EXHIBIT 10-2
Form of Stock Option Agreement with
certain non-employee directors of the
Company, dated June 20, 1997
3
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 pay a portion of the
compensation of the Company's non-employee directors in options
to purchase Common Stock of the Company; and
WHEREAS, the Company's Board of Directors (the "Board") 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 Two Thousand (2,000) 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 Board.
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 later of (i) the
first anniversary of the Date of Grant or (ii) the date of the
shareowner meeting to be held in 1998, to the extent set forth
below, depending on the conditions set forth in this Section 4
that have been satisfied. The Board will notify the Optionee,
prior to the date the Option becomes exercisable, 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 500 shares, and
will be exercisable with respect to an additional 300 shares
for each of the performance goals set forth on Exhibit A
(the "Performance Goals") which is satisfied (for a maximum
total of 2,000 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 375 shares, and will be exercisable with
respect to an additional 225 shares for each of the
Performance Goals which is satisfied (for a maximum total of
1,500 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 250 shares, and will be exercisable with
respect to an additional 150 shares for each of the
Performance Goals which is satisfied (for a maximum total of
1,000 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 Board 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
continues to serve on the Board until the Company's annual
meeting of shareowners held in 1998.
(c) The Board 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 whether the
Optionee has satisfied the conditions set forth in paragraph
4(b). Notwithstanding the foregoing provisions of this Section
4, the Board may, upon a determination that there were
extraordinary circumstances, 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) two years after
termination of the Optionee's service on the Board for any
reason; or (b) June 20, 2007 (ten years after the Date of Grant).
In no event shall the term of the Option be greater than ten
years.
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 which may be 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 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
Board 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
continued service as a Director of the Company.
11. REGISTRATION AND OTHER REQUIREMENTS:
The Option is subject to the requirement that, if at any
time the Board 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 Board.
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 Board.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto:
PENNSYLVANIA ENTERPRISES, INC.
By: ______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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 2,000 1,700 1,400 1,100 800 500
Greater Than
Outstanding
Equal to or 1,500 1,275 1,050 825 600 375
Greater Than
Target but
Less Than
Outstanding
Equal to or 1,000 850 700 550 400 250
Greater Than
Threshold but
Less Than
Target
Less Than 0 0 0 0 0 0
Threshold