<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee 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:
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(4) Date Filed:
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<PAGE> 2
SOUTHWEST GAS 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 11, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Southwest
Gas Corporation ("Company") will be held on Thursday, May 11, 2000, 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 14, 2000, 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,
1999, is enclosed.
/s/ GEORGE C. BIEHL
George C. Biehl
Senior Vice President/Chief Financial
Officer and Corporate Secretary
March 31, 2000
<PAGE> 3
SOUTHWEST GAS LOGO
March 31, 2000
Michael O. Maffie, President and 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 11, 2000, 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 the election of 11 directors
and 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
SOUTHWEST GAS LOGO
<PAGE> 4
LOCATION OF 2000
ANNUAL MEETING OF SHAREHOLDERS
5241 SPRING MOUNTAIN ROAD
LAS VEGAS, NEVADA
*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, 2000
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 11, 2000, and at any adjournment
thereof. This Proxy Statement and accompanying proxy card are being mailed to
shareholders on or about March 31, 2000.
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 14, 2000 (the "Record Date"), the Record Date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, was 31,219,583. Only holders of Common Stock on the Record Date are
entitled to notice of and to vote at the Annual Meeting. The Company will
appoint either one or three 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
1
<PAGE> 6
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 ratification of the selection of Arthur Andersen LLP as
independent auditors and, in the case of the election of directors, 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. The nominees were
elected to their present term of office at the last Annual Meeting on August 10,
1999. 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.
GEORGE C. BIEHL
Senior Vice President, Chief Financial Officer & Corporate Secretary
Southwest Gas Corporation
Director Since: 1998
Board Committees: Finance
Mr. Biehl, 52, 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 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, 61, 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 (Chairman), Nominating
Mr. Dyer, 72, 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, Nevada, 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
Director Since: 1991
Board Committees: Executive (Chairman), Compensation, Nominating
Mr. Hartley, 66, 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 has also been associated with Colbert Golf Design and Development since
1991. He joined Southwest Gas Corporation 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
Sierra Health Services, Inc., and AmeriTrade Holdings Corporation.
3
<PAGE> 8
MICHAEL B. JAGER
Private Investor
Director Since: 1989
Board Committees: Audit, Finance, Pension Plan Investment (Chairman)
Mr. Jager, 68, obtained a degree in petroleum geology from Stanford
University in 1955. After four years of 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, Nominating (Chairman)
Mr. Judd, 61, 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, Compensation, Finance
Mr. Kropid, 62, 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 of Nevada 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 is involved in many civic and charitable organizations. He is currently
president of the Boulder Dam Area Council of the Boy Scouts of America, a
trustee and treasurer of Catholic Charities of Southern Nevada, and a trustee of
the Desert Research Institute Foundation. Mr. Kropid is on the board of the YMCA
of Southern Nevada and a past chairman of that organization. He is formerly a
board member of the Nevada Development Authority, United Way of Southern Nevada,
the Las Vegas Chamber of Commerce 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, 52, joined the Company in 1978 as Treasurer after seven years
with Arthur Andersen & Co. (now Arthur Andersen LLP). 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 the Del
Webb Corporation, Boyd Gaming Corporation, and Wells Fargo Bank/Nevada Division.
A member of various civic and professional organizations, he serves as past
chairman of the board of United Way of Nevada and trustee and treasurer of the
UNLV Foundation. He also is a director of the Pacific Coast Gas Association, the
American Gas Association, and the Institute of Gas Technology.
CAROLYN M. SPARKS
Co-Founder
International Insurance Services, Ltd.
Director Since: 1988
Board Committees: Audit, Finance (Chairperson), Pension Plan Investment
Mrs. Sparks, 58, graduated from the University of California Berkeley in
1963, and with her husband, co-founded International Insurance Services, Ltd.,
in Las Vegas, Nevada, in 1966. 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.
ROBERT S. SUNDT
Retired President
Sundt Corp.
Director Since: 1987
Board Committees: Executive, Finance, Nominating, Pension Plan Investment
Mr. Sundt, 73, 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, 50, 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 a past-chairman of the Nevada Development
Authority. Mr. Wright is also a trustee and an executive committee member of the
UNLV Foundation.
The Company has been informed that (i) Arnhold and S. Bleichroeder, Inc., a
shareholder of the Company, intends to nominate a person to serve as a director
of the Company, and (ii) GAMCO Investors, Inc., another shareholder of the
Company, intends to nominate at least six persons to serve as directors of the
Company. The Company does not know whether either of these shareholders or any
other shareholder will actually propose other persons as nominees for election
to the Board of Directors at the Annual Meeting of Shareholders.
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 14, 2000.
<TABLE>
<CAPTION>
NO. OF SHARES PERCENT OF OUTSTANDING
DIRECTOR/EXECUTIVE OFFICER BENEFICIALLY OWNED(1) COMMON STOCK(2)
-------------------------- --------------------- ----------------------
<S> <C> <C>
George C. Biehl........................ 67,267(3)(4) *
Manuel J. Cortez....................... 7,228(5) *
Lloyd T. Dyer.......................... 9,840(5)(6) *
Thomas Y. Hartley...................... 21,541(5)(7) *
Michael B. Jager....................... 9,601(5)(8) *
Leonard R. Judd........................ 7,200(5)(9) *
James J. Kropid........................ 3,654(10) *
Michael O. Maffie...................... 193,287(3)(11) *
Carolyn M. Sparks...................... 11,774(5)(12) *
Robert S. Sundt........................ 10,200(5)(13) *
Terrance L. Wright..................... 2,212(14) *
James P. Kane.......................... 29,087(15) *
Dudley J. Sondeno...................... 48,976(16) *
Edward S. Zub.......................... 56,205(17) *
Other Executive Officers............... 124,239(18) *
------- ----
Total........................ 602,311 1.93%
</TABLE>
6
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- -------------------------
(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 1997, 1998, and 1999.
(2) As of March 14, 2000, the directors and executive officers of the Company
beneficially owned, including exercisable options, 602,311 shares, which
represents 1.93% of the outstanding shares of the Company's Common Stock.
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 38,250 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 5,200 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 4,640 shares over which Mr. Dyer has shared voting
and investment control with his spouse through a family trust.
(7) Number of shares include 322 shares over which Mr. Hartley has shared
voting and investment control with his spouse through a family trust.
(8) Number of shares includes 4,401 shares over which Mr. Jager has shared
voting and investment control with his spouse through a family trust.
(9) Number of shares includes 2,000 shares over which Mr. Judd has shared
voting and investment control with his spouse.
(10) The holdings include 1,962 shares which Mr. Kropid has the right to acquire
through the exercise of options under the Option Plan and 1,692 shares over
which he 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 117,500 shares which Mr. Maffie has the right to
acquire through the exercise of options under the Option Plan and 3,170
shares over which his spouse has voting and investment control.
(12) Number of shares includes 5,000 shares over which Mrs. Sparks has shared
voting and investment control with her spouse through a family trust and
1,574 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 1,962 shares which Mr. Wright has the right to acquire
through the exercise of options under the Option Plan.
(15) The holdings include 17,375 shares which Mr. Kane has the right to acquire
through the exercise of options under the Option Plan.
(16) The holdings include 31,875 shares which Mr. Sondeno has the right to
acquire through the exercise of options under the Option Plan.
(17) The holdings include 33,250 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.
(18) The holdings of other executive officers include 73,500 shares that can be
acquired through the exercise of options under the Option Plan.
- -------------------------
Mario J. Gabelli, Marc J. Gabelli and various entities they either control
or for which they act as chief investment advisors have reported that they own
in the aggregate 3,077,883 shares of the Company's Common Stock (approximately
9.86%), as of March 3, 2000. The Company has been advised that they do not admit
that they constitute a "group" within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934
7
<PAGE> 12
(the "Exchange Act") and that their address is c/o Gabelli Asset Management Co.,
One Corporate Center, Rye, New York 10580.
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 1999, all of the required reports were filed timely.
LEGAL PROCEEDINGS
On December 16, 1998, Arthur Klein filed a purported shareholder class
action complaint on behalf of himself and shareholders of the Company (excluding
defendants and their affiliates and families) in the Superior Court of the State
of California in San Diego County (Case No. 726615) against the Company and its
directors. The complaint has been amended three times. As amended, the complaint
alleges breach of the duties of loyalty, due care, candor and good faith and
fair dealing and sets forth claims relating to the Company's proxy statement for
its Annual Meeting of Shareholders in 1999, including allegations of
misrepresentations or omissions relating to the proposed acquisition of the
Company by ONEOK, Inc. ("ONEOK") and the rejection of the offers by Southern
Union Company ("Southern Union"). The case has been removed from the California
Superior Court in San Diego to the U.S. District Court for the Southern District
of California (Case No. 99 cv 1891B (JAH)).
On July 19, 1999, Southern Union filed a complaint in the U.S. District
Court for the District of Arizona (Case No. CIV-99-1294 PHX (ROS)), as amended
on October 11, 1999, which alleges that the Company, Michael O. Maffie,
President and Chief Executive Officer of the Company, Thomas Y. Hartley ,
Chairman of the Board of Directors of the Company, Edward S. Zub, Senior Vice
President/Regulation and Pricing of the Company, ONEOK, and other named
individuals have conspired to block the Company's shareholders from voting upon
Southern Union's offer and have acted to ensure that the Company's Board of
Directors would approve and recommend the ONEOK offer to the Company's
shareholders and to influence the vote of members of regulatory commissions
required to approve the proposed acquisition of the Company by ONEOK in
violation of state and federal laws. The amended complaint also includes
allegations that the defendants fraudulently induced Southern Union to enter
into a confidentiality and standstill agreement, that the Company breached the
terms of that agreement and its covenant of good faith and fair dealing, and
that the defendants, other than the Company and Mr. Hartley, intentionally
interfered with a business relationship between the Company and Southern Union,
and tortuously interfered with contractual relations between the Company and
Southern Union.
The Company, its directors and named officers have denied and continue to
deny that they have committed or attempted to commit any wrongdoing or breached
any duty owed to the Company or its shareholders.
8
<PAGE> 13
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, 2000,
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 of Shareholders 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 1999, the Company paid Arthur Andersen LLP for:
- the audit of the annual financial statements;
- reviews of unaudited quarterly financial information;
- assistance and consultation in connection with preparing various
Securities and Exchange Commission ( the "SEC") filings;
- the audit of the annual financial statements of the Company's employee
benefit plans;
- consultation in connection with various tax and accounting matters; and
- 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.
9
<PAGE> 14
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 five regular meetings, twelve special meetings (six of which were
telephonic), and one organizational meeting in 1999. Each incumbent director
attended more than 75 percent of the meetings of the Board of Directors and
standing committees on which he or she served during 1999.
DIRECTORS COMPENSATION
Outside directors receive an annual retainer of $24,000, plus $1,000 for
each Board of Directors or committee meeting attended and for any additional day
of service committed to the Company. Committee chairpersons receive an
additional $500 for each committee meeting attended. The Chairman of the Board
of Directors receives an additional $50,000 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 on August 10, 1999, options to purchase
2,000 shares of the Company's Common Stock under the provisions of the
shareholder-approved 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
termination of their status as directors. Any cash received through the
cancellation of outstanding options as a result of the change in control of the
Company may also be deferred. Amounts deferred bear interest at 150% of the
Moody's Seasoned Corporate Bond Rate. At retirement or termination, such
deferrals will be paid out over 5, 10, 15, or 20 years and be credited with
interest at 150% of the Moody's Composite Bond 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. Upon a change of control of the Company, each of the directors of the
Company with at least eight years of service will be entitled to receive
retirement benefits.
10
<PAGE> 15
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), Jager, 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 Dyer (Chairman), Cortez, Hartley, Judd, Kropid 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 recommendations with respect
to financing programs, dividend reinvestment and stock purchase programs, and
capital structure goals. The Finance Committee consists of directors Sparks
(Chairperson), Biehl, Jager, Kropid, 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 Board
of Directors committee assignments. The Nominating Committee consists of
directors Judd (Chairman), Dyer, Hartley, 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), Cortez, Sparks, Sundt, and Wright.
In 1999, two telephonic Executive Committee meetings were held, the Audit
Committee held three meetings, the Compensation Committee held two meetings, and
the Pension Plan Investment Committee held three meetings.
11
<PAGE> 16
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 following objectives:
- reasonableness;
- competitiveness;
- internal equity; and
- 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.
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 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
12
<PAGE> 17
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, actual
customers-to-employee ratio in comparison to a peer group of natural gas
distribution companies, and customer service satisfaction experienced throughout
the Company's operating divisions as 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, the
Company's regulatory commissions have 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 common stock dividend paid by the Company 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 1999 exceeded the targets for all of the
financial and productivity objectives.
Grants under the Option Plan were provided to the Company's executive
officers during 1999. 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. Information on
options granted to the named executive officers in 1999 are set forth under the
caption, "Executive Compensation and Benefits -- Option/ SARs Grants in Last
Fiscal Year."
CEO Compensation. Compensation paid to Mr. Maffie, as president and chief
executive officer for 1999, consisted of his base salary and performance award
under the MIP. Mr. Maffie's base salary normally is 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. No
adjustment was made during 1999 to Mr. Maffie's base salary due to the then
pending merger, however, a one-time cash bonus of $53,575 was paid after
year-end to balance the effect of the departure from normal salary practice and
the impact such departure had on the MIP award. Mr. Maffie's performance award
under the MIP totaled $572,413 and represented the Company's overall performance
in relation to established performance goals. During the year, the Company's
performance, as discussed above, exceeded the targets for each of the financial
and performance objectives. Mr. Maffie's targeted performance award for 1999 was
set equal to $450,000 or 90% of his salary for 1999, as shown on the Summary
Compensation Table, with the award ranging from 14.8% to 140% of his target.
Based on the Company's overall 1999 performance in relation to the established
goals, Mr. Maffie earned 127.2% of his targeted award under the MIP, with 40%
being paid in cash and 60% in performance shares.
13
<PAGE> 18
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 $1,000,000 cannot be deducted by the Company
for federal income tax purposes unless, in general, such compensation is
performance based, is established by an independent committee of directors, is
objective, and the plan or agreement providing for such performance-based
compensation has been approved in advance by shareholders or is otherwise exempt
from such limitation. The Incentive Plans were designed to satisfy these
requirements and management believes that the compensation provided under these
plans should be deductible. In the future, however, the Company may pay
compensation that is nondeductible in limited circumstances if sound management
of the Company so requires.
The Committee believes that the compensation program addresses the
Company's compensation objectives, enhances the commitment of key management
employees, and strengthens long-term shareholder value.
<TABLE>
<CAPTION>
Compensation Committee
<S> <C>
Lloyd T. Dyer (Chairman) Manuel J. Cortez
Thomas Y. Hartley Leonard R. Judd
James J. Kropid Terrance L. Wright
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The above-named committee members served on the Company's Compensation
Committee throughout 1999.
14
<PAGE> 19
SUMMARY COMPENSATION TABLE
The following table provides for fiscal years ended December 31, 1997,
1998, and 1999 compensation earned by the Company's Chief Executive Officer and
each of the four most highly compensated executive officers of the Company at
year-end 1999.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
AWARDS PAYOUTS
----------------------- -------
ANNUAL COMPENSATION RESTRICTED
--------------------------------------------------- STOCK LTIP
NAME AND OTHER ANNUAL AWARD(S) OPTIONS/ PAYOUTS
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2)(3) COMPENSATION($) ($)(2)(4)(5) SARS(#) ($)
------------------ ---- --------- -------------- --------------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael O. Maffie....................... 1999 500,000 282,540 0 343,448 25,000 N/A
President & C.E.O. 1998 486,301 234,005 0 350,997 25,000 N/A
1997 462,192 132,015 0 198,022 25,000 N/A
George C. Biehl......................... 1999 232,000 92,851 0 106,239 7,500 N/A
Senior Vice President/ 1998 225,425 72,385 0 108,577 7,500 N/A
Chief Financial Officer 1997 214,877 40,762 0 61,143 7,500 N/A
& Corporate Secretary
Edward S. Zub........................... 1999 201,370 65,683 0 98,458 7,500 N/A
Senior Vice President/ 1998 180,137 59,283 0 88,928 7,500 N/A
Regulation & Pricing 1997 160,729 56,871 0 47,807 7,500 N/A
James P. Kane........................... 1999 186,370 61,060 0 91,590 7,500 N/A
Senior Vice President/ 1998 161,301 54,604 0 81,899 7,500 N/A
Operations 1997 141,052 31,247 0 39,370 6,250 N/A
Dudley J. Sondeno....................... 1999 178,822 57,092 0 85,637 6,250 N/A
Senior Vice President/ 1998 167,616 53,669 0 80,541 6,250 N/A
Chief Knowledge & 1997 159,901 30,387 0 45,581 6,250 N/A
Technology Officer
<CAPTION>
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)(6)
------------------ ------------
<S> <C>
Michael O. Maffie....................... 74,776
President & C.E.O. 59,410
54,036
George C. Biehl......................... 28,407
Senior Vice President/ 19,830
Chief Financial Officer 17,329
& Corporate Secretary
Edward S. Zub........................... 28,346
Senior Vice President/ 20,352
Regulation & Pricing 16,583
James P. Kane........................... 7,845
Senior Vice President/ 3,750
Operations 2,241
Dudley J. Sondeno....................... 22,930
Senior Vice President/ 14,218
Chief Knowledge & 13,983
Technology Officer
</TABLE>
- -------------------------
(1) All compensation reflected in the Summary Compensation Table is reported on
an earned basis for each fiscal year.
(2) MIP awards accrued for calendar years 1997, 1998, and 1999 were paid in cash
and restricted stock in 1998, 1999, and 2000, respectively.
(3) Mr. Maffie's and Mr. Biehl's bonuses for 1999 each include a cash bonus, in
lieu of an increase in salary during 1999 and the associated impact on the
MIP awards for 1999, of $53,575 and $22,025, respectively.
(4) 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.
(5) The total number of performance shares granted in 1997, 1998, and 1999, for
calendar years 1996, 1997, and 1998, and their value based on the market
price of Company Common Stock at December 31, 1999, for the other listed
officers are as follows:
<TABLE>
<CAPTION>
SHARES VALUE
------ --------
<S> <C> <C>
Mr. Maffie.................................................. 36,257 $833,911
Mr. Biehl................................................... 11,229 258,267
Mr. Zub..................................................... 8,698 200,054
Mr. Kane.................................................... 6,747 155,181
Mr. Sondeno................................................. 8,345 191,935
</TABLE>
15
<PAGE> 20
(6) 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
100% of their annual compensation for payment at retirement or at some other
employment terminating event. The officers may also defer up to 100% of any
cash paid (i) because of the cancellation of outstanding MIP performance
shares and Option Plan options, and (ii) under the employment and change in
control agreements resulting from a change in control of the Company.
Interest on such deferrals is set at 150% of the Moody's Seasoned Corporate
Bond 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.......................................... $59,776 $15,000
Mr. Biehl........................................... 21,447 6,960
Mr. Zub............................................. 22,346 6,018
Mr. Kane............................................ 2,277 5,568
Mr. Sondeno......................................... 17,579 5,351
</TABLE>
- -------------------------
OPTIONS/SARS GRANTED IN 1999
The following table sets forth the number of shares of the Company's Common
Stock subject to stock options granted under the Option Plan to the named
executive officers listed in the Summary Compensation Table during 1999,
together with related information.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------------------ ANNUAL RATES OF STOCK
NUMBER OF PERCENT OF PRICE APPRECIATION FOR
SECURITIES UNDERLYING TOTAL OPTIONS/SARS EXERCISE OPTION TERM(2)
OPTIONS/SARS GRANTED TO EMPLOYEES OR BASE EXPIRATION ----------------------
NAME GRANTED(#)(1) IN FISCAL YEAR PRICE($/SH) DATE 5 PERCENT 10 PERCENT
---- --------------------- -------------------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael O. Maffie.... 25,000 25.00 $28.9375 7/19/09 $455,765 $1,150,266
George C. Biehl...... 7,500 7.50 28.9375 7/19/09 136,730 345,080
Edward S. Zub........ 7,500 7.50 28.9375 7/19/09 136,730 345,080
James P. Kane........ 7,500 7.50 28.9375 7/19/09 136,730 345,080
Dudley J. Sondeno.... 6,250 6.25 28.9375 7/19/09 113,941 287,566
</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 19, 2009, 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.
- -------------------------
16
<PAGE> 21
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, 1999.
AGGREGATED OPTION/SAR EXERCISES IN 1999 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, 1999 DECEMBER 31, 1999(1)
ACQUIRED ON VALUES ------------------------------ ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
---- ----------- -------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael O. Maffie.... 0 $0 117,500 47,500 $787,813 $29,063
George C. Biehl...... 0 0 38,250 14,250 260,344 8,719
Edward S. Zub........ 0 0 33,250 14,250 220,344 8,719
James P. Kane........ 0 0 17,375 13,875 96,953 7,266
Dudley J. Sondeno.... 0 0 31,875 11,875 216,953 7,266
</TABLE>
- -------------------------
(1) This column represents the difference between the exercise prices for
in-the-money options and the closing price of $23.00 for the Company's
Common Stock on the New York Stock Exchange on December 31, 1999, 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, restrictions incorporated into the Option 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.
17
<PAGE> 22
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
600,000..................... 105,000 157,500 210,000 262,500 315,000
650,000..................... 113,750 170,625 227,500 284,375 341,250
700,000..................... 122,500 183,750 245,000 306,250 367,500
</TABLE>
- -------------------------
(1) Years of service beyond 30 years will not increase benefits under the basic
retirement plan.
(2) For 2000, the maximum annual compensation that can be considered in
determining benefits under the Plan is $170,000. 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, 1999, the
credited years of service towards retirement for the named executive officers
shown in the Summary Compensation Table are as follows: Mr. Maffie, 21 years;
Mr. Biehl, 14 years; Mr. Zub, 21 years; Mr. Kane, 22 years; and Mr. Sondeno, 20
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, 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.
18
<PAGE> 23
SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS
In July 1998, the Company amended the existing employment agreements
("Employment Agreements") with seven of its designated officers (including the
named executive officers), and entered into change in control agreements
("Change in Control Agreements") with its remaining officers. The Employment
Agreements generally provide for the payment, upon termination of employment by
the Company without cause, as defined therein, of up to one and one-half years
of total annual compensation (base salary, a predetermined level of incentive
compensation and fringe benefits), and up to three years of total annual
compensation for Mr. Maffie. The Employment 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 either two to two and one-half times their total
annual compensation other than Mr. Maffie. Under such circumstances, Mr. Maffie
would be entitled to a payment equal to three times his total annual
compensation. The Change in Control Agreements for the remaining officers
parallel the change in control provisions of the Employment Agreements and
provide that these officers would be entitled to an amount equal to two times
their annual compensation.
Restricted stock awards, stock options or stock appreciation rights would
vest and become immediately exercisable upon a change in control. Benefits under
the Supplemental Retirement Plan may also vest and/or accelerate as a result of
a change in control. If any payment under these agreements would constitute a
"parachute payment" subject to any excise tax under the Internal Revenue Code,
the Company would be responsible for payment of such tax. The terms of these
agreements are for 24 months for each of the officers other than Mr. Maffie,
whose agreement is for 36 months. Each of the agreements will be automatically
extended annually for successive one-year periods, unless canceled by the
Company.
19
<PAGE> 24
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
SOUTHWEST GAS S&P 500 DIVERSIFIED INDEX (1)(2)
------------- ------- ------------------------
<S> <C> <C> <C>
1994 100.0 100.0 100.0
1995 131.3 137.5 132.4
1996 150.2 169.1 166.8
1997 152.5 225.6 209.0
1998 226.0 290.1 192.5
1999 201.1 351.1 202.1
</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 Energy Group; Consolidated Natural Gas;
Eastern Enterprises; Energen Corp.; Equitable Resources, Inc.; Kinder
Morgan, Inc.; Keyspan Corporation.; MCN Corporation; MDU Resources Group,
Inc.; National Fuel Gas Co.; Nicor, Inc.; Oneok, Inc.; Questar Corp.; Semco
Energy Inc.; the Company; Southwestern Energy Co.; UGI Corp.; Valley
Resources, Inc.; and Wicor, Inc.
- -------------------------
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.
20
<PAGE> 25
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the 2001 Annual Meeting of Shareholders and inclusion in the
Company's proxy materials for the meeting must be received in writing by the
Company on or before December 2, 2000. If a shareholder intends to offer any
proposal at such meeting without using the Company's proxy materials, notice of
such intended action has to be provided to the Company on or before December 2,
2000, in order for the proposal to be presented for shareholder consideration at
the Annual Meeting. All proposals must comply with applicable SEC rules. It is
recommended that shareholders, submitting proposals for inclusion in the
Company's proxy materials or notices to the Company, direct such proposals or
notices 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
21
<PAGE> 26
SOUTHWEST GAS CORPORATION
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
11, 2000, 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 Company:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(IMPORTANT -- SIGNATURE REQUIRED ON REVERSE SIDE)
<PAGE> 27
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, UNLESS OTHERWISE INSTRUCTED, WILL CUMULATIVELY VOTE THEIR SHARES AS
PROVIDED FOR IN THE PROXY STATEMENT.
Dated: , 2000
-------------------------------
(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.
