UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
NATIONAL PENN BANCSHARES, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NATIONAL PENN BANCSHARES, INC.
-----------------------------
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
to be held April 27, 1999
-----------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of National Penn Bancshares, Inc. (the "Company") will be held on
April 27, 1999, at 4:00 P.M. (Local Time) at the Gilbertsville Fire Company,
1456 East Philadelphia Avenue, Gilbertsville, Pennsylvania, for the following
purposes:
(1) to elect three Class III directors to hold office for three years from
the date of election and until their successors shall have been
elected and qualified; and
(2) to transact such other business as may properly be presented at the
Meeting.
Shareholders of record at the close of business on March 12, 1999, will be
entitled to notice of, and to vote at, the Meeting.
SHAREHOLDERS ARE URGED TO SIGN, DATE, AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Sandra L. Spayd
SANDRA L. SPAYD
Secretary
March 24, 1999
<PAGE>
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of National Penn Bancshares, Inc. (the
"Company"), parent company of National Penn Bank ("NPB"), for use at the
Company's Annual Meeting of Shareholders to be held April 27, 1999 (the
"Meeting"). The Proxy Statement and the accompanying proxy are first being
mailed to shareholders of the Company on or about March 24, 1999. The expense of
soliciting proxies will be borne by the Company. It is expected that the
solicitation of proxies will be primarily by mail. The Company's directors,
officers, and employees may also solicit proxies personally, by telephone, and
by telegraph.
The execution and return of the enclosed proxy will not affect a
shareholder's right to attend the Meeting and vote in person. Any shareholder
giving a proxy may revoke it at any time before it is exercised by submitting
written notice of its revocation or a subsequently executed proxy to the
Secretary of the Company, or by attending the Meeting and electing to vote in
person. Only shareholders of record at the close of business on March 12, 1999,
are entitled to notice of, and to vote at, the Meeting. On that date, there were
16,972,295 of the Company's common shares outstanding, each of which will be
entitled to one vote at the Meeting.
The presence, in person or by proxy, of shareholders entitled to cast a
majority of all the votes entitled to be cast at the Meeting will constitute a
quorum. Abstentions, broker non-votes and withhold authority votes all count for
the purpose of determining a quorum.
If a shareholder is a participant in the Company's Dividend Reinvestment
Plan and/or Employee Stock Purchase Plan, the proxy card sent to such
shareholder will represent the number of shares registered in such shareholder's
name and the number of shares credited to such shareholder's Dividend
Reinvestment Plan account and/or Employee Stock Purchase Plan account.
If the enclosed proxy is appropriately marked, signed, and returned in time
to be voted at the Meeting, the shares represented by the proxy will be voted in
accordance with the instructions marked thereon. Signed proxies not marked to
the contrary will be voted "FOR" the election, as directors, of the Board of
Directors' nominees. Signed proxies will be voted "FOR" or "AGAINST" any other
matter which properly comes before the Meeting or any adjournment thereof, in
the discretion of the persons named as proxyholders.
The Company's Annual Report for the year ended December 31, 1998, is
enclosed herewith. The Annual Report of the Company has been furnished to
shareholders for their information. No part of the Annual Report is incorporated
by reference into this Proxy Statement.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
General
The Articles of Incorporation of the Company provide that the Company's
business shall be managed by a Board of Directors of not less than eight and not
more than fifteen persons. The Board of Directors of the Company, as provided in
the Company's Articles of Incorporation, as amended, is divided into three
classes: Class I, Class II, and Class III, with each class being as nearly equal
in number as possible. The Board of Directors of the Company presently consists
of eleven members, with four directors in Class I, four directors in Class II
and three directors in Class III. John W. Jacobs and Robert E. Rigg, two of the
eleven directors, were elected to the Board of Directors on January 4, 1999 when
the Company acquired Elverson National Bank, pursuant to the terms of the
acquisition agreement.
Three Class III directors will be elected at the Meeting. The term of
office of the Class III directors elected at the Meeting will expire on the date
of the annual meeting of the Company's shareholders in 2002. The term of office
of the continuing directors in Class I and Class II will expire on the date of
the annual meeting of the Company's shareholders in 2000 and 2001, respectively.
The Board of Directors has nominated Patricia L. Langiotti, Harold C.
Wegman, and Wayne R. Weidner for election as Class III directors. Each of these
persons is presently a Class III director of the Company. The Bylaws of the
Company permit nominations for election to the Board of Directors to be made by
the Board of Directors or by any shareholder entitled to vote for the election
of directors. Nominations for director made by shareholders (other than the
Board of Directors) must be made, in writing, delivered or mailed to the Company
not less than fourteen days prior to the date of a shareholders' meeting. Such
notice must contain the same information to the extent known to the notifying
shareholder as that required to be stated by the Company in its Proxy Statement
with respect to nominees of the Board of Directors. Any nominations that are not
made in this manner or any votes cast at the Meeting for any candidate not duly
nominated may be disregarded by the chairman of the Meeting. No notice of
nomination for election as a director has been received from any shareholder as
of the date of this Proxy Statement.
The three nominees who receive the highest number of votes cast at the
Meeting will be elected as Class III directors. Abstentions and broker non-votes
will not constitute or be counted as "votes" cast for the purpose of the
election of directors. Shares represented by properly executed proxies in the
accompanying form will be voted for the nominees named below unless otherwise
specified in the proxy by the shareholder. Any shareholder who wishes to
withhold authority from the proxyholders to vote for the election of directors
or to withhold authority to vote for any individual nominee may do so by marking
his or her proxy to that effect. No proxy may be voted for a greater number of
persons than the number of nominees named. If any nominee should become unable
to serve, the persons named in the proxy may vote for another nominee. The
Company's management, however, has no present reason to believe that any nominee
listed below will be unable to serve as a director, if elected.
2
<PAGE>
The Nominees and Continuing Directors
The following table sets forth the principal occupation, age, and certain
other information as to the nominees for election as Class III directors, and
the continuing Class I and Class II directors, as of March 1, 1999:
<TABLE>
<CAPTION>
Director of
Principal Occupation(s) the Company
Name During Last Five Years Age Since (1)
---- ---------------------- --- -------------
<S> <C> <C> <C>
NOMINEES AS CLASS III DIRECTORS TO SERVE UNTIL 2002
PATRICIA L. LANGIOTTI(3)(4) President, Creative Management 52 1992
Concepts (management
consulting); 1989-April 1998,
Chief Executive Officer,
Brubacher Excavating, Inc.
HAROLD C. WEGMAN, D.D.S.(2) Dentist practicing in the Reading 71 1980
area.
WAYNE R. WEIDNER(4) President of the Company; 56 1985
Chief Executive Officer
and President of NPB.
CONTINUING CLASS I DIRECTORS TO SERVE UNTIL 2000
JOHN H. BODY(2)(3)(4) Retired; 1988-May 1998, Manager,
General Services, Air Products 65 1981
and Chemicals, Inc.
J. RALPH BORNEMAN, JR.(2)(3) President, Body-Borneman Asso- 60 1992
ciates, Inc. (insurance).
KENNETH A. LONGACRE(2)(4) Chief Executive Officer, Farm & 65 1993
Home Oil Company.
ROBERT E. RIGG(3)(5) President, Joseph A. Rigg 46 1999
Insurance Agency, Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Director of
Principal Occupation(s) the Company
Name During Last Five Years Age Since (1)
---- ---------------------- --- -------------
<S> <C> <C> <C>
CONTINUING CLASS II DIRECTORS TO SERVE UNTIL 2001
FREDERICK H. GAIGE(2)(3) Dean & Campus Executive Officer, 61 1997
Penn State, Berks - Lehigh Valley College.
JOHN W. JACOBS(5) Private Investor. 49 1999
LAWRENCE T. JILK, JR.(4) Chairman and Chief Executive 60 1978
Officer of the Company; Chairman
of NPB.
C. ROBERT ROTH(3) District Justice. 51 1990
<FN>
- ------------------------
(1) Includes period served as director of NPB prior to formation of the
Company.
(2) Member of Compensation Committee of the Company.
(3) Member of Audit Committee of the Company.
(4) Member of Executive Committee of the Company.
(5) Messrs. Rigg and Jacobs are cousins.
</FN>
</TABLE>
4
<PAGE>
Security Ownership of Management
The following table sets forth information concerning the number of common
shares of the Company held as of March 1, 1999, by each nominee for director,
each present director, each named executive officer set forth in the
compensation tables beginning on page 9, and all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
---------------------------------------------------------------
Sole Shared
Total Voting and Voting and Percent
Name of Beneficial Investment Investment of
Beneficial Owner Ownership Power Power Class(1)
---------------- --------- ----- ----- --------
<S> <C> <C> <C> <C>
Directors and Nominees
John H. Body(4) 114,964 111,400 3,564 --
J. Ralph Borneman, Jr.(4) 17,546 6,050 11,496 --
Frederick H. Gaige 497 497 0 --
John W. Jacobs 366,343 107,071 259,272 2.1%
Lawrence T. Jilk, Jr.(3) 137,100 123,411 13,689 --
Patricia L. Langiotti(2)(4) 8,686 7,832 854 --
Kenneth A. Longacre(4) 134,550 134,550 0 --
Robert E. Rigg 271,828 262,167 9,661 1.6%
C. Robert Roth(4) 17,130 9,122 8,008 --
Harold C. Wegman, D.D.S.(2)(4) 161,856 85,376 76,480 --
Wayne R. Weidner(2)(3) 148,149 139,835 8,314 --
Other Named Executive Officers
Garry D. Koch(3) 15,138 15,098 40 --
Gary L. Rhoads(3) 34,301 30,482 3,819 --
Sharon L. Weaver(3) 10,727 10,409 318 --
All Directors and Executive Officers
as a Group (14 Persons)(3)(4) 1,438,815 1,043,300 395,515 8.5%
<FN>
- ------------------------
(1) Unless otherwise indicated, amount owned does not exceed 1% of the total
number of common shares outstanding as of March 1, 1999.
(2) Indicates a nominee for election as a Class III director at the Annual
Meeting of Shareholders.
(3) Includes shares allocated under the Company's Capital Accumulation Plan.
Includes the following shares which may be acquired by exercise of vested
options granted to officers under the Company's stock compensation plans:
Mr. Jilk - 116,798 shares, Mr. Weidner - 128,793 shares, Mr. Koch - 14,088
shares, Mr. Rhoads - 26,464 shares, and Ms. Weaver - 7,802. Does not
include shares which may be acquired in the future by exercise of options
granted under the Company's stock compensation plans, which options are not
presently exercisable.
(4) Includes the following shares which may be acquired by exercise of vested
options granted to non-employee directors under the Company's stock option
plan for non-employee directors: Mr. Body - 13,780 shares, Mr. Borneman -
918 shares, Ms. Langiotti - 1,836 shares, Mr. Longacre - 5,511 shares, Mr.
Roth - 5,511 shares, and Dr. Wegman - 14,700 shares. Does not include
shares which may be acquired in the future by exercise of options granted
under the Company's stock option plan for non-employee directors which
options are not presently exercisable.
</FN>
</TABLE>
5
<PAGE>
ADDITIONAL INFORMATION
Board and Committee Meetings
The Company's Board of Directors met 13 times during 1998. The Company's
Board of Directors has an Executive Committee, a Compensation Committee and an
Audit Committee and is authorized, under the Company's Bylaws, to create other
committees. At present, no other committee has been established. The Company's
Executive Committee, which met four times during 1998, may exercise the
authority of the Board to the extent permitted by law during intervals between
meetings of the Board. The Company's Compensation Committee, which met twice
during 1998, is responsible for the approval and administration of the base
salary level and annual incentive compensation programs, as well as the
long-term incentive compensation program, for executive officers and other
officers of the Company. The Compensation Committee is comprised solely of
directors who are not employees of the Company. The Company's Audit Committee,
which met four times during 1998, is responsible for reporting to the Board on
the general financial condition of the Company and the results of the annual
audit. During 1998, each director of the Company attended at least 75% of the
total of all meetings of the Company's Board of Directors and Board committees
on which they served.
Directors' Compensation
Each director of the Company who is not an employee of the Company or NPB
(each of whom also presently serves as a director of NPB) annually receives a
$5,000 retainer for serving as a director if the director attends at least 75%
of total Board meetings and meetings of Board committees on which the director
serves, plus $250 for each Board committee meeting attended (or $125 if the
meeting is held on the same day as a Board or another Board committee meeting).
Each non-employee director of NPB currently receives $500 for each NPB Board
meeting attended, and $250 for each Board committee attended (or $125 if the
meeting is held on the same day as a Board or another Board committee meeting).
Non-employee directors of the Company or NPB also receive $125 per Board or
Board committee meeting if such meeting is held by telephone conference call.
Mr. Longacre, as a non-employee director of Investors Trust Company ("ITC"), a
Company subsidiary, receives $250 for each ITC Board meeting attended. Messrs.
Longacre and Jacobs, as non-employee directors of Penn Securities, Inc. ("PSI"),
a Company subsidiary, receive $250 for each PSI Board meeting attended.
Under a directors' fee plan, non-employee directors of the Company or of
its subsidiaries may elect to receive payment of their compensation as directors
either in cash or in the Company's common shares or to defer such compensation
for subsequent payment in cash or the Company's common shares. During 1998, the
Company accrued a total of $97,530 in director compensation. Of this amount,
$55,405 was paid currently in cash or stock. The balance of $42,125 was deferred
compensation, all of which will be paid in stock.
Under a stock option plan for non-employee directors of the Company, each
non-employee director receives annually on the first business day of the year a
non-qualified stock option for 918 common shares (subject to adjustment on
account of stock dividends or splits) at an exercise price equal to the stock's
fair market value on the date of grant. The options become exercisable two years
from the date of grant, subject to acceleration if an actual or potential change
of control of the Company occurs, and expire ten years from the date of grant.
Report of the Compensation Committee
Compensation Philosophy. The Compensation Committee of the Company's Board
of Directors (the "Committee") believes that the maximization of corporate
performance and, in turn, shareholder value, depends largely on establishing a
close alignment between the financial interests of shareholders and those of the
Company's employees, especially its senior management, and retaining
experienced, qualified management. Accordingly, the Committee follows a
pay-for-performance philosophy.
In addition to base salary and benefits, the Company maintains an incentive
compensation program closely tied to corporate results and a stock compensation
plan for managerial employees.
6
<PAGE>
The Committee intends to place at risk a major portion of senior managers'
compensation by emphasizing compensation earned through achievement of the
Company's financial goals and through appreciation in the market value of the
Company's stock. The Committee seeks to provide a high level of overall
compensation to senior managers if a high level of profitability is achieved.
Base Salary. Base salaries of executive officers are determined by
evaluating the responsibilities of their positions and by comparing salaries
paid in the marketplace to those of executives with similar experience and
responsibilities at other bank holding companies. In making this comparison, the
Committee utilizes management compensation data available from commercial
sources. In keeping with the pay-for-performance concept, base salaries are
generally targeted somewhat below the average salary levels of the companies
covered by the data reviewed by the Committee. Although the Company's financial
performance is considered, salary decisions are generally not tied to any
financial performance factor or other criteria for the Company and are made
independently of decisions on other components of the Company's compensation
package.
For 1998, the Committee reviewed an independent salary study of
Pennsylvania bank holding companies, broken down by asset size, including data
on chief executive officer compensation. This group is more narrowly defined
than are the financial institutions in the Nasdaq Bank Stock Index included in
the performance graphs on page 13, which Index includes many larger banking
companies throughout the United States. The Committee believes salary
comparisons should be made primarily with Pennsylvania companies of roughly
comparable size.
The Committee established Mr. Jilk's base salary, effective April 1, 1998,
at $301,985, a 5% increase over his 1997 salary level. This placed Mr. Jilk's
base compensation somewhat below the average base compensation of the chief
executive officers of comparable bank holding companies, as reflected in the
compensation data reviewed by the Committee. The Committee credited Mr. Jilk
with success in managing the growth of the Company's assets, new product
development and technological change, at the same time leading the Company to
another record financial performance.
Benefits. The Company provides various benefits to its employees, including
its executive officers, such as life and disability insurance and the Company's
qualified pension plan.
Short-Term Incentive Compensation. Executive officers and other
participants approved by the Committee are eligible to earn bonuses under the
Company's Executive Incentive Plan (the "Plan"). Such bonuses are a function of
(1) the size of the bonus fund, determined by the Committee each year, without
discretion, pursuant to the Plan; (2) the number of participants in the Plan,
determined by the Committee each year; and (3) the Committee's subjective
evaluation of the participants' respective contributions to the Company's
success for the year.
Under the Plan, at the beginning of a fiscal year, the Committee
establishes both internal and external financial performance goals for the
Company for that year. For 1998, the internal goal was for the Company's net
operating income before securities transactions to exceed such income for 1997;
the external goal was for the Company's net operating income before securities
transactions (profits or losses on securities sales of banks or bank holding
companies or their successors in which the Company has or had a 20% ownership
interest are included as operating income), as a percent of average realized
common equity, to exceed the average of such income, as a percent of average
realized common equity, for a group of bank holding companies selected by the
Committee. This comparison group is established annually based on common traits
with the Company, such as asset size and geographic location. For 1998, there
were nine Pennsylvania bank holding companies in this group. This group is
subject to change as companies are acquired and is more narrowly defined than
are the financial institutions in the Nasdaq Bank Stock Index included in the
performance graphs on page 13. The Committee believes that short-term financial
performance should be measured against that of companies located in or near the
Company's market area.
At the end of each year, the Committee determines the extent to which the
Company's internal and external goals are met. If both goals are met, a bonus
fund is determined by a formula set forth in the Plan. Under this formula, the
size of the bonus fund is determined solely by the extent to which the Company
exceeds its external goal. The maximum bonus fund is established if the
Company's external goal is achieved by 30% or more. If either goal is not met,
no bonus fund is established.
7
<PAGE>
The Plan provides for a maximum cash bonus of 50% of base salary for the
Company's Chairman and Chief Executive Officer and for its President. For other
officers, the Plan provides, depending on their positions, maximum cash bonuses
of 35% or 25% of base salary.
Given the Company's goal to provide incentives for its managers to remain
with the Company, the Plan also provides that each participant eligible for a
maximum cash bonus of 50% or 35% also is awarded a bonus equal to one-third of
his or her cash bonus, but this award is subject to a five-year mandatory
deferral and risk of forfeiture. If, at the end of five years, the participant
is still employed or has retired at age 60 or later, the participant becomes
entitled to the amount of the deferred bonus plus interest, together with a
matching contribution from the Company. A deferred bonus is forfeited if the
recipient does not satisfy the requirements for a matching contribution, except
in the case of death or a change in control of the Company.
In 1998, the Company met both its internal and external financial
performance goals, the latter by 32.3%. Based on the resulting size of the bonus
fund, the number of Plan participants, and the Committee's subjective
performance evaluations of Plan participants for 1998, including Mr. Jilk, the
Committee awarded Mr. Jilk a cash bonus of $150,994 and a mandatory deferred
bonus of $50,331. In evaluating Mr. Jilk's performance, the Committee noted the
Company's record earnings in 1998 and Mr.
Jilk's leadership in continuing to position the Company for long-term profitable
growth.
Stock Option Grants. The Committee grants stock options annually to
executive officers and other employees at an exercise price equal to 100% of the
stock's fair market value on the date of grant. The goal in granting stock
options has been, and is, to provide a vehicle for long-term incentive
compensation through financial rewards dependent on future increases in the
market value of the Company's stock. Thus, executive officers are encouraged to
manage the Company with a view toward maximizing long-term shareholder value.
In determining the number of options to be granted in 1998 to officers and
employees, including the Company's executive officers, the Committee considered
publicly available management compensation data (including data on options)
concerning other bank holding companies, the number of options already held by
executive officers and others, potential dilution, vesting requirements, the
number of the Company's shares outstanding, and the financial performance of the
Company to the date of grant. While the Committee considered this information,
it did not apply any specific quantitative or qualitative criteria or assign any
specific weights to these factors; the grants were made in the subjective
judgment of the Committee. In 1998, the Committee granted stock options for a
total of 228,818 shares or 1.72% of the Company's shares outstanding at December
31, 1997, including stock options for 49,278 shares granted to Mr. Jilk.
Given the Company's goal to provide incentives for its managers to remain
with the Company, stock options may be exercised only to the extent they are
vested. Under the Company's Officers' and Key Employees' Stock Compensation
Plan, options vest in 20% increments over a five-year period. If an option
holder's employment with the Company terminates other than upon death or
retirement at age 60 or later, non-vested options terminate.
Tax Law. Under a federal income tax law adopted in 1993, compensation to
executives of public companies in excess of $1 million per year that is not
"performance-based" is not deductible for income tax purposes. Given the
Company's current executive compensation levels, the Committee does not
anticipate this tax law will affect the Company, but the Committee will continue
to monitor the situation. To the extent the Committee develops new executive
compensation plans or programs, it intends to structure them so that
compensation thereunder will be deemed "performance-based" under this income tax
law.
John H. Body, Chairman Kenneth A. Longacre
J. Ralph Borneman, Jr. Harold C. Wegman
Frederick H. Gaige
8
<PAGE>
Executive Compensation Summary
The following table sets forth annual and long-term compensation for
services in all capacities to the Company during the years 1996 through 1998 of
those persons who were (i) the Company's Chief Executive Officer, and (ii) the
other four most highly compensated executive officers of the Company who were
serving as executive officers as of December 31, 1998 (collectively the "named
executives").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Securities
Restricted Underlying
Name and Other Annual Stock Options/ LTIP All Other
Principal Salary Bonus(1) Compensation Awards SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
--------- ------ -------- ------------ ------ ---- ------- ------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence T. Jilk, Jr. 1998 $305,314 $201,325 0 0 49,278 0 $66,639(2)
Chief Executive 1997 289,740 191,737 0 0 51,331 0 59,419
Officer 1996 268,760 169,050 0 0 51,334 0 56,734
Wayne R. Weidner 1998 206,923 143,333 0 0 42,240 0 45,518(2)
President 1997 191,327 133,333 0 0 44,000 0 40,649
1996 175,716 112,472 0 0 44,000 0 38,924
Garry D. Koch 1998 124,738 58,333 0 0 7,500 0 18,711(2)
Executive Vice 1997 98,997 46,667 0 0 8,750 0 11,819
President of NPB 1996 85,345 37,333 0 0 6,166 0 2,134
Gary L. Rhoads 1998 94,539 45,733 0 0 6,500 0 13,275(2)
Treasurer & Chief 1997 85,349 42,933 0 0 7,500 0 10,666
Financial Officer 1996 71,432 30,736 0 0 5,834 0 2,171
Sharon L. Weaver 1998 108,108 51,333 0 0 7,000 0 12,864(2)
Executive Vice 1997 96,371 44,800 0 0 8,125 0 11,616
President of NPB 1996 81,208 34,741 0 0 5,834 0 2,313
<FN>
- ----------
(1) Includes 25% mandatory deferral of total award under the Company's
Executive Incentive Plan.
(2) Consists of 50% matching contributions by the Company under the Capital
Accumulation Plan (a 401(k) plan) ($5,000 for Mr. Jilk, $5,000 for Mr.
Weidner, $4,113 for Mr. Koch, $3,308 for Mr. Rhoads and $3,532 for Ms.
Weaver); Company's matching contribution with respect to previously
awarded, mandatorily deferred amounts under the Company's Executive
Incentive Plan paid in accordance with the Plan ($53,260 for Mr. Jilk,
$35,049 for Mr. Weidner, $12,258 for Mr. Koch, $9,967 for Mr. Rhoads, and
$9,332 for Ms. Weaver); life insurance annual premiums of $4,260 and $4,020
for Messrs. Jilk and Weidner; and long-term disability insurance premiums
of $4,118 and $1,449 for Messrs. Jilk and Weidner.
</FN>
</TABLE>
9
<PAGE>
Option Grants
The following table summarizes certain information regarding option grants
during fiscal 1998 to the named executives:
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants Grant Date Value
----------------------------------------------------------------- ----------------
Number of Grant Date
Securities % of Total Present Value
Underlying Options Based on
Options Granted to Exercise or Black-Scholes
Granted(1) Employees in Base Price(2) Model(4)
Name (#) Fiscal Year ($/Share) Expiration Date(3) ($)
---- --------- ----------- --------- ------------------ ---
(a) (b) (c) (d) (e) (f)
<S> <C> <C> <C> <C> <C>
Lawrence T. Jilk, Jr. 49,278 18.58% $31.00 1/14/09 $365,150
Wayne R. Weidner 42,240 15.93% 31.00 1/14/09 313,041
Garry D. Koch 7,500 2.83% 31.00 1/14/09 55,575
Gary L. Rhoads 6,500 2.45% 31.00 1/14/09 48,172
Sharon L. Weaver 7,000 2.64% 31.00 1/14/09 51,870
<FN>
- ----------
(1) Each option only becomes exercisable if the holder remains an employee
after the grant date in accordance with the following vesting schedule: 20%
per year on the first through fifth anniversary dates of grant. All amounts
represent stock options; the Company's stock compensation plans do not
provide for the issuance of stock appreciation rights.
(2) Under the terms of the Company's stock compensation plans, all options must
be granted with an exercise price equal to the fair market value of the
stock on the date of grant. The exercise price for an option must be paid
in cash; an optionee exercising a non-qualified stock option may elect to
surrender a percentage of the shares otherwise issuable to cover any
required withholding taxes upon compliance with detailed procedural rules
set forth in the plans.
(3) In the event of termination of employment other than for retirement at age
60 or later or death, or for "cause," the non-vested portion of any option
will lapse immediately and the unexercised vested portion of any option
will lapse no later than three months after termination of employment. In
the event of termination of employment upon retirement at age 60 or later
or death, the nonvested portion of any option will vest immediately and the
option, to the extent remaining unexercised, will lapse no later than three
years after termination of employment. In the event of termination of
employment for "cause," all unexercised options lapse immediately.
(4) Based upon the Black-Scholes option valuation model, which estimates the
present dollar value of the Company's common stock options to be $7.41 per
share under option. The actual value, if any, an executive may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised, so that there is no assurance the value realized
will be at or near the value estimated by the Black-Scholes model. The
assumptions underlying the Black-Scholes model include (a) an expected
volatility of 24.4%, (b) a risk-free rate of return of 5.74%, which
approximates the 9-year, zero- coupon Treasury bond rate, (c) the Company's
average common shares dividend yield of 2.71% on the grant date, (d) an
expected term of 8.98 years, and (e) an expected turnover of 5%.
</FN>
</TABLE>
10
<PAGE>
Option Exercises and Fiscal Year-End Option Values
The following table summarizes certain information regarding exercises of
stock options during fiscal 1998 and the value of outstanding options at the end
of fiscal 1998 for the named executives:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Value of Unexercised
Number of Securities In-the-Money
Underlying Unexercised Options/SARs
Shares Options/SARs at FY-End at FY-End(2)
Acquired on ------------------------------ ------------------------------
Exercise Value Realized(1) Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
---- ---------- ----------------- ----------- ------------- ----------- -------------
(a) (b) (c) (d) (e) (f) (g)
<S> <C> <C> <C> <C> <C> <C>
Lawrence T. Jilk, Jr. 0 0 116,798 221,872 $1,153,792 $1,546,315
Wayne R. Weidner 29,016 $571,239 128,793 190,178 1,483,981 1,325,407
Garry D. Koch 0 0 14,088 30,137 154,516 186,630
Gary L. Rhoads 2,504 35,974 26,464 26,885 377,510 171,450
Sharon L. Weaver 0 0 7,802 27,885 77,096 172,225
<FN>
- ----------
(1) Represents the aggregate market value of the underlying common shares at
the date of exercise minus the aggregate exercise price for options
exercised.
(2) "In-the-Money Options" are stock options with respect to which the market
value of the underlying common shares exceeded the exercise price at
December 31, 1998. The value of such options is determined by subtracting
the aggregate exercise price for such options from the aggregate fair
market value of the underlying common shares on December 31, 1998.
</FN>
</TABLE>
11
<PAGE>
Pension Plan
The Company has a noncontributory, defined-benefit Pension Plan covering
employees who have reached 20 1/2 years of age and completed 1,000 hours of
service with the Company. The following table shows the annual retirement
benefits payable under the plan in the form of a joint and survivor annuity for
a range of compensation and years of service classifications. The amounts shown
in the table are based on an employee who is presently age 65 and has had a
constant salary for the past five years and are not subject to offset for social
security or other amounts. As of December 31, 1998, Messrs. Jilk, Weidner, Koch,
Rhoads and Ms. Weaver were credited with 21, 36, 15, 26 and 20 years of service
under the plan, respectively.
<TABLE>
<CAPTION>
Pension Plan Table
Years of Service
-------------------------------------------------------------------------------
Salary 15 20 25 30 35
--------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 75,000 $16,313 $21,750 $27,188 $32,625 $38,063
100,000 22,875 30,500 38,125 45,750 53,375
125,000 29,438 39,250 49,063 58,875 68,688
125,000 36,000 48,000 60,000 72,000 84,000
150,000 38,625 51,500 64,375 77,250 90,125
175,000(1) 38,625 51,500 64,375 77,250 90,125
200,000(1) 38,625 51,500 64,375 77,250 90,125
225,000(1) 38,625 51,500 64,375 77,250 90,125
250,000(1) 38,625 51,500 64,375 77,250 90,125
275,000(1) 38,625 51,500 64,375 77,250 90,125
300,000(1) 38,625 51,500 64,375 77,250 90,125
325,000(1) 38,625 51,500 64,375 77,250 90,125
350,000(1) 38,625 51,500 64,375 77,250 90,125
<FN>
- ----------
(1) Salary in excess of $160,000 is disregarded in determining a participant's
retirement benefit. The 1998 compensation covered by the plan (all salary)
for Messrs. Jilk, Weidner, Koch, Rhoads and Ms. Weaver was $160,000,
$160,000, $124,738, $94,539, and $108,108, respectively.
</FN>
</TABLE>
The Company is also contractually obligated to provide Messrs. Jilk and
Weidner with additional retirement benefits for a specified time period. See
"Transactions with Management and Others" herein.
12
<PAGE>
Performance Graphs
The following two performance graphs compare the performance of the
Company's common shares to the Nasdaq Stock Market Total Return Index and to the
Nasdaq Bank Stock Index for the Company's last three and five fiscal years,
respectively. The graphs assume that the value of the investment in the
Company's common shares and each index was $100 at each of December 31, 1995 and
December 31, 1993, respectively, and that all dividends were reinvested.
COMPARISON OF THREE-YEAR CUMULATIVE RETURN
Among National Penn Bancshares, Nasdaq Stock Market Total Return Index,
& Nasdaq Bank Stock Index
(The Performance Graph appears here. See the table below for plot points.)
December 31,
1995 1996 1997 1998
---- ---- ---- ----
National Penn Bancshares, Inc. 100 114 197 209
Nasdaq Stock Market Total Return 100 123 151 212
Nasdaq Bank Stocks 100 132 223 219
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
Among National Penn Bancshares, Nasdaq Stock Market Total Return Index,
& Nasdaq Bank Stock Index
(The Performance Graph appears here. See the table below for plot points.)
December 31,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
National Penn Bancshares, Inc. 100 67 72 82 143 152
Nasdaq Stock Market Total Return 100 98 138 170 209 293
Nasdaq Bank Stocks 100 100 148 196 331 325
13
<PAGE>
Transactions with Management and Others
The Company is a party to deferred compensation agreements with Lawrence T.
Jilk, Jr. and Wayne R. Weidner. Each of these agreements will provide the
executive with a retirement annuity of approximately 65% of his final average
base salary for a specified 15-year period. If Messrs. Jilk and Weidner had
retired at December 31, 1998, they would have been entitled to receive
retirement annuities of $141,774 and $97,768 respectively, per year. These
amounts would have included the retirement benefits payable to these executives
under the Company's Pension Plan. The deferred compensation agreements also
provide that, following a "change in control" (as defined in the agreements) of
the Company or NPB, an executive whose employment is terminated without cause or
who resigns following an adverse change in the terms of his employment,
including reduction in title or responsibilities, reduction in compensation or
benefits (except in the case of a reduction for all employees generally),
failure to nominate the executive for election to the Board of Directors of the
Company or NPB, reassignment of the executive beyond a thirty-minute commute
from Boyertown, Pennsylvania, or increased travel requirements, will receive a
lump-sum cash severance payment equal, generally, to 299% of the executive's
average annual compensation for the five years preceding the change in control.
The Company is also a party to "change-in-control" agreements with Garry D.
Koch, Gary L. Rhoads and Sharon L. Weaver. These agreements provide lump-sum
cash severance benefits under the same circumstances as the deferred
compensation agreements with Messrs. Jilk and Weidner. The benefits for Messrs.
Koch and Rhoads and for Ms. Weaver would be 200%, 150% and 200%, respectively,
of the executive's average annual compensation for the five years preceding the
change in control.
Certain directors and officers of the Company, and the companies with which
they are associated, are customers of, and during 1998 had banking transactions
with, NPB in the ordinary course of business. Similar transactions may be
expected to occur in the future. All loans, and commitments to loan, involved in
such transactions were made under substantially the same terms, including
interest rates, collateral, and repayment terms, as those prevailing at the time
for comparable transactions with other persons and, in the opinion of NPB's
management, do not involve more than the normal risk of collection or present
other unfavorable features. As of December 31, 1998, loans to officers,
directors, and affiliates represented 4.0% of shareholders' equity in the
Company.
During 1998, Patricia L. Langiotti, a Company director, and her husband
purchased from NPB for $95,000 a real estate property which NPB had acquired
previously upon foreclosure of a defaulted loan. The sale was approved by Garry
D. Koch, the Company's Chief Credit Officer, after consideration of an
appraisal, legal considerations affecting the property, NPB's carrying costs,
and the buyer's ability to close.
Auditors
Grant Thornton LLP, certified public accountants, conducted the Company's
audit for 1998. Representatives of Grant Thornton LLP are expected to be present
at the Meeting, will be given an opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions from
shareholders.
14
<PAGE>
Principal Shareholders
The following table sets forth the persons or groups known by the Company
to own more than 5% of its common shares as of March 1, 1999:
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Common Shares
------------------- ----------------------- -------------
James K. Overstreet 1,813,645 (1) 10.7%
315 Natlie Road
Phoenixville, PA 19460
- ----------
(1) These shares are owned of record by persons or entities identified by Mr.
Overstreet in filings made by him with regulatory authorities and with the
Company, as being parties through which he holds common shares of the
Company. 81,641 of these shares are held by Mr. Overstreet's wife, Evelyn
M. Overstreet, and 10,317 owned by a limited partnership in which Mr.
Overstreet is a partner.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
directors, and greater-than-ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on review of the copies of such forms furnished to the
Company, and/or written representations that no Forms 5 were required, the
Company believes that, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors, and
greater-than-ten-percent beneficial owners were complied with.
Other Matters
Management knows of no business other than as described above that is
planned to be brought before the Meeting. Should any other matters arise,
however, the persons named on the enclosed proxy will vote thereon according to
their best judgment.
Shareholder Proposals for Next Annual Meeting
Any shareholder proposal for consideration at the annual meeting of
shareholders to be held in 2000 must be received by the Company at its principal
offices not later than November 24, 1999, in order for it to be considered for
inclusion in the Company's proxy materials relating to the 2000 annual meeting
of shareholders. If the Company receives notice of any shareholder proposal
after February 7, 2000, the persons named as proxies for the 2000 annual meeting
of shareholders will have discretionary voting authority to vote on such
proposal at that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Sandra L. Spayd
SANDRA L. SPAYD
Secretary
15
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
NATIONAL PENN BANCSHARES, INC.
The undersigned hereby appoints Earl Mutter, Harry D. Yoder and William M.
Moeller proxies, each with power to act without the others and with power of
substitution, and hereby authorizes them to represent and vote, as designated on
the other side, all the shares of stock of National Penn Bancshares, Inc. (the
"Company") standing in the name of the undersigned with all powers which the
undersigned would possess if present at the Annual Meeting of Shareholders of
the Company to be held on April 27, 1999 and at any adjournments or
postponements thereof.
(Continued, and to be marked,
dated and signed, on the other side)
<PAGE>
This proxy when properly executed will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this proxy will be voted FOR
proposal 1.
1. Election of Class III Directors:
___ FOR all nominees listed to the right (except as marked to the
contrary).
___ WITHHOLD AUTHORITY to vote for all nominees listed to the right.
NOMINEES: Patricia L. Langiotti, Harold C. Wegman, D.D.S., and
Wayne R. Weidner
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
---------------------------------------------------------------------------
2. In their discretion, the proxy holders are authorized to vote upon such
other business as may come before the Annual Meeting and any adjournments
or postponements thereof.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: __________________, 1999
_______________________________
(Signature)
________________________________
(Signature if held jointly)
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
VOTING INSTRUCTION CARD
THIS VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF NATIONAL PENN BANCSHARES, INC.
This Voting Instruction Card serves to instruct Investors Trust Company, as
trustee (the "Trustee") under the National Penn Bancshares, Inc. Capital
Accumulation Plan (the "Plan"), to vote, as designated on the other side, all
the shares of stock of National Penn Bancshares, Inc. ("NPB") entitled to be
voted by the undersigned participant under the terms of such Plan with respect
to the Annual Meeting of Shareholders of NPB to be held on April 27, 1999 and at
any adjournments or postponements thereof.
The undersigned, in giving such instructions, will act as named fiduciary
for (i) such shares that have been allocated to the account of the undersigned,
(ii) a proportionate share of such shares that have been allocated to the
accounts of other participants in the Plan as to which the Trustee receives no
instructions, and (iii) a proportionate share of such shares held in the Plan
that have not been allocated to any participants in the Plan.
(Continued, and to be marked,
dated and signed, on the other side)
<PAGE>
This voting instruction card when properly executed will be voted as instructed
by the undersigned participant subject to applicable law. If no instructions are
given, the shares allocated to the undersigned participant will be voted by the
Trustee in accordance with the terms of the Plan and applicable law.
1. Election of Class III Directors:
___ FOR all nominees listed to the right (except as marked to the
contrary).
___ WITHHOLD AUTHORITY to vote for all nominees listed to the right.
NOMINEES: Patricia L. Langiotti, Harold C. Wegman, D.D.S., and
Wayne R. Weidner
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
---------------------------------------------------------------------------
2. In its discretion, the Trustee is authorized to vote upon such other
business as may come before the Annual Meeting and any adjournments or
postponements thereof.
Please sign exactly as your name appears herein.
Dated: ________________________, 1999
______________________________________
(Signature of Participant)
PLEASE SIGN, DATE AND RETURN THE VOTING INSTRUCTION CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
