Exhibit 10.21
NATIONAL PENN BANCSHARES, INC.
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FIRSTSERVICE BANK NON-EMPLOYEE DIRECTOR
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SUBSTITUTE STOCK OPTION PLAN
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(as assumed, amended and restated effective February 25, 2003)
1. Purpose, Assumption, Amendment and Restatement
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(a) FirstService Bank, ("FSB") originally approved and adopted the
Non-Employee Directors 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 assist FSB in attracting and retaining capable outside directors
(the "Directors") and to provide them with an incentive to contribute to the
long-term growth of FSB by encouraging ownership in FSB.
(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 437,488 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(b)
below. As a result, stock options 100% vested and presently exercisable for
326,998 shares of Stock are outstanding.
(e) This National Penn Bancshares, Inc. FirstService Bank Non-Employee
Director Substitute 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 326,998 shares of Stock, subject to
adjustment as provided in Section 2 hereof.
2. Total Number of Shares
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The total number of shares of Stock subject to Options under the Plan is
326,998 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 Non-Employee Directors
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Other than the persons who received Options on the Effective Date, no
persons are eligible to participate in the Plan. Prior to the Effective Date,
the persons eligible to participate in the FSB Plan were persons who were
directors of FSB, but were not employees of FSB or any subsidiary corporation of
FSB, and were selected by the administrative committee under the FSB Plan ( the
"Participants").
4. Administration of Plan
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(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.
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5. Terms and Conditions of Stock Option Awards.
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(a) Written Notification of Options. Each Participant 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) 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.
(c) Payment. The Option price shall be payable at the time the Option is
exercised in cash or, in whole or in part, in the form of shares of Stock
already owned by the Participant (based on the fair market value of the Stock on
the date the Option is exercised as determined by the Committee). A Participant
of an Option shall have none of the rights of a shareholder until the shares of
Stock are issued.
6. No Right To Serve As Directors
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The Plan shall not be deemed to create any obligation on the part of the
Board to nominate any person for election as a director or to retain any
director at any particular rate of compensation. Nor shall any provision in this
Plan or any Option granted pursuant to this Plan confer upon any person the
right to interfere in any way with the rights of National Penn or any affiliated
or subsidiary corporation to remove him or her as a director (if he or she is a
director). National Penn shall not be obligated to issue shares of Stock
pursuant to the exercise of an Option awarded under the Plan if such issuance
would constitute a violation of any applicable law.
7. Termination as Director
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(a) In the event that a Participant's service as a director shall be
terminated in a manner authorized by law, the Board, a regulatory agency, or
court for improper conduct or other cause, all Options theretofore granted to
such Participant to the extent not exercised shall terminate forthwith.
(b) In the event a Participant's service as a director shall terminate for
any other reason, including death, disability, retirement or resignation, all
Options shall continue in accordance with their terms. In the event of death,
the Options may be exercised by the decedent's personal representative or heirs.
8. Amendment, Suspension and Discontinuance of the Plan
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The Board may discontinue the Plan at any time and may from time to time
amend or revise the terms of the Plan as permitted by applicable statutes,
except that it may not revoke or alter, in a matter unfavorable to the
Participants hereunder, any Options then outstanding. If not
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terminated by the Board at an earlier time, then, at such time as all Options
outstanding under the Plan have either been exercised, lapsed unexercised, or
been terminated, forfeited or cancelled as provided herein, the Plan shall
terminate.
9. Governing Law
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This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the Commonwealth of Pennsylvania.
10. Nontransferability of Options
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Options granted under the Plan shall not be transferable otherwise than by
will or by the laws of descent and distribution, distribution pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986 as amended, 26 U.S.C. l et seq. or title l of the Employee Retirements
Income Security Act or the rules thereunder. Options may be exercised or
otherwise realized, during the lifetime of the Participant, only by the
Participant or by the Participant's guardian or legal representative.
Notwithstanding the foregoing, to the extent permitted by law, a Participant may
transfer Options to any or all of: the Participant's spouse, the Participant's
parents, the Participant's spouse's parents, the descendants of the
Participant's parents, and the descendants of the Participant's spouse's
parents, one or more trusts for any or all of the foregoing, charities or trusts
for charities, with the knowledge and approval of the Board. WARNING: EACH
PARTICIPANT SHOULD CONSULT WITH A TAX ADVISOR BEFORE ATTEMPTING TO TRANSFER
OPTIONS BECAUSE OF POSSIBLE SIGNIFICANT TAX CONSEQUENCES.
11. Effectiveness of Plan
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This Plan shall be effective as of February 25, 2003.
12. General Conditions
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(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) For purposes of Sections 6 and 7 of this Plan, the term "director"
means a member of the "FirstService Division Board of Directors" of National
Penn Bank, a subsidiary of National Penn.
(c) References in this Plan to the Code shall be deemed to also refer to
the corresponding provisions of any future United States revenue law.
(d) The use of the masculine pronoun shall include the feminine gender
whenever appropriate.
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