THE FIRST OF LONG ISLAND CORPORATION
10 GLEN HEAD ROAD
GLEN HEAD, NEW YORK 11545
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 22, 2014
March 17, 2014
To the Stockholders of
The First of Long Island Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of THE FIRST OF LONG ISLAND CORPORATION will be held at THE CARLTUN, EISENHOWER PARK, 1899 HEMPSTEAD TURNPIKE, EAST MEADOW, NEW YORK, on Tuesday,Wednesday, April 22, 2014,19, 2017, at 3:30 P.M. local time for the following purposes:
(1) | To elect |
(2) | To conduct a non-binding, advisory vote to approve the compensation paid to the Corporation’s named executive officers; |
(3) | To conduct a non-binding, advisory vote regarding the frequency of voting on the compensation paid to the Corporation’s named executive officers; |
(4) | To approve an amendment to the Certificate of Incorporation to |
(5) |
To ratify the |
(6) | To transact any other business as may properly come before the meeting. |
Only stockholders of record at the close of business on February 24, 2014March 1, 2017 are entitled to notice of and to vote at such meeting or any adjournment thereof.
By Order of the Board of Directors | |
Christopher Becker | |
Executive Vice President Chief Risk Officer and Secretary |
IMPORTANT -- PLEASE MAILVOTE YOUR PROXY PROMPTLY.
IN ORDER THAT THERE MAY BE PROPER REPRESENTATION AT THE MEETING, YOU ARE URGED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED, OR TO VOTE ELECTRONICALLY AS PROVIDED IN THE INSTRUCTIONS INCLUDED HEREWITH. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
TABLE OF CONTENTS | |
INFORMATION ABOUT THE ANNUAL MEETING OF STOCKHOLDERS | 1 |
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS | 1 |
VOTING PROCEDURES AND METHODS OF COUNTING VOTES | 2 |
PROPOSAL 1 - ELECTION OF DIRECTORS | 3 |
BUSINESS EXPERIENCE OF DIRECTORS | 4 |
QUALIFICATIONS OF DIRECTORS | 4 |
BOARD LEADERSHIP STRUCTURE | 6 |
BOARD’S ROLE IN RISK OVERSIGHT | 6 |
MEETINGS OF THE BOARD OF DIRECTORS | 6 |
BOARD COMMITTEES AND MEETINGS | 6 |
BOARD MEMBER ATTENDANCE AT ANNUAL MEETINGS | 9 |
SECURITY HOLDER COMMUNICATIONS TO THE BOARD OF DIRECTORS | 9 |
COMPENSATION OF DIRECTORS | 9 |
MANAGEMENT | 11 |
PROPOSAL 2 – NON-BINDING, ADVISORY VOTE TO APPROVE THE COMPENSATION PAID TO THE CORPORATION’S NAMED EXECUTIVE OFFICERS | 11 |
PROPOSAL 3 – NON-BINDING, ADVISORY VOTE REGARDING THE FREQUENCY OF VOTING ON THE COMPENSATION PAID TO THE CORPORATION’S NAMED EXECUTIVE OFFICERS | 12 |
COMPENSATION COMMITTEE REPORT | 12 |
COMPENSATION DISCUSSION AND ANALYSIS | 13 |
COMPENSATION OF EXECUTIVE OFFICERS | 18 |
COMPENSATION PURSUANT TO PLANS | 19 |
EQUITY COMPENSATION PLAN INFORMATION | 20 |
PENSION BENEFITS | 22 |
NONQUALIFIED DEFERRED COMPENSATION | 23 |
EMPLOYMENT CONTRACTS | 23 |
POTENTIAL LUMP SUM PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL | 24 |
PROPOSAL 4 – APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING IN DIRECTOR ELECTIONS | 24 |
TRANSACTIONS WITH MANAGEMENT AND OTHERS | 26 |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | 26 |
PROPOSAL 5 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 27 |
AUDIT COMMITTEE REPORT | 28 |
OTHER MATTERS | 29 |
STOCKHOLDER PROPOSALS | 29 |
INTERNET AVAILABILITY OF PROXY MATERIALS | 29 |
ANNUAL REPORTS TO STOCKHOLDERS | 29 |
APPENDIX A | A-1 |
THE FIRST OF LONG ISLAND CORPORATION
10 Glen Head Road
Glen Head, New York 11545
(516) 671-4900
PROXY STATEMENT
INFORMATION ABOUT THE ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is being solicited by the Board of Directors (“Board”) of The First of Long Island Corporation (“Corporation” or “Company”) for use at the Annual Meeting of Stockholders to be held at 3:30 P.M. local time at The Carltun, Eisenhower Park, 1899 Hempstead Turnpike, East Meadow, New York on April 22, 2014.19, 2017. The approximate date on which proxy statements and forms of proxy are first being sent or given to stockholders is March 17, 2014.
Proxies in the accompanying form that are properly executed and duly returned to the Corporation, or voted electronically, will be voted at the meeting in accordance with the instructions provided. Where no instructions are indicated, properly executed proxies will be voted “FOR” the proposals set forth in this proxy statement for consideration at the meeting. Each proxy granted may be revoked at any time prior to its exercise either by written notice filed with the secretary of the Corporation, by the submission of a later dated and executed proxy or by notice given during the meeting by the stockholder to the presiding officer of the meeting. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at the annual meeting constitutes a quorum for the transaction of business. In the absence ofAny meeting (whether or not a quorum the meetingis present) may be adjourned to a subsequent date, provided notice of suchthe time and place to which the meeting is mailed to each stockholder entitled to voteadjourned are announced at least five (5) days before the meeting at which the adjournment is taken. At an adjourned meeting.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The only class of voting securities of the Corporation is its Common Stock, $.10 par value ("Common Stock"), each share of which entitles the holder thereof to one vote except in the election of directors, where votes may be cumulated as described herein. Only stockholders of record at the close of business on February 24, 2014March 1, 2017 are entitled to notice of and to vote at the meeting.
As of February 14, 2014,March 1, 2017, there were issued 9,169,81023,901,419 shares of the Common Stock issued, all of which were outstanding and entitled to vote. To the best knowledge of the Corporation, the only persons owning beneficially more than five percent (5%) of the Common Stock of the Corporation as of February 14, 2014March 1, 2017 are identified in the table below.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class |
BlackRock, Inc. 55 East 52nd Street New York, NY | 1,593,973 shares (1) | 6.67% |
Basswood Capital Management, L.L.C. 645 Madison Avenue, 10 Floor New York, NY 10022 | 1,207,971 shares | |
5.05% |
(1) | Based on a Schedule 13G |
(2) | Based on a Schedule 13G/A filed on February |
Following is information with respect to the beneficial ownership of the Corporation's Common Stock as of February 14, 2014,March 1, 2017, by all directors and nominees, by the executive officers of the Corporation named in the “Summary Compensation Table” (“named executive officers” or “NEOs”), and by directors and all executive officers of the Corporation as a group. The Corporation’s Corporate Governance Guidelines require that each member of the Board and each executive officer of the Corporation own a minimum of 2,000 shares of Common Stock of the Corporation, with such minimum to be adjusted for stock splits and dividends and other changes in capitalization. The 2,000-share requirement needs to be met within two years of becoming a director or executive officer.
Title of Class | Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||
| Common Stock | Allen E. Busching | 21,144 | (1) | .23 | % |
| ($.10 par value) | Paul T. Canarick | 35,872 | (2) | .39 | % |
| Alexander L. Cover | 13,290 | (3) | .14 | % | |
| Howard Thomas Hogan, Jr. | 125,635 | (4) | 1.37 | % | |
| John T. Lane | 8,346 | (5) | .09 | % | |
| J. Douglas Maxwell, Jr. | 45,458 | (6) | .50 | % | |
| Stephen V. Murphy | 16,714 | (7) | .18 | % | |
| Milbrey Rennie Taylor | 10,747 | (8) | .12 | % | |
| Walter C. Teagle III | 72,884 | (9) | .79 | % | |
| Eric J. Tveter | 53 | - | |||
| Michael N. Vittorio | 36,227 | (10) | .40 | % | |
| Sallyanne K. Ballweg | 17,416 | (11) | .19 | % | |
| Mark D. Curtis | 33,843 | (12) | .37 | % | |
| Richard Kick | 59,245 | (13) | .65 | % | |
| Donald L. Manfredonia | 63,149 | (14) | .69 | % | |
| Directors and Executive Officers as a group (17 persons) | 568,190 | (15) | 6.20 | % | |
Title of Class | Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||
Common Stock | Paul T. Canarick | 100,793 | (1) | .42% | |
($.10 par value) | Alexander L. Cover | 36,795 | (2) | .15% | |
John J. Desmond | 75 | - | |||
Howard Thomas Hogan, Jr. | 204,624 | (3) | .86% | ||
John T. Lane | 29,044 | .12% | |||
Stephen V. Murphy | 45,624 | (4) | .19% | ||
Peter Quick | 33,354 | (5) | .14% | ||
| Milbrey Rennie Taylor | 32,198 | (6) | .13% | ||
Walter C. Teagle III | 175,485 | (7) | .73% | ||
Eric J. Tveter | 5,047 | .02% | |||
Michael N. Vittorio | 103,377 | (8) | .43% | ||
Mark D. Curtis | 88,328 | (9) | .37% | ||
Richard Kick | 140,906 | (10) | .59% | ||
Donald L. Manfredonia | 149,568 | (11) | .62% | ||
Directors and Executive Officers as a group (16 persons) | 1,165,790 | (12) | 4.83% | ||
(1) | Including |
(2) | Including |
(3) | Including |
(4) | Including 15,075 shares in Mr. Murphy’s 401(k); and 7,868 shares that can be acquired by the exercise of stock options. |
(5) | Including |
(6) | Including 10,118 shares that can be acquired by the exercise of stock options. |
(7) | Including |
(8) | Including |
(9) | Including 3,598 shares held in Mr. Curtis’ IRA; 3,622 shares in the |
(10) | Including |
(11) | Including |
(12) | Including |
VOTING PROCEDURES AND METHODS OF COUNTING VOTES
As to Proposal 1 regarding the election of directors, the proxy card being provided by the Board enables a stockholder to vote “For” the election of the sixfive nominees proposed by the Board or to “Withhold Authority” to vote for the nominees being proposed. As discussed under Proposal 1, cumulative voting applies to the election of directors. Directors are elected by a plurality of the votes cast, without regard to either broker non-votes or proxies as to which the authority to vote for the nomineesnominee is withheld.
As to Proposals 2 4 and 5, a stockholder may: (1) vote “For” the item, (2) vote “Against” the item, or (3) “Abstain” from voting on the item. In order to approve Proposals 2 4 and 5, each proposal must receive the affirmative vote of a majority of the shares voting on each matter at the annual meeting without regard to either shares as to which the “Abstain” box is marked or broker non-votes. As to Proposal 3 requireswith respect to the advisory vote on the frequency of future votes on executive compensation, a stockholder may vote for 1, 2 or 3 years, or may abstain, and the advisory vote on frequency will be determined by the number of years which receives the most votes cast. In order to approve Proposal 4, the proposal must receive the affirmative vote of the holders of at least seventy percent (70%) of the outstanding shares of Common Stock of the Corporation entitled to vote to approve the proposed amendment.vote. Abstentions, broker non-votes and other shares not voted by brokers and other entities holding shares on behalf of the beneficial owners will have the same effect as shares voted against Proposal 3.
Proxies solicited hereby will be returned to the Corporation, tabulated by the Corporation’sCorporation’s registrar and transfer agent and reviewed by the inspectors of election designated by the Board.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors presentlyof the Corporation currently consists of eleven members. Effective as of the Annual Meeting, one director whose term of office expires will retire from the Board, and the number of directors shall be reduced to ten. The Board has nominated Howard Thomas Hogan, Jr., Milbrey Rennie Taylor, Walter C. Teagle III and Michael N. Vittorio as the Class I directors for re-election and John J. Desmond for election as a Class I director. Each Board member and nominee, with the exception of Michael N. Vittorio, who also serves as President and Chief Executive Officer (“CEO”) of the Corporation and its wholly-ownedwholly owned bank subsidiary, The First National Bank of Long Island (“Bank”), is independent as defined in the Nasdaq Rules.
The Board is divided into two classes, Class I and Class II. The following table sets forth the present composition of the Board.
Name | Class | Expiration of Term |
John J. Desmond | I | 2017 |
Howard Thomas Hogan, Jr. | I | 2017 |
Milbrey Rennie Taylor | I | 2017 |
Walter C. Teagle III | I | 2017 |
Michael N. Vittorio | I | 2017 |
Paul T. Canarick | II | 2018 |
Alexander L. Cover | II | 2018 |
Stephen V. Murphy | II | 2018 |
Peter Quick | II | 2018 |
Eric J. Tveter | II | 2018 |
As to the election of directors, each stockholder entitled to vote has the right to vote, in person or by proxy, the number of shares owned by him or her for as many persons as there are directors to be elected. A stockholder may also cumulate his or her votes by giving one candidate as many votes as the number of directors to be elected multiplied by the number of his or her shares or byevenly distributing such votes on the same principle among any number of candidates. Cumulative voting can affect the election of directors if there are more nominees for director than positions to be filled. In the event that cumulative voting is in effect, it is the intention of the persons named in the accompanying proxy to vote cumulatively for the nominees listed, and if authority for any nominee or nominees is withheld, the votes will be distributed among the remaining candidates inat the discretion of the Board.
It is intended that shares represented by properly executed proxies will be voted at the meeting in accordance with the markinginstructions indicated thereon and, in the absence of contrary indication, for the re-electionelection of Directors Busching, Canarick, Cover, MaxwellDesmond, Hogan, Taylor, Teagle and Murphy and the election of Director Tveter.Vittorio. Each of the Class III directors will hold office until the 20162019 Annual Meeting of Stockholders or until his or her successor is elected and qualified. If at the time of the 20142017 Annual Meeting any of the nominees named above is unavailable or chooses not to serve as a director (an event that the Board does not now anticipate), the proxies will be voted for the election as director of such other person or persons as the Board of Directors may designate.
The Board of Directors recommends a vote FOR all named nominees.
The following table sets forth a brief description of the business experience during the past five years of each of the Corporation’s directors during the past five years.nominees and Board members continuing in office. It also indicates any other directorships held during the past five years in any company with a class of securities registered pursuant to section 12 of the Securities Exchange Act of 1934 (“Exchange Act”) or subject to the requirements of section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. The year set forth for each director is the year in which the person named became a director of the Corporation and the Bank with the exception of Mr. Hogan, who became a director of the Corporation upon its formation in 1984.
BUSINESS EXPERIENCE OF DIRECTORS
Name | Principal Occupations and Other Directorships for Last 5 Years | Director Since |
Paul T. Canarick (Age | President and Principal, Paul Todd, Inc. (Construction Company) | 1992 |
Alexander L. Cover (Age | Business and Management Consultant (Private Practice); Retired Partner of Ernst & Young LLP | 2003 |
John J. Desmond (Age 66) | Retired Partner of Grant Thornton LLP | 2016 |
Howard Thomas Hogan, Jr. (Age | Hogan & Hogan (Attorney, Private Practice) | 1978 |
Stephen V. Murphy (Age | President, S.V. Murphy & Co. | 2005 |
Peter Quick (Age 61) | Retired President of the American Stock Exchange; Partner of Burke and Quick Partners Holdings LLP, the parent company of Burke & Quick Partners LLC, a broker dealer; Director, Medicure Inc.; Gain Capital; Apicore LLC | 2015 |
Milbrey Rennie Taylor (Age | Retired Executive Producer of CBS News | 2008 |
Walter C. Teagle III (Age | Chairman of the Board, The First of Long Island Corporation and The First National Bank of Long Island; President and Owner, Teagle Management, Inc. | 1996 |
Eric J. Tveter (Age | Chief Executive Officer, Central Europe Group, Liberty Global plc; formerly: Chief Executive Officer, Austria/Switzerland Region Liberty Global plc; Chief Executive Officer, upc cablecom GmbH | 2013 |
Michael N. Vittorio (Age | President and Chief Executive Officer, The First of Long Island Corporation and The First National Bank of Long Island | 2003 |
QUALIFICATIONS OF DIRECTORS
Diversity. The Governance and Nominating Committee believes that the Board as a whole should adequately reflect the diversity of the Company’s constituencies and the communities in which the Company conducts business. Although the Committee considers diversity in identifying nominees for director, it does not have a formal policy in this regard. The Committee has a broad view of diversity, and conceptualizes it to include differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to board heterogeneity, as well as race, ethnicity, gender, national origin and other characteristics.
Specific Core Competencies. In addition to general qualifications and the consideration of diversity, the Governance and Nominating Committee has developed a Skill Sets Matrix that sets forth the specific core competencies it believes one or more Board members should possess. The matrix is used to evaluate the collective skills of the existing board and identify the skills that the Committee should seek when filling a Board vacancy or increasing the size of the Board. The Governance and Nominating Committee recognizes that some Board members may possess many of the core competencies, while others will possess only a few, but that each Board member should have particular strength with respect to at least one. The identified core competencies, which are subject to change from time to time, include, but are not limited to: experience as a director; experience with publicly-held companies; backgroundcorporate governance, banking, strategic planning, business leadership, organizational management and business operations, accounting and reporting, finance or investments, technology or information security, mergers and acquisitions, legal or regulatory, real estate, marketing or public relations and financial accounting experience necessary to qualify as an “audit committee financial expert” as defined in Regulation S-K of the Securities and Exchange Commission; and experience in banking, strategic planning, accounting and reporting, finance, mergers and acquisitions, investments, real estate, marketing, operations, information technology and legal matters.
With respect to each of the Corporation’s directors, the narrative that follows sets forth the specific experience, qualifications, attributes and skills that led to the conclusion that the person should serve as a director in light ofconsidering the Company’s business and structure and the general qualifications and core competencies identified and deemed desirable by the Governance and Nominating Committee.
Paul T. Canarick -
Mr. Canarick joined the Board in 1992, is a member of the Governance and Nominating, Loan and Asset LiabilityAlexander L. Cover - Mr. Cover joined the Board in 2003 and is Chairman of the Audit Committee and a member of the Governance and Nominating and Asset Liability and Strategic Planning Committees. He is currently a business and management consultant in private practice and, among other things, assists privately held companies with developing business plans. Previously he was Partner In Charge of the financial institutions practice of the Long Island office of Ernst & Young LLP. At Ernst & Young, Mr. Cover’s experience also included, among other things, serving as review partner on both SEC and non-SEC engagements. Mr. Cover has also been a director of a number of not-for-profit entities. Mr. Cover’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee, with particular strength in publicly held companies,which include corporate governance, banking, strategic planning, business leadership, organizational management and business operations, accounting and reporting, finance, and mergers and acquisitions.acquisitions, legal and regulatory.
John J. Desmond - Mr. Desmond joined the Board in 2016 and is a member of the Audit Committee. Previously he was Partner In Charge of the Long Island office of Grant Thornton LLP from 1988 through his retirement from the firm in 2015. At Grant Thornton, Mr. Desmond’s experience also included, among other things, serving as lead audit partner for many public and privately-held clients. Mr. Desmond was elected by the U.S. Partners of Grant Thornton LLP to be a Partnership Board Member. The Board was responsible for oversight of many of the firm’s activities including strategic planning, the performance of the senior leadership team and financial performance. Mr. Desmond also serves or has served as a board member of a number of not-for-profit entities. Mr. Desmond’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, organizational management and business operations, accounting and reporting, finance, mergers and acquisitions, legal and regulatory.
Howard Thomas Hogan, Jr., Esq. - Mr. Hogan joined the Board in 1978 and is a member of the Loan and Governance and Nominating Committees. Mr. Hogan is currently an attorney in private practice, with an emphasis on real estate. He currently serves and has served as a director of numerous not-for-profit and community organizations. His experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee, with particular strength inwhich include corporate governance, banking, legal, matters, real estate and corporate governance.
Stephen V. Murphy -
Mr. Murphy joined the Board in 2005 and is Chairman of the Loan Committee and a member of the Compensation and Asset LiabilityPeter Quick - Mr. Quick joined the Board in 2015 and is a member of the Audit, Governance and Nominating and Loan Committees. Mr. Quick has over 30 years of experience in the securities and financial services industries. He is a recognized leader in the securities industry with experience in the domestic and international equity markets, equities market making, market structure reform, trading technology and clearing operations. Mr. Quick is a Partner of Burke and Quick Partners Holdings LLP, the parent company of Burke & Quick Partners LLC, a broker dealer. Mr. Quick was President of the American Stock Exchange from 2000 to 2005. Prior to joining the American Stock Exchange, he served as President of Quick & Reilly Inc., a Quick & Reilly subsidiary and a national discount brokerage firm. Mr. Quick also serves or has served as a director of a number of publicly held companies and not-for-profit entities. Mr. Quick’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee, which include corporate governance, strategic planning, business leadership, organizational management and business operations, accounting and reporting, finance and investments, mergers and acquisitions, legal and investments.
Milbrey Rennie Taylor - Ms. Taylor joined the Board in 2008 and is Chairwoman of the Governance and Nominating Committee and a member of the Compensation and Governance and Nominating Committees.Committee. Ms. Taylor’s experience includes over thirty years in the television news business. She served as Executive Producer of CBS News Sunday Morning and CBS Weekend News. Ms. Taylor also served as Vice President of ThirdAge Media, an Internet company partly owned by CBS, Inc. Ms. Taylor serves and has served as a director of a number of not-for-profit entities. Ms. Taylor’s experience has provided her with a number of the core competencies identified by the Governance and Nominating Committee, with particular strength inwhich include corporate governance, communicationsstrategic planning, business leadership, organizational management and business operations, marketing and public relations.
Walter C. Teagle III - Mr. Teagle joined the Board in 1996, became Chairman of the Board in 2005 and is an ex officio member for all purposes of all Board Committeescommittees of the Corporation and the Bank. Mr. Teagle is currently President and owner of Teagle Management, Inc., ana private investment consulting firm, Chairman and director of The Teagle Foundation, Inc. and Managing General Partner of Gulo Capital Partners L.P., a private investment partnership. Mr. Teagle’s past experience includes a variety of executive and board positions including Managing Director, Groton Partners LLC, a merchant banking firm; Officer and Managing Director, Groton Asset Management LLC, an investment management company; Executive Vice President and Director, Lexent, Inc., a publicly-held infrastructure service provider; and President, Chief Executive Officer, and Director, Metro Design Systems, Inc., an engineering design services firm. Mr. Teagle has also been a director of not-for-profit entities. Mr. Teagle’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee, with particular strength inwhich include corporate governance, operations, finance,banking, strategic planning, business leadership, organizational management and investments.
Eric J. Tveter -- Mr. Tveter joined the Board in September 2013 onand is Chairman of the recommendationCompensation Committee and a member of a non-management director.the Audit Committee. He is currently Chief Executive Officer, Central Europe Group, Liberty Global plc. Prior to that he was Chief Executive Officer of Liberty Global’s Swiss and Austrian Region and Chief Executive Officer of upc cablecom GmbH which he joinedof Switzerland, a Liberty Global company. Mr. Tveter has extensive knowledge and experience in May 2009. Mr. Tveterthe US, UK and European cable industries. He was President of UK cable operator Telewest Global Inc. and held a range of senior management positions at Time Warner Cable, Comcast Corporation and Cablevision Systems Corporation. Mr. Tveter was a Non-Executive Board Member of Open TV and served as Chairman of Sightspeed Inc, a video conferencing and communications provider. Mr. Tveter has extensive knowledge and experience in the US, UK, and European cable industries. Mr. Tveter’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee, with particular strength inwhich include banking, strategic planning, business leadership, organizational management and business operations, accounting and reporting, finance, marketing, operationstechnology and information technology.security, mergers and acquisitions, real estate, marketing and public relations.
Michael N. Vittorio -
Mr. Vittorio has been President and Chief Executive Officer of the Corporation and the Bank since 2003.BOARD LEADERSHIP STRUCTURE
The Board has determined that the Chairman of the Board will be an independent director. The Board believes that management accountability and the Board’sBoard’s independence from management are best served by having an independent, non-executive chairman.
Walter C. Teagle III has served as Chairman of the Board since May 2005. As Chairman, Mr. Teagle organizes the work of the Board and ensures that the Board has access to sufficient information to enable it to carry out its responsibilities, including monitoring the Corporation’sCorporation’s performance and the performance of the Board and management. The role of the Chairman of the Board includes: (1) presiding over all meetings of the Board and stockholders, including regular executive sessions of the Board in which the CEOChief Executive Officer, a management director, and other members of management do not participate; (2) establishing the annual agenda of the Board and agendas of each meeting in consultation with the CEO;Chief Executive Officer; (3) serving as an ex officio member of each board committee and advising with respect to the work of each Committee and reviewing together with the Governance and Nominating Committee changes in Board membership and the membership and chair of each Committee;committee; (4) coordinating periodic Board reviews of management’s strategic plan for the Corporation; and (5) leading the Board’s review of the succession plan for the CEO; and (6) coordinating with the Compensation Committee of the Board the annual performance review of the CEO.
BOARD’S ROLE IN RISK OVERSIGHT
Risk is an integral part of Board and Board committee discussions throughout the year.discussions. The significant risks facing the Corporation are set forth in an Enterprise Risk Management document prepared by management and reviewed by the Board. While thedocument. The Corporation’s management team, which includes a Chief Risk Officer, is responsible for identifying, assessing and managing risk and the Board is responsible for risk oversight and fulfills this responsibility primarily through its committees. In granting authority to management, approving policies and strategies and receiving management reports, the Board and its committees consider, among other things, the risks that the Corporation faces. For each critical risk, such as credit risk, interest rate risk and liquidity risk, the Corporation has a formal written policy that is approved by an appropriate boardBoard committee or the full Board.
The following table sets forth eachthe Board and Board committee and identifies its risk oversight responsibilities.
Board or Board Committee | Risk Oversight Responsibilities |
Board of Directors | Strategic, Earnings and Management Succession |
| Loan Committee | Credit and Allowance for Loan Losses |
Asset Liability Committee | Interest Rate, Liquidity, |
Audit Committee | Financial Reporting, Internal Control, Compliance, Operational, Technology, Information Security, Business Continuity and Fiduciary |
Governance and Nominating Committee | Reputation, Legal and |
Compensation Committee | Compensation |
MEETINGS OF THE BOARD OF DIRECTORS
All of the members of the Board of the Corporation also serve on the Board of the Bank. The Board of the Corporation held ten regular meetings during 2013.2016. Each director attended at least 75% of the aggregate number of Board meetings and meetings of the committees on which such director served.
BOARD COMMITTEES AND MEETINGS
The Board of the Corporation has three standing committees: the Governance and Nominating Committee; the Audit Committee; and the Compensation Committee. The Board of the Bank also has threetwo standing committees: the Loan Committee and the Asset Liability Committee and the Strategic Planning Committee.
Governance and Nominating Committee
All the members of the Corporation’sCorporation’s Governance and Nominating Committee are independent directors as defined in the Nasdaq Rules. The members of the Governance and Nominating Committee are Paul T. Canarick, Alexander L. Cover, J. Douglas Maxwell, Jr., Howard Thomas Hogan, Jr., Peter Quick, Milbrey Rennie Taylor and Walter C. Teagle III. The Committee met foursix times during 2013.
The Corporation’sCorporation’s Board has adopted a formal written charter for the Governance and Nominating Committee. A current copy of the charter and the Corporation’s Corporate Governance Guidelines are available on the Corporation’s website by going to www.FNBLI.com and clicking on, placing the cursor over “Investor Relations,” then clicking on “Corporate Governance,” again clicking on “Corporate Governance,”Governance” and then clicking on “Governance“Board Governance and Nominating Committee Charter” or “Corporate Governance Guidelines.”
Among other things, the Governance and Nominating Committee is currently responsible for: (1) identifying individuals qualified to become Board members and recommending to the Board the director nominees for the next annual meeting of stockholders; (2) recommending to the Board written corporate governance guidelines and monitoring compliance with said guidelines; (3) leading the Board in an annual Board self-assessment and reporting to the Board on its own self-assessment and the self-assessments performed by the other Board committees; and (4) recommending to the Board director candidates for each committee.
Although the Corporation has a long history of being able to attract and maintain a cohesive Board with the variety of skills necessary to properly oversee the affairs of the Corporation, the Governance and Nominating Committee will consider director candidates recommended by stockholders. Submission of candidates may be made in writing at any time. However, to be considered by the Governance and Nominating Committee for nomination at the 20152018 annual meeting, such submissions should be made no later than November 17, 2014December 15, 2017 to the ChairmanChairwoman of the Governance and Nominating Committee at the Corporation’s address set forth in this proxy statement. In addition, nominations for the election of directors may be made by any stockholder entitled to vote for the election of directors provided that such nominations are made in accordance with the provisions of the Corporation’s bylaws establishing the information and notice requirements for such nominations.
In addition to interviews, the Governance and Nominating Committee may evaluate potential nominees by reviewing resumes, checking business and/or personal references, and performing background checks as deemed appropriate. The Corporation has not paid a fee to any third party or parties to identify or evaluate or assist in identifying or evaluating potential nominees.
Except for Mr. TveterDesmond who was elected by the Board of Directors in September 2013,2016, all of the Class III nominees approved by the Governance and Nominating Committee for inclusion on the Corporation’s proxy card for the Annual Meeting of Stockholders to be held April 22, 201419, 2017 are directors standing for re-election.
Audit Committee
The members of the Audit Committee are Allen E. Busching, Alexander L. Cover, John T. Lane, J. Douglas Maxwell, Jr. andDesmond, Peter Quick, Walter C. Teagle III.III and Eric J. Tveter. The Committee met seveneight times during 2013.
The Corporation’sCorporation’s Board has adopted a formal written charter for the Audit Committee. A current copy of the charter is available on the Corporation’s website by going to www.FNBLI.com and clicking on, placing the cursor over “Investor Relations,” then clicking on “Corporate Governance,” again clicking on “Corporate Governance,”Governance” and then clicking on “Audit“Board Audit Committee Charter.”
The Board has determined that all members of the Audit Committee are independent as independence for audit committee members is defined in SEC Rule 10A-3 and the Nasdaq Rules. The Board has also determined that Alexander L. Cover is, John J. Desmond and Eric J. Tveter each qualify as an audit“audit committee financial expertexpert” as that term is defined in paragraph (d)(5)(ii) of Item 407 of Regulation S-K of the Securities and Exchange Commission. The Board of Directors has also determined that all members of the Audit Committee have banking or related financial management expertise.
The responsibilities of the Audit Committee is responsible for: (1) selecting, retaining, and dismissing, if necessary,are described under the independent auditors and approving audit fees and engagement terms and all non-audit services provided by the independent auditors; (2) confirming the independence of the independent auditors; (3) reviewing and discussing with management and the independent auditors the Corporation’s audited consolidated financial statements and internal control over financial reporting; (4) meeting with the Corporation’s independent auditors and reviewing with them the results of their annual audit of the Corporation’s consolidated financial statements, including any recommendations the auditors may have with respect to internal controls or other business matters; (5) approving the audit plan and reviewing the scope and results of internal audits performed by both the Bank’s in-house audit staff and external firms; (6) reviewing the results of examinations performed by regulatory authorities; (7) overseeing management's responsibility to fulfill the annual internal control reporting requirements of Section 404 of the Sarbanes-Oxley Act and that the Bank fulfills the annual audit and management reporting requirements of the Federal Deposit Insurance Corporation Improvement Act of 1991; and (8) reviewing the Bank's performance of its obligations under various laws and regulations, including those affecting consumers. The Auditheading “Audit Committee Report is included Report” in a separate section of this proxy statement.
Compensation Committee
All the members of the Corporation’sCorporation’s Compensation Committee are independent directors as defined in the Nasdaq Rules. The members of the Compensation Committee are Allen E. Busching, Stephen V. Murphy, Milbrey Rennie Taylor, and Walter C. Teagle III.III and Eric J. Tveter. The Committee met foureight times during 2013.
The Corporation’sCorporation’s Board has adopted a formal written charter for the Compensation Committee. A current copy of the charter is available on the Corporation’s website by going to www.FNBLI.com and clicking on, placing the cursor over “Investor Relations,” then clicking on “Corporate Governance,” again clicking on “Corporate Governance,”Governance” and then clicking on “Compensation“Board Compensation Committee Charter.”
The Compensation Committee is responsible for: (1) conducting a periodic review of the Corporation’sCorporation’s incentive-based compensation policy for covered persons, as defined, and other compensation policies, strategies and plans for the CEO, other executive officers and non-employee directors and reporting and making recommendations to the Board with respect thereto; (2) recommending to the Board approval of employment contracts for the CEO and other executive officers; (3) evaluating the performance of the CEO and recommending to the Board the base compensationsalary level for the CEO; (4) reviewing, at its discretion, the CEO’s performance evaluation of the other executive officers of the Corporation and recommending to the Board the compensationbase salary level of each such officer; (5) recommending to the Board approval of cash compensation for non-employee directors; (6) setting corporate goals used to determine cash and equity incentive compensation paid to the CEO and other executive officers and stock-based compensation awarded to the CEO, other executive officers and non-employee directors;officers; (7) recommending to the Board approval ofapproving cash incentive compensation for the Corporation’s CEO and other executive officers pursuant to the Corporation’s compensation programprogram; (8) administering the Corporation’s stock compensation plan,non-equity and equity incentive plans, including recommending to the Board approval ofapproving awards of stock-based compensation to the CEO,NEOs, other executive officers, employees and non-employee directors under such plan and pursuant to the Corporation’s compensation programdirectors; (9) reviewing the overall annual salary budget for the Bank’s entire employee population; (10) conducting, or causing to be conducted, at its discretion, a periodic review of the Corporation’s pension, 401(k), supplemental executive retirement and health and welfare plans; (11) reviewing and approving the compensation disclosures included in the Corporation’s annual proxy statement and preparing or causing to be prepared an annual report of the Committee on executive compensation to be included therein; (12) considering the results of the most recent non-binding, stockholder advisory vote on executive compensation and, if deemed necessary, recommending to the Board changes in compensation policies, practices and decisions; and (13) reviewing the most recent non-binding, stockholder advisory vote on the frequency of stockholder votes on executive compensation and, in light of such advisory vote, recommending to the Board how frequently the Corporation should include in its proxy materials a non-binding, stockholder advisory vote on the compensation of its named executive officers.
The Compensation Committee administers the Corporation’s stock compensationequity incentive plan, includesincluding selecting directors and officers to whom awards are to be made and determining the timing, duration, amount, type and terms of each award. Members of the Compensation Committee as well as all other non-employee directors of the Corporation have been eligible for awards of stock-based compensation in the past and it is currently anticipated that they will be eligible for future awards.
In determining an appropriate level of compensation for the CEO and, other executive officers and the Board, the Compensation Committee periodically engages an independent compensation consulting firm to gather and help analyze the information necessary to make such determinations. In 2012,2015, the Compensation Committee engaged Pearl Meyer & Partners (“PM&P”), an independent national compensation consulting firm, to conduct a review of the compensation of the Company’s CEO, and other executive officers.officers and the Board. The objective of the review was to provide an assessment of the competitiveness and effectiveness of the Corporation’s compensation programs relative to peer banks.
In performing their 2012 review, PM&P worked with the Compensation Committee to develop a custom peer group. The peer banks were similar in size and scope to the Bank, with total assets ranging fromaveraging approximately $1.2 billion to $4.3$3.7 billion. This rangeaverage compares to total assets for the Bank of approximately $2.4$3.5 billion at year-end 2013.2016. The peer group consisted of seventeen (17) publicly-held banksbank holding companies located in the Bank’s general geographic area and included S&TArrow Financial Corporation, Bridge Bancorp, Inc., TompkinsBryn Mawr Bank Corporation, Citizens & Northern Corporation, CNB Financial Corporation, Sun Bancorp,Financial Institutions, Inc., Flushing Financial Corporation, Hudson Valley Holding Corp., Lakeland Bancorp, Inc., Hudson Valley Holding Corp., Sterling Bancorp, Metro Bancorp, Inc., Peapack-Gladstone Financial Institutions,Corporation, S&T Bancorp, Inc., Sterling Bancorp, Suffolk Bancorp, Sun Bancorp, Inc., Univest Corporation of Pennsylvania, Arrow Financial Corporation, Bryn Mawr Bank Corporation, CNB Financial Corporation, Peapack-Gladstone Financial Corporation, Centerand Washington Trust Bancorp, Inc., Alliance Financial Corporation, Bridge Bancorp, Inc., In addition to gathering and BCB Bancorp, Inc.analyzing compensation data for the peer group, PM&P also gathered and analyzed peer compensation data from published industry surveys, including their own survey and surveys performed by other nationally recognized compensation consulting firms. In performing their reviews, PM&P assessed the elements of executive compensation both individually and in the aggregate, including base salary, annual cash incentive compensation and annual equity awards. Based on their reviews, PM&P provided the Compensation Committee with a comparison of the compensation of the CEO and other executive officers to the market median and commentary on such compensation in light of the financial performance of the Company versus that of its peers.median. PM&P also provided observations and recommendations on emerging trends and best practices in executive compensation.
Other than the services described above, PM&P did not provide any other services to the Company.
The Compensation Committee considers the most recent stockholder say on paysay-on-pay advisory vote in reviewing the Corporation’s executive compensation policies, practices and decisions. In light of the support of our stockholders, theThe Compensation Committee concluded that no majorsignificant revisions were necessary to our executive compensation program.
Compensation Committee Interlocks and Insider Participation. No member of the Compensation Committee: (1) was an officer or employee of the Corporation or the Bank; (2) was formerly an officer of the Corporation or the Bank; or (3) had any relationship requiring disclosure by the Corporation under the SEC’s rules governing disclosure of related party transactions. No executive officer of the Corporation served as a director or member of a compensation committee of another entity, one of whose directors or executive officers served as a member of the Corporation’s Board of Directors or Compensation Committee.
Loan Committee of the Bank
The members of the Loan Committee are Paul T. Canarick, Howard Thomas Hogan, Jr., John T. Lane, J. Douglas Maxwell, Jr., Stephen V. Murphy,Peter Quick, Walter C. Teagle III and Michael N. Vittorio. In 2013, theThe Committee met quarterlyfive times during 2016.
The Loan Committee is responsible for providing oversight with respect to review the overall loan portfolio, reports by the Bank’s independent loan review consultantslending activities. In this regard, the Committee: (1) oversees credit risk and approves policies that govern lending activities and credit risk management; (2) reviews and ratifies the allowance for loan losses.
Asset Liability Committee of the Bank
The members of the Asset Liability Committee are Paul T. Canarick, Alexander L. Cover, John T. Lane, Stephen V. Murphy, Walter C. Teagle III and Michael N. Vittorio. The Committee held four meetings in 2013.
The Asset Liability Committee is responsible for providing oversight with respect to the Bank’sBank’s achievement of its overall objective of optimizing returns consistent with prudent risk management regarding assets, liabilities, equity and off-balance sheet activities. In this regard, the Committee: (1) oversees investment risk and approves the investment policy limits and operating guidelines set forth in the Bank’s Investment Policy; (2) oversees interest rate risk and approves the risk limits and operating guidelines set forth in the Bank’s Interest Rate Risk Policy; (3) oversees liquidity risk and approves the risk limits and operating guidelines set forth in the Bank’s Liquidity Policy and Liquidity Contingency Plan; and (4) oversees management’s use, if any, of embedded and stand-alone derivative instruments for purposes of managing interest rate risk.
BOARD MEMBER ATTENDANCE AT ANNUAL MEETINGS
The Board strongly encourages each of its members to attend the Annual Meeting of Stockholders. In this regard, the Board sets the date for the Annual Meeting of Stockholders to coincide with theits April Board meeting. All directors that were directors at the time ofexcept for Mr. Tveter attended the prior year’s Annual Meeting of Stockholders, attended the meeting, which was held on April 16, 2013.
SECURITY HOLDER COMMUNICATIONS TO THE BOARD OF DIRECTORS
The Corporation’sCorporation’s Board does not have a formal process for security holders to send communications to the Board. The Board believes that a formal process is unnecessary because the Corporation is relatively small and both the Chairman of the Board and the President and CEO, who is also a director, are easily accessible by telephone and mail.
COMPENSATION OF DIRECTORS
Cash Compensation
The Chairman of the Board of the Corporation and the Bank receives a quarterlyn annual retainer of $22,375 for service on both boards. Non-employee directors of the Corporation receive an annual retainer for service on both boards for attending up to ten meetings per year and a per meeting fee for each meeting in excess of ten. Annual retainers and per meeting fees for service on both boards in 2016 are shown in the following table.
Board Member | Annual Retainer | Per Meeting Fee |
Chairman | $111,000 | None |
Non-employee Directors | $32,500 | $1,250 |
Non-employee directors of the Corporation and the Bank receive annual retainers for Board committee service as shown in the following table.
Committee | Committee Chair | Committee Member |
Audit Committee | $15,000 | $7,500 |
Compensation Committee | $10,000 | $5,000 |
Governance and Nominating Committee | $8,000 | $4,000 |
Asset Liability Committee | $10,000 | $5,000 |
Loan Committee | $10,000 | $4,000 |
There are no per meeting fees for standing committee meetings. Loan Committee members are paid $500 for each Management Loan Committee meeting attended and Ad-Hoc Committee members are paid $500 for each meeting attended.
The Chairman does not receive per meeting fees or committee retainers. Other non-employee directors receive a quarterly retainer of $3,625 for service on the Corporation’s Board and $1,250 for each regularly scheduled meeting of the Bank’s board, provided they attend at least eight of the ten meetings. If a director attends fewer than eight meetings, the director receives $1,250 for each meeting attended. In addition, non-employee directors of the Corporation and the Bank receive $1,250 for each special Board meeting and $500 for each telephone Board meeting and, as described below, receive retainers for board committee service.
Stock-based Compensation
The Corporation’s 2006 Stock CompensationCorporation’s 2014 Equity Incentive Plan allows for the granting of equity awards to non-employee directors of the Corporation. Equity compensation for directors consists of restricted stock units (“RSUs”). The number of RSUs granted to the Chairman and each non-employee director is in accordance with a methodology recommended by the Compensation Committee and adopted by the Board of Directors.
RSUsgranted prior to January 19, 2016, are generally convertible into shares of Common Stock after three years provided certain performance criteria are met (“performance-based RSUs”). However, 1,895 RSUs were granted to directors in January 2014 that will vest ratably over a two-year time period (“time-based RSUs”) All RSUs granted to date immediatelynon-employee directors on January 19, 2016, and January 27, 2017, are time-based RSUs that vest uponratably and convert into shares of Common Stock over a changethree-year time period. The RSUs granted in control, retirement, death or total and permanent disability.January 2016 also receive annual cash dividend equivalents at the same rate as the dividends declared by the Board on the Corporation’s common stock. The ability to convert performance-based RSUs into shares of Common Stock after three years and the related conversion ratio is determined in the same manner as for executive officers described in the “Compensation Discussion and Analysis” appearing elsewhere in this proxy statement.
Retirement Plan
On June 18, 1991, the Board of Directors of the Bank adopted The First National Bank of Long Island Retirement Plan for Directors ("Retirement Plan"). Effective December 31, 2000, the Retirement Plan was terminated. Upon termination, the benefits earned by directors for services rendered through December 31, 2000to date were frozen and the ability of directors to earn additional benefits under the Retirement Plan was discontinued. Upon retirement after attaining the age of sixty (60), each of the current directors who was a director prior to 2001 will receive a credit ("Credit Percentage") of ten percent (10%) multiplied by the number of years of service on the Board through December 31, 2000, not to a maximum ofexceed one hundred percent (100%). The annual benefit ("Annual Benefit") payable under the Retirement Plan is equal to the monthly Board of Directors’ attendance fee in effect as of December 31, 2000, ofwhich was $1,000, multiplied by twelve (12) and then multiplied by the Credit Percentage. The Annual Benefit is payable in quarterly installments for a period of seven (7) years from the date of retirement ("Payment Period"). In the event of the death of a director or a retired director, the surviving spouse of such director is entitled to receive an annual payment equal to seventy-five percent (75%) of the Annual Benefit, calculated as set forth above, and payable over the remainder of the applicable Payment Period.
The following table sets forth information concerning the compensation of directors for 2013.
Fees Earned or Paid in Cash | Stock Awards (1) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (2) | Total | Aggregate Option Awards Outstanding | Aggregate Stock Awards Outstanding (3) | |||||||||||||
| Name | ($) | ($) | ($) | ($) | (#) | (#) | ||||||||||||
| Allen E. Busching | 46,750 | 30,958 | 765 | 78,473 | 9,350 | 1,850 | ||||||||||||
| Paul T. Canarick | 44,000 | 30,958 | 1,089 | 76,047 | 9,788 | 1,850 | ||||||||||||
| Alexander L. Cover | 53,250 | 30,958 | 84,208 | 10,226 | 1,850 | |||||||||||||
| Howard Thomas Hogan, Jr., Esq. | 38,250 | 30,958 | 3,454 | 72,662 | 10,348 | 1,850 | ||||||||||||
| John T. Lane | 52,250 | 30,958 | 83,208 | 5,474 | 1,850 | |||||||||||||
| J. Douglas Maxwell, Jr. | 48,500 | 30,958 | 4,231 | 83,689 | 10,070 | 1,850 | ||||||||||||
| Stephen V. Murphy | 49,750 | 30,958 | 80,708 | 5,617 | 1,850 | |||||||||||||
| Milbrey Rennie Taylor | 37,750 | 30,958 | 68,708 | 4,496 | 1,850 | |||||||||||||
| Walter C. Teagle III | 89,500 | 61,721 | 1,096 | 152,317 | 19,263 | 3,701 | ||||||||||||
| Eric J. Tveter | 8,583 | 8,583 |
Director Compensation
| Fees Earned or Paid in Cash | Stock Awards (1) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (2) | Total | Aggregate Option Awards Outstanding | Aggregate Stock Awards Outstanding (3) | |
Name | ($) | ($) | ($) | ($) | (#) | (#) | |
Paul T. Canarick | 49,750 | 35,000 | 1,388 | 86,138 | 6,272 | 5,218 | |
Alexander L. Cover | 64,750 | 35,000 |
| 99,750 | 16,801 | 5,218 | |
John J. Desmond (4) | 9,375 | 9,851 |
| 19,226 |
| 375 | |
Howard Thomas Hogan, Jr., Esq. | 46,250 | 35,000 | 3,453 | 84,703 | 16,801 | 5,218 | |
John T. Lane (5) | 54,750 | 35,000 |
| 89,750 |
| 5,218 | |
Stephen V. Murphy | 63,750 | 35,000 |
| 98,750 | 7,868 | 5,218 | |
| Peter Quick | 51,750 | 35,000 | 86,750 | 1,818 | |||
Milbrey Rennie Taylor | 47,500 | 35,000 |
| 82,500 | 10,118 | 5,218 | |
Walter C. Teagle III | 111,000 | 70,000 | 96 | 181,095 | 29,132 | 10,437 | |
Eric J. Tveter | 50,500 | 35,000 |
| 85,500 |
| 5,218 | |
(1) | The values shown are for time-based RSU awards made in January |
(2) | The change in pension value represents interest on the benefit frozen as of December 31, 2000. |
(3) | With respect to outstanding performance-based RSUs, this column includes the maximum number of shares into which |
(4) | Mr. Desmond was first appointed to the Board in September 2016. |
(5) | Mr. Lane is retiring from the Board upon the expiration of his term at the Annual Meeting. |
MANAGEMENT
The following table sets forth information about all executive officers of the Corporation and the Bank as of the date of this proxy statement.
Executive Officers | Age | Present Capacity | Officer Since |
| Michael N. Vittorio | 61 | Director, President and Chief Executive Officer of the Corporation and the Bank | 2002 |
| Sallyanne K. Ballweg | 58 | Senior Executive Vice President of the Corporation and the Bank and Secretary of the Corporation | 2007 |
| Mark D. Curtis | 59 | Executive Vice President and Chief Financial Officer of the Corporation and the Bank; Treasurer of the Corporation and Cashier of the Bank | 1997 |
| Richard Kick | 56 | Executive Vice President of the Corporation and the Bank | 1991 |
| Donald L. Manfredonia | 62 | Executive Vice President of the Corporation and the Bank | 1987 |
| Christopher Becker | 48 | Executive Vice President and Chief Risk Officer of the Corporation and the Bank | 2011 |
| Richard P. Perro | 48 | Executive Vice President of the Bank | 2002 |
Executive Officers | Age | Present Capacity | Officer Since |
Michael N. Vittorio | 64 | Director, President and Chief Executive Officer of the Corporation and the Bank | 2002 |
Mark D. Curtis | 62 | Senior Executive Vice President and Chief Financial Officer of the Corporation and the Bank; Treasurer of the Corporation and Cashier of the Bank | 1997 |
Richard Kick | 59 | Executive Vice President of the Corporation and the Bank; Senior Retail Lending Officer, Senior Facilities Administrator and Chief Security Officer of the Bank | 1991 |
Donald L. Manfredonia | 65 | Executive Vice President of the Corporation and the Bank and Senior Lending Officer of the Bank | 1987 |
Christopher Becker | 51 | Executive Vice President and Chief Risk Officer of the Corporation and the Bank; Secretary of the Corporation | 2011 |
Richard P. Perro | 51 | Executive Vice President of the Corporation and the Bank; Branch Distribution Officer and Deputy Security Officer of the Bank | 2002 |
Mr. Curtis, the Chief Financial Officer of the Corporation and the Bank, was promoted to Senior Executive Vice President of the Corporation and the Bank in 2016. Prior to that, Mr. Curtis served as Executive Vice President of the Corporation and the Bank.
Mr. Becker joined the Corporation and the Bank in February 2011 as Vice President of the Corporation and Senior Vice Presidentand Deputy Chief Financial Officer of the Bank. In 2013, Mr. Becker was promoted to Executive Vice President and Chief Risk Officer of the Corporation and the Bank. Prior to joining the Bank, Mr. Becker was Executive Vice President and Chief Financial Officernamed Secretary of the Bank of Smithtown. Prior to that, Mr. Becker served as President and Chief Executive officer of a bankCorporation in organization after spending nearly 19 years at The Bridgehampton National Bank, most recently as Executive Vice President and Chief Operating Officer.
Mr. Perro joined the Bank in 2002 as Vice President and Branch Manager. He was promoted to Senior Vice President of Branch Administration in 2009 and was promoted to the Head of Branch Distribution in 2011. In 2013, Mr. Perro was promoted to Executive Vice President of the Corporation and the Bank and Head of Branch Distribution for the Bank.
PROPOSAL 2
NON-BINDING, ADVISORY VOTE TO APPROVE THE COMPENSATION PAID TO THE
CORPORATION’S NAMED EXECUTIVE OFFICERS
The compensation paid to our named executive officers is discloseddisclosed in this proxy statement in the sections entitled “Compensation Discussion and Analysis,” “Compensation of Executive Officers,” “Compensation Pursuant to Plans” and “Employment Contracts.” We believe that our compensation policies, practices and decisions are focused on pay-for-performance principles and are strongly aligned with the long-term best interests of our stockholders. Compensation of our named executive officers is designed to enable us to attract and retain talented and experienced senior executives to lead the Corporation successfully in a competitive environment. Stockholders are being asked to cast a non-binding, advisory vote on the following resolution:
RESOLVED, that the compensation paid to the Corporation’sCorporation’s named executive officers as disclosed in its proxy statement for the April 22, 201419, 2017 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.
The affirmative vote of the holders of a majority of shares represented in person or by proxy and voting on this item will be required for approval.
Your vote on this Proposal 2 is advisory, and therefore not binding on the Corporation, the Compensation CommitteeCommittee or the Board. The vote will not be construed to overrule any decision by the Corporation or the Board; to create or imply any change to the fiduciary duties of the Corporation or the Board; or to create or imply any additional fiduciary duties for the Corporation or the Board. However, our Board and our Compensation Committee value the opinions of our stockholders and to the extent there is a significant vote against the compensation paid to our named executive officers as disclosed in this proxy statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
The Board of Directors recommends a vote FOR the proposal to approve the
compensation paid to the Corporation’s named executive officers.
PROPOSAL 3
NON-BINDING, ADVISORY VOTE REGARDING THE FREQUENCY OF AMENDMENT TOVOTING ON THE CERTIFICATE OF INCORPORATION COMPENSATION PAID
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
As required by Section 14A of the Exchange Act, the Company is also providing stockholders with a non-binding, advisory vote on the frequency with which the Corporation’s Certificatestockholders shall have the advisory say-on-pay vote on compensation paid to our named executive officers provided for in Proposal 2. We currently hold the say-on-pay vote every year.
The Corporation is presenting this Proposal 3, which gives you as a stockholder the opportunity to inform the Corporation as to how often you wish us to include a proposal, similar to Proposal 2 above, in our proxy statement. In particular, we are asking whether the advisory vote should occur every year, every two years or every three years. The Corporation asks that you support a frequency period of Incorporationevery year for future non-binding, advisory stockholder votes on the compensation paid to increaseour named executive officers. Stockholders are being asked to vote on the number of authorized shares of Common Stock from twenty million (20,000,000) shares to forty million (40,000,000) shares. If approved byfollowing resolution:
RESOLVED, that the stockholders Article Fifth of the Corporation’s Certificate of Incorporation would be amended by deleting the first sentence thereof in its entirety, and substituting in lieu thereof the following:
Choice 1 – every year;
Choice 2 – every two years;
Choice 3 – every three years; or
Choice 4 – abstain from voting.
If there is no designation on any proxy as to make all decisionshow the shares represented should be voted, the proxy will be voted for Choice 1 – every year.
The Board continues to believe that an annual stockholder vote on the compensation paid to our named executive officers represents a best practice in corporate governance and determinations regarding: (i)will provide the selection of participantsBoard with current information on stockholder sentiment about our executive compensation program and enable the granting of awards; (ii) establishingBoard to respond timely, when deemed appropriate, to stockholder concerns about the termsprogram.
Our stockholders voted on a similar proposal in 2011, with a majority voting to hold the say-on-pay voting every year.
As with your vote on Proposal 2, your vote on this Proposal 3 is advisory, and conditions relating to each award; (iii) adopting rules, regulations and guidelines for carrying out the 2014 Equity Incentive Plan’s purposes; and (iv) interpreting the provisions of the 2014 Equity Incentive Plan and any award agreement. The 2014 Equity Incentive Plan also permits the Committee to delegate its responsibilities and powers to any person or persons selected by it, subject to the limitations set forth in the plan.
The Board of Directors recommends a vote FOR a vote FOR approvalfrequency of every year for
future non-binding, advisory stockholder votes on the 2014 Equity Incentive Plan
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed with management the Compensation Discussion and Analysis included herein and provided pursuant to Item 402(b) of Regulation S-K.
Based on this review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
The Compensation Committee:
● | Eric J. Tveter, Chairman |
● | Stephen V. Murphy |
● | Milbrey Rennie Taylor |
● | Walter C. Teagle III |
The preceding report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 (“1933 Act”) or the Securities Exchange Act of 1934 (“1934 Act”), except to the extent the Corporation specifically incorporates this information by reference, and shall not otherwise be deemed filed under the 1933 Act or the 1934 Act.
COMPENSATION DISCUSSION AND ANALYSIS
The following is a discussion of the compensation awarded to, earned by or paid to the named executive officers. The discussion explains all the material elements of the Corporation’sCorporation’s compensation of the named executive officers. It should be read in conjunction with the other executive compensation disclosures that appear elsewhere in this proxy statement.
Guiding Principles
In designing and maintaining a compensation program for the Corporation’sCorporation’s named executive officers, other executive officers and employees, the Compensation Committee adheres to the following guiding principles:
(1) | The compensation program should be principles-based, employ best practices in executive compensation and consider all relevant regulatory guidance regarding sound incentive compensation policies. |
(2) | The compensation program should be designed and supervised by the Compensation Committee with, as needed, the assistance of independent compensation consultants, legal counsel and other advisors who have significant experience in risk management, compensation practices and legal matters in the financial services industry. |
(3) | The Compensation Committee should consist entirely of independent directors and operate under a charter adopted by the Board of Directors that clearly defines its duties and responsibilities. Significant approvals by the Compensation Committee regarding the provisions of the executive compensation program and awards thereunder should be ratified by the full Board of Directors. |
(4) | A significant portion of executive compensation awarded under the program should be directly tied to corporate performance and thereby closely aligned with the interests of stockholders. The corporate performance levels necessary to earn threshold, target and maximum cash incentive and equity awards should be determined by the Compensation |
(5) | The compensation program should enable the Corporation to attract and retain highly skilled professionals in each necessary discipline (i.e., executive, financial, lending, operations, risk management). |
(6) | Compensation paid should be appropriately balanced between short and long-term components. The short-term components should consist of base salary and cash incentive compensation and the long-term components should be equity awards that vest over |
(7) | The competitiveness of total direct compensation, which consists of base salary, cash incentive and equity awards, should be tested regularly by a comparison to: (1) a group of peer banks selected by the Compensation Committee that are similar in size and scope to the Corporation; and (2) amounts published in compensation surveys for the banking industry conducted by nationally recognized independent compensation consulting firms. |
(8) | The compensation program should achieve internal equity among the |
(9) | Retirement benefits should be market competitive and evaluated based on the percentage of the |
(10) | Payments upon a change in control or termination should be market competitive, |
(11) | The Compensation Committee should identify those employees, whether they |
(12) | Clawbacks should be utilized within the compensation program |
(13) | Retention of vested or exercised equity awards should be required until stock ownership guidelines are met. |
(14) | Employees, whether they are executive officers or otherwise, should be prohibited from hedging the value of equity compensation that vests over time. |
(15) | Performance goals should be established |
(16) | Achievement of performance goals should be certified by the Compensation Committee prior to the payment of awards. |
Objectives of the Executive Compensation Program
The Corporation’sCorporation’s executive compensation program is designed to enable the Corporation to attract and retain the talenttalented executive officers necessary to safely and successfully operate and grow the Bank. The executive compensation program promotes sound risk management and long-term value creation for our stockholders.
What the Executive Compensation Program is Designed to Reward
Certain elements of the executive compensation program are intended to reward current performance while others are intended. By offering long-term equity compensation, the executive compensation program is also designed to provide an incentive for continued employmentreward executive officers who help maximize long-term financial performance and future performance.
Elements of Executive Compensation
The executive compensation program consists of four basic components: (1) base salary; (2)annual cash incentive compensation; (3) equity awards; and (4) other noncash compensation, consisting primarily of retirement benefits.
Why We Choose To Pay Each Element of Executive Compensation
Base Salary.
The Compensation Committee believes that base salary forAnnual Cash incentive.Incentive Compensation. The Compensation Committee has included annual cash incentive compensation in the executive compensation program as a means to incentivizeincent executive officers to optimize corporate performance through, among other things, the achievement of annual corporate goals set forth in the Corporation’s strategic plan.
Equity Awards. The Compensation Committee uses equity awards granted under the Corporation’s equity incentive plan as a means to incentivizeincent executive officers to optimize corporate performance over a sustainedan extended time-period. Equity awards, together with retirement benefits, are the longer-term components of compensation.
Other Noncash Compensation. Other noncash compensation consists of: (1) retirement benefits paid under the Bank’s defined benefit pension plan (“Pension Plan”), 401(k) plan and Supplemental Executive Retirement Plan (“SERP”); and (2) noncash fringe benefits not available to the general employee population of the Bank. Noncash fringe benefits, other than those available to the general employee population at the Bank, include the personal use of business automobiles and a country clubs.
Retirement benefits provided by the Corporation’sCorporation’s pension 401(k) and SERP401(k) plans are providedintended to encourage the named executive officers to maintain their employment with the Corporation and maximize long-term corporate performance. The purposeSERP, of which the SERPCEO is to provide executive officers selected by the Compensation Committee withonly participant, provides the additional pension and 401(k) benefits if any, that theythe CEO would receive in the absence of Internal Revenue Code provisions which limit the amount of compensation that can be considered in determining retirement benefits to be paid under the Bank’s tax-qualified retirement plans. The only participantSERP is explained in the SERP, which is described in detail elsewhere in“PENSION BENEFIT” section of this proxy statement,statement. A country club membership is the CEO. Country club memberships are provided to the Bank’s CEO and Senior EVP to aid themhim in developing and retaining business. Business automobiles are provided to all of the Bank’s executive officers as a competitive perquisite and as an alternative to reimbursing such officers for mileage driven on account of business conducted on behalf of the Corporation.
How We Determine The Amount To Pay For Each Element of Executive Compensation
The total compensation paid by the Corporation to each of itsthe named executive officers is based on a variety of factors including: (1) the Company’s recent and expected future overall financial performance; (2) current economic conditions and the effect thereof on the Company’s performance and that of its peers; (3) the executive officer’s experience and tenure in his or her current position, years of service withto the Bank, scope of responsibilities, leadership ability, compensation relative to the Company’s other executive officers, recent and expected future performance, and contributions to corporate performance; (4) a comparison of total compensation and each element of compensation paid to the executive to compensation amounts paid by peer banks to executives with similar roles and compensation amounts set forth in published industry surveys for executives with similar roles; and (5) the most recent stockholder advisory vote on executive compensation. As previously discussed, comparative compensation studies are performed and updated on a periodic basis by an independent compensation consulting firm engaged by and working under the direction of the Corporation’s Compensation Committee.
Base salary for the CEO is reviewed by the Compensation Committee on an annual basis. The Compensation Committee completesalso performs an annual review of the base salary recommendations made by the CEO for the Company’s other named executive officers. Each executive officer does not necessarily receive an increase in base salary each year. In reviewing each named executive officer’s base salary, the Compensation Committee considers the amounts paid by peer banks, andthe amounts set forth in compensation surveys performed by nationally recognized independent compensation consulting firms. The Compensation Committee also considersfirms and the Corporation’s overall budget for base salary increases.
Annual cash incentive compensation for the NEOs represents 45%as a group over the past three years was approximately one-third of their total annual incentive compensation, whilewith equity awards make upcomprising the remaining balance. For the Corporation’s CEO and Senior EVP and CFO,Executive Vice Presidents, cash incentive compensation is based entirely on corporate performance measured by net income, ROA and bank safety. For the other NEOs, cash incentive compensation is based on a combination of corporate and personal performance, with corporate performance weighted 80% and personal performance weighted 20%. Personal performance is measured by the achievement of goals, monetary and nonmonetary, assigned byto the CEO or other NEOs. Cash incentive compensation for all executive officers can be increased or decreased at the discretion of the Compensation Committee.NEO.
The following table sets forth the range of annual cash incentive compensation as a percentage of base salary for 20132016 under the 2016 Cash Incentive Plan assuming that the Corporation achieved at least threshold, target and maximum levels of performance.performance and, where applicable, the NEO achieved threshold, target and maximum levels of performance with respect to personal goals. Cash incentive compensation targets are fixed amounts determined by the Compensation Committee and were increased for 2016 after considering the PM&P compensation study. Cash incentive compensation target increases for the NEOs ranged from 0.0% to 3.4% and considered percentile rankings to the custom peer group from the PM&P compensation study for total cash compensation that ranged from 30% to 41%. In the table below as well as those that follow, information is provided as to Sallyanne K. Ballweg, who retired as an executive officer of the Corporation and the Bank as of December 31, 2016. Achievement of corporate performance levels greater than the threshold level but less than the maximum level results in thea pro-rated payment of the annual cash incentive compensation that is proportionately greater thanbased on the threshold cash incentive compensation but less thanactual results of the maximum cash incentive compensation.
| NEO | Threshold | Target | Maximum | ||||||
| Michael N. Vittorio | 14.34% | 33.75% | 40.92% | ||||||
| Sallyanne K. Ballweg | 13.39% | 31.50% | 38.19% | ||||||
| Mark D. Curtis | 13.39% | 31.50% | 38.19% | ||||||
| Richard Kick | 12.60% | 31.50% | 40.01% | ||||||
| Donald L. Manfredonia | 12.60% | 31.50% | 40.01% |
NEO | Threshold ($) | Target ($) | Maximum ($) |
Michael N. Vittorio | 78,625 | 185,000 | 224,313 |
Sallyanne K. Ballweg | 41,650 | 98,000 | 118,825 |
Mark D. Curtis | 38,250 | 90,000 | 109,125 |
Richard Kick | 31,200 | 78,000 | 99,060 |
Donald L. Manfredonia | 28,800 | 72,000 | 91,440 |
Equity incentive compensation for the NEOs consists of both time and performance-based RSUs. The RSUs granted on January 19, 2016 were performance-based RSUs and, unlike any other RSUs granted to date, accrue dividends at the same rate as the dividends declared by the Board on the Corporation’s common stock. The accrued dividends will be payable upon vesting of the awards. For all NEOs, equity grants arethe receipt of performance-based RSUs is based entirely on corporate performance measured by the same metrics used for cash incentive compensation. Except for 3,610 time-basedPerformance-based RSUs granted in January 2014, all RSUs granted to date have a clawback feature, in that the ability to convert them into shares of Common Stock and the related conversion ratio will be dependentbased on the Corporation’ssatisfaction of net income and ROA performance inmetrics for the thirdfinal year of the three calendar year performance period beginning with the year in which the RSUs were awarded. CorporateThe three-year performance period for purposes of convertingthe performance-based RSUs into shares of Common Stock will be assessed based on net income and ROA.encourages long-term strategic focus. For outstanding performance-based RSUs granted before January 2017, the threshold level of performance will result in a conversion ratio of one RSU for one-half (½) share of Common Stock and performance at or above the target level will result in a conversion ratio of one RSU for one share of Common Stock. Performance greater than the threshold level but less than the target level will result in a conversion ratio proportionately greater than one RSU for one-half (½) share of Common Stock but less than one RSU for one share of Common Stock. If net income and ROA fallperformance falls below the threshold level, the RSUs will expire and not be convertible into shares of the Corporation’s Common Stock. The 3,610 time-basedUnlike previous RSU grants, performance-based RSUs granted in January 20142017 have upside conversion potential in that a maximum level of performance will result in a conversion ratio of one RSU for 1.25 shares of Common Stock. Performance greater than the threshold level but less than the maximum level will result in a conversion ratio proportionately greater than one RSU for one-half (½) share of Common Stock but less than one RSU for 1.25 shares of Common Stock. The maximum level of performance is 125% of the target level, whereas the threshold level of performance is 75% of the target level. While exceeding the target level of performance by 25% results in vesting 25% more than the target level of shares, falling 25% short of the target level of performance results in vesting 50% less than the target level of shares. Falling short by more than 25% results in expiration of the RSUs without any vesting of the target level of shares. The significant punitive impact of falling short of the target level of performance and the upside potential for exceeding the target level of performance is designed to encourage senior management to outperform.
In January 2017, NEOs were granted a total of 8,000 time-based RSUs that will vest and be distributed ratably on the first three anniversaries of the date of grant. These RSUs were a discretionary grant by the Compensation Committee as part of the NEOs 2016 compensation package after considering, among other things, the Corporation’s strong financial performance for 2016 and its consistent earnings growth over an extended period of time.
Internal Revenue Code Section 162(m) limits the tax deduction for compensation paid in a two-year service period. calendar year to an NEO, other than the CFO, to $1,000,000. Compensation for purposes of Section 162(m) excludes qualified performance-based compensation. All outstanding performance-based RSUs granted to dateheld by affected NEOs qualify as performance-based compensation under Section 162(m). As such, these RSUs will not immediately vest uponin the event of retirement, but can and do immediately vest in the event of an involuntary termination following a change in control, retirement, death or total and permanent disability.disability, as defined, or death. In the event of retirement, these RSUs will vest only upon completion of the related performance period and attainment of the relevant performance criteria. Like the performance-based RSUs, all outstanding time-based RSUs granted to NEOs immediately vest in the event of an involuntary termination following a change in control, total and permanent disability, as defined, or death, but, unlike the performance-based RSUs, also immediately vest in the event of retirement. The value of a RSU realized at vesting can be more or less than its grant date fair value if the Common Stock price at the date of vesting is more or less than its fair market value on the grant date fair value.of grant. Additionally, the value realized upon the vesting of ana RSU grant can be less than its grant date fair value if the aggregate conversion ratio described above is less than one RSU for one share of Common Stock.
The following table sets forth the range for the grant date fair value of performance-based equity awards as a percentage of base salaryincentive compensation for 20132016 performance assuming that the Corporation achieved at least threshold, target and maximum levels of performance. Achievement of corporate performance levels greater than the threshold level but less than the maximum level results in a grant of equity awards that is proportionately greater than the threshold grant of equity awards but less than the maximum grant of equity awards.
| NEO | Threshold | Target | Maximum | ||||||
| Michael N. Vittorio | 17.53% | 41.25% | 50.02% | ||||||
| Sallyanne K. Ballweg | 16.36% | 38.50% | 46.68% | ||||||
| Mark D. Curtis | 16.36% | 38.50% | 46.68% | ||||||
| Richard Kick | 16.36% | 38.50% | 46.68% | ||||||
| Donald L. Manfredonia | 16.36% | 38.50% | 46.68% |
NEO | Threshold ($) | Target ($) | Maximum ($) |
Michael N. Vittorio | 230,350 | 542,000 | 657,175 |
Sallyanne K. Ballweg | 78,200 | 184,000 | 223,100 |
Mark D. Curtis | 78,328 | 184,300 | 223,464 |
Richard Kick | 61,200 | 144,000 | 174,600 |
Donald L. Manfredonia | 46,750 | 110,000 | 133,375 |
The following table sets forth the performance metrics and weights established by the Compensation Committee for use in determining 2013 cash incentives paid in January 2017 for 2016 performance and grants of performance-based equity incentive compensation in January 2017 for 2016 performance along with the Corporation’s actual 20132016 performance with respect to each metric.
| Metric | Weight | Threshold | Target | Maximum | Actual Results | |||||||||||||||
| Net Income | 50% | $ 16,575,000 | $ 22,100,000 | $ 27,625,000 | $ 21,300,000 | |||||||||||||||
| ROA | 35% | 0.74% | 0.98% | 1.23% | 0.95% | |||||||||||||||
| Bank Safety Rating | 15% | N/A | Meets or Exceeds Standards | N/A | Exceeds Standards | |||||||||||||||
Metric | Weight | Threshold | Target | Maximum | Actual Results |
Net Income | 50% | $21,306,000 | $28,408,000 | $35,510,000 | $30,880,000 |
ROA | 35% | 0.65% | 0.87% | 1.09% | 0.93% |
Bank Safety Rating | 15% | N/A | Meets Standard | N/A | Meets Standard |
The following table sets forth performance-based cash incentive compensation earned in 2016 and the actual payouts for 2013 as a percentagegrant date fair value of base salary for cash and performance-based equity incentive compensation.
| NEO | Cash Incentive | Equity Awards | Total | ||||||
| Michael N. Vittorio | 31.81% | 38.87% | 70.68% | ||||||
| Sallyanne K. Ballweg | 29.68% | 36.28% | 65.96% | ||||||
| Mark D. Curtis | 29.68% | 36.28% | 65.96% | ||||||
| Richard Kick | 30.19% | 36.28% | 66.47% | ||||||
| Donald L. Manfredonia | 31.66% | 36.28% | 67.94% |
NEO | Cash Incentive ($) | Equity Awards ($) | Total ($) |
Michael N. Vittorio | 197,469 | 578,518 | 775,987 |
Sallyanne K. Ballweg | 104,605 | - | 104,605 |
Mark D. Curtis | 96,066 | 196,710 | 292,776 |
Richard Kick | 84,115 | 153,706 | 237,821 |
Donald L. Manfredonia | 75,954 | 117,427 | 193,381 |
In the future the Compensation Committee may use different metrics to measure corporate performance such as earnings per share, return on average stockholders’stockholders’ equity or the efficiency ratio.
The Compensation Committee believes that total target compensation for executive officers should be market competitive, meaning that when compared to the Bank’s peer group it should generally be within 15% of the market median and between the 50th to 8075th percentile.percentile range. In performing their 2012 review of executive compensation, PM&P usedcompiled compensation data from the proxy statements of the Corporation’s custom peer group and otherfrom published industry surveys to calculate a market median and, based on this data, calculated percentile amountamounts against which total direct compensation for the Bank’sCompany’s named executive officers consisting of base salary, cash incentive and equity awards, shouldcould be compared. The 2012 PM&P study showed that the total directtarget compensation of all of the Bank’s named executive officers was within 15% of the market median and, for all but one, was withinNEOs ranged from the 4045th to 6077th percentile. The actual range of variance from the market median was from 7% below to 7% above, and the actual percentile rankings ranged from 45% to 65%.
Termination and Change in Control Payments
Each of the named executive officers has an employment agreement with the Corporation and the Bank that provides for severance compensation in the event of an involuntarythe executive’s qualifying termination of employment or resignation of employment followingevent, including in connection with a change in control. These provisions are designed to insure that the named executive officers of the Bank are not significantly harmed or unduly enriched and are therefore objective with respect to the consummation of a transaction, such as a sale or merger of the Bank that may be in the best interests of the Corporation’s stockholders. In determining the severance arrangement for the CEO and each of the other named executive officers, the Compensation Committee considered the severance arrangements offered by peer banks to their CEOs and other named executive officers.
Notwithstanding the foregoing, in connection with Ms. Ballweg’s retirement on December 31, 2016, she entered into a separation and release agreement with the Corporation and the Bank. The separation and release agreement provided for the termination of her employment agreement with the Corporation and the Bank. Additionally, in consideration of her non-solicitation covenants under the separation and release agreement and her full and final release of claims, if any, against the Corporation and the Bank, Ms. Ballweg was paid a severance payment of $150,000 and received title to her Bank-owned automobile.
Impact of Accounting and Tax Treatment of Certain Elements of Compensation
The Compensation Committee began grantinghas granted non-qualified stock options (“NQSOs”) and RSUs as opposed to incentive stock options (“ISOs”) as had been granted in the past.equity compensation. NQSOs and RSUs are advantageous from the Corporation’s standpoint because unlike ISOs, the Corporation can recordrecords a book tax benefit for the compensation cost recognized for financial statement reporting purposes under SFAS No. 123(R)FASB ASC Topic 718 and receives a tax benefit upon the exercise of in-the-money options. BeginningNQSOs and the vesting of RSUs.
Tax Deductibility of Executive Compensation
Internal Revenue Code Section 162(m) limits the deduction for compensation paid to any covered employee to $1,000,000 per year. With the exception of the CFO, the NEOs are covered employees. For purposes of Section 162(m), compensation excludes certain performance-based compensation, commissions and qualified retirement plan contributions. Most of the compensation paid to the NEOs is deductible under Code Section 162(m). The 2016 Cash Incentive Plan was designed so that annual cash incentive compensation payable thereunder would be tax-deductible.
The Compensation Committee does not have a formal policy with respect to the payment of compensation in 2007,excess of the deduction limit under Code Section 162(m). The Compensation Committee’s practice is to structure compensation programs offered to the NEOs with a view towards maximizing tax deductibility of amounts paid. However, in structuring compensation programs, the Compensation Committee added RSUs asconsiders a componentvariety of stock-based compensation and in 2012, began solely utilizing RSUs rather than a combination of NQSOs and RSUs for equity compensation purposes. RSUs are also advantageous fromfactors, including the Corporation’s standpoint because, like NQSOs,tax position, the Corporation can record a bookmateriality of the payments and tax benefitdeductions involved and the need for flexibility to address unforeseen circumstances. After considering these factors, the compensation cost recognizedCompensation Committee may decide to authorize payments, all or part of which may be nondeductible for financial statement reporting purposes and receives afederal tax benefit upon the vesting of RSUs.
Role of Executive Officers In Determining Executive Compensation
TheCompensation Committee approves the proposed compensation of executive officers is approvedafter considering, among other things, executive compensation studies periodically performed by the Compensation Committee, periodically working in conjunction with independent compensation consultants, and then recommended to the Board.consulting firms. From time to time, certain executive officersthe Chief Executive Officer and Chief Financial Officer have served as a resource to the Compensation Committee in gathering the information necessary to make such compensation determinations. However, these officers do not have a policy-making role with respect to determining the amount or form of executive compensation and do not participate in Compensation Committee deliberations regarding their own compensation.
Compensation Policies and Practices As They Relate To Risk Management
The Corporation has a written incentive-based compensation policy whichthat sets forth governance roles for the Compensation Committee, senior management and the Corporation’sCorporation’s internal auditors. The policy is reviewed each yearannually by the Compensation Committee, modified if deemed appropriate and approved. The purpose of the policy is to insureensure that the Corporation’s incentive-based compensation arrangements, or any feature of any such arrangement, do not encourage executive officers or employees to: (1) expose the Corporation to inappropriate risks by providing such persons with excessive compensation, fees or benefits; or (2) take inappropriate risks that could lead to material financial loss to the Corporation. Pursuant to this policy, the Corporation’s incentive-based compensation arrangements are required to: (1) balance risk and financial rewards, through such things as risk adjustments of awards, deferral of payments, longer performance periods and/or reduced sensitivity to short-term performance; (2) be compatible with effective internal controls and risk management; and (3) be supported by strong corporate governance, including active and effective oversight by the Compensation Committee. The Compensation Committee has determined that the Company’s compensation policies and practices for its employees, including non-executive officers, are not reasonably likely to have a material adverse effect on the Company.
Stock Ownership Guidelines
Each director of the Corporation is required to have beneficial ownership of shares of common stock of the Corporation with a current market value equal to three (3) times cash retainers, which includes Committee retainers and per meeting fees. The CEO of the Corporation is required to have beneficial ownership of shares of common stock of the Corporation with a current market value equal to three (3) times his current base salary. Each other executive officer of the Corporation is required to have beneficial ownership of 4,500 shares of common stock of the Corporation, with such amount to be adjusted for stock splits and dividends and other changes in capitalization. All ownership requirements need to be met as follows: (1) within five years of becoming a director or executive officer; (2) within five years of an increase in ownership requirements for the incremental increase only; or (3) in the case of directors and the CEO, within three years of falling out of compliance with these requirements due to compensation increases or fluctuations in market value.
Equity Award Retention Policy
As a condition to receiving equity awarded under the Corporation’s equity incentive plan each executive officer shall enter into an agreement with the Company providing that any stock acquired from the exercise of stock options or the vesting of equity awards, net of the disposition of shares for tax withholding requirements, must be held until stock ownership requirements are met.
Clawback Policy
The Corporation has a clawback policy to enable the Company to recover certain incentive payments paid to the Company’s executive officers if (1) the payments or awards were based on materially inaccurate financial statements or any other materially inaccurate performance metric, and (2) the amount of the incentive compensation, as calculated under restated financial results, is less than the amount actually paid or awarded under the original financial results.
Anti-Hedging Policy
Directors, NEOs, other officers and employees are prohibited from hedging the Corporation's securities with the use of financial instruments (including prepaid variable forward contracts, equity swaps, calls, puts, collars, and exchange funds) that offset a decrease in the market value of the Company's equity securities and any other transaction with comparable economic consequences.
Shareholder Advisory Vote on Compensation
The Compensation Committee also takes into accountconsiders the results of the annual say on paysay-on-pay stockholder advisory vote on the compensation paid to named executive officers.NEOs. To the extent there is a significant vote against the compensation paid to our named executive officers, weNEOs, the Compensation Committee will consider our stockholders’stockholders' concerns and the Compensation Committee will evaluate whether any actions are necessary to address thesethose concerns. At the 20132016 Annual Meeting of Stockholders, there was substantial support for the say on paysay-on-pay proposal.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information with respect to the aggregate compensation paid, earned or awarded for the years ended December 31, 2013, 20122016, 2015 and 20112014 to the CEO, CFO and each of the additional three most highly compensated executive officers of the Bank. All compensation information is provided pursuant to the Securities and Exchange Commission executive compensation disclosure rules for proxy statements. All of the listed officers are also officers of the Corporation but received salaries only from the Bank. No compensation for their employment other than RSUs was received from the Corporation.
| Name and Principal Position | Year | Base Salary ($) | Bonus ($) | Stock Awards (1) ($) | Non-Equity Incentive Plan Compensation (2) ($) | Change in Pension Value and Non-qualified Deferred Compensation Earnings (3) ($) | All Other Compensation (4) ($) | Total ($) |
| Michael N. Vittorio | 2013 | 496,000 | 20,000 | 239,594 | 157,753 | 110,671 | 24,227 | 1,048,245 |
| Director, President | 2012 | 468,000 | 159,013 | 144,690 | 176,390 | 31,832 | 979,925 | |
| and CEO | 2011 | 450,000 | 155,629 | 141,793 | 151,662 | 61,962 | 961,046 | |
| Sallyanne K. Ballweg | 2013 | 279,000 | 10,000 | 126,562 | 82,820 | 17,906 | 15,548 | 531,836 |
| Senior Executive Vice President | 2012 | 264,000 | 15,000 | 83,855 | 76,303 | 57,174 | 9,981 | 506,313 |
| and Secretary | 2011 | 254,000 | 6,000 | 81,994 | 74,699 | 33,738 | 9,728 | 460,159 |
| Mark D. Curtis | 2013 | 255,200 | 9,000 | 115,995 | 75,755 | 9,324 | 465,274 | |
Executive Vice President, | 2012 | 242,700 | 20,000 | 77,105 | 70,147 | 158,578 | 8,900 | 577,430 |
| Chief Financial Officer and Treasurer | 2011 | 233,700 | 5,000 | 75,428 | 68,729 | 97,624 | 9,565 | 490,046 |
| Richard Kick | 2013 | 235,600 | 8,000 | 107,885 | 71,127 | 14,798 | 437,410 | |
| Executive Vice President | 2012 | 230,100 | 5,000 | 73,103 | 63,034 | 210,807 | 9,981 | 592,025 |
| 2011 | 223,100 | 5,000 | 72,012 | 63,958 | 113,545 | 9,348 | 486,963 | |
| Donald L. Manfredonia | 2013 | 225,000 | 5,000 | 104,454 | 71,236 | 10,980 | 416,670 | |
| Executive Vice President | 2012 | 222,500 | 2,500 | 70,675 | 64,884 | 289,263 | 10,876 | 660,698 |
| 2011 | 220,000 | 71,018 | 64,539 | 179,726 | 10,061 | 545,344 |
Summary Compensation Table
|
| Base Salary | Bonus | Stock Awards (1) | Non-Equity Incentive Plan Compensation (2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (3) | All Other Compensation (4) | Total |
Name and Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
Michael N. Vittorio | 2016 | 566,000 | - | 650,760 | 197,469 | 233,752 | 130,357 | 1,778,339 |
Director, President | 2015 | 547,000 | - | 508,508 | 172,067 | 138,031 | 131,544 | 1,497,150 |
and CEO | 2014 | 531,000 | - | 534,358 | 182,653 | 337,307 | 64,542 | 1,649,860 |
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Sallyanne K. Ballweg (5) | 2016 | 332,000 | - | - | 104,605 | 60,633 | 183,866 | 681,104 |
Senior Executive Vice | 2015 | 322,000 | - | 176,863 | 94,204 | 28,928 | 14,166 | 636,161 |
President and Secretary | 2014 | 312,500 | - | 186,478 | 100,328 | 93,644 | 14,462 | 707,412 |
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Mark D. Curtis | 2016 | 299,400 | - | 255,817 | 96,066 | 71,551 | 16,228 | 739,062 |
Senior Executive Vice | 2015 | 284,400 | 15,000 | 171,111 | 83,630 | 27,377 | 16,319 | 597,837 |
President, Chief Financial | 2014 | 275,400 | - | 180,128 | 88,417 | 210,851 | 11,574 | 766,370 |
Officer and Treasurer |
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Richard Kick | 2016 | 265,100 | - | 193,111 | 84,115 | 107,516 | 12,228 | 662,070 |
Executive Vice President | 2015 | 257,100 | - | 138,426 | 77,826 | 1,383 | 16,751 | 491,486 |
| 2014 | 246,350 | - | 146,757 | 81,746 | 267,295 | 14,930 | 757,078 |
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Donald L. Manfredonia | 2016 | 236,000 | - | 156,832 | 75,954 | 48,297 | 9,388 | 526,471 |
Executive Vice President | 2015 | 232,000 | - | 105,742 | 72,224 |
| 9,302 | 419,268 |
| 2014 | 227,500 | - | 112,466 | 72,763 | 272,761 | 12,465 | 697,955 |
(1) | The |
(2) | The amounts shown for each year represent cash incentive compensation earned based on performance for that year but paid subsequent to the close of the year. |
| (3) | The |
| (4) | The components of the |
| (5) | Ms. Ballweg retired from the Corporation and the Bank effective December 31, 2016. |
Perquisites and Other Personal Benefits | ||||||||||||||||||
Personal Use of Business Auto | Personal Use of Country Club | Tax Gross Up on SERP Tax Reimbursements | 401(k) Matching Contributions | 401(k) SERP Contributions | Total | |||||||||||||
| Name | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||
| Michael N. Vittorio | 5,717 | 691 | 2,939 | 7,650 | 7,230 | 24,227 | ||||||||||||
| Sallyanne K. Ballweg | 5,749 | 2,149 | 7,650 | 15,548 | ||||||||||||||
| Mark D. Curtis | 1,674 | 7,650 | 9,324 | |||||||||||||||
| Richard Kick | 7,730 | 7,068 | 14,798 | |||||||||||||||
| Donald L. Manfredonia | 4,230 | 6,750 | 10,980 | |||||||||||||||
All Other Compensation Table
| Perquisites and Other Personal Benefits | Tax Gross Up on SERP Contributions | 401(k) Matching Contributions and 401(k) | Pursuant to Separation and | ||
Personal Use of Business Auto | Personal Use of Country Club | and Tax Reimbursements (1) | SERP Contributions | Release Agreement | Total | |
Name | ($) | ($) | ($) | ($) | ($) | ($) |
Michael N. Vittorio | 7,570 | 2,050 | 103,757 | 16,980 |
| 130,357 |
Sallyanne K. Ballweg | 1,771 | 2,245 |
| 7,950 | 171,900 | 183,866 |
Mark D. Curtis | 8,278 |
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| 7,950 |
| 16,228 |
Richard Kick | 4,278 |
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| 7,950 |
| 12,228 |
Donald L. Manfredonia | 2,308 |
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| 7,080 |
| 9,388 |
(1) | The Bank has a legacy SERP for the CEO that is explained in the “PENSION BENEFIT” section of this proxy statement. The CEO’s participation in the legacy SERP began upon his tenure as CEO of the Corporation and the Bank in 2004. Except for this one legacy SERP, the Board of Directors has adopted a prohibition of tax gross-up arrangements and included this prohibition in the Corporation’s published Corporate Governance Guidelines. |
The Compensation Committee: (1) recognizes that currently paid out compensation, consisting almost entirely of base salary and cash incentive compensation, comprises the most significant portion of each named executive officer’s compensation; and (2)Committee believes that each named executive officer’s total compensation is appropriately balanced between currently paid out and deferred compensation, with deferred compensation consisting of equity awards that vest over time and retirement benefits provided under the Corporation’s 401(k), Pension and SERP plans.
COMPENSATION PURSUANT TO PLANS
Equity Incentive Plans
The Corporation has awards outstanding under two equity incentive plans.
Awards under the 20062014 Plan is 600,000. No grantee may, during any fiscal year of the Corporation, receive awards under the 2006 Plan which, in the aggregate, exceed 70,000 shares. If any outstanding Award under the 2006 Plan for any reason expires or is terminated, the shares allocable to the unexercised portion of such Award, including Shares of Restricted Stock and Restricted Stock Units which did not vest to the Grantee, may again be made subject to an Award under the Plan.
The following table sets forth information as of December 31, 20132016 regarding the number of shares of Common Stock to be issued upon the exercise of outstanding stock options or vesting of RSUs, the weighted average exercise price of outstanding stock options, and the number of securities remaining available for future issuance.
EQUITY COMPENSATION PLAN INFORMATION
| Plan Category | Number of securities to be issued upon exercise of | Weighted-average exercise price of outstanding options, warrants | Number of securities remaining available for future issuance under | |||||||||
| Equity compensation plans approved by security holders | 297,144 | $23.46 | 131,784 | |||||||||
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (2) |
Equity compensation plans approved by security holders | 593,351 | $10.61 | 1,939,129 |
(1) | Includes |
(2) | Of these shares, 457,699 are available to |
The Corporation does not have any equity compensation plans that have not been approved by stockholders.
The following table sets forth information regarding the grant of plan-based awards, both cash and equity, to the named executive officersbased on 2013 performance.. The stock awards were granted by the Board in January 2014 based on a recommendation by the Compensation Committee. The ability to convert 14,202 of the RSUs granted in January 2014 into shares of the Corporation’s Common Stock and the related conversion ratio will be dependent on the Corporation’s 2016 net income and ROA, with each being assigned a 50% weight. The remaining 3,610 RSUs granted in January 2014 will vest ratably over a two-year time period.
Estimated Future Payouts Under Non- Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive | Grant Date Fair Value | |||||||||||||||||
| Threshold | Target | Maximum | Threshold | Target | of Stock Awards | ||||||||||||||
| Name | Grant Date | ($) | ($) | ($) | (#) | (#) | ($) | ||||||||||||
| Michael N. Vittorio | 1/21/14 | 3,673 | 6,145 | 239,594 | |||||||||||||||
| 71,146 | 167,400 | 202,973 | |||||||||||||||||
| Sallyanne K. Ballweg | 1/21/14 | 1,948 | 3,246 | 126,562 | |||||||||||||||
| 37,353 | 87,885 | 106,561 | |||||||||||||||||
| Mark D. Curtis | 1/21/14 | 1,788 | 2,975 | 115,995 | |||||||||||||||
| 34,166 | 80,388 | 97,471 | |||||||||||||||||
| Richard Kick | 1/21/14 | 1,671 | 2,767 | 107,885 | |||||||||||||||
| 29,686 | 74,214 | 94,252 | |||||||||||||||||
| Donald L. Manfredonia | 1/21/14 | 1,632 | 2,679 | 104,454 | |||||||||||||||
| 28,350 | 70,875 | 90,011 | |||||||||||||||||
Grant Of Plan Based Awards
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| Estimated Future Payouts Under Non- | Estimated Future Payouts Under | |||||
| Equity Incentive Plan Awards (1) | Equity Incentive Plan Awards (2) | |||||
| Threshold | Target | Maximum | Threshold | Target | Maximum | |
Name | Grant Date | ($) | ($) | ($) | ($) | ($) | ($) |
Michael N. Vittorio | 1/19/16 | 78,625 | 185,000 | 224,313 | 230,350 | 542,000 | 657,175 |
Sallyanne K. Ballweg | 1/19/16 | 41,650 | 98,000 | 118,825 | 78,200 | 184,000 | 223,100 |
Mark D. Curtis | 1/19/16 | 38,250 | 90,000 | 109,125 | 78,328 | 184,300 | 223,464 |
Richard Kick | 1/19/16 | 31,200 | 78,000 | 99,060 | 61,200 | 144,000 | 174,600 |
Donald L. Manfredonia | 1/19/16 | 28,800 | 72,000 | 91,440 | 46,750 | 110,000 | 133,375 |
(1) | The amounts shown represents cash incentive compensation that could have been earned by the named executive officer in |
(2) | The |
The following table sets forth information regarding outstanding equity awards for the named executive officersNEOs at December 31, 2013.
| Option Awards | Stock Awards | |||||||||||||||
Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price | Option Expiration | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (1) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (2) | |||||||||||
| Name | Exercisable | Unexercisable | ($) | Date | (#) | ($) | ||||||||||
| Michael N. Vittorio | 120 | 21.81 | 1/17/17 | |||||||||||||
| 161 | 2,163 | 22.42 | 1/19/19 | |||||||||||||
| 1,465 | 3,311 | 25.07 | 1/18/20 | |||||||||||||
| 3,798 | 5,701 | 29.02 | 1/24/21 | |||||||||||||
| 6,423 | 275,354 | |||||||||||||||
| 5,960 | 255,505 | |||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||
Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price | Option Expiration | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (1) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (2) | |||||||||||
| Name | Exercisable | Unexercisable | ($) | Date | (#) | ($) | ||||||||||
| Sallyanne K. Ballweg | 1,207 | 22.42 | 1/19/19 | |||||||||||||
| 2,000 | 1,896 | 25.07 | 1/18/20 | |||||||||||||
| 2,066 | 3,102 | 29.02 | 1/24/21 | |||||||||||||
| 3,384 | 145,072 | |||||||||||||||
| 3,143 | 134,740 | |||||||||||||||
| Mark D. Curtis | 4,138 | 22.77 | 1/17/15 | |||||||||||||
| 2,372 | 21.81 | 1/17/17 | ||||||||||||||
| 4,564 | 1,144 | 22.42 | 1/19/19 | |||||||||||||
| 2,673 | 1,784 | 25.07 | 1/18/20 | |||||||||||||
| 1,900 | 2,852 | 29.02 | 1/24/21 | |||||||||||||
| 3,113 | 133,454 | |||||||||||||||
| 2,890 | 123,894 | |||||||||||||||
| Richard Kick | 2,430 | 22.77 | 1/17/15 | |||||||||||||
| 4,066 | 20.83 | 6/30/16 | ||||||||||||||
| 2,348 | 21.81 | 1/17/17 | ||||||||||||||
| 6,658 | 18.50 | 1/21/18 | ||||||||||||||
| 4,520 | 1,133 | 22.42 | 1/19/19 | |||||||||||||
| 2,587 | 1,726 | 25.07 | 1/18/20 | |||||||||||||
| 1,816 | 2,724 | 29.02 | 1/24/21 | |||||||||||||
| 2,972 | 127,410 | |||||||||||||||
| 2,740 | 117,464 | |||||||||||||||
| Donald L. Manfredonia | 232 | 23.95 | 1/19/14 | |||||||||||||
| 4,634 | 22.77 | 1/17/15 | ||||||||||||||
| 4,486 | 20.83 | 6/30/16 | ||||||||||||||
| 2,560 | 21.81 | 1/17/17 | ||||||||||||||
| 7,079 | 18.50 | 1/21/18 | ||||||||||||||
| 4,764 | 1,194 | 22.42 | 1/19/19 | |||||||||||||
| 2,622 | 1,750 | 25.07 | 1/18/20 | |||||||||||||
| 1,848 | 2,774 | 29.02 | 1/24/21 | |||||||||||||
| 2,931 | 125,652 | |||||||||||||||
| 2,649 | 113,563 | |||||||||||||||
Outstanding Equity Awards
| Option Awards | Stock Awards | ||||
Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price | Option Expiration | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (1) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (2) | |
Name | Exercisable | Unexercisable | ($) | Date | (#) | ($) |
Michael N. Vittorio | 1,818 |
| 12.90 | 1/24/21 |
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| 77,902 | 2,224,088 |
Mark D. Curtis | 12,843 |
| 9.96 | 1/19/19 |
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| 10,029 |
| 11.14 | 1/18/20 |
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| 10,629 |
| 12.90 | 1/24/21 |
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| 30,667 | 875,543 |
Richard Kick | 14,981 |
| 8.22 | 1/21/18 |
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| 12,720 |
| 9.96 | 1/19/19 |
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| 9,705 |
| 11.14 | 1/18/20 |
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| 10,215 |
| 12.90 | 1/24/21 |
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| 25,055 | 715,313 |
Donald L. Manfredonia | 1,773 |
| 9.69 | 1/17/17 |
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| 15,771 |
| 8.22 | 1/21/18 |
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| 13,406 |
| 9.96 | 1/19/19 |
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| 9,837 |
| 11.14 | 1/18/20 |
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| 10,400 |
| 12.90 | 1/24/21 |
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| 20,872 | 595,881 |
(1) | Represents the maximum number of shares into which outstanding RSUs can potentially be |
(2) | Represents the value of the maximum number of shares into which RSUs can potentially be converted based on the closing price of the Common Stock on December 31, |
Unexercisable Options | |||||||||||||||||
| Name | (#) | (#) | Date | (#) | Date | (#) | Date | ||||||||||
| Michael N. Vittorio | 2,163 | 2,163 | 1/19/14 | ||||||||||||||
| 3,311 | 1,655 | 1/18/14 | 1,656 | 1/18/15 | |||||||||||||
| 5,701 | 1,899 | 1/24/14 | 1,899 | 1/24/15 | 1,903 | 1/24/16 | |||||||||||
| Sallyanne K. Ballweg | 1,207 | 1,207 | 1/19/14 | ||||||||||||||
| 1,896 | 948 | 1/18/14 | 948 | 1/18/15 | |||||||||||||
| 3,102 | 1,033 | 1/24/14 | 1,033 | 1/24/15 | 1,036 | 1/24/16 | |||||||||||
| Mark D. Curtis | 1,144 | 1,144 | 1/19/14 | ||||||||||||||
| 1,784 | 892 | 1/18/14 | 892 | 1/18/15 | |||||||||||||
| 2,852 | 950 | 1/24/14 | 950 | 1/24/15 | 952 | 1/24/16 | |||||||||||
| Richard Kick | 1,133 | 1,133 | 1/19/14 | ||||||||||||||
| 1,726 | 863 | 1/18/14 | 863 | 1/18/15 | |||||||||||||
| 2,724 | 908 | 1/24/14 | 908 | 1/24/15 | 908 | 1/24/16 | |||||||||||
| Donald L. Manfredonia | 1,194 | 1,194 | 1/19/14 | ||||||||||||||
| 1,750 | 875 | 1/18/14 | 875 | 1/18/15 | |||||||||||||
| 2,774 | 924 | 1/24/14 | 924 | 1/24/15 | 926 | 1/24/16 |
The following table sets forth information for the named executive officers for 20132016 regarding stock options exercised and stock vested.
Stock Option Exercises And Stock Vested
| Option Awards | Stock Awards | ||
Number of Shares Acquired on Exercise | Value Realized on Exercise (1) | Shares Acquired on Vesting (2) | Value Realized on Vesting (3) | |
| Name | (#) | ($) | (#) | ($) |
Michael N. Vittorio | 23,606 | 181,325 | 5,866 | 167,474 |
Sallyanne K. Ballweg | 7,578 | 56,671 | 3,131 | 89,390 |
Mark D. Curtis | 1,522 | 12,938 | 2,865 | 81,796 |
Richard Kick | 5,283 | 84,387 | 2,644 | 75,486 |
Donald L. Manfredonia | 11,403 | 121,705 | 2,831 | 80,825 |
(1) | The value realized on a stock option exercise is the difference between the fair market value on the exercise date and the stock option exercise price. |
| (2) | Shares acquired on vesting are net of the disposition of shares for tax withholding requirements. |
(3) | The value realized on vesting represents the market value on December 31, 2016 of $28.55. |
| Option Awards | Stock Awards | |||||||||||
Number of Shares Acquired on Exercise | Value Realized on Exercise | Shares Acquired on Vesting | Value Realized on Vesting | |||||||||
| Name | (#) | ($) | (#) | ($) | ||||||||
| Michael N. Vittorio | 9,754 | 122,207 | 2,102 | 62,450 | ||||||||
| Sallyanne K. Ballweg | 1,997 | 19,539 | 1,203 | 35,741 | ||||||||
| Mark D. Curtis | 7,261 | 81,949 | 1,132 | 33,632 | ||||||||
| Richard Kick | 2,392 | 38,523 | 1,095 | 32,532 | ||||||||
| Donald L. Manfredonia | 3,000 | 39,574 | 1,110 | 32,978 | ||||||||
PENSION BENEFITS
The Bank has a tax-qualified defined benefit pension plan, and maintains the related SERP described hereinafter. The following table sets forth the present value of accumulated benefits under the Pension Plan as of December 31, 2013,2016, under the pension portion of the SERP as of September 30, 2013,2016, and the number of years of credited service for each named executive officer through December 31, 2013.2016. No paymentspension benefits were madedistributed to the named executive officers during 2013.
Number of Years of Credited Service | Present Value of Accumulated Benefit (1) | ||||||||
| Name | Plan Name | (#) | ($) | ||||||
| Michael N. Vittorio | Tax-qualified defined benefit pension plan | 10.42 | 460,445 | ||||||
| Supplemental Executive Retirement Plan | 10.42 | 475,536 | |||||||
| Sallyanne K. Ballweg | Tax qualified defined benefit pension plan | 5 | 160,061 | ||||||
| Mark D. Curtis | Tax qualified defined benefit pension plan | 16 | 679,056 | ||||||
| Richard Kick | Tax qualified defined benefit pension plan | 21.75 | 787,636 | ||||||
| Donald L. Manfredonia | Tax qualified defined benefit pension plan | 30.08 | 1,480,858 | ||||||
Pension Benefits
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| Number of Years of Credited Service | Present Value of Accumulated Benefit (1) | |
| Name | Plan Name | (#) | ($) | |
Michael N. Vittorio | Tax-qualified defined benefit pension plan | 13.42 | 676,386 | |
| Supplemental Executive Retirement Plan | 13.42 | 968,685 | ||
Sallyanne K. Ballweg | Tax qualified defined benefit pension plan | 8 | 343,266 | |
Mark D. Curtis | Tax qualified defined benefit pension plan | 19 | 988,835 | |
Richard Kick | Tax qualified defined benefit pension plan | 24.75 | 1,163,830 | |
Donald L. Manfredonia | Tax qualified defined benefit pension plan | 33.08 | 1,740,865 | |
(1) | The actuarial assumptions used in determining the present value of the accumulated benefit for each named executive officer under the Pension Plan are set forth in Note |
Pension Plan covers employees
Employees, including the NEOs, who are over 21 years of age and have been employed by the Bank for more than one year, includingare eligible to participate in the NEOs.Pension Plan. Compensation used to determine benefits include base salary, commissions, cash incentive compensation and taxable fringe benefits, but exclude employer contributions to the 401(k) plan, amounts realized from the exercise of nonqualified stock options, amounts realized from the conversion of restricted stock units into shares of stock, and amounts realized from the sale, exchange or other disposition of stock. Employees that elect to participate in the Pension Plan make contributions of 2 percent of their compensation used to determine benefits. Employees become fully vested in the Pension Plan after 5 years of service with the Bank and 4 years of participation in the Pension Plan (no vesting occurs during that 5-year period) or, for employees hired before February 28, 2011, upon attainment of age 55. The normal retirement age is 65. For benefits earned through February 28, 2011, early retirement with an unreduced benefit is available at age 62, provided that at least 10 years of vesting service havehad been completed by age 62 and employment by the Bank began at age 55 or prior. Early retirement with a reduced benefit is available beginning at age 55. For benefits earned through February 28, 2011, the reduction is equal to 3% per year for each year that early retirement precedes age 65, or age 62 provided that at least 10 years of vesting service have been completed by age 62 and employment began at age 55 or prior. For benefits earned after February 28, 2011, the reduction is based on actuarial equivalence.
Upon retirement, each participant with a spouse is paid a benefit in the form of a joint and survivor annuity. Participants without a spouse are paid a benefit in the form of a single life annuity guaranteed for sixty (60) months. All participants, whether with or without a spouse, may elect optional forms of benefit payments. For all participants, the annuity benefit is an amount equal to the sum of: (1) the participant’s Average Annual Compensation multiplied by the product of 1.75 percent and the participant’s credited years of service through February 28, 2011; plus (2) the participant’s Average Annual Compensation multiplied by the product of 1.50 percent and the participant’s credited years of service after February 28, 2011, with total years of credited service under clauses “1” and “2” limited to a maximum of 35 years; plus (3) 1.25 percent of Average Annual Compensation multiplied by the participant’s credited years of service in excess of 35 years (up to five such years); and less (4) the product of 0.49 percent of the participant’s Final Average Annual Compensation, limited to Covered Compensation, and the participant’s Benefit Service up to 35 years. The 0.49 percent represents the minimum Social Security offset to the pension benefit. Average Annual Compensation, Final Average Compensation, Covered Compensation and Benefit Service are all as defined in the Pension Plan.
Supplemental Executive Retirement Plan
The First National Bank has a legacy SERP with the CEO as its only participant. The CEO’s participation in this legacy plan began upon his tenure as CEO of Long Island Supplemental Executive Retirement Plan was adopted.the Corporation and the Bank in 2004. The SERP provides the additional benefits if any, that would have been provided to the CEO under the Pension Plan and 401(k) plan in the absence of Internal Revenue Code limitations for qualified plans.
The benefits are provided for employees designated bySERP was also designed so that the Compensation Committee of the Board of Directors. Mr. Vittorio is the only participant in the SERP as of December 31, 2013.
The following table sets forth Nonqualified Deferred Compensation information as of and for the year ended December 31, 20132016 for Mr. Vittorio with respect to the supplemental 401(k) SERP. The other named executive officers are not participants inplan portion of the SERP. The amount reported in the “Registrant Contributions” column of the table are also included in the “All Other Compensation” column of the “Summary Compensation Table” appearing elsewhere in this proxy statement.
NONQUALIFIED DEFERRED COMPENSATION
Registrant Contributions in Last Fiscal Year | Aggregate Earnings in Last Fiscal Year | Aggregate Balance at Last Fiscal Year End | |||||||
| Name | ($) | ($) | ($) | ||||||
| Michael N. Vittorio | 7,230 | 1,227 | 60,696 |
| Registrant Contributions | Aggregate Earnings | Aggregate Balance |
| in Last Fiscal Year (1) | in Last Fiscal Year (2) | at Last Fiscal Year End (3) |
| Name | ($) | ($) | ($) |
Michael N. Vittorio | 9,030 | 3,230 | 84,847 |
(1) | Registrant contributions are included in the “All Other Compensation” column of the “Summary Compensation Table” in this proxy statement. |
(2) | Aggregate earnings are not included in the “Summary Compensation Table” in this proxy statement. |
(3) | Includes $69,149 previously reported as compensation to the named executive officer in the Summary Compensation Tables for previous years. |
401(k) Plan
The Bank has a tax-qualified 401(k) plan. Employees, including the NEOs, are eligible to participate provided they are at least 18 years of age. The Bank may, at its sole discretion, make matching contributions to each participant's account based on the amount of the participant's tax deferred contributions. Eligibility for employer matching contributions, if any, occurs after completing twelve (12) consecutive months of Eligibility Service, as defined, in which the participant worked a minimum of 1,000 hours. The sum of employee elective contributions and employer matching contributions plus any other additions to a participant’s account currently cannot exceed the lesser of $50,000$53,000 or 100% of the participant’s compensation. Participants are fully vested in their elective contributions and, after five years of participation, any employer matching contributions. Employer matching contributions vest ratably overmade during the first five years of participation. Matching contributions were approximately $350,000, $332,000 and $319,000 for 2013, 2012 and 2011, respectively.
Participants in the 401(k) plan will receive benefits generally upon attainment of age 65. However, the 401(k) plan contains provisions allowing pre-termination withdrawals and loans under certain circumstances. The amount of a participant’sparticipant’s Normal Retirement Benefit will depend upon the accumulation of contributions and forfeitures and the investment performance of the Plan. The 401(k) matching contributions for 20132016 made to the account of each named executive officer are set forth in the “All Other Compensation Table” appearing elsewhere in this proxy statement.
EMPLOYMENT CONTRACTS
Mr. Vittorio, Ms. Ballweg, Mr. Curtis, Mr. Kick and Mr. Manfredonia have employment contracts with the Corporation pursuant to which Mr. Vittorio is employed as President and CEO of the Corporation and the Bank, Ms. Ballweg is employed as Senior Executive Vice President of the Bank, Mr. Curtis is employed asSenior Executive Vice President and Chief Financial Officer of the Bank, and Messrs. Kick and Manfredonia are each employed as Executive Vice President of the Bank. In addition, each of these officers is also employed in such other positions with the Corporation or the Bank as may be determined by the Board of the Corporation or the Bank. Mr. Vittorio’s contract has a term of three (3) years, Ms. Ballweg and Mr. Curtis each haveCurtis’ contract withhas a term of two (2) years and Messrs. Kick and Manfredonia each have a contract with a term of eighteen (18) months, with all such contracts beginning on January 1, 2014.2017. Unless the Corporation provides written notice of non-extension within the time frame set forth in each contract, the term of each contract is automatically extended at the expiration of each year for an additional period of one year, thus resulting in a new three-year term for Mr. Vittorio, a new two year termstwo-year term for Ms. Ballweg and Mr. Curtis, and new eighteen-month terms for Messrs. Kick and Manfredonia. The contracts currently provide for base annual salaries of $506,000$575,500 for Mr. Vittorio, $285,500 for Ms. Ballweg, $261,400$309,400 for Mr. Curtis, $242,600$269,100 for Mr. Kick, and $225,000$240,000 for Mr. Manfredonia.
Under these contracts the executive officers are entitled to severance compensation. Generally, upon an involuntary termination of employment or upon a resignation of employment following a change in control, Mr. Vittorio is entitled to receive a single sum payment equal to three (3) times the base annual salary under his contract together with continued family medical and dental insurance coverage. Upon a resignation of employment for any reason during the period beginning on the thirty-first day and ending on the sixtieth day following a change of control, Ms. Ballweg and Messrs. Curtis, Kick and Manfredonia are each entitled to receive a single sum payment equal to 66 2/3% of the Termination Payment under their contracts. The Termination Payment for Ms. Ballweg and Mr. Curtis is equal to two (2) times the base annual salary under their contracts,his contract, the termination payment for Mr. Manfredonia is equal to one and one-half (1.50) times the base annual salary under his contract and for Mr. Kick, the Termination Payment is equal to one and one-quarter (1.25) times the base annual salary under his contract. Upon an involuntary termination of employment, other than due to gross and substantial dishonesty, or a resignation of employment for Good Reason within twenty-four months following a change of control, Ms. Ballweg and Messrs. Curtis, Kick and Manfredonia are entitled to receive a single sum payment equal to 100% of the Termination Payment under their contracts. In addition, these officers are also entitled to family medical and dental insurance coverage for the remaining term of the contract. Good Reason for resignation of employment by any of these named executive officers means the occurrence (without the officer’s express written consent) of any one of the following acts or omissions to act by the Corporation or the Bank: (1) the assignment to the officer of any duties materially inconsistent with the nature and status of the officer’s responsibilities immediately prior to a Change of Control Event, or a substantial adverse alteration in the nature or status of the officer’s responsibilities from those in effect immediately prior to the Change of Control Event; provided, however, that a change of the officer’s title shall not in and of itself constitute Good Reason if the officer’s overall duties and status within the Corporation and the Bank are not substantially adversely affected; or (2) the failure by the Corporation or the Bank to pay the officer any portion of the officer’s current compensation, or to pay the officer any portion of an installment of a deferred compensation amount under any deferred compensation program, within fourteen (14) days of the date such compensation is due.
Each of the executive officers has agreed,is subject to the extentnon-solicitation and under the conditionsconfidentiality restrictions set forth in the contract with such executive officer, to refrain from soliciting the business of customers of the Bank subsequent to termination of the employment relationship between the Corporation and the executive officer. In that regard, each contract provides that the executive officer will not on behalf of any banking organization or lender doing business in New York City or in the counties of Nassau or Suffolk, directly or indirectly solicit business of any person or entity which shall be a customer of the Bank on the date of such termination or facilitate or assist in the development of any business relationship between any such banking organization or lender and any such customer or either directly or indirectly or on behalf of any such banking organization or lender, employ, retain, or solicit the employment or retention of any person who shall be an employee of the Bank on the date of such termination. Each of the executive officers has also agreed, without limitation as to time, to keep secret and retain in confidence all confidential matters of the Corporation or the Bank, whether developed by the Corporation, the Bank or the executive officer, including without limitation, trade secrets, customer lists, pricing policies, and operational methods, and not to disclose them to anyone outside the Corporation or the Bank except in the course of performing their duties under their employment contracts or with the express written consent of the Corporation.
The following table sets forth potential payments upon termination or change in control for the named executive officers.
POTENTIAL LUMP SUM PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
|
| Termination Payments Due to a Change in Control | |||
| Due to | Due to Resignation | Accelerated | Family Medical | |
| Termination | For Good | For Any | Vesting of | and Dental |
| By Bank | Reason | Reason | Equity Awards | Insurance |
Name | ($) | ($) | ($) | ($) | ($) |
Michael N. Vittorio (1) | 1,726,500 | 1,057,468 | 1,057,468 | 2,066,906 | 108,432 |
Mark D. Curtis | 618,800 | 618,800 | 412,533 | 822,097 | 72,288 |
Richard Kick | 336,375 | 336,375 | 224,250 | 673,552 | 54,216 |
Donald L. Manfredonia | 360,000 | 360,000 | 240,000 | 563,977 | 54,216 |
(1) As per the terms of Mr. Vittorio's employment agreement, the amount of his cash payment has been cut back to reflect the limitation under Section 280G of the Internal Revenue Code of 1986, as amended.
PROPOSAL 4
APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
ELIMINATE CUMULATIVE VOTING IN DIRECTOR ELECTIONS
We are asking stockholders to approve an amendment to our Certificate of Incorporation to eliminate cumulative voting in director elections (the “Amendment”). Cumulative voting enables a stockholder to cumulate his or her voting power by giving one candidate a number of votes equal to the number of directors to be elected, multiplied by the number of shares held by the stockholder, or distributing those votes among one or more candidates as the stockholder sees fit. Thus, with cumulative voting, a stockholder can cast all of his, her or its votes “for” one candidate or a small group of candidates, instead of voting all shares either “for” or “withheld” on each candidate.
Our Board of Directors believes that very few public companies have cumulative voting in the election of directors, and that majority voting is viewed as a best governance practice. Accordingly, in October of 2016, and subject to stockholder approval of the Amendment, the Board of Directors adopted a majority voting policy with respect to the election of directors, which we publicly disclosed in a Current Report on Form 8-K filed with the SEC. Currently, directors are elected under a plurality voting system, which means that the candidates who receive the most votes are elected, even if a candidate does not receive a majority of the votes cast. In an uncontested election of directors, any number of votes is sufficient to elect a director nominee to the board.
Under the majority voting policy, any nominee for director in an uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall tender his or her resignation for consideration by the Governance and Nominating Committee of the Board. The Committee shall recommend to the Board the action to be taken with respect to the resignation. Any director who tenders his or her resignation pursuant to this provision shall not participate in the Committee’s or the Board’s deliberations as to whether to accept the resignation. The Board will publicly disclose its decision within 90 days of the certification of the election results. In contested director elections, a plurality vote standard shall apply.
The objective of the majority voting policy is to reinforce the accountability of the Board of Directors to stockholders voting in an uncontested director election. The majority voting policy adopted by the Board is intended to give stockholders a greater voice in determining the composition of our Board of Directors. Our Board of Directors believes that cumulative voting is incompatible with that objective, as the effect of cumulative voting is potentially to allow a stockholder that holds significantly less than a majority of the outstanding voting power to elect one or more directors.
| Termination Payment Due To: | ||||||||||||
| Resignation Following a | ||||||||||||
| Change in Contol | Family Medical | |||||||||||
| Termination | For Good | For Any | and Dental | |||||||||
| By Bank | Reason | Reason | Insurance | |||||||||
| Name | ($) | ($) | ($) | ($) | ||||||||
| Michael N. Vittorio | 1,518,000 | 1,518,000 | 1,518,000 | 77,716 | ||||||||
| Sallyanne K. Ballweg | 571,000 | 571,000 | 380,667 | 51,810 | ||||||||
| Mark D. Curtis | 522,800 | 522,800 | 348,533 | 51,810 | ||||||||
| Richard Kick | 303,250 | 303,250 | 202,167 | 38,858 | ||||||||
| Donald L. Manfredonia | 337,500 | 337,500 | 225,000 | 38,858 | ||||||||
Our Board of Directors believes that each director is accountable to and should represent the interests of all of our stockholders, and not just to a minority stockholder that has cumulatively voted its shares and that may have special interests contrary to those of a majority of our stockholders. Among other things, the election of directors who view themselves as representing a particular minority stockholder could result in partisanship and discord on our Board of Directors, and may impair the ability of the directors to act in the best interests of all of our stockholders and our Corporation.
In addition, we believe that attempting to combine cumulative voting with the majority voting policy in the same election of directors could create confusion and uncertainty in the director election process, because the number of votes cast “for” or “withheld” from a director could depend on how stockholders choose to cumulate their votes.
Therefore, our Board of Directors believes that approval of the Amendment is appropriate to effectively implement the majority voting policy for uncontested director elections, and the Board has unanimously determined to recommend stockholder approval of the Amendment. This proposal is not in response to any stockholder effort of which we are aware to remove any of our directors or otherwise gain representation on our Board of Directors, to accumulate shares of our common stock, or to obtain control of our Corporation or our Board of Directors by means of a solicitation in opposition to management or otherwise.
Currently, Section (c) of Article FIFTH of the Corporation’s Certificate of Incorporation states:
At all elections of directors of the corporation, each stockholder entitled generally to vote for the election of directors shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them as he may see fit.
If Proposal 4 is approved and the Amendment is implemented, Section (c) of Article FIFTH of the Corporation’s Certificate of Incorporation shall read as follows:
“No stockholder shall have any cumulative voting rights.”
Dissenters’ Rights
Because, if approved, the Amendment will eliminate cumulative voting, holders of the Corporation’s common stock who object to the Amendment are entitled to exercise their dissenters’ rights and receive payment for the fair value of their shares.
Pursuant to Section 623 of the New York Business Corporation Law (the “NYBCL”), stockholders desiring to exercise their dissenters’ rights (i) must file with the Corporation a written objection PRIOR to the vote to be taken at the Annual Meeting and (ii) must NOT vote to approve the Amendment. The objection shall include a notice of the objecting stockholder’s election to dissent, such stockholder’s name, residence address and the number of shares of the Corporation’s common stock beneficially owned and a demand for payment of the fair value of such shares if the amendment is approved. The written objection must be in addition to and separate from any proxy or vote against or abstention from the Amendment. Voting against or failing to vote for the amendment by itself does not constitute an election to dissent within the meaning of Section 623.
Stockholders will be deemed to have waived their dissenters’ rights if they fail to file a written objection before the vote to be taken at the Annual Meeting. A vote in favor of the amendment, by proxy or in person, will constitute a waiver of the stockholder’s election to dissent with respect to the shares so voted, will nullify any previously filed written notices of election to dissent and will be deemed a waiver of the stockholder’s dissenter’s rights.
Stockholders exercising their dissenters’ rights must do so with respect to all shares held by them of record that they own beneficially. In addition to filing a written objection and notice of election to dissent, stockholders exercising their dissenters’ rights must deliver to the Corporation the certificates representing their shares within one month of filing their notice of election to dissent. The Corporation shall note thereon the stockholder’s notice of election to dissent and return the certificates to the stockholder. At the effective time of the Amendment, dissenting stockholders shall no longer have any of the rights of stockholders of the Corporation, except the right to be paid the fair value of their shares.
In the event that the Amendment is approved, the Corporation will notify within 10 days of the Annual Meeting those stockholders that have filed a notice of election to dissent of the approval of the amendment. Within 15 days of the effective time of the Amendment, but no later than 90 days after the Annual Meeting, the Corporation shall notify dissenting stockholders of the Corporation’s calculation of the fair value of their shares and shall offer to purchase the shares at that price and, to stockholders that have delivered their certificates to the Corporation for notation, make an advance payment of 80% of such amount. If within 30 days after the making of such offer, the Corporation and any dissenting stockholder agree upon the price to be paid for his or her shares, final payment shall be made within 60 days after the making of such offer or the effective time of the Amendment, whichever is later, upon the surrender of the certificates for any such shares represented by certificates.
In the event of disagreement as to the fair value of the shares, the Corporation will institute a court proceeding to determine the fair value in accordance with New York law. The court’s determination of fair value will include an allowance for interest.
THIS SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SECTION 623 OF THE NYBCL, THE TEXT OF WHICH IS SET FORTH IN APPENDIX A TO THIS PROXY STATEMENT. ANY STOCKHOLDER CONSIDERING EXERCISING DISSENTERS’ RIGHTS IS ADVISED TO CONSULT LEGAL COUNSEL. DISSENTERS’ RIGHTS WILL NOT BE AVAILABLE UNLESS AND UNTIL THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION IS CONSUMMATED.
The Board of Directors recommends that stockholders vote “FOR” the approval of the amendment to the Corporation’s
Certificate of Incorporation to eliminate cumulative voting in director elections.
Stockholder Approval
The affirmative vote of the holders of seventy percent (70%) of the shares of our common stock entitled to vote is required to approve the Amendment. Abstentions and broker non-votes will have the same effect as votes cast against the Amendment.
If adopted, the Amendment will become effective upon filing with the Secretary of State of New York, which is expected to occur promptly following the Annual Meeting. However, if there is a significant number of stockholders (greater than 1% of our shares outstanding) that exercise dissenters’ rights, the Board may determine not to proceed with the Amendment, or it may withdraw the Amendment from stockholder consideration at the Annual Meeting, in which event the majority voting policy will not become effective and cumulative voting, along with a plurality voting standard, will continue to apply to all director elections.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Corporation’sCorporation’s Corporate Governance Guidelines require the Board to conduct an appropriate review of all related party transactions for potential conflict of interest situations. Related party transactions are those required to be disclosed pursuant to Item 404 of Regulation S-K. The Board fulfills the requirement to review related party transactions in conjunction with the Audit Committee, which is comprised entirely of independent directors. The Governance and Nominating Committee is charged with the responsibility of reviewing and assessing the adequacy of and compliance with the Corporation’s Corporate Governance Guidelines and recommending any proposed changes to the Board for approval.
In 1992, the Bank, as tenant, entered into a lease with H. T. Hogan Jr., d/b/a Briar Ridge Properties, covering premises in a building located in Locust Valley, New York, used as a branch office. The Bank subsequently modified and extended the lease in 2002 and 2012. The 2012 modification and extension expires on October 31, 2017. In addition to base rent, the Bank is responsible for its proportionate share of the real estate taxes on the building in which the leased premises are located. The lease expires on October 31, 2017. Under the terms of the lease, the Bank paid $44,389was obligated to pay $46,869 for the year ended December 31, 2013.2016. In 2009, the Bank, as tenant, entered into a lease with CSH Realty LLC, covering premises in a building located in Cold Spring Harbor, New York used as a branch office. The lease expires on December 31, 2019. Under the terms of the lease, the Bank paidwas obligated to pay $33,014 for the year ended December 31, 2013.2016. Howard Thomas Hogan, Jr., a director of the Corporation and the Bank owns, or controls companies that own, both properties. The Corporation believes that the terms of the leases are comparable to competitive terms that could have been obtained from an unrelated third party.
The Bank has had, and expects to have in the future, banking transactions in the ordinary course of its business with directors, executive officers, principal stockholders of the Corporation and their associates. Such transactions, including borrowings and loan commitments, wereare made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others, and in the opinion of management do not involve more than a normal risk of collectability, nor do they present other unfavorable features.
Certain directors are officers, directors, partners or stockholders of companies or partnerships which, or associates of which, may have been customers of the Bank in the ordinary course of business during 20132016 and up to the present time. Additional transactions of this type may occur in the future. All such transactions were effected on substantially the same terms as comparable transactions with other persons.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our executive officers and, directors and beneficial owners of greater than 10% of the outstanding shares of Common Stock are required to file reports with the Securities and Exchange Commission disclosing beneficial ownership and changes in beneficial ownership of our Common Stock. Securities and Exchange Commission rules require disclosure if an executive officer, director or 10% beneficial owner does not file these reports on a timely basis. Based on our review of ownership reports required to be filed for the year ended December 31, 2013,2016, all of these filing requirements were satisfied except that executive officer Donald L. Manfredoniaeach of our non-employee directors, who were directors in January 2016, inadvertently did not timely report onfiled one late Form 4 in April 2016 to report the salegrant of 1,500 shares on May 9, 2013. The sale was subsequently reported on a Form 4 filed May 17, 2013.restricted stock units, received in January 2016.
PROPOSAL 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The consolidated financial statements of the Corporation for the year ended December 31, 20132016 were audited by Crowe Horwath LLP (“Crowe Horwath”). The Audit Committee has reappointedappointed Crowe Horwath as the Corporation’s independent registered public accounting firm to audit the Corporation’s consolidated financial statements for the year ending December 31, 2014.2017. A resolution will be presented at the Annual Meeting of Stockholders to ratify the reappointmentappointment of Crowe Horwath. The affirmative vote of the holders of a majority of shares represented in person or by proxy and voting on this item will be required for ratification. If there is no designation on an executed proxy as to how the shares represented should be voted, the proxy will be voted for the ratification. If the stockholders do not ratify the reappointmentappointment of Crowe Horwath, the Audit Committee will reconsider its selection of Crowe Horwath as the Corporation’s independent registered public accounting firm. Even if the stockholders ratify the appointment of Crowe Horwath, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change is in the best interests of the Corporation and its stockholders.
A representative of Crowe Horwath will be present at the Annual Meeting of Stockholders and will have the opportunity to make a statement and respond to appropriate questions from stockholders.
The Board of Directors recommends a vote FOR ratification of the reappointmentappointment of Crowe Horwath as the Corporation’s
independent registered public accounting firm.
Audit Fees
Crowe Horwath’sHorwath’s fees for audit services for each of the years 20132016 and 20122015 were $215,000.$245,000 and $235,000, respectively. Audit services include the following: (1) professional services rendered for the audit of the Corporation’s annual consolidated financial statements; (2) reviews of the consolidated financial statements included in the Corporation’s quarterly reportsQuarterly Reports on Form 10-Q; (3) a reading of the Corporation’s annual reportAnnual Report on Form 10-K; and (4) rendering an opinion on the effectiveness of the Corporation’s internal control over financial reporting.
Audit Related Fees
Audit related fees, as described in Item 9(e)(2) of Schedule 14A of the Securities and Exchange Commission’sCommission’s Proxy Rules, are fees billed to the Corporation by its independent auditorsIndependent Registered Public Accounting Firm (“Independent Auditors”) for assurance and related services that are reasonably related to the performance of the audit or review of the Corporation’s consolidated financial statements and are not audit fees as described in the previous paragraph. In 2016, Crowe Horwath billed the Corporation $3,500$78,000 for work done in connection with the Corporation’s Forma prospectus supplement and two form S-3 Registration Statement filed on August 9, 2013.registration statements. In 2015, Crowe Horwath did not bill the Corporation for any audit related fees.
Tax Fees
Crowe Horwath’s fees in 2012.
All Other Fees
In neither of the last two fiscal years was the Corporation billed by Crowe Horwath for any fees other than those described above under the captions “Audit Fees,” “Audit Related Fees” and “Tax Fees.”
Audit Committee Approval of Audit Related, Tax and Other Fees
In 20132016 and 2012,2015, the Audit Committee specifically approved or pre-approved all fees reported under the sections “Audit Related Fees” and “Tax Fees.”
Engagement of Independent Auditors to Perform Audit Services and Non-Audit Services
On an annual basis, and in accordance with the terms of written engagement letters, the Audit Committee engageshas engaged the Corporation’s independent auditorsIndependent Auditors to perform audit services as previously defined and to prepare the Corporation’s income tax returns.
In addition, from time to time the Audit Committee may engage the Corporation’s independent auditorsCorporation’s Independent Auditors to perform non-audit services such as providing tax advice and performing tax compliance work. The Audit Committee has pre-approved specific types of non-audit services provided that the cost of such services does not exceed $50,000 in any calendar year. The Audit Committee will not engage the independent auditorsIndependent Auditors to perform any non-audit service or pre-approve any non-audit service that could impair, in fact or appearance, the independence of the independent auditors.Independent Auditors. In addition, the Audit Committee will not pre-approve any non-audit service if such pre-approval constitutes delegation to management of the Audit Committee’s responsibilities under the Securities Exchange Act of 1934. Prohibited non-audit services include those
AUDIT COMMITTEE REPORT
Under its charter, the Audit Committee is responsible to assist the Board in whichfulfilling its oversight responsibilities by reviewing and evaluating: 1) the independent auditors would be auditing their own work, functioning as a part of management or as an employee, acting as an advocatequalifications and independence of the Corporation, or promotingIndependent Auditors; 2) the performance of the Corporation’s stock or financial interests. Other prohibited non-audit services include bookkeeping or other services related toIndependent Auditors and the accounting records or financial statementsinternal audit function; 3) the integrity of the Corporation;Corporation’s financial information systems designstatements; and implementation; appraisal or valuation services; fairness opinions; contribution-in-kind reports; actuarial services;4) management’s responsibilities to assure that there is in place an effective system of internal audit outsourcing services; performing management or human resources functions; acting as a broker/dealer, investment adviser or investment banker forcontrols.
While the Corporation; legal services; and expert services unrelated to the audit.
Specific duties and responsibilities of the Audit Committee include, among other things: 1) appoint, retain, compensate, evaluate and, where appropriate, replace the Independent Auditors; 2) approve all fees and terms of engagement of the Independent Auditors; 3) confirm the independence of the Independent Auditors; 4) review and discuss with management and the Independent Auditors the Corporation’s audited consolidated financial statements asand internal control over financial reporting; 5) meet with the Corporation’s Independent Auditors and review the scope of audit services and for the year ended December 31, 2013results of their annual audit of the Corporation’s consolidated financial statements, including any recommendations the auditors may have with management.
The Audit Committee has discussed with Crowe Horwathevaluation of the matters required to be discussed byIndependent Auditors includes, among other things, a review of the most recent Public Company Accounting Oversight Board (“PCAOB”) report and communications required by PCAOB Auditing Standard Number 16 (“AS No. 16”).
The Audit Committee reviews and discusses with management and the Independent Auditors the annual audited financial statements, Form 10-K, Forms 10-Q and earnings press releases prior to their filing, including reviewing the disclosures made in "Management's Discussion and Analysis of Financial Condition and Results of Operation." The Audit Committee also reviews and discusses policies with respect to risk assessment and risk management. Such discussions include the Corporation’s major financial and accounting risk exposures and the steps management has undertaken to control them.
The Audit Committee reviews reports from management regarding, among other things, the framework and effectiveness of internal controls over financial reporting and disclosure controls, compliance with laws and regulations, and controls over information technology risk.
The Audit Committee met eight times during 2016 and schedules meetings to ensure it devotes enough time and attention to the duties and responsibilities outlined in this report. Periodic executive sessions are held with the Independent Auditors, Chief Auditor and other members of management to discuss any matters that the Committee or these persons believe should be discussed.
The Audit Committee regularly reports its activities to the Board, and annually conducts a review of its Charter and performs a self-assessment.
Based on the review and discussions referred to above, the Audit Committee we recommended to the Board of Directors that the audited financial statements be included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 20132016 for filing with the Securities and Exchange Commission.
The Audit Committee:
● | Alexander L. Cover, Chairman |
● | John J. Desmond |
● | Peter Quick |
● |
Walter C. Teagle III |
● | Eric J. Tveter |
The preceding report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities1933 Act of 1933 (“1933 Act”) or the Securities Exchange1934 Act, of 1934 (“1934 Act”), except to the extent the Corporation specifically incorporates this information by reference, and shall not otherwise be deemed filed under the 1933 Act or the 1934 Act.
OTHER MATTERS
The Board of Directors of the Corporation does not know of any matters for action by stockholders at the Annual Meeting other than the matters described in the Notice of Annual Meeting. However, the enclosed Proxy will confer discretionary authority with respect to matters which are not known to the Board of Directors at the time of the printing hereof and which may properly come before the meeting. It is the intention of the persons named in the Proxy to vote such Proxy with respect to such matters in accordance with their best judgment.
The entire expense of preparing, assembling and mailing the enclosed material will be borne by the Corporation. In addition to using the mail, directors, officers and employees of the Bank acting on behalf of the Corporation, and without extra compensation, may solicit proxies in person, by telephone or by facsimile or throughfacsimile. We have retained Laurel Hill Advisory Group, LLC to assist us in soliciting proxies, and have agreed to pay Laurel Hill Advisory Group, LLC a proxy solicitation firm.
STOCKHOLDER PROPOSALS
Any proposals of stockholders intended to be submitted at the 20152018 Annual Meeting of Stockholders under SEC Rule 14a-8 must be received by the Chairman of the Board or the President no later than November 17, 201415, 2017 in order to be considered for inclusion in the proxy statement and form of proxy for such meeting under SEC Rule 14a-8. IfMoreover, if the Corporation is not notified of a stockholder proposalmatter to be brought before the 2018 Annual Meeting by January 31, 2015,December 15, 2017, then the proxies held by management of the Corporation may provide the discretion to vote against such stockholder proposal,matter, even though such proposalmatter is not included in the proxy statement and form of proxy.
INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on April 22, 2014
The Company’sCompany’s proxy statement and form of proxy for its 20142017 Annual Meeting of Stockholders and its 2013 annual report2016 Annual Report on Form 10-K to security holders is available at http://www.cfpproxy.com/4667www.cstproxy.com/fnbli/2017..
For driving directions to The Carltun, the location of the annual meeting, please go to http://www.carltunonthepark.com/contact.htmlwww.thecarltun.com..
ANNUAL REPORTS TO STOCKHOLDERS
Consolidated financial statements for the Corporation are included in the Corporation’s 2013Corporation’s 2016 Annual Report on Form 10-K which was mailed with this Proxy Statement. In addition, copies of the 20132016 Annual Report on Form 10-K as filed with the Securities and Exchange Commission will be sent to any stockholder upon written request without charge. Such request should be directed to Mark D. Curtis, Senior Executive Vice President, Chief Financial Officer and Treasurer, at the Corporation’s principal office, 10 Glen Head Road, Glen Head, New York 11545.
By Order of the Board of Directors | |
Christopher Becker | |
March | Executive Vice President Chief Risk Officer and Secretary |
APPENDIX A
New York Business Corporation Law § 623
Procedure to enforce shareholderSection 1.1’s right to receive payment for shares.Purpose, Effective Date
(a) A shareholder intending to enforce his right under a section of this chapter to receive payment for his shares if the proposed corporate action referred to therein is taken shall file with the corporation, before the meeting of shareholders at which the action is submitted to a vote, or at such meeting but before the vote, written objection to the action. The objection shall include a notice of his election to dissent, his name and Term. The purposeresidence address, the number and classes of The First of Long Island Corporation 2014 Equity Incentive Plan (the “Plan”) isshares as to promote the long-term financial success of The First of Long Island Corporation (the “Company”),which he dissents and its Subsidiaries, including The First National Bank of Long Island (the “Bank”), by providing a means to attract, retain and reward individuals who contribute to such success and to further align their interests with thosedemand for payment of the Company’s stockholders throughfair value of his shares if the ownershipaction is taken. Such objection is not required from any shareholder to whom the corporation did not give notice of additional common stock of the Company. The “Effective Date” of the Plan shall be the date the Plan satisfies the applicable shareholder approval requirements. The Plan shall remain in effect as long as any Awards are outstanding; provided, however, that no Awards may be granted under the Plan after the day immediately prior to the ten-year anniversary of the Effective Date.
(b) Within ten days after the Company or any Subsidiary of the Company who is granted an Award in accordance with the terms of the Plan shall be a “Participant” in the Plan. The grant of Awards shall be limited to Employees and Directors of the Company or any Subsidiary.
(c) Within twenty days after the giving of notice to him, any shareholder from whom written objection was not required and who elects to dissent shall file with respectthe corporation a written notice of such election, stating his name and residence address, the number and classes of shares as to any Restricted Stock Awards subjectwhich he dissents and a demand for payment of the fair value of his shares. Any shareholder who elects to performance-based vesting conditions unlessdissent from a merger under section 905 (Merger of subsidiary corporation) or paragraph (c) of section 907 (Merger or consolidation of domestic and untilforeign corporations) or from a share exchange under paragraph (g) of section 913 (Share exchanges) shall file a written notice of such election to dissent within twenty days after the Participant vests in such Restricted Stock Award. Upon the vestinggiving to him of a performance-based Restricted Stock Awardcopy of the plan of merger or exchange or an outline of the material features thereof under Section 2.5, any dividends declared butsection 905 or 913.
(d) A shareholder may not paid during the vesting period shall be paid within thirty (30) days following the vesting date. Any stock dividends declared on sharesdissent as to less than all of Stock subject to a Restricted Stock Award shall be subject to the same restrictions and shall vest at the same time as the shares, of Restricted Stock fromas to which said dividends were derived.
(e) Upon consummation of the Company ascorporate action, the Committeeshareholder shall designate in the direction (if the Participant is not such a beneficial owner), a written direction in the form and manner prescribed by the Committee. If no such direction is given, then the shares of Restricted Stock shall not be tendered.
(f) At the time of an Involuntary Termination following a Change in Control, all Stock Options and SARs then heldfiling the notice of election to dissent or within one month thereafter the shareholder of shares represented by certificates shall submit the Participant shall become fully earned and exercisable (subjectcertificates representing his shares to the expiration provisions otherwise applicablecorporation, or to its transfer agent, which shall forthwith note conspicuously thereon that a notice of election has been filed and shall return the certificates to the Stock Optionshareholder or other person who submitted them on his behalf. Any shareholder of shares represented by certificates who fails to submit his certificates for such notation as herein specified shall, at the option of the corporation exercised by written notice to him within forty-five days from the date of filing of such notice of election to dissent, lose his dissenter’s rights unless a court, for good cause shown, shall otherwise direct. Upon transfer of a certificate bearing such notation, each new certificate issued therefor shall bear a similar notation together with the name of the original dissenting holder of the shares and SARs). All Stock Options and SARs may be exercised for a period of two years following the Participant’s Involuntary Termination, provided, however, thattransferee shall acquire no Stock Option shall be eligible for treatment as an ISOrights in the event such Stock Option is exercised more than three (3) months following Involuntary Termination following a Change in Control.
(g) Within fifteen days after the membersexpiration of the Compensation Committeeperiod within which shareholders may file their notices of the Company who are Disinterested Board Members as defined in Section 8.1. If the Committee consists of fewer than three Disinterested Board Members, then the Board shall appointelection to the Committee such additional Disinterested Board Members as shall be necessary to provide for a Committee consisting of at least three Disinterested Board Members. Any members of the Committee who do not qualify as Disinterested Board Members shall abstain from participating in any discussiondissent, or decision to make or administer Awards that are made to Participants who at the time of consideration for such Award: (i) are persons subject to the short-swing profit rules of Section 16 of the Exchange Act, or (ii) are reasonably anticipated to be Covered Employees during the term of the Award. The Board (or if necessary to maintain compliance with the applicable listing standards, those members of the Board who are “independent directors” under the corporate governance statutes or rules of any national Exchange on which the Company lists, has listed or seeks to list its securities) may, in their discretion, take any action and exercise any power, privilege or discretion conferred on the Committee under the Plan with the same force and effect under the Plan as if done or exercised by the Committee.
(h) The following procedure shall apply if the corporation fails to make such offer within such period of fifteen days, or if it makes the offer and any dissenting shareholder or shareholders fail to agree with it within the period of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of whichever is applicable of the two periods last mentioned, institute a Subsidiary. Service shall not be deemed interruptedspecial proceeding in the supreme court in the judicial district in which the office of the corporation is located to determine the rights of dissenting shareholders and to fix the fair value of their shares. If, in the case of sick leave, military leavemerger or consolidation, the surviving or new corporation is a foreign corporation without an office in this state, such proceeding shall be brought in the county where the office of the domestic corporation, whose shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such period of twenty days, any dissenting shareholder may institute such proceeding for the same purpose not later than thirty days after the expiration of such twenty day period. If such proceeding is not instituted within such thirty day period, all dissenter’s rights shall be lost unless the supreme court, for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in paragraph (g), have agreed with the corporation upon the price to be paid for their shares, shall be made parties to such proceeding, which shall have the effect of an action quasi in rem against their shares. The corporation shall serve a copy of the petition in such proceeding upon each dissenting shareholder who is a resident of this state in the manner provided by law for the service of a summons, and upon each nonresident dissenting shareholder either by registered mail and publication, or in such other manner as is permitted by law. The jurisdiction of the court shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as to whom the corporation requests the court to make such determination, is entitled to receive payment for his shares. If the corporation does not request any such determination or if the court finds that any dissenting shareholder is so entitled, it shall proceed to fix the value of the shares, which, for the purposes of this section, shall be the fair value as of the close of business on the day prior to the shareholders’ authorization date. In fixing the fair value of the shares, the court shall consider the nature of the transaction giving rise to the shareholder’s right to receive payment for shares and its effects on the corporation and its shareholders, the concepts and methods then customary in the relevant securities and financial markets for determining fair value of shares of a corporation engaging in a similar transaction under comparable circumstances and all other relevant factors. The court shall determine the fair value of the shares without a jury and without referral to an appraiser or referee. Upon application by the corporation or by any shareholder who is a party to the proceeding, the court may, in its discretion, permit pretrial disclosure, including, but not limited to, disclosure of any expert’s reports relating to the fair value of the shares whether or not intended for use at the trial in the proceeding and notwithstanding subdivision (d) of section 3101 of the civil practice law and rules.
(5) The final order in the proceeding shall be entered against the corporation in favor of each dissenting shareholder who is a party to the proceeding and is entitled thereto for the value of his shares so determined.
(6) The final order shall include an allowance for interest at such rate as the court finds to be equitable, from the date the corporate action was consummated to the date of payment. In determining the rate of interest, the court shall consider all relevant factors, including the rate of interest which the corporation would have had to pay to borrow money during the pendency of the proceeding. If the court finds that the refusal of any shareholder to accept the corporate offer of payment for his shares was arbitrary, vexatious or otherwise not in good faith, no interest shall be allowed to him.
(7) Each party to such proceeding shall bear its own costs and expenses, including the fees and expenses of its counsel and of any experts employed by it. Notwithstanding the foregoing, the court may, in its discretion, apportion and assess all or any other absence approvedpart of the costs, expenses and fees incurred by the Companycorporation against any or a Subsidiary,all of the dissenting shareholders who are parties to the proceeding, including any who have withdrawn their notices of election as provided in paragraph (e), if the court finds that their refusal to accept the corporate offer was arbitrary, vexatious or otherwise not in good faith. The court may, in its discretion, apportion and assess all or any part of the costs, expenses and fees incurred by any or all of the dissenting shareholders who are parties to the proceeding against the corporation if the court finds any of the following: (A) that the fair value of the shares as determined materially exceeds the amount which the corporation offered to pay; (B) that no offer or required advance payment was made by the corporation; (C) that the corporation failed to institute the special proceeding within the period specified therefor; or (D) that the action of the corporation in complying with its obligations as provided in this section was arbitrary, vexatious or otherwise not in good faith. In making any determination as provided in clause (A), the court may consider the dollar amount or the percentage, or both, by which the fair value of the shares as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the corporation shall pay to each dissenting shareholder the amount found to be due him, upon surrender of the certificates for any such shares represented by certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value therefor or of the amount due under the final order, as provided in this section, shall become treasury shares or be cancelled as provided in section 515 (Reacquired shares), except that, in the case of transferees between payroll locationsa merger or betweenconsolidation, they may be held and disposed of as the Company,plan of merger or consolidation may otherwise provide.
(j) No payment shall be made to a Subsidiarydissenting shareholder under this section at a time when the corporation is insolvent or a successor.
(1) Withdraw his notice of election, which shall in such event be deemed withdrawn with the written consent of the Company, $0.10 par value per share.
(2) Retain his status as a claimant against the meaning ascribed tocorporation and, if it in Section 2.1(a) and 2.2.
(3) The dissenting shareholder shall exercise such option under subparagraph (1) or Director(2) by written notice filed with the corporation within thirty days after the corporation has given him written notice that payment for his shares cannot be made because of the Company or any Subsidiary, regardlessrestrictions of this paragraph. If the reason fordissenting shareholder fails to exercise such cessation, subjectoption as provided, the corporation shall exercise the option by written notice given to him within twenty days after the following:
(k) The Participant’s cessation as an Employee shall not be deemed to occurenforcement by reasona shareholder of the transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries.
(l) Except as otherwise expressly provided in this section, any notice to be given by a corporation to a shareholder under this section shall be given in the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided in subparagraph (e) (2) of section 907 (Merger or consolidation of domestic and foreign corporations).
