8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
February 20, 2008

SOVEREIGN BANCORP, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	1-16581	23-2453088
(State or other	(Commission	(IRS Employer
jurisdiction of	File Number)	Ident. No.)
incorporation)
1500 Market Street, Philadelphia, Pennsylvania		19102
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (215) 557-4630

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

On February 21, 2008, Sovereign Bancorp, Inc. (the “Company”) issued a press release announcing the appointment of Kirk W. Walters, as the Company’s Chief Financial Officer, effective March 3, 2008; and announcing the mutually agreed resignation of Mark R. McCollom as Chief Financial Officer of the Company, effective March 3, 2008 and Mr. McCollom’s termination of employment, without cause, effective May 30, 2008.

The press release, attached as Exhibit 99.1 hereto, is incorporated herein by reference.

On February 20, 2008, the Company entered into a Separation Agreement with Mr. McCollom (the “Separation Agreement”), dated February 20, 2008.

On February 20, 2008, the Company and Mr. Walters entered into an employment agreement effective March 3, 2008 (the “Employment Agreement”).

McCollom Separation Agreement

Under the Separation Agreement, Mr. McCollom will receive (i) a cash payment of approximately $2.1 million due under his May 20, 2005 Employment Agreement, as amended on May 30, 2006, and November 9, 2007 (the “McCollom Employment Agreement”), filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K for November 9, 2007, and incorporated herein by reference, (ii) continuation, for 36 months, of life, disability and medical insurance, also due under the McCollom Employment Agreement, (iii) $450,000 for a non-solicitation agreement, whereby Mr. McCollom agrees not to solicit or hire any employees of Sovereign, or any subsidiary, for a one-year period following his termination on May 30, 2008, (iv) $12,500 a month for 12 months (for a total of $150,000) as compensation for consulting services to be provide by Mr. McCollom to the Company, and (v) $225,500 as payment for the 2008 supplemental short-term incentive award.

The Separation Agreement provides that Mr. McCollom will receive a payment equal to the value of 35,055 shares of the Company’s common stock, which amount shall be paid on May 28, 2010, or if earlier, the date on which a Change in Control (as defined in the McCollom Employment Agreement) occurs. The value of such payment shall be determined by multiplying 35,055 by the closing price of a share of the Company’s common stock on the business day immediately preceding such payment. In addition, to the extent any vested stock options expire after the maximum allowable exercise period pursuant to the applicable SBI equity plan, with an exercise price greater than $11 and the Fair Market Value (as determined under the applicable SBI equity plan) of the underlying stock on the last day of such maximum allowable exercise period, Mr. McCollom shall receive a lump sum cash payment, equal to the difference, if any, of the Fair Market Value of the underlying stock on the earlier of: (i) the original expiration date of such stock option, (ii) the closing date of a Change in Control (as such term is defined in Treas. Reg. § 1.409A-3(i)(5)), or (iii) May 30, 2010, and the exercise price such stock option.

Under the Separation Agreement, the Company agrees to waive the otherwise applicable lapse provisions of Mr. McCollom’s outstanding and vested stock options (subject to the terms of the applicable plan under which such options were granted) and permit their exercise until a date

which is the earlier of the expiration of the term of such stock options or the latest date permitted under the applicable plan.

Mr. McCollom is also entitled under the terms of the Company’s 2007 Deferred Compensation Plan (and the Bonus Recognition and Retention Program appendix thereof) to his earned and vested account balances which will be paid in accordance with the terms of such plan.

A copy of the Separation Agreement is attached as Exhibit 10.1 to this Current Report on Form 8-K and is hereby incorporated by reference herein. The foregoing description of the Separation Agreement is qualified in its entirety by reference to Exhibit 10.1.

Walters Employment Agreement

The Employment Agreement has an initial term of two years and, unless terminated as set forth therein, is automatically extended annually to provide a new term of two years.

The Employment Agreement provides for an annual base salary of $500,000, which the Board of Directors may increase from time to time. In addition, the Employment Agreement provides, among other things, a right to participate in bonus and executive benefit plans, a right to receive insurance, vacation, retirement, temporary housing, a relocation allowance and other fringe benefits, automobile and parking allowances and club dues and business-related expenses.

In the event Mr. Walters’ employment terminates without Cause (as defined in the Employment Agreement) or for Good Reason (as defined in the Employment Agreement) following a Change in Control (as defined in the Employment Agreement), he becomes entitled to severance benefits under the agreement. In such event, he will receive a lump sum amount equal to two times the sum of (i) his highest base salary as of the date of termination and the preceding two calendar years, and (ii) the greater of the target bonus in the year of termination or his highest bonus for the preceding three calendar years. He will also continue to receive, for two years, all health and medical benefits in effect during the two calendar years preceding termination of employment.

In the event Mr. Walters’ employment is terminated without Cause prior to a Change in Control, he will receive the greater of (i) continued payments of current base salary through the end of the remaining term of the agreement or two years, whichever is longer, or (ii) a lump sum severance payment equal to the severance payment under the Company’s or Sovereign Bank’s Severance Pay Plan. He will also continue to receive, for the greater of two years or the remaining term of the agreement, all health and medical benefits in effect during the two calendar years preceding termination of employment.

In the event severance payments and benefits under the agreement, when added to all other benefits in the nature of “parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), would cause the excise tax provisions of Code Section 4999 to apply, Mr. Walters is entitled to receive such additional amounts as are necessary to neutralize the effect on him of the imposition of such tax and related incremental income and other taxes.

Upon Mr. Walters’ termination of employment during the term of the agreement, he is subject to an agreement not to solicit employees for a period of 12 months thereafter.

In light of Mr. Walters’ appointment as Chief Financial Officer of the Company, the Company also awarded Mr. Walters $200,000 of restricted stock under the Sovereign Bancorp, Inc. 2004 Broad-Based Stock Incentive Plan (the “Plan”). The number of shares granted will be determined by dividing the value of the award by the closing price of the Company’s stock on the fifth business of the month following Mr. Walters’ start date. The restricted stock award will vest twenty percent (20%) per year for five years on the anniversary of award. The grant is subject to the terms and provisions of the Plan.

A copy of the Employment Agreement is attached as Exhibit 10.2 to this Current Report on Form 8-K and is hereby incorporated by reference herein. The foregoing description of the Employment Agreement is qualified in its entirety by reference to Exhibit 10.2.

Item 9.01. Financial Statements and Exhibits.

(a)	Not Applicable.
(b)	Not Applicable.
(c)	Not Applicable.
(d)	Exhibits. The following exhibits are furnished herewith:

10.1	Separation Agreement, dated February 20, 2008, between Sovereign Bancorp, Inc. and Mark R. McCollom
10.2	Employment Agreement, dated February 20, 2008, effective March 3, 2008, between Sovereign Bancorp, Inc. and Kirk W. Walters
99.1	Press release, dated February 21, 2008, of Sovereign Bancorp, Inc.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SOVEREIGN BANCORP, INC.
Dated: February 21, 2008	/s/ Thomas J. McAuliffe
	Thomas J. McAuliffe
	Executive Vice President and Director of Human Resources

EXHIBIT INDEX

Exhibit
Number		Description
	10.1	Separation Agreement, dated February 20, 2008, between Sovereign Bancorp, Inc. and Mark R. McCollom
	10.2	Employment Agreement, dated February 20, 2008, effective March 3, 2008, between Sovereign Bancorp, Inc. and Kirk W. Walters
	99.1	Press release, dated February 21, 2008, of Sovereign Bancorp, Inc.

EX-10.1

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SEPARATION AGREEMENT

      This Separation and Release Agreement (“Agreement”) made as of this 20th day of February, 2008, between SOVEREIGN BANCORP, INC., a Pennsylvania corporation (“SBI”), and SOVEREIGN BANK (“Bank,” and, collectively, with SBI and its subsidiaries, “Sovereign”), a Federal Savings Bank organized and existing under the laws of the United States, and MARK R. MCCOLLOM, an individual (the “Executive”).

     WHEREAS, Executive has been employed by SBI in the capacity of Chief Financial Officer under the employment agreement dated May 20, 2005, as amended on May 30, 2006, and November 9, 2007 (the “Employment Agreement”); and

     WHEREAS, SBI has announced SBI’s intention to terminate Executive’s employment without Cause, effective May 30, 2008; and

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

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

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

          1. Cessation as Chief Financial Officer; Termination without Cause. The parties acknowledge that, effective on March 3, 2008 (the “CFO Resignation Date”), Executive shall no longer serve as Chief Financial Officer of SBI and that on May 30, 2008 (the “Separation Date”), Executive shall terminate without Cause as an employee of SBI and Bank.

          2. Consulting to SBI. For a period of one (1) year after the Separation Date (the “Transition Period”), Executive shall consult with SBI when and as reasonably requested by SBI, as follows:

          (a) Duration. Executive’s duties shall not exceed 25 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 SBI.

          (b) Services. Executive agrees that he shall provide consulting services, as may be reasonably requested by the Chief Executive Officer or Chief Financial Officer of SBI. Such consulting services shall include providing information with regard to senior financial and accounting management of SBI, providing information with regard to personnel or legal matters, or such other matters as are reasonably consistent with Executive’s duties as Chief Financial Officer of SBI.

          (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 Sovereign’s Code of Conduct (including the following documents: (i) the Sovereign Bancorp,

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Inc. Code of Conduct and Ethics, (ii) the Sovereign Bancorp, Inc. Policy on Personal Securities Transactions. 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 9 and 10), 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, SBI 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 SBI, SBI shall make the following payments to, and distributions for the benefit of, Executive:

               (i) Consultant Fees. During the Transition Period, SBI shall pay Executive at the rate of $12,500.00 per month for services performed as a consultant, payable in arrears on the 10th day of each month beginning July 10, 2008. At Executive’s election and written notice to SBI, 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. SBI 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 SBI.

           3. Employment Until the Separation Date.

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

          (b) Through and including the CFO Resignation Date, Executive shall continue to perform and discharge well and faithfully such duties as an executive officer of SBI and as SBI’s Chief Financial Officer as may be assigned to him from time to time by SBI’s Chief Executive Officer or SBI’s board of directors. From the CFO Resignation Date and through and including the Separation Date, Executive shall perform and discharge well and faithfully such duties as may reasonably be assigned to him from time to time by SBI’s Chief Executive Officer. Executive’s termination without Cause as described in Section 1 hereof and the payments and benefits described in Section 4 hereof are expressly conditioned on the Executive’s continued performance of his duties as described in this Section 3(b) in a reasonably satisfactory manner consistent with his performance prior to the date hereof.

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           4. Payments and Benefits Due To Severance.

          (a) Severance Payment. Pursuant to the terms of the Employment Agreement, SBI shall make a lump sum cash payment to Executive in the amount of $2,046,625, which the parties agree is the amount due under the Employment Agreement, which amount shall be paid, with interest at the short-term applicable federal rate, compounded semi-annually, as in effect as of the date of this Agreement, six months and one day after the Separation Date.

          (b) Medical Benefits. From the Separation Date until December 31, 2010, the Executive shall receive a continuation of all life, disability, and other welfare benefits (other than medical benefits) in effect with respect to Executive during the two (2) calendar years prior to Executive’s Separation Date. For a period of eighteen months following the Separation Date, the Executive shall receive a continuation of all medical benefits in effect with respect to Executive at the Separation Date. For the period commencing eighteen months following the Separation Date and continuing until December 31, 2010, the Executive shall receive a continuation of all medical benefits in effect with respect to Executive at the Separation Date. If SBI cannot provide any of the foregoing benefits because the Executive is no longer an employee, a lump sum cash payment equal to the after-tax cost to the Executive of obtaining such benefits (or substantially similar benefits) shall be made six months and one day after the Separation Date.

          (c) Short-Term Incentive Compensation. Executive shall receive a lump sum cash payment, within five (5) days of the Separation Date, equal to $225,500 as payment for the 2008 supplemental short-term incentive award, based on his services during 2008.

          (d) Equity Grants. At various times during Executive’s employment, Executive was granted options to purchase SBI common stock, and awarded restricted stock (the “Equity Grants”) as set forth on the records of Sovereign. On the Separation Date, all unvested Equity Grants shall be forfeited. Notwithstanding the foregoing, in recognition of Executive’s contributions to SBI, an accord and satisfaction of his Employment Agreement and for a number of other concessions and accommodations made by Executive, Sovereign agrees, that, Executive shall also be paid a lump sum cash payment equal to the value of 35,055 shares of SBI common stock, which amount shall be paid on May 28, 2010, or if earlier, the date on which a Change in Control (as such term is defined in Treas. Reg. § 1.409A-3(i)(5)) occurs. The value of such payment shall be determined by multiplying 35,055 by the closing price of a share of SBI common stock on the business day immediately preceding such payment.

          (e) Extension of Exercise Period of Stock Options. On the Separation Date, SBI agrees to waive the otherwise applicable lapse provisions of the Executive’s outstanding and vested stock options (subject to the terms of the applicable plan under which such options were granted) and permit their exercise until a date which is the earlier of the expiration of the term of such stock options or the dates provided in Exhibit B. Notwithstanding the foregoing, for any stock option:

               (i) that is vested on the Separation Date;

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               (ii) that has a stated term that would expire, by its terms, after the maximum allowable exercise period following an involuntary termination of employment without cause as set forth in the applicable SBI equity plan; and

               (iii) with an exercise price greater than: (A) $11 per share of Common Stock (as such term is defined under the applicable SBI equity plan) and (B) the Fair Market Value (as determined under the applicable SBI equity plan) of the underlying stock on the last day of such stock option’s maximum allowable exercise period following an involuntary termination of employment without cause as set forth in the applicable SBI equity plan,

     Executive shall receive a lump sum cash payment, equal to the difference, if any, of the Fair Market Value of the underlying stock on the earlier of: (A) the original expiration date of such stock option, (B) the closing date of a Change in Control (as such term is defined in Treas. Reg. § 1.409A-3(i)(5)), or (C) May 30, 2010, and the exercise price per share of Common Stock of such stock option. Such payment, if any, shall be made within thirty (30) days of the earlier of: (A) the original expiration date of such stock option, (B) the closing date of a Change in Control (as such term is defined in Treas. Reg. § 1.409A-3(i)(5)), or (C) May 30, 2010.

          (f) Non-Solicitation Payment. In exchange for the restrictive covenants set forth in Section 9(b) of this Agreement, SBI shall pay to Executive, within five (5) days of the Separation Date, a lump sum cash payment equal to $450,000.

          (g) Deferred Compensation Plans. With respect to the Sovereign Bancorp, Inc. 2007 Deferred Compensation Plan (and the Bonus Recognition and Retention Program appendix thereof) (the “Deferred Comp Plan”), Executive and Sovereign acknowledge and agree: (i) that, due to Executive’s termination without Cause, Executive is fully vested under the Deferred Comp Plan; (ii) that no additional amounts shall be credited to Executive’s account under the Deferred Comp Plan; (iii) that distributions shall be made in accordance with the terms of the Deferred Comp Plan, but in no event earlier than six months following the Separation Date.

          (h) No Additional Benefits. Executive acknowledges and agrees that, except as expressly provided herein, Executive’s eligibility to receive additional benefits under any benefit plan, program, policy or arrangement sponsored or maintained by Sovereign shall cease and be terminated as of the Separation 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. Notwithstanding the foregoing, nothing contained herein shall, in any way, affect Executive’s rights as a participant in SBI’s tax-qualified retirement plan.

           5. Death or Disability. In the event that Executive dies or becomes disabled prior to the Separation Date, the Executive’s personal or legal representatives, executors, administrators, heirs, distributees, devisees, or legatees shall be entitled to the compensation and benefits described in Section 4, and any amounts earned, but unpaid, for services as a consultant in accordance with Section 2.

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           6. Release. Executive shall execute the release attached hereto as Exhibit A on the Separation Date (the “Release”).

           7. 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 of Conduct. Executive agrees that this Section does not preclude introduction of this Agreement by Sovereign to establish that all of Executive’s claims against Sovereign 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 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 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.

           8. Termination of Employment Agreement. Executive agrees that the execution of this Agreement and payments made hereunder shall constitute satisfaction in full of Sovereign’s obligations under, and the extinguishment and termination of, the Employment Agreement and, effective on the Separation Date, the Employment Agreement shall terminate, provided however, that Section 8 of the Employment Agreement shall survive and remain in force through the one (1) year period beginning on the Separation Date.

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

          (a) Non-Disclosure. Executive shall not, for a period commencing on the date of this Agreement and ending on May 30, 2009, 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.

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          (b) Non-Solicitation. For a period commencing on the date of this Agreement and ending on May 30, 2009, 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, (i) employ, solicit, induce, recruit, encourage, advise, or counsel any employee or agent of Sovereign 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 or (ii) solicit, induce, encourage, advise, or counsel any client or customer of Sovereign to end or diminish its business relationships with Sovereign. Notwithstanding the immediately preceding sentence, nothing in this Section 9(b) shall be construed to preclude general solicitations not targeted at employees or clients and customers of Sovereign.

          (c) Company Remedies. In the event of any breach by Executive of Executive’s obligations under this Section 9, Executive agrees that Sovereign is entitled to pursue the remedies referenced in Section 11 of the Employment Agreement.

           10. 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 its 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 10 or in Section 9 shall preclude either party or any other person referenced in this Section 10 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.

           11. Cooperation. Executive agrees to cooperate with Sovereign, at mutually convenient times and places, in connection with any ongoing administrative, regulatory, or litigation proceedings or such like matters that may arise in the future, as to matters regarding which the Executive may have personal knowledge because of his employment with Sovereign; provided that in no event will Executive be required to provide any such cooperation if such cooperation is materially adverse to Executive’s legal interests. Such cooperation will include being interviewed by representatives of Sovereign, and participating in such proceedings by deposition and testimony at trial. To the extent possible, Sovereign will limit Executive’s cooperation to regular business hours. In any event, (i) in any matter subject to this paragraph, Executive will not be required to act against the reasonable best interests of any new employer or new business venture in which Executive is an employee, partner or active participant and (ii) any request for Executive’s cooperation will take into account Executive’s other personal and business commitments. Sovereign will promptly reimburse Executive for all reasonable expenses and costs Executive may incur as a result of providing such assistance (but not later than the end of the calendar year following the year in which such expenses are incurred), including travel costs and reasonable legal fees to the extent Executive reasonably believes, based

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upon the advice of counsel, that separate representation is warranted, provided Sovereign receives proper documentation with respect to all claimed expenses and costs. Except during the Transition Period, Executive will be entitled to an hourly fee (which fee will be mutually determined by Sovereign and Executive prior to Executive’s providing any cooperation hereunder, it being agreed that such fee will be fair and reasonable in light of Executive’s compensation history) for time spent by Executive furnishing such cooperation (other than for time spent by Executive actually providing testimony in any legal matter), including, without limitation, for time taken in travel undertaken in connection with such cooperation, such fee to be paid promptly following Executive’s submission of a statement setting forth the number of hours spent (but not later than March 15 of the calendar year following the year in which such services are performed). Commencing on the fifth anniversary hereof, Executive will not be obligated to make more than three days (or portions thereof) per calendar year available for the purpose of providing cooperation to Sovereign pursuant to this paragraph.

     12. Return of Property. Concurrently with the Separation 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.

     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.

     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. Assignment. This Agreement shall not be assignable by any party hereto, except by Sovereign to any successor in interest to the business of Sovereign.

     16. Entire Agreement. This Agreement, together with the Exhibit A attached hereto and such portions of the Employment Agreement that expressly survive the execution hereof, sets forth

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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.

           17. Successors, Binding Agreement.

          (a) Sovereign 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 SBI and/or the Bank to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Sovereign would be required to perform it if no such succession had taken place. Failure by Sovereign to obtain such assumption and agreement prior to the effectiveness of any such succession shall constitute a material breach of this Agreement.

          (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, or 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.

           18. 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.

           19. 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.

           20. 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.

           21. 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.

           22. 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.

           23. 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.

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     24. 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 SBI hereunder shall be limited to its obligations set forth in the Employment Agreement.

     25. 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.

     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.
	By	/s/ Joseph P. Campanelli
(SEAL)		Joseph P. Campanelli
		Chief Executive Officer

EXECUTIVE
By	/s/ Mark R. McCollom
	Mark R. McCollom

Agreed to the 20th day of February, 2008. SOVEREIGN BANK
By	/s/ Joseph P. Campanelli
	Joseph P. Campanelli
	Chief Executive Officer

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Exhibit A
ACCORD AND SATISFACTION AND RELEASE

               This ACCORD AND SATISFACTION AND RELEASE (“Release”) is entered into as of this 20th day of February, 2008 (the “ Effective Date ”), by and between Sovereign Bancorp, Inc. (“SBI”), a Pennsylvania corporation, and Sovereign Bank (“Bank” and collectively, with SBI, “Sovereign”), a Federal Savings Bank organized and existing under the laws of the United States, and Mark R. McCollom (“Executive”), an individual residing in the Commonwealth of Pennsylvania.

               WHEREAS, this Release is executed pursuant to Section 6 of the Separation Agreement dated as of February 20, 2008, 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 its 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: (i) any Claims under the Agreement; (ii) 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; (iii) any Claims for any amounts payable in accordance with the terms of any employee benefit plan, program or arrangement in which Executive was a participant and under which Executive has a vested accrued benefit as of the date hereof; and (iv) any 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

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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 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.
	By	/s/ Joseph P. Campanelli
(SEAL)		Joseph P. Campanelli
		Chief Executive Officer
	EXECUTIVE
	By	/s/ Mark R. McCollom
		Mark R. McCollom

Agreed to the 20th day of February, 2008. SOVEREIGN BANK
By	/s/ Joseph P. Campanelli
	Joseph P. Campanelli
	Chief Executive Officer

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Exhibit B
EXTENSION OF EXERCISE PERIOD OF STOCK OPTIONS

     SBI agrees to waive the otherwise applicable lapse provisions of the Executive’s outstanding and vested stock options (subject to the terms of the applicable plan under which such options were granted) and permit their exercise until a date which is the earlier of the expiration of the term of such stock options or:

     1. the Separation Date, for options granted under the 1993 Stock Option Plan;

     2. the date that is three (3) months from the Separation Date for an incentive stock option or the date that is one (1) year from the Separation Date for a nonqualified stock option, for options granted under the 1996 Stock Option Plan;

     3. the date that is three (3) months from the Separation Date for an incentive stock option, or the date that is two (2) years from the Separation Date for a nonqualified stock option, for options granted under the 2001 Stock Incentive Plan; or

     4. the date that is three (3) months from the Separation Date for an incentive stock option, or the date that is two (2) years from the Separation Date for a nonqualified stock option, for options granted under the 2004 Broad-Based Stock Incentive Plan.

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AGREEMENT

     THIS AGREEMENT (“Agreement”) made as of this 3rd day of March, 2008, between SOVEREIGN BANCORP, INC., a Pennsylvania corporation (“SBI”), and KIRK W. WALTERS, an individual (the “Executive”).

WITNESSETH:

     WHEREAS, Sovereign Bank (the “Bank”) is a wholly-owned subsidiary of SBI; and

     WHEREAS, SBI and the Executive desire to enter into an agreement regarding, among other things, the employment of the Executive by SBI, as Chief Financial Officer of SBI reporting to Joseph P. Campanelli, President and Chief Executive Officer of SBI.

AGREEMENT:

     NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:

     1. Employment. SBI hereby employs the Executive, and the Executive hereby accepts employment with SBI, on the terms and conditions set forth in this Agreement, effective as of the date first set forth above.

     2. Duties of Employee. The Executive shall perform and discharge such duties as may be reasonably assigned to the Executive from time to time by the Chief Executive Officer of SBI. The Executive’s duties shall be consistent with his title and shall not be unreasonably or materially changed, considering his role in the Company; provided, however, that nothing herein shall preclude his promotion. The Executive shall devote his full business time to the business of SBI and shall not, during the Employment Period (as defined in Section 3), be employed or involved in any other business activity. However, this Section 2 shall not be construed as preventing the Executive from (a) investing the Executive’s personal assets or (b) being involved in any other activity with the prior approval of the Chief Executive Officer of SBI. The

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Executive shall have the title of Chief Financial Officer of SBI, reporting directly to the Chief Executive Officer of SBI.

     3. Term of Employment. The Executive’s employment under this Agreement shall be for a period (the “Employment Period”) commencing on the date of this Agreement and ending on the date that is two (2) years subsequent thereto, provided that on the first and each subsequent annual anniversary date of this Agreement (an “Anniversary Date”), and unless a party has given the other party written notice at least sixty (60) days prior to such anniversary date that such party does not agree to renew this Agreement, the term of this Agreement and the Employment Period shall be deemed renewed for a term ending two (2) years subsequent to such anniversary date (or such longer term approved by the SBI Board of Directors) (a “Scheduled Extension”), unless sooner terminated in accordance with one of the following provisions:

     (a) The Executive’s employment under this Agreement may be terminated at any time during the Employment Period for “Cause,” by action of the board of directors of SBI. As used in this Agreement, “Cause” means any of the following events:

     (i) the Executive is convicted of or enters a plea of guilty or nolo contendere to a felony or a crime involving fraud or moral turpitude;

     (ii) the Executive repeatedly fails to follow the lawful instructions of the Chief Executive Officer of SBI;

     (iii) a government regulatory agency recommends that SBI relieve the Executive of his duties;

     (iv) the Executive willfully violates any material statute or regulation (other than traffic violations or similar offenses), or any final cease and desist order applicable to SBI or the Bank;

     (v) the Executive engages in an activity that results in a breach of fiduciary duty involving receipt of personal profit by the Executive at the expense of SBI;

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     (vi) the Executive commits an act of willful misconduct, intentionally fails to perform stated lawful duties, or performs his duties under this Agreement in an incompetent manner; or

     (vii) the Executive materially breaches any material provision of this Agreement.

If the Executive’s employment is terminated under the provisions of this Section 3(a), then all rights of the Executive under Section 4 shall cease as of the effective date of such termination.

     (b) The Executive’s employment under this Agreement may be terminated at any time during the Employment Period without Cause, by action of the Chief Executive Officer of SBI, upon giving written notice of such termination to the Executive at least thirty (30) days prior to the date upon which such termination shall take effect. If the Executive’s employment is terminated under the provisions of this Section 3(b), then the Executive shall be entitled to receive the compensation and benefits set forth in Section 5. For purposes of this Section 3(b), (i) a material adverse change in the Executive’s duties or responsibilities following a Change in Control of SBI, or (ii) a violation by SBI of the last sentence of Section 2 hereof shall be deemed to be a termination of the Executive’s employment without Cause. Upon the occurrence of any of the events listed in this Section 3(b), the Executive shall be permitted, within ninety (90) days of the occurrence of such event, to resign from employment by a notice in writing delivered to SBI, whereupon he will become entitled to receive the compensation and benefits set forth in Section 5, provided, however, that SBI shall be given thirty (30) days from the day it receives the notice of termination to remedy any such event. Notwithstanding the foregoing, any amounts payable upon a termination under this Section 3(b) shall be paid only if the Executive actually terminates employment within two (2) years following the initial existence of the events listed in this Section.

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     (c) If the Executive retires or dies, the Executive’s employment under this Agreement shall be deemed terminated as of the date of the Executive’s retirement or death, and all rights of the Executive under Section 4 shall cease and any other amounts or benefits payable to the Executive shall be determined in accordance with the retirement and insurance programs of SBI then in effect for senior executive officers. For purposes of this Agreement, the term “retirement” shall mean voluntary termination on or after age sixty-five (65).

     (d) If the Executive is incapacitated by accident, sickness, or otherwise so as to render the Executive mentally or physically incapable of performing the services required under this Agreement, notwithstanding reasonable accommodation, for a continuous period of six (6) months, then, upon the expiration of such period or at any time thereafter, by action of the Chief Executive Officer of SBI, the Executive’s employment under this Agreement may be terminated immediately. If the Executive’s employment is terminated under the provisions of this Section 3(d), then all rights of the Executive under Section 4 shall cease as of the last business day of the week in which such termination occurs and any other amounts or benefits payable to the Executive shall be determined in accordance with the retirement and insurance programs of SBI then in effect for senior executive officers.

     (e) The Executive’s employment under this Agreement may be terminated by the Executive at any time during the Employment Period for any or no reason, by giving written notice of such termination to the Chief Executive Officer of SBI at least thirty (30) days prior to the date upon which such termination is to take effect. If the Executive terminates his employment under the provisions of this Section 3(e), then all rights of the Executive under Section 4 hereof shall cease as of the effective date of such termination.

     (f) Notwithstanding anything in this Section 3 to the contrary, if a Scheduled Extension of the Employment Period is required to be approved by the SBI Board of Directors (the “Board”) by then applicable provisions of Office of Thrift Supervision (“OTS”) regulation or policy, such Scheduled Extension shall be presented for

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consideration by the Board in advance of the applicable Anniversary Date, and no Scheduled Extension shall become effective unless formally approved by the Board in the manner required from time to time by the OTS.

     4. Employment Period Compensation. The Executive shall be entitled to all benefits offered by SBI to executives holding comparable positions to those of the Executive, including, but not limited to, the following:

     (a) Salary. SBI shall pay the Executive a salary, during the Employment Period, at an annualized rate of Five Hundred Thousand Dollars ($500,000.00) per year, payable bi-weekly (or in such manner as other senior bank executive officers are paid). Effective April 1, 2009, and annually thereafter, the Executive shall be considered for increases, but not decreases, based on exemplary performance since the last review of his salary level. Any increases in the Executive’s salary shall be considered amendments to this Section 4(a) to reflect the increased amount, effective as of the date established for such increase.

     (b) Bonus. SBI shall pay the Executive bonuses, during the Employment Period, in such amounts and at such times as may be approved by the Board of Directors of SBI in its discretion, provided that in no event shall any bonus be paid later than March 15 of the calendar year next following the year to which the bonus relates.. For the purpose of determining any annual bonus to which the Executive may become entitled under a bonus plan maintained from time to time for senior bank executive officers, the Executive shall be deemed to have a “target incentive amount” equal to eight-five percent (85%) of his salary as established under Section 4(a).

     (c) Auto Allowance. So long as Executive is employed by SBI pursuant to this Agreement, Executive shall be entitled to an auto allowance of $750 per month (less statutory withholdings) to be applied towards the use or lease of an automobile used in part for SBI business. Executive shall be responsible for the costs of purchasing or

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leasing an automobile as well as for paying all costs related to such automobile, including without limitation maintenance, registration costs, fuel and insurance.

     (d) Parking. So long as Executive is employed by SBI pursuant to this Agreement, SBI shall pay for the cost of Executive’s parking at 75 State Street or such other mutually agreeable location.

     (e) Temporary Housing; Relocation Costs. SBI shall pay for the cost of for temporary housing in the Greater Boston Metropolitan Area for Executive in a two-bedroom furnished apartment at Devonshire (or comparable arrangement) for a period of six (6) months from the date of this Agreement. Upon Executive’s relocation to the Greater Boston Metropolitan Area from his current principal residence, SBI shall also provide Executive a relocation allowance in accordance with SBI’s Relocation Policy, as amended. Notwithstanding the foregoing, in the event of a termination of Executive’s employment pursuant to Sections 3(a) or (e), within one (1) year from the date of this Agreement, Executive shall reimburse SBI for the cost of such temporary housing and relocation, prorated for the number of days that Executive is actually employed by SBI during such one-year period.

     (f) Other Benefits. The Executive shall be entitled to participate in SBI’s tax-qualified employee benefit plans and SBI shall provide the Executive, during the Employment Period, with insurance, vacation, pension, and other fringe benefits in the aggregate not less favorable than those received by other senior executive officers of SBI.

     (g) Grade Level. Until further increased by appropriate corporate action, the Executive shall be considered to be within Salary Grade 22 for Human Resources and related purposes.

     (h) Certain Club Dues and Expenses. Executive shall be paid or reimbursed for country club dues and business-related expenses at one such club. The identity of such club will be mutually agreed upon by SBI and the Executive.

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     5. Rights in Event of Certain Termination of Employment Before Change in Control Announcement.

     (a) In the event that the Executive’s employment is terminated by SBI without Cause during the Employment Period, before the occurrence of the announcement of a transaction involving an actual or potential Change in Control, the Executive shall be entitled to receive the amounts and benefits set forth in this Section 5:

     (i) annual salary otherwise accrued or payable through the date of termination of employment;

     (ii) the greater of (A) continued payments of base salary then in effect through the end of the Employment Period or a period of twenty-four (24) months, whichever is longer, or (B) a lump sum severance payment equal to the severance payment due under SBI’s or the Bank’s Severance Pay Plan applicable to the Executive at the time of termination; provided, in either case, that the Executive executes SBI’s standard form of release and waiver; and

     (iii) through the end of the Employment Period or for twenty four (24) months, whichever is longer, at no charge, continuation of health and medical benefits substantially similar to the most favorable of such benefits provided to him at employer’s cost during the two year period immediately prior to such termination. Executive acknowledges that to the extent such benefits can not be provided under a plan on a tax free basis because the Executive is no longer an employee of the Employer, SBI shall treat the value of the monthly premium cost for such coverage as taxable income to Executive. Nothing herein shall be deemed to reduce or eliminate SBI’s obligation to provide COBRA coverage to the Executive.

     (b) All payments required by Section 5(a) shall be paid in a lump sum cash payment not later than the thirtieth (30th) day following the date of termination of employment.

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     (c) The Executive shall not be required to mitigate the amount of any payment provided for in this section by seeking employment or otherwise nor shall the amount of any payment provided for in this section be reduced or offset by the Executive’s subsequent employment.

     (d) The Executive agrees that the amounts set forth in this Section 5 constitute the Executive’s sole and exclusive remedy, contractual or otherwise, in the event of a termination by SBI of the Executive’s employment without Cause before the announcement of a transaction involving an actual or potential Change in Control.

     5A. Rights in Event of Certain Terminations of Employment on or After the Occurrence of a Change in Control Announcement.

     (a) Events Giving Right to Terminate for Good Reason. If a public announcement of a transaction involving an actual or potential Change in Control occurs, and concurrently therewith, or during a period of three (3) months prior thereto, or during a period of eighteen (18) months thereafter, an event constituting Good Reason also occurs with respect to the Executive, he may terminate his employment in accordance with the provisions of Section 5A(b) (or Section 5A(c) as applicable) and, thereupon, will become entitled to the payments and benefits described in Sections 5A(f) and 5A(g). As used in this Agreement, the term “Good Reason” means any of the following events:

     (i) the involuntary termination of the Executive’s employment, other than an involuntary termination permitted in Sections 3(a) and (d);

     (ii) a material reduction in the Executive’s base and/or annual target incentive compensation below a level that was in effect immediately prior to the public announcement;

     (iii) the failure to provide the Executive with a total compensation package (salary, welfare and pension benefits, and short-term and long-term

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incentive programs) reasonably comparable to the compensation package provided to the Executive immediately prior to the public announcement;

     (iv) the permanent reassignment of the Executive to a principal office which is more than fifty (50) miles from Boston, Massachusetts; and

     (v) any material breach of this Agreement by the Executive’s employer at any relevant time, coupled with the failure to cure the same within thirty (30) days after receipt of written notice of such breach from the Executive; and

     (vi) any reduction in title or any material reduction in Executive’s responsibilities or authority as they exist immediately prior to the public announcement.

     For purposes of interpreting Clause (v) above, an uncured change in reporting responsibility, as then in effect under Section 2, shall be deemed a material breach of this Agreement.

     (b) Notice of Termination. Upon the occurrence of an event of Good Reason subject to Section 5A(a), the Executive may, within ninety (90) days of the occurrence of any such event, resign from employment by a notice in writing (“Notice of Termination”) delivered to SBI, whereupon he will become entitled to the payments and benefits described in Sections 5A(f) and 5A(g), provided, however, that SBI shall be given thirty (30) days from the date it receives the Notice of Termination to remedy such event. Notwithstanding the foregoing, any amounts payable upon a termination for Good Reason shall be paid only if the Executive actually terminates employment within two (2) years following the initial existence of the event constituting Good Reason.

     (c) Notice of Termination (Santander Transaction). Notwithstanding the foregoing, if a Change of Control occurs to which Banco Santander Central Hispano SA or one of its affiliates is a party, this subsection (c) shall replace subsection (b) above. Upon the occurrence of an event of Good Reason subject to Section 5A(a), the Executive

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may, within ninety (90) days of the occurrence of any such event, give notice of his resignation from employment effective as of a date no earlier than 6 months after the date of the Change in Control by a notice in writing (“Notice of Termination”) delivered to SBI, whereupon he will become entitled to the payments and benefits described in Sections 5A(f) and 5A(g), provided, however, that SBI shall be given thirty (30) days from the date it receives the Notice of Termination to remedy such event. Notwithstanding the foregoing, any amounts payable upon a termination for Good Reason shall be paid only if the Executive actually terminates employment no earlier than 6 months after the date of the Change in Control and in all events within two (2) years following the initial existence of the event constituting Good Reason. In the case of a termination described in Section 5A(a)(i), the 6 month delay described in the preceding sentence shall not apply.

     (d) Change in Control Defined. As used in this Agreement, “Change in Control” means the first to occur of any of the following events:

     (i) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), except for any of SBI’s employee benefit plans, or any entity holding SBI’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 SBI’s securities representing 19.9% or more of the combined voting power of SBI’s then outstanding securities, other than: (A) pursuant to a transaction excepted in Clause (iii) or (iv); or (B) pursuant to a Buyer Acquisition Transaction (as defined in the Investment Agreement (the “Investment Agreement”), between SBI and Banco Santander Central Hispano, S.A., dated as of October 24, 2005, as amended as of November 22, 2005) 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;

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     (ii) there occurs a contested proxy solicitation of SBI’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 SBI’s then outstanding securities;

     (iii) a binding written agreement is executed (and, if legally required, approved by SBI’s shareholders) providing for a sale, exchange, transfer or other disposition of all or substantially all of the assets of SBI or of the Bank to another entity, except to an entity controlled directly or indirectly by SBI;

     (iv) the shareholders of SBI approve a merger, consolidation, or other reorganization of SBI, unless:

     (A) under the terms of the agreement approved by SBI’s shareholders providing for such merger, consolidation or reorganization, the shareholders of SBI 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 SBI 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;

     (B) under the terms of the agreement approved by SBI’s shareholders providing for such merger, consolidation or reorganization, the individuals who were members of the Board of Directors of SBI 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

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     (C) based on the terms of the agreement approved by SBI’s shareholders providing for such merger, consolidation or reorganization, no Person (other than (A) SBI or any Subsidiary of SBI, (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;

     (v) a plan of liquidation or dissolution of SBI, other than pursuant to bankruptcy or insolvency laws, is adopted;

     (vi) during any period of two consecutive years, individuals, who at the beginning of such period, constituted the Board of Directors of SBI cease for any reason to constitute at least a majority of the Board of Directors of SBI unless the election, or the nomination for election by SBI’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

     (vii) the occurrence of a Triggering Event within the meaning of the Second Amended and Restated Rights Agreement, between SBI 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 further amended from time to time.

     (viii) the occurrence of any other event which is irrevocably designated as a “change in control” for purposes of this Agreement by resolution adopted by a majority of the then non-employee directors of SBI.

Notwithstanding Clause (i), a Change in Control shall not be deemed to have occurred if a Person becomes the beneficial owner, directly or indirectly, of SBI’s securities representing 19.9% or more of the combined voting power of SBI’s

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then outstanding securities solely as a result of an acquisition by SBI of its voting securities which, by 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 SBI’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 SBI’s then outstanding securities by reason of share purchases by SBI and shall, after such share purchases by SBI, become the beneficial owner, directly or indirectly, of any additional voting securities of SBI (other than as a result of a stock split, stock dividend or similar transaction), then a Change in Control of SBI shall be deemed to have occurred with respect to such Person under Clause (a). In no event shall a Change in Control of SBI be deemed to occur under Clause (a) with respect to Benefit Plans.

     (e) Termination of Proposed Change in Control Transaction. If, following a public announcement described in Subsection (a), a proposed transaction is terminated without completion, this Agreement shall thereafter be construed as though no such announcement had ever been made; provided, however, that the rights associated with any termination of employment or the giving of a Notice of Termination during the interim period shall be determined without regard to this subsection.

     (f) Rights Under This Section. In the event the Executive validly and timely delivers a Notice of Termination to SBI, he will be entitled to receive the following payments and benefits:

     (i) Basic Payments. The Executive will be paid an amount equal to two (2) times the sum of (A) the highest annualized base salary paid to him during the year of termination or the immediately preceding two (2) calendar years, and (B) the greater of (i) the target bonus in the year of termination or (ii) the highest bonus paid to him with respect to one of the three (3) calendar years immediately preceding the year of termination. Such amount will be paid to the Executive in a lump sum cash payment not later than the thirtieth (30th) day following the date

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of termination of employment. For purposes of this Paragraph (i), to the extent necessary, base salary and bonuses with any predecessor of SBI or an affiliate thereof shall be taken into account.

     (ii) Health and Medical Benefits. For a period of two (2) years from the day of termination of employment, the Executive shall be provided, at no charge, with a continuation of health and medical benefits substantially similar to the most favorable of such benefits provided to him at his employer’s cost during the two year period immediately preceding such termination. Executive acknowledges that to the extent such benefits can not be provided under a plan on a tax free basis because the Executive is longer an employee of the Employer, SBI shall treat the value of the monthly premium cost for such coverage as taxable income to Executive. Nothing herein shall be deemed to reduce or eliminate SBI’s obligation to provide COBRA coverage to the Executive.

     (g) Legal Expenses. The Executive shall be paid all reasonable legal fees and expenses when incurred by the Executive in seeking to obtain or enforce any right or benefit provided by this Section 5A, provided he acts in good faith with respect to issues raised.

     (h) No Mitigation or Offset. The provisions of Section 5(c) shall apply to payments made and benefits provided under Section 5A.

     (i) Exclusive Remedy. The Executive agrees that the payments made and benefits provided under Section 5A shall constitute the Executive’s sole and exclusive remedy, contractual or otherwise, in the event of a termination for Good Reason under this section.

     6. No Disclosure of Confidential Information. The Executive agrees that all customer lists, dealer lists, files and records now or hereafter used by SBI are the property of SBI and are its trade secrets. Accordingly, the Executive acknowledges that SBI’s trade secrets as they may exist from time to time and other confidential information concerning SBI’s business, products,

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promotion, pricing techniques, business plans, customer lists and credit and financial data concerning customers are valuable, special and unique assets of SBI, access to and knowledge of which are essential to the performance of the Executive’s duties under this Agreement. The Executive further agrees that all knowledge and information described in the preceding sentence not in the public domain and heretofore or in the future obtained by the Executive as a result of employment by SBI shall be considered confidential information and shall not be disclosed without SBI’s consent. The provisions of the preceding sentence shall apply during the Executive’s employment and following the termination thereof for any reason. The provisions of this section may be enforced in the same manner as described in Section 19. Nothing contained herein shall be deemed to preclude the Executive from responding to requests for information or inquiries from the Office of Thrift Supervision or the Federal Deposit Insurance Corporation.

     6A. Non-Solicitation of Employees - In General. If the Executive voluntarily leaves employment hereunder during the term of this Agreement, but before the announcement of a transaction involving an actual or potential Change in Control, or in the event of his termination under circumstances not qualifying for payments and benefits under Section 5A, he agrees that, for a period of twelve (12) months following the date of the termination of his employment, he shall not solicit employees of SBI or any of its affiliates, including SBI, to cease employment with SBI or any of its affiliates, including SBI. To the extent the restrictions in this Section 6A are legally held to be unreasonable, they shall not be void, but shall be modified to the extent necessary to make such restrictions reasonable. The provisions of this section may be enforced in the same manner as described in Section 19.

     7. Notwithstanding anything contained herein to the contrary, if the Executive is suspended and/or temporarily prohibited from participating in the conduct of SBI’s affairs by a notice served under Section 8(c)(3) or (g)(1) of the Federal Deposit Insurance Act (the “FDIA”), SBI’s obligations hereunder shall be suspended as of the date of service unless stayed by appropriate judicial proceedings; provided, however, that, if the charges are dismissed, SBI shall (i) pay the Executive all of the compensation withheld during such suspension and (ii) reinstate all of its obligations hereunder which were suspended.

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     8. Notwithstanding anything contained herein to the contrary, if the Executive is removed or permanently prohibited from participating in SBI’s affairs by an order issued under Section 8(a)(4) or (g)(1) of the FDIA, all obligations of SBI hereunder shall terminate as of the effective date of such order; provided, however, that any rights of the Executive that have already vested shall not be affected by such action.

     9. (a) If SBI is in default (as defined in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default, but this Section 9(a) shall not affect any vested rights of the Executive.

     (b) All obligations under this Agreement shall terminate, except to the extent determined that continuation of the Agreement is necessary for the continued operation of SBI (i) by the Director (the “Director”) of the Office of Thrift Supervision, or his or her designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of SBI under the authority contained in Section 13(c) of the FDIA or (ii) by the Director, or his or her designee, at the time the Director, or his or her designee, approves a supervisory merger to resolve problems related to operation of SBI or when SBI is determined by the Director to be in an unsafe or unsound condition; provided, however, that any rights of the Executive that have already vested shall not be affected by such action.

     10. All payments made to the Executive pursuant to this Employment Agreement or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. § 1828(k) and any regulations promulgated thereunder. Notwithstanding the preceding sentence, but only to the extent permitted under 12 U.S.C. §1828(k), in the event that the amounts and benefit payable under this Agreement, when added to other amounts and benefits which may become payable to the Executive by SBI and relevant affiliates of SBI, are such that the Executive becomes subject to the excise tax provisions of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), SBI shall pay him such additional amount or amounts as will result in his retention (after the payment of all federal, state and local excise, employment and income taxes on the amount of such payments and the value of such benefits) of a net amount equal to the net amount

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he would have retained had the initially calculated payments and benefits been subject only to potential income and employment taxation. For purposes of the preceding sentence, the Executive shall be deemed to be subject to the highest marginal federal, relevant state and relevant local tax rates. All calculations required to be made under this section shall be made by independent accountants of SBI’s choice, subject to the right of the Executive’s representative to review the same. All such amounts required to be paid shall be paid at the time any withholding may be required (or, if earlier, the time Executive shall be required to pay such amounts), and any additional amounts to which Executive may be entitled shall be paid or reimbursed no later than fifteen (15) days following confirmation of such amount by SBI’s accountants, but in no event shall any such amounts be paid later than the end of the Executive’s taxable year next following the taxable year in which the Executive remits the related taxes. In the event any amount paid hereunder is subsequently determined to be in error because estimates were required or otherwise, the parties agree to reimburse each other to correct such error, as appropriate, and to pay interest thereon at the applicable federal rate (as determined under Code Section 1274 for the period of time such erroneous amount remained outstanding and unreimbursed). The parties recognize that the actual implementation of the provisions of this section are complex and agree to deal with each other in good faith to resolve any questions or disagreements arising hereunder.

     11. Notices. Any notice required or permitted to be given under this Agreement shall be deemed properly given if in writing and if mailed by registered or certified mail, postage prepaid with return receipt requested, to the residence of the Executive, in the case of notices to the Executive, and to the principal office of SBI, in the case of notices to SBI.

     12. Waiver. No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by the Executive and an executive officer of SBI specifically designated by the Board of Directors of SBI. No waiver by any party hereto at any time of any breach by any other party hereto of, or Compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

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     13. Assignment. This Agreement shall not be assignable by either party hereto, except by SBI to any successor in interest to the business of SBI, provided that SBI (if it remains a separate entity) shall remain fully liable under this Agreement for all obligations, payments and otherwise.

     14. Entire Agreement; Other Arrangements Superseded. This Agreement contains the entire agreement of the parties relating to the subject matter of this Agreement and, except to the extent not addressed herein and specifically provided in the letter to the Executive dated February 20, 2008, supersedes any prior agreement of the parties to which the Executive is a party.

     15. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     16. Applicable Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the Commonwealth of Massachusetts without regard to its conflicts of laws principles, unless and to the extent preempted by the laws of the United States of America.

     17. Headings. The headings of the sections of this Agreement are for convenience only and shall not control or affect the meaning or construction or limit the scope or intent of any of the provisions of this Agreement.

     18. Other Rights. Except as otherwise provided herein, nothing herein shall be construed as limiting, restricting or eliminating any rights the Executive may have under any plan, contract or arrangement to which he is a party or in which he is a vested participant; provided, however, that no severance benefits shall be paid to him under any severance benefit plan of SBI or the Bank unless they become payable under Section 5(a)(ii).

     19. Nonsolicitation of Employees - Section 5A Applicable. In the event the Executive becomes entitled to benefits under Section 5A, rather than Section 5, for a period of one (1) year following his termination of employment, he shall refrain from directly or indirectly soliciting,

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for employment or business relationship purposes, employees of SBI, the Bank or any affiliate of either as of the date of his termination of employment. In the event of a breach of this section, the Executive’s right to payments and benefits under Section 5A shall immediately terminate. SBI shall be entitled to recover any payments or benefits made following commencement of the prohibited conduct, but before discovery of the same, and may commence an action in any court of competent jurisdiction for such additional legal and equitable relief as it may deem necessary or appropriate to recover damages incurred by reason of such conduct and to precluded continued violation of this section.

     IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it to be executed, as of the date first above written.

SOVEREIGN BANCORP, INC.
By:	/s/ Joseph P. Campanelli
Date: 2/20/2008

(SEAL)
	Attest:	/s/ Thomas J. McAuliffe
	Date: 2/20/2008

EXECUTIVE
By:	/s/ Kirk W. Walters
		Kirk W. Walters
Date: 2/20/2008

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EX-99.1

SOVEREIGN APPOINTS KIRK W. WALTERS AS CHIEF FINANCIAL OFFICER

PHILADELPHIA, February 21, 2008 – Sovereign Bancorp, Inc.(“Sovereign”) (NYSE: SOV), parent company of Sovereign Bank (“Bank”), today announced that Kirk W. Walters has been named Executive Vice President and Chief Financial Officer, effective March 3, 2008. Mr. Walters succeeds Mark R. McCollom. Mr. McCollom and Sovereign mutually agreed that he will step down as CFO effective March 3, 2008, and that he will continue to be employed until May 30, 2008 to ensure a smooth transition.

Mr. Walters will be responsible for Sovereign’s finance and accounting functions and will help lead the company’s investor relations efforts. He will report to Joseph Campanelli, President and Chief Executive Officer of Sovereign.

“We are very pleased to welcome Kirk to the Sovereign team,” said Mr. Campanelli. “Kirk is a seasoned banking industry veteran with strong financial expertise and proven risk management skills. I look forward to working closely with Kirk as we execute Sovereign’s strategy and communicate our progress to our shareholders and the financial community.”

Mr. Walters, 52, joins Sovereign from Chittenden Corporation, headquartered in Burlington, VT, which was acquired by People’s United Financial, Inc., headquartered in Bridgeport, CT, in January 2008. At Chittenden, Mr. Walters served as Executive Vice President and Chief Financial Officer since 1996. Prior to joining Chittenden, he worked at Northeast Federal Corporation in Hartford, CT, from 1989-95 in a series of executive positions, including Chairman, Chief Executive Officer, President and Chief Operating Officer. From 1984-89, Mr. Walters worked for California Federal Bank in a variety of financial positions, including Senior Vice President and Controller. He began his career as an accountant at Coopers & Lybrand in Los Angeles. Mr. Walters earned his BS in Accounting from the University of Southern California.

Mr. Campanelli continued, “Mark has been a valuable member of our senior management team for the past 12 years. We thank him for his commitment and many contributions to Sovereign and wish him well in his future endeavors.”

Mr. McCollom joined Sovereign in 1996. He has over 20 years experience in the financial services industry and worked previously at Meridian Bancorp and Price Waterhouse.

About Sovereign

Sovereign Bancorp, Inc., (“Sovereign”) (NYSE: SOV), is the parent company of Sovereign Bank, a financial institution with $85 billion in assets as of Dec. 31, 2007 with principal markets in the Northeast United States. Sovereign Bank has 750 community banking offices, over 2,300 ATMs and approximately 12,000 team members. Sovereign offers a broad array of financial services and products including retail banking, business and corporate banking, cash management, capital markets, wealth management and insurance. Sovereign is the 19th largest banking institution in the United States. For more information on Sovereign Bank, call 1-877-SOV-BANK.

Financial Contact
Stacey Weikel
Office: 610-208-6112
sweikel@sovereignbank.com

Media Contact
Ed Shultz
Office: 610-378-6159
eshultz1@sovereignbank.com