AMENDMENT #2
TO EMPLOYMENT AGREEMENT
     AGREEMENT made the 25th day of June, 2007, by and between SOVEREIGN
BANCORP, INC., a Pennsylvania corporation (“SBI”), and JAMES J. LYNCH, an
individual (the “Executive”).
WITNESSETH:
     WHEREAS, the parties entered into an agreement dated September 16, 2002
relating, among other things, to the Executive’s employment by SBI (the
“Original Employment Agreement”); and
     WHEREAS, the Original Employment Agreement was amended on May 30, 2006 in
several respects (the Original Employment Agreement, as so amended thereby,
being referred to as the “Amended Employment Agreement”); and
     WHEREAS, SBI has advised the Executive that it intends to terminate the
Amended Employment Agreement without Cause as of September 30, 2007; and
     WHEREAS, the parties desire, among other things, to further amend the
Amended Employment Agreement by executing this document (“Amendment #2”) to
reflect the consequences to the Executive and the obligations of SBI resulting
from the Executive’s proposed termination without Cause.
     NOW, THEREFORE, the parties, intending to be legally bound hereby, further
agree as follows:
     1. Notwithstanding the provisions of Section 4(a) of the Amended Employment
Agreement, the prohibition in such section against a reduction in the
Executive’s salary shall no longer apply, so that any such reduction will not
constitute a breach of such section (or any other provision of the Amended
Employment Agreement, including Section 5(a) thereof [prior to its deletion
hereby]), nor shall any such reduction give the Executive any other right under
the Amended Employment Agreement, including the right to terminate his
employment on the basis of a deemed constructive discharge or otherwise.
     2. The Executive’s salary under Section 4(a) shall be reduced to $100,000
per annum, payable periodically at such times as other executives are paid their
salaries.
     3. Notwithstanding the provisions of Sections 4(b), (c) and (d) of the
Amended Employment Agreement (but subject to the following sentence), effective
as of January 1, 2007, the Executive shall no longer, as a matter of right, be
entitled to participate in any incentive compensation (or similar) plan,
including any stock-based compensation plan or arrangement, maintained by SBI or
any of its affiliates for its or their employees. This Paragraph 3 is not
intended to affect the provisions of Section 4(c) of the Amended Employment
Agreement insofar as it relates to the provision of welfare, retirement and
fringe benefits during the term of the Amended Employment Agreement.

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     4. Section 5 of the Amended Employment Agreement and all provisions of the
Amended Employment Agreement to the extent they relate to such Section 5 are
deleted. All deleted sections, subsections and the like shall be deemed to be
marked as “reserved”.
     5. Section 6 of the Amended Employment Agreement and all provisions of the
Amended Employment Agreement to the extent they relate to such Section 6 are
deleted. All deleted sections, subsections and the like shall be deemed to be
marked as “reserved”.
     6. Section 7 of the Amended Employment Agreement is amended and restated to
read as follows—
     7. Termination Without Cause at September 30, 2007. Effective September 30,
2007, to the extent Executive’s employment has not theretofore terminated, SBI
declares this Agreement, as amended, and the Executive’s employment to be
terminated by SBI without Cause. In consideration of such termination, the
Executive shall be entitled to the payments and benefits set forth below.
     (a) Within 15 days after his termination of employment, the Executive shall
be paid a lump sum severance amount of $2,041,631 in cash.
     (b) Within 15 days after his termination of employment, the Executive shall
be paid a additional lump sum amount of $30,016, in cash, in lieu of the
continuation of any and all welfare benefits to which he was entitled prior to
his termination of employment or otherwise entitled under this Agreement.
Notwithstanding the nature of the Executive’s termination of employment, the
noncompetition and nonsolicitation provisions of Section 8 shall apply to him
for the 12-month period described therein; provided, however, that nothing set
forth in the noncompetition provisions of Section 8 shall restrict Executive
from engaging, directly or indirectly, for his own account or as an agent,
consultant, employee, partner, officer, director, or investor with respect to
any investment company or private equity, hedge, or similar fund (a “Financial
Services Fund”) which makes portfolio or similar investments in, or provides
services to, entities in the financial services sector in the geographic area in
which SBI or its affiliates, including the Bank, are conducting business at the
time of the Executive’s termination of employment (a “Financial Services
Entity”), if (x) the ownership interest by the Financial Services Fund in the
Financial Services Entity represents less than 5% of the total outstanding
voting power of the Financial Services Entity or (y) the Executive provides
written notice to the general counsel of SBI no more than 5 business days
following the Financial Services Fund acquiring 5% or more of the total
outstanding voting power of the Financial Services Entity; provided, however,
that such permissible duties shall not include performance as an employee,
director or advisory committee member of any bank if such duties are otherwise
prohibited by the terms of Section 8 nor shall such

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permissible duties include any direct or indirect involvement in the Financial
Services Fund’s investment in a Financial Services Entity in the geographic area
in which SBI or its affiliates, including the Bank, are conducting business at
the time of the Executive’s termination of employment. SBI may, in its sole and
absolute discretion, upon written request from Executive, permit, in writing,
Executive to serve as a director or advisory committee member of a bank prior to
the end of the 12-month period described above, provided that such bank has no
operations where Sovereign is conducting business in the states of Pennsylvania,
New Jersey or Maryland. In all events, the provisions of Section 8 regarding
nonsolicitation of customers and employees shall apply to the Executive, the
Financial Services Fund and any Financial Services Entity to the full extent and
for the full time period set forth in Section 8.
     7. The payments provided for in Section 7 of the Amended Employment
Agreement, as further amended and restated by Paragraph 6 above, shall be in
complete discharge of the obligations of SBI and its affiliated companies to the
Executive in connection with his termination as described in such Section 7;
provided, however, that the provisions of such Section 7 shall not affect any
other right or benefit to which he may be entitled under an employee or
executive benefit plan outside the scope of the provisions of such Section 7.
     8. Except as otherwise provided herein, the effective date of the several
paragraphs of this Amendment #2 shall be the date first above written.
     IN WITNESS WHEREOF, the parties hereto have executed this Amendment #2, or
caused it to be executed, as of the date first above written.

                  SOVEREIGN BANCORP, INC.
 
           
 
           
 
  By   /s/ Thomas J. McAuliffe          
 
      Director of Human Resources
 
      Date: August 21, 2007
 
           
[CORPORATE SEAL]
  Attest   /s/ Richard Toomey                       Secretary
 
      Date: August 21, 2007
 
           
 
          (SEAL)         /s/ James J. Lynch
                          James J. Lynch
Date: August 22, 2007    

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