EXHIBIT 10-1
Form of Stock Option Agreement with
certain officers of the Company, dated
June 20, 1997
7
STOCK OPTION AGREEMENT
UNDER THE PENNSYLVANIA ENTERPRISES, INC.
STOCK INCENTIVE PLAN
Option No.: __________
THIS AGREEMENT dated as of June 20, 1997 (the "Date of
Grant") is made by and between PENNSYLVANIA ENTERPRISES, INC.
(the "Company") and ____________ (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 Four Thousand (4,000) 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 twenty-five dollars and seventy-five cents ($25.75), 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:
The Option will become exercisable on the first anniversary
of the Date of Grant to the extent set forth below, depending on
the conditions set forth in this Section 4 that have been
satisfied. The Committee will notify the Optionee, prior to the
first anniversary of the Date of Grant, of the number of shares
of Stock as to which the Option will be exercisable in accordance
with this Section 4.
(a) The maximum number of shares with respect to which the
option shall be exercisable shall be determined in accordance
with the provisions of this Section 4(a), subject to the
remaining provisions of this Section 4.
(1) If PEI earnings per share for 1997 reaches the
outstanding level of $[ ] per share ([ ]% of budget), the
Option will be exercisable with respect to 1,000 shares, and
will be exercisable with respect to an additional 600 shares
for each of the performance goals set forth on Exhibit A
(the "Performance Goals") which is satisfied (for a maximum
total of 4,000 shares). (Exhibit B illustrates this
relationship.)
(2) If PEI earnings per share for 1997 reaches the
target level of $[ ] per share ([ ]% of budget) but does not
reach the outstanding level, the Option will be exercisable
with respect to 750 shares, and will be exercisable with
respect to an additional 450 shares for each of the
Performance Goals which is satisfied (for a maximum total of
3,000 shares).
(3) If PEI earnings per share for 1997 reaches the
threshold level of $[ ] per share ([ ]% of budget) but does
not reach the target level, the Option will be exercisable
with respect to 500 shares, and will be exercisable with
respect to an additional 300 shares for each of the
Performance Goals which is satisfied (for a maximum total of
2,000 shares).
(4) If PEI earnings per share for 1997 does not reach
the threshold level of $[ ] per share, no portion of the
Option shall be exercisable.
(5) For purposes of Section 4(a) 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, one-time asset sales, early
retirement/severance programs, other extraordinary expenses
or transactions, and also for temperature variations from
normal degree days.
(b) Notwithstanding the provisions of Section 4(a), no
portion of the Option will be exercisable unless the Optionee (i)
remains employed by the Company or a Related Company (as defined
below) until the first anniversary of the Date of Grant in at
least the same or a similarly responsible position and (ii)
achieves at least a "meets standards" personnel performance
rating on all performance evaluations of Optionee made during
such period. 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.
(c) The Compensation Committee shall determine, in its
discretion, the level of earnings per share which has been
attained, the extent to which the Performance Goals have been
satisfied, and the extent to which the Optionee has satisfied the
conditions set forth in paragraph 4(b). 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) June 20, 2007 (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 in such manner as may
be permitted by the Company. 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, or through a combination of cash and such
shares of Stock. 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 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: Xxxxxx X. Xxxxx
Title: President and CEO
Accepted and agreed to as
of the Date of Grant:
__________________________
Optionee
Exhibit A
Performance Goals
With respect to fiscal 1997:
[Listing of Goals]
Exhibit B
Options that become exercisable based upon achievement of
earnings and performance goals as set forth in Section 4(a) of
the Stock Option Agreement.
Goals Satisfied
PEI Earnings 5 4 3 2 1 0
Equal to or 4,000 3,400 2,800 2,200 1,600 1,000
Greater Than
Outstanding
Equal to or 3,000 2,550 2,100 1,650 1,200 750
Greater Than
Target but
Less Than
Outstanding
Equal to or 2,000 1,700 1,400 1,100 800 500
Greater Than
Threshold but
Less Than
Target
Less Than 0 0 0 0 0 0
Threshold
