exv10w1



 




Exhibit 10.1


PERFORMANCE UNIT AWARD AGREEMENT




     AGREEMENT, made as of the 15th day of March 2006, between SOVEREIGN BANCORP, INC., a
Pennsylvania corporation (the “Corporation”), and JAY S. SIDHU (the “Employee”).



     1. Award.



         (a) Units. Pursuant to the actions of the Compensation Committee (the “Committee”) of
the Board of Directors (the “Board”) of the Corporation on this day, the Corporation awards, to the
Employee, One Hundred Fifty Thousand (150,000) performance units (the “Performance Units”) subject
to the terms and conditions contained herein.



         (b) Payment of Award. Upon attainment of specific Performance Goals as set forth in
Section 2(b) herein, the Employee shall be entitled to receive for each Performance Unit a cash
payment equal to the fair market value (as determined pursuant to Section 6.5 of the Sovereign
Bancorp, Inc. 2004 Broad-Based Stock Incentive Plan (the “Plan”)) of one share of the Corporation’s
common stock, no par value (the “Common Stock”). Such payment shall be made to the Employee within
45 days of the date that that the Corporation determines in good faith that the Performance Goals
have been achieved or the vesting of the Performance Units is
accelerated in accordance with Section 2(c) below.



     2. Performance Units. The Employee hereby accepts the Performance Units when issued
and agrees as follows:



         (a) Forfeiture. Except as provided in Section 2(c) below, in the event of termination
of the Employee’s employment with the Corporation or any subsidiary for any reason prior to vesting
in all or any portion of the Performance Units, the Employee shall, for no consideration, forfeit
all Performance Units to the extent the Performance Goals have not been satisfied as of the date of
termination of employment.



         (b) Performance Goals. Subject to Sections 2(c) and 6 herein, the Performance Units
shall vest only in the event that the Performance Criteria as set forth in Appendix A are
satisfied.



         (c) Acceleration of Vesting. Notwithstanding Section 2(b) above, upon the occurrence
of a Change in Control (as defined in the Plan as such definition may be amended prospectively or
retroactively from time to time) or if the Employee’s employment with the Corporation or a subsidiary terminates
due to death or being “disabled” (as defined in the Plan),
or if the Employee’s employment is terminated by the Corporation
or a subsidiary for any reason other than for Cause (as defined in any applicable employment agreement between Sovereign or a subsidiary and the Employee), any or all Performance Units shall vest.



         (d) Prohibition on Transfer. The potential rights of the Employee to the Performance
Units may not be assigned, transferred, sold, pledged, hypothecated, or otherwise encumbered or
disposed, provided, however, that the right to receive a cash payment for any Performance Units
that have vested at or prior to the Employee’s death but not yet paid may be transferred by will or
the laws of descent and distribution.



     3. Adjustments.



 









 





         (a) In the event that the shares of Common Stock, 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 the number Performance Units subject
to this award 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, 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 this award, then such adjustment shall be made in accordance with such determination.



     4. Withholding of Tax. To the extent that the receipt or vesting of the Performance
Units results in income to the Employee for federal or state income tax purposes, the Corporation
is authorized to withhold from any cash remuneration then or thereafter payable to the Employee any
tax required to be withheld by reason of such resulting compensation income.



     5. Employment Relationship. Nothing contained in this Agreement or otherwise shall be
construed to confer upon the Employee any right to continue in the employ of the Corporation or any
subsidiary of the Corporation or limit in any respect the right of the Corporation or of any
subsidiary of the Corporation to terminate the Employee’s employment at any time and for any
reason., subject to any employment agreement between the Employee and the Corporation then if
effect.



     6. Harmful Activity. If the Employee shall engage in any “harmful activity” (as
defined herein) while employed by the Corporation or within six months after termination of
employment with the Corporation, then (a) all amounts of cash received by the Employee, on or after
one year prior to the termination of employment with the Corporation, in connection with any vested
Performance Units held by the Employee shall inure to the benefit of the Corporation and (b) any
and all Performance Units held by the Employee that have not yet vested shall immediately be
forfeited. The aforementioned restriction shall not apply in the event that employment with the
Corporation terminates within two years after a Change in Control if any of the following have
occurred: (a) a relocation of the Employee’s principal place of employment more than 35 miles from
the Employee’s principal place of employment immediately prior to the Change in Control, (b) a
reduction in the Employee’s base salary after a Change in Control, or (c) termination of the
Employee’s employment under circumstances in which the Employee is entitled to severance benefits
or salary continuation or similar benefits under a change in control agreement, employment
agreement, or severance or separation pay plan. If any cash received in connection with vested
Performance Units inures to the benefit of the Corporation under this Section, the Employee pay
such amount to the Corporation within 30 days after receiving written notice from the Corporation
that the Employee has engaged in a harmful activity. Consistent with the provisions of the Plan,
the determination by the Committee as to whether the Employee engaged in “harmful activity” while
employed by the Corporation or within six months after



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termination of employment with the Corporation shall be final and conclusive, unless otherwise
determined by a majority of disinterested members of the Board.



     A “harmful activity” shall have occurred if the Employee shall do any one or more of the
following:



         (a) Use, publish, sell, trade or otherwise disclose Non-Public Information of the Corporation
unless such activity was inadvertent, done in good faith and did not cause significant harm to the
Corporation.



         (b) After notice from the Corporation, fail to return to the Corporation any document, data or
other item or items in the Employee’s possession or to which the Employee has access that may
involve Non-Public Information of the Corporation.



         (c) Upon the Employee’s own behalf or upon behalf of any other person or entity that competes
or plans to compete with the Corporation, solicit or entice for employment or hire any employee of
the Corporation.



         (d) Upon the Employee’s own behalf of upon behalf of any other person or entity that competes
or plans to compete with the Corporation, contact, call upon, solicit or do business with (other
than a business which does not compete with any business conducted by the Corporation), any
customer of the Corporation the Employee contacted, called upon, solicited, interacted with, or
became acquainted with, or learned of through access to information (whether or not such
information is or was non-public) while employed at the Corporation unless such activity was
inadvertent, done in good faith, and did not involve a customer whom the Employee should have
reasonably known was a customer of the Corporation.



         (e) Upon the Employee’s own behalf or upon behalf of any other person or entity that completes
or plans to compete with the Corporation, engage in any business activity in competition with the
Corporation in the same or a closely related activity that the Employee was engaged in for the
Corporation during the one year period prior to the termination of employment.



     For purposes of this Section, “Non-Public Information” shall mean, but shall not be limited
to, trade secrets, confidential processes, programs, software, formulas, methods, business
information or plans, financial information, and listings of names (e.g., employees, customers, and
suppliers) that are developed, owned, utilized, or maintained by the Corporation, and that of its
customers or suppliers, and that are not generally known by the public.



     7. Corporation’s Powers. No provision contained in this Agreement shall in any way
terminate, modify, or alter, or be construed or interpreted as terminating, modifying, or altering
any of the powers, rights or authority vested in the Corporation or, to the extent delegated, in
its delegate including, without limitation, the right to make certain determinations and elections
with respect to the Performance Units.



     8. Code Section 409A. Notwithstanding anything herein to the contrary, the provisions
of this Agreement are subject to the conditions and provisions of section 409A of the Internal
Revenue Code of 1986, as amended, and the rules, regulations, and notices promulgated



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thereunder (“Code Section 409A”). To the extent any provision of this Agreement or the
application thereof would violate the provisions of Code Section 409A, thereby potentially
resulting in adverse tax consequences to the Employee, the Corporation and such Employee shall
negotiate, in good faith and to the extent possible, to ameliorate or eliminate such potential
adverse tax consequences to the Employee.



     9. Binding Effect. This Agreement shall be binding upon and inure to the benefit of
any successors to the Corporation and all persons lawfully claiming under the Employee.



     10. Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Pennsylvania.



     IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly executed by an
officer thereunto duly authorized, and the Employee has executed this Agreement, all as of the date
first above written.



	 	 	 	 	 
	 	SOVEREIGN BANCORP, INC.

 	 
	 	By:  	/s/   Cheryl L. Patnick
 	 
	 	 	Cheryl L. Patnick 	 
	 	 	Senior Vice President

Director of Team Member Services 	 
	 
	 	EMPLOYEE

 	 
	 	 	/s/   Jay S. Sidhu
 	 
	 	 	Jay S. Sidhu 	 
	 	 	 	 
	 



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Appendix A




Performance Criteria





     The Performance Goals shall be achieved only in the event that, prior to December 31, 2010,
either the Corporation’s operating/cash earnings per share equal or exceed $2.84 in a fiscal year
(the “EPS Criteria”) or the Common Stock closes at or above $40 per share for 20 consecutive
trading days (the “Trading Price Criteria”). In addition,
the Performance Units will not vest unless
Sovereign Bank is “well capitalized” and has a Tier 1 leverage ratio of 6% or higher (as those
terms are defined under applicable Office of Thrift Supervision regulations on March 15, 2006) on
the date that the EPS Criteria or the Trading Price Criteria is achieved.




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