STOCK OPTION AGREEMENT
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THIS STOCK OPTION AGREEMENT ("Stock Option Agreement") dated
February 5, 1997, is by and between SOVEREIGN BANCORP, INC., a Pennsylvania
corporation ("Sovereign") and BANKERS CORP. a New Jersey corporation
("Bankers").
BACKGROUND
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1. Sovereign and Bankers desire to enter into a Agreement and
Plan of Merger, dated February 5, 1997 (the "Agreement"), providing, among other
things, for the acquisition by Sovereign of Bankers through the merger of
Bankers with and into Sovereign, with Sovereign surviving the merger (the
"Merger").
2. As a condition to Sovereign to enter into the Plan, Bankers
is granting to Sovereign an option to purchase up to that number of shares of
common stock of Bankers as shall equal 19.9% of shares of common stock of
Bankers issued and outstanding immediately prior to such purchase, on the terms
and conditions hereinafter set forth.
AGREEMENT
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In consideration of the foregoing and the mutual covenants and
agreements set forth herein, Sovereign and Bankers, intending to be legally
bound hereby, agree:
1. GRANT OF OPTION. Bankers hereby grants to Sovereign, on the
terms and conditions set forth herein, the option to purchase (the "Option") up
to 2,463,258 shares (as adjusted as set forth herein, the "Option Shares") of
common stock, par value $.01 per share (the "Common Stock"), of Bankers at a
price per share (as adjusted as set forth herein, the "Option Price") equal to
the lower of (i) $22.50 or (ii) the lowest price per share that a person or a
group, other than Sovereign or an affiliate of Sovereign, paid or offers to pay
after the date hereof for Common Stock in a transaction constituting a
Triggering Event under Section 2 hereof.
2. EXERCISE OF OPTION. Provided that (i) Sovereign shall not
be in breach of the agreements or covenants contained in this Agreement or the
Plan, and (ii) no preliminary or permanent injunction or other order against the
delivery of shares covered by the Option issued by any court of competent
jurisdiction in the United States shall be in effect, upon or after the
occurrence of a Triggering Event (as such term is hereinafter defined) and until
termination of this Stock Option Agreement in accordance with the provisions of
Section 21, Sovereign may exercise the Option, in whole or in part, at any time
or one or more times, from time to time. As used herein, the term "Triggering
Event" means the occurrence of any of the following events:
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(a) a person or group (as such terms are defined in
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations thereunder), other than Sovereign or an
affiliate of Sovereign, acquires beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of 10% or more of the
then outstanding shares of Common Stock (excluding any shares eligible
to be reported on Schedule 13G of the Securities and Exchange
Commission);
(b) a person or group, other than Sovereign or an
affiliate of Sovereign, enters into an agreement or letter of intent
with Bankers pursuant to which such person or group or any affiliate of
such person or group would (i) merge or consolidate, or enter into any
similar transaction, with Bankers, (ii) acquire all or substantially
all of the assets or liabilities of Bankers or all or substantially all
of the assets or liabilities of Bankers Savings the wholly-owned
subsidiary of Bankers ("Bankers Savings"), or (iii) acquire beneficial
ownership of securities representing, or the right to acquire
beneficial ownership or to vote securities representing, 10% or more of
the then outstanding shares of Common Stock (excluding any shares
eligible to be reported on Schedule 13G of the Securities and Exchange
Commission) or the then outstanding shares of common stock of Bankers
Savings, or
(c) a person or group, other than Sovereign or an
affiliate of Sovereign, publicly announces a bona fide proposal
(including a written communication that is or becomes the subject of
public disclosure) for (i) any merger, consolidation or acquisition of
all or substantially all the assets or liabilities of Bankers or all or
substantially all the assets or liabilities of Bankers Savings, or any
other business combination involving Bankers or Bankers Savings, or
(ii) a transaction involving the transfer of beneficial ownership of
securities representing, or the right to acquire beneficial ownership
or to vote securities representing, 10% or more of the then outstanding
shares of Common Stock or the then outstanding shares of common stock
of Bankers Savings (collectively, a "Proposal"), and thereafter, if
such Proposal has not been Publicly Withdrawn (as such term is
hereinafter defined) at least 30 days prior to the meeting of
shareholders of Bankers called to vote on the Merger, Bankers'
shareholders fail to approve the Merger by the vote required by
applicable law at the meeting of shareholders called for such purpose
or such meeting has been cancelled; or
(d) a person or group, other than Sovereign or an
affiliate of Sovereign, makes a bona fide Proposal and thereafter, but
before such Proposal has been Publicly Withdrawn, Bankers willfully
takes any action in a manner which would likely result in the failure
of either party to satisfy a material condition to the closing of the
Merger or materially reduce the value of the transaction to Sovereign;
or
(e) Bankers breaches, in any material respect, any
binding term of the Agreement with respect to the Merger, or this Stock
Option Agreement after a Proposal is made and before it is Publicly
Withdrawn or publicly announces an intention to authorize, recommend or
accept any such Proposal;
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provided, however, that any purchase of shares upon exercise of the Option shall
be subject to compliance with applicable law.
If more than one of the transactions giving rise to a
Triggering Event under this Section is undertaken or effected, then all such
transactions shall give rise only to one Triggering Event, which Triggering
Event shall be deemed continuing for all purposes hereunder until all such
transactions are abandoned.
"Publicly Withdrawn" for purposes of this Section 2 shall mean
an unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over Bankers or in soliciting or inducing any other
person (other than Sovereign or an affiliate of Sovereign) to do so.
Notwithstanding the foregoing, the obligation of Bankers to
issue Option Shares upon exercise of the Option shall be deferred (but shall not
terminate) (i) until the receipt of all required governmental or regulatory
approvals or consents necessary for Bankers to issue the Option Shares, or
Sovereign to exercise the Option, or until the expiration or termination of any
waiting period required by law, or (ii) so long as any injunction or other
order, decree or ruling issued by any federal or state court of competent
jurisdiction is in effect which prohibits the sale or delivery of the Option
Shares, and, in each case, notwithstanding any provision to the contrary set
forth herein, the Option shall not expire or otherwise terminate.
Bankers shall notify Sovereign promptly in writing of the
occurrence of any Triggering Event known to it, it being understood that the
giving of such notice by Bankers shall not be a condition to the right of
Sovereign to exercise the Option. Bankers will not take any action which would
have the effect of preventing or disabling Bankers from delivering the Option
Shares to Sovereign upon exercise of the Option or otherwise performing its
obligations under this Stock Option Agreement. In the event Sovereign wishes to
exercise the Option, Sovereign shall send a written notice to Bankers (the date
of which is hereinafter referred to as the "Notice Date") specifying the total
number of Option Shares it wishes to purchase and a place and date between two
and ten business days inclusive from the Notice Date for the closing of such a
purchase (a "Closing"); provided, however, that a Closing shall not occur prior
to two days after the later of receipt of any necessary regulatory approvals or
the expiration of any legally required notice or waiting period, if any.
3. PAYMENT AND DELIVERY OF CERTIFICATES. At any Closing
hereunder, (a) Sovereign will make payment to Bankers of the aggregate price for
the Option Shares so purchased by wire transfer of immediately available funds
to an account designated by Bankers, (b) Bankers will deliver to Sovereign a
stock certificate or certificates representing the number of Option Shares so
purchased, registered in the name of Sovereign or its designee, in such
denominations as were specified by Sovereign in its notice of exercise, and (c)
Sovereign will pay any transfer or other taxes required by reason of the
issuance of the Option Shares so purchased.
A legend will be placed on each stock certificate evidencing
Option Shares issued pursuant to this Stock Option Agreement, which legend will
read substantially as follows:
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"The shares of stock evidenced by this certificate
have not been the subject of a registration statement filed under the
Securities Act of 1933, as amended (the "Act"), and declared effective
by the Securities and Exchange Commission. These shares may not be
sold, transferred or otherwise disposed of prior to such time unless
Bankers Corp. receives an opinion of counsel stating that an exemption
from the registration provisions of the Act is available for such
transfer."
4. REGISTRATION RIGHTS. Upon or after the occurrence of a
Triggering Event and upon receipt of a written request from Sovereign, Bankers
shall prepare and file as soon as practicable a registration statement under the
Securities Act of 1933, as amended, with the Securities and Exchange Commission
covering the Option and such number of Option Shares as Sovereign shall specify
in its request, and Bankers shall use its best efforts to cause such
registration statement to be declared effective in order to permit the sale or
other disposition of the Option and the Option Shares, provided that Sovereign
shall in no event have the right to have more than one such registration
statement become effective, and provided further that Bankers shall not be
required to prepare and file any such registration statement in connection with
any proposed sale with respect to which counsel to Bankers delivers to Bankers
and to Sovereign its opinion to the effect that no such filing is required under
applicable laws and regulations with respect to such sale or disposition;
provided, however, that Bankers may delay any registration of Option Shares
above for a period not exceeding 90 days provided Bankers shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of other securities by Bankers. Sovereign shall provide
all information reasonably requested by Bankers for inclusion in any
registration statement to be filed hereunder. In connection with such filing,
Bankers shall use its best efforts to cause to be delivered to Sovereign such
certificates, opinions, accountant's letters and other documents as Sovereign
shall reasonably request and as are customarily provided in connection with
registration of securities under the Securities Act of 1933, as amended. Bankers
shall provide to Sovereign such number of copies of the preliminary prospectus
and final prospectus and any amendments and supplements thereto as Sovereign may
reasonably request. All reasonable expenses incurred by Bankers in complying
with the provisions of this Section 4, including, without limitation, all
registration and filing fees, reasonable printing expenses, reasonable fees and
disbursements of counsel for Bankers and blue sky fees and expenses, shall be
paid by Bankers. Underwriting discounts and commissions to brokers and dealers
relating to the Option Shares, fees and disbursements of counsel to Sovereign
and any other expenses incurred by Sovereign in connection with such filing
shall be borne by Sovereign. In connection with such filing, Bankers shall
indemnify and hold harmless Sovereign against any losses, claims, damages or
liabilities, joint or several, to which Sovereign may become subject, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any preliminary or final registration
statement or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and Bankers will reimburse Sovereign for any legal or other expense reasonably
incurred by Sovereign in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that Bankers will
not be liable in any case to the extent that any such loss, claim, damage or
liability arises
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out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such preliminary or final registration
statement or such amendment or supplement thereto in reliance upon and in
conformity with written information furnished by or on behalf of Sovereign
specifically for use in the preparation thereof. Sovereign will indemnify and
hold harmless Bankers to the same extent as set forth in the immediately
preceding sentence but only with reference to written information furnished by
or on behalf of Sovereign for use in the preparation of such preliminary or
final registration statement or such amendment or supplement thereto; and
Sovereign will reimburse Bankers for any legal or other expense reasonably
incurred by Bankers in connection with investigating or defending any such loss,
claim, damage, liability or action.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of
any change in the Common Stock by reason of stock dividends, split-ups,
recapitalizations, combinations, conversions, divisions, exchanges of shares or
the like, then the number and kind of Option Shares and the Option Price shall
be appropriately adjusted.
6. FILINGS AND CONSENTS. Each of Sovereign and Bankers will
use its best efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Stock Option Agreement. Within 10 days from
the date hereof, Sovereign shall file a report of beneficial ownership on Form
13D with the Securities and Exchange Commission under the Exchange Act which
discloses the rights of Sovereign hereunder.
7. REPRESENTATIONS AND WARRANTIES OF BANKERS. Bankers hereby
represents and warrants to Sovereign as follows:
(a) DUE AUTHORIZATION. Bankers has full corporate
power and authority to execute, deliver and perform this Stock Option
Agreement and all corporate action necessary for execution, delivery
and performance of this Stock Option Agreement has been duly taken by
Bankers. This Stock Option Agreement constitutes a legal, valid and
binding obligation of Bankers, enforceable against Bankers in
accordance with its terms (except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles).
(b) AUTHORIZED SHARES. Bankers has taken all
necessary corporate action to authorize and reserve for issuance all
shares of Common Stock that may be issued pursuant to any exercise of
the Option.
8. REPRESENTATIONS AND WARRANTIES OF SOVEREIGN. Sovereign
hereby represents and warrants to Bankers that Sovereign has full corporate
power and authority to execute, deliver and perform this Stock Option Agreement
and all corporate action necessary for execution, delivery and performance of
this Stock Option Agreement has been duly taken by Sovereign. This Stock Option
Agreement constitutes a legal, valid and binding obligation of Sovereign,
enforceable against Sovereign in accordance with its terms (except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar
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laws of general applicability relating to or affecting creditors' rights or by
general equity principles).
9. SPECIFIC PERFORMANCE. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Stock Option
Agreement and that the obligations of the parties hereto shall be specifically
enforceable.
10. ENTIRE AGREEMENT. This Stock Option Agreement and the
Agreement constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof.
11. ASSIGNMENT OR TRANSFER. Sovereign may not sell, assign or
otherwise transfer its rights and obligations hereunder, in whole or in part, to
any person or group of persons other than to a subsidiary of Sovereign.
Sovereign represents that it is acquiring the Option for Sovereign's own account
and not with a view to, or for sale in connection with, any distribution of the
Option or the Option Shares. Sovereign is aware that neither the Option nor the
Option Shares is the subject of a registration statement filed with, and
declared effective by, the Securities and Exchange Commission pursuant to
Section 5 of the Securities Act of 1933, as amended, but instead each is being
offered in reliance upon the exemption from the registration requirement
provided by Section 4(2) thereof and the representations and warranties made by
Sovereign in connection therewith.
12. AMENDMENT OF STOCK OPTION AGREEMENT. By mutual consent of
the parties hereto, this Stock Option Agreement may be amended in writing at any
time, for the purpose of facilitating performance hereunder or to comply with
any applicable regulation of any governmental authority or any applicable order
of any court or for any other purpose.
13. VALIDITY. The invalidity or unenforceability of any
provision of this Stock Option Agreement shall not affect the validity or
enforceability of any other provisions of this Stock Option Agreement, which
shall remain in full force and effect.
14. NOTICES. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered personally, by telegram or
telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
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(i) If to Sovereign, to:
Sovereign Bancorp, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxx X. Xxxxx, President
and Chief Executive Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx & Xxx
000 Xxxxx Xxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esquire
Xxxxx X. Xxxxxx, Esquire
Telecopy No.: (000) 000-0000
(ii) If to Bankers, to:
Bankers Corp.
000 Xxxxx Xxxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Chairman of the Board, President
and Chief Executive Officer
Telecopy No.: (000) 000-0000
with copies to:
Xxxxxxx Xxxxxxxx & Wood
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Omer X.X. Xxxxxxxx, Esquire
Telecopy No.: (000) 000-0000
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or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
15. GOVERNING LAW. This Stock Option Agreement shall be
governed by and construed in accordance with the domestic internal law (but not
the law of conflicts of law) of the Commonwealth of Pennsylvania.
16. CAPTIONS. The captions in this Stock Option Agreement are
inserted for convenience and reference purposes, and shall not limit or
otherwise affect any of the terms or provisions hereof.
17. WAIVERS AND EXTENSIONS. The parties hereto may, by mutual
consent, extend the time for performance of any of the obligations or acts of
either party hereto. Each party may waive (i) compliance with any of the
covenants of the other party contained in this Stock Option Agreement and/or
(ii) the other party's performance of any of its obligations set forth in this
Stock Option Agreement.
18. PARTIES IN INTEREST. This Stock Option Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and, nothing
in this Stock Option Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Stock Option Agreement.
19. COUNTERPARTS. This Stock Option Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
20. EXPENSES. Subject to the terms of the Plan and except as
otherwise provided herein, all costs and expenses incurred by the parties hereto
in connection with the transactions contemplated by this Stock Option Agreement
or the Option shall be paid by the party incurring such cost or expense.
21. TERMINATION. This Stock Option Agreement shall terminate
and be of no further force or effect upon the earliest to occur of (A) the
Effective Time or (B) termination of the Agreement in accordance with the terms
thereof, except that if the Agreement is terminated by Sovereign pursuant to
Section 6.01(b)(i) of the Agreement or pursuant to Section 6.01(b)(ii) of the
Agreement (provided the failure of the occurrence of the event specified in
Section 6.01(b)(ii) of the Agreement shall be due to the failure of Bankers to
perform or observe its agreements set forth in the Agreement required to be
performed or observed by Bankers prior to the Closing Date (as defined in the
Agreement)), this Stock Option Agreement shall not terminate until one year
after the date of termination of the Agreement.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to
resolutions adopted by its Board of Directors, has caused this Stock Option
Agreement to be executed by
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its duly authorized officer and has caused its corporate seal to be affixed
hereunto and to be duly attested, all as of the day and year first above
written.
SOVEREIGN BANCORP, INC.
By /s/ Xxx X. Xxxxx
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Xxx X. Xxxxx,
President and Chief
Executive Officer
BANKERS CORP.
By /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
Chairman of the Board,
President and Chief Executive
Officer
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