Document:

ex10-2.htm

    Exhibit
10.2

    2008 DIRECTOR
FEES

    

    
      	
              NATIONAL PENN
      BANCSHARES

            	
               

              2008

            
	
                Outside
      Directors only

            	 
      
	
              Retainers:  Board
      members must attend in person or by phone 75% of meetings (Board and
      Committee Meetings combined) to be paid retainer. Committees
      include:  Audit, Executive, Compensation, Nominating/Corp.
      Governance.

            	 
      
	
              Chairperson
      of Audit Committee

              Chairperson
      of Executive Committee

              Chairperson
      of Compensation Committee

              Chairperson
      of Nominating/Corporate Governance Committee

              Chairperson
      of Risk Committee

              Additional
      Retainer – Lead Independent Director

              All
      Other Board Members

            	
              $16,200

              $13,700

              $13,700

              $13,700

              $13,700

              $10,000

              $11,200

            
	
              Meeting Fees (per
      meeting attended)

               

            	
              $1,500

            
	
              Committee Fees (per
      meeting attended)

            	 
      
	
              Audit
      Committee members, including Chairperson

              Audit
      Committee Meeting by Conference Call

              Chairperson
      of Audit Committee also receives fee per phone meeting

                 with
      accountants

              Audit
      Committee Chairperson attendance at Subsidiary Board Meeting

              Audit
      Committee Members attendance at Executive Disclosure

                 Committee
      meeting

              All
      Other Committee Members, including Chairperson (Executive, Compensation,
      Nominating/Corp Governance and Risk)

              All
      Other Committee Phone Meetings

              IT
      Subcommittee

            	
              $750

               $750

               $250

               

              $750

              $750

               

              $500

               

              $500

              $500

            
	 
      	 
      
	
              Director
      Education/Strategic Planning Workshops

               

            	
              $750
      per day,

               (includes
      travel day)

            
	 
      	 
      
	
              NATIONAL PENN
      BANK

               

            	 
      
	
              Outside
      Directors only (per meeting attended)

            	 
      
	
              Board
      meetings (held quarterly)

              Phone
      meeting

              Travel
      expense allowance-annual

            	
              $1,000

              $1,000

              $500

            
	 
      	 
      
	
              DIRECTOR
      EMERITUS

            	 
      
	
              This
      retainer covers all meetings attended. Includes Bank and Bancshares Board
      Meetings and any committee meetings the director emeritus may
      attend.

            	
              $2,000

            

    

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      	
              NATIONAL PENN
      BANK

            	
               

              2008

            
	
              ADVISORY
      BOARDS

            	 
      
	
              Outside
      directors only

            	 
      
	
              Philadelphia
      Region Advisory Board

              Berks
      County Advisory Board

              Manufacturing
      Group Advisory Board

              FirstService
      Bank

              HomeTowne
      Heritage Advisory Board

              Peoples
      First

              Nittany
      Bank

              KNBT
      Advisory Board

               

            	
              N/A

              $250
      per mtg

              $250
      per mtg

              $250
      per mtg

              $6,000/Yr.

              N/A

              $18,000/Yr

              $250
      per mtg

            
	 
      	 
      
	
              NATIONAL PENN
      INVESTORS TRUST COMPANY

            	 
      
	
              Outside
      directors only

            	 
      
	
              Retainer
      for all non-bank board members

              Chairperson

              Board
      Meetings

              Phone
      Meetings

            	
              $1,000

              $750
      per mtg

              $500
      per mtg

               $500
      per mtg

            
	 
      	 
      
	
              CHRISTIANA BANK AND
      TRUST COMPANY

            	 
      
	
              Outside
      Directors only (per meeting attended)

              Audit
      Committee members, including Chairperson

              Trust
      Committee, including Chairperson

              Travel
      expense allowance-annual

            	
              $1,000
      per mtg

              $750
      per mtg

              $500
      per mtg

              $500

            

    

    

    

    

    9ex10-46.htm

    Exhibit
10.46

    

    

    NATIONAL
PENN BANCSHARES, INC.

    

    KNBT
BANCORP, INC.

    

    CONSOLIDATED
SUBSTITUTE STOCK OPTION PLAN

    

    

    

    

    The
National Penn Bancshares, Inc. KNBT Bancorp, Inc. Consolidated Substitute Stock
Option Plan (the “Consolidated Plan”), is comprised of:

    

    
      	
               
      

            	
              1.

            	
              National
      Penn Bancshares, Inc. KNBT Bancorp, Inc./First Colonial Group, Inc.
      Substitute 1994 Stock Option Plan for Non-Employee
    Directors;

            

    

    

    
      	
               
      

            	
              2.

            	
              National
      Penn Bancshares, Inc. KNBT Bancorp, Inc./First Colonial Group, Inc.
      Substitute 1996 Employee Stock Option
Plan;

            

    

    

    
      	
               
      

            	
              3.

            	
              National
      Penn Bancshares, Inc. KNBT Bancorp, Inc./First Colonial Group, Inc.
      Substitute 2001 Stock Option Plan;
and

            

    

    

    
      	
               
      

            	
              4.

            	
              National
      Penn Bancshares, Inc. KNBT Bancorp, Inc. Substitute 2004 Stock Option
      Plan.

            

    

     

     

     

    
      This
document supersedes in its entirety the National Penn Bancshares, Inc. KNBT
Bancorp, Inc. Consolidated Substitute Stock Option Plan filed as Exhibit 99.1 to
Form S-8 Registration Statement No. 333-149274, which was filed on February 15,
2008.

    

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

    NATIONAL
PENN BANCSHARES, INC.

    

    KNBT
BANCORP, INC./FIRST COLONIAL GROUP, INC.

    

    SUBSTITUTE
1994 STOCK OPTION PLAN

    FOR
NON-EMPLOYEE DIRECTORS

    

    As
assumed, amended and restated effective February 1, 2008

    
 

     1.          
 Purpose of
Plan

    

    (a)           The
purpose of the First Colonial Group, Inc.1994 Stock Option Plan for Non-Employee
Directors (the “1994 FCG Plan”) was to enhance the ability of First Colonial
Group, Inc. and its current and future subsidiaries to attract, retain and
motivate members of their respective Boards of Directors and to provide
additional incentive to members of their respective Boards of Directors by
encouraging them to invest in shares of First Colonial Group, Inc. (”FCG”)
common stock and thereby acquire a proprietary interest in FCG and an increased
personal interest in FCG’s continued success and progress, to the mutual benefit
of directors, employees and stockholders.   To the extent not
already exercisable, options granted under the 1994 FCG Plan became fully
exercisable upon execution of an Agreement and Plan of Merger between FCG, KNBT
Bancorp, Inc. (“KNBT”) and Keystone Savings Bank dated as of March 5, 2003. The
Agreement and Plan of Merger provided that upon completion of the acquisition of
FCG, KNBT would assume the stock options that previously had been issued by FCG
under the 1994 FCG Plan and which remained unexercised as of October 31,
2003.

    

    (b)           Non-Qualified
Stock Options were granted within the limitations of the Plan herein
described.

    

    (c)           Capitalized
terms and phrases used and not otherwise defined herein shall have the meanings
given in Section 2 hereof.

    

     2.           
Definitions.  Unless
the context requires otherwise, the following terms shall have the following
definitions for the purposes of this Plan (such definitions to be equally
applicable to both the singular and the plural form of the term
defined):

    

    (a)           “1994
KNBT Substitute Options” means rights to acquire KNBT common stock pursuant to
the 1994 FCG Plan, as assumed by KNBT.

    

              
 (b)           “Board”
means the Board of Directors of National Penn.

    

    (c)           “Code”
means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.

    

    (d)           “Committee”
means the Compensation Committee of the Board, which shall be comprised of, at
all times, two or more directors appointed by the Board pursuant to Section 6
hereof, and each of whom shall be: (i) “non-employee directors” as such
term is defined under the rules and regulations adopted from time to time by the
Securities and Exchange Commission pursuant to Section 16(b) of the
Exchange Act; and (ii) “outside directors” within the meaning of
Section 162(m) of the Code.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    (e)           “Director”
means a member of the Board of Directors of FCG, KNBT or a Subsidiary or any
successors thereto, including Non-Employee Directors as well as officers and
employees serving as Directors.

    

    (f)           “Disability”
means a permanent and total disability as defined in Section 22(e)(3) of the
Code (or any successor Section), as determined in the sole discretion of the
Committee.

    

    (g)           “Effective
Date” means February 1, 2008.

    

    (h)           “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

    

    (i)           
“Merger Agreement” shall mean the Agreement of Reorganization and Merger dated
as of September 6, 2007, by and between National Penn and KNBT.

    

    (j)           
“National Penn” means National Penn Bancshares, Inc.

    

    (k)           “National
Penn Common Stock” means shares of the common stock of National Penn (without
par value) as described in National Penn’s Articles of
Incorporation

    

    (l)          
 “Non-Employee Director” means a member of the Board of Directors of FCG,
KNBT or any Subsidiary, or a former officer or employee of FCG, KNBT and/or any
Subsidiary serving as a Director, who was not then an officer or employee of
FCG, KNBT or any Subsidiary.

    

    (m)          “Non-Qualified
Stock Option” means any 1994 KNBT Substitute Option which does not satisfy the
requirements of Code Section 422(b) in order to qualify as an “incentive stock
option.”

    

    (n)          “Options”
means one of the substitute non-qualified stock options issued pursuant to the
1994 FCG Plan and the Merger Agreement, exercisable for a total of 11,248 shares
of National Penn Common Stock, subject to adjustment as provided in Section 6
hereof.

    

    (o)          “Optionee”
means a Non-Employee Director or former Non-Employee Director to whom a 1994
KNBT Substitute Option was issued under the 1994 FCG Plan, as assumed by KNBT
pursuant to the KNBT/FCG Merger Agreement.

    

    (p)          “Plan”
means the National Penn Bancshares, Inc. KNBT Bancorp, Inc./First Colonial
Group, Inc. Substitute 1994 Stock Option Plan for Non-Employee
Directors.

    

    (q)          “Subsidiaries”
means, prior to the Effective Date, those subsidiaries of FCG or KNBT which met
the definition of “subsidiary corporations” set forth in Section 424(f) of the
Code, and, after the Effective Date, any subsidiary corporation of National Penn
within the meaning of Section 424(f) of the Code.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     3.           Assumption of 1994 FCG Plan by
National Penn

    

    (a)           On
the Effective Date, KNBT was merged with and into National Penn, with National
Penn surviving such merger, under the name, articles of incorporation and bylaws
of National Penn, pursuant to the Merger Agreement.

    

    (b)           On
the Effective Date, pursuant to the Merger Agreement, each outstanding option to
purchase KNBT common stock, as assumed by KNBT under the 1994 FCG Plan that
remained unexercised was vested pursuant to the terms of the 1994 FCG Plan and
automatically converted into a substitute option to purchase National Penn
Common Stock.

    

    (c)           The
number of shares subject to each substitute stock option and the exercise price
for those shares were adjusted to prevent any alteration of the economic value
of the original option, as measured immediately prior to and immediately
following the Effective Date.

    

    (d)           Immediately
prior to the Effective Date, there were Non-Qualified Stock Options outstanding
under the 1994 FCG Plan for 10,922 shares of KNBT common stock, all of which
were automatically converted into substitute options in accordance with the
provisions of Section 2.05(a) of the Merger Agreement.  The number of
shares of National Penn Common Stock subject to each substitute non-qualified
stock option is equal to the number of shares of KNBT common stock originally
subject to the 1994 KNBT Substitute Option immediately prior to the Effective
Date times 1.03 (the “Exchange Ratio” as defined and set forth in Section 2.02
of the Merger Agreement), rounded down to the nearest share. As a result,
Non-Qualified Options 100% vested and presently exercisable for 11,248 shares of
National Penn Common Stock are outstanding.

    

    (e)           This
Plan reflects National Penn’s assumption of the 1994 FCG Plan and of the stock
options outstanding under the 1994 FCG Plan as of the Effective Date, on the
terms and conditions provided in the Merger Agreement, and National Penn’s
determination to delete provisions of the 1994 KNBT Plan inapplicable to such
outstanding options.  This Plan amends and restates the 1994 Plan
accordingly.

    

    4.           Aggregate Number of
Shares

    

    The total number of shares of National
Penn Common Stock subject to Non-Qualified Stock Options under the Plan is
11,248 shares, subject to adjustment in accordance with this
Section.  Notwith­standing the foregoing, in the event of any
change in the outstanding shares of the National Penn Common Stock by reason of
a stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the Board
deems in its sole discretion to be similar circumstances, the aggregate number
and kind of shares which may be issued under this Plan shall be appropriately
adjusted in a manner determined in the sole discretion of the Committee. Where
appropriate, outstanding Options shall also be amended by the Committee with
respect to exercise price and other terms as may be necessary to equitably
reflect the foregoing events.  If there shall be any other change in
the number or kind of outstanding shares of Common Stock, or any shares into
which such shares shall have been changed, or for which the Committee shall, in
its sole discretion, determine that such change equitably requires an adjustment
in any outstanding Options, such adjustments shall be made in accordance with
the Committee’s determination.  Reacquired shares of National Penn
Common Stock, as well as unissued shares, may be used for the purpose of this
Plan.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     5.       Participation

    

    All Non-Employee Directors of FCG or
any FCG Subsidiary prior to the effective date of the merger of FCG with and
into KNBT were eligible to receive an option or options under this Plan. The
individuals who received options were selected by the Committee, in its sole
discretion, except as otherwise specified in Section 6 hereof.

    

    Other than the persons who received
Options on the Effective Date pursuant to the Merger Agreement, no persons are
eligible to participate in the Plan.

    

    6.       Administration of
Plan

    

    (a)           This
Plan shall be administered by the Board or the Committee.  The term
“Committee,” as used in this Plan and the Options substituted hereunder, refers
to either the Board or to the Committee, whichever is then administering this
Plan. Subject to the numerical limitations on Committee membership set forth in
Section 2(e) hereof, the Board may at any time appoint additional members
of the Committee and may at any time remove any member of the Committee with or
without cause.  Vacancies in the Committee, however caused, may be
filled by the Board, if it so desires.

    

    (b)           The
Committee shall adopt such rules for the conduct of its business and
administration of this Plan as it considers desirable. A majority of the members
of the Committee shall constitute a quorum for all purposes. The vote or written
consent of a majority of the members of the Committee on a particular matter
shall constitute the act of the Committee on such matter. The Committee shall
have the exclusive right to construe the Plan and the Options issued pursuant to
it, to correct defects and omissions and to reconcile inconsistencies to the
extent necessary to effectuate the purpose of this Plan and the Options issued
pursuant to it, and such action shall be final, binding and conclusive upon all
parties concerned.

    

    (c)           Neither
the Board nor the Committee has the authority to grant any stock options under
the Plan in addition to the Options set forth in Section 3 hereof.

    

    (d)           No
member of the Board shall be liable for any act or omission (whether or not
negligent) taken or omitted in good faith, or for the exercise of any authority
or discretion granted in connection with the Plan to the Board, or for the acts
or omissions of any other members of the Board.

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     7.           Terms and Conditions of Stock Option
Awards

    

    (a)           Each
Optionee will be notified in writing of the number of shares of National Penn
Common Stock subject to and the exercise price of each Non-Qualified Stock
Option he or she holds pursuant to the Plan.  The notification will
also include such other terms, conditions, restrictions and privileges as
original 1994 KNBT Substitute Options contained, provided that they are not
inconsistent with the terms, conditions and provisions of this
Plan.

    

    (b)           The
per share exercise price of the National Penn Common Stock covered by each
Non-Qualified Stock Option is equal to the quotient of: (i) the product of the
original per share exercise price of that option times1.03 (the “Exchange Ratio”
as defined and set forth in Section 2.02 of the Merger Agreement), provided that
such exercise price shall be rounded up to the nearest cent.

    

    (c)           Each
Non-Qualified Stock Option shall be further adjusted as required by Section 409A
of the Code so as not to constitute a modification, extension or renewal of that
option within the meaning of Section 409A of the Code.

    

    (d)           No
Option shall be exercisable after the first to occur of the
following:

    

    (i)           Expiration
of the Option term originally fixed by the Board of Directors of FCG;
or

    

    (ii)          Expiration
of three months from the date the Optionee’s service with National Penn or any
Subsidiary terminates by reason of the Optionee’s death, Disability voluntary or
involuntary resignation or any other reason.

    

    (e)           No
Option granted under the 1994 FCG Plan or substituted hereunder may be
transferred except by will or by the laws of descent and
distribution.  During the lifetime of the Optionee, such Option may be
exercised only by him or her or his or her guardian or legal
representative.

    

    (f)           Options
may be exercised in part or in whole and at one time or from time to time. The
procedures for exercise shall be set forth in the written stock option agreement
delivered in connection with the substitution of each Option.

    

    (g)          Payment
in full of the purchase price for shares of National Penn Common Stock purchased
pursuant to the exercise of any Option shall be made to National Penn upon
exercise of the Option. All shares sold under the Plan shall be fully paid and
nonassessable.  Payment for shares may be made by the Optionee (i) in
cash or by check, (ii) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker to sell the shares and then
to properly deliver to National Penn the amount of sale proceeds to pay the
exercise price and any withholding taxes due, all in accordance with applicable
laws and regulations, or (iii) at the discretion of the Board or the Committee,
by delivering shares of National Penn Common Stock (including shares acquired
pursuant to the previous exercise of an Option) equal in fair market value to
the purchase price of the shares to be acquired pursuant to the Option, by
withholding some of the shares of National Penn Common Stock which are being
purchased upon exercise of an Option, or any combination of the foregoing. With
respect to subclause (iii) hereof, the shares of National Penn Common Stock
delivered to pay the purchase price must have been shares of National Penn
Common Stock acquired by the Optionee (or any beneficiary of an Optionee) which
shares have been held for a period of not less than six months.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
 

    (h)          No
Optionee shall have any voting or dividend rights or other rights of a
shareholder in respect of any shares of National Penn Common Stock covered by an
Option prior to the time that his or her name is recorded on National Penn’s
shareholder ledger as the holder of record of such shares acquired pursuant to
the exercise of an Option.

    

    8.           Withholding

    

    (a)           National
Penn may withhold from any cash payment made under this Plan sufficient amounts
to cover any applicable minimum withholding taxes, and if the amount of such
cash payment is insufficient, National Penn may require the Optionee to pay to
National Penn the amount required to be withheld as a condition to delivering
the shares acquired pursuant to an Option.

    

    (b)           The
Board or the Committee is authorized to adopt rules, regulations or procedures
which provide for the satisfaction of an Optionee’s tax withholding obligation
by the retention of shares of National Penn Common Stock to which the Optionee
would otherwise be entitled pursuant to an Option and/or by the Optionee's
delivery of previously owned shares of National Penn Common Stock or other
property.

    

    9.           Amendment, Suspension and
Termination

    

    The Board reserves the right at any
time, and from time to time, to amend this Plan in any way, or to suspend or
terminate it, effective as of such date, which date may be either before or
after the taking of such action, as may be specified by the Board; provided,
however, that such action shall not affect options granted under the Plan prior
to the actual date on which such action occurred. Notwithstanding the foregoing,
the Plan provisions specified in Rule 16b-3(c)(2)(ii)(A) under the Exchange Act
or any future corresponding rule may not be modified or amended more than once
every six months, other than to comport except as permitted by Rule
16b-3(c)(2)(ii)(B). If the Board voluntarily submits a proposed amendment,
suspension or termination for stockholder approval, such submission shall not
require any future modifications, amendments (whether or not relating to the
same provision or subject matter), suspensions or terminations to be similarly
submitted for stockholder approval.

    

    10.          Effectiveness of
Plan

    

                 This
Plan shall become effective on the Effective Date.

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    11.           General
Conditions

    

    (a)           Nothing
contained in this Plan or any Option substituted pursuant to this Plan shall
confer upon any Non-Employee Director the right to continue as a Non-Employee
Director of National Penn or any Subsidiary or interfere in any way with the
rights of National Penn to terminate him as a director.

    

    (b)           References
in this plan to the Code shall be deemed to also refer to the corresponding
provisions of any future United States revenue law.

    

    (c)           Except
to the extent preempted by federal law, this Plan document, and any agreements
issued pursuant hereto, shall be construed, administered and enforced in
accordance with the domestic internal law of the Commonwealth of
Pennsylvania.

    

    (d)           The
use of the masculine pronoun shall include the feminine gender whenever
appropriate.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    NATIONAL
PENN BANCSHARES, INC.

    

    KNBT
BANCORP, INC./FIRST COLONIAL GROUP, INC.

    

    SUBSTITUTE
1996 EMPLOYEE STOCK OPTION PLAN

    

    As
assumed, amended and restated effective February 1, 2008

    

    1.             Purpose of Plan

    

    (a)           The
purpose of the First Colonial Group, Inc. 1996 Employee Stock Option Plan (the
“1996 FCG Plan”) was to provide additional incentive to officers and other key
employees of First Colonial Group, Inc. (”FCG”) and each present or future
parent or subsidiary corporation by encouraging them to invest in shares of the
Company's common stock, $5.00 par value (“FCG Common Stock”), and thereby
acquire a proprietary interest in FCG and an increased personal interest in
FCG’s continued success and progress, to the mutual benefit of officers,
employees and shareholders.  To the extent not already exercisable,
options granted under the 1996 FCG Plan became fully exercisable upon execution
of an Agreement and Plan of Merger between FCG, KNBT Bancorp, Inc. (“KNBT”) and
Keystone Savings Bank dated as of March 5, 2003. The Agreement and Plan of
Merger provided that upon completion of the acquisition of FCG, KNBT would
assume the stock options that previously had been issued by FCG under the 1996
FCG Plan and which remained unexercised as of October 31, 2003.

    

    (b)           Incentive
Stock Options and Non-Qualified Stock Options were granted within the
limitations of the Plan herein described.  Only Incentive Stock
Options remain outstanding under the Plan.

    

    (c)           Capitalized
terms and phrases used and not otherwise defined herein shall have the meanings
given in Section 2 hereof.

    

    2.             Definitions

    

    Unless the context requires otherwise,
the following terms shall have the following definitions for the purposes of
this Plan (such definitions to be equally applicable to both the singular and
the plural form of the term defined):

    

    (a)           “1996
KNBT Substitute Options” means rights to acquire KNBT common stock pursuant to
the 1996 FCG Plan, as assumed by KNBT.

    

                   
(b)            “Board”
means the Board of Directors of National Penn.

    

    (c)           
“Code” means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.

    

    (d)           
“Committee” means the Compensation Committee of the Board, which shall be
comprised of, at all times, two or more directors appointed by the Board
pursuant to Section 6 hereof, and each of whom shall be: (i) “non-employee
directors” as such term is defined under the rules and regulations adopted from
time to time by the Securities and Exchange Commission pursuant to
Section 16(b) of the Exchange Act; and (ii) “outside directors” within
the meaning of Section 162(m) of the Code.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    (e)           “Director”
means a member of the Board of Directors of FCG, KNBT or a Subsidiary or any
successors thereto, including Non-Employee Directors as well as Officers and
Employees serving as Directors.

    

    (f)           “Disability”
means any physical or mental impairment which (a) qualifies an Optionee for
disability benefits under the applicable long-term disability plan maintained by
National Penn or a Subsidiary or (b) if no such plan applies, would qualify such
Optionee for disability benefits under the long-term disability plan maintained
by National Penn, if such individual were covered by that plan, as determined in
the sole discretion of the Committee.

    

    (g)           “Effective
Date” means February 1, 2008.

    

    (h)           “Employee”
means any person who was employed by FCG, KNBT or a Subsidiary, or was an
Officer of FCG, KNBT or a Subsidiary, but not including directors who were not
also Officers of or otherwise employed by FCG, KNBT or a
Subsidiary.

    

    (i)           “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

    

    (j)           “Incentive
Stock Option” means any 1996 KNBT Substitute Option which qualified as an
incentive stock option within the meaning of Section 422 of the
Code.

    

    (k)           “Merger
Agreement” shall mean the Agreement of Reorganization and Merger dated as of
September 6, 2007, by and between National Penn and KNBT.

    

    (l)           “National
Penn” means National Penn Bancshares, Inc.

    

    (m)         “National
Penn Common Stock” means shares of the common stock of National Penn (without
par value) as described in National Penn’s Articles of
Incorporation

    

    (n)           “Non-Employee
Director” means a member of the Board of Directors of FCG, KNBT or any
Subsidiary, or a former Officer or Employee of FCG, KNBT and/or any Subsidiary
serving as a Director, who was not then an Officer or Employee of FCG, KNBT or
any Subsidiary.

    

    (o)           “Non-Qualified
Stock Option” means any 1996 KNBT Substitute Option which was not an Incentive
Stock Option.

    

    (p)           “Officer”
means an Employee whose position with FCG, KNBT or a Subsidiary was that of a
corporate officer, as determined by the Board of Directors of FCG or
KNBT.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (q)           “Options”
means one of the substitute incentive stock options or substitute non-qualified
stock options issued pursuant to the 1996 FCG Plan and the Merger Agreement,
exercisable for a total of 3,259 shares of National Penn Common Stock, subject
to adjustment as provided in Section 6 hereof.

    

    (r)           “Optionee”
means an Employee or Non-Employee Director or former Employee or Non-Employee
Director to whom a 1996 KNBT Substitute Option was issued under the 1996 FCG
Plan, as assumed by KNBT pursuant to the KNBT/FCG Merger Agreement.

    

    (s)           “Plan”
means the National Penn Bancshares, Inc. KNBT Bancorp, Inc./First Colonial
Group, Inc. Substitute 1996 Employee Stock Option Plan.

    

    (t)           “Retirement”
means a voluntary termination of employment at age 65 or later or as may be
otherwise designated by the Board or the Committee.

    

    (u)           “Subsidiaries”
means, prior to the Effective Date, those subsidiaries of FCG or KNBT which met
the definition of “subsidiary corporations” set forth in Section 424(f) of the
Code, and, after the Effective Date, any subsidiary corporation of National Penn
within the meaning of Section 424(f) of the Code.

    

    3.             Assumption of 1996 FCG Plan by
National Penn

    

    (a)           On
the Effective Date, KNBT was merged with and into National Penn, with National
Penn surviving such merger, under the name, articles of incorporation and bylaws
of National Penn, pursuant to the Merger Agreement.

    

    (b)           On
the Effective Date, pursuant to the Merger Agreement, each outstanding option to
purchase KNBT common stock, as assumed by KNBT under the 1996 FCG Plan that
remained unexercised was vested pursuant to the terms of the 1996 FCG Plan and
automatically converted into a substitute option to purchase National Penn
Common Stock.

    

    (c)           The
number of shares subject to each substitute stock option and the exercise price
for those shares were adjusted to prevent any alteration of the economic value
of the original option, as measured immediately prior to and immediately
following the Effective Date.

    

    (d)           Immediately
prior to the Effective Date, there were no Non-Qualified Stock Options
outstanding under the 1996 FCG Plan. As a result, there are no Non-Qualified
Options presently exercisable or outstanding for any shares of National Penn
Common Stock.

    

    (e)           Immediately
prior to the Effective Date, there were Incentive Stock Options outstanding
under the 1996 FCG Plan for 3,166 shares of KNBT common stock, all of which were
automatically converted into substitute options in accordance with the
provisions of Section 2.05(a) of the Merger Agreement.  The number of
shares of National Penn Common Stock subject to each substitute incentive stock
option is equal to the number of shares of KNBT common stock originally subject
to the 1996 KNBT Substitute Option immediately prior to the Effective Date times
1.03 (the “Exchange Ratio” as defined and set forth in Section 2.02 of the
Merger Agreement), rounded down to the nearest share. As a result, Incentive
Stock Options 100% vested and presently exercisable for 3,259 shares of National
Penn Common Stock are outstanding.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
       

    

    (f)           This
Plan reflects National Penn’s assumption of the 1996 FCG Plan and of the stock
options outstanding under the 1996 FCG Plan as of the Effective Date, on the
terms and conditions provided in the Merger Agreement, and National Penn’s
determination to delete provisions of the 1996 KNBT Plan inapplicable to such
outstanding options.  This Plan amends and restates the 1996 Plan
accordingly.

    

    4.           Aggregate Number of
Shares

    

    The total
aggregate number of shares of National Penn Common Stock subject to Options
under the Plan is 3,259 shares (all of which are Incentive Stock Options),
subject to adjustment in accordance with this
Section.  Notwithstanding the foregoing, in the event of any change in
the outstanding shares of National Penn Common Stock by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances, the
aggregate number and kind of shares which may be issued under this Plan shall be
appropriately adjusted in a manner determined in the sole discretion of the
Committee. Where appropriate, outstanding Options shall also be amended by the
Committee as to its exercise price and other terms as may be necessary to
equitably reflect the foregoing events, provided, however, that no adjustment
shall be made which will cause an Incentive Stock Option to lose its status as
an incentive stock option within the meaning of Section 422 and related sections
of the Code; rather, in the case of Incentive Stock Options, any adjustments
required to be made shall be made in a manner consistent with Section 424(a) of
the Code and Treas. Reg. §1.425-1(a)(4)(i).  If there shall be any
other change in the number or kind of outstanding shares of Common Stock, or any
shares into which such shares shall have been changed, or for which the
Committee shall, in its sole discretion, determine that such change equitably
requires an adjustment in any outstanding Options, such adjustments shall be
made in accordance with the Committee’s determination.  Re-acquired
shares of Common Stock, as well as unissued shares, may be used for the purpose
of this Plan.

    

    5.           Class of Persons Eligible to Receive
Options; Limitations

    

    All officers and key employees of FCG
or any FCG Subsidiary prior to the effective date of the merger of FCG with and
into KNBT were eligible to receive an option or options under this Plan. The
individuals who received options were selected by the Committee, in its sole
discretion, except as otherwise specified in Section 6 hereof.

    

    Other than the persons who received
Options on the Effective Date pursuant to the Merger Agreement, no persons are
eligible to participate in the Plan.

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    6.             Administration of
Plan

    

    (a)           This
Plan shall be administered by the Board or by the Committee.  Subject
to the numerical limitations on Committee membership set forth in
Section 2(e) hereof, the Board may at any time appoint additional members
of the Committee and may at any time remove any member of the Committee with or
without cause.  Vacancies in the Committee, however caused, may be
filled by the Board, if it so desires.

    

    (b)           The
Board or the Committee, whichever shall be administering the Plan, shall adopt
such rules for the conduct of its business and administration of this Plan as it
considers desirable. A majority of the members of the Board or the Committee
shall constitute a quorum for all purposes. The vote or written consent of a
majority of the members of the Board or the Committee on a particular matter
shall constitute the act of the Committee on such matter. The Committee shall
have the right to construe the Plan and the Options, to correct defects and
omissions and to reconcile inconsistencies to the extent necessary to effectuate
the Plan and the Options, and such action shall be final, binding and conclusive
upon all parties concerned.

    

    (c)           Neither
the Board nor the Committee has the authority to grant any stock options under
the Plan in addition to the Options set forth in Section 3 hereof.

    

    (d)           No
member of the Committee or the Board shall be liable for any act or omission
(whether or not negligent) taken or omitted in good faith, or for the exercise
of an authority or discretion granted in connection with the Plan to the
Committee or the Board, or for the acts or omissions of any other members of the
Committee or the Board.

    

    7.             Terms and Conditions of Stock Option
Awards

    

    (a)           Each
Optionee will be notified in writing of the number of shares of National Penn
Common Stock subject to and the exercise price of each Incentive Stock Option he
or she holds pursuant to the Plan.  The notification will also include
such other terms, conditions, restrictions and privileges as original 1996 KNBT
Substitute Options contained, provided that they are not inconsistent with the
terms, conditions and provisions of this Plan.

    

    (b)           The
per share exercise price of the National Penn Common Stock covered by each
Incentive Stock Option is equal to the quotient of: (i) the product of the
original per share exercise price of that option times1.03 (the “Exchange Ratio”
as defined and set forth in Section 2.02 of the Merger Agreement), provided that
such exercise price shall be rounded up to the nearest cent.

    

    (c)           Each
Incentive Stock Option shall be further adjusted as required by Sections 409A
and 424 of the Code so as not to constitute a modification, extension or renewal
of that option within the meaning of Sections 409A and 424(h) of the
Code.

    

    (d)           No
Option shall be exercisable after the first to occur of the
following:

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    (i)           Expiration
of the Option term originally fixed by the Board of Directors of
FCG.

    

    (ii)          Expiration
of three months from the date the Optionee’s employment with National Penn or
any Subsidiary terminates for any reason other than Disability or
death;

    

    (iii)         Expiration
of one year from the date the Optionee’s employment with National Penn or any
Subsidiary terminates by reason of the Optionee’s Disability;

    

    (iv)         Expiration
of one year from the date the Optionee’s employment with National Penn or any
Subsidiary terminates by reason of the Optionee’s Retirement; or

    

    (v)          Expiration
of one year from the date the Optionee’s employment with National Penn or any
Subsidiary terminates by reason of the Optionee’s death.

    

    (e)           No
Option granted under the 1996 FCG Plan or substituted hereunder may be
transferred except by will or by the laws of descent and
distribution.  During the lifetime of the Optionee, such Option may be
exercised only by him or her or his or her guardian or legal
representative.

    

    (f)           Options
may be exercised in part or in whole and at one time or from time to time. The
procedures for exercise shall be set forth in the written stock option agreement
delivered in connection with the substitution of each Option.

    

    (g)           Payment
in full of the purchase price for shares of National Penn Common Stock purchased
pursuant to the exercise of any Option shall be made to National Penn upon
exercise of the Option. All shares sold under the Plan shall be fully paid and
nonassessable.  Payment for shares may be made by the Optionee (i) in
cash or by check, (ii) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker to sell the shares and then
to properly deliver to National Penn the amount of sale proceeds to pay the
exercise price and any withholding taxes due, all in accordance with applicable
laws and regulations, or (iii) at the discretion of the Board or the Committee,
by delivering shares of National Penn Common Stock (including shares acquired
pursuant to the previous exercise of an Option) equal in fair market value to
the purchase price of the shares to be acquired pursuant to the Option, by
withholding some of the shares of National Penn Common Stock which are being
purchased upon exercise of an Option, or any combination of the foregoing. With
respect to subclause (iii) hereof, the shares of National Penn Common Stock
delivered to pay the purchase price must have been shares of National Penn
Common Stock acquired by the Optionee (or any beneficiary of an Optionee) which
shares have been held for a period of not less than six months.

    

    (h)           No
Optionee shall have any voting or dividend rights or other rights of a
shareholder in respect of any shares of National Penn Common Stock covered by an
Option prior to the time that his or her name is recorded on National Penn’s
shareholder ledger as the holder of record of such shares acquired pursuant to
the exercise of an Option.

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    8.             Withholding

    

    (a)           National
Penn may withhold from any cash payment made under this Plan sufficient amounts
to cover any applicable minimum withholding and employment taxes, and if the
amount of such cash payment is insufficient, National Penn may require the
Optionee to pay to National Penn the amount required to be withheld as a
condition to delivering the shares acquired pursuant to an Option. National Penn
also may withhold or collect amounts with respect to a disqualifying disposition
of shares of National Penn Common Stock acquired pursuant to exercise of an
Incentive Stock Option.

    

    (b)           The
Board or the Committee is authorized to adopt rules, regulations or procedures
which provide for the satisfaction of an Optionee’s tax withholding obligation
by the retention of shares of National Penn Common Stock to which the Optionee
would otherwise be entitled pursuant to an Option and/or by the Optionee's
delivery of previously owned shares of National Penn Common Stock or other
property.

    

    9.             Amendment, Supplement, Suspension and
Termination

    

    The Board reserves the right at any
time, and from time to time, to amend or supplement this Plan in any way. or to
suspend or terminate it, effective as of such date, which date may be either
before or after the taking of such action, as may be specified by the Board;
provided, however, that such action shall not affect Options substituted
pursuant to the Plan prior to the actual date on which such action occurred. If
an amendment or supplement of this Plan is required by the Code or the
regulations thereunder to be approved by National Penn shareholders in order for
Incentive Stock Options to retain their status as “incentive stock
options”  (as that term is defined in Section 422(b) of the Code and
regulations thereunder) pursuant to the amended or supplemented Plan, such
amendment or supplement shall also be approved by the National Penn shareholders
of in such manner as is prescribed by the Code and the regulations thereunder.
If the Board voluntarily submits a proposed amendment, supplement, suspension or
termination for shareholder approval, such submission shall not require any
future amendments, supplements, suspensions or terminations (whether or not
relating to the same provision or subject matter) to be similarly submitted for
shareholder approval.

    

    10.             Effectiveness of
Plan

    

    This Plan shall become effective on the
Effective Date.

    

    11.             General
Conditions

    

    (a)           Nothing
contained this Plan or any Option substituted pursuant to this Plan shall confer
upon any Employee the right to continue in the employ of National Penn or any
Subsidiary or interfere in any way with the rights of National Penn or any
Subsidiary to terminate his or her employment in any way.

    

    (b)           References
in this plan to the Code shall be deemed to also refer to the corresponding
provisions of any future United States revenue law.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

    (c)           Except
to the extent preempted by federal law, this Plan document, and any agreements
issued pursuant hereto, shall be construed, administered and enforced in
accordance with the domestic internal law of the Commonwealth of
Pennsylvania.

    

    (d)           The
use of the masculine pronoun shall include the feminine gender whenever
appropriate.

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    NATIONAL
PENN BANCSHARES, INC.

    

    KNBT
BANCORP, INC./FIRST COLONIAL GROUP, INC.

    

    SUBSTITUTE
2001 STOCK OPTION PLAN

    

    As
assumed, amended and restated effective February 1, 2008

    

    1.             Purpose of Plan

    

    (a)           The
purpose of the First Colonial Group, Inc. 2001 Stock Option Plan (the “2001 FCG
Plan”) was to provide additional incentive to officers, other key employees, and
directors of, and important consultants to, First Colonial Group, Inc., a
Pennsylvania corporation (”FCG”), and each present or future parent or
subsidiary corporation, by encouraging them to invest in shares of FCG’s common
stock, $5.00 par value per share (“FCG Common Stock”), and thereby acquire a
proprietary interest in FCG and an increased personal interest in FCG’s
continued success and progress.   To the extent not already
exercisable, options granted under the 2001 FCG Plan became fully exercisable
upon execution of an Agreement and Plan of Merger (“KNBT /FCG Merger Agreement”)
between FCG, KNBT Bancorp, Inc. (“KNBT”) and Keystone Savings Bank dated as of
March 5, 2003. The Agreement and Plan of Merger provided that upon completion of
the acquisition of FCG, KNBT would assume the stock options that previously had
been issued by FCG under the 2001 FCG Plan and which remained unexercised as of
October 31, 2003.

    

    (b)           Options under the
Plan.  Incentive Stock Options and Non-Qualified Stock Options
were granted within the limitations of the Plan herein described.

    

    (c)           Capitalized
Terms.  Capitalized terms and phrases used and not otherwise
defined herein shall have the meanings given in Section 2 hereof.

    

    2.             Definitions.  Unless
the context requires otherwise, the following terms shall have the following
definitions for the purposes of this Plan (such definitions to be equally
applicable to both the singular and the plural form of the term
defined):

    

    (a)           “2001
KNBT Substitute Options” means rights to acquire KNBT common stock pursuant to
the 2001 FCG Plan, as assumed by KNBT.

    

                   
(b)           “Board”
means the Board of Directors of National Penn.

    

    (c)           
“Code” means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.

    

    (d)           “Committee”
means the Compensation Committee of the Board, which shall be comprised of, at
all times, two or more directors appointed by the Board pursuant to Section 6
hereof, and each of whom shall be: (i) “non-employee directors” as such
term is defined under the rules and regulations adopted from time to time by the
Securities and Exchange Commission pursuant to Section 16(b) of the
Exchange Act; and (ii) “outside directors” within the meaning of
Section 162(m) of the Code.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    
(e)          “Director”
means a member of the Board of Directors of FCG, KNBT or a Subsidiary or any
successors thereto, including Non-Employee Directors as well as Officers and
Employees serving as Directors.

    

    (f)          “Disability”
means any physical or mental impairment which (a) qualifies an Optionee for
disability benefits under the applicable long-term disability plan maintained by
National Penn or a Subsidiary or (b) if no such plan applies, would qualify such
Optionee for disability benefits under the long-term disability plan maintained
by National Penn, if such individual were covered by that plan, as determined in
the sole discretion of the Committee.

    

    (g)          “Effective
Date” means February 1, 2008.

    

    (h)          “Employee”
means any person who was employed by FCG, KNBT or a Subsidiary, or was an
Officer of FCG, KNBT or a Subsidiary, but not including directors who were not
also Officers of or otherwise employed by FCG, KNBT or a
Subsidiary.

    

    (i)           “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

    

    (j)           “Incentive
Stock Option” means any 2001 KNBT Substitute Option which qualified as an
incentive stock option within the meaning of Section 422 of the
Code.

    

    (k)           “Merger
Agreement” shall mean the Agreement of Reorganization and Merger dated as of
September 6, 2007, by and between National Penn and KNBT.

    

    (l)           “National
Penn” means National Penn Bancshares, Inc.

     

    (m)          “National
Penn Common Stock” means shares of the common stock of National Penn (without
par value) as described in National Penn’s Articles of
Incorporation

    

    (n)           “Non-Employee
Director” means a member of the Board of Directors of FCG, KNBT or any
Subsidiary, or a former Officer or Employee of FCG, KNBT and/or any Subsidiary
serving as a Director, who was not then an Officer or Employee of FCG, KNBT or
any Subsidiary.

    

    (o)           “Non-Qualified
Stock Option” means any 2001 KNBT Substitute Option which was not an Incentive
Stock Option.

    

    (p)           “Officer”
means an Employee whose position with FCG, KNBT or a Subsidiary was that of a
corporate officer, as determined by the Board of Directors of FCG or
KNBT.

    

    (q)           “Options”
means one of the substitute incentive stock options or substitute non-qualified
stock options issued pursuant to the 2001 FCG Plan and the Merger Agreement,
exercisable for a total of 401,920 shares of National Penn Common Stock, subject
to adjustment as provided in Section 6 hereof.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    
                (r)           “Optionee”
means an Employee or Non-Employee Director or former Employee or Non-Employee
Director to whom a 2001 KNBT Substitute Option was issued under the 2001 FCG
Plan, as assumed by KNBT pursuant to the KNBT/FCG Merger Agreement.

    

    (s)           “Plan”
means the National Penn Bancshares, Inc. KNBT Bancorp, Inc./First Colonial
Group, Inc. Substitute 2001 Stock Option Plan.

    

    (s)           “Subsidiaries”
means, prior to the Effective Date, those subsidiaries of FCG or KNBT which met
the definition of “subsidiary corporations” set forth in Section 424(f) of the
Code, and, after the Effective Date, any subsidiary corporation of National Penn
within the meaning of Section 424(f) of the Code.

    

    
      	
              3.

            	
              Assumption of 2001 FCG Plan by
      National Penn

            

    

    

    (a)           On
the Effective Date, KNBT was merged with and into National Penn, with National
Penn surviving such merger, under the name, articles of incorporation and bylaws
of National Penn, pursuant to the Merger Agreement.

    

    (b)           On
the Effective Date, pursuant to the Merger Agreement, each outstanding option to
purchase KNBT common stock, as assumed by KNBT under the 2001 FCG Plan that
remained unexercised was vested pursuant to the terms of the 2001 FCG Plan and
automatically converted into a substitute option to purchase National Penn
Common Stock.

    

    (c)           The
number of shares subject to each substitute stock option and the exercise price
for those shares were adjusted to prevent any alteration of the economic value
of the original option, as measured immediately prior to and immediately
following the Effective Date.

    

    (d)           Immediately
prior to the Effective Date, there were Non-Qualified Stock Options outstanding
under the 2001 FCG Plan for 343,066 shares of KNBT common stock, all of which
were automatically converted into substitute options in accordance with the
provisions of Section 2.05(a) of the Merger Agreement.  The number of
shares of National Penn Common Stock subject to each substitute non-qualified
stock option is equal to the number of shares of KNBT common stock originally
subject to the 2001 KNBT Substitute Option immediately prior to the Effective
Date times 1.03 (the “Exchange Ratio” as defined and set forth in Section 2.02
of the Merger Agreement), rounded down to the nearest share. As a result,
Non-Qualified Options 100% vested and presently exercisable for 353,352 shares
of National Penn Common Stock are outstanding.

    

    (e)           Immediately
prior to the Effective Date, there were Incentive Stock Options outstanding
under the 2001 FCG Plan for 47,161 shares of KNBT common stock, all of which
were automatically converted into substitute options in accordance with the
provisions of Section 2.05(a) of the Merger Agreement.  The number of
shares of National Penn Common Stock subject to each substitute incentive stock
option is equal to the number of shares of KNBT common stock originally subject
to the 2001 KNBT Substitute Option immediately prior to the Effective Date times
1.03 (the “Exchange Ratio” as defined and set forth in Section 2.02 of the
Merger Agreement), rounded down to the nearest share. As a result, Incentive
Stock Options 100% vested and presently exercisable for 48,568 shares of
National Penn Common Stock are outstanding.

    
 

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (f)           This
Plan reflects National Penn’s assumption of the 2001 FCG Plan and of the stock
options outstanding under the 2001 FCG Plan as of the Effective Date, on the
terms and conditions provided in the Merger Agreement, and National Penn’s
determination to delete provisions of the 2001 KNBT Plan inapplicable to such
outstanding options.  This Plan amends and restates the 2001 Plan
accordingly.

    

    
      	
              4.

            	
              Aggregate Number of
      Shares

            

    

    

    The total
number of shares of National Penn Common Stock subject to Incentive Stock
Options under the Plan is 48,568 shares, and the total number of shares of
National Penn Common Stock subject to Non-Qualified Stock Options under the Plan
is 353,352 shares, for a total aggregate number of 401,920 shares of National
Penn Common Stock subject to Options under the Plan, subject to adjustment in
accordance with this Section.  Notwithstanding the foregoing, in the
event of any change in the outstanding shares of National Penn Common Stock by
reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Committee deems in its sole discretion to be similar
circumstances, the aggregate number and kind of shares which may be issued under
this Plan shall be appropriately adjusted in a manner determined in the sole
discretion of the Committee.  Where appropriate, outstanding Options
shall also be amended by the Committee as to its exercise price and other terms
as may be necessary to equitably reflect the foregoing events, provided,
however, that no adjustment shall be made which will cause an Incentive Stock
Option to lose its status as an incentive stock option within the meaning of
Section 422 and related sections of the Code; rather, in the case of Incentive
Stock Options, any adjustments required to be made shall be made in a manner
consistent with Section 424(a) of the Code and Treas. Reg.
§1.425-1(a)(4)(i).  If there shall be any other change in the number
or kind of outstanding shares of Common Stock, or any shares into which such
shares shall have been changed, or for which the Committee shall, in its sole
discretion, determine that such change equitably requires an adjustment in any
outstanding Options, such adjustments shall be made in accordance with the
Committee’s determination.  Re-acquired shares of Common Stock, as
well as unissued shares, may be used for the purpose of this Plan.

    

    
      	
              5.

            	
              Class of Persons Eligible to
      Receive Options

            

    

    

    All
Officers and key employees of FCG or any FCG Subsidiary prior to the effective
date of the merger of FCG with and into KNBT were eligible to receive an option
or options under this Plan.  All Non-Employee Directors of, and
important consultants to, FCG or any FCG subsidiary were also eligible to
receive one or more option or options under this Plan.  The
individuals who received options were selected by the Committee, in its sole
discretion, except as otherwise specified in Section 6 hereof.

    

    Other
than the persons who received Options on the Effective Date pursuant to the
Merger Agreement, no persons are eligible to participate in the
Plan.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    

    
      	
              6.

            	
              Administration of
      Plan

            

    

    

    (a)           This
Plan shall be administered by the Board or by the Committee.  The term
“Committee,” as used in this Plan and the Options substituted hereunder, refers
to either the Board or to the Committee, whichever is then administering this
Plan. Subject to the numerical limitations on Committee membership set forth in
Section 2(e) hereof, the Board may at any time appoint additional members
of the Committee and may at any time remove any member of the Committee with or
without cause.  Vacancies in the Committee, however caused, may be
filled by the Board, if it so desires.

    

    (b)           The
Board or the Committee shall adopt such rules for the conduct of its business
and administration of this Plan as it considers desirable.  A majority
of the members of the Board or the Committee shall constitute a quorum for all
purposes.  The vote or written consent of a majority of the members of
the Board or the Committee on a particular matter shall constitute the act of
the Board or the Committee on such matter.  The Board or the Committee
shall have the right to construe the Plan and the Options, to correct defects
and omissions and to reconcile inconsistencies to the extent necessary to
effectuate the Plan and the Options, and such action shall be final, binding and
conclusive upon all parties concerned.

    

    (c)           Neither
the Board nor the Committee has the authority to grant any stock options under
the Plan in addition to the Options set forth in Section 3 hereof.

    

    (d)           No
member of the Committee or the Board shall be liable for any act or omission
(whether or not negligent) taken or omitted in good faith, or for the exercise
of an authority or discretion granted in connection with the Plan to the
Committee or the Board or for the acts or omissions of any other members of the
Committee of the Board.

    

    
      	
              7.

            	
              Terms and Conditions of Stock
      Option Awards

            

    

    

    (a)           Each
Optionee will be notified in writing of the number of shares of National Penn
Common Stock subject to and the exercise price of each Incentive Stock Option
and/or Non-Qualified Option he or she holds pursuant to the Plan.  The
notification will also include such other terms, conditions, restrictions and
privileges as original 2001 KNBT Substitute Options contained, provided that
they are not inconsistent with the terms, conditions and provisions of this
Plan.

     

    (b)           The
per share exercise price of the National Penn Common Stock covered by each
Non-Qualified Stock Option is equal to the quotient of: (i) the product of the
original per share exercise price of that option times1.03 (the “Exchange Ratio”
as defined and set forth in Section 2.02 of the Merger Agreement), provided that
such exercise price shall be rounded up to the nearest cent.

     

    (c)           The
per share exercise price of the National Penn Common Stock covered by each
Incentive Stock Option is equal to the quotient of: (i) the product of the
original per share exercise price of that option times1.03 (the “Exchange Ratio”
as defined and set forth in Section 2.02 of the Merger Agreement), provided that
such exercise price shall be rounded up to the nearest cent.

     

    
      
        
        

      

      
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    (d)           Each
Incentive Stock Option shall be further adjusted as required by Sections 409A
and 424 of the Code so as not to constitute a modification, extension or renewal
of that option within the meaning of Sections 409A and 424(h) of the
Code.

     

    (e)           No
Option shall be exercisable after the first to occur of the
following:

    

    (i)           Expiration
of the Option term originally fixed by the Board of Directors of
FCG.

    

    (ii)          Expiration
of three months from the date the Optionee’s employment with National Penn or
any Subsidiary terminates for any reason other than Disability or
death;

    

    (iii)         Expiration
of one year from the date the Optionee’s employment with National Penn or any
Subsidiary terminates by reason of the Optionee’s Disability;

    

    (iv)         Expiration
of one year from the date the Optionee’s service as a Non-Employee Director with
National Penn or any Subsidiary terminates; or

    

    (v)          Expiration
of one year from the date the Optionee’s employment or service as a Non-Employee
Director with National Penn or any Subsidiary terminates by reason of the
Optionee’s death.

    

    (f)           No
Option granted under the 2001 FCG Plan or substituted hereunder may be
transferred except by will or by the laws of descent and
distribution.  During the lifetime of the Optionee, such Option may be
exercised only by him or her or his or her guardian or legal
representative.

    

    (g)           Options
may be exercised in part or in whole and at one time or from time to time. The
procedures for exercise shall be set forth in the written stock option agreement
delivered in connection with the substitution of each Option.

    

    (h)           Payment
in full of the purchase price for shares of National Penn Common Stock purchased
pursuant to the exercise of any Option shall be made to National Penn upon
exercise of the Option. All shares sold under the Plan shall be fully paid and
nonassessable.  Payment for shares may be made by the Optionee (i) in
cash or by check, (ii) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker to sell the shares and then
to properly deliver to National Penn the amount of sale proceeds to pay the
exercise price and any withholding taxes due, all in accordance with applicable
laws and regulations, or (iii) at the discretion of the Board or the Committee,
by delivering shares of National Penn Common Stock (including shares acquired
pursuant to the previous exercise of an Option) equal in fair market value to
the purchase price of the shares to be acquired pursuant to the Option, by
withholding some of the shares of National Penn Common Stock which are being
purchased upon exercise of an Option, or any combination of the foregoing. With
respect to subclause (iii) hereof, the shares of National Penn Common Stock
delivered to pay the purchase price must have been shares of National Penn
Common Stock acquired by the Optionee (or any beneficiary of an Optionee) which
shares have been held for a period of not less than six months.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    
 

    (i)           No
Optionee shall have any voting or dividend rights or other rights of a
shareholder in respect of any shares of National Penn Common Stock covered by an
Option prior to the time that his or her name is recorded on National Penn’s
shareholder ledger as the holder of record of such shares acquired pursuant to
the exercise of an Option.

    

    
      	
              8.

            	
              Withholding

            

    

    

    (a)           National
Penn may withhold from any cash payment made under this Plan sufficient amounts
to cover any applicable minimum withholding and employment taxes, and if the
amount of such cash payment is insufficient, National Penn may require the
Optionee to pay to National Penn the amount required to be withheld as a
condition to delivering the shares acquired pursuant to an Option. National Penn
also may withhold or collect amounts with respect to a disqualifying disposition
of shares of National Penn Common Stock acquired pursuant to exercise of an
Incentive Stock Option.

    

    (b)           The
Board or the Committee is authorized to adopt rules, regulations or procedures
which provide for the satisfaction of an Optionee’s tax withholding obligation
by the retention of shares of National Penn Common Stock to which the Optionee
would otherwise be entitled pursuant to an Option and/or by the Optionee's
delivery of previously owned shares of National Penn Common Stock or other
property.

    

    
      	
              9.

            	
              Amendment, Supplement,
      Suspension and Termination

            

    

    

    The Board
reserves the right at any time, and from time to time, to amend or supplement
this Plan in any way, or to suspend or terminate it, effective as of such date,
which date may be either before or after the taking of such action, as may be
specified by the Board; provided, however, that such action shall not affect
Options substituted pursuant to the Plan prior to the actual date on which such
action occurred.  If an amendment or supplement of this Plan is
required by the Code or the regulations thereunder to be approved by the
shareholders of National Penn in order for Inventive Stock Options to retain
their status as “incentive stock options,” (as that term is defined in Section
422(b) of the Code and regulations thereunder) pursuant to the amended or
supplemented Plan, such amendment or supplement shall also be approved by the
shareholders of National Penn in such manner as is prescribed by the Code and
the regulations thereunder.  If the Board voluntarily submits a
proposed amendment, supplement, suspension or termination for shareholder
approval, such submission shall not require any future amendments, supplements,
suspensions or terminations (whether or not relating to the same provision or
subject matter) to be similarly submitted for shareholder approval.

    

    
      	
              10.

            	
              Effectiveness of
      Plan

            

    

    

    This Plan
shall become effective on the Effective Date.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    

    
      	
              11.

            	
              General
      Conditions

            

    

    

    (a)           Nothing
contained in this Plan or any Option substituted pursuant to this Plan shall
confer upon any Employee the right to continue in the employ of National Penn or
any Subsidiary or interfere in any way with the rights of National Penn or any
Subsidiary to terminate his or her employment in any way.

    

    (b)           Nothing
contained in this Plan or any Option substituted pursuant to this Plan shall
confer upon any Non-Employee Director or consultant the right to continue as a
Non-Employee Director of, or consultant to, National Penn or any Subsidiary or
interfere in any way with the rights of National Penn or any Subsidiary, or
their respective shareholders, to terminate the directorship of any such
Non-Employee Director or the consultancy relationship of any such
consultant.

    

    (c)           References
in this Plan to the Code shall be deemed to also refer to the corresponding
provisions of any future United States revenue law.

    

    (d)           Except
to the extent preempted by federal law, this Plan document, and any agreements
issued pursuant hereto, shall be construed, administered and enforced in
accordance with the domestic internal law of the Commonwealth of
Pennsylvania.

    

    (e)           The
use of the masculine pronoun shall include the feminine gender whenever
appropriate.

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    NATIONAL
PENN BANCSHARES, INC.

    KNBT
BANCORP, INC.

    SUBSTITUTE
2004 STOCK OPTION PLAN

    

    As
assumed, amended and restated effective February 1, 2008

    

    

    ARTICLE
I

    ESTABLISHMENT
OF THE PLAN

    

    1.01           National
Penn Bancshares, Inc. (“National Penn”) hereby establishes this Substitute 2004
Stock Option Plan (the “Plan”) as required by the terms of Section 2.05 of the
Agreement and Plan of Merger dated as of September 6, 2007 (the “Merger
Agreement”), by and between National Penn and KNBT Bancorp, Inc. (“KNBT”), upon
the terms and conditions hereinafter stated.

    

    ARTICLE
II

    PURPOSE
OF THE PLAN

    

    2.01           Purpose.  The
purpose of the KNBT Bancorp, Inc. 2004 Stock Option Plan (the “2004 KNBT Plan”)
was to improve the growth and profitability of KNBT and its Subsidiaries by
providing Employees and Non-Employee Directors with a proprietary interest in
KNBT as an incentive to contribute to the success of KNBT and its Subsidiaries,
and to reward Employees and Non-Employee Directors for outstanding
performance.

    

    2.02           Options Under the
Plan.  Incentive Stock Options and Non-Qualified Options were
granted within the limitations of the Plan herein described.

    

    2.03           Capitalized
Terms.  Capitalized terms and phrases used and not otherwise
defined herein shall have the meanings given in Article III hereof.

    

    ARTICLE
III

    DEFINITIONS

    

    The following words and phrases when
used in this Plan with an initial capital letter, unless the context clearly
indicates otherwise, shall have the meanings set forth below. Wherever
appropriate, the masculine pronouns shall include the feminine pronouns and the
singular shall include the plural.

    

    3.01           “Advisory
Director” means a person appointed to serve in such capacity by the Board of
either KNBT or Keystone Nazareth Bank & Trust Company.

    

    3.02           “Beneficiary”
means the person or persons designated by an Optionee to receive any benefits
payable under the 2004 KNBT Plan in the event of such Optionee’s death. Such
person or persons were designated in writing on forms provided for that purpose
by the KNBT Committee charged with administering the 2004 KNBT Plan and may be
changed from time to time by similar written notice to the Committee. In the
absence of a written designation, the Beneficiary shall be the Optionee’s
surviving spouse, if any, or if none, his or her estate.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    

    3.03           “Board”
means the Board of Directors of National Penn.

    

    3.04           “Code”
means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.

    

    3.05           “Committee”
means the Compensation Committee of the Board, which shall be comprised of, at
all times, two or more directors appointed by the Board pursuant to Article IV
hereof, and each of whom shall be: (a) “non-employee directors” as such
term is defined under the rules and regulations adopted from time to time by the
Securities and Exchange Commission pursuant to Section 16(b) of the
Exchange Act; and (b) “outside directors” within the meaning of
Section 162(m) of the Code.

    

    3.06           “Director”
means a member of the Board of Directors of KNBT or a Subsidiary or any
successors thereto, including Non-Employee Directors as well as Officers and
Employees serving as Directors.

    

    3.07           “Disability”
means any physical or mental impairment which (a) qualifies an Optionee for
disability benefits under the applicable long-term disability plan maintained by
National Penn or a Subsidiary or (b) if no such plan applies, would qualify such
Optionee for disability benefits under the long-term disability plan maintained
by National Penn, if such individual were covered by that plan, as determined in
the sole discretion of the Committee.

    

    3.08           “Effective
Date” means February 1, 2008.

    

    3.09           “Employee”
means any person who was employed by KNBT or a Subsidiary, or was an Officer of
KNBT or a Subsidiary, but not including directors who were not also Officers of
or otherwise employed by KNBT or a Subsidiary.

    

    3.10           “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

    

    3.11           “Incentive
Stock Option” means any KNBT Option which qualified as an incentive stock option
within the meaning of Section 422 of the Code.

    

    3.12           “KNBT
Options” means rights to acquire KNBT common stock pursuant to the 2004 KNBT
Plan.

    

    3.13           “National
Penn Common Stock” means shares of the common stock of National Penn (without
par value) as described in National Penn’s Articles of
Incorporation.

    

    3.14           “Non-Employee
Director” means a member of the Board of Directors of KNBT or any Subsidiary,
including an Advisory Director of the Board of Directors of KNBT and/or any
Subsidiary, or a former Officer or Employee of KNBT and/or any Subsidiary
serving as a Director or Advisory Director, who was not then an Officer or
Employee of KNBT or any Subsidiary.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    
 

    3.15           “Non-Qualified
Option” means any KNBT Option which was not an Incentive Stock
Option.

    

    3.16           “Officer”
means an Employee whose position with KNBT or a Subsidiary was that of a
corporate officer, as determined by the Board of Directors of KNBT.

    

    3.17           “Options”
means one of the substitute incentive stock options or substitute non-qualified
options issued pursuant to the 2004 KNBT Plan and the Merger Agreement,
exercisable for a total of 1,740,055 shares of National Penn Common Stock,
subject to adjustment as provided in Section 6.01 hereof.

    

    3.18           “Optionee”
means an Employee or Non-Employee Director or former Employee or Non-Employee
Director to whom a KNBT Option was granted under the 2004 KNBT
Plan.

    

    3.19           “Retirement”
means:

    

    (a)             
With respect to Employees, a termination of employment which constitutes a
“retirement” at the “normal retirement age” or later under the National Penn
Capital Accumulation Plan or such other qualified pension benefit plan
maintained by National Penn as may be designated by the Board or the Committee,
or, if no such plan is applicable, which would constitute “retirement” under the
National Penn Capital Accumulation Plan, if such individual were a participant
in that plan.

    

    (b)             
With respect to Non-Employee Directors, retirement from service on the Board of
National Penn or a Subsidiary (including service on the KNBT Regional Board (as
defined in the Merger Agreement)) after reaching normal retirement age as
established by National Penn.

    

    3.20           
“Subsidiaries” means, prior to the Effective Date, those subsidiaries of KNBT
which met the definition of “subsidiary corporations” set forth in Section
424(f) of the Code, and, after the Effective Date, any subsidiary corporation of
National Penn within the meaning of Section 424(f) of the Code.

    

    ARTICLE
IV

    ASSUMPTION
OF 2004 KNBT PLAN BY NATIONAL PENN

    

    4.01.                       
Assumption of the 2004 KNBT Plan by National Penn.

    

    
      	
               
      

            	
              (a)

            	
              On
      the Effective Date, KNBT was merged with and into National Penn, with
      National Penn surviving such merger, under the name, articles of
      incorporation and bylaws of National Penn, pursuant to the Merger
      Agreement.

            

    

    

    
      	
               
      

            	
              (b)

            	
              On
      the Effective Date, pursuant to the Merger Agreement, each outstanding
      option to purchase KNBT common stock under the 2004 KNBT Plan that
      remained unexercised was vested pursuant to the terms of the 2004 KNBT
      Plan and automatically converted into a substitute option to purchase
      National Penn Common Stock.

            

    

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    
 

    
      	
               
      

            	
              (c)

            	
              The
      number of shares subject to each substitute stock option and the exercise
      price for those shares were adjusted to prevent any alteration of the
      economic value of the original option, as measured immediately prior to
      and immediately following the Effective
Date.

            

    

    

    
      	
               
      

            	
              (d)

            	
              Immediately
      prior to the Effective Date, there were Non-Qualified Options outstanding
      under the 2004 KNBT Plan for 837,123 shares of KNBT common stock, all of
      which were automatically converted into substitute options in accordance
      with the provisions of Section 2.05(a) of the Merger
      Agreement.  The number of shares of National Penn Common Stock
      subject to each substitute non-qualified option is equal to the number of
      shares of KNBT common stock originally subject to the KNBT Option
      immediately prior to the Effective Date times 1.03 (the “Exchange Ratio”
      as defined and set forth in Section 2.02 of the Merger Agreement), rounded
      down to the nearest share. As a result, Non-Qualified Options 100% vested
      and presently exercisable for 862,236 shares of National Penn Common Stock
      are outstanding.

            

    

    

    
      	
               
      

            	
              (e)

            	
              Immediately
      prior to the Effective Date, there were Incentive Stock Options
      outstanding under the 2004 KNBT Plan for 852,307 shares of KNBT common
      stock, all of which were automatically converted into substitute options
      in accordance with the provisions of Section 2.05(a) of the Merger
      Agreement.  The number of shares of National Penn Common Stock
      subject to each substitute incentive stock option is equal to the number
      of shares of KNBT common stock originally subject to the KNBT option
      immediately prior to the Effective Date times 1.03 (the “Exchange Ratio”
      as defined and set forth in Section 2.02 of the Merger Agreement) rounded
      down to the nearest share. As a result, Incentive Stock Options 100%
      vested and presently exercisable for 877,819 shares of National Penn
      Common Stock are outstanding.

            

    

    

    
      	
               
      

            	
              (f)

            	
              This
      Plan reflects National Penn’s assumption of the 2004 KNBT Plan and of the
      stock options outstanding under the 2004 KNBT Plan as of the Effective
      Date, on the terms and conditions provided in the Merger Agreement, and
      National Penn’s determination to delete provisions of the 2004 KNBT Plan
      inapplicable to such outstanding options.  This Plan amends and
      restates the 2004 Plan accordingly.

            

    

    

    ARTICLE
V

    ADMINISTRATION
OF THE PLAN

    

    5.01.        Administration.  The
Plan shall be administered and interpreted by the Committee.  The
Board may from time to time remove members from, or add members to, the
Committee.  Vacancies on the Committee, howsoever caused, shall be
filled by the Board.

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    5.02.        Powers of the
Committee.

    

    (a)           The
Committee shall have the authority to adopt, amend and rescind such rules,
regulations and procedures as, in its opinion, may be advisable in the
administration of the Plan. The interpretation and construction by the Committee
of any provisions of the Plan, any rule, regulation or procedure adopted by it
pursuant thereto or of any Option shall be final and binding in the absence of
action by the Board.  It may appoint one of its members to be chairman
and any person, whether or not a member, to be its secretary or agent. The
Committee shall report its actions and decisions to the Board at appropriate
times but in no event less than one time per calendar year.

    

    (b)           A
majority of the members of the Committee shall constitute a quorum for all
purposes.  The vote or written consent of a majority of the members of
the Committee on a particular matter shall constitute the act of the Committee
on such matter.  The Committee shall have the right to construe the
Plan and the Options, to correct defects and omissions and to reconcile
inconsistencies to the extent necessary to effectuate the Plan and the Options
and such action shall be final, binding and conclusive upon all parties
concerned.

    

    (c)           The
Committee does not have the authority to grant any stock options under the Plan
in addition to those Options set forth in Section 4.1 hereof.

    

    5.03         Liability.  No
member of the Committee or the Board shall be liable for any act or omission
(whether or not negligent) taken or omitted in good faith, or for the exercise
of any authority or discretion granted in connection with the Plan to a
Committee or the Board, or for the acts or omissions of any other members of a
Committee or the Board.

    

    ARTICLE
VI

    COMMON
STOCK COVERED BY THE PLAN

    

    6.01        Option Shares. The total number of shares
of National Penn Common Stock subject to Incentive Stock Options under the Plan
is 877,819 shares, and the total number of National Penn Common Stock subject to
Non-Qualified Options under the Plan is 862,236 shares, for a total aggregate
number of 1,740,055 shares of National Penn Common Stock subject to Options
under the Plan, subject to adjustment as provided in Article
VIII.  Any fractional share of National Penn Common Stock resulting
from the substitution of any individual KNBT Option shall be rounded down to the
nearest share.

    

    6.02        Source of Shares. The shares of National Penn
Common Stock issued under the Plan may be authorized but unissued shares,
treasury shares or shares purchased by National Penn on the open market or from
private sources for use under the Plan.

    

    ARTICLE
VII

    TERMS
AND CONDITIONS OF STOCK OPTION AWARDS

    

    7.01        No Further Eligible
Optionees.  Other than the persons who received Options on the
Effective Date pursuant to the Merger Agreement, no persons are eligible to
participate in the Plan.  Prior to the Effective Date, the persons
eligible to participate in the 2004 KNBT Plan were Employees or Non-Employee
Directors of KNBT and its Subsidiaries.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    
 

    7.02        Stock Option
Agreement. Each
Optionee will be notified in writing of the number of shares of National Penn
Common Stock subject to and the exercise price of each Incentive Stock Option
and/or Non-Qualified Option he or she holds pursuant to the Plan.  The
notification will also include such other terms, conditions, restrictions and
privileges as original KNBT Options contained, provided that they are not
inconsistent with the terms, conditions and provisions of this
Plan.

    

    7.03        Option Exercise
Price.

    

    (a)          The
per share exercise price of the National Penn Common Stock covered by each
Non-Statutory Option is equal to the quotient of: (i) the product of the
original per share exercise price of that option times1.03 (the “Exchange Ratio”
as defined and set forth in Section 2.02 of the Merger Agreement), provided that
such exercise price shall be rounded up to the nearest cent.

    

    (b)          The
per share exercise price of the National Penn Common Stock covered by each
Incentive Stock Option is equal to the quotient of: (i) the product of the
original per share exercise price of that option times1.03 (the “Exchange Ratio”
as defined and set forth in Section 2.02 of the Merger Agreement), provided that
such exercise price shall be rounded up to the nearest cent.

    

    (c)          Each
Incentive Stock Option shall be further adjusted as required by Sections 409A
and 424 of the Code so as not to constitute a modification, extension or renewal
of that option within the meaning of Sections 409A and 424(h) of the
Code.

    

    7.04        Termination of
Options.  No Option shall be exercisable after the first to
occur of the following:

    

    (a)          Expiration
of the Option term originally fixed by the Board of Directors of KNBT or the
Committee, as the case may be; or

    

    (b)          Expiration
of ten years from the date the KNBT Option was granted.

    

    7.05        Transfers.  No
Option granted under the Plan may be transferred except by will or by the laws
of descent and distribution.  During the lifetime of the Optionee,
such Option may be exercised only by him or her or his or her guardian or legal
representative.  Notwithstanding the foregoing, or any other provision
of this Plan, an Optionee who holds Non-Qualified Options may transfer such
Options to his or her immediate family or to a duly established trust for the
benefit of one or more of these individuals. For purposes hereof, ”immediate
family” includes but is not necessarily limited to, the Optionee’s spouse,
children (including step children), parents, grandchildren and great
grandchildren.  Options so transferred may thereafter be transferred
only to the Optionee who originally received the grant or to an individual or
trust to whom the Optionee could have initially transferred the Option pursuant
to this Section 7.05.  Options which are transferred pursuant to this
Section 7.05 shall be exercisable by the transferee according to the same terms
and conditions as applied to the Optionee.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    7.06        Exercise of
Options.  Options may be exercised in part or in whole and at
one time or from time to time. The procedures for exercise shall be set forth in
the written stock option agreement delivered in connection with the substitution
of each Option.

    

    7.07        Payment for Shares.
Payment in full of the purchase price for shares of National Penn Common Stock
purchased pursuant to the exercise of any Option shall be made to National Penn
upon exercise of the Option. All shares sold under the Plan shall be fully paid
and nonassessable.  Payment for shares may be made by the Optionee (i)
in cash or by check, (ii) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker to sell the shares and then
to properly deliver to National Penn the amount of sale proceeds to pay the
exercise price and any withholding taxes due, all in accordance with applicable
laws and regulations, or (iii) at the discretion of the Board or the Committee,
by delivering shares of National Penn Common Stock (including shares acquired
pursuant to the previous exercise of an Option) equal in fair market value to
the purchase price of the shares to be acquired pursuant to the Option, by
withholding some of the shares of National Penn Common Stock which are being
purchased upon exercise of an Option, or any combination of the foregoing. With
respect to subclause (iii) hereof, the shares of National Penn Common Stock
delivered to pay the purchase price must have been shares of National Penn
Common Stock acquired by the Optionee (or any beneficiary of an Optionee) which
shares have been held for a period of not less than six months.

    

    7.08        Voting and Dividend
Rights. No Optionee shall have any voting or dividend rights or other
rights of a shareholder in respect of any shares of National Penn Common Stock
covered by an Option prior to the time that his or her name is recorded on
National Penn’s shareholder ledger as the holder of record of such shares
acquired pursuant to the exercise of an Option.

    

    ARTICLE
VIII

    ADJUSTMENTS
FOR CAPITAL CHANGES

    

    8.01        Adjustments for Capital
Changes.  The aggregate number of shares of National Penn
Common Stock subject to Incentive Stock Options and Non-Qualified Options under
this Plan, the number of shares to which any Option relates, and the exercise
price per share of National Penn Common Stock under any Option shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of National Penn Common Stock issued subsequent to the
effective date of this Plan resulting from a split, subdivision or consolidation
of shares or any other capital adjustment, the payment of a stock dividend, or
other increase or decrease in such shares effected without receipt or payment of
consideration by National Penn. If, upon a merger, consolidation,
reorganization, liquidation, recapitalization or the like of National Penn, the
shares of National Penn’s Common Stock shall be exchanged for other securities
of National Penn or of another corporation, each Option shall be converted,
subject to the conditions herein stated, into the right to purchase or acquire
such number of shares of National Penn Common Stock or amount of other
securities of National Penn or such other corporation as were exchangeable for
the number of shares of National Penn Common Stock which such Optionee would
have been entitled to purchase or acquire except for such action, and
appropriate adjustments shall be made to the per share exercise price of
outstanding Options.

    

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    ARTICLE
IX

    AMENDMENT
AND TERMINATION OF THE PLAN

    

    9.01        Amendment and Termination of
the Plan.  The Board may, by resolution, at any time terminate
or amend the Plan with respect to any shares of National Penn Common Stock as to
which Options have not been granted, subject to any required shareholder
approval or any shareholder approval which the Board may deem to be advisable
for any reason, such as for the purpose of obtaining or retaining any statutory
or regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. The Board may not, without the
consent of the holder of an Option, alter or impair any Option previously
granted or awarded under this Plan except as provided by Article VIII hereof or
except as specifically authorized herein.

    

    Notwithstanding anything to the
contrary herein, in no event shall the Board without shareholder approval amend
the Plan or shall the Board or the Committee amend an Option in any manner that
effectively allows the repricing of any Option previously granted under the Plan
either through a reduction in the Exercise Price or through the cancellation and
regrant of a new Option in exchange for the cancelled Option (except as
permitted pursuant to Article VIII in connection with a change in National
Penn’s capitalization).

    

    ARTICLE
X

    EMPLOYMENT
RIGHTS

    

    10.1        No Right to
Employment.  Nothing contained in the Plan or in any instrument
under the Plan shall create any right on the part of any Employee or
Non-Employee Director of National Penn or a Subsidiary to continue in such
capacity.

    

    ARTICLE
XI

    WITHHOLDING

    

    11.01        Tax Withholding.
National Penn may withhold from any cash payment made under this Plan sufficient
amounts to cover any applicable minimum withholding and employment taxes, and if
the amount of such cash payment is insufficient, National Penn may require the
Optionee to pay to National Penn the amount required to be withheld as a
condition to delivering the shares acquired pursuant to an Option. National Penn
also may withhold or collect amounts with respect to a disqualifying disposition
of shares of National Penn Common Stock acquired pursuant to exercise of an
Incentive Stock Option.

    

    

    11.02        Methods of Tax
Withholding. The Board or the Committee is authorized to adopt rules,
regulations or procedures which provide for the satisfaction of an Optionee’s
tax withholding obligation by the retention of shares of National Penn Common
Stock to which the Optionee would otherwise be entitled pursuant to an Option
and/or by the Optionee's delivery of previously owned shares of National Penn
Common Stock or other property.

    

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    ARTICLE
XII

    EFFECTIVE
DATE OF THE PLAN; TERM

    

    12.01        Effective Date of the
Plan. This Plan shall be effective on the Effective Date.

    

    12.02        Term of Plan. If not
terminated by the Board at an earlier time, then, at such time as all Options
outstanding under the Plan have either been exercised, lapsed unexercised, or
been terminated, forfeited or cancelled as provided herein, the Plan shall
terminate.

    

    ARTICLE
XIII

    MISCELLANEOUS

    

    13.01        Governing Law. To the extent not governed
or preempted by Federal law, this Plan document, and any agreements issued
pursuant hereto, shall be construed, administered and enforced under the laws of
the Commonwealth of Pennsylvania

     

     

    
      33

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