<PAGE>
Southern
Union
Company
504 Lavaca Street, Eighth Floor
Austin, Texas 78701
September 26, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Southern Union Company to be held at 2:00 p. m.
(Central Standard Time) on Tuesday, November 12, 1996 in the
eighth floor atrium of the Company's offices at Lavaca Plaza, 504
Lavaca Street, Austin, Texas. A notice of the meeting, a proxy
and a proxy statement containing information about the matters to
be acted upon are enclosed.
In addition to the specific matters to be acted upon, there will
be a report on the progress of the Company and an opportunity for
questions of general interest to the stockholders.
Whether or not you plan to attend the meeting on November 12,
1996 please mark, sign and date the enclosed proxy and return it
in the envelope provided (which requires no postage if mailed in
the United States) so that your shares will be represented. Your
prompt cooperation will be appreciated.
On behalf of the Board of Directors,
Sincerely,
GEORGE L. LINDEMANN
Chairman of the Board and
Chief Executive Officer
<PAGE>
Southern Union Company
504 Lavaca Street, Eighth Floor
Austin, Texas 78701
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 12, 1996
To the Holders of Common Stock of
SOUTHERN UNION COMPANY:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stock-
holders (the "Meeting") of Southern Union Company, a Delaware
corporation (the "Company"), will be held in the eighth floor
atrium of the Company's offices at Lavaca Plaza, 504 Lavaca
Street, Austin, Texas on Tuesday, November 12, 1996 at 2:00 p. m.
(Central Standard Time) for the purpose of considering and acting
upon: (i) the election of three persons to serve as the Class III
directors until the 1999 Annual Meeting of Stockholders or until
their successors are duly elected and qualified; (ii) proposed
changes under the Southern Union Company Supplemental Deferred
Compensation Plan to increase maximum permissible employee con-
tributions from five percent to ten percent, to increase the Com-
pany matching contribution from fifty percent to one hundred
percent of employee contributions subject to such Company
matching and to increase employee contributions subject to Com-
pany matching from five percent to ten percent; (iii) proposed
changes under the Southern Union Company Directors' Deferred
Compensation Plan to increase directors contributions subject to
Company matching from seven percent to ten percent and to
increase the Company matching contribution from fifty percent to
one hundred percent of directors contributions subject to such
Company matching; and (iv) such other business as may properly
come before the Meeting or any adjournment or postponement
thereof. The Board of Directors is not aware of any other busi-
ness to come before the Meeting.
The Board of Directors has fixed September 13, 1996, as the
record date (the "Record Date") for the determination of stock-
holders entitled to notice of, and to vote at, the Meeting and
any adjournment or postponement thereof. Only holders of record
of the Company's common stock, par value $1.00 per share ("Common
Stock"), at the close of business on the Record Date are entitled
to vote on all matters coming before the Meeting or any adjourn-
ment or postponement thereof. A complete list of stockholders of
record entitled to vote at the Meeting will be maintained in the
Company's corporate offices at 504 Lavaca Street, Eighth Floor,
Austin, Texas 78701, for ten days prior to the Meeting.
Whether or not you plan to attend the Meeting in person, please
mark, execute, date and return the enclosed proxy in the envelope
provided (which requires no postage if mailed within the United
States). Should you attend the Meeting in person you may, if you
wish, withdraw your proxy and vote your shares in person.
By Order of the Board of Directors,
DENNIS K. MORGAN
Secretary
Austin, Texas
September 26, 1996
<PAGE>
Southern Union Company
504 Lavaca Street, Eighth Floor
Austin, Texas 78701
--------------------
PROXY STATEMENT
--------------------
The accompanying proxy, to be mailed to stockholders together
with the Notice of Annual Meeting and this Proxy Statement on or
about September 24, 1996, is solicited by Southern Union Company
(the "Company") in connection with the Annual Meeting of Stock-
holders to be held on November 12, 1996 (the "Meeting"). A proxy
may be revoked by a stockholder at any time prior to its exercise
by executing and returning another proxy bearing a later date, by
giving written notice of revocation to the Secretary of the Com-
pany, or by attending the Meeting and voting in person.
All properly executed, unrevoked proxies received before the
Meeting will be voted in accordance with the directions of the
stockholders. When no direction has been given by a stockholder
returning a signed proxy, the proxy will be voted FOR ALL
NOMINEES named in this proxy statement for election as directors;
FOR proposed changes under the Southern Union Company Supplemen-
tal Deferred Compensation Plan to increase maximum permissible
employee contributions from five percent to ten percent, to
increase the Company matching contribution from fifty percent to
one hundred percent of employee contributions subject to such
Company matching and to increase employee contributions subject
to Company matching from five percent to ten percent; and FOR
proposed changes under the Southern Union Company Directors'
Deferred Compensation Plan to increase directors contributions
subject to Company matching from seven percent to ten percent and
to increase the Company matching contribution from fifty percent
to one hundred percent of directors contributions subject to such
Company matching. Proxies should NOT be sent by stockholders to
the Company but to Boston EquiServe, L.P., the Company's Regis-
trar and Transfer Agent, at 150 Royall Street, Canton,
Massachusetts 02021.
September 13, 1996, has been set as the record date (the "Record
Date") for determination of stockholders entitled to notice of
and to vote at the Meeting. Holders of the Company's common
stock, $1.00 par value (the "Common Stock"), at the close of
business on the Record Date will be entitled to one vote per
share on all proper business brought before the Meeting. With
respect to the election of directors, holders of Common Stock
have cumulative voting rights, which entitle each stockholder to
that number of votes which equals the number of shares held
multiplied by the number of directors to be elected. The Bylaws
of the Company provide that any stockholder who intends to so
cumulate votes must give written notice to the Secretary of the
Company no later than ten (10) days after the date on which
notice of the Meeting was first sent to stockholders.
On the Record Date, there were outstanding and entitled to vote
16,223,667 shares of Common Stock. The presence, in person or by
proxy, of a majority of the outstanding shares of Common Stock
entitled to vote at the Meeting will constitute a quorum.
Proxies submitted that contain abstentions or broker non-votes
will be deemed present at the Meeting for purposes of determining
the presence of a quorum. In all matters other than the election
of directors, the affirmative vote of a majority of shares
present in person or represented by proxy and entitled to vote on
the subject matter shall constitute shareholder action.
Accordingly, an abstention other than with respect to the elec-
tion of a director has the same effect as a negative vote.
Directors are elected by a plurality of the votes of shares
present in person or represented by proxy and entitled to vote in
the election.
ELECTION OF DIRECTORS
The Board of Directors of the Company is comprised of ten direc-
tors which is divided into three classes, each of which serves a
staggered three-year term. The terms of the Class III directors
expire at the Meeting. The Class I directors will serve until
the 1997 Annual Meeting of Stockholders and the Class II direc-
directors will serve until the 1998 Annual Meeting of Stock-
holders. George L. Lindemann, Peter H. Kelley and Dan K. Wassong
(the "Nominees") are the Class III directors standing for elec-
tion for a three-year term of office expiring at the 1999 Annual
Meeting of Stockholders or when their successors are duly elected
and qualified.
The Company is informed that each of the Nominees is willing, if
elected, to serve as a director; however, if any of them should
decline or become unable to serve as a director for any reason,
votes will be cast instead for a substitute nominee designated by
the Board of Directors or, if none is so designated, will be cast
according to the judgment of the person or persons voting the
proxy. If cumulative voting is effected by a stockholder, unless
authority is withheld, the persons named in the enclosed proxy
will allocate the votes represented by such proxy in the manner
they deem proper in their best judgment.
Pursuant to the Company's Bylaws, any stockholder entitled to
vote at a meeting called for the election of directors may nomi-
nate candidates for election as directors if written notice is
delivered to the Company's Secretary at least 45 days before an
annual meeting (which was September 24, 1996 for the Meeting) or
no later than ten days after the date of the notice of a special
meeting. Accordingly, no stockholder may make additional nomina-
tions at the Annual Meeting. The notice must include certain
information about the nominating stockholder and the nominees.
Certain persons are also disqualified from serving as directors.
A copy of the relevant Bylaw provisions may be obtained from the
Company's Secretary. As of the date hereof, no stockholder has
nominated any person to serve as a director of the Company.
The following pages contain information concerning the Nominees
and the directors whose terms of office will continue after the
meeting.
Nominees
- --------
Class III - Term expires in 1999
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 Direc-
tors 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 CTS, Inc. ("Metro
Mobile") from its formation in 1983 through April 1992. He has
been President and a director of Cellular Dynamics, Inc., the
managing general partner of Activated Communications Limited
Partnership, a private investment business, since May 1982. Age:
60.
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 Company ("Southern Union Gas"), a
division of the Company, since October 1990, and Chief Executive
Officer of Missouri Gas Energy ("MGE"), a division of the Com-
pany, since December 1993. From December 1993 to September 1995,
Mr. Kelley was also President of MGE. Prior to joining the Com-
pany, he had been an officer of Metro Mobile since 1986.
Mr. Kelley is also a director of Texas Commerce Bank, N.A. --
Austin. Age: 49.
Dan K. Wassong has been the President, Chief Executive Officer
- --------------
and a director of Del Laboratories, Inc., a manufacturer of cos-
metics, toiletries and pharmaceuticals, for more than the past
five years. Mr. Wassong is also a director of Moore Medical
Corporation. Age: 66.
THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES TO SERVE AS CLASS
III DIRECTORS.
Directors Continuing in Office
- ------------------------------
Class I - Term expires in 1997
John E. Brennan has been Vice Chairman of the Board and Assistant
- ---------------
Secretary of Southern Union since February 1990. Mr. Brennan
does not devote his full business time to the Company.
Mr. Brennan has been primarily engaged in private investments
since May 1992. Prior to May 1992, Mr. Brennan had been Presi-
dent and Chief Operating Officer of Metro Mobile. Age: 50.
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 of the Com-
pany. Mr. Denius was Chairman of the Board and President of the
Company from 1986 until February 1990 and Chief Executive Officer
from 1985 until February 1990. Since February 1990, Mr. Denius
has been engaged primarily in the private practice of law in
Austin, Texas. Mr. Denius is also a director of TCC Industries.
Age: 71.
Roger J. Pearson has been an attorney in private practice in
- ----------------
Stamford, Connecticut for more than the past five years. He has
been of counsel to the firm of Neville, Shaver, Kelly & McLean
since 1991. Mr. Pearson was First-Selectman (Mayor) of Green-
wich, Connecticut from 1983 to 1985. Mr. Pearson has been a
Director of the Company since January 1992. Age: 50.
Class II - Term expires in 1998
Aaron I. Fleischman has been Senior Partner of Fleischman and
- -------------------
Walsh, L.L.P., a Washington, D.C. law firm specializing in regu-
latory, corporate-securities and litigation matters for telecom-
munications and regulated utility companies since 1976.
Mr. Fleischman is also a director of Citizens Utilities Company.
Age: 57.
Kurt A. Gitter, M.D. has been an ophthalmic surgeon in private
- --------------------
practice in New Orleans, Louisiana, since 1969. He has also been
a Clinical Professor of Ophthalmology at Louisiana State Univer-
sity since 1978 and an assistant professor of ophthalmology at
Tulane University since 1969. From 1986 to 1993 Dr. Gitter
served as Chief of Ophthalmology at Touro Infirmary. Dr. Gitter
has been a Director of the Company since June 1995. Age: 59.
Adam M. Lindemann has been a personal investor manager for Third
- -----------------
Point Partners since August 1996. From 1994 until August 1996,
he was a securities analyst for Oppenheimer & Company and during
1994 he also was a corporate finance associate with Perry Part-
ners, a money management firm. From May 1992 until 1994 he was
primarily engaged in private investments. Prior to May 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: 35.
George Rountree, III has been 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:
63.
With the exception of Messrs. Denius, Gitter and Pearson as
described above, each of the above-named directors and Nominees
first became a director of the Company in February 1990.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Executive Officers of the Company are elected by the Board to
serve at the pleasure of the Board or until their successors are
elected and qualified. Generally, officers are reelected
annually by the Board. The following Executive Officers of the
Company are not directors.
C. Thomas Clowe, Jr. has been President and Chief Operating
- --------------------
Officer of MGE since September 1995. Prior to joining the Com-
pany, Mr. Clowe served as Chairman of the Board, President and
Chief Executive Officer of Central Freight Lines, Inc. from 1990
until 1995. Age: 63.
Ronald J. Endres has been Executive Vice President since June
- ----------------
1996 and Chief Financial Officer since October 1989. He was a
Senior Vice President from April 1987 until June 1996.
Previously, Mr. Endres held other financial and operating posi-
tions with the Company since June 1969. Mr. Endres was President
of Southern Union Gas from January 1986 until October 1990. Age:
52.
David J. Kvapil has been Vice President - Controller since July
- ---------------
1993 and Controller since August 1992. Prior to joining the Com-
pany in 1992, Mr. Kvapil was with the accounting firm of Coopers
& Lybrand L.L.P. Age: 41.
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, a former oil and gas subsidiary of the
Company. Age: 48.
THE BOARD OF DIRECTORS
The Board of Directors has an Executive Committee, composed of
Messrs. George Lindemann (Chairman), Brennan and Kelley. The
Executive Committee held one meeting and acted by unanimous
written consent on seven occasions during fiscal year 1996.
During the intervals between meetings of the Board of Directors,
this committee has the authority to, and may exercise all of the
powers of, the Board of Directors in the management of the busi-
ness, property and affairs of the Company in all matters that are
not required by statute or by the Company's Certificate of Incor-
poration or Bylaws to be acted upon by the Board of Directors.
This committee must exercise such authority in such manner as it
deems to be in the best interests of the Company and consistent
with any specific directions of the Board of Directors.
The Board of Directors has an Audit Committee, currently composed
of Messrs. Pearson (Chairman) and Rountree. The Audit Committee
met three times during fiscal year 1996. This committee has the
duties of recommending to the Board of Directors the appointment
of independent auditors, reviewing their charges for services,
reviewing the scope and results of the audits performed,
reviewing the adequacy and operation of the Company's internal
audit function, and performing such other duties or functions
with respect to the Company's accounting, financial and operating
controls as deemed appropriate by it or the Board of Directors.
The Board of Directors has a Long-Term Stock Incentive Plan Com-
mittee which may consist of no fewer than two directors. The
committee is currently composed of Messrs. Rountree (Chairman)
and Pearson who have the authority to make all decisions
regarding: (i) the granting of awards under the Company's 1992
Long-Term Stock Incentive Plan (the "1992 Plan"); (ii)
eligibility of employees to receive awards under the 1992 Plan;
and (iii) interpretation of the 1992 Plan. To serve on the Plan
Committee a director may not receive any awards under the 1992
Plan during the prior year, and cannot currently be eligible to
receive any awards under the 1992 Plan. The Long-Term Stock
Incentive Plan Committee met two times during fiscal year 1996.
The Board of Directors held two meetings, one telephonic meeting
and acted by unanimous written consent on seven occasions during
fiscal year 1996. All directors attended all of the meetings of
the Board and committees on which they served that were held in
fiscal year 1996 while they were directors and a member of any
such committee. Compensation for each director is $20,000 per
year, payable in quarterly installments, except for:
Mr. George Lindemann (who receives $200,000 per year as Chairman
of the Board and Chief Executive Officer of the Company and
Chairman of the Executive Committee); Mr. Brennan (who receives
$100,000 per year as Vice Chairman of the Board of the Company
and a member of the Executive Committee); Mr. Kelley (who
receives no compensation as a director in addition to his com-
pensation as a full-time executive officer and employee of the
Company and its divisions and subsidiaries); and the chairman and
the other member of the Audit Committee of the Company's Board of
Directors, who receive $30,000 and $25,000 per year, respec-
tively. Members of the Board of Directors also are reimbursed
for travel expenses incurred in connection with Company business,
including attendance at meetings of the Board of Directors and
its committees.
The Board of Directors has a Directors' Deferred Compensation
Plan. See "Proposal of Changes to the Southern Union Company
Directors' Deferred Compensation Plan."
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Pursuant to Section 16(a) of the Securities Exchange Act of 1934,
as amended, each director and executive officer of the Company
was required to report in a timely manner to the Securities
Exchange Commission on Form 3, Form 4 and/or Form 5 any change to
his or her beneficial ownership of the Company's Common Stock, or
derivative interests therein, that occurred during the Company's
fiscal year ended June 30, 1996. With respect to fiscal 1996,
the Company did not timely file Forms 5 on behalf of the fol-
lowing directors and executive officers relating to the following
number of transactions in the Common Stock under the Company's
stock-based benefit plans, due to the unavailability of certain
information necessary to make a complete filing as of the due
date for such Forms: Peter H. Kelley (4), George L. Lindemann
(3), Aaron I. Fleischman (1), George Rountree III (1),
David J. Kvapil (4), Dennis K. Morgan (3) and Donald A. Scovil
(2). The Company is aware of no other reporting violation under
Section 16(a) by its directors, executive officers or securities
holders.
SECURITY OWNERSHIP
The following table sets forth the number of all shares of the
Company's Common Stock beneficially owned by each director, by
each executive officer named in the management compensation
tables and related footnotes (see "Management Compensation"), by
each person known by the Company to beneficially own 5% or more
of the Company's outstanding Common Stock, and by all directors
and executive officers as a group on the Record Date, unless
otherwise indicated in the footnotes. Each of the following per-
sons and members of the group had sole voting and investment
power with respect to the shares shown unless otherwise indicated
in the footnotes.
Number of Percent of
Beneficial Owner Shares Held Class
- --------------------------------- ------------------ ----------
George L. Lindemann 2,376,943(1)(2) 14.57%
Adam M. Lindemann 1,410,013(2) 8.69%
George Lindemann, Jr. 1,410,013(2) 8.69%
11950 Maidstone Drive
Wellington, Florida 33414
Sloan N. Lindemann 1,410,013(2) 8.69%
800 Fifth Avenue
New York, New York 10022
John E. Brennan 270,672(3) 1.66%
Frank W. Denius 19,847(4) *
Aaron I. Fleischman 213,987(5) 1.31%
Kurt A. Gitter, M.D. 93,369(6) *
- ---------------------
* Indicates less than one percent (1%).
(1) Of these shares: 1,034,980 are owned by Mr. Lindemann
including 2,185 vested shares held by the Southern Union
Savings Plan (the "401(k) Plan") and 1,851 vested shares
held through the Southern Union Company Supplemental
Deferred Compensation Plan (the "Supplemental Plan");
1,247,148 shares owned by his wife, Dr. F.B. Lindemann; and
94,815 shares of common stock Mr. Lindemann 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." A total of 2,287,265 shares
held by Mr. and Mrs. Lindemann and their three children
have been pledged to Activated Communications Limited Part-
nership ("Activated"). Activated, which is owned and man-
aged 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 regarding direct share ownership by mem-
bers of the Lindemann family was obtained from and is
reported herein in reliance upon a Schedule 13D (as amended
through November 4, 1994) as adjusted for any stock divi-
dends and splits since the date of such report 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 were obtained from said Schedule 13D and
reflect only such individual's direct ownership.
(3) Of these shares, 1,083 vested shares are held by the 401(k)
Plan, 908 vested shares are held through the Supplemental
Plan, 2,610 shares are owned by his wife, 109,544 are held
in two separate trusts for the benefit of members of his
family and 125,685 represent shares that Mr. Brennan is
entitled to purchase upon the exercise of presently exer-
exercisable stock options granted to him pursuant to the
Company's 1982 Stock Option Plan (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."
(4) Includes: 500 shares owned by his wife; 9,849 shares that
The Effie and Wofford Cain Foundation, in which Mr. Denius
is a Director, own; and 2,106 vested shares allocated to
Mr. Denius pursuant to the Southern Union Company Direc-
tors' Deferred Compensation Plan (the "Directors' Deferral
Plan"). Mr. Denius disclaims beneficial ownership of those
shares held by the Foundation since he does not have a
pecuniary interest in or control the Foundation's assets.
(5) Includes: 55,125 shares that Fleischman and Walsh, L.L.P.,
in which Mr. Fleischman is Senior Partner, is entitled to
purchase upon exercise of a warrant; 4,075 vested shares
allocated to Mr. Fleischman pursuant to the Directors'
Deferral Plan; and 55,032 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 300 vested shares allocated to Dr. Gitter pursuant
to the Directors' Deferral Plan.
Number of Percent of
Beneficial Owner Shares Held Class
- --------------------------------- ------------------ ----------
Peter H. Kelley 147,019(1) *
Roger J. Pearson 15,294(2) *
George Rountree, III 30,089(3) *
Dan K. Wassong 13,865(4) *
C. Thomas Clowe, Jr. 769(5) *
Ronald J. Endres 122,403(6) *
Dennis K. Morgan 14,497(7) *
Lee M. Bass 845,890(8)(9) 5.21%
201 Main Street
Fort Worth, Texas 76102
Sid R. Bass Management Trust(10) 845,890(8)(11) 5.21%
201 Main Street
Fort Worth, Texas 76102
All Directors and Executive
Officers as a group (14 in group) 4,737,753(12) 28.28%
- ---------------------
* Indicates less than one percent (1%).
(1) Includes 125,685 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." Such
number also includes: 7,841 vested shares held by the
401(k) Plan; 446 vested shares held through the Southern
Union Stock Purchase Plan; and 4,099 vested shares held
through the Supplemental Plan.
(2) Includes 9,430 shares owned jointly by Mr. Pearson and his
father.
(3) Includes: 758 shares owned by his wife; and 4,989 vested
shares allocated to Mr. Rountree pursuant to the Directors'
Deferral Plan.
(4) Includes 300 vested shares allocated to Mr. Wassong pursu-
ant to the Directors' Deferral Plan.
(5) Includes 769 vested shares held by the 401(k) Plan. See
"Management Compensation."
(6) Includes 110,250 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." Such number also includes:
4,694 vested shares held through the 401(k) Plan; and 2,895
vested shares held through the Supplemental Plan.
(7) Includes 11,025 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." Such number also includes: 2,184 vested
shares held through the 401(k) Plan; and 1,288 vested
shares held through the Supplemental Plan.
(8) Does not include 72,764 (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 Inter-
national, Inc. This information, the information set forth
in note (10) 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 any stock dividends and splits since the
date of such reports.
(9) Does not include shares reported to be held by Sid R. Bass
Management Trust. See notes (8), (10) and (11).
(10) 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 (8).
(11) Does not include shares reported to be held by Lee M. Bass.
See notes (8) and (9).
(12) 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 45,266 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.
MANAGEMENT COMPENSATION
The following table sets forth the remuneration paid by the Com-
pany and its subsidiaries (i) to the Chairman of the Board and
Chief Executive Officer and (ii) to each of the four most highly
compensated key executive officers of the Company for the years
indicated:
Summary Compensation Table
Annual Compensation Secur-
--------------------------- ities
Other Under- All
Name and Annual lying Other
Principal Compen- Options/ Compen-
Position Year Salary Bonus sation(1) SARs(2) sation(3)
- ----------- ---- -------- ------- ----------- -------- ---------
George L.
Lindemann
Chairman
of the
Board and
Chief 1996 $203,024 $ -- $ -- 70,000 $ 8,640
Executive 1995 166,017 -- 380,000(4) -- 5,870
Officer 1994 115,787 -- -- 55,125 2,127
Peter H.
Kelley
President
and Chief 1996 382,730 -- 12,576(5) 70,000 12,085
Operating 1995 338,900 -- 27,761(5) -- 8,857
Officer 1994 274,998 -- -- 55,125 6,713
C. Thomas
Clowe,
Jr.(6)
President
and Chief 1996 199,314 -- -- 21,000 5,872
Operating 1995 -- -- -- -- --
Officer -- 1994 -- -- -- -- --
Missouri
Gas Energy
Ronald J.
Endres
Executive
Vice
President 1996 214,912 7,600 -- 28,000 8,645
and Chief 1995 199,751 26,096 -- -- 5,051
Financial 1994 184,302 80,654 -- 33,075 9,073
Officer
Dennis K.
Morgan
Vice
President
- Legal 1996 140,116 4,700 -- 3,500 6,251
and 1995 118,560 21,127 -- -- 5,006
Secretary 1994 108,602 55,567 -- 11,025 6,411
- ---------------------
(1) Does not include the value of perquisites and other personal
benefits because the aggregate amount of such compensation,
if any, does not exceed the lesser of $50,000 or 10 percent
of the total amount of annual salary and bonus for any named
individual.
(2) No Stock Appreciation Rights were granted in 1996, 1995 or
1994. Additionally, no restricted stock awards or long-term
incentive plan payouts were made in 1996, 1995 or 1994.
(3) Company matching provided through the 401(k) Plan and the
Supplemental Plan.
(4) Indicates the difference between the price paid by the indi-
vidual for common stock of the Company purchased from the
Company upon the exercise of stock options and the fair mar-
ket value of such common stock.
(5) Represents forgiveness of principal and interest by the Com-
pany. See "Certain Relationships."
(6) In September 1995 Mr. Clowe, Jr. was elected President and
Chief Operating Officer of Missouri Gas Energy.
OPTION GRANTS IN 1996
Potential
Realizable
Value at Assumed
Annual Rates
of Stock Price
Appreciation for
Individual Grants Option Term(1)
------------------------------------ -------------------
% of
Total
Options Exer-
Granted cise
Number of to Em- or
Securities ploy- Base
Underlying ees in Price Expira-
Options Fiscal Per tion
Name Granted(2) Year Share(3) Date 5% 10%
- -------- ---------- ------ -------- --------- -------- ----------
George L.
Lindemann 28,721 9.98% $ 17.24 11/9/2000 $136,801 $ 302,294
41,279 14.34% 15.68 11/9/2005 407,055 1,031,557
Peter H.
Kelley 63,809(4) 22.17% 15.68 11/9/2005 629,225 1,594,579
6,191(4) 2.15% 15.68 11/9/2005 61,050 154,712
C. Thomas
Clowe,
Jr. 21,000 7.30% 15.68 11/9/2005 207,082 524,788
Ronald J.
Endres 28,000 9.73% 15.68 11/9/2005 276,110 699,717
Dennis K.
Morgan 3,500 1.22% 15.68 11/9/2005 34,514 87,465
- -----------------
(1) The dollar amounts under these columns are the result of
calculations for the period from the date of grant to the
expiration of the option at the 5% and 10% annual apprecia-
tion rates set by the Securities and Exchange Commission
and, therefore, are not intended to forecast possible future
appreciation, if any, in the price of the Common Stock. No
gain to the optionee is possible without an increase in
price of the Common Stock. In order to realize the poten-
tial values set forth in the 5% and 10% columns of this
table for options with a ten-year term, the per share price
of the Company's Common Stock would be $25.54 and $40.67,
respectively, or 63% and 159%, respectively, above the exer-
cise or base price.
(2) Options vest at a rate of 20% per annum commencing on the
first anniversary of the date of grant, unless noted other-
wise. All options are qualified except for the 41,279 and
6,191 options of Messrs. Lindemann and Kelley, respectively,
which are non-qualified.
(3) All options were granted at 100% of the fair market value on
the date of grant, except for Mr. Lindemann's 28,721 quali-
fied options which were granted at 110% of the fair market
value on the date of grant.
(4) Options vest at a rate of 10% per year commencing on the
first anniversary of the date of grant.
OPTIONS/SARS EXERCISED IN 1996 AND 1996 YEAR-END VALUES
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, 1996.
Number
of Securi-
ties Under-
lying Unexer- Value of Unexercised
cised Options In-the-Money Options
Fiscal Year End at Fiscal Year End
Exercisable/ Exercisable/
Shares Unexercisable(1) Unexercisable(2)
Acquired --------------- ---------------------
on Value Exer- Unexer- Exer- Unexer-
Name Exercise Realized cisable cisable cisable cisable
- -------- -------- -------- ------- ------- ---------- ----------
George L.
Lindemann * * 94,815 125,125 $1,321,589 $1,034,289
Peter H.
Kelley * * 125,685 129,535 1,848,628 1,151,153
C. Thomas
Clowe, Jr. * * -- 21,000 -- 132,720
Ronald J.
Endres * * 110,250 61,075 1,687,707 558,976
Dennis K.
Morgan * * 11,025 14,525 139,136 149,459
- ----------------
* No options were exercised during the year ended June 30,
1996 by the named executive officers
(1) The securities underlying unexercised options have been
adjusted to reflect each of the 5% stock dividends dis-
tributed on November 27, 1995 and on June 30, 1994, the
four-for-three stock split distributed in the form of a
33 1/3% stock dividend on March 11, 1996 and the three-for-
two stock split distributed in the form of a 50% stock
dividend on March 9, 1994.
(2) Based on a closing price on June 30, 1996 of $22.00 per
share as reported by the New York Stock Exchange.
RETIREMENT BENEFITS
The company sponsors two qualified ("Plans A and B" or collec-
tively, the "Qualified Plans") and one non-qualified (the "Non-
Qualified Plan") retirement income plans. With respect to the
Qualified Plans, Plan B covers all employees of Missouri Gas
Energy and Plan A covers all employees other than employees of
Missouri Gas Energy, Lavaca Realty Company, Mercado Gas Services,
Inc. and ConTigo, Inc. All officers listed herein the Summary
Compensation Table, except Mr. Clowe, are presently covered by
Plan A. All officers listed in the Summary Compensation Table,
except Messrs. Lindemann and Clowe, are covered by the Non-
Qualified Plan. Mr. Clowe is covered by Plan B beginning
October 1, 1996.
Under the Qualified Plans, Plan A benefits are based on total W-2
compensation (less certain defined exclusions), limited to
$150,000 annually, and includes a cost of living adjustment of up
to 2% per year. Plan A benefits are payable for life, with a 10-
year guaranteed period. Plan B benefits are based on basic
earnings, limited to $150,000 annually. Plan B benefits do not
include any cost of living adjustment. Plan B benefits are pay-
able for life, with no certain period guarantee. In both Quali-
fied Plans, benefits are based upon average annual compensation
for the five highest consecutive years in the applicable period.
The following table reflects the benefits available under the
Qualified Plans.
Qualified Plans
Years of Service
----------------------------------------------------
15 20 25
----------------------------------------------------
Remuneration Plan A Plan B Plan A Plan B Plan A Plan B
- ------------ ------- ------- ------- ------- ------- -------
$125,000 $24,938 $33,970 $33,250 $45,294 $41,563 $52,242
150,000+ 29,925 41,095 39,900 54,794 49,875 63,242
Years of Service
----------------------------------------------------
30 35
----------------------------------------------------
Remuneration Plan A Plan B Plan A Plan B
- ------------ ------- ------- ------- -------
$125,000 $49,875 $59,191 $58,188 $66,139
150,000+ 59,850 71,691 69,825 80,139
The benefits payable under the Non-Qualified Plan are shown in
the table below under the heading corresponding to the qualified
plan in which the officer participates.
Non-Qualified Plans
Years of Service
----------------------------------------------------
15 20 25
----------------------------------------------------
Remuneration Plan A Plan B Plan A Plan B Plan A Plan B
- ------------ ------- ------- ------- ------- -------- --------
$125,000 $ -- $ -- $ -- $ -- $ -- $ --
150,000 -- -- -- -- -- --
175,000 4,988 -- 6,650 -- 8,313 --
200,000 9,975 -- 13,300 -- 16,625 3,258
225,000 14,963 3,793 19,950 5,056 24,938 11,571
250,000 19,950 8,780 26,600 11,706 33,250 19,883
300,000 29,925 18,755 39,900 25,006 49,875 36,508
400,000 49,875 38,705 66,500 51,606 83,125 69,758
450,000 59,850 48,680 79,800 64,906 99,750 86,383
500,000 69,825 58,655 93,100 78,206 116,375 103,008
Years of Service
----------------------------------------------------
30 35
----------------------------------------------------
Remuneration Plan A Plan B Plan A Plan B
- ------------ -------- -------- -------- --------
$125,000 $ -- $ -- $ -- $ --
150,000 -- -- -- --
175,000 9,975 -- 11,638 1,324
200,000 19,950 8,109 23,275 12,961
225,000 29,925 18,084 34,913 24,599
250,000 39,900 28,059 46,550 36,236
300,000 59,850 48,009 69,825 59,511
400,000 99,750 87,909 116,375 106,061
450,000 119,700 107,859 139,650 129,336
500,000 139,650 127,809 162,925 152,611
As of June 30, 1996, Messrs. Lindemann, Kelley, Endres and Morgan
were credited with 6, 6, 27 and 15 years of service, respec-
tively, under the Qualified Plans. 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, the
Non-Qualified Plan was established. Beginning in 1994, the maxi-
mum compensation considered in both Qualified Plans was reduced
to $150,000 from the $235,840 limit applicable to 1993. The Non-
Qualified Plan formula has been amended effective July 1, 1996 to
convert to Plan A's simpler benefit formula, but without certain
restrictions on considered compensation and Internal Revenue Code
Section 415 limitations which Plan A must have in order to remain
qualified. In order to maintain the previous level of Non-
Qualified Plan benefits, certain participants have been credited
additional years of service under the new Non-Qualified Plan for-
mula. As of July 1, 1996 Messrs. Kelley, Endres and Morgan had
been credited with additional service of 22, 5 and 4 years,
respectively, under the Non-Qualified Plans. Neither the Quali-
fied Plans nor the Non-Qualified Plan contain an offset for
Social Security benefits.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-
CONTROL ARRANGEMENTS
All executive officers of the Company serve at the discretion of
the Board of Directors. Generally, the executive officers are
appointed to their position by the Board annually.
The Company has an agreement with Mr. Kelley that upon certain
occurrences, the outstanding balance on his promissory note due
to the company will be canceled and deemed paid in full. These
occurrences include, among other items, termination of employment
other than for cause, diminution in base salary or a change-in-
control of the Company. See "Certain Relationships."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company does not have a separate
compensation committee. Except with respect to the 1992 Plan,
which is administered by the Board's Long-Term Stock Incentive
Plan Committee, all decisions regarding management compensation
are made by the full Board of Directors of the Company. Direc-
tors 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 manage-
ment but did not participate in Board votes as to compensation
for themselves. See "Certain Relationships."
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors closely aligns the total compensation of
the executive officers with the profitability of the Company.
Merit increases to the base salaries for the officer group have
been moderate in comparison to industry standards. The Southern
Union 1992 Long-Term Stock Incentive Plan was introduced in order
to focus the attention of management on the long-term improvement
of stockholder value.
The Company's 1996 short-term incentive plan was aligned with
each officer's and manager's compensation to directly reflect the
desired short-term marketing and profitability goals of the Com-
pany applicable to such officer or manager. By balancing the use
of short- and long-term incentive and adequate base salary, the
Board of Directors believes it has been and will continue to be
able to recruit the talent needed to manage the Company, retain
the talents of current management and align the successes of the
Company and management.
The factors and criteria utilized by the Board of Directors
includes the assessment of comparable information from other
utilities and similarly-sized operations. It is the philosophy
of the Company's Board to set the base salaries of executive
officers at an amount lower than the average of a financial peer
group of other mid-sized natural gas local distribution companies
("LDCs"), with opportunities to earn above the average based on
excellent individual and corporate performance. This peer group
includes neighboring and other similarly sized LDCs which share
operating and financial characteristics with the Company. The
Board believes the performance on which executive officer compen-
sation is based should be assessed both on an annual basis and
also over a longer period of time to ensure that executive
officers work to support both the Company's current objectives as
well as its strategic objectives.
The Board of Directors regularly reviews the Chief Operating
Officer's recommended base salary merit increases, cash incentive
plan and stock option plan awards for the Company's other execu-
tive officers. Base salary merit increase and cash incentive
award recommendations, if any, are primarily based on corporate
operating and financial performance, as well as on executive
officers' individual performance, for the prior fiscal year.
Merit increases are also based on a review of peer group base
salaries and executive officers' individual contributions to the
Company's strategic objectives. Stock option recommendations, if
any, are primarily based on executive officers' individual per
formance during the prior fiscal year, but also relate to per-
formance judgments as to the past contributions of the individual
executive officers and judgments as to their individual contribu-
tions to the Company's strategic objectives. The Board of Direc-
tors then determines compensation for such executive officers, in
light of (a) the Company's actual performance as compared to its
corporate financial goals for the prior fiscal year, (b) indi-
vidual executive officers' actual performance as compared to
their individual goals supporting the Company's financial and
operating objectives, (c) the Company's executive officer com-
pensation levels relative to its peer group and (d) periodic
reports from independent compensation consultants regarding the
compensation competitiveness of the Company. The Board of Direc-
tors also reviews the above types of compensation for the Chief
Executive Officer with the assistance of the Company's human
resources staff and recommends adjustments as deemed appropriate
based on the above compensation review criteria and its expecta-
tion as to his future contributions in leading the Company.
Neither the Chairman of the Board and Chief Executive Officer nor
the President and Chief Operating Officer were included in the
Short-Term Incentive Plan for 1996. The President and Chief
Operating Officer - Missouri Gas Energy, the Executive Vice
President and Chief Financial Officer, and the Vice President -
Legal and Secretary had the ability to obtain short-term incen-
tive awards for 1996.
The Long-Term Stock Incentive Plan Committee considers all
aspects of compensation provided to the executive officers prior
to determining appropriate awards to be given under the 1992 Plan
to each executive. The 1992 Plan was approved at the annual
meeting of stockholders held on May 12, 1993. Under the 1992
Plan, options to purchase 1,146,600 shares may be granted to
officers and key employees at prices not less than the market
value on the date of grant. Options granted under the 1992 Plan
are exercisable for periods of ten years from the date of grant
or such lesser period as may be designated for particular
options, and become exercisable after a specified period of time
from the date of grant in cumulative annual installments. The
1992 Plan also allows for the granting of stock appreciation
rights, dividend equivalents, performance shares and restricted
stock.
In 1993, the Board of Directors established the Supplemental
Plan. The Supplemental Plan is designed to encourage greater
ownership of Company shares by highly compensated employees by
increasing the Company matching contribution, and to provide
employee benefits similar to the benefits such employee would
have received under the 401(k) Plan if not for the existence of
certain limitations that are set forth in the Internal Revenue
Code of 1986, as amended (the "Code"), relating to "highly com-
pensated employees" as defined in the Code. Under the Supplemen-
tal Plan, an eligible employee may defer up to 5% of his or her
annual compensation (salary and bonus) through payroll deductions
(the "Employee Contributions"). In addition, the Supplemental
Plan requires the Company to make a 50% matching contribution on
Employee Contributions up to a maximum of 5% of the participant's
annual compensation. The Employee Contributions, together with
the Company's matching contributions, are invested by the Supple-
mental Plan's trustee in shares of Common Stock. The Board of
Directors has proposed certain amendments to the Supplemental
Plan to be voted upon by stockholders at the Meeting. See
"Proposal of Changes to the Southern Union Company Supplemental
Deferred Compensation Plan."
In determining the compensation structure for the Chairman of the
Board and Chief Executive Officer consideration was given to the
fact that Mr. Lindemann does not devote his full business time to
the business of the Company. Accordingly, the Board of Directors
believes that it has concentrated, and intends to continue to
concentrate, the bulk of Mr. Lindemann's compensation on long-
term incentives such as stock option grants which are directly
attributable to increasing stockholder value.
By: The Board of Directors
George L. Lindemann John E. Brennan
Frank W. Denius Peter H. Kelley
Aaron I. Fleischman Roger J. Pearson
Kurt A. Gitter, M.D. George Rountree, III
Adam M. Lindemann Dan K. Wassong
<PAGE>
COMPANY PERFORMANCE CHART
The following performance graph compares the performance of the
Company's common stock to the Standard & Poor's 500 Stock Index
("S&P 500") and the Standard & Poor's Utilities 40 Index ("S&P
Utilities Index"). The comparison assumes $100 was invested on
June 30, 1991 in the Company's Common Stock, the S&P 500 Index
and in the S&P Utilities Index. Each case assumes reinvestment
of dividends.
Comparison of Five-Year Cumulative Total Return
(Southern Union, S&P 500 and S&P Utilities)
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Southern Union 100 113 156 222 228 388
S&P 500 Index 100 113 129 131 165 207
S&P Utilities Index 100 114 143 131 151 186
In previous years, the Company utilized the American Gas Asso-
ciation ("AGA") peer group index which is comprised of AGA member
companies classified by Edward D. Jones and Co. as gas distribu-
tion companies. The AGA Index was compiled on a calendar year
basis until 1994 when it was calculated on a quarterly basis
going forward. Since the AGA Index information is not available
to coincide with the Company's June 30 fiscal year-end, the S&P
Utilities Index is utilized instead.
PROPOSAL OF CHANGES TO THE SOUTHERN UNION COMPANY
SUPPLEMENTAL DEFERRED COMPENSATION PLAN
Terms of the Plan
- -----------------
The Southern Union Company Supplemental Deferred Compensation
Plan (the "Supplemental Plan") was adopted on June 15, 1993, by
the Executive Committee of the Board and approved by the Stock-
holders at the 1994 Annual Meeting. The Supplemental Plan was
designed to provide employee benefits similar to the benefits
such employee would receive under the Southern Union (401(k))
Savings Plan if not for the existence of certain limitations that
are set forth in the Internal Revenue Code of 1986, as amended
(the "Code"), relating to "highly compensated employees" as
defined in the Code. Under the Supplemental Plan, an eligible
employee may defer up to 10% (up from 5%) of his or her annual
compensation (salary and bonus) through payroll deductions (the
"Employee Contributions"). In addition, the Supplemental Plan
requires the Company to make a matching contribution. Such
Employee Contributions, together with the Company's matching
contribution, are invested by the Supplemental Plan's trustee in
shares of Common Stock.
A participant is at all times 100% vested with respect to the
amount of his or her Employee Contributions and to the income,
gains and losses with respect to such contributions. The Com-
pany's matching contributions and any income, gains and losses
with respect to such matching contributions vest at a rate of 20%
per year beginning with the date that the participant has com-
pleted two years of service with the Company. A participant is
fully vested with respect to such amounts upon either completing
six (6) years of service with the Company or if the participant
dies while employed by the Company. Employee Contributions and
the Company's matching contributions that are vested may not be
withdrawn by a participant until (i) thirty (30) days after such
time the participant is no longer an employee of the Company,
or (ii) with the permission of the Company's benefits committee
in the event of an unforeseeable emergency arising from events
beyond the control of the participant which results in severe
financial hardship.
The Supplemental Plan is operated under procedures set forth in
the plan, and is administered by the Company's benefits commit-
tee. The Board of Directors may terminate, suspend or amend the
Supplemental Plan; provided that, certain material amendments
must be submitted for stockholder approval to the extent neces-
sary for the Supplemental Plan to satisfy the requirements of the
exemption from the short-swing profit rules of the Securities and
Exchange Commission under Section 16(b) of the Securities
Exchange Act of 1934, as amended.
The foregoing description is qualified in its entirety by the
text of the Supplemental Plan. A copy of the Supplemental Plan
is available without charge upon written request to the Secretary
of the Company.
Proposed Amendments to the Plan
- -------------------------------
The Company desires to encourage greater ownership of Company
Common Stock by its highly compensated employees, and to provide
additional benefits beyond what would be available in the
401(k) Plan. To accomplish this, the Board proposes to increase
maximum permissible employee contributions from the current five
percent (5%) to ten percent (10%) of annual compensation, to
increase the Company matching contribution from fifty percent
(50%) to one hundred percent (100%) of employee contributions
subject to Company matching and to increase the Company matching
contribution from its current matching of $.50 per $1.00
contributed for the first five percent (5%) of salary deferred
pursuant to the Supplemental Plan, to $.50 per $1.00 contributed
for the first ten percent (10%) deferred pursuant to the
Supplemental Plan.
Contributions Under the Plan
- ----------------------------
The following table sets forth the dollar value of all Company
matching contributions during the fiscal year ended June 30, 1996
and since the inception of the Supplemental Plan to June 30,
1996. The table also sets forth the number of shares of Common
Stock contributed by the Company as matching contributions under
the Supplemental Plan during the fiscal year ended June 30, 1996
and since the inception of the Supplemental Plan to June 30,
1996.
Dollar Value ($) Number of Shares
---------------- ----------------
During During
Fiscal Fiscal
Year Since Year Since
Ended Plan Ended Plan
June 30, Incep- June 30, Incep-
Name and Position 1996 tion 1996 tion
George L. Lindemann
Chairman of the Board
and Chief Executive
Officer 6,000 8,273 251 376
Peter H. Kelley
President and Chief
Operating Officer 13,043 19,423 531 883
C. Thomas Clowe, Jr.
President and Chief
Operating Officer --
Missouri Gas Energy -- -- -- --
Ronald J. Endres
Executive Vice
President and Chief
Financial Officer 8,026 12,976 317 590
Dennis K. Morgan
Vice President --
Legal and Secretary 5,773 9,709 224 441
All Executive Officers 45,833 73,897 1,810 3,358
All Directors Who Are
Not Executive
Officers * * * *
All Employees Who Are
Not Executive
Officers 53,241 86,333 2,099 3,925
- --------------------
* Only employees of the Company are eligible to participate.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL OF CHANGES TO THE SOUTHERN UNION COMPANY SUPPLEMENTAL
DEFERRED COMPENSATION PLAN.
PROPOSAL OF CHANGES TO THE SOUTHERN UNION COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
Terms of the Plan
- -----------------
The Southern Union Company Directors' Deferred Compensation Plan
(the "Directors' Deferral Plan") was adopted on June 15, 1993, by
the Executive Committee of the Board and approved by the Stock-
holders at the 1994 Annual Meeting. The Directors' Deferral Plan
was designed to attract and retain well-qualified individuals to
serve as outside directors and to enhance the identity of their
interests and the interests of stockholders. Participation in
the Directors' Deferral Plan is optional and is subject to an
irrevocable election to satisfy the requirements of the exemption
from the short-swing profit rules of the Securities and Exchange
Commission under Section 16(b) of the Securities Exchange Act of
1934, as amended. Under the Directors' Deferral Plan, each
director who is not also an employee of the Company may choose to
defer all or any percentage of his or her director's fees and
invest such deferred amount in Common Stock, if an appropriate
irrevocable written election to defer is made at least six months
prior to the beginning of the year to which such deferral
applies. The Directors' Deferral Plan currently requires the
Company to make a matching contribution of 50% of the first 7% of
the participant's total director's fees, to the extent deferred.
The Company's matching contribution is invested by the Directors'
Deferral Plan's trustee in shares of Common Stock.
A participating director is at all times 100% vested with respect
to the amount of his or her deferred director's fees and to the
income, gains and losses with respect to such deferrals. The
Company's matching contributions do not vest until the partici-
pating director either has completed five (5) years of service as
a director or dies while serving as a director. Deferred amounts
may not be withdrawn by a participant until (i) thirty (30) days
after such time as the director either retires or ceases to be a
director of the Company; or (ii) with the permission of the Board
in the event of an unforeseeable emergency arising from events
beyond the control of the participant which results in severe
financial hardship.
The Directors' Deferral Plan operates under procedures set forth
in such plan. No discretion regarding administration of the
Directors' Deferral Plan is vested in the Board, any committee of
the Board, or any officer or director of the Company. The Board
may terminate, suspend or amend the Directors' Deferral Plan;
provided that, certain material amendments must be submitted for
stockholder approval to the extent necessary for the Directors'
Deferral Plan to satisfy the requirements of the exemption from
the short-swing profit rules of the Securities and Exchange Com-
mission under Section 16(b) of the Securities Exchange Act of
1934, as amended.
The foregoing description is qualified in its entirety by the
text of the Directors' Deferral Plan. A copy of the Directors'
Deferral Plan is available without charge upon written request to
the Secretary of the Company.
Proposed Amendments to the Plan
- -------------------------------
The Company desires to encourage greater ownership of Company
Common Stock by its directors. To accomplish this, the Board
proposes to increase directors contributions subject to Company
matching from the current seven percent (7%) to ten percent (10%)
and to increase the Company matching contribution from fifty per-
cent (50%) to one hundred percent (100%) of directors contribu-
tions subject to Company matching.
Contributions Under the Plan
- ----------------------------
The following table sets forth the dollar value of all Company
matching contributions during the fiscal year ended June 30, 1996
and since the inception of the Directors' Deferral Plan to
June 30, 1996. The table also sets forth the number of shares of
Common Stock contributed by the Company as matching contributions
under the Directors' Deferral Plan during the fiscal year ended
June 30, 1996 and since the inception of the Directors' Deferral
Plan to June 30, 1996.
Dollar Value ($) Number of Shares
During During
Fiscal Fiscal
Year Since Year Since
Ended Plan Ended Plan
June 30, Incep- June 30, Incep-
Name and Position 1996 tion 1996 tion
George L. Lindemann
Chairman of the
Board and Chief
Executive Officer * * * *
Peter H. Kelley
President and Chief
Operating Officer * * * *
C. Thomas Clowe, Jr.
President and Chief
Operating Officer --
Missouri Gas Energy * * * *
Ronald J. Endres
Executive Vice
President and Chief
Financial Officer * * * *
Dennis K. Morgan
Vice President --
Legal and Secretary * * * *
All Executive Officers * * * *
All Directors Who Are
Not Executive Officers 6,670 11,278 248 470
All Employees Who Are
Not Executive Officers * * * *
- ----------------------
* Only Directors who are not also employees of the Company are
eligible to participate. Directors Brennan, G. Lindemann and
Kelley are considered to be Executive Officers and employees
of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL OF CHANGES TO THE SOUTHERN UNION COMPANY DIRECTORS'
DEFERRED COMPENSATION PLAN.
CERTAIN RELATIONSHIPS
In April 1992 Southern Union advanced $375,980 to
Peter H. Kelley, President, Chief Operating Officer and a
Director of Southern Union, to enable him to repay certain funds
borrowed by him from his previous employer in connection with his
departure from his previous employer and relocation to become an
executive officer of the Company. In May 1995 the note was
restructured calling for 359 monthly payments of approximately
$1,909 and a balloon payment of $147,746. The restructuring is
evidenced by a renewal promissory note, bearing an annual per-
centage interest rate equal to 7.4%. At the time of restruc-
turing, the outstanding balance on the note was $369,434, to
which Mr. Kelley made a $50,000 principal payment and $27,761 of
principal and interest was forgiven by the Company. During the
fiscal year ended June 30, 1996, an additional $12,576 in
interest was forgiven by the Company. See "Management Compensa-
tion." The outstanding balance at June 30, 1996 was $271,213.
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. Chairman George L. Lindemann and Vice
Chairman John E. Brennan control and operate, and Director
Adam M. Lindemann has a beneficial interest in, Activated; none
of the foregoing Directors participated in such Board action.
Total payments to Activated in 1996, 1995 and 1994 were $251,000,
$251,000 and $125,000, respectively.
Director Fleischman is Senior Partner of Fleischman and Walsh,
L.L.P., which provides legal services to the Company and certain
of its subsidiaries. For the fiscal year ended June 30, 1996,
the total amount paid by the Company to Fleischman and Walsh,
L.L.P. for legal services was $930,602.
STOCKHOLDER PROPOSALS
In order for any stockholder proposal to receive consideration
for inclusion in the Company's Proxy Statement for its 1997
Annual Meeting of Stockholders, such proposals must be received
by June 30, 1997, at the Company's offices at 504 Lavaca Street,
Eighth Floor, Austin, Texas 78701, Attention: Dennis K. Morgan,
Secretary. The Company's Bylaws set forth certain other
requirements with respect to new or other business proposed to be
brought before the Meeting by a stockholder and with respect to
any nomination by a stockholder for election as a Director of any
person other than the Nominees selected by the Board of
Directors.
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. has served as the Certified Public
Accountants of the Company for the fiscal year ended June 30,
1996. Representatives of Coopers & Lybrand L.L.P. are expected
to be present at the Meeting, and to be given an opportunity to
make a statement if they desire to do so and to be available to
respond to appropriate questions. The Audit Committee of the
Board of Directors of the Company presently expects to recommend
to the Board, and the Board is expected to approve, the selection
of Coopers & Lybrand L.L.P. to serve as the Company's Certified
Public Accountants for the fiscal year ending June 30, 1997.
OTHER BUSINESS
The Board of Directors is not aware of any matter other than the
matters described above to be presented for action at the
Meeting. However, if any other proper items of business should
come before the Meeting, it is the intention of the person or
persons acting under the enclosed form of proxy to vote in
accordance with their best judgment on such matters.
MISCELLANEOUS
The Company will pay the expenses of this proxy solicitation. In
addition to solicitation by mail, some of the officers and regu-
lar employees of the Company may solicit proxies personally or by
telephone. The Company will request brokers and other
fiduciaries to forward proxy-soliciting material to the bene-
ficial owners of shares which are held of record by them, and the
Company may reimburse them for certain reasonable out-of-pocket
expenses incurred by them in connection therewith.
The Company's Annual Report to Stockholders and Annual Report on
Form 10-K for the fiscal year ended June 30, 1996, as filed with
the Securities and Exchange Commission are available without
charge to stockholders upon writing to the Secretary of the
Company. Neither such Annual Report to Stockholders nor the
Annual Report on Form 10-K for the fiscal year ended June 30,
1996 is to be treated as part of the proxy solicitation materials
or as having been incorporated herein by reference.
By Order of the Board of Directors,
DENNIS K. MORGAN
Secretary
Austin, Texas
September 26, 1996
<PAGE>
BACK PAGE
PROXY CARD (FRONT)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SOUTHERN UNION COMPANY FOR THE NOVEMBER 12, 1996
ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints, GEORGE L. LINDEMANN,
P JOHN E. BRENNAN, and PETER H. KELLEY, or any one, two or all
three of them, with power of substitution in each, proxies
R for the undersigned, to represent the undersigned and to
vote all the Common Stock of the Company which the under-
O signed would be entitled to vote, as fully as the under-
signed could vote and act if personally present, at the
X Annual Meeting of Stockholders to be held on November 12,
1996 at 2:00 p.m. Central Standard Time, in the eighth floor
Y atrium of the Company's offices at Lavaca Plaza, 504 Lavaca
Street, Austin, Texas or at any adjournment thereof.
THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON ALL
MATTERS PROPERLY BROUGHT BEFORE THE MEETING, INCLUDING ANY MATTER
OF WHICH MANAGEMENT WAS NOT AWARE A REASONABLE TIME BEFORE THE
SOLICITATION OF THIS PROXY. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" EACH PROPOSAL.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
PROXY CARD (BACK)
X Please mark votes as in this example
- ---
1. Election of the following nominees as Class III Directors
Nominees: GEORGE L. LINDEMANN, PETER H. KELLEY AND
DAN K. WASSONG.
FOR WITHHELD
--- ---
------------------------------------------------------------
Withheld for the following only (write the name of the
nominee(s) on the space above)
2. Proposal of changes under the Southern Union Company Supple-
ental Deferred Compensation Plan to increase maximum permis-
sible employee contributions from 5% to 10%, to increase the
Company matching contribution from 50% to 100% of employee
contributions subject to such Company matching and to
increase employee contributions subject to Company matching
contribution from 5% to 10%.
FOR AGAINST ABSTAIN
--- --- ---
3. Proposal of changes under the Southern Union Company
Directors' Deferred Compensation Plan to increase directors
contributions subject to Company matching from 7% to 10% and
to increase the Company matching contribution from 50% to
100% of directors contributions subject to such Company
matching.
FOR AGAINST ABSTAIN
--- --- ---
Please return your signed proxy at once in the enclosed envelope
which requires no postage if mailed in the United States, even
though you expect to attend the meeting in person.
Please date and sign below. If joint account, each owner should
sign. When signing in a representative capacity, please give
title. Please sign here exactly as name appears in the address.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
- ---
Signature Date
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Signature Date
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