Document:

ex10_3.htm

    Exhibit 10.3
CONFIDENTIAL TREATMENT

     

    Supplemental
Agreement No. 59

    

    to

    

    Purchase
Agreement No. 1810

    

    between

    

    THE
BOEING COMPANY

    

    and

    

    SOUTHWEST
AIRLINES CO.

    

    

    Relating
to Boeing Model 737-7H4 Aircraft (the Aircraft)

    

    

    

    THIS SUPPLEMENTAL AGREEMENT, entered
into as of March 20, 2008, by and between THE BOEING COMPANY, a Delaware
corporation with principal offices in Seattle, Washington, (Boeing) and
SOUTHWEST AIRLINES CO., a Texas corporation with principal offices in Dallas,
Texas (Buyer);

    

    WHEREAS, the parties hereto entered
into Purchase Agreement No. 1810 dated January 19, 1994, relating to Boeing
Model 737-7H4 aircraft (the Agreement) and;

     

                  
WHEREAS,
Buyer has agreed to exercise two (2) July 2009 Option Aircraft as Block T-W-2
Aircraft and;

    

    NOW THEREFORE, in consideration of the
mutual covenants herein contained, the parties agree to amend the Agreement as
follows:

    

    1.           The
Table of Contents of the Agreement is deleted in its entirety and a new Table of
Contents is attached hereto and incorporated into the Agreement by this
reference.

    

    2.           Table
1 is deleted in its entirety and replaced by a new Table
1 which is attached hereto and is incorporated into the Agreement by this
reference.

    

    ***Pursuant
to 17 CFR 240.24b-2, confidential information has been omitted and has been
filed separately with the Securities and Exchange Commission pursuant to a
Confidential Treatment Application filed with the Commission.

    
 

    
      
        P.A. 
No. 
1810                                                        
SA-59-1

      

      
        K/SWA

        
          

        

      

      
        
        

      

    

     

    3.           Table
2 is deleted in its entirety and replaced by a new Table
2 which is attached hereto and is incorporated into the Agreement by this
reference.

    

    4.           All
references in the Letter Agreements associated with Purchase Agreement No. 1810
shall be deemed to refer to the purchase by Buyer of four hundred six (406)
Model 737-7H4 Aircraft, eighty (80) Model 737-7H4 Option Aircraft and fifty-four
(54) Model 737-7H4 Purchase Right Aircraft, to the extent such reference is not
specifically addressed herein.

    

    5.           The
Advance Payment due upon signing assuming execution of this Supplemental
Agreement on or before March 31, 2008 is:

     

                 
***for two (2) July 2009 Block
T-W-2 Aircraft (***
each)

    

    Buyer
will pay the ***
directly to Boeing on or before March 31, 2008.

    

    The
Agreement will be deemed to be supplemented to the extent herein provided and as
so supplemented will continue in full force and effect.

    

    EXECUTED
IN DUPLICATE as of the day and year first above written.

    

    
      	
              THE
      BOEING COMPANY

            	
              SOUTHWEST
      AIRLINES CO.

            
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
              By:
      /s/ Nobuko
      Wiles

            	
              By:
      /s/ Laura
      Wright

            
	 
      	 
      
	
              Its:    Attorney-In-Fact

            	
              Its:
      SVP Finance
      & CFO

            

    

    

    

    
 

    
      
        P.A. 
No. 
1810                                                        
SA-59-2

      

      
        K/SWA

        
          

        

      

      
        
        

      

    

     

    TABLE OF
CONTENTS

    

    
      	 
      	 
      	
              Page

            	
              SA

            
	 
      	 
      	
              Number

            	
              Number

            
	 
      	 
      	 
      	 
      
	
              ARTICLES

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
              1.

            	
              Subject
      Matter of Sale

            	
              1-1

            	
              SA-13

            
	 
      	 
      	 
      	 
      
	
              2.

            	
              Delivery,
      Title and Risk

            	 
      	 
      
	 
      	
              of
      Loss

            	
              2-1

            	
              SA-28

            
	 
      	 
      	 
      	 
      
	
              3.

            	
              Price
      of Aircraft

            	
              3-1

            	
              SA-47

            
	 
      	 
      	 
      	 
      
	
              4.

            	
              Taxes

            	
              4-1

            	 
      
	 
      	 
      	 
      	 
      
	
              5.

            	
              Payment

            	
              5-1

            	 
      
	 
      	 
      	 
      	 
      
	
              6.

            	
              Excusable
      Delay

            	
              6-1

            	 
      
	 
      	 
      	 
      	 
      
	
              7.

            	
              Changes
      to the Detail

            	
               
      

            	 
      
	 
      	
              Specification

            	
              7-1

            	
              SA-1

            
	 
      	 
      	 
      	 
      
	
              8.

            	
              Federal
      Aviation Requirements and

            	 
      	 
      
	 
      	
              Certificates
      and Export License

            	
              8-1

            	 
      
	 
      	 
      	 
      	 
      
	
              9.

            	
              Representatives,
      Inspection,

            	 
      	 
      
	 
      	
              Flights
      and Test Data

            	
              9-1

            	 
      
	 
      	 
      	 
      	 
      
	
              10.

            	
              Assignment,
      Resale or Lease

            	
              10-1

            	 
      
	 
      	 
      	 
      	 
      
	
              11.

            	
              Termination
      for Certain Events

            	
              11-1

            	 
      
	 
      	 
      	 
      	 
      
	
              12.

            	
              Product
      Assurance; Disclaimer and

            	 
      	 
      
	 
      	
              Release;
      Exclusion of Liabilities;

            	 
      	 
      
	 
      	
              Customer
      Support; Indemnification

            	 
      	 
      
	 
      	
              and
      Insurance

            	
              12-1

            	 
      
	 
      	 
      	 
      	 
      
	
              13.

            	
              Buyer
      Furnished Equipment and

            	 
      	 
      
	 
      	
              Spare
      Parts

            	
              13-1

            	 
      
	 
      	 
      	 
      	 
      
	
              14.

            	
              Contractual
      Notices and Requests

            	
              14-1

            	 
      
	 
      	 
      	 
      	 
      
	
              15.

            	
              Miscellaneous

            	
              15-1

            	 
      

    

    

     

    
      
        P.A. 
No. 
1810                                                                                                                                         
i                                                                                                                                                  
SA-59

      

      
        K/SWA

        
          

        

      

      
        
        

      

    

    
TABLE OF
CONTENTS CON'T

    

    
      	 
      	 
      	
              SA

            
	 
      	 
      	
              Number

            
	 
      	 
      	 
      
	
              TABLE

            	 
      	 
      
	 
      	 
      	 
      
	
              1.

            	
              Aircraft
      Information Table

            	
              SA-59

            
	 
      	 
      	 
      
	
              2.

            	
              Option
      Aircraft Information Table

            	
              SA-59

            
	 
      	 
      	 
      
	
              EXHIBITS

            	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              A

            	
              Aircraft
      Configuration

            	
              SA-47

            
	 
      	 
      	 
      
	
              B

            	
              Product
      Assurance Document

            	
              SA-1

            
	 
      	 
      	 
      
	
              C

            	
              Customer
      Support Document

            	 
      
	 
      	 
      	 
      
	
              D

            	
              Price
      Adjustments Due to Economic Fluctuations - Aircraft

            	 
      
	 
      	 
      	 
      
	
              E

            	
              Buyer
      Furnished Equipment

            	 
      
	 
      	
              Provisions
      Document

            	 
      
	 
      	 
      	 
      
	
              F

            	
              Defined
      Terms Document

            	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              LETTER AGREEMENTS

            	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              1810-1

            	
              Waiver
      of Aircraft Demonstration Flight

            	 
      

    

    

    

    
      
        P.A. 
No. 
1810                                                                                                                                         
ii                                                                                                                                                 
SA-59

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE OF
CONTENTS CON'T

    

    
      	 
      	 
      	
              SA

            
	 
      	 
      	
              Number

            
	
              RESTRICTED LETTER
AGREEMENTS

            	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              6-1162-RLL-932R2

            	
              Promotional
      Support

            	
              SA-13

            
	 
      	 
      	 
      
	
              6-1162-RLL-933R20

            	
              Option
      Aircraft

            	
              SA-47

            
	 
      	 
      	 
      
	
              6-1162-RLL-934R3

            	
              Disclosure
      of Confidential

            	
              SA-14

            
	 
      	
              Information

            	 
      
	 
      	 
      	 
      
	
              6-1162-RLL-935R1

            	
              Performance
      Guarantees

            	
              SA-1

            
	 
      	 
      	 
      
	
              6-1162-NIW-890

            	
              ***

            	
              SA-39

            
	 	 	 
	
              6-1162-RLL-936R4

            	
              Certain
      Contractual Matters

            	
              SA-4

            
	 
      	 
      	 
      
	
              6-1162-RLL-937

            	
              Alternate
      Advance Payment Schedule

            	 
      
	 
      	 
      	 
      
	
              6-1162-RLL-938

            	
              ***

            	 
      
	 
      	 
      	 
      
	
              6-1162-RLL-939R1

            	
              Certification
      Flight Test Aircraft

            	
              SA-1

            
	 
      	 
      	 
      
	
              6-1162-RLL-940R1

            	
              Training
      Matters

            	
              SA-1

            
	 
      	 
      	 
      
	
              6-1162-RLL-941R2

            	
              Other
      Matters

            	
              SA-13

            
	 
      	 
      	 
      
	
              6-1162-RLL-942

            	
              Open
      Configuration Matters

            	 
      
	 
      	 
      	 
      
	
              6-1162-RLL-943R1

            	
              Substitution
      Rights

            	
              SA-6

            
	 
      	 
      	 
      
	
              6-1162-RLL-944

            	
              ***

            	 
      
	 
      	 
      	 
      
	
              6-1162-RLL-945

            	
              Comparison
      of 737-7H4 and 737-3H4

            	 
      
	 
      	
              Block
      Fuel Burn

            	 
      
	 
      	 
      	 
      
	
              6-1162-RLL-1855R3

            	
              Additional
      Contractual Matters

            	
              SA-4

            
	 
      	 
      	 
      
	
              6-1162-RLL-1856

            	
              ***

            	
              SA-1

            
	 
      	 
      	 
      
	
              6-1162-RLL-1857

            	
              Service
      Ready Validation Program

            	
              SA-1

            
	 
      	
              Field
      Test

            	 
      
	 
      	 
      	 
      
	
              6-1162-RLL-1858R1

            	
              Escalation
      Matters

            	
              SA-4

            

    

    

     

    
      
        P.A. 
No. 
1810                                                                                                                                         
iii                                                                                                                                                
SA-59

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    TABLE OF
CONTENTS CON'T

     

    
      	 
      	 
      	
                  SA

            
	 
      	 
      	
              Number

            
	
              RESTRICTED LETTER
AGREEMENTS

            	 
      
	 
      	 
      	 
      
	
              6-1162-RLL-2036

            	
              Amortization
      of Costs for

            	 
      
	 
      	
              Customer
      Unique Changes

            	
              SA-1

            
	 
      	 
      	 
      
	
              6-1162-RLL-2037

            	
              Reconciliation
      of the Aircraft

            	
              SA-1

            
	 
      	
              Basic
      Price

            	 
      
	 
      	 
      	 
      
	
              6-1162-RLL-2073

            	
              Maintenance
      Training Matters

            	
              SA-1

            
	 
      	 
      	 
      
	
              6-1162-KJJ-054R1

            	
              Business
      Matters

            	 
      
	 
      	 
      	 
      
	
              6-1162-KJJ-055R1

            	
              Structural
      Matters

            	
              SA-25

            
	 
      	 
      	 
      
	
              6-1162-KJJ-056

            	
              Noise
      and Emission Matters

            	
              SA-13

            
	 
      	 
      	 
      
	
              6-1162-KJJ-057

            	
              Product
      Development Matters

            	
              SA-13

            
	 
      	 
      	 
      
	
              6-1162-KJJ-058

            	
              Additional
      Substitution Rights

            	
              SA-13

            
	 
      	 
      	 
      
	
              6-1162-KJJ-150

            	
              Flight
      Control Computer & Mode

            	
              SA-14

            
	 
      	
              Control
      Panel Spares Matter

            	 
      
	 
      	 
      	 
      
	
              6-1162-MSA-185R3

            	
              Delivery
      Change Contractual

            	
              SA-21

            
	 
      	
              Matters

            	 
      
	 
      	 
      	 
      
	
              6-1162-JMG-669R8

            	
              ***

            	
              SA-54

            
	 
      	 
      	 
      
	
              6-1162-JMG-747R1

            	
              ***

            	
              SA-36

            
	 
      	 
      	 
      
	
              6-1162-CHL-217

            	
              Rescheduled
      Flight Test Aircraft

            	
              SA-32

            
	 
      	 
      	 
      
	
              6-1162-NIW-606R1

            	
              ***

            	
              SA-36

            
	 
      	 
      	 
      
	
              6-1162-NIW-640

            	
              Early
      Delivery of Two April 2004

            	
              SA-35

            
	 
      	
              Aircraft

            	 
      
	 
      	 
      	 
      
	
              6-1162-NIW-889

            	
              Warranty
      - Exterior Color Schemes

            	
              SA-39

            
	 
      	
              and
      Markings for YA143 and on

            	 
      
	 
      	 
      	 
      
	
              6-1162-NIW-1142

            	
              ***

            	
              SA-43

            
	 
      	 
      	 
      
	
              6-1162-NIW-1369

            	
              ***

            	
              SA-46

            

    

    

    

    
      
        P.A. 
No. 
1810                                                                                                                                         
iv
                                                                                                                                               
SA-59

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Table
1 to

    Purchase
Agreement No. 1810

    Aircraft
Information Table

    

    
      	 
      	 
      	
              Base
      Aircraft Price

            	
              Special
      Features

            	
              Aircraft
      Basic Price

            	
              Base
      Year Dollars

            
	
              Block
      A, B, C, D & E Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1992

            
	
              Block
      F & G Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1992

            
	
              Block
      H Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1992

            
	
              Block
      I Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1992

            
	
              Block
      J Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1992

            
	
              Block
      K Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1992

            
	
              Block
      K-W Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1992

            
	
              Block
      L Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1992

            
	
              Block
      T Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1999

            
	
              Block
      T-W Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1999

            
	
              Block
      T-W-1 / T-W-1a Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1999

            
	
              Block
      T-W-2 / T-W-2a Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1999

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              Block
      K-W Aircraft: Block K airplanes with production winglets
      installation

            	 
      	 
      
	
              Block
      T-W Aircraft: Block T airplanes with production winglets
      installation

            	 
      	 
      
	
              Block
      T-W-1 / T-W-1a  Aircraft: Firm Aircraft contracted to deliver
      from May 1, 2006 through June 2008 at the signing

            
	
               of
      SA-47  -- (T-W-1a Aircraft -- Advance Payment Schedule per LA
      6-1162-JGM-669)

            	 
      	 
      
	
              Block
      T-W-2 / T-W-2a Aircraft: U-W-1 Option Aircraft which became Firm Aircraft
      after signing of SA-47 and

            	 
      
	
              Firm
      Aircraft contracted to deliver in July 2008 forward at the signing of SA47
      --

            	 
      	 
      
	
              (T-W-2a
      Aircraft -- Advance Payment Schedule per LA
6-1162-JGM-669)

            	 
      	 
      

    

    

    

    
 

    
      
        SWA                                                                                                                                                      
Page
1                                                                                                                                             
SA-59

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Table
1 to

    Purchase
Agreement No. 1810

    Aircraft
Information Table

    

    
      	 
      	 
      	 
      	
              Escalation
      Estimate

            	 
      
	
              Delivery

            	
              Number
      of

            	
              Aircraft

            	
              Adv
      Payment Base

            	 
      
	
              Date

            	
              Aircraft

            	
              Block

            	
              Price
      Per A/P

            	
              Serial
      Number

            
	
              Dec-2000

            	
              2

            	
              E

            	
              ***

            	 
      
	
              Jan-2001

            	
              1

            	
              E

            	
              ***

            	 
      
	
              Feb-2001

            	
              1

            	
              E

            	
              ***

            	 
      
	
              Mar-2001

            	
              2

            	
              E

            	
              ***

            	 
      
	
              Jun-2001

            	
              3

            	
              E

            	
              ***

            	 
      
	
              Sep-2001

            	
              3

            	
              E

            	
              ***

            	 
      
	
              Oct-1998

            	
              1

            	
              F

            	
              ***

            	 
      
	
              Nov-1998

            	
              2

            	
              F

            	
              ***

            	 
      
	
              Dec-1998

            	
              2

            	
              F

            	
              ***

            	 
      
	
              Mar-1999

            	
              2

            	
              G

            	
              ***

            	 
      
	
              Jun-1999

            	
              2

            	
              H

            	
              ***

            	 
      
	
              Jul-1999

            	
              1

            	
              H

            	
              ***

            	 
      
	
              Aug-1999

            	
              1

            	
              H

            	
              ***

            	 
      
	
              Sep-1999

            	
              2

            	
              H

            	
              ***

            	 
      
	
              Oct-1999

            	
              1

            	
              H

            	
              ***

            	 
      
	
              Mar-2000

            	
              1

            	
              H

            	
              ***

            	 
      
	
              Apr-2000

            	
              2

            	
              H

            	
              ***

            	 
      
	
              Sep-2000

            	
              1

            	
              H

            	
              ***

            	 
      
	
              Oct-2000

            	
              2

            	
              H

            	
              ***

            	 
      
	
              Mar-2001

            	
              2

            	
              H

            	
              ***

            	 
      
	
              Apr-2001

            	
              1

            	
              H

            	
              ***

            	 
      
	
              Oct-2001

            	
              3

            	
              H

            	
              ***

            	 
      
	
              Nov-2001

            	
              2

            	
              I

            	
              ***

            	 
      
	
              Dec-2001

            	
              1

            	
              I

            	
              ***

            	 
      
	
              Jan-2002

            	
              1

            	
              I

            	
              ***

            	 
      
	
              Mar-2002

            	
              4

            	
              I

            	
              ***

            	 
      
	
              Apr-2002

            	
              2

            	
              I

            	
              ***

            	 
      
	
              Dec-2002

            	
              2

            	
              I

            	
              ***

            	 
      
	
              May-2003

            	
              1

            	
              I

            	
              ***

            	 
      
	
              Jun-2003

            	
              2

            	
              I

            	
              ***

            	 
      
	
              Jul-2003

            	
              1

            	
              I

            	
              ***

            	 
      
	
              Aug-2003

            	
              1

            	
              I

            	
              ***

            	 
      
	
              Sep-2003

            	
              3

            	
              I

            	
              ***

            	 
      
	
              Nov-2002

            	
              1

            	
              J

            	
              ***

            	 
      
	
              Dec-2002

            	
              1

            	
              J

            	
              ***

            	 
      
	
              Nov-2003

            	
              2

            	
              J

            	
              ***

            	 
      
	
              Dec-2003

            	
              2

            	
              J

            	
              ***

            	 
      
	
              Mar-2004

            	
              1

            	
              J

            	
              ***

            	 
      
	
              Mar-2004

            	
              1

            	
              K

            	
              ***

            	 
      
	
              Apr-2004

            	
              3

            	
              K

            	
              ***

            	 
      
	
              May-2004

            	
              1

            	
              K

            	
              ***

            	 
      
	
              Jun-2004

            	
              2

            	
              K

            	
              ***

            	 
      
	
              Jul-2004

            	
              2

            	
              K

            	
              ***

            	 
      
	
              Sep-2004

            	
              1

            	
              K-W

            	
              ***

            	 
      
	
              Oct-2004

            	
              4

            	
              K-W

            	
              ***

            	 
      
	
              Oct-1999

            	
              1

            	
              L

            	
              ***

            	 
      
	
              Nov-1999

            	
              2

            	
              L

            	
              ***

            	 
      
	
              Dec-1999

            	
              1

            	
              L

            	
              ***

            	 
      
	
              Jun-2000

            	
              3

            	
              L

            	
              ***

            	 
      
	
              Jul-2000

            	
              3

            	
              L

            	
              ***

            	 
      
	
              Sep-2000

            	
              1

            	
              L

            	
              ***

            	 
      

    

    
 

    
      
        SWA                                                                                                                                                      
Page 2                                                                                                                                             
SA-59

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Table
1 to

    Purchase
Agreement No. 1810

    Aircraft
Information Table

    

    
      	
              Oct-2000

            	
              1

            	
              L

            	
              ***

            	 
      
	
              Nov-2000

            	
              4

            	
              L

            	
              ***

            	 
      
	
              Dec-2000

            	
              1

            	
              L

            	
              ***

            	 
      
	
              Jan-2001

            	
              1

            	
              L

            	
              ***

            	 
      
	
              Feb-2001

            	
              1

            	
              L

            	
              ***

            	 
      
	
              Jul-2001

            	
              1

            	
              L

            	
              ***

            	 
      
	
              Sep-2001

            	
              1

            	
              L

            	
              ***

            	 
      
	
              Oct-2001

            	
              1

            	
              L

            	
              ***

            	 
      
	
              Mar-2003

            	
              2

            	
              L

            	
              ***

            	 
      
	
              Jul-2003

            	
              1

            	
              L

            	
              ***

            	 
      
	
              Aug-2003

            	
              2

            	
              L

            	
              ***

            	 
      
	
              Nov-2001

            	
              1

            	
              T

            	
              ***

            	 
      
	
              Feb-2002

            	
              1

            	
              T

            	
              ***

            	 
      
	
              Jan-2004

            	
              2

            	
              T

            	
              ***

            	 
      
	
              Feb-2004

            	
              1

            	
              T

            	
              ***

            	 
      
	
              Apr-2004

            	
              3

            	
              T

            	
              ***

            	 
      
	
              May-2004

            	
              1

            	
              T

            	
              ***

            	 
      
	
              Jun-2004

            	
              6

            	
              T

            	
              ***

            	 
      
	
              Jul-2004

            	
              2

            	
              T

            	
              ***

            	 
      
	
              Aug-2004

            	
              6

            	
              T-W

            	
              ***

            	 
      
	
              Sep-2004

            	
              4

            	
              T-W

            	
              ***

            	 
      
	
              Oct-2004

            	
              0

            	
              T-W

            	
              ***

            	 
      
	
              Nov-2004

            	
              3

            	
              T-W

            	
              ***

            	 
      
	
              Dec-2004

            	
              3

            	
              T-W

            	
              ***

            	 
      
	
              Jan-2005

            	
              5

            	
              T-W

            	
              ***

            	 
      
	
              Feb-2005

            	
              3

            	
              T-W

            	
              ***

            	 
      
	
              Mar-2005

            	
              4

            	
              T-W

            	
              ***

            	 
      
	
              Apr-2005

            	
              4

            	
              T-W

            	
              ***

            	 
      
	
              May-2005

            	
              2

            	
              T-W

            	
              ***

            	 
      
	
              Jun-2005

            	
              4

            	
              T-W

            	
              ***

            	 
      
	
              Jul-2005

            	
              2

            	
              T-W

            	
              ***

            	 
      
	
              Aug-2005

            	
              2

            	
              T-W

            	
              ***

            	 
      
	
              Sep-2005

            	
              3

            	
              T-W

            	
              ***

            	 
      
	
              Oct-2005

            	
              2

            	
              T-W

            	
              ***

            	 
      
	
              Nov-2005

            	
              2

            	
              T-W

            	
              ***

            	 
      
	
              Dec-2005

            	
              1

            	
              T-W

            	
              ***

            	 
      
	
              Jan-2006

            	
              1

            	
              T-W

            	
              ***

            	 
      
	
              Feb-2006

            	
              4

            	
              T-W

            	
              ***

            	 
      
	
              Mar-2006

            	
              3

            	
              T-W

            	
              ***

            	 
      
	
              Apr-2006

            	
              2

            	
              T-W

            	
              ***

            	 
      
	
              May-2006

            	
              5

            	
              T-W-1

            	
              ***

            	 
      
	
              Jun-2006

            	
              5

            	
              T-W-1

            	
              ***

            	 
      
	
              Jul-2006

            	
              3

            	
              T-W-1

            	
              ***

            	 
      
	
              Aug-2006

            	
              3

            	
              T-W-1

            	
              ***

            	 
      
	
              Sep-2006

            	
              3

            	
              T-W-1

            	
              ***

            	 
      
	
              Oct-2006

            	
              1

            	
              T-W-1

            	
              ***

            	 
      
	
              Nov-2006

            	
              2

            	
              T-W-1

            	
              ***

            	 
      
	
              Dec-2006

            	
              2

            	
              T-W-1

            	
              ***

            	 
      
	
              Jan-2007

            	
              2

            	
              T-W-1

            	
              ***

            	 
      
	
              Feb-2007

            	
              3

            	
              T-W-1

            	
              ***

            	 
      
	
              Mar-2007

            	
              2

            	
              T-W-1

            	
              ***

            	 
      
	
              Apr-2007

            	
              3

            	
              T-W-1

            	
              ***

            	 
      

    

     

     

    
      
        SWA                                                                                                                                                      
Page 3                                                                                                                                             
SA-59

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Table
1 to

    Purchase
Agreement No. 1810

    Aircraft
Information Table

    

    
      	
              May-2007

            	
              3

            	
              T-W-1

            	
              ***

            	 
      
	
              Jun-2007

            	
              2

            	
              T-W-1

            	
              ***

            	 
      
	
              Jun-2007

            	
              1

            	
              T-W-1a

            	
              ***

            	
              36528

            
	
              Jul-2007

            	
              2

            	
              T-W-1

            	
              ***

            	 
      
	
              Jul-2007

            	
              1

            	
              T-W-1a

            	
              ***

            	
              36610

            
	
              Aug-2007

            	
              2

            	
              T-W-1

            	
              ***

            	 
      
	
              Aug-2007

            	
              3

            	
              T-W-1a

            	
              ***

            	
              36611,
      36632 & 36633

            
	
              Sep-2007

            	
              2

            	
              T-W-1

            	
              ***

            	 
      
	
              Sep-2007

            	
              1

            	
              T-W-1a

            	
              ***

            	
              36612

            
	
              Oct-2007

            	
              3

            	
              T-W-1

            	
              ***

            	 
      
	
              Oct-2007

            	
              1

            	
              T-W-1a

            	
              ***

            	
              36613

            
	
              Nov-2007

            	
              1

            	
              T-W-1

            	
              ***

            	 
      
	
              Nov-2007

            	
              1

            	
              T-W-1a

            	
              ***

            	
              36614

            
	
              Dec-2007

            	
              2

            	
              T-W-1

            	
              ***

            	 
      
	
              Dec-2007

            	
              1

            	
              T-W-1a

            	
              ***

            	
              36615

            
	
              Jan-2008

            	
              1

            	
              T-W-1

            	
              ***

            	 
      
	
              Jan-2008

            	
              2

            	
              T-W-1a

            	
              ***

            	
              36616
      & 36617

            
	
              Jan-2008

            	
              1

            	
              T-W-2

            	
              ***

            	
              36887

            
	
              Feb-2008

            	
              1

            	
              T-W-1

            	
              ***

            	 
      
	
              Feb-2008

            	
              3

            	
              T-W-1a

            	
              ***

            	
              36618,
      36619 & 36620

            
	
              Mar-2008

            	
              1

            	
              T-W-1

            	
              ***

            	 
      
	
              Mar-2008

            	
              2

            	
              T-W-1a

            	
              ***

            	
              36621
      & 36622

            
	
              Mar-2008

            	
              1

            	
              T-W-2

            	
              ***

            	
              36888

            
	
              Apr-2008

            	
              1

            	
              T-W-1

            	
              ***

            	 
      
	
              Apr-2008

            	
              2

            	
              T-W-1a

            	
              ***

            	
              36623
      & 36624

            
	
              May-2008

            	
              1

            	
              T-W-1

            	
              ***

            	 
      
	
              May-2008

            	
              2

            	
              T-W-1a

            	
              ***

            	
              36625
      & 36626

            
	
              Jun-2008

            	
              1

            	
              T-W-1

            	
              ***

            	 
      
	
              Jun-2008

            	
              2

            	
              T-W-1a

            	
              ***

            	
              36627
      & 36628

            
	
              Jul-2008

            	
              2

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jul-2008

            	
              2

            	
              T-W-2

            	
              ***

            	
              36889
      & 36890

            
	
              Aug-2008

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Oct-2008

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Nov-2008

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Dec-2008

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jan-2009

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Feb-2009

            	
              2

            	
              T-W-2a

            	
              ***

            	 
      
	
              Mar-2009

            	
              2

            	
              T-W-2a

            	
              ***

            	 
      
	
              Apr-2009

            	
              2

            	
              T-W-2a

            	
              ***

            	 
      
	
              Apr-2009

            	
              2

            	
              T-W-2

            	
              ***

            	
              36899
      & 36900

            
	
              May-2009

            	
              2

            	
              T-W-2a

            	
              ***

            	 
      
	
              May-2009

            	
              1

            	
              T-W-2

            	
              ***

            	
              36901

            
	
              Jun-2009

            	
              2

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jun-2009

            	
              1

            	
              T-W-2

            	
              ***

            	
              36902

            
	
              Jul-2009

            	
              2

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jul-2009

            	
              2

            	
              T-W-2

            	
              ***

            	
              36903,
      36904

            
	
              Aug-2009

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Sep-2009

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Oct-2009

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Nov-2009

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Dec-2009

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      

    

    
 

    
      
        SWA                                                                                                                                                      
Page 4                                                                                                                                             
SA-59

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Table
1 to

    Purchase
Agreement No. 1810

    Aircraft
Information Table

    

    
      	
              Jan-2010

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Feb-2010

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Mar-2010

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Apr-2010

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              May-2010

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jun-2010

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jul-2010

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Aug-2010

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Sep-2010

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Oct-2010

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jan-2011

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Feb-2011

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Mar-2011

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Apr-2011

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              May-2011

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jun-2011

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jul-2011

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Aug-2011

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Sep-2011

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Oct-2011

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jan-2012

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Feb-2012

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Mar-2012

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Apr-2012

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              May-2012

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jun-2012

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jul-2012

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Aug-2012

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Sep-2012

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Oct-2012

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Jan-2013

            	
              1

            	
              T-W-2

            	
              ***

            	
              36891

            
	
              Jan-2013

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Feb-2013

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Mar-2013

            	
              1

            	
              T-W-2a

            	
              ***

            	 
      
	
              Mar-2013

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Apr-2013

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              May-2013

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Jun-2013

            	
              2

            	
              T-W-2

            	
              ***

            	 
      
	
              Jul-2013

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Aug-2013

            	
              2

            	
              T-W-2

            	
              ***

            	 
      
	
              Sep-2013

            	
              2

            	
              T-W-2

            	
              ***

            	 
      
	
              Oct-2013

            	
              2

            	
              T-W-2

            	
              ***

            	 
      
	
              Nov-2013

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Dec-2013

            	
              2

            	
              T-W-2

            	
              ***

            	 
      
	
              Jan-2014

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Feb-2014

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Mar-2014

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Apr-2014

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              May-2014

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Jun-2014

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Jul-2014

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Aug-2014

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Sep-2014

            	
              1

            	
              T-W-2

            	
              ***

            	 
      
	
              Oct-2014

            	
              1

            	
              T-W-2

            	
              ***

            	 
      

    

     

    

    

    
      
        SWA                                                                                                                                                      
Page 6                                                                                                                                             
SA-59

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Table
2 to Purchase Agreement No. 1810

    (Letter
Agreement No. 6-1162-RLL-933R20)

    Option
Aircraft Information Table

    

    
      	
              Price
      Description of Option Aircraft:

            	 
      	 
      	 
      
	 
      	 
      	
              Base
      Aircraft Price

            	
              Special
      Features

            	
              Aircraft
      Basic Price

            	
              Base
      Year Dollars

            
	
              Block
      U Option Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1999

            
	
              (without
      Winglets)

            	 
      	 
      	 
      	 
      
	
              Block
      U-W Option Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1999

            
	
              (with
      Winglets)

            	 
      	 
      	 
      	 
      
	
              Block
      U-W-1 Option Aircraft

            	
              ***

            	
              ***

            	
              ***

            	
              July
      1999

            
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
              Delivery
      of Purchase Right
      Aircraft:

            	
              Quantity

            	
              54

            	 
      
	
              Delivery
      Period of Purchase Right
      Aircraft:

            	
              Complete
      delivery not later than Dec. 31, 2014

            
	
              Condition
      of Offer for Purchase Right
      Aircraft:

            	
              Subject
      to Available Position

            	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
              Remaining
      Option Aircraft:

            	 
      	
              80

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      

    

    

     

    
      
        SWA                                                                                                                                                      
Page
1                                                                                                                                             
SA-59

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Table
2 to Purchase Agreement No. 1810

    (Letter
Agreement No. 6-1162-RLL-933R20)

    Option
Aircraft Information Table

    

    
      	
              Aircraft

            	
              Number
      of

            	
              Option

            	
              Adv
      Payment Base

            	 
      
	
              Delivery

            	
              Option

            	
              Aircraft

            	
              Price
      Per

            	 
      
	
              Mo.
      & Yr.

            	
              Aircraft

            	
              Block

            	
              Option
      Aircraft

            	
              Option
      Exercise

            
	
              Aug-2009

            	
              1

            	
              U-W-1

            	
              ***

            	
              April
      1, 2008

            
	
              Oct-2009

            	
              1

            	
              U-W-1

            	
              ***

            	
              June
      2, 2008

            
	
              Nov-2009

            	
              1

            	
              U-W-1

            	
              ***

            	
              July
      1, 2008

            
	
              Dec-2009

            	
              1

            	
              U-W-1

            	
              ***

            	
              August
      1, 2008

            
	
              Jan-2010

            	
              1

            	
              U-W-1

            	
              ***

            	
              September
      1, 2008

            
	
              Feb-2010

            	
              1

            	
              U-W-1

            	
              ***

            	
              October
      1, 2008

            
	
              Mar-2010

            	
              1

            	
              U-W-1

            	
              ***

            	
              November
      3, 2008

            
	
              Apr-2010

            	
              1

            	
              U-W-1

            	
              ***

            	
              December
      1, 2008

            
	
              May-2010

            	
              2

            	
              U-W-1

            	
              ***

            	
              January
      1, 2009

            
	
              Jun-2010

            	
              3

            	
              U-W-1

            	
              ***

            	
              February
      2, 2009

            
	
              Jul-2010

            	
              2

            	
              U-W-1

            	
              ***

            	
              March
      2, 2009

            
	
              Aug-2010

            	
              2

            	
              U-W-1

            	
              ***

            	
              April
      1, 2009

            
	
              Sep-2010

            	
              2

            	
              U-W-1

            	
              ***

            	
              May
      1, 2009

            
	
              Oct-2010

            	
              3

            	
              U-W-1

            	
              ***

            	
              June
      1, 2009

            
	
              Nov-2010

            	
              3

            	
              U-W-1

            	
              ***

            	
              July
      1, 2009

            
	
              Dec-2010

            	
              3

            	
              U-W-1

            	
              ***

            	
              August
      3, 2009

            
	
              Jan-2011

            	
              1

            	
              U-W-1

            	
              ***

            	
              September
      1, 2009

            
	
              Feb-2011

            	
              2

            	
              U-W-1

            	
              ***

            	
              October
      1, 2009

            
	
              Mar-2011

            	
              1

            	
              U-W-1

            	
              ***

            	
              November
      2, 2009

            
	
              Apr-2011

            	
              1

            	
              U-W-1

            	
              ***

            	
              December
      1, 2009

            
	
              May-2011

            	
              2

            	
              U-W-1

            	
              ***

            	
              January
      1, 2010

            
	
              Jun-2011

            	
              2

            	
              U-W-1

            	
              ***

            	
              February
      1, 2010

            
	
              Jul-2011

            	
              2

            	
              U-W-1

            	
              ***

            	
              March
      1, 2010

            
	
              Aug-2011

            	
              2

            	
              U-W-1

            	
              ***

            	
              April
      1, 2010

            
	
              Sep-2011

            	
              2

            	
              U-W-1

            	
              ***

            	
              May
      3, 2010

            
	
              Oct-2011

            	
              2

            	
              U-W-1

            	
              ***

            	
              June
      1, 2010

            
	
              Nov-2011

            	
              3

            	
              U-W-1

            	
              ***

            	
              July
      1, 2010

            
	
              Dec-2011

            	
              2

            	
              U-W-1

            	
              ***

            	
              August
      2, 2010

            
	
              Jan-2012

            	
              3

            	
              U-W-1

            	
              ***

            	
              September
      1, 2010

            
	
              Feb-2012

            	
              3

            	
              U-W-1

            	
              ***

            	
              October
      1, 2010

            
	
              Mar-2012

            	
              2

            	
              U-W-1

            	
              ***

            	
              November
      1, 2010

            
	
              Apr-2012

            	
              3

            	
              U-W-1

            	
              ***

            	
              December
      1, 2010

            
	
              May-2012

            	
              3

            	
              U-W-1

            	
              ***

            	
              January
      3, 2011

            
	
              Jun-2012

            	
              3

            	
              U-W-1

            	
              ***

            	
              February
      1, 2011

            
	
              Jul-2012

            	
              2

            	
              U-W-1

            	
              ***

            	
              March
      1, 2011

            
	
              Aug-2012

            	
              2

            	
              U-W-1

            	
              ***

            	
              April
      1, 2011

            
	
              Sep-2012

            	
              2

            	
              U-W-1

            	
              ***

            	
              May
      2, 2011

            
	
              Oct-2012

            	
              2

            	
              U-W-1

            	
              ***

            	
              June
      1, 2011

            
	
              Nov-2012

            	
              3

            	
              U-W-1

            	
              ***

            	
              July
      1, 2011

            
	
              Dec-2012

            	
              2

            	
              U-W-1

            	
              ***

            	
              August
      1, 2011

            
	
              Total

            	
              80

            	 
      	 
      	 
      

    

    

    

     

    
      
        SWA                                                                                                                                                      
Page 2                                                                                                                                             
SA-59exh10-1.htm

                                                                    EXHIBIT
      10.1

    Wayne
      R. Weidner – Prepared Remarks

    Annual
      Meeting of Shareholders

    April
      21, 2008

    

    REMARKS
      BY THE
      CHAIR

     

    Disclaimer:
      While
      proxies are being examined and the ballots counted, I’d like to make
      my comments.

    

    
      	
              §  

            	
              I
                should point out that our remarks regarding the outlook for the current
                year and beyond, including our anticipated earnings and asset growth
                and
                any planned new investments, may contain forward-looking
                information.

            

    

    

    
      	
              §  

            	
              Actual
                results may vary from any forecasted results that we discuss due
                to
                various risks and uncertainties, including those that we detailed
                in our
                report on Form 10-K for 2007, filed with the SEC and sent to you
                with our
                proxy statement.

               

            

    

         

    

    Record
      of
      Success

    

    
      	
              ·  

            	
              Despite
                facing yet another year of increasing challenges and a difficult
                operating
                environment, your Company was able to post its 30th consecutive year
                of
                increased earnings and cash
                dividends.

            

    

    

    
      	
              ·  

            	
              National
                Penn has enjoyed two new honors since our last
                meeting:

            

    

    

    
      	
              o  

            	
              First,
                on February 21 of this year, National Penn was named to Standard
&
                Poor’s Small Cap 600 Index.

            

    

    

    
      	
              §  

            	
              This
                is good news for several reasons:

            

    

    

    
      	
              ·  

            	
              First,
                we expect this to increase our institutional ownership as index funds
                buy
                our stock.

            

    

    

    
      	
              ·  

            	
              Second,
                it presents an opportunity for greater volume and liquidity in our
                stock.

            

    

    

    
      	
              ·  

            	
              And
                third, this will generally increase our visibility to the investing
                public.

            

    

    

    
      	
              o  

            	
              Second,
                since July 2007, National Penn has been featured twice on the Motley
                Fool
                web site in articles about “stocks that cannot be stopped” due to our
                history of paying an annual dividend without interruption since,
                at least,
                1877.

            

    

    

    
      	
              §  

            	
              That
                is more than 130 years.

            

    

    

     

    Stock
      Dividends or
      Splits/Cash Dividends

    

    
      	
              ·  

            	
              In
                addition, 2007 marked our 30th consecutive year of a stock dividend
                or
                stock split on National Penn stock.

            

    

    

    
      	
              o  

            	
              The
                board declared a 3% stock dividend that was paid on September 28,
                2007.

            

    

    

    
      	
              o  

            	
              The
                board also declared an increased cash dividend of $.17 per share
                in both
                the fourth quarter of 2007 and the first quarter of this
                year.

            

    

    

    
      	
              ·  

            	
              Your
                directors, management team, and employees will continue to strive
                for
                strong financial performance in order to sustain this
                momentum.

            

    

    

    Stock
      Performance/Market
      Cap/Growth of Stock

    

    
      	
              ·  

            	
              As
                you all are likely to have read about in the media, the market for
                mid-
                and small-sized bank stocks was not favorable for much of last
                year.

            

    

    

    
      	
              o  

            	
              According
                to a fourth quarter 2007 report by the FDIC, profits at the 8,533
                FDIC-insured institutions fell 83.5% as compared to the previous
                year.

            

    

    

    
      	
              o  

            	
              This
                included large FDIC-insured institutions, as well as community
                banks.

            

    

    

    
      	
              o  

            	
              With
                the anticipated continuation of the weak housing sector, credit squeeze
                and volatile interest rates, 2008 looks to be full of its own
                challenges.

            

    

    

    
      	
              ·  

            	
              Fortunately,
                National Penn was able to weather the storm well compared to our
                peers,
                primarily due to our consistent strategies and prudent business
                practices.

            

    

    

    
      	
              ·  

            	
              While
                we believe our stock price over the past year has been generally
                impacted
                by the disfavor and resulting market volatility in the bank stock
                sector,
                our stock price has not declined as much as many in our
                industry.  According to Nasdaq, our stock price declined 6.81%
                during the one year period ending April 17, 2008, as compared to
                an
                average decline of 13.65% for our peer banks listed in our Proxy
                Statement.

            

    

     

    
      	
              ·  

            	
              And,
                we are encouraged that since the beginning of this year, our stock
                price
                has increased by 16.05% as
                compared to an average increase of 3.23% for our peer
                group.

            

    

     

    
      	
              ·  

            	
              The
                slide on the screen compares our 10-year total investment return
                to the
                total return for the SNL bank index over the same period.  We
                believe that our total
return
                over the
                longer term is one of the best
                measures
                of how National Penn enhances shareholder value.  As you can
                see, the total return for an investment in National Penn was more
                than
                three times that of the SNL bank
                index.

            

    

     

    

    Leveraging
      Market
      Opportunities for Long-Term Growth and Financial Strength

    

    
      	
              ·  

            	
              Difficult
                times require us to allocate resources and capital in the smartest
                ways
                possible, and have the flexibility to be opportunistic. And that
                is
                exactly what we were able to do in
                2007.

            

    

    

    
      	
              ·  

            	
              I’d
                like to take a few moments to highlight two of the factors that position
                us for future success.

            

    

    

    
      	
              ·  

            	
              With
                a focus on longer-term growth and diversifying our revenue stream,
                we were
                able to lay the groundwork for the most transformative period in
                our
                134-year-old history.  We greatly expanded our geographic
                footprint and services with the addition of two new members to the
                National Penn family:

            

    

    

    
      	
              o  

            	
              The
                first is Christiana Bank & Trust Company of
                Delaware

            

    

    

    
      	
              §  

            	
              An
                announcement was made in second quarter 2007, and we finalized the
                Christiana Bank & Trust Company merger on January 4 of this
                year.

            

    

    

    
      	
              §  

            	
              This
                is particularly exciting since Delaware-based Christiana marks our
                first
                entrance into that state, long known for its tax, legal and friendly
                financial environment.

            

    

    

    
      	
              o  

            	
              Our
                second new partner is KNBT Bancorp,
                Inc.

            

    

    

    
      	
              §  

            	
              We
                announced plans to merge with KNBT Bancorp, a Lehigh
                Valley-   based financial services institution, in the
                third quarter 2007 and closed this merger on February 1,
                2008.

            

    

    

    
      	
              ·  

            	
              In
                addition to greatly strengthening our presence in the Lehigh Valley,
                KNBT
                also brings expanded insurance, investment and trust services that
                nicely
                complement our current financial services
                offerings.

            

    

    

    
      	
              ·  

            	
              While
                Glenn will provide more details about the benefits each merger partner
                brings, I’d like to highlight what these two transactions mean to you, our
                shareholders, and your Company as a
                whole.

            

    

    

    
      	
              ·  

            	
              The
                addition of these new partners has helped us create a new force in
                financial services in both Pennsylvania and the mid-Atlantic region.
                As a
                result of these strategic business combinations, National Penn today
                has:

            

    

    

    
      	
              o  

            	
              A
                more diversified revenue stream – particularly in wealth
                management.

            

    

    

    
      	
              o  

            	
              An
                expanded geographic footprint and exposure in eastern Pennsylvania
                and
                northern Delaware.

            

    

    

    
      	
              o  

            	
              The
                added benefit of extending the “Delaware Advantage” – the ability to
                provide several trust, estate and tax planning services unique to
                Delaware-chartered bank and trust companies – to current and potential
                clients across our Company.

            

    

    

    
      	
              ·  

            	
              Our
                acquisition decisions made in 2007 have been well received by analysts
                and
                the media.

            

    

    

    
      	
              o  

            	
              Cornerstone
                Advisors, Inc., a consulting firm specializing in the banking industry,
                in
                its newsletter, named our merger with KNBT as the “Merger of the Year” for
                2007, citing National Penn and KNBT as two mid-sized players doing
                an
                in-market deal that “makes sense.”

            

    

     

    
      	
              o  

            	
              In
                March, National Penn also was featured in an American Banker article
                entitled “National Penn Celebrates Two Transformative Deals,” in which our
                new partnerships with Christiana and KNBT were highlighted and which
                reflected positive comments from industry
                analysts.

            

    

     

    
      	
              o  

            	
              In
                addition, we received significant coverage in our regional media
                outlets.

            

    

     

    Introduction
      of New Senior
      Leaders Joining National Penn

    

    
      	
              ·  

            	
              Beyond
                the financial aspects of the partnership, I would be remiss if I
                did not
                mention some of the other benefits. In particular, our new shareholders
                and customers. On behalf of Glenn, the entire National Penn board
                and
                myself, I’d like to extend a heartfelt welcome to our new shareholders,
                employees and customers.

            

    

    

    
      	
              ·  

            	
              We’ve
                gained new employees from Christiana and KNBT who deepen our pool
                of
                talent, knowledge and expertise.

            

    

    

    
      	
              ·  

            	
              At
                this time, I’d like to introduce a couple of the key individuals who
                joined our team:

            

    

    

    
      	
              o  

            	
              “Ziss”
                Frangopoulos continues as president and CEO of Christiana Bank & Trust
                Company.

            

    

    

    
      	
              §  

            	
              More
                than 35 years in the banking
                industry.

            

    

    

    
      	
              ·  

            	
              30+
                years with Chase, and its predecessor Chemical Bank, before joining
                Christiana in 2001.

            

    

    

    
      	
              ·  

            	
              Covered
                a wide variety of banking facets.

            

    

    

    
      	
              §  

            	
              Ziss,
                would you please stand briefly?

            

    

    

    
      	
              o  

            	
              Scott
                V. Fainor, former president and CEO of KNBT
                Bancorp

            

    

    

    
      	
              §  

            	
              Joins
                the National Penn family as the Chief Operating Officer of the holding
                company and president and CEO and a director of National Penn
                Bank

            

    

    

    
      	
              §  

            	
              Scott
                plays a prominent role in the new Company with direct oversight of
                National Penn Bank’s corporate, small business and consumer banking and
                insurance services as well as other key corporate
                areas.

            

    

    

    
      	
              ·  

            	
              Scott
                has more than 28 years of experience in the financial services
                industry.  He served as president and CEO of KNBT from the time
                of its formation in 2003.  Before that, he was president and CEO
                of one of KNBT’s predecessor companies, and was a senior executive with a
                major super-regional banking
                company.

            

    

    

    
      	
              ·  

            	
              Scott,
                would you please stand briefly?

            

    

    

    Recognition
      of Sandy
      Spayd

    

    
      	
              §  

            	
              I
                would also like to recognize our long-time Corporate Secretary, Sandy
                Spayd, who retired on March 1 of this year.  Sandy, would you
                please come forward?

            

    

     

    (Wayne
      reads the inscription on the plaque and presents it to Sandy)

     

    

    Closing
      Remarks/Transition
      from the Chair

    

    
      	
              ·  

            	
              Before
                I turn the podium over to Glenn, I’d like to add a few personal remarks as
                part of my closing.

            

    

    

    
      	
              ·  

            	
              2007
                was a bittersweet year for me professionally. I was thrilled to be
                part of
                our Company’s most transformative year ever. At the same time, and as you
                all may know, I also retired from full-time employment after working
                at
                National Penn for 45 years.

            

    

    

    
      	
              ·  

            	
              While
                it has been an adjustment, I am glad that I can continue to be a
                part of
                National Penn’s future success as the non-employee Chair of the
                Board.

            

    

    

    
      	
              ·  

            	
              I
                look forward to working hard with my fellow board members to tap
                into the
                long-term value of our new partnerships to the benefit of our
                shareholders, employees and
                customers.

            

    

    

    
      	
              ·  

            	
              At
                this time, I’d like to turn the program over to Glenn Moyer, President and
                CEO of National Penn Bancshares, to provide his
                comments.

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Glenn
      E. Moyer – Prepared Remarks

    Annual
      Meeting of Shareholders

    April
      21, 2008

    

    
      	
              I.  

            	
              (WELCOME
                & INVITATION FOR SHAREHOLDERS TO BECOME
                MEMBERS)

            

    

    

         Thank
      you, Wayne.

     

    
      	
              ·  

            	
              I
                want to welcome everyone, and thank you for joining us today, including
                our newest members of the National Penn shareholder family from Christiana
                Bank and KNBT.

            

    

     

    
      	
              ·  

            	
              As
                I traditionally do at the beginning of my remarks at our annual
                shareholders’ meeting, I’d like to encourage any of you who are not doing
                business with us currently, to become customers of your
                Company.

            

    

     

    
      	
              ·  

            	
              You’ve
                chosen to purchase stock in our Company for a variety of reasons,
                and I
                hope you will think about further partnering with us to help fulfill
                your
                financial dreams.

            

    

     

    
      	
              ·  

            	
              I’d
                like to point out that next week, April 29th is National Teach Children
                to
                Save Day sponsored by the American Banker’s Association. National Penn has
                been an active participant in this program for several years, and
                if you
                haven’t already taken steps to help teach your children, grandchildren,
                nieces and nephews about finances, I encourage you to consider opening
                a
                Kids’ Account at one of our 127
                locations.

            

    

     

    
      	
              ·  

            	
              As
                noted in your recent annual report mailing and on the flyers provided
                here
                today, we are offering our annual “shareholders’ special” to include the
                following rates available exclusively to our
                shareholders:

            

    

     

    
      	
              o  

            	
              A
                four-month CD with a 3.4% annual percentage yield.  This is
                available through May 10, 2008.

            

    

    

    
      	
              o  

            	
              For
                new accounts, a money market rate of 3.65% through July 31,
                2008.

            

    

     

    
      	
              o  

            	
              Other
                details are discussed in the flyers you received
                today.

            

    

     

    
      	
              ·  

            	
              Any
                of our conveniently located banking or affiliate locations will be
                glad to
                help you with these special offers.

            

    

     

    Introductions
      Section:

     

    
      	
              ·  

            	
              Before
                jumping into my remarks about why we believe National Penn remains
                a solid
                investment for shareholders such as you, I’d like to introduce some
                special guests who are critical to the ongoing success of the National
                Penn family:

            

    

     

    
      	
              o  

            	
              First,
                I’d like to ask all of our Affiliate and Advisory Board Directors to
                stand
                at this time. These are a group of individuals on whom we rely for
                their
                expertise in their respective businesses and communities.  (Ask
                the groups to rise to be recognized as a
                group.)

            

    

     

    
      	
              ·  

            	
              Next,
                I’d like to ask the senior managers of our two primary non-bank segments
                to stand:

            

    

     

    
      	
              1.  

            	
              Jim
                King, president of National Penn Investors Trust Company, our primary
                trust and asset management company

            

    

     

    
      	
              2.  

            	
              Mike
                Meeneghan, executive vice president of National Penn’s Insurance
                group

            

    

    

    
      	
              ·  

            	
              I’d
                also like to take a moment to recognize our regional presidents at
                National Penn Bank. As a result of our expanded geographic coverage
                in
                Pennsylvania and Delaware, we realigned our community offices into
                five
                new regions. This move allows us to keep our high-quality level of
                customer service and decision making as close to the customer as
                possible.

            

    

    

    Would
      the
      following individuals stand briefly as I call your name:

     

    
      	
              o  

            	
              Scott
                Gruber, Central Region president

            

    

    

    
      	
              o  

            	
              Blair
                Rush, Eastern Region and FirstService Bank division
                president

            

    

    

    
      	
              o  

            	
              David
                Kennedy, Northern Region and KNBT division
                president

            

    

    

    
      	
              o  

            	
              Robert
                Marino, Southern Region president,
                and

            

    

    

    
      	
              o  

            	
              David
                Richards, Jr., Western Region and Nittany Bank division
                president

            

    

    

    
      	
              ·  

            	
              And
                last, but certainly not least, I’d like to ask each of our Group Executive
                Vice Presidents to stand briefly as I call your name. These are a
                group of
                individuals on whom Scott and I rely on a daily
                basis.

            

    

     

    
      	
              o  

            	
              Sandra
                Bodnyk, Consumer and Small Business
                Banking

            

    

     

    
      	
              o  

            	
              Bruce
                Kilroy, Enterprisewide Image and Human
                Resources

            

    

     

    
      	
              o  

            	
              Garry
                Koch, Director of Risk Management

            

    

     

    
      	
              o  

            	
              Carl
                Kovacs, Operations and Technology

            

    

     

    
      	
              o  

            	
              Paul
                McGloin, Corporate Banking and Chief Lending
                Officer

            

    

     

    
      	
              o  

            	
              Michael
                Reinhard, Chief Financial Officer,
                and

            

    

     

    
      	
              o  

            	
              Donald
                Worthington, Wealth Management
                Group

            

    

     

    Let’s
      recognize all these folks with a round of applause!

     

    

     

    
 

    Financial
      Highlights Section
– Year-End 2007 and First Quarter 2008:

     

         At
      this time, I’d like to take a brief look at our 2007 and first quarter 2008
      financial highlights.

    

    Beginning
      with our performance in 2007, prior to our mergers with KNBT and
      Christiana:

     

    
      	
              o  

            	
              We
                ended 2007 with total financial assets of $5.82 billion and achieved
                record profits of $65.23 million, compared to $64.11 million in
                2006.

            

    

     

    
      	
              o  

            	
              We
                increased our diluted earnings per share to $1.31, compared to the
                prior
                year’s diluted earnings per share of $1.29.  Many of our peers
                were not able to report an increase in
                2007!

            

    

     

    
      	
              o  

            	
              In
                2007 we paid out approximately $32.5 million in cash dividends to
                our
                shareholders, an increase of approximately 4.8% over
                2006.

            

    

     

    
      	
              o  

            	
              National
                Penn’s 2007 earnings produced a return on average assets of 1.16% and
                a
                return on average shareholders’ equity of
                12.0%.

            

    

     

    
      	
              ·  

            	
              In
                regard to the continued challenging operating environment, I’d like to
                take a moment to address our deposit and loan growth, and credit
                quality,
                in 2007.

            

    

     

    
      	
              o  

            	
              We
                ended 2007 with total deposits of $3.95 billion, representing an
                increase
                of 3.2% as compared to 2006.

            

    

     

    
      	
              o  

            	
              Our
                total loan and lease portfolio of $3.88 billion represented an increase
                of
                6.7% as compared to year end 2006.

            

    

     

    
      	
              o  

            	
              Our
                Company’s overall loan and lease loss reserve at December 31, 2007 was
                $54.9 million or 1.42% of total loans and leases.  While a
                strong allowance ratio is important, we believe that a strong coverage
                ratio is even more critical.  At the end of 2007, our loan loss
                reserve was 359% of our total loans on non-accrual plus loans 90
                days past
                due.  In recent years, our loan loss coverage ratio has compared
                very well to our peers.

            

    

     

    
      	
              ·  

            	
              Before
                I update you on our recently announced first quarter 2008 results,
                I’d
                like to give you a brief snapshot of your “new” National
                Penn:

            

    

     

    
      	
              o  

            	
              We
                now are the fifth largest bank holding company headquartered in
                Pennsylvania.

            

    

     

    
      	
              o  

            	
              We
                are a two-bank holding company with separate banking charters at
                National
                Penn Bank and Christiana Bank.

            

    

     

    
      	
              o  

            	
              We
                have 127 community offices in Pennsylvania, Delaware and
                Maryland.

            

    

     

    
      	
              o  

            	
              Over
                this past weekend, we completed the conversion of the KNBT systems,
                and I
                would like to thank our employees for all of their hard work to ensure
                a
                smooth conversion.

            

    

     

    
      	
              o  

            	
              The
                systems conversion at Christiana is scheduled for later this
                year.

            

    

     

    
      	
              ·  

            	
              And
                now for a look at our recently reported first quarter 2008
                results.  Please remember that these numbers include Christiana
                Bank & Trust since January 4th and KNBT since February 1st of
                2008:

            

    

     

    
      	
              o  

            	
              Our
                total assets grew to $9.1 billion dollars as of March 31, 2008, including
                loans of $6.0 billion.

            

    

     

    
      	
              o  

            	
              As
                of that same date, our deposits were $6.1
                billion.

            

    

     

    
      	
              o  

            	
              1st
                quarter net income was $21.6 million as compared to $15.5 million
                for
                first quarter 2007, a 39% increase.

            

    

     

    
      	
              o  

            	
              We
                now have nearly $8.2 billion in trust assets under management or
                administration – a nearly 200% increase as compared to December 31,
                2007.

            

    

     

    
      	
              o  

            	
              Despite
                the difficult operating environment that all of us are facing, we
                were
                able to achieve another quarter of increased income and
                earnings
                per share.

            

    

     

    
      	
              o  

            	
              While
                we cannot guarantee future performance numbers, we can assure you
                that we
                will continue to work hard to achieve growth in the face of a challenging
                interest rate environment and intense
                competition.

            

    

     

     A
      Look at the Challenges
      Ahead, Update on the Subprime Trickledown Effects:

     

    
      	
              o  

            	
              I
                know all of you have been reading and seen news reports covering
                the
                sub-prime mortgage crisis and the adverse effect it is having on
                the
                financial services industry. As we have stated before, National Penn
                Bank’s direct exposure to sub-prime mortgages is negligible. The
                origination of sub-prime mortgages has historically represented a
                small
                fraction of National Penn’s total mortgage loan originations. In 2007, our
                subprime mortgage originations were 1.1% of total originations in
                the
                year.  No subprime mortgage originations have been done in
                2008.  While we feel confident that our direct exposure to this
                risk is minimal, we will continue to closely monitor the market and
                our
                borrowers’ financial health for signs that the ripple effects of the
                crisis are having an impact.

            

    

    

    Achievements
      and Organic
      Growth & Acquisition Initiatives:

     

    
      	
              ·  

            	
              As
                you know, over the decades National Penn has grown organically and,
                for
                the past 10 years, by selected acquisition. Here are some highlights
                of
                our organic growth in 2007 and to-date this
                year.

            

    

     

    
      	
              o  

            	
              We
                continued to expand our reach with the opening of new offices and
                streamlining of locations to better fulfill the dreams of our
                customers:

            

    

     

    
      	
              §  

            	
              We
                opened a new National Penn Investors Trust Company regional office
                in
                York, Pennsylvania.

            

    

     

    
      	
              §  

            	
              We
                added a fifth community office location to the HomeTowne Heritage
                division, in Mount Joy, Lancaster County, and we are pleased to report
                deposits of $27.6 million as of March 31, 2008 and strong market
                acceptance of our traditional banking
                approach.

            

    

     

    
      	
              §  

            	
              We
                relocated our National Penn Bank community office in Morgantown to
                a
                larger, more accessible facility.  This has been well received
                by the community - by March 31, 2008 our deposits had increased to
                $76.8
                million – an increase of 21%.

            

    

    

    
      	
              o  

            	
              Vantage
                Investment Advisors, based in State College, increased its managed
                assets
                by $70 million to approximately $500 million by year end and also
                was
                recognized as one of the top 150 advisors in the Schwab
                network.

            

    

     

    
      	
              o  

            	
              In
                2007, National Penn Investment Services was ranked 8th among the
                600
                PrimeVest brokerage programs across the country, moving up from the
                20th
                spot in just 2 years.

            

    

     

    
      	
              §  

            	
              As
                one of the fastest growing among the top 20 PrimeVest programs, NPIS
                again
                exceeded growth expectations.

            

    

     

    
      	
              §  

            	
              NPIS
                also was featured as the cover story for the Winter 2008 issue of
                Bank
                Insurance & Investment Marketing magazine, released in
                February.

            

    

     

    
      	
              ·  

            	
              Our
                acquisition decisions have focused on like-minded partners with a
                proven
                business model that can help us continue to achieve profitable growth.
                Christiana and KNBT are prime examples of this strategy and are terrific
                additions to our Company.

            

    

     

    
      	
              ·  

            	
              While
                Wayne touched upon some of the benefits our new partners bring to
                the
                National Penn family, I’m going to spend a few moments talking in greater
                detail about each partner’s individual assets as well as our goal to
                achieve longer-term, sustainable shareholder
                growth.

            

    

     

    
      	
              o  

            	
              Christiana:

            

    

     

    Following
      the merger, Christiana Bank & Trust Company maintains its name and status as
      a separately-chartered Delaware banking corporation with wholly-owned
      subsidiaries offering commercial, domicile, agency and trust services in
      Delaware and Nevada.

     

    
      	
              §  

            	
              Christiana
                specializes in offering investment management, agency and fiduciary
                services for individuals, families, corporations and institutions
– a
                focus that has translated for Christiana into a nearly 50% ratio
                of fee
                income to total revenue.

            

    

     

    
      	
              §  

            	
              I’m
                happy to report that we are already beginning to see positive developments
                from this partnership. In the time between announcing our plans in
                second
                quarter 2007 to merge with Christiana and our finalization of the
                merger
                in early 2008, Christiana experienced a net growth in their number
                of
                customers.

            

    

     

    
      	
              §  

            	
              And
                within days of finalizing the merger, a National Penn commercial
                customer
                was able to enlist Christiana’s services to complete a tax-advantaged real
                estate transaction.

            

    

     

    
      	
              §  

            	
              But
                one of the biggest benefits Christiana brings to our wealth management
                capabilities is the “Delaware Advantage,” which Wayne alluded to in his
                remarks.

            

    

     

    
      	
              ·  

            	
              Delaware
                has long been known as a state with the ability to offer special
                legal,
                tax and judicial advantages that benefit both commercial and retail
                customers seeking wealth management and trust
                services.

            

    

     

    
      	
              ·  

            	
              Owning
                a company in Delaware means that we can extend these advantages to
                existing and potential customers in the Pennsylvania and Maryland
                markets
                we serve – a benefit that should help fuel additional growth in our wealth
                management area.

            

    

     

    
      	
              o  

            	
              KNBT:

            

    

    

     

    KNBT
      retains its name as a division of National Penn Bank for banking operations
      in
      KNBT’s market area of Lehigh, Northampton, Carbon, Luzerne, Schuylkill and
      Monroe counties.  National Penn Bank community offices in those areas
      have been converted to the KNBT name – given the organization’s strong brand
      presence and support in northeastern Pennsylvania.

     

    
      	
              §  

            	
              We
                recently introduced a new KNBT logo featuring the National Penn tulip
                and
                burgundy color and new service line descriptor – banking, insurance,
                investments, trust –being adopted by ALL National Penn Bank future
                signage.  This is a very visible, widespread reminder that we
                are much more than a bank.

            

    

     

    
      	
              §  

            	
              KNBT
                brings many benefits to this
                partnership:

            

    

    
      	
              ·  

            	
              First,
                it brings critical mass to our size and scope in the Lehigh Valley
                and
                northeastern Pennsylvania counties.  Previously, National Penn
                held the 13th position in deposit market share in the Lehigh
                Valley.  Now we hold the No. 1 position in Northampton County
                and the No. 2 position in Lehigh County which should allow us to
                further
                leverage our broader offering of products and
                services.

            

    

    

    
      	
              ·  

            	
              Second,
                it brings an extremely attractive and complementary suite of products
                and
                services including insurance, trust and
                investments.

            

    

    

    
      	
              o  

            	
              Specifically,
                we welcomed Caruso Benefits Group and Higgins Insurance Associates
                as part
                of the KNBT merger.

            

    

     

    
      	
              o  

            	
              Caruso
                brings a new insurance focus to the National Penn family, specializing
                in
                group benefits with an emphasis on medical, life and
                disability.

            

    

     

    
      	
              o  

            	
              They
                are the largest provider of benefits and health care insurance for
                commercial clients in Pennsylvania.

            

    

     

    
      	
              o  

            	
              Higgins
                Insurance adds to National Penn’s existing property and casualty insurance
                offerings and expands our geographical insurance presence to northeastern
                Pennsylvania.

            

    

     

    Emphasis
      on Integration for
      Greater Efficiency, Profitability and Growth:

     

    
      	
              ·  

            	
              I’d
                like to take a moment to talk about the integration of Christiana
                and KNBT
                into the National Penn family resulting in greater efficiencies,
                profitability and growth.

            

    

     

    
      	
              o  

            	
              As
                I mentioned at the beginning of my remarks when I introduced our
                regional
                presidents, we realigned our community offices into five new regions
                to
                help us keep service and decision making as close to the customer
                as
                possible.

            

    

    

    
      	
              ·  

            	
              In
                addition to the many benefits that Wayne and I have touched upon
                about our
                new partners, they also benefit us in some very tangible
                ways:

            

    

    

    
      	
              
                o  

              

            	
              Most
                notably, at KNBT, we estimate $26.2 million dollars in cost savings
                over
                two years, which are well defined and achievable. No heroic assumptions
                were used to get to any specific number and to date we are on schedule
                to
                achieve these. 

            

    

    

    
      	
              o   

            	
              We
                also expect the KNBT transaction to be accretive to both
                earnings
                per share and tangible book value in 2008 and are encouraged with
                our
                progress so far. 

            

    

    

    
      	
              o   

            	
              KNBT
                also represents some meaningful revenue synergies, which we consider
                to be
                “icing on the cake.”  We feel increasingly confident in our
                ability to enhance revenues through expanded product and service
                cross-selling opportunities.  Since last fall, we’ve had a team
                dedicated to developing a plan in this area.  We have already
                enjoyed some early success introducing National Penn’s Remote Deposit
                Capture and interest rate swap products to the KNBT customer
                base.  A priority list of approximately 13 other National Penn,
                KNBT and Christiana products and services has been developed where
                we
                anticipate similar cross-selling success.

            

    

    

    
      	
              ·  

            	
              Our
                primary focus for 2008 has been and will be about successfully integrating
                our new partners to create a new, stronger National Penn, while retaining
                and adding new clients across the full Company
                footprint.

            

    

     

    
      	
              o  

            	
              In
                September of last year following our announcement to merge with KNBT,
                we
                worked diligently to create and implement a well-defined process
                to
                maintain positive market momentum.

            

    

    

    
      	
              o  

            	
              We’ve
                also set a goal of 100% customer retention.  Our mindset is not
                only are we going to fight for every customer we have, we have to
                challenge ourselves to grow.

            

    

    

    
      	
              §  

            	
              In
                our mergers prior to Christiana and KNBT, we enjoyed a post-acquisition
                retention rate above 95%, which we hope to better in our current
                situation.

            

    

    

    
      	
              o  

            	
              In
                addition to customer retention, we are also focused on customer
                growth.

            

    

    

    
      	
               

            	
              For
                example, our newly-combined wealth management groups will be working
                closely with one another, as well as with executives and managers
                at the
                banking level, to identify cross-selling opportunities.
                

            

    

    

    
      	
              §  

            	
              This
                cross-functionality “team approach” also ensures that we can continue to
                serve customers locally and with the high-level customer service
                synonymous with the National Penn, KNBT and Christiana
                names.

            

    

    

    
      	
              ·  

            	
              Throughout
                our new geographic footprint, we are able to expand our outreach
                efforts
                to the communities we serve.

            

    

     

    
      	
              o  

            	
              We
                received endorsement of the KNBT merger by the Community Action Committee
                of the Lehigh Valley, an organization that includes more than a dozen
                housing, community and economic development groups serving the greater
                Lehigh Valley.

            

    

     

    
      	
              §  

            	
              We
                are pleased to have a leadership role in supporting regional community
                and
                economic development efforts throughout our
                marketplace.

            

    

     

    
      	
              §  

            	
              Under
                the state of Pennsylvania’s Neighborhood Partnership Program, a tax credit
                program, we committed to making a $175,000 annual contribution for
                six
                years to support a collaborative community development project in
                Allentown.

            

    

     

    
      	
              o  

            	
              In
                an effort to support the growing Latino population, National Penn
                partnered with the Latino Business Resource Center and the Latino
                Chamber
                of Commerce in Berks County to support a program called the “Bilingual
                Business Skills for Success for Latino
                Entrepreneurs.”

            

    

     

    
      	
              §  

            	
              We
                committed $5,000 to support a 12-week educational program for individuals
                interested in starting a business, as well as providing employee
                guest
                speakers and educators for appropriate
                sessions.

            

    

     

    
      	
              §  

            	
              We
                are also working to establish a loan fund that will provide micro
                loans to
                qualifying individuals.

            

    

     

    
      	
              o  

            	
              We
                continue to educate the communities we serve about identify theft
                through
                our Community Shred Day events.

            

    

    

    
      	
              §  

            	
              Last
                year nearly 1,500 people shredded 45,000 pounds of unwanted personal
                documents.

            

    

    

    
      	
              §  

            	
              Due
                to the success of these events, this year we increased the number
                of
                Community Shred Day events to 16, at community offices throughout
                our
                footprint.  The dates and locations of these Shred Day events
                are listed
                on a printed schedule available at the registration table in the
                lobby.

            

    

    

    
      	
              o  

            	
              Through
                our ongoing participation in the Pennsylvania Educational Improvement
                Tax
                Program, National Penn will once again contribute approximately $300,000
                this year to various educational and scholarship
                programs.

            

    

     

    
      	
              §  

            	
              These
                funds allow Pennsylvania students academic opportunities that otherwise
                may not have been available.

            

    

     

    2008
      and
      Beyond:

     

    
      	
              ·  

            	
              With
                the addition of our new partners, we have forged a new force in financial
                services in Pennsylvania and the greater mid-Atlantic region to position
                us well to take on the challenges of 2008 and
                beyond.

            

    

    

    
      	
              ·  

            	
              We
                are excited about the new opportunities presented by these partnerships
                and remain committed to longer-term, sustainable growth for our
                shareholders by continuing to follow our six business
                strategies:

            

    

     

    
      	
              §  

            	
              Community
                banking delivery techniques

            

    

     

    
      	
              §  

            	
              Superior
                asset quality

            

    

     

    
      	
              §  

            	
              Profitable
                client relationships

            

    

     

    
      	
              §  

            	
              Balanced
                organic and acquisition growth

            

    

     

    
      	
              §  

            	
              Stronger
                diversified revenue streams

            

    

     

    
      	
              §  

            	
              And
                a focus on shareholder value

            

    

     

    
      	
              ·  

            	
              We
                continue to focus on integrating our partners into the National Penn
                family and leveraging the opportunities we have as a combined
                organization.

            

    

     

    Thank
      you and closing
      remarks:

     

    
      	
              ·  

            	
              On
                behalf of Wayne, our directors and employee team, thank you for joining
                the National Penn family in its focus on
                success.

            

    

    

    
      	
              ·  

            	
              I
                want to thank all my co-workers for their commitment to National
                Penn’s
                success.  We stand determined and ready to “do something
                special” in 2008.

            

    

    

    
      	
              ·  

            	
              Thank
                you for your attention and I’ll now turn the podium back to Wayne for the
                rest of our meeting.

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