EXHIBIT 10.1

Approved by the Board of Directors
December 21, 2005 

NATIONAL PENN BANCSHARES, INC.
EXECUTIVE INCENTIVE PLAN

AMENDMENT AND RESTATEMENT - 2005

The National Penn Bancshares, Inc. Executive Incentive Plan is hereby amended
and restated in its entirety as follows:

Since formation, National Penn Bancshares, Inc. ("NPB"), as a holding company
for National Penn Bank (the "Bank"), has maintained in effect the executive
incentive plan originally adopted by the Bank on July 26, 1978. NPB now desires
to amend and restate the terms of the plan in a written document as set forth
herein.

The National Penn Bancshares, Inc. Executive Incentive Plan (the "Plan") is a
variable award compensation arrangement for selected members of executive
management. The purpose of the Plan is to motivate executives to meet and exceed
established financial goals and to promote a superior level of performance
relative to competitive banking institutions. Through payment of incentive
compensation beyond a salary, the Plan provides reward for meeting and exceeding
the established financial goals as well as recognition of individual
achievements for certain employees.

1. Definitions. The following terms have the meanings specified below, unless
the context in which they are used otherwise requires:

(a) "Affiliate" means any corporation which is included within a "controlled
group of corporations" including NPB, as determined under Section 1563 of the
Internal Revenue Code of 1986, as amended ("Code").

(b) "Award" means the "Cash Award" and the "Matching Deferral" a Participant may
earn in a Plan Year.

(c) "Cash Award" means the amount payable to a Participant in cash within 75
days of the close of the Plan Year in which it is earned. It consists of the
company performance award determined under Paragraph 3 and Schedule B and the
individual performance award determined under Paragraph 4 and Schedule B.

(d)  "CEO" means the Chief Executive Officer of NPB.

(e) "Change in Control or Ownership" means any of the following:

(i) a change in ownership of NPB, which is deemed to occur when an acquisition
by any "person" or "group" (as those terms are defined or used in Section 13(d)
of the Securities Exchange Act of 1934) of "beneficial ownership" (within the
meaning of Rule 13d-3 under such Act) acquires stock of NPB that taken together
with the equity securities held by such person or group constitutes more than
50% of the combined voting power or combined fair market value of NPB's stock
then outstanding;
 
 
 

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(ii) a change in the effective control of NPB, which is deemed to occur when (A)
any one person, or more than one person acting as a group acquires (or has
acquired during the twelve-month period ending on the most recent acquisition by
such person or group) ownership of the stock of NPB possessing 35% or more of
the total voting power of such stock or (B) a majority of NPB's Board of
Directors is replaced during any twelve-month period by directors whose
appointment or election is not endorsed by a majority of the Board of Directors
prior to the date of election; or

(iii) a change in the ownership of a substantial portion of NPB's assets, which
is deemed to occur on the date that any one person or more than one person
acting as a group acquires (or has acquired during the twelve-month period
ending on the date of the most recent acquisition by such person or group)
assets from NPB that have a total gross fair market value equal to or more than
40% of the total gross fair market value of all of the assets of NPB immediately
prior to such acquisition or acquisitions.

The existence of any of the foregoing events shall be determined based on
objective standards an in complete accordance with the requirements of Section
409A of the Code and regulations thereunder so that any accelerated distribution
resulting from a Change in Control or Ownership does not result in a violation
of Section 409A of the Code.

(f)  "Committee" means the Compensation Committee of the Board of Directors of
NPB.

(g)  "Employer" means NPB or the Affiliate which employs the Participant.

(h)  "Individual Award Fund" or "Fund" means the pool of funds generated, based
on the formula established by the Committee that may, but is not required to be,
distributed to Plan Participants as individual performance awards.

(i)  "Matching Deferral" means the amount determined and approved by the
Committee, expressed as a percentage of an annual Cash Award received by a
Participant under this Plan.
 
(j)  "Participant" means an eligible officer or employee of NPB or an Affiliate
who is designated by the CEO and approved by the Committee for participation in
the Plan for the relevant Plan Year, or a person who was such at the time of his
retirement, death, disability or resignation and who retains, or whose
beneficiaries obtain, benefits under the Plan in accordance with its terms.

(k)  "Plan Year" means the calendar year.

(l) "Tax Deferral" means that portion of the Cash Award payable to a Participant
under the Plan which the Participant elects, pursuant to Schedule C attached
hereto and made a part hereof, to defer payment in accordance with the Plan.

2. Plan Participation.

(a)  To be eligible for an Award under this Plan for a Plan Year, a Participant
must be in the active full-time service of NPB or an Affiliate at the close of
the Plan Year, continue to be employed as of the Cash Award payment date for the
Plan Year, and be in a position with substantial responsibilities.

(b)  Prior to January 31 of each Plan Year, the CEO shall recommend to the
Committee, in writing, those employees that the CEO recommends for eligibility
for such Plan Year. The Committee shall meet as soon as practicable thereafter
and act upon the recommendations of the CEO. Those employees approved by the
Committee shall be entitled to participate in the Plan for such Plan Year.

 
 

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(c)  Each year, the Committee shall classify the Participants into varying
participation levels, as specified on Schedule A attached to this Plan, and
shall specify defined Cash Award formulae for each category. Participants and
their participation level will be listed on Schedule A attached to this Plan.
This schedule will be revised each year, as appropriate.
 
(d) At the Committee’s discretion, the Committee may act upon the recommendation
of the CEO (or concerning CEO participation, on their own behalf), to remove a
Participant from the Plan during a Plan Year.

3. Company Performance Goals.

(a) Performance goals and appropriate financial thresholds shall be established
each Plan Year by the Committee prior to January 31st of that Plan Year. The
established goals shall relate to the financial performance of NPB or an
Affiliate or unit thereof.

(b) The performance goals for a Plan Year will be shown on Schedule B attached
to this Plan. This schedule shall be revised each year, as appropriate. There
may be multiple goals and each goal may be weighted differently in the award
calculation.

(c)  Each Participant will be in a performance goal level which has a threshold,
target, and optimum performance award amount with related company performance
measures. Company performance falling between threshold and target and target
and optimum will be interpolated. Company performance above optimum will create
higher performance award amounts which are increased at a rate which is one-half
the rate of increased award between target and optimum. Additional performance
points between the threshold and optimum may also be established for varying
business conditions.

(d) An Award to a Participant is conditioned on the satisfactory performance of
such Participant, as determined by the Committee in its sole discretion.

4. Individual Performance Awards.

The Fund for a Plan Year for individual performance awards is 20% of the total
of the company performance goals payable for that Plan Year. Individual
performance goal payments are in addition to the company performance portion of
the Cash Award and may range from 0% of the individual Participant’s base pay to
20% of the individual’s base pay (with the exception of Category A Participants
whose individual performance payments are limited to 20% of that year’ company
performance goal payment amount). The Committee, in its discretion, may
distribute all, a portion or none of the Fund for a particular Plan Year.

5. Distribution of Awards.

(a) Cash Awards to Participants not deferred pursuant to Subparagraph (b) below
shall be payable in cash as soon as practicable after the close of the Plan
Year, but in any event not later than March 15th following the close of the Plan
Year. Appropriate tax withholdings will be made through the payroll system.

(b) Participants may elect to have the payment of all or a portion of their Cash
Awards deferred, i.e., the Tax Deferral amount. Such election shall be made
before the beginning of the relevant Plan Year and shall be in the form of
Schedule C attached to this Plan. The Committee shall cause an account to be
established on the Employer's books for each Participant who elects a deferral
(the "Individual Tax Deferral Account"). The Account shall be credited, as of
the last day of each calendar quarter, with interest calculated at the rate paid
on the National Penn Investors Trust Company Money Market account for such
quarter. For the quarter of deferral, the credit shall reflect deferral from
January 1st. For the quarter of payment, no credit shall be made.

 
 

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(c)  (i) The Committee shall cause an account to be established on the
Employer's books for each Participant (the "Matching Deferral Account"), with
subaccounts for each Plan Year, and shall credit annually the Matching Deferral
Account with an amount equal to the Matching Deferral of such Participant for a
Plan Year. The Matching Deferral Account shall be credited, as of the last day
of each calendar quarter, with interest calculated at the rate paid on the
National Penn Investors Trust Company Money Market account for such quarter. For
the quarter of deferral, the credit shall reflect deferral from January 1st. For
the quarter of payment, no credit shall be made.
 
(ii) If, at the end of the fifth Plan Year following the Plan Year for which a
particular Matching Deferral was credited to a Participant, such Participant is
still employed by NPB or an Affiliate or has retired at age 60 or later or has
died on or before the last day of such Plan Year, such Participant's Individual
Matching Deferral Account reflecting that Matching Deferral and interest thereon
shall be credited by the Employer with an additional amount equal to that
Matching Deferral plus interest.

(iii) For purposes of this subparagraph 5(c), a Participant shall be deemed to
be still employed by NPB or an Affiliate as of the last day of any Plan Year on
which a balance exists in such Participant's Matching Deferral Account if such
Participant is no longer then performing services on behalf of NPB or such
Affiliate as a result of such Participant's disability. For purposes this
provision, a Participant shall be deemed to have terminated service due to
disability if the Participant qualifies for disability benefits under his
Employer's long term disability benefit plan.

(d)  In the event of a Participant's death after December 31st of a Plan Year
but prior to receipt of his or her Cash Award earned hereunder the Cash Award
for such Plan Year plus all deferred amounts, including the Matching Deferral
earned for the Plan Year preceding death, shall be paid, within thirty (30) days
of the last day of the calendar quarter during which the Participant’s death
occurred, to the Participant's designated beneficiary under the Employer's group
life insurance plan or, in the absence of a valid designation, to the
Participant's estate.

6.  Manner of Payment Tax Deferral Amounts.

The amount credited to a Participant's Individual Tax Deferral Account shall be
paid to such Participant in one lump sum or in annual installments. The actual
manner of distribution will be in accordance with the Participant's election
made in conjunction with the deferral election, the form of which is attached
hereto as Schedule C. If a Participant elects installment payments, the amount
of each installment shall be determined by dividing the Account balance as of
the preceding December 31st by the number of payments remaining to be made,
including the current payment.

7. Funding.

(a) Deferred obligations under the Plan shall be paid from the general assets of
NPB or an Affiliate.

(b) NPB, or an Affiliate, in its sole discretion, may earmark assets or other
means to meet the deferred obligations under the Plan. Any assets which may be
earmarked to meet NPB's or an Affiliate's deferred obligations under the Plan
shall continue for all purposes to be part of the general funds of NPB or an
Affiliate and no person other than NPB or the Affiliate shall by virtue of the
provisions of the Plan have any interest in such assets. To the extent a
Participant or his beneficiary acquires a right to receive deferred payments
from NPB or an Affiliate under the Plan, such right shall be no greater than the
right of any unsecured general creditor of NPB or an Affiliate.

 
 

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(c) Nothing contained in the Plan and no action taken pursuant to the provisions
of the Plan shall create or be construed to create a trust of any kind, or a
fiduciary relationship between NPB or an Affiliate and a Participant or any
other person.

8.  Plan Administration.

(a) The Committee shall, with respect to the Plan, have full power and authority
to construe, interpret and manage, control and administer the Plan, and to pass
and decide upon cases in conformity with the objectives of the Plan under such
rules as the Board of Directors of NPB may establish.

(b) Any decision made or action taken by the Board of Directors of NPB or the
Committee arising out of, or in connection with the administration,
interpretation, and effect of the Plan shall be at their absolute discretion and
shall be conclusive and binding on all parties.

(c) The members of the Committee and the members of the Board of Directors of
NPB shall not be liable for any act or action, whether of omission or
commission, made in connection with the interpretation and administration of the
Plan and which results in a loss, damage, expense or depreciation, except when
due to their own gross negligence or willful misconduct.

9. Amendment and Termination.

NPB reserves the right to amend the Plan from time to time and to terminate the
Plan at any time. All amendments, including any amendment to terminate the Plan,
shall be adopted by the Board of Directors of NPB.

10. Change in Control or Ownership.

(a) Subject to the further terms and provisions of this Paragraph 10, the Plan
shall automatically terminate on the date that a Change in Control or Ownership
shall occur, without necessity of any action by the Board of Directors of NPB.

(b) If a Change in Control or Ownership shall occur, each Participant's Matching
Deferral Account shall be credited, as of the day immediately preceding the date
on which such Change in Control or Ownership occurred, with additional amounts
as follows: An amount equal to each Plan Year Balance (being the amount of the
Matching Deferral as increased by interest through the close of the quarter
preceding the Change in Control or Ownership) shall be credited by the Employer
to such Participant's Matching Deferral Account (such additional amounts are
referred to herein as "Change in Control Matching Contributions").

(c) If a Change in Control or Ownership shall occur, the Employer shall pay each
Participant a cash amount equal to the total amounts credited, as of the date
such Change in Control or Ownership occurred, to (i) such Participant's Matching
Deferral Account (including all Change in Control Matching Contributions made
pursuant to subparagraph (b) hereof) and (ii) such Participant's Individual Tax
Deferral Account, if any. The Employer shall pay such total amounts to the
Participants within thirty (30) days of the termination of the Plan (as provided
in subparagraph (a) hereof).

 
 

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11. Effective Date.

The initial effective date of the Plan shall be January 1, 1984. The effective
date of this Plan as amended and restated shall be January 1, 2006, except as
provided with in Paragraph 12.

12. Transition and Compliance Rules.

(a) Notwithstanding any provision of the Plan to the contrary, if any portion of
any Award becomes payable within six months of the Participant's separation from
service and the Committee
determines that such Participant is a "specified employee", payment shall be
deferred until the first day of the calendar month that is at least six months
after the Participant's separation from service.

(b) Notwithstanding any provision of the Plan as heretofore effective, no
Participant shall be permitted to make an election (i) to defer any Cash Award
other than the Participant's initial election with respect to a Cash Award or
(ii) to defer any Matching Deferral beyond the automatic deferral period.

(c) An election to defer a Cash Award shall be irrevocable.

(d) An election with respect to the mode or time of payment of a deferred Cash
Award shall be irrevocable.

(e) To the extent this Plan provides for deferred compensation under a
nonqualified deferred compensation plan subject to Section 409A of the Code, no
distribution, no acceleration of distribution and no Participant election shall
be permitted other than as expressly set forth in the Plan and as permitted by
Section 409A((a)(2),(3) and (4) of the Code, respectively.

(f) The provisions of this Paragraph 12 and the definition of Change in Control
or Ownership shall apply to all amounts deferred under the Plan, including
amounts deferred prior to the effective date of this amended and restated Plan.

13. Miscellaneous Provisions.

(a) The Plan does not constitute a contract of employment, and participation in
the Plan shall not give any Participant the right to be retained in the service
of NPB or an Affiliate or any right or claim to a benefit under the Plan unless
such right or claim has specifically accrued under the terms of this Plan.

(b) NPB or an Affiliate reserves the right to withhold from the gross amount any
amounts payable hereunder, amounts it determines are required to be withheld to
satisfy applicable federal, state or local income or payroll tax requirements

(c) The captions of the several paragraphs and subparagraphs of this Plan are
inserted for convenience of reference only and shall not be considered in the
construction hereof.

(d) Whenever any word is used herein in the singular form, it shall be construed
as though it were used in the plural form, as the context requires, and vice
versa.

(e) A masculine, feminine or neuter pronoun, whenever used herein, shall be
construed to include all genders as the context requires.

(f) This Plan may be executed in any number of counterparts, each of which shall
be deemed one and the same instrument which may be sufficiently evidenced by any
one counterpart.

 
 

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(g) Except to the extent pre-empted by federal law, this Plan shall be
construed, administered, and enforced in accordance with the domestic internal
law of the Commonwealth of Pennsylvania.

(h) The Board of Directors of NPB may adjust the financial targets and/or awards
generated under this plan for extraordinary gains and losses to best reflect the
overall interests of the shareholders.

 
 

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SCHEDULE A

Participants for the __________ Plan Year consist of Categories
___________________.

It is anticipated that the following named persons will meet the eligibility
requirements for participation as of December 31, _________.

Named participants are classified accordingly:

CATEGORY A (___ persons) (name and grade level)

CATEGORY B (____ persons) (name and grade level)

CATEGORY C (____ persons) (name and grade level)

[INSERT NAMES AND GRADE LEVELS]

 
 

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SCHEDULE B

NATIONAL PENN BANCSHARES, INC.

EXECUTIVE INCENTIVE PLAN

_______ PERFORMANCE GOALS AND AWARD SCHEDULE

[SUBJECT TO CHANGE]

Awards pursuant to the Plan will not be made unless the internal and external
performance goals set forth below are met.

Company Portion
(Yr.) Earnings Per Share
                     
Threshold
 
Market
Target
 
NPB Target
 
Optimum
   
 
$
 
 
$
 
 
$
 
 
$
                 
 
Category
 
 
% of Base Salary
 
A
 
 
20%
 
 
40%
 
 
50%
 
 
60%
 
B
 
 
15%
 
 
27.5%
 
 
33.8%
 
 
40%
 
C
 
 
12%
 
 
20%
 
 
24%
 
 
28%
 
 
Individual Portion
 
All
 
 
0%-20%
 
 
0%-20%
 
 
0%-20%
 
 
0%-20%

Parameters:
 

 
q
No Awards will be paid for performance under threshold.

 

 
q
An Individual Award Fund equal to 20% of the total Performance Goal portion of
the Cash Award is available for distribution to individuals for individual
performance. These individual additional awards may not exceed 20% of the
participant’s base pay (except for Category A which is capped at 20% of the
Company performance award amount).

 

 
q
Cash Awards for performance between threshold and target and target and optimum
will be interpolated.

 

 
q
Performance above optimum will result in awards interpolated at one half the
rate of increase between target and optimum.

 

 
q
A participant must be continued to be employed through award payment date to
receive an award.

 

 
q
The Committee in its sole discretion may determine that an individual
participant’s performance is not satisfactory for a Plan Year and that such
participant will not receive any award under this Plan for such Plan Year.

Individual Matching Account - For _____ (yr.) the Individual Matching Deferral
Account will be established at _____% of each individual’s Cash Award (inclusive
of any elective deferral from that award) as determined above.

 
 

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SCHEDULE C

NATIONAL PENN BANCSHARES, INC.
EXECUTIVE INCENTIVE PLAN
DEFERRAL ELECTION LETTER

TO THE COMMITTEE:

In accordance with the National Penn Bancshares, Inc. Executive Incentive Plan,
as amended and restated in 2005, I hereby request to defer receipt of that
portion of any Cash Award earned by me (to the extent provided in Paragraph 2
below) for services rendered as an eligible Participant in the Plan during the
calendar year specified below. This election shall be governed by all of the
provisions of the Plan.

 
1.
This request shall be effective beginning with calendar year _________.

 
2.
This request shall apply to ________________________ of my Cash Award.
(Expressed as "all" or a designated dollar or percentage limitation.)

 
3.
My deferred award and the interest thereon shall become payable on the January 1
next following the date I retire or otherwise cease to be employed by NPB or an
Affiliate of NPB.

 
4.
I irrevocably elect that, when payable, my deferred Cash Award and the interest
thereon shall be paid to me as indicated below:

( ) In one lump sum.

( ) In a series of five annual installments.

( ) In a series of ten annual installments.

I agree that such terms and conditions shall be binding upon my beneficiaries,
distributees, and personal representatives.

Unless noted below, my beneficiaries shall be the same as designated for my
group life insurance.

____________________________
____________________________________________
Date
Signature of Participant

 

 

  Approved By:        
____________________________
____________________________________________
Date
Signature of the Chairman of the Committee

 

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