Limitation on Termination, Amendment or Modification.
     (a) The Board may at any time terminate, amend, modify or suspend the Plan,
provided that, without the approval of the shareholders of the Corporation, no
amendment or modification shall be made solely by the Board which:
     (i) increases the maximum number of shares of Common Stock as to which
Awards may be granted under the Plan;
     (ii) changes the class of eligible Participants; or
     (iii) otherwise requires the approval of shareholders under applicable
state law or under applicable federal law to avoid potential liability or
adverse consequences to the Corporation or a Participant.
     (b) No amendment, modification, suspension or termination of the Plan shall
in any manner affect any Award theretofore granted under the Plan without the
consent of the Participant or any person validly claiming under or through the
Participant.
     11.4 No Right to Grant of Award or Continued Employment. Nothing contained
in this Plan or otherwise shall be construed to (a) require the grant of an
Award to an individual who qualifies as an Employee, or (b) confer upon a
Participant any right to continue in the employ of the Corporation or any
Subsidiary or limit in any respect the right of the Corporation or of any
Subsidiary to terminate the Participant’s employment at any time and for any
reason.
     11.5 Withholding Taxes.
     (a) Subject to the provisions of Subsection (b), the Corporation will
require, where sufficient funds are not otherwise available, that a Participant
pay or reimburse to it any withholding taxes at such time as withholding is
required by law.

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     (b) With the permission of the Committee, a Participant may satisfy the
withholding obligation described in Subsection (a), in whole or in part, by
electing to have the Corporation withhold shares of Common Stock (otherwise
issuable to him or her) having a fair market value equal to the amount required
to be withheld. An election by a Participant to have shares withheld for this
purpose shall be subject to such conditions as may then be imposed thereon by
any applicable securities law.
     11.6 Listing and Registration of Shares.
     (a) No Option granted pursuant to the Plan shall be exercisable in whole or
in part, and no share certificate shall be delivered, if at any relevant time a
majority of the disinterested members of the Board shall determine in its
discretion that the listing, registration or qualification of the shares of
Common Stock subject to an Award on any securities exchange or under any
applicable law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, such Award,
until such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to a majority of
the disinterested members of the Board.
     (b) If a registration statement under the Securities Act with respect to
the shares issuable under the Plan is not in effect at any relevant time, as a
condition of the issuance of the shares, a Participant (or any person claiming
through a Participant) shall give the Committee a written statement,
satisfactory in form and substance to the Committee, that he or she is acquiring
the shares for his or her own account for investment and not with a view to
their distribution. The Corporation may place upon any stock certificate for
shares issued under the Plan the following legend or such other legend as the
Committee may prescribe to prevent disposition of the shares in violation of the
Securities Act or other applicable law:
‘THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (“ACT”) AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION
OF COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED.’
     11.7 Disinterested Director. For purposes of this Plan, a director shall be
deemed “disinterested” if such person could qualify as a member of the Committee
under Section 3.1.
     11.8 Gender; Number. Words of one gender, wherever used herein, shall be
construed to include each other gender, as the context requires. Words used
herein in the singular form shall include the plural form, as the context
requires, and vice versa.
     11.9 Applicable Law. Except to the extent preempted by federal law, this
Plan document, and the Agreements issued pursuant hereto, shall be construed,
administered and enforced in accordance with the domestic internal law of the
Commonwealth of Pennsylvania.

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     11.10 Headings. The headings of the several articles and sections of this
Plan document have been inserted for convenience of reference only and shall not
be used in the construction of the same.

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