PHILADELPHIA — A federal judge has issued an injunction preventing Republic Bank’s parent company from appointing a new chairman of the board after one of its members died.
Before the death of longtime director Theodore Flocco on May 10, Republic First Bancorp Inc.’s board of directors was split 4-4 over control of the company. Half favored retaining current President Vernon Hill II and the other half sought to oust him.
Hours after Flocco’s death, Hill’s opponents on the board, now with a 4-3 majority, proposed appointing Republic Bank Chairman Harry Madonna as interim chairman, according to a federal lawsuit filed. by Hill and his associates.
Three days later, Republic First announced that Madonna, who founded Republic Bank in 1988, would succeed Hill “effective immediately.” Hill would remain a director and CEO of the company, according to the ad.
A vote to permanently replace Hill would take place at an annual meeting that has yet to be scheduled.
On May 17, Hill, along with fellow directors Brian Tierney and Barry Spevak, filed a federal lawsuit against the rest of the board alleging that they “led a campaign to take control of the board (of Republic First) so that they can sell or refinance (Republic First) at any price and on any terms to their advantage and that of their allies, but at the expense of the vast majority of shareholders of (Republic First ).
The complaint alleges that Madonna’s employment contract “gives her a powerful incentive to sell” Republic First. It also indicates that he is entitled to a transaction bonus of at least $1 million in the event of a “merger, sale or transfer of the majority of the shares of the bank or the company”.
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On the same day, an investment group led by South Jersey businessman George Norcross III and former TD Bank executive Greg Braca withdrew two lawsuits against the company and some of its directors.
The first concerned “alleged efforts to alter employment and compensation agreements to entrench (Hill) as chairman and CEO and disenfranchise Republic First shareholders,” according to a press release. The second lawsuit sought to compel Republic First to make its books and records available for inspection.
The injunction, issued May 19, prohibits the board from engaging “in any action outside the ordinary course of the day-to-day management of (Republic First or Republic Bank)” without the unanimous consent of all members during seven days. It also requires that at least five board members be present at any business meeting during this time for the board to transact business.
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It is the latest development in an ongoing battle for control of the Philadelphia-based bank, which has 33 offices in Philadelphia, South Jersey and New York. The company also operates Oak Mortgage Co.
In March, Norcross-Braca Group offered to invest $50 million in Republic First and spend up to $106 million to acquire a majority stake in the company. The proposal also included a request for Hill’s removal as chairman and CEO.
In addition to the executive clash, Republic First is also in the midst of an independent review and audit regarding “related party transactions, certain of the company’s controls, and any associated implications on the financial statements and disclosure” for 2021.
This prevented the company from filing its annual and quarterly reports with the Securities and Exchanges Commission, according to a statement.
On the same day the injunction was issued, however, First Republic received a notification from the Nasdaq stock market that it was not in compliance with market listing rules for failing to file the reports. The company has not yet filed the reports and does not expect to file them until the review is complete, according to the statement. The notice does not immediately affect the market listing of First Republic’s shares, and it has until May 31 to submit a plan to Nasdaq to regain compliance.
Aedy Miller is a multimedia journalist covering education, labor, climate change, mental health and their intersections for the Burlington County Times, Courier-Post and The Daily Journal. Contact them at [email protected]gannett.com.
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