NATIONAL PENN BANCSHARES, INC.
                         ------------------------------

                        1997 EMPLOYEE STOCK PURCHASE PLAN

                            (As amended and restated,
                          effective December 20, 2000)

         The following constitutes the provisions of the Employee Stock Purchase
Plan (the "Plan") of National Penn Bancshares, Inc. (the "Company").

         1.  Purpose.  The  purpose of the Plan is to provide  employees  of the
Company and its Subsidiaries with an opportunity to purchase Common Stock of the
Company.  It is the Company's intention to have the Plan qualify as an "Employee
Stock Purchase Plan" under Section 423 of the Code. Accordingly,  the provisions
of the Plan  shall be  construed  so as to extend and limit  participation  in a
manner consistent with the requirements of that section of the Code.

         2. Definitions.
            -----------

         (a) "Board" means the Board of Directors of the Company.

         (b) "Code" means the Internal Revenue Code of 1986, as amended.

         (c) "Common Stock" means the Company's common stock, without par value.

         (d)  "Compensation"  means all  regular  straight-time  gross  earnings
excluding payments for overtime,  incentive  compensation,  incentive  payments,
bonuses, commissions and other compensation. For Employees paid on a commissions
only basis, "straight-time gross earnings" means commissions paid.

         (e)  "Continuous  Status  as an  Employee"  means  the  absence  of any
interruption or termination of service as an Employee.  Continuous  Status as an
Employee  shall not be considered  interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than 90 days or  re-employment  upon the  expiration  of such  leave is
guaranteed by contract or statute.

         (f)  "Contributions"  means all  amounts  credited  to the account of a
participant pursuant to the Plan.

         (g) "Employee"  means any person  employed by the Company or one of its
Subsidiaries,   including   any  officer  of  the  Company  or  of  one  of  its
Subsidiaries.

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

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         (i)  "Offering  Date"  means the first  business  day of each  Offering
Period of the Plan.

         (j) "Offering  Period" means a period of three (3) months  beginning on
January 1, April 1, July 1 or October 1 of each year.

         (k) "Purchase  Date" means the last day of each Offering  Period of the
Plan.

         (l)  "Subsidiary"  means a  corporation  of which not less  than  fifty
percent  (50%) of the  voting  shares are held by the  Company or a  Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.

         3. Eligibility.
            -----------

         (a) Any person who has been continuously employed as an Employee for at
least three (3) months prior to the  Offering  Date of a given  Offering  Period
shall be eligible to participate in such Offering Period under the Plan, subject
to the  requirements  of  Section  5(a) and the  limitations  imposed by Section
423(b) of the Code.

         (b) No  Employee  shall be  granted  an  option  under the Plan (i) if,
immediately  after the grant,  such  Employee  (or any other  person whose stock
would be  attributed to such  Employee  pursuant to Section  424(d) of the Code)
would own stock and/or hold  outstanding  options to purchase  stock  possessing
five  percent  (5%) or more of the total  combined  voting power or value of all
classes of stock of the Company or of any Subsidiary,  or (ii) which permits his
or her  rights  to  purchase  stock  under all  employee  stock  purchase  plans
(described  in Section 423 of the Code) of the Company and its  Subsidiaries  to
accrue at a rate which exceeds  Twenty-Five  Thousand Dollars  ($25,000) of fair
market value of such stock  (determined  at the time such option is granted) for
each calendar year in which such option is outstanding at any time.

         4.  Offering  Periods.  The Plan  shall be  implemented  by a series of
Offering  Periods,  with a new Offering Period commencing on January 1, April 1,
July 1 and October 1 of each year. The Plan shall  continue until  terminated in
accordance with Section 19 hereof.

         5. Participation.  An eligible Employee may become a participant in the
Plan by completing a subscription  agreement on the form provided by the Company
and filing it with the Company prior to the applicable  Offering Date,  unless a
later  time for filing the  subscription  agreement  is set by the Board for all
eligible Employees with respect to a given offering.  The subscription agreement
shall set forth the percentage of the participant's Compensation (which shall be
not less than one

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<PAGE>

percent  (1%) and not more than ten percent  (10%)) to be paid as  Contributions
pursuant to the Plan.

         6. Method of Payment of Contributions.
            ----------------------------------

         (a) The participant shall elect to have payroll deductions made on each
payday during an Offering Period in an amount not less than one percent (1%) and
not more than ten percent (10%) of such participant's  Compensation on each such
payday;  provided  that the  aggregate  of such  payroll  deductions  during  an
Offering  Period  shall  not  exceed  ten  percent  (10%)  of the  participant's
aggregate  Compensation during such Offering Period. All payroll deductions made
by a  participant  shall be  credited to his or her  account  under the Plan.  A
participant may not make any additional payments into such account.

         (b) Payroll  deductions  shall commence on the first payroll  following
the  Offering  Date and  shall end on the last  payroll  paid on or prior to the
Purchase Date of the offering to which the subscription agreement is applicable,
unless sooner terminated by the participant as provided in Section 10.

         (c) A participant may discontinue his or her  participation in the Plan
as provided in Section 10, or, on one occasion  only during an Offering  Period,
may  increase  or  decrease  the rate of his or her  Contributions  during  such
Offering  Period,  without  withdrawing  from the Plan, by completing and filing
with the  Company a new  subscription  agreement  within the ten (10) day period
immediately preceding the beginning of any month during the Offering Period. The
change in rate shall be effective as of the beginning of the month following the
date of filing of the new  subscription  agreement  and  shall  comply  with the
limits as provided in Section 6(a).

         (d) To the extent  necessary  to comply with  Section  423(b)(8) of the
Code  and  Section  3(b)  herein,  a  participant's  payroll  deductions  may be
decreased to zero percent (0%) at such time, during any Offering Period which is
scheduled to end during the current  calendar  year,  that the  aggregate of all
payroll  deductions  accumulated  with respect to such  Offering  Period and any
other  Offering  Period ending  within the same  calendar  year equals  $25,000.
Payroll  deductions shall recommence at the rate provided in such  participant's
subscription  agreement at the beginning of the first  Offering  Period which is
scheduled  to end in the  following  calendar  year,  unless  terminated  by the
participant as provided in Section 10.

         7. Grant of Option.
            ---------------

         (a) On the  Offering  Date  of  each  Offering  Period,  each  eligible
Employee  participating  in such  Offering  Period shall be granted an option to
purchase, on the Purchase Date of such

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<PAGE>
Offering  Period,  the number of shares of Common Stock  determined  by dividing
such  Employee's  Contributions  accumulated  prior  to such  Purchase  Date and
retained in the participant's  account as of the Purchase Date by ninety percent
(90%) of the fair market value of a share of Common Stock on the Purchase  Date;
provided, however, that the maximum number of shares an Employee may purchase in
any one  calendar  year shall be  determined  at the  Offering  Date by dividing
$25,000  by the fair  market  value of a share of Common  Stock on the  Offering
Date,  and  provided  further  that  such  purchase  shall  be  subject  to  the
limitations set forth in Sections 3(b) and 12 hereof. The fair market value of a
share of Common Stock shall be determined as provided in Section 7(b) herein.

         (b) The  option  price  per  share  of the  shares  offered  in a given
Offering  Period  shall be ninety  percent  (90%) of the fair market  value of a
share of Common Stock on the Purchase  Date. The fair market value of a share of
Common Stock on a given date shall be determined (i) based on the average of the
closing  sale  prices  of a share of Common  Stock for the ten (10) day  trading
period  ending on the given date,  as reported on the  National  Association  of
Securities Dealers Automated Quotation  ("Nasdaq") National Market and published
in The Wall Street  Journal,  (ii) if no closing sale prices are reported during
such ten (10) day  trading  period,  based on the average of the mean of the bid
and asked prices per share of Common Stock for such ten (10) day trading period,
as reported on Nasdaq,  (iii) if the Common Stock is listed on a stock exchange,
based on the average of the closing  sale prices of a share of Common  Stock for
the ten (10) day trading  period  ending on the given  date,  as reported in The
Wall Street Journal, or (iv) if the Common Stock is not listed on Nasdaq or on a
stock exchange, by the Board in its sole discretion.

         8. Exercise of Option.  Unless a participant withdraws from the Plan as
provided  in Section  10, his or her option for the  purchase  of shares will be
exercised  automatically  on the Purchase Date of the Offering  Period,  and the
maximum number of full and fractional shares subject to option will be purchased
for him or her at the applicable option price with the accumulated Contributions
in his or her account. The shares purchased upon exercise of an option hereunder
shall be deemed to be  transferred  to the  participant  on the  Purchase  Date.
During his or her lifetime,  a participant's option to purchase shares hereunder
is exercisable only by him or her.

         9. Stock Certificates; Cash Balances; Dividend Reinvestment.
            --------------------------------------------------------

         (a) Stock  certificates  will not be issued to participants  for shares
purchased on the Purchase Date. Shares purchased for a participant on a Purchase
Date shall be held in an account for such  participant  under the Plan,  and all
rights accruing to an owner of record of such shares  (including  voting rights)
shall  belong to the  participant  for whose  account  such  shares are held.  A
participant

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<PAGE>
may file a written  election  with the  Company to  withdraw  some or all of the
shares  of  Common  Stock  held in his or her  account,  in  which  case a stock
certificate will be issued to such participant for such withdrawn shares.

         (b) Each participant in the Plan shall be deemed to have authorized the
collection and  accumulation  of all dividends paid on shares held in his or her
account and the application of such dividends to the purchase of additional full
and  fractional  shares of Common Stock as of the dividend  payment date, at its
fair market value on such date (without any  discount).  Fair market value shall
be  determined  as of the  dividend  payment  date,  in the  manner set forth in
Section 7(b) hereof.

         10. Withdrawal; Termination of Employment.
             -------------------------------------

         (a) A  participant  may  withdraw  all,  but not less than all,  of the
Contributions credited to his or her account under the Plan at any time prior to
the Purchase Date of an Offering Period by giving written notice to the Company.
All of such participant's  Contributions  credited to his or her account will be
paid to him or her promptly after receipt of such notice of withdrawal,  and his
or her option for the current period will be  automatically  terminated,  and no
further  Contributions  for the  purchase  of  shares  will be made  during  the
Offering Period.

         (b)  Upon  termination  of a  participant's  Continuous  Status  as  an
Employee  prior to the  Purchase  Date of an  Offering  Period  for any  reason,
including retirement or death, the Contributions  credited to his or her account
prior to the Purchase Date will be returned to him or her or, in the case of his
or her death,  to the person or persons  entitled  thereto under Section 14, and
his or her option will automatically be terminated.

         (c) A  participant  who withdraws  from an Offering  Period will not be
eligible to  participate  again in the Plan until the first  anniversary  of the
Purchase Date of the Offering Period during which such participant withdrew from
the Plan. The Board, or its committee  established under Section 13 hereof,  may
waive the non-  participation  period in its sole  discretion.  A  participant's
withdrawal  from an  Offering  Period  will not have any effect  upon his or her
eligibility to participate in any similar plan which may hereafter be adopted by
the Company.

         11. No Interest.  No interest  shall accrue on the  Contributions  of a
participant in the Plan.

         12. Stock.
             -----

         (a) The  maximum  number of shares of Common  Stock which shall be made
available for sale under the Plan shall be 250,000 shares, subject to adjustment
upon changes in capitalization of the Company

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<PAGE>



as provided in Section 18. If the total number of shares  which would  otherwise
be subject to options  granted  pursuant to Section  7(a) hereof on the Offering
Date of an Offering Period exceeds the number of shares then available under the
Plan (after deduction of all shares for which options have been exercised or are
then  outstanding),  the Company shall make a pro rata  allocation of the shares
remaining  available  for  option  grant  in as  uniform  a  manner  as shall be
practicable and as it shall determine to be equitable.  Any amounts remaining in
an  Employee's  account not applied to the purchase of Common Stock  pursuant to
this  Section 12 shall be refunded on or promptly  after the Purchase  Date.  In
such event,  the Company  shall give  written  notice of such  reduction  of the
number of shares  subject to the option to each  Employee  affected  thereby and
shall similarly reduce the rate of Contributions, if necessary.

         (b) No  participant  will have any  interest  or  voting  rights in any
shares covered by his or her option until such option has been exercised.

         13. Administration. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to (i) adopt,  amend
and rescind any rules deemed desirable and appropriate for the administration of
the Plan and not  inconsistent  with the Plan,  (ii)  construe and interpret the
Plan,  and (iii) make all other  determinations  necessary or advisable  for the
administration  of the Plan. The Board, or a committee  named by the Board,  may
engage a firm or entity  to  administer  the Plan,  subject  to the  Board's  or
committee's control and authority.

         14. Designation of Beneficiary.
             --------------------------

         (a) A participant may file with the Company a written  designation of a
beneficiary  who is to  receive  any  shares  and/or  cash,  if  any,  from  the
participant's account under the Plan upon such participant's death.

         (b) Such  designation of beneficiary  may be changed by the participant
at any time by  written  notice.  Upon the  death  of a  participant  and in the
absence of a beneficiary  validly designated under the Plan who is living at the
time of such  participant's  death, the Company shall deliver such shares and/or
cash to the executor or administrator of the estate of the participant, or if no
such  executor or  administrator  has been  appointed  (to the  knowledge of the
Company),  the Company,  in its sole discretion,  may deliver such shares and/or
cash  to the  spouse  or to any  one or  more  dependents  or  relatives  of the
participant,  or if no spouse,  dependent  or relative is known to the  Company,
then to such other person as the Company may designate.

         15. Transferability.  Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of

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<PAGE>

an option or to  receive  shares  under the Plan may be  assigned,  transferred,
pledged or  otherwise  disposed of in any way (other  than by will,  the laws of
descent  and   distribution  or  as  provided  in  Section  14  hereof)  by  the
participant.  Any  such  attempt  at  assignment,   transfer,  pledge  or  other
disposition shall be without effect,  except that the Company may treat such act
as an election to withdraw funds in accordance with Section 10.

         16. Use of Funds.  All  Contributions  received  or held by the Company
under the Plan may be used by the Company  for any  corporate  purpose,  and the
Company shall not be obligated to segregate such Contributions.

         17.   Reports.   Individual   accounts  will  be  maintained  for  each
participant  in the Plan.  Statements of account will be given to  participating
Employees  promptly following the Purchase Date, which statements will set forth
the amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.

         18. Adjustments Upon Changes in Capitalization; Corporate Transactions.
             ------------------------------------------------------------------

         (a) Subject to any required action by the  shareholders of the Company,
the number of shares of Common Stock covered by each option under the Plan which
has not yet been  exercised  and the number of shares of Common Stock which have
been  authorized  for issuance under the Plan but have not yet been placed under
option (collectively,  the "Reserves"), as well as the price per share of Common
Stock  covered by each option  under the Plan which has not yet been  exercised,
shall be proportionately  adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock  dividend,  combination or  reclassification  of the Common Stock,  or any
other  increase  or decrease  in the number of shares of Common  Stock  affected
without receipt of consideration by the Company.

         (b) Upon a proposed  dissolution  or  liquidation  of the Company,  the
Offering  Period will terminate  immediately  prior to the  consummation of such
proposed action, unless otherwise provided by the Board.

         (c)  Upon a  sale  of all or  substantially  all of the  assets  of the
Company or the merger of the  Company  with or into  another  corporation,  each
option  under  the Plan  shall  be  assumed  or an  equivalent  option  shall be
substituted  by such  successor  corporation  or a parent or  subsidiary of such
successor corporation,  unless the Board determines, in the exercise of its sole
discretion  and in lieu of such  assumption  or  substitution,  to  shorten  the
Offering  Period  then in  progress  by  setting a new  Purchase  Date (the "New
Purchase  Date").  If the Board shortens the Offering Period then in progress in
lieu of assumption or

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<PAGE>

substitution in the event of a merger or sale of assets,  the Board shall notify
each  participant  in writing,  at least ten (10) days prior to the New Purchase
Date,  that the Purchase  Date for his or her option has been changed to the New
Purchase Date and that his or her option will be exercised  automatically on the
New Purchase  Date,  unless prior to such date he or she has withdrawn  from the
Offering  Period as provided in Section 10. For  purposes of this Section 18, an
option  granted  under the Plan shall be deemed to be assumed if,  following the
sale of assets or merger,  the option  confers the right to  purchase,  for each
share of option  stock  subject to the option  immediately  prior to the sale of
assets or merger, the consideration  (whether stock, cash or other securities or
property)  received  in the sale of assets or merger by holders of Common  Stock
for each share of Common  Stock held on the  effective  date of the  transaction
(and if such  holders  were  offered  a  choice  of  consideration,  the type of
consideration  chosen by the holders of a majority of the outstanding  shares of
Common Stock);  provided,  however,  that if such consideration  received in the
sale  of  assets  or  merger  was  not  solely  common  stock  of the  successor
corporation or its parent (as defined in Section 424(e) of the Code),  the Board
may, with the consent of the successor corporation and the participant,  provide
for the  consideration  to be received  upon exercise of the option to be solely
common stock of the successor  corporation  or its parent,  equal in fair market
value to the per share consideration  received by holders of Common Stock in the
sale of assets or merger.

         (d) The Board may,  if it so  determines  in the  exercise  of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock  covered by each  outstanding  option,  if the Company
effects one or more  reorganizations,  recapitalizations,  rights  offerings  or
other increases or reductions of shares of its  outstanding  Common Stock, or if
the Company is consolidated with or merged into any other corporation.

         19. Amendment or Termination.
             ------------------------

         (a) The Board may at any time  terminate  or amend the Plan.  Except as
provided  in  Section  18, no such  termination  may affect  options  previously
granted,  nor may an amendment make any change in any option theretofore granted
which  adversely  affects the rights of any  participant.  In  addition,  to the
extent,  if any,  necessary  to  comply  with  Section  423 of the  Code (or any
successor  provision) or any other  applicable  law or  regulation,  the Company
shall  obtain  shareholder  approval in such a manner and to such a degree as so
required.

         (b)  Without  shareholder  consent  and  without  regard to whether any
participant rights may be considered to have been adversely affected,  the Board
(or its committee) shall be entitled to permit payroll  withholding in excess of
the amount designated by a

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<PAGE>
participant  in  order  to  adjust  for  delays  or  mistakes  in the  Company's
processing of properly completed  withholding  elections,  establish  reasonable
waiting and  adjustment  periods and/or  accounting and crediting  procedures to
ensure  that  amounts  applied  toward  the  purchase  of Common  Stock for each
participant  properly  correspond with amounts withheld from such  participant's
Compensation,  and establish  such other  limitations or procedures as the Board
(or its  committee)  determines  in its  sole  discretion  advisable  which  are
consistent with the Plan.

         20. Notices.  All  subscription  agreements,  designations,  notices or
other communications by a participant to the Company under or in connection with
the Plan  shall be  deemed to have been duly  given  when  received  in the form
specified by the Company at the  location,  or by the person,  designated by the
Company for the receipt thereof.

         21. Conditions Upon Issuance of Shares.
             ----------------------------------

         (a) Shares  shall not be issued  with  respect to an option  unless the
exercise of such option and the issuance  and  delivery of such shares  pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign,
including,  without  limitation,  the  Securities  Act of 1933, as amended,  the
Exchange  Act,  the  rules  and  regulations  promulgated  thereunder,  and  the
requirements  of Nasdaq or any stock  exchange upon which the shares may then be
listed,  and shall be further subject to the approval of counsel for the Company
with respect to such compliance.

         (b) As a  condition  to the  exercise  of an option,  the  Company  may
require the person  exercising  such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without  any  present  intention  to sell or  distribute  such shares if, in the
opinion of counsel for the Company,  such a representation is required by any of
the aforementioned applicable provisions of law.

         22. Effective Date; Term of Plan. The Plan was approved by the Board on
December 18, 1996. Upon approval by the  shareholders  of the Company,  the Plan
will become  effective and shall  continue in effect for a term through June 30,
2007, unless sooner terminated under Section 19.

         23.  Section 16. With  respect to persons  subject to Section 16 of the
Exchange Act, this Plan is intended to be a "tax-  conditioned  plan" within the
meaning of Rule 16b-3(c) and to otherwise comply with all applicable  conditions
of Rule 16b-3 (or any successor rule) under the Exchange Act.  Accordingly,  the
provisions  of the Plan  shall be  construed  in a  manner  consistent  with the
requirements of Rule 16b-3(c).


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<PAGE>

         24. Captions.  All section captions in this Plan are for convenience of
reference only.

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