INVESTMENT AGREEMENT
---------------------
This INVESTMENT AGREEMENT made this 4th day of September, 2003, by and
between THE PENNSYLVANIA STATE BANKING COMPANY ("Company") and NATIONAL PENN
BANCSHARES, INC. ("National Penn").
BACKGROUND
A. At the time of its organization, the Pennsylvania State Bank (the
"Bank") entered into a stock purchase agreement on 20th April 1989 with National
Penn. This agreement obligated National Penn to purchase at least 19% of the
number of shares of the common stock of the Bank that the Bank would issue as a
result of its initial stock offering to raise sufficient capital for regulatory
approval to commence business (the "Stock Purchase Agreement").
B. The Bank granted to National Penn, under the Stock Purchase Agreement, a
preemptive right to purchase additional shares of its capital stock in order to
maintain a 20% ownership position in the outstanding shares of the Bank's
capital stock. From time to time. National Penn has purchased additional shares
of the Bank's common stock, as the Bank has issued common stock in a secondary
stock offering and as the result of the exercise of stock warrants and options.
C. Moreover, under the Stock Purchase Agreement, if the Bank decides to
reorganize itself into a bank holding company, then the Bank shall require the
Bank's proposed bank holding company to provide National Penn with the rights to
purchase shares of the capital stock of such bank holding company that are
substantially identical to those provided by the Bank to National Penn under the
Stock Purchase Agreement.
D. The Board of Directors of the Bank approved the formation of the Company
as the proposed bank holding company for the Bank. The Plan of Reorganization
among the Company, the Bank and Market Street Interim Bank ("Interim Bank")
requires, at Section 11.5 thereof, that the Company enter into such an agreement
with National Penn. A copy of such Plan of Reorganization including the Plan of
Merger between the Bank and Interim Bank, is attached hereto as Exhibit 1.
E. This Investment Agreement is the agreement required in the Stock
Purchase Agreement and the Plan of Reorganization.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, the parties hereto, intending to be legally bound, agree as
follows:
1. Incorporation of Background. The "Background" section of this Investment
Agreement is hereby incorporated by reference into this Investment Agreement and
the parties hereto expressly agree to perform their respective executory
obligations therein set forth.
2. Grant of Purchase Rights. In the event the Company, at any time, issues
any shares of its common stock, including without limitation any shares which
may be issued as a result of the exercise of warrants, implementation of any
stock option program or any Company qualified employee stock ownership plan or
trust or for sale to and purchase by any Company profit-sharing plan and trust
or Company qualified employee pension plan (any such issuance being herein
referred to as a "Sale Event"), then National Penn shall have the right to
purchase, on the terms and conditions herein set for, such number (or any lesser
number) of shares of the Company's common stock as, when added to the number of
shares of the Company's common stock issued in the Sale Event, constitutes 20%
of the total, such percentage to be calculated as set forth in Paragraph 13
below. Nothing contained in this Paragraph 2 or elsewhere herein shall be
construed to limit in any manner the right of National Penn to purchase shares
of common stock of the Company in the open market from time to time in any
amount.
3. Reservation of Shares. The Company shall, at all times, have authorized
shares of common stock that are not outstanding duly reserved for issuance or
sale to National Penn upon exercise of National Penn's purchase rights provided
in Paragraph 2 hereof. The Company shall reserve shares of its common stock for
issuance or sale to National Penn hereunder, prior to or simultaneously with any
occurence of a Sale Event or any issuance of options, warrants or rights whose
implementation will result in a Sale Event, in such number as shall be necessary
for issuance to National Penn pursuant to Paragraph 2 above. The Company's
obligations under this Paragraph 3 shall lapse if, and only to the degree that,
any such option, warrant or right expires or is terminated without exercise, or
upon the termination of this Investment Agreement.
4. Purchase Price--Exercise of Options. If the Sale Event shall be the
issuance of shares of common stock of the Company upon the exercise of stock
options granted to persons who are officers, employees or directors of the
Company, then the purchase price for each share of common stock of the Company
issuable to National Penn pursuant to Paragraph 2 of this Investment Agreement
shall be a price per share equal to the fair market value of the Company's
common stock at the date of exercise of such options, determined by a quotation
obtained from a member of the National Association of Securities Dealers, Inc.
approved in advance by National Penn (the "Option Purchase Price").
5. Purchase Price--Secondary Offering. If the Sale Event shall be the
issuance of shares of common stock of the Company pursuant to a public or
limited private offering or otherwise under circumstances not governed by
Paragraph 4 hereof, then the purchase price for each share of common stock of
the Company issuable to National Penn under the provisions of Paragraph 2 of
this Investment Agreement shall be the same price per share as is paid by the
purchasers in such public or limited private offering or other sale (the "Sale
Purchase Price").
6. Notices to National Penn.
(a) If the Company takes any action that could result in National Penn
having a right to purchase any shares of common stock of the Company
hereunder, the Company shall concurrently give written notice to
National Penn of such action and of the reservation of shares for
issuance or sale to National Penn hereunder.
(b) If the Company issues any shares of common stock of the Company, the
Company shall concurrently give written notice to National Penn of
such issuance.
7. Exercise of Purchase Rights.
(a) National Penn may elect to exercise its right to purchase shares of
common stock of the Company hereunder by giving written notice of such
election, specifying therein the number of
shares to be purchased, to the Company at its principal place of
business, within fourteen days after National Penn's receipt of a
written notice from the Company under Paragraph 6(b) hereof.
(b) Upon determination of the Option Exercise Price, pursuant to Paragraph
4 hereof, or of the Sale Purchase Price, pursuant to Paragraph 5
hereof (whichever price shall be applicable referred to herein as the
"Price"), National Penn shall pay to the Company the aggregate amount
of the Price for all shares then being purchased within ten days of
such determination.
(c) If the Price shall be determined in any instance to be less than the
then par value per share of the Company's common stock, then,
notwithstanding such determination, National Penn shall pay an amount
per share equal to the then par value of the purchased stock.
(d) Upon receipt of the aggregate amount of the Price for the number of
shares of common stock to be purchased, the Company shall immediately
issue to National Penn such shares by delivery to National Penn of a
stock certificate registered in the name of National Penn or its
nominee representing the shares so purchased.
8. Assignment by National Penn. This Investment Agreement may be assigned
by National Penn without consent of the Company (i) to any wholly-owned
subsidiary of National Penn, in which case National Penn shall be responsible
for such assignee's performance of its obligations hereunder; (ii) to any party
or entity which shall purchase from National Penn shares of common stock of the
Company in an aggregate amount equal to at least 19% of the then issued and
outstanding shares of common stock of the Company; or (iii) to any successor by
merger or consolidation to the business of National Penn; provided, however,
that prior to any such assignment under subparagraph 8(ii) hereof, the Company
shall have the right to purchase such shares at the same price as is agreed to
between National Penn and such party or entity within 90 days of written notice
of the intent of National Penn to sell or assign such shares or within ten days
of receipt of regulatory approval by the Company to purchase such shares,
whichever is later. The Company may, at its option, extend the aforesaid 90 day
period to 120 days if it delivers to National Penn within the 90-day period, the
Company's irrevocable written election to make such purchase, together with
evidence reasonably satisfactory to National Penn of the Company's financial
ability to consummate such purchase (e.g., a binding loan commitment from
another financial institution). Otherwise, National Penn shall not assign any of
its rights hereunder without first obtaining the Company's prior written
consent. Written notice of any such assignment shall be given to the Company.
All references to "National Penn" in this Investment Agreement shall include any
assignee permitted in this Paragraph 8 and any permitted assignee of such
assignee; any permitted assignee shall be entitled to all of the rights and
subject to all of the duties of National Penn set forth in this Investment
Agreement.
9. Additional Classes of Voting Capital Stock. The Company agrees that in
the event it amends its Articles of Incorporation to authorize any additional
classes of capital stock (including taking corporate action to establish the
rights of any series or class of its currently authorized preferred stock)
possessing the right to vote on matters submitted to a vote of shareholders,
whether as a separate class or together with the common stock of the Company,
National Penn shall have the right to purchase such number of shares of such
stock as are necessary to preserve National Penn's right to maintain its
percentage ownership of the outstanding voting capital stock of the Company. The
purchase price for each share of such stock to be sold to National Penn under
the provisions of this paragraph 9 shall be the same price per share as is paid
by the purchasers in any public or limited private offering or other sale of
such stock.
10. Governing Law. This Investment Agreement shall be construed in
accordance with the internal domestic laws (but not the conflict of laws
provisions) of the Commonwealth of Pennsylvania.
11. Binding Investment Agreement. This Investment Agreement shall be
binding upon and inure to the benefit of the parties hereto, their successors
and permitted assigns.
12. Issuance and Exercise Period Limitations. The Company shall use its
best efforts to avoid issuing any shares of its common stock between the
twentieth day and the last day of March, June, September or December of any
year, or issuing any options, warrants or rights whose implementation will
result in a Sale Event, which options, warrants or rights are exercisable
between the twentieth day and the last day of March, June, September or December
of any year.
13. Percentage Ownership Calculations. All calculations of the percentage
of ownership of shares of common stock of the Company to be made pursuant to the
terms of this Investment Agreement, including without limitation those to be
made pursuant to Paragraph 2 of this Investment Agreement, shall be made (a) on
the basis of the number of shares of common stock of the Company then issued and
outstanding and (b) excluding there from any shares of common stock of tile
Company issuable upon the conversion of any convertible securities or upon the
exercise of any options, warrants or other rights or common stock equivalents
then outstanding.
14. Time of the Essence. Time shall be of the essence in the performance of
this Investment Agreement, and the failure of National Penn to give notice or
make payment within the time periods herein prescribed shall cause any option or
right arising hereunder to lapse and be void in that instance.
15. Notices. Al1 notices arising hereunder shall be sent by certified mail,
return receipt requested, to the principal office of the party intended to
receive such notice, and shall be deemed received on the second business day
following such deposit in the mail.
16. Captions. The captions included herein are for convenience of reference
only and shall not affect the construction or interpretation of this Investment
Agreement.
17. Amendment of Investment Agreement. This Investment Agreement may be
amended in writing signed by both parties, by their respective duly authorized
officers.
18. Conditions Precedent. The obligation of National Penn to consummate the
purchase of shares of the Company's common stock provided for in this Investment
Agreement is subject to the satisfaction of the following conditions:
(a) The Board of Governors of the Federal Reserve System or the Federal
Reserve Bank of Philadelphia, acting under delegated authority, shall
have approved National Penn's purchase of up to 21% of the shares of
common stock of the Company issued and outstanding, and such approval
shall not contain a determination that National Penn will be in
"control" of the Company or that the Company will be a "subsidiary" of
National Penn, as such terms are defined in the Federal Reserve's
Regulation Y at 12 C.F.R Part 225, or any condition or requirement
deemed burdensome or otherwise objectionable by National Penn.
(b) The Department of the Banking of the Commonwealth of Pennsylvania
shall have approved National Penn's purchase of up to 21% of the
shares of common stock of the Company issued and outstanding.
19. Open Market Purchase Limitation any other provision hereof, National
Penn shall not purchase any shares of common stock of the Company in the open
market if the effect of such purchase would be to cause National Penn to own
more than 24.9% of the shares of common stock of the Company then issued and
outstanding, without the prior written approval of the Company and of the Board
of Governors of the Federal Reserve System.
20. Effective Date of Agreement. This Investment Agreement shall become
effective on the Effective Date of the Plan of Merger between the Bank and
Interim Bank set forth at Section 1.1 thereof, assuming the conditions precedent
set forth at Paragraph 18 are satisfied. If not, then this Investment Agreement
shall become effective on the date that the last of these conditions precedent
is satisfied, if satisfied after the Effective Date of the merger of the Bank
and Interim Bank.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Investment Agreement to be duly executed in their
respective names by their authorized representatives the day and year first
above written.
THE PENNSYLVANIA STATE BANKING COMPANY
By :/s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxx
Attest: /s/ Xxxxxxxx X. Xxxxxx, Secretary
-------------------------------------
Xxxxxxxx X. Xxxxxx, Secretary
NATIONAL PENN BANCSHARES, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxx, President
Attest: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Xxxxxx X. Xxxxx, Secretary
