<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
SOUTHWEST GAS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[LOGO SOUTHWEST GAS CORPORATION]
5241 SPRING MOUNTAIN ROAD - P.O. BOX 98510 - LAS VEGAS, NEVADA 89193-8510
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 8, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Southwest
Gas Corporation ("Company") will be held on Thursday, May 8, 1997, at 10:00 a.m.
in the auditorium of the Company's Headquarters office building, 5241 Spring
Mountain Road, Las Vegas, Nevada, for the following purposes:
(1) To elect 11 directors of the Company;
(2) To consider and vote on a proposal to ratify the selection of Arthur
Andersen LLP as independent public accountants for the Company; and
(3) To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has established March 12, 1997, as the record date
for the determination of shareholders entitled to vote at the annual meeting and
to receive notice thereof.
Shareholders are cordially invited to attend the meeting in person. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
A Copy of the Annual Report to Shareholders for the year ended December 31,
1996, is enclosed.
/s/ GEORGE C. BIEHL
------------------------------------
George C. Biehl
Senior Vice President/Chief Financial
Officer
& Corporate Secretary
March 31, 1997
<PAGE> 3
March 31, 1997
[LOGO SOUTHWEST GAS CORPORATION]
Michael O. Maffie, President & C.E.O.
Dear Shareholder:
You are cordially invited to the Annual Meeting of Shareholders of
Southwest Gas Corporation scheduled to be held on Thursday, May 8, 1997, in the
auditorium of the Company's Headquarters office building, 5241 Spring Mountain
Road, Las Vegas, Nevada, commencing at 10:00 a.m. Your Board of Directors looks
forward to greeting personally those shareholders able to attend.
At the meeting you will be asked to consider and approve (i) the election
of 11 directors, and (ii) the ratification of the selection of Arthur Andersen
LLP as the Company's independent public accountants. The Board of Directors
unanimously recommends that you vote FOR the selection of Arthur Andersen LLP.
It is important that your shares are represented and voted at the meeting
regardless of the number of shares you own and whether or not you plan to
attend. Accordingly, we request you to sign, date, and mail the enclosed proxy
at your earliest convenience.
Your interest and participation in the affairs of the Company are sincerely
appreciated.
Sincerely,
[SIG]
<PAGE> 4
LOCATION OF 1997
ANNUAL MEETING OF SHAREHOLDERS
5241 SPRING MOUNTAIN ROAD
*SHAREHOLDER PARKING WILL
BE IN THE WEST PARKING LOT.
ATTENDANTS WILL BE AVAILABLE
TO PROVIDE ASSISTANCE.
[MAP -- CAMERA READY]
<PAGE> 5
SOUTHWEST GAS CORPORATION
5241 SPRING MOUNTAIN ROAD - P.O. BOX 98510 - LAS VEGAS, NEVADA 89193-8510
PROXY STATEMENT
MARCH 31, 1997
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of the Company of proxies representing the common stock
of the Company (the "Common Stock") to be voted at the Annual Meeting of
Shareholders of the Company to be held on May 8, 1997, and at any adjournment
thereof. This Proxy Statement and accompanying proxy card are being mailed to
shareholders on or about March 31, 1997.
A form of proxy is enclosed for your use. The Company will acknowledge
revocation of any proxy upon request of the record holder made in person or in
writing prior to the exercise of the proxy, or upon receipt of a valid proxy
bearing a later date. Delivery of said revocation or valid proxy bearing a later
date shall be made upon the Corporate Secretary of the Company. If a shareholder
executes two or more proxies with respect to the same shares, the proxy bearing
the most recent date will be honored if otherwise valid. All shares represented
by valid proxies received pursuant to this solicitation will be voted at the
Annual Meeting. Where a shareholder specifies by means of the proxy a choice
with respect to any matter to be acted upon, his or her shares will be voted in
accordance with each specification so made.
The entire cost of soliciting proxies will be paid by the Company. In
following up the original mail solicitation of proxies, the Company will make
arrangements with brokerage houses and other custodians, nominees, and
fiduciaries to send proxies and proxy materials to the beneficial owners of
Common Stock and will reimburse them for their expenses in so doing. Under an
agreement with the Company, Morrow & Co. will assist in obtaining proxies from
certain larger and other shareholders at an estimated cost of $4,500 plus
certain expenses.
The total number of shares of Common Stock outstanding at the close of
business on March 12, 1997 (the "Record Date"), the Record Date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, was 26,901,106. Only holders of Common Stock on the Record Date are
entitled to notice of and to vote at the Annual Meeting of Shareholders. The
Company will appoint 1 or 3 employees to function as inspectors of election in
advance of the meeting to tabulate votes, to ascertain whether a quorum is
present, and to determine the voting results on all matters presented to
shareholders. A majority of all shares of Common Stock entitled to vote,
represented in person or by proxy, constitutes a quorum. Abstentions and broker
non-votes are each included in the determination of the number of shares
present; however, they are not counted for the purpose of determining the
election of each nominee for director.
Each share of Common Stock is entitled to 1 vote. Shareholders have
cumulative voting rights with respect to the election of directors, if certain
conditions are met. Any shareholder otherwise entitled to vote may cumulate his
or her votes for a candidate or candidates placed in nomination at the meeting
if, prior to the voting, he or she has given notice at the meeting that he or
she intends to cumulate his or her votes. A shareholder electing to cumulate his
or her votes may cast as many votes as there are directors to be elected,
multiplied by the number of shares of Common Stock standing in his or her name
on the books of the Company at the close of business on the Record Date. A
shareholder may cast all of his or her votes for 1 candidate or allocate them
among 2 or more candidates in any manner he or she chooses. If any shareholder
has given such notice, all shareholders may cumulate their votes for candidates
in nomination.
The persons named in the proxies solicited by the Board of Directors,
unless otherwise instructed, intend to vote the shares represented by such
proxies FOR the selection of Arthur Andersen LLP as independent public
accountants and, in the case of the election of directors,
<PAGE> 6
equally FOR each of the 11 candidates for the office of director named in this
Proxy Statement; HOWEVER, if sufficient numbers of shareholders exercise
cumulative voting rights to elect 1 or more other candidates, the management
proxies will (i) determine the number of directors they are entitled to elect,
(ii) select such number from among the named candidates, (iii) cumulate their
votes, and (iv) cast their votes for each candidate among the number they are
entitled to elect.
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
NAMES AND QUALIFICATIONS OF NOMINEES
Each director elected at the Annual Meeting of Shareholders will serve
until the next Annual Meeting (normally held on the second Thursday of May) and
until his or her successor shall be elected and qualified. The 11 nominees were
elected to their present term of office at the last Annual Meeting of
Shareholders on July 16, 1996. The 11 nominees for director receiving the
highest number of votes will be elected to serve until the next Annual Meeting.
The names of the nominees for election to the Board of Directors, the
principal occupation of each nominee and his or her employer for the last five
years or longer, and the principal business of the corporation or other
organization, if any, in which such occupation or employment is carried on,
follow.
RALPH C. BATASTINI
Former President, Vice Chairman, and Chief Financial Officer
Viad Corp (Formerly The Greyhound Corporation)
Director Since: 1992
Board Committees: Audit, Finance, Nominating, Pension Plan Investment
Mr. Batastini, 67, received his undergraduate degree from Illinois State
University and his M.B.A. degree in finance from the University of Chicago. He
joined The Greyhound Corporation in 1957 and retired in 1984 as vice chairman
and chief financial officer. At the time of his retirement Mr. Batastini headed
Greyhound's financial group of companies involved in capital equipment leasing,
computer leasing, reinsurance, money orders, mortgage insurance, and real
estate. He subsequently served as president of Batastini & Co. from 1985 to
1990. He is the past president and current trustee of the Barrow Neurological
Foundation.
MANUEL J. CORTEZ
President and Chief Executive Officer
Las Vegas Convention and Visitors Authority
Director Since: 1991
Board Committees: Compensation, Finance, Nominating, Pension Plan Investment
Mr. Cortez, 58, served four terms (1977-1990) on the Clark County
Commission and is a former chairman of the Commission. He has been active on
various boards, including the Environmental Quality Policy Review Board, the Las
Vegas Valley Water District Board of Directors, and the University Medical
Center Board of Trustees, and served as chairman of the Liquor and Gaming
Licensing Board and the Clark County Sanitation District. He has also held
leadership roles with numerous civic and charitable organizations such as Boys
and Girls Clubs of Clark County, Lied Discovery Childrens Museum, and Boys Town.
Currently, Mr. Cortez holds professional memberships in the American Society of
Association Executives, the Professional Convention Managers Association, the
International Association of Convention and Visitors Bureaus, the American
Society of Travel Agents, and is on the board of directors for the Travel
Industry Association of America.
2
<PAGE> 7
LLOYD T. DYER
Retired President and Chief Executive Officer
Harrah's
Director Since: 1978
Board Committees: Executive, Compensation, Nominating (Chairman)
Mr. Dyer, 69, obtained a degree in banking and finance from the University
of Utah prior to his employment with Harrah's, a hotel/gaming corporation with
its principal facilities in Reno and Lake Tahoe, in 1957. He was elected
president and chief operating officer of Harrah's in 1975, and elected president
and chief executive officer in 1978. He remained in those positions with
Harrah's until his retirement in April 1980. Mr. Dyer is a trustee of the
William F. Harrah Trusts.
KENNY C. GUINN
Chairman of the Board
Southwest Gas Corporation
Director Since: 1981
Board Committees: Executive (Chairman), Compensation, Nominating
Mr. Guinn, 60, was appointed President and Chief Operating Officer of
Southwest Gas Corporation in 1987, Chairman and Chief Executive Officer in 1988,
and was elected Chairman of the Board of Directors in 1993. Mr. Guinn is
actively involved in numerous business, charitable, and civic activities. He is
past chairman of the Las Vegas Metropolitan Police Fiscal Affairs Committee and
past chairman of the Board of Trustees for the University of Nevada, Las Vegas
Foundation. In May 1994 he was appointed Interim President of the University of
Nevada, Las Vegas and served in this capacity for approximately 1 year. He is
also a director for Oasis Residential, Inc., Boyd Gaming Corporation, Del Webb
Corporation, and Norwest Bank Nevada Division.
THOMAS Y. HARTLEY
President and Chief Operating Officer
Colbert Golf Design and Development
Director Since: 1991
Board Committees: Audit, Compensation (Chairman), Finance
Mr. Hartley, 63, obtained his degree in business from Ohio University in
1955, and was employed in various capacities by Deloitte Haskins & Sells (now
Deloitte & Touche) from 1959 until his retirement as an area managing partner in
1988. Mr. Hartley is actively involved in numerous business and civic
activities. He is a past chairman of the University of Nevada, Las Vegas
Foundation and president of the Las Vegas Founders Club. He has also held
executive positions with the Nevada Development Authority, the Las Vegas
Founders Golf Foundation, the Las Vegas Chamber of Commerce, and the Boulder Dam
Area Council of the Boy Scouts of America. He is a director of Rio Hotel and
Casino, Inc., Sierra Health Services, Inc., and AmeriTrade Holdings Corp.
MICHAEL B. JAGER
Private Investor
Director Since: 1989
Board Committees: Audit, Finance, Pension Plan Investment (Chairman)
Mr. Jager, 65, obtained a degree in petroleum geology from Stanford
University in 1955. After a four-year employment with the Richfield Oil
Corporation as a petroleum geologist, he joined Frank H. Ayres & Son
Construction Company and was involved in the construction of subdivisions and
homes in southern California until 1979. Since that time he has consulted in the
single family residential development industry, and owns and manages a number of
businesses in Oregon and Nevada.
3
<PAGE> 8
LEONARD R. JUDD
Former President, Chief Operating Officer, and Director
Phelps Dodge Corporation
Director Since: 1988
Board Committees: Audit (Chairman), Compensation, Nominating
Mr. Judd, 58, former president, chief operating officer, and director of
Phelps Dodge Corporation, joined Phelps Dodge in 1963 and worked at that
company's operations in Arizona, New Mexico, and New York City. He was elected
to the Phelps Dodge board of directors in 1987, president of Phelps Dodge Mining
Company in 1988, and became president and chief operating officer of Phelps
Dodge in 1989. He remained in those positions until November, 1991. Mr. Judd is
a member of various professional organizations and is active in numerous civic
groups. He serves as a director of Morrison-Knudsen Corporation and the Montana
College of Mineral Science and Technology Foundation.
JAMES R. LINCICOME
Retired Executive Vice President and General Manager,
Government Electronics Group, Motorola Corporation
Director Since: 1987
Board Committees: Audit, Compensation, Finance (Chairman)
Mr. Lincicome, 71, was employed by Motorola in its Communications Division
in 1950. After progressing through positions in that Division, he transferred to
the Government Electronics Group, where from 1979 until his retirement in 1987,
he was General Manager responsible for various national defense, space
exploration, and other government related programs. Mr. Lincicome is a member of
various professional organizations and is past Chairman of the Arizona State
University Engineering Advisory Council, Junior Achievement of Central Arizona,
the Phoenix Urban League, United for Arizona, and the Valley of the Sun United
Way. He has held a number of leadership roles in other civic and charitable
organizations in Arizona, including the Research Committee of the Arizona Town
Hall and Board Member of the Goldwater Institute, and was vice chairman of the
Government Division of the Electronic Industries Association in 1986.
MICHAEL O. MAFFIE
President and Chief Executive Officer
Southwest Gas Corporation
Director Since: 1988
Board Committees: Executive
Mr. Maffie, 49, joined the company in 1978 as Treasurer after seven years
with Arthur Andersen & Co. He was named Vice President/Finance and Treasurer in
1982, Senior Vice President and Chief Financial Officer in 1984, Executive Vice
President in 1987, President and Chief Operating Officer in 1988, and President
and Chief Executive Officer in 1993. He received his undergraduate degree in
accounting and his M.B.A. degree in finance from the University of Southern
California. He serves as a director of Norwest Bank Nevada Division. A member of
various civic and professional organizations, he serves as senior vice chairman
of the United Way of Nevada, trustee and treasurer of the University of Nevada,
Las Vegas Foundation, and a commissioner on the State of Nevada Commission on
Substance Abuse Education, Prevention, Enforcement, and Treatment. He also is a
director of the Pacific Coast Gas Association and the Institute of Gas
Technology.
4
<PAGE> 9
CAROLYN M. SPARKS
Co-Founder
International Insurance Services, Ltd.
Director Since: 1988
Board Committees: Audit, Executive, Finance, Pension Plan Investment
Mrs. Sparks, 55, graduated from the University of California at Berkeley in
1963, and with her husband, co-founded International Insurance Services, Ltd.,
in 1966 in Las Vegas. She served on the University and Community College System
of Nevada Board of Regents from 1984 to 1996, and in 1991 was elected to a
two-year term as Chairperson of the Board of Regents. Mrs. Sparks is actively
involved with numerous charitable and civic organizations, including founding
and current chairperson of the University Medical Center Foundation and the
Children's Miracle Network Telethon. She also served on the board of regents for
Bishop Gorman High School and is currently chairperson of the board of the
Nevada Children's Center Foundation. She is a director of Showboat, Inc., a
hotel/gaming corporation.
ROBERT S. SUNDT
Retired President
Sundt Corp.
Director Since: 1987
Board Committees: Executive, Finance, Nominating, Pension Plan Investment
Mr. Sundt, 70, has been associated with Sundt Corp. in a variety of
positions since 1948. He was named President of Sundt Corp. in 1983. He is now
retired and has no continuing association with Sundt Corp. He is a member of the
American Institute of Constructors, Consulting Constructors Council of America,
and a life director of the Associated General Contractors of America. He is a
member of the American Arbitration Association and serves as an arbitrator on
disputes concerning the construction industry. He is a past member of the
Construction Industry Presidents Forum. Mr. Sundt is affiliated with a number of
community organizations and is past chairman of the Tucson Metropolitan Chamber
of Commerce.
5
<PAGE> 10
SECURITIES OWNERSHIP BY NOMINEES AND EXECUTIVE OFFICERS
The following table discloses all Common Stock of the Company beneficially
owned by the nominees for directors and the executive officers of the Company,
as of March 12, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES
DIRECTOR/EXECUTIVE OFFICER BENEFICIALLY OWNED(1)(2)
---------------------------------------------- ------------------------
<S> <C>
Ralph C. Batastini............................ 6,107
Manuel J. Cortez.............................. 1,811
Lloyd T. Dyer................................. 4,331
Kenny C. Guinn................................ 0
Thomas Y. Hartley............................. 12,787
Michael B. Jager.............................. 4,900(3)
Leonard R. Judd............................... 2,000
James R. Lincicome............................ 2,000
Michael O. Maffie............................. 49,459(4)(5)
Carolyn M. Sparks............................. 2,405
Robert S. Sundt............................... 5,000
George C. Biehl............................... 18,263(5)
James F. Lowman............................... 13,504
Dudley J. Sondeno............................. 8,961
Thomas J. Trimble............................. 10,488
Edward S. Zub................................. 11,444
Other Executive Officers...................... 16,354
</TABLE>
- ---------------
(1) As of March 12, 1997, the directors and executive officers of the Company,
other than Mr. Trimble who retired in 1996, beneficially owned 159,326
shares, which represents less than 1% of the outstanding shares of the
Company's Common Stock. No investor owned more than 5% of the outstanding
voting stock of the Company as of March 12, 1997.
(2) The Common Stock holdings listed in this column include performance shares
granted to the Company's executive officers under the Company's Management
Incentive Plan for 1994, 1995, and 1996.
(3) Number of shares includes 3,000 shares held in trust for Mr. Jager's spouse,
over which Mr. Jager has no control.
(4) Number of shares includes 2,864 shares held solely by Mr. Maffie's spouse.
(5) Number of shares does not include 6,618 shares held by the Southwest Gas
Corporation Foundation, which is a charitable trust. Messrs. Maffie and
Biehl are trustees of the Foundation but disclaim beneficial ownership of
said shares.
- ---------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company has adopted procedures to assist its directors and executive
officers in complying with Section 16(a) of the Securities and Exchange Act of
1934, as amended, which includes assisting in the preparation of forms for
filing. For 1996, all the required reports were filed timely.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2 ON THE PROXY CARD)
The Board of Directors has selected Arthur Andersen LLP as independent
public accountants for the Company for the year ending December 31, 1997,
subject to ratification of the selection by shareholders. Arthur Andersen LLP
has served as independent public accountants for the Company since 1957. To the
knowledge of the Company, at no time has Arthur Andersen LLP had any direct or
indirect financial interest in or any connection with the Company or any of its
subsidiaries other than in connection with services rendered to the Company as
described below. The affirmative vote
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<PAGE> 11
of a majority of the shares represented at the Annual Meeting in person or by
proxy is necessary to ratify the selection of Arthur Andersen LLP as independent
public accountants for the Company.
The selection of Arthur Andersen LLP by the Board of Directors was based on
the recommendation of the Audit Committee, which is composed wholly of outside
directors. The Audit Committee meets periodically with the Company's internal
auditors and independent public accountants to review the scope and results of
the audit function and the policies relating to auditing procedures. In making
its annual recommendation, the Audit Committee reviews both the audit scope and
estimated fees for the coming year. If the shareholders do not ratify this
appointment, other firms of certified public accountants will be considered by
the Board of Directors upon recommendation of the Audit Committee.
During 1996, the Company paid Arthur Andersen LLP for (i) the audit of the
annual financial statements, (ii) reviews of unaudited quarterly financial
information, (iii) assistance and consultation in connection with preparing
various Securities and Exchange Commission (the "SEC") filings, (iv) the audit
of the annual financial statements of the Company's employee benefit plans, (v)
consultation in connection with various tax and accounting matters, and (vi)
certain other professional services.
The Audit Committee approved the audit and other professional services and
considered the costs of all such services and what effect, if any, performance
of the other professional services might have on the independence of the
accountants.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting of Shareholders. They will have the opportunity to make statements, if
they are so inclined, and will be available to respond to appropriate questions.
GENERAL INFORMATION
BOARD OF DIRECTORS
The Board of Directors is responsible for the overall affairs of the
Company and for establishing broad corporate policies.
Regular meetings of the Board of Directors are scheduled for the third
Tuesdays of January, July, September, and November; the first Tuesday of March;
and the second Wednesday of May. An organizational meeting is also held
immediately following the Annual Meeting of Shareholders. The Board of Directors
held 5 regular meetings, 3 special meetings, and 1 organizational meeting in
1996. Each director attended more than 75% of the meetings of the Board of
Directors and standing committees on which he or she served during 1996.
DIRECTORS COMPENSATION
Outside directors receive an annual retainer of $20,000, plus $900 for each
Board of Directors or committee meeting attended. Committee chairpersons receive
an additional $500 for each committee meeting attended. The outside directors
also received compensation for serving as directors for the Company's financial
subsidiary, PriMerit Bank, Federal Savings Bank, (the "Bank"). Such
compensation, which consisted of an annual retainer of $16,000, plus meeting
fees, ended with the sale of the Bank in July 1996. The Chairman of the Board of
Directors, Mr. Guinn, receives an additional $25,000 annually for serving in
that capacity. Directors who are full-time employees of the Company or its
subsidiaries receive no additional compensation for Board of Directors service.
Each outside director received options during 1996 to purchase 3,000 shares
of the Company's Common Stock. The award of such options was approved by
shareholders with the adoption of the 1996 Stock Incentive Plan. The exercise
price for the options is the market price of the Common
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<PAGE> 12
Stock on the date of the grant, July 16, 1996, and will become exercisable over
three years, commencing with the first anniversary of the grant. Options to
purchase 2,000 shares of Common Stock will be granted to each outside director
on the date of each Annual Meeting of Shareholders during the 10-year term of
the incentive plan. All options granted to the outside directors will expire 10
years after the date of each grant.
Outside directors may defer their compensation until retirement or other
termination of status as a director. Amounts deferred bear interest at 150% of
the Moody's Seasoned Corporate Rate.
The Company also provides a retirement plan for its outside directors. With
a minimum of 10 years of service, an outside director can retire and receive a
benefit equal to the annual retainer, at retirement, for serving on the
Company's Board. Directors who retire before age 65, after satisfying the
minimum service obligation, will receive retirement benefits upon reaching age
65.
COMMITTEES OF THE BOARD
In order to assist it in discharging its duties, the Board of Directors has
established six permanent committees. The committees consist of Executive,
Audit, Compensation, Finance, Nominating, and Pension Plan Investment. During
1996, the Board of Directors created the Compensation and Nominating Committees
by dividing the duties previously performed by the Nominating and Compensation
Committee. The Finance Committee was also established during 1996.
The Executive Committee meets, if necessary, during the months that the
full Board of Directors does not meet. The committee considers corporate policy
matters requiring timely action and recommends that certain other matters be
considered and acted upon by the Board of Directors. The Executive Committee
consists of Directors Guinn (Chairman), Dyer, Maffie, Sparks, and Sundt.
The Audit Committee, whose functions are discussed above under the caption
"Selection of Independent Public Accountants," consists of directors Judd
(Chairman), Batastini, Hartley, Jager, Lincicome, and Sparks.
The Compensation Committee makes recommendations to the Board of Directors
on such matters as directors' fees and benefit programs, executive compensation
and benefits, and compensation and benefits for all other Company employees. The
committee is also responsible for the executive compensation report and related
disclosures contained in this Proxy Statement. The Compensation Committee
consists of directors Hartley (Chairman), Cortez, Dyer, Guinn, Judd, and
Lincicome.
The Finance Committee reviews and makes recommendations to the Board of
Directors regarding the financial policies, plans, and procedures for the
Company; the financial implications of proposed corporate action; and matters
concerning the Company's dividend policy. Its responsibilities include reviewing
strategies and recommendations with respect to financing programs, dividend
reinvestment and stock purchase programs, and capital structure goals. The
Finance Committee consists of directors Lincicome (Chairman), Batastini, Cortez,
Hartley, Jager, Sparks, and Sundt.
The Nominating Committee makes recommendations to the Board of Directors
regarding nominees to be proposed by the Board of Directors for election as
directors, evaluates the size and composition of the Board of Directors, and
establishes the criteria for the selection of directors. In considering
candidates for the Board of Directors, the Nominating Committee seeks to achieve
an appropriate balance of expertise and diversity of interests recognizing
factors such as the character and quality of individuals, experience, age,
education, geographic location, anticipated participation in Board of Directors
activities, and other personal attributes or special talents. The Nominating
Committee will consider written suggestions from shareholders regarding
potential nominees for election as directors. To be considered by the Nominating
Committee for inclusion in the slate of nominees to be proposed by the Board of
Directors, such suggestions should be addressed to the Company's Corporate
Secretary. The Nominating Committee also is responsible for recommending
8
<PAGE> 13
Board of Directors committee assignments. The Nominating Committee consists of
directors Dyer (Chairman), Batastini, Cortez, Guinn, Judd, and Sundt.
The Pension Plan Investment Committee establishes, monitors, and oversees,
on a continuing basis, asset investment policy and practices for the retirement
plan. The Pension Plan Investment Committee consists of directors Jager
(Chairman), Batastini, Cortez, Sparks, and Sundt.
In 1996, no Executive Committee meetings were held, the Audit Committee
held 3 meetings, the Finance Committee held 1 meeting, and the Pension Plan
Investment Committee held 3 meetings. The Nominating and Compensation Committee
held 4 meetings during the year before bifurcation, and the Nominating Committee
held 1 meeting during the year after it was established.
EXECUTIVE COMPENSATION AND BENEFITS
EXECUTIVE COMPENSATION REPORT
The Compensation Committee of the Board of Directors (the "Committee")
administers the Company's executive compensation program. Under the supervision
of the Committee, the Company has developed and implemented an executive
compensation program designed to satisfy the objectives of (i) reasonableness,
(ii) competitiveness, (iii) internal equity, and (iv) performance. These
objectives are addressed through industry-based compensation comparisons and
incentive plans that focus on specific annual and long-term Company financial
and productivity performance goals.
Base Compensation
The nature of the Company's operation has historically led to the use of
compensation systems widely used in industry, weighted for utility companies,
and accepted by various utility regulatory agencies. Companies of comparable
size used to establish the peer group index for the "Performance Graph" were
factored into the compensation review. Other utility and general industry
surveys were also used to assess the Company's compensation program. Continued
use of such systems is designed to address the first three compensation
objectives. A range of salaries that are comparable with industry levels
provides an objective standard to judge the reasonableness of the Company's
salaries, maintains the Company's ability to compete for and retain qualified
executive officers, and provides a means for ensuring that internal
responsibilities are properly rewarded. Salaries for the Company's executives
are set relative to the midpoint levels for their positions based on this
industry comparison. Compensation above these levels is tied to achieving
specific financial and productivity performance goals.
Performance-based Compensation
The fourth objective of the Company's compensation program, performance, is
addressed through the Company's Management Incentive Plan (the "MIP") and 1996
Stock Incentive Plan (the "Option Plan"), collectively referred to as the
"Incentive Plans." The Incentive Plans are designed to retain key management
employees and to focus on specific annual and long-term Company financial and
productivity performance goals. Financial, productivity, and customer
satisfaction factors are incorporated in the MIP, while the Option Plan is
designed to enable executives to benefit from increases in the price of the
Company's common stock, thereby aligning their interests with those of the
Company's shareholders.
Under the MIP, an incentive opportunity expressed as a percentage of salary
is established annually for each executive officer. The maximum award
opportunities cannot exceed 140% of the targeted awards for meeting the
performance goals. Awards under the Incentive Plan are determined based on the
Company's annual return-on-equity performance, customer to employee ratios, and
customer service satisfaction targets. The financial performance factors used to
make this
9
<PAGE> 14
determination involve the average of the Company's return-on-equity performance
over the last three years (which is weighted and adjusted for inflation) and the
Company's current utility return-on-equity performance in comparison to a peer
group of natural gas distribution companies. The productivity performance
factors used to make this determination involve an absolute target of Company
customer to employee ratio and the actual customer to employee ratio in
comparison to a peer group of natural gas distribution companies. Additionally,
customer service satisfaction experienced throughout the Company's operating
divisions is measured by an independent outside entity. Each of the five factors
is equally weighted, and if the threshold percentage for any factor is achieved,
a percentage of annual performance awards will have been earned. While the
financial factors incorporated in the MIP are significant to shareholder
interests, customer satisfaction and productivity factors are significant to
customer interests. In prior regulatory proceedings, various commissions
insisted that these customer factors be included in the MIP, in order to recover
the cost of the program in the Company's natural gas rates. Regardless of
whether such awards are earned, no awards will be paid unless the Company's
common stock dividend equals or exceeds the prior year's dividend.
If annual performance awards are earned and payable, payment of the awards
will be subject to a possible downward adjustment depending upon satisfaction of
individual performance goals. The Committee will make such a determination for
the Company's chief executive officer's individual performance, who in turn will
make a like determination for the other executive officers. Further, the annual
awards will be split, with 40% paid in cash and the remaining 60% converted into
performance shares tied to the value of the Company's common stock on the date
of the awards. The performance shares will be restricted for three years and the
ultimate payout in Company common stock will be subject to continued employment.
The Company's performance during 1996 exceeded the threshold percentages for
each of the established productivity targets. The Company's operations exceeded
the target for the internal customer to employee ratio, the customer to employee
ratio in comparison to a peer group of natural gas distribution companies, and
the customer service satisfaction survey.
Grants under the Option Plan were provided to the Company's executive
officers during 1996. The options granted were not based upon a predetermined
formula, but rather on the Committee's judgment as to the individual's
anticipated contribution to the future success of the Company. The number of
options granted to the named executive officers in 1996 are shown on the Option
Grant Table section of this Proxy Statement.
CEO Compensation
Compensation paid to Mr. Maffie as president and chief executive officer
for 1996 consisted of his base salary, a performance award under the MIP, and a
cash bonus as a result of the sale of the Bank, described below under
"Non-Utility Bonuses." Mr. Maffie's base salary was set relative to the midpoint
level for salaries paid to chief executive officers of comparable companies,
taking into consideration the length of service in his current position, and
reflects a 5.8% increase in base salary effective August 1, 1996. Mr. Maffie's
incentive award under the MIP for 1996 totaled $324,006 and represented the
Company's overall performance in relation to the established performance goals.
During the year, the Company's performance exceeded each of the established
productivity targets, internal customer to employee ratio, customer to employee
ratio in comparison to a peer group of natural gas distribution companies, and
customer service satisfaction. Mr. Maffie's target performance award for 1996
was set equal to $405,000 or 90% of his annualized December 31, 1996, salary
(not the actual salary shown in the Summary Compensation Table), with the award
ranging from 14% to 126% of his base salary. Based on the Company's overall 1996
performance in relation to the established performance goals, Mr. Maffie earned
80% of his target award under the MIP, with 40% being paid in cash and 60% in
performance shares.
10
<PAGE> 15
Non-Utility Bonuses
The timing and the price secured in the divestiture of the Bank were
substantially influenced by the efforts of the Company's chief executive and
chief financial officers. Through their efforts, the premature disposition of
the Bank was avoided and the Company was able to realize substantial additional
value from the sale. Their involvement in the process led the Board of Directors
to reject prior offers, resulting in a substantial increase in value for the
Bank, and their management of the negotiation process provided the Company the
opportunity to avoid or shift to the acquiring bank ongoing banking and sales
related costs. Once it became apparent that the Bank sale would be approved by
shareholders, the Committee recommended to the Board of Directors that a bonus
be paid to each officer once the consummation of the sale was completed. Bonuses
of $500,000 and $200,000, which are shown on the Summary Compensation Table for
Mr. Maffie and Mr. Biehl, respectively, were paid after the sale of the Bank
closed.
Deductibility of Compensation
The Company's executive compensation program is being administered to
maintain the tax deductibility of all compensation paid to the named executive
officers pursuant to Section 162(m) of the Internal Revenue Code (the "Code").
Section 162(m) of the Code provides that compensation paid to the officers in
excess of $1,000,000 cannot be deducted by the Company for federal income tax
purposes unless, in general, such compensation is performance based, is
established by an independent committee of directors, is objective, and the plan
or agreement providing for such performance-based compensation has been approved
in advance by shareholders or is otherwise exempt from such limitation. The MIP
and Option Plan were designed to satisfy these requirements and management
believes that the compensation provided thereunder should be deductible. In the
future, however, the Company may pay compensation which is non-deductible in
limited circumstances if sound management of the Company so requires.
The Committee believes that the compensation program addresses the
Company's compensation objectives, enhances the commitment of key management
employees, and strengthens long-term shareholder value.
COMPENSATION COMMITTEE
<TABLE>
<S> <C>
Thomas Y Hartley (Chairman) Kenny C. Guinn
Manuel J. Cortez Leonard R. Judd
Lloyd T. Dyer James R. Lincicome
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The above-named committee members served on the Company's Compensation
Committee throughout 1996. Mr. Guinn retired as Chairman and Chief Executive
Officer of the Company on May 12, 1993, and retired as a full-time employee of
the Company on August 31, 1993. Mr. Guinn became a member of the Committee after
his retirement as an officer of the Company.
11
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table provides for fiscal years ended December 31, 1994,
1995, and 1996; compensation earned by the Company's Chief Executive Officer; 1
executive officer who retired during 1996; and each of the 4 most highly
compensated executive officers of the Company at year-end 1996.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
AWARDS
ANNUAL COMPENSATION --------------------- PAYOUTS
------------------------------------------------------------- RESTRICTED -------
BONUS($) OTHER ANNUAL STOCK LTIP ALL OTHER
NAME AND --------------------------- COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) UTILITY(2) NON-UTILITY(3) ($)(4) ($)(2)(5)(6) SARS(#) ($) ($)(7)
- -------------------- ---- --------- ---------- -------------- ------------ ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Michael O. Maffie 1996 435,479 129,602 500,000 0 194,404 90,000 N/A 46,210
President & C.E.O. 1995 408,671 83,642 44,625 0 179,246 N/A N/A 40,481
1994 370,616 39,294 33,855 0 51,098 N/A N/A 32,898
George C. Biehl 1996 204,773 40,324 200,000 0 60,485 30,000 N/A 13,700
Senior Vice
President/ 1995 197,326 26,373 15,075 0 56,523 N/A N/A 12,137
Chief Financial
Officer 1994 187,068 13,064 12,060 0 16,988 N/A N/A 9,148
& Corporate
Secretary
Thomas J. Trimble 1996 160,647 77,044 0 18,410 0 0 N/A 39,092
Senior Vice
President/ 1995 212,367 40,114 0 0 60,172 N/A N/A 48,153
General Counsel & 1994 209,178 20,413 0 0 20,413 N/A N/A 39,404
Corporate Secretary
James F. Lowman 1996 154,015 29,336 0 0 44,004 15,000 N/A 10,316
Senior Vice
President/ 1995 148,847 27,817 0 0 41,725 N/A N/A 7,728
Central Arizona
Division 1994 142,123 14,096 0 0 14,095 N/A N/A 7,267
Dudley J. Sondeno 1996 152,529 29,952 0 0 44,928 25,000 N/A 11,209
Senior Vice
President/ 1995 146,551 27,931 0 0 41,896 N/A N/A 7,978
Chief Knowledge &
Technology
Officer 1994 140,123 13,900 0 0 13,899 N/A N/A 7,130
Edward S. Zub 1996 139,941 28,802 0 0 43,223 25,000 N/A 12,723
Senior Vice
President/ 1995 129,438 24,839 0 0 37,258 N/A N/A 8,641
Regulation &
Product 1994 120,890 9,113 0 0 9,113 N/A N/A 7,845
Pricing
</TABLE>
- ---------------
(1) All compensation reflected in the Summary Compensation Table is reported on
an earned basis for each fiscal year.
(2) Utility bonuses and restricted stock awards accrued for calendar years 1994,
1995, and 1996 were paid and awarded in 1995, 1996, and 1997, respectively.
(3) The non-utility bonuses paid to Messrs. Maffie and Biehl for 1996 were the
result of their work in negotiating and completing the sale of the Bank.
(4) Compensation reported in this column consists of above-market interest
earned on deferred compensation paid to Mr. Trimble after his retirement in
1996. Under the Company's executive deferral plan, payment of deferred
compensation commences upon retirement or some other employment terminating
event.
(5) Dividends equal to the dividends paid on the Company's Common Stock will be
paid on the performance shares awarded under the long-term component of the
Company's management incentive plan during the restriction period.
(6) Mr. Trimble retired during 1996 and the performance shares awarded to him
under the Company's management incentive plan have been converted into
shares of Company Common Stock. The total number of performance shares
granted in 1994, 1995, and 1996, for calendar years 1993, 1994, and 1995,
and their value based on the market price of Company Common Stock at
December 31, 1996, for the other listed officers are as follows:
<TABLE>
<CAPTION>
SHARES VALUE
------ --------
<S> <C> <C>
Mr. Maffie..................................................................... 17,513 $337,125
Mr. Biehl...................................................................... 5,672 109,186
Mr. Lowman..................................................................... 4,331 83,372
Mr. Sondeno.................................................................... 4,315 83,064
Mr. Zub........................................................................ 3,394 65,335
</TABLE>
12
<PAGE> 17
(7) The amounts shown in this column for each year consist of above-market
interest on deferred compensation (in excess of 120% of the Applicable
Federal Long-term Rate) and matching contributions under the Company's
executive deferral plan. Under the plan, executive officers may defer up to
50% of their annual compensation for payment at retirement or at some other
employment terminating event. Interest on such deferrals is set at 150% of
the Moody's Seasoned Corporate Rate. As part of the plan, the Company
provides matching contributions that parallel the contributions made under
the Company's 401(k) plan, which is available to all Company employees,
equal to one-half of the deferred amount, up to 6% of their annual salary.
The breakdown of such compensation for 1996 for each named executive officer
is as follows:
<TABLE>
<CAPTION>
INTEREST CONTRIBUTIONS
------- -------------
<S> <C> <C>
Mr. Maffie................................................................. $33,661 $12,549
Mr. Biehl.................................................................. 7,706 5,994
Mr. Trimble................................................................ 35,558 3,534
Mr. Lowman................................................................. 5,697 4,612
Mr. Sondeno................................................................ 6,651 4,558
Mr. Zub.................................................................... 8,622 4,101
</TABLE>
- ---------------
OPTIONS/SARS GRANTED IN 1996
The following table sets forth the number of shares of the Company's Common
Stock subject to stock options granted under the 1996 Stock Incentive Plan to
the named executive officers listed in the Summary Compensation Table during
1996, together with related information.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------- ANNUAL
NUMBER OF PERCENT OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN OR BASE EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL YEAR PRICE ($/SH) DATE 5 PERCENT 10 PERCENT
- --------------------------------- ------------ ---------------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael O. Maffie................ 90,000 25.7 $15.00 7/15/06 $ 850,500 $2,146,500
George C. Biehl.................. 30,000 8.6 15.00 7/15/06 283,500 715,500
James F. Lowman.................. 15,000 4.2 15.00 7/15/06 141,750 375,750
Dudley J. Sondeno................ 25,000 7.1 15.00 7/15/06 236,250 596,250
Edward S. Zub.................... 25,000 7.1 15.00 7/15/06 236,250 596,250
</TABLE>
- ---------------
(1) Forty percent (40%) of the options become exercisable 1 year after the
grant. Thirty percent (30%) of the options become exercisable 2 years after
the grant, with the remaining becoming exercisable on the third anniversary
of the grant.
(2) The 5% and 10% growth rates for the period ending July 15, 2006, which were
determined in accordance with the rules of the SEC, illustrate that the
potential future value of the granted options is linked to future increases
in growth of the price of the Company's Common Stock. Because the exercise
price for the options equals the market price of the Company's Common Stock
on the date of the grant, there will be no gain to the named executive
officers without an increase in the stock price. The 5% and 10% growth rates
are for illustration only and are not intended to be predictive of future
growth.
13
<PAGE> 18
OPTIONS/SAR EXERCISES AND YEAR-END VALUES
Shown below is information with respect to unexercised options granted
under the 1996 Stock Incentive Plan to the named executive officers and held by
them at December 31, 1996. No options granted were eligible for exercise in
1996.
AGGREGATED OPTION/SAR EXERCISE IN 1996 AND
YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NO. OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NO. OF OPTIONS/SARS AT OPTIONS/SARS AT
SHARES DECEMBER 31, 1996 DECEMBER 31, 1996(1)
ACQUIRED ON VALUES ------------------------------ ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
- ---------------------- ----------- -------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael O. Maffie..... 0 $0 0 90,000 $ 0 $382,500
George C. Biehl....... 0 0 0 30,000 0 127,500
James F. Lowman....... 0 0 0 15,000 0 63,750
Dudley J. Sondeno..... 0 0 0 25,000 0 106,250
Edward S. Zub......... 0 0 0 25,000 0 106,250
</TABLE>
- ---------------
(1) Represents the difference between the exercise prices for in-the-money
options and the closing price of $19.25 for the Company's Common Stock on
the New York Stock Exchange on December 31, 1996, times the number of
in-the-money options.
(2) Unexercised options are those options which have been granted but cannot yet
be exercised due to Internal Revenue Code restrictions on the value of
incentive options and restrictions incorporated into the 1996 Stock
Incentive Plan and the specific option agreements.
- ---------------
BENEFIT PLANS
Southwest Gas Basic Retirement Plan
The named executive officers participate in the Company's non-contributory,
defined benefit retirement plan, which is available to all employees of the
Company and its subsidiaries. Benefits are based upon an employee's years of
service, up to a maximum of 30 years, and the employee's highest five
consecutive years salary, excluding bonuses, within the final 10 years of
service.
PENSION PLAN TABLE (1) (2)
<TABLE>
<CAPTION>
YEARS OF SERVICE
ANNUAL -----------------------------------------------------------
COMPENSATION 10 15 20 25 30
- ------------ ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 8,750 $ 13,125 $ 17,500 $ 21,875 $ 26,250
100,000 17,500 26,250 35,000 43,750 52,500
150,000 26,250 39,375 52,500 65,625 78,750
200,000 35,000 52,500 70,000 87,500 105,000
250,000 43,750 65,625 87,500 109,375 131,250
300,000 52,500 78,750 105,000 131,250 157,500
350,000 61,250 91,875 122,500 153,125 183,750
400,000 70,000 105,000 140,000 175,000 210,000
450,000 78,750 118,125 157,500 196,875 236,250
500,000 87,500 131,250 175,000 218,750 262,500
550,000 96,250 144,375 192,500 240,625 288,750
</TABLE>
- ---------------
(1) Years of service beyond 30 years will not increase benefits under the basic
retirement plan.
(2) For 1997, the maximum annual compensation that can be considered in
determining benefits under the Plan is $160,000. For future years the
maximum annual compensation will be adjusted to reflect changes in the cost
of living as established by the Internal Revenue Service.
- ---------------
14
<PAGE> 19
Compensation covered under the basic retirement plan is based on salary
depicted in the Summary Compensation Table. As of December 31, 1996, the
credited years of service for the named executive officers shown in the Summary
Compensation Table are as follows: Mr. Maffie, 18 years; Mr. Biehl, 11 years;
Mr. Lowman, 27 years; Mr. Sondeno, 17 years; and Mr. Zub, 18 years.
Amounts shown in the pension plan table are straight life annuity amounts
notwithstanding the availability of joint survivorship benefit provisions.
Benefits paid under the basic and supplemental retirement plans are not reduced
by any Social Security benefits received.
Supplemental Retirement Plan
The named executive officers also participate in the Company's supplemental
retirement plan. Such officers with 10 or more years of service may retire at
age 55 or older and will receive benefits under the plan. Benefits from the
plan, when added to benefits received under the basic retirement plan, will
equal 60% of their highest 12-months of salary, as depicted in the Summary
Compensation Table. For Mr. Maffie, compensation used to determine such benefits
includes salary, cash bonuses other than the 1996 non-utility bonus, and the
payment of restrictive stock awards depicted in the Summary Compensation Table.
The cost to the Company for benefits under the supplemental retirement plan for
any one of the named executive officers cannot be properly allocated or
determined because of the overall plan assumptions and options available.
SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS
In July 1996, the Company entered employment agreements (the "Agreements")
with 7 officers, including the named executive officers other than Mr. Trimble.
These agreements generally provide for the payment, upon termination of
employment by the Company without cause, as defined therein, of up to 2 years of
total annual compensation (base salary, a predetermined level of incentive
compensation, and fringe benefits), and up to 3 years of total annual
compensation for Mr. Maffie. The agreements further provide for the payment,
upon the termination of employment by such officers for "good reason," as
defined therein, within 2 years following a change in control of the Company, of
an amount equal to one and one-half times their total annual compensation other
than Mr. Maffie. Under such circumstance, Mr. Maffie would be entitled to a
payment equal to three times his total annual compensation. Vesting and payment
of benefits under the Supplemental Retirement Plan (described in this Proxy
Statement) would also be accelerated if such officers are entitled to benefits
under these agreements. If any payment under these agreements will constitute a
"parachute payment" subject to any excise tax under the Internal Revenue Code,
the officer receiving such payment will be responsible for payment of such tax.
The terms of these agreements are for 24 months for each of the designated
officers, other than Mr. Maffie, and 36 months for Mr. Maffie, and will be
extended for successive 1-year periods unless canceled by the Company.
15
<PAGE> 20
PERFORMANCE GRAPH
The performance graph below compares the five-year cumulative total return
on the Company's Common Stock, assuming reinvestment of dividends, with the
total returns on the Standard & Poor's 500 Stock Composite Index (S&P 500) and
the Edward D. Jones Natural Gas Diversified Index, a peer-group index compiled
by Edward D. Jones & Company, consisting of the Company and 22 other diversified
natural gas distribution companies.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
E.D Jones
Southwest Natural Gas
Gas S&P 500 Diversified Index(1)(2)
-------- ------- -----------------------
<S> <C> <C> <C>
1991 100 100 100
1992 136.3 107.6 110.4
1993 165.7 118.7 123.2
1994 153.2 120.3 107.8
1995 201.3 165.4 140.9
1996 230.3 203.2 177.5
</TABLE>
- ---------------
(1) The Company selected the Edward D. Jones Natural Gas Diversified Index as a
peer-group index because it provides a representative sample of natural gas
distribution companies with at least 30%, but less than 90%, of their gross
revenues from distribution operations. This index should be available on a
continuing basis.
(2) The Edward D. Jones Natural Gas Diversified Index, which is weighted by
year-end market capitalization, consists of the following companies; Atrion
Corporation; Chesapeake Utilities Corp.; Columbia Gas System; Consolidated
Natural Gas; Eastern Enterprises; Energen Corp.; Enserch Corp.; Equitable
Resources, Inc.; KN Energy, Inc.; MCN Corporation; MDU Resources Group,
Inc.; National Fuel Gas Co.; National Gas & Oil Co.; Noram Energy Corp.;
Oneok, Inc.; Questar Corp.; South Jersey Industries; Southeastern Michigan
Gas Enterprises; Southwest Gas Corporation; Southwestern Energy Co.; UGI
Corp.; Valley Resources, Inc.; and Wicor, Inc.
- ---------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the directors and executive officers of the Company were
depositors of, and had transactions with the Bank prior to the sale in July
1996. Those transactions were on the same terms (including interest rates,
repayment terms, and collateral) as those prevailing at the time for comparable
transactions with other persons of similar credit-worthiness and, in the opinion
of the Board of Directors of the Bank that included the Board of Directors of
the Company, did not involve more than a normal risk of collectibility or other
unfavorable characteristics.
16
<PAGE> 21
OTHER MATTERS TO COME BEFORE THE MEETING
If any business not described herein should come before the meeting for
shareholder action, it is intended that the shares represented by proxies will
be voted in accordance with the best judgment of the persons voting them. At the
time this proxy statement was mailed, the Company knew of no other matters which
might be presented for shareholder action at the meeting.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the 1998 annual meeting must be received in writing by the
Company on or before December 1, 1997, to be considered for inclusion in the
proxy materials for the 1998 Annual Meeting. All proposals must comply with
applicable SEC rules. It is recommended that shareholders submitting proposals
direct the proposals to the Corporate Secretary of the Company and utilize
Certified Mail-Return Receipt Requested in order to ensure timely delivery.
By Order of the Board of Directors
/s/ GEORGE C. BIEHL
------------------------------------
George C. Biehl
Senior Vice President/Chief Financial
Officer
& Corporate Secretary
17
<PAGE> 22
PROXY SOUTHWEST GAS CORPORATION PROXY
P.O. Box 98510, Las Vegas, Nevada 89193-8510
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenny C. Guinn and Lloyd T. Dyer as Proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote as designated below, all the shares of common stock of the
undersigned at the annual meeting of shareholders to be held on May 8, 1997, at
the Company's Headquarters at 5241 Spring Mountain Road, Las Vegas, Nevada, and
any adjournments thereof; and at their discretion, with authorization to vote
such shares on any other matters as may properly come before the meeting or any
adjournments thereof.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C> <C> <C>
Ralph C. Batastini Kenny C. Guinn Leonard R. Judd Carolyn M. Sparks
Manuel J. Cortez Thomas Y. Hartley James R. Lincicome Robert S. Sundt
Lloyd T. Dyer Michael B. Jager Michael O. Maffie
</TABLE>
[ ] FOR ALL [ ] FOR ALL EXCEPT*
__________________________________________ [ ] WITHHOLD AUTHORITY FOR ALL
*NOTE: TO WITHHOLD AUTHORITY TO VOTE FOR A PARTICULAR NOMINEE, MARK THE FOR ALL
EXCEPT BOX AND ENTER THE NAME(S) OF THE EXCEPTIONS IN THE SPACE PROVIDED. UNLESS
AUTHORITY TO VOTE FOR ALL THE FOREGOING NOMINEES IS WITHHELD, THIS PROXY WILL BE
DEEMED TO CONFER AUTHORITY TO VOTE FOR EVERY NOMINEE WHOSE NAME IS NOT LISTED.
2. TO APPROVE THE APPOINTMENT OF ARTHUR ANDERSEN LLP as the independent public
accountants of the corporation:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(IMPORTANT--SIGNATURE REQUIRED ON REVERSE SIDE)
<PAGE> 23
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2. FURTHER, IF CUMULATIVE VOTING RIGHTS FOR
THE ELECTION OF DIRECTORS (PROPOSAL 1) ARE EXERCISED AT THE MEETING, THE PROXIES
WILL CUMULATIVELY VOTE THEIR SHARES AS PROVIDED FOR IN THE PROXY STATEMENT.
Dated: , 1997
-------------------------------
(Signature)
-------------------------------
(Signature, if held jointly)
Please sign exactly as name
appears below. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
president or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.
