Exhibit 10.20
NATIONAL PENN BANCSHARES, INC.
------------------------------
FIRSTSERVICE BANK
-----------------
SUBSTITUTE INCENTIVE STOCK OPTION PLAN
--------------------------------------
(as assumed, amended and restated effective February 25, 2003)
1. Purpose, Assumption, Amendment and Restatement
---------------------------------------------
(a) FirstService Bank, ("FSB") originally approved and adopted the
Incentive Stock Option Plan (the "FSB Plan") in 1996. The FSB Plan was restated
in its entirety in 1998 and again in 2000. The purpose of the FSB Plan was to
encourage ownership of shares of FSB by officers and key employees, provide
additional incentive for them to promote the success of the corporation, and
increase FSB's ability to attract and retain high caliber personnel.
(b) On February 25, 2003 (the "Effective Date"), FSB merged with and into
National Penn Bank, with National Penn Bank surviving such merger (the
"Merger"), pursuant to an Agreement and Plan of Merger, dated as of September
24, 2002 ("Agreement") by and among National Penn Bancshares, Inc. ("National
Penn"), National Penn Bank and FSB.
(c) On the Effective Date, pursuant to the Agreement, each outstanding
share of FSB's common stock was automatically converted into 0.5954 share of
National Penn common stock, without par value (the "Stock"), and $3.90.
(d) Immediately prior to the Effective Date, there were stock options
outstanding under the FSB Plan for 423,001 shares of FSB's common stock, all of
which were 100% vested and currently exercisable. On the Effective Date,
pursuant to the FSB Plan and the Agreement, each such option was automatically
converted into a substitute stock option for Stock, with the number of shares
and the per share exercise price adjusted as provided in the Agreement and
otherwise on the same terms and conditions as the converted FSB stock option.
The number of shares of Stock subject to each substitute stock option is equal
to the quotient of: (1) the product of the number of shares of FSB common stock
originally subject to that option times the original exercise price of that
option, divided by (2) the adjusted exercise price of that option immediately
following the Effective Date, as determined in accordance with Section 5(c)
below. As a result, stock options 100% vested and presently exercisable for
316,171 shares of Stock are outstanding.
(e) This National Penn Bancshares, Inc. FirstService Bank Substitute
Incentive Stock Option Plan (the "Plan") reflects National Penn's assumption of
the FSB Plan and of the stock options outstanding under the FSB Plan as of the
Effective Date, on the terms and conditions provided in the Agreement, and
National Penn's determination to delete provisions of the FSB Plan inapplicable
to such outstanding options. The Plan amends and restates the FSB Plan
accordingly.
(f) As used hereinafter, the term "Options" means, individually and
collectively, the substitute stock options issued pursuant to the FSB Plan and
the Agreement, exercisable for a total of 316,171 shares of Stock, subject to
adjustment as provided in Section 2 hereof.
2. Total Number of Shares
----------------------
1
The total number of shares of Stock subject to Options under the Plan is
316,171 shares, subject to adjustment in accordance with this Section. If the
shares of Stock shall be changed into or exchanged for a different number or
kind of shares of Stock of National Penn or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification, stock
split, combination of shares or otherwise), or if the number of such shares of
Stock shall be increased through the payment of a stock dividend, then there
shall be substituted for or added to each share of Stock subject to an Option
under the Plan and to the maximum number of shares of Stock that may be subject
to Options as set forth in this Section, the number and kind of shares into
which each outstanding share of Stock shall be exchanged, or to which each such
share shall be entitled, as the case may be. Where appropriate, outstanding
Options shall also be amended by the Committee (defined in Section 4(a)) as to
Option Price and other terms as may be necessary to equitably reflect the
foregoing events. If there shall be any other change in the number or kind of
outstanding shares of Stock, or any shares into which such shares shall have
been changed, or for which the Committee shall, in its sole discretion,
determine that such change equitably requires an adjustment in any outstanding
Options, such adjustments shall be made in accordance with the Committee's
determination. Re-acquired shares of Stock, as well as unissued shares, may be
used for the purpose of this Plan.
3. No Further Eligible Optionees
------------------------------
Other than the persons who received Options on the Effective Date (the
"Optionees"), no persons are eligible to participate in the Plan. Prior to the
Effective Date, the persons eligible to participate in the FSB Plan were
officers and key employees of FSB and its subsidiaries and such other persons
determined by the Board, provided that all persons benefited were permitted to
be benefited without adversely affecting the qualification of the Plan under
Section 422 of the Internal Revenue Code.
4. Administration of Plan
----------------------
(a) The Plan shall be administered by a committee (the "Committee") which
shall be either the entire Board of Directors of National Penn (the "Board") or
a committee appointed by the Board composed of three to six members of the Board
who are (i) "non-employee directors" of National Penn within the meaning of Rule
16b-3(b)(3) under Section 16 of the Securities Exchange Act of 1934 (the "1934
Act"), and (ii) "outside directors" of National Penn within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
(b) The Committee shall adopt such rules for the conduct of its business
and administration of this Plan, as it considers desirable. A majority of the
members of the Committee shall constitute a quorum for all purposes. The vote or
written consent of a majority of the members of the Committee on a particular
matter shall constitute the act of the Committee on such matter. The Committee
shall have the right to construe the Plan and the Options, to correct defects
and omissions and to reconcile inconsistencies to the extent necessary to
effectuate the Plan and the Options, and such action shall be final, binding and
conclusive upon all parties concerned. No member of the Committee or the Board
shall be liable for any act or omission (whether or not negligent) taken or
omitted in good faith, or for the exercise of any authority or discretion
granted in connection with the Plan to a Committee or the Board, or for the acts
or omissions of any other members of a Committee or the Board. Subject to the
numerical limitations on Committee membership set forth in Section 4(a) hereof,
the Board may at any time appoint additional members of the Committee and may at
any time remove any member of the Committee with or without cause. Vacancies in
the Committee, however caused, may be filled by the Board if it so desires.
(c) The Committee does not have authority to grant any stock options under
the Plan in addition to the Options set forth in Section 2 hereof.
5. Terms and Conditions of Incentive Stock Option Awards.
------------------------------------------------------
(a) Written Notification of Options. Each Optionee will be notified in
writing of the number of shares of Stock subject to and the exercise price of
each Option he or she holds pursuant to the Plan.
(b) Exercise of Options. (i) The Options shall be exercisable during the
period originally fixed by the board of directors of FSB, but in no event shall
an option be exercisable after the last day of the ten year period beginning on
the date the predecessor option was granted, unless terminated earlier under the
terms of the Option.
(ii) An option may be exercised in whole at one time or in part from
time to time, unless the board of directors of FSB, in granting the original
option, imposed a limitation with respect to the number of shares covered by the
option which may be purchased during various periods of time within the period
of the original option.
(c) Option Price. The per share exercise price of the Stock covered by each
Option (the "Option Price") is equal to the quotient of: (1) the product of the
closing price of the Stock on the Effective Date times the original exercise
price of that option, divided by (2) the sum of (a) the product of the closing
price of the Stock on the Effective Date times the exchange ratio (.5954) plus
(b) $3.90.
(d) Nontransferability of Options. An Option shall not be transferable by
an Optionee otherwise than by will or the laws of descent and distribution and,
during his lifetime, shall be exercisable only by him. Upon the death of an
Optionee, and to the extent that the Optionee shall have been entitled to
exercise an Option at the date of his death, the Option may be exercised by a
legatee or legatees of the Optionee under his last will, or by his personal
representatives or distributees.
(e) Termination of Employment. (i) The unexercised portion of the Option
will terminate on the date the Optionee ceases to be employed by National Penn
or any of its subsidiaries for any reason other than death or the Optionee's
retirement pursuant to any retirement or pension plan of National Penn or any of
its subsidiaries. The Optionee will cease to be employed by National Penn or any
of its subsidiaries on the first to occur of (1) the last date for which he is
paid by National Penn or any of its subsidiaries, (2) the date on which he
ceases working for National Penn or any of its subsidiaries or (3) the effective
date of the termination of his employment set forth in any notice to him of such
termination.
(ii) In the case of the Optionee's death before the option expires, or
in the case of the Optionee's retirement pursuant to any retirement or pension
plan of National Penn or any of its subsidiaries, the Option shall be exercised
within the three (3) month period beginning on the date of retirement or the
date of death, but in no case later than the last day of the ten year period
beginning on the date the original option was granted to the Optionee.
3
(f) Payment. Full payment for Stock purchased by the exercise of
Options granted under the Plan shall be made in cash or in Stock at the time the
Option is exercised.
(g) Other Provisions. In addition to the limitations, conditions and
restrictions specifically set forth in the Plan, the Board shall have the power
to impose any limitations, conditions or restrictions which it shall deem
appropriate upon any or all options granted hereunder.
6. Plan and Options Not to Affect Employment
-----------------------------------------
Neither the Plan nor any Option granted hereunder shall confer upon any
employee of National Penn or any of its subsidiaries any right to continue in
the employment of National Penn or any of its subsidiaries.
7. Interpretation
--------------
The interpretation and construction by the Board of any provisions of this Plan
or of any Option granted hereunder shall be final and conclusive. It is intended
that the rights granted pursuant to the Plan shall constitute "incentive stock
options" as defined in Section 422 of the Internal Revenue Code, and the
provisions of the Plan shall be interpreted and construed, insofar as possible,
to carry out this intent.
8. Effective Date of Plan
----------------------
This Plan shall be effective as of February 25, 2003.
9. General Conditions
-------------------
(a) The term "subsidiary corporation" as used in this Plan shall mean a
corporation in which National Penn owns, directly or indirectly, shares of stock
representing fifty percent or more of the outstanding voting power of all
classes of stock of such corporation Plan.
(b) References in this Plan to the Code shall be deemed to also refer to
the corresponding provisions of any future United States revenue law.
(c) The use of the masculine pronoun shall include the feminine gender
whenever appropriate.
4