Document:

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

                                       16NATIONAL 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.

                                        1

<PAGE>

         (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

                                        2
<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

                                        3
<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

                                        4
<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

                                        5

<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

                                        6

<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

                                        7
<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

                                        8
<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).

                                        9

<PAGE>

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

                                       10

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