EXHIBIT 10.1 NATIONAL PENN BANCSHARES, INC. LONG-TERM INCENTIVE COMPENSATION PLAN

 

EXHIBIT 10.1

NATIONAL PENN BANCSHARES, INC.

 

LONG-TERM INCENTIVE COMPENSATION PLAN

 

(As adopted October 27, 2004,

subject to shareholder approval)

 

 

ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION

 

1.1 Establishment of the Plan.

 

On October 27, 2004, the Board of Directors of National Penn Bancshares, Inc. (the “Company”) adopted, subject to the approval of shareholders, this incentive compensation plan known as the “National Penn Bancshares, Inc. Long-Term Incentive Compensation Plan” (the “Plan”) which permits the grant of long-term incentive and other stock and cash awards. If approved by shareholders, the Plan would replace the National Penn Bancshares, Inc. Officers' and Key Employees' Stock Compensation Plan and no further awards would be made under that plan. The Plan would also replace the National Penn Bancshares, Inc. Non-Employee Directors' Stock Option Plan which expired in January 2004.

 

1.2 Purpose of the Plan.

 

The purpose of the Plan is to promote the success of the Company and its Subsidiaries by providing incentives to Employees and Directors of the Company and its Subsidiaries that will link their personal interests to the financial success of the Company and its Subsidiaries and to growth in shareholder value. The Plan is designed to provide flexibility to the Company and its Subsidiaries in their ability to attract, motivate and retain the services of Employees and Directors upon whose judgment, interest, and special effort the successful conduct of business operations is largely dependent.

 

1.3 Duration of the Plan.

 

The Plan shall be effective as of December 1, 2004 (the “Effective Date”) if it is approved by the Company's shareholders at the annual meeting of shareholders to be held in 2005, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time, until all Awards granted under the Plan shall have been paid or otherwise disposed of in accordance with the provisions of the Plan. In no event may an Award be granted under the Plan on or after December 1, 2014.

 

 

 

 

ARTICLE 2. DEFINITIONS AND CONSTRUCTION

 

2.1 Definitions.

 

Whenever used in the Plan, the following capitalized terms shall have the meanings set forth in this Section 2.1:

 

(a) “Award” means and includes, without limitation, Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Dividend or Dividend Equivalent Rights, Stock Awards, Cash Awards or Other Incentive Awards, whether granted on a stand-alone, combination or tandem basis, as described in or granted under the Plan.

 

(b) “Award Agreement” means the agreement or other writing (which may be framed as a plan or program) that sets forth the terms and conditions of an Award, including any amendment or modification of an Award Agreement.

 

(c) “Beneficial Ownership” shall be determined as provided in Rule 13d-3 under the Exchange Act or any successor rule.

 

(d) “Board” or “Board of Directors” means the Board of Directors of the Company.

 

(e) “Cash Award” has the meaning specified in Section 10.1(d).

 

(f) “Cause” means any of the following:

 

(i) An Employee's conviction of, or plea of guilty or nolo contendere to, a felony or a crime of falsehood or involving moral turpitude; or

 

(ii) The willful failure by an Employee to substantially perform his or her duties to the Company or any Subsidiary which is his or her employer at any particular time, other than a failure resulting from the Employee's incapacity as a result of Disability, which willful failure results in demonstrable material injury and damage to the Company or the Subsidiary employer. Notwithstanding the foregoing, an Employee's employment shall not be deemed to have been terminated for Cause if such termination took place as a result of:

 

(x) Questionable judgment on the part of the Employee;

 

(y) Any act or omission believed by the Employee in good faith to have been in or not opposed to the best interests of the Company or Subsidiary which is his or her employer at the time; or

 

 

 

(z) Any act or omission in respect of which a determination could properly be made that the Employee met the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the By-laws of the Company or the laws of the Commonwealth of Pennsylvania, or the directors and officers' liability insurance of the Company or any Subsidiary which is the Employee's employer at the time of such act or omission, in each case as in effect at the time of such act or omission.

 

(g) “Change in Control” means any of the following events:

 

(i) An acquisition by any Person of Beneficial Ownership of securities of the Company representing 24.99% or more of the combined voting power of the Company's securities then outstanding;

 

(ii) A merger, consolidation or other reorganization of the Company's principal banking subsidiary, National Penn Bank, except where the resulting entity is controlled, directly or indirectly, by the Company;

 

(iii) A merger, consolidation or other reorganization of the Company, except where shareholders of the Company immediately prior to 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 the Company's Board of Directors;

 

(iv) A sale, exchange, transfer or other disposition of substantially all of the assets of the Company or any other corporation which is included in a “controlled group of corporations” including the Company (as determined under Code Section 1563) to another entity, except to an entity controlled, directly or indirectly, by the Company;

 

(v) A sale, exchange, transfer or other disposition of substantially all of the assets of the Company to another entity, or a corporate division involving the Company; or

 

(vi) A contested proxy solicitation of the shareholders of the Company 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 the Company.

 

(h) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

 

 

(i) “Committee” means the Compensation Committee of the Board of Directors (or any successor committee designated by the Board of Directors to administer the Plan). The Committee shall be appointed by the Board, shall consist of three or more outside, independent members of the Board, and in the judgment of the Board, shall be qualified to administer the Plan:

 

(i) As “non-employee directors” under Rule 16b-3(b)(3) under the Exchange Act (or any successor rule);

 

(ii) As “outside directors” under Section 162(m) of the Code and the regulations thereunder (or any successor Section and regulations); and

 

(iii) Under all applicable rules and regulations of Nasdaq or any stock exchange on which the Stock may be traded.

 

The Board may, at any time and in its complete discretion, remove any member of the Committee and may fill any vacancy in the Committee.

 

(j) “Company” means National Penn Bancshares, Inc., a Pennsylvania corporation, or any successor thereto as provided in Article 17.

 

(k) “Covered Employee” means any Participant who is or may be a “covered employee” within the meaning of Section 162(m)(3) of the Code in the year in which an Award becomes taxable to such Participant.

 

(l) “Director” means a director of the Company or a Subsidiary.

 

(m) “Disability” means a permanent and total disability as defined in Section 22(e)(3) of the Code (or any successor Section).

 

(n) “Dividend or Dividend Equivalent Right” has the meaning specified in Section 10.1(a).

 

(o) “Effective Date” means December 1, 2004 if the Plan is approved by the Company's shareholders at the 2005 annual meeting of shareholders.

 

(p) “Employee” means an employee of the Company or any of its Subsidiaries, including an employee who is an officer or a Director.

 

(q) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

(r) “Fair Market Value” on or as of any date shall be determined as follows, unless a different method of calculation is required by applicable law:

 

 

(i) Based on the closing sale price of a share of Stock on the given date, as reported on Nasdaq (or on such other stock exchange on which the Stock may be listed);

 

(ii) If no closing sale price is reported on the given date, then based on the closing sale price of a share of Stock on the next preceding date on which there was a sale, as reported on Nasdaq (or on such other stock exchange on which the Stock may be listed); or

 

(iii) If the Stock is not listed on Nasdaq or on a stock exchange, by the Committee in its sole discretion.

 

(s) “Incentive Stock Option” or “ISO” means an option to purchase shares of Stock, granted under Article 6, which is designated as an incentive stock option and is intended to meet the requirements of Section 422 of the Code (or any successor Section).

 

(t) “Nasdaq” means the National Market tier of The Nasdaq Stock Market operated by the National Association of Securities Dealers, Inc.

 

(u) “Nonqualified Stock Option” or “NQSO” means an option to purchase Stock, granted under Article 6, which is not intended to be an Incentive Stock Option.

 

(v) “Option” means an Incentive Stock Option or a Nonqualified Stock Option.

 

(w) “Other Incentive Award” has the meaning specified in Section 10.1.

 

(x) “Participant” means an Employee or a Director who has been granted an Award under the Plan.

 

(y) “Performance Goal” has the meaning specified in Section 9.8.

 

(z) “Performance Period” means a period of time, not less than two years, determined in advance by the Committee in which performance will be measured against Performance Goals. Performance Periods may vary or overlap in duration.

 

(aa) “Performance Share” means an Award representing the right to receive a payment equal to the value of a performance share, granted to a Participant pursuant to Article 9.

 

(bb) “Performance Unit” means an Award representing the right to receive a payment based on the value of a performance unit, granted to a Participant pursuant to Article 9.

 

 

 

(i) Any child, stepchild, grandchild, parent, step-parent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships;

 

(ii) A trust in which these persons and/or the Participant (collectively at the time of the transfer) have more than 50% of the beneficial interests (taking into account both current and remainder interests);

 

(iii) A foundation in which these persons and/or the Participant (collectively at the time of the transfer) control the management of assets; and

 

(iv) Any other entity in which these persons and/or the Participant (collectively at the time of the transfer) own more than 50% of the voting interests.

 

(dd) “Person” has the meaning given to that term in Sections 13(d) and 14(d) of the Exchange Act, including a “group” as defined in Section 13(d).

 

(ee) “Plan” means this National Penn Bancshares, Inc. Long-Term Incentive Compensation Plan, as it may from time to time be amended.

 

(ff) “Predecessor Plan” means the National Penn Bancshares, Inc. Officers' and Key Employees' Stock Compensation Plan, as from time to time amended.

 

(gg) “Previously-Acquired Shares” means shares of Stock acquired by the Participant or any beneficiary of a Participant, which shares have been held for a period of not less than six months or such longer or shorter period as the Committee may require or permit.

 

(hh) “Restricted Period” means a period of time during which the transfer of shares of Restricted Stock or receipt of shares attributable to a Restricted Stock Unit is restricted, during which period the Participant is subject to a substantial risk of forfeiture, pursuant to Article 8.

 

(ii) “Restricted Stock” means an Award of Stock granted to a Participant pursuant to Article 8.

 

(jj) “Restricted Stock Unit” means an award representing a right to receive a payment equal to the value of a Share, granted to a Participant pursuant to Article 8.

 

(kk) “Retirement” means, except to the extent otherwise provided by the Committee in the an Award Agreement or any amendment or modification of an Award Agreement:

 

 

(i) In the case of an Employee, termination of employment for any reason (other than by the Company or a Subsidiary for Cause) on or after attaining age 55 and having been employed by the Company and/or a Subsidiary for ten or more years or otherwise after becoming a “pension benefit eligible retiree” as defined in the Company's defined benefit pension plan; and

 

(ii) In the case of a Director, termination of service as a Director; provided, however, that if a Company Director resigns prior to reaching the age for mandatory retirement under the bylaws of the Company or a Subsidiary Director resigns prior to reaching the age for mandatory retirement under the bylaws of such Subsidiary, such resignation shall not constitute “Retirement”.

 

(ll) “Rule 16b-3” means Rule 16b-3 under the Exchange Act (or any successor rule).

 

(mm) “Stock” means the common stock without par value of the Company.

 

(nn) “Stock Appreciation Right” or “SAR” means an Award, granted to a Participant pursuant to Article 7.

 

(oo) “Stock Award” has the meaning specified in Section 10.1(b).

 

(pp) “Subsidiary” means any corporation that is a subsidiary corporation of the Company, as that term is defined in Section 424(f) of the Code (or any successor Section).

 

2.2 Gender and Number.

 

Except where otherwise indicated by the context, any masculine term used also shall include the feminine, the plural shall include the singular, and vice versa.

 

2.3 Severability.

 

If any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

 

 

ARTICLE 3. ADMINISTRATION

 

3.1 Authority of the Committee.

 

The Plan shall be administered by the Committee. Subject to the provisions of the Plan, the Committee shall have all powers vested in it by the term of the Plan, such powers to include the authority to:

 

 

 

(a) Select the persons to be granted Awards under the Plan;

 

(b) Determine the terms, conditions, type and amount of Awards to be made to each person selected;

 

(c) Determine the time when Awards are to be made and any conditions which must be satisfied before an Award is made;

 

(d) Establish objectives and conditions for earning Awards;

 

(e) Determine the terms of each Award Agreement and any amendment or modification of any Award Agreement (which shall not be inconsistent with the Plan);

 

(f) Determine whether the conditions for earning an Award have been met and whether an Award will be paid at the end of a Performance Period;

 

(g) Determine if and when an Award may be deferred;

 

(h) Determine whether the amount or payment of an Award should be reduced or eliminated; and

 

(i) Determine the guidelines and/or procedures for the payment or exercise of Awards.

 

Notwithstanding the foregoing, no action of the Committee (other than pursuant to Section 4.2 or Section 9.4) may, without the consent of the person or persons entitled to exercise any outstanding Option or Stock Appreciation Right or to receive payment of any other outstanding Award, adversely affect the rights of such person or persons with respect to such Awards.

 

3.2 Decisions Binding.

 

The Committee shall have full power and authority to administer and interpret the Plan and to adopt or establish such rules, regulations, agreements, guidelines, procedures and instruments, which are not contrary to the terms of the Plan and which, in its opinion, may be necessary or advisable for the administration and operation of the Plan. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders or resolutions of the Board of Directors shall be final, conclusive and binding on all persons, including the Company and its Subsidiaries, its shareholders, employees, and Participants and their estates and beneficiaries, and such determinations and decisions shall not be reviewable.

 

 

 

3.3 Delegation of Certain Responsibilities.

 

The Committee may, subject to the terms of the Plan and applicable law, appoint such agents as it deems necessary or advisable for the proper administration of the Plan under this Article 3; provided, however, that the Committee may not delegate its authority to grant Awards under the Plan or to correct errors, omissions or inconsistencies in the Plan except as set forth in this Section 3.3. The Committee may delegate to the Company's Chief Executive Officer or to other officers of the Company its authority under this Article 3, provided that such delegation shall not extend to the grant of Awards or the exercise of discretion with respect to Awards to Employees who, at the time of such action, are (a) Covered Employees or (b) officers of the Company or its Subsidiaries who are subject to the reporting requirements of Section 16(a) of the Exchange Act. All authority delegated by the Committee under this Section 3.3 shall be exercised in accordance with the provisions of the Plan and any guidelines for the exercise of such authority that may be established by the Committee from time to time.

 

3.4 Procedures of the Committee.

 

Except as may otherwise be provided in the charter or similar governing document applicable to the Committee:

 

(a) All determinations of the Committee shall be made by not less than a majority of its members present at the meeting (in person or otherwise) at which a quorum is present;

 

(b) A majority of the entire Committee shall constitute a quorum for the transaction of business; and

 

(c) Any action required or permitted to be taken at a meeting of the Committee may be taken without a meeting if a unanimous written consent, which sets forth the action, is signed by each member of the Committee and filed with the minutes for proceedings of the Committee.

 

Service on the Committee shall constitute service as a Director of the Company so that members of the Committee shall be entitled to indemnification, limitation of liability and reimbursement of expenses with respect to their services as members of the Committee to the same extent that they are entitled under the Company's Articles of Incorporation and Bylaws, as amended from time to time, and Pennsylvania law for their services as Directors of the Company.

 

 

 

3.5 Award Agreements.

 

Each Award under the Plan shall be evidenced by an Award Agreement which shall be signed by an authorized officer of the Company and, if required, by the Participant, and shall contain such terms and conditions as may be authorized or approved by the Committee. Such terms and conditions need not be the same in all cases.

 

3.6 Rule 16b-3 Requirements.

 

Notwithstanding any other provision of the Plan, the Committee may impose such conditions on any Award (including, without limitation, the right of the Board or the Committee to limit the time of exercise to specified periods) as may be required to satisfy the requirements of Rule 16b-3.

 

 

ARTICLE 4. STOCK SUBJECT TO THE PLAN

 

4.1 Number of Shares.

 

(a) Subject to adjustment as provided in Section 4.2, the total number of shares of Stock subject to Awards under the Plan shall be four million (4,000,000) shares. Shares remaining available for awards under the Predecessor Plan as of the Effective Date shall not be awarded or increase the total number of shares authorized for delivery under the Plan. Stock delivered under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares.

 

(b) To the extent that shares of Stock subject to an outstanding Award are not issued by reason of:

 

(i) The forfeiture, termination, surrender, cancellation or expiration while unexercised of such award;

 

(ii) The tendering (by either actual delivery or by attestation if permitted by the Committee) or withholding of shares of Stock to pay all or a portion of the purchase price or to satisfy all or a portion of the tax withholding obligations relating to an Award;

 

(iii) The settlement in cash in lieu of Stock or settlement in a manner such that some or all of the shares of Stock covered by the Award are not issued to a Participant; or

 

(iv) An exchange for a grant under the Plan that does not involve Stock;

 

 

 

Such shares of Stock shall immediately again be available for Awards under the Plan. The Committee may from time to time adopt and observe such procedures concerning the counting of shares against the Plan maximum, as it may deem appropriate.

 

(c) Shares of Stock issued in connection with awards that are assumed, converted or substituted for pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its Subsidiaries shall not reduce the number of shares available for Awards under the Plan.

 

(d) Subject to adjustment as provided in Section 4.2, the following limitations shall apply to Awards under the Plan:

 

(i) All shares of Stock that may be issued under the Plan may be issued pursuant to SARS or Options, and all Options may be ISOs.

 

(ii) With respect to Awards other than SARs and Options, not more than 30 percent of the total number of shares of Stock that may be issued under the Plan may be issued pursuant to such other Awards.

 

(iii) The maximum number of shares of Stock that may be covered by Awards granted under the Plan to any single Participant shall be 250,000 shares during any one calendar year. For purposes of applying the limitations set forth in this paragraph (iii), if an Award, including without limitation Options, SARs, Restricted Stock, Restricted Stock Units and Performance Shares, is denominated in shares of Stock or the amount of the payment to be made thereunder shall be determined by reference to the value of shares of Stock, then such Award shall be counted in the year the Award is granted as covering the number of shares set forth in the Award. If an Award is granted in tandem with a SAR so that the exercise of the Award right or SAR with respect to a share of Stock cancels the tandem SAR or Award