Document:

exv10w1

 

Exhibit 10.1

RETIREMENT — RESIGNATION AND TRANSITION AGREEMENT

          This
RETIREMENT—RESIGNATION AND TRANSITION AGREEMENT (“Agreement”) is by and between Sovereign
Bancorp, Inc. (“Bancorp”), a Pennsylvania corporation, and Sovereign Bank (“Bank,” and,
collectively, with Bancorp, “Sovereign”), a Federal Savings Bank organized and existing under the
laws of the United States, and Jay S. Sidhu (“Executive”), an individual residing in the
Commonwealth of Pennsylvania. This Agreement is entered into as of October 10, 2006.

          WHEREAS, Executive has been employed by Bancorp in the capacity of President and Chief
Executive Officer and by Bank in the capacity of Chief Executive Officer under the Employment
Agreement dated March 1, 1997 (the “Employment Agreement”); and

          WHEREAS, Executive has also served as Chairman of the Boards of Directors of Bancorp and Bank
(the “Boards”) and as an officer and director of various direct and indirect subsidiaries and
controlled affiliates (collectively, the “Subsidiaries”) of Bancorp and Bank; and

          WHEREAS, Executive has announced Executive’s intention to resign and retire from Sovereign and
the Subsidiaries; and

          WHEREAS, Sovereign desires to provide for the orderly separation of Executive and a smooth
transition of the position of Chief Executive Officer; and

          WHEREAS, Sovereign believes it is in the best interests of Sovereign and all of its
stakeholders to enter into this Agreement.

          NOW THEREFORE, in consideration of the premises and the covenants herein, the sufficiency of
which is hereby acknowledged, Executive, Bancorp and Bank agree as follows:

     1. Resignation and Retirement; Board Position. The parties acknowledge that,
effective on October 10, 2006 (the “Resignation and Retirement Date”), Executive resigned and
retired (i) as an employee of Bancorp and as its President and Chief Executive Officer, (ii) as an
employee of Bank and as its Chief Executive Officer, (iii) from all other positions Executive
currently holds as an employee, officer and director (except as set forth below) of Sovereign and

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each of its Subsidiaries, and (iv) from Executive’s position as a director of Banco Santander
Central Hispano, S.A., effective December 31, 2006. Executive shall continue as non-executive
Chairman and a director of Bancorp through December 31, 2006 (the “Departure Date”) and shall have
such duties as shall be prescribed by the Bancorp Board from time to time and thereafter as Special
Advisor to the Bancorp Board through October 10, 2009 and shall have such duties as shall be
prescribed by the Bancorp Board from time to time. As non-Executive Chairman, Executive’s duties
shall be limited to (i) presiding as Chairman over meetings of Board of Directors of Bancorp and
the Bank, (ii) at the direction of both co-lead directors, calling special meetings of the Boards
of Directors of Bancorp and the Bank or committees thereof, and (iii) at the direction of both
co-lead directors, establishing agendas for meetings of the Boards of Directors of Bancorp and the
Bank or committees thereof. The Executive agrees that, the bylaws of Bancorp and the Bank
notwithstanding, he will not engage in any other acts as Chairman unless so directed by Board
action, including but not limited to either supervising or directing the Chief Executive Officer or
performing the duties of Chief Executive Officer if such officer is legally incapable of performing
such duties.

     2. Consulting to Board of Directors. For a period of three (3) years after the
Resignation and Retirement Date (the “Transition Period”), Executive shall consult with Bancorp
Board when and as reasonably requested by the Bancorp Board or its designee, as follows:

     (a) Duration. Executive’s duties shall not exceed 40 hours per month of consultation
by Executive, which shall be performed at such times and from such locations that are mutually
acceptable to Executive and the Bancorp Board.

     (b) Duties. Executive’s duties shall include: (i) representing Sovereign with key
community, civic, charitable and industry constituents, (ii) consulting with the Bancorp Board and
its officers, as and when requested by the Bancorp Board, regarding corporate development strategy
and mergers and acquisitions, and (iii) assisting Bancorp with respect to customer relations, bank
regulatory and related matters. During the Transition Period, in connection with the performance
of such services, Executive shall have the title of Special Advisor to the Board of Directors.

     (c) Manner of Performance. In connection with providing services hereunder,
Executive shall comply in full with all applicable law, and rules and regulations and with

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Sovereign’s Code of Conduct (including the following documents: (i) the Sovereign Bancorp,
Inc. Code of Conduct and Ethics, (ii) the Sovereign Bancorp, Inc. Policy on Personal Securities
Transactions, and (iii) the policies and procedures related to employment of Team Members by
Sovereign or a Subsidiary set forth in the Sovereign Bank Team Member Handbook) during the
Transition Period. Executive may engage in activities on Executive’s own behalf or on behalf of
entities other than Sovereign or any Subsidiary, including, but not limited to, private equity
firms or investment funds or hedge funds (subject to the restrictive covenants set forth in this
Agreement, including those set forth in Sections 10 and 11), and may allocate Executive’s time
between Executive’s obligations under this Agreement and such other activities in any manner
Executive deems appropriate, so long as Executive’s obligations under this Agreement are satisfied.

     (d) Status as Independent Contractor. During the Transition Period, Sovereign will
retain Executive in the capacity of an independent contractor and not as an employee or agent of
Sovereign or any Subsidiary and neither will represent otherwise to any third party.

     (e) Compensation as Consultant. In consideration for Executive’s services as a
consultant to the Bancorp Board, Bancorp shall make the following payments to, and distributions
for the benefit of, Executive:

          (i) Consultant Fees. During the Transition Period, Sovereign shall pay Executive at
the rate of $40,000 per month for services performed as a consultant, payable in arrears on the
10th day of each month beginning November 10, 2006. For the avoidance of doubt, such compensation
shall be in addition to any compensation to which Executive is entitled for his services as a
director of Bancorp. At Executive’s election and written notice to Sovereign, Executive may terminate the
 services as a consultant and as of such termination date (i) the monthly payments described above
 shall cease and (ii) Executive shall be relieved of his obligations under the Sovereign Bancorp, Inc.
Policy on Personal Securities Transactions and on any other restriction on his ability to buy or sell Sovereign securities.

          (ii) Expenses. Sovereign shall reimburse Executive, in accordance with Sovereign’s
then-current travel and business expense policy, for all reasonable out-of-pocket expenses incurred
by him in connection with the performance of Executive’s services during the Transition Period
within thirty (30) days following Executive’s delivery of an accounting of those expenses to
Sovereign.

     3. Compensation Until the Resignation and Retirement Date. Executive shall continue
to receive Executive’s current salary paid in the normal course, and other compensation and
benefits to which Executive is entitled in Executive’s current position (but not including any

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accrued but unpaid bonus) with Sovereign to the Resignation and Retirement Date. On the
Resignation and Retirement Date, Executive shall also be compensated for all earned but unused
vacation, if any, consistent with Sovereign’s vacation policies.

     4. Payments and Benefits Due To Resignation and Retirement.

          (a) Severance Payment. Pursuant to the terms of the Employment Agreement, Sovereign
shall make a lump sum cash payment to Executive in the amount of $10,544,008 which equals to the
present value (based on an annual interest rate of 5.5%) of $12,084,167 paid in 60 monthly
installments, which the parties agree is the amount due under the Employment Agreement, which
amount shall be paid within five business days of the Resignation and Retirement Date.

          (b) Medical Benefits. For a period of sixty (60) months following the Resignation
and Retirement Date, the Executive shall receive a continuation of all life, disability, and
medical insurance and other normal benefits in effect with respect to Executive and dependents at
any time during the two (2) years prior to Executive’s Resignation and Retirement Date, or, if
Sovereign cannot provide such benefits because the Executive is no longer an employee, a dollar
amount equal to the cost to the Executive of obtaining such benefits (or substantially similar
benefits). Notwithstanding the preceding sentence, however, Sovereign shall not be required to
continue to provide any specific benefit in the event the Executive secures substantially similar
coverage through other employment (at the employer’s cost). Executive agrees to promptly advise
Sovereign in the event the provisions of the preceding sentence become operable.

          (c) Equity Grants and Special Payment. At various times during Executive’s
employment, Executive was granted options to purchase Sovereign common stock, awarded restricted
stock, and awarded performance units (the “Equity Grants”) as set forth on the records of
Sovereign. In recognition of Executive’s role in building Sovereign and in consideration for
Executive’s resignation from the Boards and from the position as a director of Banco Santander
Central Hispano, S.A., an accord and satisfaction of his Employment Agreement and for a number of
further other concessions and accommodations made by Executive, Sovereign agrees, that (i)
Executive’s resignation from employment on the Resignation and Retirement Date will be treated as a
retirement for purposes of the Equity Grants and (ii) Sovereign will take all action

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necessary to assure that no such Equity Grant expires upon resignation and retirement and to
accelerate the vesting of any unvested portion of Equity Grants with respect to all Equity Grants
other than the awards of 26,686 shares of restricted stock under the Sovereign Bancorp, Inc. 2004
Broad-Based Stock Incentive Plan. All other terms and provisions of the Equity Grants as set forth
in the applicable agreements reflecting those Equity Grants will remain in full force and effect.
To the extent any of the foregoing actions require the amendment of outstanding agreements for the
Equity Grants, by execution of this Agreement, Executive consents to such amendments. Pursuant to
this Section 6(c), Executive shall also be paid a lump sum cash payment of $1,000,000, which amount
shall be paid within five days of the Resignation and Retirement Date.

          (d) Supplemental Retirement Plans. Executive and Sovereign acknowledge and agree:
(i) that Executive is fully vested under the Sovereign Bancorp, Inc. Enhanced Executive Retirement
Plan (“EERP”) and the Sovereign Bancorp, Inc. Supplemental Executive Retirement Plan (“SERP”)
(collectively the “Supplemental Plans”); (ii) no additional benefits shall accrue under the
Supplemental Plans or under the pension make-whole provision set forth in Section 6(c) of the
Employment Agreement after the Resignation and Retirement Date; (iii) that current present value of
all benefits accrued under Section 6(c) of the Employment Agreement and the Supplemental Plans
(under the actuarial assumptions used consistently under the Supplemental Plans), as of the
Resignation and Retirement Date is $22,448,671; and (iv) that, subject to the provisions of Section
27 hereof, all benefits accrued under the Supplemental Plans shall be paid to him in the form of a
single payment on or before November 30, 2006. Executive acknowledges and agrees that no other
benefits shall accrue to him and no other payments shall be made to him with respect to the
Supplemental Plans.

          (e)  Deferred Compensation Plans. With respect to the Sovereign Bancorp, Inc.
Nonqualified Deferred Compensation Plan (frozen December 31, 1999) and the Bonus Recognition and
Retention Program (collectively the “Deferred Comp. Plans”), Executive and Sovereign acknowledge
and agree: (i) that Executive is fully vested under the Deferred Comp Plans; (ii) that no
additional amounts shall be credited to Executive’s account under the Deferred Comp Plans; (iii)
that distributions shall be made in accordance with the terms of the Deferred Comp Plans.
Executive acknowledges and agrees that no other amounts shall accrue to him under the Deferred Comp
Plans.

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          (f) Retirement Plan. Executive and Sovereign acknowledge and agree that Executive is
a participant in the Sovereign Bancorp, Inc. Retirement Plan, and that Executive’s benefits under
such plan shall be determined in accordance with the terms and conditions of such plan and any
election related thereto.

          (g) No Additional Benefits. Executive acknowledges and agrees that except as
expressly provided herein, Executive’s coverage under any benefit plan, program, policy or
arrangement sponsored or maintained by Sovereign shall cease and be terminated as of the
Resignation and Retirement Date. Executive further acknowledges and agrees that no payment made by
Sovereign pursuant hereto is subject to any employer matching obligation or any other employer
contribution under any benefit or deferred compensation plan, whether or not any such payment is
characterized as wages or compensation.

     5. Death or Disability. In the event that Executive dies or becomes disabled prior
to the Resignation and Retirement Date, Executive’s heirs, representatives or Executive’s estate
shall be entitled to the compensation and benefits described in Section 4.

     6. Director Compensation. From and after the Resignation and Retirement Date and for
the period through and including the Departure Date, Executive shall be paid for Executive’s
services as a director on the Bancorp Board in a lump sum cash payment equal to $36,000 payable on
the Departure Date.

     7. Release. Executive shall execute the release attached hereto as
Exhibit A on the Resignation and Retirement Date (the “Release”).

     8. No Admissions; No Knowledge of Claim. By entering into this Agreement, neither
Sovereign nor Executive in any way admits that it or Executive has treated the other unlawfully or
wrongfully in any way. Neither this Agreement, nor the implementation thereof, shall be construed
to be, or shall be admissible in any proceedings as, evidence of an admission by Sovereign or
Executive of any violation of, or failure to comply with, any rule, regulation or order or any
Sovereign policy or Code. Executive agrees that this section does not preclude introduction of
this Agreement by Sovereign to establish that all of Executive’s claims against Sovereign and the
Subsidiaries relating to the subject matter hereof were settled, compromised and released according
to the terms of this Agreement. Sovereign agrees that this section does not preclude introduction
of this Agreement by Executive to establish that all of Sovereign’s

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claims against Executive relating to the subject matter hereof were settled, compromised and
released according to the terms of this Agreement. Sovereign agrees that as of the date of this
Agreement, Sovereign has not and does not intend to assert any claim against Executive in his
capacity as director and officer and has no knowledge or knowledge of any facts that would
reasonably be expected to result in a claim. Executive represents and warrants that, as of the
date of this Agreement, there are no facts or circumstances which require Sovereign to file any
information required under Item 5.02(a) of Current Report on Form 8-K with the Securities and
Exchange Commission under the Securities and Exchange Act of 1934, as amended.

     9. Termination of Employment Agreement. Executive agrees that the execution of this
Agreement and payments made thereunder shall constitute satisfaction in full of Sovereign’s
obligations under, and the extinguishment and termination of, the Employment Agreement and,
effective on the Resignation and Retirement Date, the Employment Agreement shall terminate,
provided however, that Sections 6(d) and 9 of the Employment Agreement shall survive and remain in
force through the five year period beginning on the Resignation and Retirement Date and Section 8
of the Employment Agreement shall survive and remain in force as specified in Section 10(a) of this
Agreement.

     10. Covenants of Executive. As an inducement to Sovereign to enter into this
Agreement, Executive agrees as follows:

          (a) Non-Competition. The non-competition provisions of Section 8 of the Employment
Agreement shall survive the termination of the Employment Agreement and apply to Executive for the
period commencing on the date of this Agreement and ending on the earlier of (i) October 10, 2011
or (ii) the date of a Change in Control of Sovereign occurring after the effective date of this
Agreement (as defined in the Sovereign Bancorp, Inc. 2004 Broad-Based Stock Incentive Plan)
occurring on or after the date hereof; provided however, nothing set forth in such non-competition
provisions shall restrict Executive from engaging, directly or indirectly, for his own account or
as an agent, consultant, employee, partner, officer, director, or investor with respect to any
investment company or private equity, hedge, or similar fund (a “Financial Services Fund”) which
makes portfolio or similar investments in, or provides services to, entities in the financial
services sector (a “Financial Services Entity”), if (x) the ownership interest by the Financial
Services Fund in the Financial Services Entity represents less than 5% of the total

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outstanding voting power of the Financial Services Entity, or (y) the Financial Services
Entity does not have a substantial percentage of its loans or deposits in, and/or does not have a
substantial physical or economic presence in the Non-Competition Area (as defined in the Employment
Agreement); further provided, however, that nothing set forth in this Agreement shall be construed
as expanding the geographic coverage of the provisions of Section 8 of the Employment Agreement
beyond the Non-Competition Area.

          (b) Non-Disclosure. Executive shall not, for a period commencing on the date of this
Agreement and ending on October 10, 2011, disclose or permit the disclosure of any such
confidential and proprietary business information or trade secrets of Sovereign, including but not
limited to, client and customer information and financial information, to any person other than a
person employed by Sovereign or engaged by Sovereign to render professional services to Sovereign
under circumstances requiring such person to adhere to an obligation of confidentiality with
respect to Sovereign, except as such disclosure may be required by statute, regulation or judicial
or administrative order, in which case Executive shall provide Sovereign prior written notice of
such requirement and an opportunity to contest the same. The term “confidential information” shall
not include any information which, at the time of disclosure, is in the public domain through no
breach by Executive of Executive’s obligation of confidentiality. Executive shall not take with
him any document belonging to Sovereign or any of its affiliates which is of a confidential or
proprietary nature relating to Sovereign or any such affiliate.

          (c) Non-Solicitation. For a period commencing on the date of this Agreement and
ending on October 10, 2011, Executive shall not, either directly or indirectly, through one or more
intermediaries or otherwise, on Executive’s own behalf or on behalf of any other person or entity,
employ, solicit, induce, recruit, encourage, advise, or counsel any employee or agent of Sovereign
or any of the Subsidiaries to leave their employment, or take away such employees or agents or
attempt to solicit, induce, recruit, encourage, or take away such employees or agents.

          (d) Company Remedies. In the event of any breach by Executive of Executive’s
obligations under this Section 10, Executive agrees that Sovereign is entitled to pursue the
remedies referenced in Section 9 of the Employment Agreement.

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     11. Mutual Non-Disparagement. Sovereign agrees, except as may be required by law, to
refrain from making or publishing any statements, claims, allegations or assertions which it
believes have or may reasonably be expected to have the effect of demeaning the name or business
reputation of Executive and shall cause its employees, officers, directors, agents or advisors to
be similarly bound when serving in such capacity. Executive agrees to refrain from performing any
act, engaging in any conduct or course of action or making or publishing any statements, claims,
allegations or assertions which have or may reasonably have the effect of demeaning the name or
business reputation of Sovereign or any of the Subsidiaries, or any of its or their employees,
officers, directors, agents or advisors in their capacities as such or which adversely affects (or
may reasonably be expected adversely to affect) the best interests (economic or otherwise) of any
of them. The parties agree that nothing in this Section 11 or in Section 10(b) shall preclude
either party or any other person referenced in this Section 11 from fulfilling any duty or
obligation that he, she or it may have at law, from responding to any subpoena or official inquiry
from any court or government agency, including providing truthful testimony, documents subpoenaed
or requested or otherwise cooperating in good faith with any proceeding or investigation, or from
taking any reasonable actions to enforce such party’s rights under this Agreement in accordance
with the dispute provisions specified in Section 14 hereof.

     12. Return of Property. Concurrently with the Departure Date, Executive shall
deliver to a designated Sovereign representative all records, documents, hardware, software, and
all other Sovereign property and all copies thereof in Executive’s possession. Executive
acknowledges and agrees that all such materials are the sole property of Sovereign and will certify
in writing to Sovereign at the time of termination that Executive has complied with this
obligation. Notwithstanding the foregoing, Executive shall be provided with company provided
computer equipment and information technology support in accordance with Section 2(d) herein.

     13. Sovereign’s Default in Payment. If Sovereign defaults in timely payment on the
due date of any payment or amount due under this Agreement, Executive shall give written notice of
such default to the person specified in or pursuant to this Agreement to receive notice on behalf
of Sovereign. Sovereign shall have thirty (30) days after the receipt of such a notice of default
to cure any payment default.

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     14. Arbitration. Sovereign and Executive recognize that in the event a dispute
should arise between them concerning the interpretation or implementation of this Agreement,
lengthy and expensive litigation will not afford a practical resolution of the issues within a
reasonable period of time. Consequently, each party agrees that all disputes, disagreements and
questions of interpretation concerning this Agreement are to be submitted for resolution to the
American Arbitration Association (“Association”) in Philadelphia, Pennsylvania. Sovereign or
Executive, may initiate an arbitration proceeding at any time by giving notice to the others in
accordance with the rules of the Association. The Association shall designate a single arbitrator
to conduct the proceeding, but Sovereign, and the Executive, may, as a matter of right, require the
substitution of a different arbitrator chosen by the Association. Each such right of substitution
may be exercised only once. The arbitrator shall not be bound by the rules of evidence and
procedure of the courts of the Commonwealth of Pennsylvania but shall be bound by the substantive
law applicable to this Agreement. The decision of the arbitrator, absent fraud, duress,
incompetence or gross and obvious error of fact, shall be final and binding upon the parties and
shall be enforceable in courts of proper jurisdiction. Following written notice of a request for
arbitration, Sovereign, and the Executive, shall be entitled to an injunction restraining all
further proceedings in any pending or subsequently filed litigation concerning this Agreement,
except as otherwise provided herein.

     15. Legal Expenses. Sovereign shall pay to the Executive all reasonable legal fees
and expenses when incurred by the Executive in connection with the execution and delivery of this
Agreement and in seeking to obtain or enforce any right or benefit provided by this Agreement.

     16. Assignment. This Agreement shall not be assignable by any party hereto, except
by Bancorp and the Bank to any successor in interest to the respective businesses of Bancorp and
the Bank.

     17. Entire Agreement. This Agreement, together with the Exhibits A and B attached
hereto and such portions of the Employment Agreement that expressly survive the execution hereof,
sets forth the entire agreement between the parties, and, except as otherwise provided herein,
fully supersedes any and all prior agreements, understandings, or representations between the
parties pertaining to the subject matter of this Agreement.

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     18. Successors, Binding Agreement.

          (a) Bancorp and the Bank will require any successor (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of
Bancorp and/or the Bank to expressly assume and agree to perform this Agreement in the same manner
and to the same extent that Bancorp and the Bank would be required to perform it if no such
succession had taken place. Failure by Bancorp and the Bank to obtain such assumption and
agreement prior to the effectiveness of any such succession shall constitute a material breach of
this Agreement. As used in this Agreement, “Bancorp” and the “Bank” shall mean Bancorp and the
Bank as hereinbefore defined and any successor to the business and/or assets of Bancorp and/or the
Bank as aforesaid which assumes and agrees to perform this Agreement by operation of law, or
otherwise.

          (b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, heirs, distributees, devisees, and
legatees. If the Executive should die while any amount is payable to the Executive under this
Agreement if the Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee,
legatee, or other designee, or, if there is no such designee, to the Executive’s estate.

     19. Severability. If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless
continue in full force and effect.

     20. Notices. All notices and other communications hereunder shall be in writing.
Any notice or other communication hereunder shall be deemed duly given if it is sent by registered
or certified mail, return receipt requested, postage prepaid, and addressed to the intended
recipient at the addresses maintained in Sovereign’s records. Notices sent to Sovereign should be
directed to the attention of both its Chief Executive Officer and General Counsel.

     21. Counterpart Agreements. This Agreement may be executed in multiple counterparts,
whether or not all signatories appear on these counterparts, and each counterpart shall be deemed
an original for all purposes.

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     22. Governing Law. This Agreement shall be governed by and construed under the
internal laws of the Commonwealth of Pennsylvania, without regard to its conflict of laws
principles.

     23. Jurisdiction and Venue. This Agreement shall be deemed performable by all
parties in, and venue shall exclusively be in the state or federal courts located in Pennsylvania.
Executive and Sovereign hereby consent to the personal jurisdiction of these courts and waive any
objection that such venue is objectionable or improper.

     24. No Waiver. Sovereign’s waiver or failure to enforce any term of this Agreement
on one instance shall not constitute a waiver of its rights under this Agreement with respect to
any other violations.

     25. Binding Effect of Agreement. This Agreement shall be binding upon Executive,
Sovereign and their heirs, administrators, representatives, executors, successors and permitted
assigns. Notwithstanding the foregoing, the payment obligations of the Bank hereunder shall be
limited to its obligations set forth in the Employment Agreement.

     26. Taxes and Withholding. To the extent required by the federal and applicable
state income tax laws and regulations, Sovereign shall withhold and deduct from compensation during
the Transition Period all required withholding and deductions.

     27. Application of Section 409A of Internal Revenue Code. Notwithstanding anything
in this Agreement to the contrary, the provisions of this Agreement shall be interpreted and
applied in a manner that is consistent with Section 409A of the Internal Revenue Code of 1986, as
amended and any guidance issued by the United States Treasury Department thereunder. This means
that, unless the parties shall otherwise agree, (i) to the extent that any amount payable in
connection with the termination of Executive’s employment can not be paid until six months
following such termination to avoid subjecting Executive to the additional income taxes imposed
under such Section 409A, such payments will be so delayed and paid, with interest at the short-term
applicable federal rate, as in effect at the Resignation and Retirement Date, in a single lump sum
payment six months thereafter and (ii) that, with respect to medical benefits and other welfare
benefits, Executive shall bear the full cost of such benefits for six months following such
Resignation and Retirement Date (unless guidance issued by the United States Treasury Department
permits benefit continuation through such six month period), and Bancorp shall

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continue to provide such benefits to Executive and his eligible dependents for the period that
they would otherwise have been provided, starting on the six month anniversary of the Resignation
and Retirement Date.

     The parties have duly executed this Agreement as of the date first written above.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

	 	 	 	 	 
	 	SOVEREIGN BANCORP, INC.

 	 
	 	/s/  P. Michael Ehlerman
 	 
	 	By: P. Michael Ehlerman 	 
	 	Chairman, Bancorp Board Compensation Committee 	 
	 
	 	 	 
	 	     /s/  Brian Hard
 	 
	 	By: Brian Hard 	 
	 	Chairman, Bancorp Board Audit Committee 	 
	 
	 
	 	SOVEREIGN BANK

 	 
	 	/s/  P. Michael Ehlerman
 	 
	 	By: P. Michael Ehlerman 	 
	 	 	 
	 	 	 
	 	     /s/  Brian Hard
 	 
	 	By: Brian Hard 	 
	 	 	 
	 
	 	EXECUTIVE

 	 
	 	/s/  Jay S. Sidhu
 	 
	 	By: Jay S. Sidhu 	 
	 	 	 

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Exhibit A

ACCORD AND SATISFACTION AND RELEASE

     This ACCORD AND SATISFACTION AND RELEASE (“Release”) is entered into as of this 10th
day of October, 2006 (the “Effective Date”), by and between Sovereign Bancorp, Inc.
(“Bancorp”), a Pennsylvania corporation, and Sovereign Bank (“Bank” and collectively, with Bancorp,
“Sovereign”), a Federal Savings Bank organized and existing under the laws of the United States,
and Jay S. Sidhu (“Executive”), an individual residing in the Commonwealth of Pennsylvania.

     WHEREAS, this Release is executed pursuant to Section 7 of the Severance and Transition
Agreement dated as of October 10, 2006, by and between Sovereign and Executive (the
“Agreement ”).

     1. Executive’s Release. In consideration of the promises, covenants and other
valuable consideration provided by Sovereign in the Agreement, Executive, for himself and for his
representatives, executors, administrators, heirs and assigns, hereby unconditionally releases,
satisfies and discharges Sovereign and the Subsidiaries, and its and their current and former
employees, officers, agents and directors in their capacities as such (collectively referred to as
“ Released Parties ”) from any and all claims, causes of action, demands, losses,
obligations, liabilities, damages, judgments, costs, expenses (including attorneys’ fees) of any
nature whatsoever, known or unknown, contingent or non-contingent (collectively, “ Claims
”), that Executive had, has or will have arising from, or connected with, any act, omission, deed
or event occurring up to the Effective Date, including but not limited to Claims (i) related to
Executive’s employment or other relationship with Sovereign and separation or termination of such
employment or other relationship, (ii) under any federal or state law, including without limitation
Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the Employee Retirement Income
Security Act, the Consolidated Omnibus Budget Reconciliation Act, the National Labor Relations Act,
the Occupational Safety and Health Act, the Fair Labor Standards Act, the Family and Medical Leave
Act, the Workers Adjustment and Retraining Notification Act, the Americans with Disabilities Act,
but excluding the Age Discrimination in Employment Act of 1967, (iii) under federal or state common
law, and (iv) under any agreement, whether written or oral, including the Employment Agreement.
However, Executive does not discharge or release: any

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Claims under the Agreement; Executive’s right to indemnification or advancement of expenses
under any agreement, Sovereign’s articles of incorporation, charter or bylaws, any insurance policy
or applicable law; or Claims against any Released Party arising from events in which the Released
Party was not acting as an employee, officer, agent or director of Sovereign or any Subsidiary.

     2. No Claims Against Released Parties. Executive warrants and represents that, to
the full extent permitted by law, Executive has not and will not bring or assign any Claim or
action against Sovereign or any of the Released Parties that is released by Executive under Section
1 of this Release. Executive agrees that if Executive brings or assigns any such Claim or action,
Executive shall pay all costs and expenses, including reasonable attorneys’ fees, incurred by
Sovereign or the Released Parties in dismissing or defending the action or lawsuit. Nothing in
this provision, however, shall be interpreted to prevent Executive from bringing a Claim or action
to enforce the terms of the Agreement or to bring a Claim or action which is not released under
Section 1 of this Release.

     3. Breach of this Release. If a court of competent jurisdiction determines that
Executive has breached or failed to perform any part of this Release, Sovereign shall be entitled
to injunctive relief to enforce this Release and Executive shall be responsible for paying
Sovereign’s costs and attorneys’ fees incurred in enforcing this Release.

     4. Severability. If any provision of this Release is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless
continue in full force and effect.

     5. Counterpart Agreements. This Release may be executed in multiple counterparts,
whether or not all signatories appear on these counterparts, and each counterpart shall be deemed
an original for all purposes.

BY SIGNING THIS RELEASE, EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS RELEASE, THAT HE
UNDERSTANDS ALL OF ITS TERMS, AND THAT HE IS ENTERING INTO IT VOLUNTARILY. HE FURTHER ACKNOWLEDGES
THAT HE IS AWARE OF HIS RIGHTS TO REVIEW AND CONSIDER THIS RELEASE WITH AN ATTORNEY AND THAT BEFORE
SIGNING THIS RELEASE, HE HAS THOROUGHLY DISCUSSED ALL ASPECTS OF THIS RELEASE WITH

15

 

COUNSEL OF HIS CHOOSING. HE ALSO ACKNOWLEDGES THAT HE WILL BE RECEIVING BENEFITS THAT HE WOULD NOT
OTHERWISE BE ENTITLED TO RECEIVE EXCEPT BY VIRTUE OF HIS ENTERING INTO THIS RELEASE AND THE
AGREEMENT.

     The parties, intending to be legally bound, have duly executed this Release as of the
Effective Date first written above.

	 	 	 	 	 
	 	SOVEREIGN BANCORP, INC.

 	 
	 	/s/  P. Michael Ehlerman
 	 
	 	By: P. Michael Ehlerman 	 
	 	Chairman, Bancorp Board Compensation Committee 	 
	 
	 	 	 
	 	     /s/  Brian Hard
 	 
	 	By: Brian Hard 	 
	 	Chairman, Bancorp Board Audit Committee 	 
	 
	 
	 	SOVEREIGN BANK

 	 
	 	/s/  P. Michael Ehlerman
 	 
	 	By: P. Michael Ehlerman 	 
	 	 	 
	 	 	 
	 	     /s/  Brian Hard
 	 
	 	By: Brian Hard 	 
	 	 	 
	 
	 	EXECUTIVE

 	 
	 	/s/  Jay S. Sidhu
 	 
	 	By: Jay S. Sidhu 	 
	 

16Exhibit 10.1 to Nature Vision, Inc. Form 8-K dated October 9, 2006

Exhibit 10.1

AMENDMENT TO EMPLOYMENT AGREEMENTS

RECITALS  

A.       On
or about January 5, 2004, Robin K. Sheeley (“Sheeley”) and Photo Control Corporation (“PCC” or
“Company”) entered into an Employment Agreement (the “Sheeley Agreement”).

B.       On
or about August 31, 2004, PCC changed its name to Nature Vision, Inc. in connection with a merger. 

C.       Pursuant
to the respective terms, the Sheeley Agreement will expire on December 31, 2006.

D.       Company
desires to retain the services of Sheeley beyond December 31, 2006, and, therefore, the parties agree to amend the Sheeley
Agreement on the terms and conditions set forth below.

AGREEMENT  

1.        Effective
as of the date hereof, Section 2 of the Sheeley Agreement is amended as follows: 

 

	
             
 	
            2.
 	
            Term of Employment.   Employee’s employment under this Agreement will commence as of the date of this Agreement and will continue until December 31, 2007 (the “End Date”), unless earlier terminated pursuant to Section 5 of this Agreement. After the End Date, Employee’s employment with the Company will be at-will, and either Employee or the Company may terminate Employee’s employment at any time, for any or no reason, and with or without notice and the terms of this Agreement will expire except as set forth in Section 13.9 of this Agreement or as otherwise expressly provided for herein. 
 

2.        Effective as of the date hereof, Section 3.1 of the Sheeley Agreement is amended as follows:  

 

3.1     Base Salary.   Company agrees to pay Employee at the rate of $13,000.00 per month, subject to adjustment as provided for in this Agreement. This Section 3.1 may be amended from time to time by a written agreement of the parties setting forth the then-current base salary payable by the Company to Employee. Employee will be paid his base salary in accordance with the Company’s standard payroll procedures. 

 

3.        Effective as of the date hereof, Section 4 of the Sheeley Agreement is amended by adding a new Section 4.6 to read as follows:  

 

	
             
 	
            4.6
 	
            2006 Performance Bonus.    Company agrees to pay Employee a 2006 performance bonus of $47,000.00, provided all of the following performance benchmarks are attained. This performance bonus replaces all prior 2006 performance compensation except for those listed in 4.1(c) of the Sheeley Agreement :
 

 

	
             
 	
            4.6.1
 	
            “Net Sales” of “Vaddio Product,” as both terms are defined in Section 4.1 of the Agreement, for calendar year 2006 exceed $8,700,000.00; and
 

 

	
             
 	
            4.6.2
 	
            “Gross Profit” (meaning the Net Sales less cost of goods sold) derived from the sale of Vaddio Product for calendar year 2006 exceeds $3,032,600.00; and 
 

 

	
             
 	
            4.6.3
 	
            Employee has developed and presented a reasonable relocation plan to move the Vaddio operations on or before April, 1, 2007 from its present location to a location approved by the Company and being implemented by December 31, 2006; and
 

 

	
             
 	
            4.6.4
 	
            Headcount and operating expenses do not exceed originally budgeted 2006 numbers.
 

 

4.        Effective as of the date hereof, Section 4 of the Sheeley Agreement is amended by adding new Sections 4.7 and 4.8 to read as follows:  

 

	
             
 	
            4.7
 	
            2007 Performance Bonus.    Provided the sale of the Vaddio operations is not closed prior to January 1, 2007, Company agrees to pay to Sheeley a 2007 performance bonus equal to five percent (5%) of the amount by which the Gross Profit derived from the sale of Vaddio Product, as defined in Section 4.6.2, during calendar year 2007 exceeds the Gross 
 

Profit derived from the sale of
Vaddio Product for the same period during calendar year 2006. The date of calculation shall be the earlier of: December 31, 2007;
or the date on which the sale of the Vaddio operations is closed. The bonus will be paid no later than 90 days following the
closing of the sale.

 

	
             
 	
            4.8
 	
            The operative provisions of Section 4.2, 4.3 and 4.5 shall apply to the bonus payable under new Section 4.6 and the operative provisions of Section 4.5 shall apply to the bonus payable under new Section 4.7. 
 

 

5.       Effective as of the date hereof, Section 5.1(b) of the Sheeley Agreement is amended as follows:

	
             
 	
            (b)
 	
At any time prior to
the End Date, Employee may terminate his employment other than for Good Reason upon 30 days prior written notice to the Company.
for purposes of this Section 5, “Good Reason” means: (i) the Company materially reducing Employee’s salary set
forth in Section 3.1 of this Agreement; (ii) the Company requiring Employee, without Employee’s consent, to be based
permanently outside a 100 mile radius of the Company’s principal office in Minneapolis, Minnesota; (iii) material breach
by the Company of this Agreement; (iv) if a buyer of all or substantially all of the Vaddio operations does not either
(A) agree to assume and be bound by the provisions of this Agreement or (B) hire Employee directly or indirectly to work
for such buyer; or (v) the Company discontinues the Vaddio operations, other than as a result of the sale of the Vaddio
operations to a third party.
 

6.       Effective as of the date hereof, Section 10 of the Sheeley Agreement is amended by adding a new Section 10.5 to read as follows:

	
             
 	
            10.5
 	
            Limit on Non-compete.   Notwithstanding any provision of this Agreement to the contrary, the non-competition and non-solicitation provisions of Sections 10.1, 10.2 and 10.3 of this Agreement shall continue to and expire on December 31, 2009.
 

7.     The Sheeley Agreement will remain in full force and effect, except as expressly modified herein. 

 

8.     This Amendment is as of the 9th day of October, 2006, to be effective the 1st day of August, 2006.

 

	 	 
	 
	/s/   Robin K. Sheeley 	    
	Robin K. Sheeley 
	 

	 	NATURE VISION, INC. 
	 
	    	By:    	/s/   Michael R. Day 
	    	Its:    	Chief Financial Officer

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