NATIONAL PENN BANCSHARES, INC.
                            EXECUTIVE INCENTIVE PLAN

                        AMENDMENT AND RESTATEMENT - 2000

        The National Penn Bancshares,  Inc.  Executive  Incentive Plan is hereby
amended and restated in its entirety as follows:

        Since formation,  National Penn Bancshares,  Inc. ("NPB"),  as a holding
company  for  National  Penn Bank (the  "Bank"),  has  maintained  in effect the
executive  incentive plan  originally  adopted by the Bank on July 26, 1978. NPB
now  desires to  formalize  the terms of the plan in a written  document  as set
forth herein.

        The National Penn Bancshares, Inc. Executive Incentive Plan (the "Plan")
is an unfunded deferred  compensation  arrangement for selected  employees.  The
purpose of the Plan is to  motivate  executives  to meet and exceed  established
financial  goals and to  promote a superior  level of  performance  relative  to
competitive  banking  institutions.  Through  payment of incentive  compensation
beyond a  salary,  the Plan  provides  reward  for  meeting  and  exceeding  the
established  financial  goals as well as recognition of individual  achievements
for certain employees.

        1. Definitions.  The following terms have the meanings  specified below,
unless the context in which they are used otherwise requires:

           (a)  "Affiliate"  means any  corporation  which is included  within a
"controlled  group of  corporations"  including NPB, as determined under Section
1563 of the Internal Revenue Code of 1986, as amended.

           (b) "CEO" means the Chief Executive Officer of NPB.

           (c) "Change in Control or Ownership" means:

               (i) an acquisition by any "person" or "group" (as those terms are
defined  or used in Section  13(d) of the  Securities  Exchange  Act of 1934) of
"beneficial  ownership"  (within  the  meaning of Rule 13d-3  under such Act) of
securities of NPB  representing  24.99% or more of the combined  voting power of
NPB's securities then outstanding;

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

               (iii) a merger,  consolidation  or other  reorganization  of NPB,
except where  shareholders of NPB immediately  prior to consummation of any such
transaction  continue  to hold at least a majority  of the  voting  power of the
outstanding voting

                                        1

<PAGE>
securities of the legal entity  resulting from or existing after any transaction
and a majority  of the  members of the Board of  Directors  of the legal  entity
resulting  from or existing  after any such  transaction  are former  members of
NPB's Board of Directors;

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

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

               (vi) a contested proxy  solicitation  of the  shareholders of NPB
that results in the contesting  party  obtaining the ability to cast 25% or more
of the votes entitled to be cast in an election of directors of NPB.

           (d)  "Committee"  means the  Compensation  Committee  of the Board of
Directors of NPB.

           (e)  "Employer"   means  NPB  or  the  Affiliate  which  employs  the
Participant.

           (f) "Fund"  means the pool of funds  generated,  based on the formula
established by the Committee, to be distributed to Plan Participants.

           (g) "Mandatory Deferral" means twenty-five percent (25%) of the award
received by a Type A or Type B Participant under this Plan.

           (h) "Participant"  means an eligible officer or employee of NPB or an
Affiliate  who is  designated  by the  CEO and  approved  by the  Committee  for
participation  in the Plan for the relevant  Plan Year, or a person who was such
at the time of his retirement, death, disability or resignation and who retains,
or whose  beneficiaries  obtain,  benefits under the Plan in accordance with its
terms.

           (i) "Plan Year" means the calendar year.

           (j) "Tax Deferral" means that portion of the award received by a Type
A or Type B Participant under the Plan which the Participant elects, pursuant to
Schedule C  attached  hereto  and made a part  hereof,  to receive as a deferred
payment.


                                        2
<PAGE>

        2. Plan Participation.
           ------------------

           (a) To be eligible for an award under this Plan, a  Participant  must
be in the active  full-time  service of NPB or an  Affiliate at the close of the
Plan Year.

           (b) Effective January 1, 1985, prior to January 31 of each Plan Year,
the CEO shall  recommend to the Committee,  in writing,  those employees who are
eligible to participate in the Plan for such Plan Year. The Committee shall meet
as soon as practicable  thereafter and act upon the  recommendations of the CEO.
Those  employees  approved by the Committee  shall be entitled to participate in
the Plan for such Plan Year.

           (c) At the  Committee's  discretion,  the  Committee may act upon the
recommendation  of the CEO with respect to  participation  of an employee  whose
employment with NPB or an Affiliate  commences after January 1 but prior to July
1 of a  Plan  Year.  Upon  approval  by  the  Committee,  such  Participant  may
participate in the Plan based on his or her earnings for such Plan Year.

           (d) Each year,  the Committee  shall classify the  Participants  into
Type A, Type B or Type C, as  specified  on  Schedule  A  attached  to this plan
document,  and shall specify  different  award formulae for each  category.  The
Committee  also shall specify the method by which the amount to be allocated for
the benefit of each Participant from the Fund shall be determined. Participants,
as  classified  into  Type A,  Type B or Type C,  each  year  will be  listed on
Schedule A attached to this plan  document.  This  schedule will be revised each
year, as appropriate.

           (e) At the  Committee's  discretion,  the  Committee may act upon the
recommendation  of the CEO with respect to participation by a Participant  whose
classification  changes among Type A, Type B or Type C after January 1 but prior
to July 1 of a Plan Year. Upon approval by the Committee,  such  Participant may
participate in the Plan in the new  classification  based on his or her earnings
for such Plan Year.

        3. Performance Goals.
           -----------------

           (a)  Effective  January 1, 1985,  performance  goals and  appropriate
financial  thresholds shall be established each Plan Year by the Committee prior
to January 31 of that Plan  Year.  The  established  goals  shall  relate to the
financial performance of NPB or an Affiliate or unit thereof.

           (b) Each year,  the  performance  goals for the year will be shown on
Schedule B attached to this plan  document.  This schedule shall be revised each
year, as appropriate.


                                        3
<PAGE>

           (c) An award to a Participant  may be conditioned on the  performance
of such Participant, as determined by the Committee.

        4. Calculation of Awards.
           ---------------------

           If both the  internal  and  external  performance  goals set forth in
Schedule B are met, the Fund shall be distributed among Participants as follows:

           (a) 50% of the Fund shall be allocated to the Type A Participants and
shall  be  divided  equally  among  (i) the  Chairman  of NPB,  (ii) the CEO and
President of NPB, and (iii) the President of the Bank; provided,  however,  that
the  amount  distributed  to  any  individual  shall  not  exceed  50%  of  such
individual's  base salary. To the extent that any amount allocated to the Type A
Participants  is not  distributed  to them,  such  amount  shall be added to the
amount to be allocated to and divided  among the Type B and Type C  Participants
as provided in subparagraph (2) below.

           (b) 50% of the Fund shall be allocated to and divided  among the Type
B and Type C Participants;  provided,  however, that no Type B Participant shall
receive an award in excess of 35% of base salary and no Type C Participant shall
receive an award in excess of 25% of base salary.

        5. Distribution of Awards.
           ----------------------

           (a)  (i)  The  Committee  shall  cause  an  aggregate  account  to be
established  on  the  Employer's  books  for  all  of  the  Type  A and  Type  B
Participants  (the "Mandatory  Deferral  Account") and shall credit annually the
Mandatory Deferral Account with an amount equal to the Mandatory Deferral of all
Type A and  Type  B  Participants.  The  Mandatory  Deferral  Account  shall  be
credited,  as of the last day of each calendar quarter, with interest calculated
at the rate paid on the Investors  Trust  Company Money Market  account for such
quarter.

               (ii)  The  human  resources  department  of  the  Employer  shall
maintain  individual  accounts which shall reflect the share of each Participant
in the Mandatory Deferral Account (each referred to as an "Individual  Mandatory
Deferral Account"). Interest credited to the Mandatory Deferral Account shall be
allocated among the Participants in the respective  proportions that the balance
in each Participant's  Individual  Mandatory Deferral Account bears to the total
balance in the  Mandatory  Deferral  Account on the date that such  interest  is
credited.

               (iii)  The  human  resources  department  of the  Employer  shall
maintain  records  which  shall  reflect  the  amounts  in  each   Participant's
Individual  Mandatory Deferral Account attributable to each Plan Year, i.e., for
each Plan Year for which a  Participant  receives an award,  such records  shall
show the amount of such award

                                        4
<PAGE>

plus the  interest  earned  thereon  through the most recent date  interest  was
credited  thereon (for each Plan Year,  such amount is referred to herein as the
"Plan Year  Balance").  The sum of all Plan Year Balances  shall equal the total
balance in a Participant's Individual Mandatory Deferral Account.

               (iv) If, at the end of the fifth  Plan  Year  following  the Plan
Year for which a particular award was made to a Participant, such Participant is
still  employed by NPB or an  Affiliate or has retired at age 60 or later or has
died on or before the last day of such Plan Year, such Participant's  Individual
Mandatory  Deferral Account shall be credited by the Employer with an additional
amount  equal to the Plan Year  Balance  relating to the Plan Year of five years
before (the "Matching Contribution").

               (v) For purposes of this  subparagraph  5(a), a Participant shall
be deemed to be still  employed by NPB or an Affiliate as of the last day of any
Plan Year on which a balance exists in such Participant's  Individual  Mandatory
Deferral  Account if such  Participant is no longer then performing  services on
behalf of NPB or such Affiliate as a result of such Participant's disability.

           (b) (i) Type A and Type B Participants  may elect to have the payment
of all or a portion  of the  balance of their  awards  deferred,  i.e.,  the Tax
Deferral amount.  Effective  January 1, 1985, such election shall be made before
the  beginning of the relevant  Plan Year or, in the case of a new employee or a
newly classified Type A or Type B Participant,  prior to his or her commencement
of employment or new classification as a Type A or Type B Participant, and shall
be in the form of  Schedule  C attached  to this plan  document.  The  aggregate
amount  of the Tax  Deferral  for the  Type A and Type B  Participants  shall be
credited to an account on the Employer's books (the "Tax Deferral Account"). The
Tax  Deferral  Account  shall be credited,  as of the last day of each  calendar
quarter,  with  interest  calculated  at the rate  paid on the  Investors  Trust
Company Money Market account for such quarter.

               (ii)  The  human  resources  department  of  the  Employer  shall
maintain  individual  accounts which shall reflect the share of each Participant
in the Tax Deferral  Account (each  referred to as an  "Individual  Tax Deferral
Account").  Interest  credited to the Tax  Deferral  Account  shall be allocated
among the  Participants in the respective  proportions  that the balance in each
Participant's  Individual Tax Deferral Account bears to the total balance in the
Tax Deferral Account on the date that such interest is credited.

           (c) Awards to Type A and Type B Participants not deferred pursuant to
Subparagraph (b) above and all awards to Type C Participants shall be payable in
cash as soon as practicable after the close of the Plan Year.

                                        5
<PAGE>

           (d) In the event of a Participant's  death prior to receipt of his or
her award earned hereunder  (including  amounts allocated to such  Participant's
Individual Mandatory Deferral Account and Individual Tax Deferral Account),  the
award shall be paid,  within  thirty  (30) days of the last day of the  calendar
quarter during which the  Participant's  death  occurred,  to the  Participant's
designated beneficiary under the Employer's group life insurance plan or, in the
absence of a valid designation, to the Participant's estate.

        6. Manner of Payment of Mandatory and Tax Deferral Amounts.
           -------------------------------------------------------

           (a) Prior to the end of the fifth Plan Year  following  the Plan Year
for which an award was made to a Type A or Type B Participant,  such Participant
may elect to have the  balance  on the last day of such  fifth Plan Year in such
Participant's  Individual Mandatory Deferral Account,  after the addition of the
Matching Contribution (in the aggregate,  the "Total Balance"),  transferred and
credited to such  Participant's  Individual  Tax Deferral  Account,  if any, for
distribution in accordance with the Participant's  irrevocable election pursuant
to Schedule  C. Such an election  shall be in the form of Schedule D attached to
this plan  document.  If the  Participant  does not elect to transfer  the Total
Balance  to  the  Participant's  Individual  Tax  Deferral  Account,  or if  the
Participant does not have an Individual Tax Deferral Account,  the Total Balance
shall be paid in cash to the Participant as soon as practicable  after the close
of the Plan Year.

           (b) The amount  credited to a  Participant's  Individual Tax Deferral
Account,  including amounts transferred pursuant to subparagraph (a) immediately
above,  shall  be  paid  to  such  Participant  in one  lump  sum  or in  annual
installments.  The actual manner of distribution  will be in accordance with the
Participant's  irrevocable  election,  the form of which is  attached  hereto as
Schedule C; provided, however, that if the Participant selects a distribution in
annual  installments,  such  installment will be paid in a manner which complies
with any applicable rules, regulations or laws.

        7. Funding.
           -------

           (a) Deferred award  obligations under the Plan shall be paid from the
general assets of NPB or an Affiliate.

           (b) NPB, or an Affiliate, in its sole discretion,  may earmark assets
or other means to meet the deferred award  obligations  provided under the Plan.
Any assets which may be earmarked to meet NPB's or an Affiliate's deferred award
obligations  provided  under the Plan shall continue for all purposes to be part
of the general  funds of NPB or an Affiliate and no person other than NPB or the
Affiliate  shall by virtue of the  provisions  of the Plan have any  interest in
such assets. To the

                                        6
<PAGE>

extent a Participant  or his  beneficiary  acquires a right to receive  deferred
award payments from NPB or an Affiliate  under the Plan,  such right shall be no
greater than the right of any unsecured general creditor of NPB or an Affiliate.

           (c) Nothing contained in the Plan and no action taken pursuant to the
provisions  of the Plan shall  create or be  construed  to create a trust of any
kind, or a fiduciary  relationship between NPB or an Affiliate and a Participant
or any other person.

        8. Plan Administration.
           -------------------

           (a) The Committee  shall,  with respect to the Plan,  have full power
and authority to construe,  interpret  and manage,  control and  administer  the
Plan, and to pass and decide upon cases in conformity with the objectives of the
Plan under such rules as the Board of Directors of NPB may establish.

           (b) Any  decision  made or action  taken by the Board of Directors of
NPB or the Committee  arising out of, or in connection with the  administration,
interpretation, and effect of the Plan shall be at their absolute discretion and
shall be conclusive and binding on all parties.

           (c) The  members  of the  Committee  and the  members of the Board of
Directors of NPB shall not be liable for any act or action,  whether of omission
or commission,  made in connection with the interpretation and administration of
the Plan and which results in a loss,  damage,  expense or depreciation,  except
when due to their own gross negligence or willful misconduct.

        9. Amendment and Termination.
           -------------------------

           NPB  reserves  the  right to amend  the Plan from time to time and to
terminate  the Plan at any time.  All  amendments,  including  any  amendment to
terminate  the Plan,  shall be adopted  by the Board of  Directors  of NPB.

        10. Change in Control or Ownership.
            ------------------------------

           (a) Subject to the further terms and provisions of this Paragraph 10,
the Plan shall  automatically  terminate on the date that a Change in Control or
Ownership shall occur, without necessity of any action by the Board of Directors
of NPB.

           (b)  If  a  Change  in  Control  or  Ownership   shall  occur,   each
Participant's Individual Mandatory Deferral Account shall be credited, as of the
day immediately  preceding the date on which such Change in Control or Ownership
occurred,  with additional amounts as follows: An amount equal to each Plan Year
Balance

                                        7
<PAGE>

shall be credited by the  Employer to such  Participant's  Individual  Mandatory
Deferral Account (such  additional  amounts are referred to herein as "Change in
Control Matching Contributions").

           (c) If a Change in Control or  Ownership  shall  occur,  the Employer
shall pay each Participant a cash amount equal to the total amounts credited, as
of the  date  such  Change  in  Control  or  Ownership  occurred,  to  (i)  such
Participant's  Individual  Mandatory  Deferral Account  (including all Change in
Control  Matching  Contributions  made pursuant to subparagraph  (b) hereof) and
(ii) such  Participant's  Individual Tax Deferral Account,  if any. The Employer
shall pay such total amounts to the Participants  within thirty (30) days of the
termination of the Plan (as provided in subparagraph (a) hereof).

        11. Effective Date.
            --------------

            The initial effective date of the Plan shall be January 1, 1984.

        12. Miscellaneous Provisions.
            ------------------------

           (a) The Plan  does not  constitute  a  contract  of  employment,  and
participation  in the  Plan  shall  not  give any  Participant  the  right to be
retained  in the  service  of NPB or an  Affiliate  or any  right  or claim to a
benefit under the Plan unless such right or claim has specifically accrued under
the terms of this plan document.

           (b) NPB or an  Affiliate  reserves  the  right to  withhold  from any
deferred award payments payable  hereunder,  any amounts required to be withheld
under the federal income tax laws.

           (c) The captions of the several  paragraphs and subparagraphs of this
Plan are inserted for  convenience of reference only and shall not be considered
in the construction hereof.

           (d) Whenever any word is used herein in the singular  form,  it shall
be construed as though it were used in the plural form, as the context requires,
and vice versa.

           (e) A masculine,  feminine or neuter  pronoun,  whenever used herein,
shall be construed to include all genders as the context requires.

           (f) This plan document may be executed in any number of counterparts,
each of  which  shall  be  deemed  one  and the  same  instrument  which  may be
sufficiently evidenced by any one counterpart.

                                        8
<PAGE>

           (g)  Except  to the  extent  pre-empted  by  federal  law,  this plan
document shall be construed,  administered  and enforced in accordance  with the
domestic internal law of the Commonwealth of Pennsylvania.






            (THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

                                        9

<PAGE>

                                   SCHEDULE A
                                   ----------


        Participants  for the ____  Plan  Year  consist  of Types A, B, and C as
defined in the Plan document.

        It is  anticipated  that  the  following  named  persons  will  meet the
eligibility  requirements  for  participation  as of December  31,  ____.  It is
expected that there could be additional  individuals  whose eligibility could be
determined  later in the year,  who would be named a participant  as of December
31, ____.

        Named participants are classified accordingly:


        TYPE A (3 persons) (name and grade level)

                  [CHAIRMAN OF NPB]

                  [CEO AND PRESIDENT OF NPB]

                  [PRESIDENT OF THE BANK]


        TYPE B (__ persons) (name and grade level)



                  [INSERT NAMES AND GRADE LEVELS]









        TYPE C (__ persons) (name and grade level)



                  [INSERT NAMES AND GRADE LEVELS]

                                       10
<PAGE>

                                   SCHEDULE B
                                   ----------

                         NATIONAL PENN BANCSHARES, INC.

                            EXECUTIVE INCENTIVE PLAN

                             ____ PERFORMANCE GOALS

                               [SUBJECT TO CHANGE]

        Awards  pursuant  to the Plan will not be made unless the  internal  and
external performance goals set forth below are met.


INTERNAL PERFORMANCE GOALS FOR THE      PLAN YEAR
-------------------------------------------------

The net operating  income of NPB before  securities  transactions  for ____ must
exceed the net operating income of NPB before securities transactions for ____.


EXTERNAL PERFORMANCE GOALS FOR THE      PLAN YEAR
-------------------------------------------------

The net  operating  income of NPB before  securities  transactions  on  realized
return on  average  common  equity for ____ must  exceed the  average of the net
operating  income before  securities  transactions on realized return on average
common equity for ____ for the banks or bank holding companies in the peer group
set forth on Schedule B-2 A.

                                       11

<PAGE>



                                  SCHEDULE B-1
                                  ------------

                                 PAY OUT FORMULA


     1.   Obtaining an operating return on average equity

          triggers an incentive pay out as follows:


          100% of peer group                         $0

          100.1% of peer group                        .___% of average assets

          130% of peer group                          .___% of average assets


          Interpolation is required between 100.1% and 130%.



     2.   Obtaining #1 in return on equity triggers an added

          pay out of $______.

                                       12

<PAGE>

                                  SCHEDULE B-2
                                  ------------

        The ____ banking companies which form the peer group are:


                               [INSERT PEER GROUP]

                                       13

<PAGE>

                                   SCHEDULE C
                                   ----------


                         NATIONAL PENN BANCSHARES, INC.
                            EXECUTIVE INCENTIVE PLAN
                            DEFERRAL ELECTION LETTER
                           --------------------------


TO THE COMMITTEE:


        In  accordance  with  the  National  Penn  Bancshares,   Inc.  Executive
Incentive  Plan,  as amended  and  restated in 1998,  I hereby  request to defer
receipt of that  portion of any award  earned by me (to the extent  provided  in
Paragraph 2 below) for services rendered as an eligible  Participant in the Plan
during the calendar  year  specified  below and eligible to be received in cash.
This election shall be governed by all of the provisions of the Plan.


     1.   This request shall be effective beginning with calendar year ____.

     2.   This  request  shall  apply  to   _____________________of   my  award.
          (Expressed as "all" or a designated dollar or percentage limitation.)

     3.   My deferred award and the interest thereon shall become payable on the
          January 1 next  following  the date I retire or otherwise  cease to be
          employed by NPB or an Affiliate of NPB.

     4.   I  irrevocably  elect that,  when payable,  my deferred  award and the
          interest thereon shall be paid to me as indicated below:

          (    ) In one lump sum.

          (    ) In a series of five annual installments.

          (    ) In a series of ten annual installments.



         I agree  that  such  terms  and  conditions  shall be  binding  upon my
beneficiaries, distributees, and personal representatives.

                                       14

<PAGE>

Unless noted below,  my  beneficiaries  shall be the same as  designated  for my
group life insurance.



-------------------------                       --------------------------------
Date                                            Signature of Participant


                                                Approved By:



-------------------------                       --------------------------------
Date                                            Signature of the Chairman of the
                                                Committee

                                       15

<PAGE>
                                   SCHEDULE D
                                   ----------

                         NATIONAL PENN BANCSHARES, INC.
                            EXECUTIVE INCENTIVE PLAN
                            TRANSFER ELECTION LETTER
                           --------------------------


TO THE COMMITTEE:

         In  accordance  with  the  National  Penn  Bancshares,  Inc.  Executive
Incentive  Plan,  as amended and restated in 1998, I hereby  request to transfer
the balance in the Individual  Mandatory Deferral Account established in my name
for the award earned by me for services  rendered as an eligible  Participant in
the Plan during the calendar year  specified  below,  eligible to be received in
cash, to the  Individual  Tax Deferral  Account  established  in my name for the
award earned by me for services rendered as an eligible Participant in the Plan.
This election shall be governed by all of the provisions of the Plan.

         1.       This request shall be for the Individual Mandatory Deferral
         Account established in my name for the award earned by me for
         calendar year ____.

         2.       Payment of the award transferred and deferred pursuant hereto
         shall be in accordance with the election made for the Tax
         Deferral amount voluntarily deferred pursuant to deferral
         election letter dated _______________________.



------------------------------                    ------------------------------
Date                                              Signature of Participant


                                                  Approved By:



------------------------------                    ------------------------------
Date                                              Signature of Chairman of the
                                                  Committee

                                       16