UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Republic First Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Two Liberty Place, 50 S. 16th Street, Suite 2400
Philadelphia, Pennsylvania 19102
March 23, 201127, 2012
Dear Shareholder:
You are cordially invited to attend the 20112012 Annual Meeting of Shareholders of Republic First Bancorp, Inc., or the “Company,” to be held on Tuesday, April 26, 2011May 1, 2012 at 4:5:00 PM, local time, at The Union League of Philadelphia, 140 South Broad Street, Philadelphia, PA 19102.
At the annual meeting, shareholders will be asked to consider and vote upon the election of two Class III Directors to the Company’s board of directors to serve until the 20142015 annual meeting of shareholders and until his successor istheir successors are elected and qualified, ratification of the appointment of ParenteBeard LLC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011,2012, and any such other matters as may properly come before the meeting.
It is very important that you be represented at the annual meeting regardless of the number of shares you own or whether you are able to attend the meeting in person. We urge you to mark, sign and date your proxy card today and return it in the envelope provided, even if you plan to attend the annual meeting. You may also vote by telephone or internet with the provided instructions. This will not prevent you from voting in person, but will ensure that your vote is counted if you are unable to attend.
Enclosed with your proxy materials is a copy of our 20102011 Annual Report to Shareholders.
We look forward to seeing you at the meeting.
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Very truly yours,
Harry D. Madonna
Chairman of the Board
and Chief Executive Officer
REPUBLIC FIRST BANCORP, INC.
Two Liberty Place, 50 S. 16th Street, Suite 2400
Philadelphia, Pennsylvania 19102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 2011MAY 1, 2012
NOTICE IS HEREBY GIVEN THAT the 20112012 Annual Meeting of Shareholders of Republic First Bancorp, Inc. (the “Company”) will be held on Tuesday, April 26,May 1, 2011 at 4:5:00 PM, local time, at The Union League of Philadelphia, 140 South Broad Street, Philadelphia, PA 19102 to consider and act upon:
Election of two (2) Class II Directors of the Company, to serve until the 2015 Annual Meeting of Shareholders and until their successors are elected and qualified,
Ratification of the appointment of ParenteBeard LLC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2012, and
Such other business as may properly come before the annual meeting.
Only shareholders of record of the Company at the close of business on March 15, 2011,21, 2012, are entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof.
All shareholders are cordially invited to attend the annual meeting. Whether or not you plan to attend the annual meeting, please complete and sign the enclosed proxy card and return it promptly to the Company in the enclosed envelope, which requires no postage if mailed in the United States, or vote by telephone or internet.
If the annual meeting is adjourned because of the absence of a quorum, those shareholders entitled to vote who attend the adjourned annual meeting, although constituting less than a quorum as provided herein, shall nevertheless constitute a quorum for the purpose of electing directors. If the annual meeting is adjourned for one or more periods aggregating at least 15 days because of the absence of a quorum, those shareholders entitled to vote who attend the reconvened annual meeting, if less than a quorum as determined under applicable law, shall nevertheless constitute a quorum for the purpose of acting upon any other matter set forth in this Notice of annual meeting.
Important Notice Regarding Internet Availability of Proxy Materials for the Shareholders Meeting to be held on April 26, 2011May 1, 2012
Our proxy statement, 20102011 annual report to shareholders, and proxy card are available on http://www.cfpproxy.com/5412. If you would like to receive proxy materials related to this or any future shareholders meetings, or any of the Company’s filings with the Securities and Exchange Commission or press releases, please email your request to llewis@myrepublicbank.com or call us at (215) 735-4422, ext. 5332.
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By Order of the Board of Directors
Corporate Secretary
March 23, 201127, 2012
IT IS IMPORTANT THAT YOU VOTE PROMPTLY, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE, OR VOTE BY TELEPHONE OR BY INTERNET, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
REPUBLIC FIRST BANCORP, INC.
Two Liberty Place, 50 S. 16th Street, Suite 2400
Philadelphia, Pennsylvania 19102
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON APRIL 26, 2011MAY 1, 2012
This proxy statement is being furnished to shareholders of Republic First Bancorp, Inc., referred to as “we”, “our”, “us”, or the “Company”, in connection with the solicitation by the board of directors of the Company of proxies to be voted at the annual meeting of shareholders to be held at 4:5:00 PM, local time, at The Union League of Philadelphia, 140 South Broad Street, Philadelphia, PA 19102 on Tuesday, April 26, 2011,May 1, 2012, or such later date to which the annual meeting may be adjourned or postponed.
At the annual meeting, you will be asked to consider and vote upon the following matters:
Election of two (2) Class II Directors of the Company, to serve until the 2015 Annual Meeting of Shareholders and until their successors are elected and qualified,
Ratification of the appointment of ParenteBeard LLC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2012, and
Such other business as may properly come before the annual meeting.
Information regarding the election of directors and other proposals is included in this proxy statement. Shareholders should carefully read this proxy statement.
The first date on which this proxy statement and the enclosed form of proxy are being sent to the shareholders of the Company is on or about March 29, 2011.April 2, 2012.
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TABLE OF CONTENTS
| - 1 - | |
| CODE OF ETHICS | - 29 - |
| PROPOSAL 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | - 30 - |
| INFORMATION REGARDING INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | - 31 - |
| SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | - 31 - |
| OTHER MATTERS | - 32 - |
| SHAREHOLDER PROPOSALS AND NOMINATIONS FOR THE 2013 ANNUAL MEETING | - 32 - |
| REPORTS AND OTHER DOCUMENTS | - 33 - |
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INFORMATION ABOUT VOTING
How are proxies being solicited?
This proxy solicitation is being made by and at the direction of the board of directors of the Company, and the Company will pay all expenses relating to the solicitation. In addition to the use of the mails, proxies may be solicited personally, by telephone or by other electronic means by officers, directors and employees of the Company and the Bank, who will not be compensated for such solicitation activities. Arrangements may be made with brokerage houses and other custodians, nominees and fiduciaries for forwarding solicitation materials to the beneficial owners of shares held of record by such persons, and the Company will reimburse those persons for their reasonable expenses.
What is on the agenda for the annual meeting?
The agenda for the annual meeting includes the election of two Class III Directors to the Company’s board of directors to serve until the 20142015 annual meeting of shareholders and until his successor istheir successors are elected and qualified, ratification of the appointment of ParenteBeard LLC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011,2012, and such other matters as may properly come before the annual meeting. We are not aware of any such other matters that may properly come before the annual meeting at the present time.
Who can vote?
Only shareholders of record, as shown on the transfer books of the Company at the close of business on March 15, 201121, 2012 (the “Record Date”) will be entitled to notice of, and to vote at, the annual meeting or any adjournment or postponement thereof. Each share of common stock you own as of the record date entitles you to one vote for each director to be elected in the election of directors and one vote on any other matter as may properly come before the annual meeting. As of March 15, 2011,21, 2012, there were 25,972,897 shares of common stock outstanding and entitled to vote.
How do I vote if shares are held directly in my name?
If you hold your shares in certificate form and not through a bank, brokerage firm or other nominee, you may vote your shares in one of the following ways:
Voting By Mail: If you choose to vote by mail, complete the enclosed proxy, date and sign it, and return it in the postage-paid envelope provided. |
2012.
Voting By Internet: |
In Person: If you choose to vote in person, come to the annual meeting and cast your vote. If you attend the annual meeting, you may vote your shares in person even if you have previously submitted a proxy. |
If you hold your shares in street name or through a bank, brokerage firm or other nominee, see “How do I vote if shares are holdheld in street name or through a bank, brokerage firm or other nominee?” for instruction on how to vote your shares.
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How do I vote if shares are held in street name or through a bank, brokerage firm or other nominee?
If you hold your shares in street name or through a bank, brokerage firm or other nominee, you will need to vote your shares by providing voting instructions to your bank, brokerage firm or other nominee, in accordance with the voting instruction form provided to you by your bank, brokerage firm or other nominee, or by obtaining a legal proxy from your bank, brokerage firm or other nominee authorizing you to vote those shares at the annual meeting. Only with a legal proxy from your bank, brokerage firm or other nominee can you cast your vote in person at the annual meeting.
How will my proxy be voted?
If you submit a signed proxy card or submit your proxy by telephone or the internet but do not indicate how you want your shares voted, the persons named in the enclosed proxy will vote your shares of common stock FOR the election of each of the board’s director nominees named in this proxy statement and FOR the ratification of the appointment of ParenteBeard LLC as independent registered public accounting firm for the fiscal year ending December 31, 2011, and FOR the proposal to adjourn the annual meeting, if necessary.2012. With respect to any other matter that properly comes before the annual meeting, the persons named in the enclosed proxy will vote your shares of common stock in their discretion in accordance with their best judgment and in the manner they believe to be in the best interest of the Company. If you hold your shares of the Company’s common stock in “street name” (that is, through a broker or other nominee) and fail to instruct your broker or nominee as to how to vote your shares of common stock on the election of directors, your broker or nominee cannot vote your shares in the election of directors. If you hold your shares in “street name” and fail to instruct your broker or nominee as to how to vote your shareshares of common stock on the ratification of the appointment of ParenteBeard LLC as independent registered public accounting firm for the fiscal year ending December 31, 2011,2012, your broker or other nominee has discretionary voting authority to vote your shares on such proposal.
What is a broker non-vote?
A broker non-vote occurs when a bank or brokerage firm holding shares on behalf of a shareholder does not receive voting instructions from the shareholder by a specified date before the annual meeting and the bank or brokerage firm is not permitted to vote those undirected shares on specified matters under applicable stock exchange rules. Thus, if you do not give your broker specific instructions, your shares may not be voted on those matters (so-called “broker non-votes”). Broker non-votes are not considered to be votes cast and, therefore, generally have no effect on the outcome of elections of directors or other matters submitted to the shareholders and subject to approval based on votes cast. Shares represented by “broker non-votes” will be counted, however, in determining the number of shares of common stock represented in person or by proxy and entitled to vote.
Can I revoke my proxy or change my vote after submitting my proxy?
Proxies may be revoked at any time prior to being voted at the annual meeting. You may revoke a proxy before its exercise by filing written notice of revocation with our Secretary before the annual meeting. After voting, you may change your vote one or more times by completing and returning a new proxy to our Secretary, by voting again by Internetinternet or telephone as described in this Proxy Statement,proxy statement, or by voting in person at the annual meeting. You may request a new proxy card from our Secretary. The last vote received chronologically will supersede any prior votes. The deadline for registered shareholders to change their vote by Internetinternet or telephone is 3:00 a.m., EDT, on April 26, 2011.May 1, 2012. All requests and correspondence with our Secretary should be mailed to Republic First Bancorp, Inc., Two Liberty Place, 50 S. 16th Street, Suite 2400, Philadelphia, Pennsylvania 19102, Attention: Kemma Brown, Secretary.
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What constitutes a quorum at the annual meeting?
We need a quorum of shareholders to hold a valid annual meeting. A quorum will be present if at least a majority of the outstanding shares of common stock are represented in person or by proxy at the annual meeting. Abstentions and broker non-votes are counted as present for the purpose of establishing a quorum. If the annual meeting is adjourned because of the absence of a quorum, those shareholders entitled to vote who attend the adjourned annual meeting, although constituting less than a quorum as provided herein, shall nevertheless constitute a quorum for the purpose of electing directors. If the annual meeting is adjourned for one or more periods aggregating at least 15 days due to the absence of a quorum, shareholders who are entitled to vote and who attend the adjourned annual meeting, even though they do not constitute a quorum as described above at the adjourned meeting, will constitute a quorum for the purpose of acting on any matter described in the Notice of annual meeting.
How can I obtain directions to attend the annual meeting and vote in person?
The annual meeting will be held at The Union League of Philadelphia which is located at 140 South Broad Street, Philadelphia, PA, 19102. You may obtain directions to The Union League by contacting their office during regular business hours at (215) 563-6500 or by accessing the Union League’s website at http://www.unionleague.org and clicking on the “Directions and Parking” link at the bottom of the webpage. The information on this website is not incorporated into this proxy statement and is an inactive textual reference only.
How many votes are required for the election of directors?
Directors are elected by a plurality vote of shares of common stock cast in person or by proxy at the annual meeting, provided a quorum is present. A “plurality” means that the individuals who receive the largest number of affirmative votes cast are elected as directors up to the maximum number of directors to be chosen at the annual meeting. Because the election of directors is based on a plurality of the votes cast, abstentions and broker non-votes have no effect on the outcome of the vote. Votes that are withheld from a director nominee will be excluded entirely from the vote for such nominee and will have no effect on the result. Shareholders are not entitled to cumulative voting in the election of directors.
Proxies cannot be voted for a greater number of persons than the number of nominees named.
How many votes are required for the ratification of the appointment of ParenteBeard LLC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011?2012?
The proposal to ratify the appointment of ParenteBeard LLC as the Company’s independent registered public accounting for the fiscal year ending December 31, 20112012 will be approved if a majority of the votes represented in person or proxy at the annual meeting and entitled to vote are voted FOR the proposal. Abstentions, but not broker non-votes, will have the same legal effect as votes against the proposal.
How many votes are required for any other proposals that may properly come before the annual meeting?
Generally, any other proposals that may properly come before the annual meeting will be approved if a majority of the votes at the annual meeting and entitled to vote thereon are voted in favor of the action, unless otherwise provided by express provision of law or by our articles of incorporation or our bylaws. Abstentions, but not broker non-votes, will have the same legal effect as votes against any other proposal. Broker non-votes will not count as votes against any proposal at the annual meeting.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Company’s by-laws provide that the board may consist of not less than five directors and not more than 25 directors, classified into three classes, as nearly equal in number as possible, with the specific number of directors fixed from time to time by resolution of the board. The members of one class of directors are elected at each annual meeting and each class of directors serves for approximately three years. The classes of directors have been designated as “Class I,” “Class II” and “Class III.”
The board has fixed the number of directors at seven. Currently, the Class I Director isDirectors are Harry D. Madonna;Madonna and Brian P. Tierney; the Class II Directors are Robert J. Coleman and Harris Wildstein, Esq.; and the Class III Directors are Neal I. Rodin, Barry L. Spevak and Theodore J. Flocco, Jr. During 2010,2011, and until January 15, 2011,February 21, 2012, the board was comprised of seven directors. On January 15, 2011,February 21, 2012, however, William W. Batoff,Neil I. Rodin, a member of the board of directors of the Company and an independent director, passed away unexpectedly. Mr. Batoff had beenresigned as a Class I Director. As discussed below,director of the Company. The board has nominated Brian P. Tierneyis seeking to fill the Class I vacancy.vacancy created by Mr. Rodin’s resignation with an individual the board believes is qualified to fill such role.
The incumbent Class III Directors will continue in office until the Company’s 20122014 Annual Meeting of Shareholders and the incumbent Class III Directors will continue in office until the Company’s 2013 Annual Meeting of Shareholders. All directors will hold office until the annual meeting of shareholders at which their terms expire and until the elections and qualifications of their successors.
Upon the recommendation of the nominating and governance committee of our board of directors, our board has nominated Harry D. MadonnaRobert J. Coleman and Harris Wildstein, Esq. for reelection as a Class I DirectorII Directors to serve until the Company’s 20142015 annual meeting of shareholders and thereafter until his successor istheir successors are elected and qualified. Mr. Madonna hasAll of the director nominees have agreed to stand for election. In the event, however, that, for any reason, Mr. Madonnaone or more director nominees becomes unavailable for election or service as director, the board may designate a substitute nominee or nominees to replace him or them and the persons designated in the enclosed proxy will vote for the election of such other person or persons as the board may recommend.
The specific backgrounds and qualifications of our current directors and director nominees are reflected in each person’s biography below.
Director Nominees
The following individuals have been nominated for election to the board as Class III Directors, to serve until the 20142015 Annual Meeting of Shareholders and until their successors are elected and qualified.
Robert J. Coleman, age 75, has been a director of the Company and the Bank since April 2003. Prior to his retirement in December 2009, Mr. Coleman had been the chairman and chief executive officer of Marshall, Dennehey, Warner, Coleman & Goggin, a defense litigation law firm, since 1974. Mr. Coleman’s background as an attorney offers the board valuable experience in legal matters (although he does not render the Company legal advice) and general business knowledge.
Harris Wildstein, Esq., age 66, has been a director of the Company and the Bank since 1988. Mr. Wildstein has also been a director of First Bank of Delaware since 1999. Since September 2004, Mr. Wildstein has been an owner and officer of Lifeline Funding, LLC, a pre-settlement funding organization. He has been the Vice President of R&S Imports, Ltd., an automobile dealership, since 1977, and president of HVW, Inc., an automobile dealership, since 1982. Mr. Wildstein’s background in owning and managing multiple businesses has made him sophisticated in the analysis of financial matters and offers the board insight into understanding the many customers that the Bank serves today. Mr. Wildstein also provides the board with valuable leadership and management perspectives and business acumen.
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Continuing Directors
Each of the following individuals is an incumbent director who will continue to serve as a director of the Company until the end of his respective term or until a successor is elected and qualified.
Class I Directors
Harry D. Madonna, age 68,69, has been Chairmanchairman, president and Chief Executive Officerchief executive officer of the Company and Republic since 1988. Mr. Madonna has also served as the chairman and chief executive officer of the Bank since 1988 and served as the Bank’s president from 1998 until May 2010. Mr. Madonna also has served as Executive Chairmanexecutive chairman of First Bank of Delaware since 1999 and served as its Chief Executive Officerchief executive officer from January 2002 until July 2008. Mr. Madonna was counsel to Spector Gadon & Rosen, PC, a general practice law firm located in Philadelphia, Pennsylvania from January 1, 2002 until June 30, 2005 and prior to that, was a partner of Blank Rome LLP, a law firm located in Philadelphia, Pennsylvania from 1980 until December 2001. Mr. Madonna’s background as an attorney and years of experience with the Bank provides him with the skills to lead the Boardboard and the Company. Mr. Madonna’s position within the Company and Republicthe Bank also provides him with intimate knowledge of our business, results of operations and financial condition. Further, as the Chief Executive Officerchief executive officer and Chairman,chairman, Mr. Madonna acts as the liaison between the directors and management, and assists the Boardboard in its oversight of the Company.
Brian P. Tierney, 54,55, has been a director of the Company and the Bank since April 2011. He has also served as Presidentpresident and Chief Executive Officerchief executive officer of Real Time Media, an interactive marketing services agency since November 2010. He was Publisherpublisher of the Philadelphia Inquirer and Daily News and Chief Executive Officerchief executive officer of its parent company, Philadelphia Media Holdings LLC, from June 2006 and August 2006, respectively, until October 2010. In February 2009, Philadelphia Newspapers LLC, a subsidiary of Philadelphia Media Holdings LLC, filed voluntary petitions for reorganization relief pursuant to Chapter 11 of the United States Bankruptcy code and emerged from bankruptcy in October 2010. He previously served as Chairmanchairman and Chief Executive Officerchief executive officer of Tierney Holdings LLC, a private investment firm. From June 2004 to March 2005, he was Vice Chairmanvice chairman of Advanta Corp. Prior to that, he was the founding partner of T2 Group, a public relations firm, from November 2003 until it was sold to Advanta Corp. Mr. Tierney serves on a variety of civic, educational and charitable boards of directors, including the board of directors of Nutrisystem, Inc. Mr. Tierney has a strong corporate leadership background, having served as Chief Executive Officerchief executive officer and having held additional management positions at several companies. His service as a member of another public company board and other boards of directors also provides insight on corporate governance issues.
Class III Directors
Theodore J. Flocco, Jr., C.P.A., age 66,67, has been a director of the Company and the Bank since June 2008. Before his retirement from Ernst & Young LLP, Mr. Flocco was Senior Audit Partnera general audit partner and advised many of the largest SEC regulated clients of the Philadelphia office for more than 35 years, including several regional and local banks. In June 2008, Mr. Flocco, Vernon W. Hill, II, founder and chairman (retired) of Commerce Bancorp, Inc., and three other investors, including Mr. Madonna’s family trust, invested in a private placement of $10.8 million of convertible trust preferred securities sponsored by the Company. Simultaneously with those investments, wethe Company entered into a consulting agreement with Mr. Hill which, among other things, provides Mr Hill the right to designate one individual to the board of directors of the Company and the Bank, and for the nomination and recommendation of his designee in elections of directors by ourthe Company’s shareholders, in each case subject to ourthe Company’s articles of incorporation and bylaws, and any applicable director qualification standards. OneOn June 17, 2008, Mr. Flocco, as Mr. Hill’s designee, was appointed to the board as a Class III Director. He has subsequently been elected by the Company’s shareholders at the 2010 annual meeting of shareholders. Mr. Flocco has experience in the banking, mutual fund, real estate and manufacturing and distribution industries. His responsibilities at Ernst & Young LLP included consulting with senior executives and directors of companies on accounting and strategic business issues, mergers and acquisitions, public offerings and SEC registrations. He has extensive experience in the public offering market having leadthrough his involvement in more than 100 public equity and debt offerings. Mr. Flocco’s experience in public accounting and SEC matters provides the Boardboard with depth in matters related to accounting, SEC financial reporting and shareholder communication and also qualifies him as a financial expert to serve on the Board’sboard’s audit committee.
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Barry L. Spevak, age 50,51, has been a director of the Company and the Bank since April 2004. He has also been a partner with Miller Downey, Spevak Kaffenberger, Limited,and Associates, Ltd., a certified public accounting firm, since 1991 and has previously served as the treasurer of the Recording for the Blind and Dyslexic. Mr. Spevak’s experience as a certified public accountant qualifies him as a financial expert and his financial accounting background provides the board with an understanding of financial statements, accounting and operational and financial controls. He also provides the Company with general business knowledge.
As noted above, Messrs. Madonna and Wildstein are members of First Bank of Delaware’s board of directors and Mr. Tierney is a member of Nutrisystem, Inc.’s board of directors. First Bank of Delaware and Nutrisystem, Inc. are public companies. First Bank of Delaware’s class of common stock is registered with the Federal Deposit Insurance Corporation, or “FDIC,” pursuant to section 12 of the Securities Exchange Act of 1934, as amended.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF OUR NOMINEES TO THE BOARD OF DIRECTORS OF THE COMPANY TO SERVE UNTIL THE 20142015 ANNUAL MEETING OF SHAREHOLDERS AND UNTIL HIS SUCCESSOR ISTHEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
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BOARD OF DIRECTORS AND COMMITTEES
Director Independence
The Company’s common stock is listed on the NASDAQ Global Market and the Company’s board of directors has determined the independence of the members of its board and committees under the NASDAQ listing standards. The Company’s board of directors determined that under NASDAQ independence standards Messrs. Coleman, Flocco, Rodin, Spevak, Tierney and Wildstein, constituting a majority of the members of the Company’s board of directors, are independent, and that all of the members of the audit, nominating and governance and compensation committees are independent. Mr. Batoff,Rodin, who was a member of the board of directors until his unexpected passingresignation earlier this year, was also independent. The Company’s board of directors has determined, that, if elected, Mr. Tierney would be an independent director. The Company’s only director who was determined to not be independent was Mr. Madonna. In determining the independence of Mr. Flocco, the board considered the consulting arrangement Mr. Flocco had with the Company prior to 20102011 pursuant to which Mr. Flocco earned $32,500 during 2008 and $14,200 during 2009.
The Boardboard does not have a policy regarding the separation of the roles of Chief Executive Officerchief executive officer and Chairmanchairman of the Boardboard as the Boardboard believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board.board. Accordingly, the Boardboard periodically reviews its leadership structure. Currently, the Boardboard believes that the Company’s Presidentpresident and Chief Executive Officerchief executive officer is best situated to serve as Chairmanchairman of the Board.board. We believe this Boardboard leadership structure is appropriate for our Company, in that the combined role of Presidentpresident and Chairmanchairman of the Boardboard and Chief Executive Officerchief executive officer promotes unified leadership and direction for our Company, allowing for a single, clear focus for management to execute the Company’s strategy and business plan. The Boardboard believes that the Company’s Chief Executive Officerchief executive officer is best situated to serve as chairman of the board because he is the director most familiar with the Company’s business and industry, and most capable of effectively identifying strategic priorities and leading the discussion and execution of our corporate strategy. Independent directors and management have different views and roles in the development of a strategic plan. The Company’s independent directors bring experience, oversight and expertise from outside the Company and often the industry, while the Chief Executive Officerchief executive officer brings Company-specific and industry-specific experience and expertise. The Boardboard believes that the combined role of chairman and Presidentpresident and Chief Executive Officerchief executive officer promotes efficiency, strategy development and execution, and facilitates information flow between management and the Board,board, which are essential to effective governance.
We have a relatively small board, a majority of which is independent under the listing standards of the Nasdaq Global Market. Each independent director has direct access to our Chairmanchairman of the Board, Presidentboard, president and Chief Executive Officer,chief executive officer, as well as other members of the senior management team. We believe that having such direct access makes the separation of the principal executive officer and board chairman positions unnecessary. The independent directors also regularly meet in executive session without management present.
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Our Boardboard performs its risk oversight function in several ways. The Boardboard establishes standards for risk management by approving policies that address and mitigate the Company’s most material risks. These include policies addressing credit risk, interest rate risk, capital risk, and liquidity risk, as well as Bank Secrecy Act/Anti-Money Laundering compliance. The Boardboard also monitors, reviews, and reacts to our risks through various reports presented by management, internal and external auditors, and regulatory examiners. The Boardboard conducts certain risk oversight activities through its various committees which have direct oversight over specific functional areas. Our asset/liability committee, or ALCO, is also comprised of directors and members of senior management, and has primary responsibility for risks associated with our exposure to fluctuations in interest rates and our liquidity needs. Our audit committee is responsible for risks associated with our financial reporting and internal controls, and our compensation committee is responsible for risks associated with our compensation practices. Notwithstanding that each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire board is regularly informed through committee reports about such risks.
Meetings of the Board and Attendance
During 2010,2011, the directors held 8seven board meetings. All of the current directors attended at least 75% of allthe aggregate of (1) the total number of meetings of the board (held during the period for which such director was a member of the board) and (2) the total number of meetings of all committees of the board on which such director served.served (during the periods that such director served). We encourage all incumbent directors and nominees for election as directors to attend our annual meetings, and allmeetings. All of our current directors attended the 20102011 annual meeting of shareholders.
Board Committees
The Company’s board of directors conducts much of its business through committees, including a standing audit committee, nominating and governance committee and compensation committee.
Audit Committee
The Boardboard of Directorsdirectors of the Company has designated a standing audit committee.committee, currently consisting of Messrs. Flocco (chair), Spevak and Wildstein serve as members of the audit committee. Prior to his death, Mr. Batoff served on the Audit Committee. In January 2011, Mr. Wildstein was appointed to serve on the Audit Committee to fill that vacancy.Wildstein.
All members of the audit committee are independent under NASDAQ listing standards, including the independence criteria applicable to audit committee members. Although Mr. Flocco received certain consulting fees during 2008 and 2009, as discussed above, he has been determined to be independent under NASDAQ independence standards, and his consulting arrangement was terminated prior to Mr. Flocco’s appointment to the audit committee. The board of directors has determined that both Mr. Flocco and Mr. Spevak qualify as audit committee financial experts, as defined in SEC rules and regulations, and as financially sophisticated audit committee members, under NASDAQ rules. Mr. Wildstein’s background and experience have made him capable of comprehending and understanding all financial matters reviewed by the audit committee as well.regulations.
The audit committee held 11thirteen meetings during 2010,2011, and it operates under a written charter approved by the board. A copy of the audit committee’s charter is available on the Company’s website at www.myrepublicbank.com. The responsibilities of the audit committee are to, among others:
assist the board of directors with the oversight of the integrity of the Company’s financial statements and internal controls, the Company’s compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications and independence and the performance of the Company’s internal audit function and the independent registered public accounting firm;
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establish procedures for receipt, retention, and handling complaints regarding accounting, internal accounting controls, and auditing matters, including procedures for confidential, anonymous submission of concerns by employees regarding accounting and auditing matters;
retain, evaluate, and, where appropriate, replace the independent auditors, set the independent auditor’s compensation, oversee the work of the independent auditor and pre-approve all audit services to be provided by the independent auditor;
review with the independent auditor and members of management conducting the internal audit the adequacy and effectiveness of the systems of internal controls, accounting practices, and disclosure controls and procedures of the Company and current accounting trends and developments, and take such action with respect thereto as may be deemed appropriate;
make a recommendation to the board as to whether the audited financial statements should be included in the Company’s Annual Report on Form 10-K;
prepare the report required to be prepared by the audit committee pursuant to the rules of the Securities and Exchange Commission, or “SEC,” for inclusion in the Company’s annual proxy statement; and
review in advance the public release of all financial information.
Audit Committee Report
The audit committee of the Company’s board of directors is responsible for providing independent, objective oversight of the Company’s accounting functions and internal controls.
Management is responsible for the Company’s internal controls and financial reporting process. The independent accountants are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards and to issue a report thereon. The audit committee’s responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the audit committee has reviewed and discussed the audited consolidated financial statements of the Company at and for the year ended December 31, 2010,2011, with management. The audit committee discussed with ParenteBeard, LLC, the Company’s independent registered public accounting firm, the matters required to be discussed by Statement on Auditing Standards No. 61, “Communication with Audit Committees,” as amended. The audit committee has received the written disclosures and the letter from ParenteBeard, LLC required by applicable requirements of the Public Company Accounting Oversight Board regarding its communications with the audit committee concerning independence, and has discussed with ParenteBeard, LLC its independence.
Based upon the audit committee’s review and discussions with management and the independent registered public accounting firm referred to above, the audit committee recommended to the board that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010,2011, for filing with the Securities and Exchange Commission.
- 9 - Respectfully submitted, | |
Theodore J. Flocco, Jr. (Chair)
Barry L. Spevak
Harris Wildstein
Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the Securities Act or the Exchange Act that might incorporate future filings, including this Proxy Statement,proxy statement, in whole or in part, the preceding Audit Committee Report shall not be incorporated by reference into any such filings nor shall they be deemed to be soliciting material or deemed to be filed with the SEC under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended.
Compensation Committee
The board of directors of the Company has designated a standing compensation committee, currently consisting of Messrs. Spevak (chair), RodinFlocco and Flocco serve as members of our compensation committee. Mr. Batoff was a member and the chair of the compensation committee at the time of his unexpected passing on January 15, 2011. Tierney.
The compensation committee operates under a written charter approved by the board. A copy of the compensation committee’s charter is available on the Company’s website at www.myrepublicbank.com. The charter provides, among other things, that the compensation committee be comprised of at least three members.
All members of the compensation committee have been determined by the board to be independent under NASDAQ listing standards, “non-employee directors,” as defined in SEC Rule 16b-3, and “outside directors,” as defined for purposes of Internal Revenue Code Section 162(m). The compensation committee held 8four meetings in 2010.2011. The compensation committee’s responsibilities include, among others, the following:
review and approve the Company’s overall compensation philosophy and overseeing the administration of related compensation and benefit programs, policies and practices;
set the compensation of the chief executive officer and other executive officers of the Company. Regarding compensation for officers other than the chief executive officer, the committee shall consult with the chief executive officer and the other officers of the Company as appropriate;
evaluate the performance of the chief executive officer and review and approve the chief executive officer’s evaluation of performance of the other executive officers in light of approved performance goals and objectives;
review and recommend for approval to the board cash-based incentive compensation plans, equity-based compensation plans defined benefit and contribution plans and other welfare benefit plans or amendments or modifications to such plans;
grant options and other awards under equity-based plans;
review and discuss with management the Compensation Discussion and Analysis (CD&A) to be included in the Company’s annual proxy statement, if required, and determine whether to recommend to the board that the CD&A be included in the proxy statement, if applicable;
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provide the compensation committee report for inclusion in the proxy statement, if required, that complies with the rules and regulations of the Securities and Exchange Commission; and
have the authority to retain and terminate any consulting firm to advise the compensation committee, as it deems appropriate, including the authority to approve the consultant’s fees and other retention terms.
Compensation Processes and Procedures
The compensation committee meets at such times as it determines to be necessary or appropriate, but not less than once a year. The compensation committee has the sole authority to establish the compensation of the chief executive officer and other executive officers of the Company and the Bank and may not delegate such authority, except to a subcommittee.sub-committee. The chief executive officer has the responsibility for proposing the amount and form of compensation of the other executive officers of the Company and the Bank and the compensation committee consults with the Chief Executive Officerchief executive officer on such matters. The compensation committee is empowered to engage independent compensation consultants, but has not done so since 2006.
The compensation committee is also responsible for periodically reviewing the amount and form of director compensation paid to non-employee directors. The compensation committee recommends proposed changes in director compensation to the board as appropriate, from time to time, and any changes in director compensation are approved by the board.
Nominations and Shareholder Communications
Nominating and Governance Committee
All members of the nominating and governance committee have been determined by the board to be independent under NASDAQ listing standards. The nominating and governance committee held 1 meetingthree meetings in 2010.2011. The nominating and governance committee operates under a written charter approved by the board. A copy of the nominating and governance committee’s charter is available on the Company’s website at www.myrepublicbank.com.
In addition to the responsibilities described below regarding overseeing the selection and recommendation of board nominees, the nominating and governance committee’s responsibilities include, among other things, the following:
review and approve transactions with any related persons in accordance with the related party transaction approval policy;
monitor compliance with legal prohibitions on loans to directors and officers of the Company;
develop and review periodically, and at least annually, the corporate governance policies of the Company to ensure that they are appropriate for the Company and that policies of the Company comply with applicable laws, regulations and listing standards, and recommend any desirable changes to the board;
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conduct annually an evaluation of the performance of the board as a whole and the directors in such manner as the committee deems appropriate and, through its chairperson, communicate this evaluation to the full board; and
maintain an orientation program for new directors and an education program for continuing directors.
The nominating and governance committee also oversees the composition and operation of the Company’s board, including identifying individuals qualified to become board members, recommending to the board director nominees for the annual meetings of shareholders, and filling vacancies occurring between annual shareholder meetings. It identifies director candidates by considering the recommendations of the Company’s directors, executive officers and shareholders, as well as those of experts and consultants of the Company. The nominating and governance committee evaluates candidates it has identified or who have been recommended to it based on the selection criteria provided in the nominating and governance committee charter and other criteria deemed relevant by the nominating and governance committee, including each candidate’s background and experience, the candidate’s ability to understand the business, financial affairs and complexities of the Company and the Company’s business, the candidate’s willingness and ability to spend the necessary time required to function effectively as a director, the candidate’s open-minded approach to matters and the resolve to independently analyze matters presented for consideration, as well as the candidate’s ability to act in the best interest of the Company’s shareholders, and the candidate’s reputation for honesty and integrity.
While the nominating and corporate governance committee does not have a formal policy regarding director diversity, it believes that the directors should encompass a range of experience, viewpoints, qualifications, attributes and skills in order to provide sound and prudent guidance to the Company’s management. The nominating and corporate governance committee considers diversity in connection with its review of each potential director candidate and is satisfied that the current composition of the board of directors reflects its commitment to diversity. The nominating and corporate governance committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees.
The nominating and governance committee evaluates director candidates recommended by shareholders in the same manner that it evaluates other director candidates. The procedures for shareholders to recommend director candidates are described under the heading “Shareholder Proposals and Nominations for the 20122013 Annual Meeting”.
Shareholder Communications
Any shareholder may communicate with our board, of directors, or any individual member or members of the board, by directing his, her or its communication to Kemma Brown, Corporate Secretary, Republic First Bancorp, Inc., Two Liberty Place, 50 S. 16th Street, Suite 2400, Philadelphia, PA 19102, together with a request to forward the communication to the intended recipient or recipients. In general, all shareholder communications delivered to the corporate secretary for forwarding to the board or specified board members will be forwarded in accordance with the shareholder’s instructions. The corporate secretary, however, may not forward any abusive, threatening or otherwise inappropriate materials.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 15, 2011,21, 2012, information with respect to the holdings of Company voting securities of all persons which the Company, pursuant to filings with the SEC and the Company’s stock transfer records, has reason to believe may be beneficial owners of more than five percent (5%) of the Company’s outstanding common stock, each current director or director nominee, each executive officer named in the 20102011 Summary Compensation Table, and all of the Company’s director nominees, directors and executive officers as a group.
| Name of Beneficial Owner or Identity of Group (1) | Number of Shares Beneficially Owned (2) | Percentage of Ownership (2) | Number of Shares Beneficially Owned (2) | Percentage of Ownership (2) | |
| Director Nominees, Directors and Executive Officers: | |||||
| Harris Wildstein | 997,117 (3) | 3.8% | 960,017 | (3) | 3.7% |
| Harry D. Madonna | 750,530 (4) | 2.9% | 726,226 | (4) | 2.8% |
| Robert J. Coleman | 616,668 (5) | 2.4% | 617,668 | (5) | 2.4% |
| Neal I. Rodin | 265,482 (6) | 1.0% | |||
| Theodore J. Flocco, Jr. | 49,923 (7) | * | 67,073 | (6) | * |
| Barry L. Spevak | 35,995 (8) | * | 25,999 | (7) | * |
| Brian P. Tierney | - | * | 16,597 | * | |
| Jay Neilon | 50,000 | * | 50,000 | * | |
| Rhonda Costello | 27,500 | * | 27,500 | (8) | * |
| Andrew J. Logue | 25,000 | * | 25,000 | * | |
| Frank A. Cavallaro | 13,750 | * | 13,750 | * | |
All, director nominees, directors and executive officers as a group (11 persons) | 2,831,965 | 10.8% | |||
All, director nominees, directors and executive officers as a group (10 persons) | 2,529,830 | 9.7% | |||
| Other Five Percent Beneficial Shareholders: | |||||
| Vernon W. Hill II | 2,576,077 (9) | 9.9% | 2,576,077 | (9) | 9.9% |
| Wellington Management Company, LLP | 2,529,540 (10) | 9.7% | 2,429,540 | (10) | 9.4% |
| Schaller Investment Group | 2,077,453 (11) | 8.0% | |||
| Schaller Group | 2,547,594 | (11) | 9.8% | ||
| The Evergreen Trust B | 2,019,438 (12) | 7.6% | 2,019,438 | (12) | 7.6% |
* Represents beneficial ownership of less than 1%.
| (1) | Unless otherwise indicated, the address of each beneficial owner is c/o Republic First Bancorp, Inc., Two Liberty Place, 50 S. 16th Street, Suite 2400, Philadelphia, PA 19102. The group of director nominees, directors and executive officers was determined as of March |
| (2) | The securities “beneficially owned” by an individual are determined in accordance with the definition of “beneficial ownership” set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended. Any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: voting power, which includes the power to vote, or to direct the voting of, common stock; and/or, investment power, which includes the power to dispose, or to direct the disposition of, common stock, is determined to be a beneficial owner of the common stock. All shares are subject to the named person’s sole voting and investment power unless otherwise indicated. Shares beneficially owned include shares issuable upon exercise of options which are currently exercisable or which will be exercisable within 60 days of March |
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| (3) | Includes |
| (4) | Includes |
| (5) | Includes |
| (6) | Includes |
| Includes |
| (8) | Includes 12,500 shares of common stock held by her husband. |
| (9) | Information with respect to beneficial ownership is based partly on a Schedule 13D/A filed with the SEC on August |
| (10) | Information with respect to beneficial ownership is based on a Schedule |
| (11) | Information with respect to beneficial ownership is based on a Schedule 13G/A filed with the SEC on February |
| (12) | Information with respect to beneficial ownership is based on a Schedule 13G filed with the SEC on May 17, 2011. The co-trustees of The Evergreen Trust B are Brooke C. Madonna, Harry Dillon Madonna, Brandy C. Madonna and Lucas Prewett. |
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EXECUTIVE OFFICERS AND COMPENSATION
Executive Officers
The following sets forth certain information regarding executive officers of the Company.Company and the Bank. Information pertaining to Harry D. Madonna, who is both a director and the Chief Executive Officeran executive officer of the Company and the Bank, may be found in the section entitled “Proposal 1 – Election of Directors – Director Nominees”Continuing Directors”.
Andrew JJ. Logue, 53,54, has been Presidentpresident and Chief Operating Officerchief operating officer of the Bank since May 2010. Mr. Logue had been Executive Vice Presidentexecutive vice president and Chief Operating Officerchief operating officer of the CompanyBank since August 20, 2008. Prior to joining the Company,Bank, Mr. Logue, served as Senior Vice President/Enterprise Risk Managementsenior vice president/enterprise risk management for Commerce Bank, N.A. and its successor TD Bank, N.A. from March 1991 to August 2008. Mr. Logue served in various functions during his tenure at Commerce Bank, N.A.
Rhonda Costello, 53,54, has been an Executive Vice Presidentexecutive vice president and Chief Retail Officerchief retail officer of the Bank since August 5, 2008. Prior to joining the Bank, Ms. Costello, served as Senior Retail Officersenior retail officer for Commerce Bank’s Pennsylvania, Central New Jersey and New Jersey Shore Markets. She also held a wide range of management positions including Regional Vice President for Burlington County, N.J., Director of the Company’s Human Resources Department and the Dean of Commerce University during her 23 year tenure with theCommerce Bank, which began March 4, 1985.1985, including regional vice president of the Burlington County, N.J. market, director of the Human Resources Department and dean of Commerce University.
Jay M. Neilon, 57,58, has been Senior Vice Presidentan executive vice president and Chief Credit Officerchief credit officer of the Bank since February 2012. Mr. Neilon had been a senior vice president and chief credit officer of the Bank since December 31, 2008. Prior to joining the Bank, Mr. Neilon, served as Senior Credit Officersenior credit officer for Commerce Bank, N.A. and its successor TD Bank, N.A. from July 1992 to December 2008. Prior to Commerce Bank, N.A., Mr. Neilon held various credit and lending positions with Fidelity Bank, Philadelphia, PA from September 1976 to July 1992.
Frank A. Cavallaro, 42,43, has been Senior Vice Presidentan executive vice president and Chief Financial Officerchief financial officer of the Company since February 2012. Mr. Cavallaro had been a senior vice president and chief financial officer of the Company since August 31, 2009. Prior to joining the Company, Mr. Cavallaro, served as a Vice Presidentvice president in the Finance Departmentfinance department for Commerce Bank, N.A. and its successor TD Bank, N.A. from September 1997 to August 2009. Mr. Cavallaro, a certified public accountant, has thirteensixteen years of experience in the financial services industry and, prior to that, three years experience in public accounting with Ernst & Young LLP.
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Executive Compensation
Compensation Discussion and Analysis
Overview of the Executive Compensation Program. Our executive compensation program includes a number of fixed and variable compensation and benefit components, typical of programs among comparable community banking and financial services companies in our local and regional marketplace.
The program seeks to provide participating executives with an industry-competitive level of total compensation.
Compensation Philosophy and Program Objectives. We believe that the compensation program for executives should directly support the achievement of annual, longer-term and strategic goals of the business, and, thereby, align the interests of executives with the interests of our shareholders.
We believe the current program provides sufficient levels of fixed income, in the forms of base salary and health and welfare benefits, to attract high caliber executive talent to the organization. We believe it also provides competitive annual bonus and longer-term incentive opportunities to encourage performance and to reward the successful efforts of executives.
The incentive opportunities are based on an executive’s role in our organization, company and individual performance, maintaining a compensation program that is competitive in our industry and markets, and other factors.
Our current program contains certain compensation features, provided on a selective basis, to encourage retention through long-term wealth accumulation opportunities and to assure transition support in the event of substantial organization or ownership change. These provisions are designed to support retention of good performers by the organization.
We believe that the features and composition of the current program are consistent with practices of other comparable community banking and financial services organizations in our marketplace and that the program balances the need for competitive pay opportunities at the executive level with shareholders’ expectations for reasonable return on their investment.
Program Management. The compensation committee of the board of directors has primary responsibility for the design and administration of the compensation of the chief executive officer of the Company and the Bank, and makes decisions with respect to the compensation program for other executive officers. The compensation committee will consider the make-up and administration of the executive compensation program in light of changing organization needs and operating conditions and changing trends in industry practice.
Role of Executive Management in the Pay Decision Process. The compensation committee is responsible for approving compensation of our chief executive officer and other executive officers. The Chief Executive Officerchief executive officer will make recommendations to the Compensation Committeecompensation committee with respect to the compensation of other executive officers. In formulating its decisions, the compensation committee may seek information about the performance of the business, organization staffing requirements and the performance levels of incumbent executives from our chief executive officer. It will also utilize the services of our chief financial officer and other officers to the extent the compensation committee deems appropriate.
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Program Review and Pay Decision Process. Annually, the compensation committee reviews information on executive compensation levels in the industry and industry program practices, reviews our compensation program, and considers adjustments to the program, salary adjustments and incentive awards. The compensation committee will examine the current compensation and benefit levels of executive officers in light of their continuing or changing roles in the business and the assessments of their individual performances by the compensation committee or the chief executive officer. It will also approve annual bonus compensation, after consideration of Company and individual performance, but which is ultimately discretionary.
The compensation committee may also be called upon to consider pay related decisions throughout the calendar year as executives are reassigned or promoted and new executive officers join the organization. In these instances, the compensation committee will review all aspects of the executive officer’s compensation including base salary level, annual incentive opportunities, longer-term incentive awards, participation in special benefit plans, and employment contract provisions, if applicable.
Pay Decision Factors and Considerations. The following factors typically influence compensation committee decisions on pay and benefits for our executive officers:
Salary: executive’s overall performance during the year ending, changes in organization role and scope of responsibility, current salary in relation to the position’s market value, any significant changes in the industry’s pay practices for comparable positions.
Discretionary Annual Bonus Compensation: competitive industry practice with respect to size of awards, actual performance of the Company against budget and performance of executive officer.
Longer-term Incentive Awards: competitive industry practice with respect to size of awards, recent performance of the Company and the individual executive, applicable accounting rules for expensing equity awards, and shareholder concerns about dilution and overhang.
Nonqualified Compensation and Benefits: tax rules on qualified benefit plans, likely replacement income benefits for executives compared to other categories of employees within the organization, competitive industry practice for comparable type and level of executive positions.
Perquisites: the needs of the executive’s position, frequency of travel to other Company locations, or to meet with Company clients and prospective clients, and competitive industry practices for comparable executive roles.
Employment Agreements: where they serve Company needs for confidentiality about business practices and plans, and preservation of the customer base (noncompetitions(non-competition and nonsoliciationnon-solicitation provisions) and, competitive industry practices.practices and employee retention.
Basis for Defining Competitive Compensation Levels and Practices. The types and levels of compensation included in the Company’s executive compensation program are generally consistent with current features and programming trends among similar size and type organizations in our local and regional marketplace.
The compensation committee reviews survey reports on national and regional compensation practice within the Company’s industry group, focusing on pay levels and practices among community banking and diversified financial services institutions based in the Mid-Atlantic Region and specifically the Greater Philadelphia metropolitan marketplace, having a level of total assets comparable to our own. This range of institutions represents banking companies that are somewhat smaller and somewhat larger than the Company. The asset range will be modified from time to time as the Company’s operating circumstances change.
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For the 20102011 program planning cycle, the compensation committee reviewed executive compensation information from the following institutions in Pennsylvania, and New Jersey. We expect a similar review to be completed in 2011.Jersey based on public information available through the internet and documents filed with the SEC.
| Abington Bancorp, Inc. | First Chester County Corporation |
| The Bancorp, Inc. | VIST Financial |
| Bryn Mawr Bank Corporation | Royal Bancshares of Pennsylvania, Inc. |
Program Components. There are six (6) elements in the current executive compensation program:
Base Salary. Base salary opportunities are based on industry practice for comparable jobs in like size and type community banking and financial service organizations. Within the defined competitive range, an executive’s salary level is based initially on his qualifications for the assignment and experience in similar level and type roles. Ongoing, salary adjustments reflect the individual’s overall performance of the job against organization expectations and may also reflect changes in industry practices.
Health & Welfare Benefits. Executives participate in Company’s qualified health and welfare benefits program on the same terms and conditions as all other employees of the Company.
Annual Performance Incentives. The Company pays bonus compensation which provides executives with opportunities to earn additional cash compensation in a given year. Bonus compensation is discretionary, but Company and business unit operating results and individual performance contributions are considered. Typical annual performance metrics for Company executives include net income, loan and deposit growth and net interest margin. The determination of actual bonus amounts is not formulaic, but, rather, the result of a review of achievements by the chief executive officer and the compensation committee and the application of prevailing industry practices on annual incentive awards.
Longer-term Performance Incentives. Executives are eligible to participate in longer-term incentive award plans established to focus executive efforts on the strategic directions and goals of the business and to reward them for their successes in increasing enterprise value. Awards can result in additional cash compensation or equity grants in the form of stock options or restricted stock. While the size of such awards may increase or decrease based on current business performance, it is the intention of the compensation committee to recommend some combination of the available awards at least annually as an incentive to focus executives’ future efforts on longer-term needs and objectives of the business.
Equity Grant Plan. Our Amended and Restated Stock Option Plan and Restricted Stock Plan (the “Plan”) authorizes us to grant options to purchase shares of common stock to our employees, directors and consultants. We can also grant restricted stock to this same group. Our compensation committee is the administrator of the Plan. Stock option or restricted stock grants may be made at the commencement of employment and from time to time to meet other specific retention or performance objectives, or for other reasons. Periodic grants of stock options or restricted stock are made at the discretion of the compensation committee to eligible employees and, in appropriate circumstances, the compensation committee considers the recommendations of the chief executive officer.
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Deferred Compensation. During 2009, our deferred compensation plan was frozen to new participants and Mr. Madonna is the only named executive officer who remains eligible for participation. As such, he may receive, at the compensation committee’s discretion, a company contribution in an amount determined by the compensation committee. Contributions vest three years after the plan year to which the contribution applies, or sooner upon a change of control. The value and any earnings on participant accounts are determined by the changes in value of the investments selected by the participant, including the Company’s common stock.
Nonqualified Benefits and Perquisites. We currently do not offer a nonqualified supplemental retirement income plan (SERP) to any of our executives, but our chief executive officer, as a former non-employee director, has an account balance in a now frozen retirement income plan for directors.
Perquisites for Company executives are generally limited to automobile allowanceallowances or the use of a Company-provided automobile, and, in a very few instances, a club membership. Typically, these perquisites are provided in instances where such benefits can facilitate the conduct of business with corporate and high net worth clients.
Employment Agreements and Change in Control. We have entered into employment agreements with Mr. Madonna, Mr. Logue and Ms. Costello, in each case because the agreements served certain company objectives and were consistent with competitive industry practices. The agreements with Mr. Logue and Ms. Costello were instrumental in attracting them to join us. All of the agreements include severance benefits, whether or not in connection with a change in control of the company, and obligations of the named executive officers to maintain confidentiality about business practices and plans, and for the preservation of our operations and customer base through restrictive covenants, including noncompetition and non-solicitation provisions.
It is possible that some of these future grants may include performance vesting in lieu of the traditional time vesting requirements attached to past grants. Discretionary cash bonuses will be reassessed in the future based on the operating results of the Company. The compensation committee will evaluate award opportunities for executives, consistent with performance results.
Employment Agreements. The compensation committee has responsibility for review of current and proposed employment agreements and will specifically authorize contract renewals.
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Compliance with Sections 162(m) and 409A of the Internal Revenue Code. Section 162(m) of the Internal Revenue Code provides that publicly held corporations may not deduct compensation paid to certain executive officers in excess of $1,000,000 annually, with certain exemptions for qualified “performance-based” compensation. The Company has obtained shareholder approval of its stock option plan, and compensation earned pursuant to such plan is exempt from the Section 162(m) limit. Since we retain discretion over bonuses and certain amounts contributed to the deferred compensation plan, such amounts will not qualify for the exemption for performance-based compensation. Such amounts have not been at levels that, together with other compensation, approached the $1,000,000 limit. The Company believes its compensation policies reflect due consideration of Section 162(m). We reserve the right, however, to use our judgment to authorize compensation payments that do not comply with the exemptions in Section 162(m) when we believe that such payments are appropriate and in the best interests of our shareholders, after taking into consideration changing business conditions or the executive officer’s performance.
It is also our intention to maintain our executive compensation arrangements in conformity with the requirements of Section 409A of the Internal Revenue Code, which imposes certain restrictions on deferred compensation arrangements. We have been engaged in a process of reviewing and modifying our deferred compensation arrangements in order to maintain compliance under Section 409A.
Compensation Committee Report
The compensation committee has reviewed and discussed the “Compensation Discussion and Analysis,” which begins aton page 1416 of this proxy statement, with management and, based on such review and discussions, the compensation committee recommended to the board of directors that the “Compensation Discussion and Analysis” be included in this proxy statement.
| Respectfully submitted, | |
Barry L. Spevak (Chair)
Brian P. Tierney
Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the Securities Act or the Exchange Act that might incorporate future filings, including this Proxy Statement,proxy statement, in whole or in part, the preceding Compensation Committee Report shall not be incorporated by reference into any such filings nor shall they be deemed to be soliciting material or deemed to be filed with the SEC under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended.
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Executive Compensation
The following table shows the annual compensation of our chief executive officer, our chief financial officer and the three most highly compensated executive officers of the company other than the chief executive officer and chief financial officer for the fiscal year ended December 31, 2010.2011. Collectively, these officers are referred to as our “named executive officers”.
The following table shows the annual compensation of the Company’s named executive officers for the fiscal years ended December 31, 2011, 2010 2009 and 2008.2009.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards (1) ($) | All Other Compensation ($) | Total ($) | Year | Salary ($) | Bonus ($) | Option Awards (1) ($) | All Other Compensation ($) | Total ($) |
Harry D. Madonna President and Chief Executive Officer (2) | 2010 | 429,379 | - | 22,560 | 72,963 | 524,902 | 2011 | 425,000 | - | 20,760 | 51,710 | 497,470 |
| 2009 | 439,230 | - | 31,680 | 149,216 | 620,126 | 2010 | 429,379 | - | 22,560 | 72,963 | 524,902 | |
| 2008 | 390,225 | - | 24,480 | 150,427 | 565,132 | 2009 | 439,230 | - | 31,680 | 149,216 | 620,126 | |
Andrew J. Logue Chief Operating Officer (3) | 2010 | 259,808 | - | 75,800 | 28,761 | 364,369 | 2011 | 265,000 | - | 17,300 | 30,085 | 312,385 |
| 2009 | 250,000 | - | 19,700 | 10,585 | 280,285 | 2010 | 259,808 | - | 75,800 | 28,761 | 364,369 | |
| 2008 | 89,600 | 70,000 | 85,100 | 708 | 245,408 | 2009 | 250,000 | - | 19,700 | 10,585 | 280,285 | |
Rhonda Costello Chief Retail Officer (4) | 2010 | 203,270 | - | 42,800 | 25,972 | 272,042 | 2011 | 225,000 | - | 17,300 | 26,247 | 268,547 |
| 2009 | 175,000 | - | 19,700 | 11,657 | 206,357 | 2010 | 203,270 | - | 42,800 | 25,972 | 272,042 | |
| 2008 | 64,808 | 55,000 | 85,100 | 604 | 205,512 | 2009 | 175,000 | - | 19,700 | 11,657 | 206,357 | |
Jay Neilon Chief Credit Officer (5) | 2010 | 185,000 | - | 21,400 | 23,996 | 230,396 | 2011 | 198,846 | - | 13,840 | 24,499 | 237,185 |
| 2009 | 185,000 | 25,000 | 19,700 | 5,246 | 234,946 | 2010 | 185,000 | - | 21,400 | 23,996 | 230,396 | |
| 2008 | - | - | - | - | 2009 | 185,000 | 25,000 | 19,700 | 5,246 | 234,946 | ||
Frank A. Cavallaro Chief Financial Officer (6) | 2010 | 160,000 | - | - | 17,339 | 177,339 | 2011 | 169,231 | - | 13,840 | 23,373 | 206,444 |
| 2009 | 49,231 | - | 13,200 | 930 | 63,361 | 2010 | 160,000 | - | - | 17,339 | 177,339 | |
| 2008 | - | - | - | - | 2009 | 49,231 | - | 13,200 | 930 | 63,361 | ||
| (1) | The amount shown is the aggregate fair value as of the grant date in accordance with FASB ASC |
| (2) | In 2011, all other compensation includes $20,842 of automobile and transportation allowance, $16,915 of business development expense including a club membership which is sometimes used for personal purposes, $7,261 for Company paid supplemental long-term disability policy premiums, and $6,692 in matching contributions made to the Company’s 401(k). |
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| (3) | In |
(4) | In |
| (5) | In |
| (6) | In |
Grants of Plan-Based Awards in 20102011
| Name | Grant Date | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($ / Sh) | Closing Price on Grant Date ($ / Sh) | Grant Date Fair Value of Stock and Option Awards (1) ($) | Grant Date | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($ / Sh) | Closing Price on Grant Date ($ / Sh) | Grant Date Fair Value of Stock and Option Awards (1) ($) |
| Harry D. Madonna | January 27, 2010 | 12,000 | 4.50 | 22,560 | February 2, 2011 | 12,000 | 3.23 | 20,760 | ||
| Andrew J. Logue | January 19, 2010 | 20,000 | 5.12 | 42,800 | February 2, 2011 | 10,000 | 3.23 | 17,300 | ||
| Andrew J. Logue | April 29, 2010 | 20,000 | 3.95 | 33,000 | ||||||
| Rhonda Costello | January 19, 2010 | 20,000 | 5.12 | 42,800 | February 2, 2011 | 10,000 | 3.23 | 17,300 | ||
| Jay M. Neilon | January 19, 2010 | 10,000 | 5.12 | 21,400 | February 2, 2011 | 8,000 | 3.23 | 13,840 | ||
| Frank A. Cavallaro | February 2, 2011 | 8,000 | 3.23 | 13,840 | ||||||
| (1) | The grant date fair value was determined in accordance with ASC 718-10, by the Black-Scholes option pricing model. The following assumptions were utilized: a dividend yield of 0%; expected volatility of |
The Company’s compensation committee authorized the granting of the options in the table shown above. Options issued to Mr. Madonna represented the annual grant of options as per his employment contract.
Summary Compensation and Grants of Plan-Based Awards. Our named executive officers receive from the Company a combination of base salary, health and welfare benefits, bonus compensation, long-tern incentive compensation in the form of stock option awards, qualified and nonqualified deferred compensation and perquisites. Bonus compensation is paid at the discretion of the compensation committee of the Company’s board of directors after consideration of numerous factors, which may include net income, core deposits, loan and deposit growth, income from loan programs,net interest margin, and other factors set by the compensation committee.
Mr. Madonna currently serves as chairman of the board, president and chief executive officer of the Company and Chairmanchairman of the Boardboard and Chief Executive Officerchief executive officer of the Bank, and the compensation paid to Mr. Madonna is determined, in large part, by the terms of his employment agreement. On January 25, 2010, the Company, the Bank, and Mr. Madonna entered into an amended and restated employment agreement, effective January 1, 2010. The amendments were initiated at Mr. Madonna’s request to reduce his annual compensation and certain other benefits in recognition of the state of the economy in general and the financial services industry in particular, as well as the financial performance of the Company and to further align the interests of the Company and Mr. Madonna. Compared to the prior agreement, the amended and restated agreement extends the term of the agreement, reduces Mr. Madonna’s annual base salary, eliminates automatic annual compensation increases and guaranteed deferred compensation, reduces by 50% the costs to the Company and the Bank of providing health benefits, an automobile and certain other benefits, and eliminates the tax “gross-up” provision in the event of a change of control, as defined in the agreement.
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Mr. Madonna’s amended and restated employment agreement provides for Mr. Madonna’s continuing service as chairman of the board, president and chief executive officer of the Company and chairman of the board and chief executive officer of the Bank, for an initial term of three years beginning January 1, 2010 at an annual base salary of $425,000. The Company and the Bank may terminate Mr. Madonna’s agreement with notice at least six months prior to the scheduled expiration/renewal date or any time for good reason. Mr. Madonna may terminate the agreement with six months prior notice. Mr. Madonna is also eligible to receive annual increases in base salary and annual bonuses in amounts determined in the sole discretion and determination of the Compensation Committee of the Company’s Board of Directorscompensation committee upon achieving mutually agreed upon budget criteria. He may also receive discretionary deferred compensation. Annually, for each of the three years of the agreement, Mr. Madonna will receive options to purchase 12,000 shares of the Company’s common stock at a per share exercise price equal to the price on the date of grant. Options will vest four years after their date of grant. Mr. Madonna will be provided one halfwith the costscost of an automobile and will be reimbursed for its operation, maintenance and insurance expenses. Additionally, he will receive one half of the cost of health and disability insurance available to all employees, term life insurance for three times his salary, business related travel and entertainment expenses and club dues and expenses. The agreement with Mr. Madonna provides for severance and change in control payments, which are discussed below under the caption, “Severance and“Termination or Change in Control Benefits”Provisions in Employment Agreements” on page 25.26. It also provides for the non-disclosure by Mr. Madonna of confidential information acquired by him in the context of his employment with the Company and the Bank.
Mr. Logue’s agreement also provides for severance benefits described below under “Severance and Change in Control Benefits”. It also provides for the non-disclosure by Mr. Logue of confidential information acquired by him in the context of his employment, and for covenants providing for the non-solicitation of customers and employees and non-competition for a period of twelve months following any cessation of employment.
Ms. Costello’s agreement also provides for severance benefits described below under “Severance and Change in Control Benefits”. It also provides for the non-disclosure by Ms. Costello of confidential information acquired by her in the context of her employment, and for covenants providing for the non-solicitation of customers and employees and non-competition for a period of twelve months following any cessation of employment.
The Bank has allowed Ms. Costello to enter into a consulting agreement with Metro Bank PLC (“Metro”), which is headquartered in London, England, so long as the services provided under this consulting agreement do not interfere or conflict with her responsibilities to the Bank. Under the terms of this agreement Ms. Costello spends a limited amount of time assisting Metro with the development and execution of their growth strategy. Ms. Costello is compensated directly by Metro for consulting services performed under this agreement. Metro also reimburses the Bank for any time spent by Ms. Costello on these consulting services. See footnote (4) under "2011 Summary Compensation Table" for further detail.
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The Company maintains the Amendmentan Amended and Restatement No. 3 of theRestated Stock OptionsOption Plan and Restricted Stock Plan of Republic First Bancorp, Inc. (“Plan”), under which the Company may grant options, restricted stock or stock appreciation rights to the Company’s employees, directors, and certain consultants. Under the terms of the Plan, 1.5 million shares of common stock, plus an annual increase equal to the number of shares needed to restore the maximum number of shares that may be available for grant under the Plan to 1.5 million shares, are available for such grants. As of December 31, 2010,2011, the only grants under the Plan have been option grants. The Plan provides that the exercise price of each option granted equals the market price of the Company’s stock on the date of grant. Any option granted vests within one to five years and has a maximum term of ten years.
Outstanding Equity Awards at December 31, 2010
2011
Option Awards
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (1)(2) | Option Exercise Price ($) (1) | Option Vesting Date | Option Expiration Date | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) (1) | Option Vesting Date | Option Expiration Date |
| Harry D. Madonna | 12,000 | 4.50 | January 27, 2014 | January 27, 2020 | 12,000 | 3.23 | February 2, 2015 | February 2, 2021 | ||
| 12,000 | 4.50 | January 27, 2014 | January 27, 2020 | |||||||
| 4,000 | 8,000 | 7.85 | January 21, 2012(3) | January 21, 2019 | 8,000 | 4,000 | 7.85 | January 21, 2012(2) | January 21, 2019 | |
| 12,000 | 5.99 | January 23, 2012 | January 23, 2018 | 12,000 | 5.99 | January 23, 2012 | January 23, 2018 | |||
| 13,200 | 11.77 | January 2, 2011 | January 2, 2017 | 13,200 | 11.77 | January 2, 2011 | January 2, 2017 | |||
| 27,104 | 10.05 | April 20, 2015 | 27,104 | 10.05 | April 20, 2015 | |||||
| 25,342 | 6.16 | January, 1, 2014 | 25,342 | 6.16 | January, 1, 2014 | |||||
| Andrew J. Logue | 20,000 | 3.95 | April 29, 2014 | April 29, 2020 | 10,000 | 3.23 | February 2, 2015 | February 2, 2021 | ||
| 20,000 | 5.12 | January 19, 2014 | January 19, 2020 | 20,000 | 3.95 | April 29, 2014 | April 29, 2020 | |||
| 10,000 | 5.70 | February 26, 2013 | February 26, 2019 | 20,000 | 5.12 | January 19, 2014 | January 19, 2020 | |||
| 5,000 | 7.72 | November 25, 2012 | November 25, 2018 | 10,000 | 5.70 | February 26, 2013 | February 26, 2019 | |||
| 20,000 | 8.00 | August 26, 2012 | August 26, 2018 | 5,000 | 7.72 | November 25, 2012 | November 25, 2018 | |||
| 20,000 | 8.00 | August 26, 2012 | August 26, 2018 | |||||||
| Rhonda Costello | 20,000 | 5.12 | January 19, 2014 | January 19, 2020 | 10,000 | 3.23 | February 2, 2015 | February 2, 2021 | ||
| 20,000 | 5.12 | January 19, 2014 | January 19, 2020 | |||||||
| 10,000 | 5.70 | February 26, 2013 | February 26, 2019 | 10,000 | 5.70 | February 26, 2013 | February 26, 2019 | |||
| 5,000 | 7.72 | November 25, 2012 | November 25, 2018 | 5,000 | 7.72 | November 25, 2012 | November 25, 2018 | |||
| 20,000 | 8.00 | August 26, 2012 | August 26, 2018 | 20,000 | 8.00 | August 26, 2012 | August 26, 2018 | |||
| Jay Neilon | 10,000 | 5.12 | January 19. 2014 | January 19, 2020 | 8,000 | 3.23 | February 2, 2015 | February 2, 2021 | ||
| 10,000 | 5.70 | February 26, 2013 | February 26, 2019 | 10,000 | 5.12 | January 19, 2014 | January 19, 2020 | |||
| 10,000 | 5.70 | February 26, 2013 | February 26, 2019 | |||||||
| Frank Cavallaro | 7,500 | 5.71 | September 2, 2013 | September 2, 2019 | 8,000 | 3.23 | February 2, 2015 | February 2, 2021 | ||
| 7,500 | 5.71 | September 2, 2013 | September 2, 2019 | |||||||
| (1) | The number of shares of common stock underlying options and the option exercise prices have been adjusted in accordance with their terms as a result of the Company’s 10% stock dividend in April, 2007. |
| (2) |
| Options vest one-third on January 21, 2010, one-third on January 21, 2011, and one-third on January 21, 2012. |
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Pension Benefits at December 31, 20102011
| Name | Plan Name | Number of Years Credited Service (1) | Present Value of Accumulated Benefit ($) | Plan Name | Number of Years Credited Service (1) | Present Value of Accumulated Benefit ($) |
| Harry D. Madonna | Supplemental retirement benefits | 18 | 210,883 | Supplemental retirement benefits | 19 | 210,883 |
| (1) | Mr. Madonna's years of credited service and the present value of his accumulated benefit were determined as of December 31, |
In 1992, the Company adopted a supplemental retirement plan for non-employee directors. The plan was frozen to new participants in 1992, but the Company continues to maintain the plan for participants who served as non-employee directors in 1992. At that time, Mr. Madonna was a non-employee director and he continues to be a participant in the plan. The present value of accumulated benefit was calculated based upon the actuarial present value of accumulated benefits, calculated as of December 31, 2010,2011, as described below. The plan provides for a retirement benefit of $25,000 per year for ten years, which payments may begin at the later of actual retirement date or 65 years of age. As Mr. Madonna has reached 65 years of age, the amount shown as the present value of the accumulated benefit is the amount necessary to fund $25,000 annual payments over a ten year period commencing as December 31, 2010,2011, the end of the Company’s most recently completed fiscal year, determined using a 4% discount rate.
Nonqualified Deferred Compensation at December 31, 20102011
| Name | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year ($)(1) | Aggregate Earnings in Last Fiscal Year ($) (2) | Aggregate Withdrawals/ Distributions in Last Fiscal Year ($) | Aggregate Balance at Last Fiscal Year-End ($)(3) | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($) (1) | Aggregate Withdrawals/ Distributions in Last Fiscal Year ($) | Aggregate Balance at Last Fiscal Year-End ($) (2) |
| Harry D. Madonna | - | - | (22,374) | - | 129,209 | - | - | (49,781) | - | 247,661 |