S-8

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-8

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

DNB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania	23-2222567
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4 Brandywine Avenue, Downingtown, PA	19335
(Address of Principal Executive Offices)	(Zip Code)
DNB FINANCIAL CORPORATION INCENTIVE EQUITY AND DEFERRED COMPENSATION PLAN (as approved November 24, 2004) DEFERRED COMPENSATION PLAN FOR DIRECTORS OF DNB FINANCIAL CORPORATION (adopted effective October 1, 2006) DNB FINANCIAL CORPORATION DEFERRED COMPENSATION PLAN (adopted effective October 1, 2006)
(Full title of the plan)
Bruce E. Moroney, Chief Financial Officer DNB FINANCIAL CORPORATION   4 Brandywine Avenue, Downingtown, Pennsylvania 19335
(Name and address of agent for service)
(484) 359-3153
(Telephone number, including area code, of agent for service)

CALCULATION OF REGISTRATION FEE

Title of securities to be registered (1)	Amount to be registered	Proposed maximum offering price per obligation	Proposed maximum aggregate offering price (2)	Amount of registration fee
Deferred Compensation Obligations	$ 4,313,631	100%	$ 21.00	$ 461.56

(1) The deferred compensation obligations are unsecured obligations of DNB Financial Corporation (“DNB”) to pay deferred compensation in the future in accordance with the terms of the Plans referred to above.

(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(h) based upon the maximum amount of compensation estimated by DNB which may be deferred under the Plans referred to above.

Part II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

The following documents and information filed by DNB with the Securities and Exchange Commission (the “Commission”) are, as of their respective dates, incorporated into this Registration Statement by reference:

(a) DNB’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, as filed with the Commission on March 23, 2006 (File No. 0-16667);

(b) DNB’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2006 (filed with the Commission on May 10, 2006) and June 30, 2006 (filed with the Commission on August 14, 2006) (File No. 0-16667);

(c) DNB’s definitive proxy statement for the 2006 annual meeting of shareholders filed with the Commission on March 29, 2006 (File No. 0-16667); and

(d) the description of DNB’s securities as contained in DNB’s registration on Form 8-A as filed with the Commission on April 4, 1988, and as contained in Amended and Restated Articles of Incorporation as amended effective June 15, 2004, filed on August 14, 2001, as Exhibit 3(i) to DNB’s Form 10-Q for its fiscal quarter ended June 30, 2001 (File No. 0-16667).

The class of securities to be offered pursuant to this S-8 registration statement is Common Stock of the par value of $1.00 per share, of which DNB has authority to issue ten million (10,000,000) shares. The holders of such shares of voting stock of DNB do not have the right to cumulative voting. In each election of Directors every shareholder is entitled to one vote for each Director to be elected, for each share of stock having the right to vote in such election registered in his or her or its name. In addition, the shares when issued will be fully paid and non-assessable.

All documents filed by DNB with the Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the effectiveness of this Registration Statement and prior to the filing of a post-effective amendment hereto that either indicates that all securities offered hereby have been sold or deregisters all securities then remaining unsold shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.

Upon written or oral request by a Plan participant, DNB will deliver a copy of each of the documents described in the two preceding paragraphs to such participant free of charge. To request any or all of such documents, a Plan participant may use the following address or telephone number:

DNB Financial Corporation

4 Brandywine Avenue

Downingtown, PA 19335

Attention: Bruce E. Moroney, Chief Financial Officer

(484) 359-3153

DNB will also deliver to each Plan participant a copy of each report, proxy statement and other communication that DNB distributes to its security holders generally. Such materials will be sent at the time that it is sent to DNB’s security holders and, if not received by any such Plan participant, may be obtained free of charge upon written or oral request using the address or telephone number set forth in the preceding paragraph.

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Item 4. Description of Securities.

DNB has established the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan adopted effective November 24, 2004 (the “Omnibus Plan”), the Deferred Compensation Plan for Directors of DNB Financial Corporation adopted effective October 1, 2006 (the “Directors Plan”) and the DNB Financial Corporation Deferred Compensation Plan adopted effective October 1, 2006 (the “Officers Plan”) (individually, a “Plan” and collectively, “Plans”).

The Directors Plan permits a non-employee director of DNB or any of its direct or indirect subsidiaries to defer all or a portion of the compensation payable to the director for his or her services as a member of the board of DNB or a subsidiary and committees thereof. The Officers Plan permits an eligible officer to elect to defer up to fifty percent (50%) of the regular salary otherwise payable to the eligible officer and all or a portion of any annual or other periodic bonus otherwise payable to the eligible officer. The Omnibus Plan contains provisions governing the Directors Plan and the Officers Plan, which are subject to the Omnibus Plan except to the extent they provide otherwise.

Pursuant to the applicable Plans, DNB will provide eligible officers and non-employee directors the opportunity to enter into agreements for the deferral of a specified percentage of their annual compensation and/or bonus award. The obligations of DNB to pay compensation that is deferred under the Plans, which are called Deferred Compensation Obligations in this registration statement, will be unsecured general obligations of DNB to pay the deferred compensation in the future in accordance with the terms of the applicable Plans, and will rank pari passu with other unsecured and unsubordinated indebtedness of DNB, from time to time outstanding. There is no trading market for the Deferred Compensation Obligations. The Deferred Compensation Obligations are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Any attempt by any person to transfer or assign benefits under any of the Plans will be null and void. The Deferred Compensation Obligations are not convertible into any other security of DNB. The amount of compensation to be deferred by each participating officer or non-employee director, and hence the amount of the Deferred Compensation Obligations owed to each participant and to participants in the aggregate will be determined in accordance with the Plans based on elections to be made in the future by each participant.

The Plans require that amounts credited to an eligible director’s deferred compensation account must be payable no later than the earlier of: (i) the date as of which the director separates from service with DNB, within the meaning of Section 409A of the Code; or (ii) the director’s attainment of age 75. The Plans require that amounts credited to an eligible officer’s deferred compensation account must be payable no later than the date as of which the officer separates from service with DNB. Subject to these requirements, a participant may designate an earlier distribution date at the time he or she elects to defer compensation. This earlier distribution date may be either (a) the director’s or officer’s attainment of a specified age or (b) a specified date. A single designation must apply to the entire balance of the participant’s deferred compensation account.

While the Plans permit a participant to change this earlier distribution date from time to time, the new early distribution date a participant selects in any change cannot be less than 12 months after the date the participant makes that change, and the first payment as a result of the new designation cannot be made earlier than five (5) years after the date the first payment would have been made before the participant changed the early distribution date.

A participant may elect to have distributions made from his or her deferred compensation account in the form of a lump sum, or in annual installments for a period of up to ten (10) years. The first distribution payment is to be made on or about January 15 of the calendar year following the calendar year in which the distribution event occurs.

Each participant has the right to designate one or more persons as beneficiary to receive the balance of the participant’s deferred compensation account on the participant’s death. A participant may, from time to time, revoke or change the beneficiary designation by filing a new designation with DNB. The last designation received by DNB in accordance with the applicable Plans will be controlling as long as DNB receives it prior to the participant’s death. If no beneficiary designation is in effect at the death of a participant, or if no designated beneficiary survives the participant, the balance of the participant’s deferred compensation account will be made to the participant’s estate.

All elections and designations must be made in accordance with the terms of the respective Plans. 

The Plans permit the board of directors or administering committee to authorize distribution of all or a portion of a participant’s deferred compensation account in advance of the elected deferral date upon request of the participant if the board of directors or administering committee determines that the participant has experienced an unforeseeable emergency, within the meaning of Section 409A of the Internal Revenue Code.

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Upon receiving a director’s or officer’s qualifying election to defer compensation, DNB will allocate to a deferred compensation account for the participant that number of shares of DNB common stock having a fair market value, on the last day of the month in which such compensation would have been paid in absence of the deferral election, equal to 110% of the amount of compensation the participant has elected to defer. For this purpose, the “fair market value” of the stock will be the average of the mean between the bid and the asked price for the stock at the close of trading for the trading day immediately preceding the date on which fair market value is to be determined. Cash dividends deemed to be paid with respect to the stock in each deferred compensation account shall also be allocated to the director’s or officer’s deferred compensation account and immediately reinvested in additional shares of DNB common stock based on the stock’s fair market value (determined as described above) on the date of payment of the cash dividend. Participants may not reallocate deferred amounts into any form other than DNB stock. The Omnibus Plan makes provisions with respect to adjustment of shares allocated to participants’ deferred compensation accounts in circumstances involving increases or decreases in the number of issued shares of DNB common stock, mergers or consolidations, other transactions such as dissolution or sale of assets of DNB, and other changes in the capitalization of or corporate changes with respect to DNB. Upon distribution, the amount in each director’s or officer’s deferred compensation account will be paid in shares of DNB common stock. The Plans provide that, without the express, written consent of the board or the administering committee, the shares of DNB stock to be issued on distributionmay not be sold, hypothecated or otherwise transferred for a period of one (1) year from the date of distribution.

In connection with the Plan, DNB has created a nonqualified grantor trust, commonly known as a “rabbi trust.”  The assets of the trust will be used to pay participants’ benefits under the Plans.  From time to time but in no event less frequently than monthly, DNB will contribute to the trust the amounts DNB is obligated to credit to each participant’s deferred compensation account. However, assets cannot be set aside in the rabbi trust to fund nonqualified deferred compensation for any individual subject to Section 16(a) of the Securities and Exchange Act of 1934 Act during any restricted period with respect to a defined benefit pension plan maintained by DNB or a member of the same controlled group as DNB. For this purpose, a “restricted period” exists with respect to a defined benefit pension plan (a) at any time while the employer sponsoring the defined benefit pension plan is in bankruptcy, (b) at any time beginning six months before and ending six months after the date the defined benefit pension plan is terminated in an involuntary or distress termination (per Pension Benefit Guaranty Corporation procedures), or (c) during any period in which the defined benefit pension plan is in "at risk status" within the meaning of the new pension funding rules enacted as part of the Pension Protection Act of 2006.

The assets of the trust are subject to the claims of DNB’s general creditors. The trust agreement provides that a participant’s rights or the rights of any other person to receive payment under a Plan may not be sold, assigned, transferred, pledged, mortgaged or otherwise encumbered, except that a participant may designate a beneficiary to receive the balance of the participant’s deferred compensation account upon the participant’s death. The initial trustee for the trust will be DNB First, National Association, the wholly owned subsidiary of DNB. The trustee may change. While the trustee is responsible for holding DNB stock and other assets designated as a source for payment of the deferred compensation, participants have no rights in the trust assets and each participant will be responsible for enforcing his or her own rights with respect to the Deferred Compensation Obligations.

The Plans are currently administered by DNB’s full board of directors, but they may hereafter be administered by a committee appointed by and serving at the discretion of the board of directors if the committee meets certain criteria set forth in the Omnibus Plan.

DNB’s board of directors reserves the right at any time to amend any of the plans in whole or in part, retroactively or prospectively, for any reason and without the consent of any participant or beneficiary, provided that no amendment may adversely affect the rights of a participant or beneficiary with respect to amounts credited to the participant’s deferred compensation account prior to such amendment or alter the timing of distribution of any participant’s deferred compensation account. DNB’s board of directors reserves the right at any time to terminate any of the plans. Upon termination of the Directors Plan or the Officers Plan, (a) all elections with respect to the deferral of future compensation under that plan will terminate as of the date specified by the board of directors, but not before the earliest time permitted under Section 409A of the Code; and (b) the deferred compensation account of each participant under that plan will be distributed at such time or times as it would have been distributed in the absence of termination, unless the board of directors, in its discretion, elects to distribute the deferred compensation accounts of all of that plan’s participants in some other manner but in no event prior to the earliest time permitted under Section 409A of the Code.

Item 5. Interests of Named Experts and Counsel.

None.

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Item 6. Indemnification of Directors and Officers.

Sections 1741 and 1747 of the Pennsylvania Business Corporation Act, as amended (the “Act”), provides for indemnification of, and insurance for any person who is or was a representative of DNB and specifically empowers DNB to indemnify, subject to the standards therein prescribed, any person who is or was a representative of DNB in connection with any action, suit or proceeding brought or threatened by reason of the fact that he is or was a representative of DNB. Articles 23 and 24 of DNB’s Bylaws require DNB to indemnify each of DNB’s directors and officers in such capacity in which any such director or officer acts for or on behalf of DNB including as an employee or agent.

The Bylaws provide that DNB will indemnify any officer or director who was or is a party to, or is threatened to be made a party to, or who is called to be a witness in connection with, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of DNB) by reason of the fact that such person is or was an officer or director of DNB, or is or was serving at the request of DNB as a director, officer, employee or agent of a corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of DNB, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

In addition, DNB will indemnify any officer or director who was or is a party to, or is threatened to be made a party to, or who is called as a witness in connection with, any threatened, pending or completed action or suit by or in the right of DNB to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, and/or employee or agent of a corporation, partnership, joint venture, trust or other enterprise against amounts paid in settlement and expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of, or serving as a witness in, such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of DNB. No indemnification will be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for misconduct in the performance of his duty to DNB.

The Bylaws permit the payment of expenses incurred by an officer or director in defending a civil or criminal action, suit or proceeding in advance of the final disposition of such action, suit or proceeding.

As provided in the Bylaws, DNB may purchase and maintain insurance on behalf of any person who is or was an officer or director of DNB, or is or was serving at the request of DNB as an officer or director of a corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such.

DNB will not indemnify any officer or director in any case where the act or failure to act giving rise to the claim for indemnification constituted willful misconduct or recklessness. The Bylaws also provide that a director of DNB will not be personally liable for monetary damages as such for any action taken or for any failure to take any action, unless:

(a) the director has breached or failed to perform the duties of his office, and

(b) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness.

The Bylaws exclude:

(a) the responsibility or liability of a director pursuant to a criminal statute, or

(b) the liability of a director for the payment of taxes pursuant to local, state or federal law.

Item 7. Exemption from Registration Claimed.

Not applicable.

Item 8. Exhibits.

See the Exhibit Index attached to this Registration Statement.

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Item 9. Undertakings.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement;

Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by DNB pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration Statement;

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be an initial bona fide offering thereof; and

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of its annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of DNB pursuant to the foregoing provisions or otherwise, DNB has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by DNB of expenses incurred or paid by a director, officer or controlling person of DNB in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, DNB will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy or expressed in the Act and will be governed by the final adjudication of such issue.

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EXHIBIT INDEX

Exhibit	Description
(4)	Deferred compensation plans:
	(a)	DNB Financial Corporation Incentive Equity and Deferred Compensation Plan adopted effective November 24, 2004
	(b)	Deferred Compensation Plan for Directors of DNB Financial Corporation adopted effective October 1, 2006
	(c)	DNB Financial Corporation Deferred Compensation Plan adopted effective October 1, 2006
(5)	Opinion of Stradley, Ronon, Stevens & Young, LLP.
(23)	Consents.
	(a)	Consent of Stradley, Ronon, Stevens & Young, LLP (included in Exhibit 5).
	(b)	Consent of Independent Registered Public Accounting Firm--KPMG LLP.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Downingtown, State of Pennsylvania, on October 25, 2006.

DNB FINANCIAL CORPORATION

(Registrant)

By	/s/ Bruce E. Moroney
	Bruce E. Moroney
	Executive Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.

(Signature)	(Date)
/s/ William S. Latoff	October 25, 2006
William S. Latoff
Chairman of the Board and Chief Executive Officer
Director
/s/ Bruce E. Moroney	October 25, 2006
Bruce E. Moroney
Chief Financial Officer
(Principal Accounting Officer)
/s/ Thomas A. Fillippo	October 25, 2006
Thomas A. Fillippo
Director
/s/ William J. Hieb	October 25, 2006
William J. Hieb
President and Director
/s/ Mildred R. Joyner	October 25, 2006
Mildred R. Joyner
Director
/s/ James J. Koegel	October 25, 2006
James J. Koegel
Director
/s/ Eli Silberman	October 25, 2006
Eli Silberman
Director
/s/ James H. Thornton	October 25, 2006
James H. Thornton
Director

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EX-4.A

Exhibit 10(i)

                            DNB FINANCIAL CORPORATION
                                INCENTIVE EQUITY
                                       AND
                           DEFERRED COMPENSATION PLAN


                                    ARTICLE 1
                                     PURPOSE

     1.1 GENERAL. The purpose of this DNB Financial Corporation Incentive Equity
and Deferred Compensation Plan (the "Plan") is to promote the success and
enhance the value of DNB Financial Corporation (the "Company") by linking the
personal interests of directors, employees, officers and executives of the
Company and its subsidiaries to those of Company shareholders and by providing
such individuals with an incentive for outstanding performance in order to
generate superior returns to shareholders of the Company. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of directors, employees, officers, and
executives upon whose judgment, interest, and special effort the successful
conduct of the Company's operation is largely dependent. For purposes of this
Plan, "Company" shall be deemed to include direct and indirect subsidiaries of
DNB Financial Corporation, unless the context requires otherwise.

                                    ARTICLE 2
                                 EFFECTIVE DATE

     2.1 EFFECTIVE DATE. The Plan will be effective as of the date it is
approved by the Board of Directors of DNB Financial Corporation (the "Effective
Date").

                                   ARTICLE 3
                          DEFINITIONS AND CONSTRUCTION

     3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:

     (a)  "Award" means any Stock Appreciation Right, Restricted Stock Award or
          Unrestricted Stock Award granted to a Participant under the Plan.

     (b)  "Award Agreement" means a writing, in such form as the Committee in
          its discretion shall prescribe, evidencing an Award.

     (c)  "Bank" means DNB First, National Association.

     (d)  "Board" means the Board of Directors of DNB Financial Corporation.

     (e)  "Code" means the Internal Revenue Code of 1986, as amended, and
          regulations promulgated thereunder.

     (f)  "Committee" means the committee of the Board described in Article 4.





     (g)  "Deferred Compensation Account" means the bookkeeping account
          established for each Participant pursuant to Section 9.2 of this Plan.

     (h)  "Director" means a member of the Board, or a member of the board of
          directors or comparable governing body of a direct or indirect
          subsidiary of the Company.

     (i)  "Disabled" means a condition whereby a Participant (i) is unable to
          engage in any substantial gainful activity by reason of any medically
          determinable physical or mental impairment which can be expected to
          result in death or can be expected to last for a continuous period of
          not less than 12 months, or (ii) is, by reason of any medically
          determinable physical or mental impairment which can be expected to
          last for a continuous period of not less than 12 months, receiving
          income replacement benefits for a period of not less than three months
          under a plan covering employees of the Company.

     (j)  "Distribution Event" means an event as a result of which a Participant
          is entitled to receive the balance of his or her Deferred Compensation
          Account pursuant to Section 9.3 of this Plan, namely (i) with respect
          to a Participant who is an employee of the Company, but not a
          Specified Employee with respect to the Company, and the portion of his
          or her Deferred Compensation Account attributable to an Award or other
          compensation earned as an employee, the date the Participant separates
          from service with the Company, (ii) with respect to a Participant who
          is an employee of the Company and a Specified Employee with respect to
          the Company, and the portion of his or her Deferred Compensation
          Account attributable to an Award of other compensation earned as an
          employee, the date that is six months after his or her separation from
          service with the Company, or the date the Participant terminates his
          or her employment with the Company on account of being Disabled, and
          (iii) with respect a Participant who is a Director and the portion of
          his or her Deferred Compensation Account attributable to an Award or
          other compensation earned as a Director, the earlier of (A) the date
          the Participant separates from service with the Company, or (B) the
          Participant's attainment of the age specified (not younger than age
          55) in an election form filed by the Participant with the Committee at
          such time as he or she first becomes eligible to defer compensation
          pursuant to Article 9 of this Plan. The determination of whether a
          Participant has separated from service with the Company shall be made
          in accordance with Section 409A of the Code and the regulations
          promulgated thereunder.

     (k)  "Exchange Act" means the Securities Exchange Act of 1934, as amended,
          and the regulations promulgated thereunder.

     (l)  "Fair Market Value" means, with respect to a share of Stock as of any
          given date, (i) if the Stock is traded on the over-the-counter market,
          the average of the mean between the bid and the asked price for the
          Stock at the close of trading for the trading day immediately
          preceding such given date; (ii) if the Stock is listed on a national
          securities exchange, the average of the closing prices of the Stock on
          the composite tape for the trading day immediately preceding such
          given date; and (iii) if the Stock is neither traded on the
          over-the-counter market nor listed on a national securities exchange,
          such value as the Committee, in good faith, shall determine.

     (m)  "Non-Employee Director" means a member of the Board who qualifies as a
          "Non-Employee Director" as defined in Rule 16b-3(b)(3) under the
          Exchange Act, or any successor definition adopted by the Board.

     (n)  "Participant" means a person who, as a Director or an employee,
          officer, or executive of the Company, has been granted an Award under
          the Plan, or who has been designated as eligible to make an election
          to defer compensation under this Plan.



                                       2



     (o)  "Plan" means the DNB Financial Corporation Incentive Equity and
          Deferred Compensation Plan as set forth herein.

     (p)  "Restricted Stock Award" means Stock granted to a Participant under
          Article 7 that is subject to certain restrictions and to risk of
          forfeiture.

     (q)  "Specified Employee" means an individual who is a key employee (within
          the meaning of Section 416(i) of the Code without regard to paragraph
          (5) thereof) of a corporation any stock in which is publicly traded on
          an established securities market or otherwise.

     (r)  "Stock" means the common stock of DNB Financial Corporation and such
          other securities of DNB Financial Corporation which may be substituted
          for Stock pursuant to Article 10.

     (s)  "Stock Appreciation Right" or "SAR" means a right granted to a
          Participant under Article 6 to receive a payment equal to the
          difference between the Fair Market Value of a share of Stock as of the
          date of exercise of the SAR over the grant price of the SAR, all as
          determined pursuant to Article 6.

     (t)  "Unrestricted Stock Award" means Stock granted to a Participant under
          Article 7 that is not subject to restrictions or a risk of forfeiture.

                                    ARTICLE 4
                                 ADMINISTRATION

     4.1 COMMITTEE; BOARD APPROVAL. The Plan shall be administered by a
Committee appointed by, and which serves at the discretion of, the Board. The
Board may designate the Bank's Compensation Committee as the "Committee"
hereunder provided the Compensation Committee meets the requirements of this
Section. Notwithstanding any other provision of the Plan, at all times one of
the following two provisions shall apply: (i) the Committee shall consist of at
least two individuals and each member of the Committee shall qualify as a
Non-Employee Director; or (ii) (A) at least two members of the Committee must
qualify as Non-Employee Directors, (B) any member of the Committee who does not
qualify as a "Non-Employee Director" may not participate in any action of the
Committee with respect to any Award under the Plan, and (C) the Plan shall be
deemed to be administered by the full Board, the actions of the Committee under
the Plan shall be deemed merely advisory to the Board, and the Board's approval
shall be required for all actions of the Committee under the Plan, including
without limitation the grant of each Award. The members of the Committee shall
meet such additional criteria as may be necessary or desirable to comply with
regulatory or stock exchange rules or exemptions. The Bank will pay all
reasonable expenses of the Committee.

     4.2 AUTHORITY OF COMMITTEE. Subject to any specific designation in the
Plan, the Committee (or the Board, in cases where the Board administers the Plan
pursuant to Section 4.1) has the exclusive power, authority and discretion to:

     (a)  Designate Participants to receive Awards;

     (b)  Determine the type or types of Awards to be granted to each
          Participant;

     (c)  Determine the number of Awards to be granted and the number of shares
          of Stock to which an Award will relate;



                                       3



     (d)  Determine the terms and conditions of any Award granted under the Plan
          including but not limited to any restrictions or limitations on the
          Award, any schedule for lapse of forfeiture restrictions or
          restrictions on the exercisability of an Award, and accelerations or
          waivers thereof, based in each case on such considerations as the
          Committee in its sole discretion determines;

     (e)  Amend, modify, or terminate any outstanding Award, with the
          Participant's consent unless the Committee has the authority to amend,
          modify, or terminate an Award without the Participant's consent under
          any other provision of the Plan.

     (f)  Determine whether, to what extent, and under what circumstances an
          Award may be settled in cash, Stock, other Awards, or other property,
          or an Award may be canceled, forfeited, or surrendered;

     (g)  Prescribe the form of each Award Agreement, which need not be
          identical for each Participant;

     (h)  Decide all other matters that must be determined in connection with an
          Award;

     (i)  Establish, adopt, revise, amend or rescind any guidelines, rules and
          regulations as it may deem necessary or advisable to administer the
          Plan; and

     (j)  Interpret the terms of, and rule on any matter arising under, the Plan
          or any Award Agreement;

     (k)  Make all other decisions and determinations that may be required under
          the Plan or as the Committee deems necessary or advisable to
          administer the Plan; and

     (l)  Retain counsel, accountants and other consultants to aid in exercising
          its powers and carrying out its duties under the Plan.

     4.3 DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan shall (if approved or
ratified by the Board during any period when the Board is deemed to administer
the Plan pursuant to Section 4.1) be final, binding, and conclusive on all
parties and any other persons claiming an interest in any Award or under the
Plan.

                                   ARTICLE 5
                          ELIGIBILITY AND PARTICIPATION

     5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all
Directors and any key executive of the Company (which term shall be deemed to
include among others, the president, any vice president, secretary, treasurer or
any manager in charge of a principal business unit, division or function (such
as sales, administration or finance), any other officer who performs a policy
making function, or any other person who performs similar policy making
functions for the Company) and who on the date of any Award is in the employ of
the Company.

     5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from among all eligible individuals
those to whom Awards shall be granted and shall determine the nature and amount
of each Award. No individual shall have any right to be granted an Award under
this Plan.



                                       4



                                   ARTICLE 6
                            STOCK APPRECIATION RIGHTS

     6.1 GRANT OF SARS. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:

     (a)  RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation Right, the
          Participant to whom it is granted has the right to receive the excess,
          if any, of:

          (1)  The Fair Market Value of a share of Stock on the date of
               exercise; over

          (2)  The grant price of the Stock Appreciation Right as determined by
               the Committee, which shall not be less than the Fair Market Value
               of a share of Stock on the date of grant.

     (b)  OTHER TERMS. All such Awards shall be evidenced by an Award Agreement.
          The terms, methods of exercise, methods of settlement, form of
          consideration payable in settlement, and any other terms and
          conditions of any Stock Appreciation Right shall be determined by the
          Committee at the time of the grant of the Award and shall be reflected
          in the Award Agreement, and shall comply with the requirements of
          Section 409A of the Code.

                                   ARTICLE 7
                                  STOCK AWARDS

     7.1 GRANT OF STOCK. The Committee is authorized to grant Unrestricted Stock
Awards and Restricted Stock Awards to Participants in such amounts and subject
to such terms and conditions as determined by the Committee. All such Awards
shall be evidenced by an Award Agreement.

     7.2 ISSUANCE AND RESTRICTIONS. An Unrestricted Stock Award may provide for
a transfer of shares of Stock to a Participant at the time the Award is granted,
or it may provide for a deferred transfer of shares of Stock subject to
conditions prescribed by the Committee. Restricted Stock Awards shall be subject
to such restrictions on transferability and risks of forfeiture as the Committee
may impose. These restrictions and risks may lapse separately or in combination
at such times, under such circumstances, in such installments, or otherwise, as
the Committee determines at the time of the grant of the Award or thereafter.

     7.3 FORFEITURE. Except as otherwise determined by the Committee at the time
of the grant of the Award or thereafter, upon termination of employment or
service as a Director during the applicable restriction period, Stock subject to
a Restricted Stock Award that is at that time subject to restrictions shall be
forfeited, provided, however, that the Committee may provide in any Restricted
Stock Award that restrictions or forfeiture conditions relating to the Stock
will be waived in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole or in part
restrictions or forfeiture conditions relating to the Stock.

     7.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock Awards granted
under the Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing shares of Stock subject to Restricted Stock Awards
are registered in the name of the Participant, certificates must bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such shares, and the Company may, at its discretion, retain
physical possession of the certificate until such time as all applicable
restrictions lapse.



                                       5




                                   ARTICLE 8
                       PROVISIONS APPLICABLE TO ALL AWARDS

     8.1 STAND-ALONE AND TANDEM AWARDS. Awards granted under the Plan may, in
the discretion of the Committee, be granted either alone, in addition to, or in
tandem with, any other Award granted under the Plan. Awards granted in addition
to or in tandem with other Awards may be granted either at the same time as or
at a different time from the grant of such other Awards.

     8.2 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange or
buy out any previously granted Award for a payment in cash, Stock, or another
Award, based on the terms and conditions the Committee determines and
communicates to the Participant at the time the offer is made.

     8.3 TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee.

     8.4 LIMITS ON TRANSFER. No right or interest of a Participant in any Award
may be pledged, encumbered, or hypothecated to or in favor of any party other
than the Company, or shall be subject to any lien, obligation, or liability of
such Participant to any other party other than the Company; provided, however,
that the foregoing shall not be deemed to imply any obligation of the Company to
lend against or accept a lien or pledge of any Award for any reason. No Award
shall be assignable or transferable by a Participant other than by will or the
laws of descent and distribution, except that the Committee, in its discretion,
may permit a Participant to make a gratuitous transfer of an Award to his or her
spouse, lineal descendants, lineal ascendants, or a duly established trust for
the benefit of one or more of these individuals.

     8.5 BENEFICIARIES. Notwithstanding Section 8.4, a Participant may, if and
to the extent, and in such manner as may be determined by the Committee from
time to time, designate a beneficiary to exercise the rights of the Participant
and to receive any distribution with respect to any Award upon the Participant's
death. A beneficiary, legal guardian, legal representative, or other person
claiming any rights under the Plan is subject to all terms and conditions of the
Plan and any Award applicable to the Participant, except to the extent the Plan
and Award otherwise provide, and to any additional restrictions deemed necessary
or appropriate by the Committee. If no beneficiary has been designated or
survives the Participant, payment shall be made to the Participant's estate.
Subject to the foregoing, if a Participant is entitled to designate a
beneficiary, a beneficiary designation may be changed or revoked by a
Participant at any time in accordance with any procedures or conditions
established by the Committee from time to time, provided the change or
revocation is filed with the Committee.

     8.6 STOCK CERTIFICATES. Notwithstanding anything herein to the contrary,
the Company shall not be required to issue or deliver any certificates
evidencing shares of Stock pursuant to the exercise of any Awards, unless and
until the Board has determined, with advice of counsel, that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authorities and, if applicable, the requirements of
any exchange on which the shares of Stock are listed or traded as well as the
terms of this Plan and any other terms, conditions or restrictions that may be
applicable. All Stock certificates delivered under the Plan are subject to any
stop-transfer orders and other restrictions as the Committee deems necessary or
advisable to comply with Federal, state, or foreign jurisdiction, securities or
other laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock. In addition to the terms and conditions
provided herein, the Board may require that a Participant make such reasonable
covenants, agreements, and representations as the Board, in its discretion,
deems advisable in order to comply with any such laws, regulations, or
requirements.



                                       6



                                   ARTICLE 9
                            DEFERRAL OF COMPENSATION

9.1      RIGHT TO DEFER COMPENSATION.
         ---------------------------

         (a) TYPES OF DEFERRALS. Any Participant designated by the Board or by
the Committee may elect to defer (i) all or any portion of the Participant's
salary, (ii) any percentage of a fiscal year bonus determined by the Board or
other duly constituted authority or delegate to be payable to such Participant,
or (iii) all or any portion of the Participant's director's fees. Such election
shall remain in force for all future years, to the extent applicable, until
modified or revoked. In addition, the Committee, in its discretion, may permit a
Participant to elect to defer his or her receipt of the payment of cash or the
delivery of shares of Stock that would otherwise be due to such Participant
pursuant to an Award. Any election under this Section 9 shall be made by written
notice delivered to the Chief Financial Officer of DNB Financial Corporation,
specifying the amount (or percentage) of salary and/or bonus and/or directors'
fees and/or the Award to be deferred.

         (b) TIMING OF ELECTIONS. A Participant's election to defer compensation
for services performed during a calendar year must be made not later than the
close of the preceding calendar year, or at such other time as provided in
regulations under Section 409A of the Code. Notwithstanding the preceding
sentence, (i) in the case of the first calendar year in which a Participant
becomes eligible to defer compensation pursuant to this Plan, such election may
be made with respect to services to be performed subsequent to the election
within 30 days after the date the Participant becomes eligible to participate,
and (ii) in the case of any performance-based compensation based on services
performed over a period of at least 12 months, such election may be made no
later than six months before the end of the period. The determination of whether
any compensation satisfied the criteria of clause (ii) shall be made in
accordance with Section 409A of the Code and regulations promulgated thereunder.
A Participant's election to defer salary or director's fees shall continue from
year to year unless revoked or modified with respect to a calendar year prior to
such calendar year. A Participant's election with respect to a fiscal year bonus
shall apply only with respect to that bonus. A Participant may make an election
to defer the receipt of cash or shares of Stock otherwise payable or
transferable to the Participant pursuant to an Award in accordance with the
terms of such Award as well as the requirements of this Section 9.1(b).

9.2      DEFERRED COMPENSATION ACCOUNTS.
         ------------------------------

         (a) ESTABLISHMENT OF ACCOUNTS. A Deferred Compensation Account in the
name of each Participant who has elected to defer compensation under the Plan
shall be established and maintained as a special ledger account on the books of
the Company. On the last day of each calendar month in which salary or
director's fees deferred under this Plan would have become payable to a
Participant (in the absence of an election to defer payment thereof), the amount
of such deferred salary or director's fees shall be credited to the
Participant's Deferred Compensation Account. On the last day of the month in
which the bonuses deferred under this Plan would have become payable to a
Participant in the absence of an election to defer payment thereof, the amount
of such deferred bonus shall be credited to the Participant's Deferred
Compensation Account. On the last day of the month in which an Award would have
otherwise become payable or transferable to a Participant in the absence of an
election to defer receipt thereof, the amount of such deferred Award shall be
credited to the Participant's Deferred Compensation Account.


         (b) DEEMED INVESTMENT OF ACCOUNT BALANCE.



                                       7



         (1) Except as otherwise provided by the terms of an Award, the
Participant shall, at the time of making a deferred compensation election under
this Plan, make an election directing the Company to credit to the Deferred
Compensation Account in that calendar year based upon the options made available
by the Board or designated Committee which options may include either cash,
Stock, or a combination of cash and Stock equal in value to the amount of the
current year's salary or bonus deferred under the Plan. In addition to cash or
Stock, the Board or the Committee may offer to the Participant such deemed
investment options as it shall decide are appropriate. Such investment options
may include deemed investments in individual stocks or bonds, mutual funds, and
such other investment options as the Board or Committee may choose. The Board or
Committee shall not be required to offer the same deemed investment options to
each Participant but may restrict certain investment options to designated
Participants. In the absence of a contrary election by a Participant, the amount
credited to a Deferred Compensation Account shall be credited as cash.

         (2) If the Participant directs that any amount credited to the Deferred
Compensation account be credited in the form of Stock, the Board shall credit to
the Deferred Compensation Account sufficient shares of Stock equal in value to
the Deferred Compensation Account balance, or such lesser amount as the
Participant shall direct. The value of such Stock shall be determined in
accordance with a valuation methodology approved by the Board or by the
Committee. Except as provided in Section 9.6, such Stock credited to the
Deferred Compensation Account shall merely constitute a bookkeeping entry of the
Company, and (except as provided herein) the Participant shall have no voting,
dividend, or other legal or economic rights with respect to such Stock. At the
end of each fiscal quarter, an amount equivalent to all dividends which would
otherwise have been payable with respect to such Stock shall be credited to the
Deferred Compensation Account as additional Stock. The amount of the
Participant's Deferred Compensation Account that is credited as cash shall
increase or decrease based on the deemed investment options offered to the
Participant pursuant to clause (i) and selected by the Participant, and
valuations of that portion of the Participant's Deferred Compensation Account
shall occur at such times as prescribed by the Committee.

         (3) The Participant shall elect the portion of their deferral to be
allocated to Stock or cash or such other option as made available by the Board
at the time of making such election to defer compensation. Such allocation may
not be amended with respect to such deferral without the approval of the
Committee. Any allocation to Stock shall be paid in the form of Stock. No
Participant will be granted the right to take payment of the Stock in cash
rather than in shares.

         (4) If, at any time, the deferral of a Participant is allocated to
Stock, and such Participant would otherwise be deemed to have violated the
short-swing profit rules of Section 16(b) of the Exchange Act through such
allocation, the allocation to Stock shall be void and such allocation shall
default to cash.

9.3      PAYMENT OF DEFERRED COMPENSATION.
         --------------------------------

         (a) IN GENERAL. Amounts credited to a Participant's Deferred
Compensation Account shall be payable upon the Participant's Distribution Event.
The Participant shall determine the method of distributing the amounts in the
Deferred Compensation Account at the time the first election to participate in
the Plan is made, which shall be either a single distribution or a series of up
to ten (10) consecutive, substantially equal annual installments paid to such
Participant or his or her beneficiary, as the case may be, on or before January
15 of each year, commencing in the year following the Distribution Event. If no
such election is made, the method of distribution shall be determined solely by
the Board. If the Participant has elected to receive installment distributions,
and less than the full value of the Participant's Deferred Compensation Account
balance has been distributed as of the date of his or her death, the balance
shall be paid to the Participant's beneficiary in accordance with the same
method in


                                       8



effect at the Participant's death. For purposes of this Article 9, a
Participant's "beneficiary" shall mean the person or persons designated by the
Participant pursuant to Section 8.5 of this Plan, or, in the absence of such
designation or if no such person survives the Participant, the Participant's
estate. If any portion of the Participant's Deferred Compensation Account is
credited with Stock, then distributions from that portion of the Deferred
Compensation Account shall be made directly in the form of Stock. If the
Participant has elected installment distributions, the undistributed balance of
the Participant's Deferred Compensation Account will continue to be valued and
will continue to be credited with dividends with respect to Stock, if
applicable, in accordance with Section 9.2, until the final installment is
distributed.

         (b) MODIFICATION OF PAYMENT TERMS. A Participant may elect to change
the method of distribution of his or her Deferred Compensation Account
previously elected (or deemed elected) pursuant to Section 9.3(a), subject to
the following limitations:

               (i)  no such election shall take effect until at least 12 months
                    after the date on which the election is made;

               (ii) the first payment made as a result of such election be made
                    no earlier than five years after the date such payment would
                    have been made absent such election; and

               (iii) in the case of a payment scheduled to be made or payments
                    scheduled to commence at a Distribution Event with respect
                    to a Director that is a specified age of the Director, the
                    election must be made at least 12 months prior to the
                    attainment of such age.

         (c) CHANGE IN CONTROL. In the event of a change in the ownership or
effective control of the Company, or in the ownership of a substantial portion
of its assets (in all cases as described in regulations under Section 409A of
the Code), a Participant shall receive a distribution of all or a portion of his
or her Deferred Compensation Account. Any distribution pursuant to this Section
9.3(c) shall be made (i) in the form of cash and/or Stock as his or her Deferred
Compensation Account is allocated and (ii) within seven (7) days subsequent to
the change in ownership or effective control.

         (d) HARDSHIP DISTRIBUTION IN THE CASE OF UNFORESEEABLE EMERGENCY. Prior
to the time a Deferred Compensation Account of a Participant would otherwise
become payable, the Committee, in its sole discretion, may elect to distribute
all or a portion of the Deferred Compensation Account in the event such
Participant requests a distribution by reason of an unforeseeable emergency. For
purposes of this Plan, an unforeseeable emergency shall be deemed to have
occurred if the Committee determines that a Participant has experienced (i) a
severe financial hardship resulting from an illness or accident of the
Participant, the Participant's spouse, or a dependent (within the meaning of
Section 152(a) of the Code) of the Participant, (ii) a loss of the Participant's
property due to casualty, or (iii) another similar extraordinary and
unforeseeable circumstance arising as a result of events beyond the control of
the Participant. A distribution based on an unforeseeable emergency shall not
exceed the amount necessary to satisfy such emergency plus the amount necessary
to pay taxes reasonably anticipated as a result of the distribution, after
taking into account the extent to which such emergency may be relieved through
reimbursement or compensation by insurance or otherwise or by liquidation of the
Participant's assets (to the extent the liquidation of such assets would not
itself cause severe financial hardship). In the event the Participant is a
member of the Committee making such determination, the Participant shall not
participate in the decision by the Committee.




                                       9



9.4     TRUST PROVISIONS.
        ----------------

         (a) ESTABLISHMENT OF TRUST. The Company may in its sole discretion
establish one or more trusts to provide a source of payment for its obligations
under the Plan and such trust shall be permitted to hold cash, Stock, or other
assets to the extent of the Company's obligations hereunder. The Company may,
but is not required to, utilize a single trust with respect to its obligations
to Participants who are members of the Board and Participants who are not
members of the Board. The accounts of multiple Participants may be held under a
single trust but in such event each account shall be separately maintained and
segregated from each other account.

         (b) CLAIMS OF THE COMPANY'S CREDITORS. All assets held by any account
or trust created hereunder and all distributions to be made by the Company or
any trustee pursuant to this Plan and any trust agreement shall be subject to
the claims of general creditors of the Company, including judgment creditors and
bankruptcy creditors. The rights of a Participant or his or her beneficiaries in
or to any assets of the trust shall be no greater than the rights of an
unsecured creditor of the Company.

         9.5 NON-ASSIGNMENT. No right or interest of any Participant or any
person claiming through or under such Participant in the Participant's Deferred
Compensation Account shall be assignable or transferable in any manner or be
subject to alienation, anticipation, sale, pledge, encumbrance or other legal
process (including execution, levy, garnishment, attachment, bankruptcy, or
otherwise) or in any manner be subject to the debts or liabilities of such
Participant. If any Participant or any such person shall attempt to or shall
transfer, assign, alienate, anticipate, sell, pledge or otherwise encumber his
or her benefits hereunder or any part thereof, or if by reason of his or her
bankruptcy or other event happening at any time such benefits would devolve upon
anyone else or would not be enjoyed by him or her, then the Committee, in its
discretion, may terminate his or her interest in any such benefit to the extent
the Committee considers necessary or advisable to prevent or limit the effects
of such occurrence. Termination shall be effected by filing a written
declaration of termination with the Committee's records and making reasonable
efforts to deliver a copy to such Participant or any such other person or his or
her legal representative. As long as any Participant is alive, any amounts
affected by the termination shall be retained by the Company or the trustee of
any trust established pursuant to Section 9.4 of this Plan and, in the
Committee's sole and absolute discretion, may be paid to or expended for the
benefit of such Participant, his or her spouse, his or her children, or any
other person or persons in fact dependent upon him or her in such a manner as
the Committee shall deem proper.

                                   ARTICLE 10
                          CHANGES IN CAPITAL STRUCTURE

10.1     GENERAL.

         (a) OUTSTANDING AWARDS - INCREASE OR DECREASE IN ISSUED SHARES WITHOUT
CONSIDERATION. Subject to any required action by the shareholders of the
Company, in the event of any increase or decrease in the number of issued shares
of Stock resulting from a subdivision or consolidation of shares of Stock or the
payment of a stock dividend (but only on the shares of Stock), or any other
increase or decrease in the number of such shares effected without receipt or
payment of consideration by the Company, the Committee shall proportionally
adjust the number of shares of Stock subject to each outstanding Award and the
exercise price per share of Stock of each such Award.

         (b) OUTSTANDING AWARDS - CERTAIN MERGERS. Subject to any required
action by the shareholders of the Company, in the event that the Company shall
be the surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the



                                       10



holders of shares of Stock receive securities of another corporation), each
Award outstanding on the date of such merger or consolidation shall pertain to
and apply to the securities which a holder of the number of shares of Stock
subject to such Award would have received in such merger or consolidation.

         (c) OUTSTANDING AWARDS - CERTAIN OTHER TRANSACTIONS. In the event of
(i) a dissolution or liquidation of the Company, (ii) a sale of all or
substantially all of the Company's assets, (iii) a merger or consolidation
involving the Company in which the Company is not the surviving corporation or
(iv) a merger or consolidation involving the Company in which the Company is the
surviving corporation but the holders of shares of Stock receive securities of
another corporation and/or other property, including cash, the Committee shall,
in its absolute discretion, have the power to:

              (A) cancel, effective immediately prior to the occurrence of such
event, each Award outstanding immediately prior to such event (whether or not
then exercisable), and, in full consideration of such cancellation, pay to the
Participant to whom such Award was granted an amount in cash, for each share of
Stock subject to such Award, respectively, equal to the excess of (1) the value,
as determined by the Committee in its absolute discretion, of the property
(including cash) received by the holder of a share of Stock as a result of such
event over (2) the exercise of such Award; or

              (B) provide for the exchange of each Award outstanding immediately
prior to such event for a different Award and, incident thereto, make an
equitable adjustment as determined by the Committee in its absolute discretion
in the value of the Award or the number of shares or amount of property subject
to the Award or, if appropriate, provide for a cash payment to the Participant
to whom such Award was granted in partial consideration for the exchange of the
Award, or any combination thereof.

         (d) OUTSTANDING AWARDS - OTHER CHANGES. In the event of any other
change in the capitalization of the Company or corporate change other than those
specifically referred to in this Article, the Committee may, in its absolute
discretion, make such adjustments in the number and class of shares subject to
Awards outstanding on the date on which such change occurs and in the per share
exercise price of each Award as the Committee may consider appropriate to
prevent dilution or enlargement of rights.

         (e) NO SHAREHOLDER APPROVAL REQUIRED. Except to the extent required by
applicable law, no adjustment in the number of shares subject to outstanding
Awards, and no adjustment in the number of shares available for grant under this
Plan, shall require shareholder approval, and all such future adjustments shall
be deemed approved by the approval of this Plan, to the extent that such
adjustment, whether automatic or discretionary, is proportional to and
accompanies an equivalent adjustment in the number of shares held by the
Company's shareholders.

         (f) NO OTHER RIGHTS. Except as expressly provided in the Plan, no
Participant shall have any rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any dividend, any increase or
decrease in the number of shares of stock of any class or any dissolution,
liquidation, merger, or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Stock subject to an Award or the exercise
price of any Award.



                                       11



                                   ARTICLE 11
                    AMENDMENT, MODIFICATION, AND TERMINATION

         11.1 AMENDMENT, MODIFICATION, AND TERMINATION. At any time and from
time to time, the Board may terminate, amend or modify the Plan.

         11.2 AWARDS PREVIOUSLY GRANTED. Except as otherwise provided in the
Plan, including without limitation, the provisions of Article 10, no
termination, amendment, or modification of the Plan shall adversely affect in
any material way any Award previously granted under the Plan, without the
written consent of the Participant.

                                   ARTICLE 12
                               GENERAL PROVISIONS

         12.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person
shall have any claim to be granted any Award under the Plan, and neither the
Company nor the Committee is obligated to treat Participants, employees, and
other persons uniformly.

         12.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.

         12.3 WITHHOLDING. The Company shall have the authority and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of this Plan.

         12.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any
Award Agreement shall interfere with or limit in any way the right of the
Company or the Bank or any of their affiliates or subsidiaries to terminate any
Participant's employment or services at any time, nor confer upon any
Participant any right to continue in the employ of the Company.

         12.5 INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee or of the Board shall be indemnified and held
harmless by the Company and the Bank and any of their applicable subsidiaries
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by such member in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action or failure to act under the
Plan and against and from any and all amounts paid by him or her in satisfaction
of judgment in such action, suit, or proceeding against him or her provided he
or she gives the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company's or the Bank's or any of their applicable subsidiaries' Articles of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company or the Bank or any of their applicable subsidiaries may have to
indemnify them or hold them harmless.

         12.6 FRACTIONAL SHARES. No fractional shares of Stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up or down as appropriate.



                                       12



         12.7 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
make payment of awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by government agencies as
may be required. The Company shall be under no obligation to register under the
Securities Act of 1933, as amended, any of the shares of Stock paid under the
Plan. If the shares paid under the Plan may in certain circumstances be exempt
from registration under the Securities Act of 1933, as amended, the Company may
restrict the transfer of such shares in such manner as it deems advisable to
ensure the availability of any such exemption.

         12.8 GOVERNING LAW. The Plan and the terms of all Awards shall be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania without regard to rules of choice of law or conflict of laws,
except to the extent such laws may be pre-empted by the federal laws of the
United States of America.




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EX-4.B

DEFERRED COMPENSATION PLAN

FOR DIRECTORS OF

DNB FINANCIAL CORPORATION

(Effective October 1, 2006)

1.Purpose.

The purpose of this DCP is to provide each Eligible Director with the opportunity to select the timing of receipt of his or her Compensation. This DCP has been adopted by the Board pursuant to the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan to partially implement Article IX thereof, and shall be considered a part of such Plan and subject to the pertinent terms and provisions thereof.

2.Eligibility.

Each Eligible Director shall be eligible to participate in this DCP.

3.Definitions.

The words and phrases set forth below shall have the meanings indicated, unless the context requires a different meaning. Each capitalized term or phrase used in this DCP but not defined in this Section 3 shall have the same meaning as the definition of such term or phrase set forth in the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan.

(a)“Beneficiary” shall mean the person(s) designated to receive the balance of an Eligible Director’s Deferred Account upon the death of the Eligible Director. A Beneficiary may only be a natural person, a trust, or an entity that is tax-exempt under Section 501(c)(3) of the Code.

(b)“Company” shall mean DNB Financial Corporation.

(c)“Compensation” shall mean the compensation payable by the Company, either in cash or pursuant to an Award of Shares, to an Eligible Director for his or her services as a member of the Board and committees thereof.

(d)“DCP” shall mean the Deferred Compensation Plan for Directors of DNB Financial Corporation, as set forth herein and as may be amended from time to time.

(e)“Effective Date” shall mean October 1, 2006, the effective date of this DCP.

(f)“Election” shall mean the written election by an Eligible Director, pursuant to Section 4, below, to defer the receipt of all or a portion of his Compensation pursuant to this DCP.

(g)“Eligible Director” shall mean any member of the Board, or of the board of directors of a direct or indirect subsidiary of the Company, who is entitled to Compensation for his services as a member of the Board or such other board.

(h)“Share” or “Shares” shall mean one or more shares of Stock, including fractional shares.

4.Election.

(a)Prior to the commencement of a calendar year, but not later than the preceding December 15, an Eligible Director may make an Election, pursuant to which payment of a specified percentage or flat dollar amount of his Compensation earned and otherwise payable in cash during such year and thereafter, or a specified percentage or number of Shares subject to an Award granted in such year, shall be deferred until a future date established pursuant to Section 6(b), below. Notwithstanding the preceding sentence, however, in the case of any individual who will be an Eligible Director as of the Effective Date, or in the case of an individual who first becomes an Eligible Director after the Effective Date, the Eligible Director may make an Election at any time prior to the Effective Date or during the period ending on the 30^th day following the Effective Date, or at any time prior to the date on which he or she becomes an Eligible Director or during the period ending on the 30^th day following the date he or she first becomes an Eligible Director, as the case may be, provided that in no event shall such Election apply with respect to any Compensation earned by the Eligible Director prior to the date of the Election.

(b)An Eligible Director’s Election must be in writing, and in such form as the Committee shall prescribe. No Election with respect to Compensation otherwise payable in cash shall be effective with respect to any calendar year unless the amount projected to be deferred for such year is at least five thousand dollars ($5,000).

(c)An Eligible Director may modify or revoke his or her Election effective as of the commencement of any calendar year, provided such modification or revocation is in writing in such form as the Committee shall prescribe, and is delivered to the Company in advance of such year.

(d)An Eligible Director’s Election with respect to Compensation otherwise payable in cash, or subsequent modification or revocation thereof, shall remain in effect through subsequent calendar years, unless and until modified or revoked, or a new Election is made, in accordance with the foregoing provisions of this Section 4. An Eligible Director’s Election with respect to Awards of Shares shall apply solely with respect to Awards granted in the calendar year to which the Election relates, and no Shares payable pursuant to another Award shall be deferred pursuant to this DCP or otherwise unless a new Election is made with respect to such Award pursuant to the foregoing provisions of this Section 4.

5.Allocations to Deferred Compensation Account.

(a)That number of Shares having a Fair Market Value equal to one hundred and ten percent (110%) of the amount of Compensation otherwise payable in cash which an

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Eligible Director has deferred pursuant to an Election shall be allocated to the Eligible Director’s Deferred Compensation Account. The determination of the number of Shares to be allocated shall be based on the Fair Market Value of the Stock on the last day of the month in which such Compensation would have been paid to the Eligible Director but for his or her Election.

(b)That number of Shares equal to the number of Shares subject to an Award which an Eligible Director has deferred pursuant to an Election shall be allocated to the Eligible Director’s Deferred Compensation Account as of the last day of the month in which such Shares would otherwise have been paid to the Eligible Director or become vested, whichever is later.

(c)The amount of a cash dividend paid with respect to the Stock shall be deemed to be paid with respect to the Shares allocated to an Eligible Director’s Deferred Compensation Account and immediately reinvested in additional Shares in accordance with the same procedures and valuation provisions as are applicable under the Company’s Dividend Reinvestment Plan from time to time.

(d)All Shares allocated to an Eligible Director’s Deferred Compensation Account shall thereafter be fully vested and shall not be forfeitable for any reason.

6.Distributions from Deferred Compensation Account.

(a)All distributions from an Eligible Director’s Deferred Account shall be in Shares, except that the Fair Market Value of any fraction of a Share as of the date of distribution shall be paid in cash. All Shares distributed to an Eligible Director or Beneficiary shall be subject to a restriction whereby they may not be sold, hypothecated or otherwise transferred for a period of one (1) year from the date of distribution without the express, written consent of the Committee. Certificates representing distributed Shares shall bear a legend reflecting such restriction.

(b)Distribution of an Eligible Director’s Deferred Compensation Account shall commence upon the earlier of the following:

(i)the date as of which he or she separates from service with the Company, within the meaning of Section 409A of the Code;

(ii)the Eligible Director’s attainment of age 75; or

(iii)the Eligible Director’s attainment of an attained age or a specified date designated by his or her Election, or as revised pursuant to Section 6(d), below.

If the Eligible Director does not designate an age in his or her Election pursuant to clause (iii), distribution of the Eligible Director’s Deferred Compensation Account shall commence upon the occurrence of the earlier of the events specified in clause (i) and (ii). A single designation shall apply to the entire balance of the Eligible Director’s Deferred Compensation Account.

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(c)Upon the occurrence of the distribution event set forth in Section 6(b), above, the balance of the Eligible Director’s Deferred Compensation Account shall be distributed in one of the following optional forms of distribution, as he or she may designate in his or her Election:

(i)A single lump sum distribution on or about January 15 of the calendar year following the calendar year in which such distribution event occurs; or

(ii)Annual installments payable for a number of whole years designated by the Eligible Director in his or her Election, which number shall not exceed ten (10), commencing on or about January 15 of the calendar year following the calendar year in which such distribution event occurs, and each January 15 thereafter during the installment period.

In the absence of a designation by the Eligible Director pursuant to this Section 6(c), the Eligible Director shall be deemed to have designated the distribution method set forth in clause (i). A single designation shall apply to the entire balance of the Eligible Director’s Deferred Compensation Account.

If distributions are to be made in installments, the amount of each installment shall be equal to the balance of the Deferred Compensation Account as of the close of the calendar year preceding the date of distribution of the installment, divided by the number of installment payments remaining (including that installment).

(d)An Eligible Director may elect to change the timing or method of distribution (or both) previously designated (or deemed designated) pursuant to Section 6(b) or (c), above, by submission of a new designation to the Company, subject to the following limitations and any further limitations prescribed by Section 409A of the Code:

(i)no such new designation shall take effect until at least 12 months after the date on which it is made;

(ii)the first payment as a result of such new designation shall be made no earlier than five (5) years after the date such payment would have been made absent such new Election; and

(iii)in the case of a payment scheduled to be made or payments scheduled to commence upon the attainment of a specified age, the new designation must be made at least 12 months prior to the attainment of such age.

(e)Notwithstanding an Eligible Director’s Election or any provision of this DCP to the contrary, upon an Eligible Director’s separation from service with the Company, within the meaning of Section 409A of the Code, the Eligible Director’s entire Deferred Compensation Account shall be distributed in a single lump sum on or about January 15 of the calendar year following his or her separation from service if the Fair Market Value of the Deferred Compensation Account as of the close of such calendar year is not in excess of ten thousand dollars ($10,000).

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(f)Distribution of all or a portion of an Eligible Director’s Deferred Compensation Account shall be accelerated upon request of the Eligible Director if the Committee determines that the Eligible Director has experienced an unforeseeable emergency, within the meaning of Section 409A of the Code. The amount to be distributed shall not exceed the amount necessary to satisfy such unforeseeable emergency plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution, after taking into account the extent to which such emergency may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Eligible Director’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). In the event the requesting Eligible Director is a member of the Committee, the Eligible Director shall not participate in the decision by the Committee.

(g)In the event of an Eligible Director’s death prior to the distribution in full of his or her Deferred Compensation Account, the Beneficiary shall receive the balance of the Eligible Director’s Deferred Compensation Account in a single lump sum as soon as practicable following the Eligible Director’s death.

(h)Any amount distributed to an Eligible Director or Beneficiary under this DCP shall be subject to all applicable tax withholdings mandated by law. To the extent necessary, the number of Shares otherwise distributable at any time shall be reduced by that number of Shares having a Fair Market Value equal to the amount of tax required to be withheld in connection with such distribution.

7.Designation of Beneficiary.

(a)Each Eligible Director shall file with the Company a written designation, in the form prescribed by the Company, of one or more persons as Beneficiary to receive the balance of the Eligible Director’s Deferred Compensation Account upon his or her death. The Eligible Director may, from time to time, revoke or change his or her Beneficiary designation by filing a new designation with the Company. The last such designation received by the Company shall be controlling; provided, however, that no designation, change or revocation thereof, shall be effective unless received by the Company prior to the Eligible Director’s death.

(b)If no such Beneficiary designation is in effect at the time of the Eligible Director’s death, or if no designated Beneficiary survives the Eligible Director, the payment of the amount, if any, payable under this DCP upon his or her death shall be made to the Eligible Director’s estate.

8.Claims Procedures.

(a)An Eligible Director or, in the event of the Eligible Director’s death, his or her Beneficiary, may file a written claim for payment hereunder with the Committee. In the event of a denial of any payment due to or requested by the Eligible Employee or Beneficiary (the “claimant”), the Committee will give the claimant written notification containing specific reasons for the denial. The written notification will contain specific reference to the pertinent provisions of this DCP on which the denial of the claim is based. In addition, it will contain a description of any other material or information necessary for the claimant to perfect a claim, and

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an explanation of why such material or information is necessary. The notification will provide further appropriate information as to the steps to be taken if the claimant wishes to submit the claim for review and the time limits applicable thereto. This written notification will be given to a claimant within ninety (90) days after receipt of the claim by the Committee unless special circumstances require an extension of time for processing the claim, in which case the Committee shall provide written notice of the extension to the claimant and the reasons therefore, and the date by which the Company expects to make its determination with respect to the claim. In no event shall such extension exceed 90 days.

(b)In the event of a denial of a claim for benefits, the claimant or a duly authorized representative will be permitted to submit issues and comments in writing to the Committee and to submit documents, records and other information relating to the claim for benefits. The claimant or a duly authorized representative shall also be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits. In addition, the claimant or a duly authorized representative may make a written request for a full and fair review of the claim and its denial by the Committee that takes into account all comments, documents, records and other information submitted by the claimant, without regard to whether such information was submitted or considered in the initial benefits determination; provided, however, that such written request is received by the Commitee (or its delegate) within sixty (60) days after receipt by the claimant of written notification of the denial. The sixty (60) day requirement may be waived by the Committee in appropriate cases.

(c)A decision on review of a claim for benefits will be rendered by the Commitee within sixty (60) days after the receipt of the request. Under special circumstances, an extension (up to an additional 60 days) can be granted for processing the decision. Notice of this extension must be provided in writing to the claimant prior to the expiration of the initial sixty-day period. In no event will the decision be rendered more than one hundred twenty (120) days after the initial request for review. Any decision by the Commitee will be furnished to the claimant in writing and will set forth the specific reasons for the decision and the specific provisions on which the decision is based. The claimant or a duly authorized representative shall also be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits.

9.Amendment or Termination.

The Board reserves the right at any time to amend this DCP in whole or in part, retroactively or prospectively, for any reason and without the consent of any Eligible Director or Beneficiary, provided that no amendment may adversely affect the rights of an Eligible Director or a Beneficiary with respect to amounts credited to the Eligible Director’s Deferred Compensation Account prior to such amendment or alter the timing of distribution of any Eligible Director’s Deferred Compensation Account. The Board reserves the right at any time to terminate this DCP. Upon termination of this DCP, (a) all Elections with respect to the deferral of future Compensation shall terminate as of the date specified by the Board, but not before the earliest time permitted under Section 409A of the Code; and (b) the Deferred Compensation Account of each Eligible Director shall be distributed at such time or times as it would have been distributed in the absence of termination, unless the Board, in its discretion, elects to distribute the Deferred Compensation Accounts of all Eligible Directors in some other manner but in no event prior to the earliest time permitted under Section 409A of the Code.

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10.Miscellaneous.

(a)Nothing contained in this DCP shall give the Eligible Director the right to be retained in the service of the Company.

(b)If the Company shall find that any person to whom any amount is payable under this DCP is unable to care for his affairs because of illness or accident, or is a minor, the Company may direct that any amount to which such person is entitled be paid to his or her spouse, a child, a relative, an institution maintaining or having custody of such person, or any other person deemed by the Company to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the DCP and the Company therefor.

(c)Except insofar as may otherwise be required by law, no amount payable at any time under this DCP shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge, encumbrance or garnishment by creditors of the Eligible Director or his or her Beneficiary, nor be subject in any manner to the debts or liabilities of any person, and any attempt to so alienate or subject any such amount, whether presently or thereafter payable, shall be void.

(d)It is the intention of the Company that this DCP shall be unfunded for Federal income tax purposes. Accordingly, this DCP constitutes a mere promise by the Company to make payments hereunder in the future, and each Eligible Director or, if applicable, his or her Beneficiary, shall have the status of a general unsecured creditor of the Company with respect to this DCP. Except as provided by the terms of any trust established pursuant to Section 9.4 of the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan, neither an Eligible Director nor his or her Beneficiary shall have any right, title, or interest in or to any assets which the Company may hold to aid it in meeting its obligations hereunder. Such assets, whether held in trust or otherwise, shall be unrestricted corporate assets.

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EX-4.C

DNB FINANCIAL CORPORATION

DEFERRED COMPENSATION PLAN

(Effective October 1, 2006)

1.Purpose.

The purpose of this DCP is to provide each Eligible Employee with the opportunity to select the timing of receipt of his or her Compensation. This DCP has been adopted by the Board pursuant to the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan to partially implement Article IX thereof, and shall be considered a part of such Plan and subject to the pertinent terms and provisions thereof.

This DCP shall at all times be maintained by the Company and administered by the Committee for the purpose of providing deferred compensation for a select group of management and highly compensated employees of the Company and its direct and indirect subsidiaries.

2.Eligibility.

Each Eligible Employee shall be eligible to participate in this DCP.

3.Definitions.

The words and phrases set forth below shall have the meanings indicated, unless the context requires a different meaning. Each capitalized term or phrase used in this DCP but not defined in this Section 3 shall have the same meaning as the definition of such term or phrase set forth in the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan.

(a)“Beneficiary” shall mean the person(s) designated to receive the balance of an Eligible Employee’s Deferred Account upon the death of the Eligible Employee. A Beneficiary may only be a natural person, a trust, or an entity that is tax-exempt under Section 501(c)(3) of the Code.

(b)“Bonus Deferral Election” shall mean the written election by an Eligible Employee, pursuant to Section 5, below, to defer the receipt of all or a portion of any annual or other periodic bonus otherwise payable to the Eligible Employee.

(c)“Company” shall mean DNB Financial Corporation.

(d)“Compensation” shall mean an Eligible Employee’s regular salary and annual or other periodic bonuses, and Shares payable pursuant to an Award.

(e)“DCP” shall mean the DNB Financial Corporation Deferred Compensation Plan, as set forth herein and as may be amended from time to time.

(f)“Effective Date” shall mean October 1, 2006, the effective date of this DCP.

(g)“Eligible Employee” shall mean an employee of the Company or one or more of its direct or indirect subsidiaries who has been expressly designated by the Committee as eligible to participate in this DCP.

(h)“Salary Deferral Election” shall mean the written election by an Eligible Employee, pursuant to Section 4, below, to defer the receipt of up to fifty percent (50%) of the regular salary otherwise payable to the Eligible Employee.

(i)“Share” or “Shares” shall mean one or more shares of Stock, including fractional shares.

(j)“Share Deferral Election” shall mean the written election by an Eligible Employee, pursuant to Section 6, below, to defer the receipt of Compensation otherwise payable to the Eligible Employee pursuant to an Award.

4.Salary Deferral Election.

(a)Prior to the commencement of a calendar year, but not later than the preceding December 15, an Eligible Employee may make a Salary Deferral Election, pursuant to which payment of a specified percentage of his or her regular salary earned during such year and thereafter and otherwise payable in cash shall be deferred until a future date established pursuant to Section 8(b), below. Notwithstanding the preceding sentence, however, in the case of any individual who will be an Eligible Employee as of the Effective Date, or in the case of an individual who first becomes an Eligible Employee after the Effective Date, the Eligible Employee may make a Salary Deferral Election at any time prior to the Effective Date or during the period ending on the 30^th day following the Effective Date, or at any time prior to the date on which he or she first becomes an Eligible Employee or during the period ending on the 30^th day following the date he or she first becomes an Eligible Employee, as the case may be, provided that in no event shall such Salary Deferral Election apply with respect to any salary earned by the Eligible Employee prior to the date of the Salary Deferral Election.

(b)An Eligible Employee’s Salary Deferral Election must be in writing, and in such form as the Committee shall prescribe. No Salary Deferral Election shall be effective with respect to any calendar year unless the amount projected to be deferred for such year is at least five thousand dollars ($5,000).

(c)An Eligible Employee may modify or revoke his or her Salary Deferral Election effective as of the commencement of any calendar year, provided such modification or revocation is in writing in such form as the Committee shall prescribe, and is delivered to the Company in advance of such year.

(d)An Eligible Employee’s Salary Deferral Election, or subsequent modification or revocation thereof, shall remain in effect through subsequent calendar years, unless and until modified or revoked, or a new Salary Deferral Election is made, in accordance with the foregoing provisions of this Section 4.

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5.Bonus Deferral Election.

(a)Prior to the commencement of a calendar year, but not later than the preceding December 15, an Eligible Employee may make a Bonus Deferral Election, pursuant to which payment of a specified percentage his or her annual or other periodic bonus earned during such year shall be deferred until a future date established pursuant to Section 8(b), below. Notwithstanding the preceding sentence, however -

(i)In the case of any individual who will be an Eligible Employee as of the Effective Date, or in the case of an individual who first becomes an Eligible Employee after the Effective Date, the Eligible Employee may make a Bonus Deferral Election prior to the Effective Date or during the period ending on the 30^th day following the Effective Date, or prior to the date on which he or she first becomes an Eligible Employee or during the period ending on the 30^th day following the date he or she first becomes an Eligible Employee, as the case may be, provided that in no event shall such Bonus Deferral Election apply with respect to any bonus earned by the Eligible Employee prior to the date of the Bonus Deferral Election.

(ii)In the case of any performance-based compensation, within the meaning of Section 409A of the Code, based upon a performance period of at least 12 months, an Eligible Employee may make a Bonus Deferral Election with respect to such compensation no later than the date that is six (6) months before the end of the performance period, provided that Eligible Employee performed services continuously from a date no later than the date upon which the performance criteria are established through a date no earlier than the date of the Bonus Deferral Election; and provided further that in no event shall a Bonus Deferral Election be effective with respect to such compensation if it is made after such compensation has become both substantially certain to be paid and readily ascertainable.

(b)An Eligible Employee’s Bonus Deferral Election must be in writing, and in such form as the Company shall prescribe. No Bonus Deferral Election shall be effective with respect to any calendar year unless the amount projected to be deferred is at least five thousand dollars ($5,000) or one hundred percent (100%) of the Compensation to which the Bonus Deferral Election relates, whichever is less.

(c)An Eligible Employee’s Bonus Deferral Election shall apply solely with respect to a single calendar year. No portion of an Eligible Employee’s bonus earned during any subsequent calendar year shall be deferred pursuant to this DCP or otherwise unless a new Bonus Deferral Election is made with respect to such calendar year pursuant to the foregoing provisions of this Section 5.

6.Share Deferral Election.

(a)Prior to the commencement of a calendar year, but not later than the preceding December 15, an Eligible Employee may make a Share Deferral Election, pursuant to which payment of a specified percentage or number of Shares subject to any Award granted in

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such year shall be deferred until a future date established pursuant to Section 8(b), below. Notwithstanding the preceding sentence, however -

(i)In the case of any individual who will be an Eligible Employee as of the Effective Date, or in the case of an individual who first becomes an Eligible Employee after the Effective Date, the Eligible Employee may make a Share Deferral Election prior to the Effective Date or during the period ending on the 30^th day following the Effective Date, or prior to the date on which he or she first becomes an Eligible Employee or during the period ending on the 30^th day following the date he or she first becomes an Eligible Employee, as the case may be, provided that in no event shall such Share Deferral Election apply with respect to any Award granted prior to the date of the Share Deferral Election.

(ii)In the case of any Award that constitutes performance-based compensation, within the meaning of Section 409A of the Code, based upon a performance period of at least 12 months, an Eligible Employee may make a Share Deferral Election with respect to such compensation no later than the date that is six (6) months before the end of the performance period, provided that Eligible Employee performed services continuously from a date no later than the date upon which the performance criteria are established through a date no earlier than the date of the Share Deferral Election; and provided further that in no event shall a Share Deferral Election be effective with respect to any Shares if it is made after such Shares have become both substantially certain to be paid and the number thereof readily ascertainable.

(b)An Eligible Employee’s Share Deferral Election must be in writing, and in such form as the Company shall prescribe.

(c)An Eligible Employee’s Share Deferral Election shall apply solely with respect to a single calendar year. No Shares payable pursuant to an Award granted to an Eligible Employee during any subsequent calendar year shall be deferred pursuant to this DCP or otherwise unless a new Share Deferral Election is made with respect to such calendar year pursuant to the foregoing provisions of this Section 6.

7.Allocations to Deferred Compensation Account.

(a)That number of Shares having a Fair Market Value equal to one hundred and ten percent (110%) of the amount of Compensation otherwise payable in cash which an Eligible Employee has deferred pursuant to a Salary Deferral Election or a Bonus Deferral Election shall be allocated to the Eligible Employee’s Deferred Compensation Account. The determination of the number of Shares to be allocated shall be based on the Fair Market Value of the Stock on the last day of the month in which such Compensation would have been paid to the Eligible Employee but for his or her Salary Deferral Election or Bonus Deferral Election.

(b)That number of Shares equal to the number of Shares subject to an Award which an Eligible Employee has deferred pursuant to a Share Deferral Election shall be allocated to the Eligible Employee’s Deferred Compensation Account as of the last day of the month in which such Shares would otherwise have been paid to the Eligible Employee, or the last day of the month in which the Eligible Employee becomes vested in such Shares, whichever is later.

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(c)The amount of a cash dividend paid with respect to the Stock shall be deemed to be paid with respect to the Shares allocated to an Eligible Employee’s Deferred Compensation Account and immediately reinvested in additional Shares in accordance with the same procedures and valuation provisions as are applicable under the Company’s Dividend Reinvestment Plan from time to time.

(d)All Shares allocated to an Eligible Employee’s Deferred Compensation Account shall be fully vested and shall not be forfeitable for any reason.

8.Distributions from Deferred Compensation Account.

(a)All distributions from an Eligible Employee’s Deferred Compensation Account shall be in Shares, except that the Fair Market Value of any fraction of a Share as of the date of distribution shall be paid in cash. All Shares distributed to an Eligible Employee or Beneficiary shall be subject to a restriction whereby they may not be sold, hypothecated or otherwise transferred for a period of one (1) year from the date of distribution without the express, written consent of the Committee. Certificates representing distributed Shares shall bear a legend reflecting such restriction.

(b)Distribution of an Eligible Employee’s Deferred Compensation Account shall commence upon the earlier of the following:

(i)the date as of which he or she separates from service with the Company, within the meaning of Section 409A of the Code, or

(ii)the attained age of the Eligible Employee or a specified date, in either case as designated by the Eligible Employee in his or her first Salary Deferral Election, first Bonus Deferral Election, or first Share Deferral Election, whichever was made first, or as revised pursuant to Section 8(d), below.

If the Eligible Employee does not designate an age or date pursuant to clause (ii), above, distribution of the Eligible Employee’s Deferred Compensation Account shall commence upon the occurrence of the event specified in clause (i). A single designation shall apply to the entire balance of the Eligible Employee’s Deferred Compensation Account.

(c)Upon the occurrence of the distribution event set forth in Section 8(b), above, the balance of the Eligible Employee’s Deferred Compensation Account shall be distributed in one of the following optional forms of distribution, as he or she may designate in his or her Salary Deferral Election, his or her first Bonus Deferral Election, or his or her first Share Deferral Election, whichever was made first:

(i)A single lump sum distribution on or about January 15 of the calendar year following the calendar year in which such distribution event occurs; or

(ii)Annual installments payable for a number of whole years designated by the Eligible Employee in such Salary Deferral Election, Bonus Deferral Election, or Share Deferral Election, as the case may be, which number shall not exceed ten (10), commencing on or about January 15 of the calendar year following the calendar year in which such distribution event occurs, and each January 15 thereafter during the installment period.

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However, in the case of any specified employee, no distribution shall be made as a result of his or her separation from service with the Company, within the meaning of Section 409A of the Code, before the date which is six months after the date of such separation from service (or, if earlier, the date of death of the specified employee). For purposes of the preceding sentence, a “specified employee” is a key employee (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) of the Company or any entity which, along with the Company, would be considered a single employer under Section 414(b) or (c) of the Code.

In the absence of a designation by the Eligible Employee pursuant to this Section 8(c), the Eligible Employee shall be deemed to have designated the distribution method set forth in clause (i). A single designation shall apply to the entire balance of the Eligible Employee’s Deferred Compensation Account.

If distributions are to be made in installments, the amount of each installment shall be equal to the balance of the Deferred Compensation Account as of the close of the calendar year preceding the date of distribution of the installment, divided by the number of installment payments remaining (including that installment).

(d)An Eligible Employee may elect to change the timing or method of distribution (or both) previously designated (or deemed designated) pursuant to Section 8(b) or 8(c), above, by submission of a new designation to the Committee, subject to the following limitations and any further limitations prescribed by Section 409A of the Code:

(i)no such new designation shall take effect until at least 12 months after the date on which it is made;

(ii)the first payment as a result of such new designation shall be made no earlier than five (5) years after the date such payment would have been made absent such new designation.

(e)Notwithstanding an Eligible Employee’s Salary Deferral Election, Bonus Deferral Election or Share Deferral Election, or any provision of this DCP to the contrary, upon an Eligible Employee’s separation from service with the Company, within the meaning of Section 409A of the Code, the Eligible Employee’s entire Deferred Compensation Account shall be distributed in a single lump sum on or about January 15 of the calendar year following his or her separation from service if the Fair Market Value of the Deferred Compensation Account as of the close of such calendar year is not in excess of ten thousand dollars ($10,000).

(f)Distribution of all or a portion of an Eligible Employee’s Deferred Compensation Account shall be accelerated upon request of the Eligible Employee if the Committee determines that the Eligible Employee has experienced an unforeseeable emergency, within the meaning of Section 409A of the Code. The amount to be distributed shall not exceed the amount necessary to satisfy such unforeseeable emergency plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution, after taking into account the extent to

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which such emergency may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Eligible Employee’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

(g)In the event of an Eligible Employee’s death prior to the distribution in full of his or her Deferred Compensation Account, the Beneficiary shall receive the balance of the Eligible Employee’s Deferred Compensation Account in a single lump sum as soon as practicable following the Eligible Employee’s death.

(h)Any amount distributed to an Eligible Employee or Beneficiary under this DCP shall be subject to all applicable tax withholdings mandated by law. To the extent necessary, the number of Shares otherwise distributable at any time shall be reduced by that number of Shares having a Fair Market Value equal to the amount of tax required to be withheld in connection with such distribution.

9.Designation of Beneficiary.

(a)Each Eligible Employee shall file with the Company a written designation, in the form prescribed by the Company, of one or more persons as Beneficiary to receive the balance of the Eligible Employee’s Deferred Compensation Account upon his or her death. The Eligible Employee may, from time to time, revoke or change his or her Beneficiary designation by filing a new designation with the Company. The last such designation received by the Company shall be controlling; provided, however, that no designation, change or revocation thereof, shall be effective unless received by the Company prior to the Eligible Employee’s death.

(b)If no such Beneficiary designation is in effect at the time of the Eligible Employee’s death, or if no designated Beneficiary survives the Eligible Employee, the payment of the amount, if any, payable under this DCP upon his or her death shall be made to the Eligible Employee’s estate.

10.Claims Procedures.

(a)An Eligible Employee or, in the event of the Eligible Employee’s death, his or her Beneficiary, may file a written claim for payment hereunder with the Committee. In the event of a denial of any payment due to or requested by the Eligible Employee or Beneficiary (the “claimant”), the Committee will give the claimant written notification containing specific reasons for the denial. The written notification will contain specific reference to the pertinent provisions of this DCP on which the denial of the claim is based. In addition, it will contain a description of any other material or information necessary for the claimant to perfect a claim, and an explanation of why such material or information is necessary. The notification will provide further appropriate information as to the steps to be taken if the claimant wishes to submit the claim for review and the time limits applicable thereto, and a statement of the claimant’s right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended, if applicable. This written notification will be given to a claimant within ninety (90) days after receipt of the claim by the Committee unless special circumstances require an extension of time for processing the claim, in which case the Committee shall provide written notice of the extension to the claimant and the reasons therefore, and the date by which the Company expects to make its determination with respect to the claim. In no event shall such extension exceed 90 days.

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(b)In the event of a denial of a claim for benefits, the claimant or a duly authorized representative will be permitted to submit issues and comments in writing to the Committee and to submit documents, records and other information relating to the claim for benefits. The claimant or a duly authorized representative shall also be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits. In addition, the claimant or a duly authorized representative may make a written request for a full and fair review of the claim and its denial by the Committee that takes into account all comments, documents, records and other information submitted by the claimant, without regard to whether such information was submitted or considered in the initial benefits determination; provided, however, that such written request is received by the Commitee (or its delegate) within sixty (60) days after receipt by the claimant of written notification of the denial. The sixty (60) day requirement may be waived by the Committee in appropriate cases.

(c)A decision on review of a claim for benefits will be rendered by the Commitee within sixty (60) days after the receipt of the request. Under special circumstances, an extension (up to an additional 60 days) can be granted for processing the decision. Notice of this extension must be provided in writing to the claimant prior to the expiration of the initial sixty-day period. In no event will the decision be rendered more than one hundred twenty (120) days after the initial request for review. Any decision by the Commitee will be furnished to the claimant in writing and will set forth the specific reasons for the decision and the specific provisions on which the decision is based. The claimant or a duly authorized representative shall also be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits.

11.Amendment or Termination.

The Board reserves the right at any time to amend this DCP in whole or in part, retroactively or prospectively, for any reason and without the consent of any Eligible Employee or Beneficiary, provided that no amendment may adversely affect the rights of an Eligible Employee or a Beneficiary with respect to amounts credited to the Eligible Employee’s Deferred Compensation Account prior to such amendment or alter the timing of distribution of any Eligible Employee’s Deferred Compensation Account. The Board reserves the right at any time to terminate this DCP. Upon termination of this DCP, (a) all Elections with respect to the deferral of future Compensation shall terminate as of the date specified by the Board, but not before the earliest time permitted under Section 409A of the Code; and (b) the Deferred Compensation Account of each Eligible Employee shall be distributed at such time or times as it would have been distributed in the absence of termination, unless the Board, in its discretion, elects to distribute the Deferred Compensation Accounts of all Eligible Employees in some other manner but in no event prior to the earliest time permitted under Section 409A of the Code.

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12.Miscellaneous.

(a)Nothing contained in this DCP shall give the Eligible Employee the right to be retained in the employ or other service of the Company.

(b)If the Company shall find that any person to whom any amount is payable under this DCP is unable to care for his affairs because of illness or accident, or is a minor, the Company may direct that any amount to which such person is entitled be paid to his or her spouse, a child, a relative, an institution maintaining or having custody of such person, or any other person deemed by the Company to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the DCP and the Company therefor.

(c)Except insofar as may otherwise be required by law, no amount payable at any time under this DCP shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge, encumbrance or garnishment by creditors of the Eligible Employee or his or her Beneficiary, nor be subject in any manner to the debts or liabilities of any person, and any attempt to so alienate or subject any such amount, whether presently or thereafter payable, shall be void.

(d)It is the intention of the Company that this DCP shall be unfunded for Federal income tax purposes and for purposes of the Employee Retirement Income Security Act of 1974, as amended. Accordingly, this DCP constitutes a mere promise by the Company to make payments hereunder in the future, and each Eligible Employee or, if applicable, his or her Beneficiary, shall have the status of a general unsecured creditor of the Company with respect to this DCP. Except as provided by the terms of any trust established pursuant to Section 9.4 of the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan, neither an Eligible Employee nor his or her Beneficiary shall have any right, title, or interest in or to any assets which the Company may hold to aid it in meeting its obligations hereunder. Such assets, whether held in trust or otherwise, shall be unrestricted corporate assets.

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EX-5

October 25, 2006

DNB Financial Corporation

4 Brandywine Avenue

Downingtown, PA 19335

Re: Registration Statement on Form S-8 - DNB Financial Corporation Incentive Equity and Deferred Compensation Plan (as approved November 24, 2004) - Deferred Compensation Plan for Directors of DNB Financial Corporation (adopted Effective October 1, 2006) - DNB Financial Corporation Deferred Compensation Plan (adopted effective October 1, 2006)

Dear Sirs:

We have acted as counsel for DNB Financial Corporation (the "Company") in connection with the preparation and filing with the Securities and Exchange Commission of a registration statement on Form S-8 (the "Registration Statement"), for the purpose of registering under the Securities Act of 1933, as amended, $4,313,631 in deferred compensation obligations (the “Obligations”) representing obligations of the Company to issue in the future up to 205,411 shares of the common stock of the Company, par value $1.00 per share. The Obligations are issuable pursuant to written elections that may hereafter be made by eligible directors and officers of the Company to defer compensation in accordance with the applicable “Plan” or “Plans” referred to below (“Election Agreements”) under one or more of the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan (as approved November 24, 2004), the Deferred Compensation Plan for Directors of DNB Financial Corporation (adopted effective October 1, 2006) and the DNB Financial Corporation Deferred Compensation Plan (adopted effective October 1, 2006) (individually, a “Plan” and collectively, the “Plans”).

In our capacity as counsel, we have been requested to render the opinions set forth in this letter and, in connection therewith, we have reviewed the following documents: (i) the Registration Statement, (ii) the Plans, (iii) evidence of subsistence of the Company provided on the Internet website of the Secretary of the Commonwealth of the Commonwealth of Pennsylvania on October 25, 2006, (iv) the Company's Articles of Incorporation, as amended, certified as true and correct by the Secretary of the Commonwealth of the Commonwealth of Pennsylvania on April 12, 2005, (v) copies of resolutions adopted by the Board of Directors of the Company at meetings held on September 27, 2006 and October 25, 2006, certified as true and correct by the Secretary of the Company, (vi) Bylaws of the Company, as amended, certified as true and correct by the Secretary of the Company, (vii) a Certificate of the Secretary of the Company dated this date, and (viii) such other documents, instruments and records as we deemed necessary or appropriate for purposes of rendering this option.

In rendering this opinion, we have assumed and relied upon, without independent investigation, (i) the authenticity, completeness, truth and due authorization, execution and delivery of all documents

DNB Financial Corporation

Re: S-8 Registration Statement - Deferred Compensation Plans

October 25, 2006

Page 2

submitted to us as originals, (ii) the genuineness of all signatures on all documents submitted to us as originals, and (iii) the conformity to the originals of all documents submitted to us as certified or photostatic copies.

The laws covered by the opinion expressed herein are limited to (a) the federal statutes, judicial decisions and rules and regulations of the governmental agencies of the United States of America and (b) the Pennsylvania Business Corporation Law.

This opinion letter is given only with respect to laws and regulations presently in effect.

We assume no obligation to advise you of any changes in law or regulation which may hereafter occur, whether the same are retroactively or prospectively applied, or to update or supplement this letter in any fashion to reflect any facts or circumstances which hereafter come to our attention.

Based upon, and subject to, the foregoing, we are of the opinion that the Obligations, when issued in accordance with the applicable Plan or Plans and the respective Election Agreements, will be legally issued, fully paid and non-assessable and will be binding obligations of the Company, subject to the terms and conditions of the applicable Plans and accompanying trust agreement and applicable laws and regulations.

We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement.

Furthermore, we hereby consent to the filing of this opinion letter as an exhibit to any applications for registration, qualification, or exemption, as the case may be, filed by, or on behalf of, the Company under the securities laws of the several states and other jurisdictions of the United States relating to the offering described in the Registration Statement.

Very truly yours,
STRADLEY RONON STEVENS & YOUNG, LLP,
a limited liability partnership
		/s/ David F. Scranton
By:	_________________________________
		David F. Scranton
		A Partner

EX-23.B

Consent of Independent Registered Public Accounting Firm

The Board of Directors

DNB Financial Corporation:

We consent to the incorporation by reference in the Registration Statement on Form S-8 (XXX-XXXX) of DNB Financial Corporation of our report dated October 25, 2006, with respect to the consolidated statements of financial condition of DNB Financial Corporation and subsidiary as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2005, which report appears in the December 31, 2005, annual report on Form 10-K of DNB Financial Corporation.

October 24, 2006

Philadelphia, Pennsylvania