Document:

NATIONAL PENN BANCSHARES, INC.

                            EXECUTIVE INCENTIVE PLAN

                          Adopted by Board of Directors

                                December 26, 1984

                                 PLAN YEAR 2001

As Amended By Board Dec. 16, 1998
Replaces previous Plan of Feb. 20, 1991

Amended Schedule B as approved by
   Board on May 10, 1999

As Amended By Compensation Committee
And Approved By Board December 20, 2000
Effective January 1, 2001

<PAGE>

                                   SCHEDULE A

         Participants for the 2001 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, 2001. 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, 2001.

         Named participants are classified accordingly:

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

                  Lawrence T. Jilk, Jr.                 999

                  Wayne R. Weidner                      999

                  Glenn E. Moyer                        999

         CLASS B  (26 persons)  (name and grade level)
<TABLE>
<CAPTION>
<S>                                                     <C>            <C>                                  <C>
                  Bruce G. Kilroy                       999            Todd A. Alderfer                     111
                  Garry D. Koch                         999            Brian T. Appleton                    111
                  Frederick C. Peters II                999            Nancy R. Corson                      111
                  Kathy B. Schauer                      999            Lloyd H. Reichenbach                 111
                  Algot F. Thorell, Jr.                 999            Michael L. Wummer                    111
                  Joseph C. Walter, Jr.                 999
                  Sharon L. Weaver                      999            Carol P. Franklin                    110
                                                                       Sandra L. Hoffman                    110
                  Gary L. Rhoads                        119            P. Robert Keeley                     110
                                                                       Tarrie L. Miller                     110
                  Ronald L. Bashore                     113            Larry A. Rush                        110
                  Timothy A. Day                        113            Sandra L. Spayd                      110
                  Scott L. Gruber                       113
                  Michael R. Reinhard                   113            Dennis E. Moyer                      109
                  Joseph C. Walker                      113

                  John J. Mikus, Jr.                    112

12/4/00

<PAGE>

         CLASS C  (30 persons)  (name and grade level)

                  E. Harry McGuirk                      111            Rich Gentile                         107
                  W. Scott Labenberg                    111            Eugene Guinther                      107
                  John Tucker                           111            Dick Haddock                         107
                                                                       Robert Latshaw                       107
                  Earl Houseknecht                      110            Cheryl Morris                        107
                  Ed Shin                               110            Donna Wentzel                        107
                  Linda S. Stark                        110
                                                                       Roxanne Dittman                      106
                  Lew Freeman                           109            Frank Gehringer                      106
                  Robin Hitchcock                       109            Steve Kunkel                         106
                  Hugh (Skip) Marshall                  109            Sandra Massaro                       106
                  Clarence Martindell                   109            Janice McCracken                     106
                  Steve Olson                           109            Marcia Stark                         106
                  Cindy Rankin                          109            Teresa Steuer                        106
                  Dan Tempesco                          109
                                                                       Sharon McMichael                     105
                  Michelle Debkowski                    108
                  Richard Sutton                        108            Patricia Angstadt                    104

</TABLE>

12/4/00

<PAGE>

                                   SCHEDULE B

                         NATIONAL PENN BANCSHARES, INC.
                            EXECUTIVE INCENTIVE PLAN
                             2001 PERFORMANCE GOALS

         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 2001 PLAN YEAR
-------------------------------------------------
The diluted per share operating income of NPBC for 2001 must exceed the diluted
per share operating income for 2000.

EXTERNAL PERFORMANCE GOALS FOR THE 2001 PLAN YEAR
-------------------------------------------------
The net operating income of NPB before securities transactions on realized
return on average common equity for 2001 must exceed the average of the net
operating income before securities transactions on realized return on average
common equity for 2001 for the banks or bank holding companies in the peer group
set forth on Schedule B-2 A.

Internal Performance Goals amended 5/10/99

<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               .031% of average assets

           130% of peer group                 .11% of average assets

           Interpolation is required between 100.1% and 130%.

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

           pay out of $25,000.

<PAGE>

                                  SCHEDULE B-2

         There is a change in the peer group from last year. The list of the
nine banking companies which form the peer group are:

                           Univest (Souderton)

                           Fulton Financial Corp.

                           Susquehanna Bancshares

                           Harleysville National Corp.

                           S & T Bancorp

                           BT Financial Corporation

                           Omega Financial Corp.

                           F.N.B. Corporation (Hermitage, PA)

                           First Commonwealth Financial Corp. (Indiana, PA)

                           National Penn Bancshares, Inc.

Plan Year 2001, as of December 2000

<PAGE>

                                   SCHEDULE C

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

TO THE COMMITTEE:

         In accordance with National Penn Bancshares, Inc., Executive Incentive
Plan, effective January 1, 1984, 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 2001.

         2.       This voluntary deferral request shall apply to
                  ____________% of my award.

         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.

<PAGE>

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

-------------------------
Name of ParticipantNATIONAL PENN BANCSHARES, INC.
                         ------------------------------

              OFFICERS' AND KEY EMPLOYEES' STOCK COMPENSATION PLAN
              ----------------------------------------------------

                         (As amended, February 28, 2001)

1.  PURPOSE

         The purpose of the Officers' and Key Employees' Stock Compensation Plan
(the "Plan") is to advance the interests of National Penn Bancshares,  Inc. (the
"Corporation")  by enhancing the ability of the Corporation and its Subsidiaries
to  attract  and  retain  officers  and other  key  employees,  to  reward  such
individuals for their contributions,  and to encourage them to take into account
the  long-term   interests  of  the   Corporation   through   interests  in  the
Corporation's common stock (the "Stock").

         This  Plan  provides  for (i) the grant of  options  to  acquire  Stock
("Options"), which may be incentive stock options ("ISOs") within the meaning of
the Internal  Revenue Code of 1986,  as amended (the "Code"),  or  non-qualified
stock options,  and (ii) awards of Stock subject to certain restrictions and the
risk of  forfeiture  ("Restricted  Stock").  Under this Plan,  Restricted  Stock
consists  of (i) Stock  subject  to  restrictions,  including  performance-based
restrictions  intended  to comply with the  provisions  of Code  Section  162(m)
("Performance-Based  Restricted Stock"), and (ii) Stock subject to restrictions,
not including  performance-based  restrictions.  Grants of Options and awards of
Restricted Stock are referred to herein collectively as "Awards".

         Any  officer or key  employee  selected  to receive an Award under this
Plan is sometimes referred to as a "participant"  herein, and any officer or key
employee selected to receive an Option under this Plan is sometimes  referred to
as an "optionee" herein.

2.  ADMINISTRATION

         This Plan shall be administered by a committee composed of three to six
members  of the  Corporation's  Board of  Directors  (the  "Board")  who are (i)
"non-employee   directors"  of  the  Corporation  within  the  meaning  of  Rule
16b-3(b)(3)  under Section 16 of the Securities  Exchange Act of 1934 (the "1934
Act"),  and (ii) "outside  directors" of the  Corporation  within the meaning of
Code Section  162(m) (the  "Committee").  The Board may from time to time remove
members  from,  or add members to, the  Committee.  Vacancies on the  Committee,
howsoever caused, shall be filled by the Board.

         Subject to the  terms,  provisions  and  conditions  of this Plan,  the
Committee shall have exclusive jurisdiction to: (i) make

                                        1

<PAGE>

Awards to such participants as the Committee may select; (ii) determine the time
or times when Awards shall be granted and the number of shares of Stock  subject
to each Award;  (iii)  determine  which  Options are, and which Options are not,
intended to be ISOs; (iv) determine the terms and conditions of each Award;  (v)
prescribe the form or forms of any instruments  evidencing  Awards and any other
instruments required under this Plan and to change such forms from time to time;
(vi) adopt,  amend, and rescind rules and regulations for the  administration of
this Plan; and (vii)  interpret this Plan and to decide any questions and settle
all controversies and disputes that may arise in connection with this Plan. Such
determinations of the Committee shall be conclusive and shall bind all parties.

         No member of the  Committee  or of the  Board  shall be liable  for any
determination,  decision or action made in good faith,  and the members shall be
entitled to  indemnification  and  reimbursement  in the manner  provided in the
Corporation's Bylaws.

3.  ELIGIBILITY

         Persons  eligible  to  receive  Awards  under  this Plan shall be those
officers  and key  employees  who,  in the  opinion of the  Committee,  are in a
position to make a significant  contribution  to the success of the  Corporation
and its Subsidiaries. No person who beneficially owns ten percent or more of the
outstanding  Stock shall be eligible to participate in this Plan, to exercise an
Option previously granted to him, or to take full possession of Restricted Stock
previously  issued  to him.  A  "Subsidiary"  of the  Corporation  shall  mean a
corporation  in which the  Corporation  shall own,  directly  or  indirectly,  a
majority of the capital stock entitled to vote for the election of directors.

4.  STOCK SUBJECT TO AWARDS

         The Stock subject to Awards under this Plan shall be either  authorized
but unissued shares or treasury shares. Subject to adjustment in accordance with
the provisions of Paragraph 5(G) and 6(F) hereof,  the total number of shares of
such Stock shall be 2,378,125 shares.

         If any outstanding Option or Restricted Stock Award under this Plan for
any reason expires, is forfeited or is terminated prior to the end of the period
during which Awards may be made under this Plan,  the shares of Stock  allocable
to the  unexercised  portion of such  Option or the  portion of such  Restricted
Stock Award that has  terminated or been forfeited may again be subject to award
under  this  Plan.  Shares  of Stock  delivered  to the  Corporation  to pay the
exercise price of any Option or to satisfy the tax withholding

                                        2

<PAGE>

consequences of an Option  exercise or the grant or vesting of Restricted  Stock
shall again be subject to award under this Plan.

5.  TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS

         Options granted  pursuant to this Plan shall be evidenced by agreements
in  such  form  as the  Committee  shall,  from  time to  time,  approve,  which
agreements  shall in  substance  include  and comply  with and be subject to the
following terms and conditions:

         A.  MEDIUM AND TIME OF PAYMENT

         The exercise  price of an Option shall be payable  either (i) in United
States  dollars in cash or by check,  bank draft or money  order  payable to the
order of the Corporation,  (ii) through the delivery of shares of Stock owned by
the optionee with a fair market value equal to the Option's  exercise  price, or
(iii) by a combination of (i) and (ii).  Fair market value of Stock so delivered
shall be  determined as of the date of exercise,  as provided in Paragraph  5(C)
hereof. Unless the Committee otherwise  determines,  an optionee may engage in a
successive  exchange (or series of  exchanges)  in which Stock such  optionee is
entitled to receive upon exercise of an Option may be simultaneously utilized as
payment for the exercise of an additional Option or Options.

         To  the  extent  permitted  by  applicable  law  and  regulations,  the
Committee may permit payment of the Option  exercise price through  arrangements
with a brokerage firm under which such firm, on behalf of the optionee, will pay
to the  Corporation  the exercise price of the shares being  purchased,  and the
Corporation  will  promptly  deliver  to such firm the number of shares of Stock
subject  to the  Option  so that the firm may sell  such  shares,  or a  portion
thereof, for the account of the optionee. In addition,  the Committee may permit
payment  of the  Option  exercise  price by  delivery  of an  unconditional  and
irrevocable  undertaking  by a broker to  deliver  promptly  to the  Corporation
sufficient  funds to pay the exercise price as soon as the shares subject to the
Option, or a portion thereof, are sold on behalf of the optionee.

         B.  NUMBERS OF SHARES

         The Option shall state the total number of shares to which it pertains.
Subject to adjustment  as provided in Paragraph  5(G), in any fiscal year of the
Corporation,  the aggregate number of shares of Stock as to which Options may be
granted to any one participant shall not exceed 60,000.

                                        3

<PAGE>

         C.  OPTION PRICE

         The exercise  price of an Option shall not be less than the fair market
value of the shares of Stock covered by the Option on the date of grant.

         As used in this Plan, the "fair market value" of a share of Stock as of
any date shall be determined (i) based on the average of the closing sale prices
of a share of 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 Stock for such ten (10) day trading period,  as reported on Nasdaq,  (iii) if
the Stock is listed on a stock  exchange,  based on the  average of the  closing
sale  prices of a share of Stock for the ten (10) day trading  period  ending on
the given date, as reported in The Wall Street Journal,  or (iv) if the Stock is
not  listed on  Nasdaq  or on a stock  exchange,  by the  Committee  in its sole
discretion.

         D.  EXPIRATION OF OPTIONS

         Each Option  granted under this Plan shall expire on a date  determined
by the  Committee,  which date,  in the case of an ISO, may not be more than ten
years from the date the Option is  granted,  and in the case of a  non-qualified
Option, may not be more than ten years and one month from the date the Option is
granted.

         E.  VESTING OF OPTIONS

         If and to the  extent an Option  has  become  vested,  an Option may be
exercised in whole at any time,  or in part from time to time,  during its term.
Except as provided in Paragraph 5(F) hereof,  an Option may only be exercised at
a  time  when  the  optionee  is  employed  by  the  Corporation  or  one of its
Subsidiaries.

         An optionee  shall have a  cumulative  vested  interest in the right to
exercise an Option,  determined by reference to his continuous  employment  with
the Corporation  and/or a Subsidiary  following the date of grant of the Option,
as follows:

            Period of Continuous           Cumulative Vested
         Employment Following Grant           Percentage
         --------------------------        -----------------

              Less than 1 year                    -0-
              1 year or more                     20.0
              2 years or more                    40.0
              3 years or more                    60.0
              4 years or more                    80.0
              5 years or more                   100.0

                                        4

<PAGE>

         To the extent the  application  of the above vesting  schedule would at
any time result in the right to acquire a fractional share, the right to acquire
such fractional share shall be deferred to the next vesting period.

         F.  TERMINATION OF SERVICE

         Except  as  otherwise   provided  in  this  Paragraph  5(F),  upon  the
termination of employment of an optionee for any reason,  the unexercised vested
portion  of any  Option  held  by him  shall  lapse  on the  earlier  of (i) the
expiration of the term of the Option, or (ii) three months from the date of such
termination of employment.

         Upon the termination of employment of an optionee because of retirement
at age 60 or later or death,  the unexercised  vested portion of any Option held
by him (including  any portion that became vested on account of such  retirement
or death)  shall lapse on the earlier of (i) the  expiration  of the term of the
Option, or (ii) three years from the date of such termination of employment.

         Upon the termination of employment of an optionee  because of permanent
and total disability (as defined in Code Section 22(e)(3), referred to herein as
"disability"),  the  unexercised  vested  portion  of  any  Option  held  by him
(including any portion that became vested on account of such  disability)  shall
lapse on the earlier of (i) the  expiration  of the term of the Option,  or (ii)
three years from the date of such termination of employment.

         In  the  case  of  the  discharge  of  an  optionee  for  "cause",  the
unexercised vested portion of any Option held by him shall lapse immediately. An
optionee  will be deemed  discharged  for  "cause"  if he is  discharged  by his
employer  and the ground for such  discharge  is the  employer's  good faith and
reasonable  belief  that (i) he has  committed  fraud or  dishonesty  toward his
employer (or any business  affiliated  with his employer,  or any  individual or
company doing business with any of them), or (ii) he has committed a felony, not
otherwise  described in clause (i), which  involves a crime of moral  turpitude.
Any lapse occurring under  provisions of this paragraph shall be final,  whether
or not the optionee is convicted of or admits to the  commission of the offense,
and no person or corporation shall be liable to the optionee therefor.

         Upon termination of employment of an optionee for any reason other than
retirement at age 60 or later,  disability,  or death, the nonvested  portion of
any Option held by him shall lapse immediately.

         Upon  termination of employment of an optionee because of retirement at
age 60 or later, disability,  or death, the nonvested portion of any Option held
by him shall vest immediately.

                                        5

<PAGE>

         G.  ADJUSTMENTS FOR CHANGES IN STOCK

         The  aggregate  number of shares  of Stock as to which  Options  may be
granted to participants under this Plan, the aggregate number of shares of Stock
as to which  Options may be granted to any one such  participant,  the number of
shares of Stock covered by each outstanding  Option,  and the exercise price per
share of each  outstanding  Option,  shall be  proportionately  adjusted  by the
Committee  for any increase or decrease in the number of  outstanding  shares of
Stock resulting from the subdivision or consolidation of shares or other capital
adjustments,  the payment of a Stock dividend, or any other increase or decrease
in such shares effected without receipt of consideration by the Corporation. Any
such determination by the Committee shall be conclusive.

         H.  TRANSFERABILITY

         Except as otherwise  provided in this Paragraph  5(H), no Option may be
assigned or transferred except by will, by the laws of descent and distribution,
or pursuant to a qualified domestic relations order.

         Unless the Committee  determines otherwise in connection with the grant
of a non-qualified  Option,  non-qualified  Options  granted  hereunder shall be
transferable,  without payment of  consideration,  by an optionee to a member of
the optionee's  immediate family, to a trust whose beneficiaries are all members
of the optionee's  immediate  family, or to a partnership whose partners are all
members of the optionee's  immediate  family. In any such case, the Option shall
be  exercisable  only by such  transferee.  For purposes of this  provision,  an
optionee's  "immediate  family" shall mean the optionee's  spouse,  children and
grandchildren.

         So long as non-transferability of ISOs is a requirement of the Code, no
Option granted as an ISO may be assigned or  transferred  except by will, by the
laws of descent and distribution,  or pursuant to a qualified domestic relations
order.

         I.  RIGHTS AS A SHAREHOLDER

         An  optionee  shall  have no rights as a  shareholder  with  respect to
shares  covered by an Option until the date the shares are issued and only after
such shares are fully paid.  No  adjustment  will be made for dividends or other
rights the record date for which is prior to the date of such issuance.

         J.  NO RIGHTS AS AN EMPLOYEE

         Neither this Plan, the grant of any Option hereunder, nor the execution
of any agreement with respect to such an Option,  shall confer upon any optionee
any right to remain in the employ of the  Corporation or any Subsidiary or limit
the right of the Corporation

                                        6

<PAGE>

or any  Subsidiary  to terminate the  optionee's  employment at any time for any
reason.

         K.  TAX WITHHOLDING

         The  Committee  shall  have the  right to  require  that a  participant
exercising an Option remit to the  Corporation  an amount  sufficient to satisfy
any  federal,  state,  or local  withholding  tax  requirements  (or make  other
arrangements  satisfactory  to the Committee with regard to such taxes) prior to
the delivery of any Stock  pursuant to the exercise of the Option.  If permitted
by the Committee, either at the time of the grant of the Option or in connection
with its exercise,  a participant  may elect, at such time and in such manner as
the  Committee  may  prescribe,  to satisfy such  withholding  obligation by (i)
delivering   Stock  having  a  fair  market  value  equal  to  such  withholding
obligation,  or (ii) requesting that the Corporation withhold from the shares of
Stock to be  delivered  upon the  exercise a number of shares of Stock  having a
fair market value equal to such withholding obligation.

         In the case of an ISO,  the  Committee  may require as a  condition  of
exercise  that  the  participant  exercising  the  Option  agree to  inform  the
Corporation  promptly of any  disposition  (within  the meaning of Code  Section
424(c) and the regulations thereunder) of Stock received upon exercise.

         L.  CHANGE IN CONTROL

         Notwithstanding Paragraph 5(E) or any other provision of this Plan, all
outstanding  Options shall become immediately and fully exercisable,  whether or
not otherwise exercisable by their terms, in the event of a "Change in Control".

         For purposes of this  Paragraph  5(L), a "Change in Control" shall mean
any of the following events: (i) the Corporation  acquires actual knowledge that
any Person  other than the  Corporation,  a Subsidiary  or any employee  benefit
plan(s)  sponsored by the  Corporation,  has acquired the Beneficial  Ownership,
directly or indirectly,  of securities of the Corporation  entitling such Person
to 25% or more of the Voting  Power of the  Corporation;  (ii) a Tender Offer is
made to acquire  securities of the Corporation  entitling the holders thereof to
50% or more of the Voting  Power of the  Corporation;  (iii)  Voting  Shares are
first  purchased  pursuant to any other Tender  Offer;  or (iv) at any time less
than 60% of the  members of the Board shall be  individuals  who were either (A)
Directors on the effective date of this Plan or (B) individuals  whose election,
or nomination for election, was approved by a vote (including a vote approving a
merger or other  agreement  providing for the membership of such  individuals on
the Board) of at least two-thirds of the Directors then still in office who were
Directors on the effective date of this Plan or who were so approved.

                                        7

<PAGE>

         For purposes of this Paragraph 5(L), the following terms shall have the
following meanings:

         (1)  "Affiliate",  "Associate",  and "Parent" shall have the respective
meanings  set  forth  in Rule  12b-2  under  the 1934  Act as in  effect  on the
effective date of this Plan.

         (2) The term  "Person"  shall be used as that term is used in  Sections
13(d) and 14(d) of the 1934 Act.

         (3)  "Beneficial  Ownership"  shall be  determined  as provided in Rule
13d-3 under the 1934 Act as in effect on the effective date of this Plan.

         (4) "Voting  Shares" shall mean all  securities of a company  entitling
the  holders  thereof  to vote  in an  annual  election  of  directors  (without
consideration  of the rights of any class of stock  other than  common  stock to
elect directors by a separate class vote); and a specified percentage of "Voting
Power" of a company  shall mean such number of the Voting Shares as shall enable
the holders thereof to cast such percentage of all the votes which could be cast
in an annual election of directors  (without  consideration of the rights of any
class of stock other than common stock to elect  directors  by a separate  class
vote).

         (5)  "Tender  Offer"  shall mean a tender  offer or  exchange  offer to
acquire  securities  of the  Corporation  (other  than such an offer made by the
Corporation or any Subsidiary), whether or not such offer is approved or opposed
by the Board.

         (6)  "Subsidiary"  shall mean any  corporation  in an unbroken chain of
corporations  beginning with the Corporation if each of the  corporations  other
than the last  corporation in the unbroken chain owns stock  possessing at least
fifty percent (50%) or more of the total combined Voting Power of all classes of
stock in one of the other corporations in the chain.

         M.  ADDITIONAL RESTRICTIONS AND CONDITIONS

         The Committee may impose such other  restrictions  and  conditions  (in
addition  to those  required  by the  provisions  of this  Plan) on any Award of
Options hereunder and may waive any such additional restrictions and conditions,
so long as (i) any such  additional  restrictions  and conditions are consistent
with the terms of this Plan and (ii) such waiver does not waive any  restriction
or condition required by the provisions of this Plan.

6.  TERMS AND CONDITIONS APPLICABLE TO RESTRICTED STOCK AWARDS

         Awards of Restricted Stock may be  Performance-Based  Restricted Stock,
as described in Paragraph 6(K), or Restricted Stock without

                                        8

<PAGE>

performance-based  restrictions.  The provisions of Paragraphs 6(A) through 6(J)
are applicable to all shares of Restricted Stock.

         A.  NUMBER OF SHARES

         The total  number of shares of  Restricted  Stock  that may be  awarded
under this Plan on a cumulative  basis shall not exceed one percent of the Stock
outstanding  at  the  date  of  any  such  Award.  In  any  fiscal  year  of the
Corporation,  the  aggregate  number of  shares of Stock as to which  Restricted
Stock Awards may be made to any one participant shall not exceed 5,000.

         Each  Restricted  Stock Award under this Plan shall be  evidenced  by a
stock certificate of the Corporation, registered in the name of the participant,
accompanied by an agreement in such form as the Committee  shall  prescribe from
time to time. Restricted Stock Awards shall comply with the terms and conditions
of this Plan and with such other terms and conditions not inconsistent  with the
terms and conditions of this Plan as the  Committee,  in its  discretion,  shall
establish.

         B.  RESTRICTED PERIOD; RESTRICTIONS

         The  Committee   shall  provide  that  shares  of  Stock  issued  to  a
participant  in  connection  with a  Restricted  Stock  Award  may not be  sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of, except by
will or the laws of descent and  distribution,  for such period as the Committee
shall  determine,  beginning  on the date on which  the  Award is  granted  (the
"Restricted  Period"),  and  that  the  Restricted  Period  applicable  to  such
Restricted  Stock  shall  lapse  (if at all)  only at the end of the  Restricted
Period if all other terms and conditions of the Restricted  Stock Award are then
satisfied. Without limiting the generality of the foregoing, the other terms and
conditions of the Restricted  Stock Award may include the  requirement  that the
participant be continuously  employed by the Corporation or a Subsidiary  during
the Restricted Period.

         If all terms  and  conditions  of the  Restricted  Stock  Award are not
satisfied at the end of the Restricted  Period,  the  Restricted  Stock shall be
forfeited and  transferred  to, and reacquired by, the Corporation at no cost to
the Corporation.

         C.  STOCK LEGENDS; PROHIBITION ON DISPOSITION

         Certificates  for shares of Restricted  Stock shall bear an appropriate
legend referring to the restrictions to which they are subject,  and any attempt
to dispose of any such  shares of Stock in  contravention  of such  restrictions
shall be null and void and without effect. The certificates  representing shares
of Restricted Stock shall be held by the Corporation  until the restrictions are
satisfied.

                                        9

<PAGE>

         D.  TERMINATION OF SERVICE

         The Committee shall  determine the extent to which the  restrictions on
any Restricted Stock Award shall lapse upon the termination of the participant's
service  to the  Corporation  and its  Subsidiaries  due to  death,  disability,
retirement or for any other reason. If the restrictions on all or any portion of
a Restricted Stock Award shall not lapse,  the  participant,  or in the event of
his death, his personal representative, shall forthwith deliver to the Secretary
of the Corporation  such  instruments of transfer,  if any, as may reasonably be
required to transfer the shares back to the Corporation.

         E.  CHANGE IN CONTROL

         Upon the occurrence of a Change in Control,  as determined in Paragraph
5(L) of this Plan, all  restrictions  then outstanding with respect to shares of
Restricted  Stock  shall  automatically  expire and be of no  further  force and
effect,  and all  certificates  representing  such  shares  of  Stock  shall  be
delivered to the respective participants.

         F.  ADJUSTMENT FOR CHANGES IN STOCK

         The Committee  shall  proportionately  adjust the  aggregate  number of
shares  of  Stock  as to  which  Restricted  Stock  Awards  may  be  granted  to
participants  under this Plan and the aggregate  number of shares of Stock as to
which Restricted Stock Awards may be granted to any one such participant for any
increase or decrease in the number of outstanding shares of Stock resulting from
the subdivision or  consolidation  of shares or other capital  adjustments,  the
payment of a Stock  dividend,  or any other  increase or decrease in such shares
effected without receipt of consideration by the Corporation;  provided that any
factional  shares  resulting from any such adjustment  shall be eliminated.  Any
such determination by the Committee shall be conclusive.  Shares of Stock issued
with  respect  to any  outstanding  Awards as a result  of any of the  foregoing
events shall be subject to the same restrictions.

         G.  EFFECT OF ATTEMPTED TRANSFER

         No benefit  payable or interest in any Restricted  Stock Award shall be
subject in any manner to anticipation,  alienation, sale, transfer,  assignment,
pledge,  encumbrance or charge and any such attempted  action shall be void, and
no such interest in any Restricted Stock Award shall be in any manner liable for
or  subject  to  debts,  contracts,  liabilities,  engagements  or  torts of any
participant or his beneficiary.  If any participant or beneficiary  shall become
bankrupt or shall  attempt to  anticipate,  alienate,  sell,  transfer,  assign,
pledge,  encumber  or  charge  any  benefit  payable  under or  interest  in any
Restricted Stock Award, then the

                                       10

<PAGE>

Committee, in its discretion,  may hold or apply such benefit or interest or any
part thereof to or for the benefit of such participant or his  beneficiary,  his
spouse,  children,  blood relatives or other dependents,  or any of them, in any
such manner and such proportions as the Committee may consider proper.

         H.  PAYMENT OF TAXES

         The  Corporation  shall  have the right to deduct  from any  Restricted
Stock Award or other payment hereunder any amount that federal,  state, or local
tax law  requires  to be  withheld  with  respect to such Award or payment or to
require that the participant,  prior to or  simultaneously  with the Corporation
incurring  any  obligation  to withhold any such amount,  pay such amount to the
Corporation in cash or, at the option of the Corporation, shares of Stock (which
shall be valued at their fair market value on the date of payment).  There is no
obligation  under this Plan that any  participant be advised of the existence of
the tax or the amount required to be withheld.  Without  limiting the generality
of the foregoing,  in any case where it is determined that tax is required to be
withheld  in  connection  with the  issuance,  transfer or delivery of shares of
Stock  under this  Plan,  the  Corporation  may,  pursuant  to such rules as the
Committee may establish,  reduce the number of shares so issued,  transferred or
delivered by such number of shares as the  Corporation  may deem  appropriate in
its sole discretion to comply with such withholding.  Notwithstanding  any other
provision of this Plan, the Committee may impose such  conditions on the payment
of any  withholding  obligations  as  may  be  required  to  satisfy  applicable
regulatory requirements.

         I.  RIGHTS AS A SHAREHOLDER

         A  participant  shall have the right to receive  dividends on shares of
Stock subject to the  Restricted  Stock Award during the  applicable  Restricted
Period,  to  vote  the  Stock  subject  to the  Award  and to  enjoy  all  other
shareholder  rights,  except  that the  participant  shall  not be  entitled  to
delivery of the stock certificate  until the applicable  Restricted Period shall
have lapsed (if at all).

         J.  NO RIGHTS AS AN EMPLOYEE

         Neither this Plan, the award of any Restricted Stock hereunder, nor the
execution of any agreement with respect to such Restricted  Stock,  shall confer
upon any  optionee any right to remain in the employ of the  Corporation  or any
Subsidiary or limit the right of the  Corporation or any Subsidiary to terminate
the optionee's employment at any time for any reason.

                                       11

<PAGE>

         K.  PERFORMANCE-BASED RESTRICTED STOCK

         Awards of Performance-Based Restricted Stock are intended to qualify as
"performance-based"  for purposes of Code Section  162(m).  The Committee  shall
provide that shares of Stock issued to a participant in connection with an Award
of Performance-Based  Restricted Stock may not be sold,  assigned,  transferred,
pledged,  hypothecated  or otherwise  disposed of, except by will or the laws of
descent and distribution,  during the Restricted Period, and that the Restricted
Period  applicable  to such  Restricted  Stock  shall  lapse (if at all) only if
certain pre-established objectives are attained.  Performance goals may be based
on any of the  following  criteria:  (i)  earnings or earnings  per share,  (ii)
return on equity, (iii) return on assets, (iv) revenues, (v) expenses,  (vi) one
or more operating ratios,  (vii) stock price,  (viii) shareholder  return,  (ix)
market  share,  (x)  charge-offs,  (xi)  credit  quality,  (xii)  reductions  in
non-performing  assets,  (xiii) customer  satisfaction  measures,  and (xiv) the
accomplishment of mergers,  acquisitions,  dispositions or similar extraordinary
business  transactions.  The Committee  shall  establish  one or more  objective
performance goals for each such Award of  Performance-Based  Restricted Stock on
the date of  grant.  The  performance  goals  selected  in any case  need not be
applicable  across the  Corporation,  but may be particular  to an  individual's
function  or  business  unit.  The  Committee  shall   determine   whether  such
performance  goals  are  attained  and such  determination  shall  be final  and
conclusive.  If  the  performance  goals  are  not  met,  the  Performance-Based
Restricted  Stock shall be forfeited and  transferred to, and reacquired by, the
Corporation at no cost to the Corporation.

         The Committee may impose such other  restrictions  and  conditions  (in
addition to the performance-based  restrictions described above) on any Award of
shares of Performance-Based  Restricted Stock as the Committee deems appropriate
and may waive any such additional  restrictions and conditions,  so long as such
waiver  does not waive any  restriction  described  in the  previous  paragraph.
Nothing herein shall limit the Committee's  ability to reduce the amount payable
under an  Award  upon  the  attainment  of the  performance  goal(s),  provided,
however,  that the  Committee  shall  have no right  under any  circumstance  to
increase the amount  payable  under,  or waive  compliance  with, any applicable
performance goal(s).

7.  AMENDMENT

         The  Committee  may at any time amend or suspend this Plan or alter and
amend Awards granted hereunder;  provided,  however, that no such amendment may,
without the consent of any participant to whom an Option shall  theretofore have
been granted or to whom a  Restricted  Stock Award shall  theretofore  have been
issued, adversely affect the right of such participant under such Award;

                                       12

<PAGE>

and provided,  further,  that no amendment that requires shareholder approval in
order for (i) this Plan to continue  to be eligible to satisfy the  requirements
for exemption of the acquisition of securities  under this Plan pursuant to Rule
16b-3  under  Section 16 of the 1934 Act,  or (ii) this Plan to  continue  to be
eligible to comply with Code Section  162(m),  or any amendment of or substitute
for either of them,  shall be effective unless the same shall be approved by the
requisite vote of the shareholders of the Corporation.

8.  TERMINATION

         The Board may terminate  this Plan at any time,  and no Awards shall be
made  thereafter.  Unless  previously  terminated by the Board,  this Plan shall
terminate on, and no Awards shall be made after, December 17, 2006.

9.  LEGALITY OF GRANT

         The  granting of any Award under this Plan and the issuance or transfer
of Options and shares of Stock  pursuant  hereto are  subject to all  applicable
federal and state  laws,  rules and  regulations  and to such  approvals  by any
regulatory or governmental  agency  (including,  without  limitation,  no-action
positions of the Securities and Exchange  Commission)  which may, in the opinion
of  counsel  for the  Corporation,  be  necessary  or  advisable  in  connection
therewith.  Without  limiting the generality of the foregoing,  no Awards may be
granted  under  this  Plan and no  Options  or  shares  shall be  issued  by the
Corporation,  nor  cash  payments  made  by the  Corporation  pursuant  to or in
connection  with any such  Award  unless  and  until in any such  case all legal
requirements  applicable  to the  issuance  or payment  have,  in the opinion of
counsel for the  Corporation,  been complied with. In connection with any Option
or Stock issuance or transfer,  the person acquiring the Option or the shares of
Stock shall,  if requested by the  Corporation,  give assurance  satisfactory to
counsel to the  Corporation  with respect to such matters as the Corporation may
deem desirable to assure compliance with all applicable legal requirements.

10.  CAPTIONS; PRONOUNS

         The captions  contained in this Plan are for  convenience  of reference
only, and shall not be considered  part of this Plan in its  interpretation  and
construction.

         The use of any masculine  pronoun  herein shall be construed to include
the corresponding feminine pronoun, as the context requires.

                                       13

<PAGE>

11.  EFFECTIVE DATE

         This Plan was  adopted  by the Board on  December  18,  1996,  subject,
however,  to approval of this Plan by the shareholders of the Corporation at its
1997 Annual Meeting. If so approved, this Plan shall be effective as of December
18, 1996.

                                       14

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