EX-10.1






Exhibit 10.1



SOVEREIGN BANCORP, INC.

NON-EMPLOYEE DIRECTOR COMPENSATION PLAN

Effective January 1, 1996

(reflecting all amendments through October 1, 2005)




1. Purpose. The purpose of the Sovereign Bancorp, Inc. Non-Employee Director
Compensation Plan (the “Plan”) is to advance the interests of Sovereign Bancorp, Inc. (the
“Company”) and its shareholders by closely aligning the interests of the Company and its
shareholders with “Non-Employee Directors,” who collectively include (i) members of the Board of
Directors of the Company who are not employees of the Company, Sovereign Bank (the “Bank”) or any
other Subsidiary (the “Company Non-Employee Directors”); (ii) members of the Board of Directors of
the Bank (the “Bank Board”) who are not employees of the Company, the Bank or any other Subsidiary
(the “Bank Non-Employee Directors”); and (iii) members of the Board of Directors of any Subsidiary
designated by resolution of the Board of Directors of the Company to participate in this Plan who
are not employees of the Company, the Bank or any Subsidiary (the “Subsidiary Non-Employee
Directors”). Therefore, this Plan requires the payment of a material portion of the annually
established compensation payable to Non-Employee Directors for service on the Board and the Bank
Board and their respective committees to be in shares of the Company’s common stock, no par value
(the “Common Stock”). Common Stock issuable under this Plan may be either authorized but unissued
shares, treasury shares, or shares purchased in the open market.



2. Administration. The Plan shall be administered by the Board of Directors of the
Company (the “Board”). The Board shall, subject to the provisions of the Plan, have the power to
construe the Plan, to determine all questions arising thereunder and to adopt and amend such rules
and regulations for the administration of the Plan as it may deem desirable. Any decisions of the
Board in the administration of the Plan, as described herein, shall be final and conclusive. The
Board may authorize any one or more of its members or the secretary of the Board or any Officer,
appointed vice president or employee of the Company to execute and deliver documents on behalf of
the Board. No member of the Board shall be liable for anything done or omitted to be done by him
or her or by any other member of the Board in connection with the Plan, except for his or her own
willful misconduct or as expressly provided by statute.



3. Definition of Subsidiaries. As used herein, the term “Subsidiary” means any
corporation, joint venture or other business entity of which (i) if a corporation, a majority of
the total voting power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by the Company or one or more of the other
Subsidiaries of the Company or a combination thereof, or (ii) if a joint venture or other business
entity, a majority of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by the Company or one or more Subsidiaries of the
Company or a combination thereof.



4. Participation; Amount of Non-Employee Director Compensation. Each Non-Employee
Director shall participate in the Plan. The Board annually shall approve the amount of
compensation payable for services (including the annual retainer fee, meeting attendance fees, and
any fees payable for services on the Board, the Bank Board or their respective committees) to be
performed by Company Non-Employee Directors, Bank Non-Employee Directors, the Chairman of the
Company, and, if applicable, Subsidiary Non-Employee Directors. As of 2003, such fees shall be
payable in cash and shares of Common Stock as follows:



(a) Each Company Non-Employee Director shall be entitled to receive the following compensation
for service on the Board:




(i) 5,000 shares of Common Stock paid annually in quarterly installments of 1,250
shares; plus




(ii) 1,000 shares of Common Stock paid annually in quarterly installments of 250 shares
for each Board committee that such Company Non-Employee Director serves as chairperson; plus




(iii) 1,000 shares of Common Stock paid annually in quarterly installments of 250
shares if such Company Non-Employee Director serves as Chairperson of the Audit Committee or
as “lead director” (as designated by the Company Non-Employee Directors); plus




(iv) $1,000 in cash paid monthly for each Board meeting and Executive Committee meeting
attended by such Company Non-Employee Director during such calendar month.



(b) Each Bank Non-Employee Director shall be entitled to receive the following compensation
for service on the Bank Board:




(i) 1,500 shares of Common Stock paid annually in quarterly installments of 375 shares;
plus




(ii) 400 shares of Common Stock paid annually in quarterly installments of 100 shares
if such Bank Non-Employee Director is a member of the Executive Committee of the Bank and is
not also a Company Non-Employee Director; plus




(iii) $600 in cash paid monthly for each Bank Board meeting attended in such calendar
month by such Bank Non-Employee Director, provided, however, that effective July 1, 2003,
each Bank Non-Employee Director who is not a member of the Executive Committee of the Bank
and is not also a Company Non-Employee Director shall be entitled to receive $1,000 in cash
paid monthly for each such Bank Board meeting attended; plus




(iv) $600 in cash paid monthly for each Executive Committee of the Bank meeting
attended by such Bank Non-Employee Director during such calendar month if no regular meeting
of the Bank Board is held during such calendar month and such Bank Non-Employee Director is
a member of the Executive Committee of the Bank and is not also a Company Non-Employee
Director.



(c) Notwithstanding the foregoing or anything contained in the Plan to the contrary, effective
October 1, 2005, each Company Non-Employee Director shall be entitled to receive the following
compensation for service on the Board:




(i) $50,000 in cash annually; plus




(ii) $50,000 in shares of Common Stock annually; plus




(iii) $25,000 in cash annually if such Company Non-Employee Director serves as
chairperson of the Audit Committee or as “lead director” (as designated by the Company
Non-Employee Directors); plus




(iv) $15,000 in cash annually for each Board committee that such Company Non-Employee
Director serves as chairperson.



(d) Each Bank Non-Employee Director shall be entitled to receive the following compensation
for service on the Bank Board:




(i) $21,000 in cash annually; plus




(ii) $21,000 in shares of Common Stock annually.



(e) Non-Employee Directors who are both Company Non-Employee Directors and Bank Non-Employee
Directors shall be entitled to receive compensation for service in both capacities.



(f) Notwithstanding anything contained herein to the contrary, the amount of cash or shares of
Common Stock payable to any Non-Employee Director may be reduced or withheld by the Chairman of the
Board of Directors of the Company for failure to attend meetings of any Board of Directors or
failure to otherwise perform the duties of such Non-Employee Director’s office.



(g) If the directors of any other Subsidiary are designated by resolution of the Board of
Directors of the Company to participate in the Plan, then each such Subsidiary Non-Employee
Director, shall receive such number of shares of Common Stock and cash as shall be specified by
resolution of the Board of Directors of the Company.



5. Payment of Non-Employee Director Compensation. Each Non-Employee Director shall be
issued the number of shares of Common Stock payable to such Non-Employee Director as determined
pursuant to Section 4 above as of the last business day of each calendar quarter and such shares
shall be delivered as soon as administratively feasible thereafter. Each Non-Employee Director
shall be paid the cash compensation payable to such Non-Employee Director as determined pursuant to
Section 4 above on the last business day of each calendar quarter. Notwithstanding the foregoing,
the Board may, in its discretion, cause the number of shares and/or cash determined pursuant to
Section 4 above, to be issued and paid at such other time or times as it shall determine in its
discretion.



6. Number of Shares of Common Stock Issuable Under the Plan. The maximum number of
shares of Common Stock that may be issued under the Plan shall be 500,000 (720,000 shares as
adjusted below), provided, however, that if the Company shall at any time increase or decrease the
number of its outstanding shares of Common Stock or change in any way the rights and privileges of
such shares by means of a payment of a stock dividend or any other distribution upon such shares
payable in Common Stock, or through a stock split, reverse stock split, subdivision, consolidation,
combination, reclassification or recapitalization involving Common Stock, then the numbers, rights
and privileges of the shares issuable under Section 4 and this Section 6 of Plan shall be
increased, decreased or changed in like manner. To the extent that the application of this Section
would result in fractional shares of Common Stock being issuable, cash will be paid to the
Non-Employee Director or the number of shares will be rounded up in lieu of such fractional shares
at the discretion of the Board.



7. Miscellaneous Provisions.



(a) Neither the Plan nor any action taken hereunder shall be construed as giving any
Non-Employee Director any right to be elected as a director of the Company or the Bank.



(b) A participant’s rights and interest under the Plan may not be assigned or transferred,
hypothecated or encumbered in whole or in part either directly or by operation of law or otherwise
(except in the event of a participant’s death, by will or the laws of descent and distribution),
including, but not by way of limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner, and no such right or interest of any participant in the Plan
shall be subject to any obligation or liability of such participant.



(c) No shares of Common Stock shall be issued hereunder unless counsel for the Company shall
be satisfied that such issuance will be in compliance with applicable federal, state, local, and
foreign securities, securities exchange, and other applicable laws and requirements.



(d) It shall be a condition to the obligation of the Company to issue shares of Common Stock
hereunder, that the participant pay to the Company, to the extent required by law and upon its
demand, such amount as may be requested by the Company for the purpose of satisfying any liability
to withhold federal, state, local or foreign income or other taxes. A participant in the Plan may
satisfy the withholding obligation, in whole or in part, by electing to have the Company withhold
shares of Common Stock, otherwise issuable under the Plan, having a fair market value equal to the
amount required to be withheld. If the amount requested is not paid, the Company shall have no
obligation to issue, and the participant shall have no right to receive, shares of Common Stock.



(e) The Plan shall be unfunded. The Company shall not be required to establish any special or
separate fund or to make any other segregation of assets to assure the issuance of shares
hereunder.



(f) By accepting any Common Stock hereunder or other benefit under the Plan, each participant
and each person claiming under or through him or her shall be conclusively deemed to have indicated
his or her acceptance and ratification of, and consent to, any action taken under the Plan by the
Company or the Board.



(g) The appropriate officers of the Company shall cause to be filed any registration statement
required by the Securities Act of 1933, as amended, and any reports, returns or other information
regarding any shares of Common Stock issued pursuant hereto as may be required by Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any other
applicable statute, rule or regulation.



(h) The provisions of this Plan shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania.



(i) Headings are given to the sections of this Plan solely as a convenience to facilitate
reference. Such headings, numbering and paragraphing shall not in any case be deemed in any way
material or relevant to the construction of this Plan or any provisions thereof. The use of the
singular shall also include within its meaning the plural, where appropriate, and vice versa.



8. Amendment. The Plan may be amended at any time and from time to time by resolution
of the Board as the Board shall deem advisable; provided, however, that no amendment shall become
effective without shareholder approval if such shareholder approval is required by law, rule or
regulation, and provided further, to the extent required by Rule 16b-3 under Section 16 of the
Exchange Act, in effect from time to time, the Internal Revenue Code of 1986, as amended and the
rules thereunder in effect from time to time or the Employee Retirement Income Security Act of
1974, as amended and the rules thereunder in effect from time to time. No amendment of the Plan
shall materially and adversely affect any right of any participant with respect to any shares of
Common Stock theretofore issued without such participant’s written consent.



9. Termination. This Plan shall terminate upon the earlier of the following dates or
events to occur:



(a) upon the adoption of a resolution of the Board terminating the Plan; or



(b) April 18, 2006, which is ten years from the date the Plan was initially approved and
adopted by the shareholders of the Company in accordance with Paragraph 10 below.



No termination of the Plan shall materially and adversely affect any of the rights or
obligations of any person without his or her consent with respect to any shares of Common Stock
theretofore earned and issuable under the Plan.



10. Shareholder Approval and Adoption. The Plan shall be effective as of January 1,
1996, contingent upon shareholder approval and adoption at the 1996 annual meeting of shareholders
of the Company. The shareholders shall be deemed to have approved and adopted the Plan only if it
is approved and adopted at a meeting of the shareholders duly held by vote taken in the manner
required by the laws of the Commonwealth of Pennsylvania.