STOCK OPTION GRANT
UNDER THE PENNSYLVANIA ENTERPRISES, INC.
STOCK INCENTIVE PLAN
Option No.: 98-093
THIS AGREEMENT dated as of May 6, 1998 (the "Date of Grant") is made by and
between PENNSYLVANIA ENTERPRISES, INC. (the "Company") and Xxxxxx X. Xxxxx (the
"Optionee").
WHEREAS, the Company has adopted the Pennsylvania Enterprises, Inc. Stock
Incentive Plan (the "Plan"); and
WHEREAS, the purpose of the Plan is to enable the Company and its
subsidiaries to attract and retain key employees; and
WHEREAS, the Stock Option Committee of the Company's Board of Directors
(the "Committee") has determined that it would be in the best interests of the
Company to enter into this Agreement.
NOW, THEREFORE, the Company hereby grants an option (the "Option") under
the Plan to the Optionee on the following terms and conditions:
1. AMOUNT OF STOCK SUBJECT TO OPTION:
The Company hereby grants to the Optionee, subject to the terms and
conditions set forth in this Agreement, the Option to purchase 60,000 shares of
authorized and unissued common stock of the Company (without nominal or par
value, with a stated value of $5.00 per share) or shares reacquired by the
Company and held in treasury (the "Stock"), which Stock is to be issued by the
Company upon the exercise of the Option as hereinafter set forth.
2. PURCHASE PRICE:
The purchase price per share of Stock subject to the Option shall be
$23.9375 per share, the fair market value of a share of Stock on the Date of
Grant, as determined by the Committee.
3. TYPE OF OPTION:
The Option is intended to be a Non-Qualified Stock Option that is not an
Incentive Stock Option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended.
4. EARN-OUT OF OPTION:
(a) The Option shall be exercisable with respect to 30,000 shares (50% of
the shares subject to the Option) on May 1, 2002, but only if (i) PEI earnings
per share goal for 2001, as determined by the Compensation Committee of the
Board of Directors of the Company and approved by the Board of Directors of the
Company, is met and (ii) Optionee satisfies the employment condition of
paragraph 4(c) until such date except in the event of a Change of Control (as
defined in the Incentive Plan), in which case such options shall become fully
exercisable.
(b) In addition to the portion of the Option which shall be exercisable
pursuant to paragraph 4(a) hereof, the Option shall be exercisable with respect
to 30,000 shares (50% of the shares subject to the Option) on May 1, 2003, but
only if (i) PEI earnings per share goal for 2002, as set by the Compensation
Committee of the Board of Directors of the Company, is met and (ii) Optionee
satisfies the employment condition of paragraph 4(c) until such date except in
the event of a Change of Control (as defined in the Incentive Plan), in which
case such options shall become fully exercisable.
(c) In order to satisfy the employment condition of this paragraph 4(c),
Optionee must remain employed by the Company or a Related Company (as defined
below) in at least the same or a similarly responsible position until the time
specified in paragraph 4(a) or 4(b), respectively. For purposes of this
Agreement, the term Related Company means a corporation, partnership, joint
venture or other entity in which the Company owns, directly or indirectly, at
least a 50% beneficial ownership interest.
(d) For purposes of this Section 4 the Committee reserves the right to
review and adjust, as it deems appropriate, earnings per share results for
one-time, non-operating gains or losses, such as those resulting from accounting
changes, asset sales, early retirement/severance programs, other extraordinary
expenses or transactions, and also for temperature variations from normal degree
days.
(e) The Committee shall determine, in its discretion, the level of earnings
per share which has been attained and the extent to which the Optionee has
satisfied the conditions set forth in paragraph 4(c). Notwithstanding the
foregoing provisions of this Section 4, the Committee may, in its discretion,
declare all or any portion of the Option to be exercisable.
5. PERIOD OF OPTION:
The Option is granted as of the Date of Grant. The Option shall expire at
the earliest to occur of (a) three months after termination of the Optionee's
Employment (as defined below) for any reason except death, disability, or
retirement; (b) one year after termination of the Optionee's Employment by
reason of death or disability; (c) five years after termination of the
Optionee's Employment by reason of retirement, on or after age 55, under the
Employees' Retirement Plan of Pennsylvania Enterprises, Inc.; or (d) May 5, 2008
(ten years after the Date of Grant). In no event shall the term of the Option be
greater than ten years. For purposes of this Agreement, "Employment" shall mean
employment with the Company or any Related Company.
6. EXERCISE OF OPTION:
(a) To the extent the Option has become exercisable pursuant to Section 4,
the Option may be exercised in whole or in part with respect to full shares (and
no fractional shares shall be issued) until it expires in accordance with
Section 5.
(b) In order to exercise the Option or any part thereof, the Optionee shall
give notice in writing to the Company at its headquarters address (on a form
acceptable to the Company) of the Optionee's intention to purchase all or part
of the shares subject to the Option, and in said notice the Optionee shall set
forth the number of shares as to which he/she desires to exercise his/her
Option. The notice must be accompanied by payment in full of the exercise price
for such shares. Such payment may be made in cash, through the delivery to the
Company of full shares of Stock which have been owned by the Optionee for at
least six months having a value equal to the total exercise price of the portion
of the Option so exercised, through a combination of cash and such shares of
Stock, or in such other manner as may be permitted by the Committee. Any shares
of Stock so delivered shall be valued at the average of the high and low trading
prices for the day prior to the date on which the Option is exercised. The
Option will be deemed exercised on the date a proper notice of exercise
(accompanied as described above) is hand delivered, or, if mailed, postmarked.
(c) The Optionee shall, no later than the date of exercise of the Option,
make payment to the Company in cash or its equivalent of any federal, state,
local or other taxes of any kind required by law to be withheld with respect to
the Option. The obligations of the Company under the Plan and this Option shall
be conditional on such payment, and the Company (and, where applicable, any
Related Company) shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the Optionee.
7. NON-TRANSFERABILITY OF OPTION:
The Option is not transferable otherwise than by will or by the laws of
descent and distribution. To the extent the Option is exercisable at the time of
the Optionee's death, it may be exercised by the executor or administrator of
the Optionee's estate or by the person designated by will or entitled by the
laws of descent and distribution, upon such death, to any remaining rights
arising out of the Option.
8. CHANGE OF CONTROL:
Notwithstanding the provisions of Section 4, the Option shall become fully
exercisable upon the occurrence of a Change of Control (as defined in the Plan).
9. CHANGE IN CAPITAL:
If prior to the expiration of the Option, there shall be any changes in the
Stock structure of the Company by reason of the declaration of stock dividends,
recapitalization resulting in stock split-ups or combinations or exchanges of
shares by reason of merger, consolidation, or by any other means, then the
number of shares subject to the Option and the exercise price per share of Stock
shall be equitably and appropriately adjusted as the Committee in its sole
discretion shall deem just and reasonable in light of all the circumstances
pertaining thereto.
10. RIGHT TO TERMINATE EMPLOYMENT:
The Option shall not confer upon the Optionee any right to continue in the
employ of the Company or a Related Company or interfere in any way with the
right of the Company or any Related Company to terminate the Optionee's
employment at any time, nor shall it interfere in any way with the right of the
Optionee to terminate the Optionee's employment.
11. REGISTRATION AND OTHER REQUIREMENTS:
The Option is subject to the requirement that, if at any time the Committee
shall determine that (a) the listing, registration or qualification of the Stock
subject or related to the Option upon any securities exchange or under any state
or federal law, (b) the consent or approval of any governmental regulatory body
or (c) an agreement by the Optionee with respect to the disposition of Stock is
necessary or desirable (in connection with any requirement or interpretation of
any federal or state securities law, rule or regulation) as a condition of, or
in connection with, the issuance, purchase or delivery of Stock under the
Option, the Option shall not be exercised, in whole or in part, unless such
listing, registration, qualification, consent, approval or agreement shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
12. SUBJECT TO THE PLAN:
The Option evidenced by the Agreement and the exercise thereof are subject
to the terms and conditions of the Plan, which are incorporated herein by
reference and made a part hereof. In addition, the Option is subject to any
rules and regulations promulgated by the Committee.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto:
PENNSYLVANIA ENTERPRISES, INC.
By: ______________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman
Accepted and agreed to as of the Date of Grant:
____________________________
Optionee
