EXHIBIT 10.1
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NATIONAL PENN BANCSHARES, INC.
EXECUTIVE INCENTIVE PLAN
AMENDMENT AND RESTATEMENT - 2003
The National Penn Bancshares, Inc. Executive Incentive Plan (the
"Plan") is hereby amended and restated in its entirety as follows:
Since formation, National Penn Bancshares, Inc. ("NPB"), as a holding
company for National Penn Bank (the "Bank"), has maintained in effect the
executive incentive plan originally adopted by the Bank on July 26, 1978. NPB
now desires to amend and restate the terms of the Plan as set forth herein.
As amended and restated herein, the Plan is a variable award
compensation arrangement for selected members of executive management. The
purpose of the Plan is to motivate executives to meet and exceed established
financial goals and to promote a superior level of performance relative to
competitive banking institutions. Through payment of incentive compensation
beyond a salary, the Plan provides reward for meeting and exceeding the
established financial goals as well as recognition of individual achievements
for certain employees.
1. Definitions. The following terms have the meanings specified below,
unless the context in which they are used otherwise requires:
(a) "Affiliate" means any corporation which is included within a
"controlled group of corporations" including NPB, as determined under Section
1563 of the Internal Revenue Code of 1986, as amended.
(b) "CEO" means the Chief Executive Officer of NPB.
(c) "Change in Control or Ownership" means:
(i) an acquisition by any "person" or "group" (as those terms
are defined or used in Section 13(d) of the Securities Exchange Act of 1934) of
"beneficial ownership" (within the meaning of Rule 13d-3 under such Act) of
securities of NPB representing 24.99% or more of the combined voting power of
NPB's securities then outstanding;
(ii) a merger, consolidation or other reorganization of Bank,
except where the resulting entity is controlled, directly or indirectly, by NPB;
(iii) a merger, consolidation or other reorganization of NPB,
except where shareholders of NPB immediately prior to
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consummation of any such transaction continue to hold at least a majority of the
voting power of the outstanding voting securities of the legal entity resulting
from or existing after any transaction and a majority of the members of the
Board of Directors of the legal entity resulting from or existing after any such
transaction are former members of NPB's Board of Directors;
(iv) a sale, exchange, transfer or other disposition of
substantially all of the assets of the Employer to another entity, except to an
entity controlled, directly or indirectly, by NPB;
(v) a sale, exchange, transfer or other disposition of
substantially all of the assets of NPB to another entity, or a corporate
division involving NPB; or
(vi) a contested proxy solicitation of the shareholders of NPB
that results in the contesting party obtaining the ability to cast 25% or more
of the votes entitled to be cast in an election of directors of NPB.
(d) "Committee" means the Compensation Committee of the Board of
Directors of NPB.
(e) "Employer" means NPB or the Affiliate which employs the
Participant.
(f) "Fund" means the pool of funds generated, based on the formula
established by the Committee, to be distributed to Plan Participants.
(g) "Matching Deferral" means an annually determined percentage of the
award (determined and approved by the Committee) received by a Participant under
this Plan.
(h) "Participant" means an eligible officer or employee of NPB or an
Affiliate who is designated by the CEO and approved by the Committee for
participation in the Plan for the relevant Plan Year, or a person who was such
at the time of his retirement, death, disability or resignation and who retains,
or whose beneficiaries obtain, benefits under the Plan in accordance with its
terms.
(i) "Plan Year" means the calendar year.
(j) "Tax Deferral" means that portion of the award received by a
Participant under the Plan which the Participant elects, pursuant to Schedule C
attached hereto and made a part hereof, to receive as a deferred payment.
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2. Plan Participation.
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(a) To be eligible for an award under this Plan, a Participant must be
in the active full-time service of NPB or an Affiliate at the close of the Plan
Year, continue to be employed as of the date of award payment, and be in a
position with substantial responsibilities.
(b) Effective January 1, 2004, prior to January 31 of each Plan Year,
the CEO shall recommend to the Committee, in writing, those employees who are
eligible to participate in the Plan for such Plan Year. The Committee shall meet
as soon as practicable thereafter and act upon the recommendations of the CEO.
Those employees approved by the Committee shall be entitled to participate in
the Plan for such Plan Year.
(c) At the Committee's discretion, the Committee may act upon the
recommendation of the CEO with respect to participation of an employee whose
employment with NPB or an Affiliate commences after January 1 but prior to July
1 of a Plan Year. Upon approval by the Committee, such Participant may
participate in the Plan based on his or her earnings for such Plan Year.
(d) Each year, the Committee shall classify the Participants into
varying participation levels, as specified on Schedule A attached to this plan
document, and shall specify defined award formulae for each category. The
Committee also shall specify the method by which the amount to be allocated for
the benefit of each Participant from the Fund shall be determined. Participants
and their participation level will be listed on Schedule A attached to this plan
document. This schedule will be revised each year, as appropriate.
(e) At the Committee's discretion, the Committee may act upon the
recommendation of the CEO with respect to participation by a Participant whose
classification and level changes after January 1 but prior to July 1 of a Plan
Year. Upon approval by the Committee, such Participant may participate in the
Plan in the new classification based on his or her earnings for such Plan Year.
(f) At the Committee's discretion, the Committee may act upon the
recommendation of the CEO (or concerning CEO participation, on their own
behalf), to remove a participant from the Plan during a Plan Year.
3. Performance Goals.
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(a) Effective January 1, 2004, performance goals and appropriate
financial thresholds shall be established each Plan Year by the Committee prior
to January 31 of that Plan Year. The
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established goals shall relate to the financial performance of NPB or an
Affiliate or unit thereof.
(b) Each year, the performance goals for the year will be shown on
Schedule B attached to this plan document. This schedule shall be revised each
year, as appropriate. There may be multiple goals and each goal may be weighted
differently in the award calculation.
(c) An award to a Participant may be conditioned on the performance of
such Participant, as determined by the Committee.
4. Calculation of Awards.
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The creation of the Fund is dependent upon the results of the
performance measures of NPB. The Fund is determined by totaling the award
amounts for all Participants and then adding 20% of the total to create a pool
for individual performance awards. Individual performance awards are in addition
to the company performance award and may range from 0% of the individual
participant's base pay to 20% of the individual"s base pay ( with the exception
of Category A participants whose individual performance awards are limited to
20% of that year"s company portion bonus amount).
Each participant will be in an award level which has a threshold,
target(s), and optimum award with related company performance measures. Company
performance falling between threshold, target(s), and optimum will be
interpolated for award determination. Company performance above optimum will
create higher Participant awards which are increased at a rate which is one-half
the rate of increased award between target and optimum. Additional performance
points between the threshold and optimum may also be established for varying
business conditions.
5. Distribution of Awards.
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(a) Awards to Participants not deferred pursuant to Subparagraph (b)
below shall be payable in cash as soon as practicable after the close of the
Plan Year. Appropriate tax withholdings will be made through the payroll system.
(b) (i) Participants may elect to have the payment of all or a portion
of the balance of their awards deferred, i.e., the Tax Deferral amount.
Effective January 1, 2004, such election shall be made before the beginning of
the relevant Plan Year or, in the case of a new employee or a newly classified
Participant, prior to his or her commencement of employment or new
classification as a Participant, and shall be in the form of Schedule C attached
to this plan document. The aggregate amount of the Tax Deferral for the
Participants shall be credited to an account on the Employer's books (the "Tax
Deferral Account"). The Tax Deferral
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Account shall be credited, as of the last day of each calendar quarter, with
interest calculated at the rate paid on the Investors Trust Company Money Market
account for such quarter.
(ii) The human resources department of the Employer shall maintain
individual accounts which shall reflect the share of each Participant in the Tax
Deferral Account (each referred to as an "Individual Tax Deferral Account").
Interest credited to the Tax Deferral Account shall be allocated among the
Participants in the respective proportions that the balance in each
Participant's Individual Tax Deferral Account bears to the total balance in the
Tax Deferral Account on the date that such interest is credited.
(c) (i) The Committee shall cause an aggregate account to be
established on the Employer's books for all Participants (the "Matching Deferral
Account") and shall credit annually the Matching Deferral Account with an amount
equal to the Matching Deferral of all applicable Participants. The Matching
Deferral Account shall be credited, as of the last day of each calendar quarter,
with interest calculated at the rate paid on the Investors Trust Company Money
Market account for such quarter.
(ii) The human resources department of the Employer shall
maintain individual accounts which shall reflect the share of each Participant
in the Matching Deferral Account (each referred to as an "Individual Matching
Deferral Account"). Interest credited to the Matching Deferral Account shall be
allocated among the Participants in the respective proportions that the balance
in each Participant's Individual Matching Deferral Account bears to the total
balance in the Matching Deferral Account on the date that such interest is
credited.
(iii) The human resources department of the Employer shall
maintain records which shall reflect the amounts in each Participant's
Individual Matching Deferral Account attributable to each Plan Year, i.e., for
each Plan Year for which a Participant receives an award, such records shall
show the amount of such award plus the interest earned thereon through the most
recent date interest was credited thereon (for each Plan Year, such amount is
referred to herein as the "Plan Year Balance"). The sum of all Plan Year
Balances shall equal the total balance in a Participant's Individual Matching
Deferral Account.
(iv) If, at the end of the fifth Plan Year following the Plan
Year for which a particular award was made to a Participant, such Participant is
still employed by NPB or an Affiliate or has retired at age 60 or later or has
died on or before the last day of such Plan Year, such Participant's Individual
Matching Deferral Account shall be credited by the Employer with an additional
amount equal to the Plan Year Balance relating to the Plan Year of five years
before (the "Matching Contribution").
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(v) For purposes of this subparagraph 5(c), Participant shall
be deemed to be still employed by NPB or an Affiliate as of the last day of any
Plan Year on which a balance exists in such Participant's Individual Matching
Deferral Account if such Participant is no longer then performing services on
behalf of NPB or such Affiliate as a result of such Participant's disability.
(d) In the event of a Participant's death prior to receipt of his or
her award earned hereunder (including amounts allocated to such Participant's
Individual Matching Deferral Account and Individual Tax Deferral Account), the
award shall be paid, within thirty (30) days of the last day of the calendar
quarter during which the Participant"s death occurred, to the Participant's
designated beneficiary under the Employer's group life insurance plan or, in the
absence of a valid designation, to the Participant's estate.
6. Manner of Payment of Matching and Tax Deferral Amounts.
(a) Prior to the end of the fifth Plan Year following the Plan Year for
which an award was made to a Participant, such Participant may elect to have the
balance on the last day of such fifth Plan Year in such Participant's Individual
Matching Deferral Account, after the addition of the Matching Contribution (in
the aggregate, the "Total Balance"), transferred and credited to such
Participant's Individual Tax Deferral Account, if any, for distribution in
accordance with the Participant's irrevocable election pursuant to Schedule C.
Such an election shall be in the form of Schedule D attached to this plan
document. If the Participant does not elect to transfer the Total Balance to the
Participant's Individual Tax Deferral Account, or if the Participant does not
have an Individual Tax Deferral Account, the Total Balance shall be paid in cash
to the Participant as soon as practicable after the close of the Plan Year, with
appropriate withholdings.
(b) The amount credited to a Participant's Individual Tax Deferral
Account, including amounts transferred pursuant to subparagraph (a) immediately
above, shall be paid to such Participant in one lump sum or in annual
installments. The actual manner of distribution will be in accordance with the
Participant's irrevocable election, the form of which is attached hereto as
Schedule C; provided, however, that if the Participant selects a distribution in
annual installments, such installment will be paid in a manner which complies
with any applicable rules, regulations or laws.
7. Funding.
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(a) Deferred award obligations under the Plan shall be paid from the
general assets of NPB or an Affiliate.
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(b) NPB, or an Affiliate, in its sole discretion, may earmark assets or
other means to meet the deferred award obligations provided under the Plan. Any
assets which may be earmarked to meet NPB's or an Affiliate's deferred award
obligations provided under the Plan shall continue for all purposes to be part
of the general funds of NPB or an Affiliate and no person other than NPB or the
Affiliate shall by virtue of the provisions of the Plan have any interest in
such assets. To the extent a Participant or his beneficiary acquires a right to
receive deferred award payments from NPB or an Affiliate under the Plan, such
right shall be no greater than the right of any unsecured general creditor of
NPB or an Affiliate.
(c) Nothing contained in the Plan and no action taken pursuant to the
provisions of the Plan shall create or be construed to create a trust of any
kind, or a fiduciary relationship between NPB or an Affiliate and a Participant
or any other person.
8. Plan Administration.
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(a) The Committee shall, with respect to the Plan, have full power and
authority to construe, interpret and manage, control and administer the Plan,
and to pass and decide upon cases in conformity with the objectives of the Plan
under such rules as the Board of Directors of NPB may establish.
(b) Any decision made or action taken by the Board of Directors of NPB
or the Committee arising out of, or in connection with the administration,
interpretation, and effect of the Plan shall be at their absolute discretion and
shall be conclusive and binding on all parties.
(c) The members of the Committee and the members of the Board of
Directors of NPB shall not be liable for any act or action, whether of omission
or commission, made in connection with the interpretation and administration of
the Plan and which results in a loss, damage, expense or depreciation, except
when due to their own gross negligence or willful misconduct.
9. Amendment and Termination.
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NPB reserves the right to amend the Plan from time to time and to
terminate the Plan at any time. All amendments, including any amendment to
terminate the Plan, shall be adopted by the Board of Directors of NPB.
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10. Change in Control or Ownership.
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(a) Subject to the further terms and provisions of this Paragraph 10,
the Plan shall automatically terminate on the date that a Change in Control or
Ownership shall occur, without necessity of any action by the Board of Directors
of NPB.
(b) If a Change in Control or Ownership shall occur, each Participant's
Individual Matching Deferral Account shall be credited, as of the day
immediately preceding the date on which such Change in Control or Ownership
occurred, with additional amounts as follows: An amount equal to each Plan Year
Balance shall be credited by the Employer to such Participant's Individual
Matching Deferral Account (such additional amounts are referred to herein as
"Change in Control Matching Contributions").
(c) If a Change in Control or Ownership shall occur, the Employer shall
pay each Participant a cash amount equal to the total amounts credited, as of
the date such Change in Control or Ownership occurred, to (i) such Participant's
Individual Matching Deferral Account (including all Change in Control Matching
Contributions made pursuant to subparagraph (b) hereof) and (ii) such
Participant's Individual Tax Deferral Account, if any. The Employer shall pay
such total amounts to the Participants within thirty (30) days of the
termination of the Plan (as provided in subparagraph (a) hereof).
11. Effective Date.
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The effective date of this amendment and restatement of the Plan shall
be January 1, 2004. It shall apply to Plan Year 2004 and thereafter.
All accounts of Plan participants existing as of December 31, 2003, and
all awards to be made under the Plan for Plan Year 2003, shall be governed by
the provisions of the Plan as in effect prior to this amendment and restatement
of the Plan.
12. Miscellaneous Provisions.
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(a) The Plan does not constitute a contract of employment, and
participation in the Plan shall not give any Participant the right to be
retained in the service of NPB or an Affiliate or any right or claim to a
benefit under the Plan unless such right or claim has specifically accrued under
the terms of this plan document.
(b) NPB or an Affiliate reserves the right to withhold from any
deferred award payments payable hereunder, any amounts required to be withheld
under the federal income tax laws.
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(c) The captions of the several paragraphs and subparagraphs of this
Plan are inserted for convenience of reference only and shall not be considered
in the construction hereof.
(d) Whenever any word is used herein in the singular form, it shall be
construed as though it were used in the plural form, as the context requires,
and vice versa.
(e) A masculine, feminine or neuter pronoun, whenever used herein,
shall be construed to include all genders as the context requires.
(f) This plan document may be executed in any number of counterparts,
each of which shall be deemed one and the same instrument which may be
sufficiently evidenced by any one counterpart.
(g) Except to the extent pre-empted by federal law, this plan document
shall be construed, administered, and enforced in accordance with the domestic
internal law of the Commonwealth of Pennsylvania.
(h) The Board of Directors of NPB may adjust the financial targets
and/or awards generated under this plan for extraordinary gains and losses to
best reflect the overall interests of the shareholders.
Approved By:
Board of Directors:
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Date: November 26, 2003
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SCHEDULE A
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Participants for the __________ Plan Year consist of Categories
___________________.
It is anticipated that the following named persons will meet the
eligibility requirements for participation as of December 31, _________. It is
expected that there could be additional individuals whose eligibility would be
determined later in the year, and would be named a participant as of December
31, _________.
Named participants are classified accordingly:
CATEGORY A (___ persons) (name and grade level)
CATEGORY B (____ persons) (name and grade level)
CATEGORY C (____ persons) (name and grade level)
[INSERT NAMES AND GRADE LEVELS]
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SCHEDULE B
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NATIONAL PENN BANCSHARES, INC.
EXECUTIVE INCENTIVE PLAN
_______ PERFORMANCE GOALS AND AWARD SCHEDULE
[SUBJECT TO CHANGE]
Awards pursuant to the Plan will not be made unless the internal and
external performance goals set forth below are met.
Company Portion
(Yr.) Earnings Per Share
Threshold Market Target NPB Target Optimum
$__________ $__________ $_________ $_________
Category % of Base Salary
A 20% 40% 50% 60%
B 15% 27.5% 33.8% 40%
C 12% 20% 24% 28%
Individual Portion
All 0%-20% 0%-20% 0%-20% 0%-20%
Parameters:
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o No awards will be paid for performance under threshold.
o After the total Company Portion award is determined an additional 20%
of the total is available for distribution to individuals for
Individual Performance. These individual awards may not exceed 20% of
the participant"s base pay ( except for Category A which is capped at
20% of the Company Award amount).
o Awards for performance between threshold, target(s) and optimum will be
interpolated.
o Performance above optimum will result in awards interpolated at one
half the rate of increase between target and optimum.
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o A participant must be continued to be employed through award payment
date to receive an award.
o In certain circumstances an individual participant"s performance may be
determined to be inadequate and
would not receive any award under this plan
Individual Matching Account " For _____ (yr.) the Individual Matching
Deferral Account will be established at _____% of each individual"s award as
determined above.
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SCHEDULE C
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NATIONAL PENN BANCSHARES, INC.
EXECUTIVE INCENTIVE PLAN
DEFERRAL ELECTION LETTER
TO THE COMMITTEE:
In accordance with the National Penn Bancshares, Inc. Executive
Incentive Plan, as amended and restated in 2003, I hereby request to defer
receipt of that portion of any award earned by me (to the extent provided in
Paragraph 2 below) for services rendered as an eligible Participant in the Plan
during the calendar year specified below and eligible to be received in cash.
This election shall be governed by all of the provisions of the Plan.
1. This request shall be effective beginning with calendar year
_________.
2. This request shall apply to ________________________ of my award.
(Expressed as "all" or a designated dollar or percentage limitation.)
3. My deferred award and the interest thereon shall become payable on
the January 1 next following the date I retire or otherwise cease to be employed
by NPB or an Affiliate of NPB.
4. I irrevocably elect that, when payable, my deferred award and the
interest thereon shall be paid to me as indicated below:
( ) In one lump sum.
( ) In a series of five annual installments.
( ) In a series of ten annual installments.
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I agree that such terms and conditions shall be binding upon my
beneficiaries, distributees, and personal representatives.
Unless noted below, my beneficiaries shall be the same as designated for my
group life insurance.
______________________ ______________________________________
Date Participant
Approved By:
______________________ ______________________________________
Date Chairman of the Committee
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SCHEDULE D
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NATIONAL PENN BANCSHARES, INC.
EXECUTIVE INCENTIVE PLAN TRANSFER
ELECTION LETTER
TO THE COMMITTEE:
In accordance with the National Penn Bancshares, Inc. Executive
Incentive Plan, as amended and restated in 2003, I Hereby request to transfer
the balance in the Individual Matching Deferral Account established in my name
for the award earned by me for services rendered as an eligible Participant in
the Plan during the calendar year specified below, eligible to be received in
cash, to the Individual Tax Deferral Account established in my name for the
award earned by me for services rendered as an eligible Participant in the Plan.
This election shall be governed by all of the provisions of the Plan.
1. This request shall be for the Individual Matching Deferral Account
established in my name for the award earned by me for calendar year
_______________.
2. Payment of the award transferred and deferred pursuant hereto shall
be in accordance with the election made for the Tax Deferral amount voluntarily
deferred pursuant to deferral election letter dated
_________________.
_____________________ ___________________________________
Date Participant
Approved By:
_____________________ ___________________________________
Date Chairman of the Committee
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