EXECUTIVE SUPPLEMENTAL BENEFIT AGREEMENT
AGREEMENT made as of this 27th day of December, 1989, among NATIONAL
PENN BANCSHARES, INC., a Pennsylvania business corporation having its principal
place of business in Boyertown, Pennsylvania ("NPB"), NATIONAL BANK OF
BOYERTOWN, a national banking association having its principal place of business
in Boyertown, Pennsylvania (the "Bank"), and XXXXXXXX X. XXXX, XX., an
individual residing in Boyertown, Pennsylvania (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been employed since April 1977 and is
presently employed in the capacities of President of NPB and Chairman and Chief
Executive Officer of the Bank; and
WHEREAS, the Executive has rendered many years of valuable service to
NPB and the Bank and it is the desire of the Boards of Directors of NPB and the
Bank that the Executive continue his employment in order that the experience he
has gained and the management ability he has demonstrated will continue to be
available to NPB and the Bank; and
WHEREAS, to induce the Executive to remain employed, the Board of
Directors of the Bank, by an Executive Supplemental Benefit Agreement dated
October 19, 1984, provided the Executive with supplemental retirement benefits
and salary continuation protection for the dependents of the Executive in the
event of the Executive's death, which benefits and protection were guaranteed by
NPB; and
WHEREAS, the Boards of Directors of NPB and the Bank deem it advisable
to amend and restate the 1984 Executive supplemental Benefit Agreement to
provide the Executive with certain additional benefits in the event of certain
changes in control of NPB or the Bank so that the Executive will continue to
attend to the business of NPB and the Bank without distraction in the face of
the potentially disturbing circumstances arising therefrom.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth herein and intending to be legally bound hereby, NPB the Bank and the
Executive agree as follows:
1
1. Definitions. The following terms have the meanings specified below:
(a) "Affiliate" means any corporation which is included within a
"controlled group of corporations" including NPB, as determined under
Section 1563 of the Code.
(b) "Average Monthly Salary Base" means the total of the
Executive's monthly Salary for the sixty (60) months immediately prior to
the month in which (i) he attains the age of sixty-five (65), (ii) he
elects early retirement, (iii) he voluntarily terminates his Employment
prior to attaining the age of sixty (60), or (iv) his employment is
terminated by the Employer at any time prior to a Change in Control or
Ownership other than for Cause, as the case may be, divided by the number
sixty (60).
(c) "Bank" means National Bank of Boyertown, a national banking
association, or any successor thereto as set forth in Section 13 hereof.
(d) "Bank Retirement Plan' means the defined benefit pension plan
maintained now or in the future for the employees of the Bank or NPB.
(e) "Cause" means as set forth in Section 5 hereof.
(f) "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 Exchange Act, as enacted
and in force on the date hereof) of "beneficial ownership" (within the
meaning of Rule 13d-3 under the Exchange Act, as enacted and in force
on the date hereof) 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 the
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 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 such 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;
2
(iv) a sale, exchange, transfer or other disposition of
substantially all of the assets of the Bank 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
which 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.
(g) "Code" means the Internal Revenue Code of 1986, as amended, and
as the same may be amended from time to time.
(h) Designated Beneficiary" means the person designated by the
Executive as his beneficiary under the Bank Retirement Plan, or in the
absence of such a designation, his heirs at law.
(i) "Disability" means the Executive's incapacitation by accident,
sickness or otherwise which renders the Executive mentally or physically
incapable of performing the services required of the Executive for three
hundred sixty (360) consecutive days.
(j) "Employer" means the Bank, NPB or any Affiliate which employs
the Executive at any particular time.
(k) "Employment" means the Executive's employment by the Bank, NPB
or any Affiliate at any particular time.
(1) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "NPB" means National Penn Bancshares, Inc., the Pennsylvania
corporation and bank holding company is the parent of the Bank, or any
successor thereto as set forth in Section 13 hereof.
(n) "Normal Retirement Date" means the first day of the first
calendar month following the Executive's 65th birthday.
3
(o) "Salary" means the Executive's base salary established annually
by the Board of Directors of the Employer, prior to any reduction of such
salary pursuant to any contribution to a tax-qualified plan under Section
401(k) of the Code.
(p) "Tax Change" means a change (i) in the ownership or effective
control of NPB or (ii) in the ownership of a substantial portion of the
assets of NPB, determined pursuant to regulations promulgated under Section
28OG of the Code. Such term also means any similar change with respect to
the Bank or an Affiliate, to the extent provided in such regulations.
2. Supplemental Retirement Benefits.
(a) Normal Retirement. If the Executive's Employment continues
until he attains the age of sixty-five (65) and the Executive retires at
age sixty-five (65), then the Employer of the Executive shall pay to the
Executive monthly payments, each in an amount equal to sixty-five percent
(65%) of the Average Monthly Salary Base, for a period of one hundred
twenty (120) months, commencing on the Normal Retirement Date. If the
Executive dies before he has received or commenced to receive all of such
one hundred twenty (120) monthly payments, then the provisions of
subsection 6(a) hereof shall apply,
(b) Later Retirement. If the Executive's Employment continues until
he attains the age of sixty-five (65) and, at the request of the Board of
Directors of the Employer of the Executive, the Executive chooses to
continue to perform services thereafter, for such compensation as may be
mutually agreed upon at that time or from time to time, and if thereafter
the Executive's Employment shall terminate for any reason, other than
termination for Cause, then the Employer of the Executive shall pay to the
Executive monthly payments, each in an amount equal to sixty-five percent
(65%) of the Average Monthly Salary Base, for a period of one hundred
twenty (120) months, commencing on the first day of the first calendar
month following the Executive's termination of Employment. For purposes of
this subsection 2(b) only, the "Average Monthly Salary Base" shall be the
greater of (i) the total of the Executive's monthly Salary for the sixty
(60) months prior to his attainment of age sixty-five (65) or (ii) the
total of the Executive's monthly Salary for the sixty (60) months prior to
his termination of Employment, divided by the number sixty (60). If the
Executive dies before he has received or commenced to receive all of the
payments to which he is entitled pursuant to this subsection 2(b), then the
applicable provision of Section 6 hereof shall apply.
4
(c) Early Retirement. If the Executive's Employment continues and
the Executive elects to retire early between the ages of sixty (60) and
sixty-five (65), then the Employer of the Executive shall pay to the
Executive monthly payments, each in an amount equal to sixty-five percent
(65%) of the Average Monthly Salary Base, reduced by an amount equal to
one-quarter percent (1/4%) thereof for each month by which the date that
benefit payments are to commence under this subsection 2(c) precedes the
Executive's Normal Retirement Date, for a period of one hundred twenty
(120) months, commencing on the first day of the first calendar month
following the Executive's early retirement. If the Executive dies before he
has received or commenced to receive all of the payments to which he is
entitled pursuant to this subsection 2(c), then the applicable provision of
section 6 hereof shall apply.
(d) Voluntary Termination. If the Executive's Employment continues
and prior to the Executive's attaining the age of sixty (60), the Executive
voluntarily terminates his Employment or, if at any time prior to a Change
in Control or Ownership the Executive is discharged for a reason other than
Cause, then the Employer of the Executive shall pay to the Executive
monthly payments, each in an amount equal to the Average Monthly Salary
Base multiplied by a fraction (the numerator of which is the number of full
years of the Executive's Employment from April 1977 to the date of
termination of Employment and the denominator of which is the number
twenty-six (26)) and multiplied by sixty-five percent (65%), for a period
of one hundred twenty (120) months, commencing on the first day of the
calendar month selected by the Executive, provided that at such date he
shall then be between the ages of fifty-five (55) and sixty-five (65). If
the Executive dies before he has received or commenced to receive all of
such one hundred twenty (120) monthly payments, then the applicable
provision of Section 6 hereof shall apply.
3. Resignation of Executive. If a Change in Control or Ownership shall
occur and if thereafter, at any time, there shall be:
(i) any involuntary termination of the Executive's employment
(other than for Cause or Disability);
(ii) any reduction in the Executive's title, responsibilities,
including reporting responsibilities, or authority, including such
title, responsibilities or authority as such may be increased from
time to time;
5
(iii) the assignment to the Executive of duties inconsistent
with the Executive's office immediately prior to a Change in Control
or Ownership or as the same may be increased from time to time after a
Change in Control or Ownership;
(iv) any reassignment of the Executive to a location farther
than a thirty (30) minute commute by automobile from Boyertown,
Pennsylvania;
(v) any reduction in the Executive's annual base salary in
effect immediately prior to a Change in Control or Ownership or as the
same may be increased from time to time after a Change in Control or
Ownership;
(vi) any failure to continue the Executive's participation, on
substantially similar terms, in any of the incentive compensation or
bonus plans of NPB or an Affiliate in which the Executive participated
at the time of the Change in Control or Ownership or any change or
amendment to any of the substantive provisions of any of such plans
which would materially decrease the potential benefits to the
Executive under any of such plans;
(vii) any failure to provide the Executive with benefits at
least as favorable as those enjoyed by the Executive under any of the
pension, life insurance, medical, health and accident, disability or
other employee plans of NPB or an Affiliate in which the Executive
participated immediately prior to a Change in Control or Ownership, or
the taking of any action that would materially reduce any of such
benefits in effect at the time of the Change in Control or Ownership,
unless such reduction relates to a reduction in benefits applicable to
all employees generally,
(viii) any requirement that the Executive travel in performance
of his duties on behalf of NPB or an Affiliate for a greater period of
time during any year than was required of the Executive during the
year preceding the year in which the Change in Control or ownership
occurred;
(ix) any failure of the Board of Directors of NPB or the Bank,
respectively, to nominate the Executive for election as a member of
the Board of Directors of NPB or the Bank, as the case may be, at the
expiration of the Executive's then existing term;
6
(x) any sustained pattern of interruption or disruption of the
Executive for matters substantially unrelated to the Executive's
discharge of the Executive's duties on behalf of NPB or an Affiliate;
or
(xi) any breach of this Agreement of any nature whatsoever on
the part of NPB or the Bank;
then, at the option of the Executive, exercisable by the Executive within one
hundred eighty (180) days of the occurrence of each and every of the forgoing
events, the Executive may resign from employment (or, if involuntarily
terminated, give notice of intention to collect benefits hereunder) by
delivering a notice in writing (the "Notice of Termination) to NPB and the Bank
and the provisions of Section 4 of this Agreement shall apply.
4. Continuing Compensation and Benefits.
(a) (i) If, at the time of termination of the Executive's
employment in accordance with Section 3 hereof, a Tax Change has also
occurred, NPB shall make a lump-sum cash payment to the Executive no
later than thirty (30) days following the date of such termination in
an amount ("X") determined pursuant to the following formula:
D
X = (2.99A - B) x (1 + C) .
For the purpose of the foregoing formula,
A = the Executive's base amount (determined pursuant to Code
Section 280G(b)(3)(A)) on the date of the Tax Change;
B = the present value of all other amounts which qualify as
parachute payments under Code Section 28OG(b)(2)(A) or (B)
(without regard to the provisions of Code Section
28OG(b)(2)(A)(ii)), such present value to be determined pursuant
to the provisions of Code Section 280G;
C = 120% times 0.5 times the lowest of the semiannual applicable
federal rates (determined pursuant to Code Section 1274(d)) in
effect on the date of the Tax Change; and
D = the number of whole semiannual periods plus any fraction of a
semiannual period from the later of the date of the Tax Change or
the Change in Control or Ownership to the date of termination of
the Executive's employment.
7
Notwithstanding the foregoing or any other provision of this Agreement
to the contrary, if the amount determined under "B" above equals or
exceeds 2.99 times the amount determined under "A" above, no payment
shall be made to the Executive under this Section 4.
(ii) If. at the time of termination of the Executive's
employment in accordance with Section 3 hereof, a Tax Change has not
occurred, NPB shall make lump-sum cash payment to the Executive no
later than thirty (30) days following the date of such termination in
an amount equal to (A) 2.99 times the lesser of (I) the Executive's
base amount determined pursuant to the principles set forth in the
regulations promulgated under Code Section 28OG(b)(3)(A) and as though
a Tax Change had occurred on the date of the Executive's termination
of employment and (II) the Executive's base amount so determined but
as though a Tax Change will occur in the calendar year following the
date of the Executive's termination of employment, minus (B) any other
amounts paid or payable within thirty (30) days following the
Executive's termination of employment which would constitute (or be
presumed to constitute) parachute payments under Code Section
28OG(b)(2)(A) or (B) (without regard to the provisions of Code Section
280G(b)(2)(A)(ii)) if a Tax Change had occurred on the date of such
termination of employment.
(b) The Executive shall not be required to mitigate the amount of
any payment provided for in subsection 4(a) by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in
subsection 4(a) be reduced by any compensation earned by the Executive as
the result of employment by another employer or by reason of the
Executive's receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise, except as
otherwise provided therein.
(c) Upon written request of the Executive, the Employer's
obligation to make the payment under this Section 4 shall be secured in
total (i) by a stand-by letter of credit obtained by NPB from a recognized
financial institution the long-term obligations of which are rated, on the
date of such request, investment grade or better by Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc. or (ii) by such other
security as the Executive shall approve, obtained within ten (10) days of
the Executive's written request following a change in Control or Ownership.
(d) NPB shall pay all reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel and expenses included
in connection with an
8
arbitration or in other litigation or appeal) incurred by the Executive as
a result of (i) his delivery of a Notice of Termination or (ii) his seeking
to obtain or enforce any right or benefit provided by this Agreement.
5. Termination for Cause. The Employer may terminate the Executive's
Employment for "Cause." For purposes of this Agreement, "Cause" means the
occurrence of either of the following:
(a) the Executive's conviction of, or plea of guilty or nolo
contendere to, a felony or a crime of falsehood or involving moral
turpitude; or
(b) the willful failure by the Executive to substantially perform
his duties to the Employer, other than a failure resulting from the
Executive's incapacity as a result of the Executive's Disability, which
willful failure results in demonstrable material injury and damage to the
Employer. Notwithstanding the foregoing, the Executive's Employment shall
not be deemed to have been terminated for Cause if such termination took
place as a result of:
(i) questionable judgment on the part of the Executive;
(ii) any act or omission believed by the Executive in good
faith, to have been in or not opposed to the best interests of the
Employer; or
(iii) any act or omission in respect of which a determination
could properly be made that the Executive met the applicable standard
of conduct prescribed for indemnification or reimbursement or payment
of expenses under the By-laws of NPB, or the laws of the Commonwealth
of Pennsylvania, or the directors and officers' liability insurance of
NPB or any Employer, in each case as in effect at the time of such act
or omission.
If the Executive's Employment is terminated for Cause, all rights of the
Executive under this Agreement shall cease as of the effective date of such
termination, except that the Executive (i) shall be entitled to receive accrued
Salary through the date of such termination and (ii) shall be entitled to
receive the payments and benefits to which he is then entitled under the
employee benefit plans of the Employer or any Affiliate thereof as of the date
of such termination.
9
6. Provisions for Protection of Designated Beneficiary.
(a) Continuation of Payments. If the Executive shall become
entitled to payments under the provisions of Sections 2 or 4 hereof and
shall die before receiving all of the payments that he is entitled to
receive, then the remaining payments shall be made to the Executive's
Designated Beneficiary.
(b) Special Payments. If the Executive shall die while employed by
an Employer at a time when he was eligible to have previously retired
pursuant to subsection 2(b) or 2(c) hereof or to have previously terminated
his Employment voluntarily pursuant to subsection 2(d) hereof, then for
purposes of this subsection 6(b), the date of the Executive's death shall
be deemed to be the date of an election by the Executive to retire from, or
voluntarily terminate his, Employment. In such event, the Employer shall
pay to the Designated Beneficiary monthly payments as provided in
subsection 2(b), 2(c) or 2(d), as the case may be.
7. Employee Benefits. The Executive will be entitled to participate in
all employee benefit programs of the Employer and any Affiliate thereof
including, without limitation, the pension and profit-sharing plans, medical
insurance programs and group life insurance programs as may from time to time be
in effect. The payments to be made under Sections 2 or 6 of this Agreement shall
be reduced by any amount concurrently payable to the Executive or to the
Designated Beneficiary pursuant to the Bank Retirement Plan. Any payments to be
made under this Agreement shall not be deemed Salary or other compensation to
the Executive for the purpose of computing benefits to which he may be entitled
under any pension plan or other arrangement of the Employer or any Affiliate
thereof for the benefit of their employees.
8. Arbitration. Any dispute or controversy arising out of or relating
to this Agreement and any controversy as to a termination for Cause shall be
settled exclusively by arbitration, conducted before a panel of three
arbitrators, in Reading, Pennsylvania, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction.
9. Exclusive Benefit. Neither the Executive nor his spouse nor any
other Designated Beneficiary, shall have the right to commute, sell, assign,
transfer or otherwise convey the right to receive any payments hereunder, which
payment and the right thereto are expressly declared to be non-assignable and
non-transferable. In the event of any attempted assignment or transfer, the
Employer shall have no further liability hereunder.
10
The interest of any beneficiary in any benefits hereunder shall not be subject
to attachment, execution or sequestration for any debts, contracts, obligations
or liabilities of any beneficiary and shall not be subject to pledge,
assignment, conveyance or attachment.
10. Unsecured General Creditor. If the Employer shall acquire an
insurance policy or any other asset in connection with the liabilities assumed
by it hereunder, it is expressly understood and agreed that neither the
Executive nor his spouse nor any other Designated Beneficiary shall have any
right with respect to, or claimed against, such policy or other asset, and that
the Executive shall remain at all times an unsecured general creditor with
respect to any amount payable hereunder. The provisions of this Section 10 shall
not apply with respect to any security obtained by NPB under subsection 4(c) of
this Agreement.
11. Notices. Any notice required or permitted to be given under this
Agreement shall be properly given if in writing and if mailed by registered or
certified mail, postage prepaid with return receipt requested, to the
Executive's residence in the case of any notice to the Executive, or to the
principal office of the Bank, in the case of any notice to the Employer.
12. Entire Agreement. This Agreement contains the entire agreement
relating to the subject matter hereof and may not be modified, amended or
changed orally but only by an agreement in writing, consented to in writing by
NPB, and signed by the party against whom enforcement of any modification,
amendment or change is sought.
13. Benefits.
(a) This Agreement shall be binding upon and inure to the benefit
of NPB, the Bank and their respective successors and assigns. Each of NPB
and the Bank shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) to all or substantially all
of the business and/or assets of NPB or the Bank to expressly assume and
agree to perform this Agreement in the same manner and to the same extent
that NPB or the Bank would be required to perform it if no such succession
had taken place. Failure to obtain such assumption and agreement prior to
the effectiveness of any such succession shall constitute a breach of this
Agreement and the provisions of Section 3 of this Agreement shall apply. As
used in this Agreement, "NPB" or "the Bank" shall mean NPB or the Bank as
defined previously and any successor to the business and/or assets of NPB
or the Bank as aforesaid which assumes and agrees to perform this Agreement
by operation of law or otherwise.
(b) This agreement shall be binding upon and inure to the benefit
of and be enforceable by the Executive's personal or legal representatives,
executors, administrators, heirs, distributees, devisees, and legatees.
11
14. Applicable Law. This Agreement shall be governed by and construed
in accordance with the domestic internal law (but not the law of conflicts of
law) of the Commonwealth of Pennsylvania.
15. Headings. The headings of the sections and subsections hereof are
for convenience only and shall not control or affect the meaning or construction
or limit the scope or intent of any of the sections or subsections of this
Agreement.
16. Termination of 1984 Agreement. This Agreement replaces and
supersedes in its entirety the Executive Supplemental Benefit Agreement dated
October 19, 1984 between the Executive and the Bank.
IN WITNESS WHEREOF, NPB and the Bank have each caused this Agreement
to be executed on its behalf by its duly authorized officers, and the Executive
has hereunto set his hand and seal, as of the day and year first above written.
NATIONAL PENN BANCSHARES, INC.
(SEAL) By /s/ Xxxxx X. Xxxxx
-------------------------------
Attest: /s/ Xxxxxx X. Xxxxx
--------------------------
NATIONAL BANK OF BOYERTOWN
(SEAL) By /s/ Xxxxx X. Xxxxx
-------------------------------
Attest: /s/ Xxxxxx X. Xxxxx
--------------------------
Witness:
/s/ Xxxxxx X. Xxxxx /s/ Xxxxxxxx X. Xxxx, Xx.
---------------------------------- ----------------------------------(SEAL)
Xxxxxxxx X. Xxxx, Xx.
