exv10w21



 



 Exhibit 10.21


Sovereign Bancorp, Inc.

2001 Stock Incentive Plan




(as amended by Amendments #1, #2, #3, and #4)




 









 





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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