EX-10.3






Exhibit 10.3



Sovereign Bancorp, Inc.




Stock Ownership Requirement Policy




(As Amended and Restated effective October 1, 2005)




Introduction




In order to align the interests of the management and directors of Sovereign Bancorp, Inc.
(“Bancorp” or “Sovereign”) and Sovereign Bank (“Bank”), with the long-term interests of Sovereign
shareholders, Bancorp’s Board of Directors adopted, in January 1998, a policy which requires
directors of both Bank and Bancorp and executive and senior management of Bancorp and Bank to own,
by certain dates, a specified dollar value of Sovereign common stock (the “Policy”). The ownership
requirements for Bancorp and Bank employees is based upon an individual’s degree of responsibility
within Bank or Bancorp’s management structure. The ownership requirements for directors (both Bank
and Bancorp) is fixed by the Board of Directors of Bancorp. A director who sits on both Bank and
Bancorp Boards must meet the ownership requirement for Bancorp directors. The Chief Executive
Officer must meet his specific stock ownership requirements. Any other employee who falls within
more than one category of participation must meet the stock ownership requirement of the category
of participation which results in the largest ownership requirement. This Policy has been amended
and restated effective as of October 1, 2005.



Participation




The Sovereign common stock ownership requirement is applicable to the following directors and
classification of employees:



	 	 	 
	Board Members

	 	- Bancorp Board of Directors
	 
	 	 
	Board Members

	 	- Bank Board of Directors
	 
	 	 
	Chief Executive Officer

	 	- Bancorp/Bank
	 
	 	 
	Executive Management (Office of the

Chairman/Chief Executive Officer -

designated by the Chairman/Chief

Executive Officer)

	 	





- Bancorp/Bank
	 
	 	 
	Senior Management (Those employees who

report directly to Executive Management

and are classified as Senior Leaders

and are grade 16 or above.)

	 	





- Bancorp/Bank
	 
	 	 






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What is Included and Excluded




for Stock Ownership Requirements




	 
	 

	The following common stock ownership (both beneficial and outright)

is included in the determination of ownership for Policy

requirements:

	 








	 	•	 	Sovereign common stock allocated to an employee’s account under the
401(k) provisions of the Sovereign Bancorp, Inc. Retirement Plan.






	 	•	 	Sovereign common stock purchased, pursuant to salary deduction under the
Sovereign Bancorp, Inc. Employee Stock Purchase Plan (ESPP).






	 	•	 	Shares of Sovereign common stock issued upon the exercise of stock
options.






	 	•	 	Shares of Sovereign common stock received upon lapse of restrictions
(restricted stock awards).






	 	•	 	Shares of Sovereign common stock held in an employee’s bonus deferral
account (employee’s deferred bonus) in the Sovereign Bancorp, Inc. Bonus
Recognition and Retention Program’s related trust (“BRRP”).






	 	•	 	Shares of Sovereign common stock held in an employee’s vested matching
account (Sovereign bonus match) in the BRRP’s related trust after vesting in
accordance with the BRRP provisions.






	 	•	 	Shares of Sovereign common stock (owned beneficially or outright)
purchased in the open market or otherwise acquired.
—





	 
	 

	The following common stock ownership (both beneficial and outright)

is excluded from the determination of ownership for Policy

requirements:

	 








	 	•	 	Shares of Sovereign common stock subject to unexercised stock options
(both vested and non-vested).






	 	•	 	Shares of Sovereign common stock allocated to an employee’s account
under the ESOP provisions of the Sovereign Bancorp, Inc. Retirement Plan.






	 	•	 	Restricted stock awards subject to restrictions which have not yet
lapsed.






	 	•	 	Shares of Sovereign common stock held in an employee’s unvested match
account (Sovereign bonus match) in the BRRP’s related trust which have not yet
vested in accordance with the BRRP provisions.
—





Stock Ownership Requirements




(See Administrative Rules and Policies for more detailed explanation)




	 	 	 	 	 	 	 
	 	 	 	 	 	 	Date of
	 	 	Share Value	 	Date of Commencement	 	Completion of
	Level	 	Requirement	 	of Requirement	 	Requirement
	Bancorp Directors -	 	$100,000	 	January 1, 1999	 	December 31, 1999
	 	 	$200,000	 	October 1, 2005	 	December 31, 2010
	Bank Directors -	 	$ 50,000	 	January 1, 1999	 	December 31, 1999
	 	 	six times base	 	 	 	 
	 	 	salary (determined	 	 	 	 
	 	 	as of January 1,	 	 	 	 
	Chief Executive Officer -	 	1999)	 	January 1, 1999	 	December 31, 1999
	 	 	three times base	 	 	 	 
	 	 	salary (determined	 	 	 	 
	 	 	as of January 1,	 	 	 	 
	Executive Management -	 	1999)	 	January 1, 1999	 	December 31, 2002
	 	 	one time base	 	 	 	 
	 	 	salary (determined	 	 	 	 
	 	 	as of January 1,	 	 	 	 
	Senior Management -	 	1999)	 	January 1, 1999	 	December 31, 2004
	 	 	 	 	 	 	December 31 of the
	 	 	 	 	 	 	fifth calendar year
	 	 	 	 	 	 	following the
	 	 	 	 	 	 	calendar year in
	New Bancorp Directors	 	 	 	Date of first Board	 	which ownership
	(not previously a Bank	 	 	 	meeting following	 	requirement
	Director) -	 	$200,000	 	appointment	 	commenced
	 	 	 	 	 	 	December 31 of the
	 	 	 	 	 	 	third calendar year
	 	 	 	 	 	 	following the
	 	 	 	 	 	 	calendar year in
	New Bank Director (not	 	 	 	Date of first Board	 	which ownership
	previously a Bank or	 	 	 	meeting following	 	requirement
	Bancorp Director)	 	$ 50,000	 	appointment	 	commenced
	 	 	 	 	 	 	December 31 of the
	 	 	 	 	 	 	fifth calendar year
	 	 	 	 	 	 	following the
	 	 	 	 	 	 	calendar year in
	 	 	 	 	 	 	which increased
	New Bancorp Director	 	 	 	Date of first Board	 	ownership
	(previously Bank	 	 	 	meeting following	 	requirement
	Director only)	 	$200,000	 	appointment	 	commenced
	 	 	$ Amount required	 	 	 	 
	 	 	based upon	 	 	 	 
	 	 	applicable	 	 	 	December 31 of the
	 	 	classification and	 	 	 	fifth calendar year
	 	 	salary as of date	 	 	 	following the year
	New Employee	 	of hire	 	Date of hire	 	of hire
	Employee promoted into

higher classification

which requires

additional ownership

requirements or employee

first promoted into

classification which is

subject to ownership

requirements

	 	





$ Amount required

based upon

applicable

classification and

salary as of date

of promotion
	 	









Effective date of

promotion
	 	









December 31 of the

fifth calendar year

following the year

of promotion
	 

	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 






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Administrative Rules and Policies





	 	•	 	Directors and employees who are subject to the ownership reporting requirements of Section 16(a) of The
Securities Exchange Act of 1934 should consult with Sovereign’s general counsel prior to acquiring any Sovereign
common stock.






	 	•	 	The acquisition of Sovereign common stock by employees is subject to the Sovereign Policy on Personal Securities
Transactions (effective April 8, 2002) as such policy may be amended from time to time.






	 	•	 	The Policy is administered and monitored by the Director of Team Member Services.






	 	•	 	All Policy participants are required to submit a progress report of stock ownership requirement (number of full
 shares of Sovereign common stock) to the Director of Team Member Services annually as of June 30 of each calendar
year. The progress report is due by July 31 of each calendar year, even after ownership requirement is achieved.






	 	•	 	Once common stock ownership requirement is achieved, there is no further requirement to increase ownership (i.e.,
if value of stock decreases below requirement); provided, however, that none of the shares are sold (i.e.,
increase in value of stock does not decrease ownership requirement after compliance is achieved and, likewise,
decrease in value of stock does not increase ownership requirement after compliance is achieved).






	 	•	 	Penalties for the failure of a director (both Bancorp and Bank) to meet the ownership requirements are at the
discretion of the Compensation Committee of Bancorp’s Board of Directors and include, but are not limited to, the
direction of cash director fees to purchase Sovereign common stock.






	 	•	 	Penalties for the failure of Senior Management to meet the ownership requirements are at the discretion of
Executive Management and include, but are not limited to, all future bonuses directed to common stock purchase.






	 	•	 	Penalties for the failure of Chief Executive Officer to meet the ownership requirements are at the discretion of
the Compensation Committee of Bancorp’s Board of Directors and include, but are not limited to, all future
bonuses directed to common stock purchase.






	 	•	 	Penalties for the failure of Executive Management to meet the ownership requirements are at the discretion of the
Chief Executive Officer and include, but are not limited to, all future bonuses directed to common stock
purchase.






	 	•	 	Team Member Services will calculate the value of the shares of common stock reported to Team Member Services each
compliance period using the highest closing price of Sovereign common stock for the calendar year to date as of
each annual compliance date. For purposes of this calculation, the highest closing price will be the highest
price at which Sovereign common stock closes for at least two consecutive trading days. For example, if during a
compliance period, Sovereign common stock closes at $19.60 per share and the following day closes at $20.10 and
then on the third day declines below $19.60 and stays there for the remainder of the compliance period, the
closing price used for the calculation will be $19.60, the highest closing price for at least two consecutive
trading days.






	 	•	 	If an individual is appointed to the Bancorp Board of Directors (and was not previously a Bank director), the new
Bancorp Director must meet the ownership requirement by the end of the fifth calendar year following the year in
which the first Bancorp Board meeting following appointment as a Bancorp Director occurs.






	 	•	 	If a Bank Director is appointed to the Bancorp Board, the new Bancorp Director must meet the additional ownership
requirements by the end of the fifth calendar year following the year in which the first Bancorp Board meeting
following appointment as a Bancorp Director occurs.






	 	•	 	If an individual is appointed to the Bank Board, the new Bank Director must meet the ownership requirements by
the end of the third calendar year following the year in which the first Bank Board meeting following appointment
as a Bank Director occurs.






	 	•	 	Newly hired employees must meet the ownership requirements of the participation group into which they were hired
by the end of the fifth calendar year following the year of hire.






	 	•	 	If an employee is first promoted into a category of participation, the employee is treated as a newly hired
employee and must meet the ownership requirement of the participant classification into which they were promoted
by the end of the fifth calendar year following the year in which the employee was promoted.






	 	•	 	If a current employee subject to the ownership requirements is promoted into a category of participation which
requires additional ownership, the employee must meet such requirements by the end of the fifth calendar year
following the year in which the employee was promoted.






	 	•	 	An individual who was hired into a category of participation or promoted into a category of participation after
January 1, 1999, but prior to the October 1, 2005 effective date of this amended and restated policy, must meet
the ownership requirements by the end of the fifth calendar year following the year in which such individual was
hired or promoted.






	 	•	 	Ownership requirements may be postponed for articulated hardships. The determination of hardship will be made on
a case by case basis by the Chief Executive Officer upon the recommendation of the Director of Team Member
Services (with respect to Executive or Senior Management) and by the Compensation Committee of the Board of
Directors of Bancorp (with respect to Bancorp or Bank directors or the Chief Executive Officer).






	 	•	 	The Director of Team Member Services reserves the right to require proof of ownership of Sovereign common stock
(deemed acceptable to the Director of Team Member Services) that cannot be independently verified by Team Member
Services.






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