PENNSYLVANIA ENTERPRISES, INC.

                     DIRECTOR DEFERRED COMPENSATION PLAN

          (Amended and Restated Effective as of November 19, 1997)


Section 1.  Purpose and Effective Date

         (a)  Purpose.  The purpose of the Pennsylvania Enterprises, Inc.
Director Deferred Compensation Plan (the "Plan") is to enable Pennsylvania
Enterprises, Inc. (the "Company") to attract and retain directors of
outstanding ability by allowing them to defer and accumulate Director's Fees
and to strengthen the existing mutuality of interests between such Directors
and the Company's stockholders by enabling the Directors to defer their
Director's Fees in the form of Stock Units valued by reference to the market
price of the Company's common stock ("Stock").  For purposes of this Plan,
(i) "Director's Fees" means (A) the retainer fee for service as a director
and fees for attendance at meetings of the Boards of Directors and committees
of the Boards of the Company and those of its subsidiaries that elect to
participate in the Plan, and (B) shares of Stock awarded under the Company's
1995 Directors' Stock Compensation Plan; and (ii) "Director" means a member
of the Board of Directors of the Company who is not a full-time employee of
the Company or any of its subsidiaries.

         (b)  Effective Date.  The Plan is effective as of April 1, 1997.
The Plan as amended and restated is effective as of November 19, 1997.

Section 2.  Deferral of Payments

         (a)  Deferral Election.  At any time prior to the beginning of a
calendar year, a Director may elect (the "Deferral Election") that (1) in
lieu of payment in cash, all or any specified portion of the Director's Fees
to be earned by him as retainer and meeting fees during such calendar year,
and/or (2) in lieu of delivery under the Company's 1995 Directors' Stock
Compensation Plan, all of the Directors' Fees to be earned by him in the form
of a Stock award under such plan during such year shall be credited in the
form of Stock Units to a bookkeeping account maintained by the Company on
such Director's behalf.  A Director shall also have the right to make a
Deferral Election during the 30 days following (i) the effective date of the
Plan, or (ii) the date on which he first becomes eligible to receive
Director's Fees.  Any Deferral Election made pursuant to the preceding
sentence shall be made with respect to all or any specified portion of the
Director's Fees to be earned as retainer and meeting fees in the remainder of
the calendar year following such Deferral Election.  At the time of making a
Deferral Election, a Director shall specify whether settlement of the Stock
Units credited to his account with respect to the particular Deferral
Election shall be made in cash or in Stock (as described in Section 4(b)).
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         (b)  Renewal of Elections.  Once a Deferral Election has been made,
it shall be automatically renewed from year to year unless the Director
elects to change or revoke such election.  However, each Deferral Election
shall be irrevocable as to Director's Fees earned prior to the commencement
of the calendar year next following any change or revocation.  The Director's
account shall be maintained in subaccounts to the extent necessary to reflect
different settlement options elected in different years.

Section 3.  Credits to Account

         (a)  Crediting of Stock Units.  Director's Fees which are the
subject of a Deferral Election shall not be paid currently in cash or in
Stock , but shall instead be converted into a number of Stock Units
(expressed to three decimal places) determined (1) in the case of Director's
Fees payable in cash, by dividing the amount of Director's Fees that would
have been paid to the Director on the particular day by the Market Price of a
share of Stock on such day, and (2) in the case of Director's Fees payable in
Stock, as the number of shares of Stock that would have been paid to the
Director on the particular day.  For purposes of the Plan, the "Market Price"
of the Company's Stock shall be the mean between the highest and lowest
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 mean between the high and low prices of the Stock on the
nearest trading date before such date.

         (b)  Crediting of Additional Stock Units in lieu of Dividends.  Each
Director's account shall be credited with additional Stock Units with respect
to each cash dividend paid on outstanding shares of Stock, as follows.  The
number of additional Stock Units to be credited to the Director's account
shall be the aggregate number derived by (1) multiplying the declared
dividend rate per share of Stock by the number of Stock Units then credited
to the Director's account under the Plan as of the dividend record date for
such dividend, and (2) dividing the resulting figure by the Market Price of a
share of Stock on the dividend payment date.

Section 4.  Payment of Deferred Amounts

         (a)  Settlement Date.  Settlement of the Stock Units credited to a
Director's account shall be made as of the first business day following the
Director's termination of service as a director.
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         (b)  Form of Settlement.  With respect to Stock Units which the
Director has elected to have settled in cash, there shall be delivered to the
Director, within 30 days of the settlement date, cash in an amount equal to
the number of full and fractional Stock Units being settled multiplied by the
Market Price on the settlement date.  With respect to Stock Units which the
Director has elected to have settled in Stock, there shall be delivered to
the Director, within 30 days of the settlement date, a number of shares of
Stock equal to the number of full Stock Units being settled (with cash in
lieu of any fractional Stock Unit based on the Market Price on the settlement
date).

Section 5.  Change of Control

         (a)  Settlement upon Change of Control.  Notwithstanding any other
provision of the Plan or of any Deferral Election, in the event of a Change
of Control, all Stock Units credited to a Director's account shall be settled
as of the date of the Change of Control for cash based on the Change of
Control Price.

         (b)  Change of Control Definition.  A "Change of Control" shall be
deemed to occur on:

                   (i)  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;

                   (ii)  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

                   (iii)  the date of approval by the stockholders of the
         Company of an agreement providing for the merger or consolidation of
         the Company with another corporation where (A) the stockholders of
         the Company, immediately prior to the merger or consolidation, would
         not beneficially own, immediately after the merger of consolidation,
         shares entitling such stockholders 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 stockholders of the
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         corporation issuing cash or securities in the merger of
         consolidation would be entitled in the election of directors, or (B)
         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

                   (iv)  the date of approval by the stockholders of the
         Company of the sale or other disposition of all or substantially all
         of the assets of the Company.

         (c)  Change of Control Price.  "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 6.  Unfunded Arrangement

         Neither this Plan nor the account established on behalf of any
Director shall be funded.  Rather, all accounts established under the Plan
and all entries thereto shall constitute bookkeeping records only and shall
not relate to any specific funds of the Company.  Settlement with respect to
Stock Units credited to a Director's account shall be made from the general
assets of the Company.  Notwithstanding the foregoing, the Company shall have
the right in its sole discretion to provide for the funding of its
obligations under the Plan through a trust or otherwise.

Section 7.  Administration and Other Matters

         (a)  Administration.  The Plan shall be administered by the Board of
Directors of the Company, who shall have full authority to interpret the Plan
and make all factual determinations necessary therefor.  No member of the
Board of Directors shall be liable for any act done or determination made in
good faith.  The construction and interpretation of any provision of the Plan
by the Board of Directors, and any determination by the Board of Directors of
amounts to which a Director is entitled under the Plan, shall be final and
conclusive.

         (b)  Amendments.  The Board of Directors may terminate, modify or
amend this Plan, effective prospectively, provided, however, that, except as
provided in Section 7(h), the Plan shall not be subject to termination,
modification or amendment with respect to the Stock Units credited to any
Director's account, including the right to the crediting of additional Stock
Units pursuant to Section 3(b), unless the affected Director consents.
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         (c)  Non-Alienation.  No Director (or estate of a Director) shall
have the power to transfer, assign, anticipate, mortgage or otherwise
encumber any rights or any amounts payable hereunder; nor shall any such
rights or payments be subject to seizure for the payment of any debts,
judgments, alimony, or separate maintenance, or be transferable by operation
of law in the event of bankruptcy, insolvency, or otherwise.

         (d)  Expenses.  The expenses of administering the Plan shall be
borne by the Company and shall not be charged against any Director's account.

         (e)  Withholding.  The Company shall have the right to deduct from
all payments any taxes required to be withheld with respect to such payments.

         (f)  Effect of Determination.  If any amounts deferred pursuant to
the Plan are found in a "determination" (within the meaning of Section
1313(a) of the Internal Revenue Code of 1986, as amended) to have been
includable in gross income by a director prior to payment of such amounts
under the Plan, such amounts shall be immediately paid to such Director,
notwithstanding his Deferral Elections.

         (g)  Effect on Other Plans.  All amounts which are credited to a
Director's account with respect to Directors' Fees payable in cash pursuant
to Section 3(a) (but not section 3(b)) shall, solely for purposes of
calculating benefits under the Company's Director Retirement Plan, be deemed
to have been paid to the Director on the date such amounts would have been
paid absent a Deferral Election.

         (h)  Adjustment in Certain Events.  In the event of any Stock
dividend, Stock split, spin-off, distribution of assets, or other change in
corporate structure affecting the Stock, appropriate adjustment, as may be
determined by the Board of Directors of the Company in its sole discretion,
shall be made in the number of Stock Units credited to accounts under the
Plan and the securities and/or cash to be delivered in settlement of such
Stock Units.

         IN WITNESS WHEREOF, this Plan has been duly executed by an
authorized officer of the Company on this _______ day of __________________,
1997.

                                       PENNSYLVANIA ENTERPRISES, INC.



                                              /s/ Thomas F. Karam           
                                                  Thomas F. Karam
                                       President and Chief Executive Officer
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