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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 sec. 240.14a-11(c) or sec. 240.14a-12
SWIFT ENERGY COMPANY
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(Name of Registrant as Specified in its Charter)
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(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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
SWIFT ENERGY COMPANY
16825 NORTHCHASE DRIVE, SUITE 400
HOUSTON, TEXAS 77060
(281) 874-2700
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1997
Notice is hereby given that the annual meeting of shareholders of SWIFT
ENERGY COMPANY (the "Company") will be held at the Marriott Marquis Hotel in New
York City, on Tuesday, May 13, 1997 at 4:00 p.m. Eastern Time for the following
purposes:
1. To elect two members of Class I of the board of directors to serve for
the terms specified in the attached Proxy Statement or until their
successors are elected and qualified;
2. To approve amendment of the Company's 1990 Stock Compensation Plan to
increase the number of shares of the Company's common stock reserved for
issuance by 1,400,000 shares and to make certain other changes thereto;
3. To approve amendment of the Company's 1990 Nonqualified Stock Option
Plan to increase the number of shares of the Company's common stock
reserved for issuance thereunder by 285,000 shares and to make certain
other changes thereto; and
4. To consider and act upon 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 24, 1997, 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 29, 1997, 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, and such list
will be available at the place of the meeting on the day of the meeting.
IF YOU DO NOT EXPECT TO BE PRESENT IN PERSON AT THE MEETING OR PREFER TO
VOTE BY PROXY IN ADVANCE, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED STAMPED ENVELOPE WHICH HAS BEEN PROVIDED FOR
YOUR CONVENIENCE. THE 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/ JOHN R. ALDEN
JOHN R. ALDEN
Secretary
April 8, 1997
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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
8, 1997, in connection with the solicitation by the board of directors of SWIFT
ENERGY COMPANY (the "Company") of proxies to be voted at the annual meeting of
shareholders to be held at the Marriott Marquis Hotel in New York City, on May
13, 1997 at 4:00 p.m. Eastern Time, and any adjournment thereof, for the
purposes set forth in the accompanying notice. Management does not expect that
any matters other than those referred to in such notice will be presented for
action at the meeting.
The Annual Report to Shareholders covering the fiscal year ended December
31, 1996, will be mailed to each shareholder entitled to vote at the annual
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, if
necessary to ensure the presence of a quorum, solicit proxies in person or by
telephone. The Company has retained a proxy solicitor, at an estimated cost of
approximately $1,200, to assist in contacting brokers and other "street-name"
holders to encourage the return of proxies by beneficial holders.
QUORUM AND VOTING
The record date for the determination of shareholders entitled to notice of
and to vote at the annual meeting was the close of business on March 24, 1997.
On the record date, there were 15,236,105 shares of common stock of the Company,
par value $.01 per share, 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 and otherwise in accordance with the judgment of
the persons designated as proxies. Any proxy on which no direction is specified
will be voted for the election of all nominees named therein to the board of
directors for the terms indicated, for the approval of the amended and restated
1990 Stock Compensation Plan, for the approval of the amended and restated 1990
Nonqualified Stock Option Plan, 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
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 annual meeting, a majority of the votes represented at the
meeting may adjourn the annual meeting from time to time without notice other
than an announcement until a quorum is present or represented.
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.
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ELECTION OF DIRECTORS
At the annual meeting, two Class I directors are to be elected for terms to
expire at the 2000 Annual Meeting. As a result of bylaw amendments approved by
the Board of Directors in 1995, there are three classes of directors and each
year the directors in one of such 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 the plurality of the shares represented at the meeting, either in
person or by proxy.
The persons named in the accompanying proxy have been designated by the
board of directors, and unless authority is withheld by the shareholder on the
accompanying proxy, they intend to vote for the election of the nominees named
below to the board of directors. Both nominees are currently members of the
board of directors. If either nominee should become unavailable or unable to
serve as a director, the proxy may be voted for a substitute selected by persons
named as proxies or the board may be reduced accordingly; however, the board of
directors is not aware of any circumstances likely to render any nominee
unavailable. Any director elected by the board of directors to fill a vacancy
will be elected for the unexpired term of such director's predecessor in office.
CLASS I
Raymond O. Loen
Clyde W. Smith, Jr.
Set forth below, for information purposes only, are the names and remaining
terms of the other five directors:
CLASS II
A. Earl Swift
Henry C. Montgomery
Harold J. Withrow
(Terms to Expire at 1998 Annual Meeting)
CLASS III
Virgil N. Swift
G. Robert Evans
(Terms to Expire at 1999 Annual Meeting)
NOMINEES
Set forth below is certain information, as of the date hereof, concerning
the nominees for election to the board of directors of the Company.
Raymond O. Loen, 72, has served as a director of the Company since its
founding in 1979. Since 1963, he has been President of R.O. Loen Company, a
privately held management consulting firm headquartered in Lake Oswego, Oregon.
Clyde W. Smith, Jr., 48, has served as a director of the Company since
1984. He has served as President of Somerset Properties, Inc., a real estate and
investment company, since 1985.
Set forth below, for information purposes only, is information regarding
the Class II and Class III directors whose terms will expire at the annual
meeting in 1998 and 1999, respectively:
Class II Directors
A. Earl Swift, 63, is President, Chief Executive Officer and Chairman of
the Board of Directors of the Company and has served in such capacity since its
founding in 1979. For the 17 years prior to 1979, he was employed by affiliates
of American Natural Resources Company, serving his last three years as Vice
President
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of Exploration and Production for Michigan-Wisconsin Pipe Line Company and
American Natural Gas Production 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, 61, has served as a director of the Company since
1987. Mr. Montgomery became Executive Vice President of SyQuest Technology,
Inc., a public company engaged in the development, manufacture and sale of
computer hard drives, in November of 1996. He previously served as President and
Chief Executive Officer of New Media Corporation, a private company also engaged
in the development, manufacture and sale of computer hardware, from September
1995 until November 1996. Since 1980, Mr. Montgomery has been the Chairman of
the Board of Montgomery Financial Services Corporation, a management consulting
and financial services firm. Mr. Montgomery also previously served as a director
of Catalyst Semiconductor, Inc., a public company engaged in the design and
manufacture of semiconductors (1990 to 1995), and Southwall Technologies, Inc.,
a company engaged in thin film deposition technologies, (1982 to 1995).
Harold J. Withrow, 69, 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.
Class III Directors
Virgil N. Swift, 68, has been a director of the Company since 1981, and has
acted as Vice Chairman of the Board and Executive Vice President-Business
Development since November 1991. He previously served as Executive Vice
President and Chief Operating Officer from 1982 to November 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.
G. Robert Evans, 65, has been a director of the Company since 1994. Since
1991, he has been Chairman of Material Sciences Corporation of Elk Grove
Village, a corporation that develops and commercializes continuously processed,
coated materials technologies. He is also currently serving as a director of
three other public companies: Consolidated Freightways, Inc. (transportation),
Fibreboard Corporation (wood products, insulation and resort operations) and
Elco Industries (manufacturing). From 1990 until 1991, he served as President,
Chief Executive Officer and a Director of Corporate Finance Associates of
Illinois, Inc., a financial intermediary and consulting firm. From 1987 until
1990, he served as President, Chief Executive Officer and a Director of Bemrose
Group USA, a British holding company engaged in value-added manufacturing and
sale of products to the advertising specialty industry.
COMPENSATION TO DIRECTORS
Board members are reimbursed for travel expenses they incur in attending
board of directors meetings. Employees of the Company are not compensated for
serving as directors. During 1997, nonemployee members of the board of directors
will receive $1,750 per board meeting attended, an annual fee of $5,000 for
serving on committees of the board, and an additional annual fee of $5,000 for
services as a director. Compensation paid to the five nonemployee directors
during 1996 for their services as directors in the form of cash and shares
totaled $111,250 (this figure includes deferred compensation payable in shares
valued at $10,250).
Under the 1990 Nonqualified Plan, each nonemployee director is granted
options to 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, subject to an option maximum of 60,000 shares per
director, options to purchase 5,000 shares of the Company's common stock.
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In accordance with the 1990 Nonqualified Plan, each of the nonemployee
directors (Messrs. Loen, Montgomery, Smith, Evans and Withrow) have been granted
options for shares of the Company's common stock. Due to a ten percent stock
dividend declared September 7, 1994, the number of shares underlying all options
held by each of the nonemployee directors increased by ten percent as of such
date with a commensurate 10% decrease in the option exercise prices.
Two nonemployee directors exercised options to acquire an aggregate of
22,000 shares of the Company's common stock during the year ended December 31,
1996.
The following table presents information regarding awards of stock options
under the 1990 Nonqualified Plan from its inception through December 31, 1996 to
nonemployee directors and the total number of unexercised options held by the
nonemployee directors under all Company plans. Each of the nonemployee directors
in the following table will receive options to purchase 5,000 additional shares
under the 1990 Nonqualified Plan on the day following the 1997 annual meeting.
SHARES OF COMMON TOTAL SHARES OF COMMON
STOCK UNDERLYING STOCK UNDERLYING
OPTIONS GRANTED UNDER UNEXERCISED OPTIONS
NAME 1990 NONQUALIFIED PLAN GRANTED UNDER ALL PLANS
---- ---------------------- -----------------------
G. Robert Evans................................ 16,000 16,000
Raymond O. Loen................................ 32,000 43,000
Henry C. Montgomery............................ 27,050 43,000
Clyde W. Smith, Jr............................. 32,000 26,500
Harold J. Withrow.............................. 27,600 35,300
For the number of options exercisable by each of the nonemployee directors,
see footnote (1) to the table set forth under "Principal Shareholders" below.
MEETINGS OF THE BOARD OF DIRECTORS
During 1996, the board of directors met on seven occasions. In addition,
management confers frequently with its directors on an informal basis to discuss
Company affairs. During 1996, each director attended at least 75% of both (i)
the total number of meetings of the board of directors and (ii) the total number
of meetings of all committees of the board on which he served.
COMMITTEES OF THE BOARD
The board of directors of the Company has established various standing
committees, including, among others, Audit, Nominating and Compensation
Committees. Descriptions of the functions of the Audit, Nominating and
Compensation Committees are set forth below.
Audit Committee. The Audit Committee is comprised entirely of nonemployee
directors. The Audit Committee recommends to the board of directors the
engagement of, and reviews the services performed by, the Company's independent
auditors. Messrs. Loen, Montgomery and Smith are members of the Audit Committee,
which held four meetings in 1996.
Nominating Committee. The Nominating Committee's function is to review the
performance of directors and to recommend persons to be management's nominees
for directorships. The Nominating Committee may consider nominees recommended by
shareholders, upon written request by a shareholder addressed to any member of
the committee. See "Shareholder Proposals" herein. Messrs. A. E. Swift, Loen and
Smith are members of the Nominating Committee. The Nominating Committee held two
meetings in 1996.
Compensation Committee. The Compensation Committee at all times is
comprised of at least three nonemployee directors who are "non-employee
directors" as defined 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 recommen-
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dations regarding the compensation levels of the Company's executive officers.
Messrs. Loen, Montgomery and Withrow are members of the Compensation Committee,
which held six meetings in 1996.
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
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 Securities and Exchange
Commission, the New York Stock Exchange 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,
1996, and ending December 31, 1996, and Forms 5 furnished to the Company with
respect to such fiscal year, all Section 16(a) filing requirements applicable to
the Company's officers, directors and greater than 10% beneficial owners were
complied with.
APPROVAL OF AMENDMENTS
TO 1990 STOCK COMPENSATION PLAN
The 1990 Stock Compensation Plan (the "Plan") was originally adopted by the
Company's shareholders at the 1990 annual meeting. The purposes of the Plan are
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 and cash incentive awards based on performance. The Plan was
originally adopted with a maximum of 500,000 shares reserved for issuance
thereunder. At the 1994 annual meeting, the shareholders of the Company approved
an amended and restated version of the Plan which effected (i) an amendment to
increase the number of shares of common stock reserved for awards under the Plan
by 500,000 shares to a total of 1,000,000 shares, and (ii) two amendments
relating to vesting of awards under the Plan. The number of shares of common
stock reserved for awards under the Plan is currently 1,100,000 (which has been
increased from 1,000,000 to reflect the 10% stock dividend in September 1994).
On February 10, 1997, the Board, subject to approval by the shareholders of the
Company, approved (i) an amendment to increase the number of shares of common
stock reserved for issuance under the Plan by 1,400,000 shares to a total of
2,500,000 shares, (ii) an amendment to allow transferability of nonqualified
stock options to retirement or pension plans, to certain trusts, or to
"immediate family members," directly or in certain forms of indirect ownership,
(iii) amendments to allow retired former employees of the Company to hold
nonqualified stock options and (iv) several amendments to remove provisions no
longer required by Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act") to be included in the Plan. The
shareholders are being asked to approve an amended and restated version of the
Plan reflecting the foregoing amendments.
COPIES OF THE AMENDED AND RESTATED PLAN AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION MAY BE OBTAINED BY SHAREHOLDERS WITHOUT CHARGE BY WRITING TO
THE COMPANY AT 16825 NORTHCHASE DRIVE, SUITE 400, HOUSTON, TEXAS 77060,
ATTENTION: NANCY SCHLOTTMAN, OR CALLING (713) 874-2700.
INCREASE IN NUMBER OF SHARES AVAILABLE
The Board is proposing to increase the number of shares available under the
Plan to provide sufficient shares to allow continued grants of options and
possibly other awards to Company employees. In the seven years since the Plan
was adopted, the Company has granted incentive stock options and nonqualified
stock options under the Plan covering a total of 1,036,150 shares to employees
of the Company, of which 344,274 are currently exercisable and of which 77,268
have been exercised through December 31, 1996. Additionally, 48,915 shares have
been issued to officers as Performance Bonus Awards. Only 14,935 shares remain
available to cover grants under the Plan, which is likely to be insufficient to
allow grants through the coming year. If the number of shares reserved under the
Plan is increased by 1,400,000, such increase would represent approximately 9.2%
of the Company's issued and outstanding shares as of December 31, 1996.
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TRANSFERABILITY OF NONQUALIFIED STOCK OPTIONS
The Board is proposing to amend the Plan to allow the Committee to make
awards of nonqualified stock options which permit transfer by the employee to
the employee's retirement plan, pension plan or to certain trusts, or to the
employee's spouse, children or grandchildren ("Immediate Family Members"),
either directly or in certain forms of indirect ownership. Such transferability
would provide an estate planning tool for the officers and key employees of the
Company eligible to receive awards under the Plan. This proposed amendment was
made possible by extensive revisions, effective November 1, 1996, to Rule 16b -3
promulgated under the Exchange Act, one of which was the deletion of a
prohibition against transfers of stock options. The conditions to the transfer
of nonqualified stock options under the Plan would be as follows: (i) the
transfer must be a gift; (ii) the option agreement or amendment thereto must
specifically provide for transferability; and (iii) the transferee may not make
subsequent transfers of the option except to transferees to whom the employee
could have transferred the option or by will or the laws of intestate
distribution. Furthermore, following the transfer, options would continue to be
subject to the same terms and conditions applicable to the options prior to the
transfer, including the provisions regarding termination of employment, which
shall apply as if the original employee still held the options. The purpose of
these restrictions is to avoid creating a market in the options granted pursuant
to the Plan, which would be detrimental to one of the purposes of the Plan,
which is to encourage employees to acquire a long-term proprietary interest in
the Company.
ELIGIBILITY OF RETIRED EMPLOYEES
The Board is proposing to amend the Plan to allow the Committee to provide
for retired former employees of the Company or its subsidiaries to receive
nonqualified stock options after retirement, as their incentive stock options
are required by the Code to lapse within three months of termination of
employment. The Plan currently provides that upon termination of a Participant's
employment for a reason other than death or disability, any unvested options are
terminated and any exercise of vested options must occur within the lesser of
three months or the term of the options. These termination provisions are
required by Section 422 of the Code and the accompanying regulations with
respect to incentive stock options only. The purpose of the proposed amendment
is to allow an additional benefit to long-term employees of the Company after
retirement, even though such options would no longer be treated as incentive
stock options under the Code and the accompanying regulations.
AMENDMENTS TO CONFORM THE PLAN TO NEW RULE 16B-3
Rule 16b-3 promulgated by the Securities and Exchange Commission ("SEC")
under the Exchange Act provides an exemption from the operation of the
"short-swing profit" recovery provisions of Section 16(b) of the Exchange Act
with respect to the acquisition and exercise of stock options and the use of
already owned shares for payment of the exercise price of stock options. As
mentioned above, the SEC substantially revised Section 16b-3 effective November
1, 1996 to simplify the requirements for complying with the Rule. Because the
Plan was originally drafted to comply with Rule 16b-3 as it existed in 1990, the
Plan currently contains many provisions that are no longer required to be
included in the Plan under the new Rule 16b-3. The Board is proposing to make
several amendments to the Plan to conform the Plan to new Rule 16b-3. The
principal reason for these amendments is to ensure that the Plan is consistent
with current law so as to afford the Committee additional flexibility to
structure awards under the Plan.
One of the most fundamental changes in new Rule 16b-3 is that the
requirement for shareholder approval of the terms of the Plan has been deleted.
Shareholder approval is now one of the methods by which grants under the Plan
can qualify under Rule 16b-3. Another method is advance approval of the terms of
each award by the Board of Directors or a committee of two or more "Non-Employee
Directors." In response to these changes, the proposed amendments to the Plan:
(i) provide that the committee of the Board administering the Plan shall be
composed of not less than two Non-Employee Directors instead of three
"disinterested persons," which was the term used under the prior version of Rule
16b-3; and (ii) delete the requirement for shareholder approval of amendments to
the Plan that "materially increase the benefits accruing to participants
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under the Plan," because this is no longer required by Rule 16b-3. Because
shareholder approval of certain amendments to the Plan is still required by the
rules applicable to companies listed on the New York Stock Exchange, the Plan
has also been amended to require shareholder approval in any such instances.
SUMMARY OF THE PLAN AS PROPOSED TO BE AMENDED
The 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 "Committee"),
comprised of "Non-Employee Directors" within the meaning of Rule 16b-3 ("Rule
16b-3") promulgated by the SEC under the Exchange Act, has sole authority to
construe and interpret the Plan, to select participants ("Participants"), to
grant Awards and to establish the terms and conditions of Awards. Members of the
Committee are not eligible to receive Awards under the Plan.
Eligibility. Any employee of the Company or its subsidiaries, including,
without limitation, any officer or employee-director, is eligible to receive
Awards under the Plan, and retired former employees are eligible to hold NSOs
under the Plan, if so provided by the Committee. At December 31, 1996, there
were 191 employees of the Company and its subsidiaries. Nonemployee directors
are not eligible to participate in the Plan. ISOs granted under the Plan are
transferable only at the Participant's death, but NSOs are transferable, with
some restrictions, to the Participant's retirement or pension plan, to certain
trusts or to Immediate Family Members, directly or in certain forms of indirect
ownership. The Plan sets forth various restrictions upon exercise of Awards
following the death, disability or termination of a Participant.
Shares Subject to Plan. The maximum number of shares of common stock in
respect of which Awards may be granted under the Plan (the "Plan Maximum") will
be 2,500,000, subject to appropriate adjustment in the event of a
reorganization, stock split, stock dividend, merger, consolidation or other
change in capitalization of the Company.
Term. The Plan will terminate on April 1, 2000 unless sooner terminated by
the Board, except with respect to Awards then outstanding.
Amendment. The Board may amend the Plan at any time, except that (i) the
Board must obtain shareholder approval to make any amendment to the Plan that
would increase the total number of shares reserved for issuance, such as the
amendment proposed for shareholder approval herein (except for adjustments
necessary to reflect changes in capitalization), that would materially modify
eligibility requirements or that would require approval by the shareholders
under the rules of any national stock exchange on which the Company's shares are
listed, and (ii) certain amendments are altogether prohibited (e.g., any
amendment that would impair a Participant's vested rights).
Change in Control. In the event of a change in control of the Company as a
result of a tender offer, contested election, business combination or other
related events described in the Plan, all stock options and SARs outstanding at
least one year shall become fully exercisable, and all restrictions and
conditions of Restricted Stock Grants and Restricted Unit Grants outstanding at
least one year shall be deemed to be satisfied, unless the Board expressly
provides otherwise.
Incentive Stock Options. Options designated as ISOs, within the meaning of
Section 422 of the Code, together with the regulations promulgated thereunder,
may be granted under the Plan up to the Plan Maximum. The number of shares of
common stock in respect of which ISOs are first exercisable by any Participant
during any calendar year shall not have a fair market value (determined at the
date of grant) in excess of $100,000, or such other limit as may be imposed by
the Code. ISOs shall be exercisable for such periods as the 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 voting power of all classes of stock
of the Company, five years.
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Nonqualified Stock Options. NSOs may be granted for such number of shares
of common stock and will be exercisable for such period or periods as the
Committee shall determine.
Exercisability. The Plan provides that ISOs and NSOs will become
exercisable in 20% installments on each of the first five anniversary dates of
the date of grant, unless the Compensation Committee in its sole discretion
determines to provide a different vesting period for specific options. No option
is exercisable until the first such anniversary date. The exercise price for
options may be paid in cash, by delivery of shares of common stock already owned
by the Participant with a market value equal to the exercise price, or by the
Participant's acceptance of a reduction in the number of shares that would
otherwise be deliverable upon exercise, in an amount necessary to cover the
exercise price.
Reload Options. Under the 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") or by taking
delivery of a number of shares of common stock with a value equal to the
difference between the fair market value of the stock underlying the options on
the date of exercise and the exercise price of such options (a "cashless
exercise"), the Company may grant a "Reload Option" to the Participant which
entitles the holder thereof to exercise an option to purchase the exact number
of shares tendered in the stock-for-stock exercise or netted against the shares
underlying the options in the cashless 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 are to be identical to the
terms and conditions of the related Original Options. When a Reload Option is
granted to a Participant, the Participant may make a stock-for-stock or cashless
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.
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 Plan or any other
compensation plan or program of the Company. DCSOs are to be exercisable for
such period or periods as the Committee shall determine. The Committee has not
issued any DCSOs to date.
Option Exercise Prices. NSOs and DCSOs may be issued at any exercise price
that the Committee shall determine. 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 (at least one hundred ten percent (110%) of the fair market
value to ten-percent shareholders or those deemed to be ten-percent shareholders
by attribution under the Internal Revenue Code of 1986, as amended.) 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. On April 7, 1997, the closing price of the Company's
common stock on the New York Stock Exchange was $23.125 per share.
Stock Appreciation Rights. Under the Plan, the Committee may grant an Award
of a SAR that entitles a Participant to receive an amount in cash, shares of
common stock, DCSOs, or any combination thereof, that 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, or at such other price as the Committee may
establish. The Committee may establish procedures for exercise and restrictions
regarding the dates on which SARs may be exercised, but in no event are SARs
exercisable before the first anniversary date of the date of grant. The
Committee has not issued any SARs to date.
Restricted Stock Grants and Restricted Unit Grants. 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 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
8
11
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. When the
Restriction Period expires or the restriction with respect to installments of
shares lapses, the Participant is entitled to receive (i) 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 (ii) with respect
to a Restricted Unit Grant, payment for the value of the units. The Committee
has not made any Awards of Restricted Stock Grants or Restricted Unit Grants to
date.
Performance Bonus Awards. The Committee in its discretion may award
Participants a Performance Bonus Award, in the form of cash or shares of common
stock, or any combination thereof, on such terms and conditions as the Committee
shall designate. The Committee has made Performance Bonus Awards to Participants
each year since the adoption of the Plan. Performance Bonus Awards are based on
an evaluation of a variety of performance factors applicable to the Company and
the Participant for a given calendar year ("Performance Factors"). Currently,
the Plan includes as Performance Factors (i) annual increases in earnings per
share for the Company, (ii) annual increases in cash flow per share of the
Company, (iii) annual increases in the volume of the Company's oil and gas
proved reserves, (iv) annual increases in the volume of the Company's oil and
gas probable reserves, and (v) the overall performance of a Participant in
furthering the Company's overall strategic objectives. The Committee uses the
Performance Factors to determine a Participant's bonus percentage, which is
multiplied by the employee's base salary to obtain the amount of the
Participant's Performance Bonus Award, normally in the range of up to 35% of the
Participant's base salary, or 70% in the case of the Company's Chief Executive
Officer. The Committee has the discretion to recommend Performance Bonus awards
in excess of the foregoing ranges when, in the Committee's judgment, performance
has been exceptionally strong. The above-described method of calculating
Performance Bonus Awards, or the amounts of such Awards calculated in accordance
with such method, may be adjusted by the Committee on the basis of such factors
as it shall deem relevant, provided that any such adjustment is made on a
uniform basis.
AWARDS UNDER PLAN
The following table presents information regarding awards of options under
the Plan from its inception through December 31, 1996 to (i) the Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers, (ii) all current executive officers as a group, and (iii) all
employees as a group.
OPTIONS GRANTED UNDER 1990 STOCK COMPENSATION PLAN
NUMBER OF SECURITIES
NAME AND POSITION UNDERLYING OPTIONS
----------------- --------------------
A. Earl Swift............................................... 70,480
Chief Executive Officer, President
Virgil N. Swift............................................. 46,541
Executive Vice President -- Business Development
Terry E. Swift.............................................. 97,896
Chief Operating Officer, Executive Vice President
John R. Alden............................................... 74,370
Chief Financial Officer, Senior Vice President -- Finance
James M. Kitterman.......................................... 74,550
Senior Vice President -- Operations
All executive officers as a group........................... 463,227
All employees as a group.................................... 1,036,150
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BOARD OF DIRECTORS RECOMMENDATION
The affirmative vote of a majority of the shares represented at the 1997
annual meeting of shareholders in person or by proxy will be needed to approve
the Plan as amended and restated. The Board believes that such approval is
essential to enable the Company to continue to attract and retain qualified
employees in an extremely competitive oil and gas industry. The proposal to
increase the number of shares reserved for issuance under the Plan is considered
appropriate in light of the substantial increase in the number of outstanding
shares since the last amendment of the Plan in 1994. The proposed amendment to
allow transferability of nonqualified stock options and to allow retired former
employees to hold nonqualified stock options will provide an additional benefit
to officers and key employees of the Company in the form of an estate planning
tool in the former instance and an important long-term retention device which
provides a longer period of time to realize a benefit from options granted
during their employment by the Company in the latter. Finally, the amendments to
conform the Plan to new Rule 16b-3 will achieve consistency between the Plan and
the law and will allow the Board greater flexibility to grant awards under the
Plan. Management believes that this additional flexibility is desirable and that
approval of the amendments to the Plan will contribute to the continuation of
the Company's history of employee longevity.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE IN FAVOR OF
APPROVING THE AMENDMENTS TO THE PLAN.
APPROVAL OF AMENDMENTS
TO 1990 NONQUALIFIED STOCK OPTION PLAN
The 1990 Nonqualified Plan ("Nonqualified Plan") was originally adopted and
approved by the Company's shareholders in 1990. The purposes of the Nonqualified
Plan are to retain as independent nonemployee directors on the board of
directors persons of training, experience and ability; to encourage the sense of
proprietorship of such persons; and to stimulate the active interests of such
persons in the development and financial success of the Company. As originally
adopted, a maximum of 150,000 shares of Common Stock could be issued pursuant to
the Nonqualified Plan. This maximum number of shares under the Nonqualified Plan
increased to 165,000 as a result of a 10% stock dividend in September, 1994. On
February 10, 1997, the Board, subject to approval by the shareholders of the
Company, approved (i) an amendment to increase the number of shares of common
stock reserved for issuance under the Nonqualified Plan by 285,000 to a total of
450,000 shares, (ii) an amendment to allow transferability of options to
retirement or pension plans, to "immediate family members," directly or in
certain forms of indirect ownership, or to certain trusts and (iii) several
amendments to remove provisions no longer required by Rule 16b-3 under the
Exchange Act to be included in the Plan. The shareholders are being asked to
approve an amended and restated version of the Nonqualified Plan reflecting the
foregoing amendments.
COPIES OF THE AMENDED AND RESTATED NONQUALIFIED PLAN AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION MAY BE OBTAINED BY SHAREHOLDERS WITHOUT
CHARGE BY WRITING TO THE COMPANY AT 16825 NORTHCHASE DRIVE, SUITE 400, HOUSTON,
TEXAS 77060, ATTENTION: NANCY SCHLOTTMAN, OR CALLING (713) 874-2700.
INCREASE IN THE NUMBER OF SHARES AVAILABLE
The Board is proposing to increase the number of shares available under the
Nonqualified Plan to allow continued grants of options to Directors of the
Company. The Company has granted to its nonemployee Directors nonqualified stock
options under the Nonqualified Plan covering a total of 151,150 shares. At
December 31, 1996, options covering 145,650 shares were outstanding under the
Nonqualified Plan, of which 73,960 were exercisable, and 5,500 options had been
exercised under the Nonqualified Plan. Only 13,850 shares remain available to
cover future grants under the Nonqualified Plan, which is likely to be
insufficient to allow future grants through the coming year. If the number of
shares available under the Nonqualified Plan is increased, the proposed total of
450,000 shares reserved under the Nonqualified Plan should allow the Company to
continue to reward the Directors for their service for a number of years to
come.
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TRANSFERABILITY OF NONQUALIFIED STOCK OPTIONS
The Board is proposing to amend the Plan to allow the Committee to make
awards of options which permit transfer by the director to the director's
retirement plan, pension plan or to certain trusts, or to the director's spouse,
children or grandchildren ("Immediate Family Members"), either directly or in
certain forms of indirect ownership. Such transferability would provide an
estate planning tool for the directors of the Company eligible to receive awards
under the Plan. This proposed amendment was made possible by the revisions to
Rule 16b-3 discussed above. See "Approval of Amendments to 1990 Stock
Compensation Plan -- Amendments to Conform the Plan to New Rule 16b-3." The
conditions to the transfer of nonqualified stock options under the Plan would be
as follows: (i) the transfer must be a gift; (ii) the option agreement or an
amendment thereto must specifically provide for transferability; and (iii) the
transferee may not make subsequent transfers of the option except to transferees
to whom the director could have transferred the option or by will or the laws of
intestate distribution. Furthermore, following the transfer, options would
continue to be subject to the same terms and conditions applicable to the option
prior to the transfer. The purpose of these restrictions is to avoid creating a
market in the options granted pursuant to the Plan, which would be detrimental
to one of the stated purposes of the Nonqualified Plan, which is to encourage
directors to acquire a long-term proprietary interest in the Company.
AMENDMENTS TO CONFORM THE NONQUALIFIED PLAN TO NEW RULE 16B-3
As discussed above, the SEC substantially revised Section 16b-3 effective
November 1, 1996 to simplify the requirements for complying with Rule 16b-3.
Because the Nonqualified Plan was originally drafted to comply with Rule 16b-3
as it existed in 1990, it currently contains many provisions that are no longer
required to be included in the Nonqualified Plan under the new Rule 16b-3. In
response to these changes, the Board is proposing to make several amendments to
conform the Nonqualified Plan to new Rule 16b-3. The amendments would: (i)
delete the requirement that only "disinterested persons" are allowed to exercise
any discretion concerning decisions regarding the Plan; (ii) delete the
prohibition against transfers of options; and (iii) delete the requirement for
shareholder approval of amendments to the Nonqualified Plan except in cases
where such approval is required by the New York Stock Exchange. The principal
reason for these amendments is to ensure that the Nonqualified Plan is
consistent with current law and to afford the Committee additional flexibility
to structure awards under the Nonqualified Plan.
SUMMARY OF THE NONQUALIFIED PLAN AS PROPOSED TO BE AMENDED
Under the Nonqualified Plan, each nonemployee director is granted options
to 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 automatically granted options to purchase 5,000 shares of the
Company's common stock. A grant of options to a nonemployee director is reduced
to the extent that it would cause him to hold unexercised options to purchase
more than 60,000 shares ("Option Maximum") of the Company's common stock. On the
date on which the automatic grant of options under the Nonqualified Plan would
exceed the Option Maximum for a director, the number of shares with respect to
which options are automatically granted are reduced or eliminated so that the
director's shares of all Company stock covered by outstanding options do not
exceed the Option Maximum. If a director subsequently exercises any of his
outstanding options to purchase shares of the Company's stock, the shares so
purchased are no longer considered to be outstanding options for purposes of the
Option Maximum. Options are exercisable in installments as provided in the
Option Agreement; provided, however, that no option is exercisable during the
first year after grant. Options granted under the Nonqualified Plan to date (i)
have an exercise price equal to the highest closing price of the Company's
common stock on any established national exchange on the date of grant, (ii) are
for a term of 10 years from the date of grant, and (iii) become exercisable for
20% of the shares covered thereby on each of the first five anniversaries of the
date of grant. Under the proposed amendments, options may be transferred, with
some restrictions, to a director's retirement or pension plan, to Immediate
Family Members, either directly or in certain forms of indirect ownership, or to
certain trusts.
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Shares Subject to Plan. The maximum number of shares of common stock with
respect to which options may be granted under Nonqualified Plan will be 450,000
shares, subject to adjustment in the event of a reorganization, stock split,
stock dividend, merger, consolidation or other change in capitalization of the
Company.
Change of Control. In the event of a change of control of the Company as a
result of a tender offer, business combination or other events described in the
Nonqualified Plan, all options then outstanding at least one year shall become
fully exercisable.
Amendment. The Board may amend or terminate the Nonqualified Plan without
shareholder approval at any time except that the Board must obtain approval of
the shareholders to make any amendment that must be approved by the shareholders
under the rules of any national stock exchange on which the Company's shares are
listed.
AWARDS UNDER PLAN
The table presented above under "Election of Directors -- Compensation to
Directors" sets forth information regarding awards of stock options under the
1990 Nonqualified Plan from its inception through December 31, 1996, to
nonemployee directors.
BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the shares represented at the 1997
annual meeting of shareholders in person or by proxy will be needed to approve
the amendments to the Nonqualified Plan. The Board believes that increasing the
number of shares available under the Nonqualified Plan is important in helping
the Company to continue to retain qualified nonemployee directors. The adoption
of the proposed amendment to increase the number of shares reserved for issuance
under the Nonqualified Plan is viewed as appropriate in light of the increase in
the Company's issued and outstanding common stock since the Nonqualified Plan
was adopted in 1990. The amendment to allow transferability of options under the
Nonqualified Plan will provide an additional benefit to the directors of the
Company in the form of increased estate planning capabilities without decreasing
the benefits to the Company of its directors having a proprietary interest in
the Company. Finally, the amendments to bring the Nonqualified Plan into
conformity with new Rule 16b-3 are desirable not only to achieve consistency
with the new Rule 16b-3, but also to provide the Board with the greatest
flexibility in granting options under the Nonqualified Plan. Management believes
that the approval of the amendments to the Nonqualified Plan will contribute to
the continuation of the Company's history of success and stability.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE IN FAVOR OF
APPROVING THE AMENDMENTS TO THE 1990 NONQUALIFIED PLAN.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning the shareholdings, as
of March 1, 1997, of the seven current members of the board of directors, 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
MARCH 1, 1997(1)
------------------------
PERCENT OF
CLASS
NAME OF PERSON OR GROUP POSITION NUMBER OUTSTANDING
----------------------- -------- --------- -----------
A. Earl Swift........................... Chairman of the Board, President, Chief
Executive Officer 284,342(2) 1.9%
Virgil N. Swift......................... Vice Chairman of the Board, Executive Vice
President -- Business Development 319,389 2.1%
G. Robert Evans......................... Director 6,400 (3)
Raymond O. Loen......................... Director 144,256(4) 1.0%
Henry C. Montgomery..................... Director 33,780 (3)
Clyde W. Smith, Jr...................... Director 17,400 (3)
Harold J. Withrow....................... Director 18,600 (3)
Terry E. Swift.......................... Executive Vice President, Chief Operating
Officer 92,401 (3)
John R. Alden........................... Senior Vice President -- Finance, Chief
Financial Officer, Secretary 76,351 (3)
James M. Kitterman...................... Senior Vice President -- Operations 66,426 (3)
All executive officers & directors as a group (12 persons).......................... 1,151,468 7.4%
Driehaus Capital Management, Inc.................................................... 834,202(5) 5.5%(5)
25 East Erie Street
Chicago, Illinois 60611
Foreign & Colonial Management Limited............................................... 863,069(6) 5.7%(6)
Hypo Foreign & Colonial Management (Holdings) Limited
Exchange House, Primrose Street
London EC2A 2NY England
FMR Corp............................................................................ 1,716,295(7) 11.27%(7)
82 Devonshire Street
Boston, Massachusetts 02109
Franklin Resources, Inc............................................................. 870,050(8) 5.7%(8)
777 Mariners Island Blvd.
San Mateo, California 94404
George D. Bjurman & Associates...................................................... 926,990(9) 6.1%(9)
10100 Santa Monica Blvd., Suite 1200
Los Angeles, California 90067
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(1) Unless otherwise indicated in the footnotes below, the number of shares of
common stock held and percent outstanding are as of March 1, 1997. 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, 1997 by exercise of options granted under
the Company's stock option plans: Mr. A. E. Swift -- 54,648; Mr. V. N.
Swift -- 45,324; Mr. Evans -- 4,400; Mr. Loen -- 27,400; Mr.
Smith -- 10,900; Mr. Montgomery -- 30,370; Mr. Withrow -- 16,400; Mr. T. E.
Swift -- 69,040; Mr. Alden -- 56,166; Mr. Kitterman -- 48,290; and all
executive officers and directors as a group -- 440,808.
(2) Includes 858 shares held by Mr. Swift's wife.
(3) Less than one percent.
(4) Includes 11,300 shares as to which Mr. Loen, as co-trustee for an HR-10
Retirement Plan, shares voting and investment power with his wife; 70,000
shares held by his wife (who holds sole voting and investment power as to
those shares and 3,680 shares held in her IRA), and 4,554 shares held in Mr.
Loen's IRA.
(5) Based on a Schedule 13G dated February 13, 1997 filed with the Securities
and Exchange Commission, Driehaus Capital Management, Inc. ("Driehaus"), an
Investment Adviser registered under Section 203 of the Investment Advisers
Act of 1940, is deemed to be the beneficial owner of 834,202 shares of the
Company's common stock as a result of acting as an Investment Adviser for
numerous individual clients on a fully discretionary basis. Driehaus reports
sole power to vote all of these shares but no dispositive power with respect
to these shares.
(6) Based on Schedule 13G dated February 10, 1997 filed with the Securities and
Exchange Commission, Foreign & Colonial Management Limited ("F&C") is deemed
to have beneficial ownership of 863,069 shares of the Company's stock. F&C
is an Investment Adviser registered under the Investment Advisers Act of
1940 and is a wholly-owned subsidiary of Hypo Foreign & Colonial Management
(Holdings) Limited.
(7) Based on a Schedule 13G dated February 14, 1997 filed with the Securities
and Exchange Commission, Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp., an Investment Adviser
registered under Section 203 of the Investment Advisers Act of 1940, is
deemed to be the beneficial owner of 1,716,295 shares of the Company's stock
as a result of acting as an investment adviser to several investment
companies registered under Section 8 of the Investment Company Act of 1940
(the "Funds"). Members of the Edward C. Johnson 3d family and trusts for
their benefit are the predominant owners of Class B shares of common stock
of FMR Corp., representing approximately 49% of the voting power of FMR
Corp. Mr. Johnson 3d owns 12.0% and Abigail P. Johnson owns 24.5% of the
aggregate outstanding voting stock 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 Class B shares. Accordingly, through their ownership of
voting common stock and the execution of the shareholder's 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. Neither
FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has any power to
vote or direct the voting of the shares owned directly by the Funds, which
power resides with the Funds' Boards of Trustees.
(8) Based on Schedule 13G dated February 12, 1997 filed with the Securities
Exchange Commission, Franklin Advisers Inc. ("Advisers"), a wholly-owned
subsidiary of Franklin Resources, Inc. ("FRI") and an Investment Adviser
registered under Section 203 of the Investment Advisers Act of 1940, is
deemed to be the beneficial owner of 870,050 shares of the Company's common
stock as a result of acting as an investment adviser to one or more open or
closed-end investment companies or other managed accounts. These shares of
the Company's common stock include 865,050 shares that would result upon
conversion of 30,000,000 units of the Company's 6.25% Convertible
Subordinated Notes due 2006. Charles B. Johnson and Rupert H. Johnson, Jr.
each own in excess of 10% of the outstanding common stock of FRI and are the
principal shareholders of FRI. Accordingly, Messrs. Charles B. and Rupert H.
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Johnson and FRI may each be deemed to be the beneficial owner of the shares
of the Company's common stock managed by Advisers.
(9) Based on a Schedule 13G dated as of January 10, 1997 filed with the
Securities and Exchange Commission, George D. Bjurman & Associates ("GDBA"),
an Investment Adviser registered under Section 203 of the Investment
Advisers Act of 1940, is deemed to be the beneficial owner of 926,990 shares
of the Company's common stock as a result of acting as an Investment Adviser
to its clients. GDBA reports shared voting and dispositive power with
respect to all of these shares, but only to the extent that its clients may
be able to give instructions that would supersede GDBA's otherwise full
discretionary authority over the disposition or voting of the securities in
its portfolios. George Andrew Bjurman and Owen Thomas Barry III may, as a
result of their ownership in and positions with GDBA, be deemed to be
indirect beneficial owners of the equity securities held by GDBA. Messrs.
Bjurman and Barry, however, disclaim beneficial ownership with respect to
the shares of the Company's common stock held by GDBA.
EXECUTIVE OFFICERS
The executive officers of the Company are appointed annually by the board
of directors. Information regarding A. Earl Swift, President, Chief Executive
Officer and Chairman of the Board, and Virgil N. Swift, Executive Vice
President -- Business Development and Vice Chairman of the Board, 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.
Terry E. Swift, 41, was appointed Executive Vice President and Chief
Operating Officer of the Company in 1991. 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.
John R. Alden, 51, was appointed Senior Vice President -- Finance and Chief
Financial Officer in 1990. He is also Secretary of the Company. He joined the
Company in 1981 and prior to 1990 he served the Company as its secretary and its
principal financial officer under a variety of titles. Mr. Alden holds a degree
in Accounting and a Master's degree in Business Administration.
Bruce H. Vincent, 49, joined the Company as Senior Vice President -- Funds
Management in 1990. Mr. Vincent acted as President of Vincent & Company, an
investment banking firm, from 1988 to 1990. Mr. Vincent holds a degree in
Business Administration and a Master's degree in Finance.
James M. Kitterman, 52, 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.
Alton D. Heckaman, Jr., 40, was appointed Vice President and Controller in
May 1993. He had previously served as Assistant Vice President -- Finance and
Controller since 1986. Mr. Heckaman joined the Company in 1982. He is a
Certified Public Accountant and holds a degree in Accounting.
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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 the last fiscal
year) for the fiscal years ended December 31, 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
LONG TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION($)
--------------------------------- --------------- -------------------
BONUS(1) AWARDS
-------------------- ---------------
NAME AND SECURITIES LIFE
PRINCIPAL UNDERLYING INSURANCE 401(K)
POSITION YEAR SALARY($) CASH($) STOCK($) OPTIONS/SARS(#) ($)(2) ($)(3)
--------- ---- --------- -------- -------- --------------- --------- ------
A. Earl Swift 1996 $307,000 $171,805 $43,095 30,000 $ 79,728 $7,500
Chief Executive Officer, 1995 278,400 90,000 90,000 0 80,073 7,500
President 1994 278,400 128,000 32,000 12,100(4) 102,240 7,500
Virgil N. Swift 1996 250,900 55,946 14,089 12,000 47,669 7,500
Executive Vice President -- 1995 171,968 35,391 8,836 0 47,669 7,500
Business Development 1994 190,600 23,898 5,975 12,100(4) 29,019 7,500
Terry E. Swift 1996 230,009 71,847 11,603 15,000 6,700 7,500
Chief Operating Officer, 1995 158,300 33,675 8,358 0 6,700 7,500
Executive Vice President 1994 158,300 21,117 5,279 52,756 6,138 7,500
John R. Alden 1996 187,701 65,881 10,221 12,000 14,056 7,500
Chief Financial Officer, 1995 142,500 27,462 6,086 0 14,056 7,500
Senior Vice President -- Finance 1994 142,500 17,296 4,324 37,730 11,419 7,500
James M. Kitterman 1996 180,150 39,179 9,669 8,000 14,363 7,500
Senior Vice President -- 1995 138,400 28,430 7,164 0 14,363 7,500
Operations 1994 138,400 17,353 4,338 46,750 12,328 7,500
- ---------------
(1) Bonus amounts reported for 1996, 1995 and 1994 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 (one-half in cash and one-half in Company
stock) for the account of the named executive officer to the Swift Energy
Company Employee Savings Plan.
(4) Previously granted options for 12,100 shares that were extended and repriced
in 1994.
EMPLOYMENT CONTRACTS
Effective June 1, 1994, Virgil Swift commenced a five year employment
agreement which provided for an immediate 40% reduction in salary, coupled with
an immediate 25% reduction in working hours, decreasing to a 50% work schedule
at the commencement of the third year of the agreement and continuing for the
remaining term thereof. The agreement has since been amended in light of the
fact that Mr. Swift has actually worked more hours than originally contemplated
to reflect a commensurate increase in his salary. The contract also provides for
a payment of $55,550 for four years in consideration of Mr. Swift's agreement
not to compete with the Company for a period of seven years, although if Mr.
Swift's employment is terminated by the Company upon a change in control (as
defined under "Change of Control Arrangements" below), he is entitled to receive
the non-competition payments without compliance with those provisions and his
remaining salary in one lump sum, discounted to present value at 8% per annum.
Effective November 1, 1995, the Company entered into employment agreements
with its other five most senior executive officers, A. Earl Swift, President,
Terry E. Swift, Executive Vice President, and its three
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Senior Vice Presidents, John R. Alden, James M. Kitterman and Bruce H. Vincent.
All of the agreements (other than that for A. Earl Swift) provide for an initial
three-year term, which is automatically extended for one year on each
anniversary thereof. These agreements provide for payment of six months' salary
(plus, for A. Earl Swift, two weeks' salary for every year of service to the
Company) and six months' continuation of medical benefits 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 Continuing Directors.
Upon employment termination in connection with or following a change of control
(as defined under "Change of Control Arrangements" below), the executives are
entitled to receive 18 months' salary plus two weeks' salary for every year of
service to the Company, and continuation of certain insurance coverages for
certain periods. Following termination of employment all outstanding vested and
non-vested stock options held by the executives will be converted into
non-qualified five year options for the same number of shares at the same
exercise prices, or the closing price of the Company's common stock on the New
York Stock Exchange if it is lower.
A. Earl Swift's employment agreement is similar to those for the other
executives, with the following exceptions. The term is eight years, the first
three of which cover his full-time employment by the Company under the same
compensation arrangements which have been in place over the past several years.
The last five years of the agreement cover up to twenty hours per week, 46 weeks
per year on specific matters designated by the Board of Directors. During this
five year period, Mr. Swift's compensation will be one-half his annual base
compensation at the end of the third year of the contract, plus any bonus
provided by the Board of Directors. In the event of a change of control during
the first three years of the agreement, Mr. Swift's compensation for the
remaining term of the agreement shall be at least as much as for the last
preceding year, or, if a change of control occurs during the last five years of
the agreement, at least the average of his total compensation during the first
three years of the agreement. Mr. Swift's contract provides for a payment of
$75,850, plus 17% of his total compensation during the third year of the
agreement, for five years in consideration of Mr. Swift's agreement not to
compete with the Company for a period of up to eight and one-half years. In the
event of a change of control, these amounts are payable in the same manner as
provided in Virgil Swift's agreement described above, together with two weeks'
salary for every year of service to the Company.
STOCK OPTION GRANTS
The following table contains information concerning the grant of stock
options during 1996 to the named executive officers under the Company's 1990
Stock Compensation Plan:
INDIVIDUAL GRANTS GRANT DATE
---------------------------------------------------------- VALUE
% OF TOTAL ----------
NUMBER OPTIONS GRANTED EXERCISE OR GRANT DATE
OF OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME GRANTED IN FISCAL YEAR ($/SH) DATE VALUE(1)
---- ---------- --------------- ----------- ---------- ----------
A. Earl Swift........................... 30,000 10.82% $28.50 12/26/06 $543,630
Virgil N. Swift......................... 12,000 4.33% 28.50 12/26/06 217,452
Terry E. Swift.......................... 15,000 5.41% 28.50 12/26/06 271,815
John R. Alden........................... 12,000 4.33% 28.50 12/26/06 217,452
James M. Kitterman...................... 8,000 2.89% 28.50 12/26/06 144,968
- ---------------
(1) Using Black-Scholes option pricing model.
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OPTION VALUES
The following table contains information concerning the number and value of
unexercised options held by the named executive officers at December 31, 1996:
FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FY-END (#) OPTIONS/SARS AT FY-END($)(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
A. Earl Swift........................... 54,647 42,233 $1,146,627 $295,141
Virgil N. Swift......................... 45,324 22,517 947,097 232,956
Terry E. Swift.......................... 69,041 55,959 1,450,769 863,650
John R. Alden........................... 56,167 42,293 1,171,845 639,890
James M. Kitterman...................... 48,291 42,209 999,712 714,731
- ---------------
(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, 1996
($29.875 per share) less the exercise price.
CHANGE OF CONTROL ARRANGEMENTS
Under the 1990 Stock Compensation Plan and the 1990 Nonqualified Plan
(collectively, the "Plans"), the occurrence of a change of control of the
Company will (unless the board of directors provides otherwise prior to the
change of control) cause all outstanding stock options to become fully
exercisable, other than options that have been outstanding less than one year. A
"change of control" is defined in the Plans to mean any of the following events:
(i) any person or group becomes the beneficial owner of shares having 40% or
more of the votes that may be cast for the election of directors; (ii) as a
result of any cash tender offer, exchange offer, merger or other business
combination, sale of assets or contested election, persons who were directors of
the Company immediately prior to such event cease to constitute a majority of
the board of directors; (iii) the shareholders of the Company approve an
agreement providing either for a transaction in which the Company will cease to
be an independent publicly owned corporation or for a sale or other disposition
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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The board of directors 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 in which compensation levels grew rapidly during the
late 1970s and early 1980s. 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.
In 1987 the Compensation Committee instituted an annual bonus for the Chief
Executive Officer equal to a sliding scale percentage of total partnership and
joint venture funds raised by the Company in that year, providing that only the
lowest bonus was to be paid, regardless of the amounts of funds raised, if the
Company's earnings did not increase by at least 15% in that year. This formula
was adopted at a time when
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most of the Company's earnings were derived from earned interests and fees from
partnership and joint venture activities. In late 1989, as the proportion of the
Company's revenues from oil and gas sales began to grow significantly, the
Compensation Committee adopted a new incentive compensation system for the
Company's executive officers, and revised the bonus formula for the Chief
Executive Officer, to one based upon earnings per share and growth in oil and
gas reserves, as described in detail below. In 1995, the Compensation Committee
further modified its criteria to reflect the importance of cash flow to an oil
and gas company and the Company's increased emphasis on exploration and drilling
activities, 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, in 1995, the Compensation
Committee amended the bonus formula in the 1990 Stock Compensation Plan to add
two factors: year-to-year increases in both cash flow per share and probable
reserves. The 1990 Plan, as amended, was used for determining 1994, 1995 and
1996 incentive awards based upon Company performance in each of those years.
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 an annual survey provided by an outside consultant on a group of 37
independent oil and gas companies with market capitalizations between $20
million and $1.8 billion (the "Compensation Survey Group"), 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, and in the case of
the Chief Executive Officer, a review of his performance by the Compensation
Committee.
The Compensation Survey Group includes only one company in common with the
Dow Jones Oil, Secondary Index (the "Index") used in the "Five Year Shareholder
Return Comparison" set forth herein. The Compensation Survey Group is used by
the Company for purposes of executive compensation comparison because it
constitutes a broader group than the group of 17 companies included in the
Index, and because the Compensation Survey Group is comprised of companies
somewhat closer in size and line of business to the Company than the companies
included in the Index. The Index was selected in accordance with Securities and
Exchange Commission 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 are awarded under the 1990 Stock Compensation Plan (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. The 1990 Plan,
prior to being amended in 1995, did not include the factors of increases in cash
flow per share and increases in probable reserves, while two of the factors,
earnings per share and reserve growth, are the same performance factors upon
which the Company's goals in its 1988 strategic plan were based. Generally, the
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
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(other than the Chief Executive Officer, as to whom a different adjustment may
be made). In determining Performance Bonus Awards for 1995 (determined and paid
in 1996), the Committee considered the small increase in cash flow per share,
the increase in net proved reserves of 70% and a smaller increase in probable
reserves from 1995 to 1996, as well as the slight decrease in earnings per share
before the cumulative effect of a change in accounting principles. The Committee
took into account, with respect to earnings per share, that the Company issued
5,750,000 additional shares of Common Stock in 1995 pursuant to a public
offering. In determining Performance Bonus Awards for 1996 (determined and paid
in 1997), the Committee considered the substantial increase (in excess of 150%)
in both earnings per share and cash flow per share and more moderate increases
in net proved reserves and probable reserves of 47% and 40%, respectively. For
both 1995 and 1996, 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 normally in the range of up to 35% of their base salaries, and the Chief
Executive Officer may receive an award normally in the range of up to 70% of his
base salary. Awards paid in the last three years averaged 27.6% of executive
officers' base salaries and 64.2% of the Chief Executive Officer's base salary.
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 under the 1990 Plan. This
component is intended to retain and motivate executives to improve long-term
shareholder value. Stock options are granted at the prevailing market price and
will only have value if the Company's stock price increases. Grants have always
vested in equal amounts over five years; executives must be employed by the
Company at the time of vesting in order to exercise the options.
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
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 FOR 1996
Base Salary. The Chief Executive Officer's base salary in 1996 was
$307,000, which was $28,600 more than his base salary in 1995. 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, the
Committee may give a different weighting to the five bonus formula performance
factors in determining the Chief Executive Officer's bonus than it uses in
determining bonuses for other executive officers. In determining the Chief
Executive Officer's bonus, the Committee has typically given more weight to
factors based upon the Company's performance than to its evaluation of his
general contribution, since the Committee does not observe and supervise such
performance on a day-to-day basis. For 1994, the Committee reduced the total
bonus of the Chief Executive Officer from $170,000 in 1993 ($136,000 in cash and
$34,000 in stock), or approximately 65% of base salary, to $160,000 in 1994
($128,000 in cash and $32,000 in stock), or approximately 56% of base salary.
However, due to an increase in base salary in 1994, the Chief Executive's total
compensation increased slightly. For 1995, based on the factors described above,
the Committee increased the Chief Executive Officer's total bonus from $160,000
in 1994 to $180,000 in 1995. However, the Committee reduced the cash portion of
the bonus from $128,000 to $90,000, increasing the stock portion from $32,000 to
$90,000.
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For 1996, the Committee increased the Chief Executive Officer's total bonus from
$180,000 in 1995 to $214,900 in 1996 ($171,805 in cash and $43,095 in stock).
Stock Options. The Chief Executive Officer was granted options to purchase
30,000 shares of common stock at an exercise price of $28.50 on December 26,
1996 (as were 45 other employees, including six other executive officers, in
varying amounts). As explained above under "-- Compensation Criteria and
Performance Measurement -- Long-Term Stock-Based Incentives," the Compensation
Committee determined a total number of executive options to be granted based on
the number of unexercised options held by the executive officers as a group at
the time of grant, and allocated a portion of that total to the Chief Executive
Officer based upon the scope of his responsibilities.
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, which was adopted by Congress in 1993 and limits
the deductibility of compensation paid to any individual in excess of $1 million
per year. The Company has not paid and does not anticipate paying compensation
at these levels, and even including the unrealized value of unexercised stock
options granted in any given year, does not believe that these provisions will
be relevant to the Company's executive compensation levels for the foreseeable
future.
COMPENSATION COMMITTEE
Raymond O. Loen, Chairman
Henry C. Montgomery
Harold J. Withrow
FORWARD LOOKING STATEMENTS
The information contained in this Proxy Statement that is not historical,
such as information regarding increases in oil and gas reserves contained in the
Compensation Committee Report, are "forward-looking statements," as that term is
defined in Section 21E of the Securities and Exchange Act of 1934, as amended,
that involve a number of risks and uncertainties. Estimates of proved reserves
represent quantities of oil and gas which, upon analysis of engineering and
geologic data, appear with reasonable certainty to be recoverable in the future
from known oil and gas reservoirs under existing economic and operating
conditions. When economic or operating conditions change, the Company's proved
reserves can differ materially from those stated in such "forward-looking
statements."
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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.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SWIFT ENERGY COMPANY, THE S & P 500 INDEX
AND THE DOW JONES OIL - SECONDARY INDEX
* $100 invested on 12/31/91 in stock or index -- including reinvestment of
dividends.
Fiscal year ending December 31.
MEASUREMENT PERIOD DOW JONES OIL -
(FISCAL YEAR COVERED) SWIFT ENERGY COMPANY S & P 500 SECONDARY
1991 100 100 100
1992 152 108 101
1993 158 118 112
1994 179 120 108
1995 220 165 125
1996 548 203 154
"Cumulative total return" equals (i) the change in share price during the
measurement period plus cumulative dividends for the measurement period
(assuming dividend reinvestment), divided by (ii) the share price at the
beginning of the measurement period.
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 a prospect are sold to the
Company's employees on terms identical to those at which interests are sold to
third party investors in that prospect. As a result of enhanced drilling
activity, the amounts invested by officers and employees in such prospects in
1995 and 1996 increased significantly over previous years. During 1996,
leasehold and drilling costs associated with such investments in excess of
$60,000 were incurred as follows: A. Earl Swift -- $135,957, Virgil N.
Swift -- $259,379, Terry E. Swift -- $106,621, John R. Alden -- $95,080.
Unaffiliated third parties have invested in all of the prospects in which the
officers invested, on identical terms.
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AUDITORS
Arthur Andersen LLP, 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 1997
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 LLP,
inasmuch as no such action is legally required. A representative from Arthur
Andersen LLP will be present at this year's meeting of shareholders. 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
Any shareholder who wishes to submit a proposal for action to be included
in the proxy statement and form of proxy relating to the Company's 1998 annual
meeting of shareholders, scheduled to be held May 12, 1998, shall submit such
proposal to the Company on or before December 8, 1997.
By Order of the Board of Directors
/s/ JOHN R. ALDEN
JOHN R. ALDEN
Secretary
Houston, Texas
April 8, 1997
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SWIFT ENERGY COMPANY
1990 STOCK COMPENSATION PLAN
(AMENDED AND RESTATED AS OF MAY 13, 1997)
1. PURPOSE.
This 1990 Stock Compensation Plan (Amended and Restated as of May 13,
1997) (the "Plan") is intended as an incentive to encourage stock ownership by
certain officers and employees of SWIFT ENERGY COMPANY (the "Company"), or of
its subsidiary corporations (the "Subsidiaries," as that term is defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended from time to
time), so that they may acquire or increase their proprietary interest in the
success of the Company and Subsidiaries, and to encourage them to remain in the
employ of the Company or of the Subsidiaries. The Plan is designed to meet
this intent by offering performance-based stock and cash incentives and other
equity based incentive awards, thereby providing a proprietary interest in
pursuing the long-term growth, profitability and financial success of the
Company.
2. DEFINITIONS.
For purposes of this Plan, the following terms shall have the meanings
set forth below:
(a) "AWARD" or "AWARDS" means an award or grant made to a Participant
under Sections 6 through 9, inclusive, of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended,
together with the regulations promulgated thereunder.
(d) "COMMITTEE" means the Compensation Committee of the Board, or any
committee of the Board performing similar functions, constituted as provided in
Section 3 of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company or any
security of the Company issued in substitution, exchange or lieu thereof.
(f) "COMPANY" means Swift Energy Company, a Texas corporation, or any
successor corporation.
(g) "DEFERRED COMPENSATION STOCK OPTION" means any Stock Option
granted pursuant to the provisions of Section 6 of the Plan that is
specifically designated as such.
(h) "DISABILITY" means permanent and total disability. An individual
is permanently and totally disabled if he or she is unable to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 12
months.
(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute.
(j) "FAIR MARKET VALUE" means on any given date (i) the highest
closing price of the Common Stock on any established national exchange or
exchanges or, if no sale of Common Stock is made on such day, the next
preceding day on which there was a sale of such stock, or (ii) if the Common
Stock is not listed on an established stock exchange, the mean between the
closing bid and low asked quotations of the Common Stock in the New York
over-the-counter market as reported by the National Association of Securities
Dealers, Inc. for such date.
(k) "IMMEDIATE FAMILY MEMBER" means the spouse, children or
grandchildren of the Participant.
27
(l) "INCENTIVE STOCK OPTION" means any Stock Option (as defined
below) that is intended to be and is specifically designated as an "incentive
stock option" within the meaning of Section 422 of the Code.
(m) "NONQUALIFIED STOCK OPTION" means any Stock Option granted
pursuant to the provisions of Section 6 of the Plan that is not an Incentive
Stock Option.
(n) "PARTICIPANT" means an employee of the Company or a Subsidiary or
an individual who is performing services for either entity and who is granted
an Award under the Plan.
(o) "PERFORMANCE BONUS AWARD" means an Award of cash and/or shares of
Common Stock granted pursuant to the provisions of Section 9 of the Plan.
(p) "PLAN" means this Swift Energy Company 1990 Stock Compensation
Plan (Amended and Restated as of May 9, 1995), as set forth herein and as it
may be hereafter amended.
(q) "RESTRICTED AWARD" means an Award granted pursuant to the
provisions of Section 8 of the Plan.
(r) "RESTRICTED STOCK GRANT" means an Award of shares of Common Stock
granted pursuant to the provisions of Section 8 of the Plan.
(s) "RESTRICTED UNIT GRANT" means an Award of units representing
shares of Common Stock granted pursuant to the provisions of Section 8 of the
Plan.
(t) "STOCK APPRECIATION RIGHT" means an Award to benefit from the
appreciation of Common Stock granted pursuant to the provisions of Section 7 of
the Plan.
(u) "STOCK OPTION" means an Award to purchase shares of Common Stock
granted pursuant to the provisions of Section 6 of the Plan.
(v) "SUBSIDIARY" means any corporation or entity in which the Company
directly or indirectly controls 50% or more of the total voting power of all
classes of its stock having voting power.
(w) "TEN PERCENT SHAREHOLDER" means a person who owns (or is
considered to own after taking into account the attribution of ownership rules
of Section 424(d) of the Code) more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any of its
Subsidiaries.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee, as appointed
from time to time by the Board. The Board may from time to time remove members
from, or add members to, the Committee. The Committee shall be constituted so
as to permit the Plan to comply with Rule 16b-3 promulgated by the Securities
and Exchange Commission ("SEC") under the Exchange Act or any successor rule
("Rule 16b-3") and shall initially be comprised of not less than two of the
members of the Board who are "Non-Employee Directors" as defined in Rule 16b-3.
(b) A majority of the members of the Committee shall constitute a
quorum for the transaction of business. Action approved in writing by a
majority of the members of the Committee then serving shall be as effective as
if the action had been taken by unanimous vote at a meeting duly called and
held.
(c) The Committee is authorized to construe and interpret the Plan,
to promulgate, amend, and rescind rules and procedures relating to the
implementation of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. Any determination, decision, or
action of the Committee in connection with the construction, interpretation,
administration, or application of the Plan shall be binding upon all
Participants and any person validly claiming under or through any Participant.
(d) The Committee may designate persons other than members of the
Committee to carry out its responsibilities under such conditions and
limitations as it may prescribe, except that the Committee may not delegate its
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28
authority with regard to selection for participation of, and the granting of
Awards to, persons subject to Sections 16(a) and 16(b) of the Exchange Act or
who are eligible to receive Awards under this Plan.
(e) The Committee is expressly authorized to make modifications to
the Plan as necessary to effectuate the intent of the Plan as a result of any
changes in the tax, accounting, or securities laws treatment of Participants
and the Plan, subject to those restrictions that are set forth in Section 14
below.
(f) The Company shall effect the granting of Awards under the Plan,
in accordance with the determinations made by the Committee, by execution of
instruments in writing in such form as approved by the Committee.
4. ELIGIBILITY.
Persons eligible for Awards under the Plan shall consist of employees
(including officers, whether or not they are directors) of the Company or its
Subsidiaries who from time to time shall be designated by the Committee, and,
with respect to Nonqualified Stock Options only, may, at the discretion of the
Committee, consist of retired former employees of the Company or its
subsidiaries. Any person who shall be eligible for Awards under this Plan
shall not be eligible to participate in the Company's 1990 Nonqualified Stock
Option Plan, as amended.
5. DURATION OF AND COMMON STOCK SUBJECT TO PLAN.
(a) TERM. The Plan shall terminate on April 1, 2000 except with
respect to Awards then outstanding.
(b) SHARES OF COMMON STOCK SUBJECT TO PLAN. The maximum number of
shares of Common Stock in respect of which Awards may be granted under the Plan
(the "Plan Maximum") shall be 2,500,000, subject to adjustment as provided in
Section 12 below. Common Stock issued under the Plan may be either authorized
and unissued shares or issued shares which have been reacquired by the Company.
The following terms and conditions shall apply to Common Stock subject to the
Plan:
(i) In no event shall more than the Plan Maximum be
cumulatively available for Awards under the Plan;
(ii) For the purpose of computing the total number of shares of
Common Stock available for Awards under the Plan, there shall be counted
against the foregoing limitations (A) the number of shares of Common
Stock subject to issuance upon exercise or settlement of Awards
(regardless of vesting), and (B) the number of shares of Common Stock
which equal the value of Restricted Unit Grants or Stock Appreciation
Rights determined at the dates on which such Awards are granted;
(iii) If any Awards are forfeited, terminated, expire
unexercised, settled in cash in lieu of stock or exchanged for other
Awards, the shares of Common Stock which were previously subject to the
Awards shall again be available for Awards under the Plan to the extent
of such forfeiture or expiration of the Awards; and
(iv) Any shares of Common Stock which are used as full or
partial payment to the Company by a Participant of the purchase price of
shares of Common Stock upon exercise of a Stock Option shall again be
available for Awards under the Plan.
(c) GRANTS. No Award shall be granted hereunder prior to April 1,
1991; provided, however, that Awards may be granted hereunder at such earlier
date as it shall be determined through SEC regulation or administrative
regulation or position or based upon an opinion of counsel to the Company that
the Committee shall be comprised of "disinterested persons" within the meaning
of Rule 16b-3 promulgated under the Exchange Act.
6. STOCK OPTIONS.
Stock Options granted under the Plan may be in the form of Incentive
Stock Options, Non-Qualified Stock Options or Deferred Compensation Stock
Options (collectively, the "Stock Options"). Stock Options shall be subject to
the following terms and conditions, and each Stock Option shall contain such
additional terms and conditions, not inconsistent with the express provisions
of the Plan, as the Committee shall deem desirable:
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(a) GRANT. Stock Options shall be granted separately. In no event
will Stock Options or Awards be issued in tandem whereby the exercise of one
affects the right to exercise the other.
(b) STOCK OPTION PRICE. The exercise price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant. However, in no event shall the exercise price of an Incentive
Stock Option be less than one hundred percent (100%) of the Fair Market Value
of the Common Stock on the date of the grant of the Stock Option. In the case
of a Ten Percent Shareholder, the exercise price of an Incentive Stock Option
shall be not less than one hundred ten percent (110%) of the Fair Market Value
of the Common Stock on the date of the grant.
(c) OPTION TERM. The term of each Stock Option, other than an
Incentive Stock Option, shall be fixed by the Committee. The term of Incentive
Stock Options shall not exceed ten (10) years after the date the Incentive
Stock Option is granted, and the term of any Incentive Stock Options granted to
Ten Percent Shareholders shall not exceed five (5) years after the date of the
grant.
(d) EXERCISABILITY.
(i) Incentive Stock Options and Nonqualified Stock Options
shall be exercisable in installments as provided in the following
sentence, or as the Compensation Committee in its sole discretion shall
otherwise determine, and shall be subject to such other terms and
conditions as the Committee shall determine at the date of grant;
provided, however, that except as provided in Sections 10(a), 10(b),
10(c) and 13, no Incentive Stock Option or Nonqualified Stock Option
shall be exercisable prior to the first anniversary date of the date of
grant (hereinafter, "Anniversary Date"). Incentive Stock Options and
Nonqualified Stock Options may be exercised as to twenty percent (20%)
of the shares covered thereby beginning on the first Anniversary Date,
thereafter, an additional twenty percent (20%) of shares subject to such
stock options shall be exercisable beginning on the Anniversary Date in
each of the following four years, except as otherwise provided in
Sections 10(a), 10(b), 10(c) and 13.
(ii) Reload Options shall become exercisable in accordance with
Section 6(h)(iii) hereof.
(iii) Deferred Compensation Stock Options shall become
exercisable in accordance with the terms of the grant thereof as
established by the Committee.
(e) METHOD OF EXERCISE. Subject to applicable exercise restrictions
set forth in Section 6(d) above, a Stock Option may be exercised, in whole or
in part, by giving written notice of exercise to the Company specifying the
number of shares to be purchased. The notice shall be accompanied by payment
in full of the purchase price. The purchase price may be paid by any of the
following methods, subject to the restrictions set forth in Section 6(f)
hereof:
(i) in cash, by certified or cashier's check, by money order
or by personal check (if approved by the Committee) of an amount equal
to the aggregate purchase price of the shares of Common Stock to which
such exercise relates;
(ii) if acceptable to the Committee, by delivery of shares of
Common Stock already owned by the Participant, which shares, including
any cash tendered therewith, have an aggregate Fair Market Value
(determined as of the date preceding the Company's receipt of exercise
notice) equal to the aggregate purchase price of the shares of Common
Stock to which such exercise relates; or
(iii) if acceptable to the Committee, by delivery to the Company
of an exercise notice that requests the Company to issue to the
Participant the full number of shares of Common Stock as to which the
Stock Option is then exercisable, less the number of shares of Common
Stock that have an aggregate Fair Market Value (determined as of the
date preceding the Company's receipt of the exercise notice) equal to
the aggregate purchase price of the shares of Common Stock to which such
exercise relates.
(f) RESTRICTIONS ON METHOD OF EXERCISE. Notwithstanding the
foregoing payment provisions, the Committee, in granting Stock Options pursuant
to the Plan, may limit the methods by which a Stock Option may be exercised by
any person and, in processing any purported exercise of a Stock Option granted
pursuant to the Plan, may
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refuse to recognize the method of exercise selected by the Participant (other
than the method of exercise set forth in Section 6(e)(i)), if, in the opinion
of counsel to the Company, (i) the Participant is, or within the six months
preceding such exercise was, subject to reporting under Section 16(a) of the
Exchange Act, and (ii) there is a substantial likelihood that the method of
exercise selected by the Participant would subject the Participant to
substantial risk of liability under Section 16 of the Exchange Act.
Furthermore, no Incentive Stock Option may be exercised in accordance with the
methods of exercise set forth in subsections 6(e)(ii) and 6(e)(iii) above
unless, in the opinion of counsel to the Company, such exercise would not have
a material adverse effect upon the incentive stock option tax treatment of any
outstanding Incentive Stock Options or Incentive Stock Options (other than the
particular option or options then exercised in accordance with such subsection
6(e)(ii) or 6(e)(iii)) granted pursuant to the Plan.
(g) TRANSFERABILITY OF NONQUALIFIED STOCK OPTIONS. The Committee
may, in its discretion, authorize all or a portion of any Nonqualified Stock
Option to be on terms which permit transfer by the Participant to (i) a
retirement or pension plan for the benefit of the Participant, (ii) the spouse,
children or grandchildren of the Participant ("Immediate Family Members"),
(iii) a trust or trusts for the exclusive benefit of such Immediate Family
Members, (iv) a charitable trust or trusts created or controlled by the
Participant, or (v) a partnership in which such Immediate Family Members are
the only partners, provided that (x) there may be no consideration for any such
transfer, (y) the Stock Option must be approved by the Committee, and the Stock
Option or an amendment thereto must expressly provide for transferability in a
manner consistent with this Section, and (z) subsequent transfers of
transferred Options shall be prohibited except to a transferee to whom the
Participant could have transferred the Option pursuant to this Section 6(g) or
by will or the laws of descent and distribution, after which assignment Section
10(a) hereof shall apply to exercise of the Option by the assignee. Following
transfer, any such Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
all purposes hereof the term "Participant" shall be deemed to refer to the
transferee. The events of termination of employment of Section 10 hereof shall
continue to be applied with respect to the original Participant, following
which the Options shall be exercisable by the transferee only to the extent,
and for the periods specified in Section 10.
(h) TAX WITHHOLDING. In addition to the alternative methods of
exercise set forth in Section 6(e), holders of Nonqualified Stock Options,
subject to the discretion of the Committee, may be entitled to elect at or
prior to the time the exercise notice is delivered to the Company, to have the
Company withhold from the shares of Common Stock to be delivered upon exercise
of the Nonqualified Stock Option the number of shares of Common Stock
(determined based on the Fair Market Value as of the date preceding the
Company's receipt of the exercise notice) that is necessary to satisfy any
withholding taxes attributable to the exercise of the Nonqualified Stock
Option. If withholding is made in shares of the Common Stock pursuant to the
method set forth above, the Committee, in its discretion, may grant "Reload
Option(s)" (as defined in Section 6(i) below) on the terms specified in Section
6(i) below for the number of shares so withheld. Notwithstanding the foregoing
provisions, a holder of a Nonqualified Stock Option may not elect to satisfy
his or her withholding tax obligation in respect of any exercise as
contemplated above if, in the opinion of counsel to the Company, (i) the holder
of the Nonqualified Stock Option is, or within the six months preceding such
exercise was, subject to reporting under Section 16(a) of the Exchange Act,
(ii) there is a substantial likelihood that the election or timing of the
election would subject the holder to a substantial risk of liability under
Section 16 of the Exchange Act, or (iii) such withholding would have an adverse
tax or accounting effect to the Company.
(i) GRANT OF RELOAD OPTIONS. Whenever the Participant holding any
Incentive Stock Option or Nonqualified Stock Option (the "Original Option")
outstanding under this Plan (including any "Reload Options" granted under the
provisions of this Section 6(i)) exercises the Original Option and makes
payment of the option price by tendering shares of the Common Stock previously
held by him or her pursuant to Section 6(e)(ii) hereof, or by taking delivery
of a net number of shares of Common Stock upon exercise of an option pursuant
to Section 6(e)(iii) hereof, then the Committee may grant a new option (the
"Reload Option") for that number of additional shares of Common Stock which is
equal to the number of shares tendered by the Participant (or credited on
behalf of the Participant) in payment of the option price for the Original
Option being exercised. All such Reload Options granted hereunder shall be on
the following terms and conditions:
(i) The Reload Option price per share shall be an amount equal
to the then current Fair Market Value per share of the Common Stock,
determined as of the date of the Company's receipt of the exercise
notice for the Original Option;
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(ii) The option exercise period shall expire, and the Reload
Option shall no longer be exercisable, on the expiration of the option
period of the Original Option or two (2) years from the date of the
grant of the Reload Option, whichever is later;
(iii) Any Reload Option granted under this Section 6(h) shall
vest and first become exercisable one (1) year following the date of
exercise of the Original Option; and
(iv) All other terms of Reload Options granted hereunder shall
be identical to the terms and conditions of the Original Option, the
exercise of which gives rise to the grant of the Reload Option.
Even if the shares of Common Stock which are issued upon exercise of the
Original Option are sold or exchanged within one (1) year following the
exercise of the Original Option such that the sale constitutes a disqualifying
disposition for Incentive Stock Option treatment under the Code, no provision
of this Plan shall be construed as prohibiting such a sale.
(j) SPECIAL RULE FOR INCENTIVE STOCK OPTIONS. With respect to
Incentive Stock Options granted under the Plan, the aggregate Fair Market Value
(determined as of the date Incentive Stock Options are granted) of the number
of shares with respect to which Incentive Stock Options are exercisable for the
first time by a Participant during any calendar year shall not exceed one
hundred thousand dollars ($100,000) as of the time the option with respect to
such stock is granted or such other limits as may be required by the Code.
(k) DEFERRED COMPENSATION STOCK OPTIONS. Deferred Compensation Stock
Options are intended to provide a means by which compensation payments can be
deferred to future dates. The number of shares of Common Stock subject to a
Deferred Compensation Stock Option shall be determined by the Committee, in its
sole discretion, in accordance with the following formula:
Amount of Compensation to be Deferred = Number of Shares
--------------------------------------
Fair Market Value - Stock Option Price
Amounts of compensation deferred may include amounts earned under Awards
granted under the Plan or under any other compensation plan, program, or
arrangement of the Company as permitted by the Committee.
(l) INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to
the contrary, no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended, or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code or, without the consent of the Participant(s) affected, to
disqualify any Incentive Stock Option under such Section 422 of the Code. To
the extent permitted under Section 422 of the Code or applicable regulations
thereunder or any applicable Internal Revenue Service pronouncements:
(i) if a Participant's employment is terminated by reason of
death or Disability and the portion of any Incentive Stock Option that
becomes exercisable during the post-termination period specified in
Section 10(a) or 10(b) exceeds the $100,000 limitation contained in
Section 422(d) of the Code set forth in Section 6(i) above, such excess
shall be treated as a Nonqualified Stock Option; and
(ii) if the exercise of an Incentive Stock Option is
accelerated by reason of a Change in Control (as defined in Section 13
below), any portion of such Option that exceeds the $100,000 limitation
set forth in Section 6(i) above shall be treated as a Nonqualified Stock
Option.
7. STOCK APPRECIATION RIGHTS.
The grant of Stock Appreciation Rights under the Plan shall be subject
to the following terms and conditions, and shall contain such additional terms
and conditions, not inconsistent with the express terms of the Plan, as the
Committee shall deem desirable:
(a) STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is an
Award entitling a Participant to receive an amount equal to (or if the
Committee shall determine at the time of grant, less than) 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
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the date of grant of the Stock Appreciation Right, or such other price as may
be set by the Committee, multiplied by the number of shares of Common Stock
with respect to which the Stock Appreciation Right shall have been exercised.
(b) GRANT. A Stock Appreciation Right shall be granted separately.
In no event will Stock Appreciation Rights and other Awards be issued in tandem
whereby the exercise of one such Award affects the right to exercise the other.
(c) EXERCISE. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Committee, except
that in no event shall a Stock Appreciation Right be exercisable prior to the
first Anniversary Date of the date of grant. The Committee shall establish
procedures to provide that, with respect to any Participant subject to Section
16(b) of the Exchange Act who would receive cash in whole or in part upon
exercise of the Stock Appreciation Right, such exercise may only occur during
an exercise period described in Rule 16b-3(e)(3)(iii) (as such provision exists
from time to time) which, as of the date of adoption of this Plan, is a period
beginning on the third (3rd) business day following the Company's public
release of quarterly or annual summary statements of sales and earnings and
ending on the twelfth (12th) business day following such public release
("Window Period"). To the extent it is not inconsistent with the preceding
sentence, the Committee, in its discretion, may provide that a Stock
Appreciation Right shall be automatically exercised on one or more specified
dates, or that a Stock Appreciation Right may be exercised during only limited
time periods.
(d) FORM OF PAYMENT. Payment to the Participant upon exercise of a
Stock Appreciation Right may be made (i) in cash, by certified or cashier's
check or by money order, (ii) in shares of Common Stock, (iii) in the form of a
Deferred Compensation Stock Option, or (iv) any combination of the above, as
the Committee shall determine. The Committee may elect to make this
determination either at the time the Stock Appreciation Right is granted, or
with respect to payments contemplated in clauses (i) and (ii) above, at the
time of the exercise.
8. RESTRICTED AWARDS.
Restricted Awards granted under the Plan may be in the form of either
Restricted Stock Grants or Restricted Unit Grants. Restricted Awards shall be
subject to the following terms and conditions, and may contain such additional
terms and conditions, not inconsistent with the express provisions of the Plan,
as the Committee shall deem desirable:
(a) RESTRICTED STOCK GRANTS. A Restricted Stock Grant is an Award of
shares of Common Stock transferred to a Participant subject to such terms and
conditions as the Committee deems appropriate, as set forth in Section 8 (d)
below. Further, as a condition to the grant of Restricted Stock to any
Participant who, at the date of grant has not been employed by the Company and
has not performed services for the Company, the Committee shall require such
Participant to pay at least an amount equal to the par value of the shares of
Common Stock subject to the Restricted Stock Grant within thirty (30) days of
the date of the grant, and failure to pay such amount shall result in an
automatic termination of the Restricted Stock Grant.
(b) RESTRICTED UNIT GRANTS. A Restricted Unit Grant is an Award of
units granted to a Participant subject to such terms and conditions as the
Committee deems appropriate, including, without limitation, the requirement
that the Participant forfeit such units upon termination of employment for
specified reasons within a specified period of time, and restrictions on the
sale, assignment, transfer or other disposition of the units. Based on the
discretion of the Committee at the time a Restricted Unit Grant is awarded to a
Participant, a unit will have a value (i) equivalent to one share of Common
Stock, or (ii) equivalent to the excess of the Fair Market Value of a share of
Common Stock on the date the restriction lapses over the Fair Market Value of a
share of Common Stock on the date of the grant of the Restricted Unit Grant (or
over such other value as the Committee determines at the time of the grant).
(c) GRANT OF AWARDS. Restricted Awards shall be granted separately
under the Plan in such form and on such terms and conditions as the Committee
may from time to time approve. Restricted Awards, however, may not be granted
in tandem with other Awards whereby the exercise of one such Award affects the
right to exercise the other. Subject to the terms of the Plan, the Committee
shall determine the number of Restricted Awards to be granted to a Participant
and the Committee may impose different terms and conditions on any particular
Restricted Award made to any Participant. Each Participant receiving a
Restricted Stock Grant shall be issued a stock certificate in respect of the
shares of Common Stock. The certificate shall be registered in the name of the
Participant, shall be accompanied by a stock power duly executed by the
Participant, and shall bear an appropriate legend referring to the terms,
conditions and
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restrictions applicable to the Award. The certificate evidencing the shares
shall be held in custody by the Company until the restrictions imposed thereon
shall have lapsed or been removed.
(d) RESTRICTION PERIOD. Restricted Awards shall provide that in
order for a Participant to vest in the Awards, the Participant must
continuously provide services for the Company or its Subsidiaries, subject to
relief for specified reasons, for a period of not less than one (1) year
commencing on the date of the Award and ending on such later date or dates as
the Committee may designate at the time of the Award ("Restriction Period").
During the Restriction Period, a Participant may not sell, assign, transfer,
pledge, encumber, or otherwise dispose of shares of Common Stock received under
a Restricted Stock Grant. The Committee, in its sole discretion, may provide
for the lapse of restrictions in installments during the Restriction Period.
Upon expiration of the applicable Restriction Period (or lapse of restrictions
during the Restriction Period where the restrictions lapse in installments),
the Participant shall be entitled to receive his or her Restricted Award or the
applicable portion thereof, as the case may be. Upon termination of a
Participant's employment with the Company or any Subsidiary for any reason
during the Restriction Period, all or a portion of the shares or units, as
applicable, that are still subject to a restriction may vest or be forfeited,
in accordance with the terms and conditions established by the Committee at or
after grant.
(e) PAYMENT OF AWARDS. A Participant shall be entitled to receive
payment for a Restricted Unit Grant (or portion thereof) in an amount equal to
the aggregate Fair Market Value of the units covered by the Award upon the
expiration of the applicable Restriction Period. Payment in settlement of a
Restricted Unit Grant shall be made as soon as practicable following the
conclusion of the respective Restriction Period (i) in cash, by certified or
cashier's check or by money order, (ii) in shares of Common Stock equal to the
number of units granted under the Restricted Unit Grant with respect to which
such payment is made, (iii) in the form of a Deferred Compensation Stock
Option, or (iv) in any combination of the above, as the Committee shall
determine, subject, however, to any applicable Window Period requirement
imposed by the Committee with respect to Restricted Unit Grants settled in
whole or in part in cash. The Committee may elect to make this determination
either at the time the Award is granted, or with respect to payments
contemplated in clause (i) and (ii) above, at the time the Award is settled.
(f) RIGHTS AS A SHAREHOLDER. A Participant shall have, with respect
to the shares of Common Stock received under a Restricted Stock Grant, all of
the rights of a shareholder of the Company, including the right to vote the
shares, and the right to receive any cash dividends. Stock dividends issued
with respect to the shares covered by a Restricted Stock Grant shall be treated
as additional shares under the Restricted Stock Grant and shall be subject to
the same restrictions and other terms and conditions that apply to shares under
the Restricted Stock Grant with respect to which the dividends are issued.
9. PERFORMANCE BONUS AWARDS.
Performance Bonus Awards granted under the 1990 Plan may be in the form
of cash or shares of Common Stock, or a combination thereof. If a Performance
Bonus Award is a combination of cash and Common Stock, the portion of the
Performance Bonus Award comprising cash and Common Stock will be determined by
the Board based upon the Board's judgment as to the best interests of the
Company as a whole, taking into account both long-term and short-term strategic
goals. Performance Bonus Awards shall be subject to the following terms and
conditions, and shall contain such additional terms and conditions, not
inconsistent with the express provisions of the 1990 Plan, in such form as the
Committee shall deem desirable:
(a) GRANT OF AWARDS. Performance Bonus Awards will be granted on the
basis of Company performance as well as the Committee's judgment as to each
Participant's contribution to Company Performance. Company performance will
generally be analyzed in terms of (i) short-term results as measured by
increases in earnings per share and increases in cash flow and (ii) long-term
results as measured by changes in the volume of the proved oil and gas assets
of the Company and changes in the probable reserves as reflected in defined
prospects which the Company has available to drill. In addition to the
measures of performance set forth above, the Committee will evaluate and rate
the individual contribution of each of the Participants to the Company's
achievement of its goals. Performance will be classified as "Excellent,"
"Good+," "Good," or "Good-." The Committee will give bonus consideration to
Participants only when Company performance and individual contribution are
"Excellent," "Good+" or "Good." The three major measures of performance -
short-term Company results, long-term Company results and individual
contribution - will be given equal weight. The Committee may consider other
factors as well when it considers such other factors to be appropriate.
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34
(b) PERFORMANCE FACTORS. The Committee shall evaluate the following
performance factors for a particular calendar year ("Performance Factors") in
ascertaining the numerical rating factors ("Rating Factors") to be used in
determining a Participant's Performance Bonus Award under the formula set forth
in Section 9(c) below:
(1) SHORT TERM INCENTIVE FACTORS.
(i) Annual increases in earnings per share of the Company
("Earnings Per Share") as reflected from the end of one year to the end
of the immediately following calendar year, shall be ascribed the
following Rating Factors, subject to any adjustment deemed necessary by
the Committee in light of circumstances affecting the Company's Earnings
Per Share, with one set of Rating Factors applying to the Chief
Executive Officer of the Company ("CEO Rating Factors") and another set
of Rating Factors applying to all other Participants ("Other Rating
Factors"):
EARNINGS PER SHARE PARTICIPANTS' NUMERICAL CEO RATING
INCREASE CLASSIFICATION RATING FACTORS FACTORS
------------------------- ------------------------- ------------------------ -------------------------
Below 15% Good- 0 0
15% - 17.5% Good 0 - 0.175 0 - 0.349
17.6% - 22.5% Good+ 0.175 - 0.290 0.349 - 0.583
22.6% and above Excellent 0.290 - 0.350 0.583 - 0.70
(ii) Annual increases in cash flow per share of the Company
("Cash Flow Per Share") as reflected from the end of one year to the end
of the immediately following calendar year, shall be ascribed the
following Rating Factors, subject to any adjustment deemed necessary by
the Committee in light of circumstances affecting the Company's Cash
Flow Per Share.
CASH FLOW PER SHARE PARTICIPANTS' NUMERICAL CEO RATING
INCREASE CLASSIFICATION RATING FACTORS FACTORS
------------------------- ------------------------- ------------------------ -------------------------
Below 15% Good- 0 0
15% - 17.5% Good 0 - 0.175 0 - 0.349
17.6% - 22.5% Good+ 0.175 - 0.290 0.349 - 0.583
22.6% and above Excellent 0.290 - 0.350 0.583 - 0.70
(iii) The short term incentive factor shall be the average of
the percentages for increases in Earnings Per Share and Cash Flow Per
Share with Earnings Per Share and Cash Flow Per Share having equal
weight within the short term incentive factor. When combined as an
average, the short term incentive factors will have a weight of 0.334.
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35
(2) LONG TERM INCENTIVE FACTORS.
(i) Increases in the Company's volume of oil and gas proved reserves
as defined in Attachment 1 hereto ("Proved Reserves"), shall be ascribed
the following Rating Factors, subject to any adjustment deemed necessary
by the Committee in light of circumstances affecting the value of the
Company's Proved Reserves:
INCREASE IN PARTICIPANTS' NUMERICAL CEO RATING
PROVED RESERVES CLASSIFICATION RATING FACTORS FACTORS
------------------------- ------------------------- ------------------------ -------------------------
Below 15% Good- 0 0
15% - 17.5% Good 0 - 0.175 0 - 0.349
17.6% - 22.5% Good+ 0.175 - 0.290 0.349 - 0.583
22.6% and above Excellent 0.290 - 0.350 0.583 - 0.70
(ii) Increases in the Company's volume of oil and gas probable
reserves, as defined in Attachment 1 hereto ("Probable Reserves"), shall
be ascribed the following Rating Factors, subject to any adjustment
deemed necessary by the Committee in light of circumstances affecting
the value of the Company's Probable Reserves:
INCREASE IN PARTICIPANTS' NUMERICAL CEO RATING
PROBABLE RESERVES CLASSIFICATION RATING FACTORS FACTORS
------------------------- ------------------------- ------------------------ -------------------------
Below 15% Good- 0 0
15% - 17.5% Good 0 - 0.175 0 - 0.349
17.6% - 22.5% Good+ 0.175 - 0.290 0.349 - 0.583
22.6% and above Excellent 0.290 - 0.350 0.583 - 0.70
(iii) The weighting factor for increases in Proved Reserves and
Probable Reserves shall each be 0.167. In any year in which there is a
positive increase in either Proved Reserves or Probable Reserves, the
three year compounded average of that category of reserves which has
increased for the most recent three years may be substituted for the
year-to-year values if, in the judgment of the Committee, such
substitute would better represent the performance of the Company in view
of the fact that these are intended as long term incentives. For
example, there may be a year in which a number of closings of
acquisitions of producing properties occur within a short period of each
other, but which would normally occur over a longer period of time and
which the Committee therefore determines do not accurately reflect the
longer term performance of the Company.
The long term incentive factor shall be the average of the numerical
factors for increases in Proved Reserves and Probable Reserves with Proved
Reserves and Probable Reserves having equal weight within the long term
incentive factor. When combined as an average, long term incentive factors
will have a weight of 0.334.
(3) INDIVIDUAL CONTRIBUTION INCENTIVE. The Committee, in
consultation with the CEO (except when the CEO is the Participant being
evaluated), shall evaluate the overall performance of each Participant in
contributing to the Company's achievement of its strategic objectives
("Contribution") . "Contribution" includes both an evaluation of individual
contribution and an evaluation of the Participant's management of the
organization for which he or she is responsible. The following Rating Factors
shall be ascribed to the indicated Contribution classifications:
PARTICIPANTS'
NUMERICAL RATING CEO RATING
CLASSIFICATION FACTORS FACTORS
------------------- ---------------------- -------------------
Good- 0 0
Good 0 - 0.175 0 - 0.349
Good+ 0.175 - 0.290 0.349 - 0.583
Excellent 0.290 - 0.350 0.583 - 0.70
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(c) FORMULA FOR DETERMINING PERFORMANCE BONUS AWARDS. Some time after
final annual Company financial results are available, the CEO shall make his
recommendations as to personnel to be Participants in the Performance Bonus
Award for the Participants other than himself, based on the Performance
Factors and the application of the formula thereto set forth in this Section
9(c), and the CEO shall provide supporting documentation for his
recommendations. Except as provided elsewhere herein, using this and other
information the Committee deems appropriate, the Committee shall determine each
Participant's Performance Bonus Award by (i) multiplying 0.334 by the
applicable Rating Factors for the average of the short term factors, the
average of the long term factors and for Contribution calculated as described
in Section 9(b), (ii) adding the three products thereof to obtain a
Participant's "Bonus Percentage," and (iii) multiplying the applicable Bonus
Percentage by the Participant's base salary at December 31 of the year for
which the Award is being determined. See Attachment 2 for a sample
calculation.
(d) COMMITTEE DISCRETION. The Committee will determine its
recommendations as to actual Performance Bonus Awards taking into account the
overall circumstances of the Company. The sum of the Performance Bonus Awards,
for all Participants except for that of the CEO, is expected to range from 0 to
35 percent of the annual aggregate base compensation of each individual
Participant other than the CEO. When, in the Committee's judgment, performance
is exceptionally strong, the Committee may recommend Performance Bonus Awards
which total in excess of 35 percent of the annual aggregate compensation of
Participants (other than the CEO). The Performance Bonus Award for the CEO is
expected to range from 0 to 70 percent of the CEO's annual base compensation.
10. TERMINATION OF EMPLOYMENT.
The terms and conditions under which an Award may be exercised after a
Participant's termination of employment shall be determined by the Committee,
except as otherwise provided herein. The conditions under which such post-
termination exercises shall be permitted with respect to Incentive Stock
Options shall be determined in accordance with the provisions of Section 422 of
the Code and as otherwise provided in Section 6 above, provided that the
Compensation Committee, in its sole discretion, may accelerate the dates upon
which all or a portion of any outstanding unexercised Incentive Stock Option
held by a Participant may be exercised following such termination of
employment.
(a) TERMINATION BY DEATH. Subject to Section 6(l), if a
Participant's employment by the Company or any Subsidiary terminates by reason
of the Participant's death or if the Participant's death occurs within three
months after the termination of his or her employment, any Award held by such
Participant may thereafter be exercised, to the extent such Award otherwise was
then exercisable by the Participant, by the legal representative of the
Participant's estate or by any person who acquired the Award by will or the
laws of descent and distribution, for a period of one year from the
Participant's termination of employment (as contemplated in this Section 10(a))
or until the expiration of the stated term of the Award, whichever period is
the shorter. Any right of exercise under a nonvested Award held by a
Participant at the time of his or her death is extinguished and terminated.
(b) TERMINATION BY REASON OF DISABILITY. Subject to Section 6(l), if
a Participant's employment by the Company or Subsidiary terminates by reason of
Disability, any Award held by such Participant may thereafter be exercised by
the Participant, to the extent such Award otherwise was then exercisable by the
Participant, for a period of one year from the date of such termination of
employment or until the expiration of the stated term of such Award, whichever
period is the shorter; provided, however, that if the Participant dies within
such one-year period, any unexercised Award held by such Participant shall
thereafter be exercisable to the extent to which it was exercisable at the time
of such death or until the expiration of the stated term of such Award,
whichever period is shorter. Any right of exercise under a nonvested Award
held by the Participant at the time of his or her termination by reason of
Disability is terminated and extinguished.
(c) OTHER TERMINATION. Subject to Section 6(l), if a Participant's
employment by the Company or any Subsidiary is terminated for any reason other
than retirement, any Award held by the Participant at the time of his or her
termination shall be exercisable, to the extent otherwise then exercisable, for
the lesser of three (3) months from the date of such termination or the balance
of the term of the Award, and any right of exercise under any nonvested Award
held by a Participant at the time of his or her termination is terminated and
extinguished, provided that in the case of an Award other than an Incentive
Stock Option, the Committee may extend such Award for periods determined in its
discretion; provided, however, that upon termination of employment, if the
Participant continues to serve, or commences serving, as a director of the
Company, then in such event any Awards may continue to be held by the
Participant under the original terms thereof, with any Incentive Stock Options
held by such Participant to henceforth be treated as Nonqualified Stock Options.
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11. NON-TRANSFERABILITY OF INCENTIVE STOCK OPTIONS.
No Incentive Stock Option under the Plan, and no rights or interest
therein, shall be assignable or transferable by a Participant except by will or
the laws of descent and distribution, after which assignment Section 10(a)
hereof shall apply to exercise of the Incentive Stock Option by the assignee.
During the lifetime of a Participant, Incentive Stock Options are exercisable
only by, and payments in settlement of Incentive Stock Options will be payable
only to, the Participant or his or her legal representative.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
(a) The existence of the Plan and the Awards granted hereunder shall
not affect or restrict in any way the right or power of the Board or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Company's Common Stock or the rights thereof, the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding.
(b) In the event of any change in capitalization affecting the Common
Stock of the Company, such as a stock dividend, stock split, recapitalization,
merger, consolidation, split-up, combination, exchange of shares, other form of
reorganization, or any other change affecting the Common Stock, the Board, in
its discretion, may make proportionate adjustments it deems appropriate to
reflect such change with respect to (i) the maximum number of shares of Common
Stock which may be sold or awarded to any Participant, (ii) the number of
shares of Common Stock covered by each outstanding Award, and (iii) the price
per share in respect of the outstanding Awards. Notwithstanding the foregoing,
the Board may only increase the aggregate number of shares of Common Stock for
which Awards may be granted under the Plan solely to reflect the change, if
any, of the capitalization of the Company or a Subsidiary.
(c) The Committee may also make such adjustments in the number of
shares covered by, and the price or other value of any outstanding Awards in
the event of a spin-off or other distribution (other than normal cash
dividends) of Company assets to shareholders.
13. CHANGE OF CONTROL.
(a) In the event of a Change of Control (as defined in Paragraph (b)
below) of the Company, and except as the Board may expressly provide otherwise
in resolutions adopted prior to the Change of Control:
(i) All Stock Options or Stock Appreciation Rights then
outstanding shall become fully exercisable as of the date of the Change
of Control, and
(ii) All restrictions and conditions of all Restricted Stock
Grants and Restricted Unit Grants then outstanding shall be deemed
satisfied as of the date of the Change of Control,
subject to the limitation that any Award which has been outstanding less than
one (1) year on the date of the Change of Control shall not be afforded such
treatment.
(b) A "Change of Control" shall be deemed to have occurred upon the
occurrence of any one (or more) of the following events, other than a
transaction with another person controlled by the Company or its officers or
directors, or a benefit plan or trust established by the Company for its
employees:
(i) Any person, including a group as defined in Section
13(d)(3) of the Exchange Act, becomes the beneficial owner of shares of
the Company with respect to which 40% or more of the total number of
votes for the election of the Board may be cast;
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(ii) As a result of, or in connection with, any cash tender
offer, exchange offer, merger or other business combination, sale of
assets or contested election, or combination of the above, persons who
were directors of the Company immediately prior to such event shall
cease to constitute a majority of the Board;
(iii) The stockholders of the Company shall approve an agreement
providing either for a transaction in which the Company will cease to be
an independent publicly owned corporation or for a sale or other
disposition 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 one made by the Company), and shares
of Common Stock are acquired thereunder ("Offer"). However, the
acceleration of the exercisability of outstanding Awards upon the
occurrence of an Offer shall be within the discretion of the Board.
14. AMENDMENT AND TERMINATION.
(a) AMENDMENTS WITHOUT SHAREHOLDER APPROVAL. Except as set forth in
Sections 14(b) and 14(c) below, the Board may, without further approval of the
shareholders, at any time amend, alter, discontinue or terminate this Plan, in
such respects as the Board may deem advisable.
(b) AMENDMENTS REQUIRING SHAREHOLDER APPROVAL. Except as set forth
in Section 14(c) below, subject to changes in law or other legal requirements
(including any change in the provisions of the Code and accompanying Regulations
that would permit otherwise), the Board must obtain approval of the shareholders
to make any amendment that would (a) increase the aggregate number of shares of
Common Stock that may be issued under the Plan (except for adjustments pursuant
to Section 12 of the Plan), (b) materially modify the requirements as to
eligibility for participation in the Plan, or (c) be required to be approved by
the shareholders under any rules for listed companies promulgated by any
national stock exchange on which the Company's stock is traded.
(c) PROHIBITED AMENDMENTS. Notwithstanding Sections 14(a) and 14(b),
under no circumstances may the Board or Committee (i) amend, alter, discontinue
or terminate the requirements set forth in Sections 6(b), 6(c), 6(j) and 6(l)
with respect to Incentive Stock Options unless (a) such modifications are made
to comply with changes in the tax laws, or (b) the Plan is completely
terminated, or (ii) make any amendment, alteration or modification to the Plan
that would impair the vested rights of a Participant under any Award
theretofore granted under this Plan.
15. MISCELLANEOUS MATTERS.
(a) TAX WITHHOLDING. In addition to the authority set forth in
Section 6(g) above, the Company shall have the right to deduct from a
Participant's wages or from any settlement, including the delivery of shares,
made under the Plan any federal, state, or local taxes of any kind required by
law to be withheld with respect to such payments, or to take such other action
as may be necessary in the opinion of the Company to satisfy all obligations
for the payment of such taxes.
(b) NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the
granting of any Award shall confer upon any Participant any right to continue
employment with the Company or any Subsidiary, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary to
terminate the employment of any Participant at any time, with or without cause.
(c) ANNULMENT OF AWARDS. The grant of any Award under the Plan
payable in cash is provisional until cash is paid in settlement thereof.
Except in those circumstances set forth in Section 13 hereof, the grant of any
Award payable in Common Stock is provisional until the Participant becomes
entitled to the certificate in settlement thereof. Except in those
circumstances set forth in Section 13 hereof, in the event the employment of a
Participant is terminated for cause (as defined below), any Award which is
provisional shall be annulled as of the date of such termination for cause. For
the purpose of this Section 15(c), the term "terminated for cause" means any
discharge for violation of the policies and procedures of the Company or a
Subsidiary or for other job performance or conduct which is detrimental to the
best interests of the Company or a Subsidiary, but shall not include a
termination solely related to a "Change of Control" as defined in Section 13
hereof.
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(d) SECURITIES LAW RESTRICTIONS. No shares of Common Stock shall be
issued under the Plan unless counsel for the Company shall be satisfied that
such issuance will be in compliance with applicable Federal and state
securities laws. Certificates for shares of Common Stock delivered under the
Plan may be subject to such stock-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Common Stock is then listed, and any applicable Federal or state
securities law. The Committee may cause a legend or legends to be put on any
such certificates to refer to those restrictions.
(e) AWARD AGREEMENT. Each Participant receiving an Award under the
Plan shall enter into an agreement with the Company in a form specified by the
Committee agreeing to the terms and conditions of the Award and such related
matters as the Committee, in its sole discretion, shall determine.
(f) COSTS OF PLAN. The costs and expenses of administering the Plan
shall be borne by the Company.
(g) GOVERNING LAW. The Plan and all actions taken thereunder shall
be governed by and construed in accordance with the laws of the State of Texas.
(h) EFFECTIVE DATE. This Plan, having been approved by a majority of
the non-employee Board members, is effective as amended, and subject to
approval by the Company's shareholders, as of May 13, 1997.
SWIFT ENERGY COMPANY, a Texas corporation
By:
------------------------------------------
Its:
-----------------------------------------
Date:
----------------------------------------
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SWIFT ENERGY COMPANY
1990 NONQUALIFIED STOCK OPTION PLAN
(AMENDED AND RESTATED AS OF MAY 13, 1997)
1. PURPOSE OF THE PLAN.
This Swift Energy Company 1990 Nonqualified Stock Option Plan (the
"Plan") is intended as an incentive to retain as independent directors on the
Board of Directors (the "Board") of Swift Energy Company, a Texas corporation
(the "Company"), persons of training, experience and ability, to encourage the
sense of proprietorship of such persons and to stimulate the active interests
of such persons in the development and financial success of the Company. It is
further intended that options issued pursuant to this Plant (the "Options")
shall constitute nonqualified stock options within the meaning of Section 83 of
the Internal Revenue Code of 1986, as amended ("Code").
2. SHARES AND OPTIONS.
Subject to adjustments in Paragraph 8 hereof, a total of 450,000
shares (the "Shares") of Common Stock, $.01 par value ("Stock"), of the Company
shall be subject to the Plan. The Shares subject to the Plan shall consist of
unissued shares or previously issued shares reacquired and held by the Company,
or any corporation or entity in which the Company directly or indirectly
controls 50% or more of the total combined voting power of all classes of its
stock having voting power (any such corporation or entity, a "Subsidiary"), and
such number of Shares shall be and hereby is reserved for sale for such
purpose. Any of such Shares that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purpose of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of Shares to meet the
requirements of the Plan. Should any Option expire or be cancelled prior to
its exercise in full, the Shares theretofore subject to such Option may not
again be subjected to an Option under the Plan.
3. FORMULA FOR AUTOMATIC GRANT OF OPTIONS.
(a) Options automatically shall be granted to those
persons who, as of the dates set forth in Section 3(b) below, are (i) directors
of the Company, (ii) are not employees of the Company or a Subsidiary, and
(iii) are not eligible, and have not been eligible for at least one year prior
to becoming a nonemployee director of the Company, to receive any award under
the Company's 1987 Incentive Stock Option Plan, the Company's 1990 Stock
Compensation Plan or any other stock option plan of the Company that is
administered by any person having discretion with respect to the selection of
participants and/or the amount of awards (any person satisfying all three
requirements is hereinafter referred to as a "Director"). Each person to whom
an Option is granted under this Plan, or any successor to the rights of such
person under this Plan by reason of transfer from the original grantee,
hereafter shall be referred to as an "Optionee." Each Option shall be
evidenced by an option agreement, in a form specified by the Board, containing
terms and conditions that are not inconsistent with this Plan or applicable
laws ("Option Agreement"). The Options automatically granted to Directors
under this Plan shall be in addition to regular director's fees or other
benefits with respect to any Director's position with the Company or its
Subsidiaries. Neither the Plan nor any Option granted under the Plan shall
confer upon any person any right to continue to serve as a Director.
(b) Subject to Section 3(c) below, on the date (any such
date, an "Eligibility Date") on which an individual first becomes a Director
for purposes of this Plan (but in no event earlier than April 1, 1991, unless
on an earlier date the Company determines, through an administrative regulation
or position or based upon an opinion of counsel to the Company, that each
Director is a "disinterested person" within the meaning of Rule 16b-3 or any
successor rule ("Rule 16b-3") promulgated under the Securities Exchange Act of
1934 (the "Exchange Act")), such Director shall automatically receive an Option
with respect to 10,000 Shares. Thereafter, each individual who is a Director
on the date after any subsequent annual meeting of shareholders of the Company
occurring more than eleven (11) months after his or her Eligibility Date (any
such date, an "Option Date"), on the
41
day following such annual meeting shall automatically receive an Option with
respect to 5,000 Shares, subject to the Option Maximum set forth in Section
3(c) below. Options automatically granted pursuant to this Section 3(b) are
exercisable in installments as provided in Section 6(a) below.
(c) Notwithstanding any provision herein to the contrary,
no Director shall be automatically granted any Option which, if considered
together with all other outstanding and unexercised options granted by the
Company hereunder or pursuant to any other Company plan ("Outstanding
Options"), would entitle such Director to purchase more than 60,000 shares of
the Company's common stock ("Option Maximum"). On any Eligibility Date or
Option Date on which the automatic grant of Options pursuant to Section 3(b)
above would exceed the Option Maximum for a Director, the number of Shares in
respect of which Options shall be automatically granted hereunder shall be
reduced (or eliminated) so that the Director's shares of all Company stock
covered by Outstanding Options shall not exceed the Option Maximum. In the
event that any such Director subsequently exercises any of his or her
Outstanding Options to purchase shares of the Company's stock, the shares
purchased thereby shall no longer be considered to be Outstanding Options for
purposes of the Option Maximum.
4. OPTION PRICE.
(a) Each Option shall have an exercise price for the
related Shares that is equal to the fair market value of such Shares
(determined as set forth in Section 4(b) below) on the date the Option is
granted.
(b) The fair market value of a Share on a particular date
("Fair Market Value") shall be (i) the highest closing price of the Stock on
any established national exchange or exchanges or, if no sale of Stock is made
on such day, the next preceding day on which there was a sale of such stock, or
(ii) if the Stock is not listed on an established stock exchange, the mean
between the closing high bid and low asked quotations of the Stock in the New
York over-the-counter market as reported by the National Association of
Securities Dealers, Inc. for such date.
5. OPTION PERIOD.
The Options granted under this Plan shall be for a term of ten
(10) years from the date of granting of each Option.
6. EXERCISE OF OPTIONS; CERTAIN CONDITIONS TO GRANT.
(a) An Option shall be exercisable in installments as
provided in the Option Agreement; provided, however, no Options shall be
exercisable prior to the first anniversary date of the date of grant
(hereinafter, "Anniversary Date"). An Option may be exercised as to twenty
percent (20%) of the Shares covered thereby beginning on the first Anniversary
Date; thereafter, an additional twenty percent (20%) of Shares subject to the
Option shall be exercisable as of the Anniversary Date in each of the following
four years except as otherwise provided in Sections 6(f), 6(g), 6(h) and 9
below.
(b) Subject to applicable exercise restrictions set forth
herein, Options may be exercised, in whole or in part, by giving written notice
of exercise to the Company specifying the number of Shares to be purchased.
The notice shall be accompanied by payment in full of the purchase price. The
purchase price may be paid by any of the following methods, subject to the
restrictions set forth in Section 6(c) hereof:
(i) in cash, by certified or cashier's check, by money order or by
personal check (if approved by the Board) of an amount equal to the
aggregate purchase price of the Shares to which such exercise relates;
(ii) if acceptable to the Board, by delivery of shares of Stock
already owned by the Optionee, which shares, including any cash
tendered therewith, have an aggregate Fair Market Value (determined as
of
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the date preceding the Company's receipt of the exercise notice) equal
to the aggregate purchase price of the Shares to which such exercise
relates; or
(iii) if acceptable to the Board, by delivery to the Company of an
exercise notice that requests the Company to issue to the Optionee the
full number of Shares as to which the Option is then exercisable, less
the number of Shares that have an aggregate Fair Market Value
(determined as of the date preceding the Company's receipt of the
exercise notice) equal to the aggregate purchase price of the Shares
to which such exercise relates.
(c) Notwithstanding the foregoing payment provisions, the
Board may refuse to recognize the method of exercise selected by the Optionee
(other than the method of exercise set forth in Section 6(b)(i)), if, in the
opinion of counsel to the Company, (i) the Optionee is, or within the six (6)
months preceding such exercise was, subject to reporting under Section 16(a) of
the Exchange Act, and (ii) there is a substantial likelihood that the method of
exercise selected by the Optionee would subject the Optionee to substantial
risk of liability under Section 16 of the Exchange Act.
(d) In addition to the alternative methods of exercise
set forth in Section 6(b) above, either the Optionee or the Company may elect
to have the Company withhold from the Shares to be delivered upon exercise of
the Option the number of Shares (Based on the Fair Market Value of such Shares
as of the date preceding the Company's receipt of the exercise notice) that is
necessary to satisfy any withholding taxes attributable to the exercise of the
Option. Such election shall be made by the Optionee, if at all, at or prior to
the time the exercise notice is delivered to the Company and by the Company, if
at all, within 10 days after receipt of the exercise notice. If withholding is
made in Shares pursuant to the method set forth above, the Company may grant
"Reload Option(s)" (as defined in Section 6(e) below) on the terms specified in
Section 6(e) below for the number of Shares withheld. Notwithstanding the
foregoing provisions, an Optionee may not elect to satisfy his or her
withholding tax obligation in respect of any exercise as contemplated above if,
in the opinion of counsel to the Company, (i) the Optionee is, or within the
six (6) months preceding such exercise was, subject to reporting under Section
16(a) of the Exchange Act, (ii) there is a substantial likelihood that the
election or timing of the election would subject the holder to a substantial
risk of liability under Section 16 of the Exchange Act, and (iii) such
withholding would have an adverse tax or accounting effect to the Company.
(e) Whenever the Optionee holding any Option (the
"Original Option") outstanding under this Plan (including any "Reload Options"
granted under the provisions of this Section 6(e)) exercises the Original
Option and makes payment of the option price by tendering Shares previously
held by him or her pursuant to Section 6(b)(ii) hereof, or by taking delivery
of a net number of shares of common stock upon exercise of an option pursuant
to Section 6(b)(iii) hereof, then the Company may grant a new option (the
"Reload Option") for the number of additional Shares that is equal to the
number of shares tendered by the Optionee (or credited on behalf of the
Optionee) in payment of the option price for the Original Option being
exercised. All such Reload Options granted hereunder shall be on the following
terms and conditions:
(i) The Reload Option exercise price per share shall be an amount
equal to the then current Fair Market Value per share of the Company's
Common Stock, determined as of the date of the Company's receipt of
the exercise notice for the Original Option;
(ii) The option exercise period shall expire, and the Reload Option
shall no longer be exercisable, on the expiration of the option period
of the Original Option or two (2) years from the date of the grant of
the Reload Option, whichever is later;
(iii) Any Reload Option granted under this Section 6(e) shall vest
and first become exercisable one (1) year following the date of
exercise of the Original Option; and
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(iv) All other terms of Reload Options granted hereunder shall be
identical to the terms and conditions of the Original Option, the
exercise of which gives rise to the grant of the Reload Option.
(f) Notwithstanding any provision herein to the contrary,
in the event a Director is unable to continue as a Director with the Company as
a result of his or her total and permanent "disability" (as defined in Section
22(e)(3) of the Code), he or she may, but only within the period of time one
year from the date he or she becomes disabled (but not later than the
expiration of the term of the Option), exercise his or her Option (including
any Reload Option) to the extent he or she was entitled to exercise it at the
date of such termination. To the extent the Optionee was not entitled to
exercise the Option at the date of the termination, or if he or she does not
exercise such Option (which he or she was entitled to exercise) within the time
specified herein, the Option shall terminate.
(g) In the event of the death of an Optionee during his
or her term of service as a Director of the Company, to the extent the Optionee
was entitled to exercise the Option at the time of his or her death the Option
may be exercised within a one-year period following the date of death (but not
later than the expiration of the term of the Option) by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance. To the extent the Optionee was not entitled to exercise the
Option at the date of his or her death, the Option shall terminate.
(h) Upon termination of an Optionee's service as a
Director of the Company (for any reason other than death or disability),
Options not theretofore vested and exercisable shall be forfeited; provided,
however, that if the Company terminates the Optionee's service as a Director
one-half of the Shares subject to the Option that were not theretofore
exercisable shall be immediately exercisable as of the date of termination of
such service.
7. TRANSFERABILITY.
The Board may, in its discretion, authorize all or a portion of any
Option to be on terms which permit transfer by the Optionee to (i) a retirement
or pension plan for the benefit of the Optionee, (ii) the spouse, children or
grandchildren of the Optionee ("Immediate Family Members"), (iii) a trust or
trusts for the exclusive benefit of such Immediate Family Members, (iv) a
charitable trust or trusts created or controlled by the Optionee, or (v) a
partnership in which such Immediate Family Members are the only partners,
provided that (x) there may be no consideration for any such transfer, (y) the
Option Agreement must be approved by the Board, and the Option Agreement or an
amendment thereto must expressly provide for transferability in a manner
consistent with this Section, and (z) subsequent transfers of transferred
Options shall be prohibited except to a transferee to whom the Optionee could
have transferred the Option pursuant to this Section 7 or by will or the laws
of descent and distribution. Following transfer, any such Options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for all purposes hereof the term
"Optionee" shall be deemed to refer to the transferee.
8. ADJUSTMENTS.
(a) The existence of the Plan and the Options granted hereunder
shall not affect or restrict in any way the right or power of the Board or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Company's Stock or the rights thereof, the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding.
(b) In the event of any change in capitalization affecting the
Stock of the Company, such as a stock dividend, stock split, recapitalization,
merger, consolidation, split-up, combination, exchange of shares, other form of
reorganization, or any other change affecting the Stock, the Board, in its
discretion, may make proportionate
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adjustments it deems appropriate to reflect such change with respect to (i) the
maximum number of shares of Stock which may be sold or awarded to any Optionee,
(ii) the number of shares of Stock covered by each outstanding Option, and
(iii) the price per share in respect of the outstanding Options.
Notwithstanding the foregoing, the Board may only increase the aggregate number
of shares of Stock for which Options may be granted under the Plan solely to
reflect the change, if any, of the capitalization of the Company.
9. CHANGE OF CONTROL.
(a) In the event of a Change of Control (as defined in
Section 9(b) below) of the Company, and except as the Board may expressly
provide otherwise in resolutions adopted prior to the Change of Control, all
Options then outstanding shall become fully exercisable as of the date of the
Change of Control; provided, however, that no Option which has been outstanding
less than one (1) year on the date of the Change of Control shall be afforded
such treatment.
(b) A "Change of Control" shall be deemed to have
occurred upon the occurrence of any one (or more) of the following events,
other than a transaction with another person controlled by the Company or its
officers and directors, or a benefit plan or trust established by the Company
for its employees:
(i) Any person, including a group as defined in Section 13(d)(3)
of the Exchange Act, becomes the beneficial owner of shares of the
Company with respect to which 40% or more of the total number of votes
for the election of the Board may be cast;
(ii) As a result of, or in connection with, any cash tender offer,
exchange offer, merger or other business combination, sale of assets
or contested election, or combination of the above, persons who were
directors of the Company immediately prior to such event shall cease
to constitute a majority of the Board;
(iii) The stockholders of the Company shall approve an
agreement providing either for a transaction in which the Company will
cease to be an independent publicly owned corporation or for a sale or
other disposition 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 Stock (other than one made by the Company), and forty
percent (40%) of the Company's outstanding shares of Stock are
acquired thereunder.
10. SECURITIES LAWS RESTRICTIONS.
Whether or not the Options and Shares covered by the Plan have been
registered under the Securities Act of 1933, as amended, each person exercising
an Option under the Plan may be required by the Company to give a
representation in writing that he or she is acquiring Shares for his or her own
account for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof. As a condition of any transfer of the
certificate evidencing Shares, the Board may obtain such other agreements of
undertakings, if any, that it may deem necessary or appropriate to assume
compliance with any provisions of the Plan or any law or regulation.
Certificates for Shares delivered under the Plan may be subject to such
stock-transfer orders and other restrictions as the Board may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Stock is then listed,
and any applicable Federal or state securities laws. The Board may cause a
legend or legends to be put on any such certificates to refer to those
restrictions.
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11. AMENDMENT, MODIFICATIONS, SUSPENSION OR DISCONTINUANCE OF
THIS PLAN.
(a) Except as set forth in Sections 11(b), 11(c) and
11(d) below, without shareholder approval the Board may amend, suspend or
terminate the Plan for the purpose of meeting or addressing any changes in
legal requirements or for any other purpose it deems to be in the best
interests of the Company if permitted by law.
(b) Without the approval of the shareholders, the board
may not make any amendment to the Plan for which shareholder approval is
required by (i) any rules for listed companies promulgated by any national
stock exchange on which the Company's stock is traded or (ii) any other
applicable law.
(c) Notwithstanding Sections 11(a) and 11(b) under no
circumstances may the Board amend, alter, discontinue or terminate the Plan so
as to impair the vested rights of Optionees under any Option theretofore
granted under the Plan.
(d) Notwithstanding Sections 11(a) and 11(b), the
provisions in Sections 3(a) and 3(b) regarding eligibility and automatic grants
of options under the Plan shall not be amended more than once every six (6)
months, except for such amendments as may be necessary to comply with
applicable provisions of the Code or the rules and regulations promulgated
thereunder.
12. GOVERNMENT REGULATIONS.
The Plan, and the granting and exercise of Options thereunder, and the
obligation of the Company to sell and deliver Shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approval
by any governmental agencies or national securities exchanges as may be
required.
13. COSTS OF PLAN.
The costs and expenses of administering the Plan shall be borne by the
Company.
14. GOVERNING LAW.
The Plan and all actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of Texas.
15. EFFECTIVE DATE.
The Plan shall be effective if, and when, approved by a majority of
the Company's shareholders at the 1990 annual meeting of shareholders or any
adjournment thereof.
16. INTERPRETATION.
(a) If any provision of the Plan is held invalid for any
reason, such holding shall not affect the remaining provisions hereof, but
instead the Plan shall be construed and enforced as if such provision had never
been included in the Plan.
(b) Headings contained in this Agreement are for
convenience only and shall in no manner be construed as part of this Plan.
(c) Any reference to the masculine, feminine, or neuter
gender shall be a reference to such other gender as is appropriate.
6
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17. SECTION 83(B) ELECTION.
If as a result of exercising an Option, an Optionee receives Shares
that are subject to a "substantial risk of forfeiture" and are not
"transferable" as those terms are defined for purposes of section 83(a) of the
code, then such Optionee may elect under Section 83(b) of the Code to include
in his gross income, for his taxable year in which the Shares are transferred
to him, the excess of the fair market value of such Shares at the time of
transfer (determined without regard to any restriction other than one which by
its terms will never lapse), over the amount paid for the Shares. If the
Optionee makes the section 83(b) election described above, the Optionee shall
(i) make such election in a manner that is satisfactory to the Board, (ii)
provide the Company with a copy of such election, (iii) agree to promptly
notify the Company if an Internal Revenue Service or state tax agent, on adult
or otherwise, questions the validity or correctness of such election or of the
amount of income reportable on account of such election, and (iv) agree to such
withholding as the Board may reasonably require.
SWIFT ENERGY COMPANY,
A TEXAS CORPORATION
By:
---------------------------------
Its:
--------------------------------
Date:
-------------------------------
7
47
SWIFT ENERGY COMPANY
The Board of Directors Solicits This Proxy for the
Annual Meeting of Shareholders to be held on May 13, 1997
The undersigned hereby constitutes and appoints Raymond O. Loen, Clyde
W. Smith, Jr. or A. Earl Swift, or any of them, with full power of substitution
and revocation to 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 13, 1997 at 4:00 p.m. eastern
time, in the Marriott Marquis Hotel in New York City, 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
may 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)
48
-- Please Detach and Mail in the Envelope Provided --
- --------------------------------------------------------------------------------
A /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.
FOR WITHHELD Nominees: Raymond O. Loen
/ / / / Clyde W. Smith, Jr.
PROPOSAL 1.
FOR the election of all nominees for directors listed for the terms specified
in the Company's 1997 Annual Proxy Statement (except as marked to the contrary
at right); or to WITHHOLD AUTHORITY to vote for all nominees.
PROPOSAL 2: To approve the Company's amended and FOR AGAINST ABSTAIN
restated 1990 Stock Compensation Plan as described / / / / / /
in the Company's 1997 Annual Proxy Statement.
PROPOSAL 3: To approve the Company's amended and FOR AGAINST ABSTAIN
restated 1990 Nonqualified Stock Option Plan as / / / / / /
described in the Company's 1997 Annual Proxy
Statement.
PROPOSAL 4: 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 and 3. 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 and 3.
The undersigned hereby acknowledges receipt of the Notice of 1997 Annual
Meeting of Shareholders and Proxy Statement and the 1996 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.