<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
[X] Definitive Proxy Statement Only (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
LOGO
5241 SPRING MOUNTAIN ROAD - P.O. BOX 98510 - LAS VEGAS, NEVADA 89193-8510
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 14, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Southwest
Gas Corporation (the "Company") will be held on Thursday, May 14, 1998, 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 18, 1998, 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,
1997, is enclosed.
/s/ George C. Biehl
George C. Biehl
Senior Vice President/Chief Financial
Officer & Corporate Secretary
March 31, 1998
<PAGE> 3
March 31, 1998
LOGO
LOGO
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 14, 1998, 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 (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,
/s/ MICHAEL O. MAFFIE
<PAGE> 4
LOCATION OF 1998
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)
<PAGE> 5
SOUTHWEST GAS CORPORATION
5241 SPRING MOUNTAIN ROAD - P.O. BOX 98510 - LAS VEGAS, NEVADA 89193-8510
PROXY STATEMENT
MARCH 31, 1998
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Southwest Gas Corporation (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 14, 1998,
and at any adjournment thereof. This Proxy Statement and accompanying proxy card
are being mailed to shareholders on or about March 31, 1998.
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 18, 1998 (the "Record Date"), the Record Date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, was 27,521,170. 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 one or three 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 one 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 one candidate or allocate them
among two or more candidates in any manner he or she chooses. If any one
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 director named in this Proxy
Statement; HOWEVER, if sufficient numbers of shareholders exercise cumulative
voting rights to elect one 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. Eight of the nominees
were elected to their present term of office at the last Annual Meeting of
Shareholders on May 8, 1997. Directors Kropid and Wright were elected in July
1997 and Director Biehl was elected in January 1998 to fill retirement vacancies
(actual and expected) on the Board. 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. James R. Lincicome, having reached the mandatory retirement age and
after ten plus years of service on the Board of Directors, will be retiring at
this year's Annual Meeting. Ralph C. Batastini has decided not to seek
reelection to the Board of Directors at this year's Annual Meeting.
GEORGE C. BIEHL
Senior Vice President, Chief Financial Officer & Corporate Secretary
Southwest Gas Corporation
Director Since: 1998
Board Committees: None
Mr. Biehl, 50, joined the Company in 1990 as Senior Vice President and
Chief Financial Officer after serving in a number of capacities with Deloitte
Haskins & Sells (now Deloitte & Touche) for sixteen years and as chief financial
officer for PriMerit Bank for the five years before joining the Company. He also
assumed the responsibilities as Corporate Secretary for the Company in 1996. Mr.
Biehl graduated from Ohio State University with a degree in accounting and
earned his MBA with an emphasis in finance from Columbia University. He is a
licenced CPA in several states and is a member of the American Institute of
Certified Public Accountants. He is also a member of the Las Vegas Chamber of
Commerce Leadership Las Vegas Program, and serves on the finance committees of
several trade association groups.
2
<PAGE> 7
MANUEL J. CORTEZ
President and Chief Executive Officer
Las Vegas Convention and Visitors Authority
Director Since: 1991
Board Committees: Audit (Chairman), Compensation, Pension Plan Investment
Mr. Cortez, 59, 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.
LLOYD T. DYER
Retired President and Chief Executive Officer
Harrah's
Director Since: 1978
Board Committees: Executive, Compensation, Nominating (Chairman)
Mr. Dyer, 70, 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.
THOMAS Y. HARTLEY
Chairman of the Board, Southwest Gas Corporation
President and Chief Operating Officer, Colbert Golf Design and Development
Director Since: 1991
Board Committees: Executive (Chairman), Compensation, Nominating
Mr. Hartley, 64, 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. He joined the Company as Director in 1991 and was elected Chairman of the
Board of Directors in 1997. Mr. Hartley is actively involved in numerous
business and civic activities. He is a past chairman of the UNLV Foundation and
the Nevada Development Authority, and past president of the Las Vegas Founders
Club. He has also held voluntary executive positions with 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 Holding Corporation.
3
<PAGE> 8
MICHAEL B. JAGER
Private Investor
Director Since: 1989
Board Committees: Audit, Finance, Pension Plan Investment (Chairman)
Mr. Jager, 66, 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 Nevada.
LEONARD R. JUDD
Former President, Chief Operating Officer, and Director
Phelps Dodge Corporation
Director Since: 1988
Board Committees: Executive, Compensation (Chairman), Nominating
Mr. Judd, 59, 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.
JAMES J. KROPID
President of James J. Kropid Investments
Director Since: 1997
Board Committees: Executive, Finance, Nominating
Mr. Kropid, 60, received his undergraduate degree from DePaul University
and participated in the executive development program at the University of
Illinois. He joined Centel Corporation in 1961 and became president of its
Central Telephone Company-Nevada/Texas division in 1987. In 1993, the Governor
appointed him to the position of general manager of the Nevada State Industrial
Insurance System, a position in which he served for almost two years. He is
currently president of his own investment company. Mr. Kropid holds executive
positions with various civic and charitable organizations including the National
Conference of Christians and Jews -- Las Vegas Region, Las Vegas YMCA, and the
Boy Scouts of America. He was formerly a board member for the Nevada Development
Authority, United Way of Southern Nevada, and treasurer of St. Jude's Ranch for
Children.
4
<PAGE> 9
MICHAEL O. MAFFIE
President and Chief Executive Officer
Southwest Gas Corporation
Director Since: 1988
Board Committees: Executive
Mr. Maffie, 50, 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 Del Webb Corporation, Boyd Gaming
Corporation, and Norwest Bank/Nevada Division. A member of various civic and
professional organizations, he serves as chairman of the board of United Way of
Nevada, trustee and treasurer of the UNLV Foundation, and a trustee of the
Nevada Symphony Orchestra. He also is a director of the Pacific Coast Gas
Association and the Institute of Gas Technology.
CAROLYN M. SPARKS
Co-Founder
International Insurance Services, Ltd.
Director Since: 1988
Board Committees: Audit, Finance, Pension Plan Investment
Mrs. Sparks, 56, graduated from the University of California 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 chair of the Board of Regents. Mrs. Sparks is actively involved
with numerous charitable and civic organizations, including founding and
chairing the University Medical Center Foundation and the Children's Miracle
Network Telethon. She is currently chair of the Nevada Children's Center
Foundation and has been elected to the Foundation Boards of the University of
Nevada Las Vegas and the Community College of Southern Nevada. She is a director
of Showboat, Inc., a hotel/gaming corporation.
ROBERT S. SUNDT
Retired President
Sundt Corp.
Director Since: 1987
Board Committees: Executive, Nominating, Pension Plan Investment
Mr. Sundt, 71, 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 was a
member of the American Arbitration Association and has served 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
TERRANCE "TERRY" L. WRIGHT
President and Chief Executive Officer
Nevada Title Insurance Company
Director Since: 1997
Board Committees: Audit, Compensation, Pension Plan Investment
Mr. Wright, 48, received his undergraduate degree in business
administration and his juris doctorate from DePaul University. He joined Chicago
Title Insurance Company while in law school and after graduation remained with
the company and eventually moved to the Las Vegas, Nevada office. In 1978, he
acquired the assets of Western Title to form what is now known as Nevada Title
Insurance Company. Mr. Wright is also associate general counsel for A.G. Spanos
Enterprises, Inc., one of the nation's largest apartment complex builders. He is
a member of the California and Illinois bar associations and is affiliated
professionally with the Las Vegas Board of Realtors, Nevada Land Title
Association, Las Vegas Executives, Opportunity Village, TPC board of governors,
Young President's Organization, and is chairman of the Nevada Development
Authority. Mr. Wright is also a trustee and an executive committee member of the
UNLV Foundation.
SECURITIES OWNERSHIP BY NOMINEES, EXECUTIVE OFFICERS, AND BENEFICIAL OWNERS
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 18, 1998.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES OUTSTANDING
DIRECTOR/EXECUTIVE OFFICER BENEFICIALLY OWNED(1) COMMON STOCK(2)
-------------------------- --------------------- ---------------
<S> <C> <C>
George C. Biehl...................... 33,912(3)(4) *
Manuel J. Cortez..................... 3,090(5) *
Lloyd T. Dyer........................ 5,722(5)(6)
Thomas Y. Hartley.................... 14,519(5)(7) *
Michael B. Jager..................... 6,140(5)(8) *
Leonard R. Judd...................... 3,200(5)(9) *
James J. Kropid...................... 1,577(10) *
Michael O. Maffie.................... 93,965(3)(11) *
Carolyn M. Sparks.................... 3,666(5)(12) *
Robert S. Sundt...................... 6,200(5)(13) *
Terrance L. Wright................... 250 *
James F. Lowman...................... 22,194(14) *
Dudley J. Sondeno.................... 20,773(15) *
Edward S. Zub........................ 24,501(16) *
Other Executive Officers............. 41,492(17) *
------- ---
Total.............................. 281,201 1.02%
======= ===
</TABLE>
- ---------------
(1) 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 1995, 1996, and 1997.
(2) No individual officer or director owned more than 1% of the Company's
Common Stock.
(3) 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.
(4) The holdings include 12,000 shares which Mr. Biehl has the right to acquire
through the exercise of options under the 1996 Stock Incentive Plan
("Option Plan").
(5) The holdings include 1,200 shares which the non-employee directors have the
right to acquire through the exercise of options under the Option Plan.
(6) Number of shares include 4,522 shares over which Mr. Dyer has shared voting
and investment control with his spouse through a family trust.
6
<PAGE> 11
(7) Number of shares include 300 shares over which Mr. Hartley has shared
voting and investment control with his spouse through a family trust.
(8) Number of shares includes 940 shares over which Mr. Jager has shared voting
and investment control with his spouse through a family trust and 3,000
shares held in trust for Mr. Jager's spouse, over which Mr. Jager has no
control.
(9) Number of shares includes 2,000 shares over which Mr. Judd has shared
voting and investment control with his spouse.
(10) Mr. Kropid has shared voting and investment power with his spouse through a
family trust. The family trust also holds 1,500 shares of Trust Originated
Preferred Securities issued by the Company's financing subsidiary,
Southwest Gas Capital I.
(11) The holdings include 36,000 shares which Mr. Maffie has the right to
acquire through the exercise of options under the Option Plan and 2,947
shares over which he has shared voting and investment control with his
spouse.
(12) Number of shares includes 1,000 shares over which Mrs. Sparks has shared
voting and investment control with her spouse through a family trust and
1,466 shares held as joint tenants with her spouse.
(13) Number of shares includes 5,000 shares over which Mr. Sundt has shared
voting and investment control with his spouse.
(14) The holdings include 6,000 shares which Mr. Lowman has the right to acquire
through the exercise of options under the Option Plan.
(15) The holdings include 10,000 shares which Mr. Sondeno has the right to
acquire through the exercise of options under the Option Plan.
(16) The holdings include 10,000 shares which Mr. Zub has the right to acquire
through the exercise of options under the Option Plan and 105 shares held
solely by his spouse.
(17) The holdings of other executive officers include 20,000 shares that can be
acquired through the exercise of options under the Option Plan.
- ---------------
7
<PAGE> 12
A group of investment companies headed by Mario J. Gabelli owned 2,571,650
or 9.34% of the Company's Common Stock as of March 18, 1998. The Company has
been advised that the investment companies hold the shares as investment
advisors for other beneficial owners.
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 1997, all the required reports were filed timely. However, the Form
5 for 1997 for Edward S. Zub identifies 105 shares of common stock held by his
spouse that were omitted from his Form 3 filing in September 1996.
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, 1998,
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 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 1997, 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.
8
<PAGE> 13
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 six regular meetings, one special meeting, and one organizational meeting
in 1997. Each director attended more than 75 percent of the meetings of the
Board of Directors and standing committees on which he or she served during
1997.
DIRECTORS COMPENSATION
Outside directors receive an annual retainer of $24,000, plus $1,000 for
each Board of Directors or committee meeting attended. Committee chairpersons
receive an additional $500 for each committee meeting attended. The Chairman of
the Board of Directors 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 other than directors Kropid and Wright received on
May 8, 1997, options to purchase 2,000 shares of the Company's Common Stock
under the provisions of the shareholder approved Option Plan. Directors Kropid
and Wright each received on July 15, 1997, options to purchase 1,660 shares of
the Company's Common Stock under the provisions of the Option Plan. The purchase
price for the options is the market price of the Common Stock on the date of the
grant and will become exercisable, in increments over three years, commencing
with the first anniversary of the grant. Additional 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 Option 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.
The Executive Committee meets, if necessary, to consider corporate policy
matters requiring timely action and recommend other matters for consideration
and action by the Board of Directors. The Executive Committee consists of
Directors Hartley (Chairman), Dyer, Judd, Kropid, Maffie, and Sundt.
The Audit Committee, whose functions are discussed above under the caption
"Selection of Independent Public Accountants," consists of directors Cortez
(Chairman), Batastini, Jager, Lincicome, Sparks, and Wright.
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 Judd (Chairman), Cortez, Dyer, Hartley, Lincicome, and
Wright.
The Finance Committee reviews and makes recommendations to the Board of
Directors regarding the financial policies, plans, and procedures for the
Company and the financial implications of proposed corporate actions. Its
responsibilities include reviewing strategies and recommen-
9
<PAGE> 14
dations with respect to financing programs, dividend reinvestment and stock
purchase programs, and capital structure goals. The Finance Committee consists
of directors Lincicome (Chairman), Batastini, Jager, Kropid, and Sparks.
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 Board
of Directors committee assignments. The Nominating Committee consists of
directors Dyer (Chairman), Hartley, Judd, Kropid, 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, Sundt, and Wright.
In 1997, one Executive Committee meeting was held, the Audit Committee held
three meetings, the Compensation Committee held three meetings, the Finance
Committee held three meetings, the Nominating Committee held two meetings and
the Pension Plan Investment Committee held three meetings.
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 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.
10
<PAGE> 15
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 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
economic 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 percent of the targeted awards for meeting the
performance goals. Awards under the MIP are determined based on the Company's
annual return-on-equity performance, customers to employee ratios, and customer
service satisfaction targets. The financial performance factors used to make
this 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 customers to employee ratio and the actual customers
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 percent paid in cash and the remaining 60 percent
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 1997 exceeded the
threshold percentages for each of the established productivity targets. The
Company's operations exceeded the target for the internal customers to employee
ratio, the customers 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 1997. 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 1997 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 1997 consisted of his base salary and performance award under the MIP. Mr.
Maffie's base salary was set relative to
11
<PAGE> 16
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 5.6% increase in base salary effective July 7, 1997.
Mr. Maffie's performance award under the MIP totaled $330,037 and represented
the Company's overall performance in relation to established performance goals.
During the year, the Company's performance exceeded each of the established
productivity targets, internal customers to employee ratio, customers 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 1997 was set equal to $427,500 or 90% of his annualized December 31,
1997, salary (not the actual salary shown in the Summary Compensation Table),
with the award ranging from 14% to 126% of his base annualized salary. Based on
the Company's overall 1997 performance in relation to the established goals, Mr.
Maffie earned 77.2% of his target award under the MIP, with 40% being paid in
cash and 60% in performance shares.
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 that 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>
Leonard R. Judd (Chairman) Manuel J. Cortez
Lloyd T. Dyer Thomas Y. Hartley
James C. Lincicome Terrance L. Wright
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The above-named committee members other than director Wright served on the
Company's Compensation Committee throughout 1997. Director Wright joined the
committee on November 18, 1997. One other director served on the committee
during 1997. Mr. Guinn, who retired as Chairman and Chief Executive Officer of
the Company and Chairman of the Board of Directors, served on the committee
until his resignation from the Board of Directors on September 15, 1997. Mr.
Guinn became a member of the committee after his retirement as an officer of the
Company.
12
<PAGE> 17
SUMMARY COMPENSATION TABLE
The following table provides for fiscal years ended December 31, 1995,
1996, and 1997 compensation earned by the Company's Chief Executive Officer and
each of the four most highly compensated executive officers of the Company at
year-end 1997.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------------
BONUS($)
NAME AND ------------------------ OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY($) UTILITY(2) NON-UTILITY COMPENSATION($)
------------------ ---- --------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Michael O. Maffie 1997 462,192 132,015 0 0
President & C.E.O. 1996 435,479 129,602 500,000 0
1995 408,671 83,642 44,625 0
George C. Biehl 1997 214,877 40,762 0 0
Senior Vice President/ 1996 204,773 40,324 200,000 0
Chief Financial Officer 1995 197,326 26,373 15,075 0
& Corporate Secretary
Edward S. Zub 1997 160,729 56,871 0 0
Senior Vice President/ 1996 138,484 28,802 0 0
Regulation & Product 1995 129,438 24,839 0 0
Pricing
James F. Lowman 1997 161,401 35,665 0 0
Senior Vice President/ 1996 154,015 29,336 0 0
Central Arizona Division 1995 148,847 27,817 0 0
Dudley J. Sondeno 1997 159,901 30,387 0 0
Senior Vice President/ 1996 152,529 29,952 0 0
Chief Knowledge & 1995 146,551 27,931 0 0
Technology Officer
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------------
AWARDS PAYOUTS
----------------------- ----------------------
RESTRICTED
STOCK LTIP ALL OTHER
NAME AND AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION ($)(2)(3)(4) SARS(#) ($) ($)(5)
------------------ ------------ -------- ------- ------------
<S> <C> <C> <C> <C>
Michael O. Maffie 198,022 25,000 N/A 54,036
President & C.E.O. 194,403 90,000 N/A 46,210
179,246 N/A N/A 40,481
George C. Biehl 61,143 7,500 N/A 17,329
Senior Vice President/ 60,485 30,000 N/A 13,700
Chief Financial Officer 56,523 N/A N/A 12,137
& Corporate Secretary
Edward S. Zub 47,807 7,500 N/A 16,583
Senior Vice President/ 43,223 25,000 N/A 12,723
Regulation & Product 37,258 N/A N/A 8,641
Pricing
James F. Lowman 45,998 3,750 N/A 12,279
Senior Vice President/ 44,004 15,000 N/A 10,316
Central Arizona Division 41,725 N/A N/A 7,728
Dudley J. Sondeno 45,581 6,250 N/A 13,983
Senior Vice President/ 44,928 25,000 N/A 11,209
Chief Knowledge & 41,896 N/A N/A 7,978
Technology Officer
</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 1995,
1996, and 1997 were paid and awarded in 1996, 1997, and 1998, respectively.
(3) 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 MIP during the restriction period.
(4) The total number of performance shares granted in 1995, 1996, and 1997, for
calendar years 1994, 1995, and 1996, and their value based on the market
price of Company Common Stock at December 31, 1997, for the other listed
officers are as follows:
<TABLE>
<CAPTION>
SHARES VALUE
------- -------------
<S> <C> <C>
Mr. Maffie.................................................. 25,550 $477,466
Mr. Biehl................................................... 8,078 150,958
Mr. Zub..................................................... 5,348 99,941
Mr. Lowman.................................................. 6,046 112,857
Mr. Sondeno................................................. 6,092 113,844
</TABLE>
(5) 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 this compensation for each named executive officer is as
follows:
<TABLE>
<CAPTION>
INTEREST CONTRIBUTIONS
-------- -------------
<S> <C> <C>
Mr. Maffie.................................................. $40,208 $ 13,828
Mr. Biehl................................................... 10,895 6,434
Mr. Zub..................................................... 11,804 4,779
Mr. Lowman.................................................. 7,444 4,835
Mr. Sondeno................................................. 9,196 4,787
</TABLE>
- ---------------
13
<PAGE> 18
OPTIONS/SARS GRANTED IN 1997
The following table sets forth the number of shares of the Company's Common
Stock subject to stock options granted under the Option Plan to the named
executive officers listed in the Summary Compensation Table during 1997,
together with related information.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------- ANNUAL RATES
NUMBER OF PERCENT OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5 PERCENT 10 PERCENT
---- ------------- ---------------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael O. Maffie.......... 25,000 25.6 $19.125 7/14/07 $301,219 $760,219
George C. Biehl............ 7,500 7.7 19.125 7/14/07 90,366 228,066
Edward S. Zub.............. 7,500 7.7 19.125 7/14/07 90,366 228,066
James F. Lowman............ 3,750 3.8 19.125 7/14/07 45,183 114,033
Dudley J. Sondeno.......... 6,250 6.4 19.125 7/14/07 75,305 190,056
</TABLE>
- ---------------
(1) Forty percent (40%) of the options become exercisable one year after the
grant. Thirty percent (30%) of the options become exercisable two 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 14, 2007, 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.
- ---------------
OPTIONS/SAR EXERCISES AND YEAR-END VALUES
Shown below is information with respect to unexercised options granted
under the Option Plan to the named executive officers and held by them at
December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND
YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NO. OF SECURITIES VALUE OF UNEXERCISED
NO. OF UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED DECEMBER 31, 1997 DECEMBER 31, 1997(1)(2)
ON VALUES ------------------------------ ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(3)
---- ----------- -------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael O. Maffie..... 0 $0 36,000 79,000 $132,750 $199,125
George C. Biehl....... 0 0 12,000 25,500 44,250 66,375
Edward S. Zub......... 0 0 10,000 22,500 36,875 55,313
James F. Lowman....... 0 0 6,000 12,750 22,125 33,188
Dudley J. Sondeno..... 0 0 10,000 21,250 36,875 55,313
</TABLE>
- ---------------
(1) Represents the difference between the exercise prices for in-the-money
options and the closing price of $18.6875 for the Company's Common Stock on
the New York Stock Exchange on December 31, 1997, times the number of
in-the-money options.
(2) Options granted on July 15, 1997, were not in-the-money at December 31,
1997.
(3) 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, restrictions incorporated into the Option Plan, and the
specific option agreements.
- ---------------
14
<PAGE> 19
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 1998, 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.
- ---------------
Compensation covered under the basic retirement plan is based on salary
depicted in the Summary Compensation Table. As of December 31, 1997, the
credited years of service for the named executive officers shown in the Summary
Compensation Table are as follows: Mr. Maffie, 19 years; Mr. Biehl, 12 years;
Mr. Lowman, 28 years; Mr. Sondeno, 18 years; and Mr. Zub, 19 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 seven designated officers, including the named executive officers. These
agreements generally provide for the payment, upon termination of employment by
the Company without cause, as defined therein, of up to two years of total
annual compensation (base salary, a predetermined level of incentive
15
<PAGE> 20
compensation and fringe benefits), and up to three 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 two 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 one-year periods unless canceled by the Company.
16
<PAGE> 21
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 19 other diversified
natural gas distribution companies.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
E.D. JONES
NATURAL GAS
MEASUREMENT PERIOD DIVERSIFIED INDEX
(FISCAL YEAR COVERED) SOUTHWEST GAS S&P 500 (1)(2)
<S> <C> <C> <C>
1992 100 100 100
1993 121.6 110.1 115.3
1994 112.5 111.5 102.3
1995 147.7 153.4 135.1
1996 169 188.6 170.1
1997 171.5 251.6 213.3
</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:
Chesapeake Utilities Corp.; Columbia Gas System; Consolidated Natural Gas;
Eastern Enterprises; Energen Corp.; Equitable Resources, Inc.; KN Energy,
Inc.; MCN Corporation; MDU Resources Group, Inc.; National Fuel Gas Co.;
National Gas & Oil Co.; Nicor, Inc.; Oneok, Inc.; Questar Corp.; Semco
Energy Inc.; Southwest Gas Corporation; Southwestern Energy Co.; UGI Corp.;
Valley Resources, Inc.; and Wicor, Inc.
- ---------------
17
<PAGE> 22
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 1999 Annual Meeting must be received in writing by the
Company on or before December 1, 1998, to be considered for inclusion in the
proxy materials for the 1999 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
18
<PAGE> 23
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 Thomas Y. Hartley 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
14, 1998, 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>
George C. Biehl Michael B. Jager Carolyn M. Sparks
Manuel J. Cortez Leonard R. Judd Robert S. Sundt
Lloyd T. Dyer James J. Kropid Terrance L. Wright
Thomas Y. Hartley 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> 24
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: , 1998
-------------------------------
(Signature)
-------------------------------
(Signature, if held jointly)
Please sign exactly as name
appears hereon. 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.
