<PAGE>
Southern
Union
Company
504 Lavaca Street, Eighth Floor
Austin, Texas 78701
September 24, 1997
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 11, 1997 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 11,
1997 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>
TABLE OF CONTENTS
Notice of Annual Meeting of Stockholders................... i
Defined Terms.............................................. ii
Questions and Answers...................................... 1
Proposals to be Voted Upon................................. 4
Board of Directors......................................... 6
Board Size and Composition............................. 6
Board Committees and Meetings.......................... 7
Board Compensation..................................... 7
Directors' Deferred Compensation Plan.................. 8
Board of Directors Report on Executive Compensation........ 9
Executive Officers and Compensation........................ 10
Executive Officers Who Are Not Directors............... 10
Executive Compensation................................. 11
Summary Compensation Table............................. 11
Option Grants in 1997.................................. 12
Options Exercised in 1997 and 1997 Year-End Values..... 13
Retirement Benefits.................................... 13
Employment Contracts, Termination of Employment and
Change-in Control Arrangements...................... 14
Compensation Committee Interlocks and Insider
Participation....................................... 14
Section 16(a) Beneficial Ownership Reporting
Compliance.......................................... 14
Security Ownership......................................... 15
Common Stock Performance Graph............................. 17
Certain Relationships...................................... 17
Independent Auditors....................................... 18
Company's 1997 Annual Report............................... 18
<PAGE>
Southern Union Company
504 Lavaca Street, Eighth Floor
Austin, Texas 78701
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 11, 1997
To the Holders of Common Stock of
SOUTHERN UNION COMPANY:
The 1997 Annual Meeting of Stockholders of Southern Union Com-
pany, a Delaware corporation, will be held in the eighth floor
atrium of the Company's offices at Lavaca Plaza, 504 Lavaca
Street, Austin, Texas on Tuesday, November 11, 1997 at 2:00 p. m.
(Central Standard Time) to consider and take action upon the
following:
(i) the election of three persons to serve as the Class I
directors until the 2000 Annual Meeting of Stockholders
or until their successors are duly elected and qualified;
and
(ii) proposed changes under the Southern Union Company 1992
Long-Term Stock Incentive Plan, primarily to approve an
additional 900,000 shares of Common Stock to be eligible
for grant.
Your Board of Directors recommends a vote "For" both proposals.
The Board of Directors is not aware of any other business to come
before the Meeting.
Stockholders of record of the Company's Common Stock at the close
of business on September 12, 1997 will be entitled to vote at the
Annual Meeting or any adjournment or postponement thereof. A
complete list of stockholders of record entitled to vote at the
Meeting will be maintained in the Company's 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 24, 1997
<PAGE>
DEFINED TERMS
"1982 Plan" means Southern Union's 1982 Stock Option Plan.
---------
"1992 Plan" means Southern Union's 1992 Long Term Stock Incentive
---------
Plan.
"401(k) Plan" means Southern Union's Savings Plan.
-----------
"Board" or "Board of Directors" means Southern Union's Board of
----- ------------------
Directors.
"Common Stock" means Southern Union's Common Stock.
------------
"Company" or "Southern Union" or "we" means Southern Union
------- -------------- --
Company.
"Directors' Plan" means Southern Union's Directors' Deferred
---------------
Compensation Plan.
"Plan Committee" means the 1992 Long-Term Stock Incentive Plan
--------------
Committee of the Board of Directors of the Company, which
administers the 1992 Plan and the 1982 Plan.
"Supplemental Plan" means Southern Union's Supplemental Deferred
-----------------
Compensation Plan.
<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 29, 1997, is solicited by Southern Union Company
in connection with the Annual Meeting of Stockholders to be held
on November 11, 1997.
QUESTIONS AND ANSWERS
- -----------------------------------------------------------------
Q: What am I voting on?
A: - Re-election of three directors (John E. Brennan,
Frank W. Denius and Roger J. Pearson); and
- Approval of an amendment to the 1992 Plan.
(See page 4 for more details.)
- -----------------------------------------------------------------
Q: Who is entitled to vote?
A: Stockholders as of the close of business on the Record Date,
September 12, 1997, are entitled to vote at the Annual
Meeting. Each share of Common Stock is entitled to one vote.
With respect to the election of directors, stockholders have
cumulative voting rights, which entitle each stockholder to
that number of votes which equals the number of shares he or
she holds multiplied by the number of directors to be elected
(3). The Bylaws of the Company require that a stockholder
who intends to exercise cumulative voting rights at the
Annual Meeting must give written notice to the Secretary of
the Company no later than ten (10) days after notice of the
Annual Meeting was first sent to stockholders.
- -----------------------------------------------------------------
Q: How do I vote?
A: Sign and date each Proxy Card you receive and return it in
the prepaid envelope. If you do not mark any selections,
your Proxy Card will be voted in favor of the two proposals.
You have the right to revoke your proxy at any time before
the Meeting by (1) notifying Southern Union's Corporate
Secretary, (2) attending the Meeting and voting in person or
(3) returning a later-dated proxy. If you return your signed
Proxy Card, but do not indicate your voting preferences, the
proxy will be voted FOR the two proposals on your behalf.
The Board of Directors is not aware of any matter other than
the matters described above to be presented for action at the
Meeting. If a proposal other than the two listed in the
Notice is presented at the Annual Meeting, your signed proxy
card gives authority to George L. Lindemann and
Peter H. Kelley, or either of them, to vote on such matters,
who intend to vote in accordance with their best judgment.
Proxies should NOT be sent by stockholders to the Company but
to Boston EquiServe, L.P., the Company's Registrar and
Transfer Agent, at 150 Royall Street, Canton, Massachusetts
02021.
- -----------------------------------------------------------------
Q: Is my vote confidential?
A: Yes. Proxy cards, ballots and voting tabulations that
identify individual stockholders are confidential. Only the
inspectors of election and certain employees associated with
processing proxy cards and counting the vote have access to
your card. Additionally, all comments directed to management
(whether written on the Proxy Card or elsewhere) will remain
confidential, unless you ask that your name be disclosed.
- -----------------------------------------------------------------
Q: Who will count the vote?
A: Representatives of the Company and its legal counsel,
Fleischman and Walsh, L.L.P., will tabulate the votes and act
as inspectors of election.
- -----------------------------------------------------------------
Q: What does it mean if I get more than one proxy card?
A: It is an indication that your shares are registered dif-
ferently and are in more than one account, including your
accounts in Southern Union's Direct Stock Purchase Plan, the
executive compensation plans, employee benefit plans and
shares credited to your Savings Plan account held in custody
by the trustee, Wilmington Trust. Sign and return all proxy
cards to ensure that all your shares are voted.
- -----------------------------------------------------------------
Q: What constitutes a quorum?
A: As of the Record Date, 17,122,736 shares of the Company's
Common Stock were issued and outstanding. A majority of the
outstanding shares, present or represented by proxy, consti-
tutes a quorum for the transaction of adopting proposals at
the Annual Meeting. If you submit a properly executed proxy
card, then you will be considered part of the quorum. If you
are present or represented by a proxy at the Annual Meeting
and you abstain, your abstention will have the same effect as
a vote against the proposal to amend the 1992 Plan but will
have no effect on the election of directors. Broker non-
votes will be counted as part of the quorum but will not be
part of the voting power present.
- -----------------------------------------------------------------
Q: Who can attend the Annual Meeting?
A: All stockholders as of the Record Date can attend.
- -----------------------------------------------------------------
Q: When are the 1998 stockholder proposals due?
A: In order to be considered for inclusion in next year's proxy
statement, stockholder proposals must be submitted in writing
by June 30, 1998, to Dennis K. Morgan, Corporate Secretary,
Southern Union Company, 504 Lavaca Street, Eighth Floor,
Austin, Texas 78701.
- -----------------------------------------------------------------
Q: How does a stockholder nominate someone to be considered for
election as a director of Southern Union?
A: Any stockholder may recommend any person as a nominee for
director of Southern Union by writing to the Company's
Secretary at least 45 days before an annual meeting (which
was September 26, 1997 for this year's Meeting) or no later
than ten (10) days after the date of the notice of a special
meeting. Accordingly, no stockholder may make additional
nominations at the Annual Meeting. The notice must include
certain information about the nominating stockholder and the
nominee(s). Certain persons are disqualified from serving as
directors. A copy of the relevant Bylaws provisions may be
obtained from the Company's Secretary. As of September 26,
1997, no stockholder has nominated any person to serve as a
director of the Company.
- -----------------------------------------------------------------
Q: Who pays for this proxy solicitation?
A: Southern Union will reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for forwarding proxy and solicitation
material to the owners of Common Stock.
- -----------------------------------------------------------------
<PAGE>
PROPOSALS TO BE VOTED UPON
1. Re-election of Directors
Nominees for re-election this year are John E. Brennan,
Frank W. Denius and Roger J. Pearson. Each has consented to
serve a three-year term. (See page 6 for more information.)
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. Your Board recommends a vote FOR these
directors.
If any director declines or becomes unable to serve as a
director for any reason, votes will be cast instead for a
substitute nominee designated by the Board of Directors. If
no substitute is designated, votes will be cast according to
the judgment of George L. Lindemann and Peter H. Kelley. If
cumulative voting is in effect by a stockholder, unless
authority is withheld, George L. Lindemann and
Peter H. Kelley will allocate the votes represented by such
proxy in the manner they deem proper in their best judgment.
2. Proposal of Change to the 1992 Plan
Introduction: The 1992 Plan was approved and adopted by the
------------
Company's Board of Directors as of July 1, 1992 and was
adopted by the Company's stockholders at the annual meeting
held on May 12, 1993. The 1992 Plan was adopted in order to
permit the granting of a variety of long-term incentive
awards to officers and key employees of the Company and its
subsidiaries in order to focus the attention of management
and other employees on the long-term improvement of stock-
holder value and to align the interests of management and the
Company's stockholders. The Board also believes that the use
of such long-term incentives is important to the Company's
ability to attract and retain talented people to manage the
Company. As of June 30, 1997, awards covering a total of
1,201,922 shares of Common Stock have been granted out of
1,203,930 shares available under the 1992 Plan.
Please refer to the tables under the heading "Executive
Officers and Compensation" for information regarding awards
of stock options made to the Named Officers under the 1992
Plan.
Description of the 1992 Plan: The 1992 Plan provides for
----------------------------
awards in the form of stock options, stock appreciation
rights, dividend equivalents, restricted stock and perform-
ance shares and units. Each award is granted with terms and
conditions consistent with the 1992 Plan, as the Plan Commit-
tee determines. See "Board of Directors - Board Committees
and Meetings."
Any employee, including officers, is eligible to be granted
an award under the 1992 Plan. The Company estimates that
substantially all employees are eligible to participate in
the 1992 Plan.
The shares of Common Stock subject to an award under the 1992
Plan that expires or is forfeited become available again for
future awards. No award may be assigned or transferred
except by will or the laws governing descent and distribu-
tion.
Types of Awards:
---------------
Stock Options. The term of stock options does not exceed
-------------
ten years from the date of grant. The Plan Committee may
grant either "Incentive Stock Options," as defined in the
Internal Revenue Code, or stock options not intended to
qualify as such ("Non-Qualified Stock Options"). The
exercise price for the purchase of shares subject to a
stock option may not be less then 100% of the market value
of the shares covered by the option on the date of grant.
The exercise price must be paid in full in cash or shares
of Common Stock, or a combination of both.
Stock Appreciation Rights. The Plan Committee may grant
-------------------------
stock appreciation rights ("SARs") unrelated to options or
related to options or portions of options granted to
employees pursuant to the 1992 Plan. In exchange for sur-
rendering the right to exercise a related option, the
employee may exercise an SAR with respect to the number of
shares covered by the surrendered option. Upon the exer-
cise of an SAR, the employee is entitled to receive payment
of an amount equal to the aggregate appreciation in value
of the shares covered by the SAR or by the related option.
Such payment may be made in cash, in shares of Common Stock
or a combination of both. The Plan Committee may also
grant limited SARs which are exercisable only in certain
events such as a change in control of the Company. SARs
are not transferable, other than by will or the laws of
descent and distribution.
Dividend Equivalents. The 1992 Plan authorizes the
--------------------
granting of dividend equivalents which may be granted in
conjunction with an option or which may be granted sepa-
rately. A dividend equivalent entitles the holder to
receive a cash payment(s) equal to any cash dividends paid
during the term of the dividend equivalent with respect to
a number of shares of the Company's Common Stock. The Plan
Committee also has the discretion to grant dividend equiva-
lents entitling the holder to receive cash payment equal in
value to any non-cash (other than stock) dividends as well.
When a dividend equivalent is granted in conjunction with a
stock option, no adjustment to the related option will be
made in the event of a cash dividend or other distribution
on the Common Stock.
Performance Shares or Units. The 1992 Plan also provides
---------------------------
for the granting of performance shares or units which gives
the recipient the right to receive a specified number of
shares of Common Stock or cash upon the achievement of
specified performance objectives within a specified award
period. If a participant dies or terminates his or her
position with the Company prior to the close of an award
period, any performance shares or units granted to him or
her for the period would be forfeited unless such
restriction is waived by the Plan Committee. Performance
shares and units are non-transferable.
Restricted Stock. The 1992 Plan also provides for the
----------------
granting of restricted stock. Restricted stock is Common
Stock that is subject to forfeiture in the event the
recipient ceases to be an employee or director of the
Company for any reason prior to a date set by the Plan
Committee. If the participant retires, dies or is
disabled, then the number of shares of restricted stock
forfeited will depend upon how long the shares of
restricted stock had been held by the participant. If a
participant ceases to be an employee or director for any
other reason, all shares of restricted stock held by the
participant which are still subject to restriction will be
forfeited. The Plan Committee can remove the forfeiture
restriction on the stock at any time.
Effect of Change in Control: Upon certain events constituting a
- ---------------------------
change in control of the Company, as specified in the 1992 Plan,
all awards then outstanding will become immediately vested and/or
exercisable.
Outstanding Awards: The value of all the types of awards that
- ------------------
may be granted under the 1992 Plan is based on the value of the
Common Stock. To date, only awards of stock options and cash
dividend equivalents have been granted under the plan. The cash
dividend equivalents granted have been awarded in conjunction
with stock options. Although not a requirement of the 1992 Plan,
most stock options granted under the 1992 Plan vest at a rate of
20% per year beginning on the first anniversary of the date of
grant or cliff vest in three years.
In considering the recommendation of the Board of Directors,
stockholders should be aware that employee members of the Board
are eligible to participate in the 1992 Plan and that stock-
holders' percentage interest in the Company will be diluted as
shares under the Plan are issued.
Proposed Amendment: We request stockholder approval to increase
- ------------------
by 900,000 the number of shares available for awards under the
Plan in order to achieve the Plan's purposes in the future. No
other changes to the 1992 Plan are proposed.
Any stockholder may obtain a copy of the current Plan by writing
to Southern Union Company, 504 Lavaca Street, Eighth Floor,
Austin, Texas 78701, Attention: Corporate Secretary.
Vote Required: In order to approve the proposal of change to the
- -------------
1992 Plan, a majority of the total number of votes that could be
cast at the Annual Meeting must vote in favor of the proposal.
Your Board recommends a vote FOR the proposal of change to the
1992 Plan.
<PAGE>
BOARD OF DIRECTORS
Board Size and Composition
The Board of Directors of the Company is comprised of ten
directors which is divided into three classes, each of which
serves a staggered three-year term. The terms of the Class I
directors expire at the Meeting. The Class II directors will
serve until the 1998 Annual Meeting of Stockholders and the Class
III directors will serve until the 1999 Annual Meeting of Stock-
holders. This year's Nominees, John E. Brennan, Frank W. Denius
and Roger J. Pearson are the Class III directors standing for
election for a three-year term of office expiring at the 2000
Annual Meeting of Stockholders or when their successors are duly
elected and qualified.
The following pages contain information concerning the Nominees
and the directors whose terms of office will continue after the
meeting.
NOMINEES
Class I - Term expires in 2000
John E. Brennan has been Vice Chairman of the Board and Assistant
- ---------------
Secretary of Southern Union since February 1990. Mr. Brennan has
been primarily engaged in private investments since May 1992.
Prior to May 1992, Mr. Brennan had been President and Chief
Operating Officer of Metro Mobile CTS, Inc. ("Metro Mobile").
Age: 51.
Frank W. Denius has been Chairman Emeritus of Southern Union
- ---------------
since February 1990. Since February 1990, Mr. Denius has been
engaged primarily in the private practice of law in Austin,
Texas. Age: 72.
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, Hubbard & McLean
since 1991. Mr. Pearson has been a Director of the Company since
January 1992. Age: 51.
THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES TO SERVE AS
CLASS I DIRECTORS.
DIRECTORS CONTINUING IN OFFICE
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
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: 58.
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
University 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: 60.
Adam M. Lindemann has been the managing member of Lindemann
- -----------------
Capital Advisors, L.L.C. since November, 1996, which manages
investments for various private investment funds including
Lindemann Capital Partners, L.P. Previously, he had 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 previously during 1994 he was a
corporate finance associate with Perry Partners, a money manage-
ment firm. From May 1992 until 1994 he was primarily engaged in
private investments. Prior to May 1992, he had been Vice Presi-
dent - 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:
36.
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:
64.
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
Directors since March 1990. He was Chairman of the Board and
Chief Executive Officer of 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. Mr. Lindemann is also a
director of Network Event Theater, Inc. Age: 61.
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
Company, since December 1993. From December 1993 to September
1995, Mr. Kelley was also President of MGE. Prior to joining the
Company, he had been an officer of Metro Mobile since 1986.
Mr. Kelley is also a director of Texas Commerce Bank, N.A. --
Austin. Age: 50.
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. Mr. Wassong is also a director of Moore Medical
Corporation. Age: 67.
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.
Board Committees and Meetings
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 1997. 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. Denius (Chairman) and Gitter. The Audit Committee met
two times during fiscal year 1997. 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
Committee 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
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 Plan
Committee met one time during fiscal year 1997 and acted by
unanimous written consent on two occasions.
The Board of Directors held two meetings and acted by unanimous
written consent on three occasions during fiscal year 1997.
Except for Mr. Frank W. Denius, who was unable to attend one
meeting of the board of Directors, all directors attended all of
the meetings of the Board and committees on which they served
that were held in fiscal year 1997 while they were directors and
a member of any such committee.
Board Compensation
Compensation for each director is $20,000 per year, payable in
quarterly installments, except for: Mr. George Lindemann (who
receives $220,105 per year as Chairman of the Board and Chief
Executive Officer of the Company and Chairman of the Executive
Committee); Mr. Brennan (who receives $110,094 per year as Vice
Chairman of the Board of the Company and a member of the Execu-
tive Committee); Mr. Kelley (who receives no compensation as a
director in addition to his compensation as a full-time executive
officer and employee of the Company and its divisions and sub-
sidiaries); 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, respectively. Members of the Board
of Directors also are reimbursed for travel expenses incurred in
connection with Company business, including attendance at
meetings of the Board of Directors and its committees.
Directors' Deferred Compensation Plan
The Board of Directors has a Directors' Deferred Compensation
Plan which is designed to attract and retain well-qualified
individuals to serve as outside directors and to enhance the
identity of their interests and the interests of stockholders.
Participation in the Directors' Plan is optional.
Under the Directors' 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. The Directors' Plan requires the Company to make a
matching contribution of 100% of the first 10% of the partici-
pant's total directors' fees, to the extent deferred.
A participating director is 100% vested with respect to the
amount of director's fees that he elects to defer and any related
income, gains and losses. The Company's matching contributions
do not vest until the participating director either has completed
five (5) years of service as a director or dies while serving as
a director. Deferred amounts may not be withdrawn by a partici-
pant 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 severe finan-
cial hardship.
The Board may terminate, suspend or amend the Directors' Plan
under certain circumstances, but the Board has no discretion
regarding its administration.
<PAGE>
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 1992 Plan
was introduced in order to focus the attention of management on
the long-term improvement of stockholder value.
The Company's 1997 short-term incentive plan was aligned with
each officer's and manager's compensation to directly reflect the
desired short-term marketing and profitability goals of the
Company applicable to such officer or manager. By balancing the
use of short- and long-term incentive and adequate base salary,
the Board of Directors believes it has been and will continue to
be able to recruit the talent needed to manage the Company,
retain the talents of current management and align the successes
of the Company and management.
The factors and criteria utilized by the Board of Directors
includes the assessment of comparable information from other
utilities and similarly-sized operations. 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 com-
pensation 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) individ-
ual executive officers' actual performance as compared to their
individual goals supporting the Company's financial and operating
objectives, (c) the Company's executive officer compensation
levels relative to its peer group and (d) periodic reports from
independent compensation consultants regarding the compensation
competitiveness of the Company. The Board of Directors 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 expectation 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 1997, but are eligible for discre-
tionary bonuses based on performance as determined by the Board
of Directors. 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 incentive awards for 1997.
See "Executive Officers and Compensation -- Executive Compensa-
tion."
The 1992 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. See "Proposals to be Voted Upon -- Proposal
of Change to the 1992 Plan."
In 1993, the Board of Directors established the Supplemental
Plan. The Supplemental Plan is designed to encourage greater
ownership of Company shares by executive employees by increasing
the Company matching contribution, and to provide employee bene-
fits similar to the benefits such employee would have received
under the 401(k) Plan if not for the existence of certain limita-
tions 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% of his or her annual compensation
(salary and bonus) through payroll deductions (the "Employee Con-
tributions"). In addition, the Supplemental Plan requires the
Company to make a 100% matching contribution on Employee Contri-
butions up to a maximum of 10% of the participant's annual com-
pensation. The Employee Contributions, together with the
Company's matching contributions, are invested by the Supplemen-
tal Plan's trustee in shares of Common Stock.
The Board of Directors believes that it has concentrated, and
intends to continue to concentrate, the bulk of Mr. Lindemann's
compensation as the Chairman of the Board and Chief Executive
Officer on long-term incentives such as stock option grants which
are directly attributable to increasing stockholder value.
By: The Board of Directors
George L. Lindemann John E. Brennan
Frank W. Denius Peter H. Kelley
Aaron I. Fleischman Roger J. Pearson
Adam M. Lindemann Kurt A. Gitter, M.D.
George Rountree, III Dan K. Wassong
EXECUTIVE OFFICERS AND COMPENSATION
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
Company, Mr. Clowe served as Chairman of the Board, President and
Chief Executive Officer of Central Freight Lines, Inc. from 1990
until 1995. Age: 64.
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
positions with the Company since June 1969. Mr. Endres was
President of Southern Union Gas from January 1986 until October
1990. Age: 53.
David J. Kvapil has been Vice President - Controller since July
- ---------------
1993 and Controller since August 1992. Prior to joining the
Company in 1992, Mr. Kvapil was with the accounting firm of
Coopers & Lybrand L.L.P. Age: 42.
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: 49.
<PAGE>
Executive Compensation
The following table sets forth the remuneration paid by the
Company 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 (this group is
referred to in this section as the "Named Officers"):
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 1997 $206,073 $30,107 $ 33,557(4) 70,000 $ 14,178
Executive 1996 203,024 -- -- 73,500 8,640
Officer 1995 166,017 -- 380,000(5) -- 5,870
Peter H.
Kelley
President
and Chief 1997 412,681 71,952 27,313(6) 70,000 33,138
Operating 1996 382,730 -- 12,576(6) 73,500 12,085
Officer 1995 338,900 -- 27,761(6) -- 8,857
C. Thomas
Clowe,
Jr.(7)
President
and Chief 1997 265,792 88,541 -- 5,000 25,402
Operating 1996 199,314 -- -- 22,050 5,872
Officer - 1995 -- -- -- -- --
Missouri
Gas Energy
Ronald J.
Endres
Executive
Vice
President 1997 263,119 80,046 -- 45,000 23,412
and Chief 1996 214,912 7,600 -- 29,400 8,645
Financial 1995 199,751 26,096 -- -- 5,051
Officer
Dennis K.
Morgan
Vice
President
- Legal 1997 154,611 49,703 -- 5,000 15,698
and 1996 140,116 4,700 -- 3,675 6,251
Secretary 1995 118,560 21,127 -- -- 5,006
- -----------------------
(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 1997, 1996 or
1995. Additionally, no restricted stock awards or long-term
incentive plan payouts were made in 1997, 1996 or 1995.
(3) Company matching provided through the 401(k) Plan and the
Supplemental Plan.
(4) Represents perquisites and other personal benefits received
from the Company.
(5) Indicates the difference between the price paid by the
individual for common stock of the Company purchased from
the Company upon the exercise of stock options and the fair
market value of such common stock.
(6) Principally represents forgiveness of interest by the
Company. See "Certain Relationships."
(7) Elected President and Chief Operating Officer of Missouri
Gas Energy in September 1995.
<PAGE>
Option Grants in 1997
The following table provides information regarding the award of
stock options to the Named Officers during fiscal 1997.
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for 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 61,942(4) 22.28% $ 22.56 6/26/2007 $878,825 $2,227,114
8,058(5) 2.90% 24.82 6/26/2007 125,779 318,748
Peter H.
Kelley 70,000 25.18% 22.56 6/26/2007 993,150 2,516,838
C. Thomas
Clowe, Jr. 5,000 1.80% 22.56 6/26/2007 70,939 179,774
Ronald J.
Endres 34,689(6) 12.48% 22.56 6/26/2007 492,163 1,247,237
10,311(7) 3.71% 22.56 6/26/2007 146,291 370,730
Dennis K.
Morgan 5,000 1.80% 22.56 6/26/2007 70,939 179,774
- ----------------------
(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
potential 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 $36.75 and $58.51,
respectively, or 63% and 159%, respectively, above the
exercise 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
otherwise. All options are qualified except for the 61,942,
70,000 and 34,689 options of Messrs. Lindemann, Kelley and
Endres, 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 8,058 quali-
fied options which were granted at 110% of the fair market
value on the date of grant.
(4) Options vest over five years commencing on the first anni-
versary of the date of grant at 14,000 options per year for
years one to three and 9,971 options per year for years four
and five.
(5) Options vest at a rate of 50% per year commencing on the
fourth anniversary of the date of grant.
(6) Options vest over five years commencing on the first anni-
versary of the date of grant at 8,637 options in year one,
8,458 options per year for years two and three and 4,568
options per year for years four and five.
(7) Options vest over five years commencing on the first anni-
versary of the date of grant at 363 options in year one, 542
options per year for years two and three and 4,432 options
per year for years four and five.
<PAGE>
Options Exercised in 1997 and 1997 Year-End Values
The following table provides information regarding the exercise
of stock options by each of the Named Officers and the value of
unexercised "in-the-money" options as of June 30, 1997.
Number
of Securi-
ties Under-
lying Unexer- Value of Unexercised
cised Options In-the-Money
at Fiscal Year Options at Fiscal
End Exercisable/ Year End Exercisable
Shares Unexercisable(1) Unexercisable(2)
Acquired --------------- ---------------------
on Value Exer- Unexer- Exer- Unexer-
Name Exercise Realized cisable cisable cisable cisable
- -------- -------- -------- ------- ------- ---------- ----------
George L.
Lindemann * * 137,408 163,528 $1,931,719 $ 887,666
Peter H.
Kelley * * 163,122 169,070 2,483,728 960,885
C. Thomas
Clowe, Jr. * * 4,410 22,640 35,037 141,725
Ronald J.
Endres * * 133,562 91,330 2,127,486 478,886
Dennis K.
Morgan * * 16,942 14,885 229,391 112,313
- ------------------
* No options were exercised during the year ended June 30, 1997
by the Named Officers
(1) The securities underlying unexercised options have been
adjusted to reflect each of the 5% stock dividends dis-
tributed on December 10, 1996, November 27, 1995 and June 30,
1994, and the 33 % stock dividend distributed on March 11,
1996 and the 50% stock dividend distributed on March 9, 1994.
(2) Based on a closing price on June 30, 1997 of $22 88 per share
as reported by the New York Stock Exchange.
Retirement Benefits
The company sponsors two "Qualified" (Plans A and B) and one "Non-
Qualified" retirement income plans. With respect to the Quali-
fied 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.,
SUPro Energy Company 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 since October 1, 1996.
Under the Qualified Plans, Plan A benefits are based on total W-2
compensation (less certain defined exclusions), limited to
$160,000 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 $160,000 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.
Years of Service
----------------------------------------------------
15 20 25
----------------------------------------------------
Remuneration Plan A Plan B Plan A Plan B Plan A Plan B
- ------------ ------- ------- ------- ------- ------- -------
$125,000 $24,938 $33,867 $33,250 $45,156 $41,563 $52,070
150,000 29,925 40,992 39,900 54,656 49,875 63,070
160,000+ 31,920 43,842 42,560 58,456 53,200 67,470
Years of Service
----------------------------------------------------
30 35
----------------------------------------------------
Remuneration Plan A Plan B Plan A Plan B
- ------------ ------- ------- ------- -------
$125,000 $49,875 $58,984 $58,188 $65,897
150,000 59,850 71,484 69,825 79,897
160,000+ 63,840 76,484 74,480 85,497
<PAGE>
The combined benefits payable under the Qualified and Non-
Qualified Plans are shown in the table below.
Years of Service
----------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ ----------------------------------------------------
$175,000 $34,913 $ 46,550 $ 58,188 $ 69,825 $ 81,463
200,000 39,900 53,200 66,500 79,800 93,100
225,000 44,888 59,850 74,813 89,775 104,738
250,000 49,875 66,500 83,125 99,750 116,375
300,000 59,850 79,800 99,750 119,700 139,650
400,000 79,800 106,400 133,000 159,600 186,200
450,000 89,775 119,700 149,625 179,550 209,475
500,000 99,750 133,000 166,250 199,500 232,750
As of June 30, 1997, Messrs. Lindemann, Kelley, Endres and Morgan
were credited with 7, 7, 28 and 16 years of service, respec-
tively, under the Qualified Plans. The Non-Qualified Plan for-
mula has been amended effective December 31, 1996 to convert to
Plan A's simpler benefit formula, but without certain restric-
tions 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
formula. Effective 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. Effective
January 1, 1997, a plan amendment was adopted to eliminate any
early retirement reduction factors that would otherwise be
applicable to Messrs. Kelley and Endres. Neither the Qualified
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 Plan Committee, all
decisions regarding management compensation are made by the full
Board of Directors of the Company. Directors Brennan,
George Lindemann and Kelley, who are also executive officers of
the Company, participated in deliberations of the Board of
Directors concerning compensation for members of management but
did not participate in Board votes as to compensation for
themselves. See "Certain Relationships."
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on review of the copies of forms furnished to the
Company, or written representations that no annual reports (SEC
Form 5) were required, the Company believes that during 1997, all
SEC filings of its officers, directors and 10% stockholders
complied with requirements for reporting ownership and changes in
ownership of Common Stock (pursuant to Section 16(a) of the
Securities Exchange Act).
<PAGE>
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 "Executive Officers and Compen-
sation -- Executive Compensation"), by each person known by the
Company to beneficially own 5% or more of the Company's out-
standing Common Stock, and by all directors and executive
officers as a group on the Record Date, unless otherwise indi-
cated in the footnotes. Each of the following persons 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 2,571,616(1)(2) 14.90%
Adam M. Lindemann 1,498,952(2)(3) 8.75%
George Lindemann, Jr. 1,502,863(2) 8.78%
11950 Mainstone Drive
Wellington, Florida 33414
Sloan N. Lindemann 1,502,863(2) 8.78%
767 Fifth Avenue, 50th Floor
New York, New York 10153
John E. Brennan 309,442(4) 1.79%
Frank W. Denius 24,385(5) *
Aaron I. Fleischman 256,960(6) 1.50%
Kurt A. Gitter, M.D. 98,912(7) *
- -------------------
* Indicates less than one percent (1%).
(1) Of these shares: 1,106,603 are owned by Mr. Lindemann
including 2,937 vested shares held by the 401(k) Plan and
2,975 vested shares held through the Supplemental Plan;
1,327,705 shares are owned by his wife, Dr. F.B. Lindemann;
and 137,308 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
"Executive Compensation." Substantially all shares held by
Mr. and Mrs. Lindemann and their three children (Adam M.,
George, Jr., and Sloan N.) have been pledged to Activated
Communications Limited Partnership ("Activated"). Activated,
which is owned and managed by or for the benefit of the
Lindemanns, provided the funds used to purchase certain of
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 members
of the Lindemann family generally was obtained from and is
reported herein in reliance upon a Schedule 13D (as amended
through February 6, 1997) as adjusted for any stock dividends
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. In addition,
information regarding share ownership by George L. Lindemann
(including shares owned by his wife, Dr. F. B. Lindemann) and
Adam M. Lindemann reflects information derived from their
respective reports on Form 4 and Form 5 under the Securities
Exchange Act filed to date. 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 and, so, reflect only such individual
ownership.
(3) Includes 239 vested shares pursuant to the Directors' Plan.
(4) Of these shares, 1,517 vested shares are held by the 401(k)
Plan, 1,410 vested shares are held through the Supplemental
Plan, 2,740 shares are owned by his wife, 115,020 are held in
two separate trusts for the benefit of members of his family
and 130,221 represent shares that Mr. Brennan is entitled to
purchase upon the exercise of presently exercisable stock
options granted to him pursuant to the 1982 Plan and the 1992
Plan. Such number excludes options to acquire shares of
common stock that are not exercisable within sixty days of
the date hereof.
(5) Includes: 525 shares owned by his wife; 13,341 shares that
The Effie and Wofford Cain Foundation, in which Mr. Denius is
a Director, own; and 2,758 vested shares pursuant to the
Directors' 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.
(6) Includes: 57,881 shares that Fleischman and Walsh, L.L.P., in
which Mr. Fleischman is Senior Partner, is entitled to
purchase upon exercise of a warrant; 5,289 vested shares
pursuant to the Directors' Plan; 57,783 shares owned by the
Fleischman and Walsh 401(k) Profit Sharing Plan for which
Mr. Fleischman is a trustee and a beneficiary; and 11,575
shares owned by the Aaron I. Fleischman Foundation for which
Mr. Fleischman is the sole trustee. Mr. Fleischman disclaims
beneficial ownership of those shares held by the Fleischman
and Walsh Plan in which he does not have a pecuniary interest
and those shares held by the Aaron I. Fleischman Foundation.
(7) Includes 1,190 vested shares pursuant to the Directors' Plan.
<PAGE>
Number of Percent of
Beneficial Owner Shares Held Class
- -------------------------------- ----------------- ----------
Peter H. Kelley 189,506(1) 1.10%
Roger J. Pearson 17,416(2) *
George Rountree, III 32,819(3) *
Dan K. Wassong 20,961(4) *
C. Thomas Clowe, Jr. 7,507(5) *
Ronald J. Endres 148,674(6) *
Dennis K. Morgan 22,006(7) *
Lee M. Bass 888,184(8)(9) 5.19%
201 Main Street
Fort Worth, Texas 76102
Sid R. Bass Management Trust(10) 888,184(8)(11) 5.19%
201 Main Street
Fort Worth, Texas 76102
All Directors and Executive Of-
ficers as a group (14 in group) 5,214,216(12) 29.33%
- ------------------------
* Indicates less than one percent (1%).
(1) Includes 163,122 shares that Mr. Kelley is entitled to pur-
chase 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 "Executive Compensation." Such number also
includes: 8,865 vested shares held by the 401(k) Plan; 942
vested shares held through the Southern Union Stock Purchase
Plan; and 7,182 vested shares held through the Supplemental
Plan.
(2) Includes: 7,381 shares owned jointly by Mr. Pearson and his
father; 1,000 shares held by Mr. Pearson as Custodian (pur-
suant to the Uniform Gifts to Minors Act) for his children;
and 358 vested shares pursuant to the Directors' Plan.
(3) Includes 795 shares owned by his wife and 6,465 vested
shares allocated to Mr. Rountree pursuant to the Directors'
Plan.
(4) Includes 1,218 vested shares pursuant to the Directors'
Plan.
(5) Includes 1,239 vested shares held by the 401(k) Plan, 758
vested shares held through the Supplemental Plan and 4,410
of presently exercisable stock options purusant 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 "Executive Compensation."
(6) Includes 133,562 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
"Executive Compensation." Such number also includes: 5,413
vested shares held through the 401(k) Plan and 4,907 vested
shares held through the Supplemental Plan.
(7) Includes 16,942 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 "Executive Com-
pensation." Such number also includes 2,599 vested shares
held through the 401(k) Plan and 2,465 vested shares held
through the Supplemental Plan.
(8) Does not include 76,402 (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
(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 66,047 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.
<PAGE>
COMMON STOCK PERFORMANCE GRAPH
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, 1992 in the Company's Common Stock, the S&P 500 Index
and in the S&P Utilities Index. Each case assumes reinvestment
of dividends.
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Southern Union 100 138 197 202 343 375
S&P 500 Index 100 114 115 145 183 236
S&P Utilities Index 100 125 115 132 164 168
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
percentage interest rate equal to 7.4%. During the fiscal year
ended June 30, 1997, $27,313 in interest was forgiven by the
Company. See "Executive Compensation." The outstanding balance
at June 30, 1997 was $246,606.
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.
Payments to Activated were $251,000 in each of the fiscal years
ended June 30, 1997, 1996 and 1995.
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, 1997,
the total amount paid by the Company to Fleischman and Walsh,
L.L.P. for legal services was $1,500,665.
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. has served as the Certified Public
Accountants of the Company for the fiscal year ended June 30,
1997. 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, 1998.
COMPANY'S 1997 ANNUAL REPORT
The Company's Annual Report to Stockholders and Annual Report on
Form 10-K for the fiscal year ended June 30, 1997, 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,
1997 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 24, 1997
<PAGE>
BACK PAGE
PROXY CARD (FRONT)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SOUTHERN UNION COMPANY FOR THE NOVEMBER 11, 1997
ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints, GEORGE L. LINDEMANN and
P PETER H. KELLEY, or either of them, with power of substitu-
tion in each, proxies for the undersigned, to represent the
R undersigned and to vote all the Common Stock of the Company
which the undersigned would be entitled to vote, as fully as
O the undersigned could vote and act if personally present, at
the Annual Meeting of Stockholders to be held on
X November 11, 1997 at 2:00 p.m. Central Standard Time, in the
eighth floor atrium of the Company's offices at Lavaca
Y Plaza, 504 Lavaca Street, Austin, Texas or at any adjourn-
ment or postponement 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 I Directors
Nominees: JOHN E. BRENNAN, FRANK W. DENIUS AND
ROGER J. PEARSON.
FOR WITHHELD
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Withheld for the following only (write the name of the
nominee(s) on the space above)
2. Proposal to approve an additional 900,000 shares of Southern
Union Company Common Stock to be eligible for grant under
the Southern Union Company 1992 Long-Term Stock Incentive
Plan.
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.
Signature Date
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Signature Date
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