<PAGE>
Southern
Union
Company
504 Lavaca Street, Eighth Floor
Austin, Texas 78701
September 28, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stock-
holders of Southern Union Company to be held at 2:00 p. m.
(Central Standard Time) on Thursday, November 12, 1998 at The Gem
Theater, 1601 East 18th Street, Kansas City, Missouri. A notice
of the meeting, a proxy and a proxy statement containing informa-
tion 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,
1998 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...................
Defined Terms..............................................
Questions and Answers......................................
Proposals to be Voted Upon.................................
Board of Directors.........................................
Board Size and Composition..............................
Board Committees and Meetings...........................
Board Compensation......................................
Directors' Deferred Compensation Plan...................
Board of Directors' Report on Executive Compensation.......
Executive Officers and Compensation........................
Executive Officers Who Are Not Directors................
Executive Compensation..................................
Summary Compensation Table..............................
Option Grants in 1998...................................
Options Exercised in 1998 and 1998 Year-End Values......
Retirement Benefits.....................................
Employment Contracts, Termination of Employment and
Change-in Control Arrangements.......................
Compensation Committee Interlocks and Insider
Participation........................................
Section 16(a) Beneficial Ownership Reporting Compliance.
Security Ownership.........................................
Common Stock Performance Graph.............................
Certain Relationships......................................
Independent Auditors.......................................
Company's 1998 Summary Annual Report.......................
<PAGE>
Southern Union Company
504 Lavaca Street, Eighth Floor
Austin, Texas 78701
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 12, 1998
To the Holders of Common Stock of
SOUTHERN UNION COMPANY:
The 1998 Annual Meeting of Stockholders of Southern Union Com-
pany, a Delaware corporation, will be held at The Gem Theater,
1601 East 18th Street, Kansas City, Missouri on Thursday,
November 12, 1998 at 2:00 p. m. (Central Standard Time) to
consider and take action upon the following:
(i) the election of four persons to serve as the Class II
directors until the 2001 Annual Meeting of Stockholders
or until their successors are duly elected and qualified;
and
(ii) approval of the Southern Union 1992 Long Term Stock In-
centive Plan, as Amended.
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 14, 1998 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 28, 1998
<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 Com-
------- -------------- --
pany.
"Directors' Plan" means Southern Union's Directors' Deferred Com-
---------------
pensation Plan.
"Plan Committee" means the 1992 Long-Term Stock Incentive Plan
--------------
Committee of the Board of Directors of the Company, which ad-
ministers 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, 1998, is solicited by Southern Union Company
in connection with the Annual Meeting of Stockholders to be held
on November 12, 1998.
QUESTIONS AND ANSWERS
- - -----------------------------------------------------------------
Q: What am I voting on?
A: - Re-election of four directors (Aaron I. Fleischman,
Kurt A. Gitter, M.D., Adam M. Lindemann and
George Rountree, III); and
- Approval of the 1992 Plan, as Amended.
(See page 3 for more details.)
- - -----------------------------------------------------------------
Q: Who is entitled to vote?
A: Stockholders as of the close of business on the Record Date,
September 14, 1998, 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
(4). 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 Trans-
fer Agent, at 150 Royall Street, Canton, Massachusetts 02021.
- - -----------------------------------------------------------------
Q: Is my vote confidential?
A: Yes. Proxy cards, ballots and voting tabulations that iden-
tify 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, 28,210,385 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 approve the 1992 Plan, as
amended 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 1999 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, 1999, 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 28, 1998 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 28,
1998, 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 Aaron I. Fleischman,
Kurt A. Gitter, M. D., Adam M. Lindemann and George Rountree,
III. Each has consented to serve a three-year term. (See
page 9 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 di-
rector for any reason, votes will be cast instead for a sub-
stitute 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 cumu-
lative 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. Approval of the 1992 Plan, as Amended
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 sub-
sidiaries in order to focus the attention of management and
other employees on the long-term improvement of stockholder
value and to align the interests of management and the Com-
pany's stockholders. Specifically, grants of stock options,
stock appreciation rights ("SARs"), dividend equivalents,
restricted stock, and performance shares and units (collec-
tively referred to as "Awards") may be made under the 1992
Plan. The Company's Board believes that the use of Awards is
important to the Company's ability to attract and retain
talented people to manage the Company. At the annual meeting
held on November 11, 1997, the Company's stockholders, on
recommendation of the Board, approved an increase in the
number of shares of Common Stock, available for Awards under
the 1992 Plan.
As of September 14, 1998, the Board approved and adopted
amendments to the 1992 Plan (the "1998 Amendments"), subject
to approval of the Company's stockholders as described herein.
As described more fully under the heading "Summary of 1998
Amendments" below, the 1998 Amendments: (i) provide certain
limits and other requirements in order that certain Awards
under the 1992 Plan may qualify as performance-based compensa-
tion under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"); (ii) permit the transferability
of certain non-qualified stock options in accordance with
changes in Rule 16b-3 promulgated under the Securities Ex-
change Act of 1934, as amended (the "Exchange Act"); and (iii)
document the increase in the number of shares of Common Stock
available for Awards under the 1992 Plan that was approved by
the Company's stockholders at the annual meeting held on
November 11, 1997.
The Company's stockholders are asked to approve the 1992 Plan,
as amended by the 1998 Amendments (the "Plan, As Amended").
In the event that the Company's stockholders do not approve
the Plan, As Amended, (i) the provisions of the 1992 Plan as
in effect immediately prior to the 1998 Amendments will remain
in full force and effect, (ii) all Awards made under the 1992
Plan, as in effect prior to the 1998 Amendments, will remain
outstanding in accordance with the terms and conditions of the
respective instruments evidencing those Awards, and (iii)
additional Awards (not to exceed the number of Awards provided
for under the 1992 Plan, as increased by the stockholders at
the annual meeting held on November 11, 1997) may be made
under the 1992 Plan, as in effect prior to the 1998 Amend-
ments.
Summary of 1998 Amendments
Requirements under Internal Revenue Code Section 162(m):
-------------------------------------------------------
Under Code Section 162(m), a publicly held corporation
generally cannot deduct compensation paid to the chief execu-
tive officer or any of the four other most highly compensated
officers to the extent that the compensation paid to such
officer exceeds $1,000,000 in a taxable year. An exception to
this deduction limitation exists for certain performance-based
compensation. Compensation derived from stock options will
qualify as performance-based compensation and be excepted
from the $1,000,000 deduction limitation if the material terms
of the compensation are disclosed to and approved by the
stockholders and the compensation otherwise meets the require-
ments set forth in Code Section 162(m).
In order to satisfy the requirements of Code Section 162(m), a
stock option plan must generally provide for a maximum number
of shares for which options may be granted to any participant
during a calendar year. Under the 1998 Amendments, no par-
ticipant may be granted Awards covering more than 200,000
shares of Common Stock (subject to adjustment for any stock
dividends, recapitalizations and similar events), during a
calendar year. Prior to the 1998 Amendments, the 1992 Plan
did not contain such a limitation.
Compensation derived from stock options is generally treated
as performance-based compensation for purposes of Code Section
162(m) only if the exercise price of the stock option is at
least equal to the fair market value of the stock as of the
date of grant. The 1998 Amendments provide that the exercise
price of Non-Qualified Stock Options under the Plan, As
Amended shall be equal to the fair market value of the Common
Stock as of the date of grant. Prior to the 1998 Amendments,
the exercise price of Non-Qualified Stock Options was such
amount as the Plan Committee determined to be appropriate.
Code Section 162(m) also requires that the compensation com-
mittee of a stock option plan consist solely of two or more
"outside directors." The 1998 Amendments provide for the Plan
Committee to consist of no fewer than two directors, each of
whom shall be an outside director within the meaning of Code
Section 162(m) and a "non-employee director" within the
meaning of Rule 16b-3 promulgated under the Exchange Act.
Prior to the 1998 Amendments, a member of the Plan Committee
was not required to be an outside director, but was required
to be a director who was a "disinterested person" within the
meaning of Rule 16b-3 promulgated under the Exchange Act.
While the 1998 Amendments discussed in the three preceding
paragraphs provide certain limits and other requirements in
order that stock options granted under the Plan, As Amended
may qualify as performance-based compensation under Code Sec-
tion 162(m), other Awards granted under the Plan, As Amended
may not qualify as performance-based compensation and thus may
be subject to the $1,000,000 deduction limitation under Code
Section 162(m).
Transferability of Non-Qualified Stock Options: Rule 16b-3
----------------------------------------------
promulgated under the Exchange Act no longer provides that
non-qualified stock options must not be transferable in order
to be exempt from the short-swing profit recovery provisions
of the Exchange Act. In order to take advantage of this
change to Rule 16b-3, the 1998 Amendments give the Plan Com-
mittee discretionary authority to grant Non-Qualified Stock
Options that may be gratuitously transferred by the partici-
pant (but not the participant's transferee) to any member of
the participant's immediate family, to a trust for the benefit
of one or more members of the participant's immediate family,
to a partnership or other entity in which the only partners or
interest holders are members of the participant's immediate
family, and to a charitable organization, or to any of the
foregoing. The 1998 Plan Amendments also give the Plan Com-
mittee discretionary authority to amend outstanding Non-
Qualified Stock Options to provide for such transferability.
Prior to the 1998 Amendments, Non-Qualified Stock Options were
transferable only by will or the laws of descent and distribu-
tion or by a qualified domestic relations order.
Documentation of Increase in Number of Shares: As noted
---------------------------------------------
above, the Company's stockholders, at the annual meeting held
on November 11, 1997, approved an increase in the number of
shares of Common Stock available for Awards under the 1992
Plan. Under the 1998 Amendments, the Plan, As Amended
reflects this increase in the number of shares of Common Stock
available for Awards.
Summary of the Plan, As Amended
The above discussion relating to the 1992 Plan and the 1998
Amendments and the summary of the Plan, As Amended that is set
forth below are qualified in their entireties by reference to
the full texts of the 1992 Plan, the 1998 Amendments and the
Plan, As Amended, copies of which may be obtained by any
stockholder by writing to Southern Union Company, 504 Lavaca
Street, Suite 800, Austin, Texas 78701, Attention: Corporate
Secretary.
Eligilibity: Any officer or other salaried employee of the
-----------
Company or of any subsidiary of the Company is eligible to be
granted Awards under the Plan, As Amended. A person who has
retired from active employment with the Company or any of its
subsidiaries, but continues to receive a salary pursuant to
the terms of any consulting agreement or arrangement (whether
written or unwritten), is not eligible to receive an Award.
The Company estimates that substantially all its non-hourly
employees are eligible to participate in the Plan, As Amended.
Shares Available: Under the Plan, As Amended, Awards per-
----------------
taining to 3,313,690 shares of Common Stock are reserved to be
issued: (i) upon the exercise of stock options and SARs; and
(ii) as Restricted Stock and Performance Shares. If: (i) a
stock option or SAR granted under the Plan, As Amended expires
prior to exercise; (ii) Shares of Restricted Stock are for-
feited; or (iii) a participant fails to meet the performance
goals associated with a grant of Performance Shares, then the
shares of Common Stock associated with such Award will be
available for future grants.
As of September 14, 1998, Awards covering 768,720 shares of
Common Stock are available to be granted and Awards covering
2,544,970 shares of Common Stock have been granted under the
1992 Plan.
Please refer to the tables under the heading "Executive
Officers and Compensation" for information regarding Awards
made to the Named Officers under the 1992 Plan.
Plan Administration: The Plan Committee makes all decisions
-------------------
regarding: (i) the granting of Awards under the Plan, As
Amended; (ii) eligibility of employees to receive Awards; and
(iii) interpretation of the Plan, As Amended. The Plan Com-
mittee consists of no fewer than two directors, neither of
whom have received any Awards nor are currently eligible to
receive any Awards, and each of whom is a "non-employee
director" within the meaning of Rule 16b-3 promulgated under
the Exchange Act and an "outside director" within the meaning
of Code Section 162(m).
Duration: Any Award must be granted prior to July 1, 2002.
--------
Unless otherwise specified by the Plan Committee in the grant
of an Award, once granted, an Award (if then vested), will
terminate on the earlier of: (i) the date set forth in the
grant of the Award; (ii) thirty (30) days following the date
on which the employee's employment is terminated for cause;
(iii) three months after the date such employee retires or is
terminated without cause; or (iv) one year after the date of
termination if by reason of disability. The Board of Direc-
tors or the Plan Committee may at any time and for any or no
reason suspend or terminate the Plan, As Amended prior to
July 1, 2002. An Award may not be granted while the Plan, As
Amended is suspended or after it has expired or been termi-
nated.
Awards granted while the Plan, As Amended is in effect shall
not be altered or impaired by suspension or termination of the
Plan, As Amended, except upon the consent of any person to
whom an Award was granted.
Limit on Number of Awards: In each calendar year, a person
-------------------------
eligible to receive an Award may not be granted Awards
covering more than 200,000 shares of Common Stock (as adjusted
for stock dividends, recapitalizations and similar events).
Stock Options:
-------------
Types of Stock Options: Stock options granted under the
----------------------
Plan, As Amended may be either Incentive Stock Options or
Non-Qualified Stock Options. The Plan Committee determines
the terms and conditions of each stock option granted. To
qualify as an Incentive Stock Option under Code Section
422, the Incentive Stock Option must meet certain require-
ments including requirements regarding: (i) exercise price;
(ii) duration; (iii) exercisability; and (iv) transferabil-
ity.
Exercise Price: The exercise price for each share of stock
--------------
subject to an Incentive Stock Option may not be less than
the Fair Market Value (as defined in the following
sentence) of Common Stock on the date the option is
granted. The Plan, As Amended defines "Fair Market Value"
to be the average of the high and low sales prices for the
Common Stock on the New York Stock Exchange on the date of
grant. In the case of an Incentive Stock Option granted to
an employee who at the time the stock option is granted
owns (as defined in the Code) stock possessing more than
10% of the total combined voting power of all classes of
the Company's stock, the exercise price for each share of
Common Stock, subject to the stock option, must be at least
110% of the Fair Market Value of the shares at the time of
grant and the stock option cannot be exercisable after five
years from the date of grant.
The exercise price for each share subject to a Non-
Qualified Stock Option shall be equal to the Fair Market
Value of the Common Stock on the date the stock option is
granted.
Limit on Number of Incentive Stock Options: The aggregate
------------------------------------------
Fair Market Value determined on the date of grant of the
shares with respect to which Incentive Stock Options are
exercisable for the first time by an employee in any calen-
dar year may not exceed $100,000.
Transferability: Incentive Stock Options are not transfer-
---------------
able, other than by will or the laws of descent and distri-
bution. Non-Qualified Stock Options are not transferable,
other than by will or the laws of descent and distribution
or pursuant to the terms of a qualified domestic relations
order, unless the Plan Committee, in its discretion, pro-
vides for a Non-Qualified Stock Option to be transferable
in the manner described under the heading "Summary of 1998
Amendments," above. If the participant should die, then
such participant's legal representative or beneficiary may
exercise such stock option not later than one year from the
date of death. However, in no event may a stock option be
exercised if it is not vested or at any time after the
expiration date specified in such stock option.
Payment: The exercise price of a stock option may be paid
-------
in cash, by certified check or by delivering already-owned
shares of Common Stock having a Fair Market Value equal to
the exercise price or by delivery of a combination of the
above.
Duration: The Code provides that in no case may an incen-
--------
tive Stock Option be exercised after the tenth (10th) anni-
versary of the date on which it was granted, and in no case
may an Incentive Stock Option granted to an individual who
at any time of grant owned (together with members of his or
her family) 10% or more of the combined total voting power
of the Company be exercised after the fifth (5th) anniver-
sary of the date on which it was granted. The Plan Commit-
tee has complete discretion in setting the duration of a
Non-Qualified Stock Option and the duration of a Non-
Qualified Stock Option will be as set forth in the grant.
Vesting: Although not a requirement of the Plan, As
-------
Amended, it has been the Company's policy that Stock
Options granted by the Company vest over a period of time,
usually at a rate of 20% per year beginning on the first
anniversary of the date of grant. The exact vesting sched-
ule with respect to any stock option grant is subject to
the complete discretion of the Plan Committee and will be
set forth in the grant of the Stock Option.
Adjustment: To prevent dilution of the rights of a holder
----------
of a stock option in the event of any merger, consolida-
tion, reorganization, recapitalization, stock (but not
cash) dividend, stock split, split-up, split-off, spin-off,
combination or exchange of shares or other like change in
structure of the Company, the Plan, As Amended provides for
the adjustment of: (i) the number of shares upon which
stock options may be granted; (ii) the number of shares
subject to outstanding stock options; ; and (iii) the exer-
cise price of a stock option. Upon certain events consti-
tuting a change in control of the Company, as specified in
the Plan, As Amended, all stock options then outstanding
will become immediately exercisable.
Stock Appreciation Rights: The Plan Committee may grant SARs
-------------------------
unrelated to stock options or related to stock options or
portions of stock options granted to employees pursuant to the
Plan, As Amended. In exchange for surrendering the right to
exercise a related stock option, the employee may exercise a
SAR with respect to the number of shares covered by the sur-
rendered stock option. Upon the exercise of a SAR, the
employee is entitled to receive payment of any amount equal to
the aggregate appreciation in value of the shares covered by
the SAR or by the related stock option. Such payment may be
made in cash, in shares of Common Stock valued at Fair Market
Value as of the date of exercise of the SAR or in any combina-
tion of cash and Common Stock, as the Plan Committee in its
discretion shall determine. 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 transfer-
able, other than by will or the laws of descent and distribu-
tion or pursuant to the terms of a qualified domestic
relations order. If the participant should die, then such
participant's legal representative or beneficiary may exercise
a SAR not later than one year from the date of death. How-
ever, in no event may a SAR be exercised if it has not vested
or at any time after the expiration date specified in such
SAR. Upon certain events constituting a change in control of
the Company, as specified in the Plan, As Amended, all SARs
then outstanding will become immediately exercisable.
Dividend Equivalents: The Plan, As Amended authorizes the
--------------------
granting of Dividend Equivalents which may be granted in con-
junction with a stock 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 Equivalents entitling the
holder to receive cash payment equal in value to any non-cash
(other than stock) dividends as well. When a Dividend Equiva-
lent is granted in conjunction with a stock option, no adjust-
ment to the related stock option will be made in the event of
a cash dividend or other distribution on the Common Stock.
Performance Shares or Units: The Plan, As Amended also pro-
---------------------------
vides 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 speci-
fied performance objectives within a specified period. If a
participant dies or terminates his or her position with the
Company prior to the close of a specified period, any Perfor-
mance 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 Plan, As Amended 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 a par-
ticipant 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 partici-
pant. 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. Restricted Stock is
non-transferable.
Federal Income Tax Considerations
---------------------------------
Treatment of Non-Qualified Stock Options, SARs and Dividend
-----------------------------------------------------------
Equivalents: With respect to Non-Qualified Stock Options,
-----------
Dividend Equivalents, Performance Shares or Units and SARs,
a participant generally would realize ordinary income and
the Company would receive a deduction in the year a stock
option is exercised, a dividend is paid or the SARs are
exercised. (As discussed above under the heading "Summary
of 1998 Amendments," Code Section 162(m) may limit the de-
duction to which the Company would otherwise be entitled.)
In the case of Non-Qualified Stock Options, the amount of
income would be equal to the difference between the stock
option price and the Fair Market Value of the stock on the
exercise date. In the case of Dividend Equivalents and
Performance Shares or Units, the amount of income would be
equal to the amount of cash or the Fair Market Value of any
property (including stock) received. Finally, in the case
of SARs, the amount of income would be equal to the amount
of cash or the Fair Market Value of the stock delivered to
the participant. If the participant later sells the stock,
any further gain is treated as a capital gain.
Notwithstanding the preceding paragraph, Section 83 of the
Code provides for deferral of taxation to the optionee and
the deduction by the Company so long as the shares acquired
upon exercise of the stock option are subject to the sub-
stantial risk of forfeiture and are not transferable. This
deferral can be avoided, and the tax consequences described
above with respect to the Non-Qualified Stock Options made
applicable, if the optionee, within thirty (30) days after
the exercise of the stock option, makes an election to be
taxed under Code Section 83(b).
Treatment of Incentive Stock Options: With respect to
------------------------------------
Incentive Stock Options, generally, no income to an
employee will result for federal income tax purposes upon
either the granting or the exercise of an Incentive Stock
Option under the Plan, As Amended. If the employee later
sells the acquired stock at least two years after the date
the Incentive Stock Option is granted and at least one year
after the exercise of the Incentive Stock Option, the dif-
ference between the exercise price and the price at which
the stock is sold is treated as a capital gain. If the
employee's gain is taxed as a capital gain, the Company
will not be allowed a deduction. If the employee disposes
of the acquired stock before the end of such holding
periods, (a) the employee will realize ordinary income in
the year of disposition equal to the lesser of (i) the dif-
ference between the exercise price and the Fair Market
Value of the stock on the exercise date or (ii) if the dis-
position is a taxable sale or exchange, the amount of gain
realized and (b) except as noted above, the Company will
receive an equivalent deduction.
Although an optionee does not realize ordinary income upon
the exercise of an Incentive Stock Option, the excess of
the Fair Market Value of the shares acquired at the time of
exercise over the option price constitutes an adjustment to
"alternative minimum taxable income" under Code Section 56,
and thus may result in the optionee being subject to the
"alternative minimum tax" pursuant to Code Section 55.
Withholding: Where an individual is deemed to have compen-
-----------
sation in respect of stock option exercises, payments or
constructive receipt of SARs under the Plan, As Amended,
income taxes will be withheld by the Company to the extent
the Company is required to make such withholding. Any
required withholding payable by a participant with respect
to any tax may be paid in cash, in whole shares of Common
Stock or in a combination of whole shares of Common Stock
and cash having an aggregate Fair Market Value equal to the
amount of any required withholding obligations. The Com-
pany may, at its discretion, either (i) withhold the amount
of any taxes required by any government to be withheld or
otherwise deducted upon payment of any Dividend Equivalent,
Performance Shares or Units or Restricted Stock or exercise
of any stock option or SAR from any other sums due to such
participant or (ii) hold the stock certificates to which
such participant is entitled as security for payment of
such withholding tax liability until cash sufficient to pay
such withholding has been accumulated.
Change of Control Provisions: All Awards will automatically
----------------------------
vest and become exercisable in the event of a "change of con-
trol," which is defined by the Plan, As Amended as when
either: (i) any person (other than a person who together with
all members of such person's family was the beneficial owner,
directly or indirectly, of twenty-five percent (25%) or more
of the Company's Common Stock on July 1, 1992) becomes the
beneficial owner, directly or indirectly, of Company securi-
ties representing twenty-five percent (25%) or more of the
combined voting power of the Company's outstanding securities
then entitled to vote for the election of directors; (ii)
there is a change in the composition of the Board over a
period of twenty-four (24) months or less such that a majority
of the directors cease, by reason of one or more proxy con-
tests, to be comprised of individuals who either (x) have been
directors continuously since the beginning of such period or
(y) have been elected or nominated for election as a director
during such period by at least two-thirds of the directors
described in clause (x) who were still in office at the time
such election or nomination was approved by the Board, or
(iii) the stockholders shall approve a sale of all or substan-
tially all the assets of the Company, or any merger, consoli-
dation, issuance of securities or purchase of assets, the
result of which would be the occurrence of any event described
in clauses (i) or (ii) above.
Changes, Suspension and Termination: The Plan, As Amended may
-----------------------------------
be amended, modified, suspended or terminated by the Board of
Directors or the Plan Committee without stockholder approval.
However, except for the purpose of meeting or addressing any
changes in legal requirements or for any other purpose per-
mitted by law, the Plan, As Amended may not be amended without
the consent of holders of a majority of the outstanding shares
of Common Stock represented at a meeting for which a quorum is
present to: (i) increase the aggregate number of shares avail-
able for issuance under the Plan, As Amended (except for the
adjustments described above); (ii) reduce the exercise price
of any Incentive Stock Option below the price required by the
Code; (iii) increase materially the benefits under the Plan,
As Amended to an optionee; or (iv) modify the requirements as
to eligibility for participation in the Plan, As Amended.
Proposed Amendment: We request stockholder vote FOR the
------------------
approval of the Plan, As Amended.
Any stockholder may obtain copies of the 1992 Plan, the 1998
Amendments and the Plan, As Amended, by writing to Southern
Union Company, 504 Lavaca Street, Suite 800, Austin, Texas
78701, Attention: Corporate Secretary.
Vote Required: In order to approve the Plan, As Amended, 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 approval of the Plan, As
Amended. In considering the recommendation of the Board,
stockholders should be aware that because executive officers
(who may also be members of the Board) are participants who
have received Awards and are eligible to receive future Awards
under the Plan, As Amended, each of them has an interest in
the approval of the Plan, As Amended. See "EXECUTIVE OFFICERS
AND COMPENSATION Options Grants in 1998" and " -- Options
Exercised in 1998 and 1998 Year-End Values."
<PAGE>
BOARD OF DIRECTORS
Board Size and Composition
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 II directors
expire at the Meeting. The Class III directors will serve until
the 1999 Annual Meeting of Stockholders and the Class I directors
will serve until the 2000 Annual Meeting of Stockholders. This
year's Nominees, Aaron I. Fleischman, Kurt A. Gitter, M.D.,
Adam M. Lindemann and George Rountree, III are the Class II di-
rectors standing for election for a three-year term of office
expiring at the 2001 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 II - Term expires in 2001
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, regulated utilities and transportation companies,
since 1976. Mr. Fleischman is also a director of Citizens
Utilities Company. Age: 59.
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. Dr. Gitter has been a Director of
the Company since June 1995. Age: 61.
Adam M. Lindemann has been the managing member of Lindemann
- - -----------------
Capital Advisors, L.L.C. since November, 1996, which manages in-
vestments for various private investment funds including
Lindemann Capital Partners, L.P. Previously, he had been a per-
sonal 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. Adam M. Lindemann is the son of
George L. Lindemann, Chairman of the Board and Chief Executive
Officer of Southern Union. Age: 37.
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:
65.
THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES TO SERVE AS CLASS II DIRECTORS.
DIRECTORS CONTINUING IN OFFICE
Class III - Term expires in 1999
George L. Lindemann has been Chairman of the Board and Chief Exe-
- - -------------------
cutive Officer of Southern Union since February 1990. He has
been Chairman of the Executive Committee of the Board of Direc-
tors since March 1990. 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 pri-
vate investment business, since May 1982. Mr. Lindemann is also
a director of Del Laboratories, Inc., Network Event Theater, Inc.
and Total Research Corporation. Age: 62.
Peter H. Kelley has been President and Chief Operating Officer of
- - ---------------
Southern Union since February 1990, Chief Executive Officer of
Southern Union Gas Company ("Southern Union Gas"), a division of
the Company, since June 1998, and Chief Executive Officer of
Missouri Gas Energy ("MGE"), a division of the Company, since
December 1993. From February 1990 to June 1998 Mr. Kelley was
also President and Chief Operating Officer of Southern Union Gas
and from December 1993 to September 1995, was also President of
MGE. Prior to joining the Company, he had been an officer of
Metro Mobile since 1986. Age: 51.
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: 68.
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
also been engaged in private investments since May 1992. Prior
to May 1992, Mr. Brennan had been President and Chief Operating
Officer of Metro Mobile. Age: 52.
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: 73.
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. Mr. Pearson is also a director of Workflow Manage-
ment, Inc. Age: 52.
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 two meetings and acted by unanimous
written consent on ten occasions during fiscal 1998. During the
intervals between meetings of the Board of Directors, this com-
mittee has the authority to, and may exercise all of the powers
of, the Board of Directors in the management of the business,
property and affairs of the Company in all matters that are not
required by statute or by the Company's Certificate of Incorpo-
ration or Bylaws to be acted upon by the Board. 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.
The Board of Directors has an Audit Committee, currently composed
of Messrs. Denius (Chairman) and Gitter. The Audit Committee met
three times during fiscal year 1998. This committee has the
duties of recommending to the Board the appointment of indepen-
dent 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.
The Board of Directors has a Long-Term Stock Incentive Plan Com-
mittee which may consist of no fewer than two directors. The com-
mittee 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, cannot currently be eligible
to receive any awards under the 1992 Plan and must be an
"outside" non-employee director. See "PROPOSALS TO BE VOTED ON --
2. Approval of the 1992 Plan, As Amended." The Plan Committee
met one time during fiscal year 1998.
The Board of Directors held two meetings and acted by unanimous
written consent on six occasions during fiscal year 1998. Except
for Mr. George Rountree, III 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 1998 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 $245,211 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 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 indi-
viduals to serve as outside directors and to enhance the identity
of their interests and the interests of stockholders. Participa-
tion 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 or she elects to defer and any
related income, gains and losses. The Company's matching con-
tributions 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 with-
drawn 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 severe financial 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 1998 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 perfor-
mance 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 compen-
sation levels relative to its peer group and (d) periodic reports
from independent compensation consultants regarding the compensa-
tion 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 1998, but are eligible for discre-
tionary bonuses based on performance as determined by the Board
of Directors. The former President and Chief Operating Officer -
Missouri Gas Energy, the Executive Vice President and Chief
Financial Officer, the President - Southern Union Gas and the
Senior Vice President - Legal and Secretary had the ability to
obtain short-term incentive awards for 1998. See "Executive
Officers and Compensation -- Executive Compensation."
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 -- Approval
of the 1992 Plan, as Amended."
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.
Steven W. Cattron has been President of MGE since June 1998.
- - -----------------
Prior to joining the Company, Mr. Cattron was employed with
Kansas City Power and Light Company since 1982 where most
recently he was Vice President - Marketing and Sales. Age: 42.
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 had held other financial and operating
positions with the Company since June 1969. Age: 54.
David J. Kvapil has been Senior Vice President and Corporate Con-
- - ---------------
troller since January 1998. He was Vice President - Controller
from July 1993 to December 1997, and Controller from August 1992
to July 1993. Prior to joining the Company in 1992, Mr. Kvapil
was with the accounting firm of PricewaterhouseCoopers LLP. Age:
43.
Dennis K. Morgan has been Senior Vice President - Legal and
- - ----------------
Secretary since January 1998. He was Vice President - Legal and
Secretary from April 1991 to December 1997 and a Vice President
since January 1991. Previously, Mr. Morgan held various legal
positions with Southern Union Exploration Company, a former oil
and gas subsidiary of the Company. Age: 50.
David W. Stevens has been President of Southern Union Gas since
- - ----------------
June 1998. Previously, Mr. Stevens held other financial and
operating positions with Southern Union Gas since 1993, most
recently Senior Vice President of Sales and Operations from July
1996 to June 1998. Prior to that, Mr. Stevens had held various
operational positions with numerous subsidiaries of the Company
since 1984. Age: 39.
<PAGE>
Executive 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; (ii) to each of the four most highly
compensated key executive officers at June 30, 1998 of the Com-
pany; and (iii) a highly compensated employee who was not serving
as an executive officer at June 30, 1998 (this group is referred
to in this section as the "Named Officers"):
Summary Compensation Table
Annual Compensation Securi-
------------------------------------- ties All
Other Under Other
Name and Annual lying Com-
Principal Compen- Options/ pensa-
Position Year Salary Bonus sation(1) SARs(2) tion(3)
- - ---------- ---- -------- -------- ------------- -------- -------
George L.
Lindemann
Chairman
of the
Board and
Chief 1998 $227,861 $ -- $ 45,930(4) 150,000 $24,248
Executive 1997 206,073 30,107 33,557(4) 110,250 14,178
Officer 1996 203,024 -- -- 115,763 8,640
Peter H.
Kelley
President
and Chief 1998 468,296 105,679 342,467(5)(6) 150,000 65,610
Operating 1997 412,681 71,952 27,313(7) 110,250 33,138
Officer 1996 382,730 -- 12,576(7) 115,763 12,085
Ronald J.
Endres
Executive
Vice
President
and Chief 1998 274,745 85,848 464,515(5) 75,000 40,824
Financial 1997 263,119 80,046 -- 70,875 23,412
Officer 1996 214,912 7,600 -- 46,305 8,645
David W.
Stevens(8)
President 1998 185,558 91,251 -- 30,000 32,643
- Southern 1997 -- -- -- -- --
Union Gas 1996 -- -- -- -- --
Dennis K.
Morgan
Senior
Vice
President
- Legal 1998 172,379 47,819 -- 22,500 26,933
and 1997 154,611 49,703 -- 7,875 15,698
Secretary 1996 140,116 4,700 -- 5,788 6,251
C. Thomas
Clowe, Jr.
(9)
Former
President
and Chief
Operating
Officer -- 1998 281,701 81,995 -- -- 41,266
Missouri 1997 265,792 88,541 -- 7,875 25,402
Gas Energy 1996 199,314 -- -- 34,729 5,872
- - ----------------------
(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 1998, 1997 or
1996. Additionally, no restricted stock awards or long-term
incentive plan payouts were made in 1998, 1997 or 1996.
(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 indi-
vidual for common stock of the Company purchased from the
Company upon the exercise of non-qualified (but not incen-
tive) stock options and the fair market value of such common
stock. See "--Options Exercised in 1998 and 1998 Year-End
Values."
(6) Also includes forgiveness of interest by the Company. See
"Certain Relationships."
(7) Principally represents forgiveness of interest by the Com-
pany. See "Certain Relationships."
(8) Elected President of Southern Union Gas in June 1998.
(9) President and Chief Operating Officer of Missouri Gas Energy
from September 1995 to June 1998.
<PAGE>
Option Grants in 1998
The following table provides information regarding the award of
stock options to the Named Officers during fiscal 1998.
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term(1)
---------------------------------------------------------
% of
Total Exer-
Options cise
Granted or
Number of to Em- Base
Securities ploy- Price
Underlying ees in Per Expira-
Options Fiscal Share tion
Name Granted(2) Year (3) Date 5% 10%
- - ------ ----------- ------- ------ --------- ---------- ----------
George
L.
Linde-
mann 145,038 21.50% $18.67 6/22/2008 $1,702,657 $4,314,868
4,962(4) .74% 20.53 6/22/2003 16,328 47,286
Peter
H.
Kelley 150,000 22.24% 18.67 6/22/2008 1,760,908 4,462,487
Ronald
J.
Endres 69,644(5) 10.33% 18.67 6/22/2008 817,578 2,071,903
5,356(6) .79% 18.67 6/22/2008 62,888 159,370
David
W.
Stevens 16,580(7) 2.46% 18.67 6/22/2008 194,639 493,254
13,420(8) 1.99% 18.67 6/22/2008 157,554 399,274
Dennis
K.
Morgan 18,428(9) 2.73% 18.67 6/22/2008 216,333 548,231
4,072(10) .61% 18.67 6/22/2008 47,815 121,171
C.
Thomas
Clowe,
Jr. -- -- -- -- -- --
- - ---------------------
(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 $30.41 and
$48.42, 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 other-
wise. All options are non-qualified except for the 4,962,
5,356, 16,580 and 18,428 options of Messrs. Lindemann,
Endres, Stevens and Morgan, respectively, which are quali-
fied.
(3) All options were granted at 100% of the fair market value
on the date of grant, except for Mr. Lindemann's 4,962
qualified 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 46 options for both years
one and two and 4,870 options in year five.
(5) Options vest over five years commencing on the first anni-
versary of the date of grant at 15,000 options per year for
years one to four and 9,644 option in year five.
(6) Options vest 100% in the fifth year from the date of grant.
(7) Options vest over five years commencing on the first anni-
versary of the date of grant at 1,746 options in year one,
2,489 options in year two, 2,841 options in year three,
4,148 options in year four and 5,356 options in year five.
(8) Options vest over five years commencing on the first anni-
versary of the date of grant at 4,254 options in year one,
3,511 options in year two, 3,159 options in year three,
1,852 options in year four and 644 options in year five.
(9) Options vest over five years commencing on the first anni-
versary of the date of grant at 2,073 options in year one,
3,560 ptions in year two, 4,147 options in year three,
4,148 options in year four and 4,500 options in year five.
(10) Options vest over four years commencing on the first anni-
versary of the date of grant at 2,427 options in year one,
940 options in year two, 353 options in year three and 352
options in year four.
<PAGE>
Options Exercised in 1998 and 1998 Year-End Values
The following table provides information regarding the exercise
of stock options, incentive and non-qualified, by each of the
Named Officers and the value of unexercised "in-the-money"
options as of June 30, 1998.
Number
of Securi-
ties Under-
lying Unexer- Value of Unexercised
cised Options In-the-Money Options
Shares at Fiscal Year at Fiscal Year
Ac- End Exercisable/ End Exercisable/
quired Unexercisable(1) Unexercisable(2)
on Value --------------- ---------------------
Exer- Rea- Exer- Unexer- Exer- Unexer-
Name cise lized cisable cisable cisable cisable
- - ------------ ------ ------- ------- ------- ---------- ----------
George L.
Lindemann * * 298,088 325,892 $4,434,427 $2,091,647
Peter H.
Kelley 68,877 851,036 257,336 346,996 3,900,996 2,399,774
Ronald J.
Endres 72,383 891,085 185,979 170,850 2,905,543 1,110,410
David W.
Stevens * * 30,144 46.825 452,588 225,298
Dennis K.
Morgan * * 36,709 35,922 553,823 201,369
C. Thomas
Clowe, Jr. * * 15,467 27,138 178,294 295,697
- - -------------------------
* No options were exercised during the year ended June 30, 1998
by the Named Officer.
(1) The securities underlying unexercised options have been ad-
justed to reflect each of the 5% stock dividends distributed
on December 10, 1997, December 10, 1996, November 27, 1995
and June 30, 1994, and the 50% stock dividend distributed on
July 13, 1998, the 33 1/3 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, 1998 of $21.50 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, Atlantic Utilities, Atlantic
Gas Corporation, Mercado Gas Services, Inc., SUPro Energy Company
and ConTigo, Inc. All officers listed herein the Summary Compen-
sation 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 $33,757 $33,250 $45,010 $41,563 $51,887
150,000 29,925 40,882 39,900 54,510 49,875 62,887
160,000+ 31,920 43,732 42,560 58,310 53,200 67,287
Years of Service
----------------------------------
30 35
----------------------------------
Remuneration Plan A Plan B Plan A Plan B
- - ------------ ------- ------- ------- -------
$125,000 $49,875 $58,765 $58,188 $65,642
150,000 59,850 71,265 69,825 79,642
160,000+ 63,840 76,265 74,480 85,242
<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
600,000 119,700 159,600 199,500 239,400 279,300
700,000 139,650 186,200 232,750 279,300 325,850
750,000 149,625 199,500 249,375 299,250 349,125
As of June 30, 1998, Messrs. Lindemann, Kelley, Endres, Stevens
and Morgan were credited with 8, 8, 29, 14 and 17 years of ser-
vice, respectively, under the Qualified Plans. The Non-Qualified
Plan formula has been amended effective December 31, 1996 to con-
vert 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. The definition of compensation excludes the value of
stock options, SARs, personal use of the Company plane, and com-
pany matched contributions to the 401(k) and Supplemental Plan.
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, Stevens and
Morgan had been credited with additional service of 22, 5, 4 and
5 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 deci-
sions 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 Direc-
tors 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 1998, all
SEC filings of its officers, directors and 10% stockholders com-
plied 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 mem-
bers of the group had sole voting and investment power with
respect to the shares shown unless otherwise indicated in the
footnotes. Number of shares held excludes options to acquire
shares of common stock that are not exercisable within sixty days
of the date hereof.
Number of Percent of
Beneficial Owner Shares Held Class
- - -------------------------------- ------------------- ----------
George L. Lindemann 4,151,397(1)(2) 14.56%
Adam M. Lindemann 2,370,552(2)(3) 8.40%
George Lindemann, Jr. 2,369,009(2) 8.40%
11950 Mainstone Drive
Wellington, Florida 33414
Sloan N. Lindemann 2,369,009(2) 8.40%
767 Fifth Avenue, 50th Floor
New York, New York 10153
John E. Brennan 533,640(4) 1.88%
Frank W. Denius 42,252(5) *
Aaron I. Fleischman 435,588(6) 1.54%
Kurt A. Gitter, M.D. 157,684(7) *
- - -----------------------
* Indicates less than one percent (1%).
(1) Of these shares: 1,754,174 are owned by Mr. Lindemann
including 5,508 vested shares held by the 401(k) Plan and
7,079 vested shares held through the Supplemental Plan;
2,099,135 shares are owned by his wife, Dr. F.B. Lindemann;
and 298,088 shares of common stock Mr. Lindemann is entitled
to purchase upon the exercise of presently exercisable stock
options pursuant to the 1992 Plan. 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 cer-
tain 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 owner-
ship.
(3) Includes 2,080 vested shares pursuant to the Directors' Plan.
(4) Of these shares, 2,906 vested shares are held by the 401(k)
Plan, 3,243 vested shares are held through the Supplemental
Plan, 4,315 shares are owned by his wife, 181,154 are held in
two separate trusts for the benefit of members of his family
and 249,832 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 com-
mon stock that are not exercisable within sixty days of the
date hereof.
(5) Includes: 826 shares owned by his wife; 23,512 shares that
The Effie and Wofford Cain Foundation, in which Mr. Denius is
a Director, own; and 5,691 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: 91,162 shares that Fleischman and Walsh, L.L.P., in
which Mr. Fleischman is Senior Partner, is entitled to pur-
chase upon exercise of a warrant; 9,995 vested shares pursu-
ant to the Directors' Plan; 92,008 shares owned by the
Fleischman and Walsh 401(k) Profit Sharing Plan for which
Mr. Fleischman is a trustee and a beneficiary; and 18,229
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 3,772 vested shares pursuant to the Directors' Plan.
<PAGE>
Number of Percent of
Beneficial Owner Shares Held Class
- - -------------------------------- ------------------- ----------
Peter H. Kelley 352,345(1) 1.24%
Roger J. Pearson 30,396(2) *
George Rountree, III 51,981(3) *
Dan K. Wassong 44,544(4) *
C. Thomas Clowe, Jr. 24,784(5) *
Ronald J. Endres 248,914(6) *
Dennis K. Morgan 47,917(7) *
David W. Stevens 48,759(8) *
Lee M. Bass 1,081,216(9)(10) 3.83%
201 Main Street
Fort Worth, Texas 76102
Sid R. Bass Management Trust(11) 1,398,889(9)(12) 4.96%
201 Main Street
Fort Worth, Texas 76102
All Directors and Executive
Officers as a group
(16 in group) 8,573,898(13) 29.18%
- - ---------------------
* Indicates less than one percent (1%).
(1) Includes 257,336 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 also includes: 14,788 vested shares held by the
401(k) Plan; 2,054 vested shares held through the Southern
Union Stock Purchase Plan; and 18,920 vested shares held
through the Supplemental Plan.
(2) Includes 2,665 shares held by Mr. Pearson as Custodian (pur-
suant to the Uniform Gifts to Minors Act) for his children;
and 2,446 vested shares pursuant to the Directors' Plan.
(3) Includes 1,249 shares owned by his wife and 11,978 vested
shares allocated to Mr. Rountree pursuant to the Directors'
Plan.
(4) Includes 3,624 vested shares pursuant to the Directors'
Plan.
(5) Includes 2,855 vested shares held by the 401(k) Plan, 4,730
vested shares held through the Supplemental Plan and 15,467
of presently exercisable stock options purusant to the 1992
Plan.
(6) Includes 170,979 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
also includes: 9,137 vested shares held through the 401(k)
Plan and 12,288 vested shares held through the Supplemental
Plan.
(7) Includes 36,709 shares Mr. Morgan is entitled to purchase
upon the exercise of presently exercisable stock options
pursuant to the 1992 Plan. Such number also includes 4,531
vested shares held through the 401(k) Plan and 6,677 vested
shares held through the Supplemental Plan.
(8) Includes 30,798 shares that Mr. Stevens is entitled to pur-
chase upon the exercise of presently exercisable stock
options granted pursuant to the 1992 Plan. Such number also
includes: 8,485 vested shares held by the 401(k) Plan;
1,577 vested shares held through the Southern Union Stock
Purchase Plan and 7,133 vested shares held through the Sup-
plemental Plan.
(9) Does not include 120,333, 61,303 and 61,303 shares (all
representing less than 1% of the common stock outstanding)
owned by Bass Enterprises Production Co. ("BEPCO"), The Bass
Foundation ("BF") and Lee and Romana Bass Foundation
("LRBF"), respectively. This information, the information
set forth in note (11) 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 (as amended through
December 30, 1997) filed by Sid R. Bass, Lee M. Bass,
Sid R. Bass Management Trust, Perry R. Bass, BEPCO, BF and
LRBF (the "Bass Filing Group"), as adjusted for any stock
dividends and splits since the date of such schedule. Mem-
bers of the Bass Filing Group, which collectively own 9.65%,
disclaim beneficial ownership in each other's shares.
(10) Does not include shares reported to be held by Sid R. Bass
Management Trust. See notes (9), (11) and (12).
(11) 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 (9).
(12) Does not include shares reported to be held by Lee M. Bass.
See notes (9) and (10).
(13) 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 163,131 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, 1993 in the Company's Common Stock, the S&P 500 Index
and in the S&P Utilities Index. Each case assumes reinvestment
of dividends.
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Southern Union 100 142 146 249 272 402
S&P 500 Index 100 101 128 161 217 282
S&P Utilities Index 100 92 106 131 138 180
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, 1998, $12,156 in interest was forgiven by the
Company. See "Executive Compensation." The outstanding balance
at June 30, 1998 was $229,090.
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, 1998, 1997 and 1996.
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, 1998,
the total amount paid by the Company to Fleischman and Walsh,
L.L.P. for legal services was $1,294,134.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP has served as the Certified Public
Accountants of the Company for the fiscal year ended June 30,
1998. Representatives of PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP to serve as the Company's Certified
Public Accountants for the fiscal year ending June 30, 1999.
COMPANY'S 1998 SUMMARY ANNUAL REPORT
The Company's Summary Annual Report to Stockholders and Annual
Report on Form 10-K for the fiscal year ended June 30, 1998, as
filed with the Securities and Exchange Commission are available
without charge to stockholders upon writing to the Secretary of
the Company. Neither such Summary Annual Report to Stockholders
nor the Annual Report on Form 10-K for the fiscal year ended
June 30, 1998 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 28, 1998
<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, 1998
ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints, GEORGE L. LINDEMANN and
PETER H. KELLEY, or either of them, with power of substitution in
each, proxies for the undersigned, to represent the undersigned
and to vote all the Common Stock of the Company which the under-
signed would be entitled to vote, as fully as the undersigned
could vote and act if personally present, at the Annual Meeting
of Stockholders to be held on November 12, 1998 at 2:00 p.m.
Central Standard Time, at The Gem Theater, 1601 East 18th
Street, Kansas City, Missouri or at any adjournment or post-
ponement 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.
SEE REVERSE CONTINUED AND TO BE SIGNED SEE REVERSE
SIDE ON REVERSE SIDE SIDE
PROXY CARD (BACK)
X Please mark votes as in this example
- - ---
1. Election of the following nominees as Class II Directors
Nominees: AARON I. FLEISCHMAN, KURT A GITTER, M.D.,
ADAM M. LINDEMANN, AND GEORGE ROUNTREE, III.
FOR WITHHELD
--- ---
-------------------------------------------------------------
Withheld for the following only (write the name of the
nominee(s) on the space above)
2. Proposal to approve the Southern Union 1992 Long-Term Stock
Incentive Plan, as Amended.
FOR AGAINST ABSTAIN
--- --- ---
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
-----
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
to the left.
Signature Date
------------------------------- -----------------
Signature Date
------------------------------- -----------------
