Provident Financial Services Inc 8-K, filed Mar 12, 2020
Provident Financial Services Inc (PFS)
About this 8-K
Provident Financial Services Inc filed this 8-K on March 12, 2020, reporting on events of March 11, 2020.
Items reported
- Item 1.01: Entered into a material agreement
- Item 5.02: Director or officer change, or executive pay
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 1.01 | Entry into a Material Definitive Agreement |
Merger Agreement
On March 11, 2020, Provident Financial Services, Inc. (“Provident”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SB One Bancorp (“SB One”). The Merger Agreement provides that upon the terms and subject to the conditions set forth therein, SB One will merge with and into Provident, with Provident as the surviving corporation (the “Merger”). At the effective time of the Merger (the “Effective Time”), each outstanding share of SB One common stock, no par value per share (“SB One Common Stock”), will be converted into the right to receive 1.357 shares (the “Exchange Ratio”) of Provident common stock (“Provident Common Stock”), par value $0.01 per share (the “Merger Consideration”).
At the Effective Time, each outstanding option granted by SB One to purchase shares of SB One Common Stock under the SB One stock incentive plans (the “SB One Options”), whether vested or unvested, will be cancelled and converted automatically into the right to receive an amount of cash equal to the product of (i) the excess of (A) the product of (x) the Exchange Ratio and (y) the Provident Closing Price (as defined below), over (B) the exercise price of such SB One Option, and (ii) the number of shares of SB One Common Stock subject to said SB One Option (whether vested or unvested). The Provident Closing Price means the average of the closing sales price of a share of Provident Common Stock, as reported on the New York Stock Exchange (“NYSE”) for the ten consecutive trading days ending on the fifth trading day preceding the closing date.
Furthermore, at the Effective Time, each share of SB One restricted stock, whether vested or unvested, will be cancelled and converted automatically into the right to receive the merger consideration.
Following the Merger, SB One Bank, a New Jersey-chartered commercial bank and a wholly owned subsidiary of SB One, will merge with and into Provident Bank, a New Jersey-chartered savings bank and a wholly owned subsidiary of Provident, with Provident Bank as the surviving bank.
At the Effective Time, Provident will appoint Anthony Labozzetta and two other persons from the SB One Board of Directors to be selected by Provident in consultation with SB One (and who will be subject to Provident’s customary qualification requirements) to the Boards of Directors of Provident and Provident Bank, with one former SB One director being appointed to each of the three terms of directors comprising the Provident and Provident Bank Boards of Directors.
The Merger Agreement contains customary representations and warranties from each of Provident and SB One, and each party has agreed to customary covenants, including, among others, covenants relating to the conduct of SB One’s and Provident’s businesses during the interim period between the execution of the Merger Agreement and the Effective Time and, in the case of SB One, its obligation to call a meeting of its shareholders to adopt the Merger Agreement, its obligation, subject to certain exceptions, to recommend that its stockholders approve the Merger Agreement and the Merger, and its non-solicitation obligations relating to alternative acquisition proposals.
The completion of the Merger is subject to customary conditions, including, among others, (1) the approval of the Merger by the holders of SB One Common Stock, (2) authorization for listing on the NYSE of the shares of Provident Common Stock to be issued in the Merger, (3) the effectiveness of the registration statement on Form S-4 for the Provident Common Stock to be issued in the Merger, (4) the absence of any order, decree or injunction preventing the completion of the Merger and (5) the receipt or waiver of required regulatory approvals. Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (ii) performance in all material respects by the other party of its obligations under the Merger Agreement and (iii) receipt by such party of an opinion from its counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
The Merger Agreement provides certain termination rights for both Provident and SB One and further provides that a termination fee of $9.0 million will be payable by SB One to Provident upon termination of the Merger Agreement under certain circumstances.
The Merger Agreement was unanimously approved by the boards of both Provident and SB One.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The representations, warranties and covenants of each party set forth in the Merger Agreement have been made only for purposes of, and were and are solely for the benefit of the parties to, the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between Provident and SB One instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made or at any other time, and investors should not rely on them as statements of fact. In addition, such representations and warranties (1) will not survive consummation of the Merger, unless otherwise specified therein, and (2) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding Provident or SB One, their respective affiliates or their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding Provident, SB One, their respective affiliates or their respective businesses, the Merger Agreement and the Merger that will be contained in, or incorporated by reference into, the Registration Statement on Form S-4 that will include a proxy statement of SB One and a prospectus of Provident, as well as in the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other filings that each of Provident and SB One make with the Securities and Exchange Commission (the “SEC”).
Voting Agreement
In connection with the Merger Agreement, in their capacity as shareholders of SB One, each SB One director and certain SB One executive officers entered into a Voting Agreement with Provident (the “Voting Agreements”). The SB One directors and executive officers that are party to the Voting Agreements beneficially own, in the aggregate, approximately 14.93% of the outstanding shares of SB One Common Stock. The Voting Agreements require, among other things, that the SB One shareholder that is party thereto vote his or her shares of SB One Common Stock in favor of the Merger and the other transactions contemplated by the Merger Agreement and against alternative transactions and not to, directly or indirectly, assign, sell, transfer or otherwise dispose of his or her shares of SB One Common Stock, subject to certain exceptions.
The foregoing description of the Voting Agreements does not purport to be complete and is qualified in its entirety by reference to the form of Voting Agreement, which is attached to this Current Report as Exhibit 10.1, and incorporated by reference herein.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
On March 11, 2020, Provident entered into the following agreements with Mr. Labozzetta: (1) an employment agreement (the “Provident Employment Agreement”); (2) a side-letter agreement (the “Provident Side-Letter Agreement”) to which Provident Bank is also a party; and (3) a change in control agreement (the “Provident Change in Control Agreement”). In addition, Provident, Provident Bank, SB One and SB One Bank are parties to a Settlement Agreement that was entered into with Mr. Labozzetta on March 11, 2020. The Provident Employment Agreement, the Provident Side-Letter Agreement, the Provident Change in Control Agreement and the Settlement Agreement (together, the “Provident Agreements”) will become effective and terminate Mr. Labozzetta’s employment agreement with SB One and SB One Bank dated January 20, 2010 (the “SB One Employment Agreement”) immediately upon the consummation of the Merger. Mr. Labozzetta, age 56, has served as the President and Chief Executive Officer of SB One and SB One Bank since August 2010. In the event that the Merger Agreement is terminated for any reason, the Merger does not occur or Mr. Labozzetta fails to become an employee of Provident and Provident Bank as of the consummation of the Merger, the Provident Agreements will automatically terminate and become null and void.
Provident Employment Agreement
The Provident Employment Agreement has an initial term that will continue through December 31, 2021 (the “Initial Term”). Commencing on January 1, 2022 and continuing at each January 1 thereafter, the term will automatically renew for an additional year (each, a “Renewal Term”). During the Initial Term, Mr. Labozzetta will serve as the Chief Operating Officer and President of each of Provident and Provident Bank. Additionally, subject to and conditioned upon the approval of, and appointment by, the Board of Directors of Provident, Mr. Labozzetta will serve as Chief Executive Officer and President of Provident and Provident Bank as of January 1, 2022.
Mr. Labozzetta is entitled to an initial annual base salary of $584,119 and to participate in Provident’s or Provident Bank’s bonus, incentive and benefit plans offered generally to senior officers and key management, and will be provided with an automobile suitable for his position. In addition, Provident and Provident Bank will honor the terms and conditions of Mr. Labozzetta’s Supplemental Executive Retirement Agreement, dated as of July 20, 2011 with SB One.
In the event Mr. Labozzetta terminates his employment for Good Reason or is terminated without Cause (as each such term is defined in the Provident Employment Agreement), he would receive: (1) any standard compensation and benefits that have been earned by Mr. Labozzetta as of his date of termination (the “Standard Termination Benefits”); (2) a cash lump sum payment equal to his base salary and cash bonus due for the longer of: (i) the remaining term of the agreement; or (ii) 12 months following the date of termination (the “Benefits Period”); and (3) continued life, medical, dental and disability coverage during the Benefits Period, provided, however, that Provident or Provident Bank may pay cash in lieu of such coverage if such coverage is not practicable, plus an amount to reflect the income and payroll taxes incurred by him with respect to such payment.
Subject to certain terms and limitations, the Provident Employment Agreement further provides that during its term and for a period of one year thereafter (except following a change in control), Mr. Labozzetta may not compete with, or solicit customers or employees of, Provident or Provident Bank, provided, however, that upon his termination during any Renewal Term, any restrictions limiting Mr. Labozzetta from becoming an employee of or providing services to another institution would be reduced to six months.
Provident Side-Letter Agreement
Pursuant to the Provident Side-Letter Agreement, if Mr. Labozzetta is not appointed President and Chief Executive Officer of Provident and Provident Bank by January 1, 2022 or he has a qualifying termination without Cause or for Good Reason (as set forth in the Provident Employment Agreement) during the Initial Term of the Provident Employment Agreement, his employment with Provident and Provident Bank will cease immediately following the expiration of the Initial Term (in the case of the failure to be appointed President and Chief Executive Officer) or as of the date of termination, and, in lieu of any payments or benefits under the Provident Employment Agreement, Provident or Provident Bank would pay Mr. Labozzetta the following: (1) any Standard Termination Benefits; (2) a cash lump sum payment equal to two times the sum of his base salary and annual cash bonus paid to (or earned by) him with respect to the completed fiscal year prior to the date of termination; and (3) continued life, medical, dental and disability coverage for two years, provided, however, that Provident or Provident Bank may pay cash in lieu of such coverage if such coverage is not practicable, plus an amount to reflect the income and payroll taxes incurred by him with respect to such payment.
Upon such termination, Mr. Labozzetta would be subject to the non-competition and post-termination obligations set forth in the Provident Employment Agreement.
Provident Change in Control Agreement
In the event of a change in control of Provident or Provident Bank, Mr. Labozzetta would not be entitled to any severance benefits under the Provident Employment Agreement or Provident Side-Letter Agreement upon any subsequent termination of employment. Rather, he would be entitled to only the severance benefits provided under the Provident Change in Control Agreement.
The Provident Change in Control Agreement has an initial three-year term which will automatically renew each April 1st starting in 2021 for an additional year such that there will be a three-year term remaining as of each April 1st. In the event Mr. Labozzetta terminates his employment for Good Reason or is terminated without Cause (as each such term is defined in the Provident Change in Control Agreement) during the term subsequent to a change in control, Provident or Provident Bank would pay Mr. Labozzetta: (1) any Standard Termination Benefits; and (2) a cash lump sum payment equal to three times the highest level of aggregate annualized base salary and other cash compensation paid to Mr. Labozzetta during the calendar year the termination occurs, or during either of the immediately preceding two calendar years, whichever is greater. In addition, Provident Bank will provide Mr. Labozzetta with continued group insurance, life, health, accident and disability insurance coverage for three years, provided, however, that Provident or Provident Bank may pay cash in lieu of such coverage if such coverage is not practicable, plus an amount to reflect the income and payroll taxes incurred by him with respect to such payment.
Settlement Agreement
The Settlement Agreement terminates Mr. Labozzetta’s SB One Employment Agreement (including his right thereunder to receive a gross-up payment with respect to any excise tax imposed under Section 4999 of the Internal Revenue Code) in consideration for a lump sum cash payment payable to Mr. Labozzetta at, or within five business days after, the Effective Time (the “Cash Settlement”). The Cash Settlement will equal the cash consideration and the cash equivalent of the continued welfare benefits that Mr. Labozzetta would have received under the SB One Employment Agreement in the event of his qualifying termination event following a change in control, such as the Merger. The Cash Settlement is subject to adjustment to result in no portion of any payment or benefit to be made or provided to Mr. Labozzetta being non-deductible and subject to an excise tax imposed under Sections 280G and 4999 of the Internal Revenue Code, respectively. The estimated Cash Settlement, as adjusted and to be further adjusted as necessary pursuant to the foregoing, is $2,400,004.
The foregoing descriptions of the Provident Agreements are not complete and are qualified in their entirety by references to the Provident Employment Agreement, Provident Side Letter, Provident Change in Control Agreement and Settlement Agreement, which are filed as Exhibits 10.2, 10.3, 10.4 and 10.5, respectively, and incorporated herein by reference.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about (i) the benefits of the Merger, including future financial and operating results, cost savings, enhancements to revenue and accretion to reported earnings that may be realized from the Merger; (ii) Provident’s and SB One’s plans, objectives, expectations and intentions and other statements contained in this Current Report on Form 8-K that are not historical facts; and (iii) other statements identified by words such as “expects” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “projects,” or words of similar meaning generally intended to identify forward-looking statements. These forward-looking statements are based upon the current beliefs and expectations of the respective managements of Provident and SB One and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Provident and SB One. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements because of possible uncertainties.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the businesses of Provident and SB One may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; (2) the expected growth opportunities or cost savings from the Merger may not be fully realized or may take longer to realize than expected; (3) deposit attrition, operating costs, customer losses and business disruption following the Merger, including adverse effects on relationships with employees and customers, may be greater than expected; (4) the regulatory approvals required for the Merger may not be obtained on the proposed terms or on the anticipated schedule; (5) the shareholders of SB One may fail to approve the Merger; (6) legislative or regulatory changes, including changes in accounting standards, may adversely affect the businesses in which Provident and SB One are engaged; (7) the interest rate environment may further compress margins and adversely affect net interest income; (8) results may be adversely affected by continued diversification of assets and adverse changes to credit quality; (9) competition from other financial services companies in Provident’s and SB One’s markets could adversely affect operations; and (10) an economic slowdown could adversely affect credit quality and loan originations. Additional factors, that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in SB One’s and Provident’s reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available on the SEC’s Internet site (http://www.sec.gov).
Provident and SB One caution that the foregoing list of factors is not exhaustive. All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to Provident or SB One or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Provident and SB One do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.
Important Additional Information and Where to Find It
This Current Report on Form 8-K does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the Merger. No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended, and no offer to sell or solicitation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful.
In connection with the Merger, Provident will file with the SEC a registration statement on Form S-4 (the “Registration Statement”) that will include a proxy statement of SB One and a prospectus of Provident (the “Proxy Statement/Prospectus”), and each of Provident and SB One may file with the SEC other relevant documents concerning the Merger. The definitive Proxy Statement/Prospectus will be mailed to shareholders of SB One. Shareholders and investors are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the Merger carefully and in their entirety when they become available and any other relevant documents filed with the SEC by Provident and SB One, as well as any amendments or supplements to those documents, because they will contain important information about Provident, SB One and the Merger.
Free copies of the Proxy Statement/Prospectus, as well as other filings containing information about Provident and SB One, may be obtained at the SEC’s website, www.sec.gov, when they are filed. You will also be able to obtain these documents, when they are filed, free of charge, by directing a request to Provident Financial Services, Inc., 100 Wood Avenue South, P.O. Box 1001, Iselin, New Jersey 08830, Attention: Corporate Secretary, Telephone: (732) 590-9200 or to SB One Bancorp, 95 State Route 17, Paramus, New Jersey 07652, Attention: Corporate Secretary, Telephone: (844) 256-7328, or by accessing Provident’s website at www.provident.bank under the tab “Investor Relations” and then under the heading “SEC Filings” or by accessing SB One’s website at www.sbone.bank under the tab “Investor Relations” and then under the heading “SEC Filings”. The information on Provident’s and SB One’s websites is not, and shall not be deemed to be, a part of this Current Report on Form 8-K or incorporated into other filings either company makes with the SEC.
Participants in the Solicitation
Provident, SB One and their respective directors, and certain of their executive officers and employees may be deemed to be participants in the solicitation of proxies from the shareholders of SB One in connection with the Merger. Information about Provident’s directors and executive officers is available in its proxy statement for its 2019 annual meeting of stockholders, which was filed with the SEC on March 15, 2019, and information about SB One’s directors and executive officers is available in its proxy statement for its 2019 annual meeting of shareholders, which was filed with the SEC on March 25, 2019. Information regarding all of the persons who may, under the rules of the SEC, be deemed participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Proxy Statement/Prospectus regarding the Merger and other relevant materials to be filed with the SEC when they become available. Free copies of these documents may be obtained as described in the preceding paragraph.
| Item 9.01. | Financial Statements and Exhibits |
| (a) |
Financial statements of businesses acquired. None. | |||||||
| (b) |
Pro forma financial information. None. | |||||||
| (c) |
Shell company transactions: None. | |||||||
| (d) |
Exhibits. | |||||||
| 2.1 |
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| 10.1 |
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| 10.2 |
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| 10.3 |
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| 10.4 |
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| 10.5 |
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| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
| * | Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any document so furnished. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| PROVIDENT FINANCIAL SERVICES, INC. | ||||||
| DATE: March 12, 2020 |
By: |
/s/ Christopher Martin | ||||
| Christopher Martin | ||||||
| Chairman, President and Chief Executive Officer |
Exhibit 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
PROVIDENT FINANCIAL SERVICES, INC.
AND
SB ONE BANCORP
DATED AS OF MARCH 11, 2020
TABLE OF CONTENTS
| ARTICLE I CERTAIN DEFINITIONS | 1 | |||||
| 1.1. | Certain Definitions. |
1 | ||||
| ARTICLE II THE MERGER | 7 | |||||
| 2.1. | Merger. |
7 | ||||
| 2.2. | Effective Time. |
8 | ||||
| 2.3. | Certificate of Incorporation and Bylaws. |
8 | ||||
| 2.4. | Directors and Officers of Surviving Corporation. |
8 | ||||
| 2.5. | Effects of the Merger. |
8 | ||||
| 2.6. | Tax Consequences. |
8 | ||||
| 2.7. | Additional Actions. |
8 | ||||
| 2.8. | Alternative Structure |
9 | ||||
| 2.9. | Bank Merger. |
9 | ||||
| ARTICLE III CONVERSION OF SHARES | 9 | |||||
| 3.1. | Conversion of SBBX Common Stock; Merger Consideration. |
9 | ||||
| 3.2. | Procedures for Exchange of SBBX Common Stock. |
10 | ||||
| 3.3. | SBBX Equity Awards. |
12 | ||||
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SBBX | 13 | |||||
| 4.1. | General. |
13 | ||||
| 4.2. | Organization. |
13 | ||||
| 4.3. | Capitalization. |
14 | ||||
| 4.4. | Authority; No Violation. |
15 | ||||
| 4.5. | Consents and Approvals. |
16 | ||||
| 4.6. | Financial Statements;Securities Documents; Reports. |
16 | ||||
| 4.7. | Taxes. |
17 | ||||
| 4.8. | Material Contracts; Leases; Defaults. |
18 | ||||
| 4.9. | Ownership of Property; Insurance Coverage. |
19 | ||||
| 4.10. | Legal Proceedings. |
20 | ||||
| 4.11. | Compliance With Applicable Law. |
20 | ||||
| 4.12. | Employee Benefit Plans. |
22 | ||||
| 4.13. | Brokers, Finders and Financial Advisors. |
23 | ||||
| 4.14. | Environmental Matters. |
24 | ||||
| 4.15. | Loan Portfolio and Investment Securities. |
24 | ||||
| 4.16. | Related Party Transactions. |
25 | ||||
| 4.17. | Required Vote. |
26 | ||||
| 4.18. | Registration Obligations. |
26 | ||||
| 4.19. | Risk Management Instruments. |
26 | ||||
| 4.20. | Opinion of Financial Advisor. |
26 | ||||
| 4.21. | Trust Accounts. |
26 | ||||
| 4.22. | Intellectual Property. |
27 | ||||
| 4.23. | Insurance Subsidiary. |
27 | ||||
| 4.24. | Labor Matters. |
27 | ||||
| 4.25. | No Material Adverse Effect |
28 | ||||
| 4.26. | SBBX Information Supplied. |
28 | ||||
| 4.27. | No Other Representations or Warranties |
28 | ||||
| ARTICLE V REPRESENTATIONS AND WARRANTIES OF PFS | 28 | |||||
| 5.1. | General. |
28 | ||||
| 5.2. | Organization. |
29 | ||||
| 5.3. | Capitalization. |
29 | ||||
| 5.4. | Authority; No Violation. |
30 | ||||
| 5.5. | Consents and Approvals. |
31 | ||||
(i)
| 5.6. | Financial Statements; Securities Documents; Reports |
31 | ||||
| 5.7. | Taxes. |
32 | ||||
| 5.8. | Ownership of Property; Insurance Coverage. |
33 | ||||
| 5.9. | Legal Proceedings. |
33 | ||||
| 5.10. | Compliance With Applicable Law. |
34 | ||||
| 5.11. | Employee Benefit Plans. |
35 | ||||
| 5.12. | Environmental Matters. |
36 | ||||
| 5.13. | Brokers, Finders and Financial Advisors |
37 | ||||
| 5.14. | Intellectual Property |
37 | ||||
| 5.15. | Labor Matters |
37 | ||||
| 5.16. | No Material Adverse Effect |
37 | ||||
| 5.17. | Risk Management Instruments |
37 | ||||
| 5.18. | Loan Portfolio |
38 | ||||
| 5.19. | PFS Information Supplied |
38 | ||||
| 5.20. | No Other Representation or Warranties |
38 | ||||
| ARTICLE VI COVENANTS OF SBBX | 39 | |||||
| 6.1. | Conduct of Business. |
39 | ||||
| 6.2. | Current Information. |
42 | ||||
| 6.3. | Access to Properties and Records. |
43 | ||||
| 6.4. | Financial and Other Statements. |
43 | ||||
| 6.5. | Maintenance of Insurance. |
44 | ||||
| 6.6. | Disclosure Supplements. |
44 | ||||
| 6.7. | Consents and Approvals of Third Parties. |
44 | ||||
| 6.8. | Best Efforts. |
44 | ||||
| 6.9. | Failure to Fulfill Conditions. |
44 | ||||
| 6.10. | No Solicitation. |
45 | ||||
| 6.11. | Board of Directors and Committee Meetings |
47 | ||||
| 6.12. | Shareholder Litigation |
48 | ||||
| 6.13. | Employee Benefits |
48 | ||||
| ARTICLE VII COVENANTS OF PFS | 48 | |||||
| 7.1. | Conduct of Business. |
48 | ||||
| 7.2. | Regulatory Filings Relating to Merger. |
48 | ||||
| 7.3. | Maintenance of Insurance |
48 | ||||
| 7.4. | Disclosure Supplements. |
49 | ||||
| 7.5. | Consents and Approvals of Third Parties. |
49 | ||||
| 7.6. | Best Efforts. |
49 | ||||
| 7.7. | Failure to Fulfill Conditions. |
49 | ||||
| 7.8. | Employee Benefits. |
49 | ||||
| 7.9. | Directors and Officers Indemnification and Insurance. |
50 | ||||
| 7.10. | Stock Listing. |
51 | ||||
| 7.11. | Current Information |
51 | ||||
| 7.12. | Stock Reserve. |
52 | ||||
| 7.13. | Representation on PFS and Provident Bank Boards |
52 | ||||
| ARTICLE VIII REGULATORY AND OTHER MATTERS | 52 | |||||
| 8.1. | SBBX Shareholder Meeting. |
52 | ||||
| 8.2. | Proxy Statement-Prospectus. |
53 | ||||
| 8.3. | Regulatory Approvals. |
53 | ||||
| 8.4. | Exemption from Liability under Section 16(b) |
54 | ||||
| 8.5. | Dividends |
54 | ||||
| 8.6. | Assumption of SBBX Debt |
54 | ||||
| 8.7. | No Control of Other Party’s Business |
55 | ||||
(ii)
| ARTICLE IX CLOSING CONDITIONS | 55 | |||||
| 9.1. | Conditions to Each Party’s Obligations under this Agreement. |
55 | ||||
| 9.2. | Conditions to the Obligations of PFS under this Agreement. |
56 | ||||
| 9.3. | Conditions to the Obligations of SBBX under this Agreement. |
56 | ||||
| ARTICLE X THE CLOSING | 57 | |||||
| 10.1. | Time and Place. |
57 | ||||
| 10.2. | Deliveries at the Pre-Closing and the Closing. |
57 | ||||
| ARTICLE XI TERMINATION, AMENDMENT AND WAIVER | 57 | |||||
| 11.1. | Termination. |
57 | ||||
| 11.2. | Effect of Termination. |
59 | ||||
| 11.3. | Amendment, Extension and Waiver. |
60 | ||||
| ARTICLE XII MISCELLANEOUS | 61 | |||||
| 12.1. | Confidentiality. |
61 | ||||
| 12.2. | Public Announcements. |
61 | ||||
| 12.3. | Survival. |
61 | ||||
| 12.4. | Notices. |
61 | ||||
| 12.5. | Parties in Interest. |
62 | ||||
| 12.6. | Complete Agreement. |
62 | ||||
| 12.7. | Counterparts. |
62 | ||||
| 12.8. | Severability. |
62 | ||||
| 12.9. | Governing Law; Jurisdiction. |
63 | ||||
| 12.10. | Confidential Supervisory Information. |
63 | ||||
| 12.11. | Interpretation. |
63 | ||||
| 12.12. | Specific Performance; Jurisdiction. |
63 | ||||
| 12.13. | Waiver of Jury Trial. |
64 | ||||
Exhibit A Form of Voting Agreement for SB One Bancorp Directors and Executive Officers
Exhibit B Form of Bank Merger Agreement
(iii)
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is dated as of March 11, 2020, by and between Provident Financial Services, Inc., a Delaware corporation (“PFS”), and SB One Bancorp, a New Jersey corporation (“SBBX”).
WHEREAS, PFS owns all of the issued and outstanding capital stock of Provident Bank, a New Jersey chartered savings bank; and
WHEREAS, SBBX owns all of the issued and outstanding capital stock of SB One Bank, a New Jersey chartered commercial bank; and
WHEREAS, the Board of Directors of each of PFS and SBBX (i) has determined that this Agreement and the business combination and related transactions contemplated hereby are in the best interests of their respective companies and shareholders, (ii) has determined that this Agreement and the transactions contemplated hereby are consistent with and in furtherance of their respective business strategies, and (iii) has adopted a resolution approving this Agreement and declaring its advisability; and
WHEREAS, in accordance with the terms of this Agreement, SBBX will merge with and into PFS (the “Merger”); and
WHEREAS, as a condition to the willingness of PFS to enter into this Agreement, each of the directors and certain executive officers of SBBX have entered into a Voting Agreement, substantially in the form of Exhibit A hereto, dated as of the date hereof, with PFS (the “Voting Agreements”), pursuant to which each such director and executive officer has agreed, among other things, to vote all shares of common stock of SBBX owned by such person or entity in favor of the approval of this Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth in the Voting Agreements; and
WHEREAS, the parties intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and that this Agreement be and is hereby adopted as a “plan of reorganization” within the meaning of Sections 354 and 361 of the Code; and
WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the business transactions described in this Agreement and to prescribe certain conditions thereto.
NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. Certain Definitions.
As used in this Agreement, the following terms have the following meanings (unless the context otherwise requires, references to Articles and Sections refer to Articles and Sections of this Agreement).
“Acquisition Proposal” shall have the meaning set forth in Section 6.10(a).
“Acquisition Transaction” shall have the meaning set forth in Section 6.10(a).
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“Affiliate” shall mean any Person who directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person and, without limiting the generality of the foregoing, includes any executive officer or director of such Person and any Affiliate of such executive officer or director.
“Agreement” shall mean this agreement, and any amendment hereto.
“Bank Merger” shall mean the merger of SB One Bank with and into Provident Bank, with Provident Bank as the surviving institution, in accordance with the terms of the Bank Merger Agreement.
“Bank Merger Agreement” shall mean the Agreement and Plan of Merger by and between Provident Bank and SB One Bank, in substantially the form of Exhibit B annexed to this Agreement.
“Bank Merger Certificate” shall have the meaning set forth in Section 2.9.
“Bank Regulator” shall mean any Federal or state banking regulator, including but not limited to the NJDBI, the FDIC and the FRB, which regulates PFS, Provident Bank, SBBX or SB One Bank, as the case may be.
“BHCA” shall mean the Bank Holding Company Act of 1956, as amended.
“Burdensome Condition” shall have the meaning set forth in Section 8.3.
“Business Day” means Monday through Friday of each week, except a legal holiday recognized as such by the U.S. government or any day on which banking institutions in the State of New Jersey are authorized or obligated to close.
“Chosen Courts” shall have the meaning set forth in Section 12.9.
“Closing” shall have the meaning set forth in Section 2.2.
“Closing Date” shall have the meaning set forth in Section 2.2.
“COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Confidentiality Agreement” shall mean the confidentiality agreement referred to in Section 12.1 of this Agreement.
“CRA” shall have the meaning set forth in Section 4.11.5.
“DGCL” shall mean the Delaware General Corporation Law.
“Effective Time” shall mean the date and time specified pursuant to Section 2.2 hereof as the effective time of the Merger.
“Enforceability Exceptions” shall have the meaning set forth in Section 4.4.1.
“Environmental Laws” shall mean any applicable federal, state or local law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any governmental entity relating to (1) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), and/or (2) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of
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Materials of Environmental Concern. The term Environmental Laws includes without limitation (a) the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. §9601, et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §6901, et seq; the Clean Air Act, as amended, 42 U.S.C. §7401, et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. §1251, et seq; the Toxic Substances Control Act, as amended, 15 U.S.C. §2601, et seq.; the Emergency Planning and Community Right to Know Act, 42 U.S.C. §11001, et seq.; the Safe Drinking Water Act, 42 U.S.C. §300f, et seq.; and all comparable state and local laws, and (b) any common law (including without limitation common law that may impose strict liability) that may impose liability or obligations for injuries or damages due to the presence of or exposure to any Materials of Environmental Concern.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” shall have the meaning set forth in Section 5.11.4.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Exchange Agent” shall have the meaning set forth in Section 3.2.1.
“Exchange Fund” shall have the meaning set forth in Section 3.2.2.
“Exchange Ratio” shall have the meaning set forth in Section 3.1.3.
“FDIC” shall mean the Federal Deposit Insurance Corporation or any successor thereto.
“FHLB” shall mean the Federal Home Loan Bank of New York.
“Fractional Share Consideration” shall have the meaning set forth in Section 3.1.4.
“FRB” shall mean the Board of Governors of the Federal Reserve System.
“GAAP” shall mean accounting principles generally accepted in the United States of America, consistently applied with prior practice.
“Governmental Entity” shall mean any Federal or state court, administrative agency or commission or other governmental authority or instrumentality.
“IRS” shall mean the United States Internal Revenue Service.
“Knowledge” as used with respect to a Person (including references to such Person being aware of a particular matter) shall mean those facts that are actually known by, (i) as to PFS, those persons set forth in PFS Disclosure Schedule 1.1, and (ii) as to SBBX, those persons set forth in SBBX Disclosure Schedule 1.1, and in each case shall include any facts, matters or circumstances set forth in any written notice from any Bank Regulator or any other material written notice received by such Person.
“Material Adverse Effect” shall mean, with respect to PFS or SBBX, respectively, any effect that (i) is material and adverse to the financial condition, results of operations or business of PFS and the PFS Subsidiaries taken as a whole, or of SBBX and the SBBX Subsidiaries, taken as a whole, or (ii) materially impairs or would reasonably be expected to materially impair the ability of either SBBX, on the one hand, or PFS, on the other hand, to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the transactions contemplated by this Agreement; provided that “Material Adverse Effect” shall not be deemed to include the impact of (a) changes in laws and regulations affecting banks or thrift institutions or their holding companies generally, or interpretations thereof by courts or governmental agencies,
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(b) changes in GAAP or regulatory accounting principles generally applicable to financial institutions and their holding companies, (c) actions and omissions of a party hereto (or any of its Subsidiaries) taken with the prior written consent of the other party, (d) the announcement of this Agreement and the transactions contemplated hereby, and compliance with this Agreement on the business, financial condition or results of operations of the parties and their respective subsidiaries, including the expenses incurred by the parties hereto in consummating the transactions contemplated by this Agreement, (e) changes in national or international political or social conditions including the impact of pandemics or the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (f) a decline in the trading price of a party’s common stock or the failure, in and of itself, to meet earnings projections or internal financial forecasts (it being understood that the underlying cause of such decline or failure may be taken into account in determining whether a Material Adverse Effect has occurred), (g) the expenses incurred by either party in negotiating, documenting, effecting and consummating the transactions contemplated by this Agreement, or (h) changes caused by the impact of the execution or announcement of the Agreement and the consummation of the transactions contemplated hereby on relationships with customers or employees (including the loss of personnel subsequent to the date of this Agreement); except, with respect to subclauses (a), (b) and (e), to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of SBBX and the SBBX Subsidiaries, taken as a whole, or PFS and the PFS Subsidiaries, taken as a whole, as the case may be, as compared to other companies in the financial services industry.
“Material Contracts” shall have the meaning set forth in Section 4.8.3.
“Materials of Environmental Concern” shall mean pollutants, contaminants, wastes, toxic substances, petroleum and petroleum products, and any other hazardous or toxic materials regulated under Environmental Laws.
“Merger” shall have the meaning set forth in the preamble.
“Merger Consideration” shall have the meaning set forth in Section 3.1.3.
“Merger Registration Statement” shall mean the registration statement, together with all amendments, filed with the SEC under the Securities Act for the purpose of registering shares of PFS Common Stock to be offered to holders of SBBX Common Stock in connection with the Merger.
“New Certificate” shall have the meaning set forth in Section 3.1.3.
“NJBCA” shall mean the New Jersey Business Corporation Act.
“NJDBI” shall mean the New Jersey Department of Banking and Insurance.
“Notice of Superior Proposal” shall have the meaning set forth in Section 6.10(e).
“NYSE” shall mean the New York Stock Exchange.
“Old Certificate” shall have the meaning set forth in Section 3.1.3.
“Pension Plan” shall have the meaning set forth in Section 4.12.2.
“Per Share Stock Consideration” shall mean the product of (i) the Exchange Ratio times (ii) the PFS Closing Price.
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“Person” shall mean any individual, corporation, partnership, joint venture, association, trust or “group” (as that term is defined under the Exchange Act).
“Personal Data” shall have the meaning set forth in Section 4.11.1.
“PFS” shall mean Provident Financial Services, Inc., a Delaware corporation, with its principal executive offices located at 239 Washington Street, Jersey City, New Jersey 07302.
“PFS Closing Price” shall mean the average of the closing sales price of a share of PFS Common Stock, as reported on NYSE for the ten (10) consecutive trading days ending on the fifth trading day preceding the Closing Date.
“PFS Common Stock” shall have the meaning set forth in Section 5.3.1.
“PFS Defined Benefit Plan” shall have the meaning set forth in Section 5.11.4.
“PFS Disclosure Schedule” shall mean a written disclosure schedule delivered by PFS to SBBX specifically referring to the appropriate section of this Agreement.
“PFS Financial Statements” shall mean the (i) the audited consolidated balance sheets (including related notes and schedules) of PFS as of December 31, 2019 and 2018 and the consolidated statements of income, comprehensive income, stockholders’ equity and cash flows (including related notes and schedules, if any) of PFS and subsidiaries for each of the three years ended December 31, 2019, 2018 and 2017, as set forth in PFS’s annual report for the year ended December 31, 2019, and (ii) the unaudited interim consolidated financial statements of PFS as of the end of and for the period ending each calendar quarter following December 31, 2019, as filed by PFS in its Securities Documents.
“PFS Preferred Stock” shall have the meaning set forth in Section 5.3.1.
“PFS Regulatory Agreement” shall have the meaning set forth in Section 5.10.4.
“PFS Regulatory Reports” shall have the meaning set forth in Section 5.6.1.
“PFS Stock Benefit Plans” shall mean the Provident Financial Services, Inc. 2019 Long-Term Equity Incentive Plan, the Provident Financial Services, Inc. Amended and Restated Long-Term Equity Incentive Plan and the Provident Financial Services, Inc. 2008 Long-Term Equity Incentive Plan.
“PFS Subsidiary” shall mean any entity, of which twenty-five percent (25%) or more of the capital stock is owned, either directly or indirectly, by PFS or Provident Bank, except any corporation the stock of which is held in the ordinary course of the lending activities of Provident Bank.
“Provident Bank” shall mean Provident Bank, a New Jersey chartered savings bank, with its main office located at 239 Washington Street, Jersey City, New Jersey 07302, which is a wholly owned subsidiary of PFS.
“Proxy Statement-Prospectus” shall have the meaning set forth in Section 8.2.1.
“Regulatory Approvals” shall mean the approval (or waiver of approval requirements) of any Bank Regulator that is necessary in connection with the consummation of the Merger and the Bank Merger and the related transactions contemplated by this Agreement.
“Representatives” has the meaning set forth in Section 6.10(a).
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“Rights” shall mean warrants, options, rights, convertible securities, stock appreciation rights and other arrangements or commitments which obligate an entity to issue or dispose of any of its capital stock or other ownership interests or which provide for compensation based on the equity appreciation of its capital stock.
“SB One Bank” shall mean SB One Bank, a New Jersey chartered commercial bank, with its headquarters located at 95 State Route 17, Paramus, New Jersey, 07652.
“SBBX” shall mean SB One Bancorp, a New Jersey corporation, with its headquarters located at 95 State Route 17, Paramus, New Jersey, 07652.
“SBBX Common Stock” shall have the meaning set forth in Section 4.3.1.
“SBBX Compensation and Benefit Plans” has the meaning set forth in Section 4.12.1.
“SBBX Disclosure Schedule” shall mean a written disclosure schedule delivered by SBBX to PFS specifically referring to the appropriate section of this Agreement.
“SBBX Financial Statements” shall mean (i) the audited balance sheets (including related notes and schedules, if any) of SBBX as of December 31, 2019 and 2018, and the statements of operations and comprehensive income, changes in shareholders’ equity and cash flows (including related notes and schedules, if any) of SBBX for each of the years ended December 31, 2019 and 2018, and (ii) the unaudited interim financial statements of SBBX as of the end of and for the period ending each calendar quarter following December 31, 2019, as filed by SBBX in its Securities Documents.
“SBBX Insurance Agent” shall have the meaning set forth in Section 4.23(a).
“SBBX Insurance Subsidiary” shall have the meaning set forth in Section 4.23(a).
“SBBX Recommendation” shall have the meaning set forth in Section 8.1(a).
“SBBX Regulatory Reports” shall have the meaning set forth in Section 4.6.1.
“SBBX Restricted Stock” shall mean a share of SBBX Common Stock subject to restrictions granted under the SBBX Stock Benefit Plans and related award agreements.
“SBBX Shareholders Meeting” shall have the meaning set forth in Section 8.1(a).
“SBBX Stock Benefit Plans” shall mean the Sussex Bancorp 2013 Equity Incentive Plan and the SB One Bancorp 2019 Equity Incentive Plan.
“SBBX Stock Option” shall mean an option to purchase shares of SBBX Common Stock granted pursuant to the SBBX Stock Benefit Plans and related option agreements.
“SBBX Subordinated Notes” shall mean the 5.75% Fixed-to-Floating Rate Subordinated Notes due December 22, 2026 issued by SBBX.
“SBBX Subsequent Determination” shall have the meaning set forth in Section 6.10(e).
“SBBX Subsidiary” shall mean any entity, of which more than twenty-five percent (25%) or more of the capital stock is owned, either directly or indirectly, by SBBX or SB One Bank, except any corporation the stock of which is held in the ordinary course of the lending activities of SB One Bank.
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“SBBX TPS” shall mean the Capital Securities issued by Sussex Capital Trust II on June 26, 2007, with a maturity date of September 15, 2037, and the related Junior Subordinated Deferrable Interest Debentures issued by SBBX.
“SEC” shall mean the Securities and Exchange Commission or any successor thereto.
“Securities Act” shall mean the Securities Act of 1933, as amended.
“Securities Documents” shall mean all reports, offering circulars, proxy statements, registration statements and all other documents filed, or required to be filed, pursuant to the Securities Laws.
“Securities Laws” shall mean the Securities Act; the Exchange Act; the Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940, as amended; the Trust Indenture Act of 1939, as amended, and the rules and regulations of the SEC promulgated thereunder.
“Security Breach” shall have the meaning set forth in Section 4.11.3.
“Superior Proposal” shall have the meaning set forth in Section 6.10(b).
“Surviving Corporation” shall have the meaning set forth in Section 2.1 hereof.
“Tax” or “Taxes” shall mean all federal, state, local, and foreign income, excise, gross receipts, ad valorem, profits, gains, property, capital, sales, transfer, use, license, payroll, employment, social security, severance, unemployment, withholding, duties, excise, windfall profits, intangibles, franchise, backup withholding, value added, alternative or add-on minimum, estimated and other taxes, charges, levies or like assessments together with all penalties and additions to tax and interest thereon.
“Tax Return” shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, supplied or required to be supplied to a Governmental Entity.
“Termination Date” shall mean January 31, 2021.
“Voting Agreements” shall have the meaning set forth in the preamble.
“WARN Act” shall have the meaning set forth in Section 7.8.5.
Other terms used herein are defined in the preamble and elsewhere in this Agreement.
ARTICLE II
THE MERGER
2.1. Merger.
Subject to the terms and conditions of this Agreement, at the Effective Time: (a) SBBX shall merge with and into PFS, with PFS as the resulting or surviving corporation (the “Surviving Corporation”); and (b) the separate existence of SBBX shall cease and all of the rights, privileges, powers, franchises, properties, assets, liabilities and obligations of SBBX shall be vested in and assumed by the Surviving Corporation. As part of the Merger, each share of SBBX Common Stock (other than the Exception Shares) will be converted into the right to receive the Merger Consideration pursuant to the terms of Article III hereof.
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2.2. Effective Time.
The closing (“Closing”) shall be that date and time (the “Closing Date”) selected by PFS upon no less than two business days written notice to SBBX, and shall occur no later than the close of business on the fifth business day following the satisfaction or (to the extent permitted by applicable law) waiver of the conditions set forth in Article IX (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or (to the extent permitted by applicable law) waiver of those conditions), or such other date and time that may be mutually agreed to in writing by the parties. On or before the Closing Date, PFS and SBBX, respectively, shall cause to be filed (i) a certificate of merger with the Secretary of State of the State of Delaware in accordance with the DGCL and (ii) a certificate of merger with the Secretary of State of the State of New Jersey. The Merger shall become effective as of the date and time specified in the certificates of merger (such date and time, the “Effective Time”).
2.3. Certificate of Incorporation and Bylaws.
The Certificate of Incorporation and Bylaws of PFS as in effect immediately prior to the Effective Time shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation, until thereafter amended as provided therein and by applicable law.
2.4. Directors and Officers of Surviving Corporation.
Subject to Section 7.13, the directors and officers of PFS immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation.
2.5. Effects of the Merger.
At and after the Effective Time, the Merger shall have the effects as set forth in the DGCL and the NJBCA.
2.6. Tax Consequences.
It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a “plan of reorganization” as that term is used in Sections 354 and 361 of the Code. From and after the date of this Agreement and until the Closing, each party hereto shall use its best efforts to cause the Merger to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken which action or failure to act could prevent the Merger from qualifying as a reorganization under Section 368(a) of the Code. Following the Closing, neither PFS, nor any of its affiliates, shall knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act could cause the Merger to fail to qualify as a reorganization under Section 368(a) of the Code.
2.7. Additional Actions.
If, at any time after the Effective Time, PFS shall consider or be advised that any further deeds, assignments or assurances in law or any other acts are necessary or desirable to (i) vest, perfect or confirm, of record or otherwise, in PFS its right, title or interest in, to or under any of the rights, properties or assets of SBBX, or (ii) otherwise carry out the purposes of this Agreement, SBBX and its officers and directors shall be deemed to have granted to PFS an irrevocable power of attorney to execute and deliver, in such official corporate capacities, all such deeds, assignments or assurances in law or any other acts as are necessary or desirable to (a) vest, perfect or confirm, of record or otherwise, in PFS its right, title or interest in, to or under any of the rights, properties or assets of SBBX or (b) otherwise carry out the purposes of this Agreement, and the officers and directors of PFS are authorized in the name of SBBX or otherwise to take any and all such action.
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2.8. Alternative Structure.
PFS may, at any time prior to the Effective Time, change the method of effecting the combination of PFS and SBBX, and Provident Bank and SB One Bank, respectively, (including the provisions of this Article II) if and to the extent it deems such change to be necessary, appropriate or desirable; provided, however, that no such change shall (a) alter or change the Merger Consideration; (b) adversely affect the tax treatment of SBBX’s shareholders pursuant to this Agreement; (c) adversely affect the tax treatment of PFS or SBBX pursuant to this Agreement; or (d) be reasonably likely to materially impede or delay consummation of the transactions contemplated by this Agreement. In the event PFS makes such a change, SBBX agrees to execute an appropriate amendment to this Agreement in order to reflect such change.
2.9. Bank Merger.
Subject to the terms and conditions of the Bank Merger Agreement, and in accordance with federal and state law, SB One Bank will merge with and into Provident Bank, and Provident Bank shall be the surviving institution. The Bank Merger shall become effective immediately following the Effective Time, at which time the Bank Merger shall be consummated. Prior to the Effective Time, SBBX shall cause SB One Bank, and PFS shall cause Provident Bank, to execute such certificates of merger and such other documents and certificates as are necessary to make the Bank Merger effective (the “Bank Merger Certificate”) immediately following the Effective Time.
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of SBBX Common Stock; Merger Consideration.
At the Effective Time, by virtue of the Merger and without any action on the part of PFS, SBBX or the holders of any of the shares of SBBX Common Stock, the Merger shall be effected in accordance with the following terms:
3.1.1. Each share of PFS Common Stock that is issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding following the Effective Time and shall not be affected by the Merger.
3.1.2. Each share of SBBX Common Stock issued and outstanding immediately prior to the Effective Time that is held by SBBX as treasury stock or held by SBBX, any Subsidiary of SBBX, PFS or any Subsidiary of PFS (all such shares of SBBX Common Stock, but excluding shares of SBBX Common Stock held in any employee benefit plans or related trust accounts, managed accounts, mutual funds and the like or otherwise held in any fiduciary or agency capacity or as a result of debts previously contracted, the “Exception Shares”) shall automatically be canceled and retired and shall cease to exist, and no consideration shall be paid or provided with respect thereto.
3.1.3. Subject to Section 3.1.4, each share of SBBX Common Stock that is issued and outstanding immediately prior to the Effective Time (other than the Exception Shares but including SBBX Restricted Stock) shall be converted into the right to receive 1.357 (the “Exchange Ratio”) validly issued, fully paid and nonassessable shares of PFS Common Stock (the “Merger Consideration”). Each share of SBBX Common Stock converted into the right to receive the Merger Consideration pursuant to this Article III shall no longer be outstanding and shall automatically be canceled and shall cease to exist as of the Effective Time, and each certificate previously representing any such shares of SBBX Common Stock (each, an “Old Certificate”, it being understood that any reference herein to “Old Certificate” shall be deemed to include reference to book-entry account statements relating to the ownership of shares of SBBX Common Stock) shall thereafter represent only the right to receive (x) the Merger Consideration in accordance with, and subject to, this Section 3.1.3 and
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the other terms of this Article III, (y) cash in lieu of fractional shares that the shares of SBBX Common Stock represented by such Old Certificate have been converted into the right to receive pursuant to this Section 3.1.3 and Section 3.1.4, without any interest thereon, and (z) any dividends or distributions that the holder thereof has the right to receive pursuant to Section 3.2.3, in the case of each of the foregoing, without interest and subject to all applicable withholding of Tax in accordance with Section 3.2.7. Old Certificates previously representing shares of SBBX Common Stock shall be exchanged for evidence of shares in book-entry form or, at PFS’s option, certificates (collectively, referred to herein as “New Certificates”), representing the Merger Consideration (together with any dividends or distributions with respect thereto and cash in lieu of fractional shares issued in consideration therefor) upon the surrender of such Old Certificates in accordance with Section 3.2.1, without any interest thereon and subject to all applicable withholding of Tax in accordance with Section 3.2.7.
3.1.4. Notwithstanding anything to the contrary contained herein, no New Certificates or scrip representing fractional shares of PFS Common Stock shall be issued upon the surrender for exchange of Old Certificates, no dividend or distribution with respect to PFS Common Stock shall be payable on or with respect to any fractional share interests, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a shareholder of PFS. In lieu of the issuance of any such fractional share, PFS shall, following the Effective Time, pay to each former holder of SBBX Common Stock who otherwise would be entitled to receive a fractional share of PFS Common Stock, an amount in cash, rounded to the nearest cent and without interest, determined by multiplying (i) the fraction of a share (rounded to the nearest thousandth when expressed in decimal form) of PFS Common Stock that such holder would otherwise have been entitled to receive pursuant to Section 3.1.3 and (ii) the PFS Closing Price (the “Fractional Share Consideration”). For purposes of determining any fractional share interest, all shares of SBBX Common Stock owned by a SBBX shareholder shall be combined so as to calculate the maximum number of whole shares of PFS Common Stock issuable to such SBBX shareholder.
3.1.5. If, prior to the Effective Time, the outstanding shares of PFS Common Stock or SBBX Common Stock shall have been changed into a different number or kind of shares or securities, in any such case as a result of a recapitalization, stock split, stock dividend, reclassification, reverse stock split or there shall be any extraordinary dividend or distribution, an appropriate and proportionate adjustment shall be made to the Exchange Ratio to give holders of SBBX Common Stock the same economic effect as contemplated by this Agreement prior to such event.
3.2. Procedures for Exchange of SBBX Common Stock.
3.2.1. Exchange of Certificates. Prior to the Effective Time, PFS shall designate a bank or trust company reasonably acceptable to SBBX to act as the exchange agent in connection with the Merger (the “Exchange Agent”). As promptly as practicable after the Effective Time, but in no event later than five (5) business days thereafter, PFS shall cause the Exchange Agent to mail to each holder of record of one or more Old Certificates representing shares of SBBX Common Stock immediately prior to the Effective Time that have been converted at the Effective Time into the right to receive the Merger Consideration pursuant to Section 3.1 (i) a letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the Old Certificates shall pass, only upon proper delivery of the Old Certificates (or affidavits of loss in lieu thereof) to the Exchange Agent and (ii) instructions for use in effecting the surrender of the Old Certificates (or affidavits of loss in lieu thereof) in exchange for the Merger Consideration that such holder shall have become entitled to receive in accordance with, and subject to, Section 3.1.3, and any cash in lieu payable in respect of Fractional Share Consideration in accordance with Section 3.1.4, and any dividends or distributions to be paid pursuant to Section 3.2.3. From and after the Effective Time, upon proper surrender of the Old Certificates (or an affidavit of loss in lieu thereof) for exchange and cancellation to the Exchange Agent, together with such properly completed letter of transmittal duly executed, the holder of such Old Certificate shall be entitled to receive in exchange therefor, as applicable, (i) a New Certificate representing the Merger Consideration to which such holder of SBBX Common Stock shall have become entitled to receive in accordance with, and subject to, Section 3.1.3,
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and (ii) a check representing the amount of (A) any cash in lieu of fractional shares that such holder has the right to receive in respect of the surrendered Old Certificate pursuant to Section 3.1.4 and (B) any dividends or distributions that such holder has the right to receive in respect of the surrendered Old Certificate pursuant to Section 3.2.3, and the Old Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrue on any cash in lieu of fractional shares payable to holders of Old Certificates or any dividends payable under Section 3.2.3. Until each Old Certificate is surrendered as contemplated by this Section 3.2.1, such Old Certificate shall be deemed at all times after the Effective Time to represent only the right to receive, upon surrender, the Merger Consideration (together with any dividends or distributions with respect thereto and cash in lieu of fractional shares issued in consideration therefor, without interest), subject to all applicable withholding of Tax in accordance with Section 3.2.7. The Exchange Agent shall accept such Old Certificates (or affidavits of loss in lieu thereof) upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. If any New Certificate representing shares of PFS Common Stock is to be issued in a name other than that in which the Old Certificate surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that the Old Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other similar Taxes required by reason of the issuance of a New Certificate representing shares of PFS Common Stock in any name other than that of the registered holder of the Old Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable.
3.2.2. Exchange Fund. At or immediately prior to the Effective Time, PFS shall deposit, or shall cause to be deposited, with the Exchange Agent for the benefit of the holders of Old Certificates, for exchange in accordance with this Section 3.2 (a) New Certificates representing the aggregate Merger Consideration to be issued pursuant to Section 3.1.3 and exchanged pursuant to Section 3.2.1 and (b) cash in an amount sufficient to pay any cash in lieu of any fractional shares of PFS Common Stock (such cash and New Certificates described in the foregoing clauses (a) and (b), together with any dividends or distributions with respect thereto, being hereinafter referred to as the “Exchange Fund”); provided that no such investment income or losses thereon shall affect the amount of Merger Consideration payable to the holders of Old Certificates. Any interest and other income resulting from such investments shall be solely for the benefit of and paid to PFS.
3.2.3. Rights of Certificate Holders after the Effective Time. The holder of an Old Certificate that prior to the Merger represented issued and outstanding SBBX Common Stock shall have no rights, after the Effective Time, with respect to such SBBX Common Stock except to surrender the Old Certificate in exchange for the Merger Consideration as provided in this Agreement. No dividends or other distributions declared after the Effective Time with respect to PFS Common Stock shall be paid to the holder of any unsurrendered Old Certificate until the holder thereof shall surrender such Old Certificate in accordance with this Section 3.2. After the surrender of an Old Certificate in accordance with this Section 3.2, the record holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of PFS Common Stock represented by such Old Certificate.
3.2.4. Closing of Transfer Books. After the Effective Time, there shall be no transfers on the stock transfer books of SBBX of the SBBX Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Old Certificates representing such shares are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for the Merger Consideration (together with any dividends or distributions payable with respect thereto in accordance with Section 3.2.3 and cash in lieu of fractional shares issued in consideration therefor in accordance with Section 3.1.4), subject to all applicable withholding of Tax in accordance 3.2.7, that the holder presenting such Old Certificates is entitled to, as provided in this Section 3.2 as provided in this Section 3.2.
3.2.5. Return of Exchange Fund. Any portion of the Exchange Fund that remains unclaimed by the shareholders of SBBX for one (1) year after the Effective Time shall be delivered or paid to PFS. Any former
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shareholders of SBBX who have not theretofore complied with this Article III shall thereafter look only to PFS for payment of the Merger Consideration (together with any dividends or distributions payable with respect thereto in accordance with Section 3.2.3 and cash in lieu of fractional shares issued in consideration therefor in accordance with Section 3.1.4) in respect of each former share of SBBX Common Stock such shareholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of PFS, SBBX, the Surviving Corporation, the Exchange Agent or any other person shall be liable to any former holder of shares of SBBX Common Stock for any amount delivered in good faith to a public official pursuant to applicable abandoned property, escheat or similar laws.
3.2.6. Lost, Stolen or Destroyed Certificates. In the event any Old Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Old Certificate to be lost, stolen or destroyed and, if required by the Exchange Agent or PFS, the posting by such person of a bond in such amount as the Exchange Agent or PFS may reasonably require, the Exchange Agent or PFS, as applicable, will issue in exchange for such lost, stolen or destroyed Old Certificate the Merger Consideration (together with any dividends or distributions with respect thereto and cash in lieu of fractional shares issued in consideration therefor) in respect thereof pursuant to this Agreement.
3.2.7. Withholding. Notwithstanding anything to the contrary herein, PFS shall be entitled to deduct and withhold, or cause the Exchange Agent to deduct and withhold, from the Merger Consideration, any cash in lieu of fractional shares of PFS Common Stock, cash dividends or distributions payable pursuant to Article III or any other amounts otherwise payable pursuant to this Agreement to any holder of SBBX Common Stock such amounts as PFS (or any Affiliate thereof) or the Exchange Agent are required to deduct and withhold with respect to the making of such payment under the Code, or any applicable provision of U.S. federal, state, local or non-U.S. Tax law. To the extent that such amounts are properly withheld by PFS or the Exchange Agent, and paid over to the appropriate Governmental Entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the SBBX Common Stock in respect of which the deduction and withholding were made by PFS or the Exchange Agent.
3.2.8. Reservation of Shares. PFS shall reserve for issuance a sufficient number of shares of PFS Common Stock for the purpose of issuing shares of PFS Common Stock to the SBBX shareholders in accordance with this Article III.
3.3. SBBX Equity Awards.
3.3.1. Treatment of SBBX Stock Options. At the Effective Time, each SBBX Stock Option, whether vested or unvested, that is outstanding and unexercised shall be canceled and converted, automatically and without any action on the part of the holder thereof, into the right to receive an amount of cash equal to the product of (i) the excess of (A) the Per Share Stock Consideration, over (B) the exercise price of such SBBX Stock Option, multiplied by (ii) the number of shares of SBBX Common Stock subject to said SBBX Stock Option (whether vested or unvested). Any SBBX Stock Option with an exercise price that equals or exceeds the Per Share Stock Consideration shall be canceled with no consideration being paid to the option holder with respect to such SBBX Stock Option. PFS, SBBX or any SBBX Subsidiary, as directed by PFS, shall pay the consideration described in this Section 3.3.1, less required withholding taxes, within five (5) Business Days following the Closing Date.
3.3.2. Treatment of SBBX Restricted Stock. Immediately prior to the Effective Time, each share of SBBX Restricted Stock that is outstanding as of immediately prior to the Effective Time shall fully vest (with any performance-based vesting condition to be determined based upon either: (i) the actual performance of the performance goals as of a date reasonably proximal to the Effective Time based upon pro-rated performance metrics through such date; or (ii) if actual performance is not determinable, achievement at target level) and shall be cancelled and converted at the Effective Time, automatically and without any action on the part of the holder thereof, into the right to receive (A) the Merger Consideration in respect of each share of SBBX Restricted Stock
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in accordance with Section 3.1.3, (B) cash in lieu of fractional shares that the shares of SBBX Common Stock have been converted into the right to receive pursuant to Section 3.1.3 and Section 3.1.4, and (C) any accrued but unpaid dividends or distributions on such shares of SBBX Restricted Stock. The Surviving Corporation shall issue the consideration described in this Section 3.3.2, less applicable tax withholdings, within five (5) business days following the Closing Date.
3.3.3. Certain Actions of SBBX. At or prior to the Effective Time, SBBX, the Board of Directors of SBBX and/or its compensation committee, as applicable, shall adopt resolutions and take any actions that are necessary to effectuate the provisions of this Section 3.3.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SBBX
4.1. General. SBBX represents and warrants to PFS that the statements contained in this Article IV are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article IV), except as set forth in the SBBX Disclosure Schedules delivered by SBBX to PFS on the date hereof, and except as to any representation or warranty which relates to a specific date. SBBX has made a good faith effort to ensure that the disclosure on each schedule of the SBBX Disclosure Schedules corresponds to the section referenced herein. However, for purposes of the SBBX Disclosure Schedules, (i) no such item is required to be set forth as an exception to a representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect, (ii) the mere inclusion of an item in the SBBX Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by SBBX that such item represents a material exception or fact, event or circumstance or that such item is reasonably likely to result in a Material Adverse Effect on SBBX and (iii) any disclosures made in the SBBX Disclosure Schedule with respect to a section of this Article IV shall be deemed to qualify any other section of this Article IV (A) specifically referenced or cross-referenced in such disclosure or (B) to the extent it is reasonably apparent on its face (notwithstanding the absence of a specific cross-reference) from a reading of the disclosure that such disclosure applies to such other sections of this Article.
4.2. Organization.
4.2.1. SBBX is a New Jersey corporation duly organized and validly existing and in good standing under the laws of the State of New Jersey, and is duly registered with the FRB as a bank holding company under the BHCA. SBBX has the corporate power to own its properties and assets, to incur its liabilities and to carry on its business as it is now being conducted. SBBX is duly licensed or qualified to do business in the states of the United States and foreign jurisdictions where its ownership or leasing of property or the conduct of its business requires such qualification, except where the failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect on SBBX.
4.2.2. SB One Bank is a bank duly organized, validly existing and in good standing under the laws of the State of New Jersey. SB One Bank has the full corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not have a Material Adverse Effect on SBBX. The deposits of SB One Bank are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due. SB One Bank is a member in good standing of the FHLB and owns the requisite amount of stock therein.
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4.2.3. SBBX Disclosure Schedule 4.2.3 lists every SBBX Subsidiary, and for each SBBX Subsidiary, its jurisdiction of incorporation, SBBX’s percentage ownership and the name and number of shares held by any other person who owns any stock. SBBX owns all the capital stock of the SBBX Subsidiaries, free and clear of any lien or encumbrance. Each SBBX Subsidiary (other than SB One Bank) is a corporation, limited liability company or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and each has all requisite company, partnership or corporate (as applicable) power and authority to own or lease its properties and assets and to carry on its business as now conducted, except where the failure to be so licensed, qualified or in good standing would not have a Material Adverse Effect on SBBX. Other than shares of capital stock of the SBBX Subsidiaries listed on SBBX Disclosure Schedule 4.2.3, SBBX does not own or control, directly or indirectly, or have the right to acquire directly or indirectly, an equity interest in any corporation, company, association, partnership, joint venture or other entity, except for FHLB stock, permissible equity interests held in the investment portfolios of SBBX or any SBBX Subsidiary, equity interests held by any SBBX Subsidiary in a fiduciary capacity and equity interests held in connection with the lending activities of SBBX or its Subsidiaries. There are no restrictions on the ability of any SBBX Subsidiary to pay dividends or distributions except, in the case of a SBBX Subsidiary that is a regulated entity, for restrictions on dividends or distributions generally applicable to all such regulated entities.
4.2.4. The minute books of SBBX and each SBBX Subsidiary since December 31, 2017 have been made available to PFS and accurately record, in all material respects, all material corporate actions of shareholders and boards of directors (including committees). The books and records of SBBX have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions.
4.2.5. SBBX has made available to PFS true and correct copies of the certificate of incorporation and bylaws of SBBX and each SBBX Subsidiary.
4.3. Capitalization.
4.3.1. The authorized capital stock of SBBX consists of (i) 15,000,000 shares of common stock, no par value per share (“SBBX Common Stock”) and (ii) 1,000,000 shares of preferred stock, no par value per share (“SBBX Preferred Stock”). As of the date hereof, there are (i) 9,273,375 shares of SBBX Common Stock issued and outstanding (excluding shares of treasury stock and shares of SBBX Restricted Stock), (ii) no shares or SBBX Preferred Stock issued and outstanding, (iii) 142,130 shares of SBBX Common Stock granted in respect of outstanding awards of SBBX Restricted Stock under the SBBX Stock Benefit Plans (for performance-based shares, based on achievement of target performance), (iv) 49,742 shares of SBBX Common Stock reserved for issuance upon the exercise of SBBX Stock Options granted under the SBBX Stock Benefit Plans, and (v) no other shares of capital stock or other voting securities of SBBX are issued, reserved for issuance of outstanding. All of the issued and outstanding shares of SBBX Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable and free of preemptive rights issued and outstanding. There are 231,207 shares of SBBX Common Stock held by SBBX as treasury stock.
4.3.2. The authorized capital stock of SB One Bank consists of 2,000,000 shares of common stock, no par value (“SB One Bank Common Stock”), of which 1,180,000 shares of SB One Bank Common Stock are issued and outstanding. All the issued and outstanding shares of SB One Bank Common Stock are (i) validly issued, fully paid and nonassessable and free of preemptive rights, and (ii) owned by SBBX free and clear of any liens, encumbrances, charges, restrictions or rights of third parties of any kind whatsoever. Except as set forth in SBBX Disclosure Schedule 4.3.2, either SBBX or SB One Bank owns all the outstanding shares of capital stock of each SBBX Subsidiary free and clear of all liens, security interests, pledges, charges, encumbrances, agreements and restrictions of any kind or nature.
4.3.3. Except for outstanding SBBX Stock Options and awards of SBBX Restricted Stock, neither SBBX nor any SBBX Subsidiary is bound by any Rights of any character relating to the purchase, sale or
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issuance or voting of, or right to receive dividends or other distributions on any shares of SBBX Common Stock, or any other security of SBBX or any securities representing the right to vote, purchase or otherwise receive any shares of SBBX Common Stock or any other security of SBBX. SBBX Disclosure Schedule 4.3.3 sets forth, as of the date hereof, the name of each holder of a SBBX Stock Option, identifying the number of shares each such individual may acquire pursuant to the exercise of such options, the grant and expiration dates, and the exercise price relating to the options held, and whether the SBBX Stock Option is an incentive stock option or a nonqualified stock option, as well as comparable information (if applicable) for all outstanding awards of SBBX Restricted Stock. Except for the awards of SBBX Stock Options and SBBX Restricted Stock set forth in SBBX Disclosure Schedule 4.3.3, there are no outstanding equity awards under the SBBX Stock Benefit Plans or otherwise.
4.3.4. Except as set forth in SBBX Disclosure Schedule 4.3.4, to SBBX’s Knowledge, no Person or “group” (as that term is used in Section 13(d)(3) of the Exchange Act), is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5% or more of the outstanding shares of SBBX Common Stock.
4.3.5. Except as set forth in SBBX Disclosure Schedule 4.3.5, no bonds, debentures, trust-preferred securities or other similar indebtedness of SBBX or any SBBX Subsidiary are outstanding. No bonds, debentures, notes or other indebtedness issued by SBBX or any SBBX Subsidiary are outstanding (i) that have the right to vote on any matters on which shareholders of SBBX or any of SBBX Subsidiary may vote (or which is convertible into, or exchangeable for, securities having such right), or (ii) the value of which is directly based upon or derived from the capital stock, voting securities or other ownership interests of SBBX or any SBBX Subsidiary, are issued or outstanding.
4.4. Authority; No Violation.
4.4.1. SBBX has full corporate power and authority to execute and deliver this Agreement and, subject to the receipt of the Regulatory Approvals, and the approval of this Agreement by the holders of the SBBX Common Stock, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by SBBX and the consummation by SBBX of the transactions contemplated hereby, including the Merger, have been duly and validly authorized and approved by the Board of Directors of SBBX, and no other corporate proceedings on the part of SBBX, except for the requisite approval of the holders of the SBBX Common Stock, are necessary to consummate the transactions contemplated hereby, including the Merger. This Agreement has been duly and validly executed and delivered by SBBX, and subject to approval by the shareholders of SBBX and receipt of the Regulatory Approvals, and assuming due and valid execution and delivery of this Agreement by PFS, constitutes a valid and binding obligation of SBBX, enforceable against SBBX in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity (the “Enforceability Exceptions”). SBBX has approved the Bank Merger and the Bank Merger Agreement in its capacity as sole stockholder of SB One Bank.
4.4.2. Subject to receipt of Regulatory Approvals and SBBX’s and PFS’s compliance with any conditions contained therein, and receipt of the approval of the Merger Agreement and the Merger by the holders of the SBBX Common Stock, (A) the execution and delivery of this Agreement by SBBX, (B) the consummation of the transactions contemplated hereby, and (C) compliance by SBBX with any of the terms or provisions hereof will not (i) conflict with or result in a breach of any provision of the certificate of incorporation or bylaws of SBBX or any SBBX Subsidiary; (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to SBBX or any SBBX Subsidiary or to their respective properties or assets; or (iii) violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of SBBX or any SBBX Subsidiary under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
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license, lease, agreement or other investment or obligation to which SBBX or any SBBX Subsidiary is a party, or by which they or any of their respective properties or assets may be bound or affected, except for such violations, conflicts, breaches or defaults under clause (ii) or (iii) hereof which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on SBBX and the SBBX Subsidiaries taken as a whole.
4.5. Consents and Approvals.
Except as set forth in SBBX Disclosure Schedule 4.5 and for (a) filings with Bank Regulators, the receipt of the Regulatory Approvals, and compliance with any conditions contained therein, (b) the filing with the SEC of the Merger Registration Statement, including the Proxy Statement-Prospectus, any filings that are necessary under applicable requirements of the Exchange Act, and declaration of effectiveness of the Merger Registration Statement, (c) approval of the listing of PFS Common Stock to be issued in the Merger on the NYSE, (d) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of the shares of PFS Common Stock pursuant to this Agreement, (e) the filing of the Bank Merger Certificate and (f) approval of this Agreement by the requisite vote of the holders of the SBBX Common Stock, no consents, waivers or approvals of, or filings or registrations with, any Governmental Entity are necessary, and, to SBBX’s Knowledge, no consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary, to accomplish (x) the execution and delivery of this Agreement by SBBX, and (y) the completion of the Merger by SBBX and the Bank Merger by SB One Bank.
4.6. Financial Statements; Securities Documents; Reports.
4.6.1. Since January 1, 2017, SB One Bank has filed with the NJDBI and the FDIC, and SBBX has filed with the FRB, in correct form all reports and other documentation required to be filed under applicable laws and regulations (the “SBBX Regulatory Reports”), and if requested by PFS, SBBX promptly will deliver or make available to PFS accurate and complete copies of such reports and documentation. The SBBX Regulatory Reports, to the extent they contain financial information, have been prepared in all material respects in accordance with applicable regulatory accounting principles and practices throughout the periods covered by such reports. SBBX Disclosure Schedule 4.6.1 lists all examinations of SB One Bank conducted by the NJDBI and the FDIC, and all examinations of SBBX conducted by the FRB, since January 1, 2017 and the dates of any responses thereto submitted by SB One Bank and SBBX, respectively. Notwithstanding the foregoing, nothing in this Section 4.6.1 shall require SBBX to provide PFS with any confidential regulatory supervisory information of SB One Bank or SBBX.
4.6.2. The SBBX Financial Statements have been prepared in accordance with GAAP, and (including the related notes where applicable) fairly present in each case in all material respects (subject in the case of the unaudited interim statements to normal year-end adjustments and to any other adjustments described therein), the consolidated financial position, results of operations and cash flows of SBBX and the SBBX Subsidiaries on a consolidated basis as of and for the respective periods ending on the dates thereof, in accordance with GAAP during the periods involved, except as indicated in the notes thereto, or in the case of unaudited statements, as permitted by Form 10-Q.
4.6.3. At the date of each balance sheet included in the SBBX Financial Statements or the SBBX Regulatory Reports, SBBX had no liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such SBBX Financial Statements or SBBX Regulatory Reports or in the footnotes thereto which are not fully reflected or reserved against therein or fully disclosed in a footnote thereto, except for liabilities, obligations and loss contingencies which are not material, either individually or in the aggregate, or which were incurred in the ordinary course of business, consistent with past practice, and except for liabilities, obligations and loss contingencies which are within the subject matter of a specific representation and warranty herein and subject, in the case of any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.
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4.6.4. The records, systems, controls, data and information of SBBX and the SBBX Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of SBBX and the SBBX Subsidiaries or their accountants (including all means of access thereto and there from), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described below in this Section 4.6.4. SBBX (i) has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act, and (ii) has disclosed based on its most recent evaluations, to its outside auditors and the audit committee of the SBBX Board (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect SBBX’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in SBBX’s internal control over financial reporting. These disclosures (if any) were made in writing by management to SBBX’s auditors and audit committee and a copy has previously been made available to PFS.
4.6.5. Since December 31, 2017, (i) neither SBBX nor any SBBX Subsidiary, nor to the Knowledge of SBBX, any director, officer, employee, auditor, accountant or representative of SBBX or any SBBX Subsidiary, has received any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of SBBX or any SBBX Subsidiary or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that SBBX or any SBBX Subsidiary has engaged in illegal accounting or auditing practices, and (ii) no attorney representing SBBX or any SBBX Subsidiary has reported evidence of a material violation of Securities Laws, breach of fiduciary duty or similar violation with respect to SBBX or any SBBX Subsidiary, or any of their respective officers, directors, employees or agents to the Board of Directors of SBBX or any SBBX Subsidiary.
4.6.6. Since December 31, 2017, SBBX has filed with the SEC all forms, reports, schedules, registration statements, and definitive proxy statements required to be filed by it with the SEC (collectively, the “SBBX Securities Documents”). As of their respective dates, the SBBX Securities Documents complied as to form with the requirements of the Exchange Act or the Securities Act, as applicable, and the applicable rules and regulations of the SEC promulgated thereunder in all material respects. As of their respective dates and as of the date any information has been incorporated by reference therein, the SBBX Securities Documents did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein made, in light of the circumstances under which they were made, not misleading. As of the date of this Agreement, there are no outstanding comments from or unresolved issues raised by the SEC with respect to any of the SBBX Securities Documents.
4.6.7. SBBX and its officers and board of directors are in compliance with, and have complied in all material respects, with (1) the applicable provisions of Sarbanes-Oxley and the related rules and regulations promulgated under such act and the Exchange Act and (2) the applicable listing and corporate governance rules and regulations of NASDAQ.
4.7. Taxes.
SBBX and each SBBX Subsidiary has duly and timely filed (including all applicable extensions) all material Tax Returns in all jurisdictions in which Tax Returns are required to be filed by it, and all such Tax Returns are true, correct, and complete in all material respects. All material Taxes of SBBX and each SBBX Subsidiary (whether or not shown on any Tax Returns) that are due have been fully and timely paid. Each of SBBX and each SBBX Subsidiary has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, stockholder, independent contractor or other third party. The federal income Tax Returns of SBBX and each SBBX Subsidiary for all years to and including 2015 have
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been examined by the Internal Revenue Service (the “IRS”) or are Tax Returns with respect to which the applicable period for assessment under applicable law, after giving effect to extensions or waivers, has expired. Neither SBBX nor any SBBX Subsidiary has received written notice of assessment or proposed assessment in connection with any material amount of Taxes, and there are no threatened in writing or pending disputes, claims, audits, examinations or other proceedings regarding any material Tax of SBBX and or any SBBX Subsidiary or the assets of SBBX and any SBBX Subsidiary. There are no liens for material Taxes (except Taxes not yet due and payable) on any of the assets of SBBX or any SBBX Subsidiary. SBBX has made available to PFS true and complete copies of any private letter ruling requests, closing agreements or gain recognition agreements with respect to Taxes requested or executed in the last six (6) years. Neither SBBX nor any SBBX Subsidiary is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among SBBX and each SBBX Subsidiary). Neither SBBX nor any SBBX Subsidiary (A) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was SBBX) or (B) has any liability for the Taxes of any person (other than SBBX or any SBBX Subsidiary under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise). Neither SBBX nor any SBBX Subsidiary has been, within the past two (2) years or otherwise as part of a “plan (or series of related transactions)” within the meaning of Section 355(e) of the Code of which the Merger is also a part, a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock intending to qualify for tax-free treatment under Section 355 of the Code. Neither SBBX nor any SBBX Subsidiary has participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2). At no time during the past five (5) years has SBBX been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.
4.8. Material Contracts; Leases; Defaults.
4.8.1. Except as set forth in SBBX Disclosure Schedule 4.8.1, neither SBBX nor any SBBX Subsidiary is a party to or subject to: (i) any employment agreement, change in control agreement, consulting or severance agreement with any past (but only to the extent obligations of SBBX or any SBBX Subsidiary remain outstanding thereunder) or present officer or director of SBBX or any SBBX Subsidiary, except for “at will” arrangements; (ii) any collective bargaining agreement with any labor union relating to employees of SBBX or any SBBX Subsidiary; (iii) any agreement which by its terms limits the payment of dividends by SBBX or any SBBX Subsidiary; (iv) any instrument evidencing or related to material indebtedness for borrowed money whether directly or indirectly, by way of purchase money obligation, conditional sale, lease purchase, guaranty or otherwise, in respect of which SBBX or any SBBX Subsidiary is an obligor to any person, which instrument evidences or relates to indebtedness other than deposits, repurchase agreements, FHLB advances, bankers’ acceptances, and “treasury tax and loan” accounts and transactions in “federal funds” in each case established in the ordinary course of business consistent with past practice, or which contains financial covenants or other restrictions (other than those relating to the payment of principal and interest when due) which would be applicable on or after the Closing Date to PFS, Provident Bank or any PFS Subsidiary; (v) any other agreement, written or oral, that obligates SBBX or any SBBX Subsidiary for the payment of more than $25,000 annually or for the payment of more than $50,000 over its remaining term, which is not terminable without cause on 60 days’ or less notice without penalty or payment, (vi) that is a material intellectual property license or under which SBBX or any SBBX Subsidiary has licensed to others the right to use any intellectual property owned by SBBX or any SBBX Subsidiary, other than licenses for commercial “off-the-shelf” or “shrink-wrap” software that have not been modified or customized for SBBX or any SBBX Subsidiary other than through customization tools made available by the applicable licensor, (vii) that provides any rights to shareholders of SBBX, including registration, preemptive or anti-dilution rights or rights to designate members of or observers to SBBX’s or any SBBX Subsidiary’s Board of Directors or (viii) any agreement (other than this Agreement), contract, arrangement, commitment or understanding (whether written or oral) that restricts or limits in any material way the conduct of business by SBBX or any SBBX Subsidiary (it being understood that any non-compete or similar
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provision shall be deemed material, but any limitation on the scope of any license granted under any such agreement shall not be deemed material).
4.8.2. Each real estate lease that requires the consent of the lessor or its agent of the Merger or Bank Merger by virtue of the terms of any such lease, is listed in SBBX Disclosure Schedule 4.8.2 identifying the section of the lease that contains such prohibition or restriction.
4.8.3. True and correct copies of agreements, contracts, arrangements and instruments referred to in Sections 4.8.1 and 4.8.2 (“Material Contracts”) have been made available to PFS on or before the date hereof, and are in full force and effect on the date hereof and SBBX has not (nor, to the Knowledge of SBBX, has any other party to any such contract, arrangement or instrument) materially breached any provision of, or is not in material default in any respect under any term of, any Material Contract, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a material default or breach. Except as listed on SBBX Disclosure Schedule 4.8.3, no party to any Material Contract will have the right to terminate any or all of the provisions of any such Material Contract as a result of the execution of, and the consummation of the transactions contemplated by, this Agreement.
4.8.4. Except as set forth in SBBX Disclosure Schedule 4.8.4, since December 31, 2019, through and including the date of this Agreement, neither SBBX nor any SBBX Subsidiary has (i) except for (A) normal increases for employees made in the ordinary course of business consistent with past practice (including as a result of promotions or the hiring of a new employee), (B) customary year-end bonuses in amounts consistent with past practice, or (C) as required by applicable law or the terms of SBBX Compensation and Benefit Plans listed on SBBX Disclosure Schedule 4.12.1, increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any executive officer, employee, or director from the amount thereof in effect as of December 31, 2019, granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay (except as required or permitted under the terms of SBBX Compensation and Benefit Plans listed on SBBX Disclosure Schedule 4.12.1, as in effect as of the date hereof), or paid any bonus, (ii) granted any options to purchase shares of SBBX Common Stock, any equity award under a SBBX Stock Benefit Plan, or any right to acquire any shares of its capital stock to any executive officer, director or employee of SBBX or any SBBX Subsidiary, (iii) made any material election for federal or state income tax purposes, (iv) made any material change in the credit policies or procedures of SBBX or any SBBX Subsidiary, the effect of which was or is to make any such policy or procedure less restrictive in any material respect, (v) made any material acquisition or disposition of any assets or properties, or entered into any contract for any such acquisition or disposition other than loans and loan commitments, (vi) entered into any lease of real or personal property requiring annual payments in excess of $100,000, other than in connection with foreclosed property or in the ordinary course of business consistent with past practice, (vii) changed any accounting methods, principles or practices of SBBX or any SBBX Subsidiary affecting their assets, liabilities or businesses, including any reserving, renewal or residual method, practice or policy or (viii) suffered any strike, work stoppage, slow-down, or other labor disturbance with respect to employees of SBBX or any SBBX Subsidiary.
4.9. Ownership of Property; Insurance Coverage.
4.9.1. SBBX and each SBBX Subsidiary has good and, as to real property, marketable title to all material assets and properties owned by SBBX or any SBBX Subsidiary in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the balance sheets contained in the SBBX Regulatory Reports and in the SBBX Financial Statements or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheets), subject to no material encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to FHLB, inter-bank credit facilities, or any transaction by SBBX acting in a fiduciary capacity, (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith, (iii) non-monetary liens affecting real property which do not adversely affect the value or
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use of such real property, and (iv) those described and reflected in the SBBX Financial Statements. SBBX and each SBBX Subsidiary, as lessee, has the right under valid and existing leases of real and personal properties used by SBBX or such SBBX Subsidiary in the conduct of their businesses to occupy or use all such properties as presently occupied and used by each of them.
4.9.2. With respect to all material agreements pursuant to which SBBX or any SBBX Subsidiary has purchased securities subject to an agreement to resell, if any, SBBX or any SBBX Subsidiary has a lien or security interest (which to SBBX’s Knowledge is a valid, perfected first lien) in the securities or other collateral securing the repurchase agreement, and the value of such collateral equals or exceeds the amount of the debt secured thereby.
4.9.3. SBBX and each SBBX Subsidiary are insured with reputable insurers against such risks and in such amounts that management of SBBX reasonably determined to be prudent, sufficient and consistent with industry practice, and SBBX and each SBBX Subsidiary are in compliance in all material respects with their insurance policies. Except as disclosed in SBBX Disclosure Schedule 4.9.3, neither SBBX nor any SBBX Subsidiary has received notice from any insurance carrier during the past five years that (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs (other than with respect to health or disability insurance) with respect to such policies of insurance will be materially increased. There are presently no material claims pending under such policies of insurance and no notices have been given by SBBX or any SBBX Subsidiary under such policies (other than with respect to health or disability insurance). All such insurance is valid and enforceable and in full force and effect, and within the last three years SBBX and each SBBX Subsidiary has received each type of insurance coverage for which it has applied and during such periods has not been denied indemnification for any material claims submitted under any of its insurance policies. SBBX Disclosure Schedule 4.9.3 identifies all material policies of insurance maintained by SBBX and the SBBX Subsidiaries.
4.10. Legal Proceedings.
Except as set forth in SBBX Disclosure Schedule 4.10, there is no suit, action, investigation or proceeding pending or, to SBBX’s Knowledge, threatened against or adversely affecting SBBX or any SBBX Subsidiary (and to SBBX’s Knowledge there are no facts or circumstances that reasonably could be expected to be the basis for any such suit, action or proceeding) (1) that involves a Governmental Entity or Bank Regulator, or (2) that, individually or in the aggregate, if determined adversely to SBBX or any such SBBX Subsidiary, would be (A) material to its businesses, or (B) reasonably likely to prevent or delay it from performing its obligations under, or consummating the transactions contemplated by, this Agreement. There is no injunction, order, award, judgment, settlement, decree or regulatory restriction imposed upon or entered into by SBBX or any SBBX Subsidiary (or that, upon consummation of the Merger, would apply to the Surviving Corporation or any of its affiliates) or to which their respective assets are subject.
4.11. Compliance With Applicable Law.
4.11.1. Except as set forth in SBBX Disclosure Schedule 4.11.1, to SBBX’s Knowledge, SBBX and each SBBX Subsidiary is in compliance in all material respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties, assets and deposits, its business, and its conduct of business and its relationship with its employees, including, without limitation, the Bank Secrecy Act, the USA PATRIOT Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act of 1977, the Fair Credit Reporting Act, the Truth in Lending Act, Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by the Consumer Financial Protection Bureau and all other applicable fair lending laws and other laws relating to discriminatory business practices and to the origination, sale and servicing of mortgage and consumer loans, and including laws relating to the privacy and security of data or information that constitutes
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personal data or personal information under applicable law (“Personal Data”). The Boards of Directors of SBBX and SB One Bank have adopted and SBBX and SB One Bank have implemented an anti-money laundering program that contains adequate and appropriate customer identification verification procedures, that has not been declared ineffective by any Governmental Entity and that meets the requirements of Sections 352 and 326 of the USA PATRIOT Act and the regulations thereunder.
4.11.2. Neither SBBX nor any SBBX Subsidiary has any Knowledge of, nor has SBBX or any SBBX Subsidiary been advised of, or has any reason to believe that any facts or circumstances exist, which would cause SBBX or any SBBX Subsidiary: (a) to be deemed not to be in satisfactory compliance with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by Bank Regulators of lower than “Satisfactory”; (b) to be deemed to be operating in violation of the federal Bank Secrecy Act, as amended, and its implementing regulations, the USA PATRIOT Act, and the regulations promulgated thereunder, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (c) to be deemed not to be in satisfactory compliance with the applicable requirements contained in any federal and state privacy or data security laws and regulations. Neither SBBX nor any SBBX Subsidiary is a party to any agreement with any individual or group regarding CRA matters.
4.11.3. SBBX (including SB One Bank) maintains a written information privacy and security program that maintains reasonable measures to protect the privacy, confidentiality and security of all Personal Data against any (i) loss or misuse of Personal Data, (ii) unauthorized or unlawful operations performed upon Personal Data, or (iii) other act or omission that compromises the security or confidentiality of Personal Data (clauses (i) through (iii), a “Security Breach”). To the knowledge of SBBX, neither SBBX nor any SBBX Subsidiary has experienced any Security Breach that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on SBBX. To the knowledge of SBBX, there are no data security or other technological vulnerabilities with respect to its information technology systems or networks that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on SBBX.
4.11.4. SBBX and each SBBX Subsidiary has all material permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities and Bank Regulators that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted except where the failure to hold such permits, licensees, authorizations, orders or approvals, or the failure to make such filings, applications or registrations would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on SBBX or SB One Bank; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect in all material respects and, to the Knowledge of SBBX, no suspension or cancellation of any such permit, license, certificate, order or approval is threatened or will result from the consummation of the transactions contemplated by this Agreement, subject to obtaining Regulatory Approvals.
4.11.5. Except as set forth in SBBX Disclosure Schedule 4.11.5, neither SBBX nor any SBBX Subsidiary is, or since December 31, 2017 has been, subject to any cease-and-desist or other order or enforcement action issued by, or a party to any written agreement, consent agreement or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or subject to any order or directive by, or ordered to pay any civil money penalty by, any Bank Regulator. Except as set forth in SBBX Disclosure Schedule 4.11.5, since December 31, 2017, neither SBBX nor any SBBX Subsidiary has received any written notification or, to SBBX’s Knowledge, any other communication from any Bank Regulator (i) asserting that SBBX or any SBBX Subsidiary is not in material compliance with any of the statutes, regulations or ordinances which such Bank Regulator enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization which is material to SBBX or any SBBX Subsidiary; (iii) requiring, or threatening to require, SBBX or any SBBX Subsidiary, or indicating that SBBX or any SBBX Subsidiary may be required, to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement with any federal or state governmental agency or authority which is charged with the supervision or
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regulation of banks or engages in the insurance of bank deposits restricting or limiting, or purporting to restrict or limit, in any material respect the operations of SBBX or any SBBX Subsidiary, including without limitation any restriction on the payment of dividends; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit, in any manner the operations of SBBX or any SBBX Subsidiary, including without limitation any restriction on the payment of dividends. The most recent regulatory rating given to SBBX and SB One Bank as to compliance with the Community Reinvestment Act (“CRA”) is “Satisfactory” or better.
4.12. Employee Benefit Plans.
4.12.1. SBBX Disclosure Schedule 4.12.1 includes a list of all bonus, incentive, deferred compensation, supplemental executive retirement plans, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock, stock option, stock appreciation, phantom stock, severance, welfare benefit plans (including paid time off policies and other material benefit policies and procedures), fringe benefit plans, employment, consulting, change in control agreements and all other material benefit practices, policies and arrangements maintained by SBBX or any SBBX Subsidiary (i) in which any employee or former employee, consultant or former consultant or director or former director of SBBX or any SBBX Subsidiary participates or (ii) to which any such employee, consultant or director is a party or is otherwise entitled to receive benefits (the “SBBX Compensation and Benefit Plans”), other than (A) offer letters for “at-will” employment that do not contain severance and (B) agreements and arrangements with vendors and other third-party service providers. Except as disclosed in SBBX Disclosure Schedule 4.12.1, neither SBBX nor any SBBX Subsidiary has any commitment to create any additional SBBX Compensation and Benefit Plan or to materially modify, change or renew any existing SBBX Compensation and Benefit Plan, except as required by applicable law or Governmental Entity, to maintain the qualified status thereof or in the ordinary course of business consistent with past practice. SBBX has made available to PFS true and correct copies of the SBBX Compensation and Benefit Plans.
4.12.2. Except as disclosed in SBBX Disclosure Schedule 4.12.2, to SBBX’s Knowledge, each SBBX Compensation and Benefit Plan has been operated and administered in all material respects in accordance with its terms and with applicable law, including, but not limited to, ERISA, the Code, the Securities Act, the Exchange Act, Patient Protection and Affordable Care Act, the Age Discrimination in Employment Act, COBRA, the Health Insurance Portability and Accountability Act (“HIPAA”) and any regulations or rules promulgated thereunder, and all material filings, disclosures and notices required by ERISA, the Code, the Securities Act, the Exchange Act, the Age Discrimination in Employment Act, COBRA and HIPAA and any other applicable law have been timely made or any interest, fines, penalties or other impositions for late filings have been paid in full, if due. Each SBBX Compensation and Benefit Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (a “Pension Plan”) and which is intended to be qualified under Section 401(a) of the Code is established pursuant to IRS-approved prototype or volume submitter documents or has received a favorable determination letter from the IRS, and to SBBX’s Knowledge there are no facts or circumstances which are reasonably likely to result in revocation of any such favorable determination letter. There is no pending or, to the Knowledge of SBBX, threatened material action, suit or claim relating to any of the SBBX Compensation and Benefit Plans (other than routine claims for benefits). SBBX has not engaged in a transaction, or omitted to take any action, with respect to any SBBX Compensation and Benefit Plan that would reasonably be expected to subject SBBX to a material unpaid tax or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
4.12.3. Neither SBBX nor any SBBX Subsidiary has ever maintained or contributed to or has any liability under a SBBX Compensation and Benefit Plan which is subject to Title IV of ERISA.
4.12.4. All material contributions required to be made under the terms of any SBBX Compensation and Benefit Plan have been timely made or are accrued on SBBX’s Financial Statements to the extent required by GAAP.
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4.12.5. Except as set forth in SBBX Disclosure Schedule 4.12.5, neither SBBX nor any SBBX Subsidiary has any obligation to provide post-employment health, life insurance, or disability insurance, under any SBBX Compensation and Benefit Plan, other than benefits mandated by Section 4980B of the Code or similar state law or contractually required subsidies for coverage for a limited period of time following a termination of employment. Except as set forth in SBBX Disclosure Schedule 4.12.5, to SBBX’s Knowledge, there has been no communication approved by SBBX’s management to employees of SBBX or any SBBX Subsidiary that would reasonably be expected to promise or guarantee such employees retiree health, life insurance, or disability insurance from SBBX.
4.12.6. Neither SBBX nor any SBBX Subsidiary maintains any SBBX Compensation and Benefit Plans covering employees who are not based in the United States.
4.12.7. With respect to each SBBX Compensation and Benefit Plan, if applicable, SBBX has provided or made available to PFS copies of the: (a) trust instruments and insurance contracts; (b) two most recent Forms 5500 filed with the IRS; (c) most recent actuarial reports and financial statements; (d) most recent summary plan description; (e) most recent determination letter issued by the IRS; (f) any Form 5300, 5310 or Form 5330 filed with the IRS within the last two years; and (g) most recent nondiscrimination tests performed under ERISA and the Code (including 401(k) and 401(m) tests).
4.12.8. Except as provided in SBBX Disclosure Schedule 4.12.8 and except for agreements and arrangements with vendors and other third-party service providers, the consummation of the Merger will not (alone or in combination with any other event, including, without limitation, any termination of employment or service at any time prior to or following the Effective Time) (a) entitle any employee, consultant or director of SBBX or any SBBX Subsidiary to any payment or benefit (including severance pay, change in control benefit, or similar compensation) or any increase in compensation, (b) result in the vesting or acceleration of any benefits under any SBBX Compensation and Benefit Plan, (c) result in any increase in benefits payable under any SBBX Compensation and Benefit Plan, or (d) entitle any current or former employee, director or consultant of SBBX to any actual or deemed payment (or benefit) which could reasonably be construed to constitute an “excess parachute payment” (as such term is defined in Section 280G(b)(1) of the Code).
4.12.9. Except as disclosed in SBBX Disclosure Schedule 4.12.9, neither SBBX nor any SBBX Subsidiary maintains any compensation plans, programs or arrangements under which payment is reasonably likely to become nondeductible, in whole or in part, for tax reporting purposes as a result of the limitations under Section 162(m) of the Code and the regulations issued thereunder, it being understood that SBBX makes no representation or warranty regarding the effect of the transactions or payments contemplated by this Agreement or any actions taken by PFS or any of its Subsidiaries or Affiliates on the deductibility of any compensation under Section 162(m) of the Code and the regulations issued thereunder.
4.12.10. Except as disclosed in SBBX Disclosure Schedule 4.12.10, all “nonqualified deferred compensation plans” (within the meaning of Section 409A of the Code) of SBBX or any SBBX Subsidiary are either exempt from, or in compliance in all material respects with, both in form and operation, Section 409A of the Code and the regulations issued thereunder.
4.12.11. SBBX Disclosure Schedule 4.12.11 sets forth, as of a date no more than five (5) Business Days preceding the date of this Agreement, a list of the full names of all officers, and employees of SBBX and each SBBX Subsidiary, their title and annual rate of base salary, and their date of hire.
4.13. Brokers, Finders and Financial Advisors.
SBBX has not, nor has any of its respective officers, directors, employees or agents, employed any broker, finder or financial advisor in connection with the transactions contemplated by this Agreement, or incurred any liability or commitment for any fees or commissions to any such person in connection with the transactions
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contemplated by this Agreement except for the retention of Keefe, Bruyette & Woods, Inc. (“KBW”) by SBBX and the fees payable pursuant thereto. A true and correct copy of the engagement agreements with KBW, setting forth the fees payable to KBW for services rendered to SBBX in connection with the Merger and transactions contemplated by this Agreement has been made available to PFS.
4.14. Environmental Matters.
4.14.1. To the Knowledge of SBBX, neither the conduct nor operation of its business nor any condition of any property currently or previously owned or operated by SBBX (including, without limitation, in a fiduciary or agency capacity), or on which it holds a lien, results or resulted in a violation of any Environmental Laws that is reasonably likely to impose a material liability (including a material remediation obligation) upon SBBX or any SBBX Subsidiary. To the Knowledge of SBBX, no condition has existed or event has occurred with respect to any such property that, with notice or the passage of time, or both, is reasonably likely to result in any material liability to SBBX or any SBBX Subsidiary by reason of any Environmental Laws. Neither SBBX nor any SBBX Subsidiary has during the past five years received any written notice from any Person or Governmental Entity that SBBX or the operation or condition of any property ever owned, operated, or held as collateral or in a fiduciary capacity by SBBX or any SBBX Subsidiary is currently in violation of or otherwise is alleged to have liability under any Environmental Laws or relating to Materials of Environmental Concern (including, but not limited to, responsibility (or potential responsibility) for the cleanup or other remediation of any Materials of Environmental Concern at, on, beneath, or originating from any such property) for which a material liability is reasonably likely to be imposed upon SBBX or any SBBX Subsidiary.
4.14.2. There is no suit, claim, action, demand, executive or administrative order, directive, investigation or proceeding pending or, to SBBX’s Knowledge, threatened, before any court, governmental agency or other forum against SBBX or any SBBX Subsidiary, (x) for alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (y) relating to the presence of or release into the environment of any Materials of Environmental Concern, whether or not occurring at or on a site owned, leased or operated by SBBX or any SBBX Subsidiary.
4.14.3. To SBBX’s Knowledge, there are no underground storage tanks on, in or under any properties owned or operated by SBBX or any SBBX Subsidiary, and to SBBX’s Knowledge, no underground storage tanks have been closed or removed from any properties owned or operated by SBBX or any SBBX Subsidiary except in compliance with Environmental Laws in all material respects.
4.15. Loan Portfolio and Investment Securities.
4.15.1. The allowance for loan losses reflected in SBBX’s audited consolidated balance sheet at December 31, 2019 was, and the allowance for loan losses shown on the balance sheets in SBBX’s Financial Statements for periods ending after December 31, 2019 will be, adequate under GAAP.
4.15.2. SBBX has made available to PFS a listing, as of December 31, 2019, by account, of: (A) all loans (including loan participations) of SB One Bank that have been accelerated during the past twelve months; (B) all loan commitments or lines of credit of SB One Bank which have been terminated by SB One Bank during the past twelve months by reason of a default or adverse developments in the condition of the borrower or other events or circumstances affecting the credit of the borrower; (C) each borrower, customer or other party which has notified SB One Bank during the past twelve months of, or has asserted against SB One Bank, in each case in writing, any “lender liability” or similar claim; (D) all loans, (1) that are contractually past due 60 days or more in the payment of principal and/or interest, (2) that are on non-accrual status, (3) that are contractually past due 90 days or more in the payment of principal and/or interest days or more and still accruing; (4) classified as troubled debt restructurings; (5) that as of the date of this Agreement are classified as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Watch list” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such loan
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and the identity of the obligor thereunder, (6) where, during the past three years, the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower’s ability to pay in accordance with such initial terms, or (7) where a specific reserve allocation exists in connection therewith; and (E) all assets classified by SB One Bank as real estate acquired through foreclosure or in lieu of foreclosure, including in-substance foreclosures, and all real estate owned and other assets currently held that were acquired through foreclosure or in lieu of foreclosure.
4.15.3. All loans receivable (including discounts) and accrued interest entered on the books of SB One Bank arose out of bona fide arm’s-length transactions and were made for good and valuable consideration in the ordinary course of SB One Bank’s business. All such loans are owned by SB One Bank free and clear of any liens.
4.15.4. (a) The notes and other evidences of indebtedness evidencing the loans described above, and all pledges, mortgages, deeds of trust and other collateral documents or security instruments relating thereto are, in all material respects, valid, true and genuine, and what they purport to be, (b) to the extent carried on the books and records of SBBX and any SBBX Subsidiary as secured loans, the loans described above have been secured by valid charges, mortgages, pledges, security interests, restrictions, claims, liens or encumbrances, as applicable, which have been perfected and (c) each loan described above is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, (except as may be limited by the Enforceability Exceptions).
4.15.5. SBBX and each SBBX Subsidiary has good and marketable title to all securities owned by it, free and clear of any Liens, except to the extent such securities are pledged in the ordinary course of business to secure obligations of SBBX or such SBBX Subsidiary. Such securities are valued on the books of SBBX in accordance with GAAP in all material respects. SBBX and each SBBX Subsidiary employs investment, securities, risk management and other policies, practices and procedures which SBBX believes are prudent and reasonable.
4.15.6. Neither SBBX nor any SBBX Subsidiary is now, or has been since December 31, 2016, subject to any fine, suspension, settlement or other contract or other administrative agreement or sanction by, or any reduction in any loan purchase commitment from, any Governmental Entity or Bank Regulator relating to the origination, sale or servicing of mortgage or consumer loans.
4.15.7. None of the agreements pursuant to which SBBX or any of its Subsidiaries has sold loans or pools of loans or participations in loans or pools of loans contains any obligation to repurchase such loans or interests therein solely on account of a payment default by the obligor on any such loan.
4.15.8. SBBX Disclosure Schedule 4.15.8 sets forth each loan participation entered into by SBBX or any of its Subsidiaries as of December 31, 2019. With respect to each such participation sold, SBBX or its Subsidiaries has in its files an opinion of counsel that such participation is a true sale.
4.16. Related Party Transactions.
Except as set forth in SBBX Disclosure Schedule 4.16, neither SBBX nor any SBBX Subsidiary is a party to any transaction (including any loan or other credit accommodation but excluding retail deposit transactions in the normal course of business) with any director, executive officer (or an immediate family member, as defined in SEC Regulation S-K Item 404, of such person), greater than 5% shareholder, or Affiliate of SBBX or any SBBX Subsidiary (other than a deposit relationship in the normal course of business). All such transactions (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other Persons, and (c) did not involve substantially more than the normal risk of collectability or present other unfavorable features
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(as such terms are used under Item 404 of SEC Regulation S-K promulgated under the Securities Act and the Exchange Act). No loan or credit accommodation to any director, executive officer (or an immediate family member, as defined in SEC Regulation S-K Item 404, of such person), greater than 5% shareholder, or Affiliate of SBBX is presently in default or, during the three year period prior to the date of this Agreement, has been in default or has been restructured, modified or extended. To the Knowledge of SBBX, neither SBBX nor any SBBX Subsidiary has been notified that principal and interest with respect to any such loan or other credit accommodation will not be paid when due or that the loan grade classification accorded such loan or credit accommodation by SBBX or any such any SBBX Subsidiary is inappropriate.
4.17. Required Vote.
The affirmative vote of a majority of the votes cast at the SBBX Shareholders Meeting by the holders of SBBX Common Stock entitled to vote thereon is the only shareholder approval required to approve this Agreement and the Merger under SBBX’s certificate of incorporation and the NJBCA. No “control share acquisition,” “business combination moratorium,” “fair price” or other form of antitakeover statute or regulation is applicable to this Agreement and the transactions contemplated hereby.
4.18. Registration Obligations.
Neither SBBX nor any SBBX Subsidiary is under any obligation, contingent or otherwise, which will survive the Effective Time by reason of any agreement to register any transaction involving any of its securities under the Securities Act.
4.19. Risk Management Instruments.
All material interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar risk management arrangements, whether entered into for SBBX’s or any SBBX Subsidiary’s own account or for the account of one or more of their customers (all of which are set forth in SBBX Disclosure Schedule 4.19), were in all material respects entered into in compliance with all applicable laws, rules, regulations and regulatory policies, and to the Knowledge of SBBX, with counterparties believed to be financially responsible at the time; and to SBBX’s Knowledge each of them constitutes the valid and legally binding obligation of SBBX any such SBBX Subsidiary, enforceable in accordance with its terms (except as enforceability 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), and is in full force and effect. Neither SBBX nor any SBBX Subsidiary, nor to the Knowledge of SBBX is any other party thereto, is in breach of any of its obligations under any such agreement or arrangement in any material respect.
4.20. Opinion of Financial Advisor.
Prior to the execution of this Agreement, the Board of Directors of SBBX has received an opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion, dated the same date) of KBW to the effect that, as of the date of such opinion, and based upon and subject to the factors, assumptions, and limitations set forth therein, the Exchange Ratio pursuant to this Agreement is fair from a financial point of view to the holders of SBBX Common Stock. Such opinion has not been amended or rescinded as of the date of this Agreement.
4.21. Trust Accounts.
Neither SBBX nor any SBBX Subsidiary exercises trusts powers or acts as a fiduciary in any manner requiring NJDBI or FDIC approval.
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4.22. Intellectual Property.
SBBX and the SBBX Subsidiaries own or, to SBBX’s Knowledge, possess valid and binding licenses and other rights (subject to expirations in accordance with their terms) to use all patents, copyrights, trade secrets, trade names, service marks and trademarks, which are material to the conduct of their business as currently conducted, each without payment, except for all license agreements under which license fees or other payments are due in the ordinary course of business, and except in each case the absence of which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on SBBX, and neither SBBX nor any SBBX Subsidiary has received any notice of conflict with respect thereto that asserts the rights of others. SBBX and the SBBX Subsidiaries have performed all the material obligations required to be performed, and is not in default in any respect, under any contract, agreement, arrangement or commitment relating to any of the foregoing. To the Knowledge of SBBX, the conduct of the business of SBBX and the SBBX Subsidiaries as currently conducted or proposed to be conducted does not, in any material respect, infringe upon, dilute, misappropriate or otherwise violate any intellectual property owned or controlled by any third party, except to such an extent as, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on SBBX.
4.23. Insurance Subsidiary.
4.23.1. Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on SBBX, (i) since January 1, 2017, at the time each agent, representative, producer, reinsurance intermediary, wholesaler, third-party administrator, distributor, broker, employee or other person authorized to sell, produce, manage or administer products on behalf of any SBBX Subsidiary (“SBBX Insurance Agent”) wrote, sold, produced, managed, administered or procured business for an SBBX Subsidiary, such SBBX Insurance Agent was, at the time the SBBX Insurance Agent wrote or sold business, duly licensed for the type of activity and business written, sold, produced, managed, administered or produced to the extent required by applicable law, (ii) no SBBX Insurance Agent has been since January 1, 2017, or to the Knowledge of SBBX is currently, in violation (or with or without notice or lapse of time or both, would be in violation) of any law, rule or regulation applicable to such SBBX Insurance Agent’s writing, sale, management, administration or production of insurance business for any SBBX Insurance Subsidiary (as defined below), and (iii) each SBBX Insurance Agent was appointed by SBBX or an SBBX Insurance Subsidiary in compliance with applicable insurance laws, rules and regulations and all processes and procedures undertaken with respect to such SBBX Insurance Agent were undertaken in compliance with applicable insurance laws, rules and regulations. “SBBX Insurance Subsidiary” means SB One Insurance Agency and each other SBBX Subsidiary through which insurance operations are conducted.
4.23.2. Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on SBBX, (i) since January 1, 2017, SBBX and the SBBX Insurance Subsidiaries have made all required notices, submissions, reports or other filings under applicable insurance holding company statutes, (ii) all contracts, agreements, arrangements and transactions in effect between any SBBX Insurance Subsidiary and any affiliate are in compliance in all material respects with the requirements of all applicable insurance holding company statutes, and (iii) each SBBX Insurance Subsidiary has operated and otherwise been in material compliance with all applicable insurance laws, rules and regulations.
4.24. Labor Matters.
There are no labor or collective bargaining agreements to which SBBX or any SBBX Subsidiary is a party. To the Knowledge of SBBX, there is no union organizing effort pending or, to the Knowledge of SBBX, threatened against SBBX or any SBBX Subsidiary. There is no labor strike, labor dispute (other than routine employee grievances that are not related to union employees), work slowdown, stoppage or lockout pending or, to the Knowledge of SBBX, threatened against SBBX or any SBBX Subsidiary. There is no unfair labor practice proceeding pending or, to the Knowledge of SBBX, threatened against SBBX or any SBBX Subsidiary (other
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than routine employee grievances that are not related to union employees). To the Knowledge of SBBX, SBBX and each SBBX Subsidiary is in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and is not engaged in any unfair labor practice, except for such noncompliance which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on SBBX.
4.25. No Material Adverse Effect.
Since December 31, 2019, no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SBBX. Except as set forth in SBBX Disclosure Schedule 4.25, since December 31, 2019, SBBX and each SBBX Subsidiary has carried on its businesses in all material respects in the ordinary course.
4.26. SBBX Information Supplied.
The information relating to SBBX, the SBBX Subsidiaries and its and their respective directors and officers to be contained in the Proxy Statement, Merger Registration Statement, or in any other document filed with any Bank Regulator or other Governmental Entity in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.
4.27. No Other Representations or Warranties.
Except for the representations and warranties made by SBBX in this Article IV, neither SBBX nor any other person makes any express or implied representation or warranty with respect to SBBX, its businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and SBBX hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither SBBX nor any other person makes or has made any representation or warranty to PFS, Provident Bank or any of its affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospective information relating to SBBX, any of its businesses, or (ii) except for the representations and warranties made by SBBX in this Article IV, any oral or written information presented to PFS or Provident Bank or any of its affiliates or representatives in the course of their due diligence investigation of SBBX, the negotiation of this Agreement or in the course of the transactions contemplated hereby. SBBX acknowledges and agrees that neither PFS, Provident Bank nor any other person has made or is making any express or implied representation or warranty other than those contained in Article V.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PFS
5.1. General.
PFS represents and warrants to SBBX that the statements contained in this Article V are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article V), except as set forth in the PFS Disclosure Schedules delivered by PFS to SBBX on the date hereof, and except as to any representation or warranty which relates to a specific date. PFS has made a good faith effort to ensure that the disclosure on each schedule of the PFS Disclosure Schedules corresponds to the section referenced herein. However, for purposes of the PFS Disclosure Schedules (i) no such item is required to be set forth as an exception to a representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect, (ii) the mere inclusion of an item in the PFS Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by PFS that such item
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represents a material exception or fact, event or circumstance or that such item is reasonably likely to result in a Material Adverse Effect on PFS and (iii) any disclosures made in the PFS Disclosure Schedule with respect to a section of this Article V shall be deemed to qualify any other section of this Article V (A) specifically referenced or cross-referenced in such disclosure or (B) to the extent it is reasonably apparent on its face (notwithstanding the absence of a specific cross-reference) from a reading of the disclosure that such disclosure applies to such other sections of this Article.
5.2. Organization.
5.2.1. PFS is a corporation duly organized and validly existing and in good standing under the laws of the State of Delaware, and is duly registered with the FRB as a bank holding company under the BHCA. PFS has elected to be, and qualifies as, a financial holding company under the BHCA. PFS has the corporate power to own its properties and assets, to incur its liabilities and to carry on its business as it is now being conducted. PFS is duly licensed or qualified to do business in the states of the United States and foreign jurisdictions where its ownership or leasing of property or the conduct of its business requires such qualification, except where the failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect on PFS.
5.2.2. Provident Bank is a savings bank duly organized, validly existing and in good standing under the laws of the State of New Jersey. Provident Bank has the full corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not have a Material Adverse Effect on PFS. The deposits of Provident Bank are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due. Provident Bank is a member in good standing of the FHLB and owns the requisite amount of stock therein.
5.2.3. PFS Disclosure Schedule 5.2.3 sets forth each PFS Subsidiary. Each PFS Subsidiary is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization.
5.2.4. The minute books of PFS and each PFS Subsidiary since December 31, 2017 accurately record, in all material respects, all material corporate actions of shareholders and boards of directors (including committees). The books and records of PFS have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions.
5.2.5. Prior to the date of this Agreement, PFS has made available to SBBX true and correct copies of the certificate of incorporation and bylaws of PFS and the PFS Subsidiaries.
5.3. Capitalization.
5.3.1. The authorized capital stock of PFS consists of 200,000,000 shares of common stock, $0.01 par value (the “PFS Common Stock”), of which 66,044,795 shares are issued and outstanding, and 50,000,000 shares of preferred stock, $0.01 par value (the “PFS Preferred Stock”), none of which are outstanding. All of the issued and outstanding shares of PFS Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable and free of preemptive rights. There are 17,383,016 shares of PFS Common Stock held by PFS as treasury stock. All of the issued and outstanding shares of PFS Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable and free of preemptive rights issued and outstanding. Except for shares issuable in connection with grants made under the PFS Stock Benefit Plans or as set forth in PFS Disclosure Schedule 5.3.1, neither PFS nor any PFS Subsidiary has or is bound by any Rights of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other
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distributions on any shares of PFS Common Stock, or any other security of PFS or any securities representing the right to vote, purchase or otherwise receive any shares of PFS Common Stock or any other security of PFS.
5.3.2. All the issued and outstanding shares of capital stock of Provident Bank are (i) validly issued, fully paid and nonassessable and free of preemptive rights, and (ii) owned by PFS free and clear of any liens, encumbrances, charges, restrictions or rights of third parties of any kind whatsoever.
5.3.3. Except as disclosed in the PFS Proxy Statement relating to its 2019 Annual Meeting of Shareholders, or as reflected in Schedules 13D or 13G as filed with the SEC subsequent to the Proxy Statement relating to the 2019 Annual Meeting of Shareholders, to the Knowledge of PFS, no Person or “group” (as that term is used in Section 13(d)(3) of the Exchange Act) is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5% or more of the outstanding shares of PFS Common Stock.
5.3.4. Except as set forth in PFS Disclosure Schedule 5.3.4, PFS owns all of the capital stock of each PFS Subsidiary, free and clear of any lien or encumbrance. Except for the PFS Subsidiaries, PFS does not possess, directly or indirectly, any material equity interest in any corporate entity, except for equity interests held in the investment portfolios of PFS Subsidiaries, equity interests held by PFS Subsidiaries in a fiduciary capacity, and equity interests held in connection with the lending activities of PFS Subsidiaries, including stock in the FHLB. Either PFS or any PFS Subsidiary owns all of the outstanding shares of capital stock of each PFS Subsidiary free and clear of all liens, security interests, pledges, charges, encumbrances, agreements and restrictions of any kind or nature.
5.3.5. No bonds, debentures, notes or other indebtedness issued by PFS or any of its Subsidiaries (i) having the right to vote on any matters on which shareholders or equityholders of PFS or any of its Subsidiaries may vote (or which is convertible into, or exchangeable for, securities having such right), or (ii) the value of which is directly based upon or derived from the capital stock, voting securities or other ownership interests of PFS or any of its Subsidiaries, are issued or outstanding.
5.4. Authority; No Violation.
5.4.1. PFS has full corporate power and authority to execute and deliver this Agreement and, subject to receipt of the Regulatory Approvals, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by PFS and the consummation by PFS of the transactions contemplated hereby, including the Merger, have been duly and validly authorized and approved by the Board of Directors of PFS, and no other corporate proceedings on the part of PFS are necessary to consummate the transactions contemplated hereby, including the Merger. This Agreement has been duly and validly executed and delivered by PFS, and subject to the receipt of the Regulatory Approvals, and assuming due and valid execution and delivery of this Agreement by SBBX, constitutes a valid and binding obligations of PFS, enforceable against them in accordance with its terms, subject to the Enforceability Exceptions. PFS has approved the Bank Merger Agreement and the Bank Merger in its capacity as the sole shareholder of Provident Bank.
5.4.2. Subject to receipt of Regulatory Approvals and SBBX and PFS’s compliance with any conditions contained therein, (A) the execution and delivery of this Agreement by PFS, (B) the consummation of the transactions contemplated hereby, and (C) compliance by PFS with any of the terms or provisions hereof will not (i) conflict with or result in a breach of any provision of the certificate of incorporation or bylaws of PFS or any PFS Subsidiary; (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to PFS or any PFS Subsidiary or to their respective properties or assets; or (iii) violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of PFS or any PFS Subsidiary under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other
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investment or obligation to which any of them is a party, or by which they or any of their respective properties or assets may be bound or affected, except for such violations, conflicts, breaches or defaults under clause (ii) or (iii) hereof which, either individually or in the aggregate, will not have a Material Adverse Effect on PFS.
5.5. Consents and Approvals.
Except for (a) filings with Bank Regulators, the receipt of the Regulatory Approvals, and compliance with any conditions contained therein, (b) the filing with the SEC of (i) the Merger Registration Statement, including the Proxy Statement-Prospectus and any filings that are necessary under applicable requirements of the Exchange Act, and declaration of effectiveness of the Merger Registration Statement, and (ii) such reports under Sections 13(a), 13(d), 13(g) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (c) approval of the listing of PFS Common Stock to be issued in the Merger on the NYSE, (d) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of the shares of PFS Common Stock pursuant to this Agreement, (e) the filing of the Bank Merger Certificate and (f) approval of this Agreement by the requisite vote of the shareholders of SBBX, no consents, waivers or approvals of, or filings or registrations with, any Governmental Entity are necessary, and, to PFS’s Knowledge, no consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary, in connection with (x) the execution and delivery of this Agreement by PFS, and (y) the completion of the Merger and the Bank Merger. No vote of the shareholders of PFS is required by law, the Certificate of Incorporation and Bylaws of PFS, NYSE listing standards or otherwise to approve this Agreement, the Merger or the other transactions contemplated by this Agreement.
5.6. Financial Statements; Securities Documents; Reports.
5.6.1. Since January 1, 2017, Provident Bank has filed with the NJDBI and the FDIC, and PFS has filed with the FRB, in correct form all reports and other documentation required to be filed under applicable laws and regulations (the “PFS Regulatory Reports”), and if requested by SBBX, PFS promptly will deliver or make available to SBBX accurate and complete copies of such reports and documentation. The PFS Regulatory Reports, to the extent they contain financial information, have been prepared in all material respects in accordance with applicable regulatory accounting principles and practices throughout the periods covered by such reports. Notwithstanding the foregoing, nothing in this Section 5.6.1 shall require PFS to provide PFS with any confidential regulatory supervisory information of Provident Bank or PFS.
5.6.2. The PFS Financial Statements have been prepared in accordance with GAAP, and (including the related notes where applicable) fairly present in each case in all material respects (subject in the case of the unaudited interim statements to normal year-end adjustments) the consolidated financial position, results of operations and cash flows of PFS and the PFS Subsidiaries on a consolidated basis as of and for the respective periods ending on the dates thereof, in accordance with GAAP during the periods involved, except as indicated in the notes thereto, or in the case of unaudited statements, as permitted by Form 10-Q.
5.6.3. At the date of each balance sheet included in the PFS Financial Statements or the PFS Regulatory Reports, PFS did not have any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such PFS Financial Statements or PFS Regulatory Reports or in the footnotes thereto which are not fully reflected or reserved against therein or fully disclosed in a footnote thereto, except for liabilities, obligations and loss contingencies which are not material individually or in the aggregate or which were incurred in the ordinary course of business, consistent with past practice, and except for liabilities, obligations and loss contingencies which are within the subject matter of a specific representation and warranty herein and subject, in the case of any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.
5.6.4. The records, systems, controls, data and information of PFS and the PFS Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic
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process, whether computerized or not) that are under the exclusive ownership and direct control of PFS and the PFS Subsidiaries or their accountants (including all means of access thereto and there from), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described below in this Section 5.6.4. PFS (i) has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act, and (ii) has disclosed based on its most recent evaluations, to its outside auditors and the audit committee of the PFS Board (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect PFS’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in PFS’s internal control over financial reporting. These disclosures (if any) were made in writing by management to PFS’s auditors and audit committee and a copy has previously been made available to SBBX.
5.6.5. Since December 31, 2017, (i) neither PFS nor any of its Subsidiaries nor, to the Knowledge of PFS, any director, officer, employee, auditor, accountant or representative of PFS or any of its Subsidiaries has received any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of PFS or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that PFS or any of its Subsidiaries has engaged in illegal accounting or auditing practices, and (ii) no attorney representing PFS or any of its Subsidiaries, whether or not employed by PFS or any of its Subsidiaries, has reported evidence of a material violation of Securities Laws, breach of fiduciary duty or similar violation by PFS or any of its officers, directors, employees or agents to the Board of Directors of PFS or any committee thereof or to any director or officer of PFS.
5.6.6. Since December 31, 2017, PFS has filed with the SEC all forms, reports, schedules, registration statements, and definitive proxy statements required to be filed by it with the SEC (collectively, the “PFS Securities Documents”). As of their respective dates, the PFS Securities Documents complied as to form with the requirements of the Exchange Act or the Securities Act, as applicable, and the applicable rules and regulations of the SEC promulgated thereunder in all material respects. As of their respective dates and as of the date any information has been incorporated by reference therein, the PFS Securities Documents did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein made, in light of the circumstances under which they were made, not misleading. As of the date of this Agreement, there are no outstanding comments from or unresolved issues raised by the SEC with respect to any of the PFS Securities Documents.
5.6.7. PFS and its officers and board of directors are in compliance with, and have complied in all material respects, with (1) the applicable provisions of Sarbanes-Oxley and the related rules and regulations promulgated under such act and the Exchange Act and (2) the applicable listing and corporate governance rules and regulations of NYSE.
5.7. Taxes.
PFS and each PFS Subsidiary has duly and timely filed (including all applicable extensions) all material Tax Returns in all jurisdictions in which Tax Returns are required to be filed by it, and all such Tax Returns are true, correct, and complete in all material respects. All material Taxes of PFS and each PFS Subsidiary (whether or not shown on any Tax Returns) that are due have been fully and timely paid. Each of PFS and each PFS Subsidiary has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, stockholder, independent contractor or other third party. Neither PFS nor any PFS Subsidiary has received written notice of assessment or proposed assessment in connection with any material amount of Taxes, and there are no threatened in writing or pending disputes, claims, audits, examinations or other proceedings regarding any material Tax of PFS and or any PFS Subsidiary or the assets of
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PFS and any PFS Subsidiary. There are no liens for material Taxes (except Taxes not yet due and payable) on any of the assets of PFS or any PFS Subsidiary. PFS has made available to PFS true and complete copies of any private letter ruling requests, closing agreements or gain recognition agreements with respect to Taxes requested or executed in the last six (6) years. Neither PFS nor any PFS Subsidiary is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among PFS and each PFS Subsidiary). Neither PFS nor any PFS Subsidiary (A) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was PFS) or (B) has any liability for the Taxes of any person (other than PFS or any PFS Subsidiary under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise). Neither PFS nor any PFS Subsidiary has been, within the past two (2) years or otherwise as part of a “plan (or series of related transactions)” within the meaning of Section 355(e) of the Code of which the Merger is also a part, a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock intending to qualify for tax-free treatment under Section 355 of the Code. Neither PFS nor any PFS Subsidiary has participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2). At no time during the past five (5) years has PFS been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.
5.8. Ownership of Property; Insurance Coverage.
5.8.1. PFS and each PFS Subsidiary has good and, as to real property, marketable title to all material assets and properties owned by PFS or each PFS Subsidiary in the conduct of their businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the balance sheets contained in the PFS Regulatory Reports and in the PFS Financial Statements or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheets), subject to no material encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to FHLB and FRB, inter-bank credit facilities, or any transaction by a PFS Subsidiary acting in a fiduciary capacity, (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith, (iii) non-monetary liens affecting real property which do not adversely affect the value or use of such real property, and (iv) those described and reflected in the PFS Financial Statements. PFS and the PFS Subsidiaries, as lessee, have the right under valid and existing leases of real and personal properties used by PFS and its Subsidiaries in the conduct of their businesses to occupy or use all such properties as presently occupied and used by each of them.
5.8.2. PFS and each PFS Subsidiary are insured with reputable insurers against such risks and in such amounts that management of PFS reasonably determined to be prudent, sufficient and consistent with industry practice, and PFS and each PFS Subsidiary are in compliance in all material respects with their insurance policies. Neither PFS nor any PFS Subsidiary has received notice from any insurance carrier during the past five years that (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs (other than with respect to health or disability insurance) with respect to such policies of insurance will be materially increased. There are presently no material claims pending under such policies of insurance and no notices have been given by PFS or any PFS Subsidiary under such policies (other than with respect to health or disability insurance). All such insurance is valid and enforceable and in full force and effect.
5.9. Legal Proceedings.
Except as set forth in PFS Disclosure Schedule 5.9, there is no suit, action, investigation or proceeding pending or, to PFS’ Knowledge, threatened against or adversely affecting PFS or any PFS Subsidiary (and to PFS’s Knowledge there are no facts or circumstances that reasonably could be expected to be the basis for any such suit, action or proceeding) (1) that involves a Governmental Entity or Bank Regulator, or (2) that, individually or in the aggregate, if determined adversely to PFS or any such PFS Subsidiary, would be
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(A) material to its businesses, or (B) reasonably likely to prevent or delay it from performing its obligations under, or consummating the transactions contemplated by, this Agreement. There is no injunction, order, award, judgment, settlement, decree or regulatory restriction imposed upon or entered into by PFS or any PFS Subsidiary (or that, upon consummation of the Merger, would apply to the Surviving Corporation or any of its affiliates) or to which their respective assets are subject.
5.10. Compliance With Applicable Law.
5.10.1. To PFS’s Knowledge, PFS and each PFS Subsidiary is in compliance in all material respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties, assets and deposits, its business, and its conduct of business and its relationship with its employees, including, without limitation, the Bank Secrecy Act, the USA PATRIOT Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act of 1977, the Fair Credit Reporting Act, the Truth in Lending Act, Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by the Consumer Financial Protection Bureau, and all other applicable fair lending laws and other laws relating to discriminatory business practices and to the origination, sale and servicing of mortgage and consumer loans, and including laws relating to the privacy and security of data or information that constitutes Personal Data. The Boards of Directors of PFS and Provident Bank have adopted and PFS and Provident Bank have implemented an anti-money laundering program that contains adequate and appropriate customer identification verification procedures, that has not been declared ineffective by any Governmental Entity and that meets the requirements of Sections 352 and 326 of the USA PATRIOT Act and the regulations thereunder.
5.10.2. Neither PFS nor any PFS Subsidiary has any Knowledge of, nor has PFS or any PFS Subsidiary been advised of, or has any reason to believe that any facts or circumstances exist, which would cause PFS or any PFS Subsidiary: (a) to be deemed not to be in satisfactory compliance with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by Bank Regulators of lower than “Satisfactory”; (b) to be deemed to be operating in violation of the federal Bank Secrecy Act, as amended, and its implementing regulations, the USA PATRIOT Act, and the regulations promulgated thereunder, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (c) to be deemed not to be in satisfactory compliance with the applicable requirements contained in any federal and state privacy or data security laws and regulations. Neither PFS nor any PFS Subsidiary is a party to any agreement with any individual or group regarding CRA matters.
5.10.3. PFS (including Provident Bank) maintains a written information privacy and security program that maintains reasonable measures to protect the privacy, confidentiality and security of all Personal Data against any Security Breach. To the knowledge of PFS, neither PFS nor any PFS Subsidiary has experienced any Security Breach that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on PFS. To the knowledge of PFS, there are no data security or other technological vulnerabilities with respect to its information technology systems or networks that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on PFS.
5.10.4. PFS and each PFS Subsidiary has all material permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities and Bank Regulators that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted except where the failure to hold such permits, licensees, authorizations, orders or approvals, or the failure to make such filings, applications or registrations would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on PFS or Provident Bank; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect in all material respects and, to the Knowledge of PFS, no suspension or cancellation of any such permit, license, certificate, order or approval is
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threatened or will result from the consummation of the transactions contemplated by this Agreement, subject to obtaining Regulatory Approvals.
5.10.5. Except as set forth in PFS Disclosure Schedule 5.10.5, neither PFS nor any PFS Subsidiary is, or since December 31, 2017 has been, subject to any cease-and-desist or other order or enforcement action issued by, or a party to any written agreement, consent agreement or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or subject to any order or directive by, or ordered to pay any civil money penalty by, any Bank Regulator. Except as set forth in PFS Disclosure Schedule 5.10.5, since December 31, 2017, neither PFS nor any PFS Subsidiary has received any written notification or, to PFS’s Knowledge, any other communication from any Bank Regulator (i) asserting that PFS or any PFS Subsidiary is not in material compliance with any of the statutes, regulations or ordinances which such Bank Regulator enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization which is material to PFS or any PFS Subsidiary; (iii) requiring, or threatening to require, PFS or any PFS Subsidiary, or indicating that PFS or any PFS Subsidiary may be required, to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement with any federal or state governmental agency or authority which is charged with the supervision or regulation of banks or engages in the insurance of bank deposits restricting or limiting, or purporting to restrict or limit, in any material respect the operations of PFS or any PFS Subsidiary, including without limitation any restriction on the payment of dividends; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit, in any manner the operations of PFS or any PFS Subsidiary, including without limitation any restriction on the payment of dividends (any such notice, communication, memorandum, agreement or order described in this sentence is hereinafter referred to as an “PFS Regulatory Agreement”). The most recent regulatory rating given to PFS and Provident Bank as to compliance with the CRA is “Satisfactory” or better.
5.10.6. Following the completion of the Merger, Provident Bank’s regulatory capital ratios shall be at or above the levels required for Provident Bank to be considered “well-capitalized” under applicable bank regulatory guidelines.
5.11. Employee Benefit Plans.
5.11.1. Each bonus, incentive, deferred compensation, supplemental executive retirement plans, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock, stock option, stock appreciation, phantom stock, welfare benefit plans (including paid time off policies), fringe benefit plans, employment, consulting, severance and change in control agreements, and all other material benefit practices, policies and arrangements maintained by PFS or any PFS Subsidiary (i) in which any employee or former employee, consultant or former consultant or director or former director of PFS or any PFS Subsidiary participates or (ii) to which any such employee, consultant or director is a party or is otherwise entitled to receive benefits (the “PFS Compensation and Benefit Plans”), to the Knowledge of PFS, has been operated and administered in all material respects in accordance with its terms and with applicable law, including, but not limited to, ERISA, the Code, the Securities Act, the Exchange Act, Patient Protection and Affordable Care Act, the Age Discrimination in Employment Act, COBRA, HIPAA and any regulations or rules promulgated thereunder, and all material filings, disclosures and notices required by ERISA, the Code, the Securities Act, the Exchange Act, the Age Discrimination in Employment Act, COBRA, HIPAA and any other applicable law have been timely made or any interest, fines, penalties or other impositions for late filings have been paid in full, if due. Except as disclosed in PFS Disclosure Schedule 5.11.1, neither PFS nor any PFS Subsidiary has any commitment to create any additional material PFS Compensation and Benefit Plan or to materially modify, change or renew any existing PFS Compensation and Benefit Plan, except as required by applicable law or Governmental Entity, to maintain the qualified status thereof or in the ordinary course of business consistent with past practice.
5.11.2. Each PFS Compensation and Benefit Plan which is a Pension Plan and which is intended to be qualified under Section 401(a) of the Code is established pursuant to IRS-approved prototype or volume
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submitter documents or has received a favorable determination letter from the IRS, and to PFS’s Knowledge, there are no factors or circumstances which are reasonably likely to result in revocation of any such favorable determination letter. There is no pending or, to the Knowledge of PFS, threatened material action, suit or claim relating to any of the PFS Compensation and Benefit Plans (other than routine claims for benefits). Neither PFS nor any PFS Subsidiary has engaged in a transaction, or omitted to take any action, with respect to any PFS Compensation and Benefit Plan that would reasonably be expected to subject PFS or any PFS Subsidiary to a material unpaid tax or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
5.11.3. All material contributions required to be made under the terms of any PFS Compensation and Benefit Plan have been timely made or are accrued on PFS’s Financial Statements in accordance with GAAP. PFS and its Subsidiaries have duly expensed and accrued as a liability the present value of future benefits under each applicable PFS Compensation and Benefit Plan for financial reporting purposes as required by GAAP.
5.11.4. No liability to any Governmental Entity, other than PBGC premiums arising in the ordinary course of business and timely made, has been or is expected by PFS or any of its Subsidiaries to be incurred with respect to any PFS Compensation and Benefit Plan which is a defined benefit pension plan subject to Title IV of ERISA (“PFS Defined Benefit Plan”), or with respect to any “single employer plan” (as defined in Section 4001(a) of ERISA) currently or formerly maintained by PFS or any entity which is considered one employer with PFS under Section 4001(b)(1) of ERISA or Section 414 of the Code (an “ERISA Affiliate”). No PFS Defined Benefit Plan is a “multiemployer pension plan,” as such term is defined in Section 3(37) of ERISA. To the Knowledge of PFS, (a) all required contributions to each PFS Defined Benefit Plan have been made in compliance with Section 412 and 430 of the Code and Section 302 and 303 of ERISA on or before the applicable due date, and there are no contributions which are required to be made to any of the Title IV Plan during the year ending December 31, 2020; (b) no PFS Defined Benefit Plan has applied for or received a waiver of the minimum funding standards or an extension of any amortization period within the meaning of Section 412 of the Code or Sections 302 or 303 of ERISA; (c) there are no funding-based limitations (within the meaning of Section 436 of the Code) currently in effect with respect to a PFS Defined Benefit Plan; and (d) all premiums payable and due pursuant to Section 4007 of ERISA with respect to a PFS Defined Benefit Plan have been timely paid.
5.12. Environmental Matters.
5.12.1. To the Knowledge of PFS, neither the conduct nor operation of its business nor any condition of any property currently or previously owned or operated by it (including, without limitation, in a fiduciary or agency capacity), or on which it holds a lien, results or resulted in a violation of any Environmental Laws that is reasonably likely to impose a material liability (including a material remediation obligation) upon PFS or any of PFS Subsidiary. To the Knowledge of PFS, no condition has existed or event has occurred with respect to any such property that, with notice or the passage of time, or both, is reasonably likely to result in any material liability to PFS or any PFS Subsidiary by reason of any Environmental Laws. Neither PFS nor any PFS Subsidiary has during the past five years received any written notice from any Person or Governmental Entity that PFS or any PFS Subsidiary or the operation or condition of any property ever owned, operated, or held as collateral or in a fiduciary capacity by any of them are currently in violation of or otherwise are alleged to have liability under any Environmental Laws or relating to Materials of Environmental Concern (including, but not limited to, responsibility (or potential responsibility) for the cleanup or other remediation of any Materials of Environmental Concern at, on, beneath, or originating from any such property) for which a material liability is reasonably likely to be imposed upon PFS or any PFS Subsidiary.
5.12.2. There is no suit, claim, action, demand, executive or administrative order, directive, investigation or proceeding pending or, to PFS’s Knowledge, threatened, before any court, governmental agency or other forum against PFS or any PFS Subsidiary (x) for alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (y) relating to the presence of or release into the environment of any Materials of Environmental Concern, whether or not occurring at or on a site owned, leased or operated by PFS or any PFS Subsidiary.
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5.13. Brokers, Finders and Financial Advisors.
Neither PFS nor any PFS Subsidiary, nor any of their respective officers, directors, employees or agents, has employed any broker, finder or financial advisor in connection with the transactions contemplated by this Agreement, or incurred any liability or commitment for any fees or commissions to any such person in connection with the transactions contemplated by this Agreement except for the retention of Piper Sandler & Co. and the fee payable pursuant thereto.
5.14. Intellectual Property.
PFS and each PFS Subsidiary owns or, to PFS’s Knowledge, possesses valid and binding licenses and other rights (subject to expirations in accordance with their terms) to use all patents, copyrights, trade secrets, trade names, service marks and trademarks, which are material to the conduct of their business as currently conducted, each without payment, except for all license agreements under which license fees or other payments are due in the ordinary course of PFS’s or each of PFS’s Subsidiaries’ business, except in each case the absence of which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on PFS and the PFS Subsidiaries taken as a whole and neither PFS nor any PFS Subsidiary has received any notice of conflict with respect thereto that asserts the rights of others. PFS and each PFS Subsidiary has performed all the material obligations required to be performed, and are not in default in any respect, under any contract, agreement, arrangement or commitment relating to any of the foregoing. To the Knowledge of PFS, the conduct of the business of PFS and each PFS Subsidiary as currently conducted or proposed to be conducted does not, in any material respect, infringe upon, dilute, misappropriate or otherwise violate any intellectual property owned or controlled by any third party, except in each case which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on PFS and the PFS Subsidiaries taken as a whole.
5.15. Labor Matters.
There are no labor or collective bargaining agreements to which PFS or any PFS Subsidiary is a party. There is no union organizing effort pending or, to the Knowledge of PFS, threatened against PFS or any PFS Subsidiary. There is no labor strike, labor dispute (other than routine employee grievances that are not related to union employees), work slowdown, stoppage or lockout pending or, to the Knowledge of PFS, threatened against PFS or any PFS Subsidiary. There is no unfair labor proceeding pending or, to the Knowledge of PFS, threatened in writing against PFS or any PFS Subsidiary (other than routine employee grievances that are not related to union employees). PFS and each PFS Subsidiary is in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and are not engaged in any unfair labor practice, except for such noncompliance which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on PFS and the PFS Subsidiaries taken as a whole.
5.16. No Material Adverse Effect.
Since December 31, 2019, no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on PFS and the PFS Subsidiaries taken as a whole.
5.17. Risk Management Instruments.
All material interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar risk management arrangements, whether entered into for PFS’s own account, or for the account of one or more PFS Subsidiaries or their customers, were in all material respects entered into in compliance with all applicable laws, rules, regulations and regulatory policies, and to the Knowledge of PFS, with counterparties believed to be financially responsible at the time; and to PFS’s Knowledge each of them constitutes the valid and
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legally binding obligation of PFS or one of the PFS Subsidiaries, enforceable in accordance with its terms (except as enforceability 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), and is in full force and effect. Neither PFS nor Provident Bank is, nor to the Knowledge of PFS is any other party thereto, in breach of any of its obligations under any such agreement or arrangement in any material respect.
5.18. Loan Portfolio.
5.18.1. The allowance for loan losses reflected in PFS’s audited consolidated balance sheet at December 31, 2019 was, and the allowance for loan losses shown on the balance sheets in PFS’s Financial Statements for periods ending after December 31, 2019 will be, adequate under GAAP.
5.18.2. PFS has made available to SBBX a listing of loans that as of December 31, 2019 are classified as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Watch list” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the obligor thereunder.
5.18.3. All loans receivable (including discounts) and accrued interest entered on the books of Provident Bank arose out of bona fide arm’s-length transactions and were made for good and valuable consideration in the ordinary course of Provident Bank’s business. All such loans are owned by Provident Bank free and clear of any liens.
5.18.4. The notes and other evidences of indebtedness evidencing the loans described above, and all pledges, mortgages, deeds of trust and other collateral documents or security instruments relating thereto are, in all material respects, valid, true and genuine, and what they purport to be.
5.18.5. Neither PFS nor any PFS Subsidiary is now, or has been since December 31, 2016, subject to any fine, suspension, settlement or other contract or other administrative agreement or sanction by, or any reduction in any loan purchase commitment from, any Governmental Entity or Bank Regulator relating to the origination, sale or servicing of mortgage or consumer loans.
5.18.6. PFS and the PFS Subsidiaries have good and marketable title to all securities owned by them, free and clear of any liens, except to the extent such securities are pledged in the ordinary course of business to secure obligations of PFS or a PFS Subsidiary. Such securities are valued on the books of PFS in accordance with GAAP in all material respects. PFS employs investment, securities, risk management and other policies, practices and procedures which PFS believes are prudent and reasonable.
5.19. PFS Information Supplied
The information relating to PFS, any PFS Subsidiary and its and their respective directors and officers to be contained in the Proxy Statement, Merger Registration Statement, or in any other document filed with any Bank Regulator or other Governmental Entity in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The Merger Registration Statement will comply with the provisions of the Exchange Act and the rules and regulations thereunder and the provisions of the Securities Act and the rules and regulations thereunder, except that no representation or warranty is made by PFS with respect to statements made or incorporated by reference therein based on information supplied by SBBX specifically for inclusion or incorporation by reference in the Merger Registration Statement.
5.20. No Other Representations or Warranties
Except for the representations and warranties made by PFS in this Article V, neither PFS, Provident Bank nor any other person makes any express or implied representation or warranty with respect to PFS, Provident
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Bank, their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and PFS and Provident Bank hereby disclaim any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither PFS, Provident Bank nor any other person makes or has made any representation or warranty to SBBX or any of its affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospective information relating to PFS, Provident Bank, or any of their respective subsidiaries or businesses, or (ii) except for the representations and warranties made by PFS and Provident Bank in this Article V, any oral or written information presented to SBBX or any of its affiliates or representatives in the course of their due diligence investigation of PFS and Provident Bank, the negotiation of this Agreement or in the course of the transactions contemplated hereby. PFS acknowledges and agree that neither SBBX nor any other person has made or is making any express or implied representation or warranty other than those contained in Article IV.
ARTICLE VI
COVENANTS OF SBBX
6.1. Conduct of Business.
6.1.1. Affirmative Covenants. During the period from the date of this Agreement to the Effective Time, except with the written consent of PFS, which consent shall not be unreasonably withheld or delayed, SBBX will, and it will cause each SBBX Subsidiary to: (a) operate its business, only in the usual, regular and ordinary course of business consistent with past practice; (b) use reasonable efforts to preserve intact its business organization and assets and maintain its rights and franchises; and (c) take no action that would, or would be reasonably likely to, (i) prevent or adversely affect or delay the ability of the parties to obtain any Regulatory Approvals or other approvals of Governmental Entities required for the transactions contemplated hereby, or (ii) prevent or adversely affect its ability to perform its covenants and agreements under this Agreement.
6.1.2. Negative Covenants. SBBX agrees that from the date of this Agreement to the Effective Time, except as otherwise specifically permitted or required by this Agreement, set forth in SBBX Disclosure Schedule 6.1.2, or consented to by PFS in writing (which consent shall not be unreasonably withheld or delayed), it will not, and it will cause each of the SBBX Subsidiaries not to:
(A) amend or waive any provision of its Certificate of Incorporation or Bylaws, or appoint a new director to the board of directors;
(B) (i) adjust, split, combine or reclassify any capital stock; (ii) make, declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock, except (A) dividends paid by any Subsidiary of SBBX to SBBX or any of its wholly-owned Subsidiaries, (B) a regular quarterly cash dividend on the SBBX Common Stock at a rate not to exceed $0.085 per share per quarter, with dividend record and payment dates, subject to Section 8.5, consistent with past practice, or (C) the acceptance of shares of SBBX Common Stock as payment for the exercise price of SBBX Stock Options or for withholding Taxes incurred in connection with the exercise of SBBX Stock Options or the vesting or settlement of SBBX Restricted Stock; or (iii) issue, sell or otherwise permit to become outstanding any additional shares of capital stock or securities convertible or exchangeable into, or exercisable for, any shares of its capital stock or any options, warrants, or other Rights of any kind to acquire any shares of capital stock, except for the issuance or vesting of shares of SBBX Common Stock in connection with currently outstanding awards granted under the SBBX Stock Benefit Plans;
(C) enter into, amend in any material respect or terminate any Material Contract, except in the ordinary course of business;
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(D) make application for the opening or closing of any, or open or close any, branch or automated banking facility;
(E) (i) grant or agree to pay any bonus, severance or termination to, or enter into, renew, amend or terminate any employment agreement, severance agreement and/or supplemental executive agreement (including surrendering any annuity contract related to a supplemental executive retirement plan) with, or increase the compensation or fringe benefits of, any of its directors, officers or employees, except (1) as may be required pursuant to applicable law or commitments existing on the date hereof, (2) as to non-executive employees, increases in the ordinary course of business and consistent with past practice, (3) the payment of bonuses for the year ending December 31, 2019 to the extent such bonuses have been accrued in accordance with GAAP through the date hereof and provided that such bonuses are consistent, as to amount, methodology, persons covered and payment timing, with past practice, (4) entering into standard offer letters and arrangements with new hires permitted by this Agreement, (5) in connection with promotions permitted by this Agreement in the ordinary course of business and (6) increases not to exceed five percent (5%) with respect to any individual and all such increase in the aggregate shall not exceed three percent (3%) of total compensation; or (ii) hire or promote any employee to a rank having a title of vice president or other more senior rank or hire any new employee at an annual rate of compensation in excess of $75,000, provided that notwithstanding the foregoing that SBBX may hire at-will, non-executive officer employees to fill vacancies that may from time to time arise in the ordinary course of business;
(F) (i) enter into or modify any pension, retirement, stock option, stock purchase, stock appreciation right, stock grant, savings, profit sharing, deferred compensation, supplemental retirement, group insurance or other material employee benefit contract, plan or arrangement, in respect of any of its directors, officers or employees, except in each case as required or deemed advisable to comply with applicable law; or (ii) make any employer contributions to any defined contribution plan not in the ordinary course of business consistent with past practice;
(G) merge or consolidate SBBX or any SBBX Subsidiary with any other person, or restructure, reorganize or completely or partially liquidate or dissolve itself or any of its Subsidiaries, or sell or lease all or any substantial portion of the assets or business of SBBX or any SBBX Subsidiary; make any acquisition of all or any substantial portion of the business or assets of any other person, firm, association, corporation or business organization other than in connection with foreclosures, settlements in lieu of foreclosure, troubled loan or debt restructuring, or the collection of any loan or credit arrangement between SBBX or any SBBX Subsidiary and any other person; enter into a purchase and assumption transaction with respect to deposits and liabilities; voluntarily revoke or surrender any of its certificates of authority to maintain, or file an application for the relocation of, any existing branch office, or file an application for a certificate of authority to establish a new branch office;
(H) sell or otherwise dispose of the capital stock of any SBBX Subsidiary or sell or otherwise dispose of any asset of SBBX or any SBBX Subsidiary other than in the ordinary course of business consistent with past practice; except for transactions with the FHLB, subject any asset of SBBX or any SBBX Subsidiary to a lien, pledge, security interest or other encumbrance (other than in connection with deposits, repurchase agreements, bankers acceptances, “treasury tax and loan” accounts established in the ordinary course of business and transactions in “federal funds” and the satisfaction of legal requirements in the exercise of trust powers) other than in the ordinary course of business consistent with past practice; incur any indebtedness for borrowed money, or assume, guarantee, endorse or otherwise become responsible for obligations of any other individual, corporation or other entity, except in the ordinary course of business consistent with past practice;
(I) voluntarily take any action that is intended or may reasonably be expected to result in any of the representations and warranties of SBBX set forth in this Agreement becoming untrue as of any date after the date hereof or in any of the conditions set forth in Article IX hereof not being satisfied, except in each case as may be required by applicable law;
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(J) change any method, practice or principle of accounting, except as may be required from time to time by GAAP or any Bank Regulator responsible for regulating SBBX;
(K) waive, release, grant or transfer any material rights of value or modify or change in any material respect any existing material agreement or indebtedness to which SBBX or any SBBX Subsidiary is a party, other than in the ordinary course of business, consistent with past practice;
(L) purchase any equity securities, or purchase any securities other than securities with a weighted average life of not more than four years as of the date of purchase;
(M) except for commitments issued prior to the date of this Agreement that have not yet expired and that have been disclosed on the SBBX Disclosure Schedule 6.1.2(M), and the renewal of existing lines of credit, make any new loan or other credit facility commitment (including without limitation, lines of credit and letters of credit), or modify any existing loan, in an amount in excess of $5.0 million for a commercial real estate loan or a commercial business loan, or in excess of $2.0 million for a land or construction loan, or in excess of $1.0 million for a residential loan secured by a first lien on real estate, or in excess of $500,000 for any other consumer loan, or that involves an exception to policy involving any new or renewal of an existing loan in excess of $750,000, or a new loan or loan commitment to any director or executive officer of SBBX or any SBBX Subsidiary; provided that PFS shall have been deemed to have consented to any loan in excess of such amount if PFS does not object to any such proposed loan within three business days after receipt by PFS of (i) a written request by SBBX to exceed such limit and (ii) all financial or other data that PFS may reasonably request to evaluate such loan;
(N) except as set forth on the SBBX Disclosure Schedule 6.1.2(N), enter into, renew or modify any transaction with an officer, director or affiliate, directly or indirectly through an entity affiliated or associated with such officer, director or Affiliate, other than a deposit transaction with SB One Bank in the ordinary course of business consistent with past practice;
(O) enter into any futures contract, option, interest rate caps (other than with respect to residential ARMs), interest rate floors (other than with respect to commercial loans), interest rate exchange agreement or other agreement or take any other action for purposes of hedging the exposure of its interest-earning assets and interest-bearing liabilities to changes in market rates of interest, except in the ordinary course of business consistent with past practice;
(P) except for the execution of this Agreement, and actions taken or which will be taken in accordance with this Agreement and performance thereunder, take any action that would give rise to a right of payment to any individual under any employment, change in control, severance or similar agreement;
(Q) make any material change in policies in existence on the date of this Agreement with regard to: the extension of credit, or the establishment of reserves with respect to the possible loss thereon or the charge off of losses incurred thereon; investments; asset/liability management; deposit pricing or gathering; or other material banking policies except as may be required by changes in applicable law or regulations or by a Bank Regulator;
(R) except for the execution of this Agreement, and the transactions contemplated therein, take any action that would give rise to an acceleration of the right to payment to any individual under any SBBX Compensation and Benefit Plan;
(S) except as set forth in SBBX Disclosure Schedule 6.1.2(S), make any capital expenditures in excess of $50,000 individually or $100,000 in the aggregate, other than pursuant to binding commitments existing on the date hereof and other than expenditures necessary to maintain existing assets in good repair;
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(T) except as set forth in SBBX Disclosure Schedule 6.1.2(T), purchase or otherwise acquire any assets or incur any liabilities other than in the ordinary course of business consistent with past practices and policies;
(U) sell any participation interest in any loan, other than in the ordinary course of business consistent with past practice;
(V) undertake or enter into any lease, contract or other commitment for its account, other than in the normal course of providing credit to customers as part of its banking business, involving a payment by SBBX of more than $25,000 annually, or containing any financial commitment extending beyond 24 months from the date hereof;
(W) pay, discharge, settle or compromise any claim, action, litigation, arbitration or proceeding, other than any such payment, discharge, settlement or compromise in the ordinary course of business consistent with past practice that involves solely money damages in the amount not in excess of $50,000 individually or $100,000 in the aggregate, and that does not create negative precedent for other pending or potential claims, actions, litigation, arbitration or proceedings;
(X) foreclose upon or take a deed or title to any commercial real estate without first conducting a Phase I environmental assessment of the property or foreclose upon any commercial real estate if such environmental assessment indicates the presence of a Materials of Environmental Concern;
(Y) purchase or sell any mortgage loan servicing rights;
(Z) take any action or knowingly fail to take any action where such action or failure to act could reasonably be expected to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code;
(AA) issue any broadly distributed communication of a general nature to employees (including general communications relating to benefits and compensation) without prior consultation with PFS and, to the extent relating to post-Closing employment, benefit or compensation information without the prior consent of PFS (which shall not be unreasonably withheld) or issue any broadly distributed communication of a general nature to customers without the prior approval of PFS (which shall not be unreasonably withheld), except as required by law or for communications in the ordinary course of business consistent with past practice that do not relate to the Merger or other transactions contemplated hereby; or
(BB) agree to do any of the foregoing.
6.2. Current Information.
6.2.1. During the period from the date of this Agreement to the Effective Time, SBBX will cause one or more of its representatives to confer with representatives of PFS and report the general status of its ongoing operations at such times as PFS may reasonably request. SBBX will promptly notify PFS of any material change in the normal course of its business or in the operation of its properties and, to the extent permitted by applicable law, of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the initiation or the threat of material litigation involving SBBX or any SBBX Subsidiary. Without limiting the foregoing, as requested by PFS, senior officers of SBBX shall meet with senior officers of PFS on a monthly basis to review the financial and operational affairs of SBBX.
6.2.2. SBBX and PFS shall meet on a regular basis to discuss and plan for the conversion of SBBX’s data processing and related electronic informational systems to those used by PFS, which planning shall include, but not be limited to, discussion of the possible termination by SBBX of third-party service provider
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arrangements effective at the Effective Time or at a date thereafter, non-renewal of personal property leases and software licenses used by SBBX in connection with its systems operations, retention of outside consultants and additional employees to assist with the conversion, and outsourcing, as appropriate, of proprietary or self-provided system services, it being understood that SBBX shall not be obligated to take any such action prior to the Effective Time and, unless SBBX otherwise agrees, no conversion shall take place prior to the Effective Time.
6.2.3. SBBX shall provide PFS, within 15 business days of the end of each calendar month, a written list of all SB One Bank delinquent loans and classified assets. On a monthly basis, SBBX shall provide PFS with a schedule of (i) all loan approvals, which schedule shall indicate the loan amount, loan type and other material features of the loan, and (ii) loan grading changes.
6.2.4. SBBX shall promptly inform PFS upon receiving notice of any legal, administrative, arbitration or other proceedings, demands, notices, audits or investigations (by any federal, state or local commission, agency or board) relating to the alleged liability of SBBX or any SBBX Subsidiary under any labor or employment law.
6.3. Access to Properties and Records.
6.3.1. Subject to Section 12.1 hereof, SBBX shall permit PFS reasonable access during normal business hours upon reasonable notice to its properties, and shall disclose and make available to PFS during normal business hours all of its books, papers and records relating to the assets, properties, operations, obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute books of directors’ (other than minutes that discuss any of the transactions contemplated by this Agreement or any other subject matter SBBX reasonably determines should be treated as confidential) and shareholders’ meetings, organizational documents, Bylaws, material contracts and agreements, filings with any regulatory authority, litigation files, plans affecting employees, and any other business activities or prospects in which Provident Bank may have a reasonable interest; provided, however, that SBBX shall not be required to take any action that would provide access to or to disclose information where such access or disclosure would violate or prejudice the rights or business interests or confidences of any customer or other person or would result in the waiver by it of the privilege protecting communications between it and any of its counsel or as not permitted by law or regulation. SBBX shall provide and shall request its auditors to provide PFS with such historical financial information regarding it (and related audit reports and consents) as PFS may reasonably request for securities disclosure purposes. PFS and Provident Bank shall use commercially reasonable efforts to minimize any interference with SBBX’s regular business operations during any such access to SBBX’s property, books and records.
6.3.2. Notwithstanding anything to the contrary contained in this Section 6.3, in no event shall PFS have access to any information that, based on advice of SBBX’s counsel, would (a) reasonably be expected to waive any material legal privilege (b) result in the disclosure of any trade secrets of third parties or (c) violate any obligation of SBBX with respect to confidentiality so long as, with respect to confidentiality, to the extent specifically requested by PFS, SBBX has made commercially reasonable efforts to obtain a waiver regarding the possible disclosure from the third party to whom it owes an obligation of confidentiality. All requests made pursuant to this Section 6.3 shall be directed to an executive officer of SBBX or such Person or Persons as may be designated by SBBX. All information received pursuant to this Section 6.3 shall be governed by the terms of the Confidentiality Agreement.
6.4. Financial and Other Statements.
6.4.1. Promptly upon receipt thereof, SBBX will furnish to PFS copies of each annual, interim or special audit of the books of SBBX and each SBBX Subsidiary made by its independent auditors and copies of all internal control reports submitted to SBBX by such auditors in connection with each annual, interim or special audit of the books of SBBX and the SBBX Subsidiaries made by such auditors.
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6.4.2. As soon as reasonably available, but in no event later than the date such documents are filed with the Bank Regulators, SBBX will deliver to PFS the SBBX Regulatory Reports. SBBX will furnish to PFS copies of all documents, statements and reports as it shall send to its shareholders, the FDIC, the FRB or any other regulatory authority, except as legally prohibited thereby. Within 15 days after the end of each month, SBBX will deliver to PFS a monthly financial package that shall include a consolidated balance sheet and a consolidated statement of income, without related notes, for such month prepared in accordance with current financial reporting practices.
6.4.3. SBBX will advise PFS promptly of the receipt of any examination report of any Bank Regulator with respect to the condition or activities of SBBX or any SBBX Subsidiary.
6.4.4. With reasonable promptness, SBBX will furnish to PFS such additional financial data that SBBX possesses and as PFS may reasonably request, including without limitation, detailed monthly financial statements and loan reports.
6.5. Maintenance of Insurance.
SBBX shall maintain, and shall cause the SBBX Subsidiaries to maintain, insurance in such amounts as are reasonable to cover such risks as are customary in relation to the character and location of their properties and the nature of their business and consistent with past practice.
6.6. Disclosure Supplements.
From time to time prior to the Effective Time, SBBX will promptly supplement or amend the SBBX Disclosure Schedules delivered in connection herewith with respect to any matter hereafter arising which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such SBBX Disclosure Schedules or which is necessary to correct any information in such SBBX Disclosure Schedules which has been rendered materially inaccurate thereby; provided, however, that any failure to give notice in accordance with the foregoing shall not be deemed to constitute a violation of this Section 6.6 or the failure of any condition set forth in Article IX to be satisfied, or otherwise constitute a breach of this Agreement by SBBX, unless the underlying breach would independently result in a failure to satisfy of the conditions set forth in Article IX. No supplement or amendment to such SBBX Disclosure Schedules shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article IX.
6.7. Consents and Approvals of Third Parties.
SBBX shall use its reasonable best efforts, and shall cause each SBBX Subsidiary to use its best efforts, to obtain as soon as practicable all consents and approvals necessary or desirable for the consummation of the transactions contemplated by this Agreement.
6.8. Reasonable Best Efforts.
Subject to the terms and conditions herein provided, SBBX agrees to use its reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement.
6.9. Failure to Fulfill Conditions.
In the event that SBBX determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify PFS.
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6.10. No Solicitation.
(a) SBBX shall not, and shall cause the SBBX Subsidiaries and their respective officers, directors, employees, investment bankers, financial advisors, attorneys, accountants, consultants, affiliates and other agents (collectively, the “Representatives”) not to, directly or indirectly, (i) initiate, solicit, induce or knowingly encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an Acquisition Proposal; (ii) participate in any discussions or negotiations regarding any Acquisition Proposal or furnish, or otherwise afford access, to any Person (other than PFS) any information or data with respect to SBBX or any of the SBBX Subsidiaries or otherwise relating to an Acquisition Proposal (it being understood that issuing any press release or furnishing any documents filed or furnished by SBBX pursuant to the requirements of Exchange Act would not constitute a violation of this Section); (iii) without the prior written consent of PFS, release any Person from, waive any provisions of, or fail to enforce any confidentiality agreement or standstill agreement to which SBBX is a party; or (iv) enter into any agreement, agreement in principle or letter of intent with respect to any Acquisition Proposal or approve or resolve to approve any Acquisition Proposal or any agreement, agreement in principle or letter of intent relating to an Acquisition Proposal. Any violation of the foregoing restrictions by SBBX or any Representative, whether or not such Representative is so authorized and whether or not such Representative is purporting to act on behalf of SBBX or otherwise, shall be deemed to be a breach of this Agreement by SBBX. SBBX and the SBBX Subsidiaries shall, and cause each of the SBBX Representatives to, immediately cease and cause to be terminated any and all existing discussions, negotiations, and communications with any Persons with respect to any existing or potential Acquisition Proposal.
For purposes of this Agreement, “Acquisition Proposal” shall mean any inquiry, offer or proposal (other than an inquiry, offer or proposal from PFS), whether or not in writing, contemplating, relating to, or that could reasonably be expected to lead to, an Acquisition Transaction. For purposes of this Agreement, “Acquisition Transaction” shall mean (A) any transaction or series of transactions involving any merger, consolidation, recapitalization, share exchange, liquidation, dissolution or similar transaction involving SBBX or any of the SBBX Subsidiaries; (B) any transaction pursuant to which any third party or group acquires or would acquire (whether through sale, lease or other disposition), directly or indirectly, any assets of SBBX or any of the SBBX Subsidiaries representing, in the aggregate, 25% or more of the assets of SBBX and its Subsidiaries on a consolidated basis; (C) any issuance, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase or securities convertible into, such securities) representing 25% or more of the votes attached to the outstanding securities of SBBX or any of the SBBX Subsidiaries; (D) any tender offer or exchange offer that, if consummated, would result in any third party or group beneficially owning 25% or more of any class of equity securities of SBBX or any of the SBBX Subsidiaries; or (E) any transaction which is similar in form, substance or purpose to any of the foregoing transactions, or any combination of the foregoing.
(b) Notwithstanding Section 6.10(a), SBBX may take any of the actions described in clause (ii) and (iv) of Section 6.10(a) if, but only if prior to the SBBX Shareholders Meeting, (i) SBBX has received a bona fide unsolicited written Acquisition Proposal, that did not result from a breach of this Section 6.10; (ii) the SBBX Board determines in good faith, after consultation with and having considered the advice of its outside legal counsel and, with respect to financial matters, its independent financial advisor, that (A) such Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal and (B) it is required to take such actions to comply with its fiduciary duties to SBBX’s shareholders under applicable law; (iii) SBBX has provided PFS with at least three Business Days’ prior notice of such determination; and (iv) prior to furnishing or affording access to any information or data with respect to SBBX or otherwise relating to an Acquisition Proposal, SBBX receives from such Person a confidentiality agreement with terms no less favorable to SBBX than those contained in the Confidentiality Agreement. SBBX shall promptly provide to PFS any non-public information regarding SBBX or its Subsidiaries provided to any other Person that was not previously provided to PFS, such additional information to be provided no later than the date of provision of such information to such other party.
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For purposes of this Agreement, “Superior Proposal” shall mean any bona fide written proposal (on its most recently amended or modified terms, if amended or modified) made by a third party to enter into an Acquisition Transaction on terms that the SBBX Board determines in its good faith judgment, after consultation with and having considered the advice of outside legal counsel and a financial advisor (i) would, if consummated, result in the acquisition of all, but not less than all, of the issued and outstanding shares of SBBX Common Stock or all, or substantially all, of the assets of SBBX and the SBBX Subsidiaries on a consolidated basis; (ii) would result in a transaction that (A) involves consideration to the holders of the shares of SBBX Common Stock that is more favorable, from a financial point of view, than the consideration to be paid to SBBX’s shareholders pursuant to this Agreement, considering, among other things, the nature of the consideration being offered and any material regulatory approvals or other risks associated with the timing of the proposed transaction beyond or in addition to those specifically contemplated hereby, and (B) is, in light of the other terms of such proposal, more favorable to SBBX’s shareholders than the Merger and the transactions contemplated by this Agreement; and (iii) is reasonably likely to be completed on the terms proposed, in each case taking into account all legal, financial, regulatory and other aspects of the proposal.
(c) SBBX shall promptly (and in any event within 48 hours) notify PFS in writing if any proposals or offers (or modified offers or proposals) are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with SBBX or any SBBX Representatives, in each case in connection with any Acquisition Proposal, and such notice shall indicate the name of the Person initiating such discussions or negotiations or making such proposal, offer or information request and the material terms and conditions of any proposals or offers (and, in the case of written materials relating to such proposal, offer, information request, negotiations or discussion, providing copies of such materials (including e-mails or other electronic communications) except to the extent that such materials constitute confidential information of the party making such offer or proposal under an effective confidentiality agreement). SBBX agrees that it shall keep PFS informed, on a reasonably current basis, of the status and terms of any such proposal, offer, information request, negotiations or discussions (including any amendments or modifications to such proposal, offer or request).
(d) Subject to Section 6.10(e), neither the SBBX Board nor any committee thereof shall (i) withdraw, qualify, amend or modify, or propose to withdraw, qualify, amend or modify, in a manner adverse to PFS in connection with the transactions contemplated by this Agreement (including the Merger), the SBBX Recommendation (as defined in Section 8.1), fail to reaffirm the SBBX Recommendation within five (5) Business Days following a written request by PFS, or make any statement, filing or release, in connection with the SBBX Shareholders Meeting or otherwise, inconsistent with the SBBX Recommendation; (ii) approve or recommend, or publicly propose to approve or recommend, any Acquisition Proposal; or (iii) enter into (or cause SBBX or any of the SBBX Subsidiaries to enter into) any letter of intent, agreement in principle, acquisition agreement or other agreement (A) related to any Acquisition Transaction (other than a confidentiality agreement entered into in accordance with the provisions of Section 6.10(b)) or (B) requiring SBBX to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by this Agreement.
(e) Notwithstanding Section 6.10(d), prior to the date of the SBBX Shareholders Meeting, the SBBX Board may withdraw, qualify, amend or modify the SBBX Recommendation (a “SBBX Subsequent Determination”) after the third Business Day following PFS’s receipt of a notice (the “Notice of Superior Proposal”) from SBBX advising PFS that the SBBX Board intends to determine that a bona fide unsolicited written Acquisition Proposal that it received (that did not result from a breach of this Section 6.10) constitutes a Superior Proposal if, but only if (i) the SBBX Board has reasonably determined in good faith, after consultation with and having considered the advice of outside legal counsel and an independent financial advisor, that it is required to take such actions to comply with its fiduciary duties to SBBX’s shareholders under applicable law, (ii) during the three (3) Business Day period after receipt of the Notice of Superior Proposal by PFS (the “Notice Period”), SBBX and the SBBX Board shall have cooperated and negotiated in good faith with PFS to make such adjustments, modifications or amendments to the terms and conditions of this Agreement as would enable SBBX to proceed with the SBBX Recommendation without a SBBX Subsequent Determination; provided, however,
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that PFS shall not have any obligation to propose any adjustments, modifications or amendments to the terms and conditions of this Agreement and (iii) at the end of the Notice Period, after taking into account any such adjusted, modified or amended terms as may have been proposed by PFS since its receipt of such Notice of Superior Proposal, the SBBX Board has again in good faith made the determination (A) in clause (i) of this Section 6.10(e) and (B) that such Acquisition Proposal constitutes a Superior Proposal. In the event of any material revisions to the Superior Proposal, SBBX shall be required to deliver a new Notice of Superior Proposal to PFS and again comply with the requirements of this Section 6.10(e), except that the Notice Period shall be reduced to one (1) Business Day.
(f) Notwithstanding any SBBX Subsequent Determination, this Agreement shall be submitted to SBBX’s shareholders at the SBBX Shareholders Meeting for the purpose of voting on the approval of this Agreement and the transactions contemplated hereby (including the Merger) and nothing contained herein shall be deemed to relieve SBBX of such obligation; provided, however, that if the SBBX Board shall have made a SBBX Subsequent Determination, then the SBBX Board may submit this Agreement to the SBBX’s shareholders without recommendation, in which event the SBBX Board may communicate the basis for its lack of a recommendation to the SBBX’s shareholders in the Proxy Statement-Prospectus or an appropriate amendment or supplement thereto. In addition to the foregoing, for so long as this Agreement remains in effect, SBBX shall not submit to the vote of its shareholders any Acquisition Proposal other than this Agreement and the Merger.
(g) SBBX shall adjourn or postpone the SBBX Shareholders Meeting if, (i) as of the time for which such meeting is originally scheduled, there are insufficient shares of SBBX Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the SBBX Shareholders Meeting or (ii) on the date of the SBBX Shareholders Meeting, SBBX has not received proxies representing a sufficient number of shares necessary to obtain the requisite vote of the shareholders of SBBX; provided that, from and after such time, if any, that (in response to an Acquisition Proposal that has been received by SBBX and that has been publicly disclosed or otherwise become public) SBBX makes a SBBX Subsequent Determination that is permitted by Section 6.10(e), SBBX thereafter shall not be so required to adjourn or postpone the SBBX Shareholders Meeting more than two (2) times following such time. Notwithstanding anything to the contrary herein, unless this Agreement has been terminated in accordance with its terms, the SBBX Shareholders Meeting shall be convened and this Agreement shall be submitted to the shareholders of SBBX at the SBBX Shareholders Meeting for the purpose of voting on the approval of this Agreement and the other matters contemplated hereby, and nothing contained herein shall be deemed to relieve SBBX of such obligation, including if SBBX makes a SBBX Subsequent Determination.
6.11. Board of Directors and Committee Meetings.
(a) SBBX shall distribute a copy of each SBBX Board package, including the agenda and any draft minutes, to PFS promptly after it distributes a copy of such packages to the SBBX Board; provided, however, that SBBX shall not be required to copy PFS on any documents that disclose confidential discussions of this Agreement or the transactions contemplated hereby or any third party proposal to acquire control of SBBX or any other matter that the SBBX Board has been advised of by counsel that such distribution to PFS may violate a confidentiality obligation or fiduciary duty or any law or regulation.
(b) Following the receipt of all Regulatory Approvals (without regard to any waiting periods associated therewith), SBBX shall upon the reasonable request and notice of PFS permit, and shall cause the SBBX Subsidiaries to permit, a representative of PFS to attend any meeting of their Board of Directors, executive committee, loan (or credit) committee and asset liability committee as observers, provided that SBBX shall not be required to permit such representative to remain present during any confidential discussion of this Agreement and the transactions contemplated hereby or any Acquisition Proposal or during any other matter that the SBBX Board of Directors has been advised of by counsel that such attendance by these representatives may violate or be inconsistent with a confidentiality obligation or fiduciary duty or any legal or regulatory requirement.
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6.12. Shareholder Litigation.
SBBX shall give PFS the opportunity to participate at its own expense in the defense or settlement of any shareholder litigation against SBBX and/or its directors or other affiliates relating to the transactions contemplated by this Agreement, and no such settlement shall be agreed to without PFS’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed).
6.13. Employee Benefits.
If requested by PFS in writing no later than five (5) Business Days prior to the Effective Time and after the SBBX Shareholders Meeting, SBBX shall take any and all actions, to the extent permitted by law and the terms of the applicable plan, agreement or arrangement, reasonably necessary (including without limitation, the adoption of resolutions by its Board of Directors) to amend, freeze and/or terminate each SBBX Compensation and Benefit Plan identified in writing by PFS (if permitted by the terms of such SBBX Compensation Benefit Plan), as of (a) immediately prior to the Effective Time, (b) such later date as requested by PFS, or (c) if insufficient notice is provided by PFS in order for SBBX or any SBBX Subsidiary to contractually terminate a SBBX Compensation and Benefit Plan as of such dates, on such later date as required by the termination provisions of such SBBX Compensation and Benefit Plan.
ARTICLE VII
COVENANTS OF PFS
7.1. Conduct of Business.
During the period from the date of this Agreement to the Effective Time, except with the written consent of SBBX, which consent will not be unreasonably withheld or delayed, PFS will, and it will cause each PFS Subsidiary to, use reasonable efforts to preserve intact its business organization and assets and maintain its rights and franchises, and voluntarily take no action that would or would be reasonably likely to: (i) prevent or adversely affect or delay the ability of the parties to obtain the Regulatory Approvals or other approvals of Governmental Entities required for the transaction contemplated hereby; or (ii) prevent or adversely affect its ability to perform its covenants and agreements under this Agreement; (iii) result in the representations and warranties contained in Article V of this Agreement not being true and correct on the date of this Agreement or at any future date on or prior to the Closing Date or in any of the conditions set forth in Article IX hereof not being satisfied; (iv) take any action or knowingly fail to take any action where such action or failure to act could reasonably be expected to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code; or (v) agree to do any of the foregoing.
7.2. Regulatory Filings Relating to Merger.
In furtherance and not in limitation of Sections 8.2 and 8.3 hereof, PFS will furnish to SBBX copies of all documents, statements and reports that it or Provident Bank files with any other Bank Regulator or the SEC with respect to the Merger and provide SBBX with a reasonable opportunity to comment thereon prior to submitting such materials to the Bank Regulator or the SEC.
7.3. Maintenance of Insurance.
PFS shall maintain, and cause each PFS Subsidiary to maintain, insurance in such amounts as are reasonable to cover such risks as are customary in relation to the character and location of their properties and the nature of their business.
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7.4. Disclosure Supplements.
From time to time prior to the Effective Time, PFS will promptly supplement or amend the PFS Disclosure Schedule delivered in connection herewith with respect to any material matter hereafter arising which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such PFS Disclosure Schedule or which is necessary to correct any information in such PFS Disclosure Schedule which has been rendered inaccurate thereby; provided, however, that any failure to give notice in accordance with the foregoing shall not be deemed to constitute a violation of this Section 7.4 or the failure of any condition set forth in Article IX to be satisfied, or otherwise constitute a breach of this Agreement by PFS, unless the underlying breach would independently result in a failure to satisfy of the conditions set forth in Article IX. No supplement or amendment to such PFS Disclosure Schedule shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article IX.
7.5. Consents and Approvals of Third Parties.
PFS shall use its reasonable best efforts to obtain as soon as practicable all consents and approvals, necessary or desirable for the consummation of the transactions contemplated, and in the manner contemplated, by this Agreement.
7.6. Reasonable Best Efforts.
Subject to the terms and conditions herein provided, PFS agrees to use its reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement.
7.7. Failure to Fulfill Conditions.
In the event that PFS determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify SBBX.
7.8. Employee Benefits.
7.8.1. PFS will review all SBBX Compensation and Benefit Plans to determine, in its sole and absolute discretion, whether to maintain, terminate or continue such plans. In the event employee compensation and/or benefits as currently provided by SBBX or any SBBX Subsidiary are changed or terminated by PFS, in whole or in part, PFS shall provide Continuing Employees (as defined below) with compensation and benefits that are, in the aggregate, substantially similar to the compensation and benefits provided to similarly situated employees of PFS or applicable PFS Subsidiary (as of the date any such compensation or benefit is provided). Employees of SBBX or any SBBX Subsidiary who become participants in a PFS Compensation and Benefit Plan shall, for purposes of (i) determining eligibility for, (ii) any applicable vesting periods of and (iii) with respect to vacation and severance rights, level of benefits of such employee benefits be given credit for meeting such eligibility, vesting and level of benefits requirements in such plans for service as an employee of SBBX or any SBBX Subsidiary (and their predecessors) prior to the Effective Time, provided, however, that the foregoing service recognition shall not apply (i) to the extent it would result in duplication of benefits for the same period of services; (ii) for benefit accrual purposes under any PFS Compensation and Benefit Plan (other than such plans providing vacation and severance rights); or (iii) where such service is with respect to a newly-established benefit plan of PFS for which similarly-situated employees of PFS do not receive past service credit. This Agreement shall not be construed to limit the ability of PFS or Provident Bank to terminate the employment of any employee or to review employee benefits programs from time to time and to make such changes (including terminating any program) as they deem appropriate.
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7.8.2. PFS and Provident Bank will offer employees of SBBX or any SBBX Subsidiary whose jobs are eliminated as a result of or in connection with the Merger priority in applying for open positions within PFS and Provident Bank. PFS agrees that each employee of SBBX or any SBBX Subsidiary who (i) is not offered employment with PFS or Provident Bank as of the Effective Time or (ii) is involuntarily terminated by PFS or Provident Bank (other than for cause as determined in accordance with the personnel policies of Provident Bank) within twelve months of the Effective Time and who is not covered by a separate employment agreement, change in control agreement, severance, consulting, or similar agreement shall receive a severance payment equal to (A) two weeks of base pay (at the rate in effect on the termination date) for each full year of service at SBBX or any SBBX Subsidiary, with a maximum of 26 weeks and a minimum of four weeks of base pay, plus (B) amounts payable to such employee for accrued vacation and personal days; provided, that such individual executes and does not revoke a release agreement in the form set forth in PFS Disclosure Schedule 7.8.2.
7.8.3. In the event of any termination or consolidation of any SBBX health plan with any Provident Bank health plan, Provident Bank shall use commercially reasonable efforts to make available to employees of SBBX and any SBBX Subsidiary who continue employment with PFS or Provident Bank (“Continuing Employees”) and their dependents employer-provided health coverage on the same basis as it provides such coverage to similarly situated Provident Bank employees. Unless a Continuing Employee affirmatively terminates coverage under a SBBX health plan prior to the time that such Continuing Employee becomes eligible to participate in a Provident Bank health plan, no coverage of any of the Continuing Employees or their dependents shall terminate under any of the SBBX health plans prior to the time such Continuing Employees and their dependents become eligible to participate in the health plans, programs and benefits common to all similarly situated employees of Provident Bank and their dependents. In the event of a termination or consolidation of any SBBX health plan, terminated SBBX employees and qualified beneficiaries will have the right to continued coverage under group health plans of Provident Bank in accordance with COBRA, consistent with the provisions below. Provident Bank shall use commercially reasonable efforts so that employees of SBBX or any SBBX Subsidiary who cease participating in a SBBX health plan and become participants in a comparable Provident Bank health plan receive credit for any co-payment and deductibles paid under SBBX health plan for purposes of satisfying any applicable deductible or out-of-pocket requirements under the Provident Bank health plan, upon substantiation, in a form satisfactory to Provident Bank that such co-payment and/or deductible has been satisfied.
7.8.4. PFS shall honor all obligations under the existing employment and change in control agreements as set forth in SBBX Disclosure Schedule 7.8.4. Except as otherwise terminated pursuant to Section 6.13, PFS shall assume and honor all SBBX Compensation and Benefit Plans in accordance with their terms.
7.8.5. Anthony J. Labozzetta, President and Chief Executive Officer of SBBX, shall be appointed as President and Chief Operating Officer of the Surviving Corporation at the Effective Time. At the Effective Time, PFS and Mr. Labozzetta shall enter into an employment agreement in the form set forth in PFS Disclosure Schedule 7.8.5.
7.8.6. If requested by PFS, SBBX shall take all such actions as PFS may request in order to fully and timely comply with any and all requirements of both the federal Worker Adjustment and Retraining Notification Act of 1988 and any state specific WARN Act statutes (collectively, the “WARN Act”), including providing notices to employees of SBBX or any SBBX Subsidiary.
7.9. Directors and Officers Indemnification and Insurance.
7.9.1. PFS shall indemnify, defend and hold harmless each person who is now, or who has been at any time before the date hereof or who becomes before the Effective Time, an officer, director or employee of SBBX or an SBBX Subsidiary (the “Indemnified Parties”) against all losses, claims, damages, costs, expenses (including attorney’s fees), liabilities or judgments or amounts that are paid in settlement (which settlement shall require the prior written consent of PFS, which consent shall not be unreasonably withheld) of or in connection
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with any claim, action, suit, proceeding or investigation, whether civil, criminal, or administrative (each a “Claim”), in which an Indemnified Party is, or is threatened to be made, a party or witness in whole or in part or arising in whole or in part out of the fact that such person is or was a director, officer or employee of SBBX or an SBBX Subsidiary if such Claim pertains to any matter of fact arising, existing or occurring at or before the Effective Time (including, without limitation, the Merger and the other transactions contemplated hereby), regardless of whether such Claim is asserted or claimed before, or after, the Effective Time, to the fullest extent as would have been permitted by SBBX under the NJBCA and under SBBX’s Certificate of Incorporation and Bylaws. PFS shall pay expenses in advance of the final disposition of any such action or proceeding to each Indemnified Party to the fullest extent as would have been permitted by SBBX under the NJBCA, and under SBBX’s Certificate of Incorporation and Bylaws, upon receipt of an undertaking to repay such advance payments if such officer, director or employee shall be adjudicated or determined to be not entitled to indemnification. Any Indemnified Party wishing to claim indemnification under this Section 7.9.1 upon learning of any Claim, shall notify PFS (but the failure so to notify PFS shall not relieve it from any liability which it may have under this Section 7.9.1, except to the extent such failure materially prejudices PFS) and shall deliver to PFS the undertaking referred to in the previous sentence.
7.9.2. In the event that either PFS or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving bank or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of PFS shall assume the obligations set forth in this Section 7.9.
7.9.3. Either Provident Bank or PFS shall maintain, in effect for six years following the Effective Time, the current directors’ and officers’ liability insurance policies covering the officers and directors of SBBX (provided, that PFS or Provident Bank may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less favorable) with respect to matters occurring at or prior to the Effective Time; provided, however, that in no event shall PFS or Provident Bank be required to expend in the aggregate pursuant to this Section 7.9.3 more than 200% of the annual cost currently expended by SBBX with respect to such insurance (the “Maximum Amount”); provided, further, that if the amount of the annual premium necessary to maintain or procure such insurance coverage exceeds the Maximum Amount, PFS or Provident Bank shall maintain the most advantageous policies of directors’ and officers’ insurance obtainable for a premium equal to the Maximum Amount. In connection with the foregoing, SBBX agrees in order for PFS or Provident Bank to fulfill its agreement to provide directors and officers liability insurance policies for six years to provide such insurer or substitute insurer with such reasonable and customary representations as such insurer may request with respect to the reporting of any prior claims.
7.9.4. The obligations of Provident Bank and PFS provided under this Section 7.9 are intended to be enforceable against Provident Bank and PFS directly by the Indemnified Parties and shall be binding on all respective successors and permitted assigns of PFS and Provident Bank.
7.10. Stock Listing.
PFS agrees to list on the NYSE (or such other national securities exchange on which the shares of the PFS Common Stock shall be listed as of the date of consummation of the Merger), subject to official notice of issuance, the shares of PFS Common Stock to be issued in the Merger.
7.11. Current Information.
During the period from the date of this Agreement to the Closing Date, PFS will promptly notify SBBX, to the extent permitted by applicable law, of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), which might adversely affect the ability of the parties to obtain the Regulatory Approvals or materially increase the period of time necessary to obtain such
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approvals; or the institution of material litigation involving PFS and any PFS Subsidiary. PFS shall be reasonably responsive to requests by SBBX for access to such information and personnel regarding PFS and Provident Bank as may be reasonably necessary for SBBX to confirm that the representations and warranties of PFS and Provident Bank contained herein are true and correct and that the covenants of PFS and Provident Bank contained herein have been performed in all material respects; provided, however, that neither PFS nor Provident Bank shall be required to take any action that would provide access to or to disclose information where such access or disclosure, in PFS’s or Provident Bank’s reasonable judgment, would interfere with the normal conduct of PFS’s or Provident Bank’s business or would violate or prejudice the rights or business interests or confidences of any customer or other person or would result in the waiver by it of the privilege protecting communications between it and any of its counsel.
7.12. Stock Reserve.
PFS agrees at all times from the date of this Agreement until the aggregate Merger Consideration has been paid in full to reserve a sufficient number of shares of PFS Common Stock to fulfill its obligations under this Agreement.
7.13. Representation on PFS and Provident Bank Boards.
Effective as of the Effective Time, PFS shall, (i) increase the size of the Board of Directors of PFS by three members, and cause Provident Bank to take such actions as may be necessary to increase the size of the Board of Directors of Provident Bank by three members, and (ii) appoint Anthony Labozzetta, and two other persons from the SBBX board to be selected by PFS in consultation with SBBX (and who will be subject to PFS’ customary screening and evaluation procedures for potential directors and who must meet all criteria set forth in PFS’s governance principles with respect to qualifications for directors and shall qualify as an independent director under NYSE rules), to the Board of Directors of PFS and Provident Bank, with one former SBBX director being appointed to each of the three terms of directors comprising the PFS and Provident Bank Boards. Additionally, an advisory board will be appointed by Provident Bank for no less than two years, and will consist of those SBBX directors who are not selected to serve on the PFS and Provident Bank Boards, with such other terms as set forth in PFS Disclosure Schedule 7.13.
ARTICLE VIII
REGULATORY AND OTHER MATTERS
8.1. SBBX Shareholder Meeting.
Subject to Section 6.10(e), SBBX will (i) as promptly as practicable after the Merger Registration Statement is declared effective by the SEC, take all steps necessary to duly call, give notice of, convene and hold a meeting of the holders of SBBX Common Stock (the “SBBX Shareholders Meeting”), for the purpose of considering this Agreement and the Merger, and for such other purposes as may be, in SBBX’s reasonable judgment, necessary or desirable, (ii) subject to Section 6.10, have its Board of Directors recommend approval of this Agreement and any other matters required to be approved by the SBBX’s shareholders for consummation of the Merger and the transactions contemplated hereby to the SBBX shareholders (the “SBBX Recommendation”), (iii) include the SBBX Recommendation in the SBBX proxy statement, (iv) use reasonable best efforts to obtain from the shareholders of SBBX the requisite vote of the shareholders of SBBX, including by communicating to its shareholders the SBBX Recommendation and (v) not withdraw, qualify, amend or modify, or propose publicly to withdraw, qualify, amend or modify, in a manner adverse to PFS, the SBBX Recommendation or take any action, or make any public statement, filing or release inconsistent with the SBBX Recommendation, or submit this Agreement to the SBBX’s shareholders for a vote without the SBBX Recommendation.
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8.2. Proxy Statement-Prospectus.
8.2.1. For the purposes of (i) registering PFS Common Stock to be offered to holders of SBBX Common Stock in connection with the Merger with the SEC under the Securities Act, and (ii) holding the SBBX Shareholders Meeting, PFS shall draft and prepare, and SBBX shall cooperate in the preparation of, the Merger Registration Statement, including, to the extent required by law in the judgment of counsel to either party or otherwise desired by the parties, a proxy statement and prospectus satisfying all applicable requirements of applicable state securities and banking laws, and of the Securities Act and the Exchange Act, and the rules and regulations thereunder (such prospectus and proxy statement, in the form mailed to the SBBX shareholders, together with any and all amendments or supplements thereto, being herein referred to as the “Proxy Statement-Prospectus”). PFS shall use its best efforts to file the Merger Registration Statement, including the Proxy Statement-Prospectus, as promptly as practicable following the date of this Agreement and in any event within forty-five (45) days from the date hereof. Each of PFS and SBBX shall use their best efforts to have the Merger Registration Statement declared effective under the Securities Act as promptly as practicable after such filing, and SBBX shall thereafter promptly mail the Proxy Statement-Prospectus to their respective shareholders. PFS shall also use its best efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the transactions contemplated by this Agreement, and SBBX shall furnish all information concerning SBBX and the holders of SBBX Common Stock as may be reasonably requested in connection with any such action.
8.2.2. SBBX shall provide PFS with any information concerning itself that PFS may reasonably request in connection with the drafting and preparation of the Proxy Statement-Prospectus, and PFS shall notify SBBX promptly of the receipt of any comments of the SEC with respect to the Proxy Statement-Prospectus and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to SBBX promptly copies of all correspondence between PFS or any of their representatives and the SEC. PFS shall give SBBX and its counsel the reasonable opportunity to review and comment on the Proxy Statement-Prospectus prior to its being filed with the SEC and shall give SBBX and its counsel the opportunity to review and comment on all amendments and supplements to the Proxy Statement-Prospectus and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of PFS and SBBX agrees to use all reasonable efforts, after consultation with the other party hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement-Prospectus and all required amendments and supplements thereto to be mailed to their respective shareholders at the earliest practicable time.
8.2.3. SBBX and PFS shall promptly notify the other party if at any time it becomes aware that the Proxy Statement-Prospectus or the Merger Registration Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, SBBX shall cooperate with PFS in the preparation of a supplement or amendment to such Proxy Statement-Prospectus that corrects such misstatement or omission, and PFS shall file an amended Merger Registration Statement with the SEC, and SBBX shall mail an amended Proxy Statement-Prospectus to its shareholders.
8.3. Regulatory Approvals.
Each of SBBX and PFS will cooperate with the other and use best efforts to promptly prepare all necessary documentation, to effect all necessary filings and to obtain all necessary permits, consents, waivers, approvals and authorizations of the SEC, the Bank Regulators and any other third parties and governmental bodies necessary to consummate the transactions contemplated by this Agreement, and PFS and Provident Bank will make all necessary filings in respect of the required Regulatory Approvals as promptly as practicable after the date hereof, and no later than forty-five (45) days after the date hereof; provided, however, that in no event shall PFS or Provident Bank be required to agree to any prohibition, limitation, or other requirement that would (i) prohibit or materially limit the ownership or operation by PFS or Provident Bank of all or any material portion
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of the business or assets of SBBX or any SBBX Subsidiary, (ii) compel PFS or Provident Bank to dispose of or hold separate all or any material portion of the business or assets of SBBX or any SBBX Subsidiary, (iii) impose a material compliance burden, penalty or obligation on PFS or Provident Bank resulting from noncompliance by SBBX or any SBBX Subsidiary with its regulatory obligations or (iv) otherwise materially impair the value of SBBX and the SBBX Subsidiaries to PFS and Provident Bank (any such requirement alone, or more than one such requirement together, a “Burdensome Condition”). SBBX and PFS will furnish each other and each other’s counsel with all information concerning themselves, their subsidiaries, directors, officers and shareholders and such other matters as may be necessary or advisable in connection with the Proxy Statement-Prospectus and any application, petition or any other statement or application made by or on behalf of SBBX, PFS to any Bank Regulator or governmental body in connection with the Merger, and the other transactions contemplated by this Agreement. SBBX shall have the right to review and approve in advance any filing made in connection with the transactions contemplated by this Agreement with any governmental body. PFS shall give SBBX and its counsel the opportunity to review and comment on each filing prior to its being filed with a Bank Regulator or the SEC and shall give SBBX and its counsel the opportunity to review and comment on all regulatory filings, amendments and supplements to such filings and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, a Bank Regulator or the SEC.
8.4. Exemption from Liability under Section 16(b).
SBBX and PFS agree that, in order to most effectively compensate and retain those officers and directors of the SBBX subject to the reporting requirements of Section 16(a) of the Exchange Act (the “SBBX Insiders”), both prior to and after the Effective Time, it is desirable that SBBX Insiders not be subject to a risk of liability under Section 16(b) of the Exchange Act to the fullest extent permitted by applicable law in connection with the conversion of shares of SBBX Common Stock in the Merger, and for that compensatory and retentive purpose agree to the provisions of this Section 8.4. The Board of Directors of PFS and of the SBBX, or a committee of non-employee directors thereof (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly, and in any event prior to the Effective Time, take all such steps as may be required to cause (in the case of SBBX) any dispositions of SBBX Common Stock by the SBBX Insiders, and (in the case of PFS) any acquisitions of PFS Common Stock by any SBBX Insiders who, immediately following the Merger, will be officers or directors of the Surviving Corporation subject to the reporting requirements of Section 16(a) of the Exchange Act, in each case pursuant to the transactions contemplated by this Agreement, to be exempt from liability pursuant to Rule 16b-3 under the Exchange Act to the fullest extent permitted by applicable law.
8.5. Dividends.
After the date of this Agreement, each of PFS and the SBBX shall coordinate with the other the declaration of any dividends in respect of PFS Common Stock and SBBX Common Stock and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of SBBX Common Stock shall not receive two dividends, or fail to receive one dividend, in respect of any quarter with respect to their shares of SBBX Common Stock and any shares of PFS Common Stock any such holder receives in exchange therefor in the Merger.
8.6. Assumption of SBBX Debt.
8.6.1. Effective as of the Effective Time, PFS shall enter into a supplemental indenture in accordance with the applicable terms of the indenture related to the SBBX Subordinated Notes.
8.6.2. Effective as of the Effective Time, subject to Section 8.6.3, PFS shall enter into a supplemental indenture in accordance with the applicable terms of the indenture related to the SBBX TPS, providing for assumption by PFS of the SBBX’s obligations thereunder.
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8.6.3. In lieu of PFS assuming the SBBX TPS in accordance with Section 8.6.2, SBBX shall, at the request of PFS, deliver a notice of redemption of the SBBX TPS and related Junior Subordinated Debentures and irrevocably deposit at or prior to the Effective Time funds with the applicable trustee sufficient to pay the applicable redemption price.
8.7. No Control of Other Party’s Business.
Nothing contained in this Agreement shall give PFS, directly or indirectly, the right to control or direct the operations of SBBX or any SBBX Subsidiary prior to the Effective Time, and nothing contained in this Agreement shall give SBBX, directly or indirectly, the right to control or direct the operations of PFS or any PFS Subsidiary prior to the Effective Time. Prior to the Effective Time, each of PFS and SBBX shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries’ respective operations.
ARTICLE IX
CLOSING CONDITIONS
9.1. Conditions to Each Party’s Obligations under this Agreement.
The respective obligations of each party under this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following conditions, none of which may be waived:
9.1.1. SBBX Shareholder Approval. This Agreement and the transactions contemplated hereby shall have been approved by the requisite vote of the shareholders of SBBX.
9.1.2. Injunctions. None of the parties hereto shall be subject to any order, decree or injunction of a court or agency of competent jurisdiction that enjoins or prohibits the consummation of the transactions contemplated by this Agreement and no statute, rule or regulation shall have been enacted, entered, promulgated, interpreted, applied or enforced by any Governmental Entity or Bank Regulator, that enjoins or prohibits the consummation of the transactions contemplated by this Agreement.
9.1.3. Regulatory Approvals. All Regulatory Approvals required to consummate the transactions contemplated by this Agreement shall have been obtained and shall remain in full force and effect and all waiting periods relating to such approvals shall have expired; all other necessary approvals, authorizations and consents of any Governmental Entities required to consummate the transactions contemplated by this Agreement, the failure of which to obtain would reasonably be expected to have a Material Adverse Effect, shall have been obtained and shall remain in full force and effect and all waiting periods relating to such approvals, authorizations or consents shall have expired.
9.1.4. Effectiveness of Merger Registration Statement. The Merger Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Merger Registration Statement shall have been issued, and no proceedings for that purpose shall have been initiated or threatened by the SEC and, if the offer and sale of PFS Common Stock in the Merger is subject to the “Blue Sky” laws of any state, shall not be subject to a stop order of any state securities commissioner.
9.1.5. NYSE Listing. The shares of PFS Common Stock to be issued in the Merger shall have been authorized for listing on the NYSE, subject to official notice of issuance.
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9.2. Conditions to the Obligations of PFS under this Agreement.
The obligations of PFS under this Agreement shall be further subject to the satisfaction of the conditions set forth in Sections 9.2.1 through 9.2.5 at or prior to the Closing Date:
9.2.1. Representations and Warranties. The representations and warranties of SBBX set forth in Sections 4.3.1, the second sentence of 4.3.2, the first sentence of 4.3.3 and 4.25 (in each case after giving effect to the lead in to Article IV) shall be true and correct (other than, in the case of Section 4.3.1, such failures to be true and correct as are de minimis) in each case as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, and the representations and warranties of SBBX set forth in the first sentence of Sections 4.2.1 and 4.2.2, the second and third sentence of Section 4.2.3, and Sections 4.4.1, 4.12.8 and 4.12.13 (in each case, after giving effect to the lead in to Article IV) shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. All other representations and warranties of SBBX set forth in this Agreement (read without giving effect to any qualification as to materiality or Material Adverse Effect on SBBX set forth in such representations or warranties but, in each case, after giving effect to the lead in to Article IV) shall be true and correct in all respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date; provided, that for purposes of this sentence, such representations and warranties shall be deemed to be true and correct unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, and without giving effect to any qualification as to materiality or Material Adverse Effect set forth in such representations or warranties, has had or would reasonably be expected to have a Material Adverse Effect on SBBX. PFS shall have received a certificate signed on behalf of SBBX by the Chief Executive Officer and the Chief Financial Officer of SBBX to the foregoing effect.
9.2.2. Agreements and Covenants. SBBX shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants to be performed or complied with by it at or prior to the Effective Time, and PFS shall have received a certificate signed on behalf of SBBX by the Chief Executive Officer and Chief Financial Officer of SBBX to such effect dated as of the Effective Time.
9.2.3. Regulatory Approvals. None of the Regulatory Approvals necessary to consummate the Mergers and the transactions contemplated by this Agreement shall include any term, condition or restriction upon PFS or Provident Bank that imposes a Burdensome Condition.
9.2.4. Tax Opinion. PFS shall have received an opinion of Luse Gorman, PC, dated the Closing Date, to the effect that the Merger will constitute a reorganization under Section 368(a) of the Code. In rendering its opinion, such counsel may require and rely upon customary representations contained in certificates of officers of PFS, Provident Bank, SBBX and SB One Bank, reasonably satisfactory in form and substance to such counsel.
9.3. Conditions to the Obligations of SBBX under this Agreement.
The obligations of SBBX under this Agreement shall be further subject to the satisfaction of the conditions set forth in Sections 9.3.1 through 9.3.4 at or prior to the Closing Date:
9.3.1. Representations and Warranties. The representations and warranties of PFS set forth in Sections 5.3.1, 5.3.2, and 5.16 (in each case after giving effect to the lead in to Article V) shall be true and correct (other than, in the case of Section 5.3.1, such failures to be true and correct as are de minimis) in each case as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, and the representations and warranties of PFS set forth in the first sentence of Sections 5.2.1 and 5.2.2, and Section 5.4.1 (in each case, after giving effect to the lead in to Article V) shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the
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Closing Date as though made on and as of the Closing Date. All other representations and warranties of PFS set forth in this Agreement (read without giving effect to any qualification as to materiality or Material Adverse Effect on PFS set forth in such representations or warranties but, in each case, after giving effect to the lead in to Article V) shall be true and correct in all respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date; provided, that for purposes of this sentence, such representations and warranties shall be deemed to be true and correct unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, and without giving effect to any qualification as to materiality or Material Adverse Effect set forth in such representations or warranties, has had or would reasonably be expected to have a Material Adverse Effect on PFS. SBBX shall have received a certificate signed on behalf of PFS by the Chief Executive Officer and the Chief Financial Officer of PFS to the foregoing effect.
9.3.2. Agreements and Covenants. PFS shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants to be performed or complied with by it at or prior to the Effective Time, and SBBX shall have received a certificate signed on behalf of PFS by the Chief Executive Officer and Chief Financial Officer to such effect dated as of the Effective Time.
9.3.3. Payment of Merger Consideration. PFS shall have delivered the Exchange Fund to the Exchange Agent on or before the Closing Date and the Exchange Agent shall provide SBBX with a certificate evidencing such delivery.
9.3.4. Tax Opinion. SBBX shall have received an opinion of Hogan Lovells US LLP, dated the Closing Date, to the effect that the Merger will constitute a reorganization under Section 368(a) of the Code. In rendering its opinion, such counsel may require and rely upon customary representations contained in certificates of officers of PFS, Provident Bank, SBBX and SB One Bank, reasonably satisfactory in form and substance to such counsel.
ARTICLE X
THE CLOSING
10.1. Time and Place.
Subject to the provisions of Articles IX and XI hereof, the Closing of the transactions contemplated hereby shall take place by electronic (PDF), facsimile or overnight courier exchange of executed documents, or at the option of the PFS, at the offices of Luse Gorman, PC, 5335 Wisconsin Avenue, Suite 780, Washington, D.C. at 10:00 a.m., or at such other place or time on the Closing Date which PFS and SBBX mutually agree. A pre-closing of the transactions contemplated hereby (the “Pre-Closing”) shall take place on the day prior to the Closing Date.
10.2. Deliveries at the Pre-Closing and the Closing.
At the Pre-Closing there shall be delivered to PFS and SBBX the opinions, certificates, and other documents and instruments required to be delivered at the Pre-Closing under Article IX hereof. At or prior to the Closing, PFS shall have delivered the Merger Consideration as set forth under Section 9.3.4 hereof.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1. Termination.
This Agreement may be terminated at any time prior to the Closing Date, whether before or after approval of the Merger by the shareholders of SBBX:
11.1.1. At any time by the mutual written agreement of PFS Bank and SBBX;
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11.1.2. By either PFS or SBBX (provided, that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the representations or warranties set forth in this Agreement on the part of the other party, which breach by its nature cannot be cured prior to the Termination Date or shall not have been cured within 30 days after written notice of such breach by the terminating party to the other party provided, however, that neither party shall have the right to terminate this Agreement pursuant to this Section 11.1.2 unless the breach of representation or warranty, together with all other such breaches, would entitle the terminating party not to consummate the transactions contemplated hereby under Section 9.2.1 (in the case of a breach of a representation or warranty by SBBX) or Section 9.3.1 (in the case of a breach of a representation or warranty by PFS);
11.1.3. By either PFS or SBBX (provided, that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material failure to perform or comply with any of the covenants or agreements set forth in this Agreement on the part of the other party, which failure by its nature cannot be cured prior to the Termination Date or shall not have been cured within 30 days after written notice of such failure by the terminating party to the other party provided, however, that neither party shall have the right to terminate this Agreement pursuant to this Section 11.1.3 unless the breach of covenant or agreement, together with all other such breaches, would entitle the terminating party not to consummate the transactions contemplated hereby under Section 9.2.2 (in the case of a breach of covenant by SBBX) or Section 9.3.2 (in the case of a breach of covenant by PFS);
11.1.4. By either PFS or SBBX, if the Closing shall not have occurred by the Termination Date, or such later date as shall have been agreed to in writing by PFS and SBBX; provided, that no party may terminate this Agreement pursuant to this Section 11.1.4 if the failure of the Closing to have occurred on or before said date was due to such party’s material breach of any representation, warranty, covenant or other agreement contained in this Agreement;
11.1.5. By either PFS or SBBX, if the shareholders of SBBX shall have voted at the SBBX Shareholders Meeting on the transactions contemplated by this Agreement and such vote shall not have been sufficient to approve such transactions;
11.1.6. By either PFS or SBBX, if (i) final action has been taken by a Bank Regulator whose approval is required in connection with this Agreement and the transactions contemplated hereby, which final action (x) has become unappealable and (y) does not approve this Agreement or the transactions contemplated hereby, or (ii) any court of competent jurisdiction or other governmental authority shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable;
11.1.7. By PFS, if any Regulatory Approval includes a Burdensome Condition.
11.1.8. By PFS if (x) the SBBX Board (i) withdraws, qualifies, amends or modifies the SBBX Recommendation, or makes any statement, filing or release, in connection with the SBBX Shareholders Meeting or otherwise, inconsistent with the SBBX Recommendation, (ii) materially breaches its obligation to call, give notice of and commence the SBBX Shareholders Meeting under Section 8.1, (iii) approves, recommends or enters into an acquisition agreement with respect to an Acquisition Proposal, (iv) fails to publicly recommend against a publicly announced Acquisition Proposal within five (5) Business Days of being requested to do so by PFS, (v) fails to publicly reconfirm the SBBX Recommendation within five (5) Business Days of being requested to do so by PFS, except during a period in which the SBBX Board is evaluating an Acquisition Proposal to comply with its fiduciary duties to the SBBX’s shareholders under applicable law or (vi) resolves or otherwise determines to take, or announces an intention to take, any of the foregoing actions or (y) there shall have been a material breach of Section 6.10;
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11.1.9. By SBBX, at any time during the five-day period commencing with the Determination Date, if both of the following conditions are satisfied:
(i) The number obtained by dividing the Average Closing Price by the Starting Price (as defined below) (the “Purchaser Ratio”) shall be less than 0.80; and
(ii) (x) the Purchaser Ratio shall be less than (y) the number obtained by dividing the Final Index Price by the Index Price on the Starting Date (each as defined below) and subtracting 0.20 from the quotient in this clause (ii) (y) (such number in this clause (ii) (y) being referred to herein as the “Index Ratio”);
subject, however, to the following three sentences. If SBBX elects to exercise its termination right pursuant to this Section 11.1.9, it shall give written notice to PFS (provided that such notice of election to terminate may be withdrawn at any time within the aforementioned five-day period). During the five-day period commencing with its receipt of such notice, PFS shall have the option to increase the consideration to be received by the holders of SBBX Common Stock hereunder, by adjusting the Exchange Ratio (calculated to the nearest one one-thousandth) to equal the lesser of (x) a number (rounded to the nearest one one-thousandth) obtained by dividing (A) the product of the Starting Price, 0.80 and the Exchange Ratio (as then in effect) by (B) the Average Closing Price and (y) a number (rounded to the nearest one one-thousandth) obtained by dividing (A) the product of the Index Ratio and the Exchange Ratio (as then in effect) by (B) the Purchaser Ratio; provided, however, that any such increase in the Exchange Ratio pursuant this Section 11.1.9 shall be paid to the holders of SBBX Common Stock in cash, determined on a per share basis by multiplying the increase in the Exchange Ratio by the Average Closing Price. If PFS so elects within such five-day period, it shall give prompt written notice to SBBX of such election and the revised Exchange Ratio, whereupon no termination shall have occurred pursuant to this Section 11.1.9 and this Agreement shall remain in effect in accordance with its terms (except as the Exchange Ratio shall have been so modified).
For purposes of this Section 11.1.9 the following terms shall have the meanings indicated:
“Average Closing Price” means the VWAP of PFS Common Stock as reported on the NYSE for the five (5) consecutive full trading days ending on the trading day immediately prior to the Determination Date, rounded to the nearest one-tenth of a cent.
“Determination Date” shall mean the date on which the last required Regulatory Approval is obtained with respect to the Merger and Bank Merger, without regard to any requisite waiting period.
“Final Index Price” shall mean the average of the Index Prices for the five (5) consecutive full trading days ending on the Determination Date.
“Index Price” shall mean the average, rounded to the nearest one-tenth of a cent, of the closing prices for the five (5) full consecutive trading days immediately preceding such date, of the NASDAQ Bank Index.
“Starting Date” shall mean the last trading day immediately preceding the date of the first public announcement of entry into this Agreement.
“Starting Price” shall mean the VWAP of the PFS Common Stock on the NYSE for the five (5) consecutive full trading day period ending on the Starting Date.
11.2. Effect of Termination.
11.2.1. In the event of termination of this Agreement pursuant to any provision of Section 11.1, this Agreement shall forthwith become void and have no further force, except that (i) the provisions of Sections 11.2, 12.1, 12.2, 12.4, 12.5, 12.6, 12.9, 12.10, and any other Section which, by its terms, relates to post-termination rights or obligations, shall survive such termination of this Agreement and remain in full force and effect.
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11.2.2. If this Agreement is terminated, expenses and damages of the parties hereto shall be determined as follows:
(A) Except as provided below, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses; provided, however, that the costs and expenses of printing and mailing the Proxy Statement-Prospectus and all filing and other fees paid to the SEC in connection with the Merger shall be borne equally by PFS and SBBX.
(B) In the event of a termination of this Agreement because of a willful breach of any representation, warranty, covenant or agreement contained in this Agreement, the breaching party shall remain liable for any and all damages, costs and expenses, including all reasonable attorneys’ fees, sustained or incurred by the non-breaching party as a result thereof or in connection therewith or with respect to the enforcement of its rights hereunder.
(C) As a condition of PFS’s willingness, and in order to induce PFS, to enter into this Agreement, SBBX hereby agrees to pay PFS, and PFS shall be entitled to payment of a fee of $9.0 million (the “PFS Fee”). The PFS Fee shall be paid within three business days after written demand for payment is made by PFS, following the occurrence of any of the events set forth below:
(i) (a) PFS terminates this Agreement pursuant to Section 11.1.8 or (b) PFS or SBBX terminates this Agreement pursuant to Section 11.1.5 after the public disclosure, or public awareness or SBBX’s awareness, of an Acquisition Proposal, and SBBX has made a SBBX Subsequent Determination; or
(ii) The entering into a definitive agreement by SBBX relating to an Acquisition Proposal or the consummation of an Acquisition Proposal involving SBBX within twelve months after the occurrence of any of the following: (a) the termination of the Agreement by PFS and Provident Bank pursuant to Section 11.1.2 or 11.1.3 because of, in either case, a willful breach by SBBX after the public disclosure, or public awareness or SBBX’s awareness, of an Acquisition Proposal; or (b) the failure of the shareholders of SBBX to approve this Agreement after the public disclosure or public awareness of an Acquisition Proposal.
(D) The right to receive payment of the PFS Fee under Section 11.2.2(C) will constitute the sole and exclusive remedy of PFS against SBBX and its Subsidiaries and their respective officers and directors with respect to a termination under (i) or (ii) above.
11.3. Amendment, Extension and Waiver.
Subject to applicable law, at any time prior to the Effective Time (whether before or after approval thereof by the shareholders of SBBX), the parties hereto by action of their respective Boards of Directors, may (a) amend this Agreement, (b) extend the time for the performance of any of the obligations or other acts of any other party hereto, (c) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, or (d) waive compliance with any of the agreements or conditions contained herein; provided, however, that after any approval of this Agreement and the transactions contemplated hereby by the shareholders of SBBX, there may not be, without further approval of such shareholders, any amendment of this Agreement which reduces the amount, value or changes the form of consideration to be delivered to SBBX’s shareholders pursuant to this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Any agreement on the part of a party hereto to any extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party, but such waiver or failure to insist on strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
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ARTICLE XII
MISCELLANEOUS
12.1. Confidentiality.
Except as specifically set forth herein, PFS, Provident Bank and SBBX mutually agree to be bound by the terms of the Mutual Confidentiality And Exclusivity agreement dated February 5, 2020 (the “Confidentiality Agreement”) previously executed by PFS and SBBX, which Confidentiality Agreement is hereby incorporated herein by reference. The parties hereto agree that such Confidentiality Agreement shall continue in accordance with their respective terms, notwithstanding the termination of this Agreement.
12.2. Public Announcements.
SBBX and PFS shall cooperate with each other in the development and distribution of all news releases and other public disclosures with respect to this Agreement, and except as may be otherwise required by law, neither SBBX, on the one hand, nor PFS and Provident Bank on the other hand, shall issue any news release, or other public announcement or communication with respect to this Agreement unless such news release, public announcement or communication has been mutually agreed upon by the parties hereto.
12.3. Survival.
All representations, warranties and covenants in this Agreement or in any instrument delivered pursuant hereto or thereto shall expire on and be terminated and extinguished at the Effective Time, except for those covenants and agreements contained herein which by their terms apply in whole or in part after the Effective Time.
12.4. Notices.
All notices or other communications hereunder shall be in writing and shall be deemed given if delivered by receipted hand delivery or mailed by prepaid registered or certified mail (return receipt requested) or by recognized overnight courier addressed as follows:
| If to PFS, to: | Christopher Martin Chairman, President and Chief Executive Officer Provident Financial Services, Inc. 100 Wood Avenue South Iselin, New Jersey 08830 Email: Chris.Martin@Provident.Bank | |
| With required copies (which shall not constitute notice) to: | John Kuntz Senior Executive Vice President, Chief Administrative Officer and General Counsel Provident Financial Services, Inc. 100 Wood Avenue South Iselin, New Jersey 08830 Email: John.Kuntz@Provident.Bank
And to:
John J. Gorman, Esq. Luse Gorman, PC 5335 Wisconsin Avenue, N.W., Suite 780 Washington, D.C. 20015 Fax: (202) 362-2902 Email: jgorman@luselaw.com | |
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| If to SBBX, to: | Anthony Labozzetta President and Chief Executive Officer SB One Bancorp 95 Route 17 Paramus, New Jersey 0765 Email: alabozzetta@sbone.bank | |
| With required copies to (which shall not constitute notice): |
Richard A. Schaberg Les Reese Hogan Lovells US LLP 555 Thirteenth Street, N.W. Washington, DC 20004 Email: richard.schaberg@hoganlovells.com leslie.reese@hoganlovells.com | |
or such other address as shall be furnished in writing by any party, and any such notice or communication shall be deemed to have been given: (a) as of the date delivered by hand; (b) three business days after being delivered to the U.S. mail, postage prepaid; or (c) one business day after being delivered to the overnight courier.
12.5. Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other party. Except for the provisions of Article III and Section 7.9, following the Effective Time, nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
12.6. Complete Agreement.
This Agreement, including the Exhibits and Disclosure Schedules hereto and the documents and other writings referred to herein or therein or delivered pursuant hereto, and the Confidentiality Agreement, referred to in Section 12.1, contains the entire agreement and understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties other than those expressly set forth herein or therein. This Agreement supersedes all prior agreements and understandings (other than the Confidentiality Agreement referred to in Section 12.1 hereof) between the parties, both written and oral, with respect to its subject matter.
12.7. Counterparts.
This Agreement may be executed in one or more counterparts all of which shall be considered one and the same agreement and each of which shall be deemed an original. A facsimile copy or electronic transmission of a signature page shall be deemed to be an original signature page.
12.8. Severability.
In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.
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12.9. Governing Law; Jurisdiction.
This Agreement shall be governed by and construed in accordance with the laws of State of Delaware, without regard to any applicable conflicts of law thereof (except that matters relating to the fiduciary duties of the Board of Directors of SBBX shall be subject to the laws of the State of New Jersey). Each party agrees that it will bring any action or proceeding in respect of any claim arising out of or related to this Agreement or the transactions contemplated hereby exclusively in the Court of Chancery of the State of Delaware (or, if the Court of Chancery determines that it lacks subject matter jurisdiction, any federal court sitting in the State of Delaware and, if both the Court of Chancery and the federal courts sitting in the State of Delaware determine that they lack subject matter jurisdiction, any state court sitting in the State of Delaware) (and any courts from which appeals may be taken) (the “Chosen Courts”), and, solely in connection with claims arising under this Agreement or the transactions that are the subject of this Agreement, (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party and (iv) agrees that service of process upon such party in any such action or proceeding will be effective if notice is given in accordance with Section 12.4.
12.10. Confidential Supervisory Information.
Notwithstanding any other provision of this Agreement, no disclosure, representation or warranty shall be made (or other action taken) pursuant to this Agreement that would involve the disclosure of confidential supervisory information (including confidential supervisory information as defined in 12 C.F.R. § 261.2(c) and as identified in 12 C.F.R. § 309.5(g)(8)) of a Governmental Entity by any party to this Agreement to the extent prohibited by applicable law. To the extent legally permissible, appropriate substitute disclosures or actions shall be made or taken under circumstances in which the limitations of the preceding sentence apply.
12.11. Interpretation.
When a reference is made in this Agreement to Sections or Exhibits, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated. The recitals hereto constitute an integral part of this Agreement. References to Sections include subsections, which are part of the related Section (e.g., a section numbered “Section 5.5.1” would be part of “Section 5.5” and references to “Section 5.5” would also refer to material contained in the subsection described as “Section 5.5.1”). The table of contents, index and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The phrases “the date of this Agreement,” “the date hereof” and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date set forth in the Recitals to this Agreement. The term “made available” means any document or other information that was (a) included in the virtual data room of a party at least two (2) business days prior to the date hereof, or (b) filed by a party with the SEC and publicly available on EDGAR at least two (2) business days prior to the date hereof. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
12.12. Specific Performance; Jurisdiction.
The parties hereto agree that irreparable damage would occur in the event that the provisions contained in this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be
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adequate and (b) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief.
12.13. Waiver of Jury Trial.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY LAW AT THE TIME OF INSTITUTION OF THE APPLICABLE LITIGATION, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.13.
IN WITNESS WHEREOF, PFS and SBBX have caused this Agreement to be executed by their duly authorized officers as of the date first set forth above.
| Provident Financial Services, Inc. | ||||||
| Dated: March 11, 2020 | By: | /s/ Christopher Martin | ||||
| Name: Christopher Martin | ||||||
| Title: Chairman, President and Chief Executive Officer | ||||||
| SB One Bancorp | ||||||
| Dated: March 11, 2020 | By: | /s/ Anthony Labozzetta | ||||
| Name: Anthony Labozzetta | ||||||
| Title: President and Chief Executive Officer | ||||||
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Exhibit 10.1
FORM OF
SB ONE BANCORP VOTING AGREEMENT
This Voting Agreement (this “Agreement”), dated as of March 11, 2020, is entered into by and between Provident Financial Services, Inc., a Delaware corporation (“PFS”), and the undersigned (the “Shareholder”), a shareholder of SB One Bancorp, a New Jersey corporation ( “SBBX”).
WHEREAS, subject to the terms and conditions of the Agreement and Plan of Merger (as the same may be amended, supplemented or modified, the “Merger Agreement”), dated as of the date hereof, by and between PFS and SBBX, SBBX will be merged with and into PFS, with PFS as the surviving corporation (the “Merger”);
WHEREAS, as of the date of this Agreement, the Shareholder owns beneficially or of record, and has the power to vote or direct the voting of, certain shares of common stock, no par value per share, of SBBX (“Common Stock”) (all such shares, the “Existing Shares”); and
WHEREAS, as a condition and inducement for PFS to enter into the Merger Agreement, PFS has required that the Shareholder, in his or her capacity as a shareholder of SBBX, enter into this Agreement, and the Shareholder has agreed to enter into this Agreement.
NOW THEREFORE, in consideration of the foregoing, the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
| 1. | Definitions. Capitalized terms not defined in this Agreement have the meaning assigned to those terms in the Merger Agreement. The following definition also applies to this Agreement: |
| a. | Beneficial Ownership. For purposes of this Agreement, the terms “beneficial owner” and “beneficially own” shall have the meaning set forth in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). |
| 2. | Effectiveness; Termination. This Agreement shall be effective upon signing. If the Merger Agreement is terminated for any reason in accordance with its terms, this Agreement shall automatically terminate and be null and void and of no effect as of the date of the termination of the Merger Agreement; provided that (i) this Section 2 and Sections 8 through 13 hereof shall survive any such termination and (ii) such termination shall not relieve any party of any liability or damages resulting from any willful or material breach of any of his or her representations, warranties, covenants or other agreements set forth herein. |
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| 3. | Voting Agreement. From the date hereof until the earlier of (a) the final adjournment of the SBBX Shareholder Meeting or (b) the termination of this Agreement in accordance with its terms (the “Support Period”), the Shareholder irrevocably and unconditionally hereby agrees, that at any meeting (whether annual or special and each adjourned or postponed meeting) of SBBX’s shareholders, however called, or in connection with any written consent of SBBX’s shareholders, the Shareholder shall (i) appear at such meeting or otherwise cause all of his or her Existing Shares and all other shares of Common Stock or voting securities of SBBX over which such Shareholder has acquired beneficial or record ownership after the date hereof and has the power to vote or direct the voting of (including any shares of Common Stock acquired by means of purchase, dividend or distribution, or issued upon the exercise of any stock options to acquire Common Stock or the conversion of any convertible securities, or pursuant to any other equity awards or derivative securities (including any SBBX Stock Options) or otherwise) (together with the Existing Shares, the “Shares”), which such Shareholder owns or controls as of the applicable record date, to be counted as present thereat for purposes of calculating a quorum, and (ii) vote or cause to be voted (including by proxy or written consent, if applicable) all such Shares (A) in favor of the approval of the Merger Agreement and the approval of the transactions contemplated thereby, including the Merger, (B) in favor of any proposal to adjourn or postpone such meeting of SBBX’s shareholders to a later date if there are not sufficient votes to approve the Merger Agreement, (C) against any action or proposal in favor of an Acquisition Proposal, without regard to the terms of such Acquisition Proposal, and (D) against any action, proposal, transaction or agreement that would reasonably be likely to (1) result in a breach of any covenant, representation or warranty or any other obligation or agreement of SBBX contained in the Merger Agreement, or of the Shareholder contained in this Agreement, or (2) prevent, impede, interfere with, delay, postpone, discourage or frustrate the purposes of or adversely affect the consummation of the transactions contemplated by the Merger Agreement, including the Merger; provided, that the foregoing applies solely to the Shareholder in his or her capacity as a shareholder and Shareholder makes no agreement or understanding in this Agreement in Shareholder’s capacity as a director or officer of SBBX or any of its subsidiaries (if Shareholder holds such office), and nothing in this Agreement: (a) will limit or affect any actions or omissions taken by Shareholder in Shareholder’s capacity as such a director or officer, including in exercising rights under the Merger Agreement, and no such actions or omissions shall be deemed a breach of this Agreement; or (b) will be construed to prohibit, limit or restrict Shareholder from exercising Shareholder’s fiduciary duties as an officer or director to SBBX or its shareholders. For the avoidance of doubt, the foregoing commitments apply to any Shares held by any trust, limited partnership or other entity holding Shares for which the Shareholder serves in any partner, shareholder or trustee capacity. To the extent the Shareholder does not control, by himself or herself, the determinations of such shareholder entity, the Shareholder agrees to exercise all voting or other determination rights such Shareholder has in such shareholder entity to carry out the intent and purposes of his, her or its support and voting obligations in this paragraph and otherwise set forth in this Agreement. The Shareholder covenants and agrees that, except for this Agreement, such Shareholder (x) has not entered into, and shall not enter into during the Support Period, any voting agreement or voting trust with respect to the Shares and (y) has not granted, and shall not grant during the Support Period, a proxy, consent or power of attorney with respect to the Shares except any proxy to carry out the intent of this Agreement and any proxy granted for ordinary course proposals at an annual meeting. The Shareholder agrees not to enter into any agreement or commitment with any person the effect of which would be inconsistent with or otherwise violate the provisions and agreements set forth herein. |
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| 4. | Transfer Restrictions. The Shareholder hereby agrees that such Shareholder will not, during the Support Period, without the prior written consent of PFS, directly or indirectly, offer for sale, sell, transfer, assign, give, tender in any tender or exchange offer, pledge, encumber, hypothecate or similarly dispose of (by merger, by testamentary disposition, by operation of law or otherwise), either voluntarily or involuntarily, enter into any swap or other arrangements that transfers to another, in whole or in part, any of the economic consequences of ownership of, enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or other disposition of (by merger, by testamentary disposition, by operation of law or otherwise) or otherwise convey or dispose of, any of the Shares, or any interest therein, including the right to vote any Shares, as applicable (a “Transfer”); provided, that the Shareholder may (i) Transfer Shares pursuant to any currently existing pledge agreement or for estate planning or philanthropic purposes so long as the transferee, prior to the date of Transfer, agrees in a signed writing to be bound by and comply with the provisions of this Agreement and the Shareholder provides at least two (2) days’ prior written notice (which shall include the written consent of the transferee agreeing to be bound by and comply with the provisions of this Agreement), in which case the Shareholder shall remain jointly and severally liable for any breach of this Agreement by such transferee, (ii) bequeath Shares by will or operation of law, in which case this Agreement shall bind the transferee, (iii) surrender Shares to SBBX in connection with the vesting, settlement or exercise of SBBX equity awards to satisfy any withholding for the payment of taxes incurred in connection with such vesting, settlement or exercise, or, in respect of SBBX equity awards, the exercise price thereon, or (iv) Transfer Shares as is otherwise permitted by PFS in its sole discretion. |
| 5. | Representations of the Shareholder. The Shareholder represents and warrants to PFS as follows: (a) the Shareholder has full legal right, capacity and authority to execute and deliver this Agreement, to perform the Shareholder’s obligations hereunder and to consummate the transactions contemplated hereby; (b) this Agreement has been duly and validly executed and delivered by the Shareholder and, assuming the due authorization, execution and delivery of this Agreement by PFS, constitutes a valid and legally binding agreement of the Shareholder, enforceable against the Shareholder in accordance with its terms, and no other action is necessary to authorize the execution and delivery of this Agreement by the Shareholder or the performance of his or her obligations hereunder; (c) the execution and delivery of this Agreement by the Shareholder does not, and the consummation of the transactions contemplated hereby and the compliance with the provisions hereof will not, conflict with or violate any law or result in any breach of or violation of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien on any of the Shares pursuant to, any agreement or other instrument or obligation binding upon the Shareholder or the Shares (including under the certificate of incorporation and bylaws of SBBX), nor require any authorization, consent or approval of, or filing with, any Governmental Entity; (d) the Shareholder beneficially owns (as such term is used in Rule 13d-3 of the Exchange Act) and has the power to vote or direct the voting of the Shares, and the number of such Shares as of the date of this Agreement is identified on the signature page hereto; (e) the Shareholder beneficially owns the Shares free and clear of any proxy, voting restriction, adverse claim or other lien (other than any restrictions created by this Agreement or under applicable federal or state securities laws); and (f) the Shareholder has read and is familiar with the terms of the Merger Agreement. The Shareholder agrees that the Shareholder shall not take any action that would make any representation or warranty of the Shareholder contained herein untrue or incorrect or have the effect of preventing, impairing, delaying or adversely affecting the performance by the Shareholder of his or her obligations under this Agreement. The Shareholder agrees, without further consideration, to execute and deliver such additional documents and to take such further actions as are necessary or reasonably requested by PFS to confirm and assure the rights and obligations set forth in this Agreement. |
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| 6. | Publicity. The Shareholder hereby authorizes PFS and SBBX to publish and disclose in any announcement or disclosure in connection with the Merger, including in the Merger Registration Statement, the Proxy Statement-Prospectus or any other filing with any Governmental Entity made in connection with the Merger, the Shareholder’s identity and ownership of the Shares and the nature of the Shareholder’s obligations under this Agreement. The Shareholder agrees to notify PFS as promptly as practicable of any inaccuracies or omissions in any information relating to the Shareholder that is so published or disclosed. |
| 7. | Entire Agreement; Assignment. The recitals are incorporated as a part of this Agreement. This Agreement and the Merger Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, other than, if the Shareholder is a director or officer of SBBX, with respect to any employment, non-competition, non-solicit or consulting agreement between the Shareholder and either PFS or SBBX, or its affiliates. Nothing in this Agreement, express or implied, is intended to or shall confer upon any person not a party to this Agreement any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. This Agreement shall not be assigned by operation of law or otherwise and shall be binding upon and inure solely to the benefit of each party hereto; provided, however, that the rights under this Agreement are assignable by PFS to a majority-owned affiliate or any successor-in-interest of PFS, but no such assignment shall relieve PFS of its obligations hereunder. |
| 8. | Remedies/Specific Enforcement. Each of the parties hereto agrees that this Agreement is intended to be legally binding and specifically enforceable pursuant to its terms and that PFS would be irreparably harmed if any of the provisions of this Agreement are not performed in accordance with its specific terms and that monetary damages would not provide adequate remedy in such event. Accordingly, in the event of any breach or threatened breach by the Shareholder of any covenant or obligation contained in this Agreement, in addition to any other remedy to which PFS may be entitled (including monetary damages), PFS shall be entitled to seek injunctive relief to prevent breaches or threatened breaches of this Agreement and to specifically enforce the terms and provisions hereof, and the Shareholder hereby waives any defense in any action for specific performance or an injunction or other equitable relief that a remedy at law would be adequate. The Shareholder further agrees that neither PFS nor any other person or entity shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this paragraph, and the Shareholder irrevocably waives any right he or she may have to require the obtaining, furnishing or posting of any such bond or similar instrument. |
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| 9. | Governing Law. This Agreement is governed by, and shall be interpreted in accordance with, the laws of the State of Delaware, without regard to any applicable conflict of law principles. |
| 10. | Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) if to the Shareholder, to the address or e-mail address, as applicable, set forth in Schedule A hereto, and if to PFS, in accordance with Section 12.4 of the Merger Agreement. |
| 11. | Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction such that the invalid, illegal or unenforceable provision or portion thereof shall be interpreted to be only so broad as is enforceable. |
| 12. | Amendments; Waivers. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed (a) in the case of an amendment, by PFS and the Shareholder, and (b) in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. |
| 13. | Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY LAW AT THE TIME OF INSTITUTION OF THE APPLICABLE LITIGATION, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (II) THE PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (III) THE PARTY MAKES THIS WAIVER VOLUNTARILY; AND (IV) THE PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13. |
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| 14. | Counterparts. The parties may execute this Agreement in one or more counterparts, including by facsimile or other electronic signature. All the counterparts will be construed together and will constitute one Agreement. |
[Signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the date first written above.
| PROVIDENT FINANCIAL SERVICES, INC. | ||||
| By: |
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| Christopher Martin | ||||
| Title: | Chairman, President and Chief | |||
| Executive Officer | ||||
[Additional Signatures on Next Page]
| SHAREHOLDER: |
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| Number of Shares: |
SCHEDULE A
Shareholder Information
Name, Address and E-Mail Address for Notices
Exhibit 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is dated this 11th day of March 2020, to be effective as of the Effective Date as defined in Section 22 below, by and between Provident Financial Services, Inc., a Delaware corporation (the “Company”), and Anthony J. Labozzetta (“Executive”). References to the “Bank” mean Provident Bank, a New Jersey chartered savings bank and wholly owned subsidiary of the Company. The Company and the Bank are sometimes collectively referred to as “Employers.”
WHEREAS, Executive is presently the President and Chief Executive Officer of SB One Bancorp, a New Jersey corporation (“SBBX”), and SB One Bank, a New Jersey-chartered commercial bank and wholly-owned subsidiary of SBBX; and is a party to an employment agreement with SBBX and SB One Bank, dated January 20, 2010 (such agreement, the “Prior Agreement”); and
WHEREAS, the Company and SBBX have executed and delivered an Agreement and Plan of Merger, dated as of March 11, 2020 (the “Merger Agreement”), pursuant to which SBBX shall merge with and into the Company, with the Company as the surviving entity (the “Merger”); and
WHEREAS, concurrently with the execution of the Merger Agreement, the parties desire to enter into this Agreement in order to induce Executive to accept employment with, and to provide further incentive for Executive to achieve the financial and performance objectives of, the Employers; and
WHEREAS, this Agreement shall supersede and replace the Prior Agreement as of the Effective Date.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:
| 1. | POSITION AND RESPONSIBILITIES |
(a) Position. During the Initial Term (as defined in Section 2 below), Executive agrees to serve as Chief Operating Officer and President of the Company and the Bank. Subject to and conditioned upon the approval of, and appointment by, the Board of Directors of the Company, commencing on January 1, 2022 and continuing during the Renewal Term (as defined in Section 2 below), Executive agrees to serve as of Chief Executive Officer and President of the Company and the Bank.
(b) Responsibilities. Executive will perform all duties and will have powers associated with the executive positions set forth in Section 1(a), as directed by the Board of Directors and as may be set forth in the Bylaws of the Company and the Bank. In addition, Executive shall be responsible for establishing the business objectives, policies and strategic plans of the Company and the Bank. During said period, Executive also agrees to serve, if elected, as an officer and director of any subsidiary or affiliate of the Bank or the Company without additional compensation.
| 2. | TERM |
The period of Executive’s employment under this Agreement shall begin as of the Effective Date and shall continue through December 31, 2021 (the “Initial Term”). Commencing on January 1, 2022, and continuing at each January 1 thereafter, the Agreement shall renew for an additional year such that the remaining term shall be twelve (12) full calendar months (each a “Renewal Term”). The Initial Term and any Renewal Term shall be referred to as the “Term.”
| 3. | PERFORMANCE OF DUTIES |
During the Term, except for periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of absence approved by the Board of the Company or the Bank (each a “Board,” as appropriate, however, unless otherwise noted, “Board” shall refer to the Company’s Board), Executive shall devote substantially all his business time, attention, skill, and efforts to the faithful performance of his duties hereunder, including activities and services related to the organization, operation and management of the Company and the Bank; provided, however, that, with the approval of the Board of the Company or the Bank, as evidenced by a resolution of such Board, from time to time, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, business companies or business organizations, which, in such Board’s judgment, will not present any conflict of interest with the Bank, or materially affect the performance of Executive’s duties pursuant to this Agreement.
| 4. | COMPENSATION, BENEFITS AND REIMBURSEMENT |
(a) Base Salary. The compensation specified under this Agreement shall constitute the salary and benefits paid for the duties described in Section 3. The Company or the Bank shall pay Executive as compensation a salary at an annual rate not less than $584,119.12 per year (“Base Salary”). Such Base Salary shall be payable biweekly, or with such other frequency as officers and employees are generally paid. During the period of this Agreement, Executive’s Base Salary shall be reviewed at least annually, commencing in January 2021. Such review may be conducted by a committee designated by the Board (the “Committee”), and the Board may increase, but not decrease (except a decrease that is generally applicable to all executive officers), Executive’s Base Salary (any increased Base Salary shall become the “Base Salary” for purposes of this Agreement). In addition to the Base Salary provided in this Section 3(a), the Company or the Bank shall provide Executive at no cost to Executive with all such other benefits as are provided uniformly to permanent full-time employees of the Bank. Base Salary shall include any amounts of compensation deferred by Executive under qualified and nonqualified plans, if any, maintained by the Company or the Bank.
(b) Bonus and Incentive Compensation. Executive will be entitled to participate in any incentive compensation and bonus plans or arrangements of Employers. Such incentive compensation will be paid in cash or stock in accordance with the terms of such plans or arrangements, or on a discretionary basis by the Committee. Nothing paid to Executive under any such plans or arrangements will be deemed to be in lieu of other compensation to which Executive is entitled under this Agreement.
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(c) Benefit Plans. Executive will be entitled to participate in or receive benefits under any employee benefit plans including, but not limited to, retirement plans, supplemental retirement plans, pension plans, profit-sharing plans, or any other employee benefit plan or arrangement made available by the Bank or the Company in the future to its senior executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.
(d) Health, Dental, Life and Disability Coverage. Employers shall provide Executive with life, medical, dental and disability coverage made available by Employers to its senior executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such coverage.
(e) Vacation and Leave. Executive will be entitled to paid vacation time each year during the term of this Agreement measured on a calendar year basis, in accordance with the Bank’s customary practices, as well as sick leave, holidays and other paid absences in accordance with the Bank’s policies and procedures for senior executives. Any unused paid time off during an annual period will be treated in accordance with the Bank’s personnel policies as in effect from time to time.
(f) Expense Reimbursement. The Company or the Bank shall provide Executive with an automobile suitable to Executive’s position, and such automobile may be used by Executive in carrying out his duties under this Agreement, including commuting between his residence and his principal place of employment, and other personal use. The Bank or the Company shall reimburse Executive for the cost of maintenance and servicing such automobile and, for instance, gasoline and oil for such automobile, and will also reimburse Executive for his ordinary and necessary business expenses incurred in the performance of his duties under this Agreement (including but not limited to travel and entertainment expenses) that are excludible from Executive’s gross income for federal income tax purposes and for fees for memberships in a country club, and such other clubs and organizations and such other expenses as Executive and the Board shall mutually agree are necessary and appropriate for business purposes. Any such reimbursement shall be made only after presentation to the Company or the Bank of an itemized account of such expenses in such form as the Company or the Bank may reasonably require, each such reimbursement payment to be made promptly following receipt of the itemized account and in any event not later than the last day of the calendar year following the calendar year in which the expense was incurred. Executive shall be responsible for the payment of any taxes on account of his personal use of the automobile, if any, provided by the Bank or the Company and on account of any other benefit provided herein. The foregoing provisions for use of an automobile provided by the Bank or the Company and reimbursement of related expenses shall apply on a calendar year basis; prior to the beginning of each calendar year, the Bank or the Company may determine to substitute a cash allowance or other arrangement which it determines to be of equivalent value for one or more succeeding calendar years or any portion thereof during the term of this Agreement.
(g) SERP. The Company and the Bank shall honor the terms and conditions of that certain Supplemental Executive Retirement Agreement, dated as of July 20, 2011 and as it has been amended, by and between SBBX and Executive, in accordance with its terms (as such terms may be mutually amended between the parties thereto in accordance with the Merger Agreement, including an amendment to freeze such agreement as of the Effective Time).
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| 5. | TERMINATION AND TERMINATION PAY |
Executive’s employment under this Agreement may be terminated in the following circumstances:
(a) Death. Executive’s employment under this Agreement will terminate upon his death during the Term, in which event the Company’s sole obligation under this Agreement will be to pay or provide Executive’s estate or beneficiary any “Standard Termination Entitlements.”
For purposes of this Agreement, “Standard Termination Entitlements” means the sum: (i) any Base Salary earned through the Executive’s Date of Termination; (ii) unpaid expense reimbursements (subject to, and in accordance with, Section 4(f) of this Agreement); (iii) unused paid time off that accrued through the Date of Termination; (iv) the annual bonus (if any) to which Executive is entitled under any cash-based annual bonus or performance compensation plan in effect for the year of the Date of Termination, to be paid at the same time and on the same terms and conditions (including but not limited to achievement of performance goals) applicable under the relevant plan; (v) any earned but unpaid bonus and/or incentive compensation for the year immediately preceding the year of the Date of Termination; and (vi) any vested benefits the Executive may have under any employee benefit plan of the Company or the Bank through the Date of Termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans. Unless otherwise provided by the applicable employee benefit plan, the Standard Termination Entitlements, if any, will be paid to Executive (or Executive’s estate or beneficiary) within 30 days following Executive’s Date of Termination.
(b) Retirement. Executive’s employment under this Agreement will terminate upon his “Retirement.” Termination of Executive’s employment based on “Retirement” shall mean termination of Executive’s employment (a) at age 65 or in accordance with any retirement policy established with Executive’s consent with respect to him or (b) at such later time as the Company’s Board of Directors or an authorized committee thereof may determine. Upon termination of Executive upon Retirement, the Company’s sole obligation under this Agreement is to pay or provide Executive any Standard Termination Entitlements.
(c) Disability.
| (i) | Termination of Executive’s employment based on “Disability” shall mean termination because of any permanent and total physical or mental impairment which qualifies Executive for disability benefits under the applicable long-term disability plan maintained by the Company, the Bank or any subsidiary or, if no such plan applies, which would qualify Executive for disability benefits under the Federal Social Security System, provided, however, that solely to the extent necessary to satisfy Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), “Disability” shall satisfy the requirements of the Section 409A of the Code. In the event of termination due to Disability, Executive will be entitled to disability benefits, if any, provided under a long-term disability plan sponsored by the Bank, if any. |
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| (ii) | In the event of Executive’s Disability, the Company will be entitled to terminate this Agreement, and Executive will be entitled to: (1) any Standard Termination Entitlements; and (2), as disability pay, a bi-weekly payment equal to seventy-five percent of Executive’s bi-weekly rate of Base Salary on the effective date of such termination. These disability payments shall commence on the effective date of Executive’s termination and will end on the earlier of (1) the date Executive returns to the full-time employment with the Bank and the Company in the same capacity as he was employed prior to his termination for Disability and pursuant to an employment agreement between Executive and the Bank or the Company; (2) Executive’s full-time employment by another employer; (3) Executive attaining the age of 65; or (4) Executive’s death. The disability pay shall be reduced by the amount, if any, paid to Executive under any plan of the Bank or the Company providing disability benefits to Executive. In lieu of the foregoing, in the sole discretion of the Company and the Bank, the Company or Bank may assist Executive in purchasing a supplemental disability policy owned by Executive which would provide a disability benefit, when aggregated with any benefit payable under any plan of the Bank or Company, that would provide after-tax income equal to fifty percent of Executive’s bi-weekly rate of Base Salary. In such case, the premiums for the supplemental disability policy would be fully paid by the Company or the Bank. |
| (iii) | The Bank or the Company will cause to be continued life, medical, dental and disability coverage substantially comparable, as reasonably or customarily available, to the coverage maintained by the Bank and the Company for Executive prior to his termination for Disability, except to the extent such coverage may be changed in its application to all Bank employees or not available on an individual basis to an employee terminated for Disability. This coverage shall cease upon the earlier of: (i) the date Executive returns to the full-time employment with the Bank and the Company in the same capacity as he was employed prior to his termination for Disability and pursuant to an employment agreement between Executive and the Bank or the Company; (ii) Executive’s full-time employment by another employer; (iii) Executive attaining the age of 65; or (iv) Executive’s death. |
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(d) Termination for Cause.
| (i) | The Board may, by written notice to Executive in the form and manner specified in this paragraph, immediately terminate his employment at any time for “Cause.” In the event Executive’s employment is terminated for Cause, the Company’s sole obligation will pay or provide to Executive any Standard Termination Entitlements. Termination for Cause shall mean termination because of, in the good faith determination of the Board, Executive’s: |
| (1) | personal dishonesty; |
| (2) | willful misconduct; |
| (3) | breach of fiduciary duty involving personal profit; |
| (4) | intentional failure to perform stated duties; |
| (5) | material breach of the Company’s or the Bank’s Code of Business Conduct and Ethics; |
| (6) | willful violation of any law, rule or regulation (other than traffic violations or similar offenses), or any violation of a final cease-and-desist order; |
| (7) | willfully engaging in actions that in the reasonable opinion of the Board will likely cause substantial financial harm or substantial injury to the business reputation of the Company or the Bank; or |
| (8) | material breach of any provision of this Agreement. |
| (ii) | For purposes of this Section 5(d), in evaluating Executive’s performance, Executive’s acts or omissions shall be measured against standards generally prevailing in the savings institution and commercial banking industry. For purposes of this paragraph, no act or failure to act on the part of Executive shall be considered “willful” unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that Executive’s action or omission was in the best interest of the Bank and the Company. Executive’s employment shall not be terminated in accordance with this paragraph for any act or action or failure to act which is undertaken or omitted in accordance with a resolution of the Board or upon advice of the Company’s counsel. |
| (iii) | Notwithstanding the foregoing, Executive’s termination for Cause will not become effective unless the Company has delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the independent Directors of the Board, at a meeting of the Board called and held for the purpose of finding that, in the good faith opinion of the Board (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board), Executive was guilty of the conduct described above and specifying the particulars of such conduct. |
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(e) Voluntary Termination by Executive. Executive may voluntarily terminate his employment during the Term upon at least ninety (90) days prior written notice to the Board. In its discretion, the Board may accelerate Executive’s Date of Termination. Upon Executive’s voluntary termination, the Company’s sole obligation under this Agreement will be to pay or provide Executive any Standard Termination Entitlements. Following his voluntary termination of employment under this Section 5(e), Executive will be subject to the requirements and restrictions set forth in Sections 8(a), 8(b) and 8(c) of this Agreement.
(f) Termination Without Cause or With Good Reason.
| (i) | The Board may, by written notice to Executive, immediately terminate his employment at any time for a reason other than Cause (a termination “Without Cause”), and Executive may, by written notice to the Board, terminate this Agreement by resignation upon not less than thirty (30) days prior written notice given within a reasonable period of time (not to exceed, except in the case of a continuing breach, four calendar months) following an event constituting “Good Reason, as defined in sub-section 5(f)(v) below. Any termination of Executive’s employment shall have no effect on or prejudice the vested rights of Executive under the Employers’ qualified or non-qualified retirement, pension, savings, thrift, profit-sharing, incentive compensation plans or equity plans, group life, health (including hospitalization, medical and major medical), dental, accident and long-term disability insurance plans or other employee benefit plans or programs, or compensation plans or programs in which Executive was a participant as of the Date of Termination, unless the terms of any particular plan or program expressly provide otherwise. |
| (ii) | In the event of termination under this Section 5(f), Employer shall pay Executive: |
| (1) | any Standard Termination Entitlements; and |
| (2) | as severance pay or liquidated damages, or both, a cash lump sum payment equal to the Base Salary and bonuses due for longer of: (i) the remaining Term; or (ii) twelve (12) months following Executive’s Date of Termination. For these purposes, the “bonuses due for the remaining term of the Agreement” shall be determined as the greater of one-twelfth of: (x) the average annual cash bonus paid to Executive with respect to the three completed fiscal years prior to Executive’s Date of Termination, or (y) the cash bonus paid to Executive with respect to the last fiscal year ended prior to Executive’s Date of Termination, multiplied by the number of full calendar months in the longer of the two periods set forth immediately above in this sub-section. |
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| (iii) | Upon the occurrence of a termination Without Cause or for Good Reason, the Company or the Bank will cause to be continued life, medical, dental and disability coverage substantially comparable, as reasonably or customarily available, to the coverage maintained by the Company and the Bank for Executive prior to his Date of Termination, except to the extent such coverage may be changed in its application to all Bank and Company employees. Such coverage shall cease at the end of the longer of: (i) the remaining Term; or (ii) twelve (12) months following Executive’s Date of Termination. To the extent the Company or the Bank determines in good faith it is not practicable to provide in-kind coverage, it shall pay directly to the insurance carrier the premium, or reimburse Executive for his direct out-of-pocket cost, for comparable coverage obtained by Executive on his own. Each such reimbursement payment shall be made promptly on submission of an itemized account of Executive’s reimbursable expense in such form as the Bank or the Company may reasonably require and in any event not later than the last day of the calendar year following the calendar year in which the expense was incurred. Each reimbursement payment shall include an additional amount calculated by the Bank or the Company in its reasonable discretion to reflect the aggregate amount of federal, state and local income and payroll taxes incurred by Executive with respect to the reimbursement payment. |
| (iv) | “Good Reason” exists if, without Executive’s express written consent, any of the following occurs: |
| (1) | a failure to elect or reelect or to appoint or reappoint Executive as Chief Operating Officer and President of the Company and the Bank during the Initial Term or as Chief Executive Officer and President of the Company and the Bank during the Renewal Term, or to nominate (and as to the Bank, elect) Executive to the Board of the Company and the Bank, unless consented to by Executive or resulting from Executive’s refusal to stand for election; |
| (2) | a material change in Executive’s functions, duties, or responsibilities, which change would cause Executive’s position to become one of lesser responsibility, importance, or scope from the position and attributes thereof described in Section 1 above, to which Executive has not agreed in writing (and any such material change not agreed to in writing shall be deemed a continuing breach of this Agreement); |
| (3) | a relocation of Executive’s principal place of employment by more than twenty-five (25) miles from the Company’s administrative headquarters (unless such change is closer to Executive’s principal residence at the time of such relocation); |
| (4) | a material reduction in Executive’s benefits and perquisites, including Base Salary (except for any reduction that is part of an employer-wide reduction in pay or benefits by Employer as part of a good faith, overall reduction or elimination applicable to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with applicable law)); |
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| (5) | a liquidation or dissolution of the Company or the Bank other than liquidations or dissolutions that are caused by reorganizations that do not affect the status of Executive; |
| (6) | a material breach of this Agreement by the Employer. |
| (v) | The payments and benefits under this Section 5(f) shall be paid to Executive or commence within 14 days following Executive’s Date of Termination, or if later, following the seventh (7th) day after Executive executes a release of his claims against Employer, its officers, directors, successors and assigns, in the form attached to this Agreement (the “Release”). The Release must be executed and become irrevocable by the 60th day following the Date of Termination, provided that if the 60-day period spans two (2) calendar years, then, to the extent necessary to comply with Section 409A of the Code, the payments under this Section 5(f) will be paid, or commence, in the second calendar year. The payments due under this Section 5(f) (other than any Standard Termination Entitlements) are subject to Executive’s execution of the Release. |
(g) Termination and Board Membership. To the extent Executive is a member of the Board of the Company, the Bank or of any of their subsidiaries or affiliates (including The Provident Bank Charitable Foundation) on the date of termination of employment with Employer, then immediately upon such termination, Executive’s service on such board shall terminate and this Agreement shall constitute any required notice of resignation.
| 6. | CHANGE IN CONTROL |
(a) If any of the events described in Section 6(b) hereof constituting a Change in Control shall have occurred or the Board has determined that a Change in Control has occurred, Executive shall not be entitled to the benefits provided under Section 5 of this Agreement upon any termination of employment, but shall be entitled only to the benefits provided under a separate Change in Control Agreement.
(b) “Change in Control” shall mean the occurrence of any of the following events:
(i) consummation of a transaction that results in the reorganization, merger or consolidation of the Company, with one or more other persons, other than a transaction following which:
(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Company; and
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(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51 % of the securities entitled to vote generally in the election of directors of the Company;
(ii) the acquisition of all or substantially all of the assets of the Company or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the outstanding securities of the Company entitled to vote generally in the election of directors by any person or by any persons acting in concert, or approval by the shareholders of the Company of any transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company or the Bank, or approval by the shareholders of the Company of a plan for such liquidation or dissolution;
(iv) the occurrence of any event if, immediately following such event, members of the Company’s Board who belong to any of the following groups do not constitute at least a majority of the Company’s Board:
(A) individuals who were members of the Company’s Board on the Effective Date; or
(B) individuals who first became members of the Company’s Board after the Effective Date either:
(I) upon election to serve as a member of the Company’s Board by the affirmative vote of three-quarters of the members of such Board, or of a nominating committee thereof, in office at the time of such first election; or
(II) upon election by the shareholders of the Company to serve as a member of the Company’s Board, but only if nominated for election by the affirmative vote of three-quarters of the members of such Board, or of a nominating committee thereof, in office at the time of such first nomination; provided that such individual’s election or nomination did not result from an actual or threatened election contest or other actual or threatened solicitation of proxies or consents other than by or on behalf of the Company’s Board; or
(v) any event which would be described in Section 6(b)(i), (ii), (iii), (iv), or (v), if the term “Bank” were substituted for the term “Company” therein and the term “Bank’s Board” were substituted for the term “Company’s Board” therein. In no event, however, shall a Change in Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank or a subsidiary of either of them, by the Company, the Bank, any subsidiary of either of them, or by any employee benefit plan maintained by any of them. For purposes of this Section 6, the term “person” shall include the meaning assigned to it under Sections 13(d)(3) or 14(d) of the Exchange Act.
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| 7. | NOTICE |
(a) Any purported termination by the Bank or the Company for Cause shall be communicated by Notice of Termination to Executive. For purposes of this Agreement, a “Notice of Termination” shall mean a written and dated notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated. If, within thirty (30) days after any Notice of Termination for Cause is given, Executive notifies the Bank or the Company that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration. Notwithstanding the pendency of any such dispute, the Bank and the Company may discontinue to pay Executive compensation until the dispute is finally resolved in accordance with this Agreement. If it is determined that Executive is entitled to compensation and benefits under Section 5 of this Agreement, the payment of such compensation and benefits by the Bank and Company shall commence immediately following the date of resolution by arbitration, with interest due Executive on the cash amount that would have been paid, pending arbitration (at the prime rate as published in The Wall Street Journal from time to time).
(b) Any other purported termination by the Bank and/or the Company or by Executive shall be communicated by a Notice of Termination to the other party. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated. The Notice of Termination shall specify the “Date of Termination,” which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employers’ termination of Executive’s employment for Cause, which shall be effective immediately. If within thirty (30) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration as provided in Section 17 of this Agreement. Notwithstanding the pendency of any such dispute, the Bank or the Company shall continue to pay Executive his Base Salary and other compensation and benefits in effect when the notice giving rise to the dispute was given (except as to termination of Executive for Cause). In the event of the voluntary termination by Executive of his employment, which is disputed by the Bank or the Company, and if it is determined in arbitration that Executive is not entitled to termination benefits pursuant to this Agreement, he shall return all cash payments made to him pending resolution by arbitration, with interest thereon at the prime rate as published in The Wall Street Journal from time to time if it is determined in arbitration that Executive’s voluntary termination of employment was not taken in good faith and not in the reasonable belief that grounds existed for his voluntary termination.
| 8. | NON-COMPETITION AND POST-TERMINATION OBLIGATIONS |
All payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with paragraph (a), (b) and (c) of this Section 8.
(a) Information and Assistance. Executive shall, upon reasonable notice, furnish such information and assistance to the Bank and the Company as may reasonably be required by the Bank or the Company in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party.
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(b) Confidentiality. Executive recognizes and acknowledges that the knowledge of the business activities and plans for business activities of the Employers and affiliates thereof, as it may exist from time to time, is a valuable, special and unique asset of the business of the Employers. Executive will not, during or after the term of his employment, disclose any knowledge of the past, present, planned or considered business activities of the Employers or affiliates thereof to any person, firm, corporation, or other entity for any reason or purpose whatsoever (except for such disclosure as may be required to be provided to the New Jersey Department of Banking and Insurance, the Federal Deposit Insurance Corporation, or other bank regulatory agency with jurisdiction over the Bank or Executive). Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Bank, and Executive may disclose any information regarding the Bank or the Company which is otherwise publicly available or which Executive is otherwise legally required to disclose. In the event of a breach or threatened breach by Executive of the provisions of this Section 8, the Employers will be entitled to an injunction restraining Executive from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of the Employers or affiliates thereof, or from rendering any services to any person, firm, corporation, other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting the Employers from pursuing any other remedies available to the Employers for such breach or threatened breach, including the recovery of damages from Executive.
(c) Non-Solicitation/Non-Compete. Upon any termination of Executive’s employment hereunder pursuant to Sections 5(e) or 5(f) of this Agreement (other than following a Change in Control), Executive agrees that he shall not, either directly or indirectly, take any of the following actions, absent the written consent of the Company, for a period of one (1) year following such termination; provided, however, that the restrictions set forth in Section 8(c)(iii) below shall apply for a six (6) month period following such termination during the Renewal Term:
(i) solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of the Company or the Bank, or any of their respective subsidiaries or affiliates, to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any business whatsoever;
(ii) solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Company or the Bank, or any subsidiary or affiliate of the Company or the Bank to terminate an existing business or commercial relationship with the Company, the Bank or any subsidiary or affiliate of the Company or the Bank; or
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(iii) become an officer, employee, consultant, director, independent contractor, agent, joint venturer, partner, shareholder or trustee of any savings bank, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker, wealth management or trust company, or any other entity that competes with the business of the Company or the Bank, or any of their direct or indirect subsidiaries or affiliates that has a headquarters or offices in any county in which the Company or the Bank has an office or has filed an application for regulatory approval to establish an office (the “Restricted Territory”). Notwithstanding anything to the contrary herein, Executive shall not be prohibited from owning up to one percent of the outstanding equity securities of a corporation that is publicly traded on a national securities exchange or in the over-the-counter market so long as Executive, other than with respect to such ownership, shall not engage in any activity with such person that otherwise would violate this Section 8(c).
(d) Remedy on Breach. The parties hereto agree that money damages would not be an adequate remedy for any breach of Section 8, and any breach of the terms of this Section would result in irreparable injury and damage to the Company for which the Company would not have an adequate remedy at law. Therefore, in the event of a breach or a threatened breach of this Section 8, the Company, in addition to any other rights and remedies existing in its favor at law or in equity, shall be entitled to specific performance or immediate injunctive or other equitable relief from a Court in order to enforce, or prevent any violations of, the provisions of Section 8 (without posting a bond or other security), without having to prove damages. The terms of this Section 8 shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach of this Agreement.
| 9. | SOURCE AND ALLOCATION OF PAYMENTS |
All monetary payments and non-monetary benefits provided in this Agreement shall be timely paid in cash or check, or otherwise provided for, from the general funds of (a) the Company or (b) to the extent provided under an agreement between the Company and the Bank governing the allocation of expenses, the Bank, it being the intent of this Agreement to provide for the aggregate compensation due to Executive for all services provided by him to the Bank and/or the Company.
| 10. | EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS |
This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Company and/or the Bank or any predecessor of the Bank and/or the Company and Executive (including the Prior Agreement), provided, however, that this Agreement shall operate contemporaneously with and shall not supersede that Side-Letter Agreement and Change in Control Agreement entered into between the Company and Executive dated as of the same date as this Agreement, or any successor to such Side-Letter Agreement and Change in Control Agreement. In addition, this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.
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| 11. | NO ATTACHMENT; BINDING ON SUCCESSORS |
(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of, Executive and the Bank, the Company and their respective successors and assigns.
| 12. | MODIFICATION AND WAIVER |
(a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto; provided, however, that this Agreement shall be subject to amendment in the future in such manner as the Company shall reasonably deem necessary or appropriate to effect compliance with Section 409A and the regulations thereunder and to avoid the imposition of penalties and additional taxes under Section 409A, it being the express intent of the parties that any such amendment shall not diminish the economic benefit of the Agreement to Executive on a present value basis.
(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.
| 13. | MISCELLANEOUS PROVISIONS |
(a) The Company’s Board may terminate Executive’s employment at any time, but any termination, other than Termination for Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after Termination for Cause as defined in Section 5(d) hereinabove.
(b) Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 USC Section 1828(k) and any regulations promulgated thereunder.
| 14. | SEVERABILITY |
If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.
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| 15. | HEADINGS FOR REFERENCE ONLY |
The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.
| 16. | GOVERNING LAW |
This Agreement shall be governed by the laws of the State of Delaware but only to the extent not superseded by federal law.
| 17. | ARBITRATION |
Any dispute or controversy arising under or in connection with this Agreement, other than a dispute or controversy arising under Section 8 hereof, shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by the employee within twenty-five miles of the Company’s administrative headquarters, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.
| 18. | PAYMENT OF LEGAL FEES |
All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company or the Bank, provided that the dispute or interpretation has been settled by Executive and the Company and/or the Bank or resolved in Executive’s favor. Such payment or reimbursement shall be made no later than the last day of the calendar year following the calendar year in which Executive incurs the expense or, if later, within sixty (60) days after the settlement or resolution that gives rise to Executive’s right to reimbursement; provided, however, that Executive shall have submitted to the Company or the Bank documentation supporting such expenses at such time and in such manner as the Company or the Bank may reasonably require.
| 19. | INDEMNIFICATION |
The Company shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense, and shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under Delaware law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Bank or the Company (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys’ fees and the cost of reasonable settlements (such settlements must be approved by the Board of the Company, as appropriate), provided, however, neither the Bank nor Company shall be required to indemnify or reimburse Executive for legal expenses or liabilities incurred in connection with an action, suit or proceeding arising from any illegal or fraudulent act committed by Executive.
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| 20. | NOTICE |
For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:
To the Company:
100 Wood Avenue South
Iselin, New Jersey 08830
Attention: General Counsel
To the Bank:
100 Wood Avenue South
Iselin, New Jersey 08830
Attention: General Counsel
To Executive:
Most Recent Address on File with the Company or the Bank
| 21. | INTERNAL REVENUE CODE SECTION 409A |
The Employers and Executive acknowledge that each of the payments and benefits to Executive under this Agreement must either comply with the requirements of Section 409A and the regulations thereunder or qualify for an exception from compliance. To that end, the Employers and Executive agree that:
(a) the expense reimbursements described in Section 4(f) and legal fee reimbursements described in Section 18 are intended to satisfy the requirements for a “reimbursement plan” described in Treasury Regulation Section 1.409A-3(i)(l)(iv)(A) and shall be administered to satisfy such requirements;
(b) the life, medical, dental and disability coverage described in Sections 5(c)(iii) and 5(f)(iii) are intended (A) if furnished in-kind, to be exempt from compliance with Section 409A as a welfare benefit plan described in Treasury Regulation Section 1.409A-l(b)(5) and (B) if furnished by reimbursement, to satisfy the requirements for a “reimbursement or in-kind benefit plan” described in Treasury Regulation section 1.409A-3(i)(l)(iv)(A) and shall be administered to satisfy such requirements;
(c) the payments following termination of employment based on “Disability” described in Section 5(c) are intended to constitute “disability pay” within the meaning of Treasury Regulation Section 31.3121(v)(2)-l(b)(4)(iv)(C) that is exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-l(a)(5) and shall be administered to satisfy the requirements for “disability pay”;
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(d) the liability insurance and indemnification provisions of Section 19 are intended to qualify for exemption from the requirements of Section 409A as an “indemnification and liability insurance plan” described in Treasury Regulation Section 1.409A- l(b)(10) and shall be administered to qualify for such exemption;
(e) the Standard Termination Entitlements payable upon termination of employment described in Section 5 are intended to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-l(b)(3) as payments made pursuant to the Employers’ customary payment timing arrangements;
(f) the welfare benefits provided in kind under this Agreement are intended to be exempt from Section 409A as welfare benefits pursuant to Treasury Regulation Section 1.409A-l(b)(5) and/or as benefits not includible in gross income.
All other payments and benefits due to Executive under this Agreement on account his termination of employment that are not exempt from Section 409A shall not be paid prior to, and shall, if necessary, be deferred to and paid on the later of the earliest date on which Executive experiences a separation from service (within the meaning of Treasury Regulation Section 1.409A-l(h)) and, if Executive is a specified employee (within the meaning of Treasury Regulation Section 1.409A-l(i)) on the date of his separation from service, the first day of the seventh month following his separation from service. All such deferred amounts shall be deposited in a grantor trust which meets the requirements of Revenue Procedure 92-65 (as amended or superseded from time to time), the trustee of which shall be a financial institution selected by the Employers with the approval of Executive (which approval shall not be unreasonably withheld or delayed), pursuant to a trust agreement, the terms of which are approved by Executive (which approval shall not be unreasonably withheld or delayed) (the “Rabbi Trust”), and payments made shall include earnings on the investments made with the assets of the Rabbi Trust, which investments shall consist of short-term investment grade fixed income securities or units of interest in mutual funds or other pooled investment vehicles designed to invest primarily in such securities.
| 22. | EFFECTIVE DATE AND TERMINATION OF THE PRIOR AGREEMENT |
(a) Effective Date. Notwithstanding anything to the contrary contained herein, this Agreement shall be subject to the consummation of the Merger, and shall become effective as of the Effective Time as defined in the Merger Agreement (which for purposes of this Agreement shall be referred to as the “Effective Date”). In the event the Merger Agreement is terminated for any reason, or in the event Executive fails to become an employee of the Company and the Bank as of the Effective Date, this Agreement shall automatically terminate and become null and void.
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(b) Termination of Prior Agreement. The Prior Agreement shall remain in full force and effect until the Effective Date. On the Effective Date, Executive, the Company and the Bank hereby agree that the Prior Agreement shall be terminated without any further action of any of the parties hereto or thereto. Executive hereby acknowledges and agrees that Executive has no contractual rights to any payments or benefits under the Prior Agreement as of the Effective Date and that any such payments or benefits shall be payable pursuant to a Settlement Agreement between Executive, SBBX, SB One Bank, the Company and the Bank dated March 11, 2020.
[Signature Page Follows]
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SIGNATURES
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its seal to be affixed hereunto by its duly authorized officers, and Executive has signed this Agreement, on the day and date first above written.
| ATTEST: | PROVIDENT FINANCIAL SERVICES, INC. | |||||||
| /s/ John Kuntz |
By: | /s/ Christopher Martin | ||||||
| Corporate Secretary | Name: Christopher Martin | |||||||
| Title: Chairman, President and Chief Executive Officer | ||||||||
| WITNESS: | EXECUTIVE | |||||||
| /s/ Vito Giannola |
By: | /s/ Anthony J. Labozzetta | ||||||
| Vito Giannola | Anthony J. Labozzetta | |||||||
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Exhibit 10.3
[Provident Bank Letterhead]
Anthony J. Labozzetta
[Address]
March 11, 2020
Side-Letter Agreement with Anthony J. Labozzetta
Dear Mr. Labozzetta:
Concurrently with the issuance of this Side-Letter Agreement, Provident Financial Services, Inc., a Delaware corporation (“PFS”), and SB One Bancorp, a New Jersey Corporation (“SBBX”), have entered into an Agreement and Plan of Merger dated March 11, 2020 (the “Merger Agreement”), pursuant to which SBBX will merge with and into PFS, with PFS being the surviving entity (the “Merger”). In addition, you have entered into following agreements: (1) an employment agreement with PFS dated March 11, 2020 (the “Provident Employment Agreement”); (2) a change in control agreement with PFS dated March 11, 2020 (the “Provident Change in Control Agreement”); (3) a settlement agreement with PFS, Provident Bank, a New Jersey-chartered savings bank and wholly-owned subsidiary of PFS (the “Bank” and together with PFS, “Provident”), SBBX and SB One Bank, a New Jersey-chartered commercial bank and wholly-owned subsidiary of SBBX, dated March 11, 2020 (copies of which are attached hereto and incorporated herein by reference), all of which, unless otherwise provided therein, will become effective as of the consummation of the Merger.
In addition to the agreements referenced above, the purpose of this Side-Letter Agreement is to confirm the understanding between Provident and you with respect to the matters enumerated below. If the Merger Agreement or your employment with SBBX and SB One Bank terminates for any reason before the Effective Time (as defined in the Merger Agreement) occurs, all the provisions of this Side-Letter Agreement will terminate and there will be no liability of any kind under this Side-Letter Agreement.
1. Subject to and conditioned upon the approval of, and appointment by, the Board of Directors of Provident, you will become President and Chief Executive Officer of Provident by no later than January 1, 2022.
2. If you are not appointed President and Chief Executive Officer of Provident pursuant to paragraph (1) above or you have a qualifying termination event pursuant to Section 5(f) (Termination Without Cause or With Good Reason) during the Initial Term, your employment with Provident will cease immediately following the expiration of the Initial Term (in the case of the failure to be appointed President and Chief Executive Officer of Provident) or as of the Date of Termination and, in lieu of any other payments or benefits under the Provident Employment Agreement (including pursuant to Section 5(f) thereof), Provident will pay to you the following (collectively, the “Severance Benefits”):
| (i) | any Standard Termination Entitlements; |
| (ii) | as severance pay or liquidated damages, or both, a cash lump sum payment equal to two (2) times the sum of your: (A) annual rate of Base Salary; and (B) annual cash bonus paid to (or earned by) you with respect to the completed fiscal year prior to your date of termination; and |
| (iii) | continued life, medical, dental and disability coverage substantially comparable, as reasonably or customarily available, to the coverage maintained by Provident for you prior to the date of termination, except to the extent such coverage may be changed in its application to all Provident employees. Such coverage will cease at the end of 24 months following your date of termination. To the extent that Provident determines, in good faith, it is not practical to provide in-kind coverage, Provident will pay directly to the insurance carrier the premium, or reimburse you for direct out-of-pocket cost, for comparable coverage obtained by you. Each such reimbursement payment will be made promptly on submission of an itemized account of your reimbursable expense in such form as Provident may reasonably require and in any event not later than the last day of the calendar year following the calendar year in which the expense was incurred. Each reimbursement payment will include an additional amount calculated by Provident in its reasonable discretion to reflect the aggregate amount of federal, state, and local income and payroll taxes incurred by you with respect to the reimbursement payment. |
The Severance Benefits will be paid, or commence, within 14 days following your date of termination or, if later, the 7th day after you execute the Release. The Release must be executed and become irrevocable by the 60th day following your date of termination; provided that if the 60-day period spans two (2) calendar years, then, to the extent necessary to comply with Section 409A of the Internal Revenue Code, the payments under this paragraph will be paid, or commence, in the second calendar year. The Severance Benefits (other than any Standard Termination Entitlements) are conditioned upon your execution of the Release.
3. If you are appointed and become President and Chief Executive Officer of Provident as of January 1, 2022 or, if earlier, any event described in Sections 5(a) (Death), 5(b) (Retirement), 5(c) (Disability), 5(d) (Termination for Cause), 5(e) (Voluntary Termination by Executive) or 6 (Change in Control) of the Provident Employment Agreement has occurred, this Side-Letter Agreement will terminate immediately and become null and void and no Severance Benefits will be payable pursuant to paragraph 2 above. For avoidance of doubt, this paragraph (3) does not release Provident from any obligations it may have to pay you, or provide you with, any severance benefits under the Provident Employment Agreement or the Provident Change in Control Agreement that are separate from this Side-Letter Agreement.
4. In the event of your termination of employment pursuant to paragraph (2), you will be subject to the non-competition and post-termination obligations set forth in the Provident Employment Agreement.
5. Capitalized terms not defined herein have the meaning set forth in the Provident Employment Agreement.
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6. This Side-Letter Agreement will be governed by the laws of the State of Delaware but only to the extent not superseded by federal law.
7. It is intended that the payments and benefits provided under this Side-Letter Agreement shall be exempt from the application of the requirements of Section 409A of the Internal Revenue Code and the regulations and other guidance issued thereunder (collectively, “Section 409A”). Specifically, any taxable benefits or payments provided under this Side-Letter Agreement are intended to be separate payments that qualify for the “short term deferral” exception to Section 409A to the maximum extent possible, and to the extent they do not so qualify, are intended to qualify for the separation pay exception to Section 409A, to the maximum extent possible. All other payments and benefits due to you under this Side-Letter Agreement on account your termination of employment that are not exempt from Section 409A shall not be paid prior to, and shall, if necessary, be deferred to and paid on the later of the earliest date on which you experience a separation from service (within the meaning of Treasury Regulation Section 1.409A-l(h)) and, if you are a specified employee (within the meaning of Treasury Regulation Section 1.409A-l(i)) on the date of your separation from service, the first day of the seventh month following your separation from service. All such deferred amounts shall be deposited in a grantor trust which meets the requirements of Revenue Procedure 92-65 (as amended or superseded from time to time), the trustee of which shall be a financial institution selected by Provident with your approval (which approval shall not be unreasonably withheld or delayed), pursuant to a trust agreement, the terms of which are approved by you (which approval shall not be unreasonably withheld or delayed) (the “Rabbi Trust”), and payments made shall include earnings on the investments made with the assets of the Rabbi Trust, which investments shall consist of short-term investment grade fixed income securities or units of interest in mutual funds or other pooled investment vehicles designed to invest primarily in such securities.
[Signature Page to Follow]
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| Sincerely, | ||
| PROVIDENT FINANCIAL SERVICES, INC. | ||
| By: | /s/ Christopher Martin | |
| Name: | Christopher Martin | |
| Title: | Chairman, President and Chief Executive Officer | |
| PROVIDENT BANK | ||
| By: | /s/ Christopher Martin | |
| Name: | Christopher Martin | |
| Title: | Chairman, President and Chief Executive Officer | |
| Agreed and Accepted this March 11, 2020: |
| /s/ Anthony J. Labozzetta |
| Anthony J. Labozzetta |
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Exhibit 10.4
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT is dated as of this 11th day of March, 2020, to be effective as of the Initial Effective Date as defined in Section 1 below, by and between Provident Financial Services, Inc. (the “Company”), a Delaware corporation, and the holding company of Provident Bank (the “Bank”), and Anthony J. Labozzetta (the “Executive”). The Company and the Bank are sometimes collectively referred to as the “Employers.”
WITNESSETH
WHEREAS, the Executive is presently the President and Chief Executive Officer of SB One Bancorp, a New Jersey corporation (“SBBX”), and SB One Bank, a New Jersey-chartered commercial bank and wholly-owned subsidiary of SBBX; and
WHEREAS, the Company and SBBX have executed and delivered an Agreement and Plan of Merger, dated as of March 11, 2020 (the “Merger Agreement”), pursuant to which SBBX shall merge with and into the Company with the Company as the surviving entity (the “Merger”); and
WHEREAS, concurrently with the execution of the Merger Agreement, the parties desire to enter into this Agreement in order to induce the Executive to accept employment with, and to provide further incentive for the Executive to achieve the financial and performance objectives of, the Employers.
NOW THEREFORE, in consideration of the mutual agreements herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:
| 1. | DEFINITIONS |
The following words and terms shall have the meanings set forth below for the purposes of this Agreement:
(a) Annual Compensation. The Executive’s “Annual Compensation” for purposes of this Agreement shall be deemed to mean the highest level of aggregate base salary and other cash compensation earned by the Executive (including cash compensation deferred at the election of the Executive) (i) with respect to the calendar year in which the Date of Termination occurs (determined on an annualized basis), or (ii) either of the two calendar years immediately preceding the calendar year in which the Date of Termination occurs, whichever is greater. For purposes of this definition, payments of deferred compensation shall be disregarded when paid and deferral of compensation at the Executive’s election shall be included as compensation exclusively in the year of deferral.
(b) Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, material breach of the Company’s or the Bank’s Code of Business Conduct and Ethics, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or willfully engaging in actions that in the reasonable opinion of the Company’s Board of Directors (“Board of Directors”) will likely cause substantial financial harm or substantial injury to the business reputation of the Company or the Bank. For purposes of this paragraph, no act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interests of the Employers. Executive’s employment shall not be terminated for “Cause” in accordance with this paragraph for any act or action or failure to act which is undertaken or omitted in accordance with a resolution of the Company’s Board of Directors or upon advice of the Company’s counsel.
(c) Change in Control. “Change in Control” shall mean the occurrence of any of the following events:
(i) consummation of a transaction that results in the reorganization, merger or consolidation of the Company, with one or more other persons, other than a transaction following which:
(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Company; and
(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Company;
(ii) the acquisition of all or substantially all of the assets of the Company or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the outstanding securities of the Company entitled to vote generally in the election of directors by any person or by any persons acting in concert, or approval by the shareholders of the Company of any transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company or the Bank, or approval by the shareholders of the Company of a plan for such liquidation or dissolution;
(iv) the occurrence of any event if, immediately following such event, members of the Company’s Board of Directors who belong to any of the following groups do not aggregate at least a majority of the Company’s Board of Directors:
(A) individuals who were members of the Company’s Board of Directors on the Initial Effective Date; or
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(B) individuals who first became members of the Company’s Board of Directors after the Initial Effective Date either:
(1) upon election to serve as a member of the Company’s Board of Directors by the affirmative vote of three-quarters of the members of such Board, or of a nominating committee thereof, in office at the time of such first election; or
(2) upon election by the shareholders of the Company to serve as a member of the Company’s Board of Directors, but only if nominated for election by the affirmative vote of three-quarters of the members of such Board, or of a nominating committee thereof, in office at the time of such first nomination; provided that such individual’s election or nomination did not result from an actual or threatened election contest or other actual or threatened solicitation of proxies or consents other than by or on behalf of the Company’s Board of Directors; or
(v) any event which would be described in Section 1(c)(i), (ii), (iii) or (iv) if the term “Bank” were substituted for the term “Company” therein and the term “Bank’s Board of Directors” were substituted for the term “Company’s Board of Directors” therein. In no event, however, shall a Change in Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank or a subsidiary of either of them, by the Company, the Bank, any subsidiary of either of them, or by any employee benefit plan maintained by any of them. For purposes of this Section 1(c), the term “person” shall include the meaning assigned to it under Sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(d) Code. “Code” shall mean the Internal Revenue Code of 1986.
(e) Date of Termination. “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination.
(f) Disability. Termination by the Employers of the Executive’s employment based on “Disability” shall mean termination because of any physical or mental impairment which qualifies the Executive for disability benefits under the applicable long-term disability plan maintained by the Employers or any subsidiary or, if no such plan applies, which would qualify the Executive for disability benefits under the Federal Social Security System.
(g) Good Reason. Termination by the Executive of the Executive’s employment for “Good Reason” shall mean termination by the Executive following a Change in Control based on:
(i) Without the Executive’s express written consent, the assignment by the Company or the Bank to the Executive of any duties which are materially inconsistent with the Executive’s positions, duties, responsibilities and status with the Employers immediately prior to a Change in Control, or a material change in the Executive’s reporting responsibilities, titles or offices as an officer and employee and as in effect immediately prior to such a Change in Control, or any removal of the Executive from or any failure to re-elect the Executive to any of such responsibilities, titles or offices, except in connection with the termination of the Executive’s employment for Cause, Disability or Retirement or as a result of the Executive’s death or by the Executive other than for Good Reason;
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(ii) Without the Executive’s express written consent, a reduction in the Executive’s base salary or award opportunity under the Employers’ incentive compensation plans or arrangements as in effect immediately prior to the date of the Change in Control or as the same may be increased from time to time thereafter or a reduction in the package of fringe benefits provided to the Executive as in effect immediately prior to the date of the Change in Control;
(iii) A change in the Executive’s principal place of employment by a distance in excess of 25 miles from its location immediately prior to the Change in Control;
(iv) Any purported termination of the Executive’s employment for Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (i) below; or
(v) The failure by the Company to obtain the assumption of and agreement to perform this Agreement by any successor as contemplated in Section 9 hereof.
Notwithstanding the foregoing, prior to any termination of employment for Good Reason, Executive must first provide written notice to the Company within 90 days following the initial existence of the condition, describing the existence of such condition, and the Company shall thereafter have the right to remedy the condition within 30 days of the date of the Company received written notice from Executive, but the Company may waive its right to cure. If the Company remedies the condition within such 30 day cure period, then no Good Reason shall be deemed to exist with respect to such condition. If the Company does not remedy the condition within such 30 day cure period, then Executive may deliver a Notice of Termination for Good Reason at any time within 60 days following the expiration of such cure period.
(h) Initial Effective Date. Notwithstanding anything to the contrary contained herein, this Agreement shall be subject to the consummation of the Merger, and shall become effective as of the Effective Time as defined in the Merger Agreement (which for purposes of this Agreement shall be referred to as the “Initial Effective Date”). In the event the Merger Agreement is terminated for any reason, or in the event the Executive fails to become an employee of the Company and the Bank as of the Initial Effective Date, this Agreement shall automatically terminate and become null and void.
(i) IRS. IRS shall mean the Internal Revenue Service.
(j) Notice of Termination. Any purported termination of the Executive’s employment by the Employers for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by written “Notice of Termination” to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employers’ termination of the Executive’s employment for Cause, which shall be effective immediately; and (iv) is given in the manner specified in Section 10 hereof.
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(k) Retirement. “Retirement” shall mean termination of Executive’s employment (a) at age 65 or in accordance with any retirement policy established with Executive’s consent with respect to him or (b) at such later time as the Company’s Board of Directors or an authorized committee thereof may determine. Upon termination of Executive upon Retirement, no amounts or benefits shall be due Executive under this Agreement, and the Executive shall be entitled to all benefits under any retirement plan of the Bank and other plans to which Executive is a party.
| 2. | TERM OF AGREEMENT |
The term of this Agreement shall be for thirty-six (36) months, commencing on the Initial Effective Date. On April 1st of each calendar year that begins on or after the Initial Effective Date, the Agreement shall renew for an additional year such that the remaining term shall be thirty-six (36) full calendar months beginning on such April 1st. References herein to the term of this Agreement shall refer both to the initial term and successive terms. A Notice of Termination shall also be presumed to constitute a notice of termination of this Agreement.
| 3. | BENEFITS UPON TERMINATION |
If the Executive’s employment by the Company or the Bank is terminated subsequent to a Change in Control and during the term of this Agreement by (i) the Company or Bank for other than Cause, Disability, Retirement or the Executive’s death or (ii) the Executive for Good Reason, then the Company or the Bank shall:
(a) pay the Executive his earned but unpaid base salary through the Date of Termination, to be paid not later than the date on which such base salary would ordinarily have been paid;
(b) pay to the Executive the annual bonus (if any) to which he is entitled under any cash-based annual bonus or performance compensation plan in effect for the year in which his termination occurs, to be paid at the same time and on the terms and conditions (including but not limited to achievement of performance goals) applicable under the relevant plan;
(c) provide the benefits (if any) due to the Executive as a former employee other than pursuant to this Agreement under the Bank’s and the Company’s compensation and benefits plans (the items described in Sections 3(a), (b) and (c), the “Standard Termination Entitlements”);
(d) pay to the Executive, in a lump sum on the Date of Termination, a cash severance amount equal to three (3) times the Executive’s Annual Compensation (the “Additional Severance Payment”), and
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(e) provide, for a period of three years following the Date of Termination, at no cost to the Executive, coverage of Executive (and family, if applicable) under all group insurance, life insurance, health and accident insurance and disability insurance and other insurance programs or arrangements offered by the Bank and the Company in which the Executive was entitled to participate immediately prior to the Date of Termination. To the extent the Bank or the Company determines in good faith it is not practicable to provide in-kind coverage, it shall pay Executive a cash lump sum payment reasonably estimated to equal the value of such in-kind benefits that would have been provided for three years following the Date of Termination. Such payment shall be made to Executive on the Date of Termination. The reimbursement payment payable under this Section 3(e) shall include an additional amount calculated by the Bank or the Company, in its reasonable discretion, to reflect the aggregate amount of federal, state and local income and payroll taxes, if any, incurred by the Executive with respect to the reimbursement payment.
| 4. | NO MITIGATION, EXCLUSIVITY OF BENEFITS |
(a) The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise. The amount of severance to be provided pursuant to Section 3 hereof shall not be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise.
(b) The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employers pursuant to employee benefit plans of the Employers or otherwise.
| 5. | WITHHOLDING. |
All payments required to be made by the Employers hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employers may reasonably determine should be withheld pursuant to any applicable law or regulation.
| 6. | NATURE OF EMPLOYMENT AND OBLIGATIONS |
(a) Nothing contained herein shall be deemed to create other than a terminable at will employment relationship between the Employers and the Executive, and the Employers may terminate the Executive’s employment at any time, subject to providing: (i) any payments specified herein in accordance with the terms hereof, or (ii) any payments and benefits required under any other agreement to which Executive is a party.
(b) Nothing contained herein shall create or require the Employers to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employers hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employers.
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| 7. | SOURCE AND ALLOCATION OF PAYMENTS |
All monetary payments and non-monetary benefits provided in this Agreement shall be timely paid in cash or check, or otherwise provided for, from the general funds of (a) the Company or (b) to the extent provided under an agreement between the Company and the Bank governing the allocation of expenses, the Bank, it being the intent of this Agreement to provide for the aggregate compensation due to the Executive for all services provided by him to the Bank and/or the Company.
| 8. | NO ATTACHMENT |
(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of, the Executive, the Bank, the Company and their respective successors and assigns.
| 9. | ASSIGNABILITY |
The Company may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which either of the Employers may hereafter merge or consolidate or to which either of the Employers may transfer all or substantially all of its respective assets, if, in any such case, said corporation, bank or other entity shall assume all obligations of the Company hereunder in writing as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or their rights and obligations hereunder. The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.
| 10. | NOTICE |
For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:
To the Company:
100 Wood Avenue South
Iselin, New Jersey 08830
Attention: General Counsel
To the Bank:
100 Wood Avenue South
Iselin, New Jersey 08830
Attention: General Counsel
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To the Executive:
Most Recent Address on File with the Company or the Bank
| 11. | AMENDMENT; WAIVER |
No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Company to sign on their behalf; provided, however, that this Agreement shall be subject to amendment in the future in such manner as the Company shall reasonably deem necessary or appropriate to effect compliance with Section 409A and the regulations thereunder and to avoid the imposition of penalties and additional taxes under Section 409A, it being the express intent of the parties that any such amendment shall not diminish the economic benefit of the Agreement to the Executive on a present value basis. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
| 12. | GOVERNING LAW |
The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware.
| 13. | HEADINGS |
The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
| 14. | VALIDITY |
The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.
| 15. | COUNTERPARTS |
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
| 16. | MISCELLANEOUS PROVISIONS |
(a) This Agreement does not create any obligation on the part of the Bank or the Company to make payments to (or to employ) Executive unless a Change in Control of the Bank or the Company shall have occurred. Following a Change in Control, Executive’s employment may be terminated at any time, but any termination, other than a termination for Cause, shall not prejudice the Executive’s right to compensation or other benefits under this Agreement. The Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause as defined in Section 1(b) hereof.
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(b) Notwithstanding any other provision of this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement or otherwise are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. Section 1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.
| 17. | REINSTATEMENT OF BENEFITS AFTER REGULATORY ACTION |
In the event the Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by an action of a regulatory agency having jurisdiction over the Bank during the term of this Agreement and a Change in Control, as defined herein, occurs, the Employers will assume their obligation to pay and the Executive will be entitled to receive all of the termination benefits provided for under Section 3 of this Agreement only upon the Bank’s (or its successors) receipt of a dismissal of the charges by the regulatory agency.
| 18. | ARBITRATION |
Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by the Company within fifty (50) miles from the location of the Company’s main office, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement, other than in the case of a termination for Cause.
| 19. | PAYMENT OF COSTS AND LEGAL FEES |
All reasonable costs and legal fees paid or incurred by the Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company or the Bank (in accordance with Section 7 hereof) if the Executive is successful on the merits pursuant to a legal judgment, arbitration or settlement in the Executive’s favor. Such payment or reimbursement shall be made no later than the last day of the calendar year following the calendar year in which the Executive incurs the expense or, if later, within sixty (60) days after the settlement or resolution that gives rise to the Executive’s right to reimbursement; provided, however, that the Executive shall have submitted to the Company documentation supporting such expenses at such time and in such manner as the Company may reasonably require.
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| 20. | CONFIDENTIALITY |
Executive recognizes and acknowledges that the knowledge of the business activities and plans for business activities of the Company and affiliates thereof, as it may exist from time to time, is a valuable, special and unique asset of the business of the Company. Executive will not, during or after the term of his employment, disclose any knowledge of the past, present, planned or considered business activities of the Company or affiliates thereof to any person, firm, corporation, or other entity for any reason or purpose whatsoever (except for such disclosure as may be required to be provided to the New Jersey Department of Banking and Insurance, the Federal Deposit Insurance Corporation, or other bank regulatory agency with jurisdiction over the Bank or Executive). Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Company, and Executive may disclose any information regarding the Company or the Bank which is otherwise publicly available or which exercise is otherwise legally required to disclose. In the event of a breach or threatened breach by the Executive of the provisions of this Section 20, the Company will be entitled to an injunction restraining Executive from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of the Company or affiliates thereof, or from rendering any services to any person, firm, corporation, other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from Executive.
| 21. | ENTIRE AGREEMENT |
This Agreement embodies the entire agreement between the Company and the Executive with respect to the matters agreed to herein. All prior agreements between the Company and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.
| 22. | INTERNAL REVENUE CODE SECTION 409A |
The Employers and the Executive acknowledge that each of the payments and benefits to the Executive under this Agreement must either comply with the requirements of Section 409A of the Code and the regulations thereunder or qualify for an exception from compliance. To that end, the Employers and the Executive agree that:
(a) the legal fee reimbursements described in Section 19 are intended to satisfy the requirements for a “reimbursement plan” described in Treasury Regulation Section 1.409A-3(i)(1)(iv)(A) and shall be administered to satisfy such requirements;
(b) the life, medical, dental and disability coverage described in Section 3 are intended (A) if furnished in-kind, to be exempt from compliance with Section 409A of the Code as a welfare benefit plan described in Treasury Regulation Section 1.409A-1(b)(5) and (B) if furnished by reimbursement, to satisfy the requirements for a “reimbursement or in-kind benefit plan” described in Treasury Regulation section 1.409A-3(i)(1)(iv)(A) and shall be administered to satisfy such requirements;
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(c) the Standard Termination Entitlements payable upon termination of employment described in Section 3 are intended to be exempt from Section 409A of the Code pursuant to Treasury Regulation Section 1.409A-1(b)(3) as payments made pursuant to the Employers’ customary payment timing arrangements.
All other payments and benefits due to the Executive under this Agreement on account his termination of employment that are not exempt from Section 409A of the Code shall not be paid prior to, and shall, if necessary, be deferred to and paid on the later of the earliest date on which the Executive experiences a separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)) and, if the Executive is a specified employee (within the meaning of Treasury Regulation Section 1.409A-1(i)) on the date of his separation from service, the first day of the seventh month following his separation from service. All such deferred amounts shall be deposited in a grantor trust which meets the requirements of Revenue Procedure 92-65 (as amended or superseded from time to time), the trustee of which shall be a financial institution selected by the Employers with the approval of the Executive (which approval shall not be unreasonably withheld or delayed), pursuant to a trust agreement, the terms of which are approved by the Executive (which approval shall not be unreasonably withheld or delayed) (the “Rabbi Trust”), and payments made shall include earnings on the investments made with the assets of the Rabbi Trust, which investments shall consist of short-term investment grade fixed income securities or units of interest in mutual funds or other pooled investment vehicles designed to invest primarily in such securities.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.
| ATTEST: | PROVIDENT FINANCIAL SERVICES, INC. | |||||
| /s/ John Kuntz
|
By: | /s/ Christopher Martin | ||||
| Corporate Secretary | Name: | Christopher Martin | ||||
| Title: | Chairman, President and Chief Executive Officer | |||||
| Witness: | EXECUTIVE: | |||||
| /s/ Vito Giannola | /s/ Anthony J. Labozzetta | |||||
| Vito Giannola | Anthony J. Labozzetta | |||||
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Exhibit 10.5
SETTLEMENT AGREEMENT
This Settlement Agreement (the “Agreement”) dated as of March 11, 2020 is entered into by and among Anthony Labozzetta (“Executive”), SB One Bancorp, a New Jersey corporation (“SBBX”), SB One Bank, a New Jersey-chartered commercial bank and wholly-owned subsidiary of SBBX, Provident Financial Services, Inc., a Delaware corporation (“PFS”), and Provident Bank, a New Jersey chartered savings bank and wholly owned subsidiary of PFS (the “Bank”). PFS and the Bank are sometimes collectively referred to as (“Provident”).
WHEREAS, Executive is presently the President and Chief Executive Officer of SBBX and SB One Bank, and is a party to an employment agreement with SBBX and SB One Bank dated January 20, 2010 (such agreement, the “SBBX Employment Agreement”); and
WHEREAS, PFS and SB One Bancorp (“SBBX”) have entered into an Agreement and Plan of Merger dated [March 10], 2020 (the “Merger Agreement”), pursuant to which SBBX shall merge with and into PFS, with PFS being the surviving entity (the “Merger”); and
WHEREAS, concurrently with the execution of the Merger Agreement, the parties have entered into an employment agreement with Executive (the “Provident Employment Agreement”) that will supersede and replace the SBBX Employment Agreement immediately upon the consummation of the Merger; and
WHEREAS, in connection with the termination of the SBBX Employment Agreement pursuant to the foregoing, Executive shall, in lieu of any rights and payments under the SBBX Employment Agreement, be entitled to the payment set forth herein.
NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive, SBBX, SB One Bank, PFS and the Bank agree as follows:
1. Termination of the SBBX Employment Agreement. Upon the Effective Time, Executive shall become employed with Provident in accordance with the Provident Employment Agreement and the SBBX Employment Agreement shall terminate with no further force and effect.
2. Cash Settlement. Provided Executive has remained employed with SBBX and SB One Bank through the Effective Time, the Bank shall pay to Executive a cash lump sum payment equal to the cash consideration and the cash equivalent of the continued welfare benefits pursuant to Section 8(c) of the SBBX Employment Agreement assuming Executive has a qualifying termination event as of the Effective Time, subject to reduction pursuant to Section 3 of this Agreement (the “Cash Settlement”). The Cash Settlement shall be paid to Executive at, or within five (5) business days after, the Effective Time.
For avoidance of doubt, the payment of the Cash Settlement under this Agreement does not release Provident from any of the following obligations: (i) obligations to pay to Executive accrued but unpaid wages earned up to the Effective Time; (ii) the payment of any of Executive’s benefits under the tax-qualified plans of SB One Bank; (iii) obligations regarding accelerated vesting of equity awards, if any, under any equity awards granted by SBBX to Executive and outstanding immediately prior to the Effective Time; (iv) obligations under any applicable federal, state or local law, including but not limited to, continued group health coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA); or (v) rights to indemnification under applicable corporate or banking law, the organizational documents of PFS or Bank or the Merger Agreement, as an insured under any director’s and officer’s liability insurance policy new or previously in force.
3. Section 280G Reduction. Notwithstanding anything in this Agreement or the SBBX Employment Agreement to the contrary, in no event shall the “Change in Control Benefits” (as defined below) constitute, in the aggregate, a “parachute payment” under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”). If the Change in Control Benefits result in a “parachute payment” under Section 280G of the Code, the Cash Settlement shall be reduced by the minimum amount necessary to result in no portion of the Change in Control Benefits being non-deductible pursuant to Section 280G of the Code and subject to an excise tax imposed under Section 4999 of the Code.
For purposes of this Section 2(b), “Change in Control Benefits” shall mean the Cash Settlement Payment, together with any payment or benefit in the nature of compensation that Executive has the right to receive from SBBX, SB One Bank, PFS or the Bank (or any other corporation which is a member of an “affiliated group” as defined by Section 1504(a) of the Code without regard to Section 1504(b) of the Code) that is contingent upon a change in control as determined in accordance with Section 280G of the Code and the regulations promulgated thereunder.
4. Complete Satisfaction. Executive agrees that the payment of Cash Settlement (as determined in accordance with Sections 2 and 3 above) shall be in complete satisfaction of all rights to payments due to Executive under the SBBX Employment Agreement.
5. Section 409A. Provident and Executive agree and acknowledge that the payment of the Cash Settlement is intended to be excepted from compliance of Section 409A of the Code as a short-term deferral pursuant to Treasury Regulation Section 1.409A-1(b)(4). However, in the event that the payment of the Cash Settlement is deemed to be subject to any excise tax, including any payments or interest, imposed under Section 409A of the Code (“409A Penalties”), Executive shall be solely responsible for the payment of the 409A Penalties to the Internal Revenue Service and shall release Provident and Provident’s affiliates, successors and assigns from any claim that Executive, Executive’s heirs, successors and assigns may have related to the recovery or reimbursement of any 409A Penalties incurred.
6. Miscellaneous.
(a) Successors. The Agreement shall be binding upon the parties hereto and their respective heirs, successors, assigns and legal
(b) Final Agreement. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior understandings, written, or oral. The terms of this Agreement may be changed, modified, or discharged only by an instrument in writing signed by the parties hereto.
(c) Withholdings. PFS and the Bank may withhold from any amounts payable under this Agreement such federal, state or local taxes as may be required to be withheld pursuant to applicable law or regulation
(d) Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New Jersey without regard to principles of conflicts of laws thereof.
(e) Statutory Changes. All references to sections of the Code shall refer to any successor provisions to such sections.
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(f) No Assignment of Benefits. This Agreement may not be assigned by Executive.
(g) Counterparts. This Agreement may be executed in one or more counterparts, each of which counterpart, when so executed and delivered, will be deemed an original and all of which counterparts, taken together, will constitute but one and the same agreement.
(h) Severability. If any provision of this Agreement is determined to be void or unenforceable, then the remaining provisions of this Agreement will remain in full force and effect.
(i) Regulatory Provisions. Notwithstanding any other provision of this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. Section 1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.
(j) Capitalized Terms. All capitalized terms not defined herein shall have the meaning set forth in the Merger Agreement.
7. Effectiveness. Notwithstanding anything to the contrary contained herein, this Agreement shall be subject to the consummation of the Effective Time in accordance with the terms of the Merger Agreement, as the same may be amended by the parties thereto in accordance with its terms. In the event the Merger Agreement is terminated for any reason or the Effective Time does not occur, this Agreement shall be deemed null and void.
[Signature Page to Follow]
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IN WITNESS WHEREOF, SBBX, SB One Bank, PFS and the Bank have each caused this Agreement to be executed by their duly authorized officers, and Executive has signed this Agreement, as of the date first above written.
| EXECUTIVE
/s/ Anthony Labozzetta | ||
|
Name: Anthony Labozzetta | ||
| PROVIDENT FINANCIAL SERVICES, INC. | ||
| By: | /s/ Christopher Martin | |
| Name: | Christopher Martin | |
| Title: | Chairman, President and Chief Executive Officer | |
| PROVIDENT BANK | ||
| By: | /s/ Christopher Martin | |
| Name: | Christopher Martin | |
| Title: | Chairman, President and Chief Executive Officer | |
| SB ONE BANCORP | ||
| By: | /s/ Adriano Duarte | |
| Name: | Adriano Duarte | |
| Title: | Executive Vice President and Chief Financial Officer | |
| SB ONE BANK | ||
| By: | /s/ Adriano Duarte | |
| Name: | Adriano Duarte | |
| Title: | Executive Vice President and Chief Financial Officer | |
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