NATIONAL PENN BANCSHARES, INC. TARP RESTRICTION AGREEMENT
Exhibit
10.4
NATIONAL
PENN BANCSHARES, INC.
This TARP RESTRICTION AGREEMENT
(this “Agreement”) is made and entered into as of November 23, 2009, by and
between NATIONAL PENN
BANCSHARES, INC., a Pennsylvania business corporation having its
principal place of business in Boyertown, Pennsylvania (the “Company”), NATIONAL
PENN BANK, a national banking association having its principal place of business
in Boyertown, Pennsylvania (the “Bank”), and XXXXXX X. XXXXXX (the
“Executive”).
BACKGROUND
1. Executive
is currently employed as the Chief Risk Officer of the Company and a Group
Executive Vice President of the Bank.
2. Executive
currently has an Amended and Restated Employment Agreement with the Company and
the Bank, dated January 28, 2008 (the “Employment Agreement”).
3. 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”).
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, Company and
Bank 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 or Bank, as applicable, 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 or the Bank for any reason (except for
services performed or benefits already accrued), and payments made on account of
the Company’s or the Bank’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 or the Bank 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. Consulting and
Noncompetition Agreement. If Executive is involuntarily
terminated from employment “without cause” or if she terminates her employment
with the Company and the Bank for “Good Reason” under the Employment Agreement,
and Executive executes and does not revoke a Release in the form attached hereto
as Exhibit A, at the option of the Executive, the Company hereby agrees that
Executive and the Company shall enter into a Consulting and Noncompetition
Agreement, substantially in the form set forth as Exhibit B hereto.
6. Governing
Law. This Agreement shall be governed by and construed in
accordance with the domestic internal law of the Commonwealth of
Pennsylvania.
7. Termination of this
Agreement. The Agreement shall automatically terminate and
become null and void upon the expiration of the TARP Compliance
Period.
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.
Xxxxx
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/s/ Xxxxxx X.
Xxxxxx
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NATIONAL
PENN BANCSHARES, INC.
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/s/ Xxxxx X.
Xxxxx
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Name: Xxxxx
X. Xxxxx
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Title: President
and Chief Executive Officer
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NATIONAL
PENN BANK
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/s/ Xxxxx X.
Xxxxxx
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Name: Xxxxx
X. Xxxxxx
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Title: President
and Chief Executive Officer
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EXHIBIT
A
NATIONAL
PENN BANCSHARES, INC.
CONFIDENTIAL
RELEASE AND WAIVER OF CLAIMS AGREEMENT (“Release”)
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1.
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Release
of Claims. In exchange for the benefits described in
paragraph 2, I, XXXXXX X.
XXXXXX (“Executive”), hereby release and
forever discharge National Penn Bancshares, Inc., a Pennsylvania
corporation, its subsidiaries and affiliates (the “Company” or “National
Penn”), any and all of their respective employee benefit plans, fringe
benefit plans or programs, and any and all of their respective present and
past officers, directors, shareholders, employees, agents and
representatives, and the successors and assigns of each from any and all
manner of claims, suits, demands, actions, causes of action,
administrative claims, liability, claims for damages, class action claims
or other claims made on my behalf whatsoever that I, my heirs,
representatives, agents, successors, guardians, trustees or assigns ever
had, have now or may have including, but not limited to, any claims
arising from or relating to my employment with the Company, any pending
applications for employment with the Company, or the termination of my
employment with the Company including, but not limited to: Title VII of
the Civil Rights Act of 1964 and the Civil Rights Act of 1991; the
Americans With Disabilities Act; the Pennsylvania Human Relations Act; the
Age Discrimination in Employment Act; the Older Workers Benefit Protection
Act (“OWBPA”); the Family and Medical Leave Act; Sections 1981 through
1988 of Title 42 of the United States Code; the Employee Retirement Income
Security Act of 1974; and all other federal, state or local laws of a
similar nature to any of the foregoing enumerated laws and any amendments
to the foregoing statutes or any other federal, state or local law; any
common law claim; breach of contract claim; claim for personal injury,
wrongful discharge, public policy, negligence, infliction of emotional
distress, whistleblower, retaliation, negligent hiring or retention, or
any form of tort, whether negligent, reckless or intentional, and any
claim for attorneys’ fees and costs, arising in law or equity, whether
known, suspected or unknown, and however originating or existing, from the
beginning of time to the date of my execution of this
Release. As required under OWBPA, I acknowledge that I have
received the information relating to other employees that have been
terminated in connection with a group termination, attached hereto as
Exhibit A.
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In
addition, with the exception of unemployment and worker's compensation claims, I
waive any right to any individual monetary or economic recovery or equitable
relief against the Company in any administrative proceeding or in any action,
lawsuit, hearing or other proceeding instituted by any agency, person or entity,
from the beginning of time to the date of my execution of this
Release. Notwithstanding the foregoing, this Release excludes (and I
shall retain any benefits to which I am entitled) under the Company’s Executive
Incentive Plan, Long-Term Incentive Compensation Plan, Defined Benefit Pension
Plan, or Defined Contribution (401(k)) Capital Accumulation Plan.
Notwithstanding
the foregoing, this Section shall not limit Executive’s right to challenge the
enforceability of the waiver and release contained herein under OWBPA with
respect to claims under the Age Discrimination in Employment Act or from filing
a charge of discrimination with the United States Equal Employment Opportunity
Commission (“EEOC”), but Executive will not be entitled to
any monetary or other relief from the EEOC or from any Court as a result of
litigation brought on the basis of or in connection with such charge except if
and to the extent that the release and waiver contained in this Section is held
to be invalid or unenforceable (in which event, National Penn will be entitled
to restitution or set off for the amounts paid to Executive hereunder, as and to
the extent determined by the court). Executive acknowledges and
agrees that, but for providing this waiver and release, Executive would not be
receiving the amount being provided to Executive under paragraph 2 of this
Release.
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2.
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Release
Consideration. In consideration for my execution of this
Release, the Company agrees to make payments to me and/or make benefits
available to me pursuant to the Company’s Consulting and Noncompetition
Agreement (the “Consulting Agreement”), at the times and in the forms set
forth in the Consulting Agreement.
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I
acknowledge that in the absence of my execution of this Release, I would not be
entitled to certain of the benefits described in this paragraph 2. I
acknowledge further that such benefits are adequate and satisfactory
consideration to me for entering into this Release.
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3.
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Successors
and Assigns. The Company’s rights under this Release
shall inure to the benefit of and shall be binding upon the successors and
assigns of the Company. I shall not be entitled to assign any
of my rights or obligations under this
Release.
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4.
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Governing
Law. This Release is made and entered into in the
accordance with the laws of the Commonwealth of Pennsylvania and shall in
all respects be interpreted, enforced and governed under the laws of the
Commonwealth of Pennsylvania.
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5.
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Entire
Agreement. This Release contains the entire agreement of
the parties with respect to the subject matter hereof and merges all prior
negotiations, agreements and understandings, if any. No
modification, release, discharge or waiver of any provision of this
Release shall be of any force or effect unless made in writing and signed
by me and the Director of Human Resources of the Company and specifically
identified as a modification, release or discharge of this
Release. If any term, clause or provision of this Release shall
for any reason be adjudged invalid, unenforceable or void, the same shall
not impair or invalidate any of the other provisions of this Release, all
of which shall be performed in accordance with their respective
terms.
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6.
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Acknowledgments. By
signing this Release, I acknowledge and agree
that:
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(a)
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I
have carefully read and understood all of the provisions and terms of this
Release;
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(b)
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I
have signed this Release knowingly and
voluntarily;
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(c)
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the
Company has advised me in writing to consult with counsel prior to signing
this Release;
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(d)
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the
Company has provided me at least forty-five (45) days (“Consideration
Period”) to consider this Release and I have not been pressured or coerced
to waive this Consideration Period;
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(e)
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I
understand that I have seven (7) days (“Revocation Period”) after I sign
this Release to elect to revoke the Release and acknowledge that I have
not been pressured or coerced to waive this Revocation
Period;
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(f)
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I
understand that this Release is made in compromise of any disputed claims
in order to avoid the expense and inconvenience of litigation and does not
constitute an admission of liability by the Company with regard to the
violation of any law, statute, regulation, or
ordinance;
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(g)
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In
signing this Release, I have not relied on any representations or
statements, whether oral or written, other than the express language
contained herein; and
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(h)
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I
acknowledge that I have had the right to negotiate over the terms of this
Release and that this Release shall not be construed as drafted solely by
any member of the Company; rather, this Release shall be construed as
mutually agreed upon terms which were the product of good faith and arms
length negotiations between equal parties, and this Release is not
unconscionable, unfair, the product of unfair bargaining power or a
contract of adhesion.
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Any
notice of revocation must be addressed and timely delivered to the Director of
Human Resources of the Company.
I HAVE
CAREFULLY READ THIS ENTIRE RELEASE. I UNDERSTAND THAT BY SIGNING THIS
RELEASE, I AM WAIVING ALL CLAIMS AGAINST THE COMPANY RELATING TO MY EMPLOYMENT
WITH THE COMPANY AND THE TERMINATION OF MY EMPLOYMENT WITH THE
COMPANY.
IN WITNESS WHEREOF, and intending to be
legally bound hereby, I have executed the foregoing Release effective this ___
day of ___________________, _____.
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WITNESS:
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XXXXXX X.
XXXXXX
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NATIONAL
PENN BANCSHARES, INC.
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Name:
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Title:
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EXHIBIT
A
EMPLOYEES ELIGIBLE FOR
RELEASE
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Job
Title
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Age
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#
Selected
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#
Not Selected
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EXHIBIT
B
NATIONAL
PENN BANCSHARES, INC.
CONSULTING AND NONCOMPETITION
AGREEMENT
This CONSULTING
AND NONCOMPETITION AGREEMENT (this “Agreement”) is being entered into as
of as of _____________, _____, by and between National Penn Bancshares, Inc., a
Pennsylvania corporation (“National Penn”), and XXXXXX X. XXXXXX (the
“Consultant”).
RECITALS:
WHEREAS, the Consultant
desires to provide the services described herein subject to the terms and
conditions set forth below:
NOW THEREFORE, in
consideration of the mutual covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Consultancy. During
the period beginning on the date on which Consultant’s employment with National
Penn is terminated (the “Termination Date”) and for a period of thirty-six (36)
months thereafter (the “Consulting Period”), the Consultant shall undertake to
provide his personal advice and counsel to National Penn and its subsidiaries
and affiliates in connection with the business of National Penn and its
subsidiaries, including, but not limited to:
(a) providing
continued services in the same manner as when she was employed on a permanent
basis as necessary to ensure a proper transition of her former job function to
his replacement;
(b) consulting
with National Penn regarding the operations and customer relationships of
National Penn and its subsidiaries;
(c) providing
introductions to customers and providing personal services similar to those the
Consultant is currently providing National Penn;
(collectively
the “Consulting Services”), subject to the terms and conditions which are set
forth herein. The Consultant shall provide such Consulting Services
as may be requested from time to time by either the President and Chief
Executive Officer or Senior Executive Vice President and Chief Operating
Officer of National Penn. During the Consulting Period, the
Consultant shall be available to devote up to 30 hours per week of his business
time, attention, skills and efforts (other than during holidays, vacations and
periods of illness) to the business and affairs of National Penn and its
subsidiaries and affiliates and shall use his reasonable best efforts to promote
the interests of National Penn and its subsidiaries and
affiliates. Such Consulting Services may be provided in person,
telephonically, electronically or by correspondence as reasonably determined by
National Penn. The Consultant shall be available for meetings at the
principal executive offices of National Penn at such times as National Penn
shall reasonably require.
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(d) During
the Consulting Period, the Consultant shall be treated as an independent
contractor and shall not be deemed to be an employee of National Penn or any
subsidiary or affiliate of National Penn.
(e) The
obligations of National Penn under this Agreement are subject to and contingent
upon the Consultant continuing to be employed by National Penn from the date
hereof until the Termination Date.
2. Non-Disclosure of Confidential
Information. Except in the course of performing the Consulting Services
hereunder, and in the pursuit of the business of National Penn or any of its
affiliates, the Consultant shall not, except as required by law, at any time
during or following the Consulting Period, disclose or use any confidential
information or proprietary data of National Penn or any of its affiliates or
predecessors, unless such confidential information or proprietary data become
publicly known through no fault of the Consultant. Without limiting
the generality of the foregoing, the Consultant agrees that all information
concerning the identity of the customers of National Penn and its affiliates and
the relations of such entities with their customers is confidential
information. This Section 2 shall survive the termination or
expiration of the Consulting Period.
3. Non-Competition
Provisions. The Consultant agrees that during the Consulting
Period, the Consultant will not (i) without the prior written consent of
National Penn (which consent may be given at National Penn’s discretion, but not
unreasonably withheld), directly or indirectly, engage in, become interested in,
or become associated with, in the capacity of employee, consultant, director,
officer, owner, principal, agent, trustee or in any other capacity whatsoever,
any proprietorship, partnership, corporation, enterprise or entity located
within a fifty (50) mile radius from Boyertown, PA, which proprietorship,
partnership, corporation, enterprise or other entity is, or may be deemed to be
by National Penn, competitive with any business carried on by National Penn or
its affiliates including but not limited to entities which lend money and take
deposits (in each case, a “Competing Business”), provided, however, that this
provision shall not prohibit the Consultant from owning bonds, voting and
non-voting preferred stock or up to five percent (5%) of the outstanding common
stock of any Competing Business if such common stock is publicly traded, (ii)
solicit or induce, or cause others to solicit or induce, any employee of
National Penn or any of its affiliates to leave the employment of such entities,
or (iii) solicit (whether by mail, telephone, personal meeting or any other
means, excluding general solicitations of the public that are not based in whole
or in part on any list of customers of National Penn or any of its affiliates)
any customer of National Penn or any of its affiliates to transact business with
any other entity, whether or not a Competing Business, or to reduce or refrain
from doing any business with National Penn or its subsidiaries, or interfere
with or damage (or attempt to interfere with or damage) any relationship between
National Penn or its affiliates and any such customers. This Section 3 shall
survive the termination or expiration of the Consulting Period in accordance
with its terms.
4. Compensation. In
consideration of the obligations and commitments of the Consultant under this
Agreement, including Sections 1, 2 and 3 hereof, National Penn shall pay to the
Consultant thirty-six equal installment payments in amounts equal to
[one-twelfth of then current annual base salary] per month on the last business
day of each month during the Consulting Period.
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5. Benefits. If
Consultant was participating in medical and dental coverage under a
Company-sponsored plan immediately prior to the Termination Date, Consultant
will receive such medical and dental benefits during the one-year period,
commencing as of the Termination Date, subject to Consultant’s continued payment
of the applicable monthly premiums at active Company employee
rates. Health benefits to which Consultant is entitled by law under
the Consolidated Omnibus Budget Reconciliation Act, as amended (“COBRA”) will
commence immediately upon the cessation of such one-year period.
6. Successors
and Assigns.
(a) During
the Consulting Period, National Penn will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of its business and/or assets, by agreement in form and
substance satisfactory to the Consultant, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that National Penn would be required to perform it if no
such succession or assignment had taken place. Any failure of
National Penn to obtain such agreement prior to the effectiveness of any such
succession or assignment during this twelve-month period shall be a material
breach of this Agreement.
(b) This
Agreement and all rights of the Consultant shall inure to the benefit of and be
enforceable by the Consultant’s personal or legal representatives, estate,
executors, administrators, heirs and beneficiaries. In the event of
the Consultant’s death, any amounts accrued and unpaid through the date of death
shall be paid to the Consultant’s estate, heirs and
representatives. Except as provided in this Section 6, no party may
assign this Agreement or any rights, interests, or obligations hereunder without
the prior written approval of the other party. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
7. Enforcement. This
Agreement shall be construed, enforced and interpreted in accordance with and
governed by the laws of the Commonwealth of Pennsylvania, without reference to
its principles of conflict of laws, except to the extent that federal law shall
be deemed to preempt such state laws.
8. Amendment. This
Agreement may be amended or modified at any time by a written instrument
executed by the parties.
9. Waiver. Failure to insist upon
strict compliance with any of the terms, covenants or conditions hereof shall
not be deemed a waiver of such term, covenant or condition. A waiver
of any provision of this Agreement must be made in writing, designated as a
waiver, and signed by the party against whom its enforcement is
sought. Any waiver or relinquishment of any right or power hereunder
at any one or more times shall not be deemed a waiver or relinquishment of such
right or power at any other time or times.
10. Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, and all of which shall constitute one and the same
Agreement.
11. Headings and
Construction. The headings of sections in this Agreement are
for convenience of reference only and are not intended to qualify the meaning of
any section. Any reference to a section number shall refer to a
section of this Agreement, unless otherwise stated.
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12. Entire Agreement. This
instrument contains the entire agreement of the parties relating to the subject
matter hereof, and supersedes in its entirety any and all prior agreements,
understandings or representations relating to the subject matter
hereof.
IN WITNESS WHEREOF, National
Penn has caused this Agreement to be executed by its duly authorized officer,
and the Consultant has signed this Agreement, all as of the date first written
above.
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WITNESS:
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XXXXXX X.
XXXXXX
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NATIONAL
PENN BANCSHARES, INC.
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Name:
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Title:
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