<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Southern Union Company
_______________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
Southern Union Company
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / 500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
___________________________________________________________________________
3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
___________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
___________________________________________________________________________
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/X/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing fee for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $125.00
2) Form, Schedule or Registration Statement No.: Preliminary Schedule 14A
3) Filing Party: Southern Union Company
4) Date Filed: 2 March 1994
<PAGE>
[logo]
SOUTHERN UNION COMPANY
504 Lavaca Street, Eighth Floor
Austin, Texas 78701
March 31, 1994
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Southern Union Company to be held at 2:00 p.m. (Central Daylight Savings Time)
on Wednesday, May 25, 1994 in the eighth floor atrium of the Company's offices
at Lavaca Plaza, 504 Lavaca Street, Austin, Texas. We look forward to greeting
personally those stockholders who are able to attend.
The accompanying Notice of Meeting and Proxy Statement describe the matters
to come before the meeting. SUCH MATTERS INCLUDE BOARD PROPOSALS TO AMEND THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS THAT REQUIRE THE
APPROVAL OF 80% OF THE OUTSTANDING SHARES OF COMMON STOCK. ACCORDINGLY, YOUR
PRESENCE IN PERSON OR BY PROXY IS EXTREMELY IMPORTANT.
Whether or not you plan to attend the meeting on May 25, 1994 please mark,
sign and date the enclosed proxy and return it in the envelope provided (which
requires no postage if mailed in the United States). Your prompt cooperation
will be appreciated.
On behalf of the Board of Directors,
Sincerely,
GEORGE L. LINDEMANN
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
<PAGE>
SOUTHERN UNION COMPANY
504 Lavaca Street, Eighth Floor
Austin, Texas 78701
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 1994
To the Holders of Common Stock of
SOUTHERN UNION COMPANY:
NOTICE IS HEREBY GIVEN that the 1994 Annual Meeting of Stockholders (the
"Meeting") of Southern Union Company, a Delaware corporation (the "Company"),
will be held in the eighth floor atrium of the Company's office at Lavaca Plaza,
504 Lavaca Street, Austin, Texas, on Wednesday, May 25,1994 at 2:00 p.m.
(Central Daylight Savings Time) for the purpose of considering and acting upon:
(i) the election of three persons to serve as the Class I directors until the
1997 Annual Meeting of Stockholders or until their successors are duly elected
and qualified; (ii) the approval of the proposal to amend the Restated
Certificate of Incorporation (the "Certificate") and Bylaws to increase the
maximum size of the Company's Board of Directors to twelve directors; (iii) the
approval of the proposal to amend the Certificate and Bylaws to eliminate
Article Twelfth of the Certificate and certain 80% supermajority voting
provisions contained in the Certificate and Bylaws; (iv) the adoption of the
Southern Union Company Supplemental Deferred Compensation Plan; (v) the adoption
of the Southern Union Company Directors' Deferred Compensation Plan; and (vi)
such other business as may properly come before the Meeting or any adjournment
or postponement thereof. The Board of Directors is not aware of any other
business to come before the Meeting.
The Board of Directors has fixed March 31, 1994, as the record date (the
"Record Date") for the determination of stockholders entitled to notice of, and
to vote at, the Meeting and any adjournment or postponement thereof. Only
holders of record of the Company's common stock, par value $1.00 per share
("Common Stock"), at the close of business on the Record Date are entitled to
vote on all matters coming before the Meeting or any adjournment or postponement
thereof. A complete list of stockholders of record entitled to vote at the
Meeting will be maintained in the Company's offices at 504 Lavaca Street, Eighth
Floor, Austin, Texas 78701, for ten days prior to the Meeting.
YOUR VOTE IS VERY IMPORTANT. The proposals to increase the maximum size of
the Board and to eliminate certain provisions of the Certificate and Bylaws
require the approval of 80% of the outstanding shares of Common Stock. Whether
or not you plan to attend the Meeting in person, please mark, execute, date and
return the enclosed proxy in the envelope provided (which requires no postage
if mailed within the United States). Should you attend the Meeting in person
you may, if you wish, withdraw your proxy and vote your shares in person.
By Order of the Board of Directors,
DENNIS K. MORGAN
SECRETARY
Austin, Texas
March 31, 1994
<PAGE>
SOUTHERN UNION COMPANY
504 Lavaca Street, Eighth Floor
Austin, Texas 78701
____________________
PROXY STATEMENT
____________________
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 1994
The accompanying proxy, to be mailed to stockholders together with the
Notice of Annual Meeting and this Proxy Statement on or about April 4, 1994, is
solicited by Southern Union Company (the "Company") in connection with the
Annual Meeting of Stockholders to be held on May 25,1994 (the "Meeting"). The
proxy may be revoked by a stockholder at any time prior to its exercise by
executing and returning a proxy bearing a later date, by giving written notice
of revocation to the Secretary of the Company or by attending the Meeting and
voting in person.
All properly executed, unrevoked proxies received before the Meeting will
be voted in accordance with the directions of the stockholders. When no
direction has been given by a stockholder returning a signed proxy, the proxy
will be voted FOR ALL NOMINEES named in this proxy statement for election as
directors and FOR all other proposals presented in this proxy statement.
Proxies should NOT be sent by stockholders to the Company but to Continental
Stock Transfer & Trust Company, the Company's Registrar and Transfer Agent, at 2
Broadway, 19th floor, New York, New York 10004.
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
March 31, 1994, has been set as the record date (the "Record Date") for
determination of stockholders entitled to notice of and to vote at the Meeting.
Holders of the Company's common stock, $1.00 par value (the "Common Stock"), at
the close of business on the Record Date will be entitled to one vote per share
on all proper business brought before the Meeting. With respect to the election
of directors, holders of Common Stock have cumulative voting rights, which
entitle each stockholder to that number of votes which equals the number of
shares held multiplied by the number of directors to be elected. The Bylaws of
the Company provide that any stockholder who intends to so cumulate votes must
give written notice to the Secretary of the Company no later than ten (10) days
after the date on which notice of the Meeting was first sent to stockholders.
On the Record Date, there were outstanding and entitled to vote 10,885,665
shares of Common Stock. The presence, in person or by proxy, of a majority of
the outstanding shares of Common Stock entitled to vote at the Meeting will
constitute a quorum.
<PAGE>
The following table shows as of the Record Date, unless otherwise
indicated, the number of all shares of the Company's Common Stock beneficially
held by each director, by each executive officer named in the management
compensation tables (see "Management Compensation"), by each person known by the
Company to beneficially own 5% or more of the Company's outstanding Common
Stock, and by all directors and executive officers as a group. Except as
otherwise indicated, each owner has sole voting and investment power over his
shares.
<TABLE>
<CAPTION>
NUMBER OF
NAME OF BENEFICIAL OWNER SHARES HELD PERCENT OF CLASS
- ------------------------ ------------ ----------------
<S> <C> <C>
George L. Lindemann 1,468,462(1) 13.50%
Adam M. Lindemann 913,860(2) 8.40%
George Lindemann, Jr. 913,860(2) 8.40%
950 Maidstone Drive
Wellington, Florida 33414
Sloan N. Lindemann 913,860(2) 8.40%
800 Fifth Avenue
New York, New York 10022
John E. Brennan 134,485(3) 1.24%
Frank W. Denius 5,172(4) *
Aaron I. Fleischman 132,903(5) 1.22%
Peter H. Kelley 36,954(6) *
Roger J. Pearson 8,137(7) *
George Rountree, III 17,363(8) *
Dan K. Wassong 6,372 *
Eugene N. Dubay 24,171(9) *
Ronald J. Endres 41,373(10) *
Dennis K. Morgan 2,562(11) *
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
Lee M. Bass 575,437(12)(13) 5.28%
201 Main Street
Fort Worth, Texas 76102
Sid R. Bass Management Trust(14) 575,437(12)(15) 5.28%
201 Main Street
Fort Worth, Texas 76102
Snyder Capital Management, Inc.(16) 606,261(16) 5.57%
350 California Street
Suite 1460
San Francisco, California 94104
All Directors and Executive Officers
as a group (17 in group) 2,798,144(17) 25.71%
<FN>
_______________
(1) Of these shares: 607,990 are owned by Mr. Lindemann; 804,972 shares are
owned by his wife, Dr. F.B. Lindemann; and, 55,500 shares represent shares
of Common Stock Mr. Lindemann is entitled to purchase upon the exercise of
presently exercisable stock options pursuant to the Company's 1982 Stock
Option Plan (the "1982 Plan") and the Company's 1992 Long-Term Stock
Incentive Plan (the "1992 Plan"). Such number excludes options to acquire
shares of Common Stock that are not exercisable within sixty days of the
date hereof. See "Management Compensation - Stock Options". A total of
1,367,392 shares held by Mr. and Mrs. Lindemann and their three children
have been pledged to Activated Communications Limited Partnership
("Activated"). Activated, which is owned and managed by, or for the
benefit of the Lindemanns, provided the funds used to purchase such shares.
Mr. Lindemann is the Chairman of the Board and President, and Mrs.
Lindemann is a director of the sole general partner of Activated.
(2) This information, including the numbers of shares set forth in the table,
was obtained from and is reported herein in reliance upon a Schedule 13D
(as amended through March 24, 1994) filed by Adam M. Lindemann, Dr. F.B.
Lindemann, George L. Lindemann, George Lindemann, Jr. and Sloan N.
Lindemann. Except as described in Note (1), each member of the Lindemann
family disclaims beneficial ownership of any shares owned by any other
member of the Lindemann family. Accordingly, except as described in Note
(1), the numbers of shares set forth in the table reflect only such
individual's direct ownership.
(3) Of these shares, 1,674 shares are owned by his wife, 74,520 are held in two
separate trusts for the benefit of members of his family and 37,500
represent shares that Mr. Brennan is entitled to purchase upon the exercise
of presently exercisable stock options granted to him pursuant to the 1982
Plan and the 1992 Plan. Such number excludes options to acquire shares of
Common Stock that are not exercisable within sixty days of the date hereof.
See "Management Compensation - Stock Options."
(4) Includes approximately 143 shares allocated to Mr. Denius pursuant to the
Southern Union Company Directors' Deferred Compensation Plan.
(5) Includes: 37,500 shares that Fleischman and Walsh, in which Mr. Fleischman
is Senior Partner, is entitled to purchase upon exercise of a warrant;
approximately 286 vested shares allocated to Mr. Fleischman pursuant to the
Southern Union Company Directors' Deferred Compensation Plan; and 37,438
shares owned by the Fleischman and Walsh 401(k) Profit Sharing Plan ("F&W
Plan") for which Mr. Fleischman is a trustee and a beneficiary. Mr.
Fleischman disclaims beneficial ownership of those shares held by the F&W
Plan in which he does not have a pecuniary interest.
(6) Includes 27,750 shares that Mr. Kelley is entitled to purchase upon the
exercise of presently exercisable stock options granted pursuant to the
1982 Plan and the 1992 Plan. Such number excludes options to acquire
shares of Common Stock that are not exercisable within sixty days of the
date hereof. See "Management Compensation - Stock Options." Such number
also includes: approximately 3,214 vested
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C>
shares held by the Southern Union Savings (401(k)) Plan; 228 vested shares
held through the Southern Union Stock Purchase Plan; and 181 vested shares
held through the Southern Union Company Supplemental Deferred Compensation
Plan (the "Supplemental Plan").
(7) Includes 6,417 shares owned jointly by Mr. Pearson and his father.
(8) Includes: 517 shares owned by his wife; and approximately 286 vested shares
allocated to Mr. Rountree pursuant to the Southern Union Company Directors'
Deferred Compensation Plan.
(9) Includes 21,000 shares Mr. Dubay is entitled to purchase upon the exercise
of presently exercisable stock options pursuant to the 1982 Plan and the
1992 Plan. Such number excludes options to acquire shares of Common Stock
that are not exercisable within sixty days of the date hereof. See
"Management Compensation - Stock Options." Such number also includes:
approximately 892 vested shares held through the Southern Union (401(k))
Savings Plan; and 623 vested shares held through the Supplemental Plan.
(10) Includes 36,000 shares Mr. Endres is entitled to purchase upon the exercise
of presently exercisable stock options pursuant to the 1982 Plan and the
1992 Plan. Such number excludes options to acquire shares of Common Stock
that are not exercisable within sixty days of the date hereof. See
"Management Compensation - Stock Options." Such number also includes:
approximately 2,110 vested shares held through the Southern Union (401(k))
Savings Plan; and 158 vested shares held through the Supplemental Plan.
(11) Includes 1,500 shares Mr. Morgan is entitled to purchase upon the exercise
of presently exercisable stock options pursuant to the 1992 Plan. Such
number excludes options to acquire shares of Common Stock that are not
exercisable within sixty days of the date hereof. See "Management
Compensation - Stock Options." Such number also includes: approximately
873 vested shares held through the Southern Union (401(k)) Savings Plan;
and approximately 189 vested shares held through the Supplemental Plan.
(12) Does not include 49,500 (representing less than 1% of the Common Stock
outstanding) owned by BEPCO International, Inc., which is owned in equal
parts by Lee M. Bass, Sid R. Bass and two other persons. Neither Lee M.
Bass nor Sid R. Bass is a director or officer of BEPCO International, Inc.
This information, the information set forth in note (14) and the number of
shares owned by Lee M. Bass and Sid R. Bass Management Trust set forth in
the table were obtained from and is reported herein in reliance upon a
Schedule 13D filed by Sid R. Bass, Lee M. Bass, Sid R. Bass Management
Trust and BEPCO International, Inc.
(13) Does not include shares reported to be held by Sid R. Bass Management
Trust. See notes (12), (14) and (15).
(14) Sid R. Bass Management Trust is a Revocable Trust under Texas law for which
Sid R. Bass, Lee M. Bass and one other person are trustees. See note (12).
(15) Does not include shares reported to be held by Lee M. Bass. See notes (12)
and (13).
(16) This information was obtained from and is reported herein in reliance upon
a Schedule 13G dated February 10, 1994 filed by Snyder Capital Management,
Inc.
(17) Excludes options granted pursuant to the 1982 Plan and the 1992 Plan to
acquire shares of Common Stock that are not presently exercisable or do not
become exercisable within sixty days of the date hereof. Includes
approximately 8,990 vested shares held through certain Company benefit and
deferred savings plans for which certain executive officers and directors
may be deemed beneficial owners, but excludes approximately 233 shares
which have not vested under the terms of such plans.
* Indicates less than one percent (1%).
</TABLE>
-4-
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes, each
of which serves a staggered three-year term of office. The terms of office of
the Class I directors expire at the Meeting. The Class II directors will serve
until the 1995 Annual Meeting of Stockholders and the Class III directors will
serve until the 1996 Annual Meeting of Stockholders. John E. Brennan, Frank W.
Denius and Roger J. Pearson (the "Nominees") are the Class I directors standing
for election to a three-year term of office expiring at the 1997 Annual Meeting
of Stockholders or when their successors are duly elected and qualified.
The Company is informed that each of the Nominees is willing, if elected,
to continue to serve as a director; however, if any of them should decline or
become unable to serve as a director for any reason, votes will be cast instead
for a substitute nominee designated by the Board of Directors or, if none is so
designated, will be cast according to the judgment of the person or persons
voting the proxy. If cumulative voting is in effect at the Meeting, unless
authority is withheld, the persons named in the enclosed proxy will allocate the
votes represented by such proxy in the manner they deem proper in their best
judgment.
Pursuant to the Company's Bylaws, any stockholder entitled to vote at a
meeting called for the election of directors may nominate candidates for
election as directors if written notice is delivered to the Company's Secretary
at least 45 days before an annual meeting (which is April 4, 1994 for the
meeting) or no later than ten days after the date of the notice of a special
meeting. Accordingly, no stockholder may make additional nominations at the
Annual Meeting. The notice must include certain information about the
nominating stockholder and the nominees. Certain persons are also disqualified
from serving as directors. A copy of the relevant Bylaw provisions may be
obtained from the Company's Secretary. As of the date hereof, no stockholder
has nominated any person to serve as a director of the Company.
Information as to the directors of the Company (including the Nominees) as
of March 31, 1994 is provided below:
NOMINEES
CLASS I - TERM EXPIRES IN 1997
John E. Brennan has been Vice Chairman of the Board of the Company since
February 1990. Mr. Brennan devotes only a small part of his business time to
the business of the Company. Mr. Brennan has been primarily engaged in private
investments since April 1992. Prior to April 1992, Mr. Brennan had been
President and Chief Operating Officer of Metro Mobile CTS, Inc. ("Metro
Mobile"). Age: 47.
Frank W. Denius has been a director of the Company since 1976 and
previously served as a director of the Company from 1955 to 1975. Since
February 1990, Mr. Denius has been Chairman Emeritus of the Company. Mr. Denius
was Chairman of the Board and President of the Company from 1986 until February
1990 and Chief Executive Officer from 1985 until February 1990. Since February
1990, Mr. Denius has been engaged primarily in the private practice of law in
Austin, Texas. Mr. Denius is also a director of Telecom Corp. Age: 69.
-5-
<PAGE>
Roger J. Pearson is an attorney in private practice in Stamford,
Connecticut where he is of counsel in the firm of Weber, Neville & Shaver.
Mr. Pearson was First-Selectman (Mayor) of Greenwich, Connecticut from 1983 to
1985. Mr. Pearson has been a Director of the Company since January 1992.
Age: 48.
THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES TO SERVE AS CLASS I DIRECTORS.
DIRECTORS CONTINUING IN OFFICE
CLASS II - TERM EXPIRES IN 1995
Aaron I. Fleischman has been Senior Partner of Fleischman and Walsh, a
Washington, D.C. law firm specializing in regulatory, corporate securities and
litigation matters for telecommunications and regulated utility companies since
1976. Mr. Fleischman is also a director of Citizens Utilities Company. Age:
55.
Adam M. Lindemann has been primarily engaged in private investments since
April 1992. Prior to April 1992, he had been Vice President - Corporate
Development of Metro Mobile and President of Vision Energy Resources, Inc., a
wholly owned subsidiary of Metro Mobile primarily engaged in the distribution of
propane. Adam M. Lindemann is the son of George L. Lindemann, Chairman of the
Board and Chief Executive Officer of the Company. Age: 32.
George Rountree, III is an attorney in private practice in Wilmington,
North Carolina where he has been a senior partner in the firm of Rountree &
Seagle since its formation in 1977. Age: 60.
CLASS III - NEW TERM EXPIRES IN 1996
George L. Lindemann has been Chairman of the Board and Chief Executive
Officer of the Company since February 1990. He has been Chairman of the
Executive Committee of the Company's Board of Directors since March 1990. Mr.
Lindemann does not devote his full business time to the business of the Company.
He was Chairman of the Board and Chief Executive Officer of Metro Mobile from
its formation in 1983 until April 1992. He has been President and a director of
Cellular Dynamics, Inc., the managing general partner of Activated
Communications Limited Partnership, since May 1982. Age: 58.
Peter H. Kelley has been President and Chief Operating Officer of the
Company since February 1990, President and Chief Operating Officer of Southern
Union Gas Company ("Southern Union Gas"), a division of the Company, since
October 1990, and President and Chief Executive Officer of Missouri Gas Energy
("MGE"), a division of the Company, since December 1993. Prior to joining the
Company, he had been an officer of Metro Mobile since 1986. Age: 47.
Dan K. Wassong has been the President, Chief Executive Officer and a
director of Del Laboratories, Inc., a manufacturer of cosmetics, toiletries and
pharmaceuticals, for more than the past five years. Age: 63.
With the exception of Messrs. Denius and Pearson as described above, each
of the above-named directors and Nominees first became a director of the Company
in February 1990.
-6-
<PAGE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The Executive Officers of the Company are elected by the Board to serve at
the pleasure of the Board or until their successors are elected and qualified.
Generally, officers are reelected annually by the Board. The following
Executive Officers of the Company are not directors.
Eugene N. Dubay was named Executive Vice President and Chief Operating
Officer of MGE in December 1993, and prior to that served as Senior Vice
President - Mergers and Acquisitions, Chief Information Officer and Assistant
Secretary of the Company since March 1990. Previously, Mr. Dubay held other
positions with the Company, primarily of a financial nature, since October 1981
except that from February 1989 through August 1989 he was an advisor to the
audit department of Atlantic Richfield Company. Age: 45.
Ronald J. Endres has been Senior Vice President - Finance and
Administration since October 1990 and Chief Financial Officer since October
1989. He has been a Senior Vice President since April 1987. Previously,
Mr. Endres held other financial and operating positions with the Company since
June 1969. Mr. Endres was President of Southern Union Gas from January 1986
until October 1990. Age: 49.
David J. Kvapil has been Vice President - Controller since July 1993 and
Controller since August 1992. Prior to joining the Company, Mr. Kvapil was a
Senior Audit Manager with Coopers & Lybrand. Age: 39.
Dennis K. Morgan has been Vice President - Legal and Secretary of the
Company since April 1991 and a Vice President of the Company since January 1991.
Previously, he held various legal positions with Southern Union Exploration
Company ("SX"), a subsidiary of the Company until 1993. Age: 46.
Donald A. Scovil became Senior Vice President - Planning in October 1990.
He was Vice President - Controller of Southern Union Gas from 1984 until October
1990. Previously, Mr. Scovil held other financial positions with the Company
since 1978. Age: 44.
-7-
<PAGE>
COMMITTEES AND MEETINGS
OF THE BOARD OF DIRECTORS
The Board of Directors has an Executive Committee, composed of Messrs.
George Lindemann (Chairman), Brennan and Kelley. During the intervals between
meetings of the Board of Directors, this committee has the authority to, and may
exercise all of the powers of, the Board of Directors in the management of the
business, property and affairs of the Company in all matters that are not
required by statute or by the Company's Certificate or Bylaws to be acted upon
by the Board of Directors. This committee must exercise such authority in such
manner as it deems to be in the best interests of the Company and consistent
with any specific directions of the Board of Directors.
The Board of Directors has an Audit Committee, currently composed of
Messrs. Pearson (Chairman) and Rountree. The Audit Committee met three times
during fiscal year 1993. This committee has the duties of recommending to the
Board of Directors the appointment of independent auditors, reviewing their
charges for services, reviewing the scope and results of the audits performed,
reviewing the adequacy and operation of the Company's internal audit department,
and performing such other duties or functions with respect to the Company's
accounting, financial and operating controls as deemed appropriate by it or the
Board of Directors.
The Board of Directors has a Long-Term Stock Incentive Plan Committee
currently composed of Messrs. Denius (Chairman) and Fleischman. This committee
has authority to make all decisions regarding: (i) the granting of awards under
the 1992 Plan; (ii) eligibility of employees to receive awards under the 1992
Plan; and (iii) interpretation of the 1992 Plan. The Plan Committee consists of
no fewer than two directors, who cannot receive any awards under the 1992 Plan
during the prior year, and cannot be eligible to receive any awards under the
1992 Plan.
The Board of Directors held three meetings and acted by unanimous written
consent on six occasions during fiscal year 1993. Except for Mr. Adam Lindemann
who was unable to attend one meeting of the Board of Directors, all directors
attended all of the meetings of the Board and committees on which they served
that were held in 1993 while they were directors and a member of any such
committee. Compensation for each director is $20,000 per year, payable in
quarterly installments, except for: Mr. George Lindemann (who receives $110,000
per year as Chairman of the Board and Chief Executive Officer of the Company and
Chairman of the Executive Committee); Mr. Brennan (who receives $50,000 per year
as Vice Chairman of the Board of the Company and a member of the Executive
Committee); Mr. Kelley (who receives no compensation as a director in addition
to his compensation as a full-time executive officer and employee of the Company
and its divisions and subsidiaries); and the chairman and each other member of
the Audit Committee of the Company's Board of Directors, who receive $30,000 and
$25,000 per year, respectively. Members of the Board of Directors also are
reimbursed for travel expenses incurred in connection with Company business,
including attendance at meetings of the Board of Directors and its committees.
-8-
<PAGE>
MANAGEMENT COMPENSATION
The table below sets forth all compensation paid and awarded by the Company
and its subsidiaries in each year indicated to the Chief Executive Officer of
the Company and each of the four most highly compensated executive officers for
the year ended December 31, 1993 other than the Chief Executive Officer.
<TABLE>
<CAPTION>
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options/SARs(1) Compensation(2)
- --------------------------- ---- ------ ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
George L. Lindemann
Chairman of the Board and 1993 $110,024 -- -- --
Chief Executive Officer 1992 108,086 $ 55 64,500(3) --
1991 99,142 40 -- --
Peter H. Kelley
President and Chief 1993 261,520 70 -- $ 3,865(4)
Operating Officer 1992 244,861 13,805 37,500 2,182(4)
1991 217,724 15,880 -- --
Eugene N. Dubay
Executive Vice President and 1993 163,248 9,568 -- 4,636(4)
Chief Operating Officer - 1992 145,787 4,401 22,500 1,309(4)
Missouri Gas Energy 1991 128,257 45,727 -- --
Ronald J. Endres
Senior Vice President - 1993 177,732 1,920 -- 4,805(4)
Finance and Administration 1992 167,028 27,265 22,500 2,182(4)
and Chief Financial Officer 1991 151,069 7,057 -- --
Dennis K. Morgan
Vice President - Legal 1993 105,303 1,043 -- 3,873(4)
and Secretary 1992 102,915 3,170 7,500 1,589(4)
1991 88,350 15,150 -- --
<FN>
____________
(1) No Stock Appreciation Rights were granted in 1993, 1992 or 1991.
Securities underlying stock options have been adjusted to reflect the three
for two stock split distributed as a 50% stock dividend on March 9, 1994 to
stockholders of record on February 23, 1994.
(2) Disclosure of All Other Compensation is not required for 1991.
(3) Includes 27,000 non-qualified stock options granted to Mr. Lindemann in
exchange for the cancellation of 27,000 incentive stock options. Such
non-qualified stock options have the same exercise price as the incentive
stock options canceled.
(4) Company matching provided through the Southern Union (401(k)) Savings Plan
and the Supplemental Plan. The Board approved the adoption of the
Supplemental Plan on June 1, 1993 subject to stockholder approval at the
Meeting.
</TABLE>
-9-
<PAGE>
RETIREMENT BENEFITS
The following table reflects the combined benefits available for the
retirement plan and non-qualified plan.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Years of Service
-------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
125,000 40,784 54,378 54,378 54,924 64,078
150,000 50,159 66,878 66,878 66,924 78,078
175,000 59,534 79,378 79,378 79,378 92,078
200,000 68,909 91,878 91,878 91,878 105,233
225,000 78,284 104,378 104,378 104,378 105,233
250,000 87,659 105,233 105,233 105,233 105,233
300,000 105,233 105,233 105,233 105,233 105,233
400,000 105,233 105,233 105,233 105,233 105,233
450,000 105,233 105,233 105,233 105,233 105,233
500,000 105,233 105,233 105,233 105,233 105,233
</TABLE>
The Company has a Retirement Income Plan (the "Retirement Plan") for all
employees with benefits based upon average annual basic earnings for the five
highest consecutive years in the applicable period. Basic earnings, as defined
by the Retirement Plan, was redefined in December of 1989 to include W-2
earnings minus certain defined exclusions. Effective December 31, 1989, the
plan formula was modified to conform with the requirements of the Tax Reform Act
of 1986, as amended, and the plan no longer integrates with Social Security. In
order to retain the previous benefit levels for selected highly compensated
employees, a separate Non-Qualified Plan was established.
As of December 31, 1993, Messrs. Lindemann, Kelley, Dubay, Endres and
Morgan were credited with 3, 3, 12, 24 and 12 years of service, respectively.
Benefits are computed on the basis of a lifetime annuity with a ten year certain
payment period commencing at age 65. With respect to the Non-Qualified Plan
benefits, certain offsets are included in the formula for estimated Social
Security benefits. Those offsets have been reflected in the amounts presented
in the table. Beginning in 1994, the maximum compensation considered in the
Qualified Plan will be $150,000 rather than the $235,840 limit applicable to
1993.
-10-
<PAGE>
The following table provides information regarding the exercise of stock
options by each of the named executive officers and the value of unexercised
"in-the-money" options as of December 31, 1993.
<TABLE>
<CAPTION>
Number of Securities underlying Value of Unexercised
Unexercised Options at Fiscal In-the-Money Options
Year End at Fiscal Year End
Exercisable/Unexercisable Exercisable/Unexercisable(2)
Shares Acquired Value ---------------------------- ----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George L. Lindemann * * 43,500(1) 69,000(1) $358,500 $541,500
Peter H. Kelley * * 43,500(1) 69,000(1) 388,500 574,000
Eugene N. Dubay * * 36,000(1) 39,000(1) 330,750 325,500
Ronald J. Endres * * 36,000(1) 39,000(1) 330,750 325,500
Dennis K. Morgan * * 1,500(1) 6,000(1) 10,500 42,000
<FN>
_____________
* No options were exercised during the year ended December 31, 1993 by the
named executive officer.
(1) The securities underlying unexercised options have been adjusted to reflect
the three for two stock split distributed as a 50% stock dividend on March
9, 1994 to stockholders of record on February 23, 1994.
(2) Based on a closing price on December 31, 1993 of $17 5/8 per share as
reported by the American Stock Exchange, adjusted to reflect the three for
two stock split.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company does not have a separate compensation
committee. Except with respect to the 1992 Plan, which is administered by the
Board's Long-Term Stock Incentive Plan Committee, all decisions regarding
management compensation are made by the full Board of Directors of the Company.
Directors Brennan, George Lindemann and Kelley, who are also executive officers
of the Company, participated in deliberations of the Board of Directors
concerning compensation for members of management other than themselves.
Director Fleischman, a member of the Long-Term Stock Incentive Plan
Committee, is Senior Partner of Fleischman and Walsh, which provides legal
services to the Company and certain of its subsidiaries. In 1993, the total
amount paid by the Company to Fleischman and Walsh for legal services was
$980,430. On February 10, 1994 the Company granted to Fleischman and Walsh a
warrant which expires on February 10, 2004 to purchase up to 37,500 shares of
Common Stock at an exercise price of $23.00, as adjusted for the three for two
stock split.
-11-
<PAGE>
BOARD OF DIRECTORS REPORT ON
EXECUTIVE COMPENSATION
Since 1992, the Board of Directors has more closely aligned the total
compensation of the executive officers with the profitability of the Company.
Merit increases to the base salaries for the officer group have been moderate in
comparison to industry standards. The Southern Union 1992 Long-Term Stock
Incentive Plan was introduced in order to focus the attention of management on
the long-term improvement of stockholder value.
The Company's 1993 short-term incentive plan was aligned with each
officer's and manager's compensation to directly reflect the desired short-term
marketing and profitability goals of the Company applicable to such officer or
manager. By balancing the use of short- and long-term incentive and adequate
base salary, the Board of Directors believes it has been and will continue to be
able to recruit the talent needed to manage the Company, retain the talents of
current management and align the successes of the Company and management.
The factors and criteria utilized by the Board of Directors includes the
assessment of comparable information from other utilities and similarly-sized
operations. The Long-Term Stock Incentive Plan Committee considers all aspects
of compensation provided to the executive officers prior to determining
appropriate awards to be given under the 1992 Plan to each executive.
Neither the Chairman of the Board and Chief Executive Officer nor the
President and Chief Operating Officer were included in the Short-Term Incentive
Plan for 1993. Each of the Senior Vice President - Mergers and Acquisitions and
Chief Information Officer, the Senior Vice President - Finance and
Administration and Chief Financial Officer, and the Vice President - Legal and
Secretary had the ability to obtain short-term incentive awards for 1993.
In 1993, contingent on stockholder approval, the Board of Directors
established the Supplemental Plan and the Southern Union Company Directors'
Deferred Compensation Plan. The intent of the Supplemental Plan is to allow
selected highly compensated officers and employees a method of long-term saving
which parallels the Company's 401(k) Plan. The full extent of contributions,
including Company matching contributions, to the 401(k) Plan is unavailable to
highly compensated employees due to restrictions on contribution limits
resulting from discrimination testing required by Federal income tax law and
applicable regulations. The Southern Union Company Directors' Deferred
Compensation Plan allows a deferral of income with a Company stock match in an
amount that mirrors the matching provisions provided by the Company's 401(k)
Plan.
In determining the compensation structure for the Chairman of the Board and
Chief Executive Officer consideration was given to the fact that Mr. Lindemann
does not devote his full business time to the business of the Company.
Accordingly, the Board of Directors believes that it has concentrated, and
intends to continue to concentrate, the bulk of Mr. Lindemann's compensation on
long-term incentives such as stock option grants which are directly attributable
to increasing stockholder value.
By: The Board of Directors
GEORGE L. LINDEMANN JOHN E. BRENNAN
FRANK W. DENIUS PETER H. KELLEY
AARON I. FLEISCHMAN ROGER J. PEARSON
ADAM M. LINDEMANN GEORGE ROUNTREE, III
DAN K. WASSONG
-12-
<PAGE>
COMPANY PERFORMANCE CHART
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the five years
ended December 31, 1993 with the cumulative total return on the S&P 500 Index
and an index of peer companies developed by the American Gas Association
("AGA"). The comparison assumes $100 was invested on December 31, 1988 in the
Company's Common Stock and in each of the foregoing indices and in each case
assumes reinvestment of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
(SOUTHERN UNION, AGA PEER GROUP AND S&P 500)
<TABLE>
<CAPTION>
Southern AGA S&P
Union Peer Group Index
-------- ---------- -----
<S> <C> <C> <C>
1988 $100.00 $100.00 $100.00
1989 $164.83 $131.91 $131.59
1990 $ 85.40 $101.41 $127.49
1991 $ 97.20 $121.18 $166.17
1992 $ 94.06 $119.34 $178.81
1993 $168.03 $116.18 $196.75
</TABLE>
The AGA peer group index is comprised of AGA member companies classified by
Edward D. Jones and Co. as gas distribution companies. Each component company
was included in the index in proportion to its market capitalization as
determined on the last trading day of the calendar year in each of the years
from 1988 to 1993.
-13-
<PAGE>
PROPOSAL TO INCREASE THE MAXIMUM SIZE OF
THE BOARD OF DIRECTORS TO TWELVE DIRECTORS
The Board, except for Director Wassong who was absent from the meeting at
which the Board acted, has unanimously approved and recommends that the
stockholders of the Company approve an amendment to the Company's Restated
Certificate of Incorporation (the "Certificate") and Bylaws to increase the
maximum size of the Board of Directors to twelve (12) persons. Approval of this
proposal by the holders of 80% of the Common Stock outstanding is required for
passage.
The proposal would amend the second paragraph of Article Fourth of the
Certificate and Article II, Section 2, of the Bylaws. A copy of the Certificate
and certain provisions of the Bylaws as now in effect and marked as proposed to
be amended and restated is attached as Appendix A.
The Certificate and Bylaws presently authorize a Board of Directors of not
less than five (5) nor more than nine (9) persons divided into three classes
(which shall at all times be as nearly equal in number as possible). The exact
number of directors within these limits is to be determined from time to time by
resolutions adopted by the Board. The Certificate and Bylaws, as proposed to be
amended, would continue to provide for the determination of the exact size of
the Board within the new limits of not less than five (5) nor more than twelve
(12) persons and the division of the Board into three classes as equal in number
as possible and the terms of directors currently in office would not change.
This amendment would give the Board the flexibility of adding as many as
three new members and permit increased diversity, depth of experience and
expertise in the Board membership. As a result of recent acquisitions which
have more than doubled the size of the Company and the number of customers which
it serves, the Board believes that an increase in the size of the Board is
particularly appropriate at this time.
The Board and management of the Company have no purposes other than those
described in creating the opportunity for additional directors. The Board and
management above have no knowledge of and do not anticipate any attempt to
acquire control of the Company, nor do they believe that the proposed increase
in the size of the Board would have a material effect in discouraging or
preventing any such effort.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO INCREASE THE
MAXIMUM SIZE OF THE BOARD TO TWELVE DIRECTORS.
-14-
<PAGE>
PROPOSAL TO AMEND
THE CERTIFICATE AND BYLAWS
TO ELIMINATE ANTITAKEOVER AND SUPERMAJORITY
VOTE PROVISIONS
The Board, except for Director Wassong who was absent from the meeting at
which the Board acted, has unanimously approved and recommends that the
stockholders of the Company approve an amendment to the Certificate and Bylaws
to (i) eliminate Article Twelfth from the Certificate and to eliminate
references thereto in other sections of the Certificate and Bylaws and (ii) to
eliminate the 80% supermajority voting provisions contained in the Certificate
and the Bylaws. Approval of this proposal by the holders of 80% of the Common
Stock outstanding is required for passage.
A copy of the Certificate and the relevant provisions of the Bylaws as now
in effect and marked as proposed to be amended and restated is attached as
Appendix A. If this proposal and the proposal to increase the maximum size of
the Board of Directors are approved, the Company will file a Restated
Certificate of Incorporation as set forth in Appendix A.
GENERAL DESCRIPTION
The proposed amendment would eliminate Article Twelfth of the Certificate
in its entirety. Article Twelfth requires that certain Business Combinations,
which includes certain transactions with Interested Stockholders, be approved by
a majority of the Disinterested Directors. If such approval is not received,
then any such transaction must be approved by at least 80% of the outstanding
shares of all classes of voting stock (hereinafter, Common Stock, which is the
only voting stock presently authorized or outstanding) even if no stockholder
vote, or only a simple majority of outstanding shares or of those stockholders
voting, might otherwise be legally required.
It is important to understand that many of the terms defined in Article
Twelfth differ from similar concepts established under the Delaware General
Corporation Law (the "DGCL"). Article Twelfth provides the following
definitions:
An "Interested Stockholder" is any person or group (other than the
Company or a subsidiary) who is the beneficial owner of more than 10% of
the Common Stock outstanding. The term "beneficial owner" includes persons
directly and indirectly owning or having the right to acquire or vote any
shares of voting stock and groups of such persons having agreements,
arrangements or understandings for the purpose of acquiring, holding,
voting or disposing of any shares of Common Stock outstanding.
A "Business Combination" includes the following transactions: (a) a
merger or consolidation of the Company or any subsidiary with an Interested
Stockholder or any other corporation (whether or not it is itself an
Interested Stockholder) that is, or after such merger or consolidation
would be, an "Affiliate" (as defined in Article Twelfth) of such Interested
Stockholder; (b) the sale or other disposition by the Company or a
-15-
<PAGE>
subsidiary of assets having an aggregate "Fair Market Value" (as defined in
Article Twelfth) of $25,000,000 or more if an Interested Stockholder or any
such Affiliate of an Interested Stockholder is a party to the transaction;
(c) the issuance or transfer (in one or a series of transactions) of any
securities of the Company or of a subsidiary to an Interested Stockholder
or any Affiliate of an Interested Stockholder in exchange for cash or
property (including stock or other securities) having an aggregate fair
market value of $25,000,000 or more; (d) the adoption of any plan or
proposal for the liquidation or dissolution of the Company proposed by or
on behalf of an Interested Stockholder or any Affiliate of an Interested
Stockholder; or (e) any reclassification of securities, recapitalization,
merger with a subsidiary, or other transaction that has the effect,
directly or indirectly, of increasing the proportionate share of the
outstanding stock of any class of the Company or a subsidiary owned by an
Interested Stockholder or any Affiliate of an Interested Stockholder.
A "Disinterested Director" is any member of the Board who is not
affiliated with an Interested Stockholder and was a director of the Company
prior to the time the Interested Stockholder became an Interested
Stockholder, and any successor to such Disinterested Director who is not
affiliated with an Interested Stockholder and was recommended by a majority
of the Disinterested Directors when on the Board.
The proposed amendment would also eliminate provisions in the Certificate
and the Bylaws that require the approval by holders of 80% of the outstanding
shares of Common Stock to amend, alter, repeal or adopt any provision of the
Certificate or the Bylaws that is inconsistent with the provisions (the
"supermajority provisions") of: (i) the second through fifth paragraphs of
Article Eighth of the Certificate and Article II, Sections 2 and 3 of the
Bylaws, which govern the election, removal, number and term of directorships;
(ii) Article Eleventh of the Certificate and Article I, Section 2 of the Bylaws,
which govern the calling of annual and special meetings of stockholders and
requires that all actions required or permitted to be taken by stockholders of
the Company be done at an annual or special meeting of stockholders and not
pursuant to a written consent in writing; (iii) Article Twelfth of the
Certificate, which is described above; and (iv) Article Thirteenth of the
Certificate and Article X, Section 8 of the Bylaws, which govern amendments to
the Certificate and Bylaws. If the supermajority requirements were eliminated,
changes to the Certificate (including changes to the size of the Board beyond
what is currently permitted by Article Eighth of the Certificate) could be
effected by the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock, and changes to the Bylaws could be effected by the
affirmative vote of a majority of either the outstanding shares of Common Stock
or the members of the Board. The proposed amendment would also have the effect
of eliminating the requirement in Article Eighth of the Certificate that holders
of 80% of the outstanding shares of Common Stock approve the removal of a
director.
HISTORICAL BACKGROUND
Article Twelfth and the supermajority provisions are intended to make it
more difficult for a takeover to occur without the approval of the Board.
Article Twelfth and the supermajority voting provisions of the Certificate and
the Bylaws that this proposal would eliminate were adopted by the Company's
stockholders in 1984 at a time when unsolicited attempts to take control of or
acquire companies were common.
In 1990, SU Acquisition, Inc. merged into the Company (the "Merger"). The
Merger resulted in new stockholders, a new board of directors and changes in
senior management, including George L. Lindemann becoming the Chairman of the
Board and Chief Executive Officer of the Company, he and members of his family
-16-
<PAGE>
becoming Interested Stockholders as defined in Article Twelfth, and Peter H.
Kelley becoming President and Chief Operating Officer of the Company. In
connection with the Merger, the pre-Merger Board of the Company terminated the
then-existing stock purchase rights (poison pill) plan.
Frank W. Denius was the only director of the Company prior to the Merger
that remained a director following the Merger. Accordingly, Director Denius is
the only director who now meets, or can ever meet, the Article Twelfth
definition of Disinterested Director. If Mr. Denius should cease to be a
director without first approving his successor or if he were ever unavailable to
act as a Disinterested Director, the Company would be unable to enter into any
transaction that would constitute a Business Combination without first obtaining
the approval of the holders of 80% of the outstanding shares of Common Stock.
The costs to the Company of such a stockholder vote would include actual
expenses for a meeting, the substantial time required to obtain such a vote and
the adverse effect the uncertainty of obtaining such approval might have on the
transaction that would have triggered the need for such vote before it could be
completed. For example, without Mr. Denius' approval, the Company would not
have been able, without a prior 80% stockholder vote of approval, to enter into
a Standby Purchase Agreement with Chairman Lindemann and members of his family
in connection with the Company's Common Stock subscription rights offering in
December 1993. The Lindemanns' role as standby purchasers assured the suc-
cessful sale of $50 million in Common Stock pursuant to the subscription rights
offering, which was necessary for the Company to complete its Missouri
acquisition, and also contributed to the Company's ability to obtain investment
grade ratings for its outstanding debt that enabled it to sell Senior Notes in
January 1994 on favorable terms. Without the Standby Purchase Agreement, the
Company likely would have obtained an investment banking firm to serve as an
underwriter, which might have caused the Company to have been less certain about
the completion of the offering and would have increased the cost of the offering
to the Company due to underwriting fees, commissions and discounts. Such
additional expense would have reduced the net proceeds to the Company, which
would have required the sale of additional shares for the Company to achieve the
desired net proceeds.
REASONS FOR THE PROPOSAL
The Board believes that the provisions of Article Twelfth and the
supermajority voting provisions contained in the Certificate and the Bylaws are
no longer meaningful, but have become unnecessary and potentially cumbersome.
The Board believes that elimination of Article Twelfth and the supermajority
provisions would provide greater flexibility in connection with the management
of the Company and transactions of the type subject to Article Twelfth and the
supermajority voting provisions, and that this flexibility would be beneficial
to the Company and its stockholders.
The Board believes that Article Twelfth is unnecessary because the Company
is subject to other safeguards that assure the fairness of transactions
involving interested directors or stockholders. Section 144 of the DGCL
requires that transactions with related parties, including Interested
Stockholders, either be: (i) approved by a majority of the disinterested
directors, as determined pursuant to the DGCL; (ii) approved by the holders of a
majority of the Common Stock entitled to vote thereon; or (iii) fair to the
Company as of the time such transactions were approved by the Board or the
holders of the Common Stock. It is the policy of the Company, and the terms of
the Company's outstanding senior notes and existing revolving credit facility
require, that any transaction with related parties (including Interested
Stockholders) be on terms no less favorable to the Company than could be
obtained in
-17-
<PAGE>
an arms-length transaction with unrelated parties. In approving any such
transaction, decisions by Board members are subject to the fiduciary duty
requirements of the DGCL and related case law.
Under the DGCL, approval of mergers, consolidations and similar
extraordinary transactions that are included in Business Combinations that are
subject to Article Twelfth generally would require the vote of the holders of a
majority of the outstanding shares of capital stock of the Company. Other
transactions currently covered by Article Twelfth may not require any
stockholder vote under the DGCL. In addition, Section 203 of the DGCL, which
became effective in 1987, restricts the ability of stockholders who beneficially
own 15% or more of the outstanding shares of the Company and have not held such
shares for at least three years from engaging in certain business combination
transactions involving the Company. Section 203 would not apply to Chairman
Lindemann or members of his family, since they have been the holders of more
than 15% of the outstanding Common Stock for more than three years.
The Board believes that the supermajority voting provisions are no longer
meaningful or necessary due to the current ownership structure of the Company,
and may actually hinder the Company's ability to raise capital or enter into
business combinations the Board believes are in the best interest of the
Company. Furthermore, the Board believes that the types of transactions subject
to Article Twelfth and the supermajority voting provisions should not be blocked
by holders of a small minority of 20% of the Common Stock outstanding.
As a gas utility, the Company also is subject to various federal, state and
local laws and regulations which may require the Company or a potential acquiror
to obtain certain approvals from federal, state or local regulatory authorities
for certain extraordinary events such as an acquisition of the Company. Such
approvals might be required from one or more of the Missouri Public Service
Commission, local franchise authorities in the Company's Texas service areas,
the Texas Railroad Commission, the Federal Energy Regulatory Commission and the
U.S. Securities and Exchange Commission.
EFFECTS OF ADOPTION OF THE PROPOSAL
The elimination of Article Twelfth would permit the Company and any
Interested Stockholder to engage in transactions of the type restricted by
Article Twelfth with: (i) approval of a majority of the Company's outstanding
Common Stock, pursuant to Sections 251 and 252 of the DGCL; or (ii) in the case
of certain transactions with an Interested Stockholder, with the approval of a
majority of the disinterested directors as determined in accordance with Section
144 of the DGCL. Elimination of Article Twelfth would have the effect of
rendering less difficult the accomplishment of business combinations, changes in
control of the Company, unsolicited tender offers or mergers, and the assumption
of control by the holder of a large block of shares. The elimination of the
supermajority voting provisions would make it easier for current management to
effect changes to the Certificate and the Bylaws which they favor, but would
make it more difficult for the current management to preclude such changes they
opposed or to retain control if a hostile takeover was attempted.
It is unlikely that a hostile takeover attempt, Certificate or Bylaw
amendment, or other stockholder initiative would be successful unless supported
by the Lindemann family. Members of the Lindemann family, if they vote together
as a block, presently are able to vote approximately 38.7% of the Common Stock
outstanding. The elimination of Article Twelfth and the supermajority voting
provisions would make it easier for the Lindemann
-18-
<PAGE>
family to obtain approval of a Business Combination, Certificate or Bylaw
amendment or other extraordinary item that they support, but also eliminates
their unilateral ability, and makes it more difficult for them or anyone else,
to block or veto a Business Combination, Certificate or Bylaw amendment or other
extraordinary item that they oppose. Accordingly, the Board believes there is
no need to retain Article Twelfth or the supermajority voting provisions.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO DELETE ARTICLE
TWELFTH OF THE CERTIFICATE AND TO ELIMINATE THE SUPERMAJORITY VOTING PROVISIONS
CONTAINED IN THE CERTIFICATE AND BYLAWS.
-19-
<PAGE>
PROPOSAL TO APPROVE THE ADOPTION OF THE SOUTHERN UNION COMPANY
SUPPLEMENTAL DEFERRED COMPENSATION PLAN
As of June 15, 1993, the Executive Committee of the Board approved the
adoption of the Southern Union Company Supplemental Deferred Compensation Plan
(the "Supplemental Plan"). The Supplemental Plan is designed to provide
employee benefits similar to the benefits such employee would have received
under the Southern Union (401(k)) Savings Plan if not for the existence of
certain limitations that are set forth in the Internal Revenue Code of 1986, as
amended (the "Code"), relating to "highly compensated employees" as defined in
the Code. Under the Supplemental Plan, an eligible employee may defer up to 5%
of his or her annual compensation (salary and bonus) through payroll deductions
(the "Employee Contributions"). In addition, the Supplemental Plan requires
the Company to make a 50% matching contribution up to a maximum of 2% of the
participant's annual compensation. Such Employee Contributions, together with
the Company's matching contribution, are invested by the Supplemental Plan's
trustee in shares of Common Stock.
A participant is at all times 100% vested with respect to the amount of his
or her Employee Contributions and to the income, gains and losses with respect
to such contributions. The Company's matching contributions and any income,
gains and losses with respect to such matching contributions vest at a rate of
20% per year beginning with the date that the participant has completed two
years of service with the Company. A participant is fully vested with respect
to such amounts upon either completing six (6) years of service with the Company
or if the participant dies while employed by the Company. Employee
Contributions and the Company's matching contributions that are vested may not
be withdrawn by a participant until (i) thirty (30) days after such time the
participant is no longer an employee of the Company, or (ii) with the permission
of the Company's benefits committee in the event of an unforeseeable emergency
arising from events beyond the control of the participant which results in
severe financial hardship.
The Supplemental Plan is operated under procedures set forth in the plan,
and is administered by the Company's benefits committee. The Board of Directors
may terminate, suspend or amend the Supplemental Plan; provided that, certain
material amendments must be submitted for stockholder approval to the extent
necessary for the Supplemental Plan to satisfy the requirements of the exemption
from the short-swing profit rules of the Securities and Exchange Commission
under Section 16(b) of the Securities Exchange Act of 1934, as amended.
The foregoing description is qualified in its entirety by the text of the
Supplemental Plan. A copy of the Supplemental Plan is available without charge
upon written request to the Secretary of the Company.
-20-
<PAGE>
Southern Union Company Supplemental Deferred Compensation Plan
The following table sets forth the dollar value of all Company matching
contributions as of December 31, 1993 and the number of shares contributed by
the Company as matching contributions under the Supplemental Plan for the year
ended December 31, 1993.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name and Position Dollar Value ($) Number of Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
George L. Lindemann
Chairman of the Board and Chief 0 0
Executive Officer
- --------------------------------------------------------------------------------
Peter H. Kelley
President and Chief Operating Officer 3,198 181*
- --------------------------------------------------------------------------------
Ronald J. Endres
Senior Vice President - Finance and 2,792 158*
Administration, and Chief Financial
Officer
- --------------------------------------------------------------------------------
Eugene N. Dubay
Executive Vice President and 11,088 623*
Chief Operating Officer -
Missouri Gas Energy
- --------------------------------------------------------------------------------
Dennis K. Morgan
Vice President - Legal and Secretary 3,340 189*
- --------------------------------------------------------------------------------
All Executive Officers 23,943 1,355*
- --------------------------------------------------------------------------------
All Directors Who Are Not Executive
Officers 0** 0**
- --------------------------------------------------------------------------------
All Employees Who Are Not Executive
Officers 52,286 2,959*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<FN>
_____________
* The number of shares have been adjusted to reflect the three-for-two stock
split distributed as a 50% stock dividend on March 9, 1994 to stockholders
of record on February 23, 1994.
** Only employees of the Company are eligible to participate.
</TABLE>
The affirmative vote of a majority of the votes cast at the Meeting in person or
by proxy will be required to approve the Supplemental Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ADOPTION OF THE
SOUTHERN UNION SUPPLEMENTAL DEFERRED COMPENSATION PLAN.
-21-
<PAGE>
PROPOSAL TO APPROVE THE ADOPTION OF THE
DIRECTORS' DEFERRED COMPENSATION PLAN
As of June 15, 1993, the Executive Committee of the Board approved the
adoption of the Southern Union Company Directors' Deferred Compensation Plan
(the "Directors' Deferral Plan"). The Directors' Deferral Plan is designed to
attract and retain well-qualified individuals to serve as outside directors and
to enhance the identity of their interests and the interests of stockholders.
Participation in the Directors' Deferral Plan is optional and is subject to an
irrevocable election to satisfy the requirements of the exemption from the
short-swing profit rules of the Securities and Exchange Commission under Section
16(b) of the Securities Exchange Act of 1934, as amended.
Under the Directors' Deferral Plan, each director who is not also an
employee of the Company may choose to defer all or any percentage of his or her
director's fees and invest such deferred amount in Common Stock, if an
appropriate irrevocable written election to defer is made at least six months
prior to the beginning of the year to which such deferral applies. For the
six-month period beginning July 1, 1993, such irrevocable written election was
required to be made by June 30, 1993. In addition, the Directors' Deferral Plan
requires the Company to make a matching contribution of 50% of the first 7% of
the participant's total director's fees, to the extent deferred.
A participating director is 100% vested with respect to the amount of
director's fees that he elects to defer and any related income, gains and
losses. The Company's matching contributions do not vest until the
participating director either has completed five (5) years of service as a
director or dies while serving as a director. Deferred amounts may not be
withdrawn by a participant until (i) thirty (30) days after such time as the
director either retires or ceases to be a director of the Company; or (ii) with
the permission of the Board in the event of an unforeseeable emergency arising
from events beyond the control of the participant which results in severe
financial hardship.
The Directors' Deferral Plan operates under procedures set forth in such
plan. No discretion regarding administration of the Directors' Deferral Plan is
vested in the Board, any committee of the Board, or any officer or director of
the Company. The Board may terminate, suspend or amend the Directors' Deferral
Plan; provided that, certain material amendments must be submitted for
stockholder approval to the extent necessary for the Directors' Deferral Plan to
satisfy the requirements of the exemption from the short-swing profit rules of
the Securities and Exchange Commission under Section 16(b) of the Securities
Exchange Act of 1934, as amended.
The foregoing description of the Directors' Deferral Plan is qualified in
its entirety by the text of the Directors' Deferral Plan. A copy of the
Directors' Deferral Plan is available without charge upon written request to the
Secretary of the Company.
-22-
<PAGE>
Southern Union Company Directors' Deferred Compensation Plan
The following table sets forth the dollar value and the number of shares
contributed by the Company as matching contributions under the Directors for the
year ended December 31, 1993.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name and Position Dollar Value ($) Number of Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
George L. Lindemann
Chairman of the Board and Chief 0* 0*
Executive Officer
- --------------------------------------------------------------------------------
Peter H. Kelley
President and Chief Operating Officer 0* 0*
- --------------------------------------------------------------------------------
Ronald J. Endres
Senior Vice President - Finance and 0* 0*
Administration, and Chief Financial
Officer
- --------------------------------------------------------------------------------
Eugene N. Dubay
Executive Vice President and 0* 0*
Chief Operating Officer -
Missouri Gas Energy
- --------------------------------------------------------------------------------
Dennis K. Morgan
Vice President - Legal and Secretary 0* 0*
- --------------------------------------------------------------------------------
All Executive Officers 0* 0*
- --------------------------------------------------------------------------------
All Directors Who Are Not Executive 12,634 715**
Officers
- --------------------------------------------------------------------------------
All Employees Who Are Not Executive 0* 0*
Officers
- --------------------------------------------------------------------------------
<FN>
___________
* Only Directors who are not also employees of the Company are eligible to
participate. Directors Brennan, G. Lindemann and Kelley are considered to
be Executive Officers and employees of the Company.
** This number has been adjusted to reflect the three-for-two stock split
distributed as a 50% stock dividend on March 9, 1994 to stockholders of
record on February 23, 1994.
</TABLE>
The affirmative votes of a majority of the votes cast at the Meeting in person
or by proxy will be required to approve the Directors' Deferred Compensation
Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ADOPTION OF THE
SOUTHERN UNION DIRECTORS' DEFERRED COMPENSATION PLAN.
-23-
<PAGE>
CERTAIN RELATIONSHIPS
In April 1992 Southern Union advanced $375,980 to Peter H. Kelley,
President, Chief Operating Officer and a Director of Southern Union, to enable
him to repay certain funds borrowed by him from his previous employer in
connection with his departure from his previous employer to become an executive
officer of the Company. The advance is evidenced by a note, payable on demand,
bearing an annual percentage interest rate equal to the prime rate announced by
Texas Commerce Bank National Association on the date the advance was made, plus
one-half percent (1/2%). As of December 31, 1993, Mr. Kelley's outstanding
principal and accrued but unpaid interest balance was $355,428. This loan is
being repaid on schedule.
On October 4, 1993, Southern Union's Board of Directors approved and
ratified payments by the Company to Activated Communications, Inc. ("Activated")
for use by the Company of Activated's office space in New York City. Activated
is controlled and operated by Company Chairman George L. Lindemann and Vice
Chairman John E. Brennan, who, along with Director Adam M. Lindemann, did not
participate in such Board action. Monthly rental payments commenced effective
as of August 1992 for approximately half of Activated's base lease payments
before certain adjustments. Total payments to Activated in 1993 and 1992 were
$187,000 and $104,000, respectively.
Fleischman and Walsh, of which Director Fleischman is Senior Partner,
provides legal services to the Company and certain of its subsidiaries. See
"Management Compensation-Compensation Committee Interlocks and Insider
Participation."
STOCKHOLDER PROPOSALS
In order for any stockholder proposal to receive consideration for
inclusion in the Company's Proxy Statement for its 1995 Annual Meeting of
Stockholders, such proposals must be received by December 31, 1994, at the
Company's offices at 504 Lavaca Street, Eighth Floor, Austin, Texas 78701,
Attention: Dennis K. Morgan, Secretary. The Company's Bylaws set forth certain
other requirements with respect to new or other business proposed to be brought
before the Meeting by a stockholder and with respect to any nomination by a
stockholder for election as a Director of any person other than the Nominees
selected by the Board of Directors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand has served as the Certified Public Accountants of the
Company for the Company's fiscal year ended December 31, 1993. Representatives
of Coopers & Lybrand are expected to be present at the Meeting, and to be given
an opportunity to make a statement if they desire to do so and to be available
to respond to appropriate questions. The Audit Committee of the Board of
Directors of the Company presently expects to recommend to the Board, and the
Board is expected to approve, the selection of Coopers & Lybrand to serve as the
Company's Certified Public Accountants for the fiscal year ending December 31,
1994.
-24-
<PAGE>
OTHER BUSINESS
The Board of Directors is not aware of any matter other than the matters
described above to be presented for action at the Meeting. However, if any
other proper items of business should come before the Meeting, it is the
intention of the person or persons acting under the enclosed form of proxy to
vote in accordance with their best judgment on such matters.
MISCELLANEOUS
The Company will pay the expenses of this proxy solicitation. In addition
to solicitation by mail, some of the officers and regular employees of the
Company may solicit proxies personally or by telephone. Should management of
the Company deem it necessary, the Company may also retain the services of a
proxy solicitation firm, to aid in the solicitation of proxies for which the
Company will pay a fee of approximately $7,500 plus reimbursement for certain
expenses. The Company will request brokers and other fiduciaries to forward
proxy-soliciting material to the beneficial owners of shares which are held of
record by them, and the Company may reimburse them for certain reasonable
out-of-pocket expenses incurred by them in connection therewith.
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1993, which report includes financial statements and the Company's
Annual Report on Form l0-K for the fiscal year ended December 31, 1993, as filed
with the Securities and Exchange Commission on March 29, 1994, is being mailed
along with this Notice of Annual Meeting and Proxy Statement to all holders of
record of the Company's Common Stock as of the close of business on the Record
Date. Any stockholder who has not received a copy of such Annual Report may
obtain a copy by writing to the Secretary of the Company. Such Annual Report is
not to be treated as part of the proxy solicitation materials or as having been
incorporated herein by reference.
By Order of the Board of Directors,
DENNIS K. MORGAN
SECRETARY
Austin, Texas
March 31, 1994
-25-
<PAGE>
APPENDIX A
RESTATED CERTIFICATE OF INCORPORATION
OF
SOUTHERN UNION COMPANY
Southern Union Company
Austin, Texas
Proposed additions have been underlined.
----------
Proposed deletions have been redlined.
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
SOUTHERN UNION COMPANY, a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Southern Union Company and the name
under which the corporation was originally incorporated is Southern
Union Utilities Company.
The date of filing its original Certificate of Incorporation with the
Secretary of State was December 13, 1932.
2. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the
Certificate of Incorporation of this corporation as heretofore amended
or supplemented, and there is no discrepancy between those provisions
and the provisions of this Restated Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments
or changes to read as herein set forth in full:
FIRST: The name of the corporation is Southern Union Company.
SECOND: The name of the county and the city, town or place within the
county in which the principal office or place of business of the corporation is
to be located in the State of Delaware and the street and number of such
principal office or place of business is: 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its Resident Agent is The
Corporation Trust Company, and the address by street and number of said Resident
Agent is 1209 Orange Street, City of Wilmington, State of Delaware.
THIRD: The nature of the business of the corporation or objects or
purposes to be transacted, promoted or carried on by it are:
(a) To mine for, prospect for, drill for, produce, store, refine, buy
or in any manner acquire, convert or manufacture into its several
products, and to market, sell, transport, and distribute natural
gas, manufactured gas, artificial gas and/or liquefied petroleum
gas, and any mixture or combination of any such gases, and any
derivatives or products or residual products or manufactured
products of such gases or any of them; to mine for, prospect for,
drill for, produce, buy or in any manner acquire, refine, convert
or manufacture into its several products, and to sell, market,
distribute and transport petroleum and its derivatives, products
and by-products and to construct, lay, purchase or in any manner
acquire, and to own, hold, maintain and operate, and to sell,
exchange, lease, encumber or in any manner dispose of works,
buildings, pipe lines, mains, distribution systems, machinery,
appliances, apparatus, facilities, rights, privileges,
franchises, ordinances and all such real and personal property as
may be necessary, useful or convenient in the production,
acquisition, sale,
A-1
<PAGE>
storage, combustion, refining, manufacturing, conversion,
transportation and marketing of natural gas, manufactured gas,
artificial gas, liquefied petroleum gas and petroleum, or any of
them, and the derivatives, products or by-products thereof,
however derived;
(b) To acquire, by purchase or otherwise, construct, lease, let, own,
hold, sell, convey, equip, maintain, operate and otherwise deal
in and with pipe lines, cars, vessels, tanks, tramways,
refineries, reduction plants, land and interests in land and any
and all other properties, conveyances, appliances, and apparatus
for storing, transporting, distributing, marketing, converting,
manufacturing, distilling, refining, reducing, preparing, or
otherwise dealing in and with petroleum, gas, gasoline, liquefied
petroleum gases, asphaltum, and any and all other minerals,
metals and ores, and the derivatives, products and by-products
thereof, however derived;
(c) To carry on the general business of an electric light, heat and
power company in all of its branches and to generate, buy or in
any manner acquire, accumulate, distribute, market and supply
electric current, light, heat and power to cities, towns,
streets, buildings and places, both public and private, and to
any consumer of electric energy for any purpose, and to
construct, lay down, establish, fix, and to carry on the business
of electrical and mechanical engineers, suppliers of electricity
for the purpose of light, heat and power or otherwise; to
manufacture or deal in things required for or capable of being
used in connection with the generation, distribution,
accumulation, sale, improvement and/or consumption of
electricity;
(d) To carry on the business of telephone, telegraph and/or cable
company, and to establish, work, control, regulate, manage,
maintain and operate telephone lines and exchanges and to
transmit and facilitate the transmission of telephone, telegraph
and/or cable communications and messages; to construct, equip,
maintain, operate, lease and sell telephone, telegraph and cable
lines and systems and all kinds of works, machinery, apparatus,
conveniences and things capable of being used in connection with
any of these objects;
(e) To purchase, lease, or otherwise acquire, build, construct,
erect, hold, own, improve, enlarge, maintain, operate, control,
supervise, and manage, and to sell, lease, or otherwise dispose
of water and waterworks for the purpose of supplying
municipalities, corporations, and individuals with water for
public, corporate, business, irrigation, or domestic use; to
construct, purchase, lease or otherwise acquire, maintain, and
operate dams, reservoirs, settling basins, irrigation systems,
pumping stations, water towers, buildings, plants, machinery,
distribution systems, mains, pipes, conduits, aqueducts, meters,
and all other necessary apparatus, appliances, rights, permits
and property used or useful or convenient for use in the
acquisition, distribution, measurement, and sale of water;
(f) To manufacture ice and to buy, sell and generally deal in
artificial and/or natural ice both at wholesale and retail, to
purchase or otherwise acquire and to sell or otherwise dispose of
and maintain and operate ice manufacturing plants of all kinds
and descriptions; to carry on and conduct the business of
storage, cold storage, warehousing, refrigeration, freezing and
all business necessarily or impliedly incidental thereto;
A-2
<PAGE>
(g) To carry on the business of sewage disposal and to purchase,
lease or otherwise acquire, build, construct, erect, hold, own,
improve, enlarge, maintain, operate, control, supervise and
manage sewers and sewage disposal plants and systems for the
purpose of furnishing sewer and sewage disposal services to
municipalities, corporations, and individuals; and to own and
acquire all necessary apparatus, appliances, rights, permits and
property used or useful or convenient for use in connection
therewith;
(h) To acquire, own, construct, erect, lay down, manage, maintain,
operate, enlarge, alter, work and use all such lands and
interests in land, buildings, easements, gas, electric and other
works, machinery, plant, stock, pipes, lamps, meters, fittings,
motors, apparatus, appliances, materials and things, and to
supply all such materials, products and things as may be
necessary, incident or convenient in connection with the
production, use, storage, manufacture, combustion, conversion,
regulation, purification, measurement, supply and distribution of
any of the products of the corporation;
(i) To carry on and conduct a general utility management, servicing,
operating, engineering and contracting business; to appraise,
value, design, build, construct, enlarge, develop, improve,
extend and repair light, heat, power, transmission and hydraulic
plants, electrical works, machinery and appliances, telegraph and
telephone lines, dams, reservoirs, canals, bridges, piers, docks,
mines, shafts, tunnels, wells, water works, street railways,
interurban railways, railways and buildings;
(j) To engage in and conduct any one or more or all of the businesses
classed as public utilities, particularly including but not
limited to the businesses of supplying any one or more of the
following, for employment in any manner for which the same may be
employed, to wit: power and energy, in the form of electric
current, as well as in every other form; heating from steam, hot
water or otherwise; natural gas, manufactured gas, artificial gas
and/or liquefied petroleum gas, ice, water, sewer, sewage
disposal, telephone, telegraph or cable service, cold storage and
warehousing;
(k) To obtain the grant of, purchase, lease, or otherwise acquire any
concessions, rights, options, patents, privileges, lands and
interests therein, rights of way, sites, properties, undertakings
or businesses, or any right, option or contract in relation
thereto, and to perform, carry out and fulfill the terms and
conditions thereof, and to carry the same into effect and to
develop, maintain, lease, sell, transfer, dispose of and
otherwise deal in and with the same;
(l) To subscribe for, or cause to be subscribed for, buy, own, hold,
purchase, receive, or acquire, and to sell, negotiate, guarantee,
assign, deal in, exchange, transfer, mortgage, pledge or
otherwise dispose of, shares of the capital stock, scrip, bonds,
coupons, mortgages, debentures, debenture stock, securities,
notes, acceptances, drafts and evidences of indebtedness issued
or created by other corporations, joint stock companies or
associations, whether public, private or municipal, or by any
corporate or unincorporated body, or by any government or
governmental subdivision or agency, and while the owner thereof,
to possess and to exercise in respect thereof all the rights,
powers and privileges of ownership, including the right to vote
thereon; to guarantee the payment of dividends on any shares of
the capital stock of any of the corporations, joint stock
companies or associations in which the corporation has or may at
any time have an interest, direct or indirect, and to become
surety in respect of, endorse, or otherwise guarantee the payment
of the principal of or interest on
A-3
<PAGE>
any scrip, bonds, coupons, mortgages, debentures, debenture
stock, securities, notes, drafts, bills of exchange or evidence
of indebtedness, issued or created by any such corporations,
joint stock companies or associations; to become surety for or
guarantee the carrying out and performance of any and all
contracts, leases, and obligations of every kind of any
corporations, joint stock companies, or associations and in
particular of any corporation, joint stock company or association
any of whose shares, scrip, bonds, coupons, mortgages,
debentures, debenture stock, securities, notes, drafts, bills of
exchange or evidence of indebtedness, are at any time held by or
for the corporation, and to do any acts or things designed to
protect, preserve, improve or enhance the value of any such
shares, scrip, bonds, coupons, mortgages, debentures, debenture
stock, securities, notes, drafts, bills of exchange or evidences
of indebtedness;
(m) To organize, incorporate, reorganize, finance, and to aid and
assist, financially or otherwise, companies, corporations, joint
stock companies, syndicates, partnerships and associations of all
kinds, and to underwrite, subscribe for and endorse the bonds,
stocks, securities, debentures, notes or undertakings of any such
company, corporation, joint stock company, syndicate, partnership
or association, and to make any guarantee in connection therewith
or otherwise for the payment of money or for the performance of
any obligation or undertaking, and to do any and all things
necessary or convenient to carry any of such purposes into
effect; to buy, sell and otherwise deal in notes, open accounts
and other similar evidences of debt, and to loan money and to
take notes, open accounts and other similar evidences of debt as
collateral security therefor and to charge any lawful rate of
interest in connection therewith;
(n) To improve, manage, develop, sell, assign, transfer, lease,
mortgage, pledge, or otherwise dispose of or turn to account or
deal with all or any part of the property of the corporation, and
from time to time to vary any investment or employment of capital
of the corporation;
(o) To borrow money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all kinds, whether
secured by mortgage, pledge, or otherwise, without limit as to
amount, and to secure the same by mortgage, pledge or otherwise;
and generally to make and perform agreements and contracts of
every kind and description;
(p) To manufacture, buy, sell, deal in and to engage in, conduct and
carry on the business of manufacturing, buying, selling, and
dealing in goods, wares, and merchandise of every class and
description;
(q) To the same extent as natural persons might or could do, to
purchase or otherwise acquire, and to hold, own, maintain, work,
develop, sell, lease, exchange, hire, convey, mortgage or
otherwise dispose of and deal in, lands and leaseholds, and any
interest, estate and rights in real property, and any personal or
mixed property, and any franchises, rights, licenses or
privileges necessary, convenient or appropriate for any of the
purposes herein expressed;
(r) To apply for, obtain, register, purchase, lease or otherwise to
acquire and hold, own, use, develop, operate and introduce, and
to sell, assign, grant licenses, or territorial rights in respect
to, or otherwise to turn to account or dispose of, any
copyrights, trademarks, trade names, brands, labels,
A-4
<PAGE>
patent rights, letters patent of the United States or of any
other country or government, inventions, improvements and
processes, whether used in connection with or secured under
letters patent or otherwise;
(s) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or the attainment of any of
the objects or the furtherance of any of the powers hereinbefore
set forth, either along or in association with other
corporations, firms or corporations, firms or individuals, and to
do every other act or acts, thing or things, incidental or
appurtenant to or growing out of or connected with the aforesaid
business or powers or any part or parts thereof, provided the
same to be not inconsistent with the laws under which the
corporation is organized;
(t) The business or purpose of the corporation is from time to time
to do any one or more of the acts and things hereinabove set
forth, and it shall have power to conduct and carry on its said
business, or any part thereof, and to have one or more offices,
and to exercise all or any of its corporate powers and rights, in
the State of Delaware, and in any one or more of the various
other states, territories, colonies, dependencies of the United
States, in the District of Columbia, and in all or any foreign
countries.
The foregoing clauses shall be construed both as objects and powers, and it
is hereby expressly provided that the foregoing enumeration of specific powers
shall not be held to limit or restrict in any manner the powers of the
corporation and are in furtherance of, and in addition to, and not in limitation
of the general powers conferred by the laws of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue shall be 51,500,000 of which 1,500,000
shares shall be Cumulative Preferred Stock without par value (the "Preferred
Stock"), and 50,000,000 shares shall be common stock of the par value of $1.00
per share (the "Common Stock").
The following is a statement of certain of the designations, powers,
preferences and relative, participating, voting, optional and other special
rights, and of the qualifications, limitations and restrictions thereof, in
respect of the stock of such classes, together with the grant of authority to
the Board of Directors of the corporation to fix by resolution or resolutions,
in respect of any series of the Preferred Stock, the remainder of the
designations, powers, preferences and relative, participating, voting, optional
and other special rights, and of the qualifications, limitations and
restrictions thereof;
(1) The Preferred Stock is senior to the Common Stock, and the Common
Stock is junior to and subject to all rights and preferences of the
Preferred Stock, to the extent and in the particulars hereinafter set
forth or provided for in the resolution or resolutions of the Board of
Directors with respect to the Preferred Stock adopted as herein
authorized.
(2) The Preferred Stock may be issued from time to time in one or more
series in any manner permitted by law, as determined from time to time
by the Board of Directors and stated in the resolution or resolutions
A-5
<PAGE>
providing for the issue of such stock adopted by the Board of
Directors pursuant to authority hereby vested in it, each series to be
appropriately designated, prior to the issue of any shares thereof, by
some distinguishing rate of dividend, number, letter or title. All
shares of each series of Preferred Stock shall be alike in every
particular (except as to the date from which dividends shall commence
to accrue) and all shares of Preferred Stock shall be of equal rank
and have the same powers, preferences, and rights and shall be subject
to the same qualifications, limitations and restrictions, without
distinction between the shares of different series thereof, except
only in regard to the following particulars, which may be different in
the different series:
(a) the amount or amounts payable, together with accrued dividends to
the date of distribution as hereinafter provided, to holders
thereof upon any involuntary liquidation, dissolution or
winding-up of the corporation (such amount or amounts, exclusive
of such accrued dividends, being hereinafter referred to as the
"Stated Value" of the shares in question), provided, however,
that the aggregate Stated Value of all shares of Preferred Stock
at any time outstanding shall not exceed $60,000,000;
(b) the annual rate or rates of dividends payable on shares of such
series and the dates from which such dividends shall commence to
accrue;
(c) the amount or amounts payable upon redemption thereof and,
subject to applicable provisions of the Restated Certificate of
Incorporation, as amended, the manner of effecting such
redemption;
(d) the preferential amount or amounts payable to holders thereof
upon any voluntary liquidation, dissolution or winding-up of the
corporation;
(e) the provisions of any sinking, purchase and/or analogous funds,
if any, with respect thereto (including provisions, if any, with
respect thereto requiring the corporation to set aside funds with
which to purchase and acquire shares thereof, or to attempt to
purchase and acquire shares thereof, at prices not exceeding the
redemption price from time to time applicable);
(f) the terms and rates of conversion and/or exchange thereof, if
convertible and/or exchangeable;
(g) the provisions as to voting rights, if any, and/or as to other
restrictions and limitations, if any, created for the benefit and
protection of holders of Preferred Stock of one or more series,
additional to provisions contained in this Article FOURTH for the
benefit and protection of all holders of Preferred Stock; and
(h) the provisions, if any, for reimbursement by the corporation to
the holders of shares of one or more series, of the amount of
certain taxes paid by them, to the extent it can do so from funds
which at the time might be properly applied (under the laws of
the State of Delaware and under the provisions of the Restated
Certificate of Incorporation, as amended, and under resolutions
of the Board of Directors adopted as herein authorized) to the
payment of dividends on shares of the corporation ranking junior
to the Preferred Stock as to dividends.
A-6
<PAGE>
The designations of each series of Preferred Stock and its terms,
preferences, powers and rights and qualifications, limitations or restrictions
thereof in respect of the foregoing particulars shall be fixed and determined by
the Board of Directors in any manner permitted by law and stated in the
resolution or resolutions providing for the issue of such stock adopted by the
Board of Directors, pursuant to authority herein vested in it, before any shares
of such series are issued (or, in the event of any change as contemplated by
subparagraph (b) of Clause (7) of this Article FOURTH, after the issuance of
such shares). Subject to the provisions of such resolution or resolutions the
Board of Directors may from time to time increase the number of shares of any
series of Preferred Stock already created by providing that unissued shares of
Preferred Stock, or any shares of Preferred Stock of a different series
reacquired or redeemed by the corporation and not then outstanding, shall
constitute part of such series, and/or may decrease (but not below the number of
shares thereof then outstanding) the number of shares of any series of Pre-
ferred Stock already created by providing that any unissued shares, or any
shares reacquired or redeemed by the corporation and not then outstanding,
previously assigned to such series shall no longer constitute part thereof,
and/or may classify or reclassify any unissued Preferred Stock or any shares
reacquired or redeemed by the corporation and not then outstanding, by fixing or
altering the terms thereof in respect of any of the above-mentioned particulars
and by assigning the same to an existing or newly created series from time to
time before the issuance of such stock.
(3) The Preferred Stock of each series shall be entitled to receive, and
the corporation shall be bound to pay thereon, but only as and when
declared by the Board of Directors, out of any assets, profits or
funds of the corporation at the time legally available therefor,
cumulative cash dividends at the annual rate which shall be fixed by
the Board of Directors for such series as herein authorized, and no
more, payable quarterly on the fifteenth days of March, June,
September and December in each year. Such dividends shall be
cumulative, shall be deemed to accrue from day to day regardless of
whether or not earned or declared, and shall commence to accrue on
each share of Preferred Stock either:
(a) from such date, if any, as may be fixed by the Board of Directors
prior to the issue thereof;
(b) if no such date is fixed and if such shares shall be issued in
the period following a dividend record date fixed for the series
of which it is a part and up to and including the dividend
payment date for which such record was taken, then from such
dividend payment date; or
(c) otherwise from the dividend payment date next preceding the date
of issue of such share, or if such share shall be issued on a
dividend payment date, from such dividend payment date.
The corporation in making any dividend payment upon the Preferred Stock
shall make dividend payments ratably upon all outstanding shares of Preferred
Stock in proportion to the amount of the dividends accrued thereon to the date
of such dividend payment. Accumulations of dividends shall not bear interest.
In no event, so long as any Preferred Stock shall remain outstanding, shall
any dividend whatsoever (other than a dividend payable in shares of stock of the
corporation ranking junior to the Preferred Stock as to dividends and assets) be
declared or paid upon, nor shall any distribution be made or ordered in respect
of, the Common Stock or any other class of stock ranking junior to the Preferred
Stock as to dividends or assets, nor shall any moneys
A-7
<PAGE>
(other than the net proceeds received from the sale of stock ranking junior to
the Preferred Stock as to dividends and assets) be set aside for or applied to
the purchase or redemption (through a sinking fund or otherwise) of shares of
Common Stock or of any other class of stock ranking junior to the Preferred
Stock as to dividends or assets, unless:
(i) all dividends on all outstanding shares of Preferred Stock of
all series for all past dividend periods shall have been paid
and the full dividend on all outstanding shares of Preferred
Stock of all series for the then current quarterly dividend
period shall have been paid or declared and set apart for
payment; and
(ii) the corporation shall have set aside all amounts, if any,
theretofore required to be set aside as and for sinking,
purchase and/or analogous funds, if any, for the Preferred Stock
of all series.
(4) The corporation, at the option of the Board of Directors, may at any
time redeem the whole, or from time to time may redeem any part, of
the Preferred Stock, by paying therefor in cash the amount fixed by
the Board of Directors for redemption of shares of such series as
herein authorized, such sum being hereinafter in this Clause (4)
referred to as the "redemption price." If less than all of the
outstanding shares of Preferred Stock are to be called for redemption,
redemption may be made of the whole or any part of the outstanding
shares of any one or more series, in the discretion of the Board of
Directors, and if less than all outstanding shares of any series are
to be redeemed, the shares to be redeemed shall be selected by
whichever of the following methods the Board of Directors shall
choose: by lot or pro rata in such manner as may be prescribed by
resolution of the Board of Directors. Not more than sixty (60) days
and not less than thirty (30) days prior to the redemption date,
notice of the proposed redemption shall be mailed to the holders of
record of the shares of Preferred Stock to be redeemed, such notice to
be addressed to each such stockholder at his last known post office
address shown on the records of the corporation and the time of
mailing such notice shall be deemed to be the time of the giving
thereof. On or after the date of redemption stated in such notice
(sometimes referred to in this Clause (4) as the "redemption date"),
each holder of shares of Preferred Stock called for redemption shall
surrender his certificate(s) for such shares to the corporation
(endorsed if required) at the place designated in such notice and
shall thereupon be entitled to receive payment of the redemption
price. In case less than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. If such notice of
redemption shall have been given as aforesaid, and if on or before the
redemption date funds necessary for the redemption shall have been set
aside so as to be and continue available therefor, then,
notwithstanding that the certificates representing any shares of
Preferred Stock so called for redemption shall not have been
surrendered, such shares shall not be deemed to be outstanding for any
purpose, the dividends thereon shall cease to accrue after the
redemption date, and all rights with respect to the shares so called
for redemption shall forthwith after such redemption date cease and
determine, except only the right of the holders of certificates issued
to represent such shares to receive the redemption price without
interest, upon endorsement, if required, and surrender of said
certificates. If such notice of redemption of all or any part of the
Preferred Stock shall have been mailed as aforesaid and the
corporation shall thereafter deposit money for the payment of the
redemption price pursuant thereto with any bank or trust company
(referred to in this Clause (4) as to the "depository") in Dallas,
Texas, or Chicago, Illinois, having a combined capital and surplus of
not less than $2,000,000 selected by the Board of
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Directors for that purpose, to be applied to such redemption, then
from and after the making of such deposit such shares shall not be
deemed to be outstanding for any purpose and the rights of the holders
of certificates issued to represent such shares shall be limited to
the right to receive payment of the redemption price (without
interest) from the depository upon endorsement, if required, and
surrender of said certificates; provided, however, that no then
existing right of conversion or exchange, if any, with respect to such
shares shall be impaired by such deposit. Any moneys so deposited
which shall not be required for such redemption because of the
exercise of any such right of conversion or exchange subsequent to the
date of such deposit and prior to the expiration of such right shall
be returned to the corporation forthwith. The corporation shall be
entitled to receive, from time to time, from the depository the
interest, if any, allowed on such moneys deposited with it, and the
holders of certificates issued to represent any shares so redeemed
shall have no claim to any such interest. Any moneys so deposited and
remaining unclaimed at the end of six (6) years from the redemption
date shall, if thereafter requested by resolution of the Board of
Directors, be repaid to the corporation, and in the event of such
repayment to the corporation, such holders of certificates issued to
represent the shares so called for redemption as shall not have made
claim against such moneys prior to such repayment to the corporation
shall be deemed to be unsecured creditors of the corporation for an
amount equivalent to the amount deposited as the redemption price of
such shares and so repaid to the corporation, but shall in no event be
entitled to any interest.
The corporation shall not at any time redeem, or purchase or otherwise
acquire less than all of the shares of Preferred Stock at the time
outstanding, unless full dividends with respect to all past dividend
periods and for the current dividend period have been paid or declared
and set apart for payment on all shares of the Preferred Stock then
outstanding and not then to be redeemed, purchased or otherwise
acquired by the corporation; provided, however, if the corporation has
paid or declared and set apart for payment full dividends with respect
to all past dividend periods on such shares, it shall not be required
to pay or declare and set apart for payment dividends on such shares
for any current dividend period during which it may redeem, purchase
or otherwise acquire shares of Preferred Stock of any series, at
prices not exceeding the redemption price then applicable to such
series, in pursuance of any sinking, purchase and/or analogous fund
for shares of such series.
Subject only to any applicable provisions of law and of the Restated
Certificate of Incorporation, as amended, and to limitations, if any,
placed upon the exercise of such right by resolution or resolutions
adopted by the Board of Directors providing for the issue of Preferred
Stock, as herein authorized, the corporation shall have the right to
purchase, hold, sell and transfer shares of its own stock of any class
or series; provided, that no such shares shall be deemed to be
outstanding for any purpose during any time that it belongs to or is
held by the corporation.
Shares of Preferred Stock of any particular series may also be subject
to redemption through operation of any sinking or analogous fund
created for such series, at the prices and under the terms and
provisions fixed for such fund by the Board of Directors as herein
authorized.
(5) Upon any involuntary liquidation, dissolution or winding-up of the
corporation, holders of the Preferred Stock of each series shall be
entitled, before any distribution shall be made to the Common Stock or
to any other class of stock ranking junior to the Preferred Stock as
to dividends or assets, to be paid the Stated
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Value per share plus accrued dividends to the date of distribution;
and upon any voluntary liquidation, dissolution or winding-up of the
corporation, holders of the Preferred Stock of each series shall be
entitled before any distribution shall be made to the Common Stock or
to any other class of stock ranking junior to the Preferred Stock as
to dividends or assets, to be paid the full preferential amount or
amounts fixed by the Board of Directors for such series as herein
authorized; but the Preferred Stock shall not be entitled to any
further payment and any remaining net assets shall be distributed in
accordance with the provisions hereinafter set forth in this Article
FOURTH to the Common Stock. If upon such liquidation, dissolution or
winding-up of the corporation, whether voluntary or involuntary, the
net assets of the corporation shall be insufficient to permit the
payment to holders of all outstanding shares of Preferred Stock of all
series of the full preferential amounts to which they are respectively
entitled as aforesaid, then the entire net assets of the corporation
shall be distributed ratably to holders of all outstanding shares of
Preferred Stock in proportion to the full preferential amount or
amounts to which each such share is entitled as aforesaid. Neither a
consolidation nor merger of the corporation with or into any other
corporation or corporations, nor the sale, lease or exchange of all or
substantially all of the assets of the corporation shall be deemed to
be a liquidation, dissolution or winding-up within the meaning of this
Article FOURTH.
(6) Except as otherwise specifically provided in the Restated Certificate
of Incorporation, as amended, or in the resolution or resolutions
adopted by the Board of Directors, as herein authorized, or as
otherwise expressly required by applicable law, the Preferred Stock
shall not have any right to vote for the election of directors or for
any other purpose:
Provided, however, that if and whenever dividends on the Preferred
Stock shall be in arrears and such arrearages shall aggregate an
amount equal to at least six (6) quarterly dividends thereon, the
Preferred Stock shall have the right, voting as a class, to elect two
members of the Board of Directors of the corporation, and such right
shall continue and be exercisable at each election of directors of the
corporation until all arrearages in dividends on the Preferred Stock
shall have been paid in full to holders of the Preferred Stock and the
current quarterly dividend thereon for the current quarterly dividend
period shall have been declared and set apart for payment, and
thereupon all voting rights given by this proviso shall be divested
from the Preferred Stock (subject, however to being at any time or
from time to time similarly revived and divested). At any time after
the holders of the Preferred Stock shall have thus become entitled to
elect two members of the Board of Directors of the corporation, the
Secretary of the corporation may, and upon the written request of
holders of record of at least 10% in Stated Value of the Preferred
Stock then outstanding addressed to him at the statutory office of the
corporation in Delaware shall, call a special meeting of the holders
of the Preferred Stock for the purpose of electing such two directors,
to be held, within forty days of the receipt of such request, at the
principal business office of the corporation, upon the notice then
provided by law and the by-laws for the holding of special meetings of
stockholders; provided, however, that the Secretary need not call any
such special meeting at the request of such holders of Preferred Stock
if a regular meeting of stockholders for the election of directors is
to convene within ninety days after receipt by the Secretary of such
request. If such special meeting is required to be called by the
foregoing provisions but is not called by the Secretary within twenty
days after receipt of such request, then the holders of record of 10%
or more in Stated Value of the Preferred Stock then outstanding may
designate in writing one of their number to call such meeting at the
place and upon the notice above
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provided, and any person so designated shall have access to the stock
books of the corporation for such purpose. At any such special
meeting or at any regular meeting for the election of directors at
which the holders of Preferred Stock shall be entitled to elect two
directors as aforesaid, the holders of a majority in Stated Value of
the then outstanding shares of Preferred Stock present in person or by
proxy shall be sufficient to constitute a quorum for the election of
such two directors, which shall be elected by vote of holders of
Preferred Stock having a plurality in Stated Value. The persons so
elected by holders of the Preferred Stock as directors, together with
the directors elected by the Common Stock or any other class or
classes of stock having voting rights for the election of directors,
shall constitute the Board of Directors of the corporation.
Concurrently with the first election of two (2) directors by holders
of the Preferred Stock after any vesting of the voting right
hereinabove provided for, the number of directors constituting the
Board shall be increased by two (2), and concurrently with the
divestment of such right, as aforesaid, the number of such directors
shall be reduced by two (2) and any person theretofore elected
pursuant to such right shall automatically cease to be a member of the
Board of Directors. Holders of the Preferred Stock shall be entitled
at any election of directors where they are authorized to vote,
whether a special election called for their benefit or a regular
election, to exercise with respect to the two directors to be elected
by such holders cumulative voting rights, if and to the extent that
cumulative voting rights are provided for all stockholders of the
corporation elsewhere in the Restated Certificate of Incorporation, as
amended.
Provided, further, that any series of Preferred Stock shall have such
additional voting rights, if any (in addition to the voting rights in
this Article FOURTH given to all Preferred Stock), as shall be stated
and expressed in the resolution or resolutions providing for the issue
of such series adopted by the Board of Directors of the corporation,
as herein authorized, prior to the issuance of any shares of such
series.
If less than a quorum of the outstanding Preferred Stock shall be
represented at any meeting at which holders of such stock have a right
to vote by class on any matter, whether provided for by law or in the
Restated Certificate of Incorporation, as amended, or in the
resolution or resolutions adopted by the Board of Directors providing
for issue of any such stock, as herein authorized, the meeting may,
nevertheless, proceed to transact any business and to make any
determination for the purpose of which a quorum exists, including the
election by other stockholders of directors which such other
stockholders are entitled to elect, and such meeting with respect to
the Preferred Stock may be adjourned from time to time, by affirmative
action of a majority of such stock represented in person or by proxy,
until a quorum exists for the determination of any matter, including
the election of directors, by holders of such Preferred Stock.
While any of the Preferred Stock shall be outstanding the by-laws of
the corporation shall be (and are by action of the stockholders)
amended and supplemented to the extent necessary that such by-laws
shall be consistent with provisions of the Restated Certificate of
Incorporation, as amended, respecting voting rights of holders of the
Preferred Stock and the exercise thereof, and similar provisions, if
any, contained in the resolution or resolutions adopted by the Board
of Directors as herein authorized.
Except as otherwise expressly provided hereinabove in this Clause (6)
and hereinbelow in Clauses (7) and (8) of this Article FOURTH with
respect to the Preferred Stock and except as otherwise may be required
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by law or expressly provided in the resolution or resolutions adopted
with respect to the Preferred Stock by the Board of Directors as
herein authorized, the Common Stock shall have the exclusive rights to
vote for the election of directors and on all other matters and
questions. Each stockholder entitled to vote at any particular time
on any matter or question shall have one vote on each such matter or
question for each share of stock held of record by him and entitled to
voting rights at the time such vote is taken, except that each holder
of Preferred Stock so entitled to vote shall have one vote for each
$100.00 in Stated Value of the shares of Preferred Stock so held by
him (or in the corresponding fraction of one vote in the case of any
holder of less than $100.00 in Stated Value).
Whenever holders of the Preferred Stock shall have become and then
remain entitled to vote upon any matter or question, and only then,
they shall be entitled to receive notice of any stockholders' meeting
to be held with respect to such matter or question.
Except as provided hereinbelow in Clauses (7) and (8) of this Article
FOURTH, one or more additional classes of stock may be authorized and
the amount of the authorized stock of any class or classes of the
corporation may be increased or decreased by the affirmative vote of
the holders of a majority of the outstanding Common Stock of the
corporation.
(7) So long as any shares of the Preferred Stock are outstanding, the
corporation shall not, without the affirmative vote at a meeting (the
notice of which shall state the general character of the matters to be
submitted thereat), or the written consent with or without a meeting,
of the holders of at least 66-2/3% in Stated Value of the then
outstanding shares of Preferred Stock:
(a) authorize or create, or increase the authorized amount of, any
additional class of stock ranking prior to or on a parity with
the Preferred Stock as to dividends or assets; or authorize or
create, or increase the authorized amount of, any class of stock
or obligations convertible into or evidencing the right to
purchase any class of stock ranking prior to or on a parity with
the Preferred Stock as to dividends or assets;
(b) amend, alter or repeal any of the rights, preferences or powers
of the outstanding Preferred Stock stated and expressed in the
Certificate of Incorporation, as amended, or in the resolution or
resolutions of the Board of Directors, adopted as herein
authorized, so as adversely to affect the rights, preferences or
powers of the Preferred Stock or its holders; provided, however,
that if any such amendment, alteration or repeal would adversely
affect the rights, preferences or powers of outstanding shares of
Preferred Stock of any particular series (one or more) without
correspondingly affecting the rights, preferences or powers of
the outstanding shares of all series, then a like vote or consent
by the holders of at least 66-2/3% in Stated Value of the
Preferred Stock of the affected series (one or more) at the time
outstanding shall also be necessary for effecting or validating
any such amendment, alteration or repeal;
(c) sell, lease, or convey all, or substantially all, of its property
or business; or voluntarily liquidate, dissolve or wind up its
business;
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(d) effect the merger or consolidation of the corporation into or
with any other corporation, or the merger of any other
corporation into the corporation, unless the corporation
resulting from or surviving such merger or consolidation will
upon consummation of such merger or consolidation have no class
of stock and no other securities, either authorized or
outstanding, ranking prior to or on a parity with the Preferred
Stock, except the same number of shares (or aggregate par value
or Stated Value) of stock and the same principal amount of other
securities with the same rights and preferences as the stock and
other securities of the corporation respectively authorized and
outstanding immediately preceding such merger or consolidation
and unless each holder of the Preferred Stock immediately
preceding such merger or consolidation shall receive or retain
the same number of shares (or aggregate par value or Stated
Value) of stock with the same rights and preferences of the
resulting or surviving corporation.
(8) So long as any shares of Preferred Stock are outstanding, the
corporation shall not, without the affirmative vote at a meeting (the
notice of which shall state the general character of the matters to be
submitted thereat) or the written consent with or without a meeting,
of the holders of at least a majority in Stated Value of the then
outstanding shares of Preferred Stock, increase the authorized amount
of Preferred Stock, or decrease the authorized amount of Preferred
Stock.
(9) Subject to all of the rights of the Preferred Stock, dividends may be
paid upon the Common Stock as and when declared by the Board of
Directors.
(10) Dividends upon the stock of the corporation of any class shall be
payable only out of assets, profits or funds of the corporation at the
time legally available therefor, and only when and as declared by the
Board of Directors. The Board of Directors shall have power to
determine whether any, and, if any, what part of such available
assets, profits or funds shall be declared as dividends and paid to
its stockholders; and all rights of holders of stock of the
corporation of any class in respect of dividends shall be subject to
the power of the Board of Directors so to do.
(11) The following terms, wherever used in this Article FOURTH, or in any
resolution or resolutions heretofore or hereafter adopted by the Board
of Directors as herein authorized, shall be deemed to have the
following meanings.
"Paid", whenever used with reference to dividends on any class or
series of the corporation's stock shall mean paid in fact or tendered
(including payment or tender by check or draft drawn by the
corporation or its dividend paying agent) to holders of the stock
entitled to receive such dividends, or set apart for payment to and
made available to or subject to claim by such holders, irrespective of
inability of the corporation or its paying agent to effect delivery of
such dividends or of failure or refusal on the part of such holders,
or any one or more of them, to reduce such dividends to possession.
"Accrued dividends" or "dividends accrued", whenever used with
reference to the Preferred Stock or any series thereof shall be deemed
to mean an amount which shall be equal to dividends thereon at the
rate per annum fixed by the Board of Directors as herein authorized
for a particular series, computed from the date
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on which such dividends began to accrue on such shares to the date to
which dividends are stated to accrue, less the aggregate amount of
dividends theretofore and on such date paid thereon.
"Board of Directors", when not otherwise specified, shall mean the
Board of Directors of Southern Union Company at the time elected and
acting.
"Subsidiary" shall mean any corporation of which more than fifty per
cent (50%) of the outstanding stock (other than directors' qualifying
shares, if any) having by the terms thereof ordinary voting power to
elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class
or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time directly
or indirectly owned by the corporation, or by any subsidiary, or by
the corporation and any one or more subsidiaries.
"Consolidated subsidiary" shall mean any subsidiary the accounts of
which shall have been consolidated with those of the corporation in
the financial statements in the latest annual report of the
corporation to its stockholders or, if not so consolidated, the
accounts of which are proposed by the corporation to be consolidated
with its own accounts in the financial statements in the next
succeeding annual report of the corporation to its stockholders.
"Consolidated net income of the corporation and its consolidated
subsidiaries" shall mean the balance remaining after deducting from
the consolidated earnings and other income and profits of the
corporation and its consolidated subsidiaries (including non-
operating profits, but excluding any gain or loss realized upon the
sale or other disposition of fixed property or other capital assets
not made in the ordinary course of business and also upon the
acquisition, redemption or retirement or sale of the securities of the
corporation or of any consolidated subsidiary) all expenses and
charges of every proper character, including interest, amortization of
debt discount and expense, provision for all taxes (except and
excluding taxes on account of any gain excluded above), adequate
provision for depreciation, depletion and obsolescence, amounts
appropriated under any plan of the corporation or of any consolidated
subsidiary for extra compensation for, or pension to, officers and
employees, dividends accrued on preferred stock of consolidated
subsidiaries not owned by the corporation or another consolidated
subsidiary, provision for net earnings applicable to all minority
interests in common stock of consolidated subsidiaries, and proper
reserves determined in good faith by the Board of Directors of the
corporation or of a consolidated subsidiary, as the case may be, in
its discretion, all based upon a statement of income and profit and
loss consolidating the accounts of the corporation and its
consolidated subsidiaries prepared in accordance with generally
accepted principles of accounting.
"Consolidated net income available for interest of the corporation and
its consolidated subsidiaries" shall be determined in the same manner
as "consolidated net income of the corporation and its consolidated
subsidiaries" except that (1) no deduction shall be made for interest
paid on funded debt, (2) if any property of the corporation or of a
consolidated subsidiary shall have been acquired by it during any
period for which such determination is made or shall be so acquired
before or contemporaneously with the issuance of additional stock then
proposed to be issued, the net income from such property during the
period, or such part thereof as shall have preceded acquisition by the
corporation or its consolidated subsidiary, as
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the case may be, to the extent not otherwise included, shall be
included as a part of the consolidated net income of the corporation
and its consolidated subsidiaries computed in the same manner as
specified above except that federal taxes with respect to income from
such property shall be adjusted as if such property had been owned by
the corporation or its consolidated subsidiary during the entire
period in question, and (3) if within such period or prior to or
contemporaneously with the issuance of the additional stock, the
corporation or a consolidated subsidiary shall have disposed of any
property, voluntarily or through exercise of eminent domain or
otherwise, then the net income (estimated, if necessary) from such
property for the whole of the period in question shall be excluded
from the consolidated net income of the corporation and its
consolidated subsidiaries in such computation and federal taxes with
respect to income shall be adjusted in making such computation as if
such property had been disposed of prior to the period in question.
"Funded debt" shall mean indebtedness which by its terms matures more
than one year from the date of its creation.
FIFTH: The corporation is to have perpetual existence.
SIXTH: The private property of the stockholders of the corporation shall
not be subject to the payment of corporate deficits to any extent whatever.
SEVENTH: At all elections of directors of the corporation, each
stockholder having a right to vote thereupon shall be entitled to as many votes
as shall equal the number of his shares of stock then having voting rights
multiplied by the number of directors to be elected by the class of stockholders
to which he belongs, and he may cast all of such votes for a single director or
may distribute them among the number to be voted for by such class of
stockholders, or any two or more of them as he may see fit.
EIGHTH: The following additional provisions are inserted for the
management of the business and for the conduct of the affairs of the corporation
and for the creation, definition, limitation and regulation of the powers of the
corporation, the directors and stockholders:
Except as otherwise fixed by or pursuant to the provisions of Article
FOURTH of the Restated Certificate of Incorporation relating to the rights of
the holders of the Preferred Stock to elect additional directors under specified
circumstances, the number of directors which shall constitute the whole Board of
Directors shall be not less than five (5) nor more than twelve (12) nine (9).
-----------
Within such limits, the number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption). At the special
meeting of stockholders at which this paragraph is adopted, the directors shall
be divided into three classes, designated Class I, Class II and Class III (which
at all times shall be as nearly equal in number as possible), with the term of
office of Class I directors to expire at the 1985 annual meeting of
stockholders, the term of office of Class II directors to expire at the 1986
annual meeting of stockholders, and the term of office of Class III directors to
expire at the 1987 annual meeting of stockholders. At each annual meeting of
stockholders following such initial classification and election, directors
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elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election.
Subject to the rights of the holders of any class or series of capital
stock of the corporation entitled to vote generally in the election of directors
(hereinafter referred to as the "Voting Stock") then outstanding, any director,
or the entire Board of Directors, may be removed from office at any time, but
only for cause and only by the affirmative vote of the holders of a majority at
----------
least 80% of the voting power of all of the then outstanding shares of the
Voting Stock, voting together as a single class. Except as may otherwise be
provided by law, cause for removal shall be construed to exist only if the
director whose removal is proposed has been convicted of a felony by a court of
competent jurisdiction and such conviction is no longer subject to direct
appeal, or has been adjudged by a court of competent jurisdiction to be liable
for negligence, or misconduct, in the performance of his duty to the corporation
in a matter of substantial importance to the corporation, and such adjudication
is no longer subject to direct appeal.
Subject to the rights of the holders of any class or series of the Voting
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies on the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled by a majority vote of the directors then in
office, though less than a quorum, and directors so chosen shall hold office for
a term expiring at the annual meeting of stockholders at which the term of
office of the class to which they have been elected expires. No decrease in the
number of authorized directors constituting the entire Board of Directors shall
shorten the term of any incumbent director.
Notwithstanding the foregoing, whenever the holders of the Preferred Stock
shall have the right to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies, and other
features of such directorships shall be governed by the terms of this Restated
Certificate of Incorporation applicable thereto, and such directors so elected
shall not be divided into classes pursuant to this Article unless expressly
provided by such terms.
Subject to the voting rights of the Preferred Stock as in Article FOURTH
hereof provided and to any voting rights created for the benefit of any series
of Preferred Stock by any resolution or resolutions of the Board of Directors
providing for the issue of Preferred Stock adopted as authorized in said
Article, the Board of Directors shall also have power, without the assent or
vote of the stockholders, from time to time:
(1) to fix the times for the declaration and payment of dividends;
(2) to fix and vary the amount to be reserved as working capital or for
any other proper purpose or purposes;
(3) to authorize and cause to be executed mortgages and liens upon all the
property and assets of the corporation, or any part thereof, whether
at the time owned or thereafter acquired, upon such terms and
conditions as it may determine;
(4) to determine the use and disposition of any surplus or net assets in
excess of capital;
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(5) to make and alter by-laws of the corporation, subject to the right of
the stockholders to make and alter by-laws of the corporation;
provided, however, that the directors shall not modify or repeal any
by-law hereafter made by the stockholders;
(6) to pay for, in cash or property, any property or rights acquired by
the corporation or to authorize the issue and exchange therefor of
shares of the capital stock of the corporation or bonds, debentures,
notes or other obligations or other securities of the corporation,
whether secured or unsecured; and
(7) to borrow or otherwise raise moneys, without limit to amount, for any
of the purposes of the corporation; to authorize the issue of bonds,
debentures, notes or other obligations of the corporation, of any
nature or in any manner, secured or unsecured, for moneys so borrowed;
to authorize the creation of mortgages upon, or the pledge or
conveyance or assignment in trust of, the whole or any part of the
property and assets of the corporation, real or personal, whether at
the time owned or thereafter acquired, including contracts, choses in
action and other rights, to secure the payment of any bonds,
debentures, or notes or other obligations of the corporation and the
interest thereon; and to authorize the sale or pledge or other
disposition of the bonds, debentures, notes or other obligations of
the corporation for its corporate purposes.
The Board of Directors shall also have power, with the consent in writing
of the holders of a majority of the stock issued and outstanding having voting
power, or upon the affirmative vote of the holders of a majority of the stock
issued and outstanding having voting power, to sell, lease, or exchange all of
the property and assets of the corporation, including its good will and its
corporate franchises, upon such terms and conditions as the Board of Directors
deems expedient and for the best interests of the corporation; subject, however,
to the voting rights of the Preferred Stock as in Article FOURTH hereof provided
and to any voting rights created for the benefit of any series of Preferred
Stock by any resolution or resolutions of the Board of Directors providing for
the issue of Preferred Stock adopted as in Article FOURTH hereof authorized.
In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the corporation, subject, nevertheless, to the provisions of the statutes of
Delaware, of the Restated Certificate of Incorporation, and amendments thereto,
and other contracts of the corporation, and by-laws.
NINTH: No stockholder shall be entitled as a matter of right to subscribe
for, purchase or receive any shares of the stock or any rights or options of the
corporation which it may issue or sell, whether out of the number of shares
authorized by this Restated Certificate of Incorporation, or by any amendment
thereof, or out of the shares of stock of the corporation acquired by it after
the issuance thereof, nor shall any stockholder be entitled as a matter of right
to purchase or subscribe for or receive any bonds, debentures, or other
obligations which the corporation may issue or sell that shall be convertible
into or exchangeable for stock or to which shall be attached or appertain any
warrant or warrants or other instrument or instruments that shall confer upon
the holder or owner of such obligations the right to subscribe for or purchase
from the corporation any shares of its capital stock. But all such additional
issues of stock, rights or options, or of bonds, debentures, or other
obligations convertible into or exchangeable for stock or to which warrants
shall be attached or appertain or which shall confer upon the holder
A-17
<PAGE>
the right to subscribe for or purchase any shares of stock, may be issued and
disposed of by the Board of Directors to such persons and upon such terms as in
its absolute discretion it may deem advisable.
TENTH: The minimum amount of capital with which the corporation will
commence business is One Thousand and No/100 Dollars ($1,000.00).
ELEVENTH: Any action required or permitted to be taken by the stockholders
of the corporation must be effected at a duly called annual or special meeting
of stockholders of the corporation and may not be effected by any consent in
writing by such stockholders. Special meetings of stockholders of the
corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the Board for adoption) or by
the holders of not less than a majority of the voting power of all of the
then-outstanding shares of Voting Stock.
TWELFTH: The stockholder vote required to approve any Business Combination
(as hereinafter defined) shall be as set forth in this Article TWELFTH.
(a) (1) Except as otherwise expressly provided in paragraph (b) of
this Article TWELFTH:
(A) any merger or consolidation of the corporation or any
subsidiary (as hereinafter defined) with (i) any Interested
Stockholder (as hereinafter defined) or (ii) any other
corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
corporation or any subsidiary having an aggregate Fair
Market Value (as hereinafter defined) of $25,000,000 or
more; or
(C) the issuance or transfer by the corporation or any
subsidiary (in one transaction or a series of transactions)
of any securities of the corporation or any subsidiary to
any Interested Stockholder or any Affiliate of any
Interested Stockholders in exchange for cash, securities or
other property (or a combination thereof) having an
aggregate of $25,000,000 or more; or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by or on behalf of
any Interested Stockholder or any Affiliate of any
Interested Stockholder; or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the corporation, or any
merger or consolidation of the corporation with any of its
subsidiaries or any other transaction (whether or not with
or into or otherwise involving any Interested Stockholder)
which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any
class of equity or convertible securities of the corporation
or any subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any
Interested Stockholder;
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<PAGE>
shall require the affirmative vote of the holders of at
least 80% of the voting power of all of the then-outstanding
shares of the Voting Stock, voting together as a single
class (it being understood that for purposes of this Article
TWELFTH, each share of the Voting Stock shall have the
number of votes granted to it pursuant to Article FOURTH of
the Restated Certificate of Incorporation). Such
affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage
may be specified, by law or in any agreement with any
national securities exchange or otherwise, and shall be
required in addition to any affirmative vote of the holders
of any particular class or series of Voting Stock required
by law or this Restated Certificate of Incorporation.
(2) The term "Business Combination" as used in this Article
TWELFTH shall mean any transaction which is referred to in any
one or more of subsections (A) through (E) of subparagraph (1) of
this section (a).
(b) The provisions of section (a) of this Article TWELFTH shall not
be applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote as
is required by law or any other provision of this Restated
Certificate of Incorporation, if, in the case of a Business
Combination that does not involve any cash or other consideration
being received by the stockholders of the corporation, solely in
their respective capacities as stockholders of the corporation,
the condition specified in the following subparagraph (1) is met,
or, in the case of any other Business Combination, the conditions
specified in either of the following subparagraphs (1) or (2) are
met:
(1) The Business Combination shall have been approved by a majority of the
Disinterested Directors (as hereinafter defined), it being understood
that this condition shall not be capable of satisfaction unless there
is at least one Disinterested Director.
(2) All of the following conditions shall have been met:
(A) The consideration to be received by holders of shares of a
particular class of outstanding Voting Stock shall be in
cash or in the same form as the Interested Stockholder has
paid for shares of such class of Voting Stock within the
two-year period ending on and including the date on which
the Interested Stockholder became an Interested Stockholder
(the "Determination Date"). If, within such two-year
period, the Interested Stockholder has paid for shares of
any class of Voting Stock with varying forms of
consideration, the form of consideration to be received per
share by holders of shares of such class of Voting Stock
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<PAGE>
shall be either cash or the form used to acquire the largest
number of shares of such class of Voting Stock acquired by
the Interested Stockholder within such two-year period.
(B) The aggregate amount of (x) the cash and (y) the Fair Market
Value, as of the date (the "Consummation Date") of the
consummation of the Business Combination, of the
consideration other than cash to be received per share by
holders of Common Stock in such Business Combination shall
be at least equal to the higher of the following (it being
intended that the requirements of this subparagraph (2)(B)
shall be required to be met with respect to all shares of
Common Stock outstanding whether or not the Interested
Stockholder has previously acquired any shares of Common
Stock):
(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested
Stockholder for any shares of Common Stock acquired by
it within the two-year period immediately prior to the
date of the first public announcement of the proposal
of the Business Combination (the "Announcement Date")
or in the transaction in which it became an Interested
Stockholder, whichever is higher, plus interest
compounded annually from the Determination Date
through the Consummation Date at the prime rate of
interest of Citibank, N.A., New York, New York (or
such other bank as may be selected by the
Disinterested Directors), in effect from time to time,
less the aggregate amount of any cash dividends paid,
and the Fair Market Value of any dividends paid in
other than cash, on each share of Common Stock from
the Determination Date through the Consummation Date,
in an amount up to but not exceeding the amount of
interest so payable per share of Common Stock; or
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date.
(C) The aggregate amount of (x) the cash and (y) the Fair Market
Value, as of the Consummation Date, of the consideration
other than cash to be received per share by holders of
shares of any class, other than Common Stock, of outstanding
Voting Stock shall be at least equal to the highest of the
following (it being intended that the requirements of this
subparagraph (2)(C) shall be required to be met with respect
to every such class of outstanding Voting Stock, whether or
not the Interested Stockholder has previously acquired any
shares of a particular class of Voting Stock);
(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested
Stockholder for any shares of such class of Voting
Stock acquired by it within the two-year period
immediately prior to the Announcement Date or in the
transaction in which it became an Interested
Stockholder, whichever is higher, plus interest
compounded annually from the Determination Date
through the Consummation Date at the prime rate of
interest of Citibank, N.A., New York, New York (or
such other bank as may be selected by the
Disinterested Directors), in effect from time to time,
less the aggregate amount of any cash dividends paid,
and the Fair Market Value of any dividends paid in
other than cash, on each share of
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<PAGE>
such class of Voting Stock from the Determination Date
through the Consummation Date in an amount up to but
not exceeding the amount of interest so payable per
share of such class of Voting Stock; or
(ii) the Fair Market Value per share of such class of
Voting Stock on the Announcement Date; or
(iii) the highest preferential amount per share to which the
holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the
corporation.
(D) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination: (x) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to
declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on any
outstanding Preferred Stock; (y) there shall have been (i)
no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any subdivision
of the Common Stock), except as approved by a majority of
the Disinterested Directors, and (ii) an increase in such
annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure so to
increase such annual rate is approved by a majority of
Disinterested Directors; and (z) such Interested Stockholder
shall have not become the beneficial owner of any additional
shares of Voting Stock except as part of the transaction
which results in such Interested Stockholder becoming an
Interested Stockholder.
(E) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have
received the benefit, directly or indirectly (except
proportionately as a stockholder of the corporation), of any
loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages
provided by the corporation, whether in anticipation of or
in connection with such Business Combination or otherwise.
(F) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of
the Securities Exchange Act of 1934 and the rules and
regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
all stockholders of the corporation at least 30 days prior
to the consummation of such Business Combination (whether or
not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
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<PAGE>
(c) For the purposes of this Article TWELFTH:
(1) A "person" shall mean any individual, firm, corporation or
other entity.
(2) "Interested Stockholder" shall mean any person (other than
the corporation or any Subsidiary) who or which:
(A) is the beneficial owner, directly or indirectly, of
more than 10% of the voting power of the outstanding
Voting Stock; or
(B) is an Affiliate of the corporation and at any time
within the two-year period immediately prior to the
date in question was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the
then-outstanding Voting Stock; or
(C) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within
the two-year period immediately prior to the date in
question beneficially owned by an Interested
Stockholder, if such assignment or succession shall
have occurred in the course of a transaction or series
of transactions not involving a public offering within
the meaning of the Securities Act of 1933, as amended.
(3) A person shall be a "beneficial owner" of any Voting Stock:
(A) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly; or
(B) which such person or any of its Affiliates or
Associates has (x) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or
otherwise, or (y) the right to vote pursuant to any
agreement, arrangement or understanding; or
(C) which are beneficially owned, directly or indirectly,
by any other person with which such person or any of
its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares
of Voting Stock.
(4) For the purposes of determining whether a person is an
Interested Stockholder pursuant to subparagraph (2) of this
paragraph (c), the number of shares of Voting Stock deemed
to be out-standing shall include shares deemed owned through
application of subparagraph (3) of this paragraph (c), but
shall not include any other shares of Voting Stock which may
be issuable pursuant to any agreement, arrangement, or
understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
A-22
<PAGE>
(5) "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of
1934, as in effect on October 1, 1984.
(6) "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or
indirectly, by the corporation; provided, however, that for
the purposes of the definition of Interested Stockholder set
forth in subparagraph (2) of this paragraph (c), the term
"subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly
or indirectly, by the corporation.
(7) "Disinterested Director" means any member of the Board of
Directors of the corporation (the "Board") who is
unaffiliated with the Interested Stockholder and was a
member of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder, and any
successor of a Disinterested Director who is unaffiliated
with the Interested Stockholder and is recommended to
succeed a Disinterested Director by a majority of
Disinterested Directors then on the Board.
(8) "Fair Market Value" means: (x) in the case of stock, the
highest closing sale price during the 30-day period
immediately preceding the date in question of a share of
such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on
the Composite Tape, on the New York Stock Exchange, or, if
such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to
a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then
in use, or, if no such quotations are available, the Fair
Market Value on the date in question of a share of such
stock as determined by the Board in good faith; and (y) in
the case of property other than cash or stock, the Fair
Market Value of such property on the date in question as
determined by the Board in good faith.
(9) In the event of any Business Combination in which the
corporation survives, the phrase "consideration other than
cash to be received" as used in subparagraphs (2)(A) and
(2)(C) of paragraph (b) of this Article TWELFTH shall
include the shares of Common Stock and/or the shares of any
other class of outstanding Voting Stock retained by the
holders of such shares.
(i) A majority of the total number of Disinterested
Directors (whether or not there exist any vacancies in
previously authorized directorships at the time any
such determination as is hereinafter in this paragraph
(d) specified is to be made by the Board) shall have
the power and duty to determine, on the basis of
information known to them after reasonable inquiry,
all facts necessary to determine compliance with this
Article TWELFTH, including, without limitation, (1)
whether a person is an Interested Stockholder, (2) the
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<PAGE>
number of shares of Voting Stock beneficially owned by
any person, (3) whether a person is an Affiliate or
Associate of another, (4) whether the applicable
conditions set forth in subparagraph (2) of paragraph
(b) have been met with respect to any Business
Combination, and (5) whether the assets which are the
subject of any Business Combination have, or the
consideration to be received for the issuance or
transfer of securities by the corporation or any
subsidiary in any Business Combination has, an
aggregate Fair Market Value of $25,000,000 or more.
(d) Nothing contained in this Article TWELFTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
THIRTEENTH: Notwithstanding any other provisions of this Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the Voting Stock required by law or
this Restated Certificate of Incorporation, the affirmative vote of the holders
of at least 80% of the voting power of all of the then-outstanding shares of the
Voting Stock, voting together as a single class, shall be required to alter,
amend, repeal, or adopt any provision inconsistent with, the second through
fifth paragraphs of Article EIGHTH, or Article ELEVENTH, Article TWELFTH, or
this Article THIRTEENTH.
TWELFTH: FOURTEENTH: To the fullest extent permitted by the Delaware
--------
General Corporation Law, as it now exists or may hereafter be amended, a
director of the corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this section by the stockholders of the
corporation shall be prospective only and shall not adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such repeal or modification.
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<PAGE>
SOUTHERN UNION COMPANY
RELEVANT SECTIONS OF THE BY-LAWS
Proposed additions have been underlined and
----------
Proposed deletions have been redlined
ARTICLE I - STOCKHOLDERS
Section 2. SPECIAL MEETINGS. Special meetings of stockholders of the
Company may be called only by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors (whether or
not there exists any vacancies in previously authorized directorships at the
time any such resolution is presented to the Board for adoption) or by the
holders of not less than a majority of the voting power of all of the
then-outstanding shares of any class or series of capital stock of the Company
entitled to vote generally in the election of directors. Any such special
meeting shall be held at such time and such place, either within or without the
State of Delaware, as designated in the call of such meeting. The business to
be transacted at any such meeting shall be limited to that stated in the call
and notice thereof.
ARTICLE II - DIRECTORS
Section 2. NUMBER AND TERM OF OFFICE. Except as otherwise fixed by or
pursuant to the provisions of Article FOURTH of the Company's Restated
Certificate of Incorporation relating to the rights of the holders of the
Company's Preferred Stock to elect additional directors under specified
circumstances, the number of directors which shall constitute the whole Board of
Directors shall be not less than five (5) nor more than twelve (12) nine (9).
-----------
Within such limits, the number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there
exists any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption). Any decrease
in the authorized number of directors shall not become effective until the
expiration of the term of the directors whose directorships are being eliminated
(as determined by the Board of Directors) unless, at the time of such decrease,
there shall be vacancies on the Board of Directors which are being eliminated by
the decrease. The Board of Directors shall be divided into three (3) classes
serving for those initial terms as provided in Article EIGHTH of the Company's
Restated Certificate of Incorporation. At each annual meeting of stockholders
following such initial classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders. Notwithstanding
any provision of this Section 2 or Section 3 below, whenever the holders of the
Company's Preferred Stock shall have the right to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies, and other features of directorships shall be governed by the terms of
the Company's Restated Certificate of Incorporation applicable thereto.
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<PAGE>
Section 3. FILLING OF VACANCIES. Subject to the rights of the holders of
any class or series of any capital stock of the Company entitled to vote
generally in the election of directors then-outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
by a majority vote of the directors then in office, though less than a quorum,
and directors as chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of office of the class to which they
have been elected expires. No decrease in the number of authorized directors
constituting the entire Board of Directors shall shorten the term of any
incumbent director.
Section 15. EVALUATION OF BUSINESS COMBINATIONS. The Board of Directors
of the Company, when evaluating any offer of another party to make a tender or
exchange offer for any equity security of the Company or to otherwise effect a
Business Combination (as defined by Article TWELFTH of the Company's Restated
Certificate of Incorporation), shall, in connection with the exercise of its
judgment as to what is in the best interests of the Company as a whole, be
authorized to give due consideration to such factors as the Board of Directors
determines to be relevant, including, without limitation:
(i) the interests of the Company's stockholders;
(ii) whether the proposed transaction violates federal or state law;
(iii) an analysis of not only the consideration being offered in the
proposed transaction, in relation to the then-current market price
for the outstanding capital stock of the Company, but also in
relation to the market for the capital stock of the Company over a
period of years, the estimated price which might be achieved in a
negotiated sale of the Company as a whole or in part or through
orderly liquidation, the premiums over market price for the
securities of other corporations in other similar transactions,
current political, economic and other factors bearing on securities
prices and the Company's financial condition and future prospects;
and
(iv) the social, legal and economic effects upon employees, suppliers,
customers and others having similar relationships with the Company
and the communities in which the Company conducts its business.
In connection with any such evaluation, the Board of Directors is
authorized to conduct its investigation and to engage in such legal proceedings
as the Board of Directors may determine.
ARTICLE X - MISCELLANEOUS PROVISIONS
Section 8. AMENDMENT OF BY-LAWS. The Stockholders, by the affirmative
vote of the holders of a majority of the voting power of the then-outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class, or the Board of Directors, by the affirmative vote
of a majority of the directors, may at any meeting, if the substance of the
proposed amendment shall have been stated in the notice of meeting, amend, alter
or repeal any of these By-Laws. Notwithstanding the foregoing, the affirmative
vote of the holders of at least eighty percent (80%) of the voting power of all
of the then-outstanding shares of stock entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
alter, amend
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or repeal, or adopt any provision inconsistent with, Section 2 of Article I,
Section 2 of Article II, Section 3 of Article II, or the second through the
fifth paragraphs of Article EIGHTH, or Article ELEVENTH, Article TWELFTH, or
Article THIRTEENTH of the Company's Restated Certificate of Incorporation of
this sentence.
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<PAGE>
PROXY SOUTHERN UNION COMPANY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OR
SOUTHERN UNION COMPANY FOR THE MAY 25, 1994 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints, GEORGE L. LINDEMANN, JOHN E. BRENNAN and
PETER H. KELLEY, or any one, two or all three of them, with power of
substitution in each, proxies for the undersigned, to represent the undersigned
and to vote all the Common Stock of the Company which the undersigned would be
entitled to vote, as fully as the undersigned could vote and act if personally
present, at the Annual Meeting of Stockholders to be held on May 25, 1994 at
2:00 pm Central Daylight Savings Time, in the eighth floor atrium of the
Company's offices at Lavaca Plaza, 504 Lavaca Street, Austin, Texas or at any
adjournment thereof.
The Proxies are authorized to vote in their discretion upon all matters
properly brought before the meeting, including any matter of which Management
was not aware a reasonable time before the solicitation of this proxy.
1. Election of the following nominees as Class I Directors: JOHN E.
BRENNAN, FRANK W. DENIUS and ROGER J. PEARSON
<TABLE>
<S> <C>
FOR ALL NOMINEES WITHHELD FOR ALL NOMINEES
/ / / /
</TABLE>
WITHHELD FOR THE FOLLOWING ONLY (WRITE THE NAME OF THE NOMINEE(S) ON THE
SPACE BELOW)
________________________________________
2. Proposal to amend the Restated Certificate of Incorporation and Bylaws
to increase the maximum size of the Board of Directors to twelve
Directors.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to amend the Restated Certificate of Incorporation and Bylaws
of the Company to eliminate Article Twelfth and certain other 80%
supermajority voting provisions contained in the Restated Certificate of
Incorporation and Bylaws.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
4. Proposal to adopt the Southern Union Company Supplemental Deferred
Compensation Plan.
/ / FOR / / AGAINST / / ABSTAIN
5. Proposal to adopt the Southern Union Company Directors' Deferred
Compensation Plan.
/ / FOR / / AGAINST / / ABSTAIN
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" all Nominees and FOR proposals 2, 3, 4 and 5.
Date: _______________________, 1994
___________________________________
Signature
___________________________________
Signature
Please mark, date and sign as your
name(s) appear(s) to the left and
return in the enclosed envelope. If
acting as an executor,
administrator, trustee, guardian,
etc., you should so indicate when
signing. If the signer is a
corporation, please sign the full
corporate name, by duly authorized
officer. If shares are held
jointly, each shareholder named
should sign.
