SEPARATION AGREEMENT

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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, Soverei