ESSEX COUNTY GAS COMPANY
1994 STOCK OPTION PLAN
1. PURPOSE
This 1994 Stock Option Plan (the "Plan") is intended as an incentive to, and
to encourage stock ownership by, key personnel of Essex County Gas Company
(the "Corporation") and any subsidiary corporations (the "Subsidiaries") as
that term is defined in Section 424 of the Internal Revenue Code of 1986, as
amended (the "Code"), so that they may acquire or increase their proprietary
interest in the success of the Corporation and its Subsidiaries, and to
encourage them to remain in the employ of the Corporation or of the
Subsidiaries.
2. ADMINISTRATION
The plan shall be administered by a committee appointed by the Board of
Directors of the Corporation (the "Committee"). The Committee shall consist of
three or more members of the Board each of whom shall be both a member of the
Board who is not eligible to receive any option under the Plan and a
"disinterested person", as such term is used in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") promulgated
by the Securities and Exchange Commission. The Board may from time to time
appoint members of the Committee in substitution for members previously
appointed and may fill vacancies, however caused, in the Committee. The
Committee may select one of its members as its Chairman and shall hold its
meetings at such times and places as it may determine. A majority of the
members shall constitute a quorum. All determinations of the Committee shall
be made by a majority of its members present and voting. Any decision or
determination reduced to writing signed by all of the members shall be fully
as effective as if it had been made by a majority vote at a meeting duly
called and held. The Committee may appoint a Secretary, shall keep minutes of
its meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable.
Subject to the express provisions of the Plan, the Committee shall have
complete authority to:
(a) interpret the Plan;
(b) prescribe, amend and rescind rules and regulations relating to the Plan;
(c) determine the individuals to whom, and the time or times at which,
options shall be granted;
(d) determine the number of shares to be subject to
each option and the terms and provisions of each option Agreement;
(e) subject to the limitations set forth in Sections 5(g), 5(h) and 5(i),
waive or modify at any time, either before or after an option is granted, any
condition or restriction with respect to the exercise of the option imposed by
Sections 5 or 6 in such circumstances as the Committee in its sole discretion
deems appropriate; and
(f) make all determinations not specifically set forth in (a) through (e)
above which it considers necessary or desirable for the administration of the
Plan.
3. ELIGIBILITY
The persons who shall be eligible to receive options shall be key exempt
employees of the Corporation, or its Subsidiaries, including employees who may
also be officers or directors. Persons who hold options (the "Optionees") may
hold more than one option, but only on the terms and subject to the
restrictions hereinafter set forth. Employees owning more than 10% of the
total voting power of the Corporation shall be eligible to receive options
subject to the special restrictions detailed in Section 5(i).
4. SHARES SUBJECT TO THE PLAN
The aggregate number of shares of the Corporation's common stock, with $2.50
par value ("Common Stock") which may be issued or sold pursuant to the
exercise of options granted under the Plan shall not exceed 100,000 subject to
adjustment as provided in Section 5(j). The shares issued upon exercise of
options under the Plan may be authorized and unissued shares or shares held by
the Corporation in its treasury. In the event that any outstanding option
under the Plan for any reason expires or is terminated, the shares of Common
Stock allocable to the unexercised portion of such option may again be made
subject to an option under the Plan. The aggregate number of shares of Common
Stock as to which options may be granted during any one calendar year to any
one individual shall not exceed 25,000.
5. TERMS AND CONDITIONS OF OPTIONS
Stock options granted pursuant to the Plan shall be evidenced by agreements
(the "Agreements") between the Corporation and each Optionee in such form as
the Committee shall from time to time approve, which Agreements shall comply
with, and be subject to, the following terms and conditions:
(a) Optionee's Agreement
This Plan shall not impose upon the Corporation or any of the Subsidiaries any
obligation to retain the Optionee in the employ of such entities for any
period.
(b) Grants
Each option shall be designated as an incentive stock option within the
meaning of Section 422 of the Code or as a nonqualified stock option (i.e. a
stock option which is not an incentive stock option). The number of shares of
Common Stock that shall be available for incentive stock options granted under
the plan is 100,000, subject to adjustment as provided in Section 5(j).
(c) Number of Shares
Each option shall state the number of shares of Common Stock to which it
pertains.
(d) Option Price
Each option shall state the option price, which shall be not less than 100% of
the Fair Market Value of a share of the Corporation's Common Stock on the date
the option is granted. For purposes of the Plan, "Fair Market Value" as of a
given date means the mean between the bid and the asked price for the Common
Stock at the close of trading for such given date or if no sale is reported
for such date, on the next preceding date for which a sale is reported.
If the Common Stock is listed on a national securities exchange the "Fair
Market Value" as of a given date means, the closing price of the Common Stock
on the Composite Tape for such given date or if no sale is reported for such
date, on the next preceding date for which a sale is reported.
Notwithstanding any provision of the Plan to the contrary, no determination
made with respect to the Fair Market Value of Common Stock subject to an
Incentive Stock Option shall be inconsistent with Section 422 of the Code or
regulations thereunder.
(e) Limitation on Exercise
Unless the Agreement provides otherwise, an option shall be exercisable in
whole or in part. Stock options issued in the form of incentive stock options
shall comply with Section 422 of the Code. Accordingly, the aggregate Fair
Market Value (determined at the time the option was granted) of the Common
Stock with respect to which incentive stock options are exercisable for the
first time by an Optionee during any calendar year (under this Plan or any
other plan of the Corporation or any of its Subsidiaries) shall not exceed
$100,000 (or such other limit as may be required by the Code).
(f) Medium and Time of Payment
Each option shall provide that the purchase price of the shares as to which an
option shall be exercised shall be paid to the Corporation at the time of
exercise either in cash or in Common Stock already owned by the Optionee
having a total Fair Market Value equal to the purchase price, or a combination
of cash and Common Stock having a total Fair Market Value equal to the
purchase price. The Committee shall establish appropriate methods for
accepting Common Stock and may impose such conditions as it deems appropriate
on the use of such Common Stock to exercise a stock option.
In the discretion of the Committee, payment for any shares subject to an
option may also be made by delivering a properly executed exercise notice to
the Corporation, together with a copy of irrevocable instructions to a broker
to deliver promptly to the Corporation the amount of sale or loan proceeds to
pay the purchase price. To facilitate the foregoing, the Corporation may enter
into agreements for coordinated procedures with one or more brokerage firms.
(g) Period of Option
Each option shall be exercisable during such period ending not later than ten
years from the date it is granted as the Committee may determine.
(h) Time of Exercise
Each option shall become exercisable in such cumulative annual installments as
the Committee shall determine; commencing, except as provided in Section 5(k),
twelve months after the date of grant and terminating at the end of the period
specified pursuant to Section 5(g).
(i) Restrictions for Certain Shareholders
Notwithstanding anything contained herein to the contrary, the following
restrictions shall be applied to incentive stock options granted to employees
who own more than 10% of the total combined voting power of all classes of
stock of the Corporation or its parent or any Subsidiary at the time the
option is granted (a "10% Shareholder").
(1) The option price for each incentive stock option granted to a 10%
Shareholder shall not be less than 110% of the Fair Market Value of the Common
Stock on the date the option is granted.
(2) Each incentive stock option granted to a 10% Shareholder shall be
exercisable during such period ending not later than five years from the date
it is granted as the Committee may determine.
(3) Each incentive stock option granted to a 10% Shareholder shall become
exercisable in such cumulative annual installments as the Committee shall
determine; commencing, except as provided in Section 5(k), twelve months after
the date of the grant and terminating at the end of the period specified
pursuant to Section 5(i)(2).
(j) Recapitalization
Notwithstanding any other provisions in the Plan, the Committee shall adjust,
or the Agreements entered into hereunder may contain such provisions as the
Committee shall determine to be appropriate for the adjustment of, the number,
price and class of shares subject to each outstanding option, in the event of
changes in the outstanding Common Stock by reason of stock dividends,
recapitalization, mergers, consolidations, split-ups, combinations or
exchanges of shares and the like.
In the event of a change in the Common Stock of the Corporation as presently
constituted which is limited to a change of all of its authorized Common Stock
into the same number of shares without par value, the shares resulting from
any such change shall be deemed to be the Common Stock within the meaning of
the Plan.
Such adjustments shall be made by the Committee, whose determination in that
respect shall be final, binding and conclusive, provided that each incentive
stock option granted pursuant to this Plan shall not be adjusted in a manner
that causes the option to fail to continue to qualify as an incentive stock
option within the meaning of Section 422 of the Code.
The grant of an option pursuant to the Plan shall not affect in any way the
right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part
of its business or assets.
(k) Change of Control
In order to maintain the Optionees' rights in the event of a Change of Control
of the Corporation, as hereinafter defined, the commencement of any time
periods relating to the exercise of such options shall be accelerated to the
date of Change of Control.
A "Change of Control" shall mean:
(a) the acquisition by any individual, entity or group (within the meaning of
Section 13 (d) (3) or 14 (d) (2) of the "Exchange Act") (A "Person") of
beneficial ownership (within the meaning of Rule 13d- 3 promulgated under the
Exchange Act) of 20% or more of the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote generally in
the election of directors (the "Outstanding Corporation Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Corporation, (ii) any acquisition by the Corporation, (iii)
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the Corporation
or (iv) any acquisition by any corporation pursuant to a transaction that
complies with clauses (i), (ii) and (iii) of subsection (c) below; or
(b) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Corporation's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) the consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Corporation
("Business Combination"); excluding, however, such a Business Combination
pursuant to which (i) all or substantially all of the individuals and entities
who were the beneficial owners of the Outstanding Corporation Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Corporation Voting Securities,
(ii) no Person (excluding any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding share of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority of the
member of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(d) approval by the shareholders of the Corporation of a complete liquidation
or dissolution of the Corporation.
(l) Change of Control Cash-Out
Notwithstanding any other provision of the Plan, during the 60-day period from
and after a Change of Control (the "Exercise Period"), unless the Committee
shall determine otherwise at the time of grant, an Optionee shall have the
right, whether or not the option is fully exercisable and in lieu of the
payment of the exercise price for the shares of Common Stock being purchased
under the option and by giving notice to the Corporation, to elect (within the
Exercise Period) to surrender all or part of the option to the Company and to
receive cash, within 30 days of such notice, in an amount equal to the amount
by which the Change of Control Price per share of Common Stock on the date of
such election shall exceed the exercise price per share of Stock under the
option (the "Spread") multiplied by the number of share of Common Stock
subject to the option as to which the right granted under this Section 5(l)
shall have been exercised; provided, however, that if the Change of Control
occurs within six months of the date of grant of a particular option held by
an Optionee who is an officer or director of the Corporation and is subject to
Section 16(b) of the Exchange Act no such election shall be made by such
Optionee with respect to such option prior to six months from the date of
grant. However, if the end of such 60-day period from and after a Change of
Control is within six months of the date of grant of an option held by an
Optionee who is an officer or director of the Corporation and is subject to
Section 16(b) of the Exchange Act, such option shall be canceled in exchange
for a cash payment to the Optionee, effected on the day which is six months
and one day after the date of grant of such option, equal to the Spread
multiplied by the number of shares of Stock granted under the option.
Notwhithstanding the foregoing, if any right granted pursuant to this Section
5(l) would make a Change of Control transaction ineligible for pooling of
interests accounting under APB No. 16 that but for this Section 5(l) would
otherwise be eligible for such accounting treatment, the Committee shall have
the ability to substitute for the cash payable pursuant this Section 5(l)
common stock of the entity surviving the Change of Control with a Fair Market
Value equal to the cash that would otherwise be payable hereunder.
"Change of Control Price" means the higher of (i) the highest reported sale
price of a share of Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national securities exchange on which such
share are listed or on NASDAQ, as applicable, during the 60- day period prior
to and including the date of a Change of Control and (ii) if the Change in
Control is the result of a tender or exchange offer or a Business Combination,
the highest price per share of Stock paid in such tender or exchange offer or
Business Combination; provided, however, that (x) in the case of an option
which (A) is held by an Optionee who is an officer or director of the
Corporation and is subject to Section 16 (b) of the Exchange Act and (B) was
granted within 240 days of the Change of Control, then the Change of Control
Price for such option shall be the Fair Market Value of the Stock on the date
such option is exercised or canceled and (y) in the case of incentive stock
options, the Change of Control Price shall be in all cases the Fair Market
Value of the Common Stock on the date such incentive stock option is
exercised. To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other non-cash
consideration, the value of such securities or other non-cash consideration
shall be determined in the sole discretion of the Board.
(m) Rights as a Stockholder
An Optionee shall have no rights as a stockholder with respect to any shares
covered by his option until the date of issuance of a stock certificate to him
for such shares. No adjustment shall be made for dividends (ordinary or
extraordinary whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in this Section 5.
(n) Other Provisions
The option Agreements authorized under the Plan shall contain such other
provisions, including, without limitation, restrictions upon the exercise of
the option, as the Committee shall deem advisable. Any such option Agreement
in respect of incentive stock options shall contain such limitations and
restrictions upon the exercise of the option as shall be necessary in order
that such option will be an "Incentive Stock Option" as defined in Section 422
of the Code or to conform to any change in the law.
6. TERMINATION OF EMPLOYMENT
(a) Notice of Termination
Except as provided in Sections 6(b) and 6(c) below, upon notice of termination
of an Optionee's employment with the Corporation or a Subsidiary, whether
given by the Optionee to the Corporation or Subsidiary, or by the Corporation
or Subsidiary to the Optionee, the Optionee may exercise all exercisable
options held by such Optionee on the date of termination, at any time, or from
time to time, prior to the earlier of the expiration date of the option or 3
months from the date of the Optionee's termination.
Notwithstanding the foregoing, options that are exercisable immediately
following a Change of Control shall remain exercisable following a termination
of the Optionee's employment until the earlier of the expiration date of the
option or seven months from the date of such termination.
(b) Death
When an Optionee's employment with the Corporation or a Subsidiary terminates
by reason of death, or in the event of the death of the Optionee within three
months after termination of employment with the Corporation or Subsidiary, the
Optionee's personal representatives, heirs or legatees, as the case may be,
shall be entitled to exercise all remaining unexpired options (without regard
to the twelve month and cumulative installment limitations set forth in
Sections 5(h) and 5(i)(3) above) held by the Optionee on the date of death, at
any time, or from time to time, prior to the earlier of the expiration date of
the option or two years from the date of the Optionee's death.
(c) Disability
If an Optionee's employment with the Corporation or a Subsidiary shall
terminate because of permanent disability as defined in Code Section 22(e)(3),
the Optionee may exercise all exercisable options held by such Optionee on the
date of termination, at any time, or from time to time, prior to the earlier
of the expiration date of the option or one year from the date of the
Optionee's termination.
(d) Leave of Absence
A leave of absence authorized by the Corporation shall not be deemed a
termination of employment to the extent permitted under applicable Internal
Revenue Code provisions or regulations adopted pursuant thereto; however, no
options may be exercised by an Optionee during such leave of absence before
the occurrence of a Change of Control.
7. NON-ASSIGNABILITY
Options granted under the Plan are not transferable otherwise than by will or
the laws of descent and distribution and during the Optionee's lifetime are
exercisable only by him.
8. GENERAL RESTRICTION
(a) Securities Laws and Regulations
No option granted hereunder shall be exercisable unless and until such time as
the Common Stock to which it relates is exempt, is the subject matter of an
exempt transaction, or is registered or otherwise duly qualified for sale
under all applicable federal and state securities laws and regulations.
(b) Taxes
It shall be a condition to performance of the Corporation's obligation to
issue or transfer shares upon exercise of options that the Optionee pay, or
make provision satisfactory to the Corporation for payment of, any taxes
(other than stock issue or transfer taxes) which the Corporation is obligated
to collect with respect to the issue or transfer of such shares upon such
exercise.
If an Optionee disposes of shares acquired pursuant to the exercise of an
incentive stock option in a disqualifying disposition within the time periods
identified in Section 422(a)(1) of the Code, such Optionee is required to
notify the Corporation of such disposition, provide information as to the date
of disposition, sale price, quantity disposed of and any other information
about such disposition which the Corporation may reasonably request, and pay
to the Corporation an amount sufficient to satisfy all federal, state and/or
local withholding tax requirements due as a result of such disposition. In
accordance with any applicable administrative guidelines it establishes, the
Committee may allow an Optionee to pay the amount of taxes required to be
withheld with respect to such disposition by withholding from amounts payable
to the Optionee under the Plan or from other compensation payable to the
Optionee, or by permitting the Optionee to deliver to the Corporation, shares
of Common Stock having a Fair Market Value equal to the amount of such
required withholding taxes.
9. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a period
of ten years from the date the Plan is adopted, or the date the Plan is
approved by the shareholders of the Corporation, whichever is earlier.
10. AMENDMENTS OF THE PLAN
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of
any Optionee under any outstanding option Agreement, without his consent, or
which, without the approval of the shareholders, would:
(a) Except as is provided in Section 5(j) of the Plan, increase the maximum
number of shares of Common Stock reserved for the purposes of the Plan or
reduce the minimum option price to less than 100% of the Fair Market Value of
the Common Stock on the date the option is granted;
(b) Change the class of employees eligible to receive options under the Plan;
(c) Extend the duration of the Plan; or
(d) Extend the period during which options may be exercised under the Plan.
11. APPROVAL OF SHAREHOLDERS AND
DIRECTORS
The Plan shall not take effect until approved by the affirmative vote of a
majority of the shares represented at the meeting of shareholders held to
consider such action. Such approval must occur within the period beginning
twelve months before and ending twelve months after the date the Plan is
adopted by the Board of Directors.
The Plan was adopted by the Board of Directors of the Corporation on June 7,
1994, and will be submitted to the shareholders of the Corporation on January
17, 1995.