Exhibit 10.1
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT
(“Agreement”) made as of the 11th day of November,
2007 , by and between Sovereign Bancorp, Inc., a Pennsylvania
business corporation (“Sovereign”) and M. Robert
Rose , an individual (the “Executive”).
W I T
N E S S E T H:
WHEREAS, the Executive has been
identified as a key contributor to the success of Sovereign;
and
WHEREAS, Sovereign considers the
continued services of the Executive to be in the best interest of
Sovereign, its affiliated companies, and the shareholders of
Sovereign;
WHEREAS, Sovereign recognizes that,
as is the case with many publicly-held corporations, the
possibility of a change in control may arise and that the attendant
uncertainty may result in the departure or distraction of key
management personnel to the detriment of Sovereign, its affiliated
companies and shareholders; and
WHEREAS, Sovereign desires to induce
the Executive to remain in the employ of his or her then employer
(whether it be Sovereign or any company affiliated with Sovereign
(the “Employer”)) on an impartial and objective basis
in the event a Change in Control (as defined in Section 4)
occurs.
NOW, THEREFORE, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Term of Agreement and
Related Matters .
(a)
Termination Prior to Change in Control . Except as otherwise
provided in any written employment agreement between the Executive
and Sovereign, Sovereign and/or the Executive may terminate the
Executive’s employment at any time. However, if, and only if,
such termination occurs concurrent with or subsequent to a Change
in Control, the provisions of this Agreement regarding the payment
of severance compensation and benefits shall apply.
(b)
Term . Except as otherwise provided herein, the term of this
Agreement will be for a period commencing on the date of this
Agreement and ending on December 31, 2007; provided, however,
that this Agreement will automatically be renewed on
January 1, 2008, for a one year period commencing on such date
and ending on December 31, 2008, unless either the Executive
or his or her Employer gives written notice of nonrenewal to the
other on or before November 1, 2007 (in which case this
Agreement will continue in effect through December 31, 2007);
and provided further, that if this Agreement is renewed on
January 1, 2008, it will automatically be renewed on January 1
of each subsequent year (the “Annual Renewal Date”) for
a period ending one year from each Annual Renewal Date unless
either the Executive or his or her Employer gives written notice to
the other at least 60 days prior to an Annual Renewal Date (in
which case this Agreement will continue in effect for a term ending
on the December 31 immediately following such notice).
(c)
Termination by the Employer . Notwithstanding the provisions
of Section 1(b), this Agreement will terminate automatically
upon termination of the Executive’s employment with the
Employer for any or no reason prior to a Change in Control or
termination of the Executive’s employment for Cause (as
defined in Section 4) after a Change in Control.
(d)
Voluntary Termination, Retirement, Death, or Disability .
This Agreement will terminate automatically upon the voluntary
termination of the Executive’s employment (other than in
accordance with Section 2), his or her retirement on or after
age 65, his or her death, or his or her Disability (as defined in
Section 4). In any such event, the Executive’s rights
under this Agreement will cease as of the effective date of such
termination and Sovereign shall have no further obligations under
this Agreement; provided, however, that if the Executive dies or
becomes disabled after a Notice of Termination (as defined in
Section 2(c)) is delivered by him or her in accordance with
such section, he or she will nonetheless be entitled to receive the
payments described in Section 3 pursuant to
Section 9(b).
2. Termination Events Giving
Rise to Entitlement to Change in Control Benefits .
(a)
Involuntary Termination without Cause . If a Change in
Control occurs and, concurrently therewith or during a period of
24 months thereafter, the Executive’s employment is
involuntarily terminated for any or no reason, other than a
termination for Cause.
(b)
Voluntary Termination For Good Reason . If a Change in
Control occurs and, concurrently therewith or during a period of
24 months thereafter, an event constituting Good Reason (as
defined in Section 4) also occurs with respect to the
Executive, he or she may terminate his or her employment in
accordance with the provisions of Section 2(c).
(c)
Notice of Termination and/or Notice of Entitlement to Change in
Control Benefits . Upon the occurrence of an event of Good
Reason subject to Section 2(b), the Executive may, within
90 days of the occurrence of any such event, resign from
employment by a notice in writing (“Notice of
Termination”) delivered to Sovereign, whereupon he or she
will become entitled to the payments and benefits described in
Section 3. In the case of an involuntary termination without
Cause described in Section 2(a), the Executive shall notify
Sovereign in writing within 90 days of the date of such
termination of his/her belief that the involuntary termination
entitles him/her to Change in Control benefits.
3. Benefits Payable in the
Event of a Qualifying Termination Following Change in Control .
Subsequent to the occurrence of a termination event qualifying for
Change in Control benefits pursuant to Section 2(a) or (b), if the
Executive validly and timely delivers a Notice of Termination
and/or Notice of Entitlement to Change in Control Benefits to
Sovereign in accordance with Section 2(c), he or she will be
entitled to receive the following payments and benefits:
(a)
Basic Payments . Subject to Section 3(e), the Executive
shall be paid an amount equal to two times the sum of (i) the
highest annualized base salary paid to him or her during the year
of termination or the immediately preceding two calendar years, and
(ii) the greater of (A) the target bonus in the year of
termination or (B) the highest bonus paid to him or her with
respect to one of the two calendar years immediately preceding the
year of termination.
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Such
amount shall be paid to the Executive in a lump sum payment no
later than 30 days following the date of termination of
employment. For purposes of this subsection, to the extent
necessary, base salary and bonuses with any predecessor of
Sovereign or an affiliate thereof shall be taken into
account.
(b)
Health and Medical Benefits . Subject to Section 3(e),
for a period of two years from the date 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 or her at
his or her Employer’s cost during the two-year period
immediately preceding such termination. To the extent such benefits
cannot be provided under a plan because the Executive is no longer
an employee of the Employer or on a pre-tax basis, a lump sum
payment equal to the after-tax cost (estimated in good faith by
Sovereign) of obtaining such benefits, or substantially similar
benefits, shall be paid to the Executive, as appropriate.
(c)
Excise Tax Matters .
(i)
Notwithstanding anything in this section or elsewhere in this
Agreement to the contrary, in the event the payments and benefits
payable hereunder to or on behalf of the Executive, when added to
all other amounts and benefits payable to or on behalf of the
Executive, would result in the imposition of an excise tax under
Section 4999 of the Internal Revenue Code of 1986, as amended
(the “Code”), the amounts and benefits payable
hereunder shall be reduced to such extent as may be necessary to
avoid such imposition (the “Excise Tax Reduction”). The
Executive shall have the right, within 30 days of receipt of
written notice from Sovereign, to specify which amounts and
benefits shall be reduced to satisfy the requirements of this
subsection. All calculations required to be made under this
subsection will be made by Sovereign’s independent public
accountants, subject to the right of Executive’s
representative to review the same. The parties recognize that the
actual implementation of the provisions of this subsection are
complex and agree to deal with each other in good faith to resolve
any questions or disagreements arising hereunder.
(ii) In
the event the Executive is provided written notice of the Excise
Tax Reduction as described in Section 3(c)(i) above, the
Executive may elect to be bound by the non-competition restriction
contained in Section 21 below, in exchange for a reasonable
additional payment in an amount to be determined by Sovereign and
communicated to the executive in the written notice of the Excise
Tax Reduction. Under no circumstances will the reasonable
additional payment exceed the total amount of the Excise Tax
Reduction required in Section 3(c)(i) above. The written
notice from Sovereign shall further contain a form for execution by
the Executive and return to Sovereign in the event the Executive
elects the reasonable additional payment and accepts the
non-competition restriction.
(d)
Primary Obligor . The obligation to make payments and
provide benefits under this section shall primarily be those of the
executive’s Employer as of the date of his or her termination
of employment. In the event the Employer is not Sovereign or
Sovereign Bank, Sovereign will cause such Employer to make required
payments and provide required
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benefits. To the extent Sovereign fails or is unable to do so, it
shall make such payments and provide such benefits.
(e)
Required Provision . Any payments made to the Executive
pursuant to this Agreement, or otherwise, are subject to and
conditioned upon their compliance with 12 U.S.C. § 1828(k) and
FDIC Regulation 12 C.F.R. Part 359, Golden Parachute and
Indemnification Payments.
4. Definitions of Certain
Terms : For the purposes of this Agreement, the terms defined
in this Section 4 shall have the meaning assigned to them
herein.
(a)
Cause . As used in this Agreement, termination of the
Executive’s employment for “Cause,” shall mean
any of the following events:
(i) the
repeated and willful failure of the Executive to follow the lawful
instruction of his or her employer, but only after written demand
for performance;
(ii)
the commission of any act of dishonesty against Sovereign or any
company affiliated with Sovereign, or an employee or customer of
Sovereign or any such affiliate;
(iii)
an intentional material violation by the Executive of any
applicable code of conduct or similar policy applicable to
executives of the Executive’s Employer;
(iv)
the conviction of the Executive of a felony or crime of moral
turpitude; or
(v) an
order from the Office of Thrift Supervision or other regulator
effectively requiring the Executive’s discharge.
If the
Executive’s employment is terminated for Cause, his or her
rights under this Agreement will cease as of the effective date of
such termination.
(b)
Change in Control . The term “Change in Control”
may be amended at any time and from time to time by Sovereign.
Notwithstanding the foregoing, any such amendment shall not have
the effect of modifying section (i)(B) below. As used in this
Agreement, the term “Change in Control” means the first
to occur of any of the following:
(i) any
“person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the “Exchange
Act”)), except for any of Sovereign’s employee benefit
plans, or an entity holding Sovereign’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
Sovereign’s securities representing 19.9% or more of the
combined voting power of Sovereign’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 Sovereign and
Banco Santander Central Hispano, S.A., dated as of October 24,
2005, as amended as of
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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;
(ii)
there occurs a conte
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