Exhibit 10.16

SOVEREIGN BANCORP, INC.

LEADERS INCENTIVE PLAN

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Amended and Restated as of January 1, 2005

 

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Table of Contents

              Page  
ARTICLE 1 - PURPOSES OF THE PLAN
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ARTICLE 2 - DEFINITIONS
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ARTICLE 3 - ADMINISTRATION
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ARTICLE 4 - PLAN OPERATION
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ARTICLE 5 - MISCELLANEOUS PROVISIONS
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SOVEREIGN BANCORP, INC.
LEADERS INCENTIVE PLAN

ARTICLE 1 — PURPOSES OF THE PLAN

     The Sovereign Bancorp, Inc. Leaders Incentive Plan is intended to provide
incentive to Participants to assist the Corporation and its Subsidiaries in
meeting and exceeding their corporate financial goals. By offering the potential
to earn additional compensation beyond base salary, the Corporation and its
Subsidiaries also intend that their goal of providing a competitive total
compensation program for Participants will be achieved, thereby assisting in
attracting, retaining and motivating certain personnel.

ARTICLE 2 — DEFINITIONS

     2.1 “Award.” A bonus, payable to a Participant in cash and/or Restricted
Common Stock, as determined by the Committee in accordance with the provisions
of the Plan.

     2.2 “Board.” The board of directors of the Corporation.

     2.3 “CEO.” The chief executive officer of the Corporation.

     2.4 “Code.” The Internal Revenue Code of 1986, as amended.

     2.5 “Committee.” The Compensation Committee of the Board, or such other
committee as may be determined under the provisions of Article 3.

     2.6 “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.

     2.7 “Corporate Performance Factor.” One or more earnings per share goals,
established by the Committee prior to the commencement of each Plan Year, that
must be achieved (unless waived by the Board) as a condition precedent to the
declaration and payment of an Award (or a type of Award) to any Participant. The
Corporate Performance Factor, including any detail regarding its determination,
established for a Plan Year shall be attached from time to time as an exhibit,
or a replacement exhibit, to this Plan document.

     2.8 “Corporation.” Sovereign Bancorp, Inc., a Pennsylvania corporation.

     2.9 “Employee.” A full-time or part-time common law employee of the
Corporation or a Subsidiary. Such term shall not include a temporary or “leased”
employee.

     2.10 “Individual Performance Factor.” A number or other evaluation with
respect to the performance of a Participant in a relevant Plan Year. The factor
for a Participant shall be derived through application to him or her of the
terms of the Corporation’s Performance Management Program, which program sets
forth objectives (Business MBOs, Human and Commitment

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MBOs, Critical Success Factors, and Human and Commitment Skills Criteria) to be
met by a Participant.

     2.11 “Participant.” With respect to a Plan Year, an Employee (i) who is
classified in grade 10 or above under the Corporation’s personnel policies in
effect at the beginning of such Plan Year, or (ii) who is classified in grade 8
or 9 under such policies at such time and who, following the recommendation of
his or her department head or supervisor, is selected to participate prior to
the beginning of a Plan Year by the CEO and approved by the Committee.
Additional individuals may be specified as Participants after the beginning of a
Plan Year in accordance with provisions set forth elsewhere herein.
Notwithstanding the preceding sentences, unless otherwise provided by the
Committee, no Employee who is a participant in any other incentive plan that
provides for annual or other period bonuses shall participate in this Plan
during any Plan Year that overlaps with an annual or other period under such
other plan. The CEO shall not be eligible to participate in the Plan.

     2.12 “Plan.” The Sovereign Bancorp, Inc. Leaders Incentive Plan, as amended
and restated by this document and as the same may be amended from time to time.

     2.13 “Plan Year.” A calendar year.

     2.14 “Restricted Common Stock.” Common Stock awarded to a Participant, the
right to actual unrestricted ownership of which is subject to satisfaction of
such service or performance criteria as may be specified by the Committee. The
terms of any Restricted Common Stock awarded under the Plan shall be as
prescribed by the Committee.

     2.15 “Subsidiary.” A subsidiary corporation, as defined in Code
Section 424(f), that is a subsidiary of a relevant corporation.

     2.16 “Valuation Date.” The date as of which the Common Stock is valued for
purposes of determining how many shares are distributable to a Participant in
connection with an Award declared in monetary terms but payable in the form of
equity. To the extent necessary with respect to a Plan Year, such date shall be
specified by the Committee at the time Awards are determined. If not specified,
the Valuation Date shall be December 31st of the applicable Plan Year.

ARTICLE 3 — ADMINISTRATION

     3.1 In General. The Plan shall be administered by the Committee. In the
event the Board determines, at any time, that it would in the best interest of
the Corporation for the Plan to be administered by a different group of
individuals (including the Board itself), it may provide for the administration
of the Plan by such other individuals. In such event, all references to the
Committee herein shall be deemed to be references to such other individuals as a
group.

     3.2 Powers of the Committee.

     (a) The Committee shall be vested with full authority to make such rules
and regulations as it deems appropriate to administer the Plan and to interpret
the provisions

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of the Plan. 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 each Participant and any
person claiming under or through a Participant. The Committee may specify such
persons as it deems appropriate to assist it in carrying out its
responsibilities under the Plan.

     (b) Subject to the terms and conditions of the Plan, the Committee shall
have exclusive jurisdiction, among other things, to:

     (i) approve the recommendation of the CEO to provide for participation in
the Plan of grade 8 or 9 Employees;

     (ii) approve the recommendation of the CEO to provide for participation in
the Plan of grade 8 or higher Employees who are hired after the beginning of the
relevant Plan Year;

     (iii) approve the recommendation of the CEO to provide for the
participation in the Plan of Employees who are promoted to grade 8 or higher
after the beginning of the relevant Plan Year;

     (iv) determine the amount of each Award (if any) payable, or otherwise
allocable or distributable, to a Participant for a relevant Plan Year, and the
form in which such Award shall be made;

     (v) without any requirement to do so, waive strict application of any
provision of this Plan if, in its judgment, such waiver would be equitable under
the circumstances; and

     (vi) specify such conditions applicable to each Plan Award as it may deem
necessary, desirable or appropriate.

     3.3 Liability. No member of the Board, the Committee or any person
(including the CEO and any employee of Team Member Services) assisting the Board
or the Committee in connection with the administration of the Plan shall be
liable for any act, whether of commission or omission, made in reasonable good
faith in connection therewith.

ARTICLE 4 — PLAN OPERATION

     4.1 In General. As soon as practical following the preparation of the
Corporation’s final audited financial statements for a relevant Plan Year, the
Committee shall determine, or cause to be determined under its supervision,
whether the Corporate Performance Factor has been met for the Plan Year.

     (a) In the event the Corporate Performance Factor is not achieved in whole
or in part, then, unless otherwise provided by the Board, no Awards shall be
granted for the relevant Plan Year.

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     (b) In the event the Corporate Performance Factor is achieved in whole or
in part (or is waived by the Board), Awards shall be determined by the Committee
as provided in this article.

     4.2 Evaluation of Participants and Determination of Awards. In the event
Awards are to be paid for a Plan Year, the CEO shall cause each Participant’s
Individual Performance Factor to be determined and applied by taking into
account (i) the Leadership Performance Matrix in effect for such year, which
Matrix shall be attached from time to time as an appendix, or a replacement
appendix, to the Plan document, and (ii) the incentive ranges for such year,
which shall be attached from time to time as an appendix, or a replacement
appendix, to the Plan document. The determinations made shall initially be made
under the supervision of, and approved by, the CEO and, upon such approval,
shall be subject to the further approval of the Committee. For Plan Years with
respect to which the Corporate Performance Factor is achieved (or otherwise
waived), the maximum number of Employee-Participants in Grades 8 and 9 in such
year receiving Awards will not normally exceed 30% of the number of such
individuals.

     4.3 Additional Awards. A Participant may be granted an additional Award
above the amount determined pursuant to Section 4.2 if, in the judgment of the
CEO and with the concurrence of the Committee, such Participant has rendered
extraordinary performance during the Plan Year.

     4.4 Form of Awards. Awards for a Plan Year shall be in such form as the
Committee shall specify and the Board shall approve. Except as otherwise
provided by the Board or the Committee at any relevant time, in the event a dual
Corporate Performance Factor is specified, whereby two earnings-per-share
thresholds are targeted, if: (i) only the lower threshold is achieved, all
Awards shall be distributed in cash, and (ii) the higher threshold is achieved,
Awards shall be distributed partially in cash and partially in Restricted Common
Stock (or wholly in cash to selected persons). Where relevant, distributions in
the form of Restricted Common Stock shall be made with reference to the value of
such stock on the applicable Valuation Date.

     4.5 Timing of Award Distributions. The determination and distribution of
any Awards payable with respect to a Plan Year shall be made as soon as
administratively feasible following the availability of financial information
for such year. Without any obligation to do so, the Committee will strive to
determine and distribute such Awards no later than March 31st of the year
immediately following the relevant Plan Year.

     4.6 Certain Participation, Service and Distribution Rules.

     (a) Except as otherwise provided herein, no Participant shall be entitled
to an Award for any Plan Year unless he or she is an Employee on both the last
day of such year and the date on which Awards are paid for such year.

     (b) In the case of a Participant whose employment terminates during a Plan
Year, but after July 1st of such year, by reason of his or her death, disability
or normal or early retirement (as such terms are then defined in the Sovereign
Bancorp, Inc. Employee

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Stock Ownership Plan or, if not then so defined, as otherwise defined by the
Committee), a prorated Award may, in the Committee’s sole discretion, be granted
to or with respect to such Participant. In the case of any Participant who
terminates employment as described in the preceding sentence after the close of
a Plan Year, but before Awards for such year are paid, a full or pro rated Award
may, in the Committee’s sole discretion, be granted to or with respect to such
Participant.

     (c) No Employee shall be approved as a Participant for a Plan Year if his
or her employment commences after September 30th of such year. In the case of an
Employee who commences employment or is promoted to an Award-eligible position
prior to October 1st of a Plan Year and who is approved as a Participant for
such year, any Award granted to him or her for such year shall be prorated, as
the Committee shall determine.

     (d) In the case of a Participant who is a part-time Employee during all or
any portion of a Plan Year, any Award granted to him or her for such year shall
be pro rated, as the Committee shall determine.

     (e) In the case of a Participant who is on a leave of absence for less than
three months during a Plan Year, any Award determined with respect to him or her
may, at the Committee’s discretion, be payable without being pro rated. In the
case of a Participant who is on a leave of absence for at least three, but less
than 12, months, any Award granted to him or her shall be pro rated.

     (f) Notwithstanding anything herein to the contrary, any Award declared but
remaining undistributed may be temporarily or permanently withheld from a
Participant if adverse or other special circumstances exist which, in the
judgment of the Committee, justify such action with respect to him or her.

     (g) The transfer of a Participant’s employment between and among the
Corporation and its Subsidiaries shall not be deemed a termination of
employment, but, unless otherwise provided by the Committee, a transaction
pursuant to which a Subsidiary ceases to qualify as such shall constitute a
termination of employment of all of such former Subsidiary’s Employees.

     (h) The payment of any Award, with respect to a deceased Participant, shall
be made to his or her surviving spouse or, if there is no such person at the
time of distribution, to the decedent’s estate.

ARTICLE 5 — MISCELLANEOUS PROVISIONS

     5.1 Effective Date. The effective date of this amended and restated Plan is
as of January 1, 2005.

     5.2 Amendment, Modification, Suspension, Reinstatement or Termination of
the Plan. The Corporation reserves the right, by action of the Board, to amend,
modify, suspend, reinstate or terminate the Plan at any time and from time to
time, including during any Plan Year with

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retroactive effect. Any such action shall be communicated to Participants in
writing by the Committee as soon as administratively feasible.

     5.3 No Assurance of Entitlement to Award. Participation in the Plan shall
not confer upon any Participant the right to an Award, regardless of the
satisfaction of any Corporate Performance Factor or achievement of any level of
individual performance. Any Award granted (or not granted) under the Plan is
subject to the absolute discretion of the CEO and the Committee.

     5.4 No Assurance as to Continued Employment. Participation in the Plan
shall not confer upon any Participant the right to continue in the employ of the
Corporation or any Subsidiary or limit in any respect the right of the
Corporation or any Subsidiary to terminate a Participant’s employment at any
time and for any-reason.

     5.5 Withholding. The distribution of each Award hereunder (and the vesting
in, or other taxable event occurring with respect to, any Restricted Common
Stock) shall be subject to such federal, state and local income tax withholding
as may be required by law. Where relevant, the Corporation may require, as a
condition of the distribution of an Award, that a Participant make appropriate
arrangements for the deposit of sufficient cash with the Corporation to satisfy
any tax withholding requirement.

     5.6 Obligation of Employer. The obligation to distribute an Award granted
to a Participant shall be an obligation to such Participant of his or her
primary employer at the close of a relevant Plan Year. Notwithstanding the
preceding sentence, the Corporation and its Subsidiaries may allocate the cost
of Awards, as between and among themselves, as they may agree.

     5.7 Source of Shares. Except as otherwise required by law or the rules and
regulations of any exchange on which the Common Stock is listed, shares of
Restricted Common Stock distributable under the Plan may be (i) authorized but
previously unissued shares or (ii) treasury shares acquired by purchase or
otherwise.

     5.8 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.

     5.9 Applicable Law. Except to the extent preempted by federal law, this
Plan document shall be construed, administered and enforced in accordance with
the domestic internal law of the Commonwealth of Pennsylvania.

     5.10 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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EXHIBIT

CORPORATE PERFORMANCE GOALS FOR 2005 PLAN YEAR

[The Corporate Performance Goals for the 2005 Plan Year are the attainment by
the Corporation for calendar year 2005 of certain operating earnings per share
goals.]

Approval

This Plan as amended and restated has been approved by the Board of Directors on
02/16/05.

         
/s/ Jay Sidhu
    /s/ Cheryl Patnick
 
Jay Sidhu
  Approval As Noted Above   Cheryl Patnick

Chairman, President & CEO
  Board of Directors   SVP, Managing Director Team
Member Services
       
Sovereign Bancorp, Inc.
  02/16/05   Sovereign Bancorp, Inc.
02/16/05
      02/16/05

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