UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
[ ] 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SWIFT ENERGY COMPANY
(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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
SWIFT ENERGY COMPANY
16825 NORTHCHASE DRIVE, SUITE 400
HOUSTON, TEXAS 77060
(281) 874-2700
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 2001
Notice is hereby given that the annual meeting of shareholders of SWIFT
ENERGY COMPANY (the "Company") will be held at the Marriott Hotel Greenspoint,
255 North Sam Houston Parkway East at the corner of Northchase Drive, Houston,
Texas, on Tuesday, May 8, 2001 at 4:00 p.m. Houston time for shareholders to
consider and vote upon the following proposals:
1. To elect three members of Class II of the board of directors,
positions for which A. Earl Swift, Henry C. Montgomery and Harold J.
Withrow have been nominated to serve for the terms specified in the
attached proxy statement or until their successors are elected and
qualified;
2. To approve the 2001 Omnibus Stock Option Plan and to ratify an
amendment extending the Company's 1990 Stock Compensation Plan;
3. To approve amending the Company's Articles of Incorporation to
increase the number of authorized shares of stock from 40 million
shares to 110 million shares and to conform the Articles of
Incorporation to current law;
4. To grant authority to extend the solicitation period in the event the
meeting is postponed or adjourned for any reason; and
5. Such other business as may properly be presented at the meeting, or
any adjournment thereof.
A record of shareholders has been taken as of the close of business on
March 19, 2001, and only shareholders of record on that date will be entitled to
notice of and to vote at the meeting, or any adjournment thereof. A complete
list of shareholders will be available commencing April 27, 2001, and may be
inspected during normal business hours prior to the meeting at the offices of
the Company, 16825 Northchase Drive, Suite 400, Houston, Texas. This list will
also be available at the meeting.
APPROVAL OF PROPOSAL 3 REQUIRES THE AFFIRMATIVE VOTE OF NOT LESS THAN TWO-THIRDS
(16,462,611 SHARES) OF ALL OUTSTANDING SHARES. THEREFORE, IT IS IMPORTANT THAT
YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD RIGHT AWAY, WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON. A STAMPED ENVELOPE IS ENCLOSED FOR THIS
PURPOSE. YOUR PROMPT RETURN OF THE PROXY CARD WILL ENSURE A QUORUM AND SAVE THE
COMPANY THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Directors,
/s/ Bruce H. Vincent
BRUCE H. VINCENT
Secretary
April 3, 2001
SWIFT ENERGY COMPANY
16825 NORTHCHASE DRIVE, SUITE 400
HOUSTON, TEXAS 77060
(281) 874-2700
PROXY STATEMENT
This proxy statement is mailed to shareholders commencing on or about April
3, 2001, in connection with the solicitation by the board of directors (the
"Board") of SWIFT ENERGY COMPANY (the "Company") of proxies to be voted at the
annual meeting of shareholders to be held at the Marriott Hotel Greenspoint, 255
North Sam Houston Parkway East at the corner of Northchase Drive, Houston,
Texas, on May 8, 2001 at 4:00 p.m. Houston time, and any adjournment thereof
(the "Meeting"), for the purposes set forth in the accompanying Notice.
Management does not know of any matters other than those listed on the Notice
that will be presented for action at the Meeting.
The Annual Report to Shareholders covering the fiscal year ended December
31, 2000 will be mailed to each shareholder entitled to vote at the Meeting on
or before the date of mailing this proxy statement.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitations by mail, a number of regular employees of the Company may solicit
proxies in person or by telephone. The Company does not anticipate retaining,
but may decide to retain a proxy solicitor. The Company estimates the cost of
retaining a proxy solicitor to be approximately $2,500.
QUORUM AND VOTING
The record date for the determination of shareholders entitled to notice of
and to vote at the Meeting was the close of business on March 19, 2001. On the
record date, there were 24,693,916 shares of common stock of the Company, par
value $.01 per share, issued and outstanding and entitled to vote.
Each share of common stock entitles the holder to one vote on each matter
presented at the Meeting. Proxies will be voted in accordance with the
directions specified thereon. Any proxy on which no direction is specified will
be voted for the election of all nominees named therein to the Board for the
terms indicated, for the approval of each of the proposals set forth herein and
otherwise at the discretion of the persons designated as proxies. A shareholder
may revoke his proxy at any time prior to the voting thereof by attending and
voting at the Meeting or by filing with the Secretary of the Company a written
revocation or a duly executed proxy bearing a later date.
The presence, in person or by proxy, of the holders of a majority of the
issued and outstanding shares entitled to be voted at the Meeting is necessary
to constitute a quorum to transact business. If a quorum is not present or
represented at the Meeting, a majority of the votes represented at the Meeting
may adjourn the Meeting from time to time without notice other than an
announcement at the meeting until a quorum is present or represented. If
Proposal No. 4 is approved by shareholders holding a majority of the shares
entitled to vote at the Meeting, the Meeting may be adjourned to extend the
solicitation period, even if a quorum is present at the Meeting. See "Proposal
4."
1
An automated system administered by the Company's transfer agent tabulates
the votes. Abstentions are included in the determination of the number of shares
present and voting and are counted as abstentions in tabulating the votes cast
on nominations or proposals presented to shareholders. Broker nonvotes are not
included in the determination of the number of shares present and voting or as a
vote with respect to such nominations or proposals.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, three Class II directors are to be elected for terms to
expire at the 2004 Annual Meeting. There are three classes of directors and each
year the directors in one of these classes are nominated to serve three year
terms, or until their successors have been duly elected and qualified. In order
to be elected, each nominee for director must receive at least the number of
votes equal to a majority of the shares having voting power present in person or
represented by proxy at the Meeting.
The persons named as proxies on the accompanying proxy card have been
designated by the Board, and unless authority is withheld by a shareholder on a
proxy card, they intend to vote for the election of all of the nominees named
below to the Board. If any nominee should become unavailable or unable to serve
as a director, the person named as proxies may vote for a substitute selected by
them or the Board may be reduced accordingly; however, the Board is not aware of
any circumstances likely to render any nominee unavailable. Any director elected
by the Board to fill a vacancy will be elected for the unexpired term of such
director's predecessor in office.
CLASS II
A. Earl Swift
Henry C. Montgomery
Harold J. Withrow
Set forth below, for information purposes only, are the names and remaining
terms of the other four directors:
CLASS III
Virgil N. Swift
G. Robert Evans
(Terms to expire at the 2002 Annual Meeting)
CLASS I
Clyde W. Smith, Jr.
Terry E. Swift
(Terms to expire at the 2003 Annual Meeting)
2
NOMINEES
Set forth below is certain information, as of the date of this proxy
statement, concerning the nominees for election to the Board of the Company.
CLASS II DIRECTORS
A. Earl Swift, 67, is Chairman of the Board of the Company and Chief
Executive Officer and has served in such capacities since the Company's founding
in 1979. He previously served as President from 1979 to November 1997, at which
time Terry E. Swift was appointed President. For the 17 years prior to 1979, he
was employed by affiliates of American Natural Resources Company. Mr. Swift is a
registered professional engineer and holds a degree in Petroleum Engineering, a
Juris Doctor degree and a Master's degree in Business Administration. He is the
brother of Virgil N. Swift and the father of Terry E. Swift.
Henry C. Montgomery, 65, has served as a director of the Company since
1987. Since 1980, Mr. Montgomery has been and continues to serve as the Chairman
of the Board of Montgomery Financial Services Corporation, a management
consulting and financial services firm. Mr. Montgomery specializes in services
for companies in transition or that are financially troubled. The following
describes some of those engagements. From January 2000 to March 2001, Mr.
Montgomery served as Executive Vice President, Finance and Administration, and
Chief Financial Officer of Indus International, Inc., a public company engaged
in enterprise asset management systems. For eight months in 1999 he served as
interim Executive Vice President of Finance and Administration and currently
serves on the board of directors of Spectrian Corporation, a public company
engaged in making cellular base station power amplifiers and power transistors.
From November 1996 through July 1997, Mr. Montgomery served as Executive Vice
President of SyQuest Technology, Inc., a public company engaged in the
development, manufacture and sale of computer hard drives. On November 17, 1998,
SyQuest filed a petition under Chapter 11 of the U.S. Bankruptcy Code. Mr.
Montgomery served, from March 1995 until mid-November 1996, as President and
Chief Executive Officer of New Media Corporation, a privately held company
engaged in developing, manufacturing and selling PCMCIA cards for the computer
industry. On October 14, 1998, New Media Corporation filed a petition under
Chapter 11 of the U.S. Bankruptcy Code. Mr. Montgomery currently serves on the
boards of directors of Consolidated Freightways Corporation, a trucking company,
and Catalyst Semiconductor, Inc., a company that designs, develops and markets
programmable, integrated circuit products.
Harold J. Withrow, 73, has been a director of the Company since 1988. Mr.
Withrow worked as an independent oil and gas consultant from 1988 until he
retired at the end of 1995. From 1975 until 1988, Mr. Withrow served as Senior
Vice President--Gas Supply for Michigan Wisconsin Pipe Line Company and its
successor, ANR Pipeline Company.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ALL OF THE NOMINEES FOR
DIRECTORS.
Set forth below, for information purposes only, is information regarding
the Class III and Class I directors whose terms will expire at the annual
meetings in 2002 and 2003, respectively:
3
CLASS III DIRECTORS
Virgil N. Swift, 72, has been a director of the Company since 1981 and
currently serves as Vice Chairman of the Board. He acted as Executive Vice
President--Business Development between November 1991 and June 30, 2000. He
previously served as Executive Vice President and Chief Operating Officer from
1982 to late 1991. Mr. Swift joined the Company in 1981 as Vice
President--Drilling and Production. For the preceding 28 years he held various
production, drilling and engineering positions with Gulf Oil Corporation and its
subsidiaries, last serving as General Manager--Drilling for Gulf Canada
Resources, Inc. Mr. Swift is a registered professional engineer and holds a
degree in Petroleum Engineering. He is the brother of A. Earl Swift and the
uncle of Terry E. Swift.
G. Robert Evans, 69, has been a director of the Company since 1994.
Effective January 1, 1998, Mr. Evans retired as Chairman of Material Sciences
Corporation, having held that position since 1991. Material Sciences Corporation
develops and commercializes continuously processed, coated materials
technologies. He remains a director of Material Sciences Corporation. He also
serves as a director of Consolidated Freightways Corporation, a trucking
company.
CLASS I DIRECTORS
Clyde W. Smith, Jr., 52, has served as a director of the Company since
1984. Since August 1997, Mr. Smith has served as President of Millennium
Technology Service, a White City, Oregon based contract electronics
manufacturer. He served as President of Somerset Properties, Inc., a real estate
investment company, from 1985 to 1994 and as President of H&R Precision, Inc., a
general contractor, from 1994 to 1997. Mr. Smith is a certified public
accountant. On May 7, 1997, Mr. Smith filed a petition under Chapter 7 of the
U.S. Bankruptcy Code.
Terry E. Swift, 45, has served as a director of the Company since the 2000
annual shareholders meeting. He has served as President of the Company since
November 1997. He served as Executive Vice President from 1991 to 1997 and was
Chief Operating Officer from 1991 to January 2000. He served as Senior Vice
President--Exploration and Joint Ventures from 1990 to 1991 and as Vice
President--Exploration and Joint Ventures from 1988 to 1990. Mr. Swift has a
degree in Chemical Engineering and a Master's Degree in Business Administration.
He is the son of A. Earl Swift and the nephew of Virgil N. Swift.
COMPENSATION TO DIRECTORS
Board members are reimbursed for travel expenses they incur in attending
Board meetings. Employees of the Company are not compensated for serving as
directors. During 2000, four of the nonemployee members of the Board received an
aggregate amount of $12,250 for attendance at Board meetings, an annual fee of
$5,000 for serving on committees of the Board, and an annual fee of $15,000 for
services as a director. Virgil Swift became a nonemployee director effective
June 30, 2000 and thus was paid half of the foregoing amounts during 2000.
Aggregate compensation paid to the five nonemployee directors during 2000 for
their services as directors totaled $145,125. In 2001, each of the nonemployee
directors will receive an aggregate amount of $12,250 for attendance at board
meetings, an annual fee of $5,000 for serving on committees of the Board, and an
annual fee of $15,000 for services as a director.
Under the Company's 1990 Nonqualified Stock Option Plan, as amended (the
"1990 Nonqualified Plan"), each nonemployee director is granted options to
4
purchase 10,000 shares of the Company's common stock on the date he first
becomes a nonemployee director. Additionally, on the day after each annual
meeting of the shareholders, each individual who is a nonemployee director on
that date is granted options to purchase 5,000 shares of the Company's common
stock. The 1990 Nonqualified Plan permits each nonemployee director to hold a
maximum of 60,000 options to purchase shares of common stock, which maximum
increased to 66,000 due to a 10% stock dividend declared October 1, 1997. Also
as a result of the stock dividend, the number of shares underlying all options
held by each of the nonemployee directors increased by 10% with a commensurate
10% decrease in the option exercise price.
Four of the nonemployee directors exercised options during the year ended
December 31, 2000, acquiring an aggregate of 52,912 shares of the Company's
common stock.
The following table presents information as of December 31, 2000 regarding
the total number of unexercised options held by the nonemployee directors under
the 1990 Nonqualified Plan. Each of the four nonemployee directors who were
directors in May 2000 received an annual grant of options for 5,000 shares in
May 2000, at an exercise price of $21.75. Virgil Swift was an employee director
at that time and therefore did not receive an annual grant. In 2001, each of the
five nonemployee directors will receive options to purchase 5,000 additional
shares under the 1990 Nonqualified Plan, on the day following the 2001 Meeting.
NONEMPLOYEE DIRECTOR OPTIONS
DECEMBER 31, 2000
SHARES OF COMMON STOCK
UNDERLYING UNEXERCISED OPTIONS GRANTED
NAME UNDER 1990 NONQUALIFIED PLAN
- --------------------------------------------- ----------------------------------------------------
G. Robert Evans 48,100
Henry C. Montgomery 23,300
Clyde W. Smith, Jr. 41,500
Harold J. Withrow 54,810
Virgil N. Swift -
For the number of options exercisable within 60 days of March 1, 2001 by
each of the nonemployee directors, see footnote (1) to the table set forth under
"Principal Shareholders" below.
Since July 2000, Mr. Virgil Swift has received compensation pursuant to a
consulting agreement. Under his consulting agreement, Mr. Swift is paid $5,000
per month for providing advisory services to key employees, officers and
directors especially in the area of the Company's New Zealand oil and gas
exploration and production operations and as otherwise requested by the Chairman
of the Board and the President. The consulting agreement is terminable by either
party without cause upon two weeks written notice. During the term of the
5
consulting agreement, upon a change of control, all outstanding stock options
held by Mr. Swift will become 100% vested.
MEETINGS OF THE BOARD
During 2000, the Board met on thirteen occasions. In addition, management
confers frequently with its directors on an informal basis to discuss Company
affairs. During 2000, each director attended at least 75% of the aggregate of
(i) the total number of meetings of the Board and (ii) the total number of
meetings of all committees of the Board on which he served.
COMMITTEES OF THE BOARD
The Board of the Company has established the following standing committees:
Audit, Nominating and Corporate Governance, Compensation, Conflicts of Interest,
Executive and Special Transactions Committees. Descriptions of the functions of
the Audit, the Nominating and Corporate Governance and the Compensation
Committees are set forth below.
AUDIT COMMITTEE. The New York Stock Exchange (the "NYSE") has established
standards, which have been accepted by the Securities and Exchange Commission
(the "SEC"), with respect to independence and financial experience of the
members of audit committees. The NYSE standards require that all of the members
of audit committees be independent and that they all be able to read and
understand fundamental financial statements, including balance sheets, income
statements and cash flow statements. Additionally, at least one member of the
committee must have past employment experience in finance or accounting or other
comparable experience or background such as being or having been a chief
executive officer, chief financial officer or other senior officer with
financial oversight responsibilities. The members of the Swift Audit Committee
satisfy the NYSE criteria for both independence and experience.
The Audit Committee provides assistance to the Company's directors in
fulfilling the Board's oversight responsibility as to the Company's accounting,
auditing and financial reporting practices and as to the quality and integrity
of the financial reports of the Company. The specific functions and
responsibilities of the Audit Committee are set forth in the written charter of
the Audit Committee adopted by the Board and attached hereto as Annex A. The
Audit Committee reviews and reassesses its charter annually and recommends any
changes to the Board for approval. A report of the Audit Committee appears under
the caption "Audit Committee Report," below. Messrs. Montgomery, Smith and Evans
are members of the Audit Committee, which held five meetings in 2000.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. The Nominating and Corporate
Governance Committee reviews the performance of directors and recommends persons
to be management's nominees for directorships. The Nominating and Corporate
Governance Committee may consider nominees recommended by shareholders, upon
written request by a shareholder addressed to any member of the committee. See
"Shareholder Proposals" herein. This committee also reviews corporate governance
duties and procedures and, where necessary, recommends changes to the Board.
Messrs. Evans, Smith and Withrow are members of the Nominating and Corporate
Governance Committee. The Nominating and Corporate Governance Committee held one
meeting in 2000.
COMPENSATION COMMITTEE. The Compensation Committee at all times is
comprised of at least three directors who are "nonemployee directors" as defined
6
in Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act").
The Compensation Committee has sole authority to administer the Company's stock
option plans and stock purchase plan, although it has no discretion as to awards
of stock options under the 1990 Nonqualified Plan. The Compensation Committee
also reviews and makes recommendations regarding the compensation levels of the
Company's executive officers. Messrs. Smith, Montgomery and Withrow are members
of the Compensation Committee, which held six meetings in 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the SEC, the NYSE and the Pacific
Stock Exchange initial reports of ownership and reports of changes in ownership
of common stock of the Company. Officers, directors and greater than 10%
shareholders are required by regulation to furnish the Company with copies of
all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of Forms
3 and 4 furnished to the Company during the fiscal year beginning January 1,
2000, and ending December 31, 2000, and Forms 5 furnished to the Company with
respect to such fiscal year, the Company's officers, directors and greater than
10% beneficial owners complied with all Section 16(a) filing requirements except
as follows: The Company named Mr. Victor Moran Senior Vice President of Energy
Marketing and Business Development effective August 1, 2000. Due to an
oversight, the filing of the Form 3 stating his beneficial ownership of
securities of the Company as of August 1, 2000 was not filed with the SEC until
January 10, 2001. Mr. Harold Withrow amended his Form 4 for the month of May
2000 to report two purchases of shares by his wife which were not included in
his original timely filed Form 4. Mr. Joseph A. D'Amico filed a Form 4 for the
month of November 2000 to report five open market sales. However, the filing of
his Form 4 was delayed one day and was received at the SEC one day late for the
filing deadline for November transactions.
PROPOSAL 2
TO APPROVE THE 2001 OMNIBUS STOCK COMPENSATION
AND TO RATIFY AN AMENDMENT EXTENDING
THE 1990 STOCK COMPENSATION PLAN
2001 OMNIBUS STOCK COMPENSATION PLAN
On February 21, 2001 the Board, subject to approval by the shareholders of
the Company, adopted the 2001 Omnibus Stock Compensation Plan (the "2001 Plan")
to replace the 1990 Stock Compensation Plan (the "1990 Plan"). The ability to
grant options under the 1990 Plan expired during 2000. An aggregate of 3,500,000
shares of the Company's common stock will be reserved for awards under the 2001
Plan, which represents approximately 14.2% of the Company's issued and
outstanding shares as of March 1, 2001. The purpose of the 2001 Plan is to
promote and advance the interests of the Company by aiding the Company in
hiring, retaining and rewarding qualified employees, and increasing managerial
and key employees' interest in the growth and financial success of the Company
by offering stock options and stock and cash bonus incentives based on
performance.
7
Copies of the 2001 Plan and the amendment to the 1990 Plan may both be
obtained without charge by writing to the Company at 16825 Northchase Drive,
Suite 400, Houston, Texas 77060, Attention: Nancy Schlottman, or calling (281)
874-2700.
The Company does not intend to grant any further options under the 1990
Plan which the 2001 Plan is replacing; however, the 1990 Plan remains in effect
solely for the purpose of allowing the exercise of all stock options granted
under that plan. As of March 31, 2001, options covering 169,000 shares had been
granted under the 2001 Plan, subject to shareholder approval, at a weighted
average price of $35.06 per share. For additional information on the 1990 Plan,
see "Amendment Extending the 1990 Stock Compensation Plan" below.
SUMMARY OF THE 2001 PLAN
The 2001 Plan authorizes the Company to grant various awards ("Awards") to
officers and other key employees of the Company or its subsidiaries, including
incentive stock options ("ISOs"), nonqualified stock options ("NSOs"), "reload"
options ("Reload Options"), deferred compensation stock options ("DCSOs"), stock
appreciation rights ("SARs"), restricted stock grants ("Restricted Stock
Grants"), restricted unit grants ("Restricted Unit Grants") and performance
bonus awards ("Performance Bonus Awards").
Administration. The Compensation Committee of the Board (the "Compensation
Committee") will have sole authority to construe and interpret the 2001 Plan, to
select participants ("Participants"), to grant Awards and to establish the terms
and conditions of Awards. The Compensation Committee is allowed to give the
Company's chief executive officer specifically limited written authority to
grant awards to new employees. Currently, he may grant no more than 10,000
options to any new employee, nor more than 30,000 options in any fiscal quarter.
Members of the Compensation Committee are not eligible to receive Awards under
the 2001 Plan or the 1990 Plan.
Eligibility. Any employee of the Company or its subsidiaries, including,
without limitation, any officer, employee-director, any consultant, are eligible
to receive Awards under the 2001 Plan. Nonemployee directors are not eligible to
participate in the 2001 Plan. The 2001 Plan sets forth various restrictions upon
exercise of Awards, and allows extension of the period of exercisability
following the retirement, death, disability of termination of a Participant. The
Compensation Committee also has the discretion to accelerate the vesting or
exercisability of options under such events.
Shares Subject to 2001 Plan. The maximum number of shares of common stock
in respect of which Awards may be granted under the 2001 Plan (the "Plan
Maximum") is 3,500,000, subject to appropriate adjustment in the event of a
reorganization, stock split, stock dividend, merger, consolidation or other
change in capitalization of the Company affecting its common stock.
Term. The 2001 Plan will terminate on December 31, 2010 unless sooner
terminated by the Board, except with respect to Awards then outstanding.
Amendment. The Board may amend the 2001 Plan at any time, except that (1)
the Board must obtain shareholder approval to make any amendment to the 2001
Plan that would increase the total number of shares reserved for issuance
(except for adjustments necessary to reflect changes in capitalization),
materially modify eligibility requirements or materially increase the benefits
accruing to Participants under the 2001 Plan, and (2) certain amendments are
altogether prohibited (e.g., any amendment that would impair a Participant's
vested rights).
8
Incentive Stock Options. Options designated as ISOs, within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
together with the regulations promulgated thereunder, may be granted under the
2001 Plan up to the Plan Maximum. To the extent that any portion of an ISO that
first becomes exercisable by any Participant (under all of the stock option
plans of the Company or its subsidiaries ) during any calendar year exceeds the
$100,000 aggregate fair market value limitation of Section 422(d) of the Code,
or such other limit as may be imposed by the Code, such excess portion shall be
treated as a NSO. ISOs shall be exercisable for such periods as the Compensation
Committee shall determine, but in no event for a period exceeding ten years or,
for Participants who own more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, five years.
Nonqualified Stock Options. NSOs may be granted for a stated number of
shares of common stock and will be exercisable for such period or periods as the
Compensation Committee shall determine. Holders of NSOs may elect to have the
Company withhold from shares to be delivered upon exercise of an NSO, shares
whose fair market value satisfies withholding taxes attributable to the exercise
of the NSOs.
Exercisability. ISOs and NSOs will become exercisable in installments as
determined in its sole discretion by the Compensation Committee, although it is
generally anticipated in keeping with past Company practice that such options
may be exercised as to 20% installments on each of the first five anniversary
dates of the date of grant or such other period as may be designated by the
Compensation Committee. The exercise price for options may be paid in cash or by
delivery of shares of common stock already owned by the Participant for more
than six months and having a market value equal to the exercise price.
Option Exercise Prices. NSOs and DCSOs may be issued at any exercise price
that the Compensation Committee determines. The exercise price of an ISO shall
be at least one hundred percent (100% ) of the fair market value of the common
stock on the date of grant and at least one hundred ten percent (110% ) of the
fair market value of the common stock on the date of grant to ten percent
shareholders.
Reload Options. Under the 2001 Plan, whenever a Participant holding an ISO
or NSO exercises an option (the "Original Option") and pays the exercise price
by tendering shares of common stock (a "stock- for-stock exercise"), the Company
may grant a "Reload Option" to the Participant which provides that Participant
an option to purchase the exact number of shares tendered in the stock-for-stock
exercise at an exercise price equal to the fair market value of such shares at
the date of exercise of the Original Option. Reload Options may be granted on
the exercise of Original Options as well as on the exercise of Reload Options.
Reload Options are not exercisable after the later of the expiration of the
option term of the Original Option or two years following the date of grant of
the Reload Option. Except as described above, the terms and conditions of Reload
Options will be identical to the terms and conditions of the related Original
Options. Reload Options are designed to encourage stock-for-stock exercises by
Participants, because when a Reload Option is granted to a Participant, the
Participant may make a stock-for-stock exercise without necessarily suffering a
dilution in percentage ownership of the Company's common stock. At the same
time, the Participant will be able to participate fully in any future
appreciation in the Company's common stock, as if the Original Option had been
exercised for cash.
9
Transferability. The Compensation Committee may allow transfer of NSOs to
family members, trusts and partnerships for their benefit or owned by them, or
to charitable trusts. Options held by transferees are subject to the same
restrictions and forfeiture upon termination of employment applicable to the
Original Option holder. ISOs are not transferrable except by will or the laws of
descent and distribution.
Change of Control. In the event of a change of control of the Company
described in the 2001 Plan, all stock options and SARs outstanding shall become
fully vested and fully exercisable (other than certain options granted within a
year prior to the change of control), and all restrictions and conditions of
Restricted Stock Grants and Restricted Unit Grants outstanding shall be deemed
to be satisfied, unless the Board expressly provides otherwise.
A "change of control" occurs upon: (i) any person or group becoming the
beneficial owner of shares with 40% or more of the votes that may be cast for
the election of directors; (ii) persons who were directors of the Company
immediately prior to a cash tender offer, exchange offer, merger, sale of assets
or contested election, cease to constitute a majority of the Board; (iii) the
shareholders of the Company approve a transaction in which the Company ceases to
be an independent publicly owned corporation or approve sale of all or
substantially all the assets of the Company; or (iv) a tender offer or exchange
offer is made for shares of the Company's common stock (other than by the
Company) and shares are acquired thereunder.
Deferred Compensation Stock Options. DCSOs are designed to provide a means
by which compensation payments can be deferred to future dates. Deferred
compensation may include amounts awarded under the 2001 Plan or any other
compensation plan or program of the Company. The number of shares subject to a
DCSO will be determined by the Compensation Committee using the following
formula:
AMOUNT OF COMPENSATION TO BE DEFERRED
--------------------------------------- = Number of
FMV - STOCK OPTION EXERCISE PRICE Option Shares
The "fair market value" of a share of the Company's common stock shall mean, on
any given date, the highest closing price of the common stock on any established
national exchange or exchanges. DCSOs will be exercisable for such period or
periods as the Compensation Committee determines.
Stock Appreciation Rights. Under the 2001 Plan, the Compensation Committee
may grant an Award of SARs that entitle a Participant to receive an amount in
cash, shares of common stock, DCSOs, or any combination thereof, which is
determined by multiplying the number of shares of common stock as to which the
SAR is being exercised by an amount equal to the excess of the fair market value
of a share of common stock on the date of exercise over the fair market value of
a share of common stock on the date of grant. The Compensation Committee may
establish procedures for exercise and restrictions regarding the dates on which
SARs may be exercised, but in no event will SARs be exercisable before the first
anniversary date of the date of grant.
Stock Grants, Restricted Stock Grants and Restricted Unit Grants. The
Compensation Committee may in its discretion grant shares of common stock to a
Participant with or without restrictions, vesting requirements or other
conditions. A Restricted Stock Grant is an Award of shares of the Company's
common stock that does not vest until certain conditions established by the
Compensation Committee have been satisfied. At a minimum, the Participant shall
be required to provide services to the Company for a period of at least one year
from the date of the Award ("Restriction Period"). A Restricted Unit Grant is an
Award of "units" subject to similar vesting conditions, each unit having a value
equal either to a share of common stock or the amount by which a share of common
stock appreciates in value between the date of grant and the date at which any
restrictions lapse. During the Restriction Period, a Participant may vote and
receive dividends on the shares of common stock awarded pursuant to a Restricted
10
Stock Grant, but may not sell, assign, transfer, pledge or otherwise encumber
such shares. When the Restriction Period expires or the restriction with respect
to installments of shares lapses, the Participant is entitled to receive (1)
with respect to a Restricted Stock Grant, shares of common stock free and clear
of restrictions on sale, assignment, transfer, pledge or other encumbrances, or
(2) with respect to a Restricted Unit Grant, payment for the value of the
units.
Performance Bonus Awards. The Compensation Committee in its sole discretion
may award Participants a Performance Bonus Award in the form of cash or shares
of common stock, or a combination thereof, on such terms and conditions as the
Compensation Committee designates. Performance Bonus Awards will be based upon
evaluation of a variety of performance factors ("Performance Factors")
applicable to the Company as a whole for a calendar year ("Company Factors") and
upon an individual employee's performance for the year in contributing to the
Company's performance ("Individual Factors"). The Performance Factors, their
elements and their weighting may be changed from year to year by the
Compensation Committee as the Compensation Committee deems advisable. Currently,
the 2001 Plan includes as Company Factors (1) annual increases in earnings per
share for the Company, (2) annual increases in the Company's cash flow per
share, (3) annual increases in the volume of the Company's proved oil and gas
reserves, and (4) annual increases in the volume of the Company's probable oil
and gas reserves. Currently the Individual Factors are: (a) the individual's
performance in achieving either the Company's overall strategic objectives or
the objectives of the individual's department or group within the Company and
(b) the Compensation Committee's determination, in its sole discretion, of the
extent to which the Participant's individual performance merits a bonus. The
Compensation Committee will use the Company Factors and Individual Factors to
determine a Participant's Performance Bonus Award. The Compensation Committee
may also grant bonuses under the 2001 Plan which vary from those determined
using the Performance Factors.
FEDERAL INCOME TAX CONSEQUENCES OF THE 2001 PLAN
The following discussion is intended to provide an overview of the U.S.
federal income tax laws which are generally applicable to Awards granted under
the 2001 Plan as of the date of this proxy statement. People or entities in
differing circumstances may have different tax consequences, and the tax laws
may change in the future. This discussion is not to be construed as tax advice.
Grant of Incentive Stock Options and Stock Appreciation Rights. A
Participant will not recognize any taxable income at the time an ISO or an SAR
is granted and the Company will not be entitled to a federal income tax
deduction at that time.
Exercise of Incentive Stock Options and Disposition of Common Stock
Received upon Exercise. No income will be recognized by a Participant exercising
an ISO at the time of exercise. If an ISO Participant holds the shares received
from the exercise of an ISO for the longer of two years after the date such
option was granted or one year after the acquisition of the shares pursuant to
such option, the difference between the exercise price and the amount realized
upon disposition of the shares will constitute a long-term capital gain or loss,
and the Company will not be allowed a federal income tax deduction with respect
to that amount. If the shares acquired pursuant to the exercise of an ISO are
disposed of by a Participant prior to either of these dates, the Participant
will realize taxable ordinary income in an amount equal to the excess of the
fair market value of the common stock purchased at the time of exercise over the
exercise price. Correspondingly, the Company will usually be allowed a federal
income tax deduction equal to that amount.
11
Alternative Minimum Tax. The difference between the exercise price and fair
market value of shares received from the exercise of an ISO is generally an
adjustment to income for purposes of the alternative minimum tax ("AMT"). The
AMT, imposed to the extent it exceeds the taxpayer's regular tax, is 26% of an
individual taxpayer's alternative minimum taxable income (28% in the case of
alternative minimum taxable income in excess of $175,000). Alternative minimum
taxable income is determined by adjusting regular taxable income for certain
items, increasing that income by certain tax preference items and reducing this
amount by the applicable exemption amount. Whether AMT applies to particular
Participants depends on their individual circumstances.
Nonqualified Stock Options and Deferred Compensation Stock Options. A
Participant will generally not recognize any taxable income at the time a NSO or
DCSO is granted, and the Company will not be allowed a federal income tax
deduction at that time. However, because NSOs and DCSOs may be granted by the
Compensation Committee at exercise prices substantially below the fair market
value of the common stock of the Company on the date the option is granted, the
IRS might take the position under certain circumstances that income is
recognized at the time such options are granted, equal to the amount of the
"discount" at which the NSO or DCSO was granted.
If NSOs or DCSOs are granted at an exercise price equal to the fair market
value of the common stock at the date granted, taxable ordinary income will be
recognized by the Participant at the time of exercise in an amount equal to the
excess of the fair market value of the shares purchased at the time of such
exercise over the exercise price. The Company will usually be allowed a federal
income tax deduction equal to the ordinary income attributable to the exercising
Participant. The Participant will generally recognize a taxable capital gain or
loss upon the subsequent sale of such shares.
In the case of NSOs and DCSOs which are issued at an option price that is
less than the fair market value of the common stock subject to such option on
the date it is granted to a Participant, the same rules should apply, unless the
IRS takes the position that such "discount" options may under certain
circumstances be subject to tax at the time granted to a Participant.
Stock Appreciation Rights. Upon the exercise of a SAR, the Participant will
realize taxable ordinary income on the fair market value of the payment received
from the Company, and the Company generally will be allowed a corresponding
federal income tax deduction at that time. The Participant's basis in any shares
of common stock acquired will be equal to the amount of income upon which the
Participant was taxed. Upon any subsequent disposition of such shares, any gain
or loss realized will be a capital gain or loss.
Restricted Stock Grants and Restricted Unit Grants. Unless a Participant
makes a tax election under Code Section 83(b), a Participant receiving a
Restricted Stock Grant or a Restricted Unit Grant (collectively "Restricted
Awards") will not recognize income and the Company will not be allowed a federal
income tax deduction at the time such Restricted Award is granted. When the
restrictions on a Restricted Award terminate or lapse, the excess of the fair
market value of the Restricted Award on the date the restrictions terminate or
lapse over the amount paid by the Participant, or the base value of the
Restricted Award at the time of grant as determined by the Compensation
Committee will be taxable as ordinary income to the Participant and will be
allowed as a federal income tax deduction to the Company. Upon a subsequent
disposition of shares received from a Restricted Award, the gain or loss
recognized by the Participant will be treated as capital gain or loss. By filing
a Section 83(b) election, the amount of a Participant's ordinary income, the
commencement of the holding period and the Company's deduction will be
determined as of the date of the grant.
12
Performance Bonus Awards. A Participant receiving a Performance Bonus Award
will recognize ordinary income, and the Company will be allowed a corresponding
deduction at the time such Award is granted.
Change of Control. Some Awards that become payable solely because of a
change of control of the Company as a result of a tender offer, contested
election, business combination or related events may constitute excess parachute
payments under Section 280G of the Code. Amounts generally would be treated as
"Excess Parachute Payments" to the extent they exceed 300% of the Participant's
average annual compensation for the five years preceding the change of control.
Amounts treated as Excess Parachute Payments cannot be deducted by the Company
for federal income tax purposes and the Participant is subject to a 20% excise
tax on such amounts received.
Special Rules. To the extent a Participant pays all or part of the exercise
price of an NSO or DCSO by tendering shares of common stock previously owned by
the Participant, the tax consequences described above generally would apply.
However, the number of shares received upon exercise of such option equal to the
number of shares surrendered in payment of the exercise price will have the same
basis and tax holding period as the shares surrendered. The additional shares
received upon such exercise will have a tax basis equal to the amount of
ordinary income recognized on such exercise and a holding period which commences
on the date of the exercise.
To the extent a Participant pays all or part of the exercise price of an
ISO by tendering previously acquired common stock owned by such Participant, the
tax consequences described above generally will apply to such exchange. However,
if a Participant exercises an ISO by tendering shares previously acquired on the
exercise of an ISO, a disqualifying disposition will occur if the applicable
holding period requirements described above have not been satisfied with respect
to the surrendered stock. The consequence of such a disqualifying disposition is
that the Participant may recognize ordinary income at that time.
If a Participant subject to Section 16(b) of the Exchange Act receives
shares of common stock upon the exercise of an Award, other than an ISO, Section
83 of the Code defers recognition of income until six months after the date of
exercise, unless the Participant elects to have the shares valued at the date of
exercise. Absent such election, taxable ordinary income will be recognized in an
amount equal to the difference between the exercise price and the fair market
value of the shares at the end of the six month deferral period.
The grant, receipt and exercise of Reload Options will be treated for
federal income tax purposes in the same manner as the underlying option for
which the Reload Option was granted.
Withholding Taxes. In general, withholding taxes must be paid whenever
ordinary income to the Participant is recognized for federal income tax
purposes. For example, withholding taxes must be paid at the time of exercise of
any NSO or DCSO, Performance Bonus Award or SAR. Withholding taxes must also be
paid in respect of any Restricted Stock Grant or Restricted Unit Grant when the
restrictions thereon lapse, terminate or are removed.
AMENDMENT EXTENDING THE 1990 STOCK COMPENSATION PLAN
When the 1990 Stock Compensation Plan approved by shareholders over ten
years ago initially expired April 1, 2000, 291,728 shares of common stock
remained available for the grant of options under the 1990 Plan. In conjunction
with its 2000 annual meeting, the Board determined to extend the expiration date
13
of the 1990 Plan until December 31, 2000. As the shares reserved under the 1990
Plan had been approved by the Company's shareholders, and given the focus of the
Company and its Board upon Company operations and the management transition made
in the summer of 2000, the Board wished to defer consideration of the terms of a
new option plan until 2001. The approval by shareholders of the extension of the
term of the 1990 Plan will have the effect of making the 107,080 options granted
to employees of the Company during the eight month extension period incentive
stock options, with the advantageous tax treatment afforded incentive stock
options. At December 31, 2000, 184,648 shares of common stock remained reserved
and unused for options granted under the 1990 Plan and will no longer be
available for grants of options in the future.
BOARD RECOMMENDATION
The affirmative vote of a majority of the shares represented at the Meeting
in person or by proxy is needed to approve the 2001 Plan and the amendment to
the 1990 Plan. Unless a shareholder withholds authority on the proxy card, those
persons designated as proxies by the Board intend to vote for the approval of
the 2001 Plan and the amendment to the 1990 Plan. The Board believes that such
approval is essential to enable the Company to continue to attract and retain
qualified employees in an extremely competitive labor market. As of December 31,
2000, options to purchase 2,076,593 shares of the Company's common stock were
outstanding under the Company's incentive stock option plans. The Company's 50
most senior managerial, technical and supervisory employees have been employed
by the Company for an average of approximately 11.3 years. Management believes
that the approval of the proposed 2001 Plan will contribute to the continuation
of the Company's history of employee longevity, as the Company's stock option
plans have done in the past.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" ADOPTION OF THE 2001 PLAN
AND RATIFICATION OF THE AMENDMENT EXTENDING THE 1990 PLAN.
PROPOSAL 3
INCREASE THE NUMBER OF SHARES OF
AUTHORIZED STOCK AND CONFORM
THE ARTICLES OF INCORPORATION TO CURRENT LAW
The number of authorized shares of common stock and preferred stock of the
Company has not been increased since 1981. Currently, the Articles of
Incorporation authorize the issuance of 35 million shares of common stock and
five million shares of preferred stock. As of the record date, a total of
approximately 27,650,000 shares of common stock are either issued and
outstanding or reserved for issuance under employee benefit and incentive plans.
The rate of issuance has increased as the Company has grown and will continue to
do so. To illustrate, since 1995, the Company has conducted two public
offerings, issued shares upon conversion of two issues of public debt and
declared a 10% stock dividend. The Company also reserved shares for issuance
pursuant to stock option grants during that period. As a result, in the past six
years of the Company's 21 years of existence, the Company has issued or reserved
for issuance a total of approximately 19 million shares of common stock, or
almost 70% of the shares issued throughout the Company's history. The need to
increase equity capitalization is typically to be expected with this rate of
growth. Thus, the more the Company grows, the faster it needs increased capital
and therefore, more authorized shares. The Board is proposing to increase the
number of shares of authorized common stock to 100 million shares and the
authorized preferred stock to 10 million shares. The Board believes that the
availability of such shares will provide the flexibility needed to grow the
14
Company by enabling the Board to act, without incurring the delay or expense of
a shareholders meeting, except as may be required by law, regulation or NYSE
rule. The purposes for stock issuances could include, among other things, the
issuance of stock to obtain additional capital funds, the purchase of property,
the acquisition by the Company of other companies, the use of additional shares
for various stock compensation and other employee benefit plans, the declaration
of stock dividends or distributions and other bona fide corporate purposes.
The issuance of additional shares of stock could have a dilutive effect on
earnings per share, and, for a person who does not purchase additional shares,
to maintain his, her or its pro rata interest, on a shareholder's percentage
voting power in the Company. Holders of common stock do not have preemptive
rights to purchase additional securities that may be issued by the Company,
which means that current shareholders do not have a prior right to purchase any
new issue of stock of the Company in order to maintain their proportionate
ownership interests.
The Company was incorporated in 1979, and the Articles of Incorporation
have not been updated significantly since that time. The Board is proposing that
in addition to amending the Articles of Incorporation to authorize additional
shares of stock, the Articles of Incorporation be amended to conform them to the
current Texas statute by:
o Deleting the lengthy purpose clause and replacing it with a single
sentence that states that the Company is organized for the purpose of
engaging in any lawful act, activity and/or business; and
o Deleting from the exceptions to limitation on liability of directors
one provision that Texas corporate law used to enumerate, relating to
repurchase of shares or payment of dividends, but which it no longer
enumerates as such an exception.
Further, the Articles of Incorporation have been amended in the past but
never restated. To integrate all of the past and proposed amendments into a
single document, the Company intends to restate the Articles of Incorporation.
The restatement of the Articles of Incorporation does not require shareholder
approval. The Amended and Restated Articles of Incorporation attached hereto as
Annex B will include the same provisions as are currently in effect, together
with the amendment increasing the number of authorized shares of stock and the
conforming amendments described in the foregoing paragraph, if adopted at the
Meeting.
The approval of the Amended and Restated Articles of Incorporation,
including an increase in the number of authorized shares requires an affirmative
vote of two-thirds (16,462,611 shares) of all outstanding shares. Unless a
shareholder withholds approval by marking the proxy card, those persons
designated as proxies by the board of directors intend to vote to approve the
Amended and Restated Articles of Incorporation.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE AMENDMENTS TO THE
ARTICLES OF INCORPORATION INCREASING THE NUMBER OF SHARES OF AUTHORIZED STOCK
AND CONFORMING THE ARTICLES OF INCORPORATION TO CURRENT LAW.
15
PROPOSAL 4
AUTHORITY TO EXTEND SOLICITATION PERIOD
In the event the Meeting is postponed or adjourned for any reason,
solicitation on any of the proposals may not continue past May 8, 2001 without
this authorization. For example, under Texas law, holders of two-thirds of the
outstanding shares of the Company's common stock are required to approve
amendments to the Company's Articles of Incorporation. If by the Meeting date, a
quorum is reached but the proposal to amend the Articles of Incorporation only
has 65% of the outstanding shares voting for such proposal to amend, the
proposal to amend the Articles of Incorporation would fail because the
solicitation period could not be extended to solicit the additional 1.67% vote
required. On the other hand, if by the Meeting date, a quorum is reached and
this proposal 4 passes by a majority of the shares voting, the Meeting may be
reconvened at a later time and the Company may continue to solicit additional
votes until the Meeting is reconvened. Because two-thirds of the outstanding
shares is a very high standard, the Board believes that it is particularly
important for it to be granted the authority to extend the solicitation period
if needed.
The affirmative vote of a majority of the shares representing at the 2001
Annual Meeting of Shareholders in person or by proxy is required to extend the
period for soliciting votes at the Meeting. Unless a shareholder withholds
authority on the proxy card, those persons designated as proxies by the board of
directors intend to vote for Proposal 4.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE GRANTING OF AUTHORITY
TO EXTEND THE SOLICITATION PERIOD.
16
PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning the shareholdings, as
of March 1, 2001 (unless otherwise indicated), of the seven current members of
the Board, each of the Company's five most highly compensated executive
officers, all executive officers and directors as a group, and each person who
beneficially owned more than five percent of the Company's outstanding common
stock.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED AT
FEBRUARY 1, 2001(1)
PERCENT OF
CLASS
NAME OF PERSON OR GROUP POSITION NUMBER OUTSTANDING
- ----------------------- -------- ------ -----------
A. Earl Swift.................... Chairman of the Board and Chief
Executive Officer 714,076 (2)
Virgil N. Swift.................. Vice Chairman of the Board 325,641(3) 1.3%
G. Robert Evans.................. Director 25,500 (2)
Henry C. Montgomery.............. Director 4,915 (2)
Clyde W. Smith, Jr............... Director 20,200 (2)
Harold J. Withrow................ Director 50,121 (2)
Terry E. Swift................... President, Director 111,252 (2)
Joseph A. D'Amico................ Executive Vice President, Chief
Operating Officer
63,048 (2)
Bruce H. Vincent................. Executive Vice President--Corporate 124,018 (2)
Development and Secretary
James M. Kitterman............... Senior Vice President--Operations 115,186 (2)
All executive officers and directors as a group (13 persons).................. 1,118,869 4.5%
Scudder Kemper Investments, Inc............................................... 2,188,213(4) 8.9%
345 Park Avenue
New York, New York 10154
FMR Corp ..................................................................... 1,934,431(5) 7.9%
Fidelity Low-Priced Stock Fund
Fidelity Management and Research Company
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, Massachusetts 02109
Franklin Resources, Inc....................................................... 1,666,156(6) 6.8%
Franklin Advisers, Inc.
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Blvd.
San Mateo, California 94404
Neuberger Berman Inc.......................................................... 1,323,364(7) 5.4%
Neuberger Berman, LLC
Neuberger Berman Management Inc.
605 Third Avenue
New York, New York 10158-3698
17
- ---------------------------
[FN]
(1) Unless otherwise indicated below, the persons named have sole voting and
investment power over the number of shares of the Company's common stock
shown as being owned by them. The table includes the following shares that
were acquirable within 60 days following March 1, 2001 by exercise of
options granted under the Company's stock option plans: Mr. A. E. Swift -
1,660; Mr. V. N. Swift - 37,103; Mr. Evans - 10,700; Mr. Montgomery -
2,000; Mr. Smith - 20,200; Mr. Withrow - 33,510; Mr. T. E. Swift - 68,849;
Mr. Vincent - 94,710; Mr. Kitterman - 80,225; Mr. D'Amico - 57,916; and all
executive officers and directors as a group - 481,367.
(2) Less than one percent.
(3) Includes 121 shares held jointly by Mr. Virgil Swift and his wife and
115,818 of the 119,400 shares held of record by a Texas family limited
partnership in which Mr. Virgil Swift and his wife hold a 97% interest. Mr.
Virgil Swift and his wife are both general partners of the family limited
partnership and, as such, they share voting and dispositive power as to the
119,400 shares held by the family limited partnership. Consequently, Mr.
Virgil Swift is deemed to beneficially own the 119,400 shares held by the
partnership. Mr. Virgil Swift expressly disclaims beneficial ownership as
to 3%, or 3,582, of the shares held by the partnership.
(4) Based on a Schedule 13G dated February 14, 2001 filed with the SEC to
reflect shares held at December 31, 2000, Scudder Kemper Investments, Inc.
("Scudder"), an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is deemed beneficial owner of 2,188,213
shares of the Company's common stock as a result of serving as an
investment adviser to one or more investment companies or other managed
accounts. Scudder has the sole power to dispose of and direct the
disposition of all 2,188,213 shares and has sole voting power as to
1,570,600 of such shares of the Company's common stock.
(5) Based on a Schedule 13G dated February 14, 2001 filed with the SEC to
reflect shares held at December 31, 2000, Fidelity Management & Research
Company ("Fidelity"), a wholly owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, is the beneficial owner of 1,914,831 shares or 7.85% of the
common stock outstanding of the Company as a result of acting as investment
adviser to various investment companies registered under Section 8 of the
Investment Company Act of 1940. The ownership of one investment company,
Fidelity Low-Priced Stock Fund, amounted to 1,775,000 shares or 7.2% of the
common stock outstanding. Edward C. Johnson 3d, FMR Corp., through its
control of Fidelity, and the investment funds (the "Fidelity Funds") each
has sole power to dispose of the 1,914,831 shares owned by the Fidelity
Funds.
Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the
sole power to vote or direct the voting of the shares owned directly by the
Fidelity Funds, which power resides with the Fidelity Funds' Boards of
Trustees. Fidelity carries out the voting of the shares under written
guidelines established by the Fidelity Funds' Boards of Trustees.
Fidelity Management Trust Company, a wholly owned subsidiary of FMR Corp.
and a bank as defined in Section 3(a)(6) of the Exchange Act, is the
beneficial owner of 19,600 shares or 0.08% of the common stock outstanding
of the Company as a result of its serving as investment manager of
institutional account(s). Edward C. Johnson 3d and FMR Corp., through its
control of Fidelity Management Trust Company, each has sole dispositive
power over 19,600 shares and sole power to vote or to direct the voting of
19,600 shares of common stock owned by institutional account(s) as reported
above.
Strategic Advisers, Inc., a wholly owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, provides investment advisory services to individuals. It does
not have sole power to vote or direct the voting of shares of certain
securities held for clients and does have sole dispositive power over such
securities. As such, FMR Corp.'s beneficial ownership may include shares
beneficially owned through Strategic Advisers, Inc.
Members of the Edward C. Johnson 3d family are the predominant owners of
Class B shares of common stock of FMR Corp., representing approximately 49%
of the voting power of FMR Corp. Of these, 12% are owned by Mr. Johnson 3d
and 24.5% are owned by Abigail Johnson. Mr. Johnson 3d is Chairman of FMR
18
Corp. and Abigail P. Johnson is a Director of FMR Corp. The Johnson family
group and all other Class B shareholders have entered into a shareholders'
voting agreement under which all Class B shares will be voted in accordance
with the majority vote of the Class B shares. Accordingly, through their
ownership of voting common stock of FMR Corp. and the execution of the
shareholders' voting agreement, members of the Johnson family may be
deemed, under the Investment Company Act of 1940, to form a controlling
group with respect to FMR Corp.
(6) Based on a Schedule 13G dated February 9, 2001 filed with the SEC to
reflect shares beneficially held at December 31, 2000, one or more open or
closed-end investment companies or other managed accounts which are advised
by direct and indirect investment advisory subsidiaries (the "Adviser
Subsidiaries") of Franklin Resources, Inc. ("FRI") beneficially own
1,666,156 shares of the Company's common stock. Such advisory contracts
grant to such Adviser Subsidiaries all investment and/or voting power over
the securities owned by such advisory clients. Therefore, such Adviser
Subsidiaries may be deemed to be, for such purposes of Rule 13d-3 under the
Exchange Act, the beneficial owner of all 1,666,156 shares.
Beneficial ownership by investment advisory subsidiaries and other
affiliates of FRI is being reported in conformity with the guidelines
articulated by the SEC staff in Release No. 34-39538 (January 12, 1998)
relating to organizations, such as FRI, where related entities exercise
voting and investment powers over the securities being reported
independently from each other. As to the 1,666,156 shares, Franklin
Advisers, Inc., an indirect wholly owned investment advisory subsidiary of
FRI, holds sole voting and investment power which is exercised
independently from FRI and from all other investment advisor subsidiaries
of FRI. The clients of the Adviser Subsidiaries, including investment
companies registered under the Investment Company Act of 1940 and other
managed accounts, have the right to receive dividends from, as well as the
proceeds from, the sale of the 1,666,156 shares of the Company's common
stock.
Charles B. Johnson and Rupert H. Johnson, Jr. (the "Principal
Shareholders") each own in excess of 10% of the outstanding common stock of
FRI and are the principal shareholders of FRI. FRI and the Principal
Shareholders may be deemed to be, for purposes of Rule 13d-3 under the
Exchange Act, the beneficial owner of securities held by persons and
entities advised by FRI subsidiaries, which includes the 1,666,156 shares
of the Company's common stock. FRI, the Principal Shareholders and each of
the Adviser Subsidiaries disclaim any economic interest or beneficial
ownership in any of the 1,666,156 shares.
FRI, the Principal Shareholders, and each of the Adviser Subsidiaries are
of the view that they are not acting as a "group" for purposes of Section
13(d) under the Exchange Act and that they are not otherwise required to
attribute to each other the "beneficial ownership" of securities held by
any of them or by any persons or entities advised by FRI subsidiaries.
(7) Based on a Schedule 13G dated February 6, 2001 filed with the SEC to
reflect shares held at December 29, 2000, Neuberger Berman, LLC
("Neuberger") and Neuberger Berman Management Inc. ("Management") serve as
sub-advisers and investment managers of various mutual funds and are thus
deemed beneficial owners of 1,323,364 shares of the Company's common stock,
which shares they hold for their clients and in which shares they have no
economic interest. Of the shares beneficially owned, both Neuberger and
Management share dispositive power as to all 1,323,364 shares and share
voting power as to 798,290 shares of the Company's common stock. Neuberger
has sole voting power as to 325,074 shares. As the parent holding company
of Neuberger and Management, Neuberger Berman Inc. is also deemed
beneficial owner of these shares.
</FN>
19
EXECUTIVE OFFICERS
The executive officers of the Company are appointed annually by the Board.
Information regarding A. Earl Swift, Chief Executive Officer and Chairman of the
Board and Terry E. Swift, President, is set forth above under "Election of
Directors--Nominees." Set forth below is certain information, as of the date
hereof, concerning the other executive officers of the Company.
Joseph A. D'Amico, 52, was appointed Executive Vice President in August
2000 and was appointed Chief Operating Officer of the Company in January 2000.
He was Senior Vice President of Exploration and Development of the Company from
February 1998 to January 2000. He served as the Company's Vice President of
Exploration and Development from 1993 to 1998, Director of Exploration and
Development from 1992 to 1993 and Funds Manager from 1988 to 1992. Mr. D'Amico
holds Bachelor of Science and Master of Science degrees in Petroleum Engineering
and a Master's degree in Business Administration.
Bruce H. Vincent, 53, has been Executive Vice President--Corporate
Development and Secretary of the Company since August 2000. Previously he served
as Senior Vice President--Funds Management since joining the Company in 1990.
Mr. Vincent holds a degree in Business Administration and a Master's degree in
Finance.
Alton D. Heckaman, Jr., 44, was appointed Senior Vice President--Finance
and Chief Financial Officer in August 2000. He had previously served as Vice
President and Controller from May 1993 and Assistant Vice President--Finance
from March 1986 to May 1993. Mr. Heckaman joined the Company in 1982. He is a
Certified Public Accountant and holds a degree in Accounting.
James M. Kitterman, 56, was appointed Senior Vice President--Operations in
May 1993. He had previously served as Vice President--Operations since joining
the Company in 1983. Mr. Kitterman holds a degree in Petroleum Engineering and a
Master's degree in Business Administration.
Victor R. Moran, 45, was appointed Senior Vice President--Energy Marketing
and Business Development in August 2000. From 1995, he served as Vice
President--Natural Gas Marketing/Business Development. He had previously served
as Director of Business Development since January 1992. Mr. Moran holds a degree
in government and a Juris Doctor degree.
David W. Wesson, 42, was appointed Controller in January 2001. He
previously served as Assistant Controller--Reporting from April 1999 to January
2001, Manager, Reporting/Budget from October 1995 to April 1, 1999 and Manager,
Corporate Accounting/Budget from February 1990. He joined the Company as Senior
Accountant in 1988. Mr. Wesson is a Certified Public Accountant and holds a
degree in Accounting.
20
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information regarding
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company (determined as of the end of 2000) for the
fiscal years ended December 31, 2000, 1999 and 1998.
SUMMARY COMPENSATION TABLE
LONG TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION ANNUAL COMPENSATION ($)
BONUS(1)
NAME AND COMMON STOCK
PRINCIPAL UNDERLYING LIFE
POSITION YEAR SALARY ($) CASH ($) STOCK ($) OPTIONS/SARS(#) INSURANCE ($)(2) 401(K) ($)(3)
- -------------------------- ----------- ----------- ----------- --------- ------------------- ----------------- --------------
A. EARL SWIFT 2000 $500,004 $349,835 $ - 50,000 $32,560 $8,500
Chief Executive Officer 1999 627,278(4) 250,000 - - 3,804 8,000
1998 447,500 125,981 31,519 96,300 80,073 8,000
TERRY E. SWIFT 2000 $338,256 $117,058 $ - 42,500(5) $11,580 $8,500
President 1999 307,500 55,349 13,839 - 5,709 8,000
1998 306,875 43,158 10,763 81,400 12,282 8,000
JOE D'AMICO 2000 $243,945 $93,337 $ - 49,500(5) $ 6,400 $8,500
Executive Vice President 1999 184,800 35,739 8,921 - 4,293 8,000
& Chief Operating 1998 184,800 25,947 6,458 43,250 9,920 8,000
Officer
BRUCE H. VINCENT 2000 $233,010 $87,278 $ - 33,500(5) $ 9,027 $8,500
Executive Vice 1999 204,000 34,036 8,464 - 6,055 8,000
President--Corporate 1998 202,000 25,907 6,458 44,350 13,995 8,000
Development and
Secretary
JAMES M. KITTERMAN 2000 $223,700 $69,258 $ - 22,000 $11,401 $8,500
Sr. Vice President 1999 204,000 34,036 8,464 - 8,011 8,000
Operations 1998 202,625 26,962 6,765 44,900 17,692 8,000
<FN>
- ------------------------
(1) BONUS AMOUNTS REPORTED FOR 2000, 1999 AND 1998 INCLUDE BONUSES EARNED
DURING THOSE YEARS, BUT ACTUALLY PAID IN THE FOLLOWING YEAR.
(2) REPRESENTS INSURANCE PREMIUMS PAID BY THE COMPANY DURING THE COVERED FISCAL
YEAR WITH RESPECT TO LIFE INSURANCE FOR THE BENEFIT OF THE NAMED EXECUTIVE
OFFICER.
(3) CONTRIBUTIONS BY THE COMPANY TO THE SWIFT ENERGY COMPANY EMPLOYEE SAVINGS
PLAN (ONE-HALF IN CASH AND ONE-HALF IN COMPANY COMMON STOCK FOR 2000 AND
1999 AND 100% IN COMPANY COMMON STOCK FOR 1998) FOR THE ACCOUNT OF THE
NAMED EXECUTIVE OFFICER.
(4) THE 1999 SALARY FOR A. EARL SWIFT INCLUDES A ONE TIME PAYMENT OF $177,278
IN ACCORDANCE WITH WRITTEN COMPANY POLICY AS REIMBURSEMENT FOR UNUSED
VACATION TIME ACCUMULATED.
(5) INCLUDES STOCK OPTION GRANTS IN 2000, AS WELL AS ADDITIONAL ONE-TIME STOCK
OPTION GRANTS IN 2001 UNDER THE 2001 PLAN FOR EXCEPTIONAL PERFORMANCE IN
2000.
</FN>
21
EMPLOYMENT CONTRACTS
In November 2000, A. Earl Swift's employment agreement was amended and
restated. Under the amended terms of this agreement, Mr. Swift is to work on a
full-time basis until November 2002 (or an earlier transition date after notice)
under the same compensation arrangements which were in place immediately prior
to November 2000, and thereafter, on a half-time basis for five years for up to
46 weeks per year on specific matters designated by the Board. During this five
year period, Mr. Swift's compensation will be one-half his annual base
compensation at the time of transition from a full-time to half-fime schedule,
with a 4% per annum inflation adjustment, plus any bonus provided by the Board.
These amounts are also payable in one lump sum, discounted to present value,
upon Mr. Swift's death or disability, which also triggers 100% veating of all
unexercised options, plus continuation of insurance for his spouse and minor
children for a year. In the event of a change of control, Mr. Swift is to be
paid a lump sum equal to the discounted present value of amounts payable during
the remainder of the contract, plus a year's continuation of medical and dental
coverage, and a tax gross-up if such payments are deemed to be subject to
"parachute payment" excise taxes. Mr. Swift's contract also provides for a
payment of approximately $280,000 per year to Mr. Swift or his estate during
each of the last five years of the agreement, in consideration of Mr. Swift's
agreement not to compete with the Company while he is receiving payments from
the Company. Upon termination of Mr. Swift's employment during its term, other
than for cause, Mr. Swift is entitled to receive payment of 6 months' salary and
2 weeks' salary for every year of service to the Company if Mr. Swift is
employed and being paid on a full-time basis, and continuation of his salary for
a period of one year plus 4 weeks' salary for every year of service to the
Company if he is then being employed and paid on a half-time basis. In both
cases, insurance coverage is to be continued while he is being paid, and all
unexercised stock options held at such date are to become vested.
Effective November 1, 1995, the Company entered into employment agreements
with Terry E. Swift, President (then Executive Vice President), Bruce H.
Vincent, Executive Vice President (then Senior Vice President), Alton D.
Heckaman, Senior Vice President and Chief Financial Officer (then Vice President
and Controller) and James M. Kitterman, Senior Vice President. Effective
February 1, 1998, the Company entered into an employment agreement with Joseph
D'Amico, Executive Vice President (then Senior Vice President ). All of the
agreements provide for an initial three-year term, which is automatically
extended for one year on each anniversary of the agreement. These agreements
provide for payment of six months' salary and continuation of medical benefits
for certain periods upon termination of employment other than for cause. The
agreements can be terminated by the Company other than for cause only by a
majority of the continuing directors who have been directors for two years or
nominated for election by a majority of continuing directors. Upon employment
termination in connection with or following a change of control, the executives
are entitled to receive 18 months' salary plus two weeks' salary for every year
of service to the Company and continuation of medical and dental insurance and
universal life coverages for certain periods. Prior to termination of
employment, outstanding unexercised stock options may continue to be held, with
certain adjustments. The board of directors currently anticipates entering into
new employment agreements with these and other executive officers in order to
include certain provisions that are based upon A. Earl Swift's amended and
restated employment agreement described above.
22
STOCK OPTION GRANTS
During 2000, the following stock options were granted to the named
executive officers under the Company's 1990 Stock Compensation Plan.
OPTION GRANTS IN 2000
INDIVIDUAL GRANTS GRANT DATE VALUE
- ---------------------------------------------------------------------------------------------------- --------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR GRANT DATE
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME GRANTED IN FISCAL YEAR ($/SH) DATE VALUE ($)(1)
- ------------------------- ---------------- ------------------- ---------------- ------------- --------------------
A. Earl Swift 50,000 7.7% $11.4375 2/7/2010 $387,150
Terry E. Swift 25,000 3.9% $11.4375 2/7/2010 $193,575
Joe D'Amico 25,000 3.9% $11.4375 2/7/2010 $193,575
12,000 1.9% 21.9375 8/1/2010 195,252
Bruce H. Vincent 9,000 1.4% $11.4375 2/7/2010 $ 69,687
12,000 1.9% 21.9375 8/1/2010 195,252
James M. Kitterman 10,000 1.5% $11.4375 2/7/2010 $ 77,430
12,000 1.9% 21.9375 8/1/2010 195,252
<FN>
- -------------------
(1) Estimated present values are based on the Black-Scholes Model, a
complicated mathematical formula used to value exchange-traded
options. The stock options granted by the Company are long term,
non-transferable and subject to vesting restrictions, while
exchange-traded options are short term and can be exercised or sold
immediately in a liquid market. The Black-Scholes Model considers a
number of factors, including the expected volatility of the stock,
interest rates, and the estimated time period until exercise of the
option. In calculating the grant date present values set forth in the
table, the following ranges of assumptions were used: daily volatility
for common stock of 44.66% - 46.08%, risk-free rate of return of 5.87%
- 6.92% and an estimated time period of 7.5 years until exercise. In
each case, the risk-free rate was based on a 10 year government bond
as of the grant date and no dividend yield. No adjustments were made
for non-transferability or risk of forfeiture. The ultimate value of
the option will depend on the future market price of the Company's
common stock, which cannot be forecast with reasonable accuracy.
</FN>
OPTION VALUES
The following table contains information concerning the number of shares
acquired and value realized from the exercise of options during 2000 and the
number of unexercised options held by the named executive officers at December
31, 2000.
23
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR END OPTION VALUES
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS MONEY OPTIONS
AT YEAR END 2000 AT YEAR END 2000(1)
------------------------------- -------------------------------------
Shares
Acquired Value
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- --------------- ------------- ------------- ---------------- --------------- ------------------
A. Earl Swift 95,745 $1,934,280 17,603 86,375 $ 509,138 $1,909,741
Terry E. Swift 81,664 1,663,014 61,869 82,676 1,786,859 1,900,786
Joe D'Amico 4,563 100,332 46,853 58,716 1,313,250 1,457,405
Bruce H. Vincent 24,200 65,926 91,591 40,310 2,658,760 981,674
James M. Kitterman 24,200 415,263 76,906 41,420 2,231,964 1,011,010
<FN>
- ---------------------------
(1) Options are "in-the-money" if the market price of a share of common
stock exceeds the exercise price of the option. The value of
unexercised in-the-money options equals the market price of shares at
December 31, 2000 ($37.625 per share) less the exercise price.
(2) Value Realized represents the difference between the exercise price of
the options and the NYSE closing price on the exercise date for the
common stock received upon exercise.
</FN>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, the Compensation Committee of the Company consisted of Messrs.
Smith, Montgomery and Withrow, who are all independent directors. To the
Company's knowledge, there are no inter-relationships involving members of the
Compensation Committee or other directors of the Company requiring disclosure in
this section of the proxy statement.
24
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Board first established its Compensation Committee in 1982. The
Compensation Committee has always been composed solely of nonemployee directors,
and has set executive compensation since that time. Since 1987 when the
Compensation Committee undertook an evaluation of the Company's policies,
compensation has been based upon Company performance.
Philosophically, the Compensation Committee and the Company's Chief
Executive Officer believed it to be beneficial to the Company in its early years
to keep executive compensation in the low to middle ranges in comparison to
levels paid by comparable entities, particularly in comparison to many companies
in the oil and gas industry. Since 1987, the bonus compensation of the Company's
Chief Executive Officer has been based almost solely upon the Company's
performance, as described below.
Since late 1989, the bonus formula for the Chief Executive Officer has been
based upon earnings per share and growth in oil and gas reserves, as described
in detail below. Since 1995, the Compensation Committee's criteria also
reflected the importance of cash flow to an oil and gas company and the
Company's increased emphasis on exploration and drilling activities to achieve
growth in probable reserves, in addition to acquisition of producing properties,
given the Compensation Committee's belief that successful drilling activities
are based upon a high level of drilling prospects. Accordingly, the bonus
formula in the 1990 Stock Compensation Plan (the "1990 Plan"), the plan in
effect with respect to compensation in 2000, provides for bonuses based on
year-to-year increases in earnings per share, cash flow per share, proved
reserves and probable reserves and an assessment of the individual's
contribution over the course of the year.
COMPENSATION CRITERIA AND PERFORMANCE MEASUREMENT
The Company's executive compensation consists of three components: base
salary, annual incentive bonuses, and long term stock-based incentives.
BASE SALARY for a particular year is based upon (i) the executive's scope
of responsibility, (ii) an evaluation of each executive's individual performance
during the year, (iii) an attempt to keep executive salaries within the range
paid by comparably sized oil and gas exploration and production companies, based
in part upon annual surveys provided by outside consultants on independent oil
and gas companies with similar market capitalizations (the "Compensation
Surveys"), and (iv) an evaluation of the Company's performance during the
preceding year, including the Company's earnings, reserve growth, cash flow and
levels of general and administrative expenses. Individual performance evaluation
is based upon each executive's review of his own performance throughout the year
and upon a performance review by the Company's Chief Executive Officer, except
in the case of the Chief Executive Officer, whose performance is reviewed by the
Compensation Committee.
The Compensation Surveys include companies in common with the Dow Jones
Oil, Secondary Index (the "Index") used in the "Five Year Shareholder Return
Comparison" set forth herein. The Compensation Surveys are used by the Company
for purposes of executive compensation comparison because they constitute a
25
broader group than the group of companies included in the Index, and because the
Compensation Surveys are comprised of companies somewhat closer in size and line
of business to the Company than some of the companies included in the Index. The
Index was selected in accordance with SEC rules solely for shareholder return
comparison purposes because it is a published industry index.
ANNUAL INCENTIVE BONUSES for a particular year are awarded after the end of
that year, based on both individual and Company performance during that year.
Bonuses have been awarded in the past under the 1990 Plan in the form of
Performance Bonus Awards, which may be either in cash or in shares of the
Company's common stock as determined by the Compensation Committee. The amount
of an executive officer's Performance Bonus Award for a particular year is
determined under a formula that utilizes the following factors: (i) the increase
in earnings per share during that year (a measure of short-term performance);
(ii) the increase in the cash flow per share during that year (a measure of
short-term performance); (iii) the increase in the volume of the Company's
proved oil and gas reserves during that year (a measure of long-term
performance); (iv) the increase in the probable oil and gas reserves during that
year (a measure of long-term performance); and (v) the overall performance of
that executive officer in contributing to the Company's achievement of its
strategic objectives, as evaluated by the Compensation Committee. Generally,
three broad categories of performance factors (short-term factors, long-term
factors and individual performance factors) are given equal weight, except that
the Committee may make adjustments in the bonus formula or in the performance
factors considered on a uniform basis among all the executive officers (other
than the Chief Executive Officer, as to whom a different adjustment may be
made).
In determining Performance Bonus Awards for 2000 (determined and paid in
February 2001), the Committee considered the 38% increase in net proved reserves
and the 30% increase in probable reserves as well as the increase in basic
earnings per share from $1.07 in 1999 to $2.82 (before extraordinary item, $2.79
after the extraordinary item) in 2000. The Compensation Committee also took into
account individual performance ratings reflecting individual contribution and
contribution to group effectiveness.
Under the 1990 Plan, executive officers may receive Performance Bonus
Awards of up to 35% of their base salaries, and the Chief Executive Officer may
receive an award of up to 70% of his base salary. Cash awards for 2000 averaged
32.47% of executive officers' base salaries and 70% of the Chief Executive
Officer's base salary. Historically, the Compensation Committee has elected to
have a portion of the bonus consist of Company stock.
The Performance Bonus Award to the Chief Executive Officer additionally
differs from those awarded to the other executive officers in that the size of
the Chief Executive Officer's Performance Bonus Award is more closely tied to
Company performance, so that it has varied more widely from year to year than
the awards to other executive officers.
LONG-TERM STOCK-BASED INCENTIVES are provided through annual grants of
incentive stock options to executives and others in the past, these option
grants have been provided under the 1990 Plan and, subject to shareholder
approval, will be provided in the future under the 2001 Omnibus Stock Option
Plan. This component is intended to retain and motivate executives to improve
long-term shareholder value. Stock options are granted at or above the
prevailing market price. Grants have always vested in equal amounts over five
years.
The Compensation Committee determines a total number of options to be
granted in any year based on the total number of outstanding unexercised
executive options, so as to avoid excessive dilution of the shareholders' value
26
in the Company through executive option exercises. Out of the number so
determined, options are granted to executive officers in varying amounts,
roughly related to their levels of executive responsibility. Outstanding
historical performance by an executive officer may be recognized through a
larger than normal option grant.
The Company believes that its compensation policy described above provides
an excellent link between the value created for shareholders and the
compensation paid to executive officers.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Base Salary. The Chief Executive Officer's base salary in 2000 was
$500,004, compared to $627,278 in 1999 when $177,278 of the amounts paid
represented a one-time payment as reimbursement for accrued unused vacation
time, in accordance with Company policy. Thus, ignoring the one-time payment,
the Chief Executive's base salary increased from $450,000 in 1999 to $500,004 in
2000. The Compensation Committee's determination was based on the factors
described above under "--Compensation Criteria and Performance Measurement--Base
Salary."
Bonus. As noted in the section on "Annual Incentive Bonuses" above, in
determining the Chief Executive Officer's bonus, the Compensation Committee may
give a different weight to the five bonus formula performance factors than the
weight used in determining bonuses for other executive officers. In determining
the Chief Executive Officer's bonus, the Compensation Committee has typically
given more weight to factors based upon the Company's performance than to its
evaluation of his general contribution, since the Compensation Committee does
not observe and supervise such performance on a day-to-day basis. For 2000, the
Compensation Committee increased the Chief Executive Officer's total bonus from
$250,000 in cash in 1999 to $349,835 in cash for 2000.
Stock Options. In 2000, the Company granted the Chief Executive Officer
50,000 options to purchase shares of the Company's common stock, as explained
above under "--Compensation Criteria and Performance Measurement --Long-Term
Stock-Based Incentives."
Special Option Award in 2001. In February 2001, the Company granted the
Chief Executive Officer 100,000 options to purchase shares of the Company's
common stock. This was a special grant in anticipation of the shift of his role
after 21 years of leadership of the Company. The Compensation Committee, and the
Board as a whole, believe that it is important that he remain interested in the
future success of the Company. The Compensation Committee and the Board believe
that the award would be effective if it was substantial enough to draw Mr.
Swift's continuing interest and dedication.
Section 162(m) of the Internal Revenue Code. The Compensation Committee
does not propose to adopt any particular policy with respect to Section 162(m)
of the Internal Revenue Code. Section 162(m) generally limits deductions for
compensation paid to any employee in excess of $1 million per year. The Company
believes that any loss of deduction for compensation exceeding Section 162(m)'s
limitations is outweighed by the flexibility it gains in not meeting the
requirements of this section.
COMPENSATION COMMITTEE
Clyde W. Smith, Jr., Chairman
Henry C. Montgomery
Harold J. Withrow
27
FIVE YEAR SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total return on the Company's
common stock to that of (i) the Standard & Poor's 500 Stock Index and (ii) the
Dow Jones Oil, Secondary Index, with "Cumulative total return" equaling (i) the
change in share price during the measurement period plus cumulative dividends
(of which, in accordance with its dividend policy, the Company has paid none)
for the measurement period (assuming dividend reinvestment), divided by (ii) the
share price at the beginning of the measurement period.
[graph omitted]
28
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the ordinary course of its business, the Company acquires interests in
exploratory and developmental oil and gas prospects and sells interests in such
prospects to unaffiliated third parties. For the past several years, the Company
has made available for sale to its executive officers and certain other
employees a portion of the interests in certain prospects that would otherwise
have been sold to third parties. Interests in prospects made available for
purchase by the Company's employees were offered on terms identical to those at
which interests would otherwise have been sold to third party investors in that
prospect.
During 2000 the Company determined to discontinue its program of offering
interests in prospects to its employees, and offered to repurchase from each
employee interests purchased in this program, net of the amount of indebtedness,
if any, owed by each such employee in connection with these investments. The
Company repurchased the following interests for amounts shown: A. Earl Swift -
$193,535; Terry Swift - $154,841; Virgil Swift - $390,382; Bruce Vincent -
$88,005; and James M. Kitterman - $87,045. The payments were partly in cash and
partly in debt cancellation. The Company engaged J.R. Butler and Company, an
independent consulting firm, to appraise the fair market value of these
interests. The amounts paid for all but one property were based on the fair
market values expressed in J.R. Butler's fairness opinion dated March 13, 2000.
Three executive officers retain small interests worth less than $20,000 in
properties in which the Company owns interests.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed with management the
Company's audited financial statements for the year ended December 31, 2000. The
Audit Committee also discussed with the Company's independent auditors, Arthur
Andersen LLP ("Arthur Andersen"), the matters required to be discussed by
Statement on Auditing Standards No. 61, as amended. The Audit Committee received
the written disclosures and the letter from Arthur Andersen required by
Independence Standards Board Standard No. 1 and discussed with Arthur Andersen
the independence of Arthur Andersen. Based on the review and discussions
referred to above, the Audit Committee recommended to the Board that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
filing with the SEC for the year ended December 31, 2000.
No portion of this Audit Committee Report shall be deemed to be
incorporated by reference into any filing under the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, through any general
statement incorporating by reference in its entirety the Proxy Statement in
which this report appears, except to the extent that the Company specifically
incorporates this report or a portion of it by reference. In addition, this
report shall not be deemed to be filed under either the Securities Act or the
Exchange Act.
AUDIT COMMITTEE
Henry C. Montgomery, Chairman
G. Robert Evans
Clyde W. Smith, Jr.
29
CONSIDERATION OF AUDITORS' FEES
AUDIT FEES
Audit fees billed or expected to be billed to the Company by Arthur
Andersen for its audit of the Company's annual financial statements for the year
ended December 31, 2000, and for its review of the financial statements included
in the Company's Quarterly Reports on Form 10-Q filed with the SEC for 2000
totaled $253,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not engage Arthur Andersen to provide advice to the Company
regarding financial information systems design and implementation during the
fiscal year ended December 31, 2000.
ALL OTHER FEES
Fees billed to the Company by Arthur Andersen during the Company's 2000
fiscal year for all other non-audit services rendered to the Company, including
tax related services, totaled $134,000.
In connection with the recently revised standards for independence of the
Company's independent public accountants promulgated by the SEC, the Audit
Committee has considered whether the provision of such services is compatible
with maintaining the independence of Arthur Andersen.
AUDITORS
Arthur Andersen, certified public accountants, has served as the
independent auditors of the Company since its inception. While management
anticipates that this relationship will continue to be maintained during 2001
and subsequent years, it is not proposed that any formal action be taken at the
Meeting with respect to the continued employment of Arthur Andersen, inasmuch as
no such action is legally required. A representative from Arthur Andersen will
be present at this year's Meeting. Such representative will have the opportunity
to make a statement if he desires to do so and is expected to be available to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
Pursuant to various rules promulgated by the SEC, a shareholder that seeks
to include a proposal in the Company's proxy statement and form of proxy card
for the meeting of the shareholders of the Company to be held in 2002 must
timely submit such proposal in accordance with SEC Rule 14a-8 to the Company,
addressed to Bruce H. Vincent, Secretary, 16825 Northchase Drive, Houston, Texas
77060 no later than December 8, 2001. Further, a shareholder may not submit a
matter for consideration at the 2001 Meeting, regardless of whether presented
for inclusion in the Company's proxy statement and form of proxy card, unless
the shareholder shall have timely complied with the requirements in the
Company's Bylaws which set a notice deadline after which a shareholder will not
be permitted to present a proposal at the Company's shareholder meetings. The
Bylaws state that in order for business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Secretary of the Company. To be timely, a shareholder's notice
must be delivered to or mailed and received at the principal executive offices
30
of the Company not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting. A notice given pursuant to
this advance notice Bylaw will not be timely with respect to the Company's 2002
meeting unless duly given by no later than March 9, 2002 and no earlier than
February 7, 2002.
With respect to business to be brought before the 2001 Meeting, the Company
has not received any notices from shareholders that the Company is required to
include in this proxy statement.
FORWARD LOOKING STATEMENTS
The statements contained in this proxy statement that are not historical
are "forward-looking statements," as that term is defined in Section 21E of the
Exchange Act that involve a number of risks and uncertainties. Forward-looking
statements use forward-looking terms such as "believe," "expect," "may,"
"intend," "will," "project," "budget," "should" or "anticipate" or other similar
words. These statements discuss "forward-looking" information such as future net
revenues from production and estimates of oil and gas reserves.
These forward-looking statements are based on assumptions that the Company
believes are reasonable, but they are open to a wide range of uncertainties and
business risks, including the following:
o fluctuations of the prices received or demand for oil and natural gas
over time;
o uncertainty of reserve estimates;
o operating hazards;
o unexpected substantial variances in capital requirements;
o environmental matters; and
o general economic conditions.
Other factors that could cause actual results to differ materially from
those anticipated are discussed in the Company's Annual Report to Shareholders
for the year ended December 31, 2000. The Company will not update these
forward-looking statements unless the securities laws require the Company to do
so.
GENERAL
The information contained in this proxy statement in the sections entitled
"Election of Directors, Compensation Committee Report on Executive
Compensation," "Comparative Total Returns" and "Audit Committee Report" shall
not be deemed incorporated by reference by any general statement incorporating
by reference any information contained in this proxy statement into any filing
under the Securities Act, or the Exchange Act, except to the extent that the
Company specifically incorporates by reference the information contained in such
sections, and shall not otherwise be deemed filed under the Securities Act or
the Exchange Act.
By Order of the Board of Directors
/s/ Bruce H. Vincent
BRUCE H. VINCENT
Secretary
Houston, Texas
April 3, 2001
31
SWIFT ENERGY COMPANY
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 8, 2001
The undersigned hereby constitutes and appoints Clyde W. Smith, Jr.,
A. Earl Swift or Terry E. Swift, or any of them, with full power of substitution
and revocation of each, the true and lawful attorneys and proxies of the
undersigned at the Annual Meeting of Shareholders (the "Meeting") of SWIFT
ENERGY COMPANY (the "Company") to be held on May 8, 2001 at 4:00 p.m. Houston
time, in the Marriott Hotel Greenspoint, 255 North Sam Houston Parkway East,
Houston, Texas, or any adjournments thereof, and to vote the shares of common
stock of the Company standing in the name of the undersigned on the books of the
Company (or which the undersigned my be entitled to vote) on the record date for
the Meeting with all powers the undersigned would possess if personally present
at the Meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
[x] Please mark your votes as in this example.
To withhold authority to vote for any individual nominee, strike his name from
the listing below.
PROPOSAL 1: FOR the election of all nominees for directors listed
(except as marked to the contrary); or to WITHHOLD AUTHORITY
to vote for all nominees.
NOMINEES: A. Earl Swift
Henry C. Montgomery
Harold J. Withrow
[ ] FOR [ ] WITHHELD
PROPOSAL 2: To approve the 2001 Omnibus Stock Option Plan and to ratify
an amendment extending the Company's 1990 Stock Compensation
Plan;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 3: To approve amending the Company's Articles of Incorporation
to increase the number of authorized shares of stock from 40
million shares to 110 million shares and to conform the
Articles of Incorporation to current law;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 4: To grant authority to extend the solicitation period in the
event the meeting is postponed or adjourned for any reason;
and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 5: In their discretion, the Proxies are authorized to vote upon
such other matters as may properly come before the Meeting,
hereby revoking any proxy or proxies heretofore given by the
undersigned.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES NAMED IN PROPOSAL 1,
AND FOR PROPOSALS 2, 3 AND 4. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREON. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE
VOTED FOR ALL NOMINEES AND IN FAVOR OF PROPOSALS 2, 3 AND 4.
The undersigned hereby acknowledges receipt of the Notice of 2001 Annual Meeting
of Shareholders and Proxy Statement and the 2000 Annual Report to Shareholders
furnished herewith.
PLEASE SIGN AND RETURN IN THE ENCLOSED STAMPED, PRE-ADDRESSED ENVELOPE.
Signature Date Signature Date
------------------ --------- ------------ ----------
NOTE: Signature should agree with name as it appears hereon. If stock is held in
the name of more than one person, EACH joint owner should sign. Executors,
administrators, trustees, guardians and attorneys should indicate the capacity
in which they sign. Attorneys should submit powers of attorney.
ANNEX A
Swift Energy Company
Charter for the Audit Committee of the Board of Directors
June 12, 2000
PURPOSE AND POWERS
The primary purpose of the Audit Committee (the "Committee"), by fulfilling the
responsibilities below and in concert with the Board of Directors (the "Board")
of Swift Energy Company (the "Company"), is to fulfill its responsibility to
oversee and monitor management's conduct of the Company's financial reporting
process. The financial reporting process which the Committee oversees includes
the financial reports and other financial information provided by the Company to
any governmental or regulatory body, the public or other users thereof, the
Company's systems of internal accounting and financial controls, the annual
independent audit of the Company's financial statements and the Company's legal
compliance and ethics programs as established by management and the Board.
In discharging its oversight and monitoring role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain outside
counsel, auditors or other experts for this purpose. The Board and the Committee
are in place to represent the Company's shareholders; accordingly, the
independent auditor is ultimately accountable only to the Board and the
Committee.
The Committee shall review the adequacy of this Charter and the Committee's
structure, processes and membership at a minimum on an annual basis.
MEMBERSHIP
The Committee shall be comprised of not less than three non-employee members of
the Board elected for a one-year term. The Board shall designate a chairman. The
Committee's composition will fully meet the requirements of Section 303 of the
Listed Company Manual of the New York Stock Exchange, Inc.
Accordingly, all of the members will be directors who:
o Have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
o Are financially literate or able to become so within a reasonable
period of time after joining the Committee. In addition, at least one
member of the Committee will have past employment experience in
finance or accounting, requisite professional certification in
accounting, or other comparable experience or background, including a
current or past position as a chief executive or financial officer or
other senior officer with financial oversight responsibilities.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and monitoring and it recognizes that
the Company's management is responsible for preparing the Company's consolidated
financial statements and that the independent auditors are responsible for
auditing those financial statements. Additionally, the Committee recognizes that
financial management, including any internal audit staff, as well as the
independent auditors, has more time, knowledge and more detailed information of
the Company than do Committee members.
The Committee has a responsibility to be available to any employee of the
Company who should desire to speak to any Committee member. Any such
communications will be held in confidence by the Committee and, if indicated,
will form the basis for independent investigation by the Committee.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
o Review and discuss with management and the independent auditors the
audited consolidated financial statements and Management's Discussion
and Analysis in the Company's Annual Report to the Securities and
Exchange Commission ("SEC") on Form 10-K (or the Annual Report to
Shareholders if distributed prior to the filing of Form 10-K), prior to
their submission to the Board of Directors and prior to filing with the
SEC, and review and consider with the independent auditors the results
of the annual audit and matters required to be discussed by Statement
of Auditing Standards ("SAS") No.61, as amended.
o Review and discuss with management and the independent auditors the
Company's interim financial results and Management's Discussion and
Analysis in the Company's Quarterly Reports to the SEC on Form 10-Q (or
the Quarterly Report to Shareholders if distributed prior to the filing
of Form 10-Q), prior to their submission to the Board of Directors and
prior to filing with the SEC, and review and consider with the
independent auditors the results of the quarterly review and the
matters required to be discussed by SAS No.61 , as amended. The Chair
of the Committee may represent the entire Committee for purposes of
this review.
o Review in conjunction with the review of all financial statements the
quality of accounting principles adopted by the Company.
o Review annually with the independent auditors and/or internal auditors,
if applicable, audits of the employee benefit plans to determine that
there are proper Company procedures to ensure compliance with all
relevant laws and regulations.
o Meet with the independent auditors without the presence of management
at some point during all meetings of the Committee.
o Discuss with management and the independent auditors the quality and
adequacy of the Company's internal controls.
o With respect to the independence of the independent auditors, the
Committee shall:
- Request from the independent auditors annually, a formal
written statement delineating all relationships between the
auditor and the Company consistent with Independence
Standards Board Standard Number 1 ;
- Discuss with the independent auditors any such disclosed
relationships and their impact on the independent auditor's
independence; and
- Recommend that the Board take appropriate action to oversee
the independence of the independent auditor.
o The Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to select
(or nominate for shareholder approval), evaluate and, where
appropriate, recommend for continued retention the independent auditor
and shall:
- Review the intended scope of the annual audit, and the audit
methods and principles being applied by the independent
auditors and the fee arrangements proposed by the
independent auditors;
- Approve the performance of professional auditors, including
audit and significant n rendered, and consider the possible
effect independence of the auditors; services provided by
the independent on-audit services, before such services are
on the performance of such services on the
- Require the independent auditors to perform timely reviews
of the Company's interim financial information;
- Require the independent auditor to submit to the Committee
each year a management letter, which outlines weaknesses in
internal controls and other matters of significance.
o The Committee shall review adequacy and performance of the finance
function with respect to Audit Committee matters, including, but not
limited to:
- Adequacy and competence of the finance organization;
- Review of the Company's significant accounting principles,
policies and practices and the quality of the accounting
principles adopted;
- Review Company financial reporting policies and practices;
- Review adequacy of management infom1ation systems, internal
accounting and financial controls.
o The Committee shall review with both management and the independent
auditor's procedures and their execution established to:
- Prevent and uncover unlawful political contributions,
bribes, unexplained and unaccounted for payments to
intermediaries (foreign or US);
- Ascertain whether there are any unaccounted or off -book
transactions;
- Identify payments in violation of applicable laws and
standards of business which are intended to influence
employees of potential customers to purchase their products
(commercial bribes, kickbacks, etc ).
o The Committee shall:
- Review annually the adequacy of the Company's insurance
coverage;
- Review annually the Company's asset management policies,
including a review of investment policies and performance of
cash and short term investments;
o The Committee shall provide a copy of the Audit Committee charter and a
report in the Company's proxy statement in accordance with the
requirements of Item 306 of Regulation S-K and Item 7(e)(3) of Schedule
14A.
MEETINGS
The Committee shall meet at least once every quarter.
MINUTES
Minutes will be kept of each meeting of the Audit Committee and will be provided
to each member of the Board. Any action of the Audit Committee shall be subject
to revision by the Board of Directors.
ANNEX B
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SWIFT ENERGY COMPANY
A TEXAS CORPORATION
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SWIFT ENERGY COMPANY
A TEXAS CORPORATION
1. Swift Energy Company (the "CORPORATION"), pursuant to Article 4.07 of the
Texas Business Corporation Act ("TBCA"), hereby adopts these Amended and
Restated Articles of Incorporation which accurately copy the Articles of
Incorporation and all amendments thereto that are in effect to date (the
"ORIGINAL ARTICLES OF INCORPORATION"), and which further amend the Original
Articles of Incorporation as hereinafter set forth.
2. The Amended and Restated Articles of Incorporation restate and further amend
the Original Articles of Incorporation heretofore in effect by substituting for
the provisions of such Original Articles of Incorporation in their entirety the
provisions of the Amended and Restated Articles of Incorporation, the text of
which is set forth below in paragraph 4 of these Amended and Restated Articles
of Incorporation. The Amended and Restated Articles of Incorporation restate
Articles One and Two and amend Articles Three through Twelve of the Original
Articles of Incorporation.
3. Each such amendment made by these Amended and Restated Articles of
Incorporation has been effected in conformity with the provisions of the TBCA
and these Amended and Restated Articles of Incorporation and each such amendment
made by the Amended and Restated Articles of Incorporation was duly adopted by
the shareholders of the Corporation at the Corporation's annual shareholders
meeting held May 8, 2001, the record date of such meeting being March 19, 2001.
As of the record date, there were 24,693,916 shares outstanding, all of which
were shares of Common Stock entitled to vote on the Amended and Restated
Articles of Incorporation and [ ] shares were voted in favor of the Amended and
Restated Articles of Incorporation.
4. The Original Articles of Incorporation, including all amendments and
supplements thereto, are hereby superseded by the following Amended and Restated
Articles of Incorporation, which amend and restate the entire text thereof:
ARTICLE I
The name of this corporation is Swift Energy Company (the "CORPORATION").
ARTICLE II
The period of the Corporation's duration is perpetual.
ARTICLE III
The Corporation is organized for the purpose of engaging in any lawful act,
activity or business for which corporations may be organized under the Texas
Business Corporation Act.
ARTICLE IV
The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is 110 million shares, consisting of
(a) 100 million shares of Common Stock, par value $.01 per share ("Common
Stock"), and (b) 10 million shares of Preferred Stock, par value $.01 per share
("Preferred Stock").
The Board of Directors shall issue Preferred Stock from time to time at its
option for such consideration and pursuant to such terms and conditions as it
may decide. The Board of Directors shall determine the relative rights and
preferences of the Preferred Stock and Common Stock and may, at its option,
divide such Preferred Stock into series and determine variations, if any,
between any series so established.
ARTICLE V
No shareholder shall have a preemptive right to acquire any shares or
securities of any class, whether now or hereafter authorized, which may at any
time be issued, sold or offered for sale by the Corporation.
ARTICLE VI
The address of the Corporation's registered office is 16825 Northchase
Drive, Suite 400, Houston, Texas 77060, and the name of its registered agent at
such address is Terry E. Swift.
ARTICLE VII
The number of directors of this Corporation shall be not less than three
(3) nor more than fifteen (15), the exact number to be fixed from time to time
in the manner provided in the Bylaws of the Corporation. The number of directors
constituting the present Board of Directors is seven (7), and the names and
addresses of such persons who are to serve as directors until each of his/her
successors is elected and qualified are:
NAME ADDRESS
G. Robert Evans 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Henry C. Montgomery 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Clyde W. Smith, Jr. 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Harold J. Withrow 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Virgil N. Swift 16825 Northchase Drive, Suite 400
Houston, Texas 77060
A. Earl Swift 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Terry E. Swift 16825 Northchase Drive, Suite 400
Houston, Texas 77060
ARTICLE VIII
The right to cumulate votes in the election of directors is hereby
expressly denied.
ARTICLE IX
Except as may otherwise be provided in the bylaws, the Board of Directors
of this Corporation is expressly authorized to alter, amend, or repeal the
Bylaws or to adopt new bylaws of this Corporation without any action on the part
of the shareholders; but the bylaws made by the directors and the powers so
conferred may be altered or repealed by the shareholders.
ARTICLE X
Pursuant to Article 1302-7.06 of the Texas Miscellaneous Corporation Laws
Act, as amended, no member of the Board of Directors of the Corporation shall be
liable, personally or otherwise, in any way to the Corporation or its
shareholders for monetary damages caused in any way by an act or omission
occurring in the director's capacity as a director of the Corporation, except
that this Article does not eliminate or limit liability of a director to the
extent that the director is found liable for:
(1) a breach of a director's duty of loyalty to the Corporation or its
shareholders;
(2) an act or omission not in good faith that constitutes a breach of duty of
the director to the Corporation or an act or omission that involves intentional
misconduct or a knowing violation of the law;
(3) a transaction from which the director received an improper benefit whether
or not the benefit resulted from an action taken within the scope of the
director's office; or
(4) an act or omission for which the liability of a director is expressly
provided by an applicable statute.
(5) Removed - statutory change
ARTICLE XI
The Corporation shall have the obligation or power, as may be applicable
under the Corporation's bylaws, to indemnify its officers, directors, employees
and agents for costs and expenses incurred by such persons in connection with
certain legal proceedings, and to purchase and maintain liability insurance for
those persons, as provided in the Corporation's bylaws and any future amendments
thereto, and to the full extent permitted by the applicable laws of the State of
Texas and any future amendments thereto.
ARTICLE XII
Any action required by the Texas Business Corporation Act to be taken at
any annual or special meeting of shareholders, or any action that may be taken
at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which the holders of all shares
entitled to vote on the action were present and voted. Such consent or consents
shall be in such form and shall be delivered to the Corporation in such manner
as specified in Article 9.10A. of the Texas Business Corporation Act, as
amended, or similar successor provision.
IN WITNESS WHEREOF, and in accordance with Article 4.07(D) of the Texas
Business Corporation Act, the undersigned has executed these Amended and
Restated Articles of Incorporation as of this 8th day of May, 2001.
SWIFT ENERGY COMPANY,
a Texas corporation
By:
-------------------------------------
Terry E. Swift
President