EXHIBIT INDEX

                                    EXHIBIT 5

               OPINION AND CONSENT OF MORGAN, LEWIS & BOCKIUS LLP



June 22, 2004

Aqua America, Inc.
762 W. Lancaster Avenue
Bryn Mawr, PA 19010-3489

Re: Aqua America, Inc. - Registration Statement on Form S-8, filed June 23, 2004

Ladies and Gentlemen:

We have acted as counsel to Aqua America, Inc., a Pennsylvania corporation (the
"Company"), in connection with the filing of the referenced Registration
Statement (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), with the Securities and Exchange Commission (the "SEC").
The Registration Statement relates to 3,675,000 shares of common stock, par
value $0.50 per share ("Common Stock"), of the Company issuable under the
Company's 2004 Equity Compensation Plan (the "Shares").

In connection with this opinion letter, we have examined the Registration
Statement and originals, or copies certified or otherwise identified to our
satisfaction, of the Certificate of Incorporation and Bylaws of the Company and
such other documents, records and other instruments as we have deemed
appropriate for purposes of the opinion set forth herein.

We have assumed the genuineness of all signatures, the legal capacity of all
natural persons, the authenticity of the documents submitted to us as originals,
the conformity with the originals of all documents submitted to us as certified,
facsimile or photostatic copies and the authenticity of the originals of all
documents submitted to us as copies.

Based upon the foregoing, we are of the opinion that the Shares have been duly
authorized by the Company and, when issued and sold by the Company and delivered
by the Company against receipt of the purchase price therefor, in the manner
contemplated by the Company's 2004 Equity Compensation Plan, will be validly
issued, fully paid and non-assessable.

The opinions expressed herein are limited to the Pennsylvania Business
Corporation Law.

We hereby consent to the use of this opinion as Exhibit 5 of the Registration
Statement. In giving such consent, we do not hereby admit that we are acting
within the category of persons whose consent is required under Section 7 of the
Act or the rules or regulations of the SEC thereunder.

Very truly yours,

MORGAN LEWIS & BOCKIUS LLP

                                  EXHIBIT 23.1

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 28, 2004 relating to the
financial statements, which appears in the 2003 Annual Report to Shareholders of
Aqua America, Inc., which is incorporated by reference in the Aqua America, Inc.
Annual Report on Form 10-K for the year ended December 31, 2003.


/s/ PricewaterhouseCoopers LLP

Philadelphia, PA
June 23, 2004

                                  EXHIBIT 99.1

                                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.

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 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 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 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 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 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 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.

         (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 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.

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) "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 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.