Exhibit 10.3


    
      

    

     

    Exhibit
      10.3

     

    

      COMMON
        STOCK PERFORMANCE GRAPH

      


      The
        following performance graph compares the performance of the common stock
        to the
        Standard & Poor’s 500 Stock Index (“S&P 500 Index”) and the Standard
& Poor’s Supercomposite Gas Utilities Index (“S&P Supercomposite Gas
        Utilities Index”). The comparison assumes $100 was invested on December 31, 1999
        in the common stock, the S&P 500 Index and in the S&P Supercomposite Gas
        Utilities Index. Each case assumes reinvestment of dividends.

      


      [Missing
        Graphic Reference]

      


      The
        following companies are included in the S&P Supercomposite Gas Utilities
        Index used in the graph: AGL Resources, Inc., Atmos Energy Corporation, Cascade
        Natural Gas Corporation, KeySpan Corporation, The Laclede Group, Inc., New
        Jersey Resources Corporation, Nicor, Inc., NiSource, Inc., Northwest Natural
        Gas
        Company, Peoples Energy Corporation, Piedmont Natural Gas Company, Inc.,
        Southern Union Company, Southwest Gas Corporation, UGI Corporation and WGL
        Holdings, Inc.

      


      CERTAIN
        RELATIONSHIPS

      


      In
        December 1999, the Company advanced $4,000,000 and entered into a note agreement
        with Thomas F. Karam, who is the President and Chief Operating Officer and
        a
        director of Southern Union. The note calls for nine annual payments of $569,510
        commencing on December 20, 2000, and the outstanding principal balance and
        any
        accrued but unpaid interest are due and payable on December 20, 2009. The
        note
        bears interest at 7% per annum and is collateralized by the outstanding stock
        options of Mr. Karam. Mr. Karam is current in his payments and the outstanding
        balance of the note is $2,383,487, and during the six-month period ended
        December 31, 2004 the largest principal amount due was $2,856,304.

      


      In
        January 2000, the Company advanced $308,000 and entered into a note agreement
        with Dennis K. Morgan, Executive Vice President - Regulatory and Litigation
        of
        Southern Union. The note calls for monthly payments of $1,500 commencing
        on
        February 15, 2000, and the outstanding principal balance and any accrued
        but
        unpaid interest due and payable on January 27, 2010. The note bears interest
        at
        five basis points plus the Eurodollar Rate per annum and is uncollateralized.
        Mr. Morgan is current in his payments and the outstanding balance of the
        note is
        $274,406, and during the six-month period ended December 31, 2004 the largest
        principal amount due was $280,313.

      


      Since
        1993 Southern Union has maintained executive offices in New York City for
        its
        Chairman and Vice Chairman, and for use by other Company executives, directors
        and representatives when conducting business there. Until October 1, 2004
        the
        space Southern Union occupied was leased by Activated Communications, Inc.
        (“Activated”), an entity owned by Chairman Lindemann and members of his family.
        From 1993 until October of 2004, Southern Union reimbursed Activated in
        accordance with a cost sharing arrangement approved by disinterested directors
        in 1993 (the “Cost Sharing Arrangement”). Southern Union’s payments to Activated
        for the periods July through September 2004 and fiscal years ended June 30,
        2004
        and 2003 for reimbursement of lease related expenses were $245,766, $713,000
        and
        $690,000, 

       

      
        
           

        

        
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      respectively,
        which were calculated pursuant to the Cost Sharing Arrangement. During fiscal
        year 2003, Southern Union renovated the office space and during the renovation
        period, Southern Union leased temporary space at a cost of $313,000 for shared
        use by Company personnel and representatives, and other non-Company personnel
        who maintain offices in the leased space, including director Adam Lindemann
        and
        persons employed by him or businesses he controls. 

      


      In
        2004,
        the Audit Committee reevaluated the Cost Sharing Arrangement and determined
        that
        it is in the Company’s best interest to maintain a presence in New York City.
        Based on such reevaluation, Southern Union agreed to assume the lease from
        Activated and to enter into a sublease arrangement with Activated, subject
        to
        the consent of the owner of the building which was obtained on March 11,
        2005.
        Nevertheless, both Activated and Southern Union have operated as though the
        sublease was in effect as of October 1, 2004. The sublease requires payments
        in
        advance from Activated with the payment based on the direct space utilized
        by
        Activated and a portion of certain common area office space. Activated paid
        the
        Company $67,400 for lease related expenses incurred under the sublease, from
        October 1, 2004 through December 31, 2004.

      


      Certain
        Southern Union executive officers, directors and employees have invested
        an
        aggregate of approximately $2,600,000 and beneficially own in the aggregate
        approximately a three percent equity ownership interest either directly,
        indirectly or through a partnership unrelated to Southern Union, in Advent
        Networks, Inc. ("Advent"), a private technology company in which Southern
        Union
        also maintains an investment. As of December 31, 2004, the Company had a
        $508,000 equity investment in Advent after recognizing a $16,425,000 non-cash
        charge to reflect a decrease in the fair value of its investment during the
        quarter ended December 31, 2004. Additionally, a wholly owned subsidiary
        of
        Southern Union has guaranteed a $4,000,000 line of credit between Advent
        and a
        bank. Advent remains current and is not in default on this line of credit.
        

      


      THE
        COMPANY’S 2004 TRANSITION REPORT

      


      The
        Company’s Annual Report to Stockholders and Transition Report on Form 10-K for
        the six months ended December 31, 2004, as filed with the Securities and
        Exchange Commission, are available without charge to stockholders upon written
        request to the Secretary of the Company. Neither such Annual Report to
        Stockholders nor the Transition Report on Form 10-K for the six months ended
        December 31, 2004 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,

      


      [Missing
        Graphic Reference]

              JOHN
        E. BRENNAN

              Secretary

      


      Wilkes-Barre,
        Pennsylvania

      April
        7,
        2005

      


      
        
           

        

        
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