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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ---
SECURITIES EXCHANGE ACT OF 1934
OR
X TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ---
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1994
Commission File No. 1-6407
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SOUTHERN UNION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 75-0571592
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
504 Lavaca Street, Eighth Floor 78701
Austin, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(512) 477-5981
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange in which registered
------------------- -----------------------------------------
Common Stock, par American Stock Exchange
value $1 per share
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendments by this
Form 10-K. X
---
The aggregate market value of the voting stock held by non-
affiliates of the registrant on September 16, 1994, was
approximately $123,197,968. The number of shares of the
registrant's Common Stock outstanding on September 16, 1994 was
11,501,794.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
ITEM 1. Business.
Introduction
Southern Union Company ("Southern Union" and together with its
subsidiaries, the "Company") was incorporated under the laws of
the State of Delaware in 1932. The Company's principal line of
business is the distribution of natural gas as a public utility
through Southern Union Gas Company ("Southern Union Gas") and
Missouri Gas Energy, each of which is a division of the Company.
Southern Union Gas serves approximately 484,000 residential,
commercial, industrial, agricultural and other customers in the
States of Texas (including the cities of Austin, Brownsville, El
Paso, Galveston and Port Arthur) and Oklahoma. Missouri Gas
Energy, acquired on January 31, 1994, serves approximately
463,000 customers in central and western Missouri (including the
cities of Kansas City, St. Joseph, Joplin and Monett). See
"Missouri Acquisition."
Subsidiaries of Southern Union have been established to support
and expand natural gas sales and to capitalize on the Company's
gas energy expertise. These subsidiaries market natural gas to
end-users, sell natural gas as a vehicular fuel, convert
vehicles to operate on natural gas, operate intrastate and
interstate natural gas pipeline systems, and sell commercial gas
air conditioning and other gas-fired engine-driven applications.
By providing "one-stop shopping," the Company can serve its
various customers' particular energy needs, which encompass
substantially all of the natural gas distribution and sales
businesses from natural gas sales to specialized energy
consulting services. A subsidiary also holds investments in real
estate which are used primarily in the Company's utility
business. See "Company Operations."
The Company is a sales and market-driven energy company whose
management is committed to achieving profitable growth of its
natural gas energy businesses in an increasingly competitive
business environment. Management's strategies for achieving
these objectives principally consist of: (i) promoting new sales
opportunities and markets for natural gas; (ii) enhancing
financial and operating performance; and (iii) expanding the
Company through developing existing systems and selectively
acquiring new systems. Management develops and continually
evaluates these strategies and the Company's implementation of
them by applying their experience and expertise in analyzing the
energy industry, technological advances, market opportunities and
general business trends. Each of these strategies, as
implemented throughout the Company's businesses, reflects the
Company's commitment to its core natural gas utility business.
Central to all of the Company's businesses and strategies is the
sale and transportation of natural gas.
The Company has a goal of selected growth and expansion,
primarily in the natural gas industry. To that extent, the
Company intends to consider, when appropriate, and if financially
practicable to pursue, the acquisition of other natural gas
distribution or transmission businesses. The nature and location
of any such properties, the structure of any such acquisitions,
and the method of financing any such expansion or growth will be
determined by management and the Southern Union Board of
Directors.
Missouri Acquisition
On July 9, 1993, Southern Union entered into an Agreement for the
Purchase of Assets (the "Missouri Asset Purchase Agreement") with
Western Resources, Inc. ("Western Resources"), pursuant to which
Southern Union purchased certain Missouri natural gas
distribution operations (the "Missouri Acquisition") which
Southern Union operates as Missouri Gas Energy. The acquisition
closed on January 31, 1994 and has been accounted for as a
purchase. Earnings from operations of Missouri Gas Energy have
been included in the Company's statement of consolidated
operations since February 1, 1994.
At closing, Southern Union paid approximately $400,300,000 in
cash for the Missouri Acquisition. The final determination of
the purchase price and all prorations and adjustments between
Southern Union and Western Resources have not been resolved to-
date. Pursuant to the terms of the Missouri Asset Purchase
Agreement, Southern Union is seeking arbitration with respect to
approximately $19,100,000 of adjustments in dispute.
Accordingly, Southern Union is seeking a refund of approximately
$12,000,000 while Western Resources is demanding an additional
payment of approximately $7,100,000. There can be no assurance
that the Company will be successful in resolving any or all of such
adjustments in its favor. See "Contingencies" in the Notes to
the Consolidated Financial Statements for the year ended June 30,
1994. The Missouri Acquisition, among other things, was financed
through the sale on January 31, 1994 of $475,000,000 of 7.60%
Senior Notes due 2024 (the "Senior Debt Securities") and net
proceeds from the sale of a $50,000,000 Subscription Rights
Offering of Common Stock (the "Rights Offering") completed on
December 31, 1993. See "Management's Discussion and Analysis of
Financial Conditions and Results of Operations ("MD&A") -
Liquidity and Capital Resources" and "Long-Term Debt" in the
Notes to the Consolidated Financial Statements for the year ended
June 30, 1994.
As a result of the Missouri Acquisition, the Company nearly
doubled the number of customers served by its natural gas
distribution system and became one of the top 15 gas utilities in
the United States, as measured by number of customers. In
addition, the Missouri Acquisition lessens the sensitivity of the
Company's operations to weather risk and local economic
conditions by diversifying operations into a different geographic
area. Missouri Gas Energy, a division of Southern Union, is
headquartered in Kansas City, Missouri.
The approval of the Missouri Acquisition by the Missouri Public
Service Commission ("MPSC") was subject to the terms of a
stipulation and settlement agreement (the "MPSC Stipulation")
among Southern Union, Western Resources, the MPSC staff and all
intervenors in the MPSC proceeding. Among other things, the MPSC
Stipulation: (i) provides that the Company attain a total debt
to total capital ratio that does not exceed Standard and Poor's
Corporation's Utility Financial Benchmark ratio for the lowest
investment grade investor-owned natural gas distribution company
(which, at December 31, 1993, the most recent date available, was
approximately 58%) in order for Missouri Gas Energy to implement
any general rate increase; (ii) prohibits Missouri Gas Energy
from implementing a general rate increase in Missouri before
January 31, 1997 except in certain unusual events; (iii) required
Western Resources to contribute an additional $9,000,000 to
Missouri Gas Energy's employees' and retirees' qualified defined
benefit plans transferred to the Company; (iv) requires the
Company to contribute an additional $3,000,000 to the Company's
qualified defined benefit plan applicable to Missouri Gas
Energy's employees and retirees; and (v) requires Missouri Gas
Energy to reduce rate base by $30,000,000 (to be amortized over a
ten-year period on a straight-line basis) to compensate rate
payers for rate base reductions that were eliminated as a result
of the Missouri Acquisition.
Southern Union assumed certain liabilities of Western Resources
with respect to Missouri Gas Energy, including certain
liabilities arising from certain specified contracts assigned to
Southern Union at closing, including gas supply and
transportation contracts, office equipment leases and real estate
leases, liabilities arising from certain contracts entered into
by Western Resources in the ordinary course of business, certain
liabilities that have arisen or may arise from the operation of
Missouri Gas Energy, and liabilities for certain accounts payable
of Western Resources pertaining to Missouri Gas Energy.
Southern Union and Western Resources also entered into an
Environmental Liability Agreement. Subject to the accuracy of
certain representations made by Western Resources in the Missouri
Asset Purchase Agreement, the agreement provides for a tiered
approach to the allocation of substantially all liabilities under
environmental laws that may exist or arise with respect to
Missouri Gas Energy. The agreement contemplates Southern Union
first seeking reimbursement from other potentially responsible
parties, or recovery of such costs under insurance or through
rates charged to customers. To the extent certain environmental
liabilities are discovered by Southern Union prior to January 31,
1996, and are not so reimbursed or recovered, Southern Union will
be responsible for the first $3,000,000, if any, of out-of-pocket
costs and expenses incurred to respond to and remediate any such
environmental claim. Thereafter, Western Resources would share
one-half of the next $15,000,000 of any such costs and expenses,
and Southern Union would be solely liable for any such costs and
expenses in excess of $18,000,000. The Company believes that it
will be able to obtain substantial reimbursement or recovery for
any such environmental liabilities from other potentially
responsible third parties, under insurance or through rates
charged to customers.
Pursuant to the terms of an Employee Agreement with Western
Resources entered into on July 9, 1993, after the closing of the
Missouri Acquisition, Southern Union employed certain employees
of Western Resources involved in the operation of Missouri Gas
Energy ("Continuing Employees"). Under the terms of the Employee
Agreement, the assets and liabilities under Western Resources'
qualified defined benefit plans attributable to Continuing
Employees and certain retired employees of Missouri Gas Energy
("Retired Employees") were transferred to a qualified defined
benefit plan of Southern Union that will provide benefits to
Continuing Employees and Retired Employees substantially similar
to those provided for under Western Resources' defined benefit
plans. Southern Union amended its qualified defined benefit plan
to cover the Continuing Employees and Retired Employees and
provide Continuing Employees and Retired Employees with certain
welfare, separation and other benefits and arrangements.
Other Acquisitions and Divestiture
In September 1993, the Company acquired the Rio Grande Valley Gas
Company ("Rio Grande") for approximately $30,500,000 (the "Rio
Grande Acquisition"). Rio Grande serves approximately 74,000
customers in the south Texas counties of Willacy, Cameron and
Hidalgo which includes 32 towns and cities along the Mexico
border, including Harlingen, McAllen and Brownsville (the
southernmost city in the U.S.). The Company initially funded the
purchase with borrowings from its revolving credit facility,
which was subsequently paid down out of the net proceeds from the
sale of the Senior Debt Securities and the Rights Offering. See
MD&A - "Liquidity and Capital Resources."
In July 1993, the Company acquired the natural gas distribution
facilities serving the city of Eagle Pass, Texas (the "Eagle Pass
Acquisition"), for approximately $2,000,000. In May 1993, the
Company acquired the natural gas distribution facilities of Berry
Gas Company (the "Berry Gas Acquisition") which serves the Texas
cities and towns of Nome, Raywood, Hull and Devers for
approximately $274,000. Combined, these operations serve
approximately 4,400 customers.
In February 1993, Southern Union Exploration Company ("SX"), a
wholly owned subsidiary of Southern Union, entered into a
purchase and sale agreement pursuant to which it sold
substantially all of its oil and gas leasehold interests and
associated production for approximately $22,000,000, effective
January 1, 1993. The Company recorded a book loss on the sale of
approximately $4,400,000 as of December 31, 1992. In connection
with the sale, the Company recorded an income tax liability of
approximately $6,960,000 resulting from the recognition of a tax
basis gain of approximately $18,800,000.
During 1992, the Company acquired the natural gas distribution
facilities of Nixon, Texas (the "Nixon Acquisition"). Also in
1992, the Company added approximately 12 miles of pipeline which
transports gas to the community of Sabine Pass, Texas.
Changes in Capital Structure
The incurrence of additional debt and issuance of new equity in
connection with the Missouri Acquisition also significantly
changed the Company's capital structure. The net proceeds from
the sale of the Senior Debt Securities, together with the net
proceeds from the Rights Offering and working capital from
operations, were used to: (i) fund the Missouri Acquisition;
(ii) repay approximately $59,300,000 of borrowings under the
Company's $100,000,000 revolving credit facility, used to fund
the Rio Grande Acquisition and repurchase all outstanding
preferred stock; (iii) refinance, on January 31, 1994,
$10,000,000 aggregate principal amount of 9.45% Senior Notes due
January 31, 2004, and $25,000,000 aggregate principal amount of
10% Senior Notes due January 31, 2012 and the related premium of
approximately $10,400,000 resulting from the early extinguishment
of such notes; (iv) refinance, on March 2, 1994, $50,000,000
aggregate principal amount of 10.5% Sinking Fund Debentures due
May 15, 2017 and the related premium of approximately $3,300,000
resulting from the early extinguishment of such debentures; and
(v) refinance, on May 16, 1994, $20,000,000 aggregate principal
amount of 10 1/8% Notes. See "Business - Other Acquisitions and
Divestiture" and "MD&A - Liquidity and Capital Resources." In
addition, see "Acquisitions and Divestiture - Missouri Gas
Energy" in the Notes to the Consolidated Financial Statements for
the year ended June 30, 1994.
Company Operations
The Company's principal line of business is the distribution of
natural gas through its Southern Union Gas and Missouri Gas
Energy divisions. Southern Union Gas provides service to a
number of communities and rural areas in Texas, including the
municipalities of Austin, Brownsville, El Paso, Galveston,
Harlingen, McAllen and Port Arthur, as well as several
communities in the Oklahoma panhandle. Missouri Gas Energy
provides service to various cities and communities in central and
western Missouri including Kansas City, St. Joseph, Joplin and
Monett. The Company's gas utility operations are generally
seasonal in nature, with a significant percentage of its annual
revenues and earnings occurring in the traditional heating-load
months.
Western Gas Interstate Company ("WGI"), a wholly owned subsidiary
of Southern Union, operates interstate pipeline systems
principally serving the Company's gas distribution properties in
the El Paso, Texas area and in the Texas and Oklahoma panhandles.
During 1993, WGI received approval in its restructuring and rate
case dockets from the Federal Energy Regulatory Commission
("FERC") which allowed WGI to implement services pursuant to FERC
Order No. 636. WGI is now providing unbundled transportation
service for those gas volumes entering the pipeline's
transportation system. WGI also transported approximately 8,500
million cubic feet (MMcf) to the city of Juarez, Mexico and the
Samalayuca Power Plant in north Mexico in fiscal 1994.
Southern Transmission Company ("Southern"), a wholly owned
subsidiary of Southern Union, owns and operates approximately 123
miles of intrastate pipeline. Southern's system connects the
cities of Lockhart, Luling, Cuero, Shiner, Yoakum, and Gonzales,
Texas, as well as an industrial customer in Port Arthur, Texas.
Southern also owns a transmission line which supplies gas to the
community of Sabine Pass, Texas.
Mercado Gas Services Inc. ("Mercado"), a wholly owned subsidiary
of Southern Union, markets natural gas to large volume customers.
Mercado's sales and purchasing activities are made through short-
term contracts. These contracts and business activities are not
subject to direct rate regulation.
Southern Union Econofuel Company ("Econofuel"), a wholly owned
subsidiary of Southern Union, markets and sells natural gas for
natural gas vehicles ("NGVs") as an alternative fuel to gasoline.
Econofuel owns fuel dispensing equipment in Austin, El Paso, Port
Arthur, and Galveston, Texas, located at independent retail fuel
stations for NGVs. These stations primarily serve fleet and
governmental vehicles which have been manufactured or converted
to operate on natural gas. In 1991, Econofuel and Natural Gas
Development Company, Inc. of California formed a joint venture
that, in 1992, opened the Natural Gas Vehicle Technology Centers,
L.L.P. (the "Tech Center") in Austin, Texas. The Tech Center
converts gasoline-driven vehicles to operate using natural gas.
Southern Union Energy Products and Services Company ("SUEPASCO"),
a wholly owned subsidiary of Southern Union, markets and sells
commercial gas air conditioning, irrigation pumps and other gas-
fired engine-driven applications and related services.
Southern Union Energy International, Inc. ("International"), a
wholly owned subsidiary of Southern Union, seeks to participate
in energy related projects internationally.
In addition, the Company holds investments in commercially
developed real estate as well as undeveloped tracts of land
through Southern Union's wholly owned subsidiary, Lavaca Realty
Company ("Lavaca Realty").
Competition
Southern Union Gas and Missouri Gas Energy are not currently in
significant direct competition with any other distributors of
natural gas to residential and small commercial customers within
their service areas. In recent years, certain large volume
customers, primarily industrial and significant commercial
customers, have had opportunities to access alternative natural
gas supplies and, in some instances, delivery service from
pipeline systems. The Company has offered transportation
arrangements to customers who secure their own gas supplies.
These transportation arrangements, coupled with the efforts of
Southern Union's unregulated marketing subsidiary, Mercado,
enable the Company to provide competitively priced gas service to
these large volume customers. In addition, the Company has
successfully used flexible rate provisions, when needed, to
retain customers who may have access to alternative energy
sources.
As energy providers, Southern Union Gas and Missouri Gas Energy
have historically competed with alternative energy sources,
particularly electricity and also propane, coal, natural gas
liquids and other refined products available in the Company's
service areas. At present rates, the cost of electricity to
residential and commercial customers in the Company's service
areas generally is higher than the effective cost of its natural
gas service. There can be no assurances, however, that future
fluctuations in gas and electric costs will not reduce the cost
advantage of natural gas service.
The following operating cost analysis provides a comparison of
annual gas and electric costs for four typical residential energy
applications in the three largest cities (which represent
approximately 70% of the present customers) served by Southern
Union Gas and Missouri Gas Energy:
Kansas City, MO Austin, Texas El Paso, Texas
--------------- -------------- --------------
Elec- Elec- Elec-
Application Gas(a) tric(b) Gas(a) tric(b) Gas(a) tric(b)
- - ----------- ------ ------- ------ ------- ------ -------
Water Heater(c). . $124 $335 $108 $412 $ 73 $529
Furnace
Gas. . . . . . . $344 -- $160 -- $155 --
Electric
Heat Pump . . . -- $503 -- $206 -- $343
Electric
Resistance. . . -- $656 -- $454 -- $756
- - ----------------------------
(a) Gas prices contain the cost of service rates effective
since October 15, 1993 for Kansas City, Missouri; since
July 1993 for Austin, Texas; and since November 1993 for El
Paso, Texas. The cost of gas rates are based on average
area prices for the year ended June 1994. The combined
service and gas rates amount to $.538 per hundred cubic
feet (Ccf) of gas in Kansas City, Missouri; $.434 per Ccf
of gas in Austin, Texas; and $.294 per Ccf of gas in El
Paso, Texas.
(b) Annual average electric rates were used to calculate
electric water heater costs. Winter average electric rates
were used to calculate furnace costs. The Kansas City
annual average electric rate was $.050 per kilowatt hour
(kwh), and the winter average rate was $.045 per kwh. The
Austin annual average electric rate was $.078 per kwh, and
the winter average rate was $.072 per kwh. The El Paso
annual average electric rate was $.101 per kwh, and the
winter average rate was $.096 per kwh.
(c) Based on Department of Energy first hour rating test
procedure, an average family uses 64.3 gallons of hot water
per day.
The Company believes that similar gas price advantages exist for
commercial and industrial applications. In addition, the cost of
expansion for peak load requirements of electricity in some of
Southern Union Gas' service areas has historically provided
opportunities to allow energy switching to natural gas pursuant
to integrated resource planning techniques. Electric competition
has responded by offering equipment rebates and incentive rates.
Competition between the use of fuel oil and natural gas,
particularly by industrial, electric generation and agricultural
customers, has increased as oil prices have decreased. While
competition between such fuels is generally more intense outside
the Company's service areas, this competition affects the
nationwide market for natural gas. Additionally, the general
economic conditions in its service areas continue to affect
certain customers and market areas, thus impacting the results of
the Company's operations.
Gas Supply
The low cost for natural gas service is attributable to efficient
operations and the Company's ability to contract for natural gas
using favorable mixes of long-term and short-term supply
arrangements and favorable transportation contracts. The Company
has been directly acquiring its gas supplies since the mid-1980s
when interstate pipeline systems opened their systems for
transportation service. The Company has the organization,
personnel and equipment necessary to dispatch and monitor gas
volumes on a daily and even hourly basis to ensure reliable
service to customers.
This experience will be of major significance in the post-FERC
Order 636 procurement environment. FERC Order 636 promotes the
"unbundling" of services offered by interstate pipeline
companies. As a result, gas purchasing and transportation
decisions and associated risks now shift from the pipeline
companies to the gas distributors. The increased demands on
distributors to effectively manage their gas supply in an
environment of volatile gas prices provides an advantage to
distribution companies such as Southern Union that have
demonstrated a history of contracting favorable and efficient gas
supply arrangements in an open market system.
The majority of Southern Union Gas' 1994 gas requirements for
utility operations were delivered under long-term transportation
contracts through five major pipeline companies. All of Missouri
Gas Energy's 1994 gas requirements were delivered under short-
and long-term transportation contracts through three pipeline
companies. These contracts have various expiration dates ranging
from 1995 through 2013. Southern Union Gas also purchases
significant volumes of gas under long-term and short-term
arrangements with suppliers. The amounts of such short-term
purchases are contingent upon price. Southern Union Gas and
Missouri Gas Energy both have firm supply commitments for all
areas that are supplied with gas purchased under short-term
arrangements.
Gas sales and/or transportation contracts with interruption
provisions, whereby large volume users purchase gas with the
understanding that they may be forced to shut down or switch to
alternate sources of energy at times when the gas is needed for
higher priority customers, have been utilized for load management
by Southern Union and the gas industry as a whole for many years.
In addition, during times of special supply problems,
curtailments of deliveries to customers with firm contracts may
be made in accordance with guidelines established by appropriate
federal and state regulatory agencies. There have been no
supply-related curtailments of deliveries to Southern Union Gas
or Missouri Gas Energy utility sales customers during the last
ten years. Missouri Gas Energy also holds contract rights to
over sixteen billion cubic feet ("Bcf") of storage capacity to
assist in meeting peak day demands.
The following table shows, for each of the Company's principal
utility service areas, the percentage of gas utility revenues and
sales volume for the year ended June 30, 1994, the average cost
per Mcf of gas in 1994, and the primary source of supply:
Year Ended June 30, 1994
------------------------
Percent
Percent of Gas
of Gas Utility Average
Utility Sales Cost
Service Area Revenues Volume Per Mcf Primary Source of Supply
- - ------------ -------- ------ ------- ------------------------
Southern Union
Gas
Austin and
South Texas. . 19 17 $ 2.64 Valero Transmission
Company
El Paso and
West Texas . . 19 23 2.48 El Paso Natural Gas
Company
Galveston and
Port Arthur. . 6 5 2.77 Various
Panhandle and
North Texas. . 6 6 3.02 Various
Rio Grande
Valley . . . . 7 4 4.27 Valero Transmission
Company
--- ---
57 55
Missouri Gas
Energy . . . . . 43 45 3.14 Amoco Energy Trading
Corp.
--- ---
100 100
=== ===
The Company is committed under various agreements to purchase
certain quantities of gas in the future. At June 30, 1994, the
Company has purchase commitments for nominal quantities of gas at
fixed prices. These fixed price commitments have an annual value
of approximately $2,500,000 for Southern Union Gas and
approximately $18,000,000 for Missouri Gas Energy. At June 30,
1994, the Company also has purchase commitments for certain
quantities of gas at variable, market-based prices. These
market-based priced commitments have an annual value of
approximately $55,000,000 for Southern Union Gas and $97,000,000
for Missouri Gas Energy. The Company's purchase commitments may
extend over a period of several years depending upon when the
required quantity is purchased. The Company has in place
purchase gas tariffs on file in all jurisdictions that provide
for full recovery of its purchase costs.
Utility Regulation and Rates
The Company's rates and operations are subject to regulation by
federal, state and local authorities. In Texas, municipalities
have primary jurisdiction over rates within their respective
incorporated areas. Rates in adjacent environs areas and
appellate matters are the responsibility of the Railroad
Commission of Texas. Rates in Oklahoma are regulated by the
Oklahoma Corporation Commission. In Missouri, rates are
established by the MPSC on a system-wide basis. The FERC and the
Railroad Commission of Texas have jurisdiction over rates,
facilities and services of WGI and Southern, respectively. Each
of these jurisdictions allows the Company varying rates of return
on the Company's assets; however, the Company is not allowed a
return on the additional purchase cost assigned to utility plant
of approximately $167,370,000, as of June 30, 1994, and the
approximately $30,000,000 rate base reduction, described above.
See "Business - Missouri Acquisition" and "Summary of Significant
Accounting Policies - Property, Plant and Equipment" in the Notes
to the Consolidated Financial Statements for the year ended
June 30, 1994.
The Company holds non-exclusive franchises with varying
expiration dates in all incorporated communities where it is
necessary to do so to carry on its business as it is now being
conducted. In the five largest cities in which the Company's
utility customers are located, such franchises expire as follows:
Kansas City, Missouri in 1997; El Paso, Texas in 2000; Austin,
Texas in 2006; and Port Arthur, Texas in 2013. The franchise in
St. Joseph, Missouri is perpetual.
Gas service rates are established by regulatory authorities to
collectively permit utilities to recover operating,
administrative and finance costs, and to earn a return on equity.
Gas costs are billed to customers through purchase gas adjustment
clauses which permit the Company to adjust its sales price as the
cost of purchased gas changes. The appropriate regulatory
authority must receive notice of such adjustments prior to
billing implementation. This is important because the cost of
natural gas accounts for a significant portion of the Company's
total expenses.
The Company must support any service rate changes to its
regulators using a historic test year of operating results
adjusted to normal conditions and for any known and measurable
revenue or expense changes. Because the rate regulatory process
has certain inherent time delays, rate orders may not reflect the
operating costs at the time new rates are put into effect.
The monthly customer bill contains a fixed service charge, a
usage charge for service to deliver gas, and a charge for the
amount of natural gas used. While the monthly fixed charge
provides an even revenue stream, the usage charge increases the
Company's annual revenue and earnings in the traditional heating
load months when usage of natural gas increases. The majority of
the Company's rate increases in Texas and Oklahoma in recent
years have been reflected in increased monthly fixed charges
which help stabilize earnings. Weather normalization clauses,
now in place in Austin and three other service areas in Texas,
also help stabilize earnings.
On February 10, 1993, the Company's South Texas service area
received an annualized rate increase of $777,000. On July 1,
1993, rates for Austin were changed to provide: (i) an
approximate $1,700,000 base revenue increase; (ii) new and
increased fees that add approximately $250,000 annually; and
(iii) weather normalization clause revisions. On October 15,
1993, Missouri Gas Energy's rates increased by $9,750,000
annually. See "Business - Missouri Acquisition." On November 1,
1993, El Paso rates changed to provide an approximate revenue
increase of $463,000.
The following table summarizes annualized rate increases that
have been recently granted:
1993 1992
-------- --------
(thousands of dollars)
Southern Union Gas
Austin, Texas. . . . . . . . . . . . $ 1,950 --
El Paso, Texas . . . . . . . . . . . 463 $ 1,741
All other 981 1,001
------- -------
3,394 2,742
Missouri Gas Energy 9,750 7,300
------- -------
$13,144 $10,042
======= =======
During the six-month period ended June 30, 1994, the Company did
not file for any rate increases in any of its service areas other
than several annual cost of service adjustments. In addition to
the regulation of its utility and pipeline businesses, the
Company is affected by numerous other regulatory controls,
including, among others, pipeline safety requirements of the
U. S. Department of Transportation, safety regulations under the
Occupational Safety and Health Act, and various state and federal
environmental statutes and regulations. The Company believes
that its operations are in compliance with applicable safety and
environmental statutes and regulations.
Statistics of Gas Utility and Related Operations
The following table provides by division and region the number of
gas utility customers served as of:
June 30, December 31
-------------------
1994* 1993 1992
-------- -------- --------
Southern Union Gas:
Austin and South Texas. . . . 153,757 153,096 149,896
El Paso and West Texas. . . . 168,350 168,361 165,937
Galveston and Port Arthur . . 52,329 52,953 52,127
Panhandle and North Texas . . 31,652 32,821 32,874
Rio Grande Valley
(including Eagle Pass). . . 77,832 79,616 --
------- ------- -------
483,920 486,847 400,834
------- ------- -------
Missouri Gas Energy:
Kansas City, Missouri
Metropolitan Area . . . . . 362,147 -- --
St. Joseph, Joplin, Monett
and others 100,732 -- --
------- ------- -------
462,879 -- --
------- ------- -------
Total 946,799 486,847 400,834
======= ======= =======
- - ----------------------------
* Customer levels are generally lower outside the traditional
heating season period.
Southern Union Gas, Mercado, WGI, and Southern. The following
- - ----------------------------------------------
table shows certain operating statistics of the gas distribution,
marketing and transmission operations in Texas and Oklahoma:
Year Ended
----------------------------
June 30, December 31,
------------------
1994 1993 1992
-------- -------- --------
Average number of gas
sales customers served (a):
Residential. . . . . . . . . . . 432,474 391,154 365,187
Commercial . . . . . . . . . . . 28,593 26,814 25,853
Industrial and irrigation. . . . 722 774 796
Public authorities and other . . 2,522 2,309 2,206
Pipeline and marketing . . . . . 273 182 157
------- ------- -------
Total average customers
served. . . . . . . . . . . . 464,584 421,233 394,199
======= ======= =======
Gas sales in millions of
cubic feet (MMcf):
Residential. . . . . . . . . . . 23,852 22,171 21,356
Commercial . . . . . . . . . . . 10,173 9,545 9,059
Industrial and irrigation. . . . 2,216 2,615 2,881
Public authorities and other . . 2,959 2,938 3,002
Pipeline and marketing . . . . . 7,482 6,934 14,849
------- ------- -------
Gas sales billed . . . . . . . 46,682 44,203 51,147
Net change in unbilled gas
sales. . . . . . . . . . . . . . (18) 656 (43)
------- ------- -------
Total gas sales. . . . . . . . 46,664 44,859 51,104
======= ======= =======
Gas sales revenues
(thousands of dollars):
Residential. . . . . . . . . . . $137,135 $117,954 $102,028
Commercial . . . . . . . . . . . 47,020 41,219 34,261
Industrial and irrigation. . . . 8,848 9,206 8,655
Public authorities and other . . 10,943 10,592 9,437
Pipeline and marketing . . . . . 17,759 16,247 28,793
-------- -------- --------
Gas revenues billed. . . . . . 221,705 195,218 183,174
Net change in unbilled gas
sales revenues . . . . . . . . . (2,018) 4,141 214
-------- -------- --------
Total gas sales revenues . . . $219,687 $199,359 $183,388
======== ======== ========
Gas sales margin
(thousands of dollars) (b):. . . . $ 95,136 $ 88,975 $ 80,470
======== ======== ========
Gas sales revenue per thousand
cubic feet (Mcf) billed (c):
Residential. . . . . . . . . . . $ 5.750 $ 5.320 $ 4.777
Commercial . . . . . . . . . . . 4.622 4.318 3.782
Industrial and irrigation. . . . 3.992 3.520 3.004
Public authorities and other . . 3.698 3.605 3.144
Pipeline and marketing . . . . . 2.374 2.343 1.939
Weather effect:
Degree days (d). . . . . . . . . 1,716 1,954 2,020
Percent of normal, based on
30 year average (e). . . . . . . 90% 89% 91%
Gas transported in millions of
cubic feet (MMcf). . . . . . . . . 24,461 22,750 25,438
Gas transportation revenues
(thousands of dollars) . . . . . . $ 7,393 $ 6,485 $ 5,943
- - --------------------------
(a) Increase in the average customers served in 1994 is due to
the Rio Grande and Eagle Pass Acquisitions of approximately
78,000 customers.
(b) Gas sales revenues less purchased gas costs is equal to gas
sales margin.
(c) Fluctuations in gas price billed between each period reflect
changes in the average cost of purchased gas and the effect
of rate increases.
(d) "Degree days" are a measure of the coldness of the weather
experienced. A Degree day is equivalent to each degree that
the daily mean temperature for a day falls below 65 degrees
Fahrenheit. The decrease in 1994 average degree days was
impacted by the temperate climate of Rio Grande acquired in
September 1993.
(e) Information with respect to weather conditions is provided
by the National Oceanic and Atmospheric Administration.
Percentages of normal are computed based on the weighted
average number of customers.
Missouri Gas Energy. The following table shows certain operating
- - -------------------
statistics of the gas distribution operations in Missouri:
Five
Months
Ended Year Ended
----------------------------
June 30, June 30, December 31,
------------------
1994(a) 1994(a) 1993 1992
-------- -------- -------- --------
Average number of gas
sales customers served:
Residential. . . . . . 410,934 400,222 396,755 399,421
Commercial . . . . . . 58,830 57,300 57,330 57,615
Industrial . . . . . . 254 257 260 249
-------- -------- -------- --------
Total average
customers served . . 470,018 457,779 454,345 457,285
Gas sales in millions
of cubic feet (MMcf):
Residential. . . . . . 21,569 45,407 47,244 39,839
Commercial . . . . . . 10,023 21,363 22,669 19,450
Industrial . . . . . . 26 143 309 1,254
-------- -------- -------- --------
Gas sales billed . . 31,618 66,913 70,222 60,543
Net change in unbilled
gas sales. . . . . . . (6,059) (104) (58) 1,043
-------- -------- -------- --------
Total gas sales. . . 25,559 66,809 70,164 61,586
======== ======== ======== ========
Gas sales revenues
(thousands of dollars):
Residential. . . . . . $108,871 $234,360 $215,806 $195,073
Commercial . . . . . . 47,257 102,036 95,520 84,995
Industrial . . . . . . 458 1,480 2,015 4,406
-------- -------- -------- --------
Gas revenues billed. 156,586 337,876 313,341 284,474
Net change in unbilled
gas sales revenues . . (28,564) (1,210) 3,818 3,618
-------- -------- -------- --------
Total gas sales
revenues . . . . . . $128,022 $336,666 $317,159 $288,092
======== ======== ======== ========
Gas sales margin
(thousands of
dollars) (b) . . . . . . $ 41,445 $103,191 $107,687 $105,091
======== ======== ======== ========
Gas sales revenue per
thousand cubic feet
(Mcf) billed:
Residential. . . . . . $ 5.048 $ 5.161 $ 4.568 $ 4.897
Commercial . . . . . . 4.715 4.776 4.214 4.369
Industrial . . . . . . 17.615 10.350 6.521 3.514
Weather effect:
Degree days (c). . . . 1,938 5,248 5,721 4,852
Percent of normal,
based on 30-year
average. . . . . . . . 94% 99% 106% 90%
Gas transported in
millions of cubic
feet (MMcf). . . . . . . 11,673 29,498 28,064 26,381
Gas transportation
revenues (thousands
of dollars). . . . . . . $ 2,568 $ 6,614 $ 6,676 $ 7,888
- - ----------------------------
(a) Missouri Gas Energy was acquired by the Company on
January 31, 1994 and therefore is consolidated with the
Company as of that date. The Company included Missouri Gas
Energy in its results of operations beginning February 1,
1994. The increase in the average number of customers for
the five months ended June 30, 1994 is due to the
seasonality of the Company's business.
(b) Gas sales revenues less purchased gas costs is equal to gas
sales margin.
(c) "Degree days" are a measure of the coldness of the weather
experienced. A Degree day is equivalent to each degree that
the daily mean temperature for a day falls below 65 degrees
Fahrenheit.
Investments in Real Estate
In February 1993, Southern Union entered into a settlement
agreement with the Resolution Trust Corporation ("RTC") with
respect to Southern Union's former subsidiary, First Bankers
Trust & Savings Association. As part of the settlement, in
return for payment by the Company of $4,792,000, the RTC
dismissed a $6,174,000 judgment for specific performance of a
contract to purchase real estate; canceled notes in the principal
amount of $1,600,000; permitted the Company to terminate a
$2,000,000 letter of credit; deeded the Company a 21-acre tract
in Austin, Texas; and released certain other claims asserted in
the settled litigation. This settlement had no impact on
earnings since the Company had previously recorded a reserve for
the related loss contingency. In December 1993, Lavaca Realty
sold this land for approximately $794,000, resulting in an after
tax gain of approximately $321,000. See "Real Estate" in the
Notes to the Consolidated Financial Statements.
Lavaca Realty owns a commercially developed tract of land in the
central business district of Austin, Texas, containing a combined
11-story office building, parking garage, drive-through bank
and mini-bank facility ("Lavaca Plaza"). Approximately 49% of
the office space at Lavaca Plaza is used in the Company's
business while 51% is leased to non-affiliated entities. Lavaca
Realty also owns a commercially developed tract of land in
Austin, Texas that is used exclusively in the Company's business.
Other real estate investments held at June 30, 1994 include 12
acres of undeveloped land in Dallas, Texas, 42 acres of
undeveloped land in Denton, Texas and eight acres of undeveloped
land in San Antonio, Texas. The Company is attempting to sell
all undeveloped real estate.
Employees
As of August 31, 1994, the Company has 1,811 employees, of whom
1,392 are paid on an hourly basis, 404 are paid on a salary basis
and 15 are paid on a commission basis. Of the 1,392 hourly paid
employees, approximately 56% are represented by unions. Of those
employees represented by unions, 79% are employed by Missouri Gas
Energy.
In May 1994, the Company announced an early retirement program
for certain employees of Missouri Gas Energy with an election
period from May 20 to June 23, 1994. Of an eligible 133
employees, 81 accepted the 1994 early retirement program. In
January 1993, the Company provided an early retirement program to
certain of the Company's employees with an election period from
January to March 1993. Of an eligible 109 employees, 75 accepted
the 1993 early retirement program.
From time to time the Company may be subject to labor disputes;
however, such disputes have not previously disrupted its
business. The Company believes that its relations with its
employees are good.
ITEM 2. Properties.
See Item 1, "Business," for information concerning the general
location and characteristics of the important physical properties
and assets of the Company.
Southern Union Gas' system consists of 8,504 miles of mains,
3,639 miles of service lines and 307 miles of transmission lines.
Missouri Gas Energy's system consists of 7,017 miles of mains,
3,459 miles of service lines and 71 miles of transmission lines.
WGI's system consists of 219 miles of transmission lines and 50
miles of gathering lines. Southern's system consists of 123
miles of transmission lines. The Company considers the systems
to be in good condition and to be well-maintained, and it has
continuing replacement programs based on historical performance
and system surveillance.
Prior to the Missouri Acquisition, Western Resources was required
pursuant to a 1989 MPSC order to undertake a major gas safety
program in the service territories served by Missouri Gas Energy.
Such activities included replacement of company- and customer-
owned gas service and yard lines, the movement and resetting of
meters, the replacement of cast iron mains and the replacement
and cathodic protection of bare steel mains (the "Missouri Safety
Program"). In recognition of the significant capital
expenditures associated with this safety program the MPSC issued
Western Resources Accounting Authority Orders ("AAO") providing
for the deferral, and subsequent recovery through rates, of those
costs and expenditures, including depreciation expense, property
taxes and associated carrying costs, related to the Missouri
Safety Program.
Missouri Gas Energy is required to continue the Missouri Safety
Program and has requested approval from the MPSC of an AAO to
defer depreciation expense, property taxes and carrying costs
associated with Missouri Gas Energy's investment in the Missouri
Safety Program. On May 31, 1994 the MPSC staff recommended
approval of the AAO; therefore, in anticipation of the MPSC's
approval of the requested AAO, the Company has deferred
approximately $600,000 related to depreciation, property taxes
and associated carrying costs on its investment in this program
for the five months ended June 30, 1994.
ITEM 3. Legal Proceedings.
See "Commitments and Contingencies" and "Acquisitions and
Divestiture - Missouri Gas Energy" in the Notes to Consolidated
Financial Statements for discussions of the Company's legal
proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Southern Union held its Annual Meeting of Stockholders on May 25,
1994. The following matters were submitted for a vote and
approved by Southern Union's security holders: (i) election of
Class I directors; (ii) approval of a proposal to amend the
Restated Certificate of Incorporation (the "Certificate") and
Bylaws to increase the maximum size of Southern Union's Board of
Directors to twelve directors; (iii) approval of a 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) adoption of the
Southern Union Company Supplemental Deferred Compensation Plan;
and (v) adoption of the Southern Union Company Directors'
Deferred Compensation Plan.
The number of votes cast in favor, against or withheld for each
nominee for director, and for each proposal voted on at the
Annual Meeting of Stockholders, were:
For Against Withheld
---------- ------- --------
Election of the following
nominees as Class I Directors:
John E. Brennan 10,470,082 -- 45,255
Frank W. Denius 10,475,644 -- 39,693
Roger J. Pearson 10,476,081 -- 39,256
Proposal to increase the
maximum size of the Board
of Directors to twelve
directors. 10,399,257 20,195 8,592
Proposal to amend the
Certificate and Bylaws
of the Company to
eliminate Article
Twelfth and other 80%
supermajority voting
provisions contained
therein. 9,528,095 16,588 21,798
Proposal to adopt the
Southern Union Company
Supplemental Deferred
Compensation Plan. 10,233,585 78,824 20,577
Proposal to adopt the
Southern Union Company
Directors' Deferred
Compensation Plan. 10,231,485 76,144 25,357
Southern Union expects to hold its next annual meeting of
stockholders in November 1995.
<PAGE>
PART II
ITEM 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
Market Information
Southern Union's common stock is traded on the American Stock
Exchange under the symbol "SUG". On May 25, 1994 the Company's
Board of Directors declared a 5% stock dividend, payable on
June 30, 1994 to stockholders of record on June 14, 1994. The 5%
stock dividend is consistent with the Board of Directors'
approval in February 1994 of the commencement of regular stock
dividends of approximately 5% annually. In addition, on
February 11, 1994 the Company's Board of Directors declared a
three-for-two stock split distributed in the form of a 50% stock
dividend on March 9, 1994 to stockholders of record on
February 23, 1994.
The high and low sales prices (adjusted for the June 30 and
March 9, 1994 distributions) for shares of Southern Union common
stock since January 1, 1992 are set forth below:
$/Share
-----------------
High Low
------ -------
July 1 to September 16, 1994. . . . . . . 18 3/8 16 5/8
(Quarter Ended)
June 30, 1994 . . . . . . . . . . . . . . 19 16 1/4
March 31, 1994. . . . . . . . . . . . . . 23 3/8 16 1/2
(Quarter Ended)
December 31, 1993 . . . . . . . . . . . . 20 1/8 12 5/8
September 30, 1993. . . . . . . . . . . . 14 1/8 11 7/8
June 30, 1993 . . . . . . . . . . . . . . 12 7/8 10 1/2
March 31, 1993. . . . . . . . . . . . . . 13 1/4 9
(Quarter Ended)
December 31, 1992 . . . . . . . . . . . . 10 3/8 9
September 30, 1992. . . . . . . . . . . . 10 3/8 8 5/8
June 30, 1992 . . . . . . . . . . . . . . 9 5/8 8 5/8
March 31, 1992. . . . . . . . . . . . . . 10 1/8 9
Holders
As of September 16, 1994, there were 278 holders of record of
Southern Union's common stock. This number does not include
persons whose shares are held of record by a bank, brokerage
house or clearing agency, but does include any such bank,
brokerage house or clearing agency.
There were 11,501,794 shares of Southern Union's common stock
outstanding on September 16, 1994 of which 6,892,194 shares were
held by non-affiliates.
Dividends
Southern Union paid no cash dividends on its common stock in
fiscal 1994, 1993 or 1992. Provisions in certain of Southern
Union's long-term notes and its bank revolving credit facility
limit the payment of cash or asset dividends on capital stock.
Under the most restrictive provisions in effect, as a result of
the January 1994 sale of Senior Debt Securities, Southern Union
may not declare or pay any cash or asset dividends on its common
stock (other than dividends and distributions payable solely in
shares of its common stock or in rights to acquire its common
stock) or acquire or retire any of Southern Union's common stock,
unless no event of default exists and the Company meets certain
financial ratio requirements.
The specific declaration, record and distribution dates for each
stock dividend will be determined by the Board and announced at a
date no later than the annual stockholders meeting each year.
Southern Union's next annual meeting is expected to be held in
November 1995. On May 25, 1994 the Board declared a 5% stock
dividend distributed on June 30, 1994 to stockholders of record
on June 14, 1994. A portion of the 5% stock dividend was
characterized as a distribution of capital due to the level of
the Company's retained earnings available for distribution as of
the date of declaration.
ITEM 6. Selected Financial Data.
Year
Ended
June Years Ended December 31,
------------------------------------
1994 1993 1992 1991 1990
(a)(b) (b)(c) (c) (c) (c)
-------- -------- -------- -------- ---------
(thousands of dollars, except per share amounts)
Total operating
revenues. . . . . $374,516 $209,005 $192,445 $200,261 $199,865
Earnings from
continuing
operations. . . . 8,378 7,733 6,391 4,673 387
Earnings (loss)
from continuing
operations per
share of common
stock (d) . . . . .85 .83 .47 .26 (.26)
Total assets (e). 890,950 416,207 377,167 369,783 379,856
Long-term debt. . 479,937 109,574 109,924 111,618 104,922
Redeemable
preferred stock . -- -- 24,900 25,000 25,000
- - ---------------------------------
(a) On July 9, 1993, Southern Union entered into an Agreement
with Western Resources pursuant to which Southern Union
purchased from Western Resources certain Missouri natural
gas distribution operations which Southern Union operates as
Missouri Gas Energy, a division of Southern Union
headquartered in Kansas City, Missouri. The acquisition was
consummated on January 31, 1994 and has been accounted for
as a purchase. The assets of Missouri Gas Energy were
included in the consolidated balance sheet at January 31,
1994 and its results of operations are included in the
consolidated results of operations beginning February 1,
1994. For these reasons, the consolidated results of
operations of the Company for the period subsequent to the
acquisition are not comparable to prior periods.
(b) During 1994, the Company changed its fiscal year-end from
December 31 to June 30. The Company believes the new fiscal
year more closely conforms its financial condition and
results of operations to its natural business cycle. In
order to present more meaningful comparative annual
financial data, current year information is presented for
the twelve months ended June 30, 1994. Therefore, the
comparison of consolidated results of operations for the
year ended June 30, 1994 and the year ended December 31,
1993 include the effects of the following which occurred in
the two quarters in common during the six-month period
ended December 31, 1993: (i) a non-recurring adjustment of
approximately $2,489,000 to reverse a tax reserve upon the
final settlement of prior period federal income tax audits;
(ii) a pre-tax gain of approximately $494,000 on the sale of
undeveloped real estate; and (iii) the write-off of
approximately $357,000 of acquisition-related costs as a
result of the termination of negotiations for various
acquisitions.
(c) The Company completed the Berry Gas, Eagle Pass and Rio
Grande Acquisitions during 1993 and the Nixon Acquisition in
1992. In addition, during 1991 the Company completed the
South Texas, Brazos River and Andrews acquisitions and also
completed the Arizona Sale. In February 1990, the Company
merged with S. U. Acquisition, Inc. (the "Merger"). For
these reasons the results of operations of the Company for
the periods subsequent to the Merger are not comparable to
those periods prior to the Merger nor are the 1993, 1992 and
1991 results of operations comparable between periods.
(d) Earnings per share in 1994, 1993, 1992, 1991 and 1990 were
computed based on the weighted average number of shares of
common stock outstanding during the year adjusted for the
5% stock dividend distributed on June 30, 1994 and the
three-for- two stock split effected as a 50% stock dividend
which was distributed on March 9, 1994. Losses per share
prior to 1991 were calculated as though the common shares
outstanding after the Merger were outstanding during the
period presented.
(e) Certain reclassifications have been made to prior years'
amounts to conform with the current year presentation.
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Introduction
The Company's principal line of business is the distribution of
natural gas as a public utility through Southern Union Gas and,
subsequent to January 31, 1994, Missouri Gas Energy, each of
which is a division of the Company. Missouri Gas Energy was
acquired on January 31, 1994. Accordingly, the operating results
of Missouri Gas Energy have been included in the consolidated
results of operations subsequent to the date of acquisition. In
addition, during 1993 the Company completed the Rio Grande, Berry
Gas and Eagle Pass Acquisitions. In 1992 the Company completed
the Nixon Acquisition. All of these acquisitions were accounted
for as purchases. See "Acquisitions and Divestiture" in the
Notes to Consolidated Financial Statements for the year ended
June 30, 1994. For these reasons, the results of operations of
the Company for the periods subsequent to those acquisitions are
not comparable to those periods prior to the acquisitions nor are
the 1994 results of operations comparable with previous periods.
Southern Union Gas, which accounted for approximately 57% of the
Company's total revenues for the year ended June 30, 1994, serves
approximately 484,000 residential, commercial, industrial,
agricultural and other customers in the States of Texas
(including the cities of Austin, Brownsville, El Paso, Galveston
and Port Arthur) and Oklahoma. Missouri Gas Energy, which
accounted for approximately 38% of the Company's total revenues
for the year ended June 30, 1994, serves approximately 463,000
customers in 147 communities in central and western Missouri,
including Kansas City, St. Joseph, Joplin and Monett. In
addition, the Company operates interstate and intrastate natural
gas pipeline systems, markets natural gas to end users and
markets and sells natural gas for natural gas vehicles. The
Company also holds investments in real estate.
On May 25, 1994, Southern Union's Board of Directors declared a
5% stock dividend distributed on June 30, 1994 to stockholders of
record on June 14, 1994. A portion of the 5% stock dividend was
characterized as a distribution of capital due to the level of
the Company's retained earnings available for distribution as of
the date of declaration. The 5% stock dividend is consistent
with the Board of Directors approval in February 1994 of the
commencement of regular stock dividends of approximately 5%
annually. In addition, on February 11, 1994, the Company's Board
of Directors declared a three-for-two stock split distributed in
the form of a 50% stock dividend on March 9, 1994 to stockholders
of record on February 23, 1994. Unless otherwise stated, all per
share data included in the accompanying consolidated financial
statements and notes to the consolidated financial statements
have been restated to give effect to the stock split and stock
dividend.
Also, on May 25, 1994, the Board of Directors approved a change
in the Company's fiscal year-end from December 31 to June 30.
The Company believes the new fiscal year more closely conforms
reporting of its financial condition and results of operations to
its natural business cycle. In order to present more meaningful
comparative annual financial data, current year information is
presented for the twelve months ended June 30, 1994. Therefore,
the comparison of consolidated results or operations for the year
ended June 30, 1994 and the year ended December 31, 1993 include
the effects of the following items that occurred in the two
quarters in common during the six-month period ended December 31,
1993: (i) a non-recurring adjustment of approximately $2,489,000
to reverse a tax reserve upon the final settlement of prior
period federal income tax audits; (ii) a pre-tax gain of
approximately $494,000 on the sale of undeveloped real estate;
and (iii) the write-off of approximately $357,000 of acquisition-
related costs as a result of the termination of negotiations for
various acquisitions. All references herein to years 1994, 1993
and 1992 reflect the fiscal years ended June 30, 1994,
December 31, 1993 and December 31, 1992.
Several of the Company's business activities are subject to
regulation by federal, state or local authorities where the
Company operates. Thus, the Company's financial condition and
results of operations have been dependent upon the receipt of
adequate and timely adjustments in rates. In addition, the
Company's business is affected by seasonal weather impacts,
competitive factors within the energy industry and economic
development and residential growth in its service areas.
The Company's revenues and earnings are primarily dependent upon
gas sales volumes and gas service rates. Gas purchase costs
generally do not affect the Company's earnings because such costs
usually are passed through to customers pursuant to purchase gas
adjustment clauses. Accordingly, while changes in the cost of
gas may cause the Company's operating revenues to fluctuate,
operating margin (defined as operating revenues less gas purchase
costs) is generally not affected by gas purchase cost increases
or decreases.
Gas sales volumes fluctuate as a function of seasonal weather
impact and the size of the Company's customer base, which is
affected by competitive factors in the industry as well as
economic development and residential growth in its service areas.
The primary factors that affect the distribution and sale of
natural gas are the seasonal nature of gas use, adequate and
timely rate relief from regulatory authorities, competition from
alternative fuels, competition within the gas business for
industrial customers and volatility in the supply and price of
natural gas. Gas service rates, which consist of a monthly fixed
charge and a gas usage charge, are established by regulatory
authorities and are intended to permit utilities to recover
operating, administrative and financing costs and to earn a
return on equity. The monthly fixed charge provides a base
revenue stream while the usage charge increases the Company's
revenues and earnings in colder weather when natural gas usage
increases.
In recent years weather variances experienced during the
traditional heating load months have significantly impacted the
Company's results of operations. The average temperatures in
Southern Union Gas' service areas during the past several winter
seasons have been much warmer than normal. To mitigate the
impact of these seasonal variances, Southern Union Gas has
requested and received approval for weather normalization clauses
in Austin, Galveston and in two other service areas in Texas.
These clauses allow for rate adjustments that help stabilize
customers' monthly bills and the Company's earnings from the
varying effects of weather.
Results of Operations
Net Earnings Available for Common Stock
The Company recorded net earnings available for common stock of
$8,378,000 for the year ended June 30, 1994 compared to
$6,890,000 for the year ended December 31, 1993, an increase of
$1,488,000 or 22%. Net earnings per common share, based on
weighted average shares outstanding were $.85 in 1994 compared to
$.83 in 1993. Net earnings available for common stock for the
year ended December 31, 1992 were $1,445,000 or $.18 per share
based on weighted average shares outstanding.
Net earnings for the year ended June 30, 1994 were positively
impacted by the Company's recent acquisition of Missouri Gas
Energy and Rio Grande and by the receipt of several rate
increases effected during the year ended December 31, 1993. The
acquisitions collectively contributed approximately $880,000 or
11% to 1994 net earnings after deductions for allocated corporate
expenses, interest and income taxes. Rate increases effected
during the past year included: a $777,000 annualized increase in
the Company's South Texas service area effective February 10,
1993; a $1,950,000 annualized increase in Austin effective
July 1, 1993; and a $463,000 annualized increase in El Paso
effective November 1, 1993.
The Company's net earnings for the year ended June 30, 1994 were
also positively impacted by the elimination of preferred
dividends due to the retirement of Southern Union's Series A 10%
Cumulative Preferred Stock begun in March and completed in June
1993.
As previously noted, Missouri Gas Energy's results of operations
were included in the consolidated operating results of the
Company subsequent to January 31, 1994. Accordingly, the
Company's results of operations do not include Missouri Gas
Energy's operations for December 1993 or January 1994, two of the
coldest months of Missouri's winter heating season. In addition,
Missouri Gas Energy's rate structure collects a greater
percentage of its margin during the winter heating season months
than does Southern Union Gas. This results in a significant
timing difference occurring between the collection of revenues in
the winter months to recover annual costs and the actual
incurrence of these costs throughout the year. Thus, Missouri
Gas Energy's contribution to the Company's results of operations
for the year ended June 30, 1994 were not significant. Missouri
Gas Energy's results of operations in future periods will reflect
a complete cycle of revenue collection and cost incurrence.
Accordingly, Missouri Gas Energy's contribution to the Company's
results of operations in future periods is expected to increase.
Operating Revenues
Total operating revenues in 1994, 1993 and 1992 were
$374,516,000, $209,005,000 and $192,445,000, respectively.
Revenues are affected by the level of sales volumes, customer
base and by the pass-through of increases or decreases in the
Company's gas purchase costs through its purchase gas adjustment
clauses. Operating revenues increased $165,511,000, or
approximately 79%, for the year ended June 30, 1994, primarily
due to an increase in over a half a million customers resulting
from the Missouri, Rio Grande, Berry Gas and Eagle Pass
Acquisitions. Revenues from these acquisitions were
approximately $167,692,000 in 1994. The average customer base
served in 1994, 1993 and 1992 was approximately 660,000, 421,000
and 394,000, respectively. Operating revenues also increased due
to receipt of rate increases in 1993, described above, and by an
8% increase in the average cost of gas from $2.50 per Mcf in 1993
to $2.70 per Mcf in 1994.
Operating revenues increased $16,560,000, or approximately 9%,
for the year ended December 31, 1993, primarily from an increase
in the customer base resulting from the Rio Grande, Berry Gas and
Eagle Pass Acquisitions as well as the receipt of rate increases
in 1993, also described above. These acquisitions increased
revenues by approximately $8,085,000 in 1993. Operating revenues
also increased due to a 24% increase in the average cost of gas
from $2.01 per Mcf in 1992 to $2.50 per Mcf in 1993, which was
partially offset by a 12% decrease in gas sales volumes from
51,104 MMcf in 1992 to 44,859 MMcf in 1993. The decline in gas
sales volumes reflected a decrease of 7,831 MMcf in gas sales by
Mercado, the Company's marketing subsidiary, resulting from the
Company's decision in early 1993 to reduce sales to off-system
markets.
Gas Sales and Transportation Volumes
Gas sales volumes billed in 1994, 1993 and 1992 totaled 78,300
MMcf, 44,203 MMcf and 51,147 MMcf, respectively, at an average
Mcf sales price of $4.83, $4.42 and $3.58, respectively. Gas
sales volumes fluctuate as a function of weather and customer
base. The increase in gas sales volumes is due principally to
the increase in gas sales subsequent to the Missouri Acquisition
and Rio Grande Acquisition. Gas sales volumes billed by these
acquired operations were 34,512 MMcf in 1994. Gas sales volumes
are also directly impacted by the weather patterns in the
Company's service areas which averaged 10% warmer than normal in
1994 and 11% warmer than normal in 1993. The average sales price
per Mcf varied between periods as a result of variations in
contracted gas prices as well as the average spot market price of
natural gas.
Gas transportation volumes in 1994, 1993 and 1992 totaled 36,134
MMcf, 22,750 MMcf and 25,438 MMcf, respectively, at an average
transportation rate per Mcf of $.28, $.29 and $.23, respectively.
Transportation volumes increased in 1994 as compared to 1993 as a
result of the Missouri Acquisition.
Gas Purchase Costs
Gas purchase costs in 1994, 1993 and 1992 were $211,127,000,
$110,384,000 and $102,918,000, respectively. The increase in gas
purchase costs in 1994 was due to the Missouri Acquisition which
increased gas purchase costs by $86,577,000 or 78%. In addition,
the average customer base increased due to the acquisition of gas
distribution systems, previously discussed. These increases were
partially offset by a decrease in the average spot market price
of natural gas from $1.96 per million British thermal units
("MMBtu") in 1993 to $1.94 per MMBtu in 1994. The average gas
purchase cost incurred by the Company was $2.70 per Mcf in 1994,
$2.50 per Mcf in 1993 and $2.01 per Mcf in 1992. The increase in
gas purchase costs in 1993 as compared to 1992 was due to a 16%
increase in the average spot market price of natural gas from
$1.69 per MMBtu in 1992 to $1.96 per MMBtu in 1993 and also by an
increase in the average customer base resulting from the
acquisition of gas distribution systems, previously discussed.
Operating, Maintenance and General Expenses
Operating, maintenance and general expenses were $79,667,000,
$50,076,000 and $46,313,000 in 1994, 1993 and 1992,
respectively. During 1994 operating, maintenance and general
expenses increased $29,591,000 or 59% due principally to
increased operating costs of approximately $32,400,000 associated
with the acquisitions previously discussed. The operating,
maintenance and general expenses of Southern Union Gas, excluding
Rio Grande, decreased approximately $1,444,000 in 1994 reflecting
the reduction in payroll expenses as a result of the Company's
1993 early retirement program finalized in April 1993.
Taxes
Federal and state income tax expense in 1994, 1993 and 1992 was
$5,185,000, $3,855,000 and $4,440,000, respectively. The
increase in income taxes in 1994 is primarily a result of an
increase in pre-tax income attributable to the Company's recent
acquisitions. Likewise, income taxes in 1994 and 1993 were both
impacted by reductions related to amended prior year federal
income tax returns and non-taxable income items included with
"other income" related to the reversal of a tax reserve recorded
in September 1993, as discussed below. In July 1993 the Company
paid the Internal Revenue Service ("IRS") approximately
$1,266,000 in settlement for federal income taxes and interest
related to the tax years 1984 through 1989. The Company had
previously estimated and accrued an amount for the tax
deficiencies and related interest and, as a result of the
settlement with the IRS for a lesser amount, a non-recurring
adjustment was recorded to reverse the tax reserve in excess of
the payment made. The reversal of the reserve had no impact on
liquidity or cash flows due to the non-cash impact of this
adjustment. See "Taxes on Income" in the Notes to Consolidated
Financial Statements for the year ended June 30, 1994.
Taxes other than income taxes reflect various state and local
business and payroll related taxes. The state and local business
taxes are generally based on gross receipts and investments in
property, plant and equipment and fluctuate accordingly.
Depreciation and Amortization Expense
Depreciation and amortization expense in 1994, 1993 and 1992 was
$21,919,000, $14,416,000 and $12,737,000, respectively. The
increase in depreciation expense of $7,503,000 in 1994 compared
to 1993 was primarily attributable to the acquisition of gas
distribution systems, previously discussed.
Effective January 1, 1994, the Company revised its estimate of
the amortization period of additional purchase cost assigned to
utility plant to its standard policy of forty years. As a result
of this change, amortization expense for the year ended June 30,
1994 was reduced by approximately $478,000, with a corresponding
increase to net earnings, or $.05 per average common share. See
"Change in Accounting Estimate" in the Notes to Consolidated
Financial Statements for the year ended June 30, 1994.
Other Income and Expenses, Net
Other income and expenses, net in 1994, 1993 and 1992 were
$18,470,000, $8,176,000 and $6,531,000, respectively. The
increase in other expenses of approximately $9,511,000 in 1994 is
due principally to an increase in interest expense on long-term
debt of approximately $12,033,000. The Company's outstanding
long-term debt increased as a result of the issuance of the
Senior Debt Securities which were used, in part, to fund the
Missouri Acquisition and to repay and refinance certain
outstanding debt of the Company. See "Long-Term Debt" in the
Notes to Consolidated Financial Statements for the year ended
June 30, 1994.
Other income increased in 1994 over 1993 by approximately
$1,400,000. Rental income earned by Lavaca Realty increased by
approximately $450,000 during the fiscal year ended June 30, 1994
as compared to the year ended December 31, 1993. In addition,
Missouri Gas Energy recorded other income of approximately
$276,000 related to the deferral of interest expense associated
with a service line replacement program. See "Utility Regulation
and Rates" in the Notes to the Consolidated Financial Statements
for the year ended June 30, 1994. Other income also increased by
approximately $500,000 as a result of gas appliance merchandising
related to the acquisition of the gas distribution systems,
previously discussed.
As a result of the change in the Company's year-end to June 30,
both the 1994 and 1993 results of operations were impacted by the
recording of a non-recurring adjustment of approximately
$2,489,000 to reverse a tax reserve upon the final settlement of
prior period federal income tax audits as previously discussed.
The reversal of the reserve had no impact on liquidity or cash
flows due to the non-cash impact of this adjustment. Other
income and expense items recorded during the period in common in
1994 and 1993 included the recognition of a pre-tax gain of
approximately $494,000 on the sale of undeveloped real estate and
the write-off of approximately $357,000 of acquisition-related
costs as a result of the termination of negotiations for various
acquisitions.
Other income items recorded in 1993 also included interest income
on notes receivable of approximately $830,000; rental income from
Lavaca Realty of approximately $1,835,000; and a pre-tax gain of
approximately $494,000 on the sale of undeveloped real estate.
Other income in 1992 included a $2,200,000 reversal of certain
contingency reserves recorded at the time of the 1990 merger that
were subsequently resolved or settled and a $950,000 gain
resulting from a litigation settlement, each previously
discussed.
Interest expense on short-term debt was $1,412,000, $1,836,000
and $384,000 in 1994, 1993 and 1992, respectively. Average
short-term debt outstanding during 1994, 1993 and 1992 of
$26,369,000, $33,021,000 and $5,912,000 was at an average
interest rate of 5.1%, 5.3% and 6.3%, respectively. The variance
in the average amounts outstanding coupled with a general
reduction in interest rates resulted in the change in other
interest expense in each of the years.
Discontinued Operation
The loss from discontinued operation of $2,446,000 for the year
ended December 31, 1992 includes net earnings from oil and gas
operations of $1,954,000 which were offset by the estimated loss
on disposal of $4,400,000. Increased production volumes in 1992
contributed to an increase in net earnings from operations. See
"Acquisitions and Divestiture - Other Acquisitions and
Divestiture" in the Notes to Consolidated Financial Statements
for the year ended June 30, 1994.
Liquidity and Capital Resources
The Company's liquidity is impacted by its ability to generate
funds from operations and to access capital markets. The gas
utility operations are seasonal in nature with a significant
percentage of the Company's annual revenues and earnings
occurring in the traditional heating-load months. This
seasonality results in a high level of cash flow needs during the
peak winter heating season months, resulting from the required
payments to natural gas suppliers in advance of the receipt of
cash payments from the Company's customers. The Company has
historically used its revolving loan and credit facilities and
internally-generated funds to provide funding for its seasonal
working capital, continuing construction and maintenance programs
and operational requirements.
Financing Activities
On January 31, 1994, the Company completed the sale of
$475,000,000 of Senior Debt Securities. In addition, on
December 31, 1993 Southern Union completed the Rights Offering to
its existing stockholders to subscribe for and purchase 2,000,000
pre-split and pre-dividend shares of the Company's common stock,
par value $1.00 per share, at a pre-split and pre-dividend price
of $25.00 per share for net proceeds of $49,351,000. The net
proceeds from the sale of the Senior Debt Securities, together
with the net proceeds from the Rights Offering and working
capital from operations, were used to: (i) fund the Missouri
Acquisition; (ii) repay approximately $59,300,000 of borrowings
under the $100,000,000 revolving credit facility, used to fund
the Rio Grande Acquisition and repurchase all outstanding
preferred stock; (iii) refinance, on January 31, 1994,
$10,000,000 aggregate principal amount of 9.45% Senior Notes due
January 31, 2004, and $25,000,000 aggregate principal amount of
10% Senior Notes due January 31, 2012 and the related premium of
approximately $10,400,000 resulting from the early extinguishment
of such notes; (iv) refinance, on March 2, 1994, $50,000,000
aggregate principal amount of 10.5% Sinking Fund Debentures due
May 15, 2017 and the related premium of approximately $3,300,000
resulting from the early extinguishment of such debentures; and
(v) refinance, on May 16, 1994, $20,000,000 aggregate principal
amount of 10 1/8% Notes.
The Company's effective rate under the new debt structure is
approximately 7.8% (including interest and the amortization of
debt issuance costs and redemption premiums on refinanced debt)
after the retirement of certain higher-cost debt in May 1994.
On September 30, 1993, Southern Union entered into a new
revolving credit facility with a three-year term (the "Revolving
Credit Facility") initially underwritten by Texas Commerce Bank,
N.A. for $80,000,000. On November 15, 1993, the Revolving Credit
Facility was syndicated to five additional banks and the
aggregate amount available to be borrowed was increased to
$100,000,000. Borrowings under the Revolving Credit Facility are
available for Southern Union's working capital and letter of
credit requirements. The Revolving Credit Facility can also be
used in part, but not to exceed $40,000,000, to fund acquisitions
and capital expenditures and it provided the funds to complete
the Rio Grande Acquisition. The Revolving Credit Facility
contains certain financial covenants that, among other things,
restrict cash or asset dividends, share repurchases, certain
investments and additional debt. The Revolving Credit Facility
is currently uncollaterized. Under certain conditions involving
the issuance of collateralized debt of Southern Union, the
Revolving Credit Facility automatically would become
collateralized by a first priority security interest on
substantially all of the accounts receivable, inventory and
certain related contract rights of the Company. The facility, as
amended on August 31, 1994, expires on December 31, 1997 but may
be extended annually for periods of one year beginning on
September 30, 1994 with the consent of each of the banks. The
revolving credit facility, as amended on August 31, 1994, is
subject to a commitment fee of an annualized .1875% on the unused
balance. At December 31, 1993, the outstanding balance on the
Revolving Credit Facility was approximately $20,100,000 which was
subsequently liquidated with the net proceeds from the sale of
$475,000,000 of 7.60% Senior Notes. The amount outstanding under
the Revolving Credit Facility at June 30, 1994 was zero and at
September 15, 1994 was approximately $32,500,000.
During March 1993, Southern Union retired 68,000 shares of the
Series A 10% Cumulative Preferred Stock ("Preferred Stock") at
$103 per share for $7,004,000. In April 1993, Southern Union
retired 77,000 shares of Preferred Stock at $102 per share for
$7,854,000. In June 1993, Southern Union retired 4,000 shares of
Preferred Stock at $103.50 per share for $414,000 and the
remaining outstanding 100,000 shares at par for $10,000,000.
In February 1992, Southern Union repurchased 51,625 shares of
common stock at the then-prevailing market rate, from a company
whose Chairman, Chief Executive Officer and President, at that
time, were also executive officers, directors, and stockholders
of Southern Union.
Investing Activities
As previously discussed, Southern Union acquired Missouri Gas
Energy on January 31, 1994. On the date of closing, Southern
Union paid approximately $400,300,000 in cash for Missouri Gas
Energy. The final determination of the purchase price and all
prorations and adjustments between the Company and Western
Resources have not been resolved to-date. Pursuant to the terms
of the Missouri Asset Purchase Agreement, Southern Union is
seeking arbitration with respect to approximately $19,100,000 of
adjustments in dispute. Accordingly, Southern Union is seeking a
refund of approximately $12,000,000 while Western Resources is
demanding an additional payment of approximately $7,100,000.
There can be no assurance that the Company will be successful in
resolving any or all of such adjustments in its favor. See
"Contingencies" in the Notes to the Consolidated Financial
Statements for the year ended June 30, 1994. The purchase price
was financed through the sale of the $475,000,000 Senior Debt
Securities and the proceeds from the sale of the $50,000,000
Rights Offering on December 31, 1993.
The additional purchase cost assigned to Missouri Gas Energy's
utility plant of approximately $76,490,000 consists of
approximately $44,200,000 of the excess of the purchase price
over the historical book carrying value of the utility plant
purchased and approximately $32,290,000 of accruals for certain
liabilities assumed and preacquisition contingencies which have
been incurred or estimates of amounts that will be incurred in
the future. The accruals reflect actual or estimated amounts
for: (i) employee severance and other costs associated with the
1994 early retirement program for employees of Missouri Gas
Energy of approximately $11,200,000; (ii) a $3,000,000
contribution to the Company's employees' qualified defined
benefits plan applicable to Missouri Gas Energy's employees and
retirees in excess of the minimum required contribution under the
Internal Revenue Code Section 412, as determined by the plans'
actuary, pursuant to the MPSC Stipulation; (iii) underwriting,
legal and accounting fees associated with the Missouri
Acquisition; and (iv) other preacquisition contingencies.
Amortization of the additional purchase cost assigned to utility
plant is provided on a straight-line basis over forty years. The
Company expects to finalize the determination of the purchase
price, including all prorations and adjustments in dispute, and
to finalize its estimate of all preacquisition contingencies
within one year of the date the Missouri Acquisition was
consummated.
The Company has used its revolving loan and credit facilities,
internally generated funds and long-term debt to provide funding
for its seasonal working capital, continuing construction
programs, operational requirements, preferred dividend
requirements and acquisitions. During the years ended June 30,
1994 and December 31, 1993 and 1992, the Company spent
approximately $512,000,000 on capital projects including
acquisitions. Of that total, $70,000,000 was incurred on normal
expansion of its distribution system as well as relocation and
replacement. For the year ended June 30, 1994, the Company spent
approximately $41,300,000 for capital expenditures, exclusive of
the acquisitions of natural gas distribution properties, which
was used for normal distribution system replacement and
expansion. During the years ended June 30, 1994 and December 31,
1993 and 1992 approximately $441,000,000 was incurred by the
Company for the acquisition of distribution properties.
On September 30, 1993, the Company completed the Rio Grande
Acquisition for approximately $30,500,000. Rio Grande presently
serves approximately 78,000 customers in the south Texas counties
of Willacy, Cameron and Hidalgo, including the cities of
Harlingen, McAllen and Brownsville (the southernmost city in the
U.S.). The Company initially funded the purchase with borrowings
from its Revolving Credit Facility. The Rio Grande Acquisition
was accounted for as a purchase.
In July 1993, the Company completed the Eagle Pass Acquisition
for approximately $2,000,000. During May 1993, the Company
completed the Berry Gas Acquisition which system serves the Texas
cities and towns of Nome, Raywood, Hull and Devers for
approximately $274,000. Combined, these operations collectively
serve approximately 4,400 customers. These acquisitions were
also accounted for as purchases. In addition, in October 1992,
the Company completed the Nixon Acquisition for approximately
$415,000. This system serves approximately 550 customers.
In March 1993, Southern Union Exploration Company ("SX"),
pursuant to a purchase and sale agreement entered into in
February 1993, sold substantially all of its oil and gas
leasehold interests and associated production, for $22,000,000
effective January 1, 1993. The Company recorded a book loss on
the sale of approximately $4,400,000 as of December 31, 1992.
Other Matters
Contingencies
The Company has been named as a potentially responsible party in
a special notice letter from the United States Environmental
Protection Agency for costs associated with removing hazardous
substances from the site of a former coal gasification plant in
Vermont. The Company also assumed responsibility for certain
environmental matters in connection with the Missouri
Acquisition. See "Commitments and Contingencies" in the Notes to
Consolidated Financial Statements for the year ended June 30,
1994.
Regulatory
The Company is continuing to pursue certain changes to rates and
rate structures that are intended to reduce the sensitivity of
earnings to weather including weather normalization clauses and
higher minimum monthly service charges.
On February 10, 1993, the Company's South Texas service area
received an annualized rate increase of $777,000. On July 1,
1993, rates for Austin were changed to provide: (i) an
approximate $1,700,000 base revenue increase; (ii) new and
increased fees that will add approximately $250,000 annually; and
(iii) weather normalization clause revisions. On November 1,
1993, El Paso rates changed to provide an approximate revenue
increase of $463,000. These rate increases contributed
significantly to Southern Union Gas' earnings in 1994. In
addition, on October 5, 1993, the MPSC issued a rate order
increasing Missouri Gas Energy's natural gas rates by $9,750,000
annually effective October 15, 1993. Southern Union Gas also
received several annual cost of service adjustments in fiscal
1994.
During 1992, the Company's rate cases continued to focus on the
receipt of timely and adequate revenue increases and on various
measures designed to stabilize earnings. Rate cases resolved in
El Paso, South Texas, Dell City, Port Arthur, Borger, Galveston,
Pecos and Monahans, Texas, resulted in revenue increases of
$2,742,000. The Galveston rate case also provided for an
increase in the minimum residential monthly service charge from
$7.50 to $10 and the implementation of a weather normalization
clause.
Prior to the Company's acquisition of Missouri Gas Energy,
Western Resources was required pursuant to a 1989 MPSC order to
undertake the Missouri Safety Program in the service territories
of Missouri Gas Energy. In recognition of the significant
capital expenditures associated with this safety program, the
MPSC issued Western Resources Accounting Authority Orders (AAO)
providing for the deferral, and subsequent recovery through
rates, of those costs and expenditures, including depreciation
expense, property taxes and associated carrying costs, related to
the Missouri Safety Program.
Missouri Gas Energy is required to continue the Missouri Safety
Program and has requested approval from the MPSC of an AAO to
defer depreciation expense, property taxes and carrying costs
associated with Missouri Gas Energy's investment in the Missouri
Safety Program. On May 31, 1994 the MPSC staff recommended
approval of the AAO; therefore, in anticipation of the MPSC's
approval of the requested AAO, the Company has deferred
approximately $600,000 related to depreciation, property taxes
and associated carrying costs on its investment in this program
during the five-month period subsequent to the Missouri
Acquisition.
Accounting Pronouncements
The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 112, Employers Accounting for
Postemployment Benefits, as of January 1, 1994. This statement
requires that the cost of benefits, such as disability and health
care continuation coverage provided to former or inactive
employees after employment but before retirement, be accrued if
attributable to an employee's previously rendered service. The
Company had previously recognized such post-employment benefit
costs when paid and was allowed recovery in rates as payments
were incurred. Consequently, the Company has recorded a
regulatory asset to the extent it intends to file rate
applications to include such costs in rates and such costs are
considered probable of recovery. The adoption of SFAS No. 112
has resulted in the recognition of a regulatory asset and related
liability of approximately $1,100,000 as of June 30, 1994.
The Company adopted the provisions of SFAS No. 109, "Accounting
for Income Taxes," effective as of January 1, 1993. SFAS No. 109
provides for the replacement of the "deferred method" of
interperiod income tax allocation with the "liability method"
which bases the amounts of current and future tax assets and
liabilities on events recognized in the financial statements and
on income tax laws and rates existing at the balance sheet date.
The impact of adoption of SFAS No. 109 in 1993 was insignificant.
The Company also adopted the provisions of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," effective as of January 1, 1993. SFAS No. 106
requires an accrual of postretirement medical and other benefit
liabilities on an actuarial basis during the years an employee
provides services as compared to the pay-as-you-go method. The
Company, excluding Missouri Gas Energy, records a regulatory
asset for the difference between the postretirement costs
currently included in rates and SFAS No. 106 expense to the
extent the Company files, or intends to file, a rate application
to include SFAS No. 106 expense in rates. The Company believes
that it is probable that the relevant regulatory authorities will
allow such expenses in future rates. The Company's adoption,
except for Missouri Gas Energy, of the provisions of SFAS No. 106
resulted in a transition obligation of approximately $9,328,000
which was subsequently reduced to a balance of $4,084,000 at
June 30, 1994, primarily as a result of certain plan amendments
in 1993. The Company amortizes the transition obligation over
the allowed 20-year period. Consequently, earnings were not
adversely impacted by the adoption of this statement.
Western Resources also adopted the provisions of SFAS No. 106 as
of January 1, 1993. To mitigate the impact of SFAS No. 106
expense, Western Resources filed an application with the MPSC for
an order permitting the deferral of SFAS No. 106 expense and
proposed inclusion in the future computation of cost of service
the actual SFAS No. 106 expense and an income stream generated
from Western Resources' corporate-owned life insurance ("COLI").
To the extent SFAS No. 106 expense exceeds income from the COLI
program, this excess would be deferred (as allowed by the FASB
Emerging Issues Task Force Issue No. 92-12) and offset by income
generated through the deferral period by the COLI program. The
MPSC has issued an order approving the Western Resources
application. Subsequent to the Missouri Acquisition, the Company
filed an application with the MPSC for an order to permit the
deferral of SFAS No. 106 expense and also proposes the inclusion
in the future computation of cost of service the actual SFAS No.
106 expense and income stream generated from a Company-owned
COLI. In anticipation of the MPSC's approval of the application,
the Company has recorded a regulatory asset and a related
liability of approximately $38,300,000 representing the
accumulated benefit obligation at June 30, 1994. Additionally,
the State of Missouri recently passed legislation which provides
for prospective recognition by the MPSC of postretirement medical
and benefit costs on an accrual basis. Thus, to the extent that
Missouri Gas Energy's COLI does not offset its SFAS 106 liability
then such expenses should be recoverable in future rates.
ITEM 8. Financial Statements and Supplementary Data.
Reference is made to the Consolidated Financial Statements of
Southern Union and its consolidated subsidiaries listed on page
F-1.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of Registrant.
The Board of Directors of Southern Union is divided into three
classes, each of which serves a staggered three-year term of
office. The Class I, II and III directors serve until the 1997,
1996 and 1995 Annual Meeting of Stockholders, respectively.
Information as to the directors of Southern Union as of
September 16, 1994 is provided below:
Class I - Term expires in 1997
John E. Brennan has been Vice Chairman of the Board of Southern
Union since February 1990. Mr. Brennan devotes only a small part
of his business time to 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: 48.
Frank W. Denius has been a director of Southern Union since 1976
and previously served as a director from 1955 to 1975. Since
February 1990, Mr. Denius has been Chairman Emeritus. Mr. Denius
was Chairman of the Board and President 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 TCC Industries. Age: 69.
Roger J. Pearson is an attorney in private practice in Stamford,
Connecticut where he is of counsel in the firm of Neville,
Shaver, Kelly & McLean. Mr. Pearson was First-Selectman (Mayor)
of Greenwich, Connecticut from 1983 to 1985. Mr. Pearson has
been a Director of Southern Union since January 1992. Age: 48.
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 is currently associated with Perry Partners, a
New York money management firm. Since April 1992 he has been
engaged in private investments. 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 Southern
Union. Age: 33.
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:
61.
Class III - Term expires in 1996
George L. Lindemann has been Chairman of the Board and Chief
Executive Officer of Southern Union since February 1990. He has
been Chairman of the Executive Committee of the Board of
Directors since March 1990. Mr. Lindemann does not devote his
full business time to 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
Southern Union since February 1990, President and Chief Operating
Officer of Southern Union Gas since October 1990, and President
and Chief Executive Officer of Missouri Gas Energy 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: 64.
With the exception of Messrs. Denius and Pearson as described
above, each of the above-named directors first became a director
of Southern Union in February 1990.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Officers of the Company are elected by the Southern Union 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 Missouri Gas Energy in December 1993, and
prior to that served as Senior Vice President - Mergers and
Acquisitions, Chief Information Officer and Assistant Secretary
of Southern Union since March 1990. Previously, Mr. Dubay held
other positions with the Company, primarily of a financial
nature. 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: 50.
David J. Kvapil has been Vice President - Controller since July
1993 and Controller since August 1992. Prior to joining the
Company, Mr. Kvapil was with Coopers & Lybrand. Age: 39.
Dennis K. Morgan has been Vice President - Legal and Secretary
since April 1991 and a Vice President since January 1991.
Previously, he held various legal positions with Southern Union
Exploration Company. 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:
45.
ITEM 11. Executive Compensation.
The table below sets forth all compensation paid and awarded by
the Company in each year indicated to the Chief Executive Officer
of Southern Union and each of the four most highly-compensated
executive officers for the fiscal year ended June 30, 1994 other
than the Chief Executive Officer.
Securities
Underlying All Other
Name and Principal Options/ Compensa-
Position Year* Salary Bonus SARs(1) tion(2)
- - ------------------- ----- -------- ------- ---------- ----------
George L. Lindemann
Chairman of the 1994 $115,787 -- 39,375 $ 2,127
Board and Chief 1993 110,024 -- -- --
Executive Officer 1992 108,086 $ 55 67,725(3) --
Peter H. Kelley
President and 1994 274,928 70 39,375 6,713
Chief Operating 1993 261,450 70 -- 3,865
Officer 1992 244,861 13,805 39,375 2,182
Eugene N. Dubay
Executive Vice 1994 168,524 76,717 15,570 48,366(4)
President and 1993 153,680 9,568 -- 4,636
Chief Operating 1992 145,787 4,401 23,626 1,309
Officer -
Missouri Gas
Energy
Ronald J. Endres
Senior Vice 1994 183,967 80,989 23,625 9,073
President - 1993 175,812 1,920 -- 4,805
Finance and 1992 167,028 27,265 23,626 2,182
Administration
and Chief
Finance Officer
Dennis K. Morgan
Vice President - 1994 108,412 55,757 7,875 6,411
Legal and 1993 104,260 1,043 -- 3,873
Secretary 1992 102,915 3,170 7,875 1,589
- - -------------------------------
* Compensation in 1994 reflects the twelve months ended June 30
while compensation awarded in previous periods reflects the
years ended December 31, 1993 and 1992.
(1) Securities underlying options to purchase shares of Southern
Union common stock for all years presented have been adjusted
to reflect the 5% stock dividend distributed on June 30, 1994
to stockholders of record on June 14, 1994 and the three-for-
two stock split distributed as a 50% stock dividend on
March 9, 1994 to stockholders of record on February 23, 1994.
No stock appreciation rights were granted in 1994, 1993 and
1992.
(2) Company matching provided through the Southern Union
(401(k)) Savings Plan and the Southern Union Company
Supplemental Deferred Compensation Plan.
(3) Includes 27,000 non-qualified options to purchase shares of
Southern Union common stock 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 cancelled.
(4) Includes moving expenses for relocation from Texas to
Missouri.
PENSION PLAN TABLE
The following table reflects the combined benefits available from
Plans A and B, described below and the non-qualified plan.
PENSION PLAN TABLE
Years of Service
------------------------------------------------
Remuneration 15 20 25 30 35
- - ------------ -- -- -- -- --
$125,000 $ 40,751 $ 54,335 $ 54,335 $ 54,897 $ 64,047
150,000 50,126 66,835 66,835 66,897 78,047
175,000 59,501 79,335 79,335 79,335 92,047
200,000 68,876 91,835 91,835 91,835 106,047
225,000 78,251 104,335 104,335 104,335 108,108
250,000 87,626 108,108 108,108 108,108 108,108
300,000 106,376 108,108 108,108 108,108 108,108
400,000 108,108 108,108 108,108 108,108 108,108
450,000 108,108 108,108 108,108 108,108 108,108
500,000 108,108 108,108 108,108 108,108 108,108
The Company sponsors two retirement Income Plans. "Plan B"
covers all employees of Missouri Gas Energy and "Plan A" covers
all employees other than employees of Missouri Gas Energy. In
both plans, benefits are based upon average annual basic earnings
for the five highest consecutive years in the applicable period.
All officers, except for Mr. Dubay, are presently covered by Plan
A. Mr. Dubay was previously covered by Plan A, but is presently
covered by Plan B. However, after application of the non-
qualified supplemental plan, Mr. Dubay's combined benefits are on
the same basis as the other officers. Basic earnings, as defined
by Plan A, was redefined in December of 1989 to include W-2
earnings minus certain defined exclusions. Effective
December 31, 1989, the Plan A 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 June 30, 1994, Messrs. Lindemann, Kelley, Dubay, Endres and
Morgan were credited with 4, 4, 12, 25 and 13 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 is $150,000 rather
than the $235,840 limit applicable to 1993.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The Board of Directors of Southern Union 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. 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 is Senior Partner of Fleischman and Walsh,
which provides legal services to the Company and certain of its
subsidiaries. (See "Item 13. Certain Relationships and Related
Transactions.")
OPTIONS/SAR GRANTED IN LAST FISCAL YEAR
The following table sets forth information with respect to all
options granted to each of the named executive officers during
the year ended June 30, 1994.
% of
Number Total
of Options/ Potential
Secur- SARs Realizable
ities Granted Value at
Under- to Em- Assumed Annual
lying ployees Rates of
Options/ in Exer- Expira- Appreciation
SARs Fiscal cise tion of Stock Price
-------------------
Name Granted Year Price Date 5% 10%
- - ----------- ------- ------- ------ ------ -------- ----------
George L.
Lindemann 39,375 18% $17.63 4/4/04 $436,669 $1,106,438
Peter H.
Kelley 39,375 18% 17.63 4/4/04 436,669 1,106,438
Eugene N.
Dubay 15,750 7% 17.63 4/4/04 174,668 442,575
Ronald J.
Endres 23,625 11% 17.63 4/4/04 262,001 663,863
Dennis K.
Morgan 7,875 4% 17.63 4/4/04 87,334 221,288
*No stock appreciation rights were granted in 1993.
All options except as noted vest at a rate of 20% per annum
commencing on the first anniversary of the date of grant.
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 June 30, 1994.
The securities underlying unexercised options have been adjusted
to reflect the 5% stock dividend distributed on June 30, 1994 to
stockholders of record on June 14, 1994 and the three-for-two
stock split distributed as a 50% stock dividend on March 9, 1994
to stockholders of record on February 23, 1994.
Number
of Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options At Options At
on Fiscal Year End Fiscal Year End
--------------- -------------------
Exer- Value Exer- Unexer- Exer- Unexer-
Name cise Realized cisable cisable cisable cisable
- - ------------ ------ -------- ------- ------- -------- ----------
George L.
Lindemann * * 48,195 109,305 $430,961 $1,348,002
Peter H.
Kelley * * 49,928 78,435 411,094 1,066,190
Eugene N.
Dubay 10,000 $220,000 28,350 50,400 231,194 591,350
Ronald J.
Endres * * 37,800 64,575 304,526 779,074
Dennis K.
Morgan * * 1,575 14,175 15,955 202,655
The following table provides information regarding the repricing
of stock options for each of the named executive officers.
Ten-Year Option/SAR Repricings
Length
Number of
of Market Original
Secur- Price Exer- Option
ities of cise Term
Under- Stock Price Begin-
lying at Time at Time ning
Options/ of Re- of Re- at
SARs pricing pricing New Date
Name and Repriced or or Exer- of
Principal or Amend- Amend- cise Amend-
Position Date Amended ment ment Price ment*
- - ------------- -------- ------- ------ ------- ------ -------
George L.
Lindemann
Chairman April 4,
of the 1994 39,375 $17.63 $21.90 $17.63 approxi-
Board and mately
Chief 9 years,
Executive 10 months
Officer
Peter H.
Kelley
President April 4,
and Chief 1994 39,375 17.63 21.90 17.63 approxi-
Operating mately
Officer 9 years,
10 months
Eugene N.
Dubay
Executive April 4,
Vice 1994 15,750 17.63 21.90 17.63 approxi-
President mately
and Chief 9 years,
Operating 10 months
Officer -
Missouri
Gas Energy
Ronald J.
Endres
Senior April 4,
Vice 1994 23,625 17.63 21.90 17.63 approxi-
President - mately
Finance 9 years,
and Admin- 10 months
istration
and Chief
Financial
Officer
Dennis K.
Morgan
Vice April 4,
President - 1994 7,875 17.63 21.90 17.63 approxi-
Legal and mately
Secretary 9 years,
10 months
- - -------------------------------
* Vesting was restarted at the date of repricing.
The Long-Term Stock Incentive Plan Committee (the "Committee") of
the Board of Directors of the Company authorized the repricing of
all options granted on February 10, 1994 to officers and
employees.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management.
The following table shows as of September 6, 1994, unless
otherwise indicated, the number of all shares of Southern Union'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 Southern Union's
outstanding shares of 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.
Number of Percent of
Name of Beneficial Owner Shares Held Class
- - ------------------------ ----------- ----------
George L. Lindemann 1,550,120(1) 13.14
Adam M. Lindemann 959,553(2) 8.13
George Lindemann, Jr. 959,553(2) 8.13
950 Maidstone Drive
Wellington, Florida 33414
Sloan N. Lindemann 959,553(2) 8.13
800 Fifth Avenue
New York, New York 10022
John E. Brennan 147,425(3) 1.25
Frank W. Denius 5,672(4) *
Aaron I. Fleischman 143,914(5) 1.22
Peter H. Kelley 47,236(6) *
Roger J. Pearson 8,543(7) *
George Rountree, III 18,834(8) *
Dan K. Wassong 6,690 *
Eugene N. Dubay 30,926(9) *
Ronald J. Endres 49,083(10) *
Dennis K. Morgan 4,601(11) *
Lee M. Bass 604,208(12)(13) 5.12
201 Main Street
Fort Worth, Texas 76102
Sid R. Bass Management Trust(14) 604,208(12)(15) 5.12
201 Main Street
Fort Worth, Texas 76102
Snyder Capital Management, Inc.(16) 636,574(16) 5.40
350 California Street, Suite 1460
San Francisco, California 94104
All Directors and Executive Officers
as a group (17 in group) 2,952,583(17) 25.02
- - --------------------------------
(1) Of these shares: 638,750 are owned by Mr. Lindemann
including: approximately 204 shares held by the Southern
Union Savings (401(k)) Plan and 157 shares held through the
Southern Union Company Supplemental Deferred Compensation
Plan; 845,220 shares owned by his wife,
Dr. F. B. Lindemann; and 66,150 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
June 30, 1994. See "Management Compensation - Stock
Options." A total of 1,435,761 shares held by
Mr. and Mrs. Lindemann and their three children have been
pledged to Activated Communications Limited Partnership.
Activated Communications Limited Partnership, 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, 1,757 shares are owned by his wife, 78,246
are held in two separate trusts for the benefit of members
of his family and 45,675 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 June 30, 1994. See "Management
Compensation - Stock Options."
(4) Includes approximately 392 vested shares allocated to
Mr. Denius pursuant to the Southern Union Company
Directors' Deferred Compensation Plan.
(5) Includes: 39,375 shares that Fleischman and Walsh, in
which Mr. Fleischman is Senior Partner, is entitled to
purchase upon exercise of a warrant; approximately 783
vested shares allocated to Mr. Fleischman pursuant to the
Southern Union Company Directors' Deferred Compensation
Plan; and 39,309 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 36,650 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 3,559
vested shares held by the Southern Union Savings (401(k)) Plan;
259 vested shares held through the Southern Union Stock
Purchase Plan; and 376 vested shares held through the
Supplemental Plan.
(7) Includes 6,737 shares owned jointly by Mr. Pearson and his
father.
(8) Includes: 542 shares owned by his wife; and approximately
904 vested shares allocated to Mr. Rountree pursuant to the
Directors' Deferred Compensation Plan.
(9) Includes 26,775 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 1,249 vested shares held
through the Southern Union (401(k)) Savings Plan; and 1,164
vested shares held through the Supplemental Plan.
(10) Includes 42,525 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 2,633 vested shares held
through the Southern Union (401(k)) Savings Plan; and 665
vested shares held through the Supplemental Plan.
(11) Includes 3,150 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 1,082 vested shares held through the Southern
Union (401(k)) Savings Plan; and approximately 369 vested
shares held through the Supplemental Plan.
(12) Does not include 51,975 (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. as adjusted for the stock dividend and
split since the date of such reports.
(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. as adjusted for
the stock dividend and split since the date of such
reports.
(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
15,984 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 shares which have not vested under the terms of
such plans.
* Indicates less than one percent (1%).
ITEM 13. Certain Relationships and Related Transactions.
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 June 30, 1994, Mr. Kelley's outstanding
principal and accrued but unpaid interest balance was
approximately $350,600.
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
Southern Union 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 1994, 1993 and 1992 were
approximately $125,000, $187,000 and $104,000, respectively.
Director Fleischman is Senior Partner of Fleischman and Walsh,
which provides legal services to the Company and certain of its
subsidiaries. For the fiscal year ended June 30, 1994, the total
amount paid by the Company to Fleischman and Walsh for legal
services was approximately $1,224,000. On February 10, 1994, the
Company granted to Fleischman and Walsh a warrant, which was
subsequently repriced on April 4, 1994 at the same time and to
the same price as the Company repriced options granted to Company
employees on February 10, 1994. The warrant currently entitles
the holder to purchase 39,375 shares of common stock at an
exercise price of $17.63 and expires on February 10, 2004.
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.
(a)(1) Financial Statements. Reference is made to the Index on
page F-1 for a list of all financial statements filed as
part of this Report.
(a)(2) Financial Statement Schedules. Reference is made to the
Index on page F-1 for a list of all financial statement
schedules filed as a part of this Report.
(a)(3) Exhibits. Reference is made to the Exhibit Index on
pages E-1 and E-2 for a list of all exhibits filed as a
part of this Report.
(b) Reports on Form 8-K.
A current report was filed on June 7, 1994 with respect
to the change of the Company's fiscal year-end from
December 31st to June 30th for financial reporting
purposes.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Southern Union has duly caused
this report to be signed by the undersigned, thereunto duly
authorized, on September 20, 1994.
SOUTHERN UNION COMPANY
By PETER H. KELLEY
---------------------
Peter H. Kelley
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of Southern Union and in the capacities indicated as of
September 20, 1994.
Signature/Name Title
- - -------------- -----
GEORGE L. LINDEMANN* Chairman of the Board,
Chief Executive Officer
and Director
JOHN E. BRENNAN* Director
FRANK W. DENIUS* Director
AARON I. FLEISCHMAN* Director
PETER H. KELLEY Director
---------------
Peter H. Kelley
ADAM M. LINDEMANN* Director
ROGER J. PEARSON* Director
GEORGE ROUNTREE, III* Director
DAN K. WASSONG* Director
RONALD J. ENDRES Senior Vice President of
----------------
Ronald J. Endres Administration,
and Chief Financial Officer
DAVID J. KVAPIL Vice President and Controller
---------------
David J. Kvapil (Principal Accounting Officer)
*By PETER H. KELLEY
----------------
Peter H. Kelley
Attorney-in-fact
<PAGE>
EXHIBIT 3(a)
RESTATED CERTIFICATE OF INCORPORATION OF
SOUTHERN UNION COMPANY
<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 has been duly
adopted in accordance with the provisions of Sections 242
and 245 of the Delaware General Corporation law.
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,
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;
(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 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,
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 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.
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 Preferred 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 (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 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 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 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 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;
(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 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 Company 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 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 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
debts 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 thirteen
(13). 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
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 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;
(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 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: 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.
This Restated Certificate of Incorporation was duly adopted by
the Board of Directors in accordance with Section 245 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Southern Union Company has, on this
27th day of May, 1994, caused this Certificate to be signed by
Peter H. Kelley, its President, and attested by Dennis K. Morgan,
its Secretary, and the corporate seal of said Southern Union
Company to be affixed to this Certificate by the said
Dennis K. Morgan.
SOUTHERN UNION COMPANY
(Corporate Seal)
By: PETER H. KELLEY
----------------------
Peter H. Kelley
President
ATTEST:
By: DENNIS K. MORGAN
----------------
Dennis K. Morgan
Secretary
STATE OF TEXAS )
) ss:
COUNTY OF TRAVIS)
On this 27th day of May, 1994, personally appeared before me,
the undersigned, a Notary Public in and for said County,
Peter H. Kelley, known to me to be the President of Southern
Union Company, a Delaware corporation, who acknowledged that he
signed this Restated Certificate of Incorporation (the
"Certificate") as such officer for and on behalf of Southern
Union Company, that his signing the Certificate was his free act
and deed as such officer and was the free act and deed of
Southern Union Company, and that the facts stated in the
Certificate are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal at
Austin, Texas this 27th day of May, 1994.
(Notarial Seal)
JOAN K. SHERBENOU
-----------------
Joan K. Sherbenou
Notary Public in and for the State
of Texas
<PAGE>
EXHIBIT 3(b)
SOUTHERN UNION COMPANY BYLAWS
<PAGE>
SOUTHERN UNION COMPANY
BY-LAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meetings. Annual meetings of stockholders
---------------
for the election of directors and the transaction of such other
business as may properly be brought before the meeting shall be
held on the second Tuesday in November at such time and place or
on such other date and time, either within or without the State
of Delaware, as may be designated from time to time by the Board
of Directors and stated in the notice of the meeting.
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.
Section 3. Notice of Meetings. At least ten (10) days before
------------------
each meeting of stockholders, other than an adjourned meeting,
written or printed notice, stating the time and place of the
meeting and generally the nature of the business to be
considered, shall be given by the Secretary to each stockholder
entitled to vote at the meeting, at such stockholder's last known
address as shown by the Company's stock records.
Section 4. Record Date. The Board of Directors shall fix a
-----------
record date for determination of stockholders entitled to receive
notice of and vote at each stockholders' meeting, which such date
shall not be more than sixty (60) days or less than ten (10) days
before the date of the meeting; provided, however, that when a
meeting is adjourned to another time, no new record date need be
fixed for the adjourned meeting, unless the adjournment is for
more than thirty (30) days. In the absence of any action by the
Board of Directors, the date upon which the notice is mailed
shall be the record date.
Section 5. Quorum. Except as provided in the next section, a
------
quorum for the transaction of business at any duly called meeting
of stockholders shall be any number of stockholders, present in
person or represented by proxy at the meeting, who together are
the holders of at least a majority of the shares of issued and
outstanding stock the holders of which are entitled to vote at
the meeting. The stockholders present at a duly organized
meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
Section 6. Adjournment of Meetings. If any meeting of
-----------------------
stockholders cannot be organized for failure of a quorum to be
present as provided above, the meeting may, after the lapse of at
least half an hour, be adjourned from time to time by the
affirmative vote of the holders of a majority of the stock having
voting power who are present in person or represented by proxy,
and unless adjournment is for more than thirty (30) days or a new
record date is fixed, no notice shall be required for any such
adjourned meeting. If, however, notice of such adjourned meeting
is sent to the stockholders entitled to receive the same at least
ten (10) days in advance thereof, such notice stating (a) the
purpose of the meeting, (b) that the previous meeting could not
be organized for lack of a quorum, and (c) that under the
provisions of this section, it is proposed to hold the adjourned
meeting with a quorum of those present, though representing less
than a majority of the stock, then any number of stockholders
entitled to vote who are present in person or represented by
proxy shall constitute a quorum at such adjourned meeting for the
transaction of business, unless the number of stockholders
present constitutes less than one-third (1/3) of the shares
entitled to vote at the meeting.
Section 7. Voting.
------
(a) Election of Directors. In voting for election of
directors, the voting shall be by written ballot, each
stockholder shall be entitled to as many votes as shall
equal the number of votes which (except for this
provision as to cumulative voting) such stockholder
would be entitled to cast for election of directors
with respect to the shares of stock held by the
stockholder multiplied by the number of directors to be
elected by the stockholder, and the stockholder may
cast all of such votes for a single director or may
distribute them among the number of directors to be
voted for or for any two or more of them as the
stockholder may see fit. Any stockholder who intends
to cumulate votes shall give written notice of such
intention to the Secretary of the Company no later than
ten days after the date on which notice of such meeting
was first sent to stockholders. The number of nominees
for election as director up to the number of directors
to be elected receiving the greatest number of votes
shall be those elected.
(b) Other Matters. At all meetings of stockholders all
questions except the election of directors, and except
as otherwise expressly provided by statute or the
Certificate of Incorporation, shall be determined by
the vote of the holders of a majority of the stock
having voting power represented at the meeting in
person or by proxy. The manner of voting (by ballot,
voice vote or showing of hands) shall be at the
discretion of the chairman of the meeting, unless
otherwise provided by statute, the Certificate of
Incorporation, or these By-Laws.
Section 8. Proxies. A stockholder may vote through a proxy
-------
appointed by a written instrument signed by the stockholder or by
the stockholder's duly authorized attorney-in-fact and delivered
to the Secretary at or prior to the meeting. No proxy shall be
valid after six (6) months of the date of its execution unless a
longer period is expressly provided therein. Each proxy shall be
revocable unless expressly provided to be irrevocable and if, and
only as long as, it is coupled with an interest sufficient in law
to support an irrevocable power.
Section 9. Certain Rules of Procedure Relating to Stockholder
--------------------------------------------------
Meetings. All stockholder meetings, annual or special, shall be
- - --------
governed in accordance with the following rules:
(i) The Inspectors of Election and Tellers Committee shall
be composed of such persons designated by resolution of
the Board of Directors in advance of any such meeting.
(ii) Only stockholders of record will be permitted to
present motions from the floor at any meeting of
stockholders.
(iii) The Chairman of the Board and Chief Executive Officer
or the President shall preside over and conduct the
meeting in a fair and reasonable manner, and all
questions of procedure or conduct of the meeting shall
be decided solely by the Chairman of the Board and
Chief Executive Officer or the President (whichever is
presiding). The Chairman of the Board and Chief
Executive Officer or the President (whichever is
presiding) shall have all power and authority vested in
a presiding officer by law or practice to conduct an
orderly meeting. Among other things, the Chairman of
the Board and Chief Executive Officer or the President
(whichever is presiding) shall have the power to
adjourn or recess the meeting (except as provided in
Article I, Section 6), to silence or expel persons to
insure the orderly conduct of the meeting, to declare
motions or persons out of order, to prescribe rules of
conduct and an agenda for the meeting, to impose
reasonable time limits on questions and remarks by any
stockholder, to limit the number of questions a
stockholder may ask, to limit the nature of questions
and comments to one subject matter at a time as
dictated by any agenda for the meeting, to limit the
number of speakers or persons addressing the Chairman
of the Board and Chief Executive Officer or President
(whichever is presiding) or the meeting, to determine
when the polls shall be closed, to limit the attendance
at the meeting to stockholders of record, beneficial
owners of stock who present letters from the record
holders confirming their status as beneficial owners,
and the proxies of such record and beneficial holders,
and to limit the number of proxies a stockholder may
name.
Section 10. Requests for Stockholder List and Company Records.
-------------------------------------------------
Stockholders shall have those rights afforded under the General
Corporation Law of the State of Delaware to inspect a list of
stockholders and other related records and to make copies or
extracts therefrom. Such request shall be in writing in
compliance with Section 220 of the General Corporation Law of the
State of Delaware. In addition, any stockholder making such a
request must agree that any information so inspected, copied or
extracted by the stockholder shall be kept confidential, that any
copies or extracts of such information shall be returned to the
Company and that such information shall only be used for the
purpose stated in the request. Information so requested shall be
made available for inspecting, copying or extracting at the
principal executive offices of the Company. Each stockholder
desiring a photostatic or other duplicate copies of any of such
information requested shall make arrangements to provide such
duplicating or other equipment necessary in the city where the
Company's principal executive offices are located. Alternative
arrangements with respect to this Section 10 may be permitted in
the discretion of the President of the Company or by vote of the
Board of Directors.
Section 11. New Business. Any new business to be taken up at
------------
any annual meeting of stockholders shall be stated in writing and
filed with the Secretary at least ten (10) days before the date
of the annual meeting, and all business so stated, proposed and
filed shall be considered at the annual meeting, but no other
proposal shall be acted upon at the annual meeting of
stockholders. Any stockholder may make any other proposal at the
annual meeting, and the proposal may be discussed and considered,
but unless stated in writing and filed with the Secretary at
least ten (10) days before the meeting such proposal shall be
postponed for action at an adjourned, special or annual meeting
of stockholders taking place thirty (30) days or more thereafter.
This provision shall not prevent the consideration and approval
or disapproval at the annual meeting of stockholders of reports
of officers, directors and committees, but in connection with
such reports no new business shall be acted upon at such annual
meeting unless stated as herein provided."
ARTICLE II - DIRECTORS
Section 1. Powers. The business, property and affairs of the
------
Company shall be managed by or under the direction of its Board
of Directors which may exercise all such powers of the Company
and do all such lawful acts and things as are not by statute, the
Certificate of Incorporation or these By-Laws required to be
exercised or done by the stockholders.
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).
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.
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 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.
Section 4. Place and Manner of Meetings. The Board of
----------------------------
Directors and any committee of the Board of Directors may hold
meetings, both regular and special, either within or without the
State of Delaware. Members of the Board of Directors may
participate in such meetings by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other and such
participation constitutes presence in person at such meeting.
Section 5. Organizational Meetings. Immediately after each
-----------------------
annual meeting of stockholders, the newly elected directors shall
meet for the purpose of organization, election of officers and
the transaction of any business, if a quorum be present. No
notice of any such organizational meeting shall be required.
Section 6. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held without notice at such places and times as
shall be determined from time to time by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by the Chairman of the Board, the
Chairman of the Executive Committee or the President and shall be
called by the Secretary on the written request of any two (2)
directors, upon at least two (2) days notice stating the time and
place of the meeting given to each director by mail, telegraph or
telephone. Except as otherwise expressly provided by statute,
the Certificate of Incorporation, or these By-Laws, neither the
business to be transacted at, nor the purpose of, any special
meeting must be specified in the notice or waiver of notice.
Section 8. Action Without Meeting. Any action which may be
----------------------
taken at a meeting of the Board of Directors or at any meeting of
a Committee of the Board of Directors, may be taken without a
meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the members of the Board of
Directors or the committee and filed with the minutes of the
proceedings of the Board of Directors or the committee. Such
consent shall have the same force and effect as a unanimous vote
at a meeting.
Section 9. Quorum. A majority of the directors shall
------
constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and the act of a majority of
the directors present, if a quorum exists, shall be the act of
the Board of Directors except as may be otherwise expressly
provided by statute, the Certificate of Incorporation or these
By-Laws. In the case of an equality of votes on any question
before the Board of Directors, the Chairman of the Board of the
Company shall have a second and deciding vote.
Section 10. Adjourned Meetings. Any meeting of the Board of
------------------
Directors may be adjourned from time to time to reconvene at the
same or a different place, upon resolution of the Board of
Directors or a majority of the directors present, if less than a
quorum, and no notice of any adjourned meeting or meetings or the
business to be transacted thereat shall be necessary.
Section 11. Advisory Directors. The Board of Directors from
------------------
time to time may appoint one or more persons as advisory
directors of the Company, to serve in such capacity until the
next organizational meeting of the Board of Directors provided
for in Section 5 of this Article. No such advisory director
shall be entitled to vote at any meeting of the Board of
Directors nor shall such advisory director be counted for
purposes of determining the presence of a quorum at any such
meeting. Each such advisory director, however, shall be entitled
to notice of, to attend, and to participate in the deliberations
of, all meetings of the Board of Directors.
Section 12. Compensation of Directors and Advisory Directors.
------------------------------------------------
Directors and advisory directors shall not receive any salary for
their services as directors, but as authorized by the Board of
Directors they shall be paid their expenses of attendance at
meetings of the Board of Directors and any committees of the
Board of Directors and a fixed fee for attendance at each such
meeting, series of meetings, and/or a regular retainer payable
quarterly, monthly or otherwise. Nothing herein contained shall
be construed to preclude any director or advisory director from
serving the Company in any other capacity and receiving
compensation therefor.
Section 13. Nominating Procedure for Directors and
--------------------------------------
Qualifications.
- - --------------
(a) Nominating Procedure. 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 in
specified circumstance, nominations for the election
of directors may be made by the Board of Directors or a
committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of
directors generally. However, any stockholder entitled
to vote in the election of directors generally may
nominate one or more persons for election as directors
at a meeting of stockholders only if written notice of
such stockholders's intent to make such nomination or
nominations has been given to the Secretary of the
Company not later than (1) with respect to an election
to be held at an annual meeting of stockholders, at
least forty-five (45) days in advance of such meeting
and (2) with respect to an election to be held at a
special meeting of stockholders, no later than ten days
after the date on which notice of such meeting was
first sent to stockholders. Each such notice shall set
forth (i) the name, age, residence address and business
address of the nominating stockholder and of the person
or persons to be nominated; (ii) a representation that
the nominating stockholder is a holder of record of
stock of the Company entitled to vote at such meeting
and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in
the notice; (iii) a description of all arrangements
or understandings between the nominating stockholder
and each nominee and any other person or persons
(naming such person or persons) pursuant to which the
nomination or nominations are to be made by the
stockholder or such nominees are to be elected; (iv)
such other information regarding each nominee proposed
by such stockholder as would be required to be included
in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by
the Board of Directors or a committee thereof; (v) a
statement as to each proposed nominee and a statement
as to the nominating stockholder stating whether the
nominee or stockholder has been a participant in any
proxy contest or other change of corporate control
within the past ten years, and, if so, the statement
shall indicate the principals involved, the subject
matter of the contest, the outcome thereof and the
relationship of the nominee and the stockholder to the
principals; (vi) if any shares of the Company's stock
owned of record or beneficially, directly or
indirectly, by each proposed nominee or the nominating
stockholder were acquired in the last two years, a
statement of the dates of acquisition and amounts
acquired on each date; (vii) a description of any
arrangement or understanding of each nominee and
of the nominating stockholder with any person regarding
future employment by the nominee or stockholder with
the Company or any future transaction to which the
Company will or may be a party; (viii) a statement as
to each nominee and a statement as to the nominating
stockholder as to whether or not the nominee or
stockholder will bear any part of the expense incurred
in any proxy solicitation, and, if so, the amount
thereof; (ix) the consent of each nominee to serve as a
director of the Company if so elected; and (x) any
plans or proposals that each nominee or the nominating
stockholder may have that relate to or may result in
the acquisition or disposition of securities of the
Company, an extraordinary corporate transaction (such
as a merger, reorganization or liquidation) involving
the Company or any of its subsidiaries, a sale or
transfer of a material amount of assets of the Company
or of any of its subsidiaries, any change in the Board
of Directors or management of the Company (including
any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the
Board), any material change in the present
capitalization or dividend policy of the Company, any
change in the Company's Restated Certificate of
Incorporation or By-Laws, causing a class of securities
of the Company to be delisted from a national
securities exchange or to cease to be quoted on an
inter-dealer quotation system of a registered national
securities association, a class of equity securities of
the Company becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, or any other material
change in the Company's business or corporate structure
or any action similar to those listed above. The Board
of Directors of the Company may disqualify any nominee
who fails to provide it with complete and accurate
information as required above. The President may, in
his discretion, determine and declare to the meeting
that a nomination not made in accordance with the
foregoing procedure shall be disregarded.
(b) Certain Qualifications. No person shall be a member of
the Board of Directors, (i) who owns, together with his
family residing with him, directly or indirectly, more
than one percent (1%) of the outstanding shares of any
other entity, or an affiliate or subsidiary thereof,
that competes with the Company or any of its
subsidiaries, (ii) who is a director, officer,
employee, agent, a nominee, attorney or investment
banker of or for any other entity, or an affiliate or
subsidiary thereof, that competes with the Company or
any of its subsidiaries or (iii) who has or is the
nominee of anyone who has any contract, arrangement or
understanding with any other entity, or an affiliate of
subsidiary thereof, that competes with the Company or
any of its subsidiaries or with any officer, employee,
agent, nominee, attorney or other representative
thereof, that he will reveal or in any way utilize
information obtained as a director or that he will
directly or indirectly attempt to effect or encourage
any action of the Company. Directors must be
stockholders of the Company. Notwithstanding any
limitation in this subsection 14(b), the Board of
Directors in their discretion may waive any or all of
the above requirements.
Section 14. Interested Directors. No contract, transaction or
--------------------
act of the Company shall be affected by the fact that a director
of the Company is in any way interested in, or connected with,
any party to such contract, transaction or act, if the interested
director shall at least five days prior to the date of any
meeting of the Board of Directors, regular or special, at which
such contract, transaction or act is to be considered, give
notice in writing to each of the remaining directors of his
interest in or in connection with the proposed contract,
transaction or act. If such condition is complied with, the
interested director may be counted in determining a quorum at any
meeting of the Board of Directors which shall authorize any such
contract, transaction or act, but may not vote thereat.
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,
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 it 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 III - EXECUTIVE COMMITTEE
Section 1. How Appointed. By the affirmative vote of a
-------------
majority of the directors, the Board of Directors may appoint an
Executive Committee made up of members of the Board of Directors
consisting of a Chairman and at least one additional member.
Vacancies occurring in the Executive Committee may be filled at
any meeting of the Board of Directors.
Section 2. Powers. During the intervals between meetings of
------
the Board of Directors, the Executive Committee shall have 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 such manner as the Executive Committee shall deem best for the
interests of the Company in all cases in which specific
directions shall not have been given by the Board of Directors,
and as respects all matters which are not by statute, the
Certificate of Incorporation or these By-Laws required to be
acted upon by the Board of Directors. Incident to the exercise
of such powers the Executive Committee shall have the power to
authorize the seal of the Company to be affixed to all papers
which may require it.
Section 3. Procedures, Meetings and Quorum. The Executive
-------------------------------
Committee of the Board of Directors may make its own rules or
procedures. It shall meet on the call of the Chairman or any two
(2) of its members, and at any other time or times specified by
the Board of Directors. A majority of the members of the
Executive Committee shall constitute a quorum for the transaction
of business, and in every case the affirmative vote of a majority
of the Committee's members shall be necessary for the taking of
any action.
Section 4. Committee to Report to Board of Directors. All
-----------------------------------------
actions by the Executive Committee of the Board of Directors
shall be recorded in minutes of the Committee's proceedings and
shall be reported to the Board of Directors at the next meeting
of the Board of Directors and, unless copies thereof shall
previously have been distributed to the directors, the minutes of
the Committee reflecting such actions shall be made available for
the information of the directors attending such meeting of the
Board.
Section 5. Chairman of the Executive Committee. The Chairman
-----------------------------------
of the Executive Committee shall be entitled to preside at the
meetings of the Committee.
ARTICLE IV - AUDIT COMMITTEE
Section 1. How Appointed. By the affirmative vote of a
-------------
majority of the directors, the Board of Directors may appoint an
Audit Committee made up of members of the Board of Directors who
are not also employed as full time officers of the Company and
consisting of a Chairman and one (1) additional member.
Vacancies occurring in the Audit Committee may be filled at any
meeting of the Board of Directors.
Section 2. Powers. The Audit Committee shall have the
------
following powers, responsibilities and duties: the
recommendation to the Board of Directors of the engagement or
discharge of the independent auditor; the review with the
independent auditor of the plan and results of the auditing
engagement; the review of the scope and results of the Company's
internal auditing procedures; the approval of each professional
service provided or to be provided by the independent auditor;
the consideration of the range of audit and nonaudit fees; and
the review of the Company's system of internal accounting
controls. And, to the extent not otherwise required by statute,
the Certificate of Incorporation or these By-Laws to be exercised
or done by the stockholders or the Board of Director's, the Audit
Committee shall have and may exercise all powers and authority of
the Board of Directors in the management of the business,
property and affairs of the Company that are delegated or
assigned to the Audit Committee from time to time by the Board of
Directors.
Section 3. Procedures, Meetings and Quorum. The Audit
-------------------------------
Committee may make its own rules of procedures. It shall meet on
the call of the Chairman or other member and at any other time or
times specified by the Board of Directors. Both members of the
Audit Committee shall be necessary to constitute a quorum for the
transaction of business, and in every case the affirmative vote
of both of the Committee's members shall be necessary for the
taking of any action.
Section 4. Committee to Report to Board of Directors. All
-----------------------------------------
actions by the Audit Committee shall be reported to the Board of
Directors at the next meeting of the Board and, unless copies
thereof shall previously have been distributed to the directors,
the minutes of the Committee reflecting such action shall be made
available for the information of the directors attending such
meeting of the Board.
ARTICLE V - EXECUTIVE COMPENSATION COMMITTEE
Section 1. How Appointed. By the affirmative vote of a
-------------
majority of the directors, the Board of Directors may appoint an
Executive Compensation Committee made up of members of the Board
of Directors who are not also employed as full time officers of
the Company and consisting of a Chairman and not less than two
(2) additional members. Vacancies occurring in the Executive
Compensation Committee may be filled at any meeting of the Board
of Directors.
Section 2. Powers and Duties. The Executive Compensation
-----------------
Committee shall review from time to time the compensation being
paid by the Company to officers of the Company and all plans,
provisions and policies of the Company covering the payment of
various kinds of benefits to the various classifications of
Company employees including, without being limited to, retirement
income, group insurance, savings plans, retirement income plans,
severance pay plans, stock option plans and long-term disability
plans and based upon such review, the Executive Compensation
Committee shall from time to time make recommendations to the
entire Board of Directors with respect to changes and
modifications in such plans and benefits as the Executive
Compensation Committee shall have determined to be appropriate.
In addition, the Executive Compensation Committee shall have and
may exercise such powers and authority to the extent not
otherwise required by statute, the Certificate of Incorporation
or these By-Laws to be acted upon the Board of Directors or
stockholders, as may be delegated or assigned to the Executive
Compensation Committee from time to time by the Board of
Directors.
Section 3. Procedures, Meetings and Quorum. The Executive
-------------------------------
Compensation Committee may make its own rules of procedures. It
shall meet on the call of the Chairman of any two (2) of its
members and at any other time or times specified by the Board of
Directors. A majority of the members of the Executive
Compensation Committee shall constitute a quorum for the
transaction of business, and in every case the affirmative vote
of a majority of the Committee's members shall be necessary for
the taking of any action.
Section 4. Committee to Report to Board of Directors. All
-----------------------------------------
actions by the Executive Compensation Committee shall be reported
to the Board of Directors at the next meeting of the Board of
Directors and, unless copies thereof shall previously have been
distributed to the directors, the minutes of the Committee
reflecting such actions shall be made available for the
information of the directors attending such meeting of the Board.
ARTICLE VI - OTHER COMMITTEES
Section 1. Designation. The Board of Directors may, from time
-----------
to time, designate other committees, with such lawfully delegated
powers and duties with regard to the management of the business,
property and affairs of the Company as the Board of Directors may
confer, to serve at the pleasure of the Board and shall, for
those committees, elect a director or directors to serve as the
member of members. The Board of Directors shall have the power
at any time to fill vacancies in, to change the size or members
of, and to discharge any such committee.
Section 2. Conduct of Business. Each committee may determine
-------------------
the procedural rules for meeting and conducting its business and
shall act in accordance therewith, except as otherwise provided
by statute, the Board of Directors or these By-Laws. Adequate
provisions shall be made for notice to members of all meetings; a
majority of the members shall constitute a quorum and all matters
shall be determined by a majority vote of the members present.
Section 3. Committees to Report to Board of Directors. All
------------------------------------------
actions by each committee of the Board of Directors shall be
recorded in minutes of each committee's proceedings and shall be
reported to the Board of Directors at the next meeting of the
Board of Directors and, unless copies thereof shall previously
have been distributed to the directors, the minutes of the
committee reflecting such actions shall be made available for the
information of the directors attending such meeting of the Board.
ARTICLE VII - OFFICERS
Section 1. Executive and Other Officers. The officers of the
----------------------------
Company shall include a Chairman of the Board, a President, a
Treasurer, a Secretary and a Controller. The officers of the
Company may also include one or more Vice Presidents, any one or
more of whom may be designated an Executive Vice President or a
Senior Vice president, a General Counsel, and such other officers
and assistant officers as the Board of Directors from time to
time may deem necessary for the proper conduct of the company's
business. Only the President need be a director. Divisions of
the company may also have officers as designated by the Board of
Directors. One person may be elected to any one or more of the
officer positions specified in these By-Laws.
Section 2. Election and Term of Office. The officers of the
---------------------------
Company and any divisions of the Company shall be elected
annually by the Board of Directors at the first meeting thereof
after each annual meeting of stockholders. Additional officers
may also be elected by the Board of Directors at any time. Each
officer shall hold office until death, removal or resignation or
until a successor is duly elected and qualified.
Section 3. Removal and Vacancies. Any officer may be removed
---------------------
by the Board of Directors at any time whenever in its judgment
the best interests of the Company would be served thereby. All
vacancies among the officers shall be filled by the Board of
Directors, except that the Board of Directors in its discretion
may abolish or leave unfilled when vacant any offices other than
those of the President, the Treasurer and the Secretary.
Section 4. Chairman of the Board. The Chairman of the Board
---------------------
shall be the chief executive officer and chief policy officer of
the Company elected from among the directors and shall be
entitled to preside at all meetings of the stockholders and of
the Board of Directors at which the Chairman of the Board is
present. The Chairman of the Board shall perform the duties
incident to the office of the Chairman of the Board and chief
executive officer and, subject to the direction of the Board of
Directors, shall have overall responsibility for the management
and direction of the business, property and affairs of the
Company, unless some other officer of the Company shall have been
designated by the Board of Directors to serve as such chief
executive officer. The Chairman of the Board shall also have
such other powers and duties as may be prescribed from time to
time by the Board of Directors.
Section 5. President. The President shall be the chief
---------
operating officer of the Company and, subject to the direction of
the Board of Directors, shall be responsible for supervising the
day to day operations of the business of the Company; shall have
the authority to execute bonds, mortgages, guaranties and other
contracts on behalf of the Company, and shall also have such
other powers and duties as may be prescribed from time to time by
the Board of Directors.
Section 6. Vice Presidents. The Vice Presidents in the order
---------------
designated by the Board of Directors or in the absence of any
designation, then in the order of their rank (Executive Vice
president, Senior Vice President, Vice President) and within
their rank by their seniority, shall in the absence or disability
of the President, be vested with all the powers and shall perform
all the duties of the President unless and until the Board of
Directors shall otherwise determine. The Vice Presidents shall
also have such other powers and duties as may from time to time
be prescribed by the President or by the Board of Directors.
Section 7. General Counsel. The General Counsel shall be the
---------------
chief legal officer of the Company and as such, shall:
(a) Be responsible for the supervision and management of
all judicial, administrative and other legal
proceedings involving the Company;
(b) Prepare, review or review or cause to be prepared,
revised or reviewed legal documents proposed to be
executed on behalf of the Company as may be requested
from time to time by the directors, officers and
employees of the Company;
(c) Render legal opinions to the directors, officers and
employees of the Company on all matters of concern to
the Company as may be requested from time to time; and
(d) Be responsible for retaining outside counsel for the
Company, as approved by the President of the company.
In addition, the General Counsel shall also have such other
powers and duties as may from time to time be prescribed by the
President or by the Board of Directors.
Section 8. Treasurer. The Treasurer shall have custody of and
---------
be responsible for all funds and securities of the Company except
as otherwise provided by the Board of Directors. The Treasurer
shall disburse the funds and pledge the credit of the Company as
may be directed by the Board of Directors and shall also have
such other powers and duties as may from time to time be
prescribed by the President or by the Board of Directors.
Section 9. Secretary. The Secretary or any Assistant
---------
Secretary designated by the Secretary or the President shall
give, or cause to be given, notice of all meetings of
stockholders and directors and all other notices required to be
given to holders of the Company's securities, and shall keep
minutes of all meetings of the stockholders, the Board of
Directors, the Executive Committee when required, or any other
committee, if requested. The Secretary or any Assistant
Secretary shall have custody of the seal of the Company and shall
have authority to affix and attest to the same on instruments
requiring it. In addition, the Secretary shall also be
responsible for supervision of the activities of the Transfer
Agent of the Company with regard to transfer of stock,
maintenance of a list of stockholders of record and payment of
dividends on Company stock. The Secretary shall also have such
other powers and duties as may from time to time be prescribed by
the President or by the Board of Directors.
Section 10. Controller. The Controller shall be the chief
----------
accounting officer of the Company. The Controller shall cause to
be maintained accurate accounts reflecting all business
transactions of the Company and shall develop, coordinate and
administer procedures for adequate accounting control of the
Company's revenues, expenses and capital investments. The
Controller shall report and interpret the financial results of
operations to all levels of management and perform other duties
as may from time to time be prescribed by the President or by the
Board of Directors.
Section 11. Other Officers. Each of the officers elected by
--------------
the Board of Directors, other than those referred to in Sections
5 through 10 of this Article, shall have such powers and duties
as may from time to time be prescribed by the President or by the
Board of Directors.
ARTICLE VIII - CAPITAL STOCK
Section 1. Stock Certificates. Each stockholder of the
------------------
Company shall be entitled to one or more certificates, under the
seal of the Company or a facsimile thereof, signed by the
President or Vice president and the Treasurer or Assistant
Treasurer or Secretary or Assistant Secretary of the Company,
certifying the number of shares owned by the Stockholder in the
Company provided, however, that where such certificate is signed
by a registrar acting on behalf of the Company, the signature of
any such President, Vice President, Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary of the Company, or
any officer or employee of the transfer agent, may be facsimile.
In case any officer of the Company, or officer or employee of
the transfer agent, who has signed or whose facsimile signature
has been used on any such certificate shall cease to be such
officer of the Company, or officer or employee of the transfer
agent, because of death, resignation, or otherwise, before the
certificate is issued, such certificate shall nevertheless be
deemed adopted by the Company and may thereafter be issued and
delivered by the Company as though the person who signed such
certificate or whose facsimile signature has been used thereon
had not ceased to be such officer of the Company, or officer or
employee of the transfer agent.
The Company shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof, and
accordingly shall not be bound to recognize any equitable or
other claim to or interest in such share of shares on the part of
any other person, whether or not it has actual or other notice
thereof.
Section 2. Transfer of Shares. The shares of stock of the
------------------
Company shall be transferable upon its books by the holders
thereof in person or by their duly authorized attorneys or legal
representatives, and upon such transfer the old certificates
shall be surrendered to the Company by the delivery thereof to
the person in charge of the stock and transfer books and ledgers,
or to such other person as the Board of Directors may designate,
by whom they shall be canceled, and new certificates shall
thereupon be issued.
Section 3. Lost Certificates. A new certificate or
-----------------
certificates of stock may be issued in the place of any
certificate alleged to have been lost, stolen, mutilated, or
destroyed theretofore issued by the Company and/or by any
corporation of which the Company is the successor upon the making
of an affidavit of that fact by the person claiming the
certificate to be lost, stolen, mutilated, or destroyed. The
Board of Directors may, in its discretion, require the owner or
the owner's legal representatives, as a condition precedent to
the issue of a new certificate, in the case of a mutilated
certificate, to surrender the mutilated certificate, or in the
case of a lost, destroyed or stolen certificate, to give the
Company a bond sufficient to indemnify it or its transfer agent,
or both, against any claim that may be made on account of the
alleged loss, destruction or theft of any such certificate or the
issuance of any such new certificate.
Section 4. Dividends. Subject to the provisions of law and
---------
the Certificate of Incorporation, dividends upon the capital
stock of the Company or any class or series of shares thereof may
be declared by the Board of Directors at any regular or special
meeting, payable in cash, property or shares of the Company's
capital stock, at such times and in such amounts as the Board of
Directors, in its sole discretion, may think appropriate and in
the best interest of the Company.
ARTICLE IX - EXECUTION OF DOCUMENTS AND INSTRUMENTS
Section 1. Deeds, Leases and Contracts. Except as otherwise
---------------------------
provided by the Board of Directors, all deeds, leases, contracts,
agreements and other formal documents shall be signed on behalf
of the Company or any division of the Company by the President or
a Vice President of the Company or of such division and, where a
seal is required, sealed with the Company's seal or the seal of
such division and attested by the Secretary or an Assistant
Secretary of the Company or such division.
Section 2. Checks, Drafts and Notes. All checks, drafts or
------------------------
other orders for the payment of money and all notes or other
evidences of indebtedness issued in the name of the Company or
any division of the Company shall be signed by the President or
such other officer or officers or agent or agents of the Company
or such division, and in such manner, as shall from time to time
be determined by the Board of Directors.
ARTICLE X - MISCELLANEOUS PROVISIONS
Section 1. Corporate Seal. The corporate seal shall be
--------------
circular, shall bear the name of the Company, the year of its
organization and the words "Corporate Seal, Delaware," and shall
be in such form as shall be prescribed by the Board of Directors
from time to time. Divisions of the Company may have seals as
prescribed by the Board of Directors.
Section 2. Fiscal Year. The fiscal year of the Company shall
-----------
end on June 30th of each year.
Section 3. Notices. Whenever the provisions of statute, the
-------
Certificate of Incorporation or these By-laws require notice to
be given to any director or stockholder, such notice, if in
writing, shall be deemed validly given if delivered personally or
by depositing the same in a United States post office or letter
box in a sealed postpaid wrapper addressed to the last known
address of the director or to the address of the stockholder
appearing on the Company's stock records. Notices so mailed
shall be deemed to have been given at the time of their mailing.
Stockholders not entitled to vote at any meeting need not be
given notice thereof except as otherwise provided by statute.
Section 4. Waiver of Notices. A waiver in writing of any
-----------------
notice referred to in Section 3 of this Article, if signed by the
director or stockholder entitled thereto, shall be deemed
equivalent to the giving of such notice, regardless of when such
waiver is signed or delivered to the Company. Attendance at a
meeting shall constitute a waiver of notice of such meeting,
except where such person attends for the express purpose of
objecting to the transaction of any business on the grounds that
the meeting is not lawfully called or convened.
Section 5. Resignations. Any resignation of a director shall
------------
be made in writing and shall take effect on the earlier of its
acceptance by the board of directors or ten days after its
receipt by the President or Secretary. Any resignation of a
member of a committee or officer shall be made in writing and
shall take effect at the time specified therein or, if no time be
specified, at the time of its receipt by the President or
Secretary.
Section 6. Inspection of Books. The Board of Directors shall
-------------------
determine from time to time whether the accounts and books of the
Company, or any of them, shall be opened to the inspection of
stockholders and, if permitted, when and under what conditions
and regulations the accounts and books of the Company, or any of
them, shall be open to the inspection of stockholders, and the
stockholders' rights in this respect shall be restricted and
limited accordingly.
Section 7. Indemnification of Directors, Officers and Others.
-------------------------------------------------
Directors and officers of the Company shall be indemnified to the
fullest extent now or hereafter permitted by law in connection
with any actual or threatened action or proceeding (including
civil, criminal, administrative or investigative proceedings)
arising out of their service to the Company or to any other
organization at the Company's request. Employees and agents of
the Company who are not directors of officers thereof may be
similarly indemnified in respect of such service to the extent
authorized at any time by the Board of Directors. The provisions
of this Section shall be applicable to actions or proceedings
commenced after the adoption hereof, whether arising from acts or
omissions occurring before or after the adoption hereof, and to
persons who have ceased to be directors, officers or employees
and shall inure to the benefit of their heirs, executors, and
administrators. For the purposes of this Section, directors,
officers, trustees or employees of an organization shall be
deemed to be rendering service thereto at the Company's request
if such organization is, directly or indirectly, a wholly-owned
subsidiary of the Company or it designated by the Board of
Directors as an organization service to which shall be deemed to
be so rendered.
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.
Section 9. Severability. In case any one or more of the
------------
provisions contained in these By-Laws shall be for any reason be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision hereof, and these By-Laws shall be construed as
if such invalid, illegal, or unenforceable provision had never
been contained herein.
<PAGE>
EXHIBIT 10(c)
SECOND AMENDMENT TO
REVOLVING CREDIT AGREEMENT
<PAGE>
SECOND AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT (the
"Second Amendment") is made effective as of August 31, 1994 (as
to the amendments to Sections 1.1, 1.3, 1.4, and 1.5 of the Loan
Agreement identified below, such amendments being set forth
below), and as of July 1, 1994 (as to all other provisions set
forth below), by and among SOUTHERN UNION COMPANY, a Delaware
corporation (the "Borrower"), the financial institutions listed
on the signature pages hereof (individually the "Bank" and
collectively the "Banks") and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking corporation ("TCB"), in its
capacity as agent (the "Agent") for the Banks.
RECITALS
WHEREAS, the Borrower, the Banks and the Agent have executed a
certain Revolving Credit Agreement dated September 30, 1993 (the
"Original Agreement"); and
WHEREAS, the Borrower, the Banks and the Agent have executed a
certain First Amendment to Revolving Credit Agreement, Revolving
Note and Loan Documents (the "First Amendment") (the Original
Agreement as amended by the First Amendment is referred to herein
as the "Agreement"); and
WHEREAS, the Banks, the Agent and the Borrower desire to
further amend the Agreement.
NOW, THEREFORE, in consideration of ten dollars ($10.00) and
other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
1. Amendments to Section 1. Section 1 of the Agreement is
-----------------------
amended as follows:
1.1 "Alternate Base Rate". The definition of Alternate
Base Rate is deleted in its entirety and the following
definition substituted therefor:
"Alternate Base Rate shall mean, for any day, a rate
per annum (rounded upward to the nearest 1/16 of 1%)
equal to: (a) the greatest of (i) the Prime Rate
(computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case
may be) in effect on such day; (ii) the Federal Funds
Rate in effect for such day plus 1/2 of 1 percent
(computed on the basis of the actual number of days
elapsed over a year of 360 days); or (iii) the Average
CD Rate in effect for such day plus 1 percent (computed
on the basis of the actual number of days elapsed over
a year of 360 days); plus (b) if, and for so long as
the Borrower's Senior Funded Debt is rated:
by Moody's Investor by Standard and additional per-
Service, Inc. Poor's Corpo- centage per
ration annum to be
added to the
rate deter-
mined by (a)
above
higher than Ba2 and higher than BB 0%
higher than Ba3 but and higher than BB 0%
lower than or but lower
equal to Ba2 than or equal
to BB
equal to or lower or equal to or lower 0%
than Ba3 than BB
If for any reason the Bank shall have determined (which
determination shall be conclusive and binding, absent
manifest error) that it is unable to ascertain the
Federal Funds Rate or Average CD Rate for any reason,
including, without limitation, the inability or failure
of the Bank to obtain sufficient bids or publications
in accordance with the terms thereof, the Alternate
Base Rate shall be determined by reference to the
unaffected indices listed in (a)(i) through (iii)
above, until the circumstances giving rise to such
inability no longer exist."
1.2 "Borrowing Base". The definition of Borrowing Base is
deleted in its entirety and the following definition
substituted therefor:
"Borrowing Base" shall mean, without duplication, an
amount equal to the sum of: (a) 95% of Eligible
Accounts Receivable; plus (b) 75% of Eligible Unbilled
Accounts of the Borrower; plus (c) 100% of all Cash and
the face value of all Cash Equivalents (other than the
Accounts); plus (d) 50% of Eligible Inventory; plus
(e) 95% of Eligible PGA Receivables; plus (f) 75%
of Eligible Marketing Accounts (provided that the
amount of Eligible Marketing Accounts to be used in the
determination of the Borrowing Base shall never exceed
$12,000,000.00), in each case as reflected on the books
of the Borrower as of the time at which the Borrowing
Base is being determined; provided, however, that if
(and for so long as) Borrower's Senior Funded Debt is
rated equal to or lower than Ba2 by Moody's Investor
Service, Inc. or BB by Standard and Poor's Corporation,
the maximum amount of Cash and Cash Equivalents
included in the Borrowing Base shall be $5,000,000.00.
1.3 "CD Rate". The definition of "CD Rate" is deleted in
its entirety and the following definition substituted
therefor:
"CD Rate" shall mean, with respect to the applicable
Rate Period in effect for each CD Rate Loan, the sum of
(a) the average rate of interest determined by the
Agent to be the bid rate per annum, on such date, of at
least two certificate of deposit dealers of recognized
standing selected by the Agent for the purchase at
face value of certificates of deposit having a maturity
equal to such Rate Period and in an amount
substantially equal to the principal amount of the CD
Rate Loan to be made by the Agent for such Rate Period,
divided by the result obtained by subtracting from 100%
the CD Rate Reserve Percentage plus (b) the annual
assessment rate estimated by the Agent on such date
determined by then-current annual assessment payable by
the Agent to the Federal Deposit Insurance Corporation
for such Corporation's insuring Dollar deposits of the
Agent in the United States, expressed as a percentage,
plus (c) the following: if, and for so long as the
Borrower's Senior Funded Debt is rated:
by Moody's Investor by Standard and additional per-
Service, Inc. Poor's Corpo- centage per
ration annum to be
added to the
rate deter-
mined by (a)
and (b) above
higher than Baa1 and higher than BBB+ 5/8 of 1 per=
cent (5/8%)
higher than Ba1 but and higher than BB+ 7/8 of 1 per-
lower than or but lower cent (7/8%)
equal to Baa1 than or equal
to BBB+
lower than or or lower than or 1 and 3/8 of
equal to Ba1 equal to BB+ 1 percent
(1 3/8%)
1.4 "Eurodollar Rate". The definition of "Eurodollar Rate"
is deleted in its entirety and the following definition
substituted therefor:
"Eurodollar Rate" shall mean with respect to the
applicable Rate Period in effect for each Eurodollar
Rate Loan, the sum of (a) the quotient obtained by
dividing (i) the annual rate of interest determined by
the Agent, at or before 11:00 a.m. Houston time (or as
soon thereafter as practicable), on the second Business
Day prior to the first day of such Rate Period, to be
the annual rate of interest at which deposits of
Dollars are offered to the Agent by prime banks in
whatever eurodollar interbank market may be selected by
the Agent in its sole discretion, acting in good faith,
at the time of determination and in accordance with
then existing practice in such market for delivery on
the first day of such Rate Period in immediately
available funds and having a maturity equal to such
Rate Period in an amount substantially equal to the
amount of such Eurodollar Rate Loan by (ii) a
percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage for such Rate Period, plus (b) the
following:
if (and for so long as) the Borrower's Senior Funded
Debt is rated:
by Moody's Investor by Standard and additional per-
Service, Inc. Poor's Corpo- centage per
ration annum to be
added to the
rate deter-
mined by (a)
and (b) above
higher than Baa1 and higher than BBB+ 1/2 of 1 per=
cent (1/2%)
higher than Ba1 but and higher than BB+ 3/4 of 1 per-
lower than or but lower cent (3/4%)
equal to Baa1 than or equal
to BBB+
lower than or or lower than or 1 and 1/4 of
equal to Ba1 equal to BB+ 1 percent
(1 1/4%)
1.5 "Facility Letter of Credit Fee Percentage". The
definition of "Facility Letter of Credit" is deleted in
its entirety and the following definition substituted
therefor:
"Facility Letter of Credit Fee Percentage" shall mean
the following fees in the related circumstances:
If (and for so long as) the Borrower's Senior Funded
Debt is rated:
by Moody's Investor by Standard and
Service, Inc. Poor's Corpo-
ration
higher than Baa1 and higher than BBB+ 1/2 of 1 per=
cent (1/2%)
higher than Ba1 but and higher than BB+ 3/4 of 1 per-
lower than or but lower cent (3/4%)
equal to Baa1 than or equal
to BBB+
lower than or or lower than or 1 and 1/4 of
equal to Ba1 equal to BB+ 1 percent
(1 1/4%)
1.6 "L/C Subfacility". The definition of "L/C Subfacility"
is deleted in its entirety and the following definition
substituted therefor:
"L/C Subfacility" shall mean that portion of the
Commitments equal to $25,000,000.00.
1.7 "Maturity Date". The definition of "Maturity Date" is
deleted in its entirety and the following definition
substituted therefor:
"Maturity Date" shall mean December 31, 1997, as
modified pursuant to the provisions of Section 2.4.
1.8 "Qualifying Assets". The definition of "Qualifying
Assets" is deleted in its entirety and the following
definition substituted therefor:
"Qualifying Assets" shall mean equity interests owned
one hundred percent (100%) by the Borrower in entities
engaged primarily in the business of natural gas
transportation and local distribution (including,
without limitation, the promotion or marketing and sale
of compressed natural gas and liquefied natural gas),
or productive assets used in such businesses; provided,
however, that as to any related group of such Assets
acquired for a purchase price of more than Forty
Million Dollars ($40,000,000.00) (including the amount
of any Debt assumed or deemed incurred in connection
with such acquisition), the Majority Banks shall have
delivered to the Borrower their prior written consent.
1.9 "Rate Period". The last sentence of the definition of
"Rate Period" is deleted in its entirety and the
following sentence substituted therefor:
For any Alternate Base Rate Loan, the Rate Period shall
be 90 days; for any Eurodollar Rate Loan the Rate
Period may be 15 days, 1, 2, 3 or 6 months; and for any
CD Rate Loan the Rate Period may be 30, 60, 90 or 180
days, in each case as specified in the applicable
Notice of Borrowing, subject to the provisions of
Sections 2.2 and 2.3.
1.10 "Significant Property". The definition of "Significant
Property" is deleted in its entirety and the following
definition substituted therefor:
"Significant Property" shall mean at any time property
or assets of the Borrower or any Subsidiary having a
book value (net of accumulated depreciation taken in
accordance with GAAP) of at least $1,000,000.00 or that
contributed (or is an integrated physical portion of an
assemblage of assets that contributed) at least 5% of
the gross income of the owner thereof for the fiscal
quarter most recently ended.
2. Amendment to Section 2.1. The text of Section 2.1(a) is
------------------------
deleted in its entirety and the following provisions
substituted therefor:
The Loans. (a) Subject to the terms and conditions and
relying upon the representations and warranties of the
Borrower herein set forth, each Bank severally agrees to
make Loans to the Borrower on any one or more Business Days
prior to the Maturity Date, up to an aggregate principal
amount of Loans not exceeding at any time outstanding:
(i) the lesser of (A) the amount set opposite such Bank's
name on the signature pages hereof (such Bank's
"Commitment"), and (B) the sum of the Borrowing Base and the
Bridge Advance Amount; minus (ii) such Bank's Pro Rata
Percentage of the Facility Letter of Credit Obligations.
Within such limits and during such period and subject to the
terms and conditions of this Agreement, the Borrower may
borrow, repay and reborrow hereunder.
3. Amendment to Section 5.1. The text of Section 5.1 is
------------------------
deleted in its entirety and the following provisions
substituted therefor:
Commitment Fee. The Borrower agrees to pay to the Agent for
the account of each Bank a commitment fee based on a year of
360 days, from the date of the first Loans to, but not
including, the Maturity Date (or such earlier date as of
which all Commitments shall have terminated), at the rate of
3/16 of 1 percent (3/16%) per annum on the daily average
unused amount of each Bank's Commitment, such commitment fee
to be payable quarterly in arrears on (a) the last day of
each March, June, September, and December, commencing on
December 31, 1993 and (b) the Maturity Date; provided,
however, that such commitment fee shall be calculated and
paid at a rate of: (i) 1/5 of 1 percent (1/5%) per annum on
the daily average unused amount of each Bank's Commitment,
if (and for so long as) the Borrower's Funded Debt is rated
lower than or equal to Baa1 by Moody's Investors Service,
Inc. or BBB+ by Standard and Poor's Corporation; and
(ii) 1/4 of 1 percent (1/4%) per annum on the daily average
unused amount of each Bank's Commitment, if (and for so long
as) the Borrower's Funded Debt is rated lower than or equal
to Ba1 by Moody's Investors Service, Inc. or BB+ by Standard
and Poor's Corporation.
4. Amendments to Section 9.1(c). The text of
----------------------------
Section 9.1(c)(iii) is deleted in its entirety and the
following provisions substituted therefor:
(iii) a Borrowing Base certificate for such month in the
form attached hereto as Exhibit H; provided, however,
that the Borrower may deliver the Borrowing Base
reports for the last month of any fiscal year and the
Borrowing Base reports for the first two months of
the succeeding fiscal year no later than 90 days
following the commencement of such succeeding fiscal
year.
5. Amendments to Section 10.1. The texts of Section 10.1(b)
--------------------------
and Section (e) are deleted in their entirety and the
following provisions substituted therefor:
(b) permit the ratio of its Consolidated Total
Indebtedness to its Consolidated Total Capitalization
to be greater than (i) 0.75 to 1.00 at the end of any
fiscal quarter ending on or prior to December 31, 1995,
(ii) 0.70 to 1.00 at the end of any fiscal quarter
ending after December 31, 1995 but on or prior to
March 31, 1997, and (iii) 0.65 to 1.00 at the end of
any fiscal quarter thereafter; or
(e) permit the ratio of Adjusted EBDIT to Cash Interest
Expense for the four fiscal quarters most recently
ended (considered as a single accounting period):
(i) at any time in the period from June 30, 1993 to and
including June 30, 1995, to be less than 2.0 to 1.0;
and (ii) at any time thereafter, to be less than 2.25
to 1.0; or
6. Amendments to Section 10.3. The texts of Section 10.3(f)
--------------------------
and Section 10.3(h) are deleted in their entirety and the
following provisions substituted therefor:
(f) Debt of the Borrower or any Subsidiary representing
the portion of the purchase price of property acquired
by the Borrower or such Subsidiary that is secured by
Liens permitted by the provisions of Section 10.2(d);
provided, however, that at no time may such Debt exceed
$20,000,000.00 in aggregate principal amount
outstanding; and
(h) additional Debt of the Borrower provided that after
giving effect to the issuance thereof there shall exist
no Default or Event of Default; and: (i) the ratio of
Consolidated Total Indebtedness to Consolidated Total
Capitalization shall be no greater than 0.65 to 1.00;
(ii) the ratio of Adjusted EBDIT to pro forma Cash
Interest Expense shall be no less than 2.25 to 1.00;
and (iii) such Debt shall have a final maturity no
earlier than the Maturity Date (as the same may be
extended pursuant to Section 2.4) and shall mature no
earlier than the Maturity Date (as so extended) and
shall be subject to no mandatory redemption or "put" to
the Borrower exercisable, or sinking fund or other
similar mandatory principal payment provisions that
require payments to be made toward principal, prior to
such Maturity Date (as so extended).
7. Amendments to Section 10.4. The texts of Section 10.4(e),
--------------------------
Section 10.4(h), and Section 10.(i) are deleted and the
following provisions substituted therefor:
(e) loans or advances by the Borrower to customers in
connection with and pursuant to marketing and
merchandising products that the Borrower reasonably
expects to increase sales of the Borrower or
Subsidiaries, provided that: (i) such loans must
be either less than $1,000,000.00 to any one customer
(or group of affiliated customers shown on the
Borrower's records to be Affiliates) or must be
disclosed on Schedule 9.2 hereof; and (ii) all such
loans must not exceed $12,000,000.00 in the aggregate
outstanding at any one time;
(h) loans by the Borrower or any Subsidiary other than
Lavaca Realty Company to other Persons representing the
deferred portion of the sales price of Property not
exceeding $371,035.56 in aggregate principal amount
outstanding provided that such Person remains
substantially in compliance with the note evidencing
the same and the payment schedule therefor;
(i) loans by Lavaca Realty Company to other Persons
representing the deferred portion of the sales price of
its Property not exceeding eighty percent (80%) of the
sales price of such Property, provided that the
purchaser's default in payment of such loan shall not
have a material adverse affect on the consolidated
financial condition of the Borrower and its
Subsidiaries.
8. Amendment of Section 10.8. The text of Section 10.8 is
-------------------------
amended by adding the following provisions:
and (iv) the Borrower and Lavaca Realty Company may dispose
of their real property in one or more sale/leaseback
transactions, provided that any Debt incurred in connection
with such transaction does not create a Default as defined
herein.
9. Amendments to Section 10.9. The text of Section 10.9 is
--------------------------
deleted in its entirety and the following provisions
substituted therefor:
Discount or Sale of Receivables. The Borrower will not, and
will not permit any Subsidiary other than Southern Union
Econofuel Company or Southern Union Energy Products and
Services Company to discount or sell with recourse, or sell
for less than the face value thereof (including any accrued
interest) any of its notes receivable, receivables under
leases or other accounts receivable.
10. Amendments to Section 11.4. The text of Section 11.4 is
--------------------------
deleted in its entirety and the following provisions
substituted therefor:
Failure to Pay Other Debt. The Borrower or any Subsidiary
fails to pay principal or interest aggregating more than
$1,000,000.00 on any other Debt when due and any related
grace period has expired, or the holder of any Debt declares
such Debt due prior to its stated maturity because of the
Borrower's or any Subsidiary's default thereunder and the
expiration of any related grace period; or
11. Amendments to Section 11.10. The text of Section 11.10 is
---------------------------
deleted in its entirety and the following provisions
substituted therefor:
Undischarged Judgment. Final judgment, or judgments in the
aggregate, that might be or give rise to Liens on any
property of the Borrower or any Subsidiary, for the payment
of money in excess of $1,000,000.00 shall be rendered
against the Borrower or any Subsidiary and the same shall
remain undischarged for a period of thirty (30) days during
which execution shall not be effective stayed; or
12. Amendments to Section 11.11. The text of Section 11.11 is
---------------------------
deleted in its entirety and the following provisions
substituted therefor:
Environmental Matters. The occurrence of any of the
following events that could result in liability to the
Borrower or any Subsidiary under any Environmental Law of
the creation of a Lien on any property of the Borrower or
any Subsidiary in favor of any governmental authority or any
other Person for any liability under any Environmental Law
or for damages arising from costs incurred by such Person in
response to a Release or threatened Release of Hazardous
Materials into the environment if any such asserted
liability or lien exceeds $5,000,000.00 and if any such Lien
would cover any property of the Borrower or any Subsidiary
which property is or would reasonably be considered to be
integral to the operations of the Borrower or any Subsidiary
in the ordinary course of business:
(a) the Release of Hazardous Materials at, upon, under
or within the property owned or leased or leased by the
Borrower or any Subsidiary or any contiguous property;
(b) the receipt by the Borrower or any Subsidiary of any
summons, claim, complaint, judgment, order or similar
notice that it is not in compliance with or that any
governmental authority if investigating its compliance
with any Environmental Law;
(c) the receipt by the Borrower or any Subsidiary of any
notice or claim to the effect that it is or may be
liable for the Release or threatened Release of
Hazardous Materials into the environment; or
(d) any governmental authority incurs costs or expenses
in response to the Release of any Hazardous Material
which affects in any way the properties of the Borrower
or any Subsidiary.
13. Amendment of Notice of Borrowing. Exhibit B to the
--------------------------------
Agreement is hereby deleted and Exhibit B attached hereto is
substituted therefor.
14. Usury. All agreements between the Borrower and the Banks,
-----
whether now existing or hereafter arising and whether
written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand
being made on one or more of the Notes or otherwise, shall
the amount paid, or agreed to be paid, to one or more of the
Banks for the use, forbearance, or detention of the money to
be loaned under the Agreement and evidenced by the
applicable Note(s) or otherwise or for the payment or
performance of any covenant or obligation contained in the
Agreement or any of the applicable Note(s) exceed the amount
permissible at the Highest Lawful Rate. If, as a result of
any circumstances whatsoever, fulfillment of any provision
of the applicable Note(s) or of the Agreement, at the time
performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by applicable
usury law, then ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity, and if, from
any such circumstance, any one or more the Banks shall ever
receive interest or anything which might be deemed interest
under applicable law which would exceed the amount
permissible at the Highest Lawful Rate, such amount which
would be excessive interest shall be applied to the
reduction or the principal amount owing on account of the
applicable Note(s) or the amount owing on other obligations
of the Borrower to the applicable Bank(s) under the
Agreement and not to the payment of interest, or if such
excessive interest exceeds the unpaid principal balance of
the applicable Note(s) and the amounts owing on other
obligations of the Borrower to the applicable Bank(s) under
the Agreement, as the case may, such excess shall be
refunded to the Borrower. In determining whether or not the
interest paid or payable under any specific contingencies
exceeds the Highest Lawful Rate, the Borrower and the Banks
shall, to the maximum extent permitted under applicable law,
(a) characterize any nonprincipal payment as an expense, fee
or premium rather than as interest; (b) exclude voluntary
prepayments and the effects thereof; and (c) amortize,
prorate, allocate and spread in equal parts during the
period of the full stated term of the applicable Note(s),
all interest at any time contracted for, charged, received
or reserved in connection with the indebtedness evidenced by
the applicable Note(s).
15. Other Sections. Except as expressly amended by this Second
--------------
Amendment, the provisions of the Agreement and the Note(s)
shall remain in full force and effect, and the Borrower
acknowledges and reaffirms its liability to the Banks
thereunder. In the event of any inconsistency between this
Second Amendment and the terms of the Agreement or the
Note(s), this Second Amendment shall govern.
16. Miscellaneous.
-------------
(a) The Banks do not, by their execution of this Amendment,
waive any rights they may have against any person not a
party hereto.
(b) This Second Amendment may be executed in multiple
counterparts, each of which shall constitute an
original instrument, but all of which shall constitute
one and the same Agreement.
(c) All capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms
in the Agreement.
(d) The invalidity of any one or more covenants, phrases,
clauses, sentences or paragraphs of this Second
Amendment shall not affect the remaining portions of
this Second Amendment, or any part thereof, and in case
of an such invalidity, this Second Amendment shall be
construed as if such invalid covenants, phrases,
clauses, sentences or paragraphs had not been inserted.
The section headings in this Second Amendment are for
convenience only and shall not limit or in any way
affect the meaning of the terms and provisions of this
Second Amendment.
(e) THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
TEXAS AND THE UNITED STATES OF AMERICA; provided,
however, that Chapter 15 of Subtitle 3,
Title 79, Revise Civil Statutes of Texas, 1925, as
amended (Articles 5069-15.01 through 5069.15.11,
Vernon's Texas Civil Statutes, as amended) shall not
apply to this Second Amendment.
THIS WRITTEN SECOND AMENDMENT, TOGETHER WITH THE AGREEMENT AND
THE NOTES, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AN
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment on the dates set forth below, to be effective
July 1, 1994.
SOUTHERN UNION COMPANY
Date: August 26, 1994 By: RONALD J. ENDRES
----------------
Ronald J. Endres,
Senior Vice President
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Date: August 29, 1994 By: SCOTT RICHARDSON
----------------
Scott Richardson
BANQUE PARIBAS HOUSTON AGENCY
Date: August 29, 1994 By: PATRICK V. MILLAN
-----------------
Patrick V. Millan
Date: August 29, 1994 By: BARTON D. SCHOURST
------------------
Barton D. Schourst
THE BANK OF NOVA SCOTIA
Date: August 30, 1994 By: F. C. H. ASHBY
--------------
F. C. H. Ashby
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
Date: August 30, 1994 By: ALAIN PAPIASSE
--------------
Alain Papiasse
BOATMEN'S FIRST NATIONAL BANK
Date: August 26, 1994 By: BARRY O'SULLIVAN
----------------
Barry O'Sullivan
BANK OF MONTREAL
Date: August 30, 1994 By: DONALD S. WARMINGTON
--------------------
Donald S. Warmington
CONSENTED TO AS OF THE DATE FIRST WRITTEN ABOVE BY THE
FOLLOWING PLEDGOR SUBSIDIARIES.
WESTERN GAS INTERSTATE COMPANY
By: MANUEL CAVAZOS
--------------
Manuel Cavazos,
Executive Vice President
MERCADO GAS SERVICES, INC.
By: DAVID J. KVAPIL
---------------
David J. Kvapil,
Vice President
SOUTHERN TRANSMISSION COMPANY
By: MANUAL CAVAZOS
--------------
Manuel Cavazos,
Executive Vice President
<PAGE>
EXHIBIT B
NOTICE OF BORROWING
The undersigned hereby certifies that s/he is an officer of
SOUTHERN UNION COMPANY, a corporation organized under the laws of
the state of Delaware (the "Borrower"), authorized to execute
this Notice of Borrowing on behalf of the Borrower. With
reference to that certain Credit Agreement dated September 30,
1993 (as same may be amended, modified, increased, supplemented
and/or restated from time to time, the "Credit Agreement")
entered into by and between the Borrower, TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as Agent, and the Banks identified therein,
the undersigned further certifies, represents and warrants to
Banks on behalf of the Borrower that to his best knowledge and
belief after reasonable and due investigation and review, all of
the following statements are true and correct (each capitalized
term used herein having the same meaning given to it in the
Credit Agreement unless otherwise specified):
(a) Borrower requests that the Banks advance to the
Borrower the aggregate sum of $ by no later
------------
than , 19 (the "Borrowing Date").
--------------- --
Immediately following such Loan, the aggregate
outstanding balance of Loans shall equal $ .
------------
Borrower requests that the Loans bear interest as
follows:
(i) The principal amount of the Loans, if any, which
shall bear interest at the Alternate Base Rate
requested to be made by the Banks is $ .
-----------
The initial Rate Period for such Loans shall be 90
days.
(ii) The principal amount of the Loans, if any, which
shall bear interest at the CD Rate for which the
Rate Period shall be 30 days requested to be made
by the Banks is $ .
-----------------
(iii) The principal amount of the Loans, if any, which
shall bear interest at the CD Rate for which the
Rate Period shall be 60 days requested to be made
by the Banks is $ .
-----------------
(iv) The principal amount of the Loans, if any, which
shall bear interest at the CD Rate for which the
Rate Period shall be 90 days requested to be made
by the Banks is $ .
-----------------
(v) The principal amount of the Loans, if any, which
shall bear interest at the CD Rate for which the
Rate Period shall be 180 days requested to be made
by the Banks is $ .
----------------
(iv) The principal amount of the Loans, if any, which
shall bear interest at the Adjusted Eurodollar
Rate for which the Rate Period shall be fifteen
days requested to be made by the Banks is
$ .
----------------
(vii) The principal amount of the Loans, if any,
which shall bear interest at the Adjusted
Eurodollar Rate for which the Rate Period shall be
one month requested to be made by the Banks is
$ .
---------------
(viii) The principal amount of the Loans, if any,
which shall bear interest at the Adjusted
Eurodollar Rate for which the Rate Period shall be
two months requested to be made by the Banks is
$ .
---------------
(ix) The principal amount of the Loans, if any, which
shall bear interest at the Adjusted Eurodollar
Rate for which the Rate Period shall be three
months requested to be made by the Banks is
$ .
---------------
(x) The principal amount of the Loans, if any, which
shall bear interest at the Adjusted Eurodollar
Rate for which the Rate Period shall be six months
requested to be made by the Banks is $ .
-----------
(b) The proceeds of the borrowing shall be deposited into
Borrower's demand deposit account at Texas Commerce
Bank-Austin, National Association more fully described
as follows:
Account No. 09916100522, styled Southern Union Company.
(c) Of the aggregate sum to be advanced, $
---------------
will be advanced to provide working capital pursuant to
Section 6.1(a) of the Credit Agreement and $
-----------
will be advanced for the purposes set forth in
Section 6.1(b) of the Credit agreement; and $
----------
will be advanced for the purposes set forth in
Section 6.1(c) of the Credit Agreement; and $
----------
will be advanced for the purposes of replacing Loans
currently outstanding under the Credit Agreement.
(d) The Expiration Date of each Rate Period specified in
(a) above shall be the last day of such Rate Period.
(e) As of the date hereof, and as a result of the making of
the requested Loans, there does not and will not exist
any Default or Event of Default.
(f) The representations and warranties contained in
Section 7 of the Credit Agreement are true and correct
in all material respects as of the date hereof and
shall be true and correct upon the making of the
requested Loans, with the same force and effect as
though made on and as of the date hereof and thereof.
(g) No change that would cause a material adverse effect on
the business operations or condition (financial or
otherwise) of the Borrower has occurred since the date
of the most recent financial statements provided to the
Banks dated as of , 19 .
------------------- ---
EXECUTED AND DELIVERED this day of , 19 .
-------- --------------- ---
SOUTHERN UNION COMPANY
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
EXHIBIT 10(j)
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF SOUTHERN UNION COMPANY
<PAGE>
Warrant No. 1994-1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
SOUTHERN UNION COMPANY
This is to Certify that, for value received, the receipt and
sufficiency of which is hereby acknowledged by SOUTHERN UNION
COMPANY, a Delaware corporation (the "Company") with its
principal business office at 504 Lavaca Street, Suite 800,
Austin, Texas 78701, FLEISCHMAN AND WALSH, a partnership with an
address at 1400 Sixteenth Street N.W., Suite 600, Washington,
D.C., or any other holder of this Warrant ("Holder"), is entitled
to purchase, from the Company, subject to the provisions of this
Warrant, at any time prior to the expiration date set forth in
paragraph 8 hereof, the number of shares of the Company's Common
Stock, $1.00 par value per share ("Common Stock"), set forth in
paragraph 1 hereof.
This Warrant and the securities issuable upon exercise hereof are
subject to the following provisions, terms and conditions.
1.) Shares Covered; Exercise Price. The holder of this Warrant
------------------------------
shall be entitled to purchase up to 25,000 shares, as
adjusted from time to time pursuant to paragraph 7 hereof,
of Common Stock, at an exercise price of $34.50 per share,
as adjusted from time to time pursuant to paragraph 7 hereof
(the "Exercise Price").
2.) Notice of Exercise. In case Holder shall desire to exercise
------------------
the purchase right evidenced by this Warrant, Holder shall
surrender this Warrant with an appropriate exercise form
similar to that attached as Exhibit A, duly executed by
Holder, to the Secretary of the Company, or such other
person or persons as the Company from time to time may
designate, at the principal business office of the Company,
specifying the number of shares of Common Stock to be
purchased and specifying a business day not more than
fifteen (15) days from the date such notice is given, for
the payment of the purchase price against delivery of the
shares of Common Stock being purchased.
3.) Manner of Exercise of Option. The Holder can exercise the
----------------------------
Warrant to purchase on a cumulative basis, to the extent
hereinafter provided, all or any part of the number of
shares subject to the Warrant, and such right shall be a
continuing one during the term of the Warrant period until
the number of shares subject to the Warrant stated in
Paragraph 1, as adjusted pursuant to paragraph 7, have been
purchased. If this Warrant is exercised in part, then the
Company will deliver to the Holder a new warrant of like
tenor in the name of Holder evidencing the right to
purchase the remaining number of shares of Common Stock at
the Exercise Price. The exercise price may be paid in
either cash or shares of Common Stock (either shares
outstanding or subject to issuance pursuant to this
Warrant). If the Exercise Price is paid in shares of Common
Stock, then each share of Common Stock tendered in payment
shall be valued at an amount equal to the last sale price of
the Common Stock on the American Stock Exchange (or such
other exchange on which the stock is listed for trading) on
the last business day prior to the date of exercise or if no
such sale is made on such day, the average closing bid and
asked prices for the Common Stock on such day on such
exchange. Payment in shares of Common Stock may be made
simultaneously with the exercise and purchase of shares
pursuant to this Warrant, in which case the number of shares
to be issued will be equal to: (a) the excess, if any, of
(i) the value of the Common Stock, as previously described,
multiplied by the number of shares of Common Stock for which
the Warrant is being exercised, over (ii) the Exercise Price
multiplied by the number of shares of Common Stock for which
the Warrant is being exercised; divided by (b) the value of
the Common Stock, as previously described.
4.) Authority and Binding Effect. The execution, delivery and
----------------------------
performance of this Warrant by the Company has been duly
authorized by all corporate action, and no preemptive rights
or rights of first refusal exist with respect to the
issuance of any shares of Common Stock pursuant to any
exercise of this Warrant. The execution, delivery and
performance of this Warrant will not result in a violation
or breach of any term or provision of, or constitute a
default or accelerate the performance required under, the
Certificate of Incorporation or Bylaws of the Company, any
indenture, loan agreement, partnership agreement or other
contract or agreement to which the Company is bound, or
violate any order, writ, injunction or decree of any court,
administrative agency or governmental body to which the
Company is subject. This Warrant constitutes the valid and
binding obligation of the Company enforceable in accordance
with its terms, except as may be limited by (i) bankruptcy
or similar laws from time to time in effect affecting the
enforcement of creditors' rights generally or (ii) the
availability of equitable remedies generally.
5.) Company's Covenants as to Common Stock. Shares deliverable
--------------------------------------
on the exercise of this Warrant shall, at delivery, be fully
paid and non-assessable, free from taxes, liens, and charges
with respect to their purchase. The Company shall take any
necessary steps to assure that the par value per share of
the Common Stock is at all times equal to or less than the
Exercise Price of the Common Stock issuable pursuant to this
Warrant. The Company will at all times reserve and keep
available out of its authorized and unissued stock solely
for the purpose of issuance upon exercise of this Warrant,
free from preemptive rights or any other actual or
contingent purchase rights of persons or entities other than
the Holder, a sufficient number of shares of Common Stock to
provide for the delivery of shares of Common Stock as shall
from time to time be issuable upon the exercise in full of
this Warrant.
6.) Assignments. It is expressly understood that this Warrant
-----------
and the securities issuable upon exercise hereof are
transferable, in whole or in part, without charge by the
Company to the Holder or the transferee, at the office of
the Company, by the Holder or the transferee in person or by
duly authorized attorney, upon surrender of this Warrant
properly endorsed. The Holder, by holding the same,
consents and agrees that this Warrant, when endorsed in
blank, shall be deemed negotiable, and that the Holder, when
this Warrant shall have been endorsed, may be treated by the
Company and all other persons dealing with this Warrant as
the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company, any
notice to the contrary notwithstanding, but until such
transfer on such books, the Company may treat the registered
holder hereof as the owner for all purposes.
7.) Anti-Dilution Provisions. In the event of any change in the
------------------------
outstanding Shares through merger, consolidation,
reorganization, recapitalization, stock dividend, stock
split, split-up, split-off, spin-off, combination or
exchange of shares, or other like change in capital
structure of the Company, an adjustment shall be made to
the Warrant such that the Warrant shall thereafter be
exercisable for such securities, cash and/or other property
as would have been received in respect of the Shares subject
to this Warrant had this Warrant been exercised in full
immediately prior to such change, and such an adjustment
shall be made successively each time any such change shall
occur. The term "Shares" after any such change shall refer
to the securities, cash and/or property then receivable
upon exercise of this Warrant. In addition, in the event of
any such change, the Company shall make any further
adjustment as may be appropriate to the number of Shares and
the Exercise Price as shall be equitable to prevent any
dilution or enlargement of the value of and rights under
this Warrant.
8.) Expiration Date. The Warrant shall expire at the 4:00 pm
---------------
Central time on February 10, 2004.
9.) Fractional Shares. This Warrant may be exercised only with
-----------------
respect to full shares and no fractional share of Common
Stock shall be issued. With respect to any fraction of a
share called for upon the exercise of this Warrant, the
Company shall pay the Holder an amount in cash equal to such
fraction multiplied by the last sale price of the Common
Stock on the American Stock Exchange (or such other exchange
on which the stock is listed for trading if not then listed
on the American Stock Exchange) on the last business day
prior to the date of exercise; provided that, if no such
sale is made on such day, the average closing bid and asked
prices for such day on such exchange shall be used.
10.) Purchase for Investment. Except as hereafter provided,
-----------------------
Holder shall, upon any exercise of the Warrant, execute and
deliver to the Company a written statement, in form
satisfactory to the Company, in which Holder represents and
warrants that Holder is purchasing or acquiring the shares
of Common Stock acquired under the Warrant for Holder's own
account, for investment only and not with a view to the
resale or distribution thereof, and agrees that any
subsequent offer for sale or sale or distribution of any of
such shares of Common Stock shall be made only pursuant to
either (a) a Registration Statement on an appropriate form
under the Securities Act of 1933, as amended (the
"Securities Act"), which Registration Statement has become
effective and is current with regard to the shares of Common
Stock being offered or sold, or (b) a specific exemption
from the registration requirements of the Securities Act,
but in claiming such exemption the Holder shall, if so
requested by the Company, prior to any offer for sale or
sale of such shares of Common Stock, obtain a prior
favorable written opinion, in form and substance reasonably
satisfactory to the Company, from counsel for or approved by
the Company, as to the applicability of such exemption
thereto. The foregoing requirements shall not apply to (i)
issuances by the Company upon the exercise of the Warrant so
long as the shares of Common Stock being issued are
registered under the Securities Act and a prospectus in
respect thereof is current or (ii) reofferings of shares of
Common Stock by affiliates of the Company (as defined in
Rule 405 or any successor rule or regulation promulgated
under the Securities Act) if the shares of Common Stock
being reoffered are registered under the Securities Act and
a prospectus in respect thereof is current.
11.) Registration Under the Securities Act. The Company shall
-------------------------------------
not be required to register either this Warrant or the
securities issuable upon exercise of this Warrant, unless,
the Company files a registration statement on a form that
permits the registration of the Warrant and/or the resale of
the securities issuable upon exercise of the Warrant;
provided however, that the Company shall not be required to
include the Warrant or the securities issuable upon exercise
of this Warrant if the registration statement either (i)
does not provide for the registration of either Common Stock
or such other securities as may be issuable upon exercise of
the Warrant or (ii) relates to an underwritten public
offering and the managing underwriter thereof determines
that the number of securities requested to be included in
such registration exceeds the number which can be sold in
(or during the time of) such offering, then the Company will
include in such registration, to the extent of the number
which the Company is so advised can be sold in (or during
the time of) such offering, first, all securities proposed
by the Company to be sold for its own account, and second,
such Registrable Securities and other securities of the
Company requested to be included in such registration pro
rata on the basis of the number of shares of such securities
so proposed to be sold and so requested to be included. The
Company shall file an additional listing application with
the American Stock Exchange with covering the shares of
Common Stock issuable upon the exercise of this Warrant, and
will take all steps necessary to include the shares of
Common Stock, or other securities issuable upon the exercise
of this Warrant in any listing of the Common Stock, or
other securities issuable upon exercise of the Warrant, on
any other stock exchange.
12.) Rights as a Stockholder. After receipt of the notice of
-----------------------
exercise and the purchase price as provided in paragraph 2,
the Company shall cause to be issued and delivered such
certificates in such denominations as Holder may direct,
representing the number of fully paid, nonassessable shares
of Common Stock so purchased, registered in the name of
Holder, but Holder shall have no right as a stockholder with
respect to any shares covered by this Warrant until the
issuance of such stock certificates, and no adjustment
shall be made for dividends or other rights for which the
record date is prior to the time such stock certificates are
issued except as may be otherwise provided for in paragraph
7. The Company agrees to promptly seek all consents of
regulatory bodies and other governmental agencies as may be
necessary, if any, to issue the Common Stock so purchased by
Holder. All stock so purchased shall be issued by the later
of (i) 20 days after the payment of the Exercise Price or
(ii) not more than five (5) business days after the receipt
of any and all regulatory and governmental consents referred
to in the preceding sentence of this paragraph 12.
13.) Dividend Rights. The Company also grants to the Holder the
---------------
right to receive, upon the payment date of any cash dividend
on the Common Stock declared by the Board of Directors of
the Company, a cash payment equal to the amount of any cash
dividends to be paid on each share of Common Stock times the
number of shares of Common Stock which may be purchased upon
the exercise of this Warrant granted herein to the Holder
which have not been exercised, forfeited or terminated prior
to the close of business on the record date set by the Board
of Directors for such cash dividends. All other dividends
and distributions will result in an adjustment to this
Warrant as set forth under paragraph 7.
14.) Loss, Theft, Destruction or Mutilation. Upon receipt by the
--------------------------------------
Company of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation
of this Warrant and (in the case of loss, theft, or
destruction) of reasonable indemnity and (in the case of
mutilation) upon surrender and cancellation thereof, the
Company will execute and deliver, in lieu thereof, a new
warrant of like tenor.
15.) Headings. The descriptive headings of the several sections
--------
of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
16.) Governing Law. This Warrant is a contract made under the
-------------
laws of the State of Texas and shall be construed under the
laws of the State of Texas, without considering its rules of
conflicts of law.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed and delivered by its duly authorized officer, attested
to by its duly authorized secretary under its corporate seal, and
Holder has caused this Warrant to be executed by its authorized
representative, in each case as of February 10, 1994.
ATTEST: SOUTHERN UNION COMPANY
DENNIS K. MORGAN By: PETER H. KELLEY
- - ---------------- ---------------
Dennis K. Morgan Peter H. Kelley
Vice President - Legal President and Chief
and Secretary Operating Officer
(Corporate Seal)
FLEISCHMAN AND WALSH
By: AARON I. FLEISCHMAN
-------------------
Aaron I. Fleischman
Senior Partner
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
Southern Union Company
504 Lavaca Street
Suite 800
Austin, Texas 78701
Attn: Dennis K. Morgan
Vice President - Legal and Secretary
Dear Mr. Morgan:
Pursuant to paragraph 2 of Warrant No. 1994-1 dated February 10,
1994, I hereby give notice that I am exercising such Warrant with
respect to the number of shares of Southern Union Common Stock
listed below.
Number of Shares Being Acquired
-----------------
Pursuant to the [Full/Partial]
Exercise of the Warrant
Exercise Price Per Share x $
----------------
Total Exercise Price To Be Paid $
----------------
Date Exercise Price Will Be Paid
(must be a business day within 15
days of this Notice)
----------------
Exercise Price Will Be Paid In:
Cash Southern Union Common Stock Both
----- ----- -----
If exercise price is to be paid in shares of Southern Union
Common Stock, such Common Stock will be valued at the last sale
price of the Common Stock on the American Stock Exchange (or such
other exchange on which the stock is then listed for trading if
it is no longer listed on the American Stock Exchange) on the
last business day prior to the date of exercise; provided that,
if no such sale is made on such day, the average closing bid and
asked prices for such day on such exchange shall be used.
<PAGE>
I understand that Southern Union will use its best efforts to
cause the shares of Southern Union Common Stock which I will
receive following the exercise of the Warrant to be delivered by
the transfer agent within twenty (20) days from the date this
Notice is received by Southern Union or within five (5) business
days following the payment of the exercise price, whichever is
later, but in either case subject to paragraph 12 of the Warrant.
If the shares are to be delivered to a broker:
Name of Broker:
--------------------------------------
Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Broker's Telephone No.
--------------------------------------
Sincerely,
By:
- - ------------------------- ------------------------
Date Name
- - ------------------------- ----------------------------
Tax Payer Identification
Number
----------------------------
- - ------------------------- ----------------------------
Telephone Number Mailing Address
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, hereby sells, assigns
-----------------------
and transfers unto shares
---------------------------- --------
of the right to purchase Common Stock represented by this Warrant
to the extent of shares as to which such right is
---------------
exercisable, and does hereby irrevocably constitute and appoint
attorney to transfer the same on the books
- - ---------------------
of the Company with full power of substitution in the premises.
DATED this day of , .
------- -------------------- -----
WITNESS:
- - ---------------------------- ----------------------------
<PAGE>
SOUTHERN UNION COMPANY
504 LAVACA, SUITE 800
AUSTIN, TEXAS 78701
(512) 477-5852
April 4, 1994
Fleischman and Walsh
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Attn: Aaron I. Fleischman
Gentlemen:
This letter will serve as notice that, effective as of the date
hereof, the Exercise Price per share for your Warrant to purchase
shares of Common Stock of Southern Union Company (Warrant
No. 1994-1) has been changed to $18.56. This change, which is an
amendment to the Warrant, is pursuant to paragraph 7 of the
Warrant and consistent with the action of the Board of Directors
of the Company as of February 10, 1994 in granting the Warrant,
and the action of the Southern Union Company 1992 Long-Term Stock
Incentive Plan Committee of the Board as of the date hereof in
effectively repricing the options granted to employees on
February 10, 1994.
The Warrant now represents the right to purchase 37,500 shares of
Common Stock at an Exercise Price of $18.56 per share (as
adjusted to give effect to the 3-for-2 stock split, effected as a
50% stock dividend distributed on March 9, 1994 to stockholders
of record on February 23, 1994).
Except as set forth above, there have been no changes, amendments
or modifications to the Warrant. Defined terms used herein have
whatever meaning that may be ascribed to them in the Warrant.
Please acknowledge this amendment to the Warrant by signing and
returning the enclosed copy hereof.
Sincerely,
DENNIS K. MORGAN
----------------
Dennis K. Morgan
Acknowledged by
FLEISCHMAN AND WALSH
By: AARON I. FLEISCHMAN
-------------------
Aaron I. Fleischman
<PAGE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
<PAGE>
COMPUTATION OF PER SHARE EARNINGS Exhibit 11
Years Ended
---------------------------
June 30, December 31,
------------------
1994 1993 1992
-------- -------- --------
(thousands of dollars,
except per share amounts)
Net earnings available for
common stock. . . . . . . . . . . $ 8,378 $ 6,890 $ 1,445
======= ======= =======
Primary earnings per share:
Average shares outstanding
at year end . . . . . . . . . . 9,866 8,286 8,256
Stock options issued or granted . 269 183 63
------- ------- -------
Average shares outstanding. . . . 10,135 8,469 8,319
======= ======= =======
Primary earnings per share. . . . $ 0.83 $ 0.81 $ 0.17
======= ======= =======
Fully diluted earnings per share:
Average shares outstanding at
year end . . . . . . . . . . . 9,866 8,286 8,256
Stock options issued or granted . 269 264 63
------- ------- -------
Average shares outstanding. . . . 10,135 8,550 8,319
======= ======= =======
Fully diluted earnings per
share . . . . . . . . . . . . . $ 0.83 $ 0.81 $ 0.17
======= ======= =======
- - -------------------------
Note: All periods have been adjusted for the 5% stock dividend
distributed on June 30, 1994 and the three-for-two stock
split distributed in the form of a 50% stock dividend on
March 9, 1994.
<PAGE>
EXHIBIT 22
SUBSIDIARIES OF SOUTHERN UNION COMPANY
<PAGE>
SUBSIDIARIES OF SOUTHERN UNION COMPANY Exhibit 22
Name State of Incorporation
- - ---------------------------------------- ----------------------
Lavaca Realty Company Delaware
Mercado Gas Services Inc. Delaware
Southern Union Econofuel Company Delaware
Southern Union Energy International, Inc. Delaware
Southern Union Energy
Products and Services Company Delaware
Southern Union Exploration Company Delaware
Southern Transmission Company Delaware
Western Gas Interstate Company Delaware
Western Utilities, Inc. Delaware
- - --------------------------
Note: Two other wholly owned subsidiaries of Southern Union
Company, Southern Union Gas Company, Inc. (a Delaware
corporation) and Southern Union Gas Company, Inc. (a Texas
corporation), conduct no business except to the extent
necessary to hold the Corporate name.
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 24
The Board of Directors
Southern Union Company:
We consent to the incorporation by reference in the registration
statements of Southern Union Company on Form S-8
(File No. 2-79612, 33-37261, 33-61558, 33-69596 and 33-69598) of
our report dated September 15, 1994, on our audits of the
consolidated financial statements and financial statement
schedules of Southern Union Company and Subsidiaries as of
June 30, 1994 and December 31, 1993 and for the years ended
June 30, 1994 and December 31, 1993 and 1992, which report is
included in this Transition Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Austin, Texas
September 26, 1994
<PAGE>
EXHIBIT 25
POWER OF ATTORNEY WITH RESPECT TO CERTAIN SIGNATURES
<PAGE>
POWER OF ATTORNEY Exhibit 25
KNOW ALL PERSONS BY THESE PRESENTS that each person whose
signature appears below constitutes and appoints Peter H. Kelley,
Ronald J. Endres and David J. Kvapil, or any of them, as such
person's true and lawful attorney-in-fact and agent, with full
power of substitution and revocation, for such person and in such
person's name, place and stead, in any and all capacities, to
sign the Transition Report on Form 10-K for the fiscal year ended
June 30, 1994 of Southern Union Company, a Delaware corporation,
and any amendments thereto, and to file the same with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission and the American
Stock Exchange.
Dated: September 20, 1994
JOHN E. BRENNAN GEORGE L. LINDEMANN
- - --------------- -------------------
John E. Brennan George L. Lindemann
FRANK W. DENIUS ROGER J. PEARSON
- - --------------- ----------------
Frank W. Denius Roger J. Pearson
AARON I. FLEISCHMAN GEORGE ROUNTREE, III
- - ------------------- --------------------
Aaron I. Fleischman George Rountree, III
ADAM M. LINDEMANN DAN K. WASSONG
- - ----------------- --------------
Adam M. Lindemann Dan K. Wassong
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