EXHIBIT 10.29

AQUA AMERICA, INC
2004 EQUITY COMPENSATION PLAN
(as amended February 22, 2007)

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. Each of the members of the Committee 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
Corporation 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, subject to adjustment as provided in Section 15. 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:

 

 

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  (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 closing price 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
closing price 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
Corporation 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).

 

 

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  (c)  
Termination of Employment. Upon the termination of a grantee’s regular full-time
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 as a regular full-time employee 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 or a subsidiary.
whose employment with the Corporation or subsidiary 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 as a regular full-time employee 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 a grantee’s 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.

 

 

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  (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 by
the Committee (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 regular full-time 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.

 

 

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  (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 1,500 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

 

 

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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; (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.

 

 

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(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 with respect to 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 regular full-time
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 for the applicable Performance Period
exceeds the targets for such criteria established by the Committee .

  (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 for the applicable Performance Period is
less than the targets for such criteria established by the Committee.

 

 

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  (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 regular full-time
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 regular
full-time 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.

 

 

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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.

 

 

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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 will 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.

 

 

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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.

 

 

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  (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.

 

 

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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.

 

 

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