EX-10.3


    Exhibit
      10.3

    

      EMPLOYMENT
        AGREEMENT

      


      THIS
        EMPLOYMENT AGREEMENT ("Agreement"), dated September 6, 2005, is made among
        NATIONAL PENN BANCSHARES, INC., a Pennsylvania business corporation and
        registered bank holding company ("NPB"); NATIONAL PENN BANK, a national banking
        association ("Bank"); and JOHN E. ARRINGTON ("Executive") (NPB and Bank are
        sometimes referred to herein collectively as "Employer").

      


      BACKGROUND

      


      1.
        Nittany Financial Corp. (“NF”) is a Pennsylvania business corporation and
        registered savings and loan holding company, and Nittany Bank is a wholly-owned
        banking subsidiary of NF (“Nittany Bank”).

      


      2.
        Executive is presently employed by NF as its Vice President - Retail Banking
        pursuant to an Employment Agreement dated as of March 19, 1999, as amended
        on
        January 1, 2005 (the "Nittany Bank Employment Agreement").

      


      3.
        On
        September 6, 2005, NPB and NF entered into an Agreement (the "Merger Agreement")
        providing, among other things, for the merger of NF with and into NPB (the
        "Merger"), to be followed, at the discretion of NPB, by the Bank Merger (as
        defined in the Merger Agreement). The Agreement also provides for Bank to
        establish, immediately after any such Bank Merger, a new banking division
        to be
        called the "Nittany Bank Division of National Penn Bank" (the "Nittany Bank
        Division").

      


      4.
        It is
        the desire of the Boards of Directors of NPB and Bank that Executive continue
        Executive’s employment from and after the effective date of the Merger (the
“Effective Date”), on the terms and conditions set forth herein, in order that
        the experience Executive has gained throughout Executive’s career and the
        management ability Executive has demonstrated will continue to be available
        to
        NPB and Bank, including Nittany Bank or the Nittany Bank Division, if and
        when
        established. Executive is willing to continue such employment, on the terms
        and
        conditions set forth herein.

      


      AGREEMENT

      


      NOW,
        THEREFORE, in consideration of the mutual promises contained herein, and
        each
        intending to be legally bound, NPB, Bank and Executive agree as
        follows:

      


      1. Background.
        The
        matters set forth in the "Background" section of this Agreement are incorporated
        by reference herein.

      


      2. Term.
        This
        Agreement shall be for a term of five (5) years (the "Term"), beginning on
        the
        Effective Date, subject to termination at any time as provided in Sections
        9
        through 13.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      3. Position,
        Duties.

      


      (a) During
        the Term, NPB will cause Executive to be employed as Vice President - Retail
        Banking of Nittany Bank or the Nittany Bank Division. Executive acknowledges
        that Executive’s employment as such officer does not give rise to an obligation
        to maintain the Nittany Bank Division beyond that provided in the Merger
        Agreement. Executive accepts such employment, with such powers and duties
        as may
        from time to time be determined by NPB's Chairman or President.

      


      (b) Executive
        will devote substantially all of Executive’s time and attention to, and will use
        Executive’s best energies and abilities in the performance of, Executive’s
        duties and responsibilities as prescribed in this Section 3, and will not
        engage
        in consulting work or any trade or business for Executive’s own account or for
        or on behalf of any other person, firm or corporation which competes, conflicts,
        or interferes with the performance of Executive’s duties hereunder in any way.
        Notwithstanding the foregoing, Executive may perform community service
        consistent with NPB and Bank policy and engage in activities on behalf of
        NPB or
        Bank or for Executive’s own account, including personal investment activities
        (excluding any personal investments in publicly-traded companies (other than
        NPB) with voting power equal to five percent or more); provided, however,
        that
        all such service or activities do not interfere with performance of Executive's
        responsibilities under this Agreement.

      


      4. Base
        Compensation.
        Except
        as provided in Section 17, for all services to be performed by Executive
        pursuant to Section 3, Employer will pay Executive a base salary of One Hundred
        Ten Thousand Dollars ($110,000.00) per year (pro-rated for partial years).
        Employer shall pay such salary to Executive in approximately equal installments
        during each year on the customary salary payment dates of Employer, and such
        salary shall be subject to applicable income tax withholding, deductions
        required by law, and other deductions authorized by Executive. Executive
        shall
        not be entitled to any additional compensation for service as a director
        or
        committee member of NPB, Bank, the Nittany Bank Division or any other affiliated
        company. Employer will evaluate Executive's performance annually, and Executive
        shall be eligible for annual merit increases in base salary in the discretion
        of
        NPB and Bank. A base salary increase (if any) shall, when it takes effect,
        become the new minimum base salary required thereafter by this Section
        4.

      


      5. Health
        Insurance, Benefit Plans, Stock Compensation Plans, etc.

      


      (a) In
        addition to the compensation payable to Executive pursuant to Section 4 hereof,
        Executive shall be entitled during the time this Agreement is in effect to
        participate in all health insurance and benefit plans, group insurance, salary
        reduction (401(k)) plans, employee stock purchase plans or other plans (other
        than pension plans) providing benefits applicable generally to employees
        of NPB
        or Bank which are presently in force or which may hereafter be adopted by
        NPB or
        Bank.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      (b) Executive
        shall also be eligible during the time this Agreement is in effect for receipt
        of stock options, restricted stock, or other equity awards, commensurate
        with
        Executive’s positions with NPB and Bank, pursuant to NPB's Long-Term Incentive
        Compensation Plan or any successor or additional stock option plan or stock
        compensation plan which may hereafter be adopted by NPB for officers and
        other
        key employees of NPB and its subsidiaries. Any discretionary terms of grants
        or
        awards to Executive (other than with respect to amount) shall be consistent
        with
        grants or awards to other senior officers generally.

      


      6. Bonuses.
        As
        additional compensation for services rendered hereunder, Executive shall
        be
        entitled to participate in such Financial Performance Incentive Plan as NPB
        may
        establish from time to time for the Nittany Bank Division (the “Nittany
        Incentive Plan”).

      


      7. Other
        Benefits.
        Except
        as provided in Section 17, as additional compensation for services rendered
        hereunder, Executive shall be entitled during the time this Agreement is
        in
        effect:

      


      (a) To
        life
        insurance coverage and long-term disability insurance coverage at no expense
        to
        Executive, in amounts available to others in commensurate positions with
        Employer;

      


      (b) To
        receipt of a cellular telephone allowance, in such amount as shall be determined
        by Employer from time to time, in Employer’s sole discretion, but in no event
        less than $60.00 per month; and

      


      (c) To
        reasonable vacation and sick leave in accordance with Employer policy, as
        the
        same may be revised from time to time.

      


      8. Change
        in Control.

      


      (a) If
        a
        Change in Control (as defined in Section 8(b)) shall occur, and if thereafter,
        there shall be:

      


      (1)
        At
        any time, any involuntary termination of Executive's employment (other than
        for
        Cause);

      


      (2)
        At
        any time, any reduction in Executive's title, responsibilities or authority,
        including such title, responsibilities or authority as such may be increased
        from time to time;

      


      (3)
        At
        any time, any reduction in Executive's Salary in effect immediately prior
        to a
        Change in Control, or any failure to provide Executive with benefits at least
        as
        favorable as those enjoyed by Executive under any of the pension, life
        insurance, medical, health and accident, disability or other employee plans
        of
        Employer in which Executive participated immediately prior to a Change in
        Control, or the taking of any action that would materially reduce any of
        such
        compensation or benefits in effect at the time of the Change in Control,
        unless
        such reduction relates to a reduction applicable to all employees
        generally;

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      (4)
        At
        any time, any reassignment of Executive beyond a fifty (50) mile radius from
        Executive's home address set forth on the signature page hereto; or

      


      (5)
        At
        any time, any requirement that Executive travel in performance of Executive’s
        duties on behalf of NPB or an Affiliate for a greater period of time during
        any
        year than was required of Executive during the year preceding the year in
        which
        the Change in Control occurred;

      


      then,
        at
        the election of Executive, exercisable by Executive within one hundred eighty
        (180) days of the occurrence of any of the foregoing events, Executive may
        resign from employment (or, if involuntarily terminated, give notice of
        intention to collect benefits hereunder) by delivering a notice in writing
        to
        Employer, in which case Executive shall be entitled to a lump sum cash severance
        payment of $110,000, which Employer shall pay to Executive within fifteen
        (15)
        days of Executive's termination of employment.

      


      Notwithstanding
        the foregoing or any other provision of this Agreement to the contrary, in
        no
        event shall the lump sum payment to Executive pursuant to this Section 8(a)
        be
        greater than an amount equal to an amount ("X") determined pursuant to the
        following formula:

      


      X
        =
        (2.99A - B) x (1 + C)D.

      


      For
        purposes of the foregoing formula:

      


      A
        =Executive's Base Amount on the date of the Change in Control;

      


      B
        =The
        present value of all other amounts which qualify as parachute payments under
        Code Section 280G(b)(2)(A) or (B) (without regard to the provisions of Code
        Section 280G(b)(2)(A)(ii)), such present value to be determined pursuant
        to the
        provisions of Code Section 280G;

      


      C
        =60%
        times the lowest of the semiannual applicable federal rates (determined pursuant
        to Code Section 1274(d)) in effect on the date of the Change in Control;
        and

      


      D
        =The
        number of whole semiannual periods plus any fraction of a semiannual period
        from
        the date of the Change in Control to the date of termination of the Executive's
        employment.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      (b) "Change
        in Control" means:

      


      (1) 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 (the "Exchange Act"))
        of
        "beneficial ownership" (within the meaning of Rule 13d-3 under the Exchange
        Act)
        of securities of NPB representing 24.99% or more of the combined voting power
        of
        NPB's securities then outstanding;

      


      (2) A
        merger,
        consolidation or other reorganization of Bank, except where the resulting
        entity
        is controlled, directly or indirectly, by NPB;

      


      (3) A
        merger,
        consolidation or other reorganization of NPB, except where shareholders of
        NPB,
        immediately prior to consummation of any such transaction, continue to hold
        at
        least a majority of the voting power of the outstanding voting securities
        of the
        legal entity resulting from or existing after any such transaction and
        a
        majority of the members of the Board of Directors of the legal entity resulting
        from or existing after any such transaction are former members of NPB's Board
        of
        Directors;

      


      (4) A
        sale,
        exchange, transfer or other disposition of substantially all of the assets
        of
        Bank to another entity, except to an entity controlled, directly or indirectly,
        by NPB;

      


      (5) A
        sale,
        exchange, transfer or other disposition of substantially all of the assets
        of
        NPB to another entity, or a corporate division involving NPB; or

      


      (6) The
        following individuals cease for any reason to constitute a majority of the
        number of directors then serving: individuals
        who were directors of NPB on the Effective Date, together with individuals
        elected as directors by not less than a majority of the individuals who were
        directors of NPB on the Effective Date, shall cease to constitute a majority
        of
        the members of the board of directors of NPB.

      


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

      


      (d)
        "Base
        Amount" means Executive's average annualized taxable compensation from Employer
        for the five years prior to the year in which a Change in Control occurs,
        determined in accordance with the provisions of Code Section 280G.

      


      (e)
        "Code" means the Internal Revenue Code of 1986, as amended, and as the same
        may
        be amended from time to time.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      (f)
        "Employer" includes, for purposes of Section 8 only, NPB or any Affiliate
        which
        employs Executive at any particular time.

      


      (g)
        "Salary" means Executive's annual base salary, established either by contract
        or
        by the Board of Directors of Employer, prior to any reduction of such salary
        pursuant to any contribution to a tax-qualified plan under Section 401(k)
        of the
        Code.

      


      (h) Executive
        shall not be required to mitigate the amount of any payment provided for
        in
        Section 8(a) by seeking other employment or otherwise, nor shall the amount
        of
        any payment or benefit provided for in Section 8(a) be reduced by any
        compensation earned by Executive as the result of employment by another employer
        or by reason of Executive's receipt of or right to receive any retirement
        or
        other benefits after the date of termination of employment or
        otherwise.

      


      9. Termination--Disability.
        Employer may terminate Executive's employment at any time if Executive shall
        be
        "disabled" for a period of 180 consecutive days. "Disability" means that,
        because of Executive's injury or sickness, Executive cannot perform each
        of the
        material duties of Executive’s regular occupation, as determined by Employer in
        good faith. In such event:

      


      (a) This
        Agreement shall remain in effect for the remainder of the Term and terminate
        at
        the end of such Term;

      


      (b) Employer
        shall continue to pay Executive the compensation set forth in Section 4 for
        the
        remainder of the Term, at the times set forth in Section 4; 

      


      (c) Employer
        shall continue to pay Executive the compensation set forth in Section 6,
        if any,
        at the times and for the duration set forth in the Nittany Incentive Plan;
        and

      


      (d) Employer
        shall continue to pay Executive any amounts due to him pursuant to Section
        26
        hereof, at the times set forth in Section 26.

      


      10. Termination--Death.
        If
        Executive's employment is terminated because of Executive's death:

      


      (a) This
        Agreement shall terminate at that time; and

      


      (b) Within
        30
        days of the date of death, Employer shall pay to Executive's designated
        beneficiary, in one lump sum, an amount equal to the total amount of
        compensation remaining to be paid to Executive pursuant to Section 4 through
        the
        remaining Term of the Agreement and Section 6 for the remaining period set
        forth
        in the Nittany Incentive Plan, plus any amounts still due pursuant to Section
        26.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      11. Voluntary
        Termination.
        Executive may terminate Executive’s employment with Employer at any time. In
        such event:

      


      (a) This
        Agreement shall terminate at that time; and

      


      (b) Employer
        shall not be obligated to pay Executive any further compensation pursuant
        to
        Section 4 or otherwise, except that the following shall remain due and payable
        by Employer to Executive notwithstanding termination of this
        Agreement:

      


      (1) Section
        4
        compensation, if any, accrued and unpaid through the date of voluntary
        termination;

      


      (2) The
        remaining amount payable to Executive pursuant to Section 6, if any, in
        accordance with the Nittany Incentive Plan; and

      


      (3) The
        amount payable to Executive pursuant to Section 8, if any.

      


      12. Termination--Cause.
        Nothing
        contained in this Agreement shall be construed to prevent Employer from
        terminating the employment of Executive hereunder at any time for
        "cause".

      


      (a) "Cause"
        means the Employer's good faith reasonable belief that the Executive committed
        (1) fraud, theft or embezzlement, (2) falsified corporate records,
        (3) disseminated confidential information concerning customers, NPB, Bank,
        any NPB or Bank subsidiary or any of its or their employees, (4) had
        documented unsatisfactory job performance under NPB's dismissal policy, or
        (5) violated NPB's Code of Conduct. The foregoing definition of "cause" is
        the definition of "cause" used by NPB, Bank and their subsidiaries in the
        ordinary course of business.

      


      (b) If
        Employer terminates Executive's employment for cause:

      


      (1) Employer
        shall give Executive a written notice of termination effective on the date
        specified by Employer in said notice, which notice shall contain a full
        statement of the facts and reasons for such termination;

      


      (2) This
        Agreement shall terminate at such time, and such date of termination shall
        constitute the last date of the Term; and

      


      (3) Employer
        shall not be obligated to pay Executive any further compensation pursuant
        to
        Section 4 or otherwise, except for (A) Section 4 compensation, if any, accrued
        and unpaid through the date of termination and (B) the remaining amount payable
        to Executive pursuant to Section 6, if any, in accordance with the Nittany
        Incentive Plan.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      13. Termination--Without
        Cause.
        Employer may terminate Executive's employment at any time without cause (defined
        in Section 12(a)). In such event:

      


      (a) This
        Agreement shall remain in effect for the remainder of the Term and shall
        terminate thereafter;

      


      (b) Employer
        shall continue to pay Executive the compensation set forth in Section 4 for
        the
        remainder of the Term at the times set forth in Section 4;

      


      (c) Employer
        shall continue to pay Executive the compensation set forth in Section 6,
        if any,
        at the times and for the duration set forth in Nittany Incentive
        Plan;

      


      (d) Employer
        shall reimburse Executive for the cost of "COBRA" health care continuation
        coverage for the remainder of the Term;

      


      (e) If
        a
        Change in Control (defined in Section 8(b)) shall occur prior to the end
        of the
        Term, Employer shall pay to Executive the payment to which Executive is entitled
        pursuant to Section 8; 

      


      (f) Employer
        shall continue to pay Executive any amounts due to him pursuant to Section
        26
        hereof, at the times set forth in Section 26; 

      


      (g) if
        applicable, during the Tail Period described in Section 14(b)(5) or Section
        14(b)(6) below, Employer shall make cash payments to Executive at a rate
        of
        Fifty-Two Thousand Dollars ($52,000) per year (pro-rated for partial years),
        in
        approximately equal installments during such Tail Period on the customary
        salary
        payment dates of Employer, subject to applicable income tax withholding and
        other deductions required by law; and

      


      (h) Executive
        shall not receive any other employee benefits, including the benefits described
        in Section 7 of this Agreement, or be entitled to participate in any other
        plan
        or plans providing benefits generally to employees of Employer which are
        presently in effect or which may hereafter be adopted by Employer, for the
        remainder of the Term.

      


      14. Non-Competition.
        

      


      (a) Executive
        acknowledges that NPB is a registered bank holding company engaged principally
        in the commercial and retail banking business through its ownership, support,
        operation and management of its subsidiaries, including Bank. During the
        Term
        and thereafter for the applicable Tail Period (as defined in Section 14(b)
        below), if any, Executive shall not, directly or indirectly, acting alone
        or in
        conjunction with others:

      


      (1) Engage
        as
        a director, officer, employee, partner, shareholder, consultant, agent or
        in any
        other capacity, in the commercial or retail banking business in competition
        with
        NPB, Bank or any other future NPB banking subsidiary, in any location whether
        or
        not within the Commonwealth of Pennsylvania that is within either fifty (50)
        miles of Boyertown, Berks County, Pennsylvania, or within fifty (50) miles
        of
        State College, Centre County, Pennsylvania;

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      (2) Request
        any customers of NPB, Bank or any other future NPB banking subsidiary, to
        curtail or cancel their business with NPB, Bank, or any other future NPB
        banking
        subsidiary, excluding himself and any customer who is a relative of Executive;
        or

      


      (3) Induce,
        or attempt to influence, any employee of NPB, Bank, or any other future NPB
        banking subsidiary to terminate employment with NPB, Bank, or any other future
        NPB banking subsidiary, or to enter into any employment or other business
        relationship with any other person (including Executive), firm or
        corporation.

      


      (b) “Tail
        Period” shall have the following meaning, as the case may be: 

      


      (1) If,
        following any Change in Control, either Executive or Employer terminates
        Executive’s employment for any reason, whether voluntarily or involuntary,
        whether pursuant to Section 8(a) or otherwise (but excluding the reasons
        set
        forth in clause (7) below), then the Tail Period shall be a period of one
        year
        from the date of such termination.

      


      (2)
         If
        Executive terminates his employment pursuant to Section 11 hereof (other
        than
        following a Change of Control), then the Tail Period shall be a period of
        two
        years from the date of such termination.

      


      (3) If
        Employer terminates Executive’s employment pursuant to Section 12 hereof (other
        than following a Change of Control), then the Tail Period shall be a period
        of
        one year from the date of such termination.

      


      (4) If
        Employer terminates Executive’s employment pursuant to Section 13 hereof (other
        than following a Change of Control) and there shall be two years or more
        remaining in the Term, then there shall be no Tail Period.

      


      (5) If
        Employer terminates Executive’s employment pursuant to Section 13 hereof (other
        than following a Change of Control) and there shall be less than two years
        but
        more than one year remaining in the Term, then the Tail Period shall be such
        period of time which, when added to the remainder of the Term, would equal
        a
        period of two years.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      Examples:

      


      
        	
                If
                  Employer terminates Executive’s 

                employment
                  pursuant to Section 13 hereof 

                (other
                  than following a Change of Control):

              	 	
                 

                 

                Then
                  the Tail Period in such case will be: 

              
	
                 

                Three
                  (3) years and one (1) month after the Effective Date

              	 	
                 

                One
                  (1) year and eleven (11) months after the end of the
                  Term

              
	
                Three
                  (3) years and six (6) months after the Effective Date

              	 	
                One
                  (1) year and six (6) months after the end of the Term

              
	
                Three
                  (3) years and eleven (11) months after the Effective Date

              	 	
                One
                  (1) year and one (1) month after the end of the
                  Term

              


      

      


      (6) If
        Employer terminates Executive’s employment pursuant to Section 13 hereof (other
        than following a Change of Control) and there shall be one year or less
        remaining in the Term, then the Tail Period shall be a period of one year
        from
        the end of the Term. 

      


      (7) If
        Employer terminates Executive’s employment pursuant to Section 9 hereof, or upon
        the expiration of the Term, then regardless of whether a Change of Control
        shall
        have previously occurred, there shall be no Tail Period.

       

      (c) Executive
        recognizes that immediate and irreparable damage will result to Employer
        if
        Executive breaches any of the terms and conditions of this Section 14 and,
        accordingly, Executive hereby consents to the entry by any court of competent
        jurisdiction of an injunction against him to restrain any such breach, in
        addition to any other remedies or claims for money damages which Employer
        may
        seek. Executive represents and warrants to Employer that Executive’s experience
        and capabilities are such that Executive can obtain employment in business
        without breaching the terms and conditions of this Section 14, and the
        enforcement hereof by injunction or otherwise will not prevent Executive
        from
        earning a livelihood. This Section 14 shall remain in full force and effect
        in
        accordance with its provisions following any termination of this
        Agreement.

      


      15. Non-Disclosure.
        During
        the Term and for an indefinite period thereafter, Executive shall not, directly
        or indirectly, acting alone or in conjunction with others, disclose to any
        person, firm or corporation any of the following information: any trade secret,
        any details of organization or business affairs, any names of past or present
        customers, consumers or employees, or any other proprietary data or confidential
        information, of NPB, Bank, or of any of NPB's other direct or indirect, present
        or future, subsidiaries or affiliates; provided, however, that disclosure
        of
        such information within the scope of Executive's employment, disclosure of
        such
        information as is required by law, and disclosure of such information already
        in
        the public domain through no fault of Executive, shall not be prohibited
        by this
        Section 15.

       

       

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Employer
        may enforce the provisions of this Section 15 by suit for damages, injunction,
        or both. Executive agrees that Employer would be irreparably injured by the
        breach of any provision of this Section 15, and money damages alone would
        not be
        an appropriate measure of the harm to Employer from such continuing breach.
        Therefore, Executive acknowledges and agrees that Employer may seek equitable
        relief, including specific performance of the provisions of this Section
        15, by
        injunction to remedy a breach of the provisions of this Section 15. This
        Section
        15 shall remain in full force and effect in accordance with its provisions
        following any termination of this Agreement.

      


      16. Binding
        Effect, Assignment.

      


      (a) This
        Agreement shall be binding upon and inure to the benefit of NPB and Bank,
        and it
        shall be assignable to any corporation, limited liability company or other
        entity which may be or become the legal employer of all of NPB's and Bank's
        current employees in which case both NPB and Bank shall be guarantors of
        the due
        performance of all obligations set forth herein and the term "Employer" used
        herein shall include such assignee. This Agreement shall also be assignable
        to
        any corporation, bank or other entity which may acquire NPB's or Bank's business
        or all or substantially all of the assets of NPB or Bank, or with or into
        which
        NPB or Bank may be merged or consolidated, as provided in Section
        16(b).

      


      (b) Each
        of
        NPB and Bank shall require any successor (whether direct or indirect, by
        purchase, merger, consolidation or otherwise) to all or substantially all
        of the
        business and/or assets of NPB or Bank to expressly assume and agree to perform
        this Agreement in the same manner and to the same extent that NPB or Bank
        would
        be required to perform it if no such succession had taken place. Failure
        to
        obtain such assumption and agreement prior to the effectiveness of any such
        succession shall constitute a breach of this Agreement, in which case a "Change
        in Control" (as defined in Section 8(b)) shall be deemed to have occurred
        and
        Executive shall have the immediate right to take the actions and receive
        the
        payments provided in Section 8. As used in this Agreement, "NPB" and "Bank"
        shall mean NPB and Bank as previously defined and any successor to the business
        and/or assets of NPB or Bank as aforesaid which assumes and agrees to perform
        this Agreement by operation of law or otherwise.

      


      (c) This
        Agreement shall be binding upon and inure to the benefit of Executive,
        Executive’s personal and legal representatives, heirs, distributees, devisees
        and assigns. Notwithstanding the foregoing, the obligations and duties of
        Executive hereunder shall be personal and not assignable or delegable by
        Executive in any manner whatsoever.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      17. Exception
        for Across-the-Board Actions.
        If,
        during the Term, the Boards of Directors of NPB and Bank shall determine,
        acting
        in good faith and with a reasonable basis, that it is in the best interests
        of
        NPB, Bank and NPB's shareholders to implement one or more broad,
        across-the-board cost-cutting measures for all members of senior management
        of
        NPB and its subsidiaries, then, notwithstanding Sections 4 and 7, Executive's
        base compensation and other benefits may be reduced in accordance with such
        cost-cutting measures in a manner consistent with any such reductions in
        base
        compensation and/or other benefits for other senior officers
        generally.

      


      18.
        Employment
        After Term; Survival of Provisions.
        Upon
        expiration of the Term, as it may be extended from time to time and Executive's
        employment status shall convert to "at will" employment status and the
        provisions of Section 15 relating to non-disclosure shall remain in full
        force
        and effect in accordance with its provisions.

      


      19. Notices.
        All
        notices or other communications hereunder shall be in writing and shall be
        deemed given upon delivery if delivered personally or two business days after
        mailing if mailed by prepaid, registered or certified mail, return receipt
        requested, addressed as follows:

      


      If
        to
        NPB, to:

      


      Wayne
        R.
        Weidner

      Chairman
        and Chief Executive Officer

      National
        Penn Bancshares, Inc.

      Reading
        and Philadelphia Avenues

      Boyertown,
        PA 19512

      


      If
        to
        Bank, to:

      


      Glenn
        E.
        Moyer

      President
        and Chief Executive Officer

      National
        Penn Bank

      Reading
        and Philadelphia Avenues

      Boyertown,
        PA 19512

      


      If
        to
        Executive, at the address set forth on the signature page hereto;

      


      or
        to
        such other address as may have been previously furnished by the party to
        the
        other by notice given in the manner provided herein.

      


      20. Entire
        Agreement.
        This
        Agreement is intended by the parties to constitute and does constitute the
        entire agreement between NPB, Bank and Executive with respect to the subject
        matter hereof. This Agreement supersedes any and all prior agreements,
        understandings, negotiations and discussions of the parties, whether oral
        or
        written.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      21. Amendment.
        This
        Agreement may be amended, modified, waived, discharged or terminated only
        by an
        instrument in writing signed by Executive, an authorized officer of NPB or
        an
        authorized officer of Bank, as the case may be, against whom or which
        enforcement of the amendment, modification, waiver, discharge or termination
        is
        sought.

      


      22. Governing
        Law.
        This
        Agreement shall be governed by and construed in accordance with the domestic
        internal law of the Commonwealth of Pennsylvania.

      


      23. Interpretation
        of Provisions.
        Wherever possible, each provision of this Agreement shall be interpreted
        in such
        manner as to be effective and valid under applicable law, but if any provision
        of this Agreement shall be prohibited by or invalid under applicable law,
        such
        provision shall be ineffective to the extent of such prohibition or invalidity,
        without invalidating the remainder of such provision or the remaining provisions
        of this Agreement. Without limiting the generality of the foregoing, if a
        court
        of competent jurisdiction shall determine that the time or geography provisions
        of Section 14 are not reasonable, then such provision(s) shall be reformed
        to
        reflect such period of time or geographical areas as the court shall determine
        to be reasonable and enforceable.

      


      24. Captions.
        The
        captions contained in this Agreement are for reference purposes only and
        are not
        part of this Agreement.

      


      25. Joint
        and Several Obligations.
        All
        obligations of NPB and Bank herein shall be joint and several
        obligations.

      


      26. Termination
        of Prior Agreement, Pay-Out of Change-in-Control Benefit.
        Effective concurrently with the closing of the Merger, the Nittany Bank
        Employment Agreement is terminated and of no further force and effect, and
        in
        exchange for consent to such agreement termination, the Executive shall be
        paid
        the amount calculated under Section 9(a) of the Nittany Bank Employment
        Agreement without regard to the occurrence of the conditions precedent to
        such
        payments
        less the
        sum of any other payments that would constitute parachute payments under
        section
        280G of the Code with respect to the Merger (“Cancellation Payment”),
        such
        Cancellation Payment to be paid to Executive (after any required withholding
        or
        excise tax, if applicable), as follows: one-half shall be paid within five
        (5)
        business days following the Effective Date and the remainder shall be placed
        in
        an interest bearing escrow account at Bank (the “Escrow Account”) that would
        earn interest at the “National Penn Investors Trust Company” money market
        account rate. Monies held in the Escrow Account shall be paid to Executive
        in 3
        installments as follows: (i) one-fifth (1/5) of the escrowed amount, plus
        accrued interest thereon, within five (5) business days following the 1st
        anniversary of the Effective Date; (ii) one-fifth (1/5) of the escrowed amount,
        plus accrued interest thereon, within five (5) business days following the
        2nd
        anniversary of the Effective Date; and (iii) three-fifths (3/5) of the escrowed
        amount, plus accrued interest thereon, within five (5) business days following
        the 3rd anniversary of the Effective Date. Notwithstanding the foregoing,
        if
        Executive is eligible for payment under Section 8(a) and exercises his option
        to
        receive such payment in accordance with such Section, then all monies in
        the
        Escrow Account, together with accrued but unpaid interest on those monies,
        shall
        be paid to Executive concurrently with the payment being made under Section
        8(a). If Executive terminates employment pursuant to Section 11 hereof or
        Employer terminates employment of Executive pursuant to Section 12 hereof,
        all
        monies in the Escrow Account, together with all accrued and unpaid interest
        thereon, shall be paid to NPB within thirty (30) days following either of
        those
        events.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      27. Deferred
        Compensation.
        Notwithstanding
        anything herein to the contrary, in no event shall this Agreement be construed
        to cause a payment of deferred compensation (as defined for purposes of Section
        409A of the Code and any guidance or regulations promulgated thereunder)
        to be
        made on any date (or upon the occurrence of any event) which would cause
        the
        imposition of an excise tax under Section 409A of the Code. In the event
        that
        this Agreement purports to provide that such a payment is to be made on any
        date
        (or upon the occurrence of any event) which would cause the imposition of
        an
        excise tax under Section 409A of the Code, such payment shall not be made
        until
        the earliest date on which (or upon the occurrence of the next event upon
        which)
        such payment can be made without causing the imposition of such an excise
        tax.

      


      28. Effective
        Date.
        This
        Agreement shall terminate and be of no further force and effect if for any
        reason the Merger Agreement is terminated prior to a Merger.

      


      [Signature
        Page Follows]


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      IN
        WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
        first above written.

      


      

        
          	 	
                  NATIONAL
                    PENN BANCSHARES, INC.

                
	 	 
	 	 
	 	
                  By:
                    /s/
                    Wayne R. Weidner

                
	 	
                  Name:
                    Wayne R. Weidner

                
	 	
                  Title:
                    Chairman/CEO

                
	 	 
	 	
                  NATIONAL
                    PENN BANK

                
	 	 
	 	 
	 	
                  By:
                    /s/
                    Glenn E. Moyer

                
	 	
                  Name:
                    Glenn E. Moyer

                
	 	
                  Title:
                    President/CEO

                
	 	 
	 	 
	
                  Witness:
                    /s/ Lisa M. Williams

                	
                  /s/
                    John E. Arrington

                
	 	
                  John
                    E. Arrington

                
	 	 
	 	
                  Address:

                   

                
	 	
                  _____________________________

                   

                
	 	
                  _____________________________

                   

                
	 	
                  _____________________________