SOVEREIGN BANCORP, INC.

2006 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN

Effective October 1, 2006

1. Purpose. The purpose of the Sovereign Bancorp, Inc. 2006 Non-Employee Director Compensation Plan (the "Plan") is to advance the interests of Sovereign Bancorp, Inc. (the "Company") and its shareholders by closely aligning the interests of the Company and its shareholders with "Non-Employee Directors," who collectively include

(i) members of the board of directors of the Company (the "Board") who are not employees of the Company, Sovereign Bank (the "Bank") or any other Subsidiary (the "Company Non-Employee Directors");

(ii) members of the board of directors of the Bank (the "Bank Board") who are not employees of the Company, the Bank or any other Subsidiary (the "Bank Non-Employee Directors"); and

(iii) members of the board of directors of any Subsidiary designated by resolution of the Board of Directors of the Company to participate in this Plan who are not employees of the Company, the Bank or any Subsidiary (the "Subsidiary Non-Employee Directors"). Therefore, this Plan requires the payment of a substantial portion of the annually established compensation payable to Non-Employee Directors for their service to be in shares of the Company's common stock, no par value (the "Common Stock"). Common Stock issuable under this Plan may be either authorized but unis sued shares, treasury shares, or shares purchased in the open market.

2. Administration. The Compensation Committee of the Board (the "Committee") shall administer the Plan. The Committee shall, subject to the provisions of the Plan, have the power to construe the Plan, to determine all questions arising thereunder, and to adopt and amend such rules and regulations for the administration of the Plan, as it may deem desirable. Any decisions of the Committee in the administration of the Plan, as described herein, shall be final and conclusive. The Committee may authorize any one or more of its members or any officer of the Company or the Bank to execute and deliver documents on behalf of the Committee. No member of the Committee shall be liable for anything done or omitted to be done by him or her or by any other member of the Board in connection with the Plan, except for his or her own willful misconduct or as expressly provided by statute.

3. Definition of Subsidiaries. As used herein, the term "Subsidiary" means any corporation, joint venture, or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by the Company or one or more of the other Subsidiaries of the Company or a combination thereof, or (ii) if a joint venture or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by the Company or one or more Subsidiaries of the Company or a combination thereof.

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