[COVER PAGE]
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /x/ Filed by a Party other than
the Registrant / /
Check the appropriate box:
/ /Preliminary Proxy Statement / /Confidential, for Use of
the
/x/ Definitive Proxy Statement Commission Only (as
permitted
/ / Definitive Additional by Rule 14a-6(c)(2))
Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11 or
sec. 240.14s-12
- - ------------------------------------------------------------
PENNSYLVANIA ENTERPRISES, INC.
(Name of Registrant as Specified in its Charter)
- - ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules O-11(c) (1) (ii), or
14a-6(i)(1), or 14a-6 (I)(2) or Item 22
(a)(2) of Schedule 14A.
[TRANSMITTAL LETTER]
March 25, 1997
EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
Re: Pennsylvania Enterprises, Inc. --
Definitive Annual Meeting Proxy Material
On behalf of Pennsylvania Enterprises, Inc. (the
"Company") and pursuant to Rule 14a-6(c) promulgated under
the Securities Exchange Act of 1934, as amended, in
connection with the Company's 1997 Annual Meeting of
Shareowners scheduled to be held on May 14, 1997, please
find for filing, by electronic mail:
(i) A definitive copy of the Company's 1997 Annual
Meeting Proxy Statement (including the Notice
of Meeting) and form of proxy, which will be
released on March 26 tothe Company's
shareowners,
(ii) Definitive copies of our letter which will be
sent on March 31 to certain participants in the
Company's Employees' Savings Plan (401(k)),
(iii)A definitive copy of a reminder notice which is
to be sent to all employees of the Company on
April 11.
A filing fee of $125 required by Rule 14a-6(j) under
the Act was wired to the SEC's account at Mellon Bank on
March 21.
Pursuant to Rule 14a-3(c) under the Act, seven
information copies of the Company's 1996 Annual Report to
Shareowners (the "1996 Annual Report"), which will be
distributed to shareowners along with the Annual
Meeting Proxy Statement, are being sent to the SEC
Operations Center, 6432 General Green Way, Alexandria,
Virginia. Also being sent to this location
are printed copies of the previously mentioned materials
(items i, ii, and iii).
Securities and Exchange Commission -2-
March 25, 1997
One set of the previously referenced materials is
also being provided to H. Roger Schwall, the SEC Branch
Chief with responsibility for matters pertaining to the
Company.
Under separate cover, five definitive copies of the
Company's 1997 Annual Meeting proxy materials and five
copies of the 1996 Annual Report are concurrently being
filed with the New York Stock Exchange.
Sincerely yours,
/s/ Thomas J. Ward
Thomas J. Ward
Vice President,
Administrative Services,
and Secretary
jmm
[PROXY STATEMENT]
[LOGO] One PEI Center
Wilkes-Barre, Pennsylvania 18711-0601
Telephone: (717) 829-8843
March 26, 1997
Dear Fellow Shareowner:
You are cordially invited to attend the Annual Meeting
of Shareowners of the Company.
The meeting will be held at Montage Mountain Ski
Resort, 1000 Montage Mountain Road, Scranton, Pennsylvania,
beginning at 10:00 a.m., on Wednesday, May 14, 1997.
Directions to the meeting site and a map are included with
this letter. A report on the operations of the Company
during 1996 and its plans for 1997 will be presented at the
Annual Meeting. Also, directors, officers, and other key
employees will be present to respond to your questions.
This year, in addition to the election of eleven
directors, you are being asked to approve the Company's
Stock Incentive Plan. The Board of Directors voted to
approve the Plan and recommend it to shareowners because it
believes the Plan will enable the Company to attract and
retain employees who contribute to the Company's success, to
give these employees the opportunity to participate in the
long-term success and growth of the Company by giving them
an equity interest in the Company, and to emphasize the
common interests of employees and shareowners, by offering
employees an equity interest in the Company.
Your vote is important. Whether or not you expect to
attend the Annual Meeting, please sign and date the enclosed
proxy and return it promptly by mail in the enclosed
envelope which requires no postage if mailed in the United
States.
Sincerely,
Thomas F. Karam
President and
Chief Executive Officer
Kenneth L. Pollock
Chairman of the Board
Directions To Montage Mountain Ski Resort, Scranton,
Pennsylvania
[MAP]
From New York and Northern New Jersey: Take I-80 West into
Pennsylvania to I-380, proceed on I-380 North to I-81. Take
I-81 South to Exit 51 (Montage Mountain Road) and follow
signs.
From Philadelphia and Southeastern Pennsylvania: Take the
Northeast Extension of the Pennsylvania Turnpike to Exit 37
(I-81 North). Follow I-81 North to Exit 51 (Montage
Mountain Road) and follow signs.
From Western Pennsylvania and the Harrisburg Area: Take
I-81 North to Exit 51 (Montage Mountain Road) and follow
signs.
From Baltimore and Washington, DC: Take I-83 North to I-81.
Take I-81 North to Exit 51 (Montage Mountain Road) and
follow signs.
[LOGO] One PEI Center
Wilkes-Barre, Pennsylvania 18711-0601
Telephone: (717) 829-8843
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareowners of Pennsylvania Enterprises, Inc. (the
"Company") will be held at the Montage Mountain Ski Resort,
1000 Montage Mountain Road, Scranton, Pennsylvania, on
Wednesday, May 14, 1997, at 10:00 a.m., for the following
purposes:
(1) To elect eleven directors of the Company;
(2) To approve the Company's Stock Incentive Plan; and
(3) To transact such other business as may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business
on March 18, 1997, as the record date for the determination
of owners of the Company's Common Stock entitled to notice
of and to vote at the meeting.
If you plan to attend the meeting and are a shareowner
of record, please mark your proxy card in the appropriate
space. An admission ticket will be mailed to you prior to
the meeting date. However, if your shares are not
registered in your own name, please advise the shareowner
of record (your bank, broker, etc.) that you wish to attend.
That firm will provide you with evidence of your ownership
which will enable you to gain admittance to the meeting.
Whether you plan to attend the meeting or not, please
sign and date the enclosed proxy and return it promptly by
mail in the enclosed envelope. No postage is required if
mailed in the United States.
By Order of the Board of Directors,
Thomas J. Ward
Vice President of Administrative Services
and Secretary
Wilkes-Barre, Pennsylvania
March 26, 1997
IMPORTANT
Pennsylvania law requires that the owners of a majority
of the Company's outstanding Common Stock be present in
person or by proxy at the Annual Meeting in order to
constitute a quorum. Shareowners can help avoid the
necessity and expense of follow-up letters to assure
that a quorum is present at the Annual Meeting by promptly
returning the enclosed proxy. Broker non-votes,
abstentions, and withhold authority votes all count for the
purpose of determining a quorum. In the absence of a
quorum, the Annual Meeting will be adjourned until a
time announced at such meeting. At the adjourned meeting,
the shareowners in attendance, although less than a quorum,
will nevertheless constitute a quorum to elect directors
and, if the adjournment has been at least fifteen days, to
act on all other matters included in this Proxy Statement.
[LOGO] One PEI Center
Wilkes-Barre, Pennsylvania 18711-0601
Telephone: (717) 829-8843
March 26, 1997
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREOWNERS TO BE HELD MAY 14, 1997
GENERAL
This Proxy Statement is furnished in connection with
the solicitation by and on behalf of the Board of Directors
of Pennsylvania Enterprises, Inc., (the "Company") of
proxies to be used at the Annual Meeting of Shareowners of
the Company and any adjournment or adjournments thereof to
be held at the Montage Mountain Ski Resort, 1000 Montage
Mountain Road, Scranton, Pennsylvania, on Wednesday, May 14,
1997, at 10:00 a.m., for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareowners. The
Board of Directors has fixed the close of business on March
18, 1997, as the record date for the determination of
shareowners entitled to notice of and to vote at the
meeting.
Pennsylvania law provides that a proxy, unless coupled
with an interest (for example, a vote pooling or similar
arrangement among shareowners; or between the Company and
shareowners; or an unrevoked proxy in favor of an existing
or potential creditor of a shareowner), is revocable at will
by a shareowner, notwithstanding any other agreement or any
provision in the proxy to the contrary. A shareowner may
revoke a proxy by giving written notice of revocation
to the Secretary of the Company at any time before the proxy
is voted. Such revocation shall be effective upon receipt
of the written notice by the Secretary of the Company.
COMMON STOCK OUTSTANDING
Common Stock, of which there were 4,815,332 shares
outstanding and entitled to vote on March 18, 1997, the
record date for the Annual Meeting, constitutes the only
class of securities of the Company entitled to vote at the
meeting. Effective March 20, 1997, the Company's
Common Stock was split two-for-one. There would have been
9,630,664 shares outstanding on the record date for the
Annual Meeting if the stock split had been effected on or
prior to the annual meeting record date. All share amounts
in this Proxy Statement have been adjusted to reflect the
two-for-one split. The Company does not know of any person
who is the beneficial owner of more than 5% of the
outstanding Common Stock of the Company, other than Mr.
Kenneth L. Pollock, Chairman of the Company, who
beneficially owns 6.37% of the Company's Common Stock as
described in the Security Ownership of Management section of
this Proxy Statement.
ANNUAL REPORT
A copy of the annual report of the Company for the year
1996 is included with this proxy.
MATTERS TO BE BROUGHT BEFORE THE MEETING
Election of Directors
At the meeting, eleven directors are to be elected to
hold office for the term of one year and until their
successors have been elected and qualified. Unless a
contrary indication is specified, it is the intention of the
persons named as proxies to vote the shares represented by
the proxy for the election of the nominees listed herein as
directors of the Company. Each of the nominees for election
as a director was elected as a director of the Company at
the 1996 Annual Meeting of Shareowners, except for Mr.
Thomas F. Karam who was elected by the Board of Directors
effective September 1, 1996. In the event that any of the
nominees should become unavailable for any reason, which is
not anticipated, the Board of Directors, in its discretion,
may, unless it shall have provided for a lesser number of
directors, designate a substitute nominee, in which event,
pursuant to the accompanying proxy, votes will be cast for
such substitute nominee.
Nominees for Election as Directors
The following information is furnished with respect to
each person nominated by the Board of Directors for election
as a director: principal occupations or employment, age,
principal directorships, other affiliations, Board
Committee(s) on which each serves, the period of service
as a director of PG Energy Inc. ("PG Energy"), formerly
Pennsylvania Gas and Water Company, and the Company and the
number of shares of Common Stock of the Company which each
nominee has advised the Company was beneficially owned
directly or indirectly by him as of March 10, 1997.
Nominees for Election as Directors
Name
First Became Director
Common Shares
Beneficially Owned* Principal Occupation and
Other Information
[PHOTO]
Kenneth L. Pollock
July 1972
613,706 Shares
Chairman of the Board of Directors of the Company
and PG Energy since June, 1987; President and Chief
Executive Officer of the Company and PG Energy from March,
1991, to August, 1991; Director and sole stockholder,
Susquehanna Coal Company and Ken L. Pollock, Inc.,
Nanticoke, PA, since prior to 1990. Member of the
Pennsylvania State University National Development Council
and Campaign for the Library Committee; former board member
of United Penn Bank, King's College, Mercy Hospital, and the
Mill Memorial Library. Age 76. Chairman of the Executive
Committee.
[PHOTO]
Thomas F. Karam
September 1996
130,382 Shares
President and Chief Executive Officer of the
Company and PG Energy since September 1, 1996. Executive
Vice President of the Company and PG Energy from September
1995 to August 1996. Vice President, Investment Banking,
Legg Mason Wood Walker, Inc. from July 1989 to September
1995. Vice President, Investment Banking, Thomson McKinnon
Securities, Inc. from September 1987 to July 1989. Director
of the Pennsylvania Gas Association, Greater Scranton
Chamber of Commerce, Mental Health Association of
Northeastern Pennsylvania, and the Wyoming Valley Health
Care Systems, Inc. Age 38.
______
*See page 9, Security Ownership of Management, for complete
listing and explanatory notes relating to the security
ownership of directors and officers of the Company. Shares
are shown after giving effect to the two-for-one stock
split.
Name
First Became Director
Common Shares
Beneficially Owned* Principal Occupation and
Other Information
[PHOTO]
William D. Davis
June 1981
12,942 Shares
Vice Chairman of the Board of Directors of the
Company and PG Energy since March, 1991; Chairman of the
Board of the Commonwealth Bank Division of Meridian Bank,
Williamsport, PA, from September, 1993 to December 31, 1995;
Director, Meridian Bancorp, Inc., and Meridian Bank,
Reading, PA, from September, 1993, to April, 1996; Chairman
of the Board and Chief Executive Officer of Commonwealth
Bancshares Corporation, Williamsport, PA, from April, 1987
to June, 1993; Director Corestates Bank, N.A., since April,
1996; Director of the National Association of Corporate
Directors; Director, Lycoming Foundation; past Director and
President of Industrial Properties Corporation; Director,
Pennsylvania Economy League; Director and Treasurer,
Pennsylvania College of Technology; past Director and
Chairman, Williamsport/Lycoming Chamber of Commerce;
Director, Williamsport/Lycoming Foundation; and Director,
Pennsylvania Economic Development Financing Authority
(PEDFA). Age 66. Member of Executive Committee, Chairman
of Audit Committee and member of the Compensation and Stock
Option Committees.
[PHOTO]
Robert J. Keating
June 1974
19,840 Shares
Chairman of the Board of Directors of the Company
and PG Energy from June, 1986, to June, 1987; Chairman of
the Board, Parodi Industries, Inc., Scranton, PA, from
January, 1985, to February, 1994. Age 78. Member of
Executive Committee and Investment Committee of the
Employees' Retirement Plan.
______
*See page 9, Security Ownership of Management, for complete
listing and explanatory notes relating to the security
ownership of directors and officers of the Company. Shares
are shown after giving effect to the two-for-one stock
split.
Name
First Became Director
Common Shares
Beneficially Owned* Principal Occupation and
Other Information
[PHOTO]
James A. Ross
May 1978
6,500 Shares
Independent financial consultant since prior to
1988; Chairman, Priestgate, Limited, since 1991; former
President and Chief Executive Officer and Director, Sprague
& Henwood, Inc., Scranton, PA; Director, Scranton Industrial
Development Company; Director, Lackawanna Industrial
Development Enterprise. Age 60. Chairman of the Planning
Committee and member of the Investment Committee of the
Employees' Retirement Plan.
[PHOTO]
John D. McCarthy
March 1991
7,800 Shares
President of McCarthy Tire Service Company,
Wilkes-Barre, PA, since 1968; President of McCarthy Realty,
Inc., since 1988; Director and Chairman, Wyoming Valley
Health Care Systems, Inc.; Director of Pennsylvania-American
Water Company. Age 61. Chairman of Compensation and Stock
Option Committees, Chairman of the Investment Committee of
the Employees' Retirement Plan, and member of Executive
Committee.
______
*See page 9, Security Ownership of Management, for complete
listing and explanatory notes relating to the security
ownership of directors and officers of the Company. Shares
are shown after giving effect to the two-for-one stock
split.
Name
First Became Director
Common Shares
Beneficially Owned* Principal Occupation and
Other Information
[PHOTO]
Ronald W. Simms
March 1991
272,000 Shares
President and Chief Executive Officer of Petroleum
Service Company, Inc., Wilkes-Barre, PA, since 1980;
Chairman of the Board of Directors since 1994, and Chief
Executive Officer since 1984, of Mountain Productions, Inc.;
Chairman of the Board of Directors of First Heritage Bank,
since March, 1994; Director of Pennsylvania-American Water
Company; past Chairman of the Wilkes-Barre Chamber of
Commerce. Age 57. Member of the Executive, Audit,
Planning, Compensation and Stock Option Committees, and the
Investment Committee of the Employees' Retirement Plan.
[PHOTO]
Kenneth M. Pollock
October 1993
257,372 Shares
Vice President of HUD, Inc., trading as Emerald
Anthracite II, and Vice President of Susquehanna Coal
Company and Susquehanna Mt. Carmel, Inc., Nanticoke, PA,
since prior to 1987; Northeastern Pennsylvania Regional
Advisory Board of Directors of Corestates Bank, N.A.;
Director of F. M. Kirby Center for the Performing Arts. Age
39. Member of Audit and Planning Committees.
______
*See page 9, Security Ownership of Management, for complete
listing and explanatory notes relating to the security
ownership of directors and officers of the Company. Shares
are shown after giving effect to the two-for-one stock
split.
Name
First Became Director
Common Shares
Beneficially Owned* Principal Occupation and
Other Information
[PHOTO]
Paul R. Freeman
November 1995
2,400 Shares
Controller for HUD, Inc., trading as Emerald
Anthracite II, Nanticoke, PA, since 1988. Previously held
positions with Northeastern Bank, United Penn Bank, Barnett
Banks, and Marine Midland Bank. Age 49. Member of the
Audit Committee and the Investment Committee of the
Employees' Retirement Plan.
[PHOTO]
John D. McCarthy, Jr.
November 1995
4,400 Shares
Vice President of McCarthy Tire Service Company,
Wilkes-Barre, PA, since 1989 and Vice President of McCarthy
Realty, Inc. since 1988. President of McCarthy Tire Service
Company of Allentown, Reading and Lancaster since 1992.
Member and Chairman of the Board of Directors of the Wyoming
Valley Catholic Youth Center; member of the Michelin Tire
Corporation Dealer Council and Continental/General Tire
Dealer Council. Age 32. Member of the Audit Committee.
_______
*See page 9, Security Ownership of Management, for complete
listing and explanatory notes relating to the security
ownership of directors and officers of the Company. Shares
are shown after giving effect to the two-for-one stock
split.
Name
First Became Director
Common Shares
Beneficially Owned* Principal Occupation and
Other Information
[PHOTO]
Richard A. Rose, Jr.
November 1995
26,032 Shares
President of Petroleum Sales Company, Inc.,
Wilkes-Barre, PA, since 1992 and Vice President of Petroleum
Service Company, Inc. since 1987. Director of the Black
Horse Foundation, Inc., Mountain Productions, Inc., Mountain
Productions Services, Inc., and Rock USA, Inc. Age 36.
Member of the Planning Committee and the Compensation and
Stock Option Committees.
_______
*See page 9, Security Ownership of Management, for complete
listing and explanatory notes relating to the security
ownership of directors and officers of the Company. Shares
are shown after giving effect to the two-for-one stock
split.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of the
Company's Common Stock, beneficially owned, directly or
indirectly, as of March 10, 1997, after giving effect to the
two-for-one stock split effective for shareowners of record
on March 20, 1996, by individual directors, each of the
officers named in the Summary Compensation Table, and all
directors and officers as a group, who held such positions
as of March 10, 1997. Unless otherwise specified,
shares are beneficially owned directly by the director or
officer.
Amount and Nature of
Beneficial Ownership
Number of Shares Percent of
Title of Class Name of Beneficial Beneficially Owned(1) Class
Owner
Common Kenneth L. Pollock 613,706 (2)(3) 6.37%
Thomas F. Karam 130,382 (4) 1.35%
William D. Davis 12,942 *
Robert J. Keating 19,840 (5) *
James A. Ross 6,500 (6) *
John D. McCarthy 7,800 (7) *
Ronald W. Simms 272,000 (8) 2.82%
Kenneth M. Pollock 257,372 (3)(9) 2.67%
Paul R. Freeman 2,400 *
John D. McCarthy, Jr. 4,400 (7)(10) *
Richard A. Rose, Jr. 26,032 (11) *
John F. Kell, Jr. 15,738 (12) *
All directors and
officers as a group
(20 persons) 1,179,878(13)(14) 12.25%
_________
"*" - Less than one percent.
(1) Includes shares that may be acquired pursuant to the
exercise of stock options exercisable within 60 days of
March 1, 1997, as follows: 50,000 for Mr. Karam, 50,000 for
Mr. Kenneth L.Pollock, 7,000 for Mr. Kell, and 24,600 for
other officers not specifically named. Does not
include options to purchase shares of Common Stock granted
on September 1, 1996, in the amount of 90,000 to Mr. Kenneth
L. Pollock and 150,000 to Mr. Thomas F. Karam for which the
first annual installment of 30,000 for each of Mr. Pollock
and Mr. Karam is first exercisable on September 1, 1997.
(2) Includes 17,156 shares that Mr. Pollock owns jointly
with his wife, 173,798 shares jointly with his son, Kenneth
M. Pollock, 14,800 shares jointly with his daughter, 48,288
shares jointly with his son and daughter, and 17,084 as
custodian for his grandchildren, 12,486 of which are for
the children of Kenneth M. Pollock. Includes 216,800 shares
held by several corporations in which Mr. Pollock holds a
controlling interest.
(3) Shares held jointly by Mr. Kenneth L. Pollock and Mr.
Kenneth M. Pollock, and by Mr. Kenneth L. Pollock for Mr.
Kenneth M. Pollock's children are reported in the total
shares for each of them but are reported one time, on an
unduplicated basis, in the total shares owned by all
directors and officers as a group. A total of 636,452
shares are beneficially owned by Mr. Kenneth L. Pollock and
Mr. Kenneth M. Pollock on an unduplicated basis.
(4) Includes 32,800 shares that Mr. Karam owns jointly with
his wife, 41,582 shares for which Mr. Karam has sole voting
and investment power, and 6,000 shares held in the name of
Lakeside Drive Assoc., Inc., in which Mr. Karam's wife has
an interest. These 6,000 shares are also reported for Mr.
Keating who has an interest in Lakeside Drive Assoc., Inc.
These shares are reported one time, on an unduplicated
basis, in the total shares owned by all directors and
officers as a group.
(5) Includes 1,200 shares of Common Stock owned by Mr.
Keating's wife and 6,000 shares that Mr. Keating
beneficially owns through Lakeside Drive Assoc., Inc.
(6) Includes 2,300 shares held jointly with Mr. Ross's
wife, 600 shares owned by Mr. Ross's wife and 2,600 shares
owned by charitable foundations of which Mr. Ross is a
trustee. Mr. Ross shares voting and investment power and
disclaims beneficial ownership of the shares held by
these foundations.
(7) Includes 2,000 shares held by McCarthy Realty, Inc. in
which both John D. McCarthy and John D. McCarthy, Jr. each
have a beneficial interest. These shares are reported in
the total shares for each of them, but are reported one
time, on an unduplicated basis, in the total shares
owned by all directors and officers as a group.
(8) Includes 71,854 shares owned by Mr. Simms's wife and
80,400 shares for which Mr.Simms has voting power.
(9) Includes 173,798 shares held jointly with his father,
Mr. Kenneth L. Pollock, 48,288 shares held jointly with his
father and sister, 12,486 shares held by his father as
custodian for his children, and 18,000 shares as custodian
for his children.
(10) Includes 1,800 shares that Mr. McCarthy owns jointly
with his wife and 200 shares he owns jointly with his wife
and son.
(11) Includes 14,776 shares that Mr. Rose owns jointly with
his wife, 5,106 shares owned by Mr. Rose's wife, 1,500
shares held as custodian for his children, and 4,050 shares
for which Mr. Rose has voting power.
(12) Includes 5,404 shares that Mr. Kell owns jointly with
his wife.
(13) The Company has an Employees' Savings Plan in which
officers and employees participate. Included in the number
of shares of Common Stock shown above are 20,692 shares
which were allocated to the accounts under the Employees'
Savings Plan of all officers as a group at March 1, 1997
(including 1,866 shares in those shown for Mr. Pollock, and
3,334 for Mr.Kell).
(14) Does not include 104,162 shares of the Company's Common
Stock held by the Employees' Retirement Plan, as to which
investment power is exercised by the Investment
Committee under the Plan, consisting of Messrs. Freeman,
Keating, John D. McCarthy, Ross, and Simms. The Committee
members disclaim beneficial ownership of these shares.
Section 16(a) Beneficial Ownership Reporting Compliance
The Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's directors and
officers file reports of ownership and changes in ownership
of the Company's Common Stock with the Securities and
Exchange Commission and the New York Stock Exchange. Based
solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) under the
Exchange Act, the Company believes that all directors and
officers filed on a timely basis all such reports required
of them with respect to stock ownership and changes in
ownership during 1996.
Additional Director Information
During 1996, the Board met 12 times, and each incumbent
director attended more than 75% of the total number of
meetings of the Board and of the committees of the Board on
which he served.
The Company has an Executive Committee, currently
consisting of Messrs. Kenneth L.
Pollock (Chairman), Davis, Keating, John D. McCarthy, and
Simms. During intervals between meetings of the Company's
Board of Directors, the Executive Committee may exercise,
subject to law and any specific directions given by the
Board to the Executive Committee, all powers of the Board of
Directors in the management of the business and affairs of
the Company. The Executive Committee met two times during
1996.
In addition to an Executive Committee, the Company has
an Audit Committee, currently consisting of Messrs. Davis
(Chairman), Freeman, Kenneth M. Pollock, John D. McCarthy,
Jr., and Simms. This Committee met four times during 1996
and performs the following functions, among others:
recommending the appointment and monitoring the independence
and compensation of the independent auditors; approving
professional services provided by the independent auditors;
reviewing the scope of the annual audit with the independent
auditors; reviewing the independent and internal auditors'
reports to management; reviewing financial statements; and
reviewing various internal accounting controls.
The Company has an Investment Committee of the
Employees' Retirement Plan currently consisting of Messrs.
John D. McCarthy (Chairman), Freeman, Ross, Simms, and
Keating. The duties of this Committee include appointing,
removing, and monitoring the performance of investment
managers, allocating Plan assets among them, reviewing the
investment philosophy of the Plan, and managing all or
portions of the assets of the Plan, subject to any limits or
guidelines established by the Board. This Committee met
four times during 1996.
The Company has a Compensation Committee which provides
direction and guidance and makes recommendations to the
Board and management on compensation-related matters.
The members of the Compensation Committee are also
designated as the Stock Option Committee for the purpose of
administering the 1992 Stock Option Plan. The Compensation
and Stock Option Committees currently consist of Messrs.
John D. McCarthy (Chairman), Simms, Davis, and Rose. These
committees met four times during 1996.
The Company's Planning Committee, currently consisting
of Messrs. Ross (Chairman), Simms, Kenneth M. Pollock, and
Rose, provides direction and guidance and makes
recommendations to the Board and management on corporate
planning issues.
The Company does not have a Nominating Committee.
Nominations are considered by the full Board.
During 1996, directors of the Company and PG Energy who
were not full-time employees of the Company and/or PG Energy
were paid a retainer fee of $500 per month, and on days they
attended a Company and/or PG Energy Board meeting(s) they
were paid $500, plus expenses. Since the Company and PG
Energy Boards consist of the same members, meetings are
usually scheduled on the same day, and a single fee is paid
for attendance at both meetings. Additionally, each
director received $250 for each Board Committee meeting
attended on the same day as meeting(s) of the full Board(s),
and $500 for each Board Committee meeting attended on a day
when the full Board(s) did not meet. Further, directors who
were members of the Investment Committee of the Employees'
Retirement Plan were paid $250 for each meeting
attended on the same day as a meeting of the full Board(s)
and $500 for each meeting attended on a day when the full
Board(s) did not meet.
During 1996, Messrs Davis, Freeman, John D. McCarthy,
Ross and Simms also served as directors of Pennsylvania
Energy Resources, Inc. (PERI), a wholly-owned subsidiary of
PEI. Mr. Davis was paid $100 and Messrs. Freeman, McCarthy,
Ross and Simms were paid $250 for attending Board meetings
of PERI during 1996.
The Company's 1995 Directors' Stock Compensation Plan
(the "Directors' Stock Plan")provides for the annual
automatic award of 200 shares (400 shares on a post-split
basis) ofCompany Common Stock (subject to anti-dilution
adjustment in the event of certain corporate changes) to
each continuing director, who has completed at least one
year of service and who is not a full-time employee of the
Company or any of its affiliates, immediately following each
annual meeting of shareowners. The Directors' Stock Plan
will terminate in 2005. Directors who are full-time
employees of the Company are not eligible to participate in
the Directors' Stock Plan. Except for anti-dilution
adjustments, without shareowner approval, the number of
shares to be awarded to each director each year under the
Directors' Stock Plan may not be increased and the
eligibility for awards may not be changed. All shares
awarded under the Directors' Stock Plan are
non-transferrable for a period of three years following the
award, except in the event of death, disability, or
retirement on or after age 65, but in no event less than six
months following the date of the award.
On November 13, 1996, the Board of Directors made a
special grant of 200 (400 shares on a post-split basis)
shares of Common Stock each to Messrs. Paul R. Freeman, John
D. McCarthy, Jr., and Richard A. Rose, Jr., following their
completion of one year of service on the Board.
On February 11, 1997, the Board of Directors adopted a
Director Deferred Compensation Plan, pursuant to which each
director who is not a full-time employee of the Company or
any of its subsidiaries may elect to defer all or any
portion of his retainer and meeting fees. Amounts
deferred are credited to a bookkeeping account maintained by
the Company for the director in the form of stock units,
representing the number of shares of the Company's Common
Stock which could have been purchased with the deferred
amount (based on the market price of the Common Stock on the
date such amount would have been paid to the director had it
not been deferred). Additional stock units are credited to
the director's account whenever a cash dividend is paid on
the Common Stock, reflecting the number of shares that could
have been purchased on the dividend payment date with the
amount of the per share dividend multiplied by the number of
stock units then credited to the director's account. Upon
the director's termination of services as a director, the
director receives for each stock unit either one share of
Common Stock or cash equal to the value of a share on such
date, as elected by the director before the units were
credited.
Mr. Kenneth L. Pollock is the father of Mr. Kenneth M.
Pollock. Mr. Simms is the father-in-law of Mr. Rose. Mr.
John D. McCarthy is the father of Mr. John D. McCarthy, Jr.
Mr. Keating is the father-in-law of Mr. Karam, President and
Chief Executive Officer of the Company. There are no other
family relationships among any of the directors or executive
officers of the Company.
Compensation Committee Interlocks
During 1996, the Compensation Committee consisted of
Messrs. John D. McCarthy, Davis, Rose, and Simms. None of
these persons was or is an officer or employee of the
Company or any of its subsidiaries, except for Mr. Davis who
serves as Vice Chairman of the Board of Directors of the
Company and PG Energy, and Chairman of the Board of
Directors of Pennsylvania Energy Resources. Although Mr.
Davis was not an employee of these companies, these
positions were considered officers of the respective
companies until October 31, 1996. None of the Company's
executive officers served on the compensation committee or
board of an entity of which (i) a member of the Company's
Compensation Committee or other director of the
Company was an executive officer or (ii) an executive
officer of the entity was one of the Company's directors.
APPROVAL OF THE PENNSYLVANIA ENTERPRISES, INC.
STOCK INCENTIVE PLAN
The Board of Directors has adopted, subject to approval
by shareowners at the Annual Meeting, the Pennsylvania
Enterprises, Inc. Stock Incentive Plan (the "Plan"). The
purposes of the Plan are to enable the Company to attract
and retain employees who contribute to the Company's
success, to give these employees the opportunity to
participate in the long-term success and growth of the
Company, to emphasize the common interests of employees and
shareowners by giving employees an equity interest in the
Company, and to enable the Company to grant stock options to
its outside directors.
Principal Provisions of the Plan
The following summary of the Plan, as adopted by the
Board of Directors subject to shareowner approval, is
qualified by reference to the full text of the Plan, which
is attached as Exhibit A to this Proxy Statement.
General Provisions
The Plan authorizes the granting of awards to employees
(including officers) of the Company and certain related
companies in the form of any combination of (1) options to
purchase shares of Common Stock, (2) shares of restricted
Common Stock ("restricted stock"), (3) bonus stock, and (4)
dividend equivalent units. The Plan also provides for the
discretionary grant of stock options to directors who are
not employees or officers of the Company or certain
related companies ("Outside Directors").
Administration. The Plan is administered by the Stock
Option Committee of the Company's Board of Directors (the
"Board"), or another committee of directors designated by
the Board (the "Committee"), which consists of at least two
directors who are "non-employee" directors as defined in
Rule 16b-3 under the Securities Exchange Act of 1934, as
amended. The Committee has authority to interpret the Plan,
adopt administrative regulations, and interpret the
provisions of all awards granted under the Plan. The
Committee designates the employees of the Company and its
subsidiaries and affiliated companies to be granted awards
under the Plan and the type, amount, and terms of awards
granted to employees. Awards of stock options to Outside
Directors are made by the full Board of Directors, which has
discretion to determine the amount and terms of such awards.
Eligibility. The Committee may make awards under the
Plan to employees (including officers) of the Company or of
any entity in which the Company owns at least a 50%
interest. The employee participants in the Plan are
selected from among those eligible in the sole discretion of
the Committee. Outside Directors may be granted stock
options, but are not eligible to receive any other awards
under the Plan. All employees and Outside Directors are
eligible to receive awards under the Plan.
Limitations on Awards. The aggregate number of shares
of Common Stock which may be issued under the Plan is
460,000 (after the two-for-one stock split). Such shares
may consist of authorized but unissued shares or treasury
shares. The payment of any award in cash will not
count against this share limit. Shares subject to lapsed,
forfeited or canceled awards will not count against this
limit and can be regranted under the Plan. If the exercise
price of an option is paid in Common Stock or if shares are
withheld from payment of an award to satisfy tax obligations
with respect to the award, such shares also will not count
against the above limit.
No employee may be granted stock options, restricted
stock, or bonus stock, or any combination of the foregoing,
under the Plan with respect to more than 200,000 shares of
Common Stock in any fiscal year, or more than 200,000
dividend equivalent units in any fiscal year. The Plan does
not limit awards which may be made under other plans of the
Company.
Awards to Employees
The Plan authorizes the Committee to grant the
following types of awards to eligible employees, including
officers:
1. Stock Options. The Committee is authorized to
grant incentive stock options ("ISOs") and non-qualified
stock options to purchase such number of shares of Common
Stock as the Committee determines. An option will be
exercisable at such times, over such term and subject
to such terms and conditions as the Committee determines,
and at an exercise price determined by the Committee, which
may not be less than the fair market value of the Common
Stock at the date of grant of the option. ISOs are subject
to additional restrictions as to exercise period and
exercise price as required by the Internal Revenue Code of
1986, as amended (the "Code"). Payment of the exercise
price of an option may be made in such manner as
the Committee may provide, including cash, delivery of
shares of Common Stock already owned or subject to an award
under the Plan, "cashless exercise" (an arrangement with a
brokerage firm whereby shares issuable upon exercise of an
option would be sold by the broker and the proceeds
used to pay the exercise price), or in any other manner
specified by the Committee.
The Committee is authorized to specify the period, if
any, over which options become exercisable, and to
accelerate the exercisability of options on a case by case
basis at any time. The Committee is also authorized to
specify the period during which options may be exercised
following an employee's termination of employment, and to
extend such period on a case by case basis. The Committee
may permit an option to be exercised for an additional
period after the optionee's death, even if such period
extends beyond the original option term. Unless otherwise
provided by the Committee, options will not be transferable
except by will or by the laws of descent and distribution.
2. Restricted Stock. The Committee is authorized to
award restricted stock subject to such terms and conditions
as the Committee may determine in its sole discretion. The
Committee has authority to determine the number of shares of
restricted stock to be awarded, the price, if any, to be
paid by the recipient of the restricted stock, and the date
or dates on which the restricted stock will vest. The
vesting of restricted stock may be conditioned upon the
completion of a specified period of service with the
Company, upon the attainment of specified performance goals,
or upon such other criteria as the Committee may determine.
The Plan gives the Committee discretion to accelerate the
vesting of restricted stock on a case by case basis at
any time. The Committee also has authority to determine
whether the employee will have the right to vote and/or
receive dividends on shares of restricted stock, and whether
the certificates for such shares will be held by the Company
or delivered to the employee bearing legends to restrict
their transfer.
Stock certificates representing the restricted stock
granted to an eligible employee will be registered in the
employee's name. However, no share of restricted stock may
be sold, transferred, assigned or pledged by the employee
until such share has vested in accordance with the terms of
the restricted stock award. In the event of an employee's
termination of employment before all of his restricted stock
has vested, or in the event other conditions to the vesting
of restricted stock have not been satisfied prior to any
deadline for the satisfaction of such conditions set forth
in the award, the shares of restricted stock which have not
vested will be forfeited and any purchase price paid by the
employee generally will be returned to the employee.
At the time restricted stock vests, a certificate for such
vested shares will be delivered to the employee (or the
beneficiary designated by the employee, in the event of
death), free of all restrictions.
3. Bonus Stock. The Committee may award bonus stock
subject to such terms and conditions as it may determine.
Such awards may be conditioned upon attainment of specified
performance goals or such other criteria as the Committee
may determine, and the Committee may waive such conditions
in its discretion. Bonus stock may be issued without
payment therefor or may be sold to the employee at a
discount from its fair market value.
4. Dividend Equivalent Units. The Committee may award
dividend equivalent units
subject to such terms and conditions as the Committee may
determine in its sole discretion. The Committee may
condition the grant and/or settlement of an award upon the
completion of a specified period of service, upon the
achievement of specified performance goals, or upon any
such other criteria as the Committee shall determine, and
the Committee may waive such conditions.
The Committee specifies the number of dividend
equivalent units ("Units") awarded. Each time a cash
dividend is paid on the Common Stock, the award is credited
with a number of additional Units generally equal to the
number of shares of Common Stock that could be purchased on
the dividend payment date with the per share dividend
multiplied by the number of Units credited to the award.
Upon the settlement of the award, the employee receives
an amount equal to (1) the number of Units then credited to
his/her award reduced by the number of Units initially
awarded, multiplied by (2) the market price of a share of
Common Stock on the settlement date. The Committee
determines whether this amount is paid to the employee in
cash, Common Stock, or a combination thereof. All Units
granted pursuant to a particular award must be settled at
the same time. The Committee may specify the settlement
date for any award of Units, or may allow the employee to
select a settlement date within a specific period designated
by the Committee.
Awards to Outside Directors
The Plan authorizes the Board of Directors to grant
stock options to Outside Directors, in such amount and
having such terms and conditions as the Board of Directors
may determine in its discretion. Generally, the Board of
Directors' discretion to determine the terms of stock
option grants to Outside Directors is similar to the
Committee's discretion to determine the terms of stock
option grants to employees, as described above.
Provisions Relating to a Change of Control
Generally, upon the occurrence of a Change of Control
(1) all outstanding stock options, including those held by
Outside Directors, will become fully exercisable and vested,
(2) all restrictions applicable to outstanding restricted
stock and bonus stock awards under the Plan will lapse, and
such shares and awards will be deemed fully vested, and (3)
to the extent the cash payment of any award or the
settlement of a dividend equivalent unit is based on the
fair market value of stock, such fair market value will be
the Change of Control Price.
A "Change of Control" is deemed to occur on the date
(1) any person or group acquires beneficial ownership of
securities representing 20% or more of the Company's voting
securities, (2) individuals who constitute the "Current
Directors" (as defined in the Plan) fail to constitute at
least two-thirds of the Board of Directors, (3) the
shareowners approve a merger or consolidation unless
following such transaction (a) the beneficial owners of the
Company's Common Stock before the transaction own securities
representing more than 50% of the total voting power of the
company resulting from the transaction, and (b) at least a
majority of members of the Board of Directors of the company
resulting from the transaction were members of the Company's
Board of Directors before the transaction, or (4) the
shareowners of the Company approve a sale of substantially
all of its assets.
The "Change of Control Price" is the highest price per
share of Common Stock paid in any open market transaction,
or paid or offered to be paid in any transaction related to
a Change of Control, during the 90-day period ending with
the Change of Control.
Other Provisions
Tax Withholding. The Plan permits employees to satisfy
all or a portion of their federal, state, local or other tax
liability with respect to awards under the Plan by
delivering previously-owned shares or by having the Company
withhold from the shares otherwise deliverable to such
employee shares having a value equal to the tax liability to
be so satisfied.
Adjustments. In the event of specified changes in the
Company's capital structure, the Committee will have the
power to adjust the number and kind of shares authorized by
the Plan (including any limitations on individual awards),
the number, option price and kinds of shares covered by
outstanding awards (including those held by Outside
Directors), the number of dividend equivalent units subject
to outstanding awards, and to make such other adjustments in
awards under the Plan as it deems appropriate, provided that
no such adjustment may increase the aggregate value of
outstanding awards.
Amendments. The Board of Directors may amend the Plan
without shareowner approval, unless such approval is
required by law or other regulatory requirements. Amendment
or discontinuation of the Plan cannot adversely affect any
award previously granted without the holder's written
consent.
The Committee may amend any grant under the Plan other
than grants to Outside Directors, and the Board of Directors
may amend any grant to Outside Directors, in each case, to
include any provision which, at the time of such amendment,
is authorized under the terms of the Plan, except that no
award can be modified in a manner unfavorable to the holder
without the written consent of the holder. In addition, the
Committee or the Board may, without shareowner approval,
cancel an option or other award granted by it and grant a
new option or award to the employee or Outside Director at a
lower exercise price or otherwise on more favorable terms
and conditions than the canceled award. The Plan shall
continue in effect for an unlimited period, but may be
terminated by the Board of Directors in its discretion at
any time.
Certain Federal Income Tax Consequences
The following is a summary of certain federal income
tax aspects of awards made under the Plan, based upon the
laws in effect on the date hereof.
Non-Qualified Stock Options. As a general matter, with
respect to non-qualified stock options: (a) no income is
recognized by the participant at the time the option is
granted; (b) upon exercise of the option, the participant
recognizes ordinary income in an amount equal to the
difference between the option price and the fair market
value of the shares on the date of exercise; and (c) at
disposition, any appreciation after the date of exercise is
treated either as long-term or short-term capital gain,
depending on whether the shares were held for more than
one year by the participant.
Incentive Stock Options. Generally, no taxable income
is recognized by the participant upon the grant of an ISO or
upon the exercise of an ISO during the period of his or her
employment with the company or one of its subsidiaries or
within three months after termination (12 months in the
event of permanent and total disability, or during the term
of the option in the event of death). However, the exercise
of an ISO may result in an alternative minimum tax
liability to the participant. If the participant continues
to hold the shares acquired upon exercise of an ISO for at
least two years from the date of grant and one year from the
date of exercise, upon the sale of the shares, any amount
realized in excess of the option price will be taxed as
long-term capital gain.
If Common Stock acquired upon the exercise of an ISO is
disposed of prior to the expiration of the one-year and
two-year holding periods described above, the participant
will generally recognize ordinary income in an amount equal
to the excess, if any, of the fair market value of the
shares on the date of exercise (or, if less, the amount
realized on the disposition of the shares) over the option
price. Any further gain recognized by the participant on
such disposition will be taxed as short-term or long-term
capital gain, depending on whether the shares were held for
more than one year.
Restricted Stock. A participant receiving restricted
stock generally will recognize ordinary income in the amount
of the fair market value of the restricted stock at the time
the stock vests, less the consideration paid for the
restricted stock. However, a participant may elect,
under Section 83(b) of the Code, to recognize ordinary
income on the date of grant in an amount equal to the excess
of the fair market value of the shares on such date
(determined without regard to the restrictions) over their
purchase price. The holding period to determine whether the
participant has long-term or short-term capital gain on a
subsequent disposition of the shares generally begins when
the restriction period expires, and the tax basis for such
shares will generally be the fair market value of such
shares on such date. However, if the participant has
made an election under Section 83(b), the holding period
will commence on the day after the date of the grant, and
the tax basis will be equal to the fair market value of the
shares on the date of grant (determined without regard to
the restrictions).
Dividends. Dividends paid on restricted stock prior to
the date on which the forfeiture restrictions lapse
generally will be treated as compensation that is taxable as
ordinary income to the participant. If, however, the
participant makes a Section 83(b) election with respect to
the restricted stock, the dividends will be taxable as
ordinary dividend income to the participant.
Dividend Equivalent Units. A participant generally
will recognize ordinary income upon the settlement of
dividend equivalent units equal to the amount of cash
received plus the fair market value on the settlement date
of any shares received.
Bonus Stock. A participant receiving bonus stock
generally will recognize ordinary income on the date of
grant equal to the fair market value of such stock on such
date less the consideration, if any, paid for such stock.
Company Deductions. As a general rule, the Company
will be entitled to a deduction for federal income tax
purposes at the same time and in the same amount that an
employee or Outside Director recognizes ordinary income from
awards under the Plan, to the extent such income is
considered reasonable compensation under the Code. The
Company will not, however, be entitled to a deduction to the
extent compensation in excess of $1 million is paid to
an executive officer named in the proxy statement who was
employed by the Company at year-end, unless the compensation
qualifies as "performance-based" under Section 162(m) of the
Code or certain other exceptions apply. In addition, the
Company will not be entitled to a deduction with respect to
payments to employees which are contingent upon a change of
control if such payments are deemed to constitute "excess
parachute payments" under Section 280G of the Code and do
not qualify as reasonable compensation pursuant to that
Section; such payments will subject the recipients to a 20%
excise tax.
Benefits Under the Plan
It is anticipated that the Committee and the Board of
Directors will make grants under the Plan from time to time.
The size of future awards and the identity of the recipients
cannot be determined at this time.
Additional Information
The closing price of the Common Stock on the New York
Stock Exchange Composite Tape on March 17, 1997 was $ 45 1/2
per share (equal to $22 3/4 per share if the two-for-one
stock split had been effected).
The Board of Directors recommends that shareowners vote
FOR the approval of the Stock Incentive Plan.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is
administered by the Compensation Committee of the Board of
Directors, which is composed of four non-employee directors.
The following is a report of the Compensation Committee to
the Company's shareowners:
Compensation Policies
In determining compensation, including the award of
both annual and long-term compensation, the Committee
follows a policy of considering, among other factors, the
operating and financial performance of the Company and the
individual contribution of each officer.
Salary is the principal component of the annual portion
of the compensation of senior executives. Stock options,
which were authorized for the first time in 1992 and granted
in 1993 and 1996, comprise both the long-term component and
a portion of the annual component of compensation. The
value realized by an executive from stock options is
directly dependent on the performance of the Company's
stock. The Board of Directors has recommended that
shareowners approve a Stock Incentive Plan under which an
executive could receive stock options, restricted stock and
other awards based on the performance of the Company's
stock. If approved by shareowners, the Stock Incentive Plan
will become part of the executive compensation program.
1996 Compensation of the Chief Executive Officer
Mr. Karam was elected President and Chief Executive
Officer, effective September 1, 1996. Mr. Karam has an
employment agreement with the Company which provides for a
five-year term of employment with an annual salary
commencing at $212,880 the first year, increasing to
$225,000 the second year, and subject to increase at the
discretion of the Compensation Committee during the
remaining three years of the term. The agreement also
provides for the grant of options to purchase 150,000 shares
(on a post-split basis) of the Company's Common Stock with
the options becoming exercisable in five equal annual
installments commencing 12 months after grant. In
concluding to provide this employment agreement to Mr.
Karam, the Committee considered the need to ensure the
retention of this key executive, to enable him to perform
his duties without distraction, and to provide him with
competitive compensation. The Committee also determined
that a greater portion of the compensation called for by
this agreement should be made up of the long-term component
- - -- stock options -- than typically awarded to Company
officers as a way to more closely align the interest of this
key executive with those of the shareowners.
The Committee operates on the principle that the
compensation of the Company's executive officers should be
competitive with compensation of senior executives at
comparable companies. In this regard, the Committee
reviewed and considered the compensation of executives in
comparable positions at other utility companies, and
non-utility companies located in the same region as the
Company, with which the Company competes for executive
talent. Consequently, these are not exactly the same
companies that are included in the indices used in
the performance graphs in this proxy statement. The
Committee targets executive compensation to be in the
general range, but not the high end, of compensation for
comparable positions at these companies.
The Committee (which also serves as the Stock Option
Committee) believes stock options help to align the
interests of management with those of the Company's
shareowners and provide an incentive and reward for
increasing shareowner value. Options are awarded at market
price and there is no benefit to the optionee unless the
stock performs and improves in price in which case both
shareowners and the optionees are rewarded. The Committee
considers the contributions of potential recipients in
determining whether to award options.
Other Officers
The compensation of Mr. Kell was determined in
accordance with the compensation policies discussed earlier
in this report.
All members of the Committee concur and join in this
report to the Company's shareowners.
John D. McCarthy, Chairman William D. Davis
Ronald W. Simms Richard A. Rose, Jr.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Securities
Other Annual Underlying All Other
Name and Salary Bonus Compensation Options Compensation
Principal Position Year ($) ($)
($)(1) (#ofShares) ($)(2)
Thomas F. Karam 1996 $171,023 -0- -0- 200,000(5) $ 306
President and
Chief 1995 31,731(4)-0- -0- -0- 77
Executive Officer(3)
Dean T. Casaday, 1996 $148,298 -0- -0- -0- $ 5,553
Former President 1995 207,318 -0- -0- -0- 3,987
and Chief
Executive 1994 195,583 -0- -0- -0- 3,377
Officer (3)
John F. Kell, Jr. 1996 $124,053 -0- -0- -0- $ 1,824
Vice President, 1995 125,053 -0- -0- -0- 1,876
Financial
Services 1994 121,204 -0- -0- -0- 1,518
_______
(1) Does not include the value of perquisites and other
personal benefits because the aggregate amount of such
compensation does not exceed established reporting
thresholds.
(2) The amounts shown under All Other Compensation are for
group term life insurance provided for officers and matching
contributions made by the Company for the named executives
to their Employees' Savings Plan (401(k)) account. The
amounts for Mr. Karam's life insurance premiums in 1996 were
$306, for Mr. Casaday, $4,620, and for Mr. Kell, $1,080.
The amounts for the Employees' Savings Plan for Mr. Casaday
in 1996 were $933, and for Mr. Kell, $744.
(3) Mr. Casaday retired as President and Chief Executive
Officer effective September 1, 1996, at which time Mr. Karam
became President and Chief Executive Officer.
(4) Mr. Karam commenced employment with the Company
effective October 1, 1995, at an annual salary of $150,000.
The above amount is his actual salary for that portion of
the year during which he was employed by the Company.
(5) Adjusted to reflect the two-for-one stock split.
The Company also has an employment agreement with Mr.
Kenneth L. Pollock, Chairman of the Board of Directors,
effective June 26, 1996, providing for a three-year term of
employment, subject to his re-election by the Company's
shareowners, at an annual salary of $97,500 per year, and
the grant of options to purchase 90,000 shares (on a
post-split basis) of the Company's Common Stock exercisable
in three equal annual installments, the first of which is
exercisable on September 1, 1997.
STOCK OPTION GRANTS IN THE LAST FISCAL YEAR
Number of
Securities % of Total
Underlying Options Granted Exercise Grant Date
Options to Employees in Price Expiration Present
Name Granted(#)(1)Fiscal Year $/Share(1) Date Value($)(1)
Thomas F. Karam
50,000 15% $19.50 04/14/2006 $169,492
150,000 44% $20.75 08/31/2006 565,223
_______
(1) The number of securities and exercise price are
adjusted to reflect the two-for-one stock split.
(2) The "grant date present value" shown is an estimated
value based upon the application of the Black-Scholes Option
Pricing Model. Use of this model should not be viewed in
any way as a forecast of the future performance of the
Company's Common Stock. An option granted to an employee
will have value to the optionee only if and to the extent
the market price of the Company's stock rises above the
exercise price. The estimated present value of each stock
option is $3.39 and $3.77, respectively, based upon the
following assumptions: (1) a stock price volatility of
20.5%, (2) a risk-free interest rate of 6.64% and 7.02%,
respectively, (3) a dividend yield of 5.30%, and (4) an
expected option term of seven years (the full term is ten
years) to reflect the likelihood that the options will be
exercised before the full term based upon the Company's
exercise history.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
Value of
Number of Unexercised
Securities In-the-Money
Underlying Options at
Shares Unexercised Fiscal
Acquired on Value Options Year-End($)
Exercise Realized at Fiscal Exercisable/
(#)(1) ($) Year-End(#) Uexercisable
Exercisable/
Unexercisable(1)
Name
Thomas F. Karam -0- -0- -0-/200,000 -0-/$300,000
Dean T. Casaday 18,000 $103,500 -0-/-0- -0-/-0-
John F. Kell, Jr -0- -0- 7,000/-0- $48,563/-0-
(1) The number of shares are adjusted to reflect the
two-for-one stock split.
Employees' Retirement Plan
The following table illustrates the estimated annual
retirement benefits payable at age 65 under the Company's
Employees' Retirement Plan as a straight life annuity to an
employee retiring with the specified combination of final
average earnings and years of service with the Company. The
benefits shown are not subject to deduction for social
security.
5-Year Years of Credited Service
Average Earnings 15 20 25 30 35
$100,000 $ 21,182 $ 28,242 $ 35,303 $ 42,363 $ 42,363
$125,000 $ 26,994 $ 35,992 $ 44,990 $ 53,988 $ 53,988
$150,000 $ 32,807 $ 43,742 $ 54,678 $ 65,613 $ 65,613
$175,000 $ 35,132*$ 46,842* $ 58,553* $ 70,263* $70,263*
$200,000 $ 35,132*$ 46,842* $ 58,553* $ 70,263* $70,263*
$250,000 $ 35,132*$ 46,842* $ 58,553* $ 70,263* $70,263*
_______
* The Internal Revenue Code limits the amount of
compensation which may be taken into account under a
tax-qualified retirement plan.
The above table reflects the benefits payable to
employees who retire after January 1, 1997. As of December
31, 1996, Mr. Karam had completed one year of credited
service and Mr. Kell 18 years.
Mr. Casaday, who retired effective September 1, 1996,
receives a monthly benefit of $2,746 pursuant to the
Employees' Retirement Plan for his approximately 20 years of
service with the Company and a supplemental monthly benefit
of $1,036 pursuant to the terms of Mr. Casaday's
supplemental retirement agreement in which the Company
agreed to pay the difference between the benefits he would
be entitled to under the Company's Employees' Retirement
Plan, assuming a full 20 years of service and if such
benefits were calculated without regard to restrictions
imposed under the Internal Revenue Code, and the amount of
pension benefit actually payable under the Company's
Employees' Retirement Plan.
Covered compensation under the Retirement Plan is the
same as the amount reported in the Salary column of the
Summary Compensation Table subject to IRS limitations.
Change in Control and Other Agreements
If following a change in control (as defined in such
agreements) of the Company, the employment of Mr. Pollock or
Mr. Karam is terminated or their compensation, position or
benefits are reduced, the employment agreements that the
Company has with each of them entitle them to receive a
severance payment equal to two times their annual salary for
the year in which such termination occurs and the unpaid
portion of their salary with respect to any additional years
remaining in the term of their employment agreements, other
than the year in which the termination occurs.
The Company has agreements with certain of its other
officers, including Mr. Kell, which entitle the officers to
receive a severance payment equal to two times their annual
salary if, following a change in control (as defined in such
agreements) of the Company, their employment is terminated
or their compensation, position or benefits are reduced.
FIVE-YEAR CUMULATIVE RETURN
The following graph compares the cumulative total
return on the Company's stock during the past five years
with the average cumulative total return during the same
period of the S & P 500 Stock Index, and a self-constructed
index of a group of comparable mid-sized natural gas
distribution companies, excluding the Company. The
companies included in the self-constructed natural gas
distribution index are: Atmos Energy Corporation, Cascade
Natural Gas Corporation, Colonial Gas Company, Connecticut
Energy Corp., Connecticut Natural Gas Co., North Carolina
Natural Gas Corp., Providence Energy Corp., Public Service
Company of North Carolina, Southeastern Michigan Gas
Enterprises, United Cities Gas Co., and Yankee Energy
Systems Inc. These companies, selected from the Edward D.
Jones Index for Natural Gas Distribution Companies, have
revenues, net plant, and market capitalization in the same
general range as that of the Company.
The graph reflects the investment of $100 on December
31, 1991, in the Company's Common Stock, the S & P 500 Stock
Index, and the gas utility index. Dividends are assumed to
be reinvested as paid in the Company's Common Stock and in
the S & P 500 Stock Index and quarterly in the stocks of the
gas utility index.
[PERFORMANCE GRAPH]
1991 1992 1993 1994 1995 1996
Pennsylvania Enterprises, Inc.
$100.00 $150.92 $156.20 $150.77 $223.27 $272.84
S&P 500 Stock Index
$100.00 $107.61 $118.40 $120.01 $164.95 $202.72
Gas Utility Index
$100.00 $126.73 $148.80 $134.71 $164.39 $180.80
SOLICITATION OF PROXIES
The Company will bear the costs of this solicitation of
proxies. In addition to solicitation by mail, arrangements
may be made with brokerage houses and other custodians,
nominees and fiduciaries to send material to their
principals, and the Company may reimburse them for their
expenses in so doing. To the extent necessary in order to
ensure a sufficient shareowner presence to constitute a
quorum, officers and other employees of the Company and its
principal subsidiary, PG Energy Inc. or designated agents
may, without additional renumeration, in person or by
telephone or telegram, request the return of proxies. In
addition, the Company has retained D. F. King & Co., Inc.
for assistance in the solicitation of proxies. For its
services, D. F. King will receive a fee estimated at $5,500
plus reimbursement for reasonable and customary
out-of-pocket expenses.
VOTE REQUIRED
Candidates for director receiving the highest number of
affirmative votes, up to the number of directors to be
elected, shall be elected. Broker non-votes, abstentions,
and withhold authority votes, will be counted in determining
the presence of a quorum but will have no effect on the
election of directors.
The Stock Incentive Plan will become effective upon
approval of the affirmative votes of the owners of the
majority of the Company's Common Stock present, or
represented, and entitled to vote on the approval of the
Plan. Abstentions will count towards the total vote on the
proposals and as such will have the effect of a "no" vote.
Broker non-votes will not count, for or against a proposal,
or for the purposes of determining the total vote on a
proposal.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as independent public
accountants for the Company for the year ended December 31,
1996, and for a number of years prior thereto.
Representatives of Arthur Andersen LLP will be present at
the Annual Meeting, and will be available to respond to
appropriate questions by shareowners.
In March, 1997, the Company requested Arthur Andersen
LLP and several other accounting firms to provide a proposal
concerning the terms and conditions of engagement as
independent accountants to the Company for future periods.
The decision to request proposals from Arthur Andersen LLP
and other accountants was approved by the Company's Audit
Committee. The Company expects to receive and consider such
proposals during the second quarter of 1997. Any change in
accountants would be submitted to the Audit Committee and
the Board of Directors for prior approval.
The report of Arthur Andersen LLP on the financial
statements of the Company for the fiscal years ended
December 31, 1996 and 1995, did not contain an adverse
opinion or a disclaimer of opinion, nor were such reports
qualified or modified as to uncertainty, audit scope
or accounting principles. There were no disagreements
between Arthur Andersen LLP and the Company on any matter of
accounting principle or practice, financial statement
disclosure or audit scope or procedure, which, if not
resolved to its satisfaction, would have caused Arthur
Andersen LLP to make reference to the subject matter of any
such disagreement in connection with this report.
SHAREOWNER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareowners intended to be presented at
the 1998 Annual Meeting of Shareowners must be received by
the Secretary of the Company at the Company's executive
offices, One PEI Center, Wilkes-Barre, Pennsylvania
18711-0601, by November 27, 1997, for inclusion in the
Company's proxy statement and form of proxy relating to that
meeting.
OTHER MATTERS
The Board of Directors knows of no other business to be
transacted at the Annual Meeting, but if any other matters
properly come before the meeting, the persons named as
proxies will vote upon such matters in accordance with their
best judgment.
By Order of the Board of Directors,
Thomas J. Ward
Vice President of Administrative Services
and Secretary
Wilkes-Barre, Pennsylvania
March 26, 1997
Upon written request the Company will provide without
charge to each person whose vote is solicited for the Annual
Meeting a copy of the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, as filed with the
Securities and Exchange Commission. Requests for such
Annual Report should be addressed to the Investor Relations
Department, Pennsylvania Enterprises, Inc., One PEI Center,
Wilkes-Barre, Pennsylvania 18711-0601. Persons who were not
shareowners of record on March 18, 1997, should include with
the request a representation that the person making the
request is a beneficial owner of Common Stock as of
the date of the request.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
REQUESTED TO SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Exhibit A
PENNSYLVANIA ENTERPRISES, INC.
STOCK INCENTIVE PLAN
SECTION 1. Purposes
The purposes of the Pennsylvania Enterprises, Inc.
Stock Incentive Plan (the "Plan") are (i) to enable
Pennsylvania Enterprises, Inc. (the "Company") and Related
Companies (as defined below) to attract and retain employees
who contribute to the Company's success by their ability,
ingenuity and industry, and strengthen the existing
mutuality of interests between such employees and the
Company's shareowners by offering such employees an equity
interest in the Company and thereby enabling them to
participate in the long-term success and growth of the
Company, and (ii) to enable the Company to pay part of the
compensation of its Outside Directors (as defined in Section
5.2) in options to purchase shares of the Company's common
stock ("Stock"), thereby increasing such directors'
proprietary interests in the Company and more closely
aligning their interests with those of other shareowners.
For purposes of the Plan, a "Related Company" means any
corporation, partnership, joint venture or other entity in
which the Company owns, directly or indirectly, at least a
50% beneficial ownership interest.
SECTION 2. Types of Awards
2.1 Awards under the Plan may be in the form of
(i) Stock Options; (ii) Restricted Stock; (iii) Bonus Stock;
and/or (iv) Dividend Equivalent Units.
2.2 An eligible employee may be granted one or
more types of awards, which may be independent or granted in
tandem. If two awards are granted in tandem, the employee
may exercise (or otherwise receive the benefit of) one award
only to the extent he or she relinquishes the tandem award.
2.3 Outside Directors may receive only
discretionary grants of Stock Options as provided in Section
5.2.
SECTION 3. Administration
3.1 The Plan shall be administered by the Stock
Option Committee of the Company's Board of Directors (the
"Board") or such other committee of directors as the Board
shall designate (the "Committee"), which shall consist of
not less than two directors each of whom is a "non-employee
director," as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934 or any successor rule. The
members of the Committee shall serve at the pleasure of the
Board. Notwithstanding the foregoing, grants of
Discretionary Stock Options (as defined below) to Outside
Directors shall only be made by the Board.
3.2 The Committee shall have the following
authority with respect to awards under the Plan other than
awards to Outside Directors: to grant awards to eligible
employees under the Plan; to adopt, alter and repeal such
administrative rules, guidelines and practices governing the
Plan as it shall deem advisable; to interpret the terms and
provisions of the Plan and any award granted under the Plan;
and to otherwise supervise the administration of the Plan.
In particular, and without limiting its authority and
powers, except with respect to awards to Outside Directors,
the Committee shall have the authority:
(a) to determine whether and to what extent
any award or combination of awards will be granted
hereunder, including whether any awards will be granted in
tandem with each other;
(b) to select the employees to whom
awards will be granted;
(c) to determine the number of shares of
Stock to be covered by each award granted hereunder subject
to the limitations contained herein;
(d) to determine the terms and
conditions of any award granted hereunder, including, but
not limited to, any vesting or other restrictions based on
such performance objectives (the"Performance Objectives")
and such other factors as the Committee may establish, and
to determine whether the Performance Objectives and other
terms and conditions of the award are satisfied;
(e) to determine the treatment of
awards upon an employee's retirement, disability, death,
termination for cause or other termination of employment;
(f) to determine pursuant to a formula
or otherwise the fair market value of the Stock on a given
date; provided, however, that if the Committee fails to
make such a determination, fair market value of the Stock on
a given date shall be the average of the high and low quoted
selling price of the Stock on the principal exchange upon
which the Stock is listed on the day preceding the date in
question, or if no such sale of Stock occurs on such date,
the average of the high and low prices on the nearest
trading date before such date;
(g) to determine that amounts equal to
the amount of any dividends declared with respect to the
number of shares covered by an award (i) will be paid to
the employee currently or (ii) will be deferred and deemed
to be reinvested or (iii) will otherwise be credited to the
employee, or that the employee has no rights with respect to
such dividends;
(h) to determine whether, to what
extent, and under what circumstances Stock and other amounts
payable with respect to an award will be deferred either
automatically or at the election of an employee, including
providing for and determining the amount (if any) of deemed
earnings on any deferred amount during any deferral period;
(i) to provide that the shares of Stock
received as a result of an award shall be subject to a right
of first refusal, pursuant to which the employee shall be
required to offer to the Company any shares that the
employee wishes to sell, subject to such terms and
conditions as the Committee may specify;
(j) to amend the terms of any award,
prospectively or retroactively; provided, however, that no
amendment shall impair the rights of the award holder
without his or her written consent; and
(k) to substitute new Stock Options for
previously granted Stock Options, or for options granted
under other plans or agreements, in each case including
previously granted options having higher option prices.
3.3 With respect to awards to Outside Directors,
the Committee shall have authority to interpret the Plan and
the terms of any awards granted to Outside Directors; to
adopt, amend, and rescind administrative regulations to
further the purposes of the Plan; and to take any
other action necessary to the proper operation of the Plan.
The Board shall have the power to make grants of
Discretionary Stock Options to Outside Directors pursuant to
Section 5.2, subject to the provisions of Section 6, and to
amend such awards.
3.4 All determinations made by the Committee or
the Board pursuant to the provisions of the Plan shall be
final and binding on all persons, including the Company and
Plan participants.
3.5 The Committee may from time to time delegate
to one or more officers of the Company any or all of its
authorities granted hereunder except with respect to awards
granted to persons subject to Section 16 of the Securities
Exchange Act of 1934. The Committee shall specify the
maximum number of shares that the officer or officers to
whom such authority is delegated may award.
SECTION 4. Stock Subject to Plan
4.1 The total number of shares of Stock which may
be issued under the Plan
shall be 460,000 (after the two-for-one stock split and
subject to adjustment as provided below). Such shares may
consist of authorized but unissued shares or treasury
shares. The payment of any award in cash shall not count
against this share limit.
4.2 To the extent a Stock Option terminates
without having been exercised, or an award terminates
without the holder having received payment of the award, or
shares awarded are forfeited, the shares subject to such
award shall again be available for distribution in
connection with awards under the Plan. Shares of Stock
equal in number to the shares surrendered in payment of the
option price, and shares of Stock which are withheld in
order to satisfy federal, state or local tax liability,
shall not count against the above limit, and shall again
be available for distribution in connection with awards
under the Plan.
4.3 No employee shall be granted Stock Options,
Restricted Stock, and/or Bonus Stock, or any combination of
the foregoing with respect to more than 200,000 shares of
Stock in any fiscal year and no employee shall be granted
more than 200,000 Dividend Equivalent Units in any fiscal
year (in each case, subject to adjustment as provided in
Section
4.4).
4.4 In the event of any merger, reorganization,
consolidation, sale of substantially all assets,
recapitalization, Stock dividend, Stock split, spin-off,
split-up, split-off, distribution of assets or other change
in corporate structure affecting the Stock, a substitution
or adjustment, as may be determined to be appropriate by the
Committee in its sole discretion, shall be made in the
aggregate number of shares reserved for issuance under the
Plan, the number of shares and Dividend Equivalent Units as
to which awards may be granted to any individual in
any fiscal year, the number of shares or Dividend Equivalent
units subject to outstanding awards and the amounts to be
paid by award holders or the Company, as the case may be,
with respect to outstanding awards; provided, however, that
no such adjustment shall increase the aggregate
value of any outstanding award. In the event any change
described in this Section 4.4 occurs and an adjustment is
made in the outstanding Stock Options held by employees, a
similar adjustment shall be made in the number and terms of
Stock Options held by Outside Directors.
SECTION 5. Eligibility
5.1 Employees of the Company or a Related
Company, including employees who are officers and/or
directors of the Company, are eligible to be granted awards
under the Plan, other than under Section 5.2. Except as
provided in Section 5.2, Outside Directors are not eligible
to be granted awards under the Plan. The employee
participants under the Plan shall be selected from time to
time by the Committee, in its sole discretion, from among
those eligible.
5.2 The Board, in its discretion, may grant
discretionary Stock Options to one or more Outside
Directors, subject to the provisions of Section 6. Stock
Options granted under this Section 5.2 shall be referred to
as "Discretionary Stock Options." For purposes of the Plan
the term "Outside Director" shall mean any director of the
Company other than one who is an employee of the Company or
a Related Company.
SECTION 6. Stock Options
6.1 The Stock Options awarded to employees under
the Plan may be of two types: (i) Incentive Stock Options
within the meaning of Section 422 of the Internal Revenue
Code or any successor provision thereto; and (ii)
Non-Qualified Stock Options. To the extent that any Stock
Option does not qualify as an Incentive Stock Option, it
shall constitute a Non-Qualified Stock Option. All Stock
Options awarded to Outside Directors shall be Non-Qualified
Stock Options.
6.2 Subject to the following provisions, Stock
Options awarded to employees under the Plan by the Committee
and Discretionary Stock Options awarded to Outside Directors
by the Board shall be in such form and shall have such terms
and conditions as the Committee or Board, as the case may
be, may determine (the Committee or the Board, as the case
may be, hereafter referred to as the "Granting Authority").
(a) Option Price. The option price per
share of Stock purchasable under a Stock Option shall be
determined by the Granting Authority, and may not be less
than the fair market value of the Stock on the date of the
award of the Stock Option.
(b) Option Term. The term of each
Stock Option shall be fixed by the Granting Authority.
(c) Exercisability. Stock Options
shall be exercisable at such time or times and subject
to such terms and conditions as shall be determined by the
Granting Authority. The Granting Authority may waive such
exercise provisions or accelerate the exercisability of the
Stock Option at any time in whole or in part.
(d) Method of Exercise. Stock Options
may be exercised in whole or in part at any time
during the option period by giving written notice of
exercise to the Company specifying the number of shares to
be purchased, accompanied by payment of the purchase price.
Payment of the purchase price shall be made in such manner
as the Granting Authority may provide in the award, which
may include cash (including cash equivalents), delivery of
shares of Stock already owned by the optionee or subject to
awards hereunder, "cashless exercise," any other manner
permitted by law determined by the Granting Authority, or
any combination of the foregoing. If the Granting Authority
determines that a Stock Option may be exercised using shares
of Restricted Stock, then unless the Granting Authority
provides otherwise, the shares received upon the exercise of
a Stock Option which are paid for using Restricted Stock
shall be restricted in accordance with the original terms of
the Restricted Stock award.
(e) No Shareowner Rights. An optionee
shall have neither rights to dividends or other rights of a
shareowner with respect to shares subject to a Stock Option
until the optionee has given written notice of exercise and
has paid for such shares.
(f) Surrender Rights. The Granting
Authority may provide that options may be surrendered for
cash upon any terms and conditions set by the Granting
Authority.
(g) Non-transferability. Unless
otherwise provided by the Granting Authority, (i) Stock
Options shall not be transferable by the optionee other than
by will or by the laws of descent and distribution, and (ii)
during the optionee's lifetime, all Stock Options shall be
exercisable only by the optionee or by his or her guardian
or legal representative.
(h) Termination of Employment.
Following the termination of an optionee's
employment with the Company or a Related Company, the Stock
Option shall be exercisable to the extent determined by the
Granting Authority. The Granting Authority may provide
different post-termination exercise provisions with respect
to termination of employment for different reasons. The
Granting Authority may provide that, notwithstanding the
option term fixed pursuant to Section 6.2(b), a Stock Option
which is outstanding on the date of an optionee's death
shall remain outstanding for an additional period after the
date of such death.
6.3 Notwithstanding the provisions of Section
6.2, no Incentive Stock Option shall (i) have an option
price which is less than 100% of the fair market value of
the Stock on the date of the award of the Incentive Stock
Option, (ii) be exercisable more than ten years after the
date such Incentive Stock Option is awarded, or (iii) be
awarded more than ten years after the effective date of the
Plan specified in Section 14. No Incentive Stock Option
granted to an employee who owns more than 10% of the total
combined voting power of all classes of stock ofthe Company
or any of its parent or subsidiary corporations, as defined
in Section 424 of the Code, shall (A) have an option price
which is less than 110% of the fair market value of the
Stock on the date of award of the Incentive Stock Option or
(B) be exercisable more than five years after the date such
Incentive Stock Option is awarded.
SECTION 7. Restricted Stock
Subject to the following provisions, all awards of
Restricted Stock to employees shall be in such form and
shall have such terms and conditions as the Committee may
determine:
(a) The Restricted Stock award shall
specify the number of shares of Restricted Stock
to be awarded, the price, if any, to be paid by the
recipient of the Restricted Stock and the date or
dates on which, or the conditions upon the satisfaction of
which, the Restricted Stock will vest. The grant and/or the
vesting of Restricted Stock may be conditioned upon the
completion of a specified period of service with the Company
or a Related Company, upon the attainment of specified
Performance Objectives or upon such other criteria as the
Committee may determine.
(b) Stock certificates representing the
Restricted Stock awarded to an employee shall be registered
in the employee's name, but the Committee may direct that
such certificates be held by the Company on behalf of the
employee. Except as may be permitted by the Committee, no
share of Restricted Stock may be sold, transferred,
assigned, pledged or otherwise encumbered by the employee
until such share has vested in accordance with the terms of
the Restricted Stock award. At the time Restricted Stock
vests, a certificate for such vested shares shall be
delivered to the employee (or his or her designated
beneficiary in the event of death), free of all
restrictions.
(c) The Committee may provide that the
employee shall have the right to vote or receive
dividends on Restricted Stock. Unless the Committee
provides otherwise, Stock received as a dividend on, or in
connection with a stock split of, Restricted Stock shall be
subject to the same restrictions as the Restricted Stock.
(d) Except as may be provided by the
Committee, in the event of an employee's termination of
employment before all of his or her Restricted Stock has
vested, or in the event any conditions to the vesting of
Restricted Stock have not been satisfied prior to any
deadline for the satisfaction of such conditions set forth
in the award, the shares of Restricted Stock which
have not vested shall be forfeited, and the Committee may
provide that (i) any purchase price paid by the employee
shall be returned to the employee or (ii) if lower, a cash
payment equal to the Restricted Stock's fair market value on
the date of forfeiture shall be paid to the employee.
(e) The Committee may waive, in whole
or in part, any or all of the conditions to receipt
of, or restrictions with respect to, any or all of the
employee's Restricted Stock.
SECTION 8. Bonus Stock
The Committee may award Bonus stock to an eligible
employee subject to such terms and conditions as the
Committee shall determine. The grant of Bonus Stock may be
conditioned upon the attainment of specified Performance
Objectives or upon such other criteria as the Committee may
determine. The Committee may waive such conditions in whole
or in part. Unless otherwise specified by the Committee, no
money shall be paid by the recipient for the Bonus Stock.
Alternatively, the Committee may offer eligible employees
the opportunity to purchase Bonus Stock at a discount from
its fair market value. The Bonus Stock award shall be
satisfied by the delivery of the designated number of shares
of Stock which are not subject to restriction.
SECTION 9. Dividend Equivalent Units
Subject to the following provisions, all awards of
Dividend Units to employees shall be in such form and shall
have such terms and conditions as the Committee may
determine:
(a) The Dividend Equivalent Unit award
shall specify the number of Dividend Equivalent Units
("Units") to be awarded. Each Unit shall be credited with
additional Units with respect to each cash dividend paid on
outstanding shares of Stock, as follows. The number of
additional Units to be credited with respect to the award
shall be the aggregate number derived by (1) multiplying the
declared dividend rate per share of Stock by the number of
Units held by the awardee with respect to that award as of
the dividend record date for such dividend (including Units
credited to such award on account of previous dividend
payments), and (2) dividing the resulting figure by the
Market Price (as defined below) of a share of Stock on the
dividend payment date. The number of Units shall be
calculated to the nearest 0.001 of a Unit. For purposes of
Section 9 of the Plan, the term "Market Price" shall mean
the average of the high and low quoted selling price of the
Stock, on the principal exchange on which the Stock is
listed, on the date in question, or, if no such sale of
Stock occurs on such day, the average of the high and low
prices on the nearest trading date before such date.
(b) Upon settlement of the award, the
awardee shall receive an amount equal to (1) the
number of Units then credited to his/her award reduced by
the number of Units initially awarded, multiplied by (2) the
Market Price of a share of Stock on the settlement date.
Such amount shall be paid in cash, Stock, or a combination
thereof, as determined by the Committee. All Units
granted to an employee in a particular award shall be
settled at the same time.
(c) The Committee may specify the
settlement date for any award of Units, or may
permit the awardee to elect a settlement date within a
period specified by the Committee. The Committee may
condition the grant and/or settlement of an award of
Dividend Equivalent Units upon the completion of a specified
period of service with the Company or a Related Company,
upon the attainment of specified Performance Objectives or
upon such other criteria as the Committee may determine; and
the Committee, in its discretion, may waive any such
conditions.
SECTION 10. Tax Withholding
10.1 Each employee shall, no later than the date
as of which the value of an award first becomes includible
in such person's gross income for applicable tax purposes,
pay to the Company, or make arrangements satisfactory to the
Committee regarding payment of, any federal, state, local or
other taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under
the Plan shall be conditional on such payment or
arrangements, 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 employee.
10.2 To the extent permitted by the Committee, and
subject to such terms and conditions as the Committee may
provide, an employee may elect to have the withholding tax
obligation, or any additional tax obligation with respect to
any awards hereunder, satisfied by (i)having the Company
withhold shares of Stock otherwise deliverable to such
person with respect to the award or (ii) delivering to the
Company shares of unrestricted Stock. Alternatively, the
Committee may require that a portion of the shares of Stock
otherwise deliverable be applied to satisfy the withholding
tax obligations with respect to the award.
SECTION 11. Amendments and Termination
The Board may discontinue the Plan at any time and may
amend it from time to time. No amendment or discontinuation
of the Plan shall adversely affect any award previously
granted without the award holder's written consent.
Amendments may be made without shareowner approval except as
required to satisfy Rule 16b-3 under the Securities Exchange
Act of 1934 (or any successor rule), or other stock exchange
or regulatory requirements.
SECTION 12. Change of Control
12.1 In the event of a Change of Control, unless
otherwise determined by the Committee at the time of grant
or by amendment (with the holder's consent) of such grant:
(a) all outstanding Stock Options
awarded under the Plan shall become fully
exercisable and vested;
(b) the restrictions applicable to any
outstanding Restricted Stock or Bonus Stock
awards under the Plan shall lapse and such shares and
awards shall be deemed fully
vested; and
(c) to the extent the cash payment of
any award or the settlement of a Dividend Equivalent Unit
is based on the fair market value of Stock, such fair market
value shall be the Change of Control Price.
12.2 A "Change of Control" shall be deemed to
occur on:
(a) the date that any person or group
deemed a person under Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act") other
than the Company and its subsidiaries as determined prior to
that date, in a transaction or series of transactions has
become the beneficial owner, directly or indirectly (with
beneficial ownership determined as provided in Rule 13d-3,
or any successor rule, under the Exchange Act) of 20% or
more of the outstanding securities of the Company having the
right under ordinary circumstances to vote at an election of
the Board;
(b) the date on which one-third or more
of the members of the Board shall consist of persons other
than Current Directors (for these purposes, a "Current
Director" shall mean any member of the Board as of the
effective date of the Plan and any successor of a Current
Director whose nomination or election has been approved by a
majority of the Current Directors then on the Board); or
(c) the date of approval by the
shareowners of the Company of an agreement providing
for the merger or consolidation of the Company with another
corporation where (i) the shareowners of the Company,
immediately prior to the merger or consolidation, would not
beneficially own, immediately after the merger or
consolidation, shares entitling such shareowners to 50% or
more of all votes (without consideration of the rights of
any class of stock to elect directors by a separate class
vote) to which all shareowners of the corporation issuing
cash or securities in the merger or consolidation would be
entitled in the election of directors, or (ii) where the
members of the Board, immediately prior to the merger or
consolidation, would not, immediately after the merger or
consolidation, constitute a majority of the board of
directors of the corporation issuing cash or securities in
the merger; or
(d) the date of approval by the
shareowners of the Company of the sale or other
disposition of all or substantially all of the assets of the
Company.
12.3 "Change of Control Price" means the highest
price per share of Stock paid in any transaction reported on
any national securities exchange where the Stock is traded,
or paid or offered in any transaction related to a Change of
Control, at any time during the 90-day period ending with
the Change of Control.
SECTION 13. General Provisions
13.1 Each award under the Plan shall be subject to
the requirement that, if at any time the Committee shall
determine that (i) the listing, registration or
qualification of the Stock subject or related thereto upon
any securities exchange or under any state or federal law,
or (ii) the consent or approval of any government regulatory
body, or (iii) an agreement by the recipient of an award
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
granting of such award or the issuance, purchase or delivery
of Stock thereunder, such award shall not be granted or
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.
13.2 Nothing set forth in this Plan shall prevent
the Board from adopting other or additional compensation
arrangements. Neither the adoption of the Plan nor any
award hereunder shall confer upon any employee of the
Company, or of a Related Company, any right to continued
employment, and no award to any Outside Director shall
confer upon such Outside Director any right to continued
service as a director.
13.3 Determinations by the Board or the Committee
under the Plan relating to the form, amount, and terms and
conditions of awards need not be uniform, and may be made
selectively among persons who receive or are eligible to
receive awards under the Plan, whether or not such persons
are similarly situated.
13.4 No member of the Board or the Committee, nor
any officer or employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for
any action, determination or interpretation taken or made
with respect to the Plan, and all members of the Board or
the Committee and all officers or employees of the Company
acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
SECTION 14. Effective Date of Plan
The Plan shall be effective on May 14, 1997, subject to
approval by the Company's shareowners at the 1997 Annual
Meeting of Shareowners.
___________________________________
_____________________________________
Notice of [LOGO]
Annual Meeting
of Shareowners
on May 14, 1997
and
Proxy Statement
___________________________________
_____________________________________
[PROXY]
PENNSYLVANIA ENTERPRISES, INC.
Solicited by the Board of Directors of the Company
Shareowner's Proxy
The undersigned hereby appoints John F. Kell, Jr., Joseph
F. Perugino, and Thomas J. Ward, or any one or more of them,
each with full power of substitution, the proxy or proxies
of the undersigned to vote the shares of Common Stock of
Pennsylvania Enterprises, Inc. which the undersigned would
be entitled to vote if personally present at the Annual
Meeting of Shareowners of Pennsylvania Enterprises, Inc. to
be held on May 14, 1997, at the Montage Mountain Ski Resort,
1000 Montage Mountain Road, Scranton, Pennsylvania, at 10:00
a.m., and at any and all adjournments or postponements
thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
PENNSYLVANIA ENTERPRISES, INC.
Annual Meeting of Shareowners
Wednesday, May 14, 1997
10:00 A. M.
Montage Mountain Ski Resort
1000 Montage Mountain Road
The shares represented by this proxy, which revokes all
prior proxies, will be voted as directed by the shareowner.
If no direction is given, such shares will be voted "FOR ALL
NOMINEES" in Item 1 and "FOR" Item 2.
Please mark
/ x / your votes as
indicated in
this example
The Board of Directors Recommends a Vote "FOR all nominees"
in Item 1.
Item 1 - Election of the following nominees as Directors:
Kenneth L. Pollock, William D. Davis, Thomas F. Karam,
Robert J. Keating, James A. Ross, John D. McCarthy, Ronald
W. Simms, Kenneth M. Pollock, Paul R. Freeman, John D.
McCarthy, Jr., and Richard A. Rose, Jr.
FOR all nominees listed
above (except as marked Withhold authority to
to the contrary on the vote for all nominees
line provided below) listed above
/ / / /
To withhold authority to vote for any individual
nominee(s), write the nominee(s)' name(s) below
________________________________________________
Item 2 - Proposal to approve the Stock Incentive Plan
FOR AGAINST ABSTAIN
/ / / / / /
Item 3 - In their discretion, the Proxies are authorized to
vote upon such other matters as may properly come before the
meeting.
If you plan to attend the Annual Meeting,
please check this box in order to receive
an admission ticket / /
Signature ___________________ Signature ___________________
Date ________
Please mark, date and sign your name exactly as it appears
above and return promptly in the enclosed envelope. For
joint accounts, each joint owner should sign. When signing
as an attorney, executor, administrator, trustee, guardian,
or other officer of a corporation, please give your full
title as such. If stock is owned by a partnership or
corporation, please indicate your capacity in signing the
proxy.
Directions to the Montage Mountain Ski Resort, Scranton,
Pennsylvania
From New York and Northern New Jersey: Take I-80 West into
Pennsylvania to I-380, proceed on I-380 North to I-81. Take
I-81 South to Exit 51 (Montage Mountain Road) and follow
signs.
From Philadelphia and Southeastern Pennsylvania: Take the
Northeast Extension of the Pennsylvania Turnpike to Exit 37
(I-81 North). Follow I-81 North to Exit 51 (Montage
Mountain Road) and follow signs.
From Western Pennsylvania and the Harrisburg Area: Take
I-81 North to Exit 51 (Montage Mountain Road) and follow
signs.
From Baltimore and Washington, DC: Take I-83 North to I-81.
Take I-81 North to Exit 51 (Montage Mountain Road) and
follow signs.
[LETTER]
March 31, 1997
Dear 401(k) Plan Participant:
As you know, shares of common stock of Pennsylvania
Enterprises, Inc. (PEI) are added to your individual
Employees' Savings Plan (401(k)) account through your
contributions, matching contributions by the Company, and/or
the reinvestment of dividends on stock held in your account.
The total investments in your 401(k) account will be an
important part of your retirement package.
Because you are the owner of the shares of common
stock of PEI held in your 401(k) account, you are entitled
to vote those shares by proxy at the Annual Meeting of
Shareowners.
Therefore, enclosed is a 1996 Annual Report to
Shareowners, a Notice of Annual Meeting, Proxy Statement,
and your shareowner's proxy card for the shares of common
stock held in your 401(k) account. I would appreciate your
signing, dating, and returning your proxy card as soon as
possible by mailing it in the enclosed envelope, to
Retirement & Investment Services, PNC Bank, P. O. Box 937,
Scranton, PA 18540-9951, Attention: Employee Benefit
Department.
Your vote is important. Whether or not you expect to
attend the Annual Meeting, please complete your proxy card
and return it as indicated.
Thank you for your cooperation.
/s/ Thomas F. Karam
Thomas F. Karam
President and Chief Executive Officer
jmm
Enclosures
[REMINDER LETTER]
April 11, 1997
On March 26, 1997, a Notice of Annual Meeting of
Shareowners of Pennsylvania Enterprises, Inc. (PEI) to be
held on May 14, 1997, was sent to every common shareowner of
record on March 18, 1997.
A large number of active employees are registered
shareowners of PEI, and if you are one of them, we ask that
if you have not already done so, that you give this matter
your prompt attention by sending your proxy card in the
postage-free envelope provided, addressed to ChaseMellon
Shareholder Services, New York.
Also, if you received a proxy card for the Employees'
Savings Plan (401(k)) stock held in your name by the
Trustee, we would also appreciate your sending that card to
the Trustee, PNC Bank.
THOMAS J. WARD
Vice President,
Administrative Services, and Secretary