AQUA AMERICA, INC
                         2004 EQUITY COMPENSATION PLAN
 
1. Purpose
 
   The purpose of this plan (the "Plan") is to provide an incentive, in the
form of a proprietary interest in Aqua America, Inc. (the "Corporation"), to
officers, other key employees and Non-employee Directors, as defined below, of
the Corporation and its subsidiaries and key consultants who are in a position
to contribute materially to the successful operation of the business of the
Corporation, to increase their interest in the Corporation's welfare, and to
provide a means through which the Corporation can attract and retain officers,
other key employees and Non-employee Directors and key consultants of
significant abilities. The Plan is a successor plan to the Corporation's
existing Amended and Restated 1994 Equity Compensation Plan (the "1994 Plan.")
 
2. Administration
 
   This Plan shall be administered by a Committee (the "Committee") of the
Board of Directors of the Corporation. The Committee shall consist of three or
more of those members of the Board of Directors, each of whom may be an
"outside director" as defined under section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), and related Treasury regulations and
each of whom shall also be a "non-employee director" as defined under Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). However, the Board of Directors may ratify or approve any grants made
by the Committee if the Committee deems it appropriate in a particular
circumstance.
 
   From time to time the Committee may make grants, subject to the terms of the
Plan, with respect to such number of shares of Common Stock of the Corporation
as the Committee, acting in its sole discretion, may determine. All references
to the Committee hereunder shall also mean the Board of Directors to the
extent that the Board of Directors is acting pursuant to its authority to
ratify or approve grants under the Plan. Non-employee Directors, as defined
below, may only receive stock grants pursuant to the provisions of Section
7(f).
 
   Subject to the provisions of the Plan, the Committee shall be authorized to
interpret the Plan and the grants made under the Plan, to establish, amend and
rescind any rules and regulations relating to the Plan, to determine the terms
and provisions of the agreement related to grants described in Section 9
hereof, and to make all other determinations, including factual
determinations, necessary or advisable for the administration of the Plan. The
Committee may correct any defect, supply any omission and reconcile any
inconsistency in the Plan or in any option or grant in the manner and to the
extent it shall be deemed desirable to carry it into effect. The
determinations of the Committee in the administration of the Plan, as
described herein, shall be final and conclusive. The Committee may adopt such
rules and regulations as it deems necessary for governing its affairs. All
powers of the Committee shall be executed in its sole discretion, in the best
interest of the Corporation, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
individuals. An Agreement, as defined below, shall be executed by each grantee
and shall constitute that grantee's acknowledgement and acceptance of the
terms of the Plan and the Committee's authority and discretion.
 
 
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3. Grants
 
   Pursuant to the terms of the Plan, the Committee shall have the authority to
grant stock options to officers and other key employees and key consultants
and restricted stock and dividend equivalents to officers and other key
employees; provided, however, that Non-employee Directors, as defined below,
may receive stock grants in accordance with Section 7(f) (hereinafter
collectively referred to as the "Grants"). All Grants shall be subject to the
terms and conditions set forth herein and to those other terms and conditions
consistent with this Plan as the Committee deems appropriate and as are
specified in writing by the Committee in the agreement described in Section 9
of the Plan (the "Agreement"). Grants under a particular Section of the Plan
need not be uniform as among the grantees and Grants under two or more
Sections of the Plan may be combined in one instrument.
 
4. Shares Subject to the Plan
 
   Subject to adjustment as provided in Section 15, the maximum aggregate
number of shares of the Common Stock of the Corporation that may be issued or
transferred under the Plan shall be 3,675,000 shares; provided, however, that
no more than 50% of these shares shall be available for issuance as restricted
stock. The maximum number of shares of Common Stock that may be subject to
Grants made under the Plan to any individual during any calendar year shall be
150,000 shares. Shares deliverable under the Plan may be authorized and
unissued shares or treasury shares, as the Committee may from time to time
determine. Shares of Common Stock related to the unexercised or undistributed
portion of any terminated, expired or forfeited Grant also may be made
available for distribution in connection with future Grants under the Plan.
Additionally, if and to the extent options granted under the 1994 Plan
terminate or expire without being exercised, or if any shares of restricted
stock are forfeited, or shares of Common Stock otherwise issuable under the
1994 Plan are withheld by the Corporation in satisfaction of withholding taxes
incurred in connection with the exercise of a stock option or vesting of a
restricted stock award, the shares subject to such awards may be made
available for distribution in connection with future Grants under the Plan.
 
5. Eligibility
 
   Only officers, key employees, members of the Board of Directors who are not
employed in any capacity by the Corporation (hereinafter referred to as
"Non-employee Directors") and key consultants of the Corporation and its
subsidiaries shall be eligible for Grants under the Plan; provided, however,
that Grants to Non-employee Directors shall be made only in accordance with
Section 7(f). The term "subsidiaries" shall mean any corporation in an
unbroken chain of corporations beginning with the Corporation, if at the time
of the Grant, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
 
6. Granting of Options
 
   The Committee may, from time to time, grant stock options to eligible
officers and other key employees and shall designate options at the time of
grant as either "incentive stock options" intended to qualify as such under
section 422 of the Internal Revenue Code of 1986, as from time to time amended
or any successor statute of similar purpose (the "Code"), or "nonqualified
stock options", which options are not intended to so qualify. The
 
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Committee may, from time to time, grant nonqualified stock options to key
consultants. Except as hereinafter provided, options granted pursuant to the
Plan shall be subject to the following terms and conditions:
 
     (a)  Price.  The purchase price per share of stock deliverable upon the
          issuance of shares pursuant to the exercise of each option shall be
          not less than 100% of the fair market value of the Corporation's
          Common Stock on the date the option is granted. The fair market
          value shall be the mean of the high and low sale prices of the
          Corporation's Common Stock on the New York Stock Exchange --
          Composite Transactions or other recognized market source, as
          determined by the Committee, on the date the option is granted, or
          if there is no sale on such date, then the mean of such high and low
          sale prices on the last previous day on which a sale is reported. In
          any event, in case of the grant of an incentive stock option, the
          fair market value shall be determined in a manner consistent with
          section 422 of the Code.
 
   Shares may be purchased only by delivering a notice of exercise to the
Committee with payment of the purchase price therefore to be paid in full
prior to the issuance of the shares. Such notice may instruct the Corporation
to deliver shares of Common Stock due upon the exercise of the option to any
registered broker or dealer in lieu of delivery to the grantee. Such
instructions must designate the account into which the shares are to be
deposited. The grantee may tender this notice of exercise, which has been
properly executed by the grantee, and the aforementioned delivery instructions
to any broker or dealer. With the consent of the Committee, payment of the
purchase price may be made, in whole or in part, through the surrender of
shares of the Common Stock of the Corporation (including without limitation
shares of Common Stock acquired pursuant to the option then being exercised)
at the fair market value of such shares determined as of the last trading day
prior to the date on which the option is exercised, in the same manner set
forth in the above paragraph.
 
     (b)  Terms of Options.  The term during which each incentive stock option
          may be exercised shall be determined by the Committee, but in no
          event shall an incentive stock option be exercisable in whole or in
          part more than 10 years from the date it is granted and in no event
          shall a nonqualified stock option be exercisable in whole or in part
          more than 10 years and one day from the date it is granted. All
          rights to purchase pursuant to an option shall, unless sooner
          terminated, expire at the date designated by the Committee.
 
   The Committee shall determine the date on which each option shall become
exercisable and may provide that an option shall become exercisable in
installments. The shares comprising each installment may be purchased in whole
or in part at any time after such installment becomes exercisable. The
Committee may, in its sole discretion, accelerate the time at which any option
may be exercised in whole or in part. Notwithstanding any determinations by
the Committee regarding the exercise period of any option, all outstanding
options shall become immediately exercisable upon a Change of Control of the
Corporation (as defined herein).
 
     (c)  Termination of Employment.  Upon the termination of a grantee's
          employment for any reason (except as a result of retirement,
          disability or death), the options held by such grantee shall
          terminate. Notwithstanding the fact that, in all cases, a grantee's
          employment shall be deemed to have terminated upon the sale of a
          "subsidiary" of the Corporation (an entity in which the Corporation
          has at least a
 
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          50% ownership of the entity's total voting power) that employs such
          grantee, the Committee, in its sole discretion, may extend the
          period during which any option held by such a grantee may be
          exercised after such sale to the earliest of (i) a date which is not
          more than three years from the date of the sale of the subsidiary,
          (ii) the date of the grantee's termination of employment with the
          subsidiary (or successor employer) following such sale for reasons
          other than retirement, disability or death, (iii) the date which is
          one year from the date of the grantee's termination of employment
          with the subsidiary on account of the grantee's total disability (as
          defined in section 22(e)(3) of the Code), or three months from the
          date of such termination if on account of death, retirement or a
          disability other than a total disability, or (iv) the expiration of
          the original term of the option as established at the time of grant.
          The Committee, in its sole discretion, may similarly extend the
          period of exercise of any option held by a grantee employed by the
          Corporation whose employment with the Corporation is terminated in
          connection with the sale of a subsidiary of the Corporation. To the
          extent that any option is not otherwise exercisable as of the date
          on which the grantee ceases to be employed by the subsidiary or the
          Corporation, as applicable, such unexercisable portion of the option
          shall terminate as of such date.
 
   Upon termination of a grantee's employment as a result of retirement,
disability or death, the period during which the options may be exercised
shall not exceed: (i) one year from the date of such termination of employment
in the case of death; (ii) two years from the date of such termination in the
case of permanent and total disability (within the meaning of section 22(e)(3)
of the Code) or retirement; and (iii) three months from the date of such
termination of employment in the case of other disability; provided, however,
that in no event shall the period extend beyond the expiration of the option
term. To the extent that any option is not otherwise exercisable as of the
date on which the grantee ceases to be employed by the Corporation or any
subsidiary, as applicable, such unexercisable portion of the option shall
terminate as of such date.
 
   Subject to the foregoing, in the event of death, such options may be
exercised by a grantee's legal representative or beneficiary, but only to the
extent that an option has become exercisable as of the date of death.
Notwithstanding the foregoing, the Committee, in its sole discretion, may
determine that any portion of an option that has not become exercisable as of
the date of the grantee's death, termination of employment on account of
permanent and total disability (within the meaning of section 22(e)(3) of the
Code) or other termination of employment may also be exercised by a grantee,
or in the case of death, a grantee's legal representative or beneficiary.
Transfer from the Corporation to a subsidiary, from a subsidiary to the
Corporation, or from one subsidiary to another, shall not be deemed to be a
termination of employment. All references in this Section 6(c) to the
termination of a grantee's employment shall include the termination of a
consultant's relationship with the Corporation or any subsidiary.
 
     (d)  Limits on Incentive Stock Options.  Each Grant of an incentive stock
          option shall provide that it (i) is not transferable by the grantee
          otherwise than by will or the laws of descent and distribution and
          (ii) is exercisable, during the grantee's lifetime, only by the
          grantee and that the aggregate fair market value of the Common Stock
          on the date of the Grant with respect to which incentive stock
          options are exercisable for the first time by a grantee during any
          calendar year under the Plan and under any other
 
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          stock option plan of the Corporation shall not exceed the limitation
          set forth in section 422(d) of the Code.
 
   An incentive stock option shall not be granted to any grantee who, at the
time of grant, owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Corporation or subsidiary
of the Corporation, unless the exercise price of the incentive stock option is
no less than 110% of the fair market value per share on the date of grant and
the term of the incentive stock option is not more than five years. Unless a
grantee could otherwise transfer Common Stock issued pursuant to an incentive
stock option granted hereunder without incurring liability under section 16(b)
of the Exchange Act, at least six months must elapse from the date of
acquisition of an incentive stock option to the date of disposition of the
Common Stock issued upon exercise of such option.
 
7.   Restricted Stock Grants
 
   The Committee may issue or transfer shares of Common Stock of the
Corporation to an eligible officer or other key employee. The following
provisions are applicable to restricted stock grants:
 
     (a)  General Requirements. Shares of Common Stock of the Corporation
          issued pursuant to restricted stock grants may be issued for
          consideration or for no consideration. Subject to any other
          restrictions by the Committee as provided pursuant to Section 7(e)
          and 7(g), restrictions on the transfer of shares of Common Stock set
          forth in Section 7(c) shall lapse on such date or dates as the
          Committee may approve until the restrictions have lapsed on 100% of
          the shares; provided, however, that upon a Change of Control of the
          Corporation, all restrictions on the transfer of the shares which
          have not, prior to such date, been forfeited shall immediately
          lapse. The period of years during which the restricted stock grant
          will remain subject to restrictions will be designated in the
          Agreement (the "Restriction Period"). Prior to the lapse of the
          Restriction Period the shares of Common Stock granted to any grantee
          shall be held by the Corporation, subject to the provisions of
          Section 15 with respect to voting and dividends.
 
     (b)  Number of Shares. The Committee may grant to each grantee a number
          of shares of Common Stock of the Corporation determined in its sole
          discretion.
 
     (c)  Requirement of Employment. If the grantee's employment terminates
          during the Restriction Period, the restricted stock grant terminates
          as to all shares covered by the Grant as to which restrictions on
          transfer have not lapsed, and those shares of Common Stock must be
          immediately returned to the Corporation. The Committee may, however,
          provide for complete or partial exceptions to this requirement as it
          deems equitable.
 
     (d)  Restrictions on Transfer and Legend on Stock Certificate. During the
          Restriction Period, a grantee may not sell, assign, transfer,
          pledge, or otherwise dispose of the shares of Common Stock to which
          such Restriction Period applies except to a Successor Grantee (as
          defined in Section 10 of the Plan). Each certificate for a share
          issued or transferred under a restricted stock grant shall contain a
          legend giving appropriate notice of the restrictions in the Grant.
          The grantee shall be entitled to have the
 
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          legend removed from the stock certificate or certificates covering
          any of the shares subject to restrictions when all restrictions on
          such shares have lapsed.
 
     (e)  Lapse of Restrictions. All restrictions imposed under the restricted
          stock grant shall lapse upon the expiration of the applicable
          Restriction Period; provided, however, that upon the death of the
          grantee or a Change of Control of the Corporation, all restrictions
          on the transfer of shares which have not, prior to such date, been
          forfeited shall immediately lapse. In addition, the Committee may
          determine as to any or all restricted stock grants, that all the
          restrictions shall lapse, without regard to any Restriction Period,
          under such circumstances as it deems equitable.
 
     (f)  Stock grants to Non-employee Directors. As of the first day of the
          month following the Corporation's annual meeting of shareholders,
          each Non-employee Director shall receive a grant of 1,093 shares of
          Common Stock. Such shares shall not be sold for 6 months following
          the date of grant. No other restrictions shall apply to such shares.
          Notwithstanding any other provision of the Plan, this Section 7(f)
          may not be amended more than once every 12 months, except for
          amendments necessary to conform the Plan to changes of the
          provisions of, or the regulations relating to, the Code.
 
     (g)  (1) Restricted Stock Awards Subject to Performance Goals. From time
          to time the Committee may issues shares of Common Stock of the
          Corporation pursuant to restricted stock grants, which, in addition
          to the terms and restrictions of Sections 7(a)-(f) above, will be
          subject to certain pre-established performance goals. In setting the
          performance goals for grants designated as "qualified
          performance-based compensation" pursuant to this Section 7, the
          Committee may establish that the Restriction Period of such
          restricted stock grants will lapse only upon the achievement of
          certain pre-established corporate performance goals that shall be
          objectively determinable. The performance goals may be based on one
          or more of the following criteria: (1) total return to shareholders;
          (2) dividends; (3) earnings per share; (4) customer growth; (5) cost
          reduction goals; (6) the achievement of specified operational goals,
          including water quality and the reliability of water supply; (7)
          measures of customer satisfaction; (8) net income (before or after
          taxes) or operating income, before or after non-recurring items; (9)
          earnings before interest, taxes, depreciation and amortization or
          operating income before depreciation and amortization; (10) revenue
          targets; (11) return on assets, capital or investment; (12) cash
          flow; (13) budget comparisons; (14) implementation or completion of
          projects or processes strategic or critical to the Company's
          business operations; and (15) any combination of, or a specified
          increase in, any of the foregoing. In addition, such performance
          goals may be based upon the attainment of specified levels of the
          Corporation's performance under one or more of the measures
          described above relative to the performance of other entities and
          may also be based on the performance of any of the Corporation's
          business units or divisions or any parent or subsidiary. Performance
          goals may be based upon the attainment of specified levels of the
          Company's performance under one or more of the measures described
          above during a specified time period, which may differ from the
          Restriction Period. Performance goals may include a minimum
          threshold level of performance below which no award will be earned,
          levels of performance at which specified portions of an award will
          be earned and a maximum level of performance at which an award will
          be fully earned. These performance goals shall
 
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          satisfy the requirements for "qualified performance-based
          compensation," including the requirement that the achievement of the
          goals be substantially uncertain at the time they are established
          and that the performance goals be established in such a way that a
          third party with knowledge of the relevant facts could determine
          whether and to what extent the performance goals have been met. The
          Committee shall not have discretion to increase the amount of
          compensation that is payable upon achievement of the designated
          performance goals, but the Committee may reduce the amount of
          compensation that is payable upon achievement of the designated
          performance goals.
 
     (2)  Timing of Establishment of Goals. The Committee shall establish the
          performance goals in writing either before the beginning of the
          commencement of the period during which the specified performance
          goals are to be measured or during a period ending no later than the
          earlier of (i) 90 days after the beginning of the period during
          which the specified performance goals are to be measured or (ii) the
          date on which 25% of the period during which the specified
          performance goals are to be measured has been completed, or such
          other date as may be required or permitted under applicable
          regulations under Code section 162(m).
 
     (3)  Announcement of Results. The Committee shall certify and announce
          the results for the Restriction Period to all grantees after the
          Company announces the Company's financial results for the
          Restriction Period. If and to the extent that the Committee does not
          certify that the performance goals have been met, the applicable
          grants for the Restriction Period shall be forfeited or shall not be
          paid, as applicable.
 
     (4)  Death, Disability or Other Circumstances. The Committee may provide
          that grants shall be payable or restrictions shall lapse, in whole
          or in part, in the event of the grantee's death or disability during
          the Restriction Period, a Change of Control or under other
          circumstances consistent with the Treasury regulations and rulings
          under Code section 162(m).
 
8.   Dividend Equivalents
 
   The Committee may grant dividend equivalents to eligible officers and other
key employees either alone or in conjunction with all or part of any option
granted under the Plan. A dividend equivalent shall be equal to the dividend
payable on a share of Common Stock of the Corporation. The amount of dividend
equivalents for any grantee (the "Dividend Equivalent Amount") is determined
by multiplying the number of dividend equivalents subject to the Grant by the
per-share cash dividend, or the per-share fair market value (as determined by
the Committee) of any dividend in other than cash, paid by the Corporation on
each record date for the payment of a dividend during the period described in
Section 8(a).
 
     (a)  Amount of Dividend Equivalent Credited. The Corporation shall credit
          to an account for each grantee maintained by the Corporation in its
          books and records on each record date, from the date of grant until
          the earlier of the date of (i) the end of the applicable
          accumulation period designated by the Committee at the time of
          grant, (ii) the date of the termination of employment for any reason
          (including retirement), other than total disability (as defined in
          section 22(e)(3) of the Code) or death of the grantee, or as
          otherwise determined by the Committee, in its sole discretion, at
          the time of a grantee's termination of employment or (iii) the end
          of a period of four years from the date of grant, that portion
 
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          of the Dividend Equivalent Amount for each such grantee attributable
          to each record date. The Corporation shall maintain in its books and
          records separate accounts which identify each Grantee's Dividend
          Equivalent Amount. Except as set forth in Section 8(e) below, no
          interest shall be credited to any such account.
 
     (b)  Payment of Credited Dividend Equivalents. The Committee, at the time
          of grant, shall designate the percentage of each grantee's Dividend
          Equivalent Amount that shall be paid to the grantee at the end of an
          applicable performance period (the "Performance Period"), generally
          being four years from the date of grant (the Committee, in its sole
          discretion, shall retain the right to designate a longer or shorter
          Performance Period at the time of grant); provided, however, that
          such Performance Period shall be:
 
          (i)   Reduced by one year for each calendar year during the applicable
                Performance Period ending after the date of grant in which the
                measurable performance criteria established by the Committee at
                the time of grant for the applicable Performance Period exceeds
                the targets for such criteria established by the Committee at
                the time of grant.
 
          (ii)  Increased by one year for each calendar year during the
                applicable Performance Period ending after the date of grant in
                which the measurable performance criteria established by the
                Committee at the time of grant for the applicable Performance
                Period is less than the targets for such criteria established by
                the Committee at the time of grant.
 
          (iii) In no event shall the Performance Period be reduced to less than
                two years or increased to more than eight years from the date of
                grant.
 
          (iv)  In the event that the Performance Period is shorter than the
                period described in Section 8(a), a grantee shall receive the
                payment of the amount credited to his account at the end of the
                applicable Performance Period and any portion of the Dividend
                Equivalent Amount not yet so credited to his account shall be
                paid on the Corporation's normal dividend payment dates until
                the grantee's Dividend Equivalent Amount for the period
                described in Section 8(a) is fully paid to the grantee.
 
     (c)  Timing of Payment of Dividend Equivalents.  Except as otherwise
          determined by the Committee in the event of a grantee's termination
          from employment prior to the end of the applicable Performance
          Period, no payments of the Dividend Equivalent Amount shall be made
          until the end of the applicable Performance Period and no payments
          shall be made to any grantee whose employment by the Corporation or
          a subsidiary terminates prior to the end of the applicable
          Performance Period for any reason other than retirement under the
          Corporation's or a subsidiary's retirement plan, death or total
          disability (as defined in section 22(e)(3) of the Code). Subject to
          Section 8(b)(iv), as soon as practicable after the end of such
          Performance Period, unless a grantee shall have made an election
          under Section 8(f) to defer receipt of any portion of such amount, a
          grantee shall receive 100% of the Dividend Equivalent Amount payable
          to him. Notwithstanding the foregoing, upon a Change of Control of
          the Corporation, any Dividend Equivalent Amount or portion thereof,
          which has not, prior to such date, been paid to the grantee or
          forfeited shall immediately become payable to the grantee without
          regard to whether the applicable Performance Period has ended.
 
 
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<PAGE>
     (d)  Form of Payment. The Committee shall have the sole discretion to
          determine whether the Corporation's obligation in respect of the
          payment of a Dividend Equivalent Amount shall be paid solely in
          credits to be applied toward payment of the option price under then
          exercisable options, solely in cash or partly in such credits and
          partly in cash.
 
     (e)  Interest on Dividend Equivalents. From a date which is 45 days after
          the end of the applicable Performance Period until the date that the
          Dividend Equivalent Amount payable to the grantee is paid to such
          grantee, the account maintained by the Corporation in its books and
          records with respect to such dividend equivalents shall be credited
          with interest at a market rate determined by the Committee.
 
     (f)  Deferral of Dividend Equivalents. A grantee shall have the right to
          defer receipt of any Dividend Equivalent Amount payments if he shall
          elect to do so on or prior to December 31 of the year preceding the
          beginning of the last full year of the applicable Performance Period
          (or such other time as the Committee shall determine is appropriate
          to make such deferral effective under the applicable requirements of
          federal tax laws). The terms and conditions of any such deferral
          (including the period of time thereof and any earnings on the
          deferral) shall be subject to approval by the Committee and all
          deferrals shall be made on a form provided a grantee for this
          purpose.
 
9.   Agreement with Grantees
 
   Each grantee who receives a Grant under the Plan shall enter into an
agreement with the Corporation which shall contain such provisions, consistent
with the provisions of the Plan, as may be established from time to time by
the Committee and shall constitute that grantee's acknowledgement and
acceptance of the terms of the Plan and the Committee's authority and
discretion.
 
10.  Transferability of Grants
 
     (a)  Nontransferability of Grants. Only a grantee or his or her
          authorized legal representative may exercise rights under a Grant.
          Such persons may not transfer those rights except by will or by the
          laws of descent and distribution or, with respect to Grants other
          then incentive stock options, if permitted in any specific case by
          the Committee in their sole discretion, pursuant to a domestic
          relations order as defined under the Code or Title I of ERISA or the
          rules thereunder. When a grantee dies, the personal representative
          or other person entitled to succeed to the rights of the grantee
          ("Successor Grantee") may exercise such rights. A Successor Grantee
          must furnish proof satisfactory to the Corporation of his or her
          right to receive the Grant under the grantee's will or under the
          applicable laws of descent and distribution.
 
     (b)  Transfer of Nonqualified Stock Options. Notwithstanding the
          foregoing, the Committee may provide, in the Agreement, that a
          grantee may transfer nonqualified stock options to family members,
          one or more trusts for the benefit of family members, or one or more
          partnerships of which family members are the only partners,
          according to such terms as the Committee may determine; provided
          that the grantee receives no consideration for the transfer of an
          option and the transferred option shall continue
 
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<PAGE>
          to be subject to the same terms and conditions as were applicable to
          the option immediately before the transfer.
 
11. Funding of the Plan
 
   This Plan shall be unfunded. The Corporation shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. Subject to Section
8(e), in no event shall interest be paid or accrued on any Grant, including
unpaid installments of Grants.
 
12. Rights of Grantees
 
   Nothing in this Plan shall entitle any grantee or other person to any claim
or right to receive a Grant under this Plan or to any of the rights and
privileges of, a shareholder of the Corporation in respect of any shares
related to any Grant or purchasable upon the exercise of any option, in whole
or in part, unless and until certificates for such shares have been issued.
Notwithstanding the foregoing, a grantee who receives a grant of restricted
stock shall have all rights of a shareholder, except as set forth in Section
7(d), during the Restriction Period, including the right to vote and receive
dividends. Neither this Plan nor any action taken hereunder shall be construed
as giving any grantee any rights to be retained in the employ of the
Corporation, to be retained as a consultant by the Corporation or to be
retained as a Non-employee Director by the Corporation.
 
13. Withholding of Taxes
 
   The Corporation shall have the right to deduct from all Grants paid in cash
any federal, state or local taxes required by law to be withheld with respect
to such cash awards. The grantee or other person receiving such shares shall
be required to pay to the Corporation the amount of any such taxes which the
Corporation is required to withhold with respect to such Grants. With respect
to Grants of restricted stock or nonqualified stock options, the Corporation
shall have the right to require that the grantee make such provision, or
furnish the Corporation such authorization as may be necessary or desirable so
that the Corporation may satisfy its obligation, under applicable income tax
laws, to withhold for income or other taxes due upon or incident to such
restricted stock or the exercise of such nonqualified stock options.
 
   The Committee may adopt such rules, forms and procedures as it considers
necessary or desirable to implement such withholding procedures, which rules,
forms and procedures shall be binding upon all grantees, and which shall be
applied uniformly to all grantees similarly situated.
 
14. Listing and Registration
 
   Each Grant shall be subject to the requirement that, if at any time the
Committee shall determine in its discretion that the listing, registration or
qualification of the Grant or the shares subject to the Grant upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, such Grant or the issue or purchase of
shares thereunder, no such Grant may be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
 
 
                                      C-10
 
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15. Adjustment of and Changes in Common Stock of the Corporation.
 
   In the event of a reorganization, recapitalization, change of shares, stock
split, spin-off, stock dividend, reclassification, subdivision or combination
of shares, merger, consolidation, rights offering, or any other change in the
corporate structure or shares of the Corporation, the Committee may make such
adjustment as it deems appropriate in the number and kind of shares authorized
by the Plan, in the number and kind of shares covered by Grants made under the
Plan, in the purchase prices of outstanding options or the terms and
conditions applicable to dividend equivalents. Any adjustment determined by
the Committee shall be final, binding and conclusive.
 
16. Change of Control of the Corporation
 
   As used herein, the following defined terms shall have the meanings
described in this Section:
 
     (a)  "Affiliate" and "Associate" shall have the respective meanings
          ascribed to such terms in Rule 12b-2 of the General Rules and
          Regulations under the Securities Exchange Act of 1934, as amended
          (the "Exchange Act").
 
     (b)  A Person shall be deemed the "Beneficial Owner" of any securities:
          (i) that such Person or any of such Person's Affiliates or
          Associates, directly or indirectly, has the right to acquire
          (whether such right is exercisable immediately or only after the
          passage of time) pursuant to any agreement, arrangement or
          understanding (whether or not in writing) or upon the exercise of
          conversion rights, exchange rights, rights, warrants or options, or
          otherwise; provided, however, that a Person shall not be deemed the
          "Beneficial Owner" of securities tendered pursuant to a tender or
          exchange offer made by such Person or any of such Person's
          Affiliates or Associates until such tendered securities are accepted
          for payment, purchase or exchange; (ii) that such Person or any of
          such Person's Affiliates or Associates, directly or indirectly, has
          the right to vote or dispose of or has "beneficial ownership" of (as
          determined pursuant to Rule 13d-3 of the General Rules and
          Regulations under the Exchange Act), including without limitation
          pursuant to any agreement, arrangement or understanding, whether or
          not in writing; provided, however, that a Person shall not be deemed
          the "Beneficial Owner" of any security under this clause (ii) as a
          result of an oral or written agreement, arrangement or understanding
          to vote such security if such agreement, arrangement or
          understanding (A) arises solely from a revocable proxy given in
          response to a public proxy or consent solicitation made pursuant to,
          and in accordance with, the applicable provisions of the General
          Rules and Regulations under the Exchange Act, and (B) is not then
          reportable by such Person on Schedule 13D under the Exchange Act (or
          any comparable or successor report); or (iii) that are beneficially
          owned, directly or indirectly, by any other Person (or any Affiliate
          or Associate thereof) with which such Person (or any of such
          Person's Affiliates or Associates) has any agreement, arrangement or
          understanding (whether or not in writing) for the purpose of
          acquiring, holding, voting (except pursuant to a revocable proxy as
          described in the proviso to clause (ii) above) or disposing of any
          voting securities of the Corporation; provided, however, that
          nothing in this subsection (b) shall cause a Person engaged in
          business as an underwriter of securities to be the "Beneficial
          Owner" of any securities acquired through such Person's
          participation in good faith in a firm commitment underwriting until
          the expiration of forty days after the date of such acquisition.
 
 
                                      C-11
 
<PAGE>
     (c)  "Change of Control" shall mean:
 
          (i)   any Person (including any individual, firm, corporation,
                partnership or other entity except the Corporation, any
                subsidiary of the Corporation, any employee benefit plan of the
                Corporation or of any subsidiary, or any Person or entity
                organized, appointed or established by the Corporation for or
                pursuant to the terms of any such employee benefit plan),
                together with all Affiliates and Associates of such Person,
                shall become the Beneficial Owner in the aggregate of 20% or
                more of the Common Stock of the Corporation then outstanding;
 
          (ii)  during any twenty-four month period, individuals who at the
                beginning of such period constitute the Board cease for any
                reason to constitute a majority thereof, unless the election, or
                the nomination for election by the Corporation's shareholders,
                of at least seventy-five percent of the directors who were not
                directors at the beginning of such period was approved by a vote
                of at least seventy-five percent of the directors in office at
                the time of such election or nomination who were directors at
                the beginning of such period; or
 
          (iii) there occurs a sale of 50% or more of the aggregate assets or
                earning power of the Corporation and its subsidiaries, or its
                liquidation is approved by a majority of its shareholders or the
                Corporation is merged into or is merged with an unrelated entity
                such that following the merger the shareholders of the
                Corporation no longer own more than 50% of the resultant entity.
 
   Notwithstanding anything in this subsection (c) to the contrary, a Change of
Control shall not be deemed to have taken place under clause (c)(i) above if
(i) such Person becomes the beneficial owner in the aggregate of 20% or more
of the Common Stock of the Corporation then outstanding as a result, in the
determination of a majority of those members of the Board of Directors of the
Corporation in office prior to the acquisition, of an inadvertent acquisition
by such Person if such Person, as soon as practicable, divests itself of a
sufficient amount of its Common Stock so that it no longer owns 20% or more of
the Common Stock then outstanding, or (ii) such Person becomes the beneficial
owner in the aggregate of 20% or more of the common stock of Corporation
outstanding as a result of an acquisition of common stock by the Corporation
which, by reducing the number of common stock outstanding, increases the
proportionate number of shares of common stock beneficially owned by such
Person to 20% or more of the shares of common stock then outstanding;
provided, however that if a Person shall become the beneficial owner of 20% or
more of the shares of common stock then outstanding by reason of common stock
purchased by the Corporation and shall, after such share purchases by the
Corporation become the beneficial owner of any additional shares of common
stock, then the exemption set forth in this clause shall be inapplicable.
 
17.  Amendment and Termination
 
     (a)  The Plan may be amended by the Board of Directors of the Corporation
          as it shall deem advisable to ensure such qualification and conform
          to any change in the law or regulations applicable thereto,
          including such new regulations as may be enacted pertaining to the
          tax treatment of incentive stock options to be granted under this
          Plan, or in any other respect that the Board may deem to be in the
          best interest of the Corporation; provided, however, that the Board
          may not amend the Plan, without the
 
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<PAGE>
          authorization and approval of the shareholders of this Corporation,
          if such approval is required by section 422 of the Code or section
          162(m) of the Code.
 
          The Board of Directors shall not amend the Plan if the amendment
          would cause the Plan or the Grant or exercise of an incentive stock
          option under the Plan to fail to comply with the requirements of
          section 422 of the Code including, without limitation, a reduction
          of the option price set forth in Section 6(a) or an extension of the
          period during which an incentive stock option may be exercised as
          set forth in Section 6(b).
 
     (b)  The Board of Directors of the Corporation may, in its discretion,
          terminate, or fix a date for the termination of, the Plan. Unless
          previously terminated, the Plan shall terminate on March 17, 2014
          and no Grants shall be made under the Plan after such date.
 
     (c)  A termination or amendment of the Plan that occurs after a Grant is
          made shall not result in the termination or amendment of the Grant
          unless the grantee consents or unless the Committee acts under
          Section 18. The termination of the Plan shall not impair the power
          and authority of the Committee with respect to an outstanding Grant.
          Whether or not the Plan has terminated, an outstanding Grant may be
          terminated or amended under this Section 17 or may be amended by
          agreement of the Corporation and the grantee consistent with the
          Plan.
 
18.  Compliance with Law
 
   The Plan, the exercise of Grants and the obligations of the Corporation to
issue or transfer shares of Common Stock under Grants shall be subject to all
applicable laws, including any applicable federal or Pennsylvania state law,
and to approvals by a governmental or regulatory agency as may be required.
With respect to persons subject to Section 16 of the Exchange Act, it is the
intent of the Corporation that the Plan and all transactions under the Plan
comply with all applicable conditions of Rule 16b-3 or its successors under
the Exchange Act. In addition, it is the intent of the Corporation that the
Plan and applicable Grants of stock options under the Plan comply with the
applicable provisions of sections 162(m) and 422 of the Code. The Committee
may revoke any Grant if it is contrary to law or modify a Grant to bring it
into compliance with any valid and mandatory government regulation. The
Committee may also adopt rules regarding the withholding of taxes on payments
to grantees. The Committee may, in its sole discretion, agree to limit its
authority under this Section.
 
19.  Effective Date of the Plan
 
   The Plan shall be effective on March 18, 2004, but subject to the approval
of the Corporation's stockholders at the May 20, 2004 meeting of the
Corporation's stockholders or any resumption thereof.
 
 
                                      C-13