UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed
by
the Registrant [x] Filed
by
a Party other than the Registrant [ ]
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the appropriate box:
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[
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Preliminary
Proxy Statement
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[
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[X]
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Definitive
Proxy Statement
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[
]
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Definitive
Additional Materials
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[
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Soliciting
Material under ss. 240.14a-12
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REPUBLIC
FIRST BANCORP, INC.
(Name
of
Registrant as Specified In Its Charter)
N/A
(Name
of
Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No
fee required
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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Title
of each class of securities to which transaction
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
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0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration statement
number,
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filing.
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Schedule or Registration Statement No.:
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Party:
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4)
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Date
Filed:
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March
23,
2007
Dear
Shareholder:
You
are
cordially invited to attend the 2007 Annual Meeting of the Shareholders of
Republic First Bancorp, Inc. to be held on Tuesday, April 24, 2007, at 4:00
p.m., Philadelphia time, at the Union League of Philadelphia, Broad & Sansom
Streets, Philadelphia, PA 19102.
It
is
very important that you be represented at the annual meeting regardless of
the
number of shares you own or whether you are able to attend the meeting in
person. We urge you to mark, sign and date your proxy card today and return
it
in the envelope provided, even if you plan to attend the annual meeting. This
will not prevent you from voting in person, but will ensure that your vote
is
counted if you are unable to attend.
Enclosed
with your proxy materials is a copy of our 2006 Annual Report to shareholders
and Form 10-K.
We
look
forward to seeing you at the meeting.
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Sincerely,
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Harry
D. Madonna
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Chairman
of the Board of Directors
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Chief
Executive Officer
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REPUBLIC
FIRST BANCORP, INC.
1608
Walnut Street
Philadelphia,
Pennsylvania 19103
______________________
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON APRIL 24, 2007
_______________________
TO
OUR
SHAREHOLDERS:
NOTICE
IS
HEREBY GIVEN THAT the 2007 Annual Meeting of Shareholders
(the
“Annual Meeting”) of Republic First Bancorp, Inc. (the “Company”) will be held
on Tuesday, April 24, 2007, at 4:00 p.m., Philadelphia time, at the Union League
of Philadelphia, Broad & Sansom Streets, Philadelphia, PA 19102 to consider
and act upon:
1.
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The
election of three (3) Class III Directors of the Company; and
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2.
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The
transaction of such other business as properly may be brought before
the
Annual Meeting or any adjournment or postponement thereof.
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Only
shareholders of record of the Company at the close of business on March 13,
2007, are entitled to notice of and to vote at the Annual Meeting and any
adjournment or postponement thereof.
All
shareholders are cordially invited to attend the Annual Meeting. Whether or
not
you plan to attend the Annual Meeting, please complete and sign the enclosed
proxy card and return it promptly to the Company in the enclosed envelope,
which
requires no postage if mailed in the United States.
March
24, 2007
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Sincerely,
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Denise
Tinney
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Corporate
Secretary
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IT
IS
IMPORTANT THAT YOU RETURN YOUR SIGNED PROXY CARD PROMPTLY, REGARDLESS OF THE
NUMBER OF SHARES YOU OWN. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY
CARD
IN THE ACCOMPANYING ENVELOPE PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.
______________________
TABLE
OF CONTENTS
______________________
REPUBLIC
FIRST BANCORP, INC.
1608
Walnut Street
Philadelphia,
Pennsylvania 19103
ANNUAL
MEETING OF SHAREHOLDERS
To
Be Held on Tuesday, April 24, 2007
_____________________
PROXY
STATEMENT
_____________________
This
Proxy Statement has been prepared and is being distributed in connection with
the solicitation by the Board of Directors of Republic First Bancorp, Inc.
(the
“Company”) of proxies in the enclosed form for use at the 2007 Annual Meeting of
Shareholders of the Company to be held on Tuesday, April 24, 2007, at 4:00
p.m.,
Philadelphia time, at the Union League of Philadelphia, Broad & Sansom
Streets, Philadelphia, PA 19102 (such meeting and any adjournment(s) or
postponement(s) thereof are herein referred to as the “Annual Meeting”). This
Proxy Statement is first being given or sent to shareholders of the Company
on
or about March 23, 2007.
Voting
and Revocability of Proxies
Unless
contrary instructions are indicated, all shares represented by valid proxies
received pursuant to this solicitation (and not revoked before they are voted)
will be voted FOR
the
election of the nominees for Directors named herein. As of the date of this
Proxy Statement, the Board of Directors of the Company (the “Board”) knows of no
business that will be presented for consideration at the Annual Meeting other
than that referred to above. If any other business properly comes before the
Annual Meeting, the persons designated in the enclosed proxy will vote on such
business in accordance with their best judgment.
Any
shareholder who executes and returns a proxy card may revoke it at any time
before it is voted by delivering to Denise Tinney, Corporate Secretary of the
Company,
at
the
principal executive offices of the Company at 1608 Walnut Street, Philadelphia,
PA 19103, a written instrument revoking the proxy, a duly executed proxy bearing
a later date, or by attending the Annual Meeting and voting in
person.
Your
proxy is being solicited by the Board for use in connection with the Annual
Meeting. The cost of such solicitation will be borne by the Company. Proxies
may
be solicited in person or by mail, telephone, telegram, mailgram or other means
by Directors, officers, and employees of the Company. Such persons will not
receive any fees for such solicitation. Brokers, nominees, fiduciaries and
other
custodians have been requested to forward such solic-iting material to the
beneficial owners of shares held of record by them, and such custodians may
be
reimbursed for their expenses.
Voting
Securities, Quorum and Required
Vote
As
of the
close of business on March 13, 2007, the record date for voting at the Annual
Meeting (“the Record Date”), there were 9,747,312 outstanding shares of common
stock, par value $0.01 per share, of the Company. Holders of the Company’s
common stock are entitled to one vote per share on all matters to be voted
upon
at the Annual Meeting.
As
of the
date hereof, there are no other classes of the Company’s capital stock issued
or
outstanding.
The
presence in person or by proxy of a majority of the shares of common stock
outstanding on the Record Date will constitute a quorum for the purpose of
conducting business at the Annual Meeting. For the purpose of determining the
votes cast with respect to any matter presented for consideration at the
meeting, only those votes cast “FOR” or “AGAINST” are included. Abstentions and
broker non-votes (shares held by brokers on behalf of their customers which
may
not be voted on certain matters because the brokers have not received specific
voting instructions from their customers with respect to such matters) will
be
counted solely for the purpose of determining whether a quorum is present.
The
three
Class III nominees for Directors receiving the highest number of votes cast
by
shareholders entitled to vote for such class of Directors shall be
elected.
Paul
Verdi and Maria Oliveri shall be appointed the lawful proxies, each with full
power of substitution, for and on behalf of the shareholders, to vote as
specified in any appropriately completed proxy card, the shares of the Company’s
common stock held of record by the shareholder.
Shareholder
Communications with
Directors
The
Company does not have formal procedures for shareholder communication with
the
Board. Any matter intended for the Board, or for any individual member or
members
of
the
Board, should be directed to the Corporate Secretary at Republic First Bancorp,
Inc., 1608 Walnut Street, Philadelphia, PA 19103, with a request to forward
the
same to the intended recipient. In general, all shareholder communication
delivered to the Corporate Secretary for forwarding to the Board or specified
Board members will be forwarded in accordance with the shareholder’s
instructions. However, the Corporate Secretary reserves the right to not forward
to Board members any abusive, threatening or otherwise inappropriate materials.
The
Company encourages all incumbent Directors and nominees for election
as
Director to attend the Annual Meeting. All Directors attended the Annual Meeting
in April, 2006.
The
Company’s Articles of Incorporation and By-Laws provide for the classification
of Directors into three classes, as nearly equal in number as possible, with
approximately one-third of the Directors to be elected annually for three-year
terms. The Articles of Incorporation and By-Laws provide that the Board may
consist of not less than five Directors and not more than 25
Directors.
The
Board
consists of nine Directors divided into three classes. Currently, the Class
I
Directors are Harry D. Madonna, William W. Batoff and Louis J. DeCesare; the
Class II Directors are Robert J. Coleman, Lyle W. Hall and Harris Wildstein,
Esq.; and the Class III Directors are Neal I. Rodin, Steven J. Shotz and Barry
L. Spevak.
The
Class
I Directors will hold office until the Company’s 2008 annual meeting
and
the
Class II Directors will hold office until the Company’s 2009 annual
meeting. All
Directors will hold office until the annual meeting of shareholders at which
their terms expire and the elections and qualification of their successors.
The
Board
has nominated Neal I. Rodin, Barry L. Spevak and Steven J. Shotz to continue
to
serve as Class III Directors, each of whose term will expire in 2010. All of
the
Director nominees have agreed to stand for election. Assuming election of all
nominees, a
majority of the Board members will be independent, as defined by the rules
of
the NASDAQ Stock Market. The independent members of our Board include Messrs.
Batoff, Coleman, Hall, Rodin and Spevak.
The
following individuals have been nominated for election to the Board each
of
them
to serve until the
end
of his respective terms or until his successor is elected and
qualified:
Neal
I. Rodin,
age 61,
has been a Director of the Company and of Republic First Bank, a Pennsylvania
chartered bank which is a wholly-owned subsidiary of the Company (the “Bank”)
since 1988. Mr. Rodin has been the Managing Director of the Rodin Group, an
international real estate investment company, since 1988, and has been the
President of IFC, an international financing and investing company, since
1975.
Steven
J. Shotz,
age 62,
has been a Director of the Company and the Bank since 1988 and a Director of
First Bank of Delaware since 1999. Mr.
Shotz
was appointed as a Director of Remington Financial Group, a real estate
investment bank in 2005 and has been the President of Quantum Group, Inc.,
a
venture capital fund, since 1995.
Barry
L. Spevak,
age 46,
has been a Director of the Company since April 2004.
He
has
also been a partner with Miller Downey Spevak Kaffenberger, Limited, a certified
public accounting firm, since 1991 and serves on the board of directors of
the
Recording for the Blind and Dyslectic.
Each
of
Messrs. Rodin, Shotz, and Spevak has agreed to be named as a nominee for
Director in this Proxy Statement and has consented to serve as a Director if
elected. The
Company
expects all nominees to be willing and able to serve. The Board may designate
a
substitute nominee to replace any bona fide nominee who was nominated and who,
for any reason, becomes unavailable for election or service as a Director.
If
any of the nominees becomes unable to serve, the persons designated in the
enclosed proxy will vote for the election of such other person or persons as
the
Board may recommend.
Each
of
the following individuals will continue to serve as a Director of the Company
until the end of his respective terms or until his successor is elected and
qualified:
William
W. Batoff,
age 72,
has been a Director of the Company and the Bank since 1988 and a Director of
First Bank of Delaware since 1999. Since 1996, he has been the managing Director
of William W. Batoff Associates, a government relations consulting firm. Prior
to that, Mr. Batoff has been a senior consultant of Cassidy & Associates, a
government relations consulting firm, since 1992, and has been a Presidential
Appointee to the Advisory Board of the Pension Benefit Guarantee Corporation
(PBGC) a United States Government Agency.
Robert
J. Coleman,
age 70,
has been a Director of the Company and the Bank since April 2003. He has also
been the Chairman & Chief Executive Officer of Marshall, Dennehey, Warner,
Coleman & Goggin, a defense litigation law firm, since 1974.
Louis
J. DeCesare, age
47,
has been
a Director of the Company and the Bank since February 2006.
Mr.
DeCesare has been President of the Bank since December 2006. Previously, Mr.
DeCesare has
been
the Executive Vice President and Chief Lending Officer of the Bank since
November 2003. Prior to that, Mr. DeCesare served as a Vice President of
Commercial Lending of Commonwealth Bank from 1998 until 2002. He was Regional
Vice President of Commerce Bank from 1994 to 1998.
Lyle
W. Hall, Jr.,
age 62,
has been a Director of the Company and the Bank since April 2004. Mr. Hall
has
been the President of Deilwydd Partners, a real estate and financial consulting
company, since 1987. Prior to that, Mr. Hall was the Executive Vice President
and Director of Butcher & Company, a New York Stock Exchange Investment
Banking Company. Mr. Hall is a Certified Public Accountant and a member of
the
American Institute of Certified Public Accountants.
Harry
D. Madonna,
age 64
has been the Chairman and Chief Executive Officer of
the
Company and of the Bank since 1988. Since 1999 Mr. Madonna has been chairman
of
the Board of Directors of First Bank of Delaware. Since January 2002, Mr.
Madonna also served as chief executive officer of First Bank of Delaware. Mr.
Madonna was of counsel to Spector Gadon & Rosen, P.C., a general practice
law firm located in Philadelphia, Pennsylvania, from January 1, 2002 until
June
30, 2005, and prior to that, was a partner of Blank Rome Comisky & McCauley
LLP, a general practice law firm located in Philadelphia, Pennsylvania, since
1980.
Harris
Wildstein, Esq.,
age 62,
has been a Director of the Company and the Bank since 1988. Since 1999, Mr.
Wildstein has been a Director of the First Bank of Delaware, a Delaware
chartered bank. Mr. Wildstein has also been the Vice President of R&S
Imports, Ltd., an automobile dealership since 1977 and President of HVW, Inc.,
an automobile dealership, since 1982.
Committees
of the Board of Directors
The
Company’s Board of Directors has organized the following standing committees:
the Executive Committee, the Audit Committee, the Nominating Committee and
the
Compensation and Option Committee.
Executive
Committee.
Messrs.
Madonna (chair), Shotz and Wildstein serve as members of the Company’s Executive
Committee. The Executive Committee is authorized to exercise all of the
authority of the Board in the management of the Company’s affairs between Board
meetings, unless otherwise provided by the by-laws or applicable law. The
Executive Committee did not hold any meetings during 2006.
Audit
Committee.
Messrs.
Hall (chair), Batoff and Spevak serve as members of the Audit Committee. The
Board of Directors has determined that Mr. Hall is an “audit committee financial
expert” as that term is defined in Item 407(d)(5) of Regulation S-K, and is
“financially sophisticated,” as that term is defined under the rules of the
NASDAQ Stock Market. The Audit Committee provides general financial oversight
over financial reporting and the adequacy of the Company’s internal controls
through meetings with the Company’s management and its independent auditors. All
members
of the Audit Committee are independent,
as defined by the rules of the NASDAQ Stock Market.
The
Audit
Committee held four meetings during 2006, and it operates under a written
charter approved by the Board. A
copy of
the Audit Committee’s charter is available on the Company’s website at
www.rfbkonline.com.
See
“Audit Committee Report to Shareholders.”
Compensation
and Option Committee.
Messrs.
Batoff (chair), Coleman, Hall, and Spevak serve as members of the Compensation
and Option Committee (the “Compensation Committee”). The Compensation Committee
is authorized to grant options, evaluate executive management’s performance and
approve compensation arrangements for the Company’s Chief Executive Officer. The
role of the Compensation Committee in approving and administering the Company’s
compensation programs is discussed in detail in “Compensation Discussion &
Analysis.” All
members
of the Compensation Committee are independent
as defined by the rules of the NASDAQ Stock Market.
The
Compensation Committee held three meetings in 2006. A copy of the Compensation
Committee’s charter is available on the Company’s website at www.rfbkonline.com.
Nominating
Committee.
Messrs.
Spevak (chair), Hall, and Batoff serve as members of the Nominating Committee.
All members of the Nominating Committee are independent, as defined by the
rules
of the NASDAQ Stock Market.
The
Nominating Committee held one meeting in 2006. A copy of the Nominating
Committee’s charter is available on the Company’s website at www.rfbkonline.com.
The
Nominating Committee oversees the composition and operation of the Company’s
Board, including identifying individuals qualified to become Board members,
recommending to the Board Director nominees for the next annual meeting of
shareholders, and filling vacancies occurring between annual shareholder
meetings. It identifies Director candidates by considering the recommendations
of the Company’s Directors, executive officers and shareholders, as well as
those of experts and consultants of the Company. The Nominating Committee
evaluates each candidate’s background and experience as well as the candidate’s
ability to act in the best interest of the Company’s shareholders, analyzing
such qualities as the candidate’s accomplishments, business experience and
acumen, honesty and integrity.
The
Nominating Committee will consider Director nominees recommended by security
holders for nomination for election at the annual meetings of the Company’s
shareholders. The procedures for submitting such nominations are described
below
under “Shareholder Proposals and Nominations for the 2008 Annual
Meeting.”
Meetings
of the Board and Attendance
During
2006, the Directors held six Board meetings. All of the Directors attended
at
least
75% of all of the meetings of the Board and the meetings of all committees
of
the Board on which such Director served.
The
following sets forth certain information regarding the executive officers of
the
Company. Information pertaining to Harry D. Madonna, who is both a Director
and
Chief Executive Officer of the Company and to Louis J. DeCesare who is both
a
Director and is President and Chief Operating Officer of Republic First Bank
(the “Bank”), may be found in the section entitled “Continuing
Directors.”
Paul
Frenkiel,
age 54
has been the Chief Financial Officer of the Company, the Bank and First Bank
of
Delaware since November 2000, and had been a Director of First Bank of Delaware
from January 2002 until April 2004. Prior to that, Mr. Frenkiel served as the
Chief Financial Officer of JeffBanks Inc., a bank holding company, from 1987
until April 2000.
Randy
McGarry,
age 39,
has been the Executive Vice President and the Chief Operations Officer of the
Bank and First Bank of Delaware since January 2005. Prior to that, Mr. McGarry
served as an Operations Officer from June, 1998 through December 2004. Prior
to
that, Mr. McGarry served in various operational functions since October
1991.
Paul
A. Verdi, Jr., age
44,
has
been
an Executive Vice President and Chief Retail Banking Officer of the Company,
the
Bank and First Bank of Delaware since September 1994. Prior to that, Mr. Verdi
served as vice president/area manager of First Fidelity Bank since
1986.
Recommendation
of the Board of Directors
THE
BOARD
OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR
THE
ELECTION OF ALL
NOMINEES.
Following
the spin-off by the Company in 2005 of First Bank of Delaware, all of the
employees of the Company and its subsidiaries (the Company and Republic First
Bank are sometimes in this section jointly referred to as the “Company”) were
transferred to BSC Services Corporation, a wholly-owned subsidiary of First
Bank
of Delaware. Certain of the Company’s officers continue to serve as officers of
First Bank of Delaware. The Company and First Bank of Delaware have agreed
to
reimburse BSC Services Corporation for compensation expenses related to such
officers. Such reimbursement will be made by the Company and First Bank of
Delaware in accordance with agreed upon time allocations. Such allocations
will
include the amounts spent on the work of such respective officers for the
Company. See “Certain Relationships and Related Party Transactions.”
COMPENSATION
DISCUSSION & ANALYSIS
Overview
of the Executive Compensation Program. The
Company’s executive compensation program includes a number of fixed and variable
compensation and benefit components, typical of programs among comparable
community banking and financial services companies in our local and regional
marketplace.
The
program provides participating executives with an industry-competitive level
of
total compensation when their collective and individual performances meet or
exceed the goals approved by the Board of Directors and the Compensation
Committee.
Compensation
Philosophy and Program Objectives. We
believe that the compensation program for executives should directly support
the
achievement of specific annual, longer-term and strategic goals of the business,
and, thereby, align the interests of executives with the interests of Company
shareholders.
The
current program provides sufficient levels of fixed income, in the forms of
base
salary and health & welfare benefits, to attract high caliber executive
talent to the organization. It also provides competitive annual and longer-term
incentive opportunities to encourage specific performance and to reward the
successful efforts of executives.
The
incentive opportunities are based on competitive industry practice and will
provide as much as 40% to 60% of executives’ total compensation, depending on
their role in the organization, from short- and longer-term incentive
opportunities, but
only when performance targets are met on a consistent basis.
The
current program contains certain deferred post-employment compensation features,
provided on a selective basis, to encourage retention through long-term wealth
accumulation opportunities and to assure transition support in the event of
substantial organization or ownership change. These provisions clearly support
retention of good performers by the organization.
We
believe that the features and composition of the current program are consistent
with practices of other comparable community banking and financial services
organizations in our marketplace and that it balances the need for competitive
pay opportunities at the executive level with shareholders’ expectations for
reasonable return on their investment.
Program
Management. The
Compensation Committee (the “Committee”) of the Board of Directors has primary
responsibility for the design and administration of the executive compensation
program. It reviews the make-up and administration of the executive compensation
program throughout the year in light of changing organization needs and
operating conditions and changing trends in industry practice. In evaluating
program effectiveness, the Committee utilizes information from management and
the services of an outside consultant. Strategic Compensation Planning, Inc.
of
Malvern, PA is the Committee’s consultant on executive and director compensation
matters.
The
Committee currently consists of four (4) directors, all of whom qualify as
independent members of the Board. William W. Batoff serves as Chair of the
Committee. Robert J. Coleman, Lyle W. Hall and Barry L. Spevak also serve on
the
Committee.
Role
of Executive Management in the Pay Decision Process.
The
Committee is responsible for approving compensation related decisions. In
formulating its decisions, the Committee will regularly seek information about
the performance of the business, organization staffing requirements and the
performance levels of incumbent executives from the Chief Executive Officer.
It
will also utilize the services of the Company’s Chief Financial Officer and, as
circumstances suggest, other officers of the Company. The Committee weighs
the
information provided by officers carefully, especially the recommendations
of
the Chief Executive Officer on decisions affecting subordinate executives,
but
ultimately makes its decisions independently.
Program
Review and Pay Decision Process.
Starting
in the early Fall of a calendar year and usually continuing through January
of
the following year, the Compensation Committee (1) receives information on
current executive compensation levels in the industry and industry program
practices, (2) conducts a comprehensive review of the Company program structure
and provisions, and (3) considers salary and benefit adjustments and incentive
awards for executives.
After
examining industry practice information provided by its outside consultant,
the
Committee determines (1) if the content and structure of the Company program
is
still competitive, (2) if the current provisions remain consistent with the
Company’s overall pay philosophy, and (3) if they continue to support
achievement of business objectives.
After
deciding on the program structure for the coming calendar year, the Compensation
Committee will examine the current compensation and benefit levels of incumbent
executives in light of their continuing or changing roles in the business,
the
assessments of their individual performances by the Chief Executive Officer,
and
industry practice trends.
Based
on
the information gathered about each executive, the Compensation Committee will
make salary adjustments for executives during the coming calendar year. It
will
also determine annual incentive awards for executives based on results achieved
against goals and objectives set at the beginning of the year, and it will
determine appropriate longer-term incentive awards, usually in the forms of
deferred compensation awards, or stock options or restricted stock grants.
These
determinations were presented to the full Board of Directors at its December
19,
2006 meeting.
As
incentive awards for the year ending are calculated, the Compensation Committee
is also working with the Chief Executive Officer to construct organization
and
executive performance plans for the coming calendar year (the new fiscal year).
The
Committee is also called upon to consider pay related decisions throughout
the
calendar year as executives are reassigned or promoted and new executives join
the organization. In these instances, the Committee will review all aspects
of
the executive’s compensation including base salary level, annual incentive
opportunities, longer-term incentive awards, participation in special benefit
plans, and employment contract provisions, if applicable.
Pay
Decision Factors and Considerations.
The
following factors typically influence Compensation Committee decisions on pay
and benefits for Company executives:
Salary:
executive’s overall performance during the year ending, changes in organization
role and scope of responsibility, current salary in relation to the position’s
market value, any significant changes in the industry’s pay practices for
comparable positions.
Annual
Incentive Awards:
competitive industry practice with respect to size of awards, actual performance
(achievement) against goals and objectives assigned for the fiscal year.
Longer-term
Incentive Awards:
competitive industry practice with respect to size of awards and the typical
“mix” of stock options, restricted shares and other forms of equity-based
grants, recent performance of the Company and the individual executive,
applicable accounting rules for expensing equity awards, and shareholder
concerns about dilution and overhang.
Nonqualified
Compensation and Benefits:
tax
rules on qualified benefit plans, likely replacement income benefits for
executives compared to other categories of employees within the organization,
competitive industry practice for comparable type and level of executive
positions.
Perquisites:
the
needs of the executive’s position, i.e., frequency of travel to other Company
locations, or to meet with Company clients and prospective clients, and
competitive industry practices for comparable executive roles.
Employment
Contracts:
where
they serve Company needs for confidentiality about business practices and plans
and preservation of the customer base (noncompetition and nonsolicitation
provisions) and competitive industry practices.
Basis
for Defining Competitive Compensation Levels and
Practices.
The
types and levels of compensation included in the Company executive compensation
program are generally consistent with current features and programming trends
among similar size and type organizations in the Company’s local and regional
marketplace.
Periodically,
the Compensation Committee asks its outside consultant to review survey reports
on national and regional compensation practice within Company’s industry group,
focusing on pay levels and practices among Community Banking and Diversified
Financial Services institutions based in the Mid-Atlantic Region and
specifically the Greater Philadelphia metropolitan marketplace having assets
of
$800M to $1.5B. This range of institutions represents banking companies that
are
somewhat smaller and somewhat larger than Company. The asset range will be
modified from time to time as Company’s operating circumstances change.
The
consultant also examines proxy information on specific institutions in Company’s
marketplace that fall into the comparison standards noted. For the 2007 program
planning cycle, the outside consultant reviewed and discussed with the
Compensation Committee executive compensation information from the following
institutions in Pennsylvania, Delaware, and New Jersey:
Abington
Community Bancorp, Inc.
|
Leesport
Financial Corp.
|
Bancorp,
Inc.
|
Peapack-Gladstone
Financial
|
Bryn
Mawr Bank Corp.
|
Royal
Bancshares of Pennsylvania
|
First
Chester County Corp.
|
Synergy
Financial Group, Inc.
|
Greater
Community Bancorp
|
|
Program
Components. There
are
six (6) elements in the current executive compensation program:
|
1.
|
Base
Salary.
Base salary opportunities are set at the median level of industry
practice
for comparable jobs in like size and type community banking and financial
service organizations. Within the defined competitive range, an
executive’s salary level is based initially on his/her qualifications for
the assignment and experience in similar level and type roles. Ongoing,
salary adjustments reflect the individual’s overall performance of the job
against organization expectations and may also reflect changes in
industry
practices. For most Company executive positions, salary will provide
50%-65% of total
annual compensation,
when considering the value of short-term incentive awards, deferred
compensation contributions and other benefits provided by the
organization.
|
|
2.
|
Health
& Welfare Benefits.
Executives participate in Company’s qualified health & welfare
benefits program on the same terms and conditions as all other employees
of the Company.
|
|
3.
|
Annual
Performance Incentives.
The annual performance incentive award plan provides participating
executives with opportunities to earn additional cash compensation
in a
given year when corporate and business unit operating results and
individual performance contributions meet or exceed the agreed upon
business and organization goals for the period. Typical annual performance
goals for Company executives include net income v. budget, loan and
deposit growth v. budget and net interest margin against a target.
The
determination of actual awards is not formulaic, but, rather, the
result
of a review of achievements by the CEO and the Compensation Committee
and
the application of prevailing industry practices on annual incentive
awards.
|
|
4.
|
Longer-term
Performance Incentives.
Executives are eligible to participate in longer-term incentive award
plans established to focus executive efforts on the strategic directions
and goals of the business and to reward them for their successes
in
increasing enterprise value. Awards can result in additional cash
compensation or equity grants in the form of stock options or restricted
stock. While
the size of such awards may increase or decrease based on current
business
performance, it is the intention of the Compensation Committee to
recommend some combination of the available awards at least annually
as an
incentive to focus executives future efforts on longer-term needs
and
objectives of the business.
|
a.
Equity
Grant Plans.
Our
Amended and Restated Stock Option and Restricted Stock Plan authorizes us to
grant options to purchase shares of common stock to our employees, directors
and
consultants. We can also grant restricted stock to these same audiences. Our
Compensation Committee is the administrator of all stock grant plans. Stock
option or restricted stock grants may be made at the commencement of employment
and from time to time to meet other specific retention or performance
objectives. The Compensation Committee reviews and approves stock option and
restricted stock awards to executive officers based upon a review of competitive
compensation data, its assessment of individual performance, a review of the
executive’s existing long-term incentives, and retention considerations.
Periodic grants of stock options or restricted stock are made at the discretion
of the Compensation Committee to eligible employees and, in appropriate
circumstances, the Compensation Committee considers the recommendations of
the
Chief Executive Officer. In January 2007, stock options were granted to Named
Executive Officers. Historically, we have used the closing price of company
stock on the date of grant as the exercise price for stock option grants. The
2007 stock options will vest four (4) years after the date of grant and
generally expire ten (10) years after the date of grant.
The
Compensation Committee authorized the awarding of stock options to executives
and certain employees on specific dates in December 2002 through December 2005.
The timing of such grants was not tied to the release of negative or positive
material information about Company. Prior to 2002, options were awarded from
time to time, when authorized by the Committee, during the fourth calendar
quarter. No annual practice or program of granting annual awards had been
developed at that time.
The
company has not established a policy regarding executive ownership of company
stock and/or retention guidelines applicable to equity awards to executives.
b. Deferred
Compensation.
At the
end of the calendar year, Named Executive Officers may receive, at the
Committee’s discretion, a contribution equal to some percentage of their base
salary, usually 10%-25%, into a Deferred Compensation Plan. These contributions
are converted into shares of Company common stock, or shares of First Bank
of
Delaware, a spin-off now wholly independent of the Company and vest three (3)
years after the year in which the contribution is made. Receipt of this
compensation, in the form of shares of Company or First Bank of Delaware common
stock, is deferred to normal retirement.
|
5.
|
Nonqualified
Benefits and Perquisites.
We
currently do not offer a nonqualified supplemental retirement income
plan
(SERP) to any of our executives, but may consider establishing such
a
benefit plan in the future as executive income levels rise and more
are
facing reduced retirement income benefits from qualified retirement
income
plans under current Federal regulations. (Our CEO, in his capacity
as a
Director, participates in a now frozen retirement income plan for
Company
Directors. The value of this benefit is included in the compensation
tables.)
|
Perquisites
for Company executives are generally limited automobile allowance or use of
a
company-provided automobile, and, in a very few instances, a club membership.
Typically,
these perquisites are provided in instances where such benefits can facilitate
the conduct of business with corporate and high net worth clients.
|
6.
|
Employment
Contracts and Change of Control Agreements.
Two (2) executives, our CEO and our President, have employment contracts
with Company. As the business grows and more executives are involved
in
the leadership of the organization, it may be appropriate to extend
use of
such agreements to other executives.
|
The
CEO
and the President have Change of Control severance agreements in their
employment contracts with Company. On the advice of its outside consultant,
the
Committee is considering limited Change of Control severance agreements for
several other executives who are key contributors to the business.
a.
Post
Retirement Income Benefits.
When
retired, former Company executives are only eligible to receive replacement
income benefits from our qualified retirement income plans, the same plans
covering other employees of the Company. We do not currently sponsor any type
of
supplemental retirement income plan for highly compensated employees, although
we may consider instituting such a plan in the future.
b. Severance
in the Event of Termination Not for Cause or Change of Control.
Two (2)
executives, our CEO and our President, have specific severance arrangements
in
place with Company in the event of a termination of their employment not related
to a Change of Control and in the event of a Change of Control. Under these
arrangements, the CEO and the President would each be eligible to receive three
(3) times their respective annual compensation. All outstanding equity grants
and other benefit provisions would fully vest.
c. |
Tax
Gross-up Provision. The
employment contracts for the CEO and the COO both provide for an
excise
tax liability gross-up payment to the executives following a Change
of
Control if their severance benefits exceed the then current IRS standard
under Code Section 4999.
|
Recent
Actions: 2006 and Q1, 2007. During
2006 and the first quarter of 2007, the Company, through its Compensation
Committee and Board of Directors, has made a number of decisions related to
executive compensation. In making these determinations, the Compensation
Committee considered the Company’s compensation philosophy, the achievement of
business and performance goals set by the Company, relevant peer group data,
recommendations of the Company’s CEO and the advice of the Company’s outside
consultant. The most important actions are summarized here.
Base
Salaries.
At the
beginning of 2007, the President and COO of the Company received a salary
increase of 25%, commensurate with the significant increase in responsibilities
assigned to the incumbent. On the next anniversary of his contract, the CEO
will
receive an increase of 10%. Other executives received modest base salary
increases reflecting typical “market movement” for their positions.
At
the
beginning of 2007, most Named Executive Officers were awarded salary increases
ranging from 5% to 10%.
Annual
Incentives.
Executives received substantial incentive awards in 2006 for 2005 performance,
reflecting strong financial and operating results for the prior
period.
For
2006,
the Board had established a series of Corporate and Business Unit goals for
each
Named Executive Officer. Based on results achieved against these goals, Named
Executive Officers were again awarded significant incentive payments for their
2006 contributions and performances.
Longer-term
Incentives.
The
Compensation Committee authorized stock option grants (granted January 2, 2007)
and deferred compensation contributions to selected Named Executive Officers.
These awards are, in part, considered further recognition of the good financial
results achieved during 2006. The awards are also an integral part of the
Company’s overall retention strategy aimed at key contributors to ongoing
Company success.
Nonqualified
Benefits and Perquisites.
No
nonqualified benefit plans have been introduced and there have been no changes
in perquisites and related participation practices.
Employment
Contracts and Change of Control Agreements.
As noted
earlier, the Compensation Committee approved an extension of the employment
contract with the CEO and also approved entering into a formal employment
contract with the President and COO, consistent with prevailing industry
practices for comparable positions.
Status
of the Program and Likely Practices Going Forward. The
general structure of the Company executive compensation program was established
several years ago and it has been continuously refined to meet the changing
needs of the business and to maintain a competitive posture in the marketplace
for executive talent.
Currently,
all of Company’s Named Executive Officers are paid salaries that fall in the
competitive median (50th percentile) range of industry practice. Future salary
increases will be functions of industry practice changes and changes in
executives’ roles in the business.
Recent
annual incentive awards have been significant, but in line with the Company’s
recent financial and operating results against the goals established for 2006
and 2005. The Compensation Committee will continue to provide substantial award
opportunities for executives, consistent with performance results.
Equity
grants to executives over the past two years have also been significant in
some
cases, again reflecting good performance of the business over the time period.
Both stock option grants and deferred compensation contributions are likely
to
continue with the size of awards tracking with the performance results of the
business.
It
is
possible that some of these future grants may include performance vesting in
lieu of the traditional time vesting requirements attached to past grants.
Nonqualified
Benefits.
The
Committee will continue to evaluate the need and effectiveness of a supplemental
retirement income plan for certain highly compensated employees, but it has
made
no decision on this matter as of this time.
Perquisites.
Company’s program has always been modest, offering use of a company vehicle
primarily to those executives who travel among Company’s branch offices and
operations centers and those who frequently meet with clients and prospects
offsite. Similarly, club memberships are only provided for those executives
who
can utilize them in conducting the Company’s business.
Employment
Contracts.
The
Compensation Committee has responsibility for review of current and proposed
employment contracts and will specifically authorize contract
renewals.
The
Compensation Committee believes that the executive compensation program
structure is competitive, generally mirroring the make-up of programs in other
like institutions. Further, it intends to maintain the current leveraged
approach to total compensation, directly tying a significant portion of an
executive’s total earnings to achievements against goals and objectives approved
by the Board of Directors.
Compliance
with Sections 162(m) and 409A of the Internal Revenue Code. Section
162(m) of the Internal Revenue Code provides that publicly held corporations
may
not deduct compensation paid to certain executive officers in excess of
$1,000,000 annually, with certain exemptions for qualified “performance-based”
compensation. The Company has obtained shareholder approval of its stock option
plan, and compensation earned pursuant to such plans is exempt from the Section
162(m) limit. Since we retain discretion over bonuses and certain amounts
contributed to the Deferred Compensation Plan, such amounts will not qualify
for
the exemption for performance-based compensation. Such amounts have not been
at
levels that, together with other compensation, approached the $1,000,000 limit.
Due to the relatively conservative amount of annual compensation, the Company
believes its compensation policies reflect due consideration of Section 162(m).
However, we reserve the right to use our judgment to authorize compensation
payments that do not comply with the exemptions in Section 162(m) when we
believe that such payments are appropriate and in the best interests of our
shareholders, after taking into consideration changing business conditions
or
the executive officer’s performance.
It
is
also our intention to maintain our executive compensation arrangements in
conformity with the requirements of Section 409A of the Internal Revenue Code,
which imposes certain restrictions on deferred compensation arrangements. We
have been engaged in a process of reviewing and modifying our deferred
compensation arrangements since the enactment of Section 409A in 2004 in order
to remain compliant with provisional guidance issued by the Internal Revenue
Service under Section 409A.
Compensation
Committee Report. The
Compensation Committee has reviewed and discussed the Compensation Discussion
& Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussions, the Compensation Committee recommended
to
the Board of Directors that the Compensation Discussion & Analysis be
included in this Proxy Statement.
COMPENSATION
COMMITTEE
|
William
W. Batoff, Chairman
|
|
Robert
J. Coleman
|
|
Lyle
W. Hall
|
|
Barry
L. Spevak
|
Compensation
Committee Interlocks and Insider
Participation
In
2006
the Compensation Committee members were Messrs. Batoff, Coleman, Hall and
Spevak. No executive officer of the Company served on any board of directors
or
compensation committee of any entity that compensates any member of the
Compensation Committee that is also an executive officer of such other
entity.
2006
SUMMARY COMPENSATION TABLE
The
following table shows the annual compensation of the Company's Named Executive
Officers for the fiscal year ended December 31, 2006. The Named Executive
Officers are the Company’s Chief Executive Officer, Chief Financial Officer and
the Company’s other three most highly compensated executive officers for
2006.
No
executive officer who would otherwise have been included in such table on the
basis of compensation for fiscal year 2006 has been excluded by reason of his
or
her termination of employment or change in executive status during the fiscal
year.
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation Earnings (1)
($)
|
|
All
Other Compensation
($)
|
|
Total
($)
|
|
Harry
D. Madonna
Chief
Executive Officer (2)
|
|
|
2006
|
|
|
330,000
|
|
|
250,000
|
|
|
87,301
|
|
|
49,340
|
|
|
716,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Louis
J. DeCesare
President
(3)
|
|
|
2006
|
|
|
200,000
|
|
|
125,000
|
|
|
43,182
|
|
|
23,770
|
|
|
391,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
Frenkiel
Chief
Financial Officer (4)
|
|
|
2006
|
|
|
104,000
|
|
|
13,000
|
|
|
22,147
|
|
|
9,369
|
|
|
148,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randy
McGarry
Executive
Vice President and Chief Operations Officer (5)
|
|
|
2006
|
|
|
100,935
|
|
|
28,800
|
|
|
22,203
|
|
|
11,431
|
|
|
163,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
A. Verdi, Jr.
Executive
Vice President (6)
|
|
|
2006
|
|
|
136,500
|
|
|
40,950
|
|
|
28,774
|
|
|
20,678
|
|
|
226,902
|
|
(1) |
The
amount shown for Harry D. Madonna includes $7,799 for a supplemental
retirement plan which has not been offered since 1992, with the balance
resulting from the deferred compensation plan contribution and plan
earnings. Amounts shown for all others are comprised of the deferred
compensation plan contribution and plan earnings.
|
(2) |
Other
compensation for Harry D. Madonna includes $13,510 of automobile
and
transportation allowance, $27,485 of business development expense
including a club membership which is sometimes used for personal
purposes,
$4,145 for a limited term disability policy and $4,200 for a 401k
match.
|
(3) |
Other
compensation for Louis J. DeCesare includes $11,230 of automobile
and
transportation allowance and $12,540 of business development expense
including a club membership which is sometimes used for personal
purposes
|
(4) |
Other
compensation for Paul Frenkiel includes $4,550 of automobile and
transportation allowance and $4,819 for a 401k
match.
|
(5) |
Other
compensation for Randy McGarry includes $ 6,164 of automobile and
transportation allowance and $5,267 for a 401k
match.
|
(6) |
Other
compensation for Paul A. Verdi Jr. includes $7,098 of automobile
and
transportation allowance, $6,923 of business development expense
and
$6,657 for a 401k match.
|
The
columns disclosing stock awards and option awards were omitted because no named
executive officer received any such awards in 2006.
The
table
disclosing grants of plan-based awards was omitted, because no named executive
officer received any such awards in 2006.
2006
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
TABLE
|
|
Option
Awards
|
|
Name
|
|
Number
of Securities Underlying Unexercised
Options
(#)
Exercisable
|
|
Number
of Securities Underlying Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Harry
D. Madonna
Chief
Executive Officer
|
|
|
24,640
|
|
|
|
|
|
11.06
|
|
|
April
20, 2015
|
|
|
|
|
23,038
|
|
|
|
|
|
6.78
|
|
|
January
1, 2014
|
|
|
|
|
21,683
|
|
|
|
|
|
3.43
|
|
|
December
17, 2012
|
|
|
|
|
21,683
|
|
|
|
|
|
3.05
|
|
|
February
19, 2012
|
|
|
|
|
27,104
|
|
|
|
|
|
1.99
|
|
|
December
26, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Louis
J. DeCesare
President
|
|
|
15,350
|
|
|
|
|
|
11.06
|
|
|
April
20, 2015
|
|
|
|
|
16,262
|
|
|
|
|
|
6.78
|
|
|
January
1, 2014
|
|
|
|
|
3,388
|
|
|
|
|
|
4.14
|
|
|
March
31, 2013
|
|
|
|
|
4,065
|
|
|
|
|
|
3.05
|
|
|
February
19, 2012
|
|
|
|
|
4,065
|
|
|
|
|
|
2.99
|
|
|
April
16, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randy
McGarry
Executive
Vice President
and
Chief Operations Officer
|
|
|
2,710
|
|
|
|
|
|
11.06
|
|
|
April
20, 2015
|
|
|
|
|
5,420
|
|
|
|
|
|
4.54
|
|
|
August
4, 2013
|
|
|
|
|
2,710
|
|
|
|
|
|
3.05
|
|
|
February
19, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
A. Verdi, Jr.
Executive
Vice President
|
|
|
3,696
|
|
|
|
|
|
11.06
|
|
|
April
20, 2015
|
|
|
|
|
3,388
|
|
|
|
|
|
4.14
|
|
|
March
31, 2013
|
|
|
|
|
6,776
|
|
|
|
|
|
6.78
|
|
|
January
1, 2014
|
|
|
|
|
4,065
|
|
|
|
|
|
3.05
|
|
|
February
19, 2012
|
|
|
|
|
6,776
|
|
|
|
|
|
1.99
|
|
|
December
26, 2010
|
|
The
columns relating to equity incentive plan awards and stock awards were omitted
because no officer had any such awards outstanding in 2006. All of the options
shown in the above table are fully vested.
The
options exercised and stock vesting table was omitted because no named executive
officer exercised or had shares vested in 2006.
2006
PENSION BENEFITS TABLE
Name
|
|
Plan
Name
|
|
Number
of Years
Credited
Service (#)
|
|
Present
Value of Accumulated Benefit ($)
|
|
Harry
D. Madonna
Chief
Executive Officer
|
|
|
Supplemental
retirement benefits
|
|
|
14
|
|
|
202,772
|
|
No
payments have been made since the plan's inception in 1992, accordingly the
payments during last fiscal year column was omitted. The Company maintains
a
supplemental retirement plan. The plan was frozen and no other named executive
officers are entitled to any benefits under the plan. Years of credited service
were determined based on the same pension plan measurement date that we used
in
preparing our audited financial statements for the year ended December 31,
2006.
The present value of accumulated benefit was calculated based upon the actuarial
present value of accumulated benefits, calculated as of year end using the
assumptions set forth in the “Benefit Plans” footnote included in our audited
financial statements for the year ended December 31, 2006.
The
following table set forth contributions to the Company’s deferred compensation
plan. The plan permits participants to make contributions up to the amount
of
the executive’s salary subject to applicable limitations under the Internal
Revenue Code (the “Code”). In addition, the company may make discretionary
contributions to the plan which represent a percentage of the participant’s
salary. Earnings are wholly determined by the increase in value of the
underlying equity investments. The plan permits withdrawals and distributions
upon retirement and, subject to applicable limitations under the Code, limited
hardship withdrawals.
Name
|
|
Registrant
Contributions in Last Fiscal Year (1)
($)
|
|
Aggregate
Earnings in
Last
Fiscal Year
($)
|
|
Aggregate
Balance at Last Fiscal Year-End (2)
($)
|
|
Harry
D. Madonna
Chief
Executive Officer
|
|
|
79,503
|
|
|
14,933
|
|
|
188,965
|
|
Louis
J. DeCesare
President
|
|
|
43,182
|
|
|
4,283
|
|
|
116,515
|
|
Paul
Frenkiel
Chief
Financial Officer
|
|
|
22,147
|
|
|
2,909
|
|
|
68,655
|
|
Randy
McGarry
Executive
Vice Presient and Chief Operations Officer
|
|
|
22,203
|
|
|
3,907
|
|
|
63,205
|
|
Paul
A. Verdi, Jr.
Executive
Vice President
|
|
|
28,774
|
|
|
3,157
|
|
|
80,756
|
|
(1)
These
amounts are also included in the Summary Compensation Table.
(2)
As of
December 31, 2006, none of the above balances had vested.
The
executive contributions column was omitted because no executive elected to
make
contributions to the plan in 2006.
2006
DIRECTOR COMPENSATION TABLE
Name
|
|
Fees
Earned
or
Paid in Cash
($)
|
|
Change
in Pension Value and Nonqualifies Deferred Compensation Earnings
(1)
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
William
W. Batoff
|
|
|
28,000
|
|
|
7,466
|
|
|
|
|
|
35,466
|
|
Robert
J. Coleman
|
|
|
26,000
|
|
|
|
|
|
|
|
|
26,000
|
|
Lyle
W. Hall, Jr.
|
|
|
29,500
|
|
|
|
|
|
|
|
|
29,500
|
|
Neal
I. Rodin
|
|
|
27,750
|
|
|
7,211
|
|
|
|
|
|
34,961
|
|
Steven
J. Shotz (2)
|
|
|
58,250
|
|
|
7,211
|
|
|
12,596
|
|
|
78,057
|
|
Barry
L. Spevak
|
|
|
29,000
|
|
|
|
|
|
|
|
|
29,000
|
|
Harris
Wildstein Esq. (3)
|
|
|
46,000
|
|
|
6,933
|
|
|
11,004
|
|
|
63,937
|
|
(1) |
Amounts
shown represent the 2006 expense for supplemental retirement benefits
for
directors who served as such in 1992, the year in which the benefit
originated. The benefit has not been offered since
1992.
|
(2) |
All
other compensation for Steven J. Shotz includes $12,596 as auto and
other
transportation allowance in his capacity as chairman of the loan
committee.
|
(3) |
All
other compensation for Harris Wildstein Esq. includes $11,004 of
expenses
for business development.
|
The
stock
award, option award and non-equity incentive plan award columns were omitted
because no director received such compensation in 2006. As of December 31,
2006,
the following directors had the following outstanding options: Mr. Batoff 23,683
options; Mr. Coleman 9,996 options; Mr. Hall 9,996 options; Mr. Rodin 22,328
options; Mr. Shotz 115,270 options; Mr. Spevak 9,996 options; and Mr. Wildstein
111,208 options.
Compensation
of Directors
Employee
Directors receive no additional compensation for their participation in Board
meetings. Non-employee Directors receive a $6,000 quarterly retainer and $500
for each committee meeting attended, except that the chair of each committee
receives $750 for each committee meeting attended. Also, Audit Committee members
receive $1,000 for each meeting attended, and the Audit Committee chair receives
$1,500 for each meeting attended.
Employment
Agreements and Change in Control
Agreements
Harry
D. Madonna.
Mr.
Madonna currently serves as Chairman of the Board and Chief Executive Officer
of
the Bank and Company under the terms of an agreement (the “Madonna Agreement”)
with a term of three years beginning January 1, 2007, at his prior annual base
salary of $330,000. The annual base salary will increase 10% on April 1, 2007
and annually for each of the second and third years of the Madonna Agreement.
The Bank may terminate the Madonna Agreement after three years with six months
prior notice or any time for cause. Mr. Madonna may terminate the agreement
upon
six months notice. Mr. Madonna is also eligible to receive an annual bonus
in an
amount set by the sole discretion and determination of the Compensation
Committee upon achieving mutually agreed upon budget criteria. He will also
receive 25% of base salary and his most recent bonus as deferred compensation
pursuant to the Bank’s Deferred Compensation Plan. Annually, for each of the
three years of the contract, Mr. Madonna will receive 12,000 stock options
at an
exercise price equal to the stock’s market price on the date of grant, with four
year vesting periods. Mr. Madonna will be provided an automobile and will be
reimbursed for its operation, maintenance and insurance expenses. Additionally,
he will receive health and disability insurance available to all employees,
term
life insurance for three times his salary, business related travel and
entertainment expenses and club dues and expenses. Upon the occurrence of a
change in control (as defined in the Agreement), or termination without cause,
Mr. Madonna will receive a severance payment equal to three times both his
annual base salary and the most recent three year average of his bonuses. Also
he will receive three years of health and life insurance and an automobile.
Mr.
Madonna will also receive a “gross-up’ payment as reimbursement for any
additional excise taxes which may be triggered under section 4999 of the
Internal Revenue Code. The Madonna Agreement provides for the non-disclosure
by
Mr. Madonna of confidential information acquired by him in the context of his
employment with the Bank. Had Mr. Madonna been terminated as of December 31,
2006 without cause or in connection with a change in control, he would have
received cash severance, life and health insurance benefits, automobile
allowances and tax gross ups aggregating approximately $2.2
million.
Louis
J. DeCesare Mr.
DeCesare currently serves as President of the Bank under the terms of an
agreement (the “DeCesare Agreement”) with a term of three years beginning
January 1, 2007, at a salary of $250,000. The annual base salary will increase
10% annually for each of the second and third years of the DeCesare Agreement.
The Bank may terminate the DeCesare Agreement after three years with six months
prior notice or any time for cause. Mr. DeCesare may terminate the agreement
upon six months notice. Mr. DeCesare is also eligible to receive an annual
bonus
in an amount set by the sole discretion and determination of the Compensation
Committee upon achieving mutually agreed upon budget criteria. Mr. DeCesare
will
also receive 20% of base salary and most recent bonus as deferred compensation
pursuant to the Bank’s Deferred Compensation Plan. Annually, for each of the
three years of the contract, Mr. DeCesare will receive 12,000 stock options
at
an exercise price equal to the stock’s market price on the date of grant, with
four year vesting periods. Mr. DeCesare will receive a monthly automobile
allowance of $1,250. Additionally, Mr. DeCesare will receive health and
disability insurance available to all employees, term life insurance for three
times his salary, business related travel and entertainment expenses and club
dues and expenses. Upon the occurrence of a change in control (as defined in
the
Agreement), or termination without cause, Mr. DeCesare will receive a severance
payment equal to three times of both his annual base salary the most recent
three year average of his
bonuses.
Also he will receive three years of health and life insurance. He will also
receive a “gross-up’ payment as reimbursement for any additional excise taxes
which may be triggered under section 4999 of the Internal Revenue Code. The
DeCesare Agreement provides for the non-disclosure by Mr. DeCesare of
confidential information acquired by him in the context of his employment with
the Bank, and a one year restrictive covenant encompassing various non-compete
agreements. Had Mr. DeCesare been terminated as of December 31, 2006 without
cause or in connection with a change in control, he would have received cash
severance, life and health insurance benefits and tax gross-ups aggregating
approximately $1.4 million.
Other
Executives. The
Company has adopted a change in control policy according to
which,
upon the occurrence of any one of the events described therein as resulting
in a
change in control which has not been approved by a majority of our incumbent
directors, each senior officer of the Company will receive a payment equal
to 2
times such officer’s annual base salary, in the event that the officer
determines not to continue their employment after such event.
EQUITY
COMPENSATION PLAN
INFORMATION
The
following table sets forth information as of December 31, 2006, with respect
to
the shares of common stock the may be issued under the Company’s existing equity
compensation plans.
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Plan
category
|
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
|
Number
of securities remaining available for future issuance (excluding
securities reflected in column (a)
|
|
Equity
compensation plans approved
by
security holders: Amended and Restated Stock Option Plan and Restricted
Stock Plan
|
|
|
601,317
|
|
$
|
6.10
|
|
|
(1
|
)
|
Equity
compensation plans not approved by security holders:
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Incentives
to acquire new employees
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Total
|
|
|
601,317
|
|
$
|
6.10
|
|
|
(1
|
)
|
(1)
|
The
amended plan includes an "evergreen formula" which provides that
the
maximum number of shares which may be issued is 1,540,000 shares
plus an
annual increase equal to the number of shares required to restore
the
maximum number of shares available for grant to 1,540,000
shares.
|
Compliance
with Section 16(a) of the Exchange
Act
Section
16(a) of the Exchange Act requires the Company’s officers and Directors and
persons who own more than 10% of a registered class of the Company’s equity
securities (collectively, the “Reporting Persons”) to file reports of ownership
and changes in
ownership with the Securities and Exchange Commission and to furnish the Company
with copies of these reports. Based on the Company’s review of the copies of the
reports filed by such persons, the Company believes that all filings required
to
be made by Reporting Persons for the period from January 1, 2006 through
December 31, 2006 were made on a timely basis. Notwithstanding anything to
the
contrary set forth in any of the Company’s previous filings
under
the
Securities Act or the Exchange Act that might incorporate future filings,
including this proxy statement, in whole or in part, the reports contained
herein by the Audit Committee and the Compensation and Option Committee shall
not be incorporated by reference into any such filings nor shall they be deemed
to be soliciting material or deemed to be filed with the SEC under the
Securities Act of 1933, as amended, or the Exchange Act of 1934, as
amended.
AUDIT
COMMITTEE REPORT TO
SHAREHOLDERS
The
Audit
Committee of the Company’s Board of Directors (the “Audit Committee”) is
responsible for providing independent, objective oversight of the Company’s
accounting functions and internal controls. The Audit Committee is composed
of
three Directors, each of whom is independent as defined by Rule 4200(15) of
the
NASDAQ Stock Market. The Audit Committee operates under a written charter
approved by the Board of Directors.
A
copy of
the charter is available on the Company’s website at www.rfbkonline.com.
Management
is responsible for the Company’s internal controls and financial reporting
process. The independent accountants are responsible for performing an
independent audit of the Company’s consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Audit Committee’s responsibility is to monitor and oversee these
processes.
In
connection with these responsibilities, the Audit Committee has reviewed and
discussed the Company’s audited financial statements for the fiscal year ended
December 31, 2006 with management and the independent accountant and reviewed
the Annual Report on Form 10-K. The Audit Committee has discussed with the
independent accountant the matters required to be discussed by Statement on
Auditing Standards No. 61 (Codification of Statements on Auditing Standards
AU
§ 380). The Audit Committee received the written disclosures and letter
from the independent accountants required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees) and discussed
with the independent accountant the independent accountant’s
independence.
Based
upon the Audit Committee’s discussions with management and the independent
accountants, and the Audit Committee’s review of the disclosures and
representations of management and the independent accountants, the Audit
Committee recommended to the Board that the Company’s audited consolidated
financial statements be included in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2006, for filing with the Securities and
Exchange Commission.
Respectfully
submitted,
Lyle
W.
Hall,
Chair
William
W. Batoff
Barry
L.
Spevak
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The
following table sets forth, as of February 20, 2007, information with respect
to
the
securities holdings of all persons which the Company, pursuant to filings with
the Securities and Exchange Commission and the Company’s stock transfer records,
has reason to believe may be deemed the beneficial owners of more than five
percent (5%) of the Company's outstanding common stock. The following table
also
sets forth, as of such date, the beneficial ownership of the Company's common
stock by each Director and nominee for Director of the Company, by the Company’s
Chief Executive Officer, Chief Financial Officer and by each of the Company’s
three other most highly compensated executive officers in 2006, and by all
of
the Company’s officers and Directors as a group. Each of the persons named in
the table below as beneficially owning the shares set forth therein has sole
voting power and sole investment power with respect to such shares, unless
otherwise indicated.
Name
and Address of Beneficial Owner(1)
|
|
Amount
and Nature of
Beneficial
Ownership (2)
|
|
Percentage
of
Class(2)
|
|
Harry
D. Madonna
|
|
|
642,197(3)
|
|
|
6.5
|
%
|
William
W. Batoff
|
|
|
126,639(5)
|
|
|
1.3
|
%
|
Robert
J. Coleman
|
|
|
145,516(4)
|
|
|
1.5
|
%
|
Neal
I. Rodin
|
|
|
175,982(6)
|
|
|
1.8
|
%
|
Steven
J. Shotz
|
|
|
371,571(7)
|
|
|
3.8
|
%
|
Harris
Wildstein, Esq.
|
|
|
694,611(8)
|
|
|
7.0
|
%
|
Louis
J. DeCesare
|
|
|
66,884(9)
|
|
|
*
|
|
Paul
Frenkiel
|
|
|
107,236(14)
|
|
|
1.0
|
%
|
Lyle
W. Hall, Jr.
|
|
|
41,750(10)
|
|
|
*
|
|
Barry
L. Spevak
|
|
|
19,218(11)
|
|
|
*
|
|
Paul
A. Verdi
|
|
|
35,433(12)
|
|
|
*
|
|
Randy
McGarry
|
|
|
22,666(13)
|
|
|
*
|
|
All
Directors and executive officers as a group
(12
persons)
|
|
|
2,449,703
|
|
|
23.6
|
%
|
* Represents
less than 1% of the issued and outstanding shares.
(1)
|
Unless
otherwise indicated, the address of each beneficial owner is c/o
Republic
First Bancorp, Inc., 1608 Walnut Street, Philadelphia, PA
19103.
|
(2)
|
The
securities “beneficially owned” by an individual are determined in
accordance with the definition of “beneficial ownership” set forth in Rule
13d-3 under the Securities Exchange Act of 1934, as amended. As of
February 20, 2007 there were 9,747,312 shares of the Company’s common
stock outstanding.
|
(3)
|
Includes
130,148 shares of common stock subject to options of which 118,148
are
currently exercisable.
|
(4) |
Includes
9,996 shares of common stock issuable upon exercise of options of
which
6,996 are currently exercisable.
|
(5)
|
Includes
23,683 shares of common stock issuable upon the exercise options
of which
20,683 are currently exercisable.
|
(6)
|
Includes
22,328 shares of common stock issuable upon exercise of options of
which
19,328 are currently exercisable.
|
(7)
|
Includes
115,270 shares of common stock issuable upon exercise of options
of which
112,270 are currently exercisable.
|
(8)
|
Includes
111,208 shares of common stock issuable upon exercise of options
of which
108,208 are currently exercisable. Does not include 9,164 shares
held as
custodian, 40,018 shares in trust, and 11,123 shares with power of
attorney for his grandchildren, children and mother, for which Mr.
Wildstein disclaims beneficial ownership. Also does not include 1,126
shares owned by his son outright for which Mr. Wildstein disclaims
beneficial ownership.
|
(9)
|
Includes
55,132 shares of common stock issuable upon exercise of options of
which
43,132 are currently exercisable.
|
(10)
|
Includes
9,996 shares of common stock issuable upon exercise of options of
which
6,996 are exercisable.
|
(11)
|
Includes
9,996 shares of common stock issuable upon exercise of options of
which
6,996 are exercisable.
|
(12)
|
Includes
29,702 shares of common stock issuable upon exercise of options of
which
24,702 are currently exercisable.
|
(13)
|
Includes
15,841 shares of common stock issuable upon exercise of options of
which
10,841 are currently exercisable.
|
(14)
|
Includes
5,000 shares of common stock issuable upon exercise of options none
of
which are currently exercisable.
|
Certain
Relationships and Related Party
Transactions
Certain
of the Directors of the Company and/or their affiliates have loans outstanding
from the Bank which, as noted above, is a wholly-owned subsidiary of the
Company. All such loans were made in the ordinary course of the Bank’s business,
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unrelated persons and, in the opinion of management, do not involve more than
the normal risk of collectability or present other unfavorable
features.
Mr.
Madonna also serves as Chairman and Chief Executive Officer and Mr. Frenkiel
serves as Chief Financial Officer of First Bank of Delaware.
The
following important intercompany agreements between the Company and First Bank
of Delaware have remained in force following the spin-off of First Bank of
Delaware by the Company in 2005:
· |
Financial
Accounting and Reporting Service Agreement dated July 31,
2004;
|
· |
Compliance
Services Agreement dated July 31,
2004;
|
· |
Operation
and Data Processing Services Agreement dated July 31, 2004;
and
|
· |
Human
Resources and Payroll Services Agreement dated July 31,
2004
|
The
agreements set forth above provide for data processing, accounting, human
resources and compliance services. All such services are provided by BSC
Services Corporation, a subsidiary of First Bank of Delaware. The Bank and
First
Bank of Delaware
reimburse
BSC Services Corporation for actual costs incurred in connection with the
provision of such services.
Another
intercompany agreement which is currently in effect between the Bank and First
Bank of Delaware is:
· |
an
agreement dealing with the Bank’s participation in tax anticipation loans
made by First Bank of Delaware. Tax anticipation loans are short-term,
small amount loans repayable out of the tax refund paid to the borrower,
primarily from the U.S. Treasury. The agreement provides for the
purchase
by the Bank of such loans made by First Bank of Delaware, which due
to its
size, is more limited in the amount of such loans it can retain.
First
Bank of Delaware retains a $3 servicing fee for each tax anticipation
loan
sold to the Bank. In 2006, the Bank has paid First Bank of Delaware
approximately $320,934 in such
fees.
|
Registered
Public Accounting Firm
The
following table presents fees for the audit of the Company’s annual financial
statements and other professional services by Beard Miller Company, LLP
(“Beard”), the Bank’s independent auditors, for 2006 and 2005.
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Audit
Fees:
|
|
$
|
131,000
|
|
$
|
105,000
|
|
|
|
|
|
|
|
|
|
Audit-Related
Fees:
|
|
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
Tax
Fees:
|
|
|
12,500
|
|
|
9,500
|
|
|
|
|
|
|
|
|
|
All
Other Fees:
|
|
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
Total
Fees
|
|
$
|
143,500
|
|
$
|
114,500
|
|
Audit
Fees consist of fees billed for professional services rendered for the audit
of
the
Company’s consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by
Beard
in connection with statutory and regulatory filings or engagements.
Audit-Related
Fees consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the Company’s
consolidated financial statements and are not reported under “Audit Fees.”
Tax
Fees
consists of fees billed for professional services for tax compliance,
tax
advice and tax planning. These services include assistance regarding federal
and
state tax
compliance, tax audit defense, customs and duties, and mergers and acquisitions.
All
Other
Fees consist of fees billed for products and services provided by the principal
accountant, other than those services described above.
Representatives
of Beard are expected to be present at the Annual Meeting, they will
have
the opportunity to make a statement if they desire to do so, and they will
be
available to respond to appropriate questions.
The
Audit
Committee meets with our independent auditors to approve the annual scope of
accounting services to be performed and the related fee estimates. The Audit
Committee also meets with the Company’s independent auditors, on a quarterly
basis, following completion of their quarterly reviews and annual audit and
prior to the Company’s earnings announcements, to review the results of their
auditors’ work. During the course of the year, the chairman of the Audit
Committee has the authority to pre-approve requests for services that were
not
approved in the annual pre-approval process. The chairman reports any interim
pre-approvals at the following quarterly meeting. At each of the meetings,
management and the Company’s independent auditors update the Audit Committee
with material changes to any service engagement and related fee estimates as
compared to amounts previously approved. During fiscal 2006, all audit and
non-audit services performed by Beard for the Company were pre-approved by
the
Audit Committee in accordance with the foregoing procedures.
Shareholder
Proposals and Nominations for the 2008 Annual
Meeting
Any
shareholder who intends to present a proposal for consideration at the Company’s
2008 Annual Meeting of Shareholders must submit her or his proposal to
the
Company no later than November 25, 2007 in order to have the Company consider
the inclusion of such proposal in the Company’s 2008 proxy and proxy statement
relating to the 2007 Annual Meeting. Reference is made to Rule 14a-8 under
the
Securities Exchange Act of 1934, as amended, for information concerning the
content and form of such proposal and the manner in which such proposal must
be
made.
Any
shareholder who intends to present a proposal for consideration at the Company’s
2008 annual meeting of shareholders must deliver written notice to the Company’s
corporate secretary no later than November 24, 2007. These requirements are
separate from and in addition to the SEC’s requirements that a stockholder must
meet in order to have a stockholder proposal included in the Company’s proxy
statement.
Nominations
for election to the Board of Directors at the 2008 Annual Meeting may be made
only in writing by a shareholder entitled to vote at the 2008 Annual Meeting
of
Shareholders. Such nominations must be addressed as follows: Denise Tinney,
Corporate Secretary, Republic First Bancorp, Inc., 1608 Walnut Street,
Philadelphia, PA 19103. Nominations for the 2008 Annual Meeting must be received
by the Corporate Secretary no later than November 24, 2007 and must be
accompanied by the following information: (i) the name and address of the
share-holder who intends to make the nomination; (ii) a representation that
the
shareholder is a holder of record of stock entitled to vote at the meeting
and
intends to appear in person or by proxy at the meeting to nominate the person
or
persons specified in the notice; (iii) a description of all arrangements or
understandings between the shareholder and each nominee and any other person
or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (iv) such other information
regarding each nominee proposed by such shareholder as would have been re-quired
to be included in a proxy statement filed pursuant to
the
proxy rules of the Securities and Exchange Commission had each nominee been
nominated or intended to be nominated by the Board; and (v) the consent of
each
nominee to
serve
as a Director of the Company if so elected. The Chairman of any meeting of
shareholders
held to elect Directors and the Board of Directors may refuse to recognize
the
nomination of any person not made in compliance with such provisions.
Annual
Report and Form 10-K
The
Company will provide without charge to each shareholder of the Company, upon
receipt of a written request, a full copy of the Company’s Annual Report and
Form 10-K for the year ended December 31, 2006, including all materials
filed as an exhibit or schedule thereto. A request for such copy should be
delivered to Denise Tinney, Corporate Secretary, Republic First Bancorp, Inc.,
1608 Walnut Street, Philadelphia, PA 19103. Such request should also set forth
a
good faith representation that as of March 13, 2007, the requesting party was
a
beneficial owner of the Company’s common stock.
Management
does not know of any other matters to come before the meeting. However, if
any
other matters properly come before the meeting, it is the intention of the
persons designated as proxies to vote in accordance with their best judgment
on
such matters. The shareholders, present and voting at the Annual Meeting, may
extend by adjournment the Annual Meeting as provided in the Bylaws.
IT
IS
IMPORTANT THAT YOU RETURN YOUR SIGNED PROXY CARD PROMPTLY, REGARDLESS OF THE
NUMBER OF SHARES YOU OWN. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY
CARD
IN THE ACCOMPANYING ENVELOPE PROMPTLY, WHETHER OR NOT YOU PLAN TO
ATTEND
THE ANNUAL MEETING.
|
By
Order of the Board of Directors,
|
|
|
|
Denise
Tinney,
|
|
Corporate
Secretary
|
March
23,
2007
REVOCABLE
PROXY
REPUBLIC
FIRST BANCORP, INC. COMMON STOCK
[X]
PLEASE MARK VOTES
AS
IN THIS EXAMPLE
|
|
|
|
THIS
PROXY IS SOLICITED ON BEHALF OF THE
BOARD
OF DIRECTORS
|
|
(1) Election
of Directors:
Neal
I. Rodin
Steven
J. Shotz
BarryL.
Spevak
|
For With-hold For
All
Except
[
] [
] []
|
The
undersigned shareholder of Republic First Bancorp, Inc. (the “Company”)
hereby constitutes and appoints Paul A. Verdi and Maria L. Oliveri,
or
either of them the lawful attorneys and proxies of the undersigned
both
with full power of substitution, for and on behalf of the undersigned,
to
vote as specified on the reverse side, all of the shares of the
Corporation’s common stock held of record by the undersigned on March 13,
2007 at the Annual Meeting of Shareholders of the Corporation to
be held
on Tuesday, April 24, 2007, at4:00 p.m., at The Union League of
Philadelphia, Broad & Sansom Streets, Philadelphia, PA19102 and at any
adjournments or postponements thereof.
THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED ON THEREVERSE
SIDE. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED “FOR”PROPOSAL
(1). IF ANY OTHER MATTERS ARE VOTED ON AT THE ANNUAL MEETING, THISPROXY
WILL BE VOTED BY THE PROXYHOLDERS ON SUCH MATTER IN THEIR SOLEDISCRETION.
THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS
EXERCISED.
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INSTRUCTION: To withhold authority to
vote for
any individual nominee, mark “For All Except” and write that nominee’s
name in the space provided below.
________________________________________________
Please
complete, date and sign this proxy below and mail without delay
in the
enclosed envelope. NOTE: Joint owners must EACH sign. Please sign
EXACTLY
as your name(s)appear(s) on this card. Signature(s) should agree
with
name(s) on proxy form. Executors, administrators, trustees, and
other
fiduciaries, and persons signing on behalf of corporations or
partnerships, should so indicate when signing. When signing as
attorney,
trustee, executor, administrator, guardian or corporate officer,
please
give your FULL title.
Receipt
of the Company’s Annual Report and Notice of Meeting and Proxy Statement,
dated March 23, 2007 is hereby acknowledged.
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Please
be sure to sign and date
this
Proxy in the box below.
Date
___________________
__________________________________________________
Shareholder
sign above _________Co-holder (if any) sign above
+
Detach
above card, sign, date and mail in postage paid envelope
provided.
REPUBLIC
FIRST BANCORP, INC.
PLEASE
ACT PROMPTLY
SIGN,
DATE & MAIL YOUR PROXYCARD TODAY
IF
YOUR
ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW
AND
RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
_______________________________________
_______________________________________
_______________________________________