[FORM OF OPTION]
EXHIBIT 2.2
STOCK OPTION AGREEMENT
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THIS STOCK OPTION AGREEMENT ("Stock Option Agreement") dated
September 7, 1998, is by and between SOVEREIGN BANCORP, INC., a Pennsylvania
corporation ("Sovereign") and PEOPLES BANCORP, INC., a Delaware corporation
("Peoples").
BACKGROUND
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1. Sovereign and Peoples desire to enter into an Agreement and Plan
of Merger, dated September 7, 1998 (the "Agreement"), providing, among other
things, for the acquisition by Sovereign of Peoples through the merger of
Peoples with and into Sovereign, with Sovereign surviving the merger (the
"Merger").
2. As a condition to Sovereign to enter into the Plan, Peoples is
granting to Sovereign an option to purchase up to that number of shares of
common stock, no par value (the "Common Stock"), of Peoples as shall equal 19.9%
of shares of Common Stock of Peoples 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 Peoples, intending to be legally
bound hereby, agree:
1. Grant of Option. Peoples hereby grants to Sovereign, on the terms
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and conditions set forth herein, the option to purchase (the "Option") up to
7,225,000 shares (as adjusted as set forth herein, the "Option Shares") of
Common Stock of Peoples at a price per share (as adjusted as set forth herein,
the "Option Price") equal to $8.50, provided, however, that in no event shall
the number of Option Shares for which the Option is exercisable exceed 19.9% of
the issued and outstanding shares of Common Stock of Peoples without giving
effect to any shares subject to or issued pursuant to the Option.
2. Exercise of Option. Provided that (i) Sovereign shall not be on
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the date of exercise in breach of the agreements or covenants contained in the
Agreement or herein, 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 23, 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:
(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 15% 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, letter of intent, or similar document
with Peoples 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 Peoples, (ii) acquire all or substantially all of
the assets or liabilities of Peoples or all or substantially all of the
assets or liabilities of Trenton Savings Bank, FSB, the wholly-owned
subsidiary of Peoples ("Trenton Savings"), or (iii) acquire beneficial
ownership of securities representing, or the right to acquire beneficial
ownership or to vote securities representing, 15% 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 Trenton 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 Peoples or all or substantially all the assets or
liabilities of Trenton Savings, or any other business combination involving
Peoples or Trenton 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, 15% or more of the
then outstanding shares of Common Stock or the then outstanding shares of
common stock of Trenton 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 Peoples called to vote on the Merger, Peoples's
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, Peoples 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) the Board of Directors of Peoples shall (i) fail to recommend
and endorse the Agreement and the transactions contemplated thereby or (ii)
withdraw, modify, or change in a manner adverse to Sovereign its approval
or recommendation of the Agreement and the transactions contemplated
thereby, or (iii) recommend or endorse an Acquisition Transaction (as
defined in Section 4.06 of the Agreement); or
(f) Peoples 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;
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 2 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 Peoples 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 Peoples 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 Peoples 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.
Peoples 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 Peoples shall not be a condition to the right of Sovereign to exercise
the Option. Subject to compliance with the applicable banking and securities
laws or regulations, Peoples will not take any action which would have the
effect of preventing or disabling Peoples 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 Peoples (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. Repurchase of Option by Peoples.
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(a) At the request of Sovereign at any time commencing upon the
first occurrence of a Repurchase Event (as defined in Section 3(d)) and
ending 18 months immediately thereafter, Peoples shall repurchase from
Sovereign (x) the Option and (y) all shares of Common Stock purchased by
Sovereign pursuant hereto with respect to which Sovereign then has
beneficial ownership. The date on which Sovereign exercises its rights
under this Section 3 is referred to as the "Request Date." Such repurchase
shall be at an aggregate price (the "Section 3 Repurchase Consideration")
equal to the sum of: (i) the aggregate Purchase Price paid by Sovereign
for any shares of Common Stock acquired pursuant to the Option with respect
to which Sovereign then has beneficial ownership; (ii) the excess, if any,
of (x) the Applicable Price (as defined below) for each share of Common
Stock over (y) the Option Price (subject to adjustment pursuant to Section
6), multiplied by the number of shares of Common Stock with respect to
which the Option has not been exercised; and (iii) the excess, if any, of
the Applicable price over the Option Price (subject to adjustment pursuant
to Section 6) paid (or, in the case of Option Shares with respect to which
the Option has been exercised, but the Closing has not occurred, payable)
by Sovereign for each share of Common Stock with respect to which the
Option has been exercised and with respect to which Sovereign then has
beneficial ownership, multiplied by the number of such shares.
(b) If Sovereign exercises its rights under this Section 3,
Peoples shall, within ten (10) business days after the Request Date, pay
the Section 3 Repurchase Consideration to Sovereign in immediately
available funds, and contemporaneously with such payment, Sovereign shall
surrender to Peoples the Option and the certificate evidencing the shares
of Common Stock purchased thereunder with respect to which Sovereign then
has beneficial ownership, and Sovereign shall warrant that it has sole
record and beneficial ownership of such shares, and that the same are then
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any banking agency or department of any
federal or state government, including without limitation the OTS, the
FDIC, or the respective staffs thereof (the "Regulatory Authority"), is
required in connection with the payment of all or any portion of the
Section 3 Repurchase Consideration, Sovereign shall have the ongoing option
to revoke its request for repurchase pursuant to Section 3, in whole or in
part, or to require that Peoples deliver from time to time that portion of
the Section 3 Repurchase Consideration that it is not then so prohibited
from paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall cooperate
with the other in the filing of any such notice or application and the
obtaining of any such approval), in which case the ten (10) business day
period of time that would otherwise run pursuant to the preceding sentence
for the payment of the portion of the Section 3 Repurchase Consideration
shall run instead from the date on which, as the case may be, any required
notification period has expired or been terminated or such approval has
been obtained and, in either event, any requisite waiting period shall have
passed. If any Regulatory Authority disapproves of any part of Peoples's
proposed repurchase pursuant to this Section 3, Peoples shall promptly give
notice of such fact to Sovereign. If any Regulatory Authority prohibits
the repurchase pursuant to this Section 3, Peoples shall promptly give
notice of such fact to Sovereign. If any Regulatory Authority prohibits
the repurchase in part but not in whole, then Sovereign shall have the
right (i) to revoke the repurchase request or (ii) to the extent permitted
by such Regulatory Authority, determine whether the repurchase should apply
to the Option and/or Option Shares and to what extent to each, and
Sovereign shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request
Date less the sum of the number of shares covered by the Option in respect
of which payment has been made pursuant to Section 3(a)(ii) and the number
of shares covered by the portion of the Option (if any) that has been
repurchased. Sovereign shall notify Peoples of its determination under the
preceding sentence within five (5)
business days of receipt of notice of disapproval of the repurchase.
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Common Stock paid for any
such share by the person or groups described in Section 3(d)(i), (ii) the
price per share of Common Stock received by a holder of Common Stock in
connection with any merger or other business combination transaction
described in Section 3(d)(ii), (iii) or (iv), or (iii) the highest closing
sales price per share of Common Stock quoted on the Nasdaq Stock Market
during the 40 business days preceding the Request Date; provided, however,
that in the event of a sale of less than all of Peoples's assets, the
Applicable Price shall be the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of Peoples as
determined by a nationally-recognized investment banking firm selected by
Sovereign, divided by the number of shares of Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or
received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in
good faith by an independent nationally-recognized investment banking firm
selected by Sovereign and reasonably acceptable to Peoples, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, a Repurchase Event shall occur if (i) any
person or group (as such terms are defined in 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, or the right to acquire beneficial ownership
of, 15% or more of the then-outstanding shares of Common Stock, (ii)
Peoples shall have merged or consolidated with any person, other than
Sovereign or an affiliate of Sovereign, and shall not be the surviving or
continuing corporation of such merger or consolidation, (iii) any person,
other than Sovereign or an affiliate of Sovereign, shall have merged into
Peoples and Peoples shall be the surviving corporation, but, in connection
with such merger, the then-outstanding shares of Common Stock have been
changed into or exchanged for stock or other securities of Peoples or any
other person or cash or any other property or the outstanding shares of
Common Stock immediately prior to such merger shall after such merger
represent less than 50% of the outstanding shares and share equivalents of
the surviving corporation or (iv) Peoples shall have sold or otherwise
transferred more than 15% of its consolidated assets to any person, other
than Sovereign or an affiliate of Sovereign.
4. Payment and Delivery of Certificates. At any Closing hereunder,
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(a) Sovereign will make payment to Peoples of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by Peoples, (b) Peoples 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:
"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 Peoples Corp. receives an
opinion of counsel reasonably acceptable to it stating that an exemption
from the registration provisions of the Act is available for such
transfer."
5. Registration Rights. Upon or after the occurrence of a Triggering
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Event and upon receipt of a written request from Sovereign, Peoples shall
prepare and file as soon as practicable a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with the Securities
and Exchange Commission covering the Option and such number of Option Shares as
Sovereign shall specify in its request, and Peoples 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 Peoples shall
not be required to prepare and file any such registration statement in
connection with any proposed sale with respect to which counsel to Peoples
delivers to Peoples 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 Peoples may delay any registration
of Option Shares above for a period not exceeding 90 days in the event that
Peoples shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Peoples.
Sovereign shall provide all information reasonably requested by Peoples for
inclusion in any registration statement to be filed hereunder. In connection
with such filing, Peoples shall use its commercially reasonable 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.
Peoples 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 Peoples in complying with the
provisions of this Section 5, including, without limitation, all registration
and filing fees, reasonable printing expenses, reasonable fees and disbursements
of counsel for Peoples and blue sky fees and expenses, shall be paid by Peoples.
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, Peoples 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 Peoples 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 Peoples will not be liable
in any case to the extent that any such loss, claim, damage or liability arises
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 Peoples 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 Peoples for any legal or other expense reasonably
incurred by Peoples in connection with investigating or defending any such loss,
claim, damage, liability or action. Notwithstanding anything to the contrary
contained herein, no indemnifying party shall be liable for any settlement
effected without its prior written consent.
6. Adjustment Upon Changes in Capitalization. In the event of any
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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.
7. Filings and Consents. Each of Sovereign and Peoples will use its
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commercially reasonable 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
Schedule 13D with the Securities and Exchange Commission under the Exchange Act
which discloses the rights of Sovereign hereunder.
8. Representations and Warranties of Peoples. Peoples hereby
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represents and warrants to Sovereign as follows:
(a) Due Authorization. Peoples has the requisite corporate power
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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 Peoples. This Stock
Option Agreement constitutes a legal, valid and binding obligation of
Peoples, enforceable against Peoples 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. Peoples has taken all necessary corporate
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action to authorize and reserve for issuance all shares of Common Stock
that may be issued pursuant to any exercise of the Option.
9. Representations and Warranties of Sovereign. Sovereign hereby
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represents and warrants to Peoples that Sovereign has the requisite 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 laws of general applicability relating to or
affecting creditors' rights or by general equity principles). Sovereign or its
assignee agrees to execute a standard investment representation letter with
respect to its acquisition of any Peoples securities acquired in connection with
this transaction.
10. Specific Performance. The parties hereto acknowledge that
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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.
11. Entire Agreement. This Stock Option Agreement and the Agreement
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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.
12. Assignment or Transfer. Sovereign may not sell, assign or
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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 subject
to compliance with applicable securities laws. 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,
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.
13. Amendment of Stock Option Agreement. By mutual consent of the
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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.
14. Validity. The invalidity or unenforceability of any provision of
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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.
15. Notices. All notices, requests, consents and other
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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:
(i) If to Sovereign, to:
Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, Pennsylvania 19610
Attention: Jay S. Sidhu,
President and Chief Executive
Officer
Telecopy No.: (610) 320-8448
with a copy to:
Stevens & Lee
111 North Sixth Street
P.O. Box 679
Reading, Pennsylvania 19603
Attention: Joseph M. Harenza, Esquire
David W. Swartz, Esquire
Telecopy No.: (610) 376-5610
(ii) If to Peoples, to:
Peoples Bancorp, Inc.
134 Franklin Corner Road
Lawrenceville, New Jersey 08648
Attention: Wendell T. Breithaupt
President and Chief Executive
Officer
Telecopy No.: (609) 844-9636
with copies to:
Luse Lehman Gorman Pomerenk & Schick
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
Attention: John J. Gorman, Esquire
Kenneth R. Lehman, Esquire
Telecopy No.: (202) 362-2902
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).
16. Governing Law. This Stock Option Agreement shall be governed by
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and construed in accordance with the domestic
internal law (but not the law of conflicts of law) of the Commonwealth of
Pennsylvania.
17. Captions. The captions in this Stock Option Agreement are
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inserted for convenience and reference purposes, and shall not limit or
otherwise affect any of the terms or provisions hereof.
18. Waivers and Extensions. The parties hereto may, by mutual
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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.
19. Parties in Interest. This Stock Option Agreement shall be
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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.
20. Counterparts. This Stock Option Agreement may be executed in two
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or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
21. Expenses. Except as otherwise provided herein, all costs and
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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.
22. Defined Terms. Capitalized terms which are used but not defined
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herein shall have the meanings ascribed to such terms in the Agreement.
23. Termination. This Stock Option Agreement shall terminate and be
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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 (i) the Agreement is terminated by Sovereign pursuant to any of
Sections 6.01(b)(i), 6.01(d), or 6.01(e) of the Agreement (provided the failure
of the occurrence of the event specified in Section 6.01(b)(i) of the Agreement
shall be due to the failure of Peoples to perform or observe its agreements set
forth in the Agreement required to be performed or observed by Peoples prior to
the Closing Date (as defined in the Agreement) and further provided that the
breach specified in Section 6.01(e) of the Agreement shall result from a willful
action taken by Peoples), this Stock Option Agreement shall not terminate until
one year after the date of termination of the Agreement or (ii) the Agreement is
terminated as a result of the failure of Peoples
shareholders to approve the Agreement following either a withdrawal or
modification by a director of Peoples of a prior recommendation to approve the
Agreement or a failure of a director of Peoples to recommend approval of 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 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/ Jay S. Sidhu
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Jay S. Sidhu,
President and Chief Executive Officer
PEOPLES BANCORP, INC.
By /s/ Wendell T. Breithaupt
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Wendell T. Breithaupt,
President and Chief Executive Officer