SOVEREIGN BANCORP INC
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT UNDER THE 2004 PLAN
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<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>w05798exv10w3.htm
<DESCRIPTION>FORM OF NONQUALIFIED STOCK OPTION AGREEMENT UNDER THE 2004 PLAN
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<P align="right" style="font-size: 10pt">Exhibit&nbsp;10.3



<P align="center" style="font-size: 10pt"><B>SOVEREIGN BANCORP, INC. 2004 BROAD-BASED STOCK INCENTIVE PLAN</B>



<P align="center" style="font-size: 10pt"><B>FORM OF STOCK OPTION AGREEMENT FOR</B>



<P align="center" style="font-size: 10pt"><B>NONQUALIFIED STOCK OPTION</B>



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<P align="center" style="font-size: 10pt">BETWEEN



<P align="center" style="font-size: 10pt">SOVEREIGN BANCORP, INC.



<P align="center" style="font-size: 10pt">AND



<p align="center" style="font-size: 10pt"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
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<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
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<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

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<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Date of Grant:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">_____________</TD>
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<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Number of Shares:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">_____________</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise Price:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">$________/share</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Option Expiration Date:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">_____________</TD>
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<P align="center" style="font-size: 10pt">&nbsp;
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<P align="center" style="font-size: 10pt"><U><B>NONQUALIFIED STOCK OPTION AGREEMENT</B></U>



<P align="left" style="font-size: 10pt">Number of shares subject to option: ___ shares.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement dated &#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;, between Sovereign Bancorp, Inc. (the &#147;Corporation&#148;) and
&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;(the &#147;Optionholder&#148;).


<P align="center" style="font-size: 10pt"><B>WITNESSETH:</B>



<P align="left" style="font-size: 10pt"><B>1. </B><U><B>Grant of Option</B></U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the provisions of the Sovereign Bancorp, Inc. 2004 Broad-Based Stock Incentive
Plan (the &#147;Plan&#148;) the Corporation hereby grants to the Optionholder, subject to the terms and
conditions of the Plan and subject further to the terms and conditions herein set forth, the right
and option to purchase from the Corporation for cash, or for common stock of the Corporation
subject to the approval of the Committee (as defined in the Plan), all or any part of an aggregate
of &#95;&#95;&#95;shares of common stock (without par value) of the Corporation (the &#147;Common Stock&#148;) at the
exercise price of $&#95;&#95;&#95; per share; such option to be exercised as hereinafter provided (this
&#147;Option&#148;).


<P align="left" style="font-size: 10pt"><B>2. </B><U><B>Terms and Conditions</B></U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is understood and agreed that the Option evidenced hereby is subject to the following terms
and conditions:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(a)&nbsp;&nbsp;</TD>
    <TD><U>Expiration Date</U>. Subject to the provisions of paragraphs 2(d) and 2(e),
the Option granted hereby shall expire on &#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#091;not more than ten years and
one month from the date of grant&#093;.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(b)&nbsp;&nbsp;</TD>
    <TD><U>Exercise of Option</U>. Except in the case of a Change In Control (as defined
in the Plan), this Option may not be exercised until both (1)&nbsp;the Optionholder has been
continuously employed by the Corporation or a Subsidiary of the Corporation (as defined
in the Plan) for a period of &#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;years following the date of grant (the &#147;Service
Requirement&#148;) and (2)&nbsp;certain performance goals (the &#147;Performance Goals&#148;) determined by
the Corporation on the date of grant and described in Appendix&nbsp;A hereto have been
achieved. Upon achievement of the Performance</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;
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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>Goals and attainment of the Service Requirement, this Option may be exercised at any
time thereafter but no later than the Option&#146;s expiration date.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>This Option may be exercised in whole at any time, or from time to time in
part, to the extent vested, prior to the expiration date specified in paragraph
2(a). Any exercise shall be accompanied by a written notice to the Corporation
specifying the number of shares as to which the Option is being exercised.
Notwithstanding anything contained herein to the contrary, if a Change in
Control (as defined in the Plan) occurs, the Option granted hereby shall become
immediately exercisable.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(c)&nbsp;&nbsp;</TD>
    <TD><U>Payment of Exercise Price upon Exercise</U>. At the time of any exercise, the
exercise price of the shares as to which this Option shall be exercised shall be paid
in cash (or, subject to the conditions and limitations described in the Plan, by
delivering shares of Common Stock of the Corporation or by delivering a combination of
such Common Stock and cash equal to the aggregate exercise price of the shares being
acquired, determined by reference to the exercise price per share set forth in
paragraph 1 hereof) to the Corporation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(d)&nbsp;&nbsp;</TD>
    <TD><U>Exercise upon Death, Being Disabled, or Termination of Employment</U>.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(1)&nbsp;&nbsp;</TD>
    <TD>In the event of the termination of the Optionholder&#146;s employment as
an employee of the Corporation or a Subsidiary by reason of death or being
disabled (as defined in the Plan), this Option may be exercised, to the extent
that the Optionholder was entitled to do so at the date of termination of
employment due to such cause, in whole at any time, or from time to time in part,
within 24&nbsp;months after the Optionholder&#146;s death or disability, but in no event
later than the expiration date specified in paragraph 2(a).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(2)&nbsp;&nbsp;</TD>
    <TD>In the event the Optionholder&#146;s employment with the Corporation or a
Subsidiary is terminated by the Optionholder due to Retirement (as defined in the
Plan), this Option may be exercised, to the extent that the Optionholder was
entitled to do so at the date of termination of employment due to such cause, in</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;
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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>whole at any time, or from time to time in part, within 24&nbsp;months after the date
of such termination of employment, but in no event later than the expiration date
specified in paragraph 2(a).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(3)&nbsp;&nbsp;</TD>
    <TD>In the event the Optionholder&#146;s employment with the Corporation or a
Subsidiary is voluntarily terminated by the Optionholder (other than for
Retirement), this Option will expire upon such termination of employment.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(4)&nbsp;&nbsp;</TD>
    <TD>&#091;SENIOR OFFICERS ONLY&#093; In the event the Optionholder&#146;s employment
with the Corporation or a Subsidiary is terminated and the Committee deems it
equitable to do so, the Committee may, subject to the approval of the
disinterested members of the Board, waive any continuous service requirements (but
not the Performance Goals) for vesting purposes in accordance with the terms of
the Plan and permit the exercise of this Option. In the event that the Committee
waives the continuous service requirement as set forth in this subparagraph, this
Option may be exercised to the extent that the Optionholder was entitled to do so
at the date of termination of employment, in whole at any time, or from time to
time in part, within 24&nbsp;months after the Optionholder&#146;s termination of employment,
but in no event later than the expiration date specified in paragraph 2(a).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(5)&nbsp;&nbsp;</TD>
    <TD>Notwithstanding anything herein to the contrary, in the event the
Optionholder&#146;s employment with the Corporation or a Subsidiary is terminated &#147;for
cause&#148; (as defined in the Plan), all rights to exercise this Option shall
terminate upon such termination of employment.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(e)&nbsp;&nbsp;</TD>
    <TD><U>Harmful Activity</U><B>. </B>If the Optionholder shall engage in any &#147;harmful
activity&#148; while employed by the Corporation or within six months after termination of
employment with the Corporation, then (a)&nbsp;this Option, to the extent then unexercised
and whether vested or unvested, shall immediately be forfeited and canceled; and (b)
any Profits realized upon the exercise of this Option shall inure to the Corporation.
The aforementioned restriction shall not apply in the event that Optionholder&#146;s
employment with the Corporation terminates within two years after a Change in</TD>
</TR>

</TABLE>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>Control if any of the following have occurred: (a)&nbsp;a relocation of the Optionholder&#146;s
principal place of employment more than 35 miles from the Optionholder&#146;s principal
place of employment immediately prior to the Change in Control, (b)&nbsp;a reduction in the
Optionholder&#146;s base salary after a Change in Control, or (c)&nbsp;termination of the
Optionholder&#146;s employment under circumstances in which the Optionholder is entitled to
severance benefits or salary continuation or similar benefits under a change in control
agreement, employment agreement, or severance or separation pay plan. If any Profits
realized upon the exercise of this Option inure to the benefit of the Corporation in
accordance with the first sentence of this paragraph, the Optionholder shall pay all
such Profits to the Corporation within 30&nbsp;days after receiving written notice from the
Corporation that the Optionholder has engaged in a harmful activity. Consistent with
the provisions of the Plan, the determination by the Committee as to whether the
Optionholder engaged in &#147;harmful activity&#148; while employed by the Corporation or within
six months after termination of employment with the Corporation shall be final and
conclusive, unless otherwise determined by a majority of disinterested members of the
Board.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:6%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A &#147;harmful activity&#148; shall have occurred if the Optionholder shall do any one or
more of the following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(1)&nbsp;&nbsp;</TD>
    <TD>Use, publish, sell, trade or otherwise disclose Non-Public
Information of the Corporation unless such activity was inadvertent, done in good
faith and did not cause significant harm to the Corporation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(2)&nbsp;&nbsp;</TD>
    <TD>After notice from the Corporation, fail to return to the Corporation
any document, data or other item or items in the Optionholder&#146;s possession or to
which the Optionholder has access that may involve Non-Public Information of the
Corporation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(3)&nbsp;&nbsp;</TD>
    <TD>Upon the Optionholder&#146;s own behalf or upon behalf of any other person
or entity that competes or plans to compete with the Corporation, solicit or
entice for employment or hire any employee of the Corporation.</TD>
</TR>

</TABLE>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(4)&nbsp;&nbsp;</TD>
    <TD>Upon the Optionholder&#146;s own behalf of upon behalf of any other person
or entity that competes or plans to compete with the Corporation, contact, call
upon, solicit or do business with (other than a business which does not compete
with any business conducted by the Corporation), any customer of the Corporation
the Optionholder contacted, called upon, solicited, interacted with, or became
acquainted with, or learned of through access to information (whether or not such
information is or was non-public) while employed at the Corporation unless such
activity was inadvertent, done in good faith, and did not involve a customer whom
the Optionholder should have reasonably known was a customer of the Corporation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(5)&nbsp;&nbsp;</TD>
    <TD>Upon the Optionholder&#146;s own behalf or upon behalf of any other person
or entity that completes or plans to compete with the Corporation, engage in any
business activity in competition with the Corporation in the same or a closely
related activity that the Optionholder was engaged in for the Corporation during
the one year period prior to the termination of employment.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:3%; font-size: 10pt">For purposes of this subparagraph 2(e):



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Non-Public
Information&#148; shall mean, but is not limited to, trade secrets, confidential
processes, programs, software, formulas, methods, business information or plans, financial
information, and listings of names (e.g., employees, customers, and suppliers) that are
developed, owned, utilized, or maintained by the Corporation, and that of its customers or
suppliers, and that are not generally known by the public.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Profits&#148; shall mean, with respect to this Option, the spread between the Fair Market
Value of a share of Common Stock on the date of exercise and the exercise price, multiplied
by the number of shares exercised under this Option.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(f)&nbsp;&nbsp;</TD>
    <TD><U>Nontransferability</U>. The Optionholder may, with the prior approval of the
Committee, transfer this Option in accordance with the provisions of Section&nbsp;6.5(b) of
the Plan. Without the prior approval of the Committee, this Option shall not be
transferable other than by will or by the laws of descent and distribution and this</TD>
</TR>

</TABLE>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>Option shall, during the lifetime of the Optionholder, be exercisable only by such
Optionholder.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(g)&nbsp;&nbsp;</TD>
    <TD><U>Adjustments</U>. In the event that the shares of Common Stock, as presently
constituted, shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of the Corporation, or if the number of such shares
of Common Stock shall be changed through the payment of a stock dividend, stock split,
or reverse stock split, then the shares of Common Stock then subject to this Option and
the exercise price thereof shall be increased, decreased, or otherwise changed to such
extent and in such manner as may be necessary or appropriate to reflect any of the
foregoing events. If there shall be any other change in the number or kind of the
outstanding shares of the Common Stock, or of any stock or other securities into which
such Common Stock shall have been changed, or for which it shall have been exchanged,
and if a majority of the disinterested members of the Board shall, in its sole
discretion, determine that such change equitably requires an adjustment to the terms of
this Option, then such adjustment shall be made in accordance with such determination.
Any adjustment so made shall be final and binding upon the Optionholder.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(h)&nbsp;&nbsp;</TD>
    <TD><U>No Rights as Shareholder</U>. The Optionholder shall have no rights as a
shareholder with respect to any shares of Common Stock subject to this Option prior to
the date of issuance of a certificate or certificates for such shares.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(i)&nbsp;&nbsp;</TD>
    <TD><U>No Right to Continued Employment</U>. This Option shall not confer upon the
Optionholder any right to continue in the employ of the Corporation or any Subsidiary,
nor shall it interfere in any way with the right of the Corporation or any Subsidiary
to terminate the Optionholder&#146;s employment at any time and for any reason.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(j)&nbsp;&nbsp;</TD>
    <TD><U>Compliance with Law and Regulations</U>. This Option and the obligation of the
Corporation to sell and deliver shares hereunder shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by any government
or regulatory agency as may be required. The Corporation shall not be</TD>
</TR>

</TABLE>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>required to issue or deliver any certificates for shares of Common Stock prior to (1)
the listing of such shares on any stock exchange on which the Common Stock may then be
listed and (2)&nbsp;the completion of any registration or qualification of such shares under
any federal or state law, or any rule or regulation of any government body which a
majority of the disinterested members of the Board shall, in its sole discretion,
determine to be necessary or advisable.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(k)&nbsp;&nbsp;</TD>
    <TD><U>Deferred Delivery of Nonqualified Stock Option Shares</U>. The Committee may,
in its discretion, approve an arrangement whereby an Optionholder may elect to defer
receipt of Common Stock otherwise issuable to him or her upon exercise of this Option.
Any such arrangement, if approved at all, shall be subject to such terms and conditions
as the Committee, in its sole discretion, may specify, which terms and conditions may
(but need not) include provision for the award of additional shares to take into
account dividends paid subsequent to exercise of this Option.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>3. </B><U><B>Investment Representation</B></U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Corporation may require the Optionholder to furnish to the Corporation, prior to the
issuance of any shares upon the exercise of all or any part of this Option, an agreement (in such
form as the Corporation may specify) in which the Optionholder represents that the shares acquired
upon exercise are being acquired for investment and not with a view to the sale or distribution
thereof.


<P align="left" style="font-size: 10pt"><B>4. </B><U><B>Optionholder Bound by Plan</B></U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Optionholder hereby acknowledges receipt of a copy of the Plan, prospectus and any
amendments thereto, and agrees to be bound by all the terms and provisions thereof, which, to the
extent relevant, are incorporated herein by reference.


<P align="left" style="font-size: 10pt"><B>5. </B><U><B>Withholding of Taxes</B></U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Corporation will require, as a condition precedent to the exercise of this Option, that
appropriate arrangements be made for the withholding of any applicable taxes. The obligation of
the Optionholder under this paragraph to provide for the payment of withholding taxes may be


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">satisfied, subject to the provisions of Section&nbsp;11.6(b) of the Plan, by electing to have the
Corporation withhold certain of the shares that would otherwise be issuable pursuant to the
exercise of the Option granted hereby.



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>6. </B><U><B>Notices</B></U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any notice hereunder to the Corporation shall be addressed to it at its office at 1130
Berkshire Boulevard, Wyomissing, PA 19610, Attention: Corporate Secretary, and any notice
hereunder to Optionholder shall be addressed to him or her at the address below, subject to the
right of either party to designate at any time hereafter in writing some other address.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF</B>, Sovereign Bancorp, Inc. has caused this Agreement to be executed by a duly
authorized officer and the Optionholder has executed this Agreement, both as of the day and year
first above written.


<P align="left" style="font-size: 10pt"><IMG src="w05798w0579800.gif" alt="-s- Jay S. Sidhu">



<P align="left" style="font-size: 10pt">Jay S. Sidhu<BR>
President, Chairman, and Chief Executive Officer

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>OPTIONHOLDER:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Signature)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Print Address)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>APPENDIX A</B>



<P align="center" style="font-size: 10pt"><B>PERFORMANCE GOALS FOR OPTION EXERCISE</B>




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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