STOCK OPTION AGREEMENT
                    UNDER THE PENNSYLVANIA ENTERPRISES, INC.
                              STOCK INCENTIVE PLAN



Option No.:  _______________



         THIS  AGREEMENT  dated as of  _______________  (the "Date of Grant") is
made  by  and  between  PENNSYLVANIA  ENTERPRISES,   INC.  (the  "Company")  and
_______________ (the "Optionee").

     WHEREAS, the Company, has adopted the Pennsylvania Enterprises,  Inc. Stock
Incentive Plan (the "Plan"); and

         WHEREAS, the Company's Board of Directors (the "Board"), has determined
that it  would be in the best  interests  of the  Company  to  enter  into  this
Agreement.

         NOW,  THEREFORE,  the Company  hereby  grants an Option (the  "Option")
under the Plan to the Optionee on the following terms and conditions:

         1.       AMOUNT OF STOCK SUBJECT TO OPTION:

         The Company  hereby  grants to the  Optionee,  subject to the terms and
conditions  set forth in this  Agreement,  the Option to  purchase  ____________
shares of authorized and unissued common stock of the Company  (without  nominal
or par value,  with a stated value of $5.00 per share) or shares  reacquired  by
the Company and held in treasury (the  "Stock"),  which Stock is to be issued by
the Company upon the exercise of the Option as hereinafter set forth.

         2.       PURCHASE PRICE:

         The  purchase  price per share of Stock  subject to the Option shall be
_______________, the fair market value of a share of Stock on the Date of Grant,
as determined by the Board.

         3.       TYPE OF OPTION:

         The Option is intended to be a  Non-Qualified  Stock Option that is not
an  Incentive  Stock  Option  within the meaning of Section 422 of the  Internal
Revenue Code of 1986, as amended.



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Option No.:  _______________

         4.       PERIOD OF OPTION:

         The Option is granted as of the Date of Grant.  The Option shall expire
at the earliest to occur of (a) three months after termination of the Optionee's
employment or service on the Board for any reason except death,  disability,  or
retirement; (b) one year after termination of the Optionee's employment with the
Company or service on the Board by reason of death or disability; (c) five years
after  termination of the Optionee's  Employment by reason of retirement,  on or
after age 55, under the Employees' Retirement Plan of Pennsylvania  Enterprises,
Inc., or (d)  _______________  (ten years after the Date of Grant).  In no event
shall the term of the Option be greater than ten years.

         5.       EXERCISE OF OPTION:

         (a) The Option may be  exercised  with  respect to full  shares (and no
fractional shares shall be issued) as follows:

                  (i) no part of the Option may be exercised  during the first 
         year following the Date of Grant;

                  (ii)  thereafter,  the Option may be  exercised  in part or in
         full until it expires in accordance with Section 4.

         (b) In order to exercise the Option or any part  thereof,  the Optionee
shall give  notice in writing to the Company at its  headquarters  address (on a
form  acceptable to the Company) of the Optionee's  intention to purchase all or
part of the shares subject to the Option,  and in said notice the Optionee shall
set forth the number of shares as to which  he/she  desires to exercise  his/her
Option.  The notice must be accompanied by payment in full of the exercise price
for such shares.  Such payment may be made in cash,  through the delivery to the
Company of full  shares of Stock  which have been owned by the  Optionee  for at
least six months having a value equal to the total exercise price of the portion
of the Option so exercised or through a combination of cash and shares of Stock,
or in any such other  manner as may be  permitted  by the  Board.  Any shares of
Stock so  delivered  shall be valued at the  average of the high and low trading
prices for the trading date immediately prior to the date on which the Option is
exercised.  The Option will be deemed  exercised on the date a proper  notice of
exercise  (accompanied  as described  above) is hand  delivered,  or, if mailed,
postmarked.

         (c) The  Optionee  shall,  no later  than the date of  exercise  of the
Option,  make payment to the Company in cash or its  equivalent  of any federal,
state,  local or other taxes of any kind  required  by law to be  withheld  with
respect to the Option.  The  obligations  of the Company under the Plan and this
Option shall be  conditional  on such  payment,  and the 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 Optionee.

<PAGE>



         Option No.:  _______________

         6.       NON-TRANSFERABILITY OF OPTION:

         The Option is not transferable otherwise than by will or by the laws of
descent and distribution. To the extent the Option is exercisable at the time of
the Optionee's  death, it may be exercised by the executor or  administrator  of
the  Optionee's  estate or by the person  designated  by will or entitled by the
laws of descent and  distribution,  upon such  death,  to any  remaining  rights
arising out of the Option.

         7.       CHANGE OF CONTROL:

         Notwithstanding  the  provisions  of Section 4, the Option shall become
fully  exercisable upon the occurrence of a Change of Control (as defined in the
Plan).

         8.       CHANGE IN CAPITAL:

         If prior to the expiration of the Option, there shall be any changes in
the  Stock  structure  of the  Company  by reason  of the  declaration  of stock
dividends,  recapitalization  resulting in stock  split-ups or  combinations  or
exchanges of shares by reason of merger,  consolidation,  or by any other means,
then the number of shares subject to the Option and the exercise price per share
of Stock shall be equitably and appropriately  adjusted as the Board in its sole
discretion  shall  deem just and  reasonable  in light of all the  circumstances
pertaining thereto.

         9.       RIGHT TO TERMINATE SERVICE AS DIRECTOR:

         The Option  shall not confer upon the  Optionee  any right to continued
service as a Director of the Company.

         10.      REGISTRATION AND OTHER REQUIREMENTS:

         The Option is subject to the requirement that, if at any time the Board
shall determine that (a) the listing, registration or qualification of the Stock
subject or related to the Option upon any securities exchange or under any state
or federal law, (b) the consent or approval of any governmental  regulatory body
or (c) an agreement by the Optionee 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  issuance,  purchase  or  delivery of Stock under the
Option,  the Option  shall not be  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 Board.

         11.      SUBJECT TO THE PLAN:

         The Option  evidenced by the  Agreement  and the  exercise  thereof are
subject to the terms and conditions of the Plan, which are  incorporated  herein
by reference and made a part hereof.  In addition,  the Option is subject to any
rules and regulations promulgated by the Board.



<PAGE>



         Option No.:  _______________

         IN WITNESS  WHEREOF,  this Agreement has been executed and delivered by
the parties hereto:





                                           PENNSYLVANIA ENTERPRISES, INC.



                                  By:      ______________________________
                                            Name:    Thomas F. Karam
                                            Title:    President and CEO


Accepted and agreed to as of the Date of Grant:



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Optionee