8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): December 12, 2011

 DNB FINANCIAL CORPORATION

__________________________________________

(Exact name of registrant as specified in its charter)

Pennsylvania	1-34242	23-2222567
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
4 Brandywine Avenue, Downingtown, Pennsylvania		19335
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: (610) 269-1040

Not Applicable

______________________________________________

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 Item 1.01. Entry into a Material Definitive Agreement.

At a special meeting on December 12, 2011, the Benefits and Compensation Committee (the “Committee”) of the Board of Directors of DNB Financial Corporation (the “Registrant”) approved the granting of non-statutory stock option awards effective December 12, 2011, under the DNB Financial Corporation 1995 Stock Option Plan, as amended and restated effective April 27, 2004, for the following members of the Registrant’s Board of Directors:

Name	Title	Shares of Common Stock Underlying Option
Mildred C. Joyner	Director	2,100
Gerard F. Griesser	Director	2,100
James J. Koegel	Director	2,100
James H. Thornton	Director	2,100
Thomas A. Fillippo	Director	2,100

Pursuant to the terms of the stock option award agreements between the Registrant and the Grantee, the options have a 7 year term, and the Grantee shall first be entitled to exercise the options on a date (the “Vesting Date”) that shall be the earlier of the third (3rd ) anniversary of the Grant Date, the date of Grantee’s death, his or her termination of service as a member of the Board of Directors on account of disability, the date on which a change in control of the Company occurs, or the date as of which the Grantee attains the normal mandatory retirement age for Directors as currently prescribed by the Holding Company’s Bylaws, and without regard to any exceptions to such normal mandatory retirement age. If Grantee’s service as a member of the Board of Directors terminates for any reason prior to the Vesting Date, the Agreement shall automatically terminate, the Grantee shall forfeit all rights hereunder, and no shares of common stock or other consideration shall be transferred to Grantee pursuant to the Agreement. The Grantee is subject to a two year holding period following exercise, but is permitted to sell shares to pay taxes. The Grantee is also restricted from exercising the options until the market value of the outstanding common shares of the Registrant reaches 110% of the grant price. The exercise price of $10.31 is equal to the market value of the plan shares on the date the options were granted.  For purposes of determining "market value", DNB looked at the consolidated closing bid price as of 4:00 PM, eastern time for the trading day immediately preceding December 12, 2011. The agreement is in the form shown in Exhibit 99.1, which is incorporated herein by reference as if set forth in full. To the maximum extent permitted by regulations, such exhibit shall be deemed supplied and not filed.

 Item 5.02.  Compensatory Arrangements of Certain Officers.

At a special meeting on December 12, 2011 the Benefits and Compensation Committee (the “Committee”) of the Board of Directors of DNB Financial Corporation (the “Registrant”) approved a Restricted Stock Award effective December 12, 2011, under the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan, of 15,000 shares for William S. Latoff, Chairman and Chief Executive Officer.

Pursuant to the terms of  Restricted Stock Award Agreement between the Registrant and the grantee, Grantee shall first be entitled to the Award Shares on a date (the “Vesting Date”) that shall be the earlier of the fourth (4th ) anniversary of the Grant Date, the date of Grantee’s death, Grantee’s termination of employment on account of disability, the date on which a change in control of the Company first occurs, or the later of the second (2nd ) anniversary of the Grant Date, provided he has continued to perform substantial services for the Company through that date, or the date on which Grantee attains age sixty-five (65), subject to such further terms and conditions of the Plan as may be applicable.  If Grantee’s employment terminates for any reason prior to the Vesting Date, this Agreement shall automatically terminate, the Grantee shall forfeit all rights hereunder, and no shares of common stock or other consideration shall be transferred to Grantee pursuant to this Agreement.

The award agreements further provide that, upon vesting and issuance of the plan shares, the grantee may elect to pay withholding taxes on the award in cash or by electing to apply some of the awarded shares at their fair market value, or both. The Grantee is also not permitted to sell, assign, pledge gift, encumber or otherwise dispose of any of the transferred shares for one (1) year from the vesting date. The agreement is in the form shown in Exhibit 99.2, which is incorporated herein by reference as if set forth in full. To the maximum extent permitted by regulations, such exhibit shall be deemed supplied and not filed.

On December 12, 2011 the Committee approved the granting of non-statutory stock option awards effective December 12, 2011, under the 1995 Stock Option Plan of DNB Financial Corporation, as amended and restated effective April 27, 2004, for the following members of the Registrant’s executive management:

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Name	Title	Shares of Common Stock Underlying Option
William J. Hieb	President & Chief Risk & Credit Officer	8,600
Albert J. Melfi	EVP & Senior Loan Officer	5,500
Gerald F. Sopp	EVP & CFO	5,500
Bruce E. Moroney	EVP & CAO	3,000

Pursuant to the terms of the stock option award agreements between the Registrant and the Grantee, the options have a 7-year term, and the Grantee shall first be entitled to exercise the options on a date (the “Vesting Date”) that shall be the earlier of the third (3rd ) anniversary of the Grant Date, the date of Grantee’s death, Grantee’s termination of employment on account of disability, the date on which a change in control of the Company first occurs, or the date of the Grantee’s retirement if retirement is at or after the normal retirement age of 65. If Grantee’s employment terminates for any reason prior to the Vesting Date, this Agreement shall automatically terminate, the Grantee shall forfeit all rights hereunder, and no options or other consideration shall be issued to the Grantee pursuant to this Agreement. The Grantee is subject to a two-year holding period at the time of exercise, but is permitted to sell shares to pay withholding taxes. The Grantee is also restricted from exercising the options until the market value of the outstanding common shares of the Registrant reaches 110% of the exercise price. The exercise price of $10.31 is equal to the market value of the plan shares on the date the options were granted.  For purposes of determining "market value", DNB looked at the consolidated closing bid price as of 4:00 PM, eastern time for the trading day immediately preceding December 12, 2011.  The agreement is in the form shown in Exhibit 99.3, which is incorporated herein by reference as if set forth in full. To the maximum extent permitted by regulations, such exhibit shall be deemed supplied and not filed.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits. The following exhibits are furnished herewith:

99.1 Stock option agreement between Registrant and members of the Board of Directors

99.2 Restricted Stock Agreement between Registrant and William S. Latoff

99.3 Stock option agreement between Registrant and Certain Officers

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DNB Financial Corporation
December 16, 2011	By: /s/ Gerald F. Sopp
	Name: Gerald F. Sopp
	Title: Chief Financial Officer and Executive VP

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EXHIBIT INDEX

99.1 Stock option agreement between Registrant and members of the Board of Directors

99.2 Restricted Stock Agreement between Registrant and William S. Latoff

99.3 Stock option agreement between Registrant and Certain Officers

 5

EX-99.1

Exhibit 99.1

NON-EMPLOYEE DIRECTOR

STOCK OPTION AGREEMENT

(Non-Qualified Option)

THIS AGREEMENT GRANTS A NON-QUALIFIED STOCK OPTION

RESALE OF STOCK ISSUED ON EXERCISE OF THIS OPTION WILL BE RESTRICTED

Dear _______________________________ (“Grantee”):

In view of your substantial contributions toward the achievement of the business goals and objectives of DNB Financial Corporation (the "Corporation") and DNB First, National Association (the "Bank") and the expectation of your future contributions, the Board of Directors of the Corporation is pleased to award you an option to purchase shares of the Common Stock of the Corporation pursuant to the 1995 Stock Option Plan of DNB Financial Corporation (As amended and restated, effective as of April 27, 2004) (the "Plan"). This letter will serve as the stock option agreement between you and the Corporation. The option awarded to you is subject to the following terms.

1. NUMBER OF SHARES: You are awarded an option to purchase a total of two thousand and one hundred (2,100) shares of the Common Stock of the Corporation, subject to the terms, conditions and restrictions set forth in this Agreement and the Plan.

2. RESALE RESTRICTIONS ON SHARES:

(a) When issued, your resale or other disposition of these shares will be restricted for two (2) years from the date the Common Stock is issued to you, on the following terms and will bear the following legend:

“Sale, assignment, pledge, gift, or any other disposition, alienation or encumbrance of the shares represented by this certificate are restricted and prohibited until ______________, _____ pursuant to the terms of a Stock Option Agreement dated December 12, 2011, between DNB Financial Corporation and the holder of the shares named on this certificate, which may be examined at the principal office of the Company, and such shares may be sold, transferred, assigned, pledged, given or otherwise disposed of, alienated or encumbered only upon compliance with the terms of that Agreement.”

(b) Notwithstanding subsection (a) of this Section (but subject to subsection (c) of this Section), upon and after issuance of the shares on your exercise of this option, you will be authorized to resell these shares free of the restriction set forth in subsection (a) of this Section solely for the purpose of securing funds to pay federal, state or local tax liabilities applicable to your exercise of this stock option.

(c) Even if you are permitted to resell these shares free of the restriction described in subsection (a) of this Section, resale may nevertheless be restricted for other reasons under applicable securities laws. For example, if you are an “affiliate” of the Corporation, your resale of the Common Stock you receive on exercise of an Option will be subject to resale restrictions. A person who is an “affiliate” of the Corporation may not resell shares of Common Stock received by such employee upon exercise of Options under the Plan, except pursuant to an effective registration statement under the Securities Act of 1933 (the “Securities Act”) or in accordance with Rule 144 promulgated under the Securities Act or another exemption available under the Securities Act. For purposes of the Securities Act, an employee will be considered to be an “affiliate” of the Corporation if such employee directly or indirectly controls the Corporation. In addition, under Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), if you are a director or one of certain types of “officer” of the Corporation identified in SEC regulations under Section 16(b), you may be liable to the Corporation for profit you are deemed to realize if you make certain types of purchases and certain types of sales of the Common Stock within a period of less than six months of each other. You should consult with legal counsel as to your status as an “affiliate” of the Corporation and the applicability of Section 16(b) of the Exchange Act to you.

3. TYPE OF OPTION: The option awarded to you is a Non-Qualified Option as that term is defined in the Plan.

4. EXERCISE PRICE: The shares may be purchased upon your exercise of this option for the price of ten dollars and thirty one cents ($10.31) per share.

5. DATE OF GRANT OF AWARD: The Grant Date of the award of this option is December 12, 2011, which is also the date of this Agreement.

6. STATED EXPIRATION DATE: Unless earlier terminated as explained below, the option awarded to you expires (with respect to any number of shares subject to this option not previously exercised) on the seventh (7th) anniversary of the Grant Date stated above. This is the Stated Expiration Date.

7. DATE OPTION BECOMES EXERCISABLE; LOSS OF OPTION IN CERTAIN CIRCUMSTANCES: The stock option awarded to you is exercisable only at and after such time as the market value of the Common Stock first equals or exceeds eleven dollars and thirty-four cents ($11.34), which is one hundred and ten percent (110%) of the exercise price stated above, and then only after the earlier of (a) the third (3rd) anniversary of the Grant Date stated above, (b) your death, (c) your termination of service as a Director on account of disability, (d) the date of a change in control of the Corporation, as defined below, or (e) your attainment of the current mandatory retirement age for Directors under our bylaws, without regard to any exceptions to such mandatory retirement age, provided that your rights under this stock option shall be forfeited in the event of your termination of service as a Director of the Corporation and the Bank prior to the first to occur of such events. Once exercisable, the stock option remains exercisable by you until the expiration of the option in accordance with the terms of this Agreement and the terms of the Plan.

“Change in control” shall mean a change in control of the nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), provided that a “change in control” shall nevertheless bee deemed to have occurred if either (a) any “persons” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act in effect on the Grant Date), other than the Corporation or any “person” who on the date hereof is a director of officer of the Corporation, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 50% or more of the combined voting power of the Corporation’s then outstanding securities, or (b) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period.

8. EXERCISE OF OPTION: You may exercise the option awarded to you from time to time as provided above by delivering to the Corporation all of the following:

(a)  Written notice of the exercise marked to the attention of the Chief Financial Officer specifying the number of whole shares in respect of which you are exercising the option.

(b) Payment of the exercise price for such shares in any of the following forms: (i) cash, (ii) certified check payable to the order of the Corporation, (iii) shares of Common Stock of the Corporation already owned by you, (iv) shares of Common Stock of the Corporation you are entitled to receive as a result of stock option exercises that you are entitled to make for such purpose, but only if those options are “in the money,” or (v) any combination of the foregoing.

(c) Payment of any federal, state and local withholding taxes required in respect of such exercise in any combination of the forms of payment described in (b) above.

Shares of Common Stock of the Corporation may only be applied against the exercise price or to pay any federal, state or local withholding taxes to the extent consistent with any restrictions applicable to such shares. If shares of Common Stock of the Corporation are to be applied in whole or partial payment of the exercise price or any withholding taxes, they shall be applied at their fair market value (as determined under the Plan) on the Exercise Date.  

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Upon receipt of the documents and payments listed above, the Corporation will issue you a certificate for the number of shares with respect to which you have exercised the option.

9. EXERCISE DATE: The date on which the Corporation receives the documents specified above in complete and otherwise acceptable form and the payments specified above will be treated as the Exercise Date with respect to your exercise of the stock option.

10. NON-ASSIGNABILITY OF OPTION: Except as provided by the Plan, the option awarded to you is exercisable only by you. The option may not be transferred, assigned, pledged as security or hypothecated in any other way and shall not be subject to execution, attachment or similar process even if you agree with someone else that it will be, except that if you die while still employed with the Corporation or the Bank, your estate or the person who acquires the right to exercise the Stock Option upon your death by bequest or inheritance may exercise your option. Upon any attempt by you to transfer, assign, pledge, hypothecate or otherwise dispose of this option or of any portion thereof or upon the levy of any execution, attachment or similar process on this option or on any portion thereof, the option awarded to you will immediately expire with respect to the number of shares not exercised prior to such event.

11. RIGHTS IN SHARES SUBJECT TO OPTION: You will not be treated as a holder of any of the shares subject to this option or of any rights of a holder of such shares unless and until the shares are issued to you as evidenced by stock certificates.

12. EFFECT ON SERVICE AS A DIRECTOR: This letter is not an employment agreement or service contract. Therefore, none of the rights awarded to you by this letter affect, in any way, your employment or service relationship with the Corporation or the Bank.

13. TERMINATION OF SERVICE: Except as otherwise provided in the Plan or this Agreement, upon termination of your service as a Director of the Corporation and the Bank, if applicable, the unexercised portion of this option will terminate according to the following terms:

(a) If you terminate on account of death or disability or you terminate on account of retirement at or after attainment of age 65, your option will terminate on the Stated Expiration Date described above.

(b) If the termination of your service as a Director is a “Termination for Cause” as defined in the Plan, your option will terminate automatically with respect to any shares not previously exercised, effective immediately as of your termination or separation.

(c) If you terminate for any other reason, your option will terminate at the close of business on the earlier of the Stated Expiration Date described above or on the ninetieth (90th) day following the date of your termination or separation.

14. OPTION AWARDED SUBJECT TO PLAN PROVISIONS: The Plan provisions take precedence over the provisions of this letter agreement, Therefore, in the case of any inconsistency between any provision of this letter agreement and any provision of the Plan in effect on the Grant Date, the provision of the Plan will control.

15. COUNTERPARTS: This letter agreement may be executed in one or more counterparts each of which shall be deemed an original and all of which shall be deemed one and the same agreement.

IN WITNESS WHEREOF, the Corporation and the Grantee have duly executed this Agreement as of the Grant Date.

DNB FINANCIAL CORPORATION	Grantee:
By: ________________________________	________________________________
Print Name: __________________________	(Signature)
Title: _______________________________	Print Name: _______________________

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1995 STOCK OPTION PLAN OF DNB FINANCIAL CORPORATION

(As amended and restated, effective as of April 27, 2004)

NOTICE OF STOCK OPTION EXERCISE

To: DNB Financial Corporation Attention: Chief Financial Officer

From: ______________________________	Date: __________________, 20____
(Grantee Name)
Tel.No. (______) _______ - ___________	Address: _______________________________ _______________________________

Date of Grant: _______________, _______  

Date of Grant: _______________, _______	Number of Shares Exercised: ________
Exercise Price Per Share: $ _________.____	Total Exercise Price: $ __________
PLUS:
Federal Income Tax Withholding	$ __________. ____
(Contact Payroll to Determine)
F.I.C.A. Tax Withholding	$ __________. ____
(Contact Payroll to Determine)
Pennsylvania Personal Income Tax Withholding	$ __________. ____
(Contact Payroll to Determine))
Local Earned Income Tax Withholding	$ __________. ____
(Contact Payroll to Determine)
Subtotal of withholding taxes	$ __________. ____
(Contact Payroll to Determine)
Total Remittance	$ __________. ____

_____ Check this box if you want to use all or part of any shares exercised that are “in the money” to pay exercise price or withholding taxes.

(Attach certified check for net remittance due or attach properly endorsed certificates of stock with equal value)

[Please note that final remittance due is subject to adjustment pending determination of applicable stock value]

Please accept the above notice of exercise and issue share certificates as required.

__________________________________

(signature of person authorized to exercise)

 -4-

EX-99.2

Exhibit 99.2

RESTRICTED STOCK AWARD AGREEMENT

THIS AGREEMENT is made as of this 12th day of December 2011 (the “Grant Date”), by and between DNB Financial Corporation (“Holding Company”) and (“Grantee”).

Background:

Grantee is a valued employee or director of the Holding Company and/or DNB First, National Association (the “Bank”) (the Holding Company and the Bank are collectively referred to herein as the “Company”).  The Holding Company’s Board of Directors adopted the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan on November 24, 2004 (“Plan”).  As additional compensation for Grantee’s past and future services to the Company, and to induce the Grantee to continue Grantee’s efforts to enhance the value of the Company for shareholders, generally, the Company wishes to conditionally transfer rights to receive shares of Common Stock of the Holding Company to Grantee pursuant to the terms of the Plan, subject to the additional terms and conditions of this Agreement.

NOW, THEREFORE, the Company and Grantee hereby agree as follows, intending to be legally bound:

1. Subject to and as soon as practicable following the satisfaction of the vesting condition set forth in Paragraph 2, below, the Company agrees to transfer to Grantee on the “Vesting Date” (defined below) December 12, 2015, ______ shares of the Holding Company’s common stock, par value $1.00 per share (“Award Shares”), minus that number of Award Shares, if any, required to pay taxes as more fully described in Paragraph 3, below (such shares actually transferred to Grantee are sometimes hereinafter referred to as “Transferred Shares”), subject to the transfer restrictions in this Agreement and the Plan.  The number of Award Shares is subject to adjustment as provided in Section 10.1 of the Plan.

2. Grantee shall first be entitled to the Award Shares on a date (the “Vesting Date”) that shall be the earlier of (1) the Fourth (4th) anniversary of the Grant Date, (2) the date of Grantee’s death, (3) Grantee’s termination of employment on account of disability, (4) the date on which a “Change in Control” (as hereinafter defined) of the Company first occurs, or (5) the later of the second (2nd) anniversary of the Grant Date, provided he has continued to perform substantial services for the Company through that date, or the date on which Grantee attains age sixty-five (65), subject to such further terms and conditions of the Plan as may be applicable.  If Grantee’s employment terminates for any reason prior to the Vesting Date, this Agreement shall automatically terminate, the Grantee shall forfeit all rights hereunder, and no shares of common stock or other consideration shall be transferred to Grantee pursuant to this Agreement.For this purpose, “Change in Control” shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), provided that a “Change in Control” shall nevertheless be deemed to have occurred if either (a) any "persons" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act in effect on the Grant Date), other than the Company or any "person" who on the date hereof is a director of officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities, or (b) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period.  If Grantee’s employment as an employee and service as a director (collectively, “Service”) with the Company, terminates for any reason (including but not limited to Grantee’s death or disability or voluntary or involuntary termination of Service) prior to the Vesting Date, this Agreement shall automatically terminate, the Grantee shall forfeit all rights hereunder, and no shares of common stock or other consideration shall be transferred to Grantee pursuant to this Agreement.

3. At Grantee’s written election, to be provided in writing to the Company on or prior to the Vesting Date together with the cash necessary for such payment, Grantee shall pay to the Company in cash an amount sufficient to fund all of the Federal, state and local taxes the Company may be required to withhold with respect to the Award Shares.  To the extent that the Grantee shall not so have elected and paid the necessary amount on or prior to the Vesting Date, the Company may reduce the Award Shares by that number of shares having an aggregate Fair Market Value, as of the Vesting Date, equal to the aggregate amount of Federal, state and local taxes required to be withheld with respect to the Award Shares.

4. Grantee shall not sell, assign, pledge, gift, encumber or otherwise alienate or dispose of any of the Transferred Shares for one (1) year from the Vesting Date.  Each certificate for the Transferred Shares shall bear the following legend:

“Sale, assignment, pledge, gift, encumbrance or other alienation or disposition of the shares represented by this certificate may be restricted as provided under applicable federal and state securities laws, and are also restricted and prohibited until _______________  pursuant to the terms of a Restricted Stock Award Agreement dated December 12, 2011, between DNB Financial Corporation and the holder of the shares named on this certificate, and the provisions of the DNB Financial Corporation Incentive Equity and Deferred Compensation Plan approved on November 24, 2004, each of which may be examined at the principal office of the Company, and any subsequent transfer is subject to the terms and conditions of such Agreement and Plan.”

5. As a condition to any transfer, encumbrance or other alienation of any of the Transferred Shares, Grantee shall provide the Company and/or any transfer agent or broker upon request with such certifications, legal opinions and other documents as they may request with respect to applicable securities and tax laws.

6. Nothing in this Agreement confers on Grantee any right to continue as an employee or director of the Company or any affiliate or interfere with or restrict in any way the rights of the Company or its affiliates to terminate Grantee’s employment or other Service at any time.

7. Transfer of rights under this Agreement are further restricted as provided in the Plan.  Grantee acknowledges receipt of a copy of the Plan, which is incorporated into this Agreement.  Capitalized terms not otherwise defined in this Agreement shall have the respective meanings, if any, assigned to such terms in the Plan.  This Agreement is an “Award Agreement” under the Plan.

8. This Agreement is governed by the internal laws of Pennsylvania, without giving effect to the choice of law or conflict of laws principles, subject to pre-emption by applicable federal law and regulations.

The parties hereby have duly entered into this Agreement as of the first date set forth above.

ATTEST:	DNB FINANCIAL CORPORATION
___________________________________	By:________________________________
Print Name:	Print Name:
Title:	Title:
Witness:	GRANTEE
___________________________________	(Signature) _____________________________
	Print Name
	Address

EX-99.3

Exhibit 99.3

EMPLOYEE

STOCK OPTION AGREEMENT

(Non-Qualified)

THIS AGREEMENT GRANTS A NON-QUALIFIED STOCK OPTION

RESALE OF STOCK ISSUED ON EXERCISE OF THIS OPTION WILL BE RESTRICTED

Dear _______________________________ (“Grantee”):

In view of your substantial contributions toward the achievement of the business goals and objectives of DNB Financial Corporation (the "Corporation") and DNB First, National Association (the "Bank") and the expectation of your future contributions, the Board of Directors of the Corporation is pleased to award you an option to purchase shares of the Common Stock of the Corporation pursuant to the 1995 Stock Option Plan of DNB Financial Corporation (As amended and restated, effective as of April 27, 2004) (the "Plan"). This letter will serve as the stock option agreement between you and the Corporation. The option awarded to you is subject to the following terms.

1. NUMBER OF SHARES: You are awarded an option to purchase a total of ___________________________________ (_____) shares of the Common Stock of the Corporation, subject to the terms, conditions and restrictions set forth in this Agreement and the Plan.

2. RESALE RESTRICTIONS ON SHARES:

(a) When issued, your resale or other disposition of these shares will be restricted for two (2) years from the date the Common Stock is issued to you, on the following terms and will bear the following legend:

“Sale, assignment, pledge, gift, or any other disposition, alienation or encumbrance of the shares represented by this certificate are restricted and prohibited until ______________, _____ pursuant to the terms of a Stock Option Agreement dated December 12, 2011, between DNB Financial Corporation and the holder of the shares named on this certificate, which may be examined at the principal office of the Company, and such shares may be sold, transferred, assigned, pledged, given or otherwise disposed of, alienated or encumbered only upon compliance with the terms of that Agreement.”

(b) Notwithstanding subsection (a) of this Section (but subject to subsection (c) of this Section), upon and after issuance of the shares on your exercise of this option, you will be authorized to resell these shares free of the restriction set forth in subsection (a) of this Section solely for the purpose of securing funds to satisfy federal, state or local withholding taxes applicable to your exercise of this stock option.

(c) Even if you are permitted to resell these shares free of the restriction described in subsection (a) of this Section, resale may nevertheless be restricted for other reasons under applicable securities laws. For example, if you are an “affiliate” of the Corporation, your resale of the Common Stock you receive on exercise of an Option will be subject to resale restrictions. A person who is an “affiliate” of the Corporation may not resell shares of Common Stock received by such employee upon exercise of Options under the Plan, except pursuant to an effective registration statement under the Securities Act of 1933 (the “Securities Act”) or in accordance with Rule 144 promulgated under the Securities Act or another exemption available under the Securities Act. For purposes of the Securities Act, an employee will be considered to be an “affiliate” of the Corporation if such employee directly or indirectly controls the Corporation. In addition, under Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), if you are a director or one of certain types of “officer” of the Corporation identified in SEC regulations under Section 16(b), you may be liable to the Corporation for profit you are deemed to realize if you make certain types of purchases and certain types of sales of the Common Stock within a period of less than six months of each other. You should consult with legal counsel as to your status as an “affiliate” of the Corporation and the applicability of Section 16(b) of the Exchange Act to you.

3. TYPE OF OPTION: The option awarded to you is a Non-Qualified Option as that term is defined in the Plan.

4. EXERCISE PRICE: The shares may be purchased upon your exercise of this option for the price of ten dollars and thirty-one cents ($10.31) per share

5. DATE OF GRANT OF AWARD: The Grant Date of the award of this option is December 12, 2011, which is also the date of this Agreement.

6. STATED EXPIRATION DATE: Unless earlier terminated as explained below, the option awarded to you expires (with respect to any number of shares subject to this option not previously exercised) on the seventh (7th) anniversary of the Grant Date stated above. This is the Stated Expiration Date.

7. DATE OPTION BECOMES EXERCISABLE; LOSS OF OPTION IN CERTAIN CIRCUMSTANCES: The stock option awarded to you is exercisable only at and after such time as the market value of the Common Stock first equals or exceeds eleven dollars and thirty-four cents ($11.34), which is one hundred and ten percent (110%) of the exercise price stated above, and then only after the earlier of (a) the third (3rd) anniversary of the Grant Date stated above, (b) your death, (c) your termination of service on account of disability, (d) the date of a change in control of the Corporation, as defined below, or (e) your retirement at or after attainment of age sixty-five (65), provided that your rights under this stock option shall be forfeited in the event of your termination prior to the first to occur of such events. Once exercisable, the stock option remains exercisable by you until the expiration of the option in accordance with the terms of this Agreement and the terms of the Plan.

“Change in control” shall mean a change in control of the nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), provided that a “change in control” shall nevertheless bee deemed to have occurred if either (a) any “persons” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act in effect on the Grant Date), other than the Corporation or any “person” who on the date hereof is a director of officer of the Corporation, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 50% or more of the combined voting power of the Corporation’s then outstanding securities, or (b) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period.

8. EXERCISE OF OPTION: You may exercise the option awarded to you from time to time as provided above by delivering to the Corporation all of the following:

(a)  Written notice of the exercise marked to the attention of the Chief Financial Officer specifying the number of whole shares in respect of which you are exercising the option.

(b) Payment of the exercise price for such shares in any of the following forms: (i) cash, (ii) certified check payable to the order of the Corporation, (iii) shares of Common Stock of the Corporation already owned by you, (iv) shares of Common Stock of the Corporation you are entitled to receive as a result of stock option exercises that you are entitled to make for such purpose, but only if those options are “in the money,” or (v) any combination of the foregoing.

(c) Payment of any federal, state and local withholding taxes required in respect of such exercise in any combination of the forms of payment described in (b) above.

Shares of Common Stock of the Corporation may only be applied against the exercise price or to pay any federal, state or local withholding taxes to the extent consistent with any restrictions applicable to such shares. If shares of Common Stock of the Corporation are to be applied in whole or partial payment of the exercise price or any withholding taxes, they shall be applied at their fair market value (as determined under the Plan) on the Exercise Date.  

Upon receipt of the documents and payments listed above, the Corporation will issue you a certificate for the number of shares with respect to which you have exercised the option.

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9. EXERCISE DATE: The date on which the Corporation receives the documents specified above in complete and otherwise acceptable form and the payments specified above will be treated as the Exercise Date with respect to your exercise of the stock option.

10. NON-ASSIGNABILITY OF OPTION: Except as provided by the Plan, the option awarded to you is exercisable only by you. The option may not be transferred, assigned, pledged as security or hypothecated in any other way and shall not be subject to execution, attachment or similar process even if you agree with someone else that it will be, except that if you die while still employed with the Corporation or the Bank, your estate or the person who acquires the right to exercise the Stock Option upon your death by bequest or inheritance may exercise your option. Upon any attempt by you to transfer, assign, pledge, hypothecate or otherwise dispose of this option or of any portion thereof or upon the levy of any execution, attachment or similar process on this option or on any portion thereof, the option awarded to you will immediately expire with respect to the number of shares not exercised prior to such event.

11. RIGHTS IN SHARES SUBJECT TO OPTION: You will not be treated as a holder of any of the shares subject to this option or of any rights of a holder of such shares unless and until the shares are issued to you as evidenced by stock certificates.

12. EFFECT ON SERVICE AS AN EMPLOYEE: This letter is not an employment agreement or service contract. Therefore, none of the rights awarded to you by this letter affect, in any way, your employment or service relationship with the Corporation or the Bank.

13. TERMINATION OF SERVICE: Except as otherwise provided in the Plan or this Agreement, upon termination of your service with the Corporation and the Bank, if applicable, the unexercised portion of this option will terminate according to the following terms:

(a) If you terminate on account of death or disability or you terminate on account of retirement at or after attainment of age 65, your option will terminate on the Stated Expiration Date described above.

(b) If the termination of your employment is a “Termination for Cause” as defined in the Plan, your option will terminate automatically with respect to any shares not previously exercised, effective immediately as of your termination or separation.

(c) If you terminate for any other reason, your option will terminate at the close of business on the earlier of the Stated Expiration Date described above or on the ninetieth (90th) day following the date of your termination or separation.

14. OPTION AWARDED SUBJECT TO PLAN PROVISIONS: The Plan provisions take precedence over the provisions of this letter agreement, Therefore, in the case of any inconsistency between any provision of this letter agreement and any provision of the Plan in effect on the Grant Date, the provision of the Plan will control.

15. COUNTERPARTS: This letter agreement may be executed in one or more counterparts each of which shall be deemed an original and all of which shall be deemed one and the same agreement.

IN WITNESS WHEREOF, the Corporation and the Grantee have duly executed this Agreement as of the Grant Date.

DNB FINANCIAL CORPORATION	Grantee:
By: ________________________________	________________________________
Print Name: __________________________	(Signature)
Title: _______________________________	Print Name: _______________________

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1995 STOCK OPTION PLAN OF DNB FINANCIAL CORPORATION

(As amended and restated, effective as of April 27, 2004)

NOTICE OF STOCK OPTION EXERCISE

To: DNB Financial Corporation Attention: Chief Financial Officer

From: ______________________________	Date: __________________, 20____
(Grantee Name)
Tel.No. (______) _______ - ___________	Address: _______________________________ _______________________________

Date of Grant: _______________, _______	Number of Shares Exercised: ________
Exercise Price Per Share: $ _________.____	Total Exercise Price: $ __________

PLUS:

Federal Income Tax Withholding	$ __________. ____
(Contact Payroll to Determine)
F.I.C.A. Tax Withholding	$ __________. ____
(Contact Payroll to Determine)
Pennsylvania Personal Income Tax Withholding	$ __________. ____
(Contact Payroll to Determine))
Local Earned Income Tax Withholding	$ __________. ____
(Contact Payroll to Determine)
Subtotal of withholding taxes	$ __________. ____
(Contact Payroll to Determine)
Total Remittance	$ __________. ____

_____ Check this box if you want to use all or part of any shares exercised that are “in the money” to pay exercise price or withholding taxes.

(Attach certified check for net remittance due or attach properly endorsed certificates of stock with equal value)

[Please note that final remittance due is subject to adjustment pending determination of applicable stock value]

Please accept the above notice of exercise and issue share certificates as required.

__________________________________

(signature of person authorized to exercise)

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