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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The Bancorp, Inc.
(Exact Name of Registrant as Specified in its Charter)
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The Bancorp, Inc.
409 Silverside Road
Wilmington, DE 19809
NOTICE OF ANNUALSPECIAL MEETING OF STOCKHOLDERS
To Be Held May 18,September 29, 2016
To the Stockholders of THE BANCORP, INC.:
Notice is hereby given that the 2016 annuala special meeting (the "Meeting") of stockholders (the "Special Meeting") of THE BANCORP, INC., a Delaware corporation (the "Company"), will be held at 409 Silverside Road, Suite 105, Wilmington, Delaware 19809 on Wednesday, May 18,Thursday, September 29, 2016 at 9:00 A.M., Delaware time, fortime. At the following purposes:Special Meeting, our stockholders will be asked to consider and vote to:
| 1. | To electApprove, for the nine directors named inpurpose of Nasdaq Rule §5635(d), the enclosed proxy statement to serve untilconversion of the next annual meetingCompany's Series C Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock into shares of stockholders.the Company's Common Stock and the issuance of such shares of the Company's common stock upon conversion. |
2. | To approve, in an advisory (non-binding) vote, the Company's 2015 compensation program for its named executive officers. |
3. | To approve an amendment to2. | Approve, for the purpose of Nasdaq Rule §5635(c), the issuance of shares of the Company's Certificatecommon stock to certain officers and directors of Incorporation to increase the number of authorized shares of Common Stock from 50 million shares to 75 million shares. |
4. | To approve the selection of Grant Thornton LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2016. |
5. | To transact such other business as may properly be brought before the Meeting and any adjournment, postponement or continuation thereof.Company. |
These items of business are more fully described in the Proxy Statement accompanying this Notice of Special Meeting of Stockholders. The record date for the Special Meeting is August 15, 2016. Only stockholders of record on the books of the Company at the close of business on March 21, 2016 will be entitled to notice of and tothe record date may vote at the Meetingmeeting or at any adjournmentsadjournment thereof. A list of stockholders entitledeligible to vote at the Meetingmeeting will be available for inspectionreview for any purpose relating to the meeting during our regular business hours at the Meeting and at theour offices of the Company at 409 Silverside Road, Suite 105, Wilmington, Delaware 19809.19809 for the ten days prior to the meeting.
STOCKHOLDERS CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO ASSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO POSTAGE AND YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE ITS USE.
| | By order of the Board of Directors Paul Frenkiel Secretary |
Wilmington, Delaware
April 11,August 26, 2016
Important Notice Regarding the Availability of Proxy Materials for the Meeting to be held on May 18,September 29, 2016:
The proxy statement and the Company's Annual Report for the year ended December 31, 2015 areis available at http://www.snl.com/IRW/investors.thebancorp.com/CustomPage/4054569/Index?KeyGenPage=203269
If you have any questions or require any assistance with voting your shares, please contact our proxy solicitor at the contact listed below:
D.F. King & Co., Inc.
48 Wall Street
New York, NY 10005
TABLE OF CONTENTS
GENERAL | | |
| | Page | |
| PROXY STATEMENT FOR THE SPECIAL MEETING OF STOCKHOLDERS | 1 | |
| QUESTIONS AND ANSWERS | 2 | |
PROPOSAL 1. ELECTION OF DIRECTORS1 | | |
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STOCK OWNERSHIP AND SECTION 16 COMPLIANCE | | |
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NON-DIRECTOR EXECUTIVE OFFICERS | | |
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CORPORATE GOVERNANCE | | |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | | |
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PROPOSAL 2. ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION2 | | |
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COMPENSATION DISCUSSIONSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND ANALYSISMANAGEMENT | | |
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COMPENSATION COMMITTEE REPORT | | |
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EXECUTIVE AND DIRECTOR COMPENSATION | | |
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AUDIT COMMITTEE REPORT | | |
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PROPOSAL 3. APPROVAL TO INCREASE AUTHORIZED SHARES OF COMMON STOCK | | |
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PROPOSAL 4. APPROVAL OF ACCOUNTANTS | | |
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| OTHER MATTERS | | |
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| STOCKHOLDER PROPOSALS AND NOMINATIONS | | |
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STOCKHOLDER OUTREACHANNEX A: CERTIFICATE OF DESIGNATION | | | |
The Bancorp, Inc.
409 Silverside Road
Wilmington, DE 19809
FOR THE SPECIAL MEETING OF STOCKHOLDERS
GENERALTO BE HELD SEPTEMBER 29, 2016
IntroductionDate, Time and Place of Meeting
The 2016 annual meetingBoard of Directors (the "Meeting""Board") of stockholders of The Bancorp, Inc., a Delaware corporation ("Bancorp," the "Company," "we," "our" and similar terms), is asking for your proxy for use at a special meeting of stockholders (the "Company""Special Meeting") will be heldand at any adjournments or postponements thereof. We are holding the Special Meeting on Wednesday, May 18,Thursday, September 29, 2016, at 9:00 A.M,a.m. Eastern Time, at our offices at 409 Silverside Road, Suite 105, Wilmington, Delaware 19809, for the purposes set forth in19809. This proxy statement and the accompanying notice. Onlyproxy card are first being mailed to stockholders on or about August 26, 2016. The address of record at the close of business on March 21, 2016 will be entitled to notice of and to vote at such Meeting.our principal executive offices is 409 Silverside Road Suite 105, Wilmington, Delaware 19809.
This statement is furnished in connectionPurpose of Meeting
On August 5, 2016, we entered into a Securities Purchase Agreement ("Securities Purchase Agreement") with certain institutional and accredited investors (collectively, the solicitation by the Board"Investors"), pursuant to which we sold an aggregate of Directors7,560,000 shares of the Company (the "Board of Directors") of proxies from holders of the Company'sour common stock, par value $1.00 per share (the "Common Shares"Stock"), at a purchase price of $4.50 per share, and 40,000 shares of a new series of preferred stock, Series C Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock, par value $0.01 per share (the "Series C Preferred Stock"), at a purchase price of $1,000 per share, in a private placement (the "Private Placement") for total consideration of approximately $74 million.
The Securities Purchase Agreement and the terms of the Series C Preferred Stock provide that, upon the approving vote of our stockholders, each share of Series C Preferred Stock will convert into that number of shares of Common Stock equal to (i) the $1,000 liquidation value of the Series C Preferred Stock plus all accrued and unpaid dividends thereon, divided by (ii) the conversion price of $4.50 per share, subject to adjustment as described in the Series C Preferred Stock Certificate of Designation. Pursuant to the Securities Purchase Agreement, we agreed to seek approval of the conversion of the Series C Preferred Stock into Common Stock at a special meeting of stockholders in order to comply with Nasdaq Rule 5635(d), as described in Proposal 1. Under Proposal 1, we are seeking this approval.
Further, we also entered into a subscription agreement dated as of August 5, 2016 (the "Subscription Agreement") with our directors and executive officers listed below (the "Affiliated Investors"). Pursuant to the Subscription Agreement, the Affiliated Investors have agreed to purchase an aggregate of 1,025,000 shares of Common Stock at $4.50 per share, contingent upon the Company obtaining stockholder approval to convert the Series C Preferred Stock to Common Stock as set forth in Proposal 1, and satisfaction of stockholder approval requirements in accordance with Nasdaq Marketplace Rule 5635(c). Under Proposal 2, we are seeking this approval. The following officers and directors are parties to the Subscription Agreement: Walter Beach, John Chrystal, Daniel Cohen, Paul Frenkiel, Damian Kozlowski, Jeremy Kuiper, James McEntee III and Donald McGraw.
Available Information
Our Internet address is www.thebancorp.com. We make available free of charge through our website our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and Exchange Commission (the "SEC").
Who can vote at the meeting?
The Board set August 15, 2016 as the record date for the Special Meeting (the "Record Date"). Except as set forth below, if you owned shares of our common stock as of the close of business on the Record Date, you may attend and vote your shares at the Special Meeting. Each stockholder is entitled to one vote for each share of Common Stock held on all matters to be usedvoted on.
Notwithstanding the foregoing, in accordance with Nasdaq Stock Market guidance (IM-5635-2), the 7,560,000 shares of Common Stock issued in the Private Placement will not be entitled to vote on the conversion of the shares of Series C Preferred Stock into Common Stock (Proposal 1) or the sale of Common Stock to the Affiliated Investors (Proposal 2).
What is the quorum requirement for the meeting?
The holders of a majority of our outstanding shares of Common Stock as of the Record Date must be present in person or represented by proxy and entitled to vote at the Special Meeting in order for there to be a quorum. A quorum is required to hold the meeting and conduct business. If there is no quorum, the holders of a majority of the shares present at anythe Special Meeting may adjourn the meeting to another date.
You will be counted as present at the Special Meeting if you are present and all adjournments thereof. Proxiesentitled to vote in person at the accompanyingmeeting or you have properly submitted a proxy card or voter instruction form, properly executedor voted by telephone or over the Internet. Both abstentions and duly returnedbroker non-votes (as described below) are counted for the purpose of determining the presence of a quorum.
As of the Record Date, there were 37,845,323 shares of our common stock outstanding and entitled to the Company, and not revoked,vote, which means that holders of 18,922,662 shares of our common stock must be present in person or by proxy for there to be a quorum.
What proposals will be voted on at the Meeting and any and all adjournments thereof.meeting?
This proxy statementThere are two proposals scheduled to be voted on at the meeting:
| | Approval, for the purpose of Nasdaq Rule §5635(d), of the conversion of the Company's Series C Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock and the issuance of shares of the Company's common stock upon such conversion. ("Proposal 1"). |
| | Approval, for the purpose of Nasdaq Rule §5635(c), of the issuance of shares of the Company's common stock to certain officers and directors of the Company. ("Proposal 2"). |
Some of our officers and members of the Board have interests that could affect their decision to support or approve the proposals. Please refer to the subsections entitled " Proposal 1 – Approval, for purpose of Nasdaq Rule §5635(d), of the conversion of the Series C Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock and the accompanying formissuance of proxy will be sent on or about April 11, 2016 to stockholdersthe Company's Common Stock upon such conversion — Interests of record asCertain Persons," and "Proposal 2 –– Approval, for purpose of March 21, 2016.Nasdaq Rules §5635(c), of the purchase by certain officers and directors of the Company of Common Stock at a price less than the market value of the stock — Interests of Certain Persons."
RevocationCan other matters be decided at the Special Meeting?
Generally no. Under Section 1.3 of Proxythe Company's Amended and Restated Bylaws, unless all stockholders entitled to vote are present at the Special Meeting and consent, only business stated in the Notice of Special Meeting of Stockholders (or any supplement thereto), and matters germane thereto, shall be transacted at the Special Meeting or any adjournment or postponement thereof.
How does the Board recommend I vote on each proposal?
The Board recommends that you vote:
| | FOR approval of Proposal 1. |
| | FOR approval of Proposal 2. |
How do I vote my shares in person at the Special Meeting?
If your shares of Common Stock are registered directly in your name with our transfer agent, American Stock Transfer and Trust Company, on the Record Date, you are considered, with respect to those shares, to be the stockholder of record. As the stockholder of record, you have the right to vote in person at the Special Meeting.
If your shares are held in a brokerage account or by another intermediary, you are considered the beneficial owner of shares held in street name. As the beneficial owner, you are also invited to attend the Special Meeting. However, since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Special Meeting unless you obtain a "legal proxy" from the intermediary that is the record holder of the shares, giving you the right to vote the shares at the Special Meeting.
How can I vote my shares without attending the Special Meeting?
Whether you hold shares directly as a registered stockholder of record or beneficially in street name, you may vote without attending the Special Meeting. You may vote by granting a proxy or, for shares held beneficially in street name, by submitting voting instructions to your broker, bank or other trustee or nominee. In most cases, you will be able to do this by using the Internet, by telephone or by mail.
| | Voting by Internet or telephone. You may submit your proxy over the Internet or by telephone by following the instructions for Internet or telephone voting provided with your proxy materials and on your proxy card or voter instruction form. |
| | Voting by mail. You may submit your proxy by mail by completing, signing, dating and returning your proxy card or, for shares held beneficially in street name, by following the voting instructions included by your broker or other intermediary. If you provide specific voting instructions, your shares will be voted as you have instructed. |
What happens if I do not give specific voting instructions?
If you are a stockholder of record and you either indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or you sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the accompanying formmanner recommended by the Board with respect to Proposal 1 and Proposal 2 and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Special Meeting.
If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under stock market rules, the organization that holds your shares may generally vote at its discretion only on routine matters and cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is executedgenerally referred to as a "broker non-vote." In tabulating the voting results for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal. Thus, broker non-votes will not affect the outcome of Proposal 1 and returned, itProposal 2, assuming a quorum is obtained.
Is the proposal considered "routine" or considered "non-routine"?
The approvals of Proposal 1 and Proposal 2 are considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore we expect there to be broker non-votes on Proposal 1 and Proposal 2.
How are votes counted?
Votes will be counted by the inspector of election appointed for the meeting. The inspector of election will separately count "For" and "Against" votes, abstentions and any broker non-votes. Abstentions will be counted toward the vote total for the proposal and will have the same effect as an "Against" vote for this proposal.
What is the vote required to approve Proposal 1?
The proposal must receive a "For" vote from the holders of a majority of the shares of Common Stock casting votes in person or by proxy on Proposal 1 at the Special Meeting. Abstentions will be counted toward the vote total for the proposal and will have the same effect as an "Against" vote for this proposal.
What is the vote required to approve Proposal 2?
The proposal must receive a "For" vote from the holders of a majority of the shares of Common Stock casting votes in person or by proxy on Proposal 2 at the Special Meeting. Abstentions will be counted toward the vote total for the proposal and will have the same effect as an "Against" vote for this proposal.
How can I revoke my proxy and change my vote after I return my proxy card?
You may nevertheless be revokedrevoke your proxy and change your vote at any time before its exercisethe final vote at the Special Meeting. If you are a stockholder of record, you may do this by giving written notice of revocation to the Secretary of the Company at its Wilmington address stated herein, bysigning and submitting a new proxy card with a later dateddate, by using the Internet or voting by telephone (either of which must be completed by 11:59 p.m. Eastern Time on September 28, 2016 — the time the latest telephone or Internet proxy is counted), or by attending the Special Meeting and voting in person. Attending the Special Meeting alone will not revoke your proxy unless you specifically request that your proxy be revoked. If you hold shares through a bank or brokerage firm, you must contact that bank or firm directly to revoke any prior voting instructions.
ExpensesWho is responsible for the costs of soliciting proxies and Manner of Solicitationhow will they be solicited?
The cost of soliciting proxies will be borne by the Company. Directors, officers and regular employees of the Company may solicit proxies either personally, by letter or by telephone, but will not be specifically compensated for soliciting such proxies.
The Company has retained D.F. King & Co., Inc. ("D.F. King"), a proxy solicitation firm, to assist in connection with soliciting proxies for the Special Meeting. This proxy solicitation firm will assist in the solicitation of proxies by personal interview, mail, telephone, facsimile, email, other electronic channels of communication, or otherwise. The Company will pay D.F. King & Co. a fee of $8,500, plus reimbursement of out-of-pocket expenses incurred in the process of soliciting proxies, and additional fees if the Company requests a telephone solicitation campaign of stockholders. The Company has agreed to indemnify D.F. King & Co. and certain related persons against certain liabilities relating to or arising out of the engagement. In addition, the Company will reimburse banks, brokerage firms, other custodians, nominees and fiduciaries for reasonable expenses incurred in sending proxy materials to beneficial owners of the common stock of the Company.
Common Stock.
APPROVAL, FOR PURPOSE OF NASDAQ RULE §5635(D), OF THE CONVERSION OF THE SERIES C MANDATORILY CONVERTIBLE CUMULATIVE NON-VOTING PERPETUAL PREFERRED STOCK AND THE ISSUANCE OF THE COMPANY'S COMMON STOCK UPON SUCH CONVERSION
Background and the Agreement
In the first and second quarters of 2016, the Company's management performed analyses of capital levels, and obtained regulatory input in connection with the analysis. The analyses included capital allocations for various lines of business and peer comparisons as to capital levels and other criteria. Those other criteria included historical profitability and regulatory assessments of the Company's wholly-owned subsidiary, The Bancorp Bank. Based on this assessment, management determined that it was prudent to raise the leverage ratio to the 8% level, which required approximately $74 million in additional equity capital. The Company then began to work closely with Piper Jaffray & Co. to explore capital raising opportunities for purposes of raising the capital ratios, and for general corporate purposes. In June 2016, the Company, after receiving Board approval, commenced the offering of Common Stock and Series C Preferred Stock to accredited investors, in a private placement exempt from registration pursuant to Rule 506 of Regulation D under the Securities Act of 1933, amended.
Annual ReportBased on the orders placed by the accredited investors, the Board had lengthy discussions on the sale price of the Common Stock and Reportthe potential conversion price of the Series C Preferred Stock and potential effect on Form 10-Kthe Company. After these discussions, the Pricing Committee of the Board concluded that a Common Stock sale price and conversion price of the Series C Preferred Stock of $4.50 per share was the highest price the Company could obtain given the current market conditions.
On August 5, 2016, the Company entered into the Securities Purchase Agreement with the Investors pursuant to which the Company sold (i) 7,560,000 shares of Common Stock at a purchase price of $4.50 per share, and (ii) 40,000 shares of Series C Preferred Stock, at a purchase price of $1,000 per share, for total consideration of approximately $74 million. The Company paid approximately $3.3 million to Piper Jaffray & Co. (the "Placement Agent") as compensation for service as the Placement Agent for the Private Placement and related expense reimbursements. The Company also paid $250,000 to one Investor as a structuring fee.
On August 5, 2016, the Company also entered into a Registration Rights Agreement with the Investors and the Affiliated Investors pursuant to which the Company agreed, among other things, to register for resale the shares of Common Stock sold in the Private Placement, the shares of Common Stock to be issued upon conversion of the Series C Preferred Stock and the shares of Common Stock to be sold to the Affiliated Investors (the "Registration Rights Agreement").
Use of the Net Proceeds of the Private Placement
The Company's Annual Reportnet proceeds to Stockholders, includingus from the financial statementsissuance of the Common Stock and management's discussionSeries C Preferred Stock are approximately $70.3 million, after deducting the Placement Agent's fees, structuring fees and analysis of financial conditionother fees and results of operationsexpenses payable by us in connection with the Private Placement. The Company expects to use the proceeds for to raise its capital ratios and for general corporate purposes.
Reasons for the year ended December 31, 2015,Proposal
Because the Company's Common Stock is being sentlisted on the Nasdaq Stock Market, the Company is subject to stockholdersthe provisions of record asNasdaq Rule 5635(d), which requires stockholder approval prior to the issuance of March 21, 2016. Stockholderssecurities in connection with a transaction, other than a public offering, involving the sale, issuance or potential issuance by a Nasdaq-listed company of record ascommon stock, or securities convertible into or exercisable for common stock, equal to 20% or more of March 21, 2016, and beneficial ownersthe common stock or 20% or more of the voting power outstanding before the issuance, at a price less than the greater of book or market value of the stock.
The 7,560,000 shares of Common Stock sold in the Private Placement were the maximum number of shares permitted to be sold privately by the Company without stockholder approval. The 40,000 shares of Series C Preferred Stock is not convertible without stockholder approval, but upon obtaining such approval will convert into 8,888,888 shares of Common Stock, which, together with the Common Stock issued in the Private Placement, will exceed 20% of the number of shares of the Company's Common SharesStock and voting power outstanding prior to the consummation of the Private Placement. The $4.50 per share sale price for the Common Stock in the Private Placement and the $4.50 conversion price of the Series C Preferred Stock was less than the greater of the book or market value of the Common Stock at the time we entered into the Securities Purchase Agreement. For the aforementioned reasons, stockholder approval is required pursuant to Nasdaq Stock Market Rule 5635(d).
Consequences Associated with the Approval of this Proposal
Conversion of the Series C Preferred Stock into Common Stock. Each share of Series C Preferred Stock will automatically convert into shares of our Common Stock pursuant to the terms of the Certificate of Designation of Preferences, Rights and Limitations (the "Certificate of Designation") filed by the Company with and accepted for recording by the Secretary of State of the State of Delaware. The Certificate of Designation is attached as Annex A to this Proxy Statement and is incorporated by reference herein. Assuming approval of this proposal, the number of shares of Common Stock to be issued upon such conversion will be determined by dividing (i) the $1,000 per share liquidation preference; plus (ii) any accrued but unpaid dividends on the Series C Preferred Stock, by (iii) the conversion price then in effect. The initial conversion price of the Series C Preferred Stock is $4.50 per share. Accordingly, the conversion of the Series C Preferred Stock would result in the issuance of 8,888,888 shares of our Common Stock.
Payment of Dividends on Series C Preferred Stock. If the shares of Series C Preferred Stock are not converted into Common Stock prior to October 1, 2016, then each share of Series C Preferred Stock will begin to accrue a dividend at the rate of 12.0% per annum on the liquidation value, payable quarterly.
Elimination of Dividend and Liquidation Rights of Series C Preferred Stock. Upon stockholder approval and conversion of the Series C Preferred Stock into Common Stock, all shares of the Series C Preferred Stock will be cancelled. As a result, approval of the proposal will result in the elimination of the dividend rights and liquidation preference existing in favor of the Series C Preferred Stock. See "Description of the Series C Preferred Stock."
Rights of Investors. If stockholder approval is received, the rights and privileges associated with our Common Stock issued upon the conversion of the Series C Preferred Stock will be identical to the rights and privileges associated with the Common Stock held by our existing common stockholders, including the right to vote on all matters presented to the holders of our Common Stock.
Dilution. If stockholder approval is received, the conversion of the Series C Preferred Stock would result in the issuance of 8,888,888 shares of our Common Stock. The issuance of 8,888,888 shares of our Common Stock would have the effect of reducing the interest of our existing stockholders that did not participate in the Private Placement with respect to earnings per share, voting power, liquidation value and book and market value per share. On the Record Date for the Annual Meeting, including the Common Stock that we issued in the Private Placement that is not eligible to vote on Proposal 1 or Proposal 2, we had 45,405,323 shares of Common Stock issued and outstanding. Following conversion of the Series C Preferred Stock, the percentage of Common Stock issued as a result of conversion of the Series C Preferred Stock, is approximately 19.6% of the number of currently outstanding shares of Common Stock.
Market Effects. The conversion of the Series C Preferred Stock may impact trading patterns and adversely affect the market price of our Common Stock. Additionally, in accordance with the Registration Rights Agreement, we intend to file a resale registration statement with the SEC to enable the Investors and Affiliated Investors to freely sell their shares of Common Stock and Common Stock to be issued upon conversion of the Series C Preferred Stock. If significant quantities of the Common Stock are sold (or if it is perceived that they may be sold) in the public market, the trading price of our Common Stock could be adversely affected.
Consequences Associated with the Failure to Approve this Proposal
The Series C Preferred Stock Will Remain Outstanding. Unless stockholder approval is received or unless our stockholders approve a similar proposal at a subsequent meeting, the Series C Preferred Stock will remain outstanding in accordance with its terms.
Dividend Obligation Will Begin. Currently, the Series C Preferred Stock will begin accruing dividends on October 1, 2016, payable with respect to the quarter ending December 31, 2016. If stockholder approval is not obtained and the Series C Preferred Stock is not converted into Common Stock prior to October 1, 2016, each share of the Series C Preferred Stock will begin accruing dividends equal to 12.0% per annum. Such dividends will be payable quarterly in arrears, provided, however, that we may not declare or pay any dividends from and after the date may obtainwhich is 180 days from the Company, without charge, a copydate of issuance of the Company's Annual ReportSeries C Preferred Stock without prior consultation with, and non-objection by, the Federal Reserve Bank of Philadelphia (the "FRB").
Potential Market Effects of Failure to Pay Series C Dividends. As with any dividend, there is no assurance that we will be able to pay the dividends on Form 10-K for the year ended December 31, 2015 filed withSeries C Preferred Stock. Additionally, we may neither declare nor pay any dividends from and after the Securities and Exchange Commission (the "SEC"), by a request therefor in writing. Any such requestdate which is 180 days from a beneficial ownerthe date of issuance of the Company'sSeries C Preferred Stock without prior consultation with, and non-objection by, the FRB. If we are unable to pay such dividends as scheduled, the market perception could have a serious adverse impact on the price of our Common Shares must set forthStock.
Liquidation Preference. For as long as the Series C Preferred Stock remains outstanding, such shares will retain a good faith representationsenior liquidation preference over our Common Stock if we were to liquidate and, accordingly, no payments will be made to holders of our Common Stock upon our liquidation unless the full liquidation preference on the Series C Preferred Stock has been paid.
Interests of Certain Persons
When you consider the Board's recommendation to vote in favor of Proposal 1, you should be aware that ascertain of our directors and officers may have interests that may be different from, or in addition to, the interests of other stockholders. In particular, the purchases by the Affiliated Investors of shares of Common Stock discussed in Proposal 2 is conditioned upon the approval of Proposal 1. If Proposal 1 is not approved, such Affiliated Investors will not have the opportunity to purchase our Common Stock at the agreed-upon price.
Description of the record date for this solicitation, March 21, 2016, the person making the request was the beneficial ownerSeries C Preferred Stock
The following is a summary of the Company's Common Shares. Such written requests should be directedmaterial terms and provisions of the preferences, limitations, voting powers and relative rights of the Series C Preferred Stock as listed in the Certificate of Designation. Stockholders are urged to The Bancorp, Inc., Attention: Paul Frenkiel, 409 Silverside Road, Suite 105, Wilmington, Delaware 19809.read carefully the Certificate of Designation in its entirety. Although we believe this summary covers the material terms and provisions of the Series C Preferred Stock as contained in the Certificate of Designation, it may not contain all the information that is important to you.
Stockholders Sharing an AddressRank. Our Series C Preferred Stock ranks with respect to dividend rights and rights upon our liquidation, winding-up or dissolution:
Stockholders sharing an address with another stockholder may receive only one annual report or one set of proxy materials at that address unless they have provided contrary instructions. Any such stockholder who wishes | | senior to our Common Stock and any other class or series of our capital stock, the terms of which expressly provide that our Series C Preferred Stock ranks senior to such class or series as to dividend rights or rights on our liquidation, winding-up and dissolution; |
| | pari passu with any class or series of our capital stock hereafter created specifically ranking by its terms on parity with the Series C Preferred Stock; and |
| | junior to any class or series of our capital stock specifically ranking by its terms senior to the Series C Preferred Stock; provided that such issuance is approved by the holders of a majority of outstanding shares of Series C Preferred Stock. |
Dividends. Subject to receive a separate copythe preferential rights of the annual reportholders of any class or a separate setseries of proxy materials nowour capital stock ranking senior to our Series C Preferred Stock, if any such class or series is authorized in the future, the holders of Series C Preferred Stock are entitled to receive, when, and if, authorized by our Board and declared by us out of legally available funds, cumulative cash dividends at the rate of 12% per annum. Dividends on any shares of the Series C Preferred Stock are payable quarterly in arrears within forty-five (45) days after the end of each quarter; provided, however, that (A) dividends will begin accruing on October 1, 2016 and the first dividend will be payable with respect to the quarter ending December 31, 2016; and (B) we may write or callneither declare nor pay any dividends from and after the Company to request a separate copy of these materialsdate which is 180 days from the Company at The Bancorp, Inc., Attention: Andres Viroslav, 409 Silverside Road, Wilmington, Delaware 19809, telephone number (215) 861-7990. The Company will promptly deliver a copydate of issuance of the requested materials.Series C Preferred Stock without prior consultation with, and non-objection by, the FRB.
Similarly, a stockholder sharing an address with another stockholder who has received multiple copiesMandatory Conversion. Upon the approval by the holders of the Company's proxy materialsCommon Stock of the conversion of the Series C Preferred Stock and the issuance of Common Stock upon such conversion, each share of the Series C Preferred Stock will automatically convert into that number of shares of Common Stock equal to (i) the sum of the Liquidation Preference, described in the following section, and all accrued and unpaid dividends thereon; divided by (ii) $4.50 (as such dollar amount in this clause (ii) may usebe adjusted from time to time pursuant to Section 7 of the contact information above to request deliveryCertificate of Designation, the "Conversion Price"). Fractional shares, if any, of Common Stock will not be issued upon conversion but, in lieu thereof, we will make a single copycash payment based on such fraction times the closing price of these materials.our Common Stock as reported on the Nasdaq Stock Market on the trading day immediately preceding the Conversion Date.
Voting at the Meeting
At the Meeting, only thoseLiquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding-up of our affairs, before any distribution or payment shall be made to holders of our Common Shares atStock or any other class or series of capital stock ranking junior to our shares of Series C Preferred Stock, the closeholders of business on March 21, 2016, the record date,shares of Series C Preferred Stock will be entitled to vote. Asbe paid out of our assets legally available for distribution to our stockholders, after payment or provision for our debts and other liabilities, a liquidation preference equal to $1,000 per share, plus an amount equal to any accrued and unpaid dividends (whether or not declared) to and including the date of payment of the record date, 37,879,428liquidation preference.
Adjustment. If we, at any time prior to the conversion of the Series C Preferred Stock into Common Shares were outstanding. EachStock, (i) pay a dividend or make a distribution on the outstanding shares of Common Stock in cash, Common Stock or other assets, rights or property of the Company, (ii) subdivide the outstanding shares of Common Stock into a larger number of shares, (iii) combine the outstanding shares of Common Stock into a smaller number of shares, (iv) issue any shares of our capital stock in a reclassification, recapitalization or other similar event affecting the Common Stock, (v) declare a redemption or repurchase of the Common Stock, or (vi) authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of Common Stock or of any rights, then the conversion price in effect immediately prior to such event shall be adjusted (and/or any other appropriate actions shall be taken by us) so that the holder isof any share of Series C Preferred Stock thereafter converted shall be entitled to one vote perreceive the number of shares of Common Stock or other securities of the Corporation, cash or other assets, rights or property that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share on each matter of business properly brought beforeSeries C Preferred Stock been converted immediately prior to the Meeting. Stockholders do not have cumulative voting rights.occurrence of such event.
The presence at the Meeting in person or by proxy of holders of outstanding Common Shares entitled to cast a majority of all the votes entitled to be cast at the Meeting will constitute a quorum. The presence of a quorum for any proposal establishes a quorum for allVoting Rights. Holders of the proposals, even if holders of outstanding Common Shares entitled to cast a majority of all the votes entitled to be cast at the Meeting do not vote on all of the proposals.
A failure by brokers to vote Common Shares held by them in nominee nameSeries C Preferred Stock generally will mean that such Common Shares will not be counted for the purposes of establishing a quorumhave no voting rights and will not be voted. If a broker does not receiveincluded in determining the number of shares voting instructions from the beneficial owner of Common Shares on a particular matter and indicates on the proxy delivered with respect to such Common Shares that it does not have discretionary authorityor entitled to vote on that matter, which is referred toany matter. However, as a broker "non-vote," those Common Shares will be consideredlong as present for the purposeany shares of determining whether a quorum exists, but willSeries C Preferred Stock are outstanding, we may not, be considered cast on any proposal on which they were not voted. Brokers that are member firms of the New York Stock Exchange and who hold Common Shares in street name for customers only have discretion to vote those shares with respect to the approval of the selection of the auditor (Proposal 3 below), and do not have discretion to vote those shares with respect to the other proposals. Should any matters not described above be properly presented at the Meeting, the persons named in the proxy form will vote in accordance with their judgment. The proxy form authorizes these persons, in their discretion, to vote upon such matters as may properly be brought before the meeting or any adjournment, postponement or continuation thereof.
Proposal 1. The number of votes required in order to be elected as a director is dependent on whether an election is contested or uncontested. The Company's bylaws define an election as "contested" if the number of nominees exceeds the number of directors to be elected. As no Company stockholders have provided proper notice to the Company of an intention to nominate one or more candidates to compete with the Board of Directors nominees, the director election described in Proposal 1 below is an uncontested election. In order to be elected as a director in an uncontested election as described in Proposal 1 below, each director is elected by a majority of votes cast with respect to such director nominee at the Meeting. A "majority of votes cast" means that the number of votes cast "for" a director's election exceeds the number of votes cast "against" that director's election. Votes "cast" includes votes "for", votes to withhold authority and votes "against", but excludes abstentions with respect to a director's election or with respect to the election of directors in general. In the case of any contested election, the Company's bylaws provide that directors shall be elected by a plurality of votes cast at a meeting of stockholders duly called and at which a quorum is present.
Proposal 2. The affirmative vote of the holders of at least a majority of the votes cast at the Meeting is required to approve the compensation of the Company's named executive officers as described in Proposal 2 below. The vote is advisory, which is a mechanism that allows for stockholders of the Company to tell the Board of Directors how they feel about certain issues facing the Company, such as executive compensation. The results of an advisory vote are non-binding, which means that the Board of Directors is not required by law to take any specific action in response to the results of the vote. However, the Board of Directors strongly values feedback from the Company's stockholders and will take the results of an advisory vote into account when considering future actions.
Proposal 3. The affirmative vote of the holders of at least a majority of Common Shares outstanding as of the record date will be necessary for the approval of the amendment.
Proposal 4. The affirmative vote of the holders of at least a majority of the votes cast at the Meeting is required to approve the selection of Grant Thornton LLP, or Grant Thornton, as the Company's independent registered public accounting firm as described in our discussion of Proposal 4 below.
Proposal 5. For any other matter which may properly come before the Meeting,without the affirmative vote of the holders of at least a majority of the votes cast atthen outstanding shares of the Meeting atSeries C Preferred Stock, (a) issue any amounts or classes of securities ranking senior to the Series C Preferred Stock, (b) modify the terms of the Series C Preferred Stock so as to significantly and adversely affect its rights or preference, as reasonably determined by the holders thereof, (c) liquidate, dissolve or wind-up the business and affairs of the Company in any form of transaction, or consent to any of the foregoing, (d) pay any other dividends when preferred dividends on the Series C Preferred Stock are in arrears or (e) take any other action which, under the laws of Delaware or any other applicable law, requires the prior approval (by vote or written consent) of the Series C Preferred Stock voting as a quorum is present is required, eitherseparate class.
Vote Required and Board Recommendation for Proposal 1
Proposal 1 must receive a "For" vote from the holders of a majority of the shares of Common Stock casting votes in person or by proxy on Proposal 1 at the Special Meeting. Abstentions will be counted toward the vote total for approval, unless otherwise requiredthe proposal and will have the same effect as an "Against" vote for this proposal. Shares represented by law.
Any proxyexecuted proxies that do not specifying to the contrary, and not designated asindicate a broker non-vote,vote "For," "Against" or "Abstain" will be voted FOR:
by the electionproxy holders "For" the adoption of the directors;
the approvalresolution. If you own shares through a bank, broker or other holder of the compensation for the named executive officers;
the approval to amend the Company's Certificaterecord, you must instruct your bank, broker or other holder of Incorporation to increase the number of authorized shares of common stock from 50 million shares to 75 million shares; and
the approval of the selection of Grant Thornton as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2016.
PROPOSAL 1. ELECTION OF DIRECTORSDirectors and Nominees
The Bylaws of the Company provide that the number of directors shall be fixed by the Board of Directors. The Board of Directors has fixed the number of directors at nine. All directors are elected for a term of one year or until their successors are elected and qualified. The Board of Directors, upon the recommendation of its Nominating and Governance Committee, has nominated Daniel G. Cohen, Walter T. Beach, Michael J. Bradley, John C. Chrystal, Matthew Cohn, Hersh Kozlov, William H. Lamb, James J. McEntee III and Mei-Mei Tuan, for election at the Meeting for a term to expire at the annual meeting to be held in 2017 or until their successors are elected or appointed.
It is the intention of the persons named in the enclosed proxy, in the absence of a contrary direction,record how to vote in order for the election of all of the current directors. Should any of the nominees become unable or refuse to accept nomination or election as a director, the persons named as proxies intendthem to vote for the election of such other person as the Nominating and Governance Committee of the Board of Directors may recommend. The Board of Directors knows of no reason why any of the nominees mightyour shares so that your vote can be unable or refuse to accept nomination or election.
Information is set forth below regarding the principal occupation of each nominee. There are no family relationships among the directors, nominees and executive officers of the Company.
Following are summaries of the background, business experience and principal occupations of the nominees and current directors.
Daniel G. Cohen, age 46, has been the Chairman of The Bancorp, Inc. and Chairman of its Executive Committee of the Board of Directors and the Bank since 1999; he was also named Chairman of the Board of Directors of the Company's wholly-owned subsidiary, The Bancorp Bank (the "Bank"), effective January 1, 2015. He had previously been Chairman of the Bank's Board of Directors from September 2000 to November 2003 and, from July 2000 to September 2000, had been the Bank's Chief Executive Officer. Additionally, Mr. Cohen is an Executive Vice President at The Bancorp, and oversees the commercial mortgage-backed securities origination and sales division of the Company. Since November 2013, Mr. Cohen has served as a director of FinTech Acquisition Corp., and has been its President and Chief Executive Officer since August 2014. Mr. Cohen has served as President of Cohen & Company Financial Limited (formerly Euro DeKania Management LTD), a wholly-owned subsidiary of Institutional Financial Markets, Inc. (IFMI), formerly Cohen & Company Inc., and Alesco Financial, Inc. (which merged into IFMI), investment firms specializing in credit-related fixed income investments, since September 2013. Mr. Cohen has also served since September 2013 as President and Chief Executive Officer of all businesses of IFMI arising out of or related to Europe. Mr. Cohen served as Chief Executive Officer and Chief Investment Officer of IFMI from December 2009 through September 2013, as their respective Chairman of the Board of Directors since October 2006 and as Executive Chairman from October 2006 through December 2009. Mr. Cohen was Chairman of PrinceRidge LLC, when it was consolidated with JVB Financial Group LLC into a single broker-dealer subsidiary of IFMI in October 2013. In addition, before its merger with and into Alesco Financial, Mr. Cohen served as the Chairman of the Board of Managers of Cohen Brothers LLC from 2001, as Chief Investment Officer from October 2008 and as Chief Executive Officer from December 2009. He previously served as Chief Executive Officer of RAIT Financial Trust (a real estate investment trust) from December 2006 when it merged with Taberna Realty Finance Trust to February 2009, and served as a trustee from the date RAIT acquired Taberna until his resignation from that position in February 2010. Mr. Cohen was Chairman of the Board of Trustees and Chief Executive Officer of Taberna Realty Financial Trust from its inception in March 2005 until its December 2006 acquisition by RAIT. Mr. Cohen served as a director of Star Asia, a joint venture investing in Asian commercial real estate, from February 2007 to February 2014, and as a director of Muni Funding Company of American, LLC, a company investing in middle-market non-profit organizations, from April 2007 to June 2011. He also served as the Chairman of the Board of Dekania Acquisition Corp., a business combination company focusedcounted on acquiring businesses that operate within the insurance industry, from its inception in February 2006 until December 2006, and remained a director of Dekania Acquisition Corp until its liquidation in February 2009. Mr. Cohen served as a member of the board of directors of TRM Corporation, a consumer services company, from 2000 to September 2006 and as its Chairman from 2003 to September 2006.
Walter T. Beach, age 49, has been a director of The Bancorp, Inc. and the Bank since 1999. Mr. Beach has served as Managing Director of Beach Investment Counsel, Inc. since 1997. Previously, Mr. Beach was a Senior Analyst and Director of Research at Widmann, Siff and Co., Inc., an investment management firm where he was, beginning in 1994, responsible for the firm's investment decisions for its principal equity product. Mr. Beach has served as an analyst at both Essex Financial Group and Industry Analysis Group, and since 2005 has served as a director of Resource Capital Corp., a real estate investment trust. Mr. Beach has also been a director of FinTech Acquisition Corp. since November 2014 and served as a director of Institutional Financial Markets, Inc. from December 2009 to September 2013.
Michael J. Bradley, age 71, has been a director of The Bancorp, Inc. and the Bank since 2005. Since 1998, Mr. Bradley has been a co-owner and Managing Director of BF Healthcare, Inc., a supplier of physician services to hospitals and assisted living facilities. Mr. Bradley has served on the Board of Directors of Resource America, Inc., a specialized asset management company, since 2005, and SourceCorp, a provider of business outsourcing solutions, since 1996. Mr. Bradley has also served on the Managing Board of Atlas Pipeline Partners GP, LLC, the general partner of Atlas Pipeline Partners L.P., an oil and gas pipeline company, since 2004. Previously, Mr. Bradley served as Chairman of First Executive Bank, and as Vice Chairman of First Republic Bank. Mr. Bradley is a certified public accountant
John C. Chrystal, age 58, was appointed Interim Chief Executive Officer of The Bancorp, Inc., and President of The Bancorp Bank effective January 2016; he has served as a Director of The Bancorp and its subsidiaries since 2013. Mr. Chrystal has served as a director of Regatta Loan Management LLC (a privately held, SEC-registered Investment Adviser) since 2015, a director of Javelin Mortgage Investments, Inc. (a mortgage real estate investment trust) since 2012, a director of the Trust for Advised Portfolios (a mutual fund series trust focused on equities, credit alternatives and multiple asset classes) since 2010, and a director of Morgan Stanley Derivative Products, Inc. (an entity providing credit enhancement for select derivative transactions) since 2010. From 2009 to 2012, Mr. Chrystal was a Managing Member of Bent Gate Advisors, LLC (a firm providing strategic advice to financial institutions); from 2005 through 2008 was the Chief Risk Officer of DiMaio Ahmad Capital (an investment management firm focused on corporate credit markets) and from 1993 to 2005 was a Managing Director with Credit Suisse entities, with oversight of asset management and financial products functions.
Matthew Cohn, age 46, has been a director of The Bancorp, Inc. and the Bank since 1999. Mr. Cohn founded and serves as Vice Chairman of The ASI Show, a leading producer of trade shows throughout the country and the recipient of prestigious awards, including the INC 500 Award twice. In addition, since 1992, Mr. Cohn has been the Chairman of ASI Computer Systems, and the Vice Chairman of the Advertising Specialty Institute, a multi-year winner of the "Best Place to Work" award. Mr. Cohn serves on the international boards of YPO (the Young Presidents' Organization) and of the JDRF (formerly known as the Juvenile Diabetes Research Foundation). Mr. Cohn was the Chief Executive Officer of the Medical Data Institute as well as a past board member of The Society of Independent Show Organizers and Changing Attitudes, Decisions and Environments for Kids (CADEKids).
Hersh Kozlov, age 68, has been a director of The Bancorp, Inc. and the Bank since 2014. He has been a partner at Duane Morris LLP (An international law firm) since 2009. Previously, he was a partner at Wolf, Block, Schorr and Solis-Cohen LLP (a law firm) from 2001 to 2009. Mr. Kozlov is a member of the board of directors of Resource America, Inc. and was previously a member of the board of directors of JeffBanks, Inc., TRM Corporation, Hudson United Bank, US Healthcare Life Insurance Company, and Princeton Insurance Company. Mr. Kozlov has also served as counsel to the board of directors of US Healthcare, Inc. and was appointed by the President of the United States to be a member of the Advisory Committee for Trade Policy & Negotiations, serving in that role from 2002 to 2004.
William H. Lamb, age 75, has been a director of The Bancorp, Inc. and the Bank since 2004. Mr. Lamb currently serves as Chairman of Lamb McErlane PC and directs the firm's Post-Trial and Appellate Advocacy Group. From January 2003 through January 2004, Mr. Lamb served as a Justice of the Pennsylvania Supreme Court and is the only former Pennsylvania Supreme Court Justice currently in practice. Mr. Lamb has been recognized as a Top 100 Pennsylvania Super Lawyer for appellate law and as a Pennsylvania Super Lawyer since 2005. Mr. Lamb previously served as director and corporate secretary of JeffBanks, Inc. and Jefferson Bank until their acquisition by Hudson United Bank in 1999. Since 2004, Mr. Lamb has been appointed to the President's Advisory Committee on the Arts, the Commonwealth of Pennsylvania's Court of Judicial Discipline, and the Pennsylvania Elections Reform Task Force. Mr. Lamb also served as President Judge of the Court of Judicial Discipline and on the Chester County Boy Scout Council.
James J. McEntee III, age 58, has been a director of both The Bancorp, Inc. and the Bank since 2000. Since December 2015, Mr. McEntee has served as director of IFMI and also serves as Chief Operating Officer of its broker dealer. Since October 2014, Mr. McEntee has served as a director of T-Rex Group, Inc., a private company specializing in renewable energy financial analytics and software. Since August 2014, Mr. McEntee has been the Chief Operating Officer and Chief Financial Officer of FinTech Acquisition Corp. Mr. McEntee was the Chief Executive Officer of Alesco Financial, Inc. from its incorporation in 2006 until its merger with Cohen & Company in December 2009 and was the Chief Operating Officer of Cohen & Company from March 2003 until December 2009, and was a managing director of Institutional Financial Markets, Inc. (a successor company to Cohen & Company) through October 2013. Previously, Mr. McEntee served as Vice Chairman and Co-Chief Operating Officer of PrinceRidge through October 2013, and also served as a principal in Harron Capital, L.P., and a media and communications venture capital fund. From 1990 through 1999, Mr. McEntee was a stockholder at Lamb McErlane PC, and, from 2000 until 2004, was of counsel to Lamb McErlane. Mr. McEntee was previously a director of Pegasus Communications Corporation, a publicly held provider of communications and other services.
Mei-Mei Tuan, age 49 has been a director of both The Bancorp, Inc. and its U.S. subsidiary since 2013. Ms. Tuan is the co-founder and managing partner of Notch Partners LLC, a firm providing leadership capital and managed-led buyout strategies exclusively for institutional leveraged buyout funds. As an investment banker with Goldman Sachs, BankAmerica and BankAustria, Ms. Tuan led domestic and international transactions in project finance, mergers and acquisitions, real estate, syndications and sale leasebacks. Ms. Tuan's operating experience includes serving as Chief Financial Officer and Chief Operating Officer at the Sierra Foundation, from 1996 through 1997, and the San Francisco Food Bank, from 1997 through 1998. Ms. Tuan is an active board member of the New Jersey Women's Forum, the Wellesley College Alumnae Association, the Harvard Business School Asian Alumnae Association, the Wellesley College Business Leadership Council, Friends of Thirteen, and the Mid-Manhattan Performing Arts Foundation. Ms. Tuan is a member of the Committee of 100, an organization that addresses issues concerning Sino-U.S. relations.this proposal.
The Board of Directors has not adopted specific minimum qualificationsrecommends a vote FOR
the conversion of the Series C Preferred Stock and the issuance of our Common Stock upon such conversion.
APPROVAL, FOR PURPOSES OF NASDAQ RULE §5635(C), OF THE PURCHASE BY CERTAIN OFFICERS AND DIRECTORS OF THE COMPANY OF COMMON STOCK AT A PRICE LESS THAN THE MARKET VALUE OF THE STOCK
Background and the Agreement
In connection with the sale of Common Stock and Series C Preferred Stock to accredited investors pursuant to the Securities Purchase Agreement, the Company entered into the Subscription Agreement with certain Affiliated Investors for servicethe sale of 1,025,000 shares of Common Stock at $4.50 per share, the same price as we agreed to sell to purchasers under the Securities Purchase Agreement. Under the terms of the Subscription Agreement, the sale of shares of Common Stock is contingent on (i) the stockholders approving the conversion into Common Stock of the Series C Preferred Stock in Proposal 1, and (ii) obtaining stockholder approval under Nasdaq rules.
Use of the Net Proceeds of the Private Placement
The net proceeds to us from the issuance of the Common Stock will be approximately $4.6 million. We expect to use the proceeds for to raise our capital ratios and for general corporate purposes.
Reasons for the Proposal
Because the Company's Common Stock is listed on the board, but rather seeksNasdaq Stock Market, the Company is subject to the provisions of Nasdaq Rules 5635(c). Nasdaq Rule 5635(c) requires stockholder approval before the issuance of common stock, or securities convertible into or exercisable for common stock, to a mixtureNasdaq-listed company's officers, directors, employees or consultants in a private placement at a price less than the market value of skillsthe stock, calculated as the closing bid price for such shares on the trading day immediately prior to entry into the agreement.
The Subscription Agreement provides for the sale of shares of Common Stock to the Affiliated Investors at a price of $4.50 per share, which is less than the closing bid price of our Common Stock as reported on the Nasdaq Stock Market on August 4, 2016, the trading day immediately prior to the date we entered into the Subscription Agreement. Because the Subscription Agreement provides for the sale of Common Stock to our officers and directors at a price below the closing bid price of our Common Stock as reported on the trading day immediately before entry into the Subscription Agreement, stockholder approval is required pursuant to Nasdaq Stock Market Rule 5635(c).
Consequences Associated with the Approval of this Proposal
Dilution. If stockholder approval is received, the Affiliated Investors would purchase 1,025,000 shares of Common Stock, which would have the effect of reducing the interest of our existing stockholders with respect to earnings per share, voting power, liquidation value and book and market value per share. On the Record Date for the Special Meeting, assuming conversion of the 8,888,888 shares of Common Stock to be issued upon conversion of the Series C Preferred Stock, we would have had 54,294,211 shares of Common Stock issued and outstanding. The issuance of the Common Stock to the Affiliated Investors would represent approximately 1.9% of the number of then-outstanding shares of Common Stock.
Market Effects. The issuance of the shares of Common Stock to the Affiliated Investors may impact trading patterns and adversely affect the market price of our Common Stock. Additionally, in accordance with the Registration Rights Agreement, we intend to file a resale registration statement with the SEC to enable the Affiliated Investors to freely sell their shares of Common Stock. If significant quantities of our Common Stock that are relevantissued to Affiliated Investors are sold (or if it is perceived that they may be sold) in the public market, the trading price of our Common Stock could be adversely affected.
Consequences Associated with Failure to Approve this Proposal
If stockholder approval is not obtained, the Subscription Agreement will terminate and the Affiliated Investors would not purchase shares of Common Stock. The Company would not receive the approximate $4.6 million in proceeds from the sale.
Interests of Certain Persons
When you consider the Board's recommendation to vote in favor of Proposal 2, you should be aware that certain of our directors and officers may have interests that may be different from, or in addition to, the Company's business asinterests of other stockholders. In particular, if stockholder approval is obtained, the Affiliated Investors will purchase shares of Common Stock at a bank holding company andprice that was below the business of its subsidiary bank. The following presents a brief summaryclosing bid price on the day prior to the execution of the attributes of each director that led to the conclusion that he or she should serve as such:
Mr. Cohen has served as a director of, and in other significant management capacities, with a number of financial companies.Subscription Agreement. In addition to experience in commercial real estate, he has considerable experience in securities, investment management and capital markets.
Mr. Beach has extensive experience in investment management, corporate finance and capital markets. He is deemed an audit committee financial expert which, among other factors, reflectsobtaining the quantitative and analytical skills developed in his experience as a director of research for an investment management firm.
Mr. Bradley has served as chairman and in other significant capacities for financial institutions and served as Chief Executive Officer of several University hospitals, including Columbia Presbyterian Medical Center and Thomas Jefferson University Hospital. Within these capacities, he was involved in significant management functions with respect to business and financial matters.
Mr. Chrystal has extensive financial, investment and financial risk management experience, enabling him to provide the Company with advice and oversight regarding financial markets, risk management and investments.
Mr. Cohn has significant experience in founding, leading and having senior roles in a variety of companies, including mid-size businesses of the type that are the Bank's primary clients. In addition, he has considerable experience with electronic distribution and technology based companies.
Mr. Kozlov has extensive legal and business experience resulting from his partnerships at prominent law firms where he represented companies which included banks, insurance companies and other financial institutions. He has board of director's experience at multiple financial institutions. His experience in general business matters also reflects service within the Advisory Committee for Trade Policy and Negotiations.
Mr. Lamb has extensive experience as a director of public bank holding companies, beginning in 1974. Additionally, he has significant legal experience with respect to business and financial matters and has particular knowledge of the southeastern region of Pennsylvania, which is one of the primary markets served by the Company.
Mr. McEntee has extensive experience in corporate law and financial institution management, as well as significant managerial experience in real estate, investments and capital markets operations.
Ms.Tuan has significant experience in financing real estate projects and a variety of other investment banking experience. She has served as a Chief Financial Officer and Chief Operating Officer and holds an M.B.A. from Harvard Business School.
Standard for Election of Directors
The number of votes required in order to be elected as a director depends on whether an election is contested or uncontested. An election is uncontested if no stockholder provides proper notice of an intention to nominate one or more candidates to compete with the Board of Directors' nominees in a director election, or if any such stockholders have withdrawn all such nominations at least five days prior to the mailing of notice of the meeting to stockholders. As no such notice has been provided, the director election describedapproval in this Proposal 12, the purchase by Affiliated Investors is an uncontested election. In order to be elected asconditioned upon the approval of Proposal 1.
Vote Required and Board Recommendation for Proposal 2
This proposal must receive a director in an uncontested election, each director is elected by"For" vote from the holders of a majority of the shares of Common Stock casting votes cast with respect to such director nominee. A "majority of votes cast" means thatin person or by proxy on Proposal 2 at the number of votes cast "for" a director's election exceeds the number of votes cast "against" that director's election. Votes "cast" include votes "for" and votes "against," but excludes abstentions with respect to a director's election or with respect to the election of directors in general. In a contested election, directorsSpecial Meeting. Abstentions will be electedcounted toward the vote total for the proposal and will have the same effect as an "Against" vote for this proposal. Shares represented by executed proxies that do not indicate a plurality of votes cast at a meeting of stockholders duly called and at which a quorum is present.
If an incumbent director nominated for election as a director receives a greater number of "against" votes for hisvote "For," "Against" or her election than votes "for" such election, then that director, as a holdover director, must tender an offer of his or her resignation to"Abstain" will be voted by the Board of Directors for consideration promptly followingproxy holders "For" the certificationadoption of the vote. The Nominating and Governance Committeeresolution. If you own shares through a bank, broker or other holder of record, you must promptly consider any resignation offerinstruct your bank, broker or other holder of record how to vote in order for them to vote your shares so tendered and a range of possible responses, basedthat your vote can be counted on any facts or circumstances they consider relevant, and make a recommendation to the Board of Directors as to the response to the resignation offer. If each member of the Nominating and Governance Committee received a majority against vote at the same election, then the independent directors who did not receive a majority against vote must appoint a committee among themselves to consider the resignation offers and to recommend to the Board of Directors a response to the resignation offers. The Board of Directors must take action on the Nominating and Governance Committee's recommendation (or committee of independent directors' recommendation) within 90 days following certification of the stockholder vote. Any director whose resignation is under consideration must abstain from participating in any board or committee deliberations regarding the acceptance of his or her offer of resignation or the offer of resignation of any other director tendered because that director received a majority against vote.this proposal.
If an incumbent director's offer of resignation is accepted by the Board of Directors, then such director will cease to be a member of the Board of Directors upon the effective date of acceptance by the Board of Directors of the offer of resignation. If an incumbent director's offer of resignation is not accepted by the Board of Directors, then such director will continue to serve until the earlier of the next annual meeting and until his or her successor is elected and qualifies and his or her subsequent resignation or removal.
If any nominee for director who is not an incumbent fails in an uncontested election to receive a majority of votes cast at a meeting of stockholders duly called and at which a quorum is present, such nominee will not be elected and will not take office. All of the Board of Directors' nominees for election as a director at the Meeting are incumbents. If an incumbent director's offer of resignation is accepted by the board of directors, or if a non-incumbent nominee for director is not elected, the Board of Directors may fill any resulting vacancy or may decrease the size of the Board of Directors pursuant to the Company's bylaws.
The Board of Directors unanimously recommends a vote "FOR" FOR
the electionsale of each nominee.
shares of Common Stock to officers and directors of the Company at a price below market value.
STOCKSECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND
SECTION 16 COMPLIANCEMANAGEMENT
The following table sets forth the number and percentage of the Company'sour Common SharesStock owned as of March 18,July 31, 2016, by each of the Company'sour directors and executive officers, all of the directors and executive officers as a group and other persons who beneficially own more than 5% of the Company'sour outstanding voting securities. This information is reported in accordance with the beneficial ownership rules of the SEC under which a person is deemed to be the beneficial owner of a security, if that person has or shares voting power or investment power with respect to such security, or has the right to acquire such ownership within 60 days. Shares issuable pursuant to options or warrants are deemed to be outstanding for purposes of computing the percentage of the person or group holding such options or warrants, but are not deemed to be outstanding for purposes of computing the percentage of any other person.
| | | Common | | Percent |
Directors (2) | | Shares(1) | | of Class |
| Cohen, Daniel | | | 867,533 | (3) | | | 2.29 | % |
| Beach, Walter | | | 1,117,818 | (4) | | | 2.95 | % |
| Bradley, Michael | | | 51,000 | (5) | | | * | |
| Chrystal, John | | | 18,809 | (6) | | | * | |
| Cohn, Matthew | | | 68,063 | (7) | | | * | |
| Kozlov, Hersh | | | 15,500 | (8) | | | * | |
| Lamb, William | | | 179,750 | (9) | | | * | |
| Mastrangelo, Frank | | | 321,679 | (10) | | | * | |
| McEntee, James | | | 124,084 | (11) | | | * | |
| Tuan, Mei-Mei | | | 1,000 | (12) | | | * | |
| | | | | | | | | |
| | | | | | | | | |
Executive Officers (2) | | | | | | | | |
| Frenkiel, Paul | | | 168,655 | (13) | | | * | |
| Kuiper, Jeremy | | | 156,816 | (14) | | | * | |
| McGraw, Donald | | | 171,221 | (15) | | | * | |
| Pareigat, Thomas | | | 40,353 | (16) | | | * | |
| Gail S. Ball | | | 1,027 | (17) | | | * | |
| Steven Turowski | | | 767 | (18) | | | * | |
| | | | | | | | | |
| All executive officers and directors (15 persons) | | | 3,304,075 | | | | 8.72 | % |
| | | | | | | | | |
| | | | | | | | | |
Other owners of 5% or more outstanding shares | | | | | | | | |
| Second Curve Capital LLC | | | 2,323,703 | (19) | | | 6.2 | % |
| BlackRock, Inc. | | | 2,063,066 | (20) | | | 5.5 | % |
| State Street Corporation | | | 1,903,412 | (21) | | | 5.0 | % |
| | | | | | | | | |
| * Less than 1% | | | | | | | | |
As of the Record Date and prior to giving effect to the transactions under the Securities Purchase Agreement and Subscription Agreement, a total of 37,845,323 shares of Common Stock were outstanding and entitled to vote at the Special Meeting. After giving effect to the shares of Common Stock issued in the Private Placement, a total of 45,405,323 shares of Common Stock were outstanding as of the Record Date. Because purchasers under the Securities Purchase Agreement may not vote any of the shares issued in connection with the Private Placement, the figures in the beneficial ownership table below do not include the shares of Common Stock (i) issued in the Private Placement, (ii) issuable upon conversion of the Series C Preferred Stock and (iii) issuable to the Affiliated Investors pursuant to the Subscription Agreement. If stockholders approve Proposals 1 and 2, we will have 55,319,211 shares of Common Stock outstanding.
| | | Common | | Percent |
Directors(2) | | Shares(1) | | of Class |
| Cohen, Daniel | | | 867,533 | (3) | | | 2.28 | % |
| Beach, Walter | | | 1,117,818 | (4) | | | 2.95 | % |
| Bradley, Michael | | | 51,000 | (5) | | | * | |
| Chrystal, John | | | 18,809 | (6) | | | * | |
| Cohn, Matthew | | | 68,063 | (7) | | | * | |
| Kozlov, Hersh | | | 15,500 | | | | * | |
| Kozlowski, Damian | | | -- | | | | -- | |
| Lamb, William | | | 179,750 | (8) | | | * | |
| McEntee, James | | | 124,084 | (9) | | | * | |
| Tuan, Mei-Mei | | | 1,000 | | | | * | |
| | | | | | | | | |
| | | | | | | | | |
Executive Officers(2) | | | | | | | | |
| Frenkiel, Paul | | | 168,722 | (10) | | | * | |
| Kuiper, Jeremy | | | 157,141 | (11) | | | * | |
| McGraw, Donald | | | 171,221 | (12) | | | * | |
| Pareigat, Thomas | | | 40,569 | (13) | | | * | |
| Turowski, Steven | | | 1,232 | (14) | | | * | |
| Leto, John | | | -- | | | | -- | |
| McFadden, Hugh | | | -- | | | | -- | |
| | | | | | | | | |
| All executive officers and directors (17 persons) | | | 2,982,442 | | | | 7.71 | % |
| | | | | | | | | |
| | | | | | | | | |
Other owners of 5% or more outstanding shares(15) | | | | | | | | |
| Second Curve Capital LLC | | | 2,114,381 | (16) | | | 5.59 | % |
| BlackRock, Inc. | | | 2,063,066 | (17) | | | 5.45 | % |
__________________________
* Less than 1%
| (1) | Includes: (a) Common SharesStock and (b) Common SharesStock receivable upon exercise of options held by such person which are vested or will vest within 60 days of March 18,July 31, 2016. |
| (2) | The address of all of the Company's directors and executive officers is c/o The Bancorp, Inc., 409 Silverside Road Suite 105, Wilmington, Delaware 19809. |
| (3) | Consists of: (a) 352,281 Common Sharescommon shares owned directly; (b) 200,000 Common Sharescommon shares issuable upon exercise of options; (c) 252 Common Sharescommon shares held in a 401(k) plan account for the benefit of Mr. Cohen; and (d) 315,000 Common Sharescommon shares owned by a charitable foundation of which Mr. Cohen is a co-trustee. |
| (4) | Consists of: (a) 150,829 Common Sharescommon shares owned directly; (b) options to purchase 28,000 Common Shares;common shares; and (c) 938,989, Common Sharescommon shares owned by various accounts managed by Beach Investment Counsel, Inc., Beach Asset Management, LLC or Beach Investment Management, LLC, investment management firms for which Mr. Beach is a principal and which possess investment and/or voting power over the shares. The address for these investment management firms is Five Tower Bridge, 300 Barr Harbor Drive, Suite 220, West Conshohocken, PA 19428. |
| (5) | Consists of: (a) 25,000 Common Sharescommon shares owned directly and (b) 26,000 Common Sharescommon shares issuable upon exercise of options. |
| (6) | Consists of: (a) 13,500 Common Sharescommon shares owned directly, (b) 5,000 Common Sharescommon shares issuable upon exercise of options and (c) 309 Common Sharescommon shares held in a 401(k) plan account for the benefit of Mr. Chrystal. |
| (7) | Consists of: (a) 41,063 Common Sharescommon shares owned directly and (b) 27,000 Common Sharescommon shares issuable upon exercise of options. |
(8) | Consists of 15,500 Common Shares owned directly. |
(9) | (8) | Consists of: (a) 124,463 Common Sharescommon shares owned directly, (b) 30,287 Common Sharescommon shares held in trusts for the benefit of members of Mr. Lamb's immediate family and (c) 25,000 Common Sharescommon shares issuable upon exercise of options. |
| (9) | Consists of: (a) 98,084 common shares owned directly and (b) 26,000 common shares issuable upon exercise of options. |
| (10) | Consists of: (a) 69,298 Common Shares7,500 common shares owned directly, (b) 2,787 Common Shares held by the Individual Retirement Account ("IRA") IRA of Mr. Mastrangelo's spouse, (c) 240,000 Common Shares156,000 common shares issuable upon exercise of options and (d) 9,594 Common Shares(c) 5,222 common shares held in a 401(k) plan account for the benefit of Mr. Mastrangelo.Frenkiel. |
| (11) | Consists of: (a) 98,084 Common Shares owned directly and (b) 26,000 Common Shares issuable upon exercise of options. |
(12) | Consists of 1,000 Common Shares owned directly. |
(13) | Consists of: (a) 7,500 Common Sharescommon shares owned directly, (b) 156,000 Common Shares148,000 common shares issuable upon exercise of options and (c) 5,155 Common Shares held in a 401(k) plan account for the benefit of Mr. Frenkiel. |
(14) | Consists of: (a) 7,500 Common Shares owned directly, (b) 148,000 Common Shares issuable upon exercise of options and (c) 1,316 Common Shares1,641 common shares held in a 401(k) plan account for the benefit of Mr. Kuiper. |
(15) | (12) | Consists of: (a) 23,415 Common Sharescommon shares owned directly, (b) 140,500 Common Sharescommon shares issuable upon exercise of options and (c) 7,306 Common Sharescommon shares held in a 401 (k) plan account for the benefit of Mr. McGraw. |
(16) | (13) | Consists of: (a) 3,750 Common Sharescommon shares owned directly, (b) 32,500 Common Sharescommon shares issuable upon exercise of options and (c) 4,1034,319 Common shares held in a 401 (k) plan account for the benefit of Mr. Pareigat. |
(17) | (14) | Consists of 1,027 Common shares held in a 401 (k) plan account for the benefit of Ms. Ball. |
(18) | Consists of 7671,232 Common shares held in a 401 (k) plan account for the benefit of Mr. Turowski. |
(19) | (15) | Does not include 5% or more holders after the August 5, 2016 issuance of shares of Common Stock pursuant to the Private Placement. Upon issuance of the shares of Common Stock on August 5, 2016, the following holders would own 5% or more of the Company's Common Stock: |
| - | Wellington Management Group: 7.42% |
| - | Nantahala Capital Management: 6.16% |
| - | Second Curve Capital: 5.43% |
| (16) | Based solely on Form 13G/A filed by Second Curve Capital, LLC on January 27, 2016 and Form 13F for the quarter ended June 30, 2016. The address of Second Curve Capital, LLC is 350 5th Ave. Suite 4730, New York, NY 10118. |
(20) | (17) | Based solely on Form 13G/A filed by BlackRock, Inc. on January 27, 2016. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10022. |
(21) | Based solely on Form 13G/A filed by State Street Corporation, Inc. on February 12, 2015. The address of State Street Corporation is One Lincoln Street, Boston, Massachusetts 02111. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's officers, directors and persons who own more than ten percent of a registered class of the Company's equity securities to file reports of ownership and changes in ownership with the SEC and to furnish the Company with copies of all such reports.
Based solely on its review of the reports received by it, the Company believes that, during fiscal 2015, no officers, directors or beneficial owners failed to file reports of ownership and changes of ownership on a timely basis.
NON-DIRECTOR EXECUTIVE OFFICERS
Information is set forth below regarding the background of each of the Company's executive officers who is not also a director. For the Company's officer who is a director nominee, John C. Chrystal, this information can be found above under "Proposal 1. Election of Directors—Directors and Nominees."
Gail S. Ball, age 58, has been Executive Vice President and Chief Operating Officer of The Bancorp since March 2015. From April 2014 to March 2015, Ms. Ball served as Head of the Payment Studies Group of the Federal Reserve Bank of Richmond; from August 2010 to April 2014 she was Senior Vice President, Treasury Management Operations at Capital One; and was SVP Treasury at NCO Financial Systems from 2002 to August 2010. From 1999 to 2001, Ms. Ball was Senior Vice President, Settlement Operations, First USA; Vice President, PNC Bank from 1991 to 1999, and Vice President, Mellon Bank from 1982 to 1991. Ms. Ball served as National Board Member of NCJW, Inc. from 2005 to 2014 Treasurer, 2008-2011 and Vice president, 2011-2014., From June 2010 to March 2015 was a Board Member and Chair of the Risk Committee for Kompanion Financial Group, the mission of which is to be the leading community development financial institution in Central Asia. Ms. Ball is an AAP (accredited ACH professional) and a CTP (certified treasury professional).
Paul Frenkiel, age 63, has served as Chief Financial Officer and Executive Vice President of Strategy at The Bancorp since joining the organization in September 2009; he also serves as the organization's Principal Accounting Officer. From November 2000 through October 2008 he was Chief Financial Officer and Executive Vice President of Republic First Bancorp Inc. From January 2005 through September 2009, Mr. Frenkiel also served as Chief Financial Officer and in other capacities for First Bank of Delaware, which was spun off from Republic First Bancorp Inc. Additionally, he served as Chief Financial Officer of JeffBanks, Inc., from 1987 through its acquisition by Hudson United Bancorp in 2000, and also served as Chief Financial Officer at Dominion Bank. A chartered bank auditor and certified public accountant, Mr. Frenkiel is a member of the American Institute of Certified Public Accountants.
Jeremy Kuiper, age 53, has served as Managing Director of the Payment Solutions division of The Bancorp since 2007. Previously, he served as Director of Financial Management, Operations and Credit Risk Management at BankFirst and served in other positions at that company between 2000 and 2007. From 1997 through 2000, he served as Senior Vice President of United Credit National Bank where he oversaw card products. From 1994 through 2007, he served as Senior Vice President of Specialized Card Services, where he was responsible for all information services, customer service and other aspects of card management. Mr. Kuiper is an in-demand industry panelist/speaker and participates on many boards, including the Network Branded Prepaid Card Association, of which he is a former Chairman.
Thomas G. Pareigat, age 56, has served as Senior Vice President and General Counsel since February 2011. From 2003 to 2005 and from 2007 to 2011 he was a partner in the Minneapolis, Minnesota law firm of Lindquist & Vennum LLP, where he concentrated his practice on banking law and regulatory compliance matters as a member of the firm's Financial Institutions Practice Group. Between 2005 and 2007 he served as Senior Vice President and Regulatory Counsel for Marshall BankFirst Corp. From 2001 to 2002, Mr. Pareigat was Vice President and Corporate Counsel for Marquette Bancshares, Inc. and its subsidiary banks until their acquisition by Wells Fargo. From 1989 to 2001 he served as Senior Attorney with Bankers Systems, Inc. (now Wolters Kluwer Financial Services). A frequent speaker on emerging risk issues within the financial services industry, Mr. Pareigat serves on the Editorial Board of the American Bankers Association's Bank Compliance magazine, and has served on the faculty of the ABA's National Compliance School and Graduate School for Compliance Risk Management.
Donald F. McGraw, Jr., age 58, has served as Executive Vice President and Chief Credit Officer of The Bancorp since 1999, overseeing both Loan Operations and Credit Administration. Mr. McGraw is also responsible for implementing credit policy, serving as senior member of the Loan Committee, and acts in the capacity of Assistant Secretary to the Board of Directors. Additionally, he has served as Regulatory Examination Manager, supervising all examinations conducted by the FDIC and the State of Delaware. From 1986 through 1998, he was Senior Vice President, Credit Administration, for Jefferson Bank. From 1977 to 1986, he was a bank examiner at the FDIC.
Steven Turowski, age 56, has been Chief Risk Officer of The Bancorp since he joined the company in September, 2015. Previously, Mr. Turowski was Senior Risk Manager and Managing Director at BNY Mellon (July 2010 to September 2015), and from January 1998 to July 2010 he served as Chief Risk Officer at PNC Global Investment Servicing (formerly PFPC). From 1995 to 1997 he was Vice President, Mutual Fund Services, Transfer Agency at Bankers Trust Company (now Deutsche Bank), and from 1981 to 1995 was at Seligman Data Corporation, where he served as Vice President – Mutual Fund Operations from 1990 to 1995. Mr. Turowski is a founding member of the Investment Company Institute (ICI) Risk Management Committee.
Director Independence
The Company's Common Shares are listed on the NASDAQ Global Select Market under the symbol "TBBK" and the Company is subject to the listing standards thereof. The Board of Directors has determined that Mr. Beach, Mr. Bradley, Mr. Cohn, Mr. Kozlov, Mr. Lamb, Mr. McEntee and Ms. Tuan, each meet the definition of an independent director set forth in the NASDAQ rules. In making these determinations, the Board of Directors reviewed information from each of these directors concerning all their respective relationships with the Company and its affiliates and analyzed the materiality of those relationships.
Board Leadership Structure and Role in Risk Oversight
Daniel G. Cohen serves as the Chairman of the Board and John C. Chrystal serves as our Interim Chief Executive Officer and director. We believe that the most effective leadership structure at the present time is to have separate Chairman of the Board and Chief Executive Officer positions because this allows the board to benefit from having two strong voices bringing separate views and perspectives to meetings.
The Risk Oversight Committee is primarily responsible for overseeing the Company's risk management processes on behalf of the Board of Directors, although the Board of Directors and all of its committees are sensitive to risks relating to the Company and its operations. The Audit Committee focuses on financial reporting risk, oversees the entire audit function and evaluates the effectiveness of internal and external audit efforts. These committees receive reports from management regularly regarding the Company's assessment of risks and the adequacy and effectiveness of internal control systems. Through its interaction with the Company's senior management, these committees oversee credit risk, market risk (including liquidity and interest rate risk) and operational risk (including compliance and legal risk). The Chief Risk Officer meets at least monthly with the Risk Oversight Committee to discuss potential risk or control issues involving management. The Audit Committee meets at least quarterly and reports regularly to the Board of Directors, which also considers the Company's entire risk profile, including additional strategic and reputational risks. While the Board of Directors oversees the Company's risk management, management is responsible for the day-to-day risk management processes. Senior management comprises the Bank's Enterprise Risk Management Committee which meets at least quarterly and addresses various risks, controls and related monitoring. The Bank Secrecy Act ("BSA") Committee oversees compliance with BSA regulations and expectations and related BSA risks. While the Board of Directors believes that this division of responsibility is the most effective approach for addressing the risks facing the Company, it will continue to re-examine this structure on a regular basis, recognizing that different structures may be appropriate in different situations faced by the Company.
Board Meetings
The Board of Directors held a total of 18 meetings during fiscal 2015. During fiscal 2015 all directors attended at least 75% of the aggregate of (a) the total number of meetings of the Board of Directors held during the period for which the director had been a director and (b) the total number of meetings held by all committees of the Board of Directors on which the director served during the periods that the director served, except for Mr. Cohn who attended less than 75% of such meetings due to health reasons related to extended hospitalization and recovery from a serious accident. It is the policy of the Board of Directors that all directors attend the annual meeting of stockholders of the Company, if practicable. All directors attended the last annual meeting.
Communications with the Board
Stockholders, employees and others who wish to communicate with the Board of Directors may do so by sending their correspondence to The Bancorp, Inc., Attention: Paul Frenkiel, Secretary 409 Silverside Road Suite 105, Wilmington, Delaware 19809. The mailing envelope must contain a clear notation indicating that the enclosed letter is a "Stockholder-Board Communication." All such letters must identify the author as a stockholder of the Company and clearly state whether the intended recipients are all or individual members of the Board. The Secretary will make copies of all such letters and circulate them to the appropriate director or directors. The Secretary has been authorized to screen commercial solicitations and materials which pose security risks, are unrelated to the business or governance of the Company, or are otherwise inappropriate.
Corporate Governance Materials
The Company's Code of Business Conduct and Ethics (the "Code of Business Conduct"), Corporate Governance Guidelines and the charters of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee are available on the Company's website: http://www.snl.com/irweblinkx/govdocs.aspx?iid=4054569.
Copies of these documents are available, free of charge, upon written request to: The Bancorp, Inc., Attention: Andres Viroslav, Investor Relations, 409 Silverside Road Suite 105, Wilmington, Delaware 19809. The Company will satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct by posting such information on the Company's website.
Board Committees
The Board of Directors currently has six standing committees: the Audit Committee, the Compensation Committee, the Risk Oversight Committee, the Bank Secrecy Act Committee, the Nominating and Governance Committee and the Executive Committee. The committees on which directors serve, the chairman of each committee, and the number of meetings held during 2015 are set forth below.
| Board Member | | Audit | | Compensation | | Risk Oversight | | Bank Secrecy Act | | Nominating and Governance | | Executive |
| | | | | | | | | | | | | |
| Daniel G. Cohen | | | | | | | | | | X | | Chairman |
| Walter T. Beach | | X | | Chairman | | | | | | X | | X |
| Michael J. Bradley | | Chairman | | X | | X | | | | | | |
| John Chrystal | | | | | | X (a) | | X (a) | | | | X |
| Matthew Cohn | | X | | | | | | | | | | |
| William H. Lamb | | | | X | | | | | | Chairman | | X |
| Hersh Kozlov | | | | | | X | | | | | | |
| James McEntee | | | | | | Chairman | | X | | | | |
| Mei-Mei Tuan | | | | | | X | | Chairman | | | | |
| Meetings held in 2015 | | 18 | | 1 | | 6 | | 11 | | 1 | | 1 |
(a) | Upon his appointment as Interim Chief Executive Officer, Mr. Chrystal became a non-voting member of these committees. |
Audit Committee. The Audit Committee is appointed by the Board of Directors to assist Board of Directors audit oversight of (a) the integrity of the Company's financial statements, (b) the Company's risk management processes (c) the Company's compliance with legal and regulatory requirements, (d) the independent auditor's qualifications and independence and (e) the performance of the Company's internal audit function and independent auditors. The Audit Committee also prepares the audit committee report required by the rules of the SEC to be included in the Company's annual proxy statement.
Each member of the Audit Committee meets the independence standards for audit committee members set forth in applicable NASDAQ rules, as well as those set forth in Rule 10A-3(b)(1) of the Exchange Act. The Board of Directors has determined that Mr. Beach qualifies as an "audit committee financial expert" as that term is defined in applicable rules and regulations under the Exchange Act.
Compensation Committee. The Compensation Committee is appointed by the Board of Directors to have direct responsibility for approving the compensation of the Chief Executive Officer and certain other officers and the non-management directors of the Company as described in "Compensation Committee Report" and the related "Compensation Discussion and Analysis," in Item 11, "Executive Compensation". At all times during 2015, the Compensation Committee had direct responsibility for (a) administering the Company's equity-based compensation plans and (b) reviewing any extraordinary bonus or other compensatory payments to any employee of the Company. For officers and employees reporting to named executive officers, or NEOs, the Compensation Committee has delegated primary responsibility for recommending salary changes to the Chief Executive Officer and President.
Compensation Committee Interlocks and Insider Participation. The Compensation Committee consists of Messrs. Beach, Bradley and Lamb. None of such persons was an officer or employee of the Company or any of its subsidiaries during fiscal 2015 or was formerly an officer or employee of the Company. During fiscal 2015, none of the Company's executive officers served as a director or on the compensation committee of another entity, one of whose executive officers served on the Compensation Committee. During fiscal 2015, none of the Company's executive officers served on the compensation committee of another entity, any one of whose executive officers served on the Company's Board of Directors.
Risk Oversight Committee. The Risk Committee is appointed by the Board of Directors to assist in the oversight of risk management and risks inherent in the Company's activities. The committee oversees the activities of the Chief Risk Officer and meets with various members of management, as necessary or desirable, in its oversight of risk management.
Bank Secrecy Act ("BSA") Committee. The BSA Committee is appointed by the Board of Directors to assist in the oversight of compliance with BSA/AML requirements, including resolutions of agreed upon improvements required by the FDIC consent orders.
Nominating and Governance Committee. The Nominating and Governance Committee is appointed by the Board of Directors to (a) assist the Company and the Board of Directors in maintaining an effective and knowledgeable Board of Directors, including assisting the Board of Directors in identifying individuals qualified to become directors and recommending to the Board of Directors the director nominees for the next annual meeting of stockholders and the directors to be appointed to each committee, and (b) develop and recommend for the Board of Director's consideration governance guidelines for the Company. All of the members of this committee have been determined by the Board of Directors to be independent under applicable NASDAQ and Exchange Act rules.
The Nominating and Governance Committee will consider candidates for nomination as a director recommended by stockholders, directors, officers, third party search firms and other sources. The Company describes the procedures for nominations by stockholders in "Stockholder Proposals and Nominations." In evaluating candidates, the Nominating and Governance Committee considers the attributes of the candidate (including skills, experience, diversity, age, and legal and regulatory requirements) and the needs of the Board of Directors, and will review all candidates in the same manner, regardless of the source of the recommendation.
The Nominating and Governance Committee has not adopted specific, minimum qualifications or specific qualities or skills that must be met by a Nominating and Governance Committee-recommended nominee. The Nominating and Governance Committee seeks to insure that the membership of the Board of Directors and each committee of the Board of Directors satisfies all relevant NASDAQ rules and applicable laws and regulations and all requirements of the Company's governance documents. The Nominating and Governance Committee seeks to achieve a mixture of skills that are related to the Company's business. The nature of the specific qualifications, qualities or skills that the Nominating and Governance Committee may look for in any particular director nominee depends on the qualifications, qualities and skills of the rest of the directors at the time of any vacancy on the Board of Directors.
Executive Committee. The Executive Committee has the delegated authority to act in lieu of the Company's Board of Directors in between meetings of the Board.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONSUnder the Code of Business Conduct, the Company has established a procedure regarding the review and approval of transactions that would be required to be reported under Item 404 of Regulation S-K. Under this procedure, the Audit Committee must approve any such transaction and find it to be on terms comparable to those available on an arms' length basis from an unaffiliated third party, or find that it otherwise does not create a conflict of interest. The Code of Business Conduct exempts from the review and approval process any employment or other business connection of an officer, director, employee or affiliate with Resource America, Inc., Institutional Financial Markets, Inc. including J.V.B. Financial Group, LLC, the Bank and their affiliates. If the Audit Committee finds a conflict of interest to exist with respect to a particular transaction, that transaction is prohibited unless a waiver of the Code of Business Conduct is approved by the Audit Committee.
The Company entered into a space sharing agreement for office space in New York, New York with Resource America Inc. commencing in September 2011, which terminated on January 31, 2015. The Company pays only its proportionate share of the lease rate to a lessor which is an unrelated third party. The Chairman of the Board of Resource America, Inc. is the father of the Chairman of the Board and the spouse of the former Chief Executive Officer of the Company. The Chief Executive Officer of Resource America is the brother of the Chairman of the Board and the son of the former Chief Executive Officer of the Company. Rent expense is 50% of the fixed rent, real estate tax payment and the base expense charges. Rent expense was $9,000, for the year ended December 31, 2015.
The Company entered into a space sharing agreement for office space in New York, New York with Atlas Energy, L.P. commencing May 2012, which expired in May 2015. As a result of certain transactions, Atlas Energy, L.P. assigned the lease to its successor, Atlas Energy Group, LLC, in 2015. The Company pays only its proportionate share of the lease rate to a lessor which is an unrelated third party. The Executive Chairman of the Board of Atlas Energy Group, LLC and; prior thereto, of the general partner of Atlas Energy, L.P., is the brother of the Chairman of the Board and son of the former Chief Executive Officer of the Company. The Chief Executive Officer and President of Atlas Energy Group, LLC, and; prior thereto, of the general partner of Atlas Energy, L.P., is the father of the Chairman of the Board and spouse of the former Chief Executive Officer of the Company. Rent expense is 50% of the fixed rent, real estate tax payment, and the base expense charges. Rent expense was $35,000 for the year ended December 31, 2015.
The Bank maintains deposits for various affiliated companies totaling approximately $33.4 million as of December 31, 2015.
The Bank has entered into lending transactions in the ordinary course of business with directors, executive officers, principal stockholders and affiliates of such persons. All loans were made on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable loans with persons not related to the lender. At December 31, 2015, these loans were current as to principal and interest payments, and did not involve more than normal risk of collectability. At December 31, 2015, respectively, loans to these related parties included in assets held for sale amounted to $1.8 million and loans included in loans, net of deferred loan fees and costs amounted to $1.8 million.
The Bank periodically purchases securities under agreements to resell and engages in other securities transactions through J.V.B. Financial Group, LLC (JVB), a broker dealer in which the Company's Chairman has a minority interest. The Company's Chairman also serves as Vice Chairman of Institutional Financial Markets Inc., the parent company of JVB. The Company purchased securities under agreements to resell through JVB primarily consisting of Government National Mortgage Association certificates which are full faith and credit obligations of the United States government issued at competitive rates. JVB was in full compliance with all of the terms of the repurchase agreements at December 31, 2015 and had complied with the terms for all prior repurchase agreements. There were no repurchase transactions outstanding at December 31, 2015.
The Company entered into a consulting agreement with Betsy Z. Cohen, its former Chief Executive Officer, which was effective January 1, 2015 and expires on December 31, 2016. Under the agreement, Mrs. Cohen acts as an advisor to the Board of Directors and executive management with respect to business strategies, the performance of various lines of business, and other corporate and regulatory matters. The agreement is intended to preserve for the Company Mrs. Cohen's insight and experience with respect to the Company, the Bank and the financial services industry generally. The agreement provides for a monthly service fee of $30,000, and the provision of office space and administrative support. We have not paid any monthly fees under this agreement pending regulatory review.
PROPOSAL 2. ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
Introduction
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which was signed into law by President Obama on July 21, 2010, requires public companies to provide their stockholders with a non-binding vote to approve executive compensation at least once every three years, or more frequently, as directed by stockholder vote. The Company is seeking this stockholder advisory vote on its executive compensation in accordance with Section 14A of the Exchange Act and Exchange Act Rule 14a-21(a), which the SEC issued on January 25, 2011 in order to implement the Dodd-Frank Act's requirement, and pursuant to the stockholder vote of the Company's 2011 annual meeting that required the advisory vote to be on an annual basis.
The Board of Directors Supports a Say-On-Pay Vote, and Will Consider the Results Carefully
At its 2015 meeting, 93% of the votes cast approved the 2014 executive compensation program. At its 2014 meeting, 79% of the votes cast approved the 2013 executive compensation program. The Compensation Committee and the Board of Directors believes the results of these say-on-pay votes reflect the Company's stockholders' affirmation of the executive compensation program. The Board of Directors values the Company's stockholders' opinions. As it does each year, the Board of Directors intends to evaluate the results of the 2016 vote carefully when making future decisions regarding compensation of the named executive officers.
Compensation of Named Executive Officers
As described in the Compensation Discussion and Analysis ("CD&A") below, the Compensation Committee has developed an executive compensation program designed to align the long-term interests of the Company's named executive officers with the long-term interests of its stockholders. The disclosure in the CD&A and the disclosure included in the section entitled "Executive and Director Compensation" below have been provided in response to the requirements of SEC rules and explain the compensation policies under which the Company paid its named executive officers for 2015.
Advisory or Non-Binding Effect of Vote
Under the Dodd-Frank Act and the related SEC rules, your vote on this resolution is an advisory or "non-binding" vote. This means that the purpose of the vote is to provide stockholders with a method to give their opinion to the Board of Directors about certain issues, like executive compensation. The Board of Directors is not required by law to take any action in response to the stockholder vote. However, the Board of Directors values the Company's stockholders' opinions, and the Board of Directors intends to evaluate the results of the vote carefully when making future decisions regarding compensation of the named executive officers. The Company believes that providing its stockholders with an advisory vote on its executive compensation program will further enhance communication with stockholders, while also meeting the Company's obligations under the Dodd-Frank Act and the SEC's rules.
Resolution
The Board of Directors recommends that stockholders approve the following resolution:
RESOLVED, that the stockholders approve the 2015 compensation of the named executive officers, as disclosed in the Company's proxy statement dated April 11, 2016.
The Board of Directors unanimously recommends a vote "FOR" approval of the compensation of executive officers as described in this proxy statement.
COMPENSATION DISCUSSION AND ANALYSIS
General
TheIn connection with Proposal 2, the Company is required to provide information regarding the compensation program in place for its Chief Executive Officer, Chief Financial Officer and its three other most highly compensated executive officers. The Company must also provide compensation information for up to two additional individuals who would have been included but for the fact that they were not executive officers at the end of the fiscal year. This discussion refers to the Company's Chief Executive Officer, Chief Financial Officer and the other three most highly-compensated executive officers as the "Named Executive Officers" or "NEOs." This discussion should be read in conjunction with the detailed tables and narrative descriptions under "Executive and Director Compensation."
The Compensation Committee is responsible for formulating and presenting recommendations to the Board of Directors with respect to the compensation of the Company's NEOs. The Compensation Committee is also responsible for administering the Company's employee benefit plans, including incentive plans. The Compensation Committee is comprised solely of independent directors.
Executive Summary
The Company's compensation policies are intended to provide appropriate compensation packages to motivate, reward, attract and retain talented and experienced executive officers while at the same time controlling the Company's compensation costs. The primary components of the Company's executive compensation program have historically been base pay and equity-based compensation. The Compensation Committee generally determines compensation amounts for individual NEOs for 12 month periods beginning on particular review dates. The Compensation Committee did not review the NEOs' compensation in 2015, accordingly, there were no salary changes, bonuses or equity compensation granted to NEOs in 2015. Additionally, the compensation standards and criteria discussed below remain unchanged from those established by the Compensation Committee in 2014.
In establishing compensation for the Company's NEOs, the Compensation Committee focuses on performance- based compensation ("pay for performance") and weights stock option and restricted stock grants accordingly. The Compensation Committee utilizes criteria which it believes will create long term shareholder value and is forward looking. It evaluates the overall performance of the Company, the performance of the Company relative to the performance of the national and regional economies, the performance of the Company in comparison with its peers and the contributions of the respective NEOs to the Company's performance. Base salary reflects ongoing performance and level of achievement. In addition, the Compensation Committee evaluates the NEOs' base salary relative to the base salary paid for similar positions within a peer group of institutions, seeking to maintain a competitive advantage in light of the NEO's performance. The Compensation Committee believes that, by focusing on a NEO's overall performance rather than pre-set criteria, the Company substantially lessens the risk of an NEO taking actions to increase his or her compensation without due regard for potential adverse impacts on the Company.
Compensation Objectives and the Focus of Compensation Awards
The Compensation Committee believes that an appropriate compensation program should draw a balance between providing rewards to executive officers while at the same time effectively controlling compensation costs. Executive officers are rewarded in order to attract and retain highly qualified individuals and to motivate them to perform in a manner that maximizes corporate performance.
The Company's executive compensation program consists of three elements to reward and motivate its executive officers in line with the Compensation Committee's objectives described above:
long-term equity incentives reflected in grants of stock options, restricted stock awards and phantom units.
Generally, the Compensation Committee annually reviews the Company's mix of short-term performance incentives versus longer-term incentives. It primarily focuses compensation on base salary and equity incentives. The Compensation Committee has not established set percentages of short-term versus long-term incentives. Instead, it looks to provide a reasonable balance of those incentives, while emphasizing stock options to promote pay for performance. The Compensation Committee's policy for allocating between long-term and currently paid compensation is to set base compensation at levels adequate to attract and retain personnel, while providing incentives to maximize long-term shareholder value for the Company and its stockholders. As discussed in "Specific Elements of the Compensation Program," below, the Company provides cash compensation in the form of base salary to meet competitive salary norms. The Company also provides non-cash equity compensation to align this form of compensation with shareholder interests and the Company's long-term strategic goals. Historically, the Company has not awarded bonuses.
The Compensation Committee also "benchmarks" the Company's compensation programs to a peer group of banking institutions based upon its review of financial statements and other publicly available data. The Compensation Committee did not review the NEOs' compensation in 2015. In 2014, the Compensation Committee utilized regional banks with total assets in the $3 billion to $4 billion range as a peer group. While the Company's payment processing business differentiates it from these institutions, this peer group represented one source for comparisons. The level of an institution's total assets and its regional location are primary factors the Compensation Committee considered in establishing the peer group. The peer group institutions consist of the following: The Dime Savings Bank, S&T Bancorp, Flushing Financial (Flushing Savings), TrustCo Bank, WSFS Financial and Beneficial Mutual. While NEO's were not reviewed in 2015, benchmarks were used in prior years.
Although considerable knowledge about the competitiveness of the Company's compensation programs is gained through the benchmarking process, the Compensation Committee recognizes that each financial institution is unique and that significant differences between institutions in regard to executive compensation practices exist. The Compensation Committee believes that the combination of short and long-term compensation that the Company provides fulfills its objectives of providing a competitive level of compensation and benefits in order to attract and retain key executives. The Compensation Committee also believes that the Company's incentive programs appropriately reward performance to achieve profitability and growth while at the same time allowing the Company to maintain controls over its compensation costs.
Compensation Methodology
The Compensation Committee ordinarily determines compensation amounts for individual NEOs for 12 month periods. The Chief Executive Officer typically provides the Compensation Committee with key elements of both the Company's and the NEOs' (other than the Chief Executive Officer's) performance as well as recommendations to assist it in determining compensation levels. In the case bonuses, if any, the Compensation Committee determines the amount of awards based the then concluded fiscal year. The Compensation Committee has the discretion to issue compensation awards at other times during the fiscal year. In 2013 and 2014, the Compensation Committee reviewed performance during the first quarter of those years. The NEOs were not reviewed in 2015. There were no salary increases, bonuses or stock compensation granted to NEOs in 2015 or 2014.
Specific Elements of the Compensation Program
Below are the specific elements of the Company's compensation program for executive officers.
Salary. The Company believes that it is important to maintain a competitive salary structure in order to retain its existing qualified executive officers and a base pay structure consistent with similarly situated executives at similarly sized banking institutions. The Company believes that a key objective of its salary structure is to maintain reasonable "fixed" compensation costs by targeting base salaries at a competitive average, taking into account the Company's and the individual's performance.
Base salaries are paid to executive officers on a bi-weekly basis, and are generally reviewed annually by the Compensation Committee as described in "Compensation Methodology," above. The Compensation Committee determines if any base pay changes should be made for executive officers. Base pay change, if any, is normally determined after considering:
the executive's total itemized compensation for the prior year;
the executive's current base pay position relative to the peer group;
the Company's performance and the individual's contribution to that performance for the prior year; and
national and regional economic conditions, their effect upon the Company and how the executive has dealt with them within his or her area of responsibility.
In 2015 and 2014, the Compensation Committee awarded no increases in base salary.
Bonus. While historically the Compensation Committee has not awarded bonuses because it generally prefers long-term equity incentive compensation (discussed below), it retains the discretion to do so. In determining whether a bonus award for one or more officers would be appropriate, the Compensation Committee considers the Company's financial performance, including net income, return on assets, return on equity, the efficiency ratio and earnings per share and would particularly focus on the contribution made to the Company by the NEO under consideration. As with base salary, the Compensation Committee also considers national and regional economic conditions. The Chief Executive Officer makes recommendations to the Compensation Committee with respect to annual bonuses for the other executive officers, based on their respective contributions to the performance of the areas for which they are responsible. Generally, the Compensation Committee utilizes non-cash equity compensation and not cash bonuses as the primary non-base salary form of compensation. There were no bonuses in 2014 or 2015.
Long-Term Incentive Compensation. Long-term incentives are provided to executive officers through The Bancorp, Inc. Stock Option and Equity Plan of 2013 (the "2013 Plan") and similar prior plans. The plans permit the grant of stock options, restricted stock awards, stock appreciation rights and phantom units. Stock options are granted to executive officers at exercise prices equal to the then current market price of the Company's shares of Common Shares.Stock. Options and restricted stock awards under the 2013 Plan are granted on a discretionary basis taking into account the Company's financial performance and each executive's contribution to such performance. Overall, the objective of long-term incentive compensation awards is to tie the interests of executive officers directly to increases in stockholder value. Stock options and stock grants were awarded to each NEO, in varying amounts, in 2010 through 2013. There were no stock options or other awards granted in 2014 or 2015.
Compensation Risk Analysis
As a financial holding company regulated by the Federal Reserve Bank, which has a subsidiary bank regulated by the FDIC and the State of Delaware, the Company adheres to defined risk guidelines, practices and controls to ensure the safety and soundness of the institution. The Company's management and Board of Directors conduct regular reviews of its business to ensure that it is operating within appropriate regulatory guidelines and with appropriate practices, supplemented by its internal audit function.
During 2014, the Compensation Committee reviewed the Company's compensation practices to ensure that (1) base salaries are appropriately competitive in light of overall compensation; (2) the Company's use of equity grants provides appropriate long term incentives; and (3) the Company offered an appropriate mix of cash and equity compensation to facilitate the alignment of the interests of the Company's senior executives with those of the Company and its stockholders. In light of regulatory releases, the ultimate goal of the review was to assess the design, governance, policies and procedures of the Company's compensation structure to ensure that, as designed and executed, it does not motivate excessive risk-taking that could adversely impact the long-term value of the Company.
After conducting the review, the Compensation Committee concluded that the Company's incentive programs do not motivate or encourage unnecessary or excessive risk taking. This conclusion reflected a review of the Company's structure to determine that credit and other new business approvals are independent of new business efforts. Other factors, such as fostering an appropriate risk management culture, were also considered. The Company will continue to review and monitor its compensation programs to ensure that they continue to not motivate excessive risk taking that could adversely impact the long-term value of the Company.
Determination of Compensation Amounts
The Compensation Committee did not review the NEOs' compensation in 2015,2015; accordingly, there were no salary changes, bonuses or equity compensation granted to NEOs in 2015. In 2014, the Compensation Committee reviewed the compensation of the NEOs in the first quarter of 2014. After consideration, the Compensation Committee concluded that no salary increases, stock compensation or bonuses should be awarded to the Chief Executive Officer in 2014. In 2013, the Compensation Committee had awarded a $100,000 increase to base salary for the then Chief Executive Officer, which amounted to 8.7% of the total compensation of all types received in 2012. No bonus was awarded to the Chief Executive Officer in 2013. In 2014, the Compensation Committee also concluded that no salary increase, stock compensation or bonus should be awarded to any of the other NEOs. In 2013, the Chief Financial Officer received a $35,000 increase, the then President and Chief Operating Officer received a $75,000 increase, the then Executive Vice President-Commercial Loans received a $20,000 increase, the Senior Vice President and General Counsel received a $17,500 increase and no bonuses were awarded. Options and share awards were also granted to NEOs in 2013 to continue to align management with long term shareholder value and to balance issues of profitability and appropriate risk management. All options and share awards vest over a four year period to further shareholder and management alignment and to emphasize long term risk management. The Compensation Committee decided to forego any bonuses to the Chief Executive Officer or NEOs for 2010 through 2014. As noted previously, no compensation of any form was modified in 2015.
For its 2014 evaluation, the Compensation Committee believed that adjusted operating earnings and long term shareholder value, rather than shorter term movements in stock price, should be emphasized in the Chief Executive Officer's compensation methodology. The Compensation Committee believes that pay for performance should be emphasized and considers stock options as its primary pay for performance component. To further tie stock option grants to pay for performance, all NEO options and grants require a four year period over which such options ratably vest. To emphasize the importance of long term risk management and performance, cash bonuses have not been paid to NEOs for six years.
A primary objective of long term compensation equity awards is to tie interests of NEOs to increasing shareholder value. In 2014, the Compensation Committee reviewed performance during the first quarter of 2014. The committee concluded that long term shareholder growth was enhanced by low cost deposit growth notwithstanding that such growth depressed return on assets in the short term, in the current below normal rate environment. Additionally, the Compensation Committee considered progress made in executing management's strategy emphasizing non-interest income over interest income principally through the development of its prepaid, or stored value, card division. Further, the Compensation Committee considered statistics which continue to show that contracts and new relationships for prepaid card fees, which is the most significant element of non-interest income
growth, require multiple year periods in which expense is incurred, prior to generating revenue. The Compensation Committee also reviewed the continuing costs of the prepaid card-related infrastructure buildout, which represented significant fixed costs which can be used to generate larger fee growth. Related historical statistics were reviewed which validated the Compensation Committee's view. Expansion of compliance infrastructure had continued. Additionally, the Company continued to execute its strategy of growing low cost deposits and, as a result, its interest costs continued to be lower than its peers. The Compensation Committee reviewed the strategy for increased growth in leases, SBA loans and security backed lines of credit, noting that additional progress had been made. Accordingly, the Compensation Committee concluded that a balanced view of long term shareholder value versus current stock price should be considered in its decisions. After consideration, the Compensation Committee did not award any salary increases, stock compensation or bonuses in 2014. In 2015, NEOs were not reviewed. The Compensation Committee also determined to continue to monitor progress in managing the growth in non-interest income's impact on operating earnings and net income, which would be a primary determinant of any future bonus awards.
The Compensation Committee reiterated its previously approved compensation recoupment policy as follows:
Compensation Recoupment Policy
The compensation recoupment policy applies if the Company is required to provide an accounting restatement for any of the prior three fiscal years for which audited financial statements have been completed, due to material noncompliance with any financial reporting requirement under the federal securities laws. In the event of such a restatement, the Compensation Committee will determine, in its discretion, whether (1) NEOs, regardless of whether they were directly responsible for the restatement, or (2) all other recipients of cash-based or equity based incentive compensation who were directly responsible for the restatement, have received any cash-based or equity-based incentive compensation that they would not have been entitled to receive under the restated results. The Compensation Committee then will take such actions as it deems necessary or appropriate, depending on all the facts and circumstances as determined during its review, including (i) the recoupment of all or part of any such excess compensation, (ii) recommending disciplinary actions to the Board, up to and including termination, and/or (iii) the pursuit of other available remedies.
COMPENSATION COMMITTEE REPORTCompensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis above and has discussed that analysis with management. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.
| | Walter T. Beach, Chairman |
| | Michael J. Bradley |
| | William H. Lamb |
EXECUTIVE AND DIRECTOR COMPENSATIONExecutive and Director Compensation
Summary Compensation Table
The following table provides information concerning total compensation earned or paid to the NEOs for the years ended December 31, 2015, 2014 and 2013.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | All other compensation ($) | Total |
| | | | | (1) | (2) | (3) | |
| | | | | | | | |
John C. Chrystal Interim Chief Executive Officer(4) | 2015 | 11,538 | - | - | - | - | 11,538 |
| | | | | | | | |
| Frank M. Mastrangelo | 2015 | 510,000 | - | - | - | 30,534 | 540,534 |
Former Chief Executive Officer(5) | 2014 | 510,000 | - | - | - | 16,864 | 526,864 |
| | 2013 | 509,508 | - | 470,250 | - | 18,330 | 998,088 |
| | | | | | | | |
| Paul Frenkiel | 2015 | 312,200 | - | - | - | 15,660 | 327,860 |
| Chief Financial Officer/ | 2014 | 312,200 | - | - | - | 9,888 | 322,088 |
| Secretary | 2013 | 310,805 | - | 104,500 | 99,400 | 10,614 | 525,319 |
| | | | | | | | |
| | | | | | | | |
| Jeremy L. Kuiper | 2015 | 458,060 | - | - | - | 16,687 | 474,747 |
| Senior Vice President/ | 2014 | 458,060 | - | - | - | 17,531 | 475,591 |
| Managing Director | 2013 | 451,931 | - | 104,500 | 99,400 | 15,287 | 671,118 |
| | | | | | | | |
| Thomas G. Pareigat | 2015 | 347,500 | - | - | - | 15,660 | 363,160 |
| Senior Vice President/ | 2014 | 347,500 | - | - | - | 15,900 | 363,400 |
| General Counsel | 2013 | 346,154 | - | - | - | 16,904 | 363,058 |
| | | | | | | | |
| Donald F. McGraw Jr. | 2015 | 317,500 | - | - | - | 42,183 | 359,683 |
| Executive Vice President/ | 2014 | 317,500 | - | - | - | 17,588 | 335,088 |
| Chief Credit Officer | 2013 | 316,154 | - | - | - | 15,556 | 331,710 |
| | | | | | | | |
| Daniel G. Cohen | 2015 | 300,000 | - | - | - | 600 | 300,600 |
| Executive Vice President | 2014 | 300,000 | - | - | - | 600 | 300,600 |
| | 2013 | 294,410 | - | 418,000 | - | - | 712,410 |
________________ | (1) | The column reflects the aggregate grant date fair value of stock awards granted during each of the last three fiscal years in accordance with FASB ASC Topic 718. There were no stock awards in 2015 or 2014. |
| (2) | The column reflects the aggregate grant date fair value of stock options granted during each of the last three fiscal years in accordance with FASB ASC Topic 718. There were no option awards in 2015 or 2014. |
| (3) | Represents the aggregate dollar amount for each NEO for perquisites and other personal benefits comprised of the Company's contributions to its 401(k) savings plan, insurance premiums and personal use of automobiles. For DonMr. McGraw, the amount shown includes $24,422 of compensation for unused vacation. |
| (4) | Mr. Chrystal was appointed Interim Chief Executive Officer on January 29, 2016, upon the Company's receipt of non-objection from the Federal Reserve Bank of Philadelphia. He resigned as Interim Chief Executive Officer on May 31, 2016. |
| (5) | ResignedMr. Mastrangelo resigned as Chief Executive Officer effective December 13, 2015 and was appointed Technologist in Residence.2015. |
Grants of Plan-Based Awards
The table providing information on the grant of options or other plan-based awards in 2015 is omitted because no such awards or grants were made.
Equity Compensation Plan Information
| Plan | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted- average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | | Weighted- average exercise price of outstanding options, warrants and rights | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) | |
| | | (a) | | (b) | | (c) | | | (a) | | | (b) | | | (c) | |
| 1999 Omnibus plan | | 476,124 | | $9.71 | | 291,876 | | | | 476,124 | | | $ | 9.71 | | | | 291,876 | |
| 2005 Omnibus plan | | 506,500 | | $7.91 | | 335,125 | | | | 506,500 | | | $ | 7.91 | | | | 335,125 | |
| Stock option and equity plan of 2011 | | 1,162,921 | | $8.48 | | 72,534 | | | | 1,162,921 | | | $ | 8.48 | | | | 72,534 | |
| Stock option and equity plan of 2013 | | 0 | | - | | 2,200,000 | | | | 0 | | | | - | | | | 2,200,000 | |
| Total | | 2,145,545 | | $8.58 | | 2,899,535 | | | | 2,145,545 | | | $ | 8.58 | | | | 2,899,535 | |
* All plans authorized have been approved by shareholders.
Outstanding Equity Awards at Fiscal Year-End Table
The following table provides information on the current holdings of stock options and stock that has not vested by the Company's NEOs.
| | | Option Awards(1) | Stock Awards | | | Option Awards(1) | Stock Awards | |
| Name | Grant Date | Number of securities underlying unexercised options Exercisable (#) | Number of securities underlying unexercised options Unexercisable (#) | Options exercise price ($) | Option expiration date | Number of shares or units of stock that have not vested (2) (#) | Market value of shares or units of stock that have not vested(3) ($) | | Grant Date | Number of securities underlying unexercised options Exercisable (#) | Number of securities underlying unexercised options Unexercisable (#) | Options exercise price ($) | Option expiration date | Number of shares or units of stock that have not vested (2) (#) | Market value of shares or units of stock that have not vested(3) ($) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| John C. Chrystal | 01/23/2013 | 5,000 | - | 10.45 | 01/23/2023 | - | - | | 01/23/2013 | 5,000 | - | 10.45 | 01/23/2023 | - | - | |
| | Total | 5,000 | | | | | | | Total | 5,000 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Frank M. Mastrangelo | 05/07/2010 | 90,000 | - | 7.81 | 05/06/2020 | - | - | | 05/07/2010 | 90,000 | - | 7.81 | 05/06/2020 | - | - | |
| | 12/24/2010 | 50,000 | - | 9.84 | 12/24/2020 | - | - | | 12/24/2010 | 50,000 | - | 9.84 | 12/24/2020 | - | - | |
| | 08/11/2011 | 50,000 | - | 7.36 | 08/11/2021 | - | - | | 08/11/2011 | 50,000 | - | 7.36 | 08/11/2021 | - | - | |
| | 01/25/2012 | 37,500 | 12,500 | 8.50 | 01/25/2022 | - | - | | 01/25/2012 | 37,500 | 12,500 | 8.50 | 01/25/2022 | - | - | |
| | 01/23/2013 | | | | | 22,500 | 143,325 | | 01/23/2013 | | | | | 22,500 | 143,325 | |
| | Total | 227,500 | 12,500 | | | 22,500 | 143,325 | | Total | 227,500 | 12,500 | | | 22,500 | 143,325 | |
| | | | | | | | | | | | | | | | | |
| Paul Frenkiel | 05/07/2010 | 25,000 | - | 7.81 | 05/06/2020 | - | - | | 05/07/2010 | 25,000 | - | 7.81 | 05/06/2020 | - | - | |
| | 12/24/2010 | 38,000 | - | 9.84 | 12/24/2020 | - | - | | 12/24/2010 | 38,000 | - | 9.84 | 12/24/2020 | - | - | |
| | 08/11/2011 | 38,000 | - | 7.36 | 08/11/2021 | - | - | | 08/11/2011 | 38,000 | - | 7.36 | 08/11/2021 | - | - | |
| | 01/25/2012 | 30,000 | 10,000 | 8.50 | 01/25/2022 | - | - | | 01/25/2012 | 30,000 | 10,000 | 8.50 | 01/25/2022 | - | - | |
| | 01/23/2013 | 10,000 | 10,000 | 10.45 | 01/23/2023 | 5,000 | 31,850 | | 01/23/2013 | 10,000 | 10,000 | 10.45 | 01/23/2023 | 5,000 | 31,850 | |
| | Total | 141,000 | 20,000 | | | 5,000 | 31,850 | | Total | 141,000 | 20,000 | | | 5,000 | 31,850 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Jeremy L. Kuiper | 05/07/2010 | 25,000 | - | 7.81 | 05/06/2020 | - | - | | 05/07/2010 | 25,000 | - | 7.81 | 05/06/2020 | - | - | |
| | 12/24/2010 | 34,000 | - | 9.84 | 12/24/2020 | - | - | | 12/24/2010 | 34,000 | - | 9.84 | 12/24/2020 | - | - | |
| | 08/11/2011 | 34,000 | - | 7.36 | 08/11/2021 | - | - | | 08/11/2011 | 34,000 | - | 7.36 | 08/11/2021 | - | - | |
| | 01/25/2012 | 30,000 | 10,000 | 8.50 | 01/25/2022 | - | - | | 01/25/2012 | 30,000 | 10,000 | 8.50 | 01/25/2022 | - | - | |
| | 01/23/2013 | 10,000 | 10,000 | 10.45 | 01/23/2023 | 5,000 | 31,850 | | 01/23/2013 | 10,000 | 10,000 | 10.45 | 01/23/2023 | 5,000 | 31,850 | |
| | Total | 133,000 | 20,000 | | | 5,000 | 31,850 | | Total | 133,000 | 20,000 | | | 5,000 | 31,850 | |
| | | | | | | | | | | | | | | | | |
| Thomas G. Pareigat | 01/25/2012 | 18,750 | 6,250 | 8.50 | 01/25/2022 | - | - | | 01/25/2012 | 18,750 | 6,250 | 8.50 | 01/25/2022 | - | - | |
| | 01/23/2013 | 5,000 | 5,000 | 10.45 | 01/23/2023 | 2,500 | 15,925 | | 01/23/2013 | 5,000 | 5,000 | 10.45 | 01/23/2023 | 2,500 | 15,925 | |
| | Total | 23,750 | 11,250 | | | 2,500 | 15,925 | | Total | 23,750 | 11,250 | | | 2,500 | 15,925 | |
| | | | | | | | | | | | | | | | | |
| Donald F. McGraw Jr. | 05/07/2010 | 40,000 | - | 7.81 | 05/06/2020 | - | - | | 05/07/2010 | 40,000 | - | 7.81 | 05/06/2020 | - | - | |
| | 12/24/2010 | 34,000 | - | 9.84 | 12/24/2020 | - | - | | 12/24/2010 | 34,000 | - | 9.84 | 12/24/2020 | - | - | |
| | 08/11/2011 | 34,000 | - | 7.36 | 08/11/2021 | - | - | | 08/11/2011 | 34,000 | - | 7.36 | 08/11/2021 | - | - | |
| | 01/25/2012 | 18,750 | 6,250 | 8.50 | 01/25/2022 | - | - | | 01/25/2012 | 18,750 | 6,250 | 8.50 | 01/25/2022 | - | - | |
| | 01/23/2013 | 5,000 | 5,000 | 10.45 | 01/23/2023 | 2,500 | 15,925 | | 01/23/2013 | 5,000 | 5,000 | 10.45 | 01/23/2023 | 2,500 | 15,925 | |
| | Total | 131,750 | 11,250 | | | 2,500 | 15,925 | | Total | 131,750 | 11,250 | | | 2,500 | 15,925 | |
| | | | | | | | | | | | | | | | | |
| Daniel G. Cohen | 05/07/2010 | 55,000 | - | 7.81 | 05/06/2020 | - | - | | 05/07/2010 | 55,000 | - | 7.81 | 05/06/2020 | - | - | |
| | 12/24/2010 | 45,000 | - | 9.84 | 12/24/2020 | - | - | | 12/24/2010 | 45,000 | - | 9.84 | 12/24/2020 | - | - | |
| | 08/11/2011 | 50,000 | - | 7.36 | 08/11/2021 | - | - | | 08/11/2011 | 50,000 | - | 7.36 | 08/11/2021 | - | - | |
| | 01/25/2012 | 37,500 | 12,500 | 8.50 | 01/25/2022 | - | - | | 01/25/2012 | 37,500 | 12,500 | 8.50 | 01/25/2022 | - | - | |
| | 01/23/2013 | | | | | 20,000 | 127,400 | | 01/23/2013 | | | | | 20,000 | 127,400 | |
| | Total | 187,500 | 12,500 | | | 20,000 | 127,400 | | Total | 187,500 | 12,500 | | | 20,000 | 127,400 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | Total | 849,500 | 87,500 | | | 57,500 | 366,275 | | Total | 849,500 | 87,500 | | | 57,500 | 366,275 | |
| | | | | | | | | | | | | | | | | |
| (1) | All options listed vest at a rate of 25% per year over a period of four years from grant date. |
| (2) | All stock awards vest at a rate of 25% per year over a period of four years from grant date. |
| (3) | Market value is based on the closing market price of the Company's common stock on December 31, 2015, which was $6.37. |
Option Exercises and Stock Vested in 2015*2015
The following table provides information for the Company's NEOs regarding stock vested in 2015 and options exercised.
| | Stock Awards |
| | Number of Shares Acquired on Vesting | Value Realized on Vesting ($) |
| John C. Chrystal | - | - |
| Frank Mastrangelo | 11,250 | 97,988 |
| Paul Frenkiel | 2,500 | 21,775 |
| Jeremy L. Kuiper | 2,500 | 21,775 |
| Thomas G. Pareigat | 1,250 | 10,887 |
| Donald F. McGraw Jr. | 1,250 | 10,887 |
| Daniel G. Cohen | 10,000 | 87,100 |
| | | |
* No options were exercised in 2015.
| | Stock Awards |
| | Number of Shares Acquired on Vesting | Value Realized on Vesting ($) |
| John C. Chrystal | - | - |
| Frank Mastrangelo | 11,250 | 97,988 |
| Paul Frenkiel | 2,500 | 21,775 |
| Jeremy L. Kuiper | 2,500 | 21,775 |
| Thomas G. Pareigat | 1,250 | 10,887 |
| Donald F. McGraw Jr. | 1,250 | 10,887 |
| Daniel G. Cohen | 10,000 | 87,100 |
Director Compensation Table
The following table provides information concerning the compensation of the Company's non-employee directors for fiscal 2015. Directors who are employees or officers of the Company receive no compensation for their services as members of the Board of Directors or any committees. Each non-employee director received an annual retainer of $75,000. Each non-employee director also receives $500 for each meeting of a committee of the Board of Directors he or she attends; the Chairman of the Audit Committee and the Chairman of the Risk Oversight Committee receivesreceive $1,500 for each committee meeting attended; and the chairmen of the other committees receive $1,000 for each committee meeting attended. The independent lead director, Michael J. Bradley, receives an additional annual retainer of $20,000 per annum. No stock or option awards were made in 2015.
| | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Total ($) |
Walter T. Beach Michael J. Bradley John C. Chrystal(1) Matthew Cohn Hersh Kozlov William H. Lamb James J. McEntee Mei-Mei Tuan | 84,000 98,500 104,500 96,000 75,000 75,000 83,000 85,000 | - - - - - - - - | - - - - - - - - | 84,000 98,500 104,500 96,000 75,000 75,000 83,000 85,000 |
| (1) | Mr. Chrystal stopped receiving compensation for his service as a director when he was named Interim Chief Executive Officer on January 29, 2016, upon the Company's receipt of non-objection from the Federal Reserve Bank of Philadelphia. |
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Beach, Bradley and Lamb. None of such persons was an officer or employee of the Company or any of its subsidiaries during fiscal 2015 or was formerly an officer or employee of the Company. During fiscal 2015, none of the Company's executive officers served as a director or on the compensation committee of another entity, one of whose executive officers served on the Compensation Committee. During fiscal 2015, none of the Company's executive officers served on the compensation committee of another entity, any one of whose executive officers served on the Company's Board of Directors.
In connection with the preparation and filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2015 (the "2015 Annual Report on Form 10-K"):
(1) | the Audit Committee reviewed and discussed the audited financial statements included in the 2015 Annual Report on Form 10-K with the Company's management; |
(2) | the Audit Committee discussed with the Company's independent registered public accounting firm, Grant Thornton LLP ("Grant Thornton"), the matters required to be discussed by Auditing Standard 16; |
(3) | the Audit Committee received and reviewed the written disclosures and the letter from Grant Thornton required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and has discussed with Grant Thornton the independence of Grant Thornton and satisfied itself as to Grant Thornton's independence; and |
(4) | based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors of the Company that the audited financial statements be included in the Company's 2015 Annual Report on Form 10-K. |
The Audit Committee of the Board of Directors of the Company has provided this report. This report shall not be deemed to be filed under, nor shall it be deemed to be incorporated by reference by any general statement incorporating this Proxy Statement into any filing under the Securities Act of 1933, as amended, and the Exchange Act (collectively, the "Acts"), except to the extent the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
| Michael J. Bradley, Chairman
Walter T. Beach
Matthew Cohn
|
PROPOSAL 3. APPROVAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 50 MILLION TO 75 MILLION SHARESThe Board proposes to amend Article Four of the Company's Certificate of Incorporation, as amended, to increase the number of authorized Common Shares from 50 million shares to 75 million shares. The Board has approved the amendment, but its approval is subject to the approval of the amendment by the holders of a majority of the outstanding Common Shares. The amendment, in its entirety, reads as follows:
FOURTH: The Corporation shall be authorized to issue Seventy Five Million (75,000,000) shares of Common Stock at $1.00 par value, and Five Million (5,000,000) shares of Preferred Stock at $.01 par value. The Board of Directors of the Corporation is hereby expressly vested with the authority, by resolution, from time to time to divide the Preferred Stock of the Corporation into one or more classes, series, or series within a class, to fix and determine the variable rights or preferences of any class or series so established and to change redeemed or reacquired shares of any one series within a class thereof into shares of another series.
The Board considers the proposed amendment to be in the best interests of the Company, its stockholders and its other constituencies. The proposed increase in the number of authorized Common Shares will ensure that a sufficient number of shares will be available, if needed, for issuance in connection with any transactions approved by the Board, including, among others, current and future public and private sales of Common Shares, acquisitions, stock splits, stock dividends, stock incentive plans and other corporate purposes. The Board believes that the availability of the additional shares for such purposes will be beneficial to the Company by providing it with the flexibility to consider and respond to future business opportunities and needs as they arise. The availability of the additional shares will also enable the Company to act promptly when the Board determines that the issuance of additional Common Shares is advisable. The issuance of additional Common Shares could decrease the proportionate equity interest and voting power of the Company's current stockholders and, depending on the price paid for the additional shares, could result in dilution in the book value of shares held by the current stockholders. The holders of Common Shares are not entitled to preemptive rights with respect to the issuance of additional Common Shares.
Under the Company's Certificate of Incorporation, as amended, the Company currently has authority to issue 50 million Common Shares, par value $1.00 per share, of which 37,858,322 shares were issued and outstanding as of December 31, 2015. In addition, as of such date, approximately 2.1 million shares were reserved for issuance for outstanding options and grants under the Company's incentive compensation plans. A total of 2.9 million of additional shares are reserved but unissued under the company's stock compensation plans.
Potential Anti-Takeover Effect
Although an increase in the Company's authorized Common Shares could, under certain circumstances, also be construed as having an anti-takeover effect (for example, by permitting easier dilution of the stock ownership of a person seeking to effect a change in the composition of the Board or contemplating a tender offer or other transaction resulting in the Company's acquisition by another company), the proposed increase in shares authorized is not in response to any effort by any person or group to accumulate Common Shares or to obtain control of the Company by any means. In addition, the proposal is not part of any plan by the Board to recommend or implement a series of anti-takeover measures.
Additionally, the Company's Certificate of Incorporation, as amended, presently gives the Board the authority to issue Preferred Shares, and to fix the relative rights and preferences of those shares, without stockholder approval. This provision could have an anti-takeover effect.
The Board of Directors unanimously recommends a vote "FOR" the adoption of the amendment to the Certificate of Incorporation to increase the number of authorized Common Shares from 50 million to 75 million.
PROPOSAL 4. APPROVAL OF ACCOUNTANTS
The Board of Directors unanimously recommends that the stockholders approve the selection of Grant Thornton LLP, independent registered public accounting firm, to audit the financial statements of the Company for the fiscal year ending December 31, 2016. Representatives of Grant Thornton are expected to be present at the Meeting. These representatives will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
The following table presents the aggregate fees billed by Grant Thornton for each of the services listed below for each of the Company's last two fiscal years.
Audit Fees
| | | 2015 | | | 2014 | |
| Audit Fees (1) | | $ | 675,000 | | | $ | 3,638,500 | |
| Audit-Related Fees (2) | | | - | | | | 131,848 | |
| Tax Fees (3) | | | 52,000 | | | | 180,000 | |
| All Other Fees (4) | | | - | | | | 85,825 | |
| Total | | $ | 727,000 | | | $ | 4,036,173 | |
(1) | Audit fees consisted of the aggregate fees billed for professional services rendered by Grant Thornton in connection with its audit of the Company's consolidated financial statements and its limited reviews of the unaudited consolidated interim financial statements that are normally provided in connection with statutory and regulatory filings or engagements for these fiscal years. Audit fees in 2015 include fees incurred in 2014 relating to prior years in connection with the restatement of the financial statements. |
(2) | Audit-related fees consisted of the aggregate fees billed for assurance and related services rendered by Grant Thornton that are reasonably related to the performance of the audit or review of the Company's consolidated financial statements and are not disclosed under "Audit Fees" above. |
(3) | Tax fees consisted of the aggregate fees billed for professional services rendered by Grant Thornton for tax compliance, tax advice and tax planning in 2015 and 2014. |
(4) | All other fees consist of the aggregate fees billed for products and services provided by Grant Thornton other than the services described under audit fees, audit-related fees and tax fees. All other fees in 2014 consisted primarily of permitted information technology services pre-approved by the audit committee. |
Exchange Act rules generally require any engagement by a public company of an accountant to provide audit or non-audit services to be pre-approved by the audit committee of that public company. This pre-approval requirement is waived with respect to the provision of services other than audit, review or attest services if certain conditions set forth in rule 2-01(c)(7)(i)(C) under the Exchange Act are met. None of the audit-related and tax services described above were subject to this Rule and the approval procedures set forth therein. All services provided to the Company by Grant Thornton in 2015 and 2014 were pre-approved by the Audit Committee.
The Board of Directors unanimously recommends a vote "FOR" the selection of Grant Thornton as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2016.
As ofUnder the date of this proxy statement, the Board of Directors does not intendCompany's Amended and Restated Bylaws, unless all stockholders entitled to vote are present and has not been informed that any other person intends to present any other matters for action at the Meeting. However, if otherSpecial Meeting and consent, only business stated in the Notice of Special Meeting of Stockholders (or any supplement thereto), and matters do properly come beforegermane thereto, shall be transacted at the meetingSpecial Meeting or any adjournment or postponement or continuation thereof, it is the intention of the persons named as proxies to vote upon them in accordance with their best judgment. For any other matter which may properly come before the meeting, the affirmative vote of the holders of at least a majority of the votes cast at the Meeting at which a quorum is present is required, either in person or by proxy, for approval, unless otherwise required by law.thereof.
Except as set forth in this section, all Common Shares represented by valid proxies received will be voted in accordance with the provisions of the proxy.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Rule 14a-8 the Exchange Act establishes the eligibility requirements and the procedures that must be followed for a stockholder's proposal to be included in a public company's proxy materials. Proposals submitted for inclusion in the Company's proxy statement for its 2017 annual meeting of stockholders must be received by the Company's Secretary on or before the close of business December 12, 2016. Additionally, the persons named as proxies in the proxy statement and/or form of proxy will have discretionary authority to vote on a stockholder proposal received before February 25, 2017, if we briefly describe the matter in the proxy statement and how management's proxy holders intend to vote on it, and if the stockholder does not comply with the requirements of Rule 14a-4(c) (2) under the Securities Exchange Act of 1934.
Stockholders who wish to submit their recommendations for director candidates to the Nominating and Governance Committee should send their written recommendation to the Company's executive offices, The Bancorp, Inc., and Attention: Nominating and Governance Committee Chairman, 409 Silverside Road Suite 105, Wilmington, Delaware 19809. These stockholders must represent that they are stockholders of the Company and will remain so through the date of the relevant annual meeting of stockholders of the Company and include the written consent of the person so recommended to serve as a director if nominated and elected and to provide such information as the Nominating and the Governance Committee may request, as well as a description of the nominee's background and qualifications. All stockholder recommendations received by the Nominating and Governance Committee will be reviewed at the first meeting of the Nominating and Governance Committee held after receipt of the recommendation. The Nominating and Governance Committee will consider nominees recommended by security holders for the annual meeting of stockholders to be held in 2017, if submitted as described above by December 12, 2016.
STOCKHOLDER OUTREACHANNEX ACERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES C MANDATORILY CONVERTIBLE CUMULATIVE NON-VOTING PERPETUAL PREFERRED STOCK
OF
THE BANCORP, INC.
THE BANCORP, INC., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, does hereby certify:
The Company'sboard of directors of the Corporation (the "Board of Directors") or an applicable committee of the Board of Directors, in accordance with the Certificate of Incorporation and Bylaws of the Corporation and applicable law, adopted the following resolution on July 20, 2016 creating a series of shares of Preferred Stock of the Corporation designated as "Series C Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock".
RESOLVED, that pursuant to the provisions of the Certificate of Incorporation and the Bylaws of the Corporation and applicable law, a series of preferred stock, par value $0.01 per share, of the Corporation be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:
Section 1.Definitions. For the purposes hereof, the following terms shall have the following meanings:
"Affiliate" means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.
"Beneficial Ownership Limitation" shall have the meaning set forth in Section 6(b).
"BHC Act" means the federal Bank Holding Company Act of 1956, as amended, and the Federal Reserve regulations thereunder.
"BHC Affiliates" means, with respect to a Person, its Affiliates and all of its "affiliates" as defined in the BHC Act or Regulation Y of the Federal Reserve.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Corporation's common stock, par value $1.00 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.
"Conversion Price" shall have the meaning set forth in Section 6(a).
"Conversion Shares" means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series C Preferred Stock in accordance with the terms hereof.
"Corporation" means The Bancorp, Inc.
"DGCL" shall mean the Delaware General Corporation Law.
"Dividend Payment Date" shall have the meaning set forth in Section 3(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Federal Reserve" means the Board of Governors of the Federal Reserve System.
"Holder" means any holder of Series C Preferred Stock.
"Issuance Date" means the date of the "Closing" as defined in that certain Securities Purchase Agreement, dated August 5, 2016, by and among the Corporation and the "Purchasers" named therein.
"Junior Securities" shall have the meaning set forth in Section 5(a).
"Liquidation Preference" shall mean $1,000.
"Mandatory Conversion" shall have the meaning set forth in Section 6(a).
"Mandatory Conversion Date" shall have the meaning set forth in Section 6(a).
"Parity Securities" shall have the meaning set forth in Section 5(a).
"Permitted Transfer" means a transfer by any Holder: (i) in a widespread public distribution; (ii) in which no transferee (or group of associated transferees) would receive two percent (2%) or more of any class of Voting Securities of the Corporation; or (iii) to a transferee that would control more than fifty percent (50%) of the Voting Securities of the Corporation without any transfer from the Holder.
"Person" means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Senior Securities" shall have the meaning set forth in Section 5(a).
"Series C Cash Dividend" shall have the meaning set forth in Section 3(a).
"Series C Cash Dividend Rate" shall have the meaning set forth in Section 3(a).
"Series C Preferred Stock" shall have the meaning set forth in Section 2(a).
"Series C Preferred Stock Register" shall have the meaning set forth in Section 2(b).
"Share Delivery Date" shall have the meaning set forth in Section 6(d)(i).
"Stockholder Approval" means the time after which the Corporation shall have obtained stockholder approval, in accordance with the Corporation's amended and restated bylaws, of the Corporation's stockholders in accordance with Section 5635(e)(4) of the Equity Rules of The NASDAQ Stock Market (or any successor provisions thereto or any similar provisions of any stock exchange on which the Common Stock is listed) with respect to the issuance of all of the Securities as described in the Securities Purchase Agreement, including, without limitation, the issuance of the Common Stock issuable upon conversion of the Series C Preferred Stock.
"Trading Day" means a day on which the Common Stock is traded for any period on the principal securities exchange on which the Common Stock is then traded, or if the Common Stock is not traded on a principal securities exchange, on a day that the Common Stock is traded on another securities market on which the Common Stock is then being traded.
"Voting Conversion Limit" has the meaning set forth in Section 6(b).
"Voting Ownership Interest" means, with respect to any particular date and with respect to any Holder, the percentage of any class of Voting Securities of the Corporation deemed to be owned or controlled by the Holder (when aggregated with its BHC Affiliates) for purposes of, and in accordance with, the BHC Act and its implementing regulations and guidance.
"Voting Securities" has the meaning set forth in the BHC Act and any rules and regulations promulgated thereunder.
Section 2.Designation, Amount and Par Value; Assignment.
(a)The series of preferred stock designated by this Certificate of Designation shall be designated as the Corporation's Series C Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock (the "Series C Preferred Stock") and the number of shares so designated shall be 40,000 (which shall not be subject to increase without the written consent of the Holders of a majority of the issued and outstanding Series C Preferred Stock). Each share of Series C Preferred Stock shall have a par value of $0.01 per share.
(b)The Corporation shall register shares of the Series C Preferred Stock in the name of the Holders thereof from time to time upon records to be maintained by the Corporation for that purpose, or, at the option of the Corporation, the Corporation's transfer agent (the "Series C Preferred Stock Register"). The Series C Preferred Stock shall be issued in book entry only, provided that the Corporation shall issue one or more certificates representing shares of Series C Preferred Stock, to the extent such issuance is requested by a given Holder. References herein to certificates representing the Series C Preferred Stock shall apply only if such shares have been issued in certificated form. The Corporation may deem and treat the registered Holder of shares of Series C Preferred Stock as the absolute owner thereof for the purpose of any conversion thereof and for all other purposes. The Corporation shall register the transfer of any shares of Series C Preferred Stock in the Series C Preferred Stock Register, upon surrender of the certificates evidencing such shares to be transferred, duly endorsed by the Holder thereof, to the Corporation at its address specified herein. Upon any such registration or transfer, a new certificate evidencing the shares of Series C Preferred Stock so transferred shall be issued to the transferee (if requested) and a new certificate evidencing the remaining portion of the shares not so transferred, if any, shall be issued to the transferring Holder. The provisions of this Certificate of Designation are intended to be for the benefit of all Holders from time to time and shall be enforceable by any such Holder.
Section 3.Dividends.
(a)Unless the Series C Preferred Stock has been converted in accordance with Section 6, and subject to the preferential rights of holders of any class or series of Senior Securities, the holders of Series C Preferred Stock shall be entitled to receive, when, as and if authorized by the Board of Directors and management value direct interactiondeclared by the Corporation, out of funds legally available for the payment of dividends, cash dividends at the rate of 12% per annum (the "Series C Cash Dividend Rate"). Dividends on the Series C Preferred Stock are cumulative. Dividends on any shares of the Series C Preferred Stock (each a "Series C Cash Dividend") shall be payable quarterly in arrears within forty-five (45) days after the end of each quarter (each such payment date, a "Dividend Payment Date"); provided, however, (A) dividends will begin accruing on October 1, 2016 and communicationthe first Series C Cash Dividend will be payable with stockholders. In 2015,respect to the quarter ending December 31, 2016; and (B) the Corporation shall neither declare nor pay any Series C Cash Dividends from and after the date which is 180 days from the Issuance Date without prior consultation with, and non-objection by, the Federal Reserve Bank of Philadelphia. Any dividend payable on the Series C Preferred Stock for any partial dividend period shall be prorated and computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends shall be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date, which shall be any date designated by the Board of Directors for the payment of dividends that is not more than 90 nor less than five days prior to such Dividend Payment Date. If the Series C Preferred Stock is converted into Common Stock prior to October 1, 2016, pursuant to Section 6, then no dividends shall be payable on the Series C Preferred Stock.
(b)No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series C Preferred Stock that may be in arrears.
(c)So long as any shares of Series C Preferred Stock remain outstanding, if all dividends payable pursuant to Section 3 on all outstanding shares of the Series C Preferred Stock for any Dividend Payment Date have not been declared and paid, or declared and funds set aside therefor, the Corporation shall not (x) declare or pay dividends with respect to, or, directly or indirectly, redeem, purchase or acquire any of its Junior Securities or (y) directly or indirectly, redeem, purchase or acquire any of its Parity Securities, other than, in each case, (i) redemptions, purchases or other acquisitions of Junior Securities or Parity Securities in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants or in connection with a dividend reinvestment plan, (ii) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (iii) conversions or exchanges of Junior Securities or Parity Securities for Junior Securities or Parity Securities and (iv) any purchase of fractional interests in shares of the Corporation's share capital pursuant to the conversion or exchange provisions of such share capital or the securities being converted or exchanged.
(d)When dividends are not paid in full upon the Series C Preferred Stock or any other class or series of Parity Stock, or a sum sufficient for such payment is not set apart, all dividends declared upon the Series C Preferred Stock and any shares of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Series C Preferred Stock and accumulated, accrued and unpaid on such Parity Stock (which shall not include any accumulation in respect of unpaid dividends for prior dividend periods if such Parity Stock does not have a cumulative dividend).
Section 4.Voting Rights. Except as otherwise provided herein or as otherwise required by the DGCL, the Series C Preferred Stock shall have no voting rights and shall not be included in determining the number of shares voting or entitled to vote on any matter. However, as long as any shares of Series C Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Series C Preferred Stock, (a) issue additional amounts or classes of Senior Securities, (b) modify the terms of the Series C Preferred Stock so as to significantly and adversely affect its rights or preference, as reasonably determined by the Holders, (c) liquidate, dissolve or wind-up the business and affairs of the Corporation in any form of transaction, or consent to any of the foregoing, (d) pay dividends when preferred dividends on the Series C Preferred Stock are in arrears or (e) take any other action which, under the laws of Delaware or any other applicable law, requires the prior approval (by vote or written consent) of the Series C Preferred Stock voting as a separate class.
Section 5.Rank; Liquidation.
(a)The Series C Preferred Stock shall rank (i) senior management heldto all of the Common Stock; (ii) senior to any class or series of capital stock of the Corporation hereafter created specifically ranking by its terms junior to any Series C Preferred Stock ("Junior Securities"); (iii) on parity with any class or series of capital stock of the Corporation hereafter created specifically ranking by its terms on parity with the Series C Preferred Stock ("Parity Securities"); and (iv) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking by its terms senior to any Series C Preferred Stock ("Senior Securities"), in each case, as to distributions of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntarily or involuntarily.
(b)Subject to the prior and superior rights of the holders of any Senior Securities of the Corporation, upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, each Holder shall be entitled to receive, in preference to any distributions of any of the assets or surplus funds of the Corporation to the holders of the Common Stock and Junior Securities and pari passu with any distribution to the holders of Parity Securities, an amount equal to the Liquidation Preference plus an additional amount equal to any dividends accrued and unpaid and/or declared but unpaid on such shares, before any payments shall be made or any assets distributed to holders of any class of Common Stock or Junior Securities. If, upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation shall be insufficient to pay the holders of shares of the Series C Preferred Stock the amount required under the preceding sentence, then all remaining assets of the Corporation shall be distributed ratably to holders of the shares of the Series C Preferred Stock and Parity Securities.
Section 6.Mandatory Conversion.
(a)Mandatory Conversion Upon Stockholder Approval. Upon the Corporation obtaining Stockholder Approval (the time of obtaining such Stockholder Approval is referred to herein as the "Mandatory Conversion Date"), then all outstanding shares of Series C Preferred Stock shall automatically be converted into shares of Common Stock (the "Mandatory Conversion") equal to (i) the sum of the Liquidation Preference and all accrued and unpaid dividends thereon; divided by (ii) $4.50 (as such dollar amount in this clause (ii) may be adjusted from time to time pursuant to Section 7, the "Conversion Price").
(b)Beneficial Ownership Limitation.
(i)Notwithstanding anything in this Certificate of Designation to the contrary, the Corporation shall not effect any conversion of the Series C Preferred Stock, and a Holder shall not have the right to convert any portion of the Series C Preferred Stock, to the extent that, after giving effect to such Conversion, such Holder (together with such Holder's Affiliates, and any other Person whose beneficial ownership of Common Stock would be aggregated with that of the Holder for purposes of Section 13(d) of the Exchange Act and the applicable regulations of the Commission, including any "group" of which the Holder is a member) would beneficially own a number of shares of Common Stock in excess of 80 meetings and conference calls with mostthe Beneficial Ownership Limitation (as defined below). For purposes of the Company's major stockholders. Although some investors haveforegoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of the Series C Preferred Stock. Except as set forth in the preceding sentence, for purposes of this Section 6(b), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable regulations of the Commission. For purposes of this Section 6(b), in determining the number of outstanding shares of Common Stock, absent actual knowledge of such Holder to the contrary, a policyHolder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (A) the Corporation's most recent periodic or annual filing with the Commission, as the case may be, (B) a more recent public announcement by the Corporation that is filed with the Commission, or (C) a more recent notice by the Corporation or the Corporation's transfer agent to the Holder setting forth the number of shares of Common Stock then outstanding. The "Beneficial Ownership Limitation" shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock pursuant to the Mandatory Conversion.
(ii)Notwithstanding anything to the contrary contained in this Certificate of Designation, if, as of the Mandatory Conversion Date, the conversion of the Series C Preferred Stock would result in the Holder thereof (together with its BHC Affiliates) owning or controlling in the aggregate more than a 9.9% Voting Ownership Interest, excluding for the purpose of this calculation any reduction in ownership resulting from transfers by such Holder and its BHC Affiliates of Voting Securities of the Corporation (the "Voting Conversion Limit"), then then such shares of Series C Preferred Stock owned by such Holder shall not meeting directly with management, management was successfulbe converted on such the Mandatory Conversion Date to the extent such conversion would result in speaking directly with stockholders holdingsuch Holder and its BHC Affiliates owning or controlling in the aggregate Voting Securities in excess of 60 percentthe Voting Conversion Limit (for the avoidance of doubt, thereby permitting conversion of shares up to but not exceeding the Voting Conversion Limit). Each share of Series C Preferred Stock that is not converted on the Mandatory Conversion Date due to the Voting Conversion Limit shall remain outstanding and shall be converted into Common Stock at the Conversion Price, following a transfer of such Series C Preferred Stock to a transferee pursuant to a Permitted Transfer upon the election of such transferee
(c)Mechanics of Conversion
(i)Procedural Requirements. All holders of record of shares of Series C Preferred Stock shall be sent written notice of the Company'sMandatory Conversion Date. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Date. Upon receipt of such notice, each holder of certificated shares of Series C Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such Holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series C Preferred Stock converted pursuant to Section 6(a), including the rights, if any, to receive notices and vote (other than notice of the Mandatory Conversion Date or as a holder of Common Stock), will terminate at the Mandatory Conversion Date (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time). As soon as practicable after the Mandatory Conversion Date and the surrender of the certificate or certificates (or lost certificate affidavit and agreement), if any, for Series C Preferred Stock, the Corporation shall authorize American Stock Transfer and Trust Company (the "Transfer Agent") to register in the name of the Holder such Conversion Shares on the book-entry system of the Transfer Agent. If the Holder wishes to hold the Conversion Shares in certificated form, the Holder may so request and the Transfer Agent will mail to the holder on or more stock certificates evidencing the Holder's Conversion Shares. Holders of uncertificated shares of Series C Preferred Stock will have their shares automatically converted, and such Conversion Shares will be reflected on the book-entry system of the Transfer Agent. The Corporation will also issue and deliver to such Holder cash as provided in Section 6(c)(iii) in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.
(ii)Reservation of Shares Issuable Upon Conversion. The Corporation shall at all times when any Series C Preferred Stock shall be outstanding, common stock. The Company uses these meetingsreserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series C Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series C Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series C Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in commercially reasonable efforts to obtain feedback from its stockholders about areas importantthe requisite stockholder approval of any necessary amendment to them; including the Company's business model, performance, corporate governance, compensation practicesCorporation's Certificate of Incorporation.
(iii)Fractional Shares. Fractional shares, if any, of Common Stock will not be issued upon conversion but, in lieu thereof, the Corporation will make a cash payment based on such fraction times the closing price of the Corporation's Common Stock as reported on the NASDAQ Stock Market or such other stock exchange or quotation system on which the Common Stock is then listed or quoted, on the trading day immediately preceding the Mandatory Conversion Date.
(iv)Transfer Taxes. The issuance of certificates for shares of the Common Stock upon conversion of the Series C Preferred Stock shall be made without charge to any Holder for any documentary, stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other investor topics. The Company maintains a stockholder relations department headed by Andres Viroslav,than that of the registered Holder(s) of such shares of Series C Preferred Stock and the Company encourages youCorporation shall not be required to call either himissue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.
Section 7.Certain Adjustments.
(a)If the Corporation shall, at 215.861.7990any time or its corporate secretary and chief financial officer, Paul Frenkiel at 302.385.5122 for your feedback and financially-relatedfrom time to time prior to conversion of shares of Series C Preferred Stock, (i) pay a dividend or make a distribution on the outstanding shares of Common Stock payable in cash, Common Stock or other questions.assets, rights or property of the Company, (ii) subdivide the outstanding shares of Common Stock into a larger number of shares, (iii) combine the outstanding shares of Common Stock into a smaller number of shares, (iv) issue any shares of its capital stock in a reclassification, recapitalization or other similar event affecting the Common Stock, (v) declare a redemption or repurchase of the Common Stock, or (vi) authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of Common Stock or of any rights, then, and in each such case, the Conversion Price in effect immediately prior to such event shall be adjusted (and/or any other appropriate actions shall be taken by the Corporation) so that the holder of any share of Series C Preferred Stock thereafter converted shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation, cash or other assets, rights or property that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Series C Preferred Stock been converted immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 7(a) shall become effective retroactively (A) in the case of any such dividend or distribution, to a date immediately following the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution, or (B) in the case of any such subdivision, combination or reclassification, recapitalization or other similar event, to the close of business on the day upon which such corporate action becomes effective.
(b)No adjustment of the applicable Conversion Price for the Series C Preferred Stock shall be made in an amount less than one cent per share; provided, however, that any adjustments which are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three years from the date of the event giving rise to the adjustment being carried forward.
(c)Notice to the Holders.
(i)Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
(ii) Other Notices. If (A) the Corporation shall declare a redemption or repurchase of the Common Stock, (B) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of Common Stock or of any rights, (C) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (D) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of the Series C Preferred Stock, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.
Section 8.Miscellaneous.
(a) Redemption. The Series C Preferred Stock is not redeemable.
(b) Notices. Any and all notices or other communications or deliveries to be provided by the holders hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 409 Silverside Road, Wilmington, Delaware 19809, facsimile number (302) 793-1672, or such other facsimile number or address as the Corporation may specify for such purposes by notice to the holders delivered in accordance with this Section. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each holder at the facsimile number or address of such holder appearing on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
(c) Lost or Mutilated Series C Preferred Stock Certificate. If a Holder's Series C Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series C Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership thereof, reasonably satisfactory to the Corporation and, in each case, customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation may prescribe.
(d) Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation. Any waiver by the Corporation or a Holder must be in writing. Notwithstanding any provision in this Certificate of Designation to the contrary, any provision contained herein and any right of the Holders of Series C Preferred Stock granted hereunder may be waived as to all shares of Series C Preferred Stock (and the Holders thereof) upon the written consent of the Holders of not less than a majority of the shares of Series C Preferred Stock then outstanding.
(e) Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.
(f) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
(g) Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
(h) Status of Converted Series C Preferred Stock. If any shares of Series C Preferred Stock shall be converted or reacquired by the Corporation, such shares shall, without need for any action by the Board of Directors or otherwise, resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series C Preferred Stock.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation this 5th day of August 2016.
| THE BANCORP, INC. |
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| By: /s/ Damian Kozlowski |
| Name: Damian Kozlowski |
| Title: Chief Executive Officer |
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Signature Page to Certificate of Designation
ANNUALSPECIAL MEETING OF STOCKHOLDERS OF
THE BANCORP, INC.
May 18,September 29, 2016
PROXY VOTING INSTRUCTIONS |
INTERNET - Access "www.voteproxy.com""www.voteproxy.com" and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. Vote online until 11:59 PM EST the day before the meeting. | |   | |
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MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible. | | | |
| | | COMPANY NUMBER | |
IN PERSON - You may vote your shares in person by attending the AnnualSpecial Meeting. | | | |
| | | ACCOUNT NUMBER | |
GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access. | | | |
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, Proxy Statement, Proxy Card are available at -http:http://www.snl.com/IRWeblinkX/GenPage.aspx?IID=4054569&gkp=investors.thebancorp.com/CustomPage/Index?KeyGenPage=203269 |
\/ Please detach along perforated line and mail in the envelope provided IF you are not voting via the Internet. \/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORSITEMS 1 AND "FOR" ITEMS 2, 3 AND 4.2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: ☒ |
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| | | | | | | | | FOR | AGAINST | ABSTAIN | |
1. | Election of Directors | | | | | | Mei-Mei Tuan | | | | |
| | FOR | AGAINST | ABSTAIN | | | | | | | |
| Daniel G. Cohen
Walter T. Beach
Michael J. Bradley
John C. Chrystal
Matthew Cohn
Hersh Kozlov
William H. Lamb
James J. McEntee III
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| | 2.1. | Proposal to approve, a non-binding advisory vote onfor the purpose of Nasdaq Rule §5635(d), the conversion of the Company's 2015 compensation program for its named executive officers.Series C Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock into shares of the Company's Common Stock and the issuance of such shares of the Company's Common Stock upon conversion. | ☐ | ☐ | ☐ | |
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| | 3.2. | Proposal to approve, an amendment tofor the purpose of Nasdaq Rule §5635(c), the issuance of shares of the Company's CertificateCommon Stock to certain officers and directors of Incorporation to increase the number of authorized shares of common stock from 50 million shares to 75 million shares.Company. | ☐ | ☐ | ☐ | |
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| | 4. | Proposal to approve the selection of Grant Thornton LLP as independent public accountants for the Company for the fiscal year ending December 31, 2016. | | | | |
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| 5.3. | In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting.Thismeeting.This proxy is solicited on behalf of the Board of Directors of the Company. This proxy, when properly executed, will be voted in accordance with the instructions given above. If no instructions are given, this proxy will be voted "FOR" election of the Directorsproposals 1 and "FOR" proposals 2, 3 and 4.2. | |
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| To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. |
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| Signature of Stockholder | | Date: | | Signature of Stockholder | | Date: | | |
| Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
ANNUALSPECIAL MEETING OF STOCKHOLDERS OF
THE BANCORP, INC.
May 18,September 29, 2016
GO GREEN
e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access.
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, Proxy Statement, Proxy Card
are available at -http:http://www.snl.com/IRWeblinkX/GenPage.aspx?IID=4054569&gkp=investors.thebancorp.com/CustomPage/Index?KeyGenPage=203269
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
\/ Please detach along perforated line and mail in the envelope provided. \/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORSITEMS 1 AND "FOR" ITEMS 2, 3 AND 4.2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: ☒ |
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| | | | | | | | | FOR | AGAINST | ABSTAIN | |
1. | Election of Directors | | | | | | | Mei-Mei Tuan | | | | |
| | FOR | AGAINST | ABSTAIN | | | | | | | |
| Daniel G. Cohen
Walter T. Beach
Michael J. Bradley
John C. Chrystal
Matthew Cohn
Hersh Kozlov
William H. Lamb
James J. McEntee III
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| | 2.1. | Proposal to approve, a non-binding advisory vote onfor the purpose of Nasdaq Rule §5635(d), the conversion of the Company's 2015 compensation program for its named executive officers.Series C Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock into shares of the Company's Common Stock and the issuance of such shares of the Company's Common Stock upon conversion. | ☐ | ☐ | ☐ | |
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| | 3.2. | Proposal to approve, an amendment tofor the purpose of Nasdaq Rule §5635(c), the issuance of shares of the Company's CertificateCommon Stock to certain officers and directors of Incorporation to increase the number of authorized shares of common stock from 50 million shares to 75 million shares.Company. | ☐ | ☐ | ☐ | |
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| | 4. | Proposal to approve the selection of Grant Thornton LLP as independent public accountants for the Company for the fiscal year ending December 31, 2016. | | | | |
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| 5.3. | In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting.Thismeeting.This proxy is solicited on behalf of the Board of Directors of the Company. This proxy, when properly executed, will be voted in accordance with the instructions given above. If no instructions are given, this proxy will be voted "FOR" election of the Directorsproposals 1 and "FOR" proposals 2, 3 and 4.2. | |
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| To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. |
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| Signature of Stockholder | | Date: | | Signature of Stockholder | | Date: | | |
| Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
THE BANCORP, INC.
ANNUALSPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 18,SEPTEMBER 29, 2016
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John C. ChrystalDamian Kozlowski and Paul Frenkiel as proxies, each with full power of substitution, to represent and vote as designated on the reverse side, all shares of the Common SharesStock of The Bancorp, Inc. held of record by the undersigned on March 21,August 15, 2016, at the AnnualSpecial Meeting of Stockholders to be held at 409 Silverside Road, Suite 105, Wilmington, Delaware 19809, on May 18,September 29, 2016, or any adjournment or postponement thereof.
(Continued and to be signed on the reverse side)
