Exhibit 4(a)
ESSEX GAS COMPANY
1994 STOCK OPTION PLAN
ESSEX 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 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 the Board of Directors of the Corporation or
any committee appointed by such Board (such body administering the plan shall be
known as the "Committee").
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
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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. As a result of the acquisition of the Corporation by Eastern Enterprises
("Eastern") on September 30, 1998, all issued and outstanding options issued
under this Plan as of such date will be exercisable only for shares of common
stock, $1.00 par value per share, of Eastern ("Eastern Common Stock") in
accordance with Section 7.12 of the Agreement and Plan of Merger, dated as of
December 19, 1997, by and between Eastern and the Corporation. No additional
options shall be granted under this Plan after September 30, 1998. All
references to Common Stock shall mean Eastern Common Stock after September 30,
1998. All references to the Corporation shall be interpreted by the Committee to
mean Eastern as the Committee shall, in its sole discretion, deem necessary to
the administration of the Plan after September 30, 1998.
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
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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).
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(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 Eastern 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.
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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 opinion price for each incentive stock option
granted to a 10% Shareholder shall not be less than
10% 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).
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(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");
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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
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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
members 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. Notwithstanding 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
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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
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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.
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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 bewithheld 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
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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.
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