ex10-2.htm


    
      EXHIBIT
        10.2

    

    


    


    


    NATIONAL
      PENN BANCSHARES, INC.

    EXECUTIVE
      INCENTIVE PLAN

    


    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 effective January 1,
      2008.

    


    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 a reward for meeting and
      exceeding the established financial and performance goals as well as recognition
      of individual achievements for certain Participants.

    


    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 NPB
      performance award determined under Paragraph 3 and Schedule B and the individual
      performance award determined under Paragraph 4 and Schedule B.

    


    (d)           
      “Cause” means any of the following:

    


    (i)  A
      Participant’s
      conviction of, or plea of guilty or nolo contendere to, a felony or a crime
      of
      falsehood or involving moral turpitude; or

    


    (ii)  The
      willful failure by
      a Participant to substantially perform his or her duties to NPB or any Affiliate
      which is his or her Employer at any particular time, other than a failure
      resulting from the Participant’s incapacity as a result of disability, which
      willful failure results in demonstrable material injury and damage to NPB or
      the
      Affiliate Employer.  Notwithstanding the foregoing, a Participant’s
      employment shall not be deemed to have been terminated for Cause if such
      termination took place as a result of:

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    


    (1)
      Questionable judgment on the part
      of the Participant;

    


    (2)
      Any act or omission believed by the
      Participant in good faith to have been in or not opposed to the best interests
      of NPB or Affiliate which is his or her Employer at the time; or

    


    (3)
      Any act or omission in respect of
      which a determination could properly be made that the Participant 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 Affiliate which is the Participant’s Employer at the time of such act or
      omission, in each case as in effect at the time of such act or
      omission.

    


    
      	
               

            	
              (e)

            	
              "CEO"
                means the Chief Executive Officer of NPB.


            


    

    


    
      	
               

            	
              (f)

            	
              "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
      one person, or more than one person acting as a group (as defined in 26 CFR
      1.409A-3(i)(5)(v)(B)) acquires ownership of stock of NPB that taken together
      with  stock held by such person or group constitutes more than 50% of
      the  total voting power or  total fair market value of NPB's
      stock then outstanding;

    


    (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 (as determined under
      26
      CFR 1.409A-3(i)(5)(v)(B)) 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 30%  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 (as determined under 26 CFR 1.409A-3(i)(5)(v)(B)) 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 and in complete accordance with the requirements of Section 409A
      of
      the Code and 26 CFR 1.409A-3(i)(5) 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.

    


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

    


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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    


    (i)           
      "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.

    


    (j)           
      "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.

    


    (k)           
      "Participant" means an 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
      (i)
      retirement or other voluntary termination of employment, in either case after
      attaining age 60, (ii) death, (iii) disability, or (iv) involuntary termination
      of employment not for “Cause,” and who retains, or whose beneficiaries obtain,
      benefits under the Plan in accordance with its terms.

    


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

    

    


    (m)           
      "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 and continue to be employed as of the Cash Award payment date for
      the
      Plan Year, unless employment has terminated earlier due to (i) retirement or
      other voluntary termination of employment, in either case after attaining age
      60, (ii) death, (iii) disability, or (iv) involuntary termination of employment
      not for “Cause.”

    


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

    


    (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.


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    3.           
      Company Performance
      Goals.

    


    (a)           
      Performance goals and appropriate financial thresholds shall be established
      each
      Plan Year by the Committee prior to February 15th of that Plan Year. The
      established goals shall relate to financial targets and strategic performance
      targets related to critical corporate objectives 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. Corporate
      performance to goal may require subjective interpretation of objective measures,
      in which case the Compensation Committee makes the final determination in
      evaluating performance to goal.

    


    (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 at a rate of increase which
      is
      consistent with that between target and optimum.

    


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

     

    (e)            From
      time to time, business and economic conditions may be such that the Compensation
      Committee and the Board want to recognize the level of financial performance
      achieved by NPB or an Affiliate or unit
      thereof in relation to that of a predefined, high-performing, peer
      group. Therefore, award amounts may be increased or decreased at some or all
      participation levels at the discretion of the Compensation Committee based
      on
      Company performance to said peer group.

    


    4.           
      Individual Performance
      Awards.

    


    The
      Fund
      for a Plan Year for individual performance awards shall be determined annually
      and be reflected in the completed Schedule B  for that Plan Year.
      Individual performance goal payments are in addition to the NPB performance
      portion of the Cash Award.   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.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    


    (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)
      A
      Participant’s Matching Deferral subaccount established for a particular Plan
      Year shall vest  on the last day of the fifth Plan Year following the
      Plan Year for which  it was credited (A) if such Participant is still
      employed by NPB or an Affiliate on the last day of such fifth Plan Year
      following crediting or (B) if on or prior to the last day of such fifth Plan
      Year following crediting, such Participant (1)has retired or otherwise
      voluntarily terminated employment, in either case at or after
      attaining  age 60 or later, (2) has died, or (3) has been
      involuntarily terminated as an employee by NPB or an Affiliate not for
“Cause.”  In addition, the Employer shall credit such Participant's
      vested Matching Deferral subaccount for that Plan year with an additional amount
      equal to the amount of that Matching Deferral plus interest.  A
      Participant shall forfeit any Matching Deferral subaccount that does not vest
      on
      the last day of the fifth Plan Year following the Plan Year for which it was
      credited.

    


    (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
      of 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.

    


    6.           
      Payment of Mandatory
      and Tax Deferral Amounts.

    
 

    (a)           
      After a Participant’s Matching Deferral subaccount has become vested and has
      been credited with the additional amount required by subparagraph 5(c)(ii),
      the
      total amount vested as of the close of that fifth Plan Year shall be paid out
      in
      cash to the Participant as soon as practicable after the close of the Plan
      Year,
      but in any event not later than February 15th
      following the close of the Plan Year.

    
       (b)    In
      the event of a
      Participant’s death, any Cash Award not yet paid, plus all deferred amounts,
      including the additional amount required by subparagraph 5(c)(ii) for all prior
      Plan Years, 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.


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    



              (c)           
      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.

    


    (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.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    10.           
      Change in Control
      or
      Ownership.

    


    (a)           
      If a Change in Control or Ownership shall occur before the last day of the
      Plan
      Year, any Awards issued with respect to that Plan Year shall be prorated by
      multiplication by a fraction, the numerator of which is the number of days
      that
      have elapsed from and including the first day of the Plan Year through and
      including the day immediately preceding the date on which such Change in Control
      or Ownership occurred and the denominator of which is 365 or 366, depending
      on
      the number of days in the entire Plan Year. Each Participant’s Matching Deferral
      for such Plan Year shall be included in the Participant’s Matching Deferral
      Account and shall be credited with the additional amount provided for under
      subparagraph 10(b).  The Cash Award and Matching Deferral for such
      partial Plan Year, including the additional amount credited under subparagraph
      10(b), shall be paid within the time set under subparagraph 10(c).

    


    (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, within thirty (30) days of the Change in Control
      or
      Ownership.

    


    11.           
      Transition
      Rule.

    


    The
      Plan
      as amended and restated herein shall apply to all Awards made under the Plan
      and
      amounts deferred under the Plan, including Awards and deferrals made prior
      to
      January 1,
      2008.

    


    12.           
      Compliance
      Rules.

    


    (a)           
      Notwithstanding any provision of the Plan to the contrary, if any portion of
      any
      Cash Award held in a Tax Deferral Account becomes payable on account of the
      Participant's separation from service and the Committee determines that such
      Participant is a "specified employee", payment of any amount due during the
      first six calendar months following the Participant’s separation from service
      shall be deferred until the first day of the calendar month that is at least
      six
      full months after the Participant's separation from service.  The term
“specified employee” means a Participant who, as of the date of separation from
      service, is a “key employee” of NPB or an Affiliate.  A Participant is
      a “key employee” if the Participant meets the requirements of section
      416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the
      regulations thereunder and disregarding section 416(i)(5)) at any time during
      the twelve-month period ending on a December 31st.  If a Participant
      is a “key employee” on that date, the Participant is treated as such and
      therefore as a “specified employee” for the entire twelve-monthperiod beginning
      on the April 1st following the December 31st as of which key employee status
      is
      determined.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    


    (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.

    


    


    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.

    


    (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 or its Compensation Committee may adjust the
      financial targets and/or awards generated under this Plan for extraordinary
      gains and losses or otherwise to best reflect the overall interests of the
      shareholders.

    


    (i)            
      The Board of Directors of NPB or its Compensation Committee may amend or
      terminate this Plan at any time. No termination or amendment may adversely
      affect the accrued rights or benefits of any Participant under the
      Plan.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

      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]

      


      

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        



    

    SCHEDULE
      B

    


    


    NATIONAL
      PENN BANCSHARES, INC.

    EXECUTIVE
      INCENTIVE PLAN

    2008
      PERFORMANCE GOALS AND AWARD SCHEDULE

    


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

    


    
      	
              Company
                Portion

            
	
              Factor
                (Weight)

            	
              Threshold

            	 	
              Target

            	 	
              Optimum

            
	
              
              

              Earnings
                Per Share (EPS) (60%)

            	 	 	 	 	 
	
              Merger
                Objective (six metrics attached) (40%)

            	
              Meets
                Marginal

            	 	
              Meets

            	 	
              Exceeds

            
	 	 	 	 	 	 
	
              Award
                Level (% of
                base)

            
	
              Category

            	
              Threshold

            	 	
              Target

            	 	
              Optimum

            
	
              A

            	
              15%

            	 	
              50%

            	 	
              75%

            
	
              B

            	
              10%

            	 	
              25%

            	 	
              40%

            
	
              C

            	
              5%

            	 	
              15%

            	 	
              25%

            
	 	 	 	 	 	 
	
              Individual
                Award (Based on
                Individual Performance – % of base pay)

            
	
              A

            	
              Plus
                or Minus 10%

            
	
              B

            	
              Range
                0% to 20% - Target 7%

            
	
              C

            	
              Range
                0% to 20% - Target 10%

            


    

    
 

    
      Parameters:

      
        	
                
                

                q

              	
                
                

                Both
                  measures must meet Threshold for any company award portion to be
                  paid.

              
	
                
                

                q

              	
                
                

                Mix
                  of company award/individual award at Target Category B 78%-22%;
                  Category C
                  60%-40%.

              
	
                
                

                q

              	
                
                

                Individual
                  portion pool will be budgeted and accrued at Target, company award
                  accrued
                  according to performance during the year.  Individual
                  Performance award will be based on performance of specific objectives,
                  established at the beginning of each year.  If there is no
                  company award, individual awards may or may not be
                  paid.

              
	
                
                

                q

              	
                
                

                Awards
                  for performance between Threshold, Target and Optimum will be
                  interpolated.  Awards above Optimum will increase at the same
                  rate as between Target and Optimum.

              
	
                
                

                q

              	
                
                

                An
                  employee must be continuously employed through award payment date
                  to
                  receive an award, except for death, disability, involuntary termination
                  (not for cause) and retirement, when awards will be
                  prorated.

              
	
                
                

                q

              	
                
                

                In
                  certain circumstances an individual participant’s performance may be
                  determined to be inadequate and the participant would not receive
                  any
                  award under this plan, including the award calculated for company
                  performance.

              
	 	 


      

       

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    


    Individual
      Matching Account –
For 2008 the
      Individual Matching Deferral Account will be established at 10% of each
      individual’s award at Company Threshold level, 25% at Target, and 35% at
      Optimum.  Performance between points will be interpolated for matching
      award calculation.

    


    Peer
      Performance Lever – The
      above awards are determined by internally established objectives which, at
      the
      beginning of the year, represent strong performance relative to peers. During
      the year overall financial markets and the economy may change. With this change
      National Penn’s relative peer performance may be better or worse than
      anticipated. The Committee may increase or decrease the above awards based
      on
      that peer performance.  Following are possible
      guidelines:

    


    
      	
              ·

            	
              Top
                Quartile – no less than target award level

            
	
              ·

            	
              Second
                Quartile – no less than 20% below target award

            
	
              ·

            	
              Third
                Quartile – no more than target award level

            
	
              ·

            	
              Fourth
                Quartile – no more than threshold award
                level

            


    


    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    


    SCHEDULE
      B
      (Addendum)

    


    NPBC/KNBT
      MERGER INTEGRATION SUCCESS CRITERIA - 2008

    


    


    
      	
              ·

            	
              Customer
                retention–
                Achievement of 95% customer retention, for customers who meet our
                risk and
                pricing criteria, across all major business groups by month six after
                closing. Customer survey data remains largely favorable. Post closing
                revenue realization and referral/cross tracking mechanism
                established.

            
	 	 
	
              ·

            	
              Cost
                savings– Gross cost
                savings goal of $25.2 million realized in 2008. While following planned
                headcount displacements, achieve $9.9 million in human resource cost
                savings in 2008.

            
	 	 
	
              ·

            	
              Employees–
By
                month six
                after core systems conversion, employee survey results reflect a
                generally
                favorable attitude towards National Penn and the merger. Minimal
                loss of
                key staff members and key senior leaders.

            
	 	 
	
              ·

            	
              Major
                milestones
                achieved– Core and ancillary system conversions take place with
                minimal adverse customer experience and little internal system downtime
                or
                disruption. Departmental moves take place in a relatively trouble-free
                manner. The employee displacement process is handled with a high
                level of
                compassion and professionalism. Integration Milestone tracking results
                continue to produce favorable results.

            
	 	 
	
              ·

            	
              Schedule–
Legal
                closing
                takes place on or before February 15, 2008. Core systems conversion
                takes
                place on or about April 18/19, 2008. Substantially all critical path
                milestones completed on schedule in 2008.

            
	 	 
	
              ·

            	
              Judgmental–
Based
                upon
                an assessment of the new company’s forward business momentum, relative
                assimilation of cultures, anecdotal customer and employee feedback,
                and
                the quality of work and effort by of all the employees directly and
                indirectly involved in the merger integration
                process.

            


    

    


    In
      the
      Committee’s evaluation of the above six criteria/objectives, the following
      guidelines will apply:

    
      	
                  o

            	
              Achieving
                4 of 6 = Threshold = Meets Marginal

            
	
                  o

            	
              Achieving
                5 of 6 = Target = Meets

            
	
                  o

            	
              Achieving
                6 of 6 = Optimum = Exceeds

            
	 	 
	 	 
	 	 


    

    


    


    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    


    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 2008, 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 Cash Award and the interest thereon shall become payable
                as
                provided in item #4 below following the date I retire or otherwise
                have a
                separation from service with NPB or an Affiliate of NPB unless subject
                to
                a six-month delay following my separation from service as provided
                for in
                subparagraph 12(a) of the Plan. 

            


    

    


    
      	
               

            	
              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 during the month of January following my retirement or
      separation from service.

    


    (       
      )                      
In a series of five annual installments payable during each of the five
      consecutive months of January following my retirement or separation from
      service.

    


    (       
      )                      
In a series of ten annual installments payable during each of the ten
      consecutive months of January following my retirement or separation from
      service.

    


    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

            
	 	 


    

    



    20