[EnergyNorth logo]
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EnergyNorth, Inc. [bullet] 1260 Elm Street [bullet] P.O. Box 329 [bullet]
Manchester, New Hampshire 03105-0329 [bullet] Telephone (603) 625-4000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held February 3, 1999
To the Stockholders of
ENERGYNORTH, INC.:
The annual meeting of stockholders of EnergyNorth, Inc. will be held at the
Center of New Hampshire Holiday Inn, 700 Elm Street, Manchester, New Hampshire,
at 11:00 a.m. on Wednesday, February 3, 1999, for the following purposes:
1. To elect four directors to the Board of Directors.
2. To approve the EnergyNorth, Inc. 1998 Stock Option Plan.
3. To ratify the appointment of independent public accountants for 1999.
4. To transact such other business as may lawfully come before the meeting
or any adjournments thereof.
Only stockholders of record at the close of business on December 15, 1998
will be eligible to vote at this meeting and any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
RICHARD A. SAMUELS, Secretary
December 21, 1998
IMPORTANT
The interest and cooperation of all stockholders in the affairs of the
Company are considered to be of the greatest importance by your Company's Board
of Directors. If you do not expect to attend the annual meeting, it is urgently
requested that, even though your holdings of stock may not be large, you
promptly mark, sign, date and return the accompanying proxy in the envelope
enclosed for your use. If you do so now, the Company will be saved the expense
of follow-up solicitations.
<PAGE>
<PAGE>
ENERGYNORTH, INC.
1260 Elm Street
P.O. Box 329
Manchester, New Hampshire 03105
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of EnergyNorth, Inc. (hereinafter the "Company") of
proxies in the accompanying form, for use at the annual meeting of stockholders
to be held at the Center of New Hampshire-Holiday Inn, 700 Elm Street,
Manchester, New Hampshire, at 11:00 a.m. on Wednesday, February 3, 1999. This
proxy statement and accompanying form of proxy are being mailed to stockholders
on or about December 21, 1998.
The cost of this solicitation is being borne by the Company. In addition to
the use of the mails, proxies may be solicited by advertisement, telephone,
facsimile, electronic message and personal interview.
SUBSIDIARIES
Some of the information contained in this proxy statement refers to the
Company's subsidiaries, EnergyNorth Natural Gas, Inc. ("ENGI"); EnergyNorth
Propane, Inc. ("ENPI"); ENI Mechanicals, Inc. ("ENMI"); and EnergyNorth Realty,
Inc. ("ENRI").
VOTING OF PROXIES
Proxies will be voted in accordance with stockholders' directions. If no
directions are given, proxies will be voted in favor of the election as
directors of the four persons named as nominees under the caption "Election of
Directors" and in favor of the proposals to approve the 1998 Stock Option Plan
and to ratify the appointment of independent public accountants. There is no
reason to believe that any nominee for director will not be a candidate or will
be unwilling to serve, but if either event occurs it is intended that the shares
represented by the proxies will be voted for any substitute nominee designated
by the Board of Directors.
At the meeting, each stockholder will be entitled to one vote for each
share of stock standing in the stockholder's name on the books of the Company at
the close of business on December 15, 1998. On that date, the Company had
outstanding and entitled to vote 3,319,718 shares of $1.00 par value Common
Stock.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise. Filing of a duly executed proxy bearing a later date with the
Company's secretary or appearing at the meeting and voting in person will
constitute such revocation.
The Bylaws of the Company provide for the election of four directors to the
Board of eleven directors. The proxies cannot be voted for a greater number than
for the four vacancies to be filled.
BOARD OF DIRECTORS
The Board of Directors of the Company met five times during the most recent
fiscal year. Each director attended 75% or more of the aggregate of the total
number of Board meetings and total number of meetings of Committees on which the
director served.
The Compensation Committee of the Board consists of Sylvio L. Dupuis,
Chairman, Roger C. Avery and John E. Tulley II. This Committee reviews the
compensation of the officers and directors of the Company and makes
recommendations to the Board of Directors with respect to those matters. It held
three meetings during the fiscal year.
<PAGE>
The Audit Committee of the Board consists of Richard B. Couser, Chairman,
Roger C. Avery and Joan P. Cudhea. It held two meetings during the fiscal year.
This Committee reviews the scope and results of the audit by the independent
public accountants, makes recommendations to the Board of Directors as to the
selection of independent public accountants for each fiscal year, and approves
services provided by the independent public accountants and the fees for those
services. It also reviews systems of internal control and accounting policies
and procedures, financial reporting, and other matters relating to fiscal
management of the Company.
The Board does not have a nominating committee.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of the Company's $1.00 par value Common Stock, its only class of securities, by
each director and nominee for director, certain executive officers (Messrs.
Childs, Demers and Margossian), and all directors and executive officers as a
group, as of October 21, 1998. No person is known to the Company to own more
than 5% of the Company's stock.
<TABLE>
<CAPTION>
Name Shares Beneficially Owned*
- ---- -----------------------------
<S> <C>
Roger C. Avery (1) 34,377
Edward T. Borer (2) 15,189
Michelle L. Chicoine 2,494
Frank L. Childs 1,306
Richard B. Couser 257
Joan P. Cudhea (3) 13,952
Richard P. Demers 2,044
Sylvio L. Dupuis 929
Robert R. Giordano (4) 17,371
Constance B. Girard-diCarlo 235
Andrew E. Lietz 1,000
Kenneth M. Margossian --
N. George Mattaini (5) 11,512
John E. Tulley II 400
All Directors, Nominees and Executive Officers
as a Group (16 in number at 12/1/98) 102,917
</TABLE>
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*The beneficial ownership of shares of directors, nominees, and executive
officers of the Company in no individual case, except Mr. Avery, whose
beneficial ownership represented 1.04 percent, exceeded one percent of the
outstanding Common Stock of the Company. Such ownership represented in the
aggregate 3.1 percent of the outstanding Common Stock.
2
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(1) Includes 12,879 shares held by Mr. Avery solely in a fiduciary capacity and
in which he disclaims beneficial ownership.
(2) Includes 963 shares held by Mr. Borer's spouse, in which he disclaims
beneficial ownership.
(3) Includes 1,690 shares held by Ms. Cudhea's daughter-in-law, in which she
disclaims beneficial ownership and over which she shares investment power
only.
(4) Includes 430 shares held by Mr. Giordano's spouse, in which he disclaims
beneficial ownership.
(5) Includes 7,404 shares held by Mr. Mattaini's spouse, in which he disclaims
beneficial ownership.
ELECTION OF DIRECTORS
(Item 1 on Proxy)
The following information concerning the name, age at December 31, 1998,
and business experience of the four persons to be nominated for election as
directors and the seven directors whose terms do not expire in 1999 has been
furnished to the Company by the nominees and directors. The election of each
nominee will require the affirmative votes of the holders of a majority of the
shares of Common Stock present at the meeting and entitled to vote. Where
proxies are marked "withhold authority," such shares are included in determining
the number of shares present and voting. "Broker non-votes" on proxies returned
by brokers holding shares for beneficial owners who have not provided
instructions as to voting for directors will be counted as a vote for each
nominee.
Each person nominated, if elected, will hold office until the annual
meeting to be held in the year in which his or her term expires and until his or
her successor is duly elected.
NOMINEES FOR ELECTION FOR TERM OF THREE YEARS EXPIRING IN 2002
<TABLE>
<CAPTION>
Name, Age and Other Served as
Positions Held With Director Principal Occupation or Employment
the Company Since During Last Five Years
- -------------------------- ---------- ---------------------------------------------------------
<S> <C> <C>
Edward T. Borer, 60(1) 1982 Chairman (and, until 1996, Chief Executive Officer; and,
Chairman of the Board until 1995, President) of Philadelphia Corporation for
Investment Services, a registered securities broker/
dealer and investment advisor
Michelle L. Chicoine, 42 -- President of ENGI; Vice Chairman of ENPI and ENMI
Executive Vice President
Richard B. Couser, 57 1985 Attorney with Orr & Reno, Professional Association
Constance B. 1994 President, Healthcare Support Services, a division of
Girard-diCarlo, 51 ARAMARK Corporation, which manages support
service departments in the healthcare industry
</TABLE>
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DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 2001
<TABLE>
<CAPTION>
Name, Age and Other Served as
Positions Held With Director Principal Occupation or Employment
the Company Since During Last Five Years
- ------------------------ ---------- -----------------------------------------------------
<S> <C> <C>
Joan P. Cudhea, 66 1984 Certified Financial Planner and Registered Investment
Advisor
Sylvio L. Dupuis, 64 1982 Optometrist; Executive Director of McLane, Graf, Raul-
erson & Middleton, Professional Association law firm;
formerly (until 1996) Commissioner of Insurance -
State of New Hampshire; formerly (until 1994) Presi-
dent and Chief Executive Officer, Catholic Medical
Center, a hospital
Andrew E. Lietz, 60(2) 1998 President, Chief Executive Officer and Director (until
1995, Vice President and Chief Operating Officer)
of Hadco Corporation, a manufacturer of printed
circuit boards
</TABLE>
DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 2000
<TABLE>
<CAPTION>
Name, Age and Other Served as
Positions Held With Director Principal Occupation or Employment
the Company Since During Last Five Years
- ----------------------- ---------- ---------------------------------------------------------
<S> <C> <C>
Roger C. Avery, 59 1984 President and Chief Executive Officer, Illinois Gas Com-
pany; Adjunct Associate Professor, Brown University
Robert R. Giordano, 60 1988 Chairman and Chief Executive Officer of ENGI and
President and Chief ENPI; Chairman, President and Chief Executive
Executive Officer Officer of ENMI
N. George Mattaini, 73 1982 Retired President and Chief Executive Officer of the
Vice Chairman Company
of the Board
John E. Tulley II, 44 1997 President and Chief Executive Officer, Tulley Buick
Pontiac Company, Inc.
</TABLE>
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(1) Mr. Borer is a director of Philadelphia Corporation for Investment Services
and Chester Valley Bancorp Inc., a NASDAQ traded company. Chester Valley
Bancorp Inc. is a 100% owner of Philadelphia Corporation for Investment
Services.
(2) Mr. Leitz is a director of the Wyman-Gordon Company.
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Compensation of Directors
The Chairman of the Board of Directors receives an annual retainer of
$42,000 and the Vice Chairman receives an annual retainer of $24,000. All other
directors receive annual retainers of $10,500. Committee Chairmen receive
additional annual retainers of $2,500. Incentive compensation in the amount of
100 shares of the Company's $1.00 par value Common Stock is awarded to each
director annually provided that the Company has achieved certain fiscal year
earnings and shareholder return objectives. Directors, other than the Chairman
and Vice Chairman, receive fees of $600 for each Board meeting attended and $500
for each committee meeting attended, with the exception of multiple meetings of
the Board of Directors held on the day of the annual meeting of the Board of
Directors. Directors who are employees receive no annual retainers, director
incentive compensation, or meeting fees.
Directors may elect to have portions of their retainers and fees credited
each year to a deferred compensation account pursuant to a plan that provides
for accrual of interest and distribution of the deferral accounts in lump sum
amounts or in equal installments over ten years, at the option of each director,
beginning on a date designated by the director.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that each
director and certain officers of the Company file reports of initial beneficial
ownership and changes in beneficial ownership of the Company's common stock with
the Securities and Exchange Commission. To the Company's knowledge, during 1998
all directors and officers filed all such required notices.
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EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by the
Company for services rendered in all capacities during the fiscal years ended
September 30, 1998, 1997 and 1996 to the Chief Executive Officer and the four
other executive officers of the Company whose salary and cash incentive & bonus
award for the 1998 fiscal year exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
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Long-Term
Annual Compensation Compensation
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Cash Incentive Restricted Stock All Other
Name and Principal Position Year Salary(1) & Bonus Awards Other Awards(2) Compensation(3)
- ----------------------------- ------ ----------- ---------------- --------- ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Giordano 1998 $229,902 $56,832 $2,656 $55,136(4) $16,170
President and CEO 1997 210,797 61,217 2,234 20,403 12,132
1996 200,334 59,103 2,492 19,677 7,961
Michelle L. Chicoine 1998 $126,667 $34,342(4) $1,593 $ 8,078 $ 7,303
Executive Vice 1997 111,595 26,832 1,350 8,932 6,013
President 1996 85,584 21,550 1,053 7,164 4,095
Frank L. Childs 1998 $115,883 $44,342(4) $ 0 $ 8,078 $ 7,260
Senior Vice President, 1997 107,417 25,695 0 8,563 3,571
Treasurer and CFO 1996 93,750 22,062 0 7,338 1,946
Kenneth M. Margossian(5) 1998 $115,853 $29,085(4) $ 0 $ 8,023 $ 1,499
Senior Vice President
Richard P. Demers 1998 $103,000 $19,244 $ 0 $ 6,413 $ 5,526
Vice President 1997 99,750 21,054 0 7,016 4,565
1996 95,333 20,959 0 6,971 4,397
</TABLE>
(1) Includes amounts earned and deferred without election by the officer and
amounts deferred pursuant to Deferred Compensation Agreements and the
Company's 401(k) plan.
(2) The aggregate number of shares of restricted stock holdings of the
above-named officers, as of September 30, 1998, is 7,694 shares, having a
value of $212,070. Dividends are paid on such shares.
(3) All other compensation paid in 1998 includes: Employer contributions to the
Company's 401(k) plan for Mr. Giordano ($5,169), Ms. Chicoine ($5,024), Mr.
Childs ($5,127), and Mr. Demers ($3,641); value of term life insurance
premiums paid for Mr. Giordano ($2,400), Ms. Chicoine ($2,279), Mr. Childs
($2,133), Mr. Margossian ($1,499) and Mr. Demers ($1,885); portion of
interest earned in a deferred compensation account by Mr. Giordano in
excess of 120% of federal long-term rate ($8,601).
(4) Includes an award of 1,350 shares of restricted stock which are subject to
forfeiture and nontransferability until July 16, 2000 for Mr. Giordano
($36,197) and cash bonus award for Ms. Chicoine ($10,000), Mr. Childs
($20,000) and Mr. Margossian ($5,000) for 1998 acquisition activities.
(5) Mr. Margossian joined the Company on September 29, 1997.
6
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The following Pension Plan Table sets forth estimated combined annual
benefits payable under the Company's Retirement Plan and Supplemental Executive
Retirement Plan ("SERP") at age 65 to persons in specified compensation and
years of service classifications. The combined annual benefits shown in the
table do not reflect offsets for benefits of Social Security and for retirement
benefits received from other employers.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
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Average Annual Earnings 15 Years of 25 Years of 35 Years of
During Highest Five Years Service Service Service
- --------------------------- ------------- ------------- ------------
<S> <C> <C> <C>
$125,000 $ 93,750 $ 93,750 $ 93,750
150,000 112,500 112,500 112,500
175,000 131,250 131,250 131,250
200,000 150,000 150,000 150,000
250,000 187,500 187,500 187,500
300,000 225,000 225,000 225,000
350,000 262,500 262,500 262,500
400,000 300,000 300,000 300,000
</TABLE>
Noncontributory Retirement Plan
All full-time salaried employees, including officers and certain part-time
employees, are eligible to participate in the Company's Retirement Plan,
provided an employee has reached the age of 21 and has completed one year of
service. The SERP is a noncontributory plan intended to supplement benefits of
the Retirement Plan for certain named executive officers, effective January 1,
1985. Under both plans normal retirement is at age 65 with a provision for early
retirement. Benefits under the Retirement Plan vest after five years of service
and under the SERP vest after ten years of service. Earnings under the plans for
the executive officers named in the Summary Compensation Table consist of
regular annual compensation, excluding bonuses or severance pay, and are the
same, except for bonuses and "Other", as the Annual Compensation and Long-Term
Compensation shown in the Summary Compensation Table. Mr. Giordano has 33
credited years of service under the plans, Ms. Chicoine 8 years, Mr. Childs 3
years, and Mr. Demers 10 years. Mr. Margossian has one credited year of service
under the Retirement Plan.
Funding of the Retirement Plan is based on actuarial computations and
results in a pool of assets held in trust that is unallocated with respect to
any particular individual. Benefits payable under the Retirement Plan are
calculated on the basis of straight life annuity amounts, accrued over a 25-year
period and are not subject to any deduction for Social Security Benefits or
other offset.
Benefits under the SERP are unfunded, accrue over a 15-year period and once
they are fully vested do not vary with years of service, except that SERP
participants who are included in the plan after September 30, 1995 will have
benefits reduced if they retire prior to normal retirement date under the
Retirement Plan. For an individual retiring at age 65, benefits are calculated
on the basis of 75% of the average of the five highest consecutive years'
earnings, less any amounts receivable for benefits of Social Security, the
Retirement Plan, and other qualified plans of the Company and other employers.
7
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Employment Agreements
The Company has employment agreements with Mr. Giordano and Ms. Chicoine
under which the Company has agreed to employ Mr. Giordano through March 31, 2003
and Ms. Chicoine for a two-year period, which may be extended annually for an
additional year. If the Company terminates the employment of either of these
individuals other than for breach of the agreement or misconduct, it is required
to continue salary payments including average incentive compensation, deferred
compensation and amounts the employee has elected to defer, through the term of
the agreement. Such termination payments will not be made following any
termination of employment that gives rise to payments under the management
continuity agreements described below.
Management Continuity Agreements
The Company has management continuity agreements (the "Continuity
Agreements") with Mr. Giordano, Ms. Chicoine, Messrs. Childs, Margossian, and
Demers. The Continuity Agreements provide that in the event of termination of
employment or a reduction in compensation, position or other conditions of
employment within a specified period following a Change in Control of the
Company, as defined in the Continuity Agreements, or termination by the employee
for Good Reason, as defined in the Continuity Agreements, following a Change in
Control, the Company shall pay to the employee a lump sum severance benefit and
certain other benefits. The severance benefit payable to Mr. Giordano is three
times his annual salary and incentive and deferred compensation, a prorated
incentive payment for the year in which termination occurs, the present value of
the additional amount he would have received under the Retirement Plan and the
SERP if he had continued to be employed for three years from termination, and
continuation of benefits or a payment equal to the present value of those
benefits. In addition, the Company is required to make an additional payment to
Mr. Giordano sufficient on an after-tax basis to satisfy any tax liability
incurred under the "parachute" tax rules of the Internal Revenue Code. The
severance benefit payable to Ms. Chicoine and Messrs. Childs and Margossian is
2.95 times each of their annual salaries and incentive and deferred
compensation. The severance benefit payable to Mr. Demers is the greater of two
times his annual salary or 2.75 times his five-year average taxable
compensation. In each Continuity Agreement, except for Mr. Giordano's, no
severance benefits are paid to the extent that such benefits, aggregated with
other benefits paid to the employee, constitute "excess parachute payments"
within the meaning of Section 280G of the Internal Revenue Code.
8
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PERFORMANCE GRAPH
The following graph compares the performance of the Company's common stock
to the S&P 500 Index and a natural gas industry peer group, consisting of 53
companies published by Media General Financial Services, Inc., for the last five
years. The graph assumes an investment of $100 at September 30, 1993 with all
dividends reinvested.
Comparison of Five Year Cumulative Total Return
[line graph and legend]
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9/93 9/94 9/95 9/96 9/97 9/98
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S&P 500 Index $100 $104 $135 $162 $227 $248
EnergyNorth, Inc. 100 89 89 107 137 172
Industry Peer Group 100 90 95 122 160 166
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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The compensation program for executive officers of the Company is
administered by the Compensation Committee of the Board of Directors. The
Committee's philosophy is to link executive compensation to improvements in
corporate performance and enhanced profitability and shareholder value. The
compensation program objectives are to (1) provide a competitive, market-based
total compensation package that enables the Company to attract and retain key
executives; (2) integrate all compensation programs with the Company's annual
and long-term business objectives and focus executive efforts on the fulfillment
of those objectives; and (3) provide variable compensation opportunities that
are directly linked with the performance of the Company and that align executive
remuneration with the interests of shareholders and utility subsidiary
ratepayers.
Base Salary
The base salary component of executive compensation reflects the first
objective stated above of attracting and retaining qualified executives.
9
<PAGE>
The salary range for each executive officer ("officer") position, including
the Chief Executive Officer ("CEO"), and the actual base salary of each officer
is reviewed annually. The salary ranges are based upon independent regional and
industry salary surveys, including peer groups, for comparable positions. These
surveys are reviewed and analyzed by the Company's Human Resources Department
with the assistance of outside consultants from time to time. Specific salary
levels are established through an evaluation of each officer's performance
relating to duties and individual achievements. For fiscal year 1998, the salary
range and specific officer salary recommendations were reviewed and approved by
the Compensation Committee.
In establishing the CEO's 1998 base salary, the Compensation Committee
reviewed the competitive market data and also reviewed performance relating to
the Company's earnings level and return on equity, cost containment efforts,
involvement in community and industry leadership activities and development of
relations with customers. The Committee's evaluation of the CEO's success in
meeting these goals resulted in the determination of his base salary. The
Compensation Committee recommended a base salary, which was approved by the
Board of Directors.
Key Employee Incentive Plan
Each officer participates in the Company's Key Employee Performance and
Equity Incentive Plan. The Plan is intended to compensate key employees based
upon performance standards and objectives and to reward performance with share
ownership in the Company. The Company seeks to align the interests of key
employees with the interests of shareholders and utility customers. In 1998 the
annual performance criteria which determined eligibility for awards under the
plan were (1) earnings levels compared to forecast, (2) total shareholder return
over a rolling three-year period compared to a peer group of comparable natural
gas distribution companies, (3) operations and maintenance expenses per customer
benchmarks compared to inflation, and (4) evaluation of individual performance.
Success in meeting these goals determines the amount of annual incentive
compensation an officer will receive. Targeted awards for the CEO under the
program range up to 40% of the midpoint of the market interval and up to 30% for
other participating officers. Three-quarters of the Incentive Plan award is paid
in cash and one-quarter is paid in the form of awards of Company Common Stock
that are subject to forfeiture and restrictions on transferability for a period
of three years.
Stock Option Plan
All officers will be eligible to receive grants of stock options under the
Company's 1998 Stock Option Plan, if it is approved by the shareholders. Grants
under the plan are intended to provide officers with long-term incentives which
appreciate in value with the continued favorable performance of the Company. The
Plan is described in detail in the section of this proxy statement entitled
"Adoption of the 1998 Stock Option Plan."
Bonus Awards
From time-to-time, the Company may determine that special recognition is
appropriate for one or more officers for an extraordinary level of performance.
Any bonus awards granted for this reason are intended to be non-recurring in
nature.
A key component of the Company's strategic goals has been to enhance
shareholder value by increasing the earnings contribution from non-utility
activities and expanding as a diversified provider of energy and energy related
products and services. During 1998, the Company identified and completed three
major acquisitions, one in the propane industry and two in the mechanical
contracting business. These acquisitions represented a major accomplishment by
the management of the Company toward achieving
10
<PAGE>
long-term strategic goals of diversifying the business units and expanding
the geographic area of operations. In recognition of these acquisitions during
1998, the Compensation Committee recommended and the Board approved the award of
bonuses to the CEO and four other officers.
Conclusion
The Compensation Committee believes that the total compensation program for
executives of the Company is competitive with the compensation programs provided
by similarly sized utilities. The Compensation Committee believes that any
amounts paid under the annual incentive plan are appropriately related to
corporate and individual performance, yielding awards that are directly linked
to annual financial and operational results of the Company.
Compensation Committee
of the Board of Directors
Sylvio L. Dupuis, Chairman
Roger C. Avery
John E. Tulley II
11
<PAGE>
ADOPTION OF THE 1998 STOCK OPTION PLAN
(Item 2 on Proxy)
On November 19, 1998, the Board of Directors, subject to stockholder
approval, adopted the EnergyNorth, Inc. 1998 Stock Option Plan (the "Plan"). The
purposes of the Plan are to promote the success and enhance the value of the
Company by linking the interests of eligible recipients to those of stockholders
and to assist the Company in its ability to motivate, attract, and retain highly
qualified individuals to serve as employees and directors of the Company.
Summary of the Stock Option Plan
Eligibility to Receive Awards. The Plan provides for grants of options to
purchase shares of Company Common Stock. Stock options may be granted under the
Plan to those officers, directors, and employees of the Company and its
subsidiaries that the Compensation Committee of the Board of Directors from time
to time selects. Although all of the more than 400 employees and directors of
the Company and its subsidiaries are to be eligible to participate in the Plan,
it is anticipated that options will be granted only to management level
employees and directors.
Shares Subject to the Incentive Plan. Subject to adjustment as provided in
the Plan, a maximum of 200,000 shares of Common Stock will be available for
issuance under the Plan. Shares issued under the Plan will be authorized but
previously unissued shares. Any shares covered by a grant that subsequently
cease to be subject to the grant (other than because of exercise) will again be
available for issuance in connection with future grants of options under the
Plan.
Administration. The Compensation Committee, so long as it is comprised of
at least two non-employee directors, will administer the Plan and will have the
authority to determine all matters relating to the Plan, including the persons
to whom options are granted, the number of shares of Common Stock subject to
options, and all terms, conditions, restrictions and limitations of grants;
provided, however, that no options may be granted without the approval of the
Board of Directors.
Options. Options granted under the Plan may be either incentive stock
options ("ISOs") or nonqualified stock options ("NSOs"). The exercise price for
all ISOs granted under the Plan will not be less than 100% of the Common Stock's
fair market value on the date of grant. "Fair market value," for purposes of the
Plan, means the average of the closing price of the Common Stock, as reported on
the New York Stock Exchange, during the ten trading days immediately preceding
the date of grant.
The Compensation Committee has broad discretion to determine the terms and
conditions under which options are exercisable, but under no circumstances may
an option have a term exceeding ten years from the date it is granted. The
exercise price for shares purchased under options must be paid in cash, or if
authorized by the Compensation Committee, by tendering shares of Common Stock or
any other legally permissible method.
Exercise Schedule. Each option will be exercisable according to a schedule
determined by the Compensation Committee. An option held by an employee who
retires or becomes disabled will become immediately exercisable and will remain
exercisable for three years unless the option expires earlier by its terms. An
option held by a director whose service is terminated because he or she cannot,
at his or her age, stand for reelection will continue to be exercisable in
accordance with its terms. At the death of an option holder, the options will
generally become immediately exercisable by the holder's representative and will
remain exercisable for one year unless the option expires earlier by its terms.
If the employment of an employee or the service of a director who holds options
terminates for any other reason, the options
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<PAGE>
held will terminate upon such termination of employment or service unless
otherwise provided in the stock option agreement that will govern each option
grant.
Transferability. No option will be assignable or otherwise transferable by
the holder other than by will or the laws of descent and distribution. During
the holder's lifetime, options may be exercised only by the holder.
Adjustment and Change of Control. The Plan provides that the number of
shares that may be issued under the Plan and the number of shares subject to
outstanding stock options will be proportionally adjusted for any share
dividends, splits, or other share distributions. In the event of an exchange,
reorganization, recapitalization, merger, or consolidation, securities that are
delivered in exchange for the Common Stock will be substituted for the shares
that may be purchased pursuant to an option, based on such exchange. In
addition, upon the occurrence of any of the following events, each outstanding
stock option becomes immediately exercisable and will remain exercisable for six
months: (1) any person or group becomes the beneficial owner of 20% or more of
the Common Stock; (2) the directors of the Company no longer constitute a
majority of the Board of Directors as a result of a tender offer, merger, sale
of assets, other business combination or a contested election; or (3) the
stockholders approve a sale of the Company's assets or a transaction in which
the Company would cease to be an independent publicly-owned corporation.
Amendment and Termination. The Plan may be amended or terminated at any
time by the Board of Directors. To the extent required by Section 422 of the
Internal Revenue Code (the "Code") or any applicable law or regulation, any
amendment that would increase the number of shares available under the Plan,
modify the class of persons eligible to receive options, or otherwise require
stockholders approval must be approved by the Company's stockholders.
Options Granted. The following table reflects the number of stock options
granted under the Plan on November 19, 1998, subject to approval of the Plan by
the stockholders. The exercise price for all such options is $28.00 per share,
and the options become exercisable over a four year period beginning in 1999
(except for options granted to Mr. Giordano, which become exercisable over five
years). All of the options are ISOs, with the exception of options granted to
directors.
<TABLE>
<CAPTION>
Number of Shares
Name and Position Underlying Options Executed
------------------- ----------------------------
<S> <C>
Robert R. Giordano, President and CEO 15,000
Michelle L. Chicoine, Executive Vice President 10,000
Frank L. Childs, Senior Vice President and CFO 5,000
Kenneth M. Margossian, Senior Vice President 5,000
Each Non-Employee Director 1,000
All Directors and Officers as a Group 44,000
</TABLE>
Federal Income Tax Consequences.
The following discussion summarizes the federal income tax consequences of
the Plan based on current provisions of the Code, which are subject to change.
The summary does not cover any state or local tax consequences of participation
in the Plan and does not address issues related to the tax consequences of any
individual participant.
Incentive Stock Options. An optionee will not recognize any income at the
time an ISO is granted. When an optionee exercises an ISO while employed by the
Company or one of its subsidiaries or within
13
<PAGE>
three months (one year for disability) after termination of employment, no
ordinary income will be recognized by the optionee at that time. The excess (if
any) of the fair market value of the shares acquired upon such exercise over the
option price may be an adjustment to the taxable income of the optionee for
alternative minimum tax purposes. If the shares acquired upon exercise are not
disposed of prior to the expiration of one year after the date of transfer and
two years after the date of grant of the option, the excess (if any) of the
sales proceeds over the aggregate option price of such shares will be or
long-term capital gain eligible for favorable rates under the Code. If the
shares are disposed of prior to the expiration of such periods (a "disqualifying
disposition"), the optionee will recognize ordinary income in the year of the
disqualifying disposition equal to the excess of the amount received for the
shares (or, in the case of a gift, the fair market value of the shares at the
time the ISO is exercised) over the option price. If an ISO is exercised by the
optionee more than three months (one year for disability) after termination of
employment, the tax consequences are the same as those described below for
nonqualified stock options.
The Company is not entitled to a tax deduction as the result of the grant
or exercise of an ISO. If the optionee has ordinary income taxable as
compensation as a result of a disqualifying disposition, the Company will be
entitled to a deduction at the same time and in the same amount as the optionee,
assuming that the deduction is not disallowed by Section 162(m) of the Code.
Nonqualified Stock Options. An optionee will not have any income at the
time an NSO is granted. When an optionee exercises an NSO, the difference
between the option price and any higher fair market value of the shares on the
date of exercise will be ordinary income to the optionee and will be allowed as
a deduction to the Company for federal income tax purposes, assuming that the
deduction is not disallowed by Section 162(m) of the Code. When an optionee
disposes of shares acquired by exercise of the option, any amount received in
excess of the market value of the shares on the date of exercise will be treated
as long-term or short-term capital gain, depending upon the holding period of
the shares. If the amount received is less than the market value of the shares
on the date of exercise, the loss will be treated as long-term or short-term
capital loss, depending upon the holding period of the shares.
Approval of the Plan will require the affirmative vote of the holders of a
majority of the Common Stock present at the meeting and entitled to vote.
"Broker non-votes" on proxies returned by brokers holding shares for beneficial
owners who have not provided instructions as to voting for the Plan will not be
counted in determining the number of votes cast or as a vote in favor of the
Plan. The Board of Directors recommends a vote FOR approval of the 1998 Stock
Option Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(Item 3 on Proxy)
Subject to stockholder ratification, the Board of Directors, upon
recommendation of the Audit Committee, has reappointed Arthur Andersen LLP to
serve as independent public accountants for the Company for the year 1999.
Arthur Andersen LLP were the Company's principal accountants in 1998.
Ratification of the appointment of independent public accountants will require
the affirmative vote of the holders of a majority of the shares of common stock
present at the meeting and entitled to vote. The Board of Directors recommends
that the stockholders vote for such ratification. Representatives of Arthur
Andersen LLP are expected to be present at the meeting and will have an
opportunity to make a statement and be available to respond to appropriate
questions.
STOCKHOLDERS' PROPOSALS
Stockholders may submit proposals to be considered for stockholder action
at the 2000 Annual Meeting if they do so in accordance with appropriate
regulations of the Securities and Exchange Commission. The deadline for
submitting a stockholder proposal for inclusion in the Company's proxy materials
for
14
<PAGE>
the 2000 Annual Meeting is August 24, 1999. With respect to any stockholder
proposal that a stockholder does not seek to have included in the Company's
proxy materials, the proxyholders named in management's proxy for that annual
meeting will be entitled to exercise their discretionary authority on that
proposal if the Company does not receive proper notice of the matter proposed
before November 9, 1999. If proper notice is timely received, the proxyholders
named in management's proxy may nevertheless exercise discretionary authority to
the extent permitted by appropriate regulations of the Securities and Exchange
Commission. In any event, the Company may have no obligation to include such
proposals submitted after August 24, 1999 on the agenda of the 2000 Annual
Meeting.
OTHER MATTERS
Management knows of no matters to be presented at the meeting other than
those set forth in the accompanying proxy. However, if any other matters are
properly presented for action, it is the intention of the persons named in the
proxy to vote upon such matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
RICHARD A. SAMUELS, Secretary
December 21, 1998
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO
EXECUTE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
AVAILABILITY OF FORM 10-K
A copy of the Company's annual report for the last fiscal year filed on
Form 10-K with the Securities and Exchange Commission will be furnished to
stockholders without charge upon written request to Treasurer, EnergyNorth,
Inc., P.O. Box 329, Manchester, NH 03105-0329.
15
<PAGE>
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16
<PAGE>
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17
<PAGE>
2670-PS-98
<PAGE>
ENERGYNORTH, INC. ANNUAL MEETING OF STOCKHOLDERS
DIRECTIONS TO:
THE CENTER OF NEW HAMPSHIRE - HOLIDAY INN
700 Elm Street, Manchester, NH 03101
Hotel tel. (603) 625-100
FROM LOGAN AIRPORT, BOSTON, MA: Through the Sumner Tunnel to Rte 93N. Near
Manchester, take Rte 293N (left hand exit off Rte 93). After Brown Ave exit,
stay to right as 293N bears right. Stay on Rte 293N to second exit, #5/Granite
St. Turn right at bottom of ramp, then go through two sets of lights. Hotel
garage is next left.
FROM NASHUA, NH: Take Rte 3N; just south of Manchester. Rte 3 becomes Rte 293.
Take exit #5/Granite St. and follow directions above.
FROM MAINE OR PORTSMOUTH, NH: Follow 95S to Portsmouth; after crossing the New
Hampshire state line, take 3rd exit (exit #3A) to 101W to 93S to 293N. After
passing Brown Ave exit, stay to the right as 293N bears right. Stay on Rte 293N
to second exit, #5/Granite St. Turn right at bottom of ramp, then go through two
sets of lights. Hotel garage is next left.
FROM VERMONT: Take Rte 89S to Rte 93S to 293S. On 293S take exit #6. Exit will
circle around and over Amoskeag Bridge. Stay right, take Canal St. ramp. Follow
Canal St. for about 1 mile (8 sets of lights) to Granite St. (Bus station is on
your left.) Take left on Granite St. Hotel garage is next left.
FROM NJ, NYC OR CT: Take Rte 95N to New Haven, then Rte 91N to Hartford. From
Hartford, take Rte 84 to Rte 90 (Mass Pike) Take Mass Pike to Rte 290
(Worcester) to Rte 495 (Lowell) to Rte 3N (Nashua). Stay on Rte 3. Just South of
Manchester, Rte 3 becomes Rte 293. Take exit #5/Granite St. Turn right at bottom
of ramp, then go through two sets of lights. Hotel garage is next left.
ENG16B
DETACH HERE
Proxy for the Annual Meeting of Stockholders of
EnergyNorth, Inc.
To Be Held February 3, 1999
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward T. Borer, Robert R. Giordano, and N.
George Mattaini, and each of them, proxies for the undersigned, with power of
substitution, to vote on behalf of the undersigned at the annual meeting of
stockholders to be held February 3, 1999, and any adjournments thereof, upon the
matters set forth in the notice of said meeting and as stated below. The proxies
are further authorized to vote, in their discretion, upon such other business as
may properly come before the meeting and any adjournments thereof.
UNLESS OTHERWISE INDICATED, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS
SET FORTH ON THE REVERSE SIDE.
- ----------- -----------
SEE REVERSE TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE MAIL IN THE ENCLOSED POSTAGE PAID ENVELOPE. SIDE
- ----------- -----------
<PAGE>
[EnergyNorth logo]
ENG16A
DETACH HERE
[x] Please mark
votes as in
this example.
The Board of Directors recommends a vote FOR the election of all nominees for
director, FOR the approval of the EnergyNorth, Inc. 1998 Stock Option Plan and
FOR the appointment of independent public accountants.
1. To elect the following nominees as directors:
Nominees: Edward T. Borer, Michelle L. Chicoine,
Richard B. Couser, Constance B. Girard-diCarlo
FOR WITHHELD
[ ] [ ]
[ ] ______________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve the EnergyNorth, Inc. [ ] [ ] [ ]
1998 Stock Option Plan.
3. To ratify the appointment of [ ] [ ] [ ]
independent public accountants for
1999.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
The undersigned also hereby acknowledges receipt of notice of
said meeting and the related proxy statement.
NOTE: Attorneys, executors, administrators, trustees and others
signing in a representative capacity should indicate that capacity.
If shares are held jointly, EACH holder must sign.
Signature: _____________ Date: ________ Signature: _____________ Date: ________
<PAGE>
APPENDIX A
ENERGYNORTH, INC.
1998 STOCK OPTION PLAN
1. Purposes
The purposes of the 1998 Stock Option Plan (the "Plan") are to
encourage eligible officers, directors, and employees of EnergyNorth, Inc. (the
"Company") and its Subsidiaries to increase their efforts to make the Company
and each Subsidiary more successful, to provide an additional inducement for
such individuals to remain with the Company or a Subsidiary, to reward such
individuals by providing the opportunity to acquire the Common Stock, $1.00 par
value, of the Company (the "Common Stock") on favorable terms, and to provide a
means through which the Company may attract able persons to enter the employ of
the Company or its Subsidiaries.
2. Administration
The Plan shall be administered by the Compensation Committee of the
Board of Directors of the Company (the "Compensation Committee"), so long as it
is comprised of two or more non-employee Directors, provided that no option
shall be granted without the approval of the Board of Directors.
The Committee shall interpret the Plan and prescribe such rules,
regulations, and procedures in connection with the Plan as it shall deem to be
necessary or advisable for the administration of the Plan consistent with the
purposes of the Plan. The Committee shall keep records of actions taken at its
meetings.
3. Eligibility
Officers, and directors, of the Company or any Subsidiary and those
employees ("Key Employees") of the Company or any Subsidiary who share the
primary responsibility for the management, growth, or protection of the business
of the Company or any Subsidiary shall be eligible to receive stock options as
described herein. Only Key Employees shall be eligible to receive incentive
stock options.
Subject to the provisions of the Plan and the approval of the Board of
Directors, the Committee shall have authority to grant stock options as
described herein and, in its discretion, to determine the individuals to whom
stock options shall be granted (an "Optionee") and the number of shares to be
covered by each stock option. In determining the eligibility of any individual,
as well as in determining the number of shares covered by each stock option, the
Committee shall consider the position and the responsibilities of the individual
being considered, the nature and value to the Company or a Subsidiary of his or
her services, his or her present and/or potential contribution to the success of
the Company or a Subsidiary, and such other factors as the Committee may deem
relevant.
4. Shares Available for Stock Options
The aggregate number of shares of the Common Stock which may be issued
or delivered under the Plan is 200,000 shares, subject to adjustment and
acceleration as set forth in Section 7. If any stock option granted under the
Plan is canceled in full or expires before exercise, the shares subject to such
stock option shall again be available for the purposes of the Plan.
5. Grant of Stock Options
The Committee shall have the authority, in its discretion, to grant
"incentive stock options" pursuant to Section 422 of the Internal Revenue Code
of 1986, as the same may from time to time be
<PAGE>
amended, (the "Code") and to grant "nonstatutory stock options" (stock options
which do not qualify under Section 422 of the Code). The aggregate fair market
value, determined as of the date of grant and as set forth in Section 6.G., of
all shares issuable upon exercise of all incentive stock options which become
exercisable by a Key Employee for the first time during any calendar year under
all plans of the corporation employing such Key Employee, any parent or
subsidiary corporations of such corporation and any predecessor corporation of
any such corporation, shall not exceed $100,000.
6. Terms and Conditions of Stock Options
Stock options granted under the Plan shall be subject to the following
terms and conditions and such other terms and conditions as the Committee shall
deem advisable:
A. Purchase Price. The purchase price at which each stock option may
be exercised (the "option price") shall be such price (either greater than, the
same as, or less than the fair market value per share of the Common Stock on the
date of grant) as the Committee, in its discretion, shall determine but (i) in
the case of incentive stock options, shall not be less than one hundred percent
(100%) of the fair market value per share of the shares of Common Stock covered
by the stock option on the date of grant and (ii) in the case of incentive stock
options granted to a Key Employee who together with the members of his immediate
family owns, or may be deemed to own, beneficially, more than 10% of the
outstanding voting securities of the Company (as the terms "immediate family"
and "beneficial ownership" are defined under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and such other terms and conditions as the
Committee shall deem advisable (such a Key Employee is referred to as a
"Principal Shareholder"), shall not be less than one hundred and ten percent
(110%) of the fair market value per share of the shares of Common Stock covered
by the stock option on the date of grant. In exercising its discretion, the
Committee shall take into account the nature and value to the Company of the
recipient's service, and such other factors as the Committee may deem relevant.
For purposes of this Section 6.A., fair market value shall be determined as set
forth in Section 6.G.
B. Payment. The option price is to be paid in full in cash upon the
exercise of a stock option; provided, however, that in lieu of cash an
individual may, if authorized by the Committee, exercise a stock option by
tendering to the Company shares of Common Stock owned by the individual and
having a fair market value on the date of exercise, determined as set forth in
Section 6(G), equal to the option price. The provisions of this Section 6.B.
shall not preclude the payment of the option price of a stock option by any
other legally permissible method specifically approved by the Committee. No
shares shall be issued or delivered upon exercise of a stock option until
payment of the option price in full has been made. When payment of the option
price in full has been made, the Optionee shall be considered for all purposes
to be the owner of the shares with respect to which payment has been made.
C. Restrictions on Exercise. No incentive stock option or
nonstatutory stock option shall be exercisable after the expiration of ten years
from the date of grant or, in the case of an incentive stock option or
nonstatutory stock option granted to a Principal Shareholder, five years from
the date of grant. Except as provided in this Section 6.C. and in Section 6.E.,
stock options may be exercised at such times, in such amounts and subject to
such restrictions as shall be determined by the Committee.
D. Transfer. No stock option shall be transferable other than by will
by the laws of descent and distribution, and each stock option shall be
exercisable during the lifetime of an Optionee only by the Optionee.
E. Retirement, Termination, Disability, Death. If a Key Employee
Retires (as defined below) or if the employment of a Key Employee who is
disabled within the meaning of Section 422(c)(6) of the Code ("Disabled
Optionee") is voluntarily terminated with the consent of the Company or a
Subsidiary, any then outstanding stock option held by such Key Employee shall
become immediately exercisable by such Key Employee at any time prior to the
stock option expiration date or within three years after the
-2-
<PAGE>
date of termination of employment, whichever is the shorter period. "Retires"
shall mean retirement on or after date of Normal Retirement, or on any earlier
date such that the employee's benefits are not reduced, under the Company's
retirement plan. Whether termination of employment is a voluntary termination
with consent and whether a Key Employee is disabled within the meaning of
Section 422(c)(6) of the Code shall be determined in each case by the Committee,
and any such determination by the Committee shall be final and binding.
If the service of an Optionee who is a director is terminated because
such Optionee cannot at his or her age stand for re-election to the Committee,
any then outstanding stock option held by such Optionee shall continue to be
exercisable and shall expire in accordance with its terms.
Following the death of an Optionee, any outstanding stock option held
by any such recipient at the time of death shall be exercisable in full (whether
or not so exercisable on the date of the recipient's death, but subject to such
other restrictions on the exercise of incentive stock options as are set forth
in Section 6(C)) by the person or persons entitled to do so under the
recipient's will, or, if the recipient shall fail to make testamentary
disposition of such stock option or shall die intestate, by the recipient's
legal representative, in either case at any time prior to the expiration date of
such stock option or within one year after the date of death, whichever is the
shorter period.
In the event of termination of the employment of an employee or the
service of any other Optionee for any reason other than as set forth in this
Section 6.E., the rights of such Optionee under any then outstanding stock
option shall terminate at the date of such termination of employment except as
otherwise provided in the stock option agreement entered in accordance with
Section 6.F.
F. Stock Option Agreement. Each stock option shall be confirmed by a
stock option agreement which shall be executed by the Chairman of the Committee
or the President on behalf of the Company and by the person to whom such stock
option is granted.
G. Valuation. The fair market value of the Common Stock shall be the
average of the closing price of the Common Stock, as reported on the New York
Stock Exchange, during the ten trading days immediately preceding the date of
grant.
7. Adjustment and Acceleration of Shares
If a dividend or other distribution shall be declared upon the Common
Stock payable in shares of the Common Stock, the number of shares of the Common
Stock then subject to any outstanding stock option and the number of shares
which may be issued or delivered under the Plan but are not then subject to an
outstanding stock option shall be adjusted by adding thereto the number of
shares which would have been distributable thereon if such shares had been
outstanding on the date fixed for determining the shareholders entitled to
receive such stock dividend or distribution.
If the outstanding shares of the Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Common Stock subject to any then outstanding stock option and for
each share of the Common Stock which may be issued or delivered under the Plan
but are not then subject to an outstanding stock option, the number and kind of
shares of stock or other securities into which each outstanding share of the
Common Stock shall be so changed or for which each such share shall be
exchangeable; or, alternatively the Committee, or the governing body of any
successor entity, shall make an appropriate and equitable adjustment in the
number and kind of option shares as to which the option is then unexercised in
order that, after such event, the option shares as to which the option is then
unexercised shall represent the same potential
-3-
<PAGE>
ownership interest in the company (or that part of a successor entity which
consists of the company) immediately after such event as they represent
immediately before such event.
Each outstanding stock option shall become immediately and fully
exercisable for a period of six months following the date of the following
occurrences: (i) if any person (including a group as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934) becomes directly or indirectly the
beneficial owner of 20% or more of the Common Stock; (ii) as a result of or in
connection with any cash tender offer, exchange offer, merger or other business
combination, sale of assets or contested election, or combination of the
foregoing, the persons who were directors of the Company just prior to such
event cease to constitute a majority of the Company's Committee of Directors; or
(iii) the stockholders of the Company approve an agreement providing for a
transaction in which the Company will cease to be an independent publicly-owned
corporation or a sale or other disposition of all or substantially all of the
assets of the Company occurs.
In case of any adjustment or acceleration as provided for in this
Section 7, the aggregate option price for all shares subject to each then
outstanding stock option prior to such adjustment or acceleration shall be the
aggregate option price for all shares of stock or other securities (including
any fraction) to which such shares shall have been adjusted or which shall have
been substituted for such shares.
All references in this Plan to shares shall, where the context so
requires, be deemed to be references to such shares as adjusted pursuant to this
Section 7. If any such adjustment to the number of shares subject to the grant
of stock options requires the approval of stockholders in order to enable the
Company to issue incentive stock options then no such adjustment shall be made
without the approval of the stockholders. Notwithstanding the foregoing, in the
case of incentive stock options, if the effect of any adjustment or acceleration
is to cause the stock option to fail to continue to qualify as an incentive
stock option or to cause a modification, extension, or renewal of such stock
option within the meaning of Section 424(h) of the Code, the Committee of
Directors may elect not to make such adjustment or acceleration but rather shall
use reasonable efforts to effect such other adjustment of each then outstanding
stock option as the Committee of Directors in its sole discretion shall deem
equitable and which will not result in any disqualification, modification,
extension, or renewal (within the meaning of Section 424(h) of the Code) of such
stock option.
8. Effect of the Plan on the Rights of Directors or Employees
Neither the adoption of the Plan nor any action of the Committee or the
Board of Directors pursuant to the Plan shall be deemed to give any person any
right to be granted a stock option under the Plan, and nothing in the Plan or in
any stock option agreement shall confer upon any person any right to continue to
serve the Company or any Subsidiary as an employee, officer, director,
consultant, or otherwise, or interfere in any way with the rights of the Company
or any Subsidiary to terminate the service or employment of any person at any
time.
9. Amendment
The right to alter and amend the Plan at any time and from time to time
and the right to revoke or terminate the Plan are hereby specifically reserved
to the Board of Directors; provided always that no such revocation or
termination shall terminate any outstanding stock option previously granted
under the Plan; and provided further that no such alteration or amendment of the
Plan shall, without prior shareholder approval, (i) increase the total number of
shares which may be issued or delivered under the Plan, (ii) make any changes in
the class of eligible officers, directors, or employees, or (iii) extend the
periods set forth in the Plan during which stock options may be granted. No
alteration, amendment, revocation, or termination of the Plan shall, without the
written consent of the holder of a stock option previously granted under the
Plan, adversely affect the rights of such holder with respect to such stock
option.
-4-
<PAGE>
10. Effective Date and Duration of Plan
The date of adoption of the Plan shall be November 19, 1998 provided
that the Plan is ratified and approved by shareholders of the Company at a
meeting of such holders held on or prior to November 18, 1999. No stock option
granted under the Plan may be exercised until after such ratification and
approval. No stock option may be granted under the Plan subsequent to
November 18, 2008.
