NATIONAL PENN BANCSHARES, INC. TARP RESTRICTION AGREEMENT
Exhibit
10.5
NATIONAL
PENN BANCSHARES, INC.
This TARP RESTRICTION AGREEMENT
(this “Agreement”) is made and entered into as of November 19, 2009, by and
between NATIONAL PENN
BANCSHARES, INC., a Pennsylvania business corporation having its
principal place of business in Boyertown, Pennsylvania (the “Company”), and
XXXXXXX X.
XXXXXXXX (the “Executive”).
BACKGROUND
1. Executive
is currently employed as an officer of the Company or of a Company
subsidiary.
2. In
December 2008, the Company issued $150 million of senior preferred stock, and
related common stock purchase warrants, to the U.S. Treasury Department
(“Treasury”) under the Troubled Asset Relief Program Capital Purchase Program
(the “TARP Program”), established under the Emergency Economic Stabilization Act
of 2008 (Pub.L. 110-343, Div. A, enacted October 3, 2008), and amended by the
American Recovery and Reinvestment Act of 2009 (Pub.L. 111-5, enacted February
17, 2009) and subsequent Treasury guidance (the “TARP Interim Final
Rules”).
3. On
December 10, 2008, certain Company employees executed a CPP Clawback and
Parachute Restriction Agreement between the Company and such employees (the
“Prior TARP Restriction Agreement”).
4. As
required to participate in the TARP Program, the Company must adopt the Treasury
standards for executive compensation and corporate governance, for the period
during which Treasury holds equity or debt securities of the Company issued
under this Program (the “TARP Compliance Period”).
5. Under
the TARP Program, Treasury’s standards apply to the senior executive officers
(the “SEOs”) of the Company and other “most highly compensated employees” (as
such terms are defined under the TARP Interim Final Rules).
AGREEMENT
NOW, THEREFORE, as required to
participate in the TARP Program, and in consideration of the mutual promises
contained herein, and each intending to be legally bound, Executive and Company
agree as follows:
1. Background. The
matters set forth in the “Background” section of this Agreement are incorporated
by reference herein.
2. SEO and Top
5. During any time period in which Executive is classified by
the Company as (i) an SEO or (ii) one of the next 5 “most highly compensated
employees,” as defined in the TARP Interim Final Rules (the “Top 5”), he or she
agrees as follows:
(a) Incentive Compensation
Recovery. Executive agrees that Executive shall repay to the
Company any bonus and incentive compensation paid to Executive during the TARP
Compliance Period, if the payments were based on materially inaccurate financial
statements or any other materially inaccurate performance metric
criteria. This repayment shall not be limited to a specific recovery
period, material inaccuracies in financial reporting statements, or inaccuracies
that result in accounting restatements. The recovery encompasses all
incentive compensation paid to Executive as a result any determination of
achievement of a performance metric that is later determined to have been based
on material inaccuracies related to financial reporting. For purposes
of this paragraph and without limiting the foregoing, financial statements or
performance metric criteria are treated as being materially inaccurate with
respect to Executive if, Executive either knowingly engages in providing
inaccurate information or knowingly fails to timely correct inaccurate
information relating to those financial statements or performance
metrics;
(b) Golden Parachute
Restrictions. Executive agrees to forfeit all “Golden
Parachute” payments, whether Executive is entitled to such payment, or solely
obtains a legally enforceable right to such payment during the TARP Compliance
Period. “Golden Parachute” payments are defined as payments resulting from
Executive’s departure from the Company for any reason (except for
services performed or benefits already accrued), and payments made on account of
the Company’s “change in control” (as defined in 26 CFR 1.280G-1, Q&A-27
through Q&A-29 or as a change in control event as defined in 26 CFR
1.409A-3(i)(5)(i)). Such payments shall be determined in a manner
that is consistent with the TARP Interim Final Rules; and
(c) Gross-Up Payment
Restrictions. Executive agrees to forfeit all “Gross-Up”
payments or legally enforceable rights to such payments, during the TARP
Compliance Period. “Gross-up” payments are defined as any
reimbursement by the Company of taxes owed to Executive with respect to any
compensation, provided
that such payment does not include a payment under an agreement or other
arrangement that provides payments intended to compensate Executive for some or
all of the excess of the taxes actually imposed by a foreign
jurisdiction.
3. SEO and Top
20. During any time period in which Executive is classified by
the Company as (i) an SEO or (ii) one of the next 20 “most highly compensated
employees,” as defined in the TARP Interim Final Rules (the “Top 20”), he or she
agrees as follows:
(a) Executive
shall comply with the Incentive Compensation Recovery
provision in this Agreement, as
described under Section (2)(a) above; and
(b) Executive
shall comply with the Gross-Up
Payment Restrictions provision in this Agreement, as
described under Section (2)(c) above.
4. Most Highly Compensated
Employees. During any time period in which Executive is
classified by the Company as one the five “most highly compensated employees” of
the Company, as defined in the TARP Interim Final Rules (the “5 Most Highly
Compensated Employees”), he or she shall forfeit the payment or accrual of any
bonuses or retention awards accrued after June 15, 2009, except for restricted stock, which
vests no earlier than in 25% vesting tranches conditioned on 25% of total senior
preferred stock being repurchased from Treasury, until the final preferred stock
is repurchased (as provided in the TARP Interim Final Rules) during the TARP
Compliance Period, and has a value of no more than one-third of Executive’s
total “annual compensation” (as defined under the TARP Interim Final Rules) for
that fiscal year (as
valued using grant-date fair market value). Notwithstanding the
foregoing, any bonus accrued before June 15, 2009 shall be payable within 30
days following the earlier of (i) March 15th of
the first year in which such employee is not a 5 Most Highly
Compensated Employee or (ii) the end of the TARP Compliance Period.
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5. Governing
Law. This Agreement shall be governed by and construed in
accordance with the domestic internal law of the Commonwealth of
Pennsylvania.
6. Termination of this
Agreement. The Agreement shall automatically terminate and
become null and void upon the expiration of the TARP Compliance
Period.
7. Termination of the Prior
TARP Restriction Agreement. Effective concurrently with the
execution and delivery of this Agreement, any Prior TARP Restriction Agreement
dated December 10, 2008 between the Company and Executive is hereby rescinded
and is of no further force and effect.
IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above
written.
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WITNESS:
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/s/ Xxxxx X.
Xxxxxx
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/s/ Xxxxxxx X.
Reinhard__
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XXXXXXX
X. XXXXXXXX
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NATIONAL
PENN BANCSHARES, INC.
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By:
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/s/
Xxxxx X. Xxxxx
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Name: Xxxxx
X. Xxxxx
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Title: President
& Chief Executive Officer
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