UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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. )
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Swift Energy Company
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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, 2003
Notice is hereby given that the annual meeting of shareholders of SWIFT
ENERGY COMPANY (the "Company") will be held at the Wyndham Greenspoint Hotel,
12400 Greenspoint Drive, Houston, Texas, on Tuesday, May 13, 2003 at 4:00 p.m.,
Houston time, for shareholders to consider and vote upon the following matters:
(1) A proposal to elect three members of Class I of the board of
directors, positions for which Raymond E. Galvin, Clyde W.
Smith, Jr. and Terry E. Swift have been nominated to serve for
the terms specified in the attached proxy statement or until
their successors are elected and qualified;
(2) A proposal to amend the Company's 2001 Omnibus Stock
Compensation Plan to increase the number of shares subject to
the Plan by 500,000 shares from 1.5 million shares to 2.0
million shares; and
(3) 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 28, 2003, 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 May 2, 2003, and may be
inspected during normal business hours prior to the meeting at the offices of
the Company, 16825 Northchase Drive, Suite 400, Houston, Texas. This list will
also be available at the meeting.
Please sign, date and return the enclosed proxy card right away,
whether or not you plan to attend the meeting in person. A stamped envelope is
enclosed for this purpose. Your prompt return of the proxy card will ensure a
quorum and save the Company the expense of further solicitation.
By Order of the Board of Directors,
BRUCE H. VINCENT
April 2, 2003 Secretary
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 2, 2003, in connection with the solicitation by the board of directors
(the "Board") of SWIFT ENERGY COMPANY (the "Company") of proxies to be voted at
the annual meeting of shareholders to be held at the Wyndham Greenspoint Hotel,
12400 Greenspoint Drive, Houston, Texas, on May 13, 2003 at 4:00 p.m., Houston
time, and any adjournment thereof (the "Meeting"), for the purposes set forth in
the accompanying Notice. Management does not know of any matters other than
those listed on the Notice that will be presented for action at the Meeting.
The Annual Report to Shareholders covering the fiscal year ended
December 31, 2002 will be mailed to each shareholder entitled to vote at the
Meeting on or before the date of mailing this proxy statement.
The cost of soliciting proxies will be borne by the Company. In
addition to solicitations by mail, a number of regular employees of the Company
may solicit proxies in person or by telephone. The Company has also retained
Georgeson Shareholder Communications Inc. as sole proxy solicitor. The Company
estimates the cost of retaining Georgeson to be approximately $7,500.
QUORUM AND VOTING
The record date for the determination of shareholders entitled to
notice of and to vote at the Meeting was the close of business on March 28,
2003. On the record date, there were 27,284,710 shares of common stock of the
Company, par value $.01 per share, issued and outstanding and entitled to vote.
Each share of common stock entitles the holder to one vote on each
matter presented at the Meeting. Proxies will be voted in accordance with the
directions specified thereon. Any proxy on which no direction is specified will
be voted for the election of all nominees named therein to the Board for the
terms indicated, in favor of amendment of the 2001 Omnibus Stock Compensation
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 issued and outstanding shares entitled to be voted at the Meeting is
necessary to constitute a quorum to transact business. If a quorum is not
present or represented at the Meeting, a majority of the votes represented at
the Meeting may adjourn the Meeting from time to time without notice, other than
an announcement at the Meeting, until a quorum is present or represented.
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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PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, three Class I directors are to be elected for terms to
expire at the 2006 Annual Meeting. The Company has three classes of directors
and each year the directors in one of these classes are nominated to serve three
year terms, or until their successors have been duly elected and qualified. In
order to be elected, each nominee for director must receive at least the number
of votes equal to a majority of the shares having voting power that are present
in person or represented by proxy at the Meeting.
The persons named as proxies on the accompanying proxy card have been
designated by the Board, and unless authority is withheld by a shareholder on a
proxy card, they intend to vote for the election of all of the nominees named
below to the Board. If any nominee should become unavailable or unable to serve
as a director, the persons named as proxies may vote for a substitute selected
by them, or the Board may be reduced accordingly; however, the Board is not
aware of any circumstances likely to render any nominee unavailable. Any
director elected by the Board to fill a vacancy will be elected for the
unexpired term of such director's predecessor in office.
Class I
Raymond E. Galvin
Clyde W. Smith, Jr.
Terry E. Swift
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 H. Withrow
(Terms to expire at the 2004 Annual Meeting)
Class III
Virgil N. Swift
G. Robert Evans
(Terms to expire at the 2005 Annual Meeting)
Nominees
Set forth below is certain information, as of the date of this proxy
statement, concerning the nominees for election to the Board of the Company.
Class I Directors
Raymond E. Galvin, 71, has served as a director of the Company since
August 5, 2002. From 1992 until he retired in February 1997, he was the
President of Chevron USA Production Company. He also served as a director of
Chevron Corp. from 1995 to 1997 and as a Vice President of Chevron Corp. from
1988 to 1997. Mr. Galvin has also served as chairman of the Natural Gas Council
and the Natural Gas Supply Association.
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Clyde W. Smith, Jr., 54, has served as a director of the Company since
1984. Since January 2002, Mr. Smith has served as President of Ascentron, Inc.,
an electronics manufacturing services company, that acquired the assets of D.W.
Manufacturing, Inc. in January 2002. From May 1998 until January 2002, Mr. Smith
served as General Manager of D.W. Manufacturing, Inc. d/b/a Millennium
Technology Services, a White City, Oregon based electronics manufacturer. From
August 1997 to May 1998, when its assets were acquired by D.W. Manufacturing,
Mr. Smith served as President of Millennium Technology Inc., a
debtor-in-possession under the U.S. Bankruptcy Code. He served as President of
H&R Precision, Inc., a general contractor, from 1994 to August 1997 and as
President of Somerset Properties, Inc., a real estate investment company, from
1985 to 1994. Mr. Smith is a certified public accountant.
Terry E. Swift, 47, has served as the Chief Executive Officer of the
Company since May 2001, as a director of the Company since the 2000 annual
shareholders meeting and as President of the Company since November 1997. He
served as Executive Vice President from 1991 to 1997 and was Chief Operating
Officer from 1991 to February 2000. He served as Senior Vice
President--Exploration and Joint Ventures from 1990 to 1991 and as Vice
President--Exploration and Joint Ventures from 1988 to 1990. Mr. Swift has a
degree in Chemical Engineering and a Master's Degree in Business Administration.
He is the son of A. Earl Swift and the nephew of Virgil N. Swift.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ALL OF THE NOMINEES FOR
DIRECTORS.
Set forth below, for information purposes only, is information
regarding the Class II and Class III directors whose terms will expire at the
annual meetings in 2004 and 2005, respectively:
Class II Directors
A. Earl Swift, 69, is Chairman of the Board of the Company and has
served in such capacity since the Company's founding in 1979. He previously
served as President from 1979 to November 1997 and as Chief Executive Officer
from 1979 until May 2001. For the 17 years prior to 1979, he was employed by
affiliates of American Natural Resources Company. He currently serves on the
board of directors of Excalibur Industries, a steel fabricator. 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, 67, has served as a director of the Company since
1987. Since 1980, Mr. Montgomery has been and continues to serve as the Chairman
of the Board of Montgomery Financial Services Corporation, a management
consulting and financial services firm. Mr. Montgomery specializes in services
for companies in transition or that are financially troubled. The following
describes some of those engagements. From January 2000 to early March 2001, Mr.
Montgomery served as Executive Vice President, Finance and Administration, and
Chief Financial Officer of Indus International, Inc., a public company engaged
in enterprise asset management systems. For eight months in 1999 he served as
interim Executive Vice President of Finance and Administration of Spectrian
Corporation. From November 1996 through July 1997, Mr. Montgomery served as
Executive Vice President of SyQuest Technology, Inc., a public company engaged
in the development, manufacture and sale of computer hard drives. On November
17, 1998, SyQuest filed a petition under Chapter 11 of the U.S. Bankruptcy Code.
Mr. Montgomery served from March 1995 until mid-November 1996 as President and
Chief Executive Officer of New Media Corporation, a privately held company
engaged in developing, manufacturing and selling PCMCIA cards for the computer
industry. On October 14, 1998, New Media Corporation filed a petition under
Chapter 11 of the U.S. Bankruptcy Code. Mr. Montgomery currently also serves as
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Chairman of the Board of Catalyst Semiconductor, Inc., a public company that
designs, develops and markets programmable integrated circuit products.
Harold J. Withrow, 75, 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, 74, has been a director of the Company since 1981 and
has acted as Vice Chairman of the Board since 1991. He acted as Executive Vice
President--Business Development between November 1991 and June 30, 2000. He
previously served as Executive Vice President and Chief Operating Officer from
1982 to 1991. Mr. Swift joined the Company in 1981 as Vice President--Drilling
and Production. For the preceding 28 years he held various production, drilling
and engineering positions with Gulf Oil Corporation and its subsidiaries, last
serving as General Manager--Drilling for Gulf Canada Resources, Inc. Mr. Swift
is a registered professional engineer and holds a degree in Petroleum
Engineering. He is the brother of A. Earl Swift and the uncle of Terry E. Swift.
G. Robert Evans, 71, has been a director of the Company since 1994.
Effective January 1, 1998, Mr. Evans retired as Chairman of Material Sciences
Corporation, having held that position since 1991. Material Sciences Corporation
is a public company that develops and commercializes continuously processed,
coated materials technologies. He remains a director of Material Sciences
Corporation. He also serves as a director of Consolidated Freightways
Corporation, a public trucking company.
Compensation of Directors
Board members are reimbursed for travel expenses they incur in
attending Board meetings. Employees of the Company are not compensated for
serving as directors. During 2002, each nonemployee member of the Board who
served a full year received an aggregate amount of $32,250 for serving on the
Board and one or more committees of the Board. One Board member who served a
partial year received $8,062. Aggregate compensation paid to the nonemployee
directors during 2002 for their services as directors totaled $169,312. In
addition, an emeritus director received $1,000 per month under a consulting
agreement.
Under the Company's 1990 Nonqualified Stock Option Plan, as amended
(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 options to purchase 5,000 shares of the Company's common
stock. The 1990 Nonqualified Plan permits each nonemployee director to hold a
maximum of 66,000 options to purchase shares of common stock under the Plan,
subject to adjustments for changes in capitalization affecting the stock of the
Company.
One nonemployee director exercised options during the year ended
December 31, 2002, acquiring a total of 6,050 shares of the Company's common
stock.
The following table presents information as of December 31, 2002
regarding the total number of unexercised options held by the nonemployee
directors under the 1990 Nonqualified Plan. Each of the nonemployee directors
who were directors in May 2002 received an annual grant of options for 5,000
shares in May 2002, at an exercise price of $15.65. In 2003, each of the
nonemployee directors will
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receive options to purchase 5,000 additional shares under the 1990 Nonqualified
Plan on the day following the 2003 Meeting.
Nonemployee Director Options
December 31, 2002
Shares of Common Stock
Underlying Unexercised Options Granted Under the
Name 1990 Nonqualified Plan
------------------------- ------------------------------------------------
G. Robert Evans 37,000
Raymond E. Galvin 10,000
Henry C. Montgomery 28,300
Clyde W. Smith, Jr. 46,500
Virgil N. Swift 5,000
Harold J. Withrow 52,710
For the number of options exercisable within 60 days of March 1, 2003
by each of the nonemployee directors, see footnote (1) to the table set forth
under "Principal Shareholders" below.
In addition to his fees as a non-employee director, Mr. Virgil Swift
receives compensation pursuant to a consulting agreement. Under his consulting
agreement, which has been in effect since July 2000, Mr. Swift is paid $5,000
per month for providing advisory services to key employees, officers and
directors, especially in the area of the Company's New Zealand oil and gas
exploration and production operations and as otherwise requested by the Chairman
of the Board and the President. In 2002, Mr. Swift received a special grant of
22,000 options under the 2001 Omnibus Stock Compensation Plan for his consulting
services. The consulting agreement is terminable by either party without cause
upon two weeks written notice. During the term of the consulting agreement, upon
a change of control, all outstanding stock options held by Mr. Swift will become
100% vested.
Meetings of the Board
During 2002, the Board met on 12 occasions either in person or
telephonically. In addition, management confers frequently with its directors on
an informal basis to discuss Company affairs. During 2002, each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board and (ii) the total number of meetings of all committees of the Board
on which he served.
Committees of the Board
The Board of the Company has established the following standing
committees: Audit, Corporate Governance, Compensation, Executive and Special
Transactions Committees. Descriptions of the functions of the Audit, Corporate
Governance and Compensation Committees are set forth below.
Audit Committee. Under currently existing New York Stock Exchange (the
"NYSE") standards, all of the members of audit committees must be independent.
Additionally, the NYSE has standards of experience for audit committee members.
The members of the Swift audit committee satisfy the NYSE's current criteria for
both independence and experience.
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Under new SEC rules, companies will be required to disclose whether
their audit committees have an "audit committee financial expert" as defined in
Item 401(h) of Regulation SK under the Securities Act of 1933 (the "Securities
Act") and whether that expert is "independent" as that term is used in Item
7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934 (the
"Exchange Act"). The board of directors has determined that Henry C. Montgomery,
chairman of the Audit Committee, and Clyde W. Smith, Jr., are "audit committee
financial experts." Each of them is "independent," as well.
The audit committee provides assistance to the Company's directors in
fulfilling the Board's oversight responsibility as to the Company's accounting,
auditing and financial reporting practices and as to the quality and integrity
of the financial reports of the Company. The specific functions and
responsibilities of the audit committee are set forth in the written charter of
the audit committee adopted by the Board. The audit committee reviews and
reassesses its charter annually and recommends any changes to the Board for
approval. A report of the audit committee appears under the caption "Audit
Committee Report," below. Messrs. Montgomery (Chairman), Smith and Evans are
members of the audit committee, which held eight meetings in 2002.
Corporate Governance Committee. The Corporate Governance Committee
reviews the performance of directors and recommends persons for directorships.
The Corporate Governance Committee may consider nominees recommended by
shareholders, upon written request by a shareholder addressed to any member of
the committee. See "Shareholder Proposals" herein. This committee reviews
corporate governance duties and procedures and, where necessary, recommends
changes to the Board. This committee also administers the Company's conflicts of
interest policies. Messrs. Evans (Chairman), Smith, Withrow and Galvin are
members of the Corporate Governance Committee. The Corporate Governance
Committee held three meetings in 2002.
Compensation Committee. The Compensation Committee at all times is
comprised of at least three directors who are "nonemployee directors" as defined
in Rule 16b-3 under 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 Stock Option Plan for nonemployee directors (as amended and
restated as of May 13, 1997). The Compensation Committee also reviews and makes
recommendations regarding the compensation levels of the Company's executive
officers. Messrs. Smith (Chairman), Montgomery, Withrow and Galvin are members
of the Compensation Committee, which held three meetings in 2002.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the SEC and the NYSE 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 2002 fiscal year, and Forms 5
furnished to the Company with respect to such fiscal year, the Company's
officers, directors and greater than 10% beneficial owners complied with all
Section 16(a) filing requirements except as follows: Mr. David Wesson
inadvertently filed a Form 4 for the month of November 2002 three days late. Mr.
Harold Withrow and Mr. Joe D'Amico each inadvertently filed a Form 4 late,
filing in November 2002 for a transaction that occurred in January 2002.
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PROPOSAL 2
TO AMEND THE COMPANY'S 2001 OMNIBUS STOCK COMPENSATION PLAN TO INCREASE THE
NUMBER OF SHARES SUBJECT TO THE PLAN BY 500,000 SHARES FROM 1.5 MILLION SHARES
TO 2.0 MILLION SHARES
2001 Omnibus Stock Compensation Plan
The purpose of the 2001 Omnibus Stock Compensation Plan (the "2001
Plan") is to promote and advance the interests of the Company by aiding the
Company in hiring, retaining and rewarding qualified employees, and increasing
managerial and key employees' interest in the growth and financial success of
the Company by offering stock options and stock and cash bonus incentives based
on performance. Copies of the 2001 Plan as filed with the SEC may be obtained by
going to the Company's website at www.swiftenergy.com or the SEC's website at
www.sec.gov. The 2001 Plan appears as an exhibit to the Company's registration
statement on Form S-8 filed with the SEC on August 9, 2001. It may also be
obtained without charge by writing to the Company at 16825 Northchase Drive,
Suite 400, Houston, Texas 77060, Attention: Corporate Secretary, or calling
(281) 874-2700.
An aggregate of 1.5 million shares of the Company's common stock are
currently reserved for awards under the 2001 Plan, which represents
approximately 6% of the Company's issued and outstanding shares as of December
31, 2002. As of December 31, 2002, approximately 1,206,390 options were
outstanding under the 2001 Plan, meaning that only 293,610 options remain
available for future grant. The Board of Directors has authorized an amendment
to the 2001 Plan, subject to shareholder approval, to increase the number of
shares of the Company's common stock available for issuance under the 2001 Plan
from 1.5 million shares to 2.0 million shares.
The Company currently anticipates that it will, as a general matter,
grant options on an annual basis, although future option grant recipients, and
future option grant levels, have not been determined. Therefore, the number,
amount and type of awards to be received by or allocated to eligible persons in
the future under the 2001 Plan cannot be determined at this time. The Company
has not approved any awards under the 2001 Plan that are conditioned upon
shareholder approval of the proposed plan amendment. On March 28, 2003, the
closing price of the Company's common stock was $8.87. On that date,
approximately 183 employees were eligible to participate in the 2001 Plan.
Summary of the 2001 Plan
The 2001 Plan authorizes the Company to grant various awards ("Awards")
to officers and other key employees of the Company or its subsidiaries,
including incentive stock options ("ISOs"), nonqualified stock options ("NSOs"),
"reload" options ("Reload Options"), deferred compensation stock options
("DCSOs"), stock appreciation rights ("SARs"), restricted stock grants
("Restricted Stock Grants"), restricted unit grants ("Restricted Unit Grants")
and performance bonus awards ("Performance Bonus Awards").
Administration. The Compensation Committee of the Board has sole
authority to construe and interpret the 2001 Plan, to select participants
("Participants"), to grant Awards and to establish the terms and conditions of
Awards. The Compensation Committee is allowed to give the Company's chief
executive officer specifically limited written authority to grant Awards to new
employees. Currently, he may grant no more than 10,000 options to any new
employee, nor more than 30,000 options in any fiscal quarter. Members of the
Compensation Committee are not eligible to receive Awards under the 2001 Plan.
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Eligibility. Any employee of the Company or its subsidiaries,
including, without limitation, any officer, employee-director, or any
consultant, is eligible to receive Awards under the 2001 Plan. Nonemployee
directors are not eligible to participate in the 2001 Plan. The 2001 Plan sets
forth various restrictions upon exercise of Awards, and allows extension of the
period of exercisability following the retirement, death, disability or
termination of a Participant. The Compensation Committee also has the discretion
to accelerate the vesting or exercisability of options under such events.
Shares Subject to 2001 Plan. The maximum number of shares of common
stock in respect of which Awards may currently be granted under the 2001 Plan
(the "Plan Maximum") is 1,500,000 (2,000,000 if Proposal 2 passes), subject to
appropriate adjustment in the event of a reorganization, stock split, stock
dividend, merger, consolidation or other change in capitalization of the Company
affecting its common stock.
Term. The 2001 Plan will terminate on December 31, 2010 unless sooner
terminated by the Board, except with respect to Awards then outstanding.
Amendment. The Board may amend the 2001 Plan at any time, except that
(1) the Board must obtain shareholder approval to make any amendment to the 2001
Plan that would increase the total number of shares reserved for issuance
(except for adjustments necessary to reflect changes in capitalization),
materially modify eligibility requirements or materially increase the benefits
accruing to Participants under the 2001 Plan, and (2) certain amendments are
altogether prohibited (e.g., any amendment that would impair a Participant's
vested rights).
Incentive Stock Options. Options designated as ISOs within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
together with the regulations promulgated thereunder, may be granted under the
2001 Plan up to the Plan Maximum. To the extent that any portion of an ISO that
first becomes exercisable by any Participant (under all of the stock option
plans of the Company or its subsidiaries) during any calendar year exceeds the
$100,000 aggregate fair market value limitation of Section 422(d) of the Code,
or such other limit as may be imposed by the Code, such excess portion shall be
treated as a NSO. ISOs shall be exercisable for such periods as the Compensation
Committee shall determine, but in no event for a period exceeding ten years or,
for Participants who own more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, five years.
Nonqualified Stock Options. NSOs may be granted for a stated number of
shares of common stock and will be exercisable for such period or periods as the
Compensation Committee shall determine. Holders of NSOs may elect, subject to
the discretion of the Compensation Committee, to have the Company withhold from
shares to be delivered upon exercise of an NSO, the number of shares necessary
to satisfy any withholding taxes attributable to the exercise, so long as the
amount withheld does not exceed the minimum statutory tax withholding
attributable to the transfer.
Exercisability. ISOs and NSOs will become exercisable in installments
as determined in its sole discretion by the Compensation Committee although it
is generally anticipated in keeping with past Company practice that such options
may be exercised as to 20% installments on each of the first five anniversary
dates of the date of grant or such other period as may be designated by the
Compensation Committee. The exercise price for options may be paid in cash or,
if acceptable to the Compensation Committee, by delivery of shares of common
stock already owned by the Participant for more than six months and having a
market value equal to the exercise price.
Option Exercise Prices. NSOs and DCSOs may be issued at any exercise
price that the Compensation Committee determines. The exercise price of an ISO
shall be at least one hundred percent
8
(100%) of the fair market value of the common stock on the date of grant and at
least one hundred ten percent (110%) of the fair market value of the common
stock on the date of grant to ten percent shareholders.
Reload Options. Under the 2001 Plan, whenever a Participant holding an
ISO or NSO exercises an option (the "Original Option") and pays the exercise
price by tendering shares of common stock (a "stock-for-stock exercise"), the
Company may grant a "Reload Option" to the Participant which provides that
Participant an option to purchase the exact number of shares tendered in the
stock-for-stock exercise at an exercise price equal to the fair market value of
such shares at the date of exercise of the Original Option. Reload Options may
be granted on the exercise of Original Options as well as on the exercise of
Reload Options. Reload Options are not exercisable after the later of the
expiration of the option term of the Original Option or two years following the
date of grant of the Reload Option. Except as described above, the terms and
conditions of Reload Options will be identical to the terms and conditions of
the related Original Options. Reload Options are designed to encourage
stock-for-stock exercises by Participants, because when a Reload Option is
granted to a Participant, the Participant may make a stock-for-stock exercise
without necessarily suffering a dilution in percentage ownership of the
Company's common stock. At the same time, the Participant will be able to
participate fully in any future appreciation in the Company's common stock, as
if the Original Option had been exercised for cash.
Transferability. The Compensation Committee may allow transfer of NSOs
to family members, trusts and partnerships for their benefit or owned by them,
or to charitable trusts. Options held by transferees are subject to the same
restrictions and forfeiture upon termination of employment applicable to the
Original Option holder. ISOs are not transferable except by will or the laws of
descent and distribution.
Change of Control. In the event of a change of control of the Company
described in the 2001 Plan, all stock options and SARs outstanding shall become
fully vested and fully exercisable (other than certain options granted within a
year prior to the change of control), and all restrictions and conditions of
Restricted Stock Grants and Restricted Unit Grants outstanding shall be deemed
to be satisfied, unless the Board expressly provides otherwise.
A "change of control" occurs upon: (i) any person or group becoming the
beneficial owner of shares with 40% or more of the votes that may be cast for
the election of directors; (ii) persons who were directors of the Company
immediately prior to a cash tender offer, exchange offer, merger, sale of assets
or contested election cease to constitute a majority of the Board; (iii) the
shareholders of the Company approve a transaction in which the Company ceases to
be an independent publicly owned corporation or approve the sale of all or
substantially all the assets of the Company; or (iv) a tender offer or exchange
offer is made for shares of the Company's common stock (other than by the
Company) and shares are acquired thereunder.
Stock Grants, Restricted Stock Grants and Restricted Unit Grants. The
Compensation Committee may in its discretion grant shares of common stock to a
Participant with or without restrictions, vesting requirements or other
conditions. A Restricted Stock Grant is an Award of shares of the Company's
common stock that does not vest until certain conditions established by the
Compensation Committee have been satisfied. At a minimum, the Participant shall
be required to provide services to the Company for a period of at least one year
from the date of the Award ("Restriction Period"). A Restricted Unit Grant is an
Award of "units" subject to similar vesting conditions, each unit having a value
equal either to a share of common stock or the amount by which a share of common
stock appreciates in value between the date of grant and the date at which any
restrictions lapse. During the Restriction Period, a Participant may vote and
receive dividends on the shares of common stock awarded pursuant to a Restricted
Stock Grant, but may not sell, assign, transfer, pledge or otherwise encumber
such shares.
9
When the Restriction Period expires or the restriction with respect to
installments of shares lapses, the Participant is entitled to receive (1) with
respect to a Restricted Stock Grant, shares of common stock free and clear of
restrictions on sale, assignment, transfer, pledge or other encumbrances, or (2)
with respect to a Restricted Unit Grant, payment for the value of the units.
Performance Bonus Awards. The Compensation Committee in its sole
discretion may award Participants a Performance Bonus Award in the form of cash
or shares of common stock, or a combination thereof, on such terms and
conditions as the Compensation Committee designates. Performance Bonus Awards
will be based upon evaluation of a variety of performance factors ("Performance
Factors") applicable to the Company as a whole for a calendar year ("Company
Factors") and upon an individual employee's performance for the year in
contributing to the Company's performance ("Individual Factors"). The
Performance Factors, their elements and their weighting may be changed from year
to year by the Compensation Committee as the Compensation Committee deems
advisable. Currently, the 2001 Plan includes as Company Factors (1) annual
increases in earnings per share for the Company, (2) annual increases in the
Company's cash flow per share, (3) annual increases in the volume of the
Company's proved oil and gas reserves and (4) annual increases in the volume of
the Company's probable oil and gas reserves. Currently the Individual Factors
are: (a) the individual's performance in achieving either the Company's overall
strategic objectives or the objectives of the individual's department or group
within the Company and (b) the Compensation Committee's determination, in its
sole discretion, of the extent to which the Participant's individual performance
merits a bonus. The Compensation Committee will use the Company Factors and
Individual Factors to determine a Participant's Performance Bonus Award. The
Compensation Committee may also grant bonuses under the 2001 Plan which vary
from those determined using the Performance Factors.
Certain U.S. Federal Income Tax Consequences of the 2001 Plan
The following is a summary of the material U.S. federal income tax
consequences which are generally applicable to Awards granted under the 2001
Plan as of the date of this proxy statement. This summary is for general
information only and does not address all of the tax consequences that may be
relevant to a particular Participant in light of his, her or its personal
circumstances. This discussion is not to be construed as tax advice.
Participants are urged to consult their own tax advisors as to the particular
tax consequences to them of their participation in the 2001 Plan, including the
applicability of any U.S. federal tax laws or any state, local or foreign tax
laws or any treaty, and any changes (or proposed changes) in applicable tax laws
or interpretations thereof.
Grant of Incentive Stock Options and Stock Appreciation Rights. A
Participant will not recognize any taxable income at the time an ISO or an SAR
is granted and the Company will not be entitled to a federal income tax
deduction at that time.
Exercise of Incentive Stock Options and Disposition of Common Stock
Received upon Exercise. No taxable income will be recognized by a Participant
exercising an ISO at the time of exercise. If an ISO Participant holds the
shares received from the exercise of an ISO for the longer of two years after
the date such option was granted or one year after the acquisition of the shares
pursuant to such option, the difference between the exercise price and the
amount realized upon disposition of the shares will constitute a long-term
capital gain or loss, and the Company will not be allowed a federal income tax
deduction with respect to that amount. If the shares acquired pursuant to the
exercise of an ISO are disposed of by a Participant prior to either of these
dates, the Participant will realize taxable ordinary income in an amount equal
to the excess of the fair market value of the common stock purchased at the time
of exercise over the exercise price. Correspondingly, the Company will usually
be allowed a federal income tax deduction equal to that amount, predicated upon
satisfaction of certain reporting obligations.
10
Alternative Minimum Tax. The difference between the exercise price and
fair market value of shares received from the exercise of an ISO is generally an
adjustment to income for purposes of the alternative minimum tax ("AMT"). The
AMT, imposed to the extent it exceeds the taxpayer's regular tax, is 26% of an
individual taxpayer's alternative minimum taxable income (28% in the case of
alternative minimum taxable income in excess of $175,000). Alternative minimum
taxable income is determined by adjusting regular taxable income for certain
items, increasing that income by certain tax preference items and reducing this
amount by the applicable exemption amount. Whether AMT applies to particular
Participants depends on their individual circumstances. If a Participant incurs
AMT as a results of the exercise of an ISO, the Participant will generally be
allowed an AMT credit carryover for use in future years.
Nonqualified Stock Options and Deferred Compensation Stock Options. A
Participant will generally not recognize any taxable income at the time a NSO or
DCSO is granted, and the Company will not be entitled to a federal income tax
deduction at that time. However, because NSOs and DCSOs may be granted by the
Compensation Committee at exercise prices substantially below the fair market
value of the common stock of the Company on the date the option is granted, the
IRS might take the position under certain circumstances that income is
recognized at the time such options are granted, equal to the amount of the
"discount" at which the NSO or DCSO was granted.
If NSOs or DCSOs are granted at an exercise price equal to the fair
market value of the common stock at the date granted, taxable ordinary income
will be recognized by the Participant at the time of exercise in an amount equal
to the excess of the fair market value of the shares purchased at the time of
such exercise over the exercise price. The Company will usually be allowed a
federal income tax deduction equal to the ordinary income attributable to the
exercising Participant. The Participant will generally recognize a taxable
capital gain or loss upon the subsequent sale of such shares.
In the case of NSOs and DCSOs which are issued at an option price that
is less than the fair market value of the common stock subject to such option on
the date it is granted to a Participant, the same rules should apply, unless the
IRS takes the position that such "discount" options may under certain
circumstances be subject to tax at the time granted to a Participant.
Stock Appreciation Rights. Upon the exercise of a SAR, the Participant
will realize taxable ordinary income equal to the fair market value of the
payment received from the Company, and the Company generally will be allowed a
corresponding federal income tax deduction at that time. The Participant's basis
in any shares of common stock acquired will be equal to the amount of income
upon which the Participant was taxed. Upon any subsequent disposition of such
shares, any gain or loss realized will be a capital gain or loss.
Restricted Stock Grants and Restricted Unit Grants. Unless a
Participant makes a tax election under Code Section 83(b), a Participant
receiving a Restricted Stock Grant or a Restricted Unit Grant (collectively
"Restricted Awards") will not recognize taxable income and the Company will not
be entitled to a federal income tax deduction at the time such Restricted Award
is granted. When the restrictions on a Restricted Award terminate or lapse, the
excess of the fair market value of the Restricted Award on the date the
restrictions terminate or lapse over the amount paid by the Participant, or the
base value of the Restricted Award at the time of grant as determined by the
Compensation Committee will be taxable as ordinary income to the Participant and
will be allowed as a federal income tax deduction to the Company. Upon a
subsequent disposition of shares received from a Restricted Award, the gain or
loss recognized by the Participant will generally be treated as capital gain or
loss. By filing a Section 83(b) election, the amount of a Participant's ordinary
income, the commencement of the holding period and the Company's deduction will
be determined as of the date of the grant.
11
Performance Bonus Awards. A Participant receiving a Performance Bonus
Award will recognize ordinary income, and the Company will be allowed a
corresponding deduction at the time such Award is granted.
Change of Control. Some Awards that become payable solely because of a
change of control of the Company as a result of a tender offer, contested
election, business combination or related events may constitute excess parachute
payments under Section 280G of the Code. Amounts generally would be treated as
"excess parachute payments" to the extent they exceed 300% of the Participant's
average annual compensation for the five years preceding the change of control.
Amounts treated as excess parachute payments cannot be deducted by the Company
for federal income tax purposes and the Participant is subject to a 20% excise
tax thereon.
Special Rules. To the extent a Participant pays all or part of the
exercise price of an NSO or DCSO by tendering shares of common stock previously
owned by the Participant, the tax consequences described above generally would
apply. However, the number of shares received upon exercise of such option equal
to the number of shares surrendered in payment of the exercise price will have
the same basis and tax holding period as the shares surrendered. The additional
shares received upon such exercise will have a tax basis equal to the amount of
ordinary income recognized on such exercise and a holding period which commences
on the date of the exercise.
To the extent a Participant pays all or part of the exercise price of
an ISO by tendering previously acquired common stock owned by such Participant,
the tax consequences described above generally will apply to such exchange.
However, if a Participant exercises an ISO by tendering shares previously
acquired on the exercise of an ISO, a disqualifying disposition will occur if
the applicable holding period requirements described above have not been
satisfied with respect to the surrendered stock. The consequence of such a
disqualifying disposition is that the Participant may recognize ordinary income
at that time.
If a Participant subject to Section 16(b) of the Exchange Act receives
shares of common stock upon the exercise of an Award, other than an ISO, Section
83 of the Code generally defers recognition of income until six months after the
date of exercise, unless the Participant elects to have the shares valued at the
date of exercise. Absent such election, taxable ordinary income will be
recognized in an amount equal to the difference between the exercise price and
the fair market value of the shares at the end of the six month deferral period.
The grant, receipt and exercise of Reload Options will be treated for
federal income tax purposes in the same manner as the underlying option for
which the Reload Option was granted.
Withholding Taxes. In general, withholding taxes must be paid whenever
ordinary income to the Participant is recognized for federal income tax
purposes. For example, withholding taxes must be paid at the time of exercise of
any NSO or DCSO, Performance Bonus Award or SAR. Withholding taxes must also be
paid in respect of any Restricted Stock Grant or Restricted Unit Grant when the
restrictions thereon lapse, terminate or are removed.
12
Board Recommendation
The affirmative vote of a majority of the shares represented at the
Meeting in person or by proxy is needed to approve the amendment to the 2001
Plan. Unless a shareholder withholds authority on the proxy card, those persons
designated as proxies by the Board intend to vote for the approval of the
amendment to the 2001 Plan. The Board believes that such approval is essential
to enable the Company to continue to attract and retain qualified employees. The
Company's 50 most senior managerial, technical and supervisory employees have
been employed by the Company for an average of approximately 13 years.
Management believes that the approval of the proposed amendment to the 2001 Plan
will contribute to the continuation of the Company's history of employee
longevity, as the Company's stock option plans have done in the past.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" AMENDMENT OF THE 2001
PLAN.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information as of December 31, 2002
regarding compensation plans (including individual compensation arrangements)
under which equity securities of the Company are authorized for issuance, which
plans are the 2001 Plan, the 1990 Nonqualified Stock Option Plan for
non-employee directors (as amended and restated as of May 13, 1997) and the
Employee Stock Purchase Plan available to all employees after a year of service
(as amended and restated as of January 1, 2002).
EQUITY COMPENSATION PLAN INFORMATION
(c)
Number of securities
(a) (b) remaining available for
Number of securities to Weighted average future issuance under
be issued upon exercise exercise price of equity compensation plans
of outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights warrants and rights reflected in column (a))
--------------------------------------- -------------------------- ---------------------- -------------------------
Equity compensation plans approved
by security holders 3,018,505 $ 16.64 772,472
Equity compensation plans not
approved by security holders -0- -0- -0-
--------------------------- ---------------------- -------------------------
TOTAL 3,018,505 $ 16.64 772,472
=========================== ====================== =========================
13
PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning the
shareholdings, as of March 1, 2003 (unless otherwise indicated), of the eight
current members of the Board, each of the Company's five most highly compensated
executive officers, all executive officers and directors as a group, and to the
Company's knowledge, each person who beneficially owned more than five percent
of the Company's outstanding common stock. The addresses for all officers and
directors is the Company's address at 16825 Northchase Drive, Suite 400,
Houston, Texas 77060.
Shares of Common Stock
Beneficially Owned at
March 1, 2003(1)
-------------------------------------
Percent of
Class
Name of Person or Group Position Number Outstanding
----------------------- -------- ------ -----------
A. Earl Swift.............. Chairman of the Board 289,421 1.1%
Virgil N. Swift............ Vice Chairman of the Board 355,359(2) 1.3%
G. Robert Evans............ Director 39,800 (3)
Raymond E. Galvin.......... Director 5,000 (3)
Henry C. Montgomery........ Director 19,215 (3)
Clyde W. Smith, Jr......... Director 34,500 (3)
Harold J. Withrow.......... Director 70,840(4) (3)
Terry E. Swift............. President, Chief Executive Officer, and Director 194,514 (3)
Joseph A. D'Amico.......... Executive Vice President, Chief Operating Officer 104,686 (3)
Bruce H. Vincent........... Executive Vice President--Corporate Development 161,809 (3)
and Secretary
Alton D. Heckaman, Jr. .... Senior Vice President--Finance, Chief Financial 89,221 (3)
Officer
James M. Kitterman......... Senior Vice President--Operations 147,408 (3)
All executive officers and directors as a group (15 persons)............... 1,634,234 5.8%
Boston Partners Asset Management, L.P...................................... 1,898,365(5) 7.0%
BPAM (GP), LLC
BPAM Holding Company
Desmond John Heathwood
28 State Street, 20th Floor
Boston, Massachusetts 02109
Dimensional Fund Advisors Inc. ............................................ 1,712,295(6) 6.3%
1299 Ocean Avenue
Santa Monica, California 90401
14
FMR Corp................................................................... 2,186,800(7) 8.0%
Fidelity Low-Priced Stock Fund
Fidelity Management and Research Company
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, Massachusetts 02109
Neuberger Berman, Inc...................................................... 1,613,574(8) 6.0%
Neuberger Berman, LLC
Neuberger Berman Management, Inc.
605 Third Avenue
New York, New York 10158-3698
Wellington Management Company, LLP......................................... 2,154,100(9) 7.9%
Wellington Trust Company, NA
75 State Street
Boston, Massachusetts 02109
---------------------------
(1) Unless otherwise indicated below, the persons named have sole voting
and investment power, or joint voting and investment power with their
respective spouses, over the number of shares of the Company's common
stock shown as being beneficially owned by them, less the shares set
forth in this footnote. The table includes the following shares that
were acquirable within 60 days following March 1, 2003 by exercise of
options granted under the Company's stock option plans: Mr. A. E. Swift
- 130,644; Mr. V. N. Swift - 66,804; Mr. Evans - 25,000; Mr. Montgomery
- 16,300; Mr. Smith- 34,500; Mr. Withrow - 41,760; Mr. T. E. Swift -
147,146; Mr. D'Amico - 86,376; Mr. Vincent - 126,097; Mr. Heckaman -
68,002; Mr. Kitterman - 111,825; and all executive officers and
directors as a group - 958,558.
(2) Includes 119,400 shares held of record by a Texas family limited
partnership in which Mr. Virgil Swift and his wife hold a 2% general
partner interest. Mr. Virgil Swift and his wife are both general
partners of the family limited partnership and, as such, they share
voting and dispositive power as to the 119,400 shares held by the
family limited partnership. Mr. Virgil Swift is deemed to beneficially
own the 119,400 shares held by the partnership. Mr. Virgil Swift
expressly disclaims beneficial ownership as to 92%, or 109,848, of the
shares held by the partnership.
(3) Less than one percent.
(4) Mr. Withrow disclaims beneficial ownership as to 11,479 shares held by
his wife, his daughter and jointly by his wife and daughter.
(5) Based on a Schedule 13G dated February 13, 2003 filed with the SEC to
reflect shares held at December 31, 2002, Boston Partners Asset
Management, L.P. ("BPAM") owns of record and beneficially 1,898,365
shares of the Company's common stock. As general partner of BPAM, BPAM
(GP), LLC ("BPAM GP") may be deemed to own beneficially all of the
shares of the Company's common stock that BPAM may be deemed to own
beneficially. As sole member of BPAM GP, BPAM Holding Company may be
deemed to own beneficially all of the shares of the Company's common
stock that BPAM GP may be deemed to own beneficially. As principal
shareholder and sole trustee of BPAM Holding Company, Mr. Heathwood may
be deemed to own beneficially all of the shares of common stock that
BPAM Holding Company may be deemed to own beneficially. Therefore,
BPAM, BPAM GP, BPAM Holding Company and Mr. Heathwood may each be
deemed to own beneficially 1,898,365 shares of the Company's common
stock.
(6) Based on a Schedule 13 G dated February 3, 2003, filed with the SEC to
reflect shares held at December 31, 2002, Dimensional Fund Advisors
Inc. ("Dimensional"), an investment advisor registered under Section
203 of the Investment Advisers Act of 1940, furnishes investment advice
to four investment companies registered under the Investment Company
Act of 1940, and serves as investment manager to certain other
commingled group trusts and separate accounts. These investment
companies, trusts and accounts are the "Funds." In its role as
investment advisor or manager, Dimensional possesses voting and/or
investment power over the shares of the Company described in this
schedule that are owned by the Funds, and may be deemed to be the
beneficial owner of the shares of the Company held by the Funds.
However, all securities reported in this schedule are owned by the
Funds. Dimensional disclaims beneficial ownership of such securities.
(7) Based on a Schedule 13G dated February 13, 2003 filed with the SEC to
reflect shares held at December 31, 2002, Fidelity Management &
Research Company ("Fidelity"), a wholly owned subsidiary of FMR Corp.
and an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is the beneficial owner of 2,186,800
15
shares or 8.0% of the common stock outstanding of the Company as a
result of acting as investment adviser to various investment companies
registered under Section 8 of the Investment Company Act of 1940. The
ownership of one investment company, Fidelity Low-Priced Stock Fund,
amounted to 2,186,800 shares or 7.2% of the common stock outstanding.
Edward C. Johnson 3d, FMR Corp., through its control of Fidelity, and
the investment funds (the "Fidelity Funds") each has sole power to
dispose of the 2,186,800 shares owned by the Fidelity Funds.
Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has
the sole power to vote or direct the voting of the shares owned
directly by the Fidelity Funds, which power resides with the Fidelity
Funds Boards of Trustees. Fidelity carries out the voting of the shares
under written guidelines established by the Fidelity Funds Boards of
Trustees.
Members of the Edward C. Johnson 3d family are the predominant owners
of Class B shares of common stock of FMR Corp., representing
approximately 49% of the voting power of FMR Corp. Mr. Johnson 3d owns
12.0% and Abigail Johnson owns 24.5% of the aggregate outstanding
voting stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR Corp. and
Abigail P. Johnson is a Director of FMR Corp. The Johnson family group
and all other Class B shareholders have entered into a shareholders'
voting agreement under which all Class B shares will be voted in
accordance with the majority vote of Class B shares. Accordingly,
through their ownership of voting common stock and the execution of the
shareholders' voting agreement, members of the Johnson family may be
deemed, under the Investment Company Act of 1940, to form a controlling
group with respect to FMR Corp.
(8) Based on a Schedule 13G dated February 12, 2003 filed with the SEC to
reflect shares held at December 31, 2002, Neuberger Berman, LLC
("Neuberger") and Neuberger Berman Management Inc. ("Management") serve
as sub-adviser and investment manager, respectively, of various mutual
funds and are thus deemed beneficial owners of 1,613,574 shares of the
Company's common stock, which shares they hold for their clients and in
which shares they have no economic interest. Of the shares beneficially
owned, both Neuberger and Management share dispositive power as to all
1,613,574 shares and share voting power as to 1,124,680 shares of the
Company's common stock. Neuberger has sole voting power as to 700
shares. The remaining shares are for individual accounts over which
Neuberger has shared power to dispose but not vote shares. As the
parent holding company of Neuberger and Management, Neuberger Berman
Inc. is also deemed beneficial owner of these shares.
(9) Based on a Schedule 13G dated February 14, 2003 filed with the SEC to
reflect shares held at December 31, 2002, the shares of common stock
shown in the table are owned of record by clients of Wellington
Management Company, LLP, an investment advisor. Those clients have the
right to receive, or the power to direct the receipt of dividends from,
or the proceeds from the sale of such securities. WMC has shared power
to vote 1,848,900 of the shares and shared power to dispose of
2,154,100 shares of common stock.
EXECUTIVE OFFICERS
The executive officers of the Company are appointed annually by the
Board. Information regarding Terry E. Swift, President and Chief Executive
Officer, is set forth above under "Election of Directors--Nominees." Set forth
below is certain information, as of the date hereof, concerning the other
executive officers of the Company.
Joseph A. D'Amico, 54, was appointed Executive Vice President in August
2000 and was appointed Chief Operating Officer of the Company in February 2000.
He was Senior Vice President of Exploration and Development of the Company from
February 1998 to February 2000. He served as the Company's Vice President of
Exploration and Development from 1993 to 1998, Director of Exploration and
Development from 1992 to 1993 and Funds Manager from 1988, when he joined the
Company, until 1992. Mr. D'Amico holds Bachelor of Science and Master of Science
degrees in Petroleum Engineering and a Master's degree in Business
Administration.
Bruce H. Vincent, 55, was appointed Executive Vice President--Corporate
Development and Secretary of the Company in August 2000. Previously he served as
Senior Vice President--Funds Management since joining the Company in 1990. Mr.
Vincent holds a degree in Business Administration and a Master's degree in
Finance.
Alton D. Heckaman, Jr., 46, was appointed Senior Vice
President--Finance and Chief Financial Officer in August 2000. He had previously
served as Vice President and Controller from May 1993 to
16
August 2000 and Assistant Vice President--Finance from March 1986 to May 1993.
Mr. Heckaman joined the Company in 1982. He is a Certified Public Accountant and
holds a degree in Accounting.
James M. Kitterman, 58, 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.
James P. Mitchell, 48, was appointed Senior Vice President-Commercial
Transactions and Land in February 2003. He previously served as Vice
President-Land and Property Transactions from December 2001 to February 2003,
Vice President-Land from 1996 to 2001 and Manager of Land from 1992 to 1996. He
had previously served as Director of Land Acquisitions and Joint Venture
Negotiations and Coordinator of Land Acquisitions, having joined the Company in
1987. Mr. Mitchell holds a degree in History and Business Law.
Victor R. Moran, 47, was appointed Senior Vice President--Energy
Marketing and Business Development in August 2000. From 1995 he served as Vice
President--Natural Gas Marketing/Business Development. He had previously served
as Director of Business Development since January 1992, when he joined the
Company. Mr. Moran holds a degree in government, a Master's degree in Business
Administration and a Juris Doctor degree.
David W. Wesson, 44, was appointed Controller in January 2001. He
previously served as Assistant Controller--Reporting from April 1999 to January
2001, Manager, Reporting/Budget from October 1995 to April 1999 and Manager,
Corporate Accounting/Budget from February 1990. He joined the Company as Senior
Accountant in 1988. Mr. Wesson is a Certified Public Accountant and holds a
degree in Accounting.
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 2002) for the
fiscal years ended December 31, 2002, 2001 and 2000.
17
SUMMARY COMPENSATION TABLE
Long Term
Compensation
---------------
Annual Compensation
---------------------------------- All Other
Bonus(1) Common Annual Compensation ($)
Name and --------------------- Stock -------------------------------
Principal Underlying Life
Position(2) Year Salary ($) Cash ($) Stock ($) Options/SARs(#) Insurance($)(3) 401(k)($)(4)
---------------------------- ---- ---------- -------- --------- --------------- --------------- ------------
Terry E. Swift 2002 $400,000 $120,000 $0 20,000 $24,870 $8,500
President and Chief 2001 392,068 96,600 $0 67,500 21,989 8,500
Executive Officer(5) 2000 338,256 117,058 $0 25,000 11,580 8,500
Joseph A. D'Amico 2002 $302,504 $45,800 $0 26,000 $23,036 $8,500
Executive Vice President 2001 302,504 35,300 $0 45,500 13,658 8,500
and Chief Operating Officer 2000 243,945 93,337 $0 37,000 6,400 8,500
Bruce H. Vincent 2002 $277,424 $57,700 $0 34,000 $33,099 $8,500
Executive Vice President- 2001 277,424 56,200 $0 42,500 18,825 8,500
Corporate Development and 2000 233,010 87,278 $0 21,000 9,027 8,500
Secretary
James M. Kitterman 2002 $245,165 $46,900 $0 23,000 $27,459 $8,500
Senior Vice President- 2001 245,165 24,500 $0 20,000 22,753 8,500
Operations 2000 223,700 69,258 $0 22,000 11,401 8,500
Alton D. Heckaman, Jr. 2002 $214,711 $44,700 $0 26,000 $21,832 $8,500
Senior Vice President- 2001 214,711 42,200 $0 37,500 10,080 8,500
Finance and Chief Financial 2000 170,104 66,249 $0 42,000 4,901 8,500
Officer
-----------------------------------
(1) Bonus amounts reported for 2002, 2001 and 2000 include bonuses earned
during those years, but actually paid in the following year.
(2) In accordance with the terms of A. Earl Swift's employment agreement,
he is entitled to a non-competition payment each year for five years
following his retirement as Chief Executive Officer of the Company in
May 2001. Upon his retirement from his position as Chief Executive
Officer, he began working half-time for the Company. His salary in 2002
was $312,000 and he also received the second of his non-competition
payments in the amount of $406,842, along with a final contractual
payment for accrued vacation of $537,698. Additionally, he received a
cash bonus of $75,000 and 25,000 stock options. The Company also paid
$126,772 in insurance premiums for his benefit and contributed $8,500
to his 401(k) in 2002.
(3) 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.
(4) Contributions by the Company to the Swift Energy Company Employee
Savings Plan (100% in Company common stock for 2002 and 2001 and
one-half in cash and one-half in Company common stock for 2000) for the
account of the named executive officer.
(5) Terry E. Swift was appointed Chief Executive Officer, effective May 8,
2001.
Employment Contracts
A. Earl Swift's employment agreement was amended and restated in
November 2000. Effective May 8, 2001, Mr. Swift stepped down as Chief Executive
Officer and effective June 30, 2001 began working on a half-time basis. He may
continue on a half-time basis for five years (up to 46 weeks per year as the
Board may specify) on specific matters designated by the Board. During this five
year period, Mr. Swift's compensation is one-half (i.e. $300,000) his annual
base compensation at the time of
18
transition from a full-time to half-time schedule, with a 4% per annum inflation
adjustment, plus any bonus provided by the Board. These amounts are also payable
in one lump sum, discounted to present value, upon Mr. Swift's death or
disability, which also triggers 100% vesting of all unexercised options, plus
continuation of insurance for his spouse and minor children for a year. In the
event of a change of control, Mr. Swift is to be paid a lump sum equal to the
discounted present value of amounts payable during the remainder of the
contract, plus a one year continuation of medical and dental coverage, and a tax
gross-up if such payments are deemed to be subject to "parachute payment" excise
taxes. Mr. Swift's contract also provides for a payment of approximately
$407,000 per year to Mr. Swift or his estate during each of the last five years
of the agreement in consideration of Mr. Swift's agreement not to compete with
the Company while he is receiving payments from the Company. The first two of
these payments were made in 2002 and 2001. Upon termination of Mr. Swift's
employment during its term, other than for cause, Mr. Swift is entitled to
receive continuation of his salary for a period of one year plus 4 weeks' salary
for every year of service to the Company if he is then being employed and paid
on a half-time basis, provided that salary payments are not to be made for more
than five years after he begins his part-time status. Insurance coverage is to
be continued while he is being paid, and all unexercised stock options held at
such date are to become vested.
Effective May 9, 2001, the Company entered into amended and restated
employment agreements with Terry E. Swift, President and Chief Executive
Officer, Bruce H. Vincent, Executive Vice President, Alton D. Heckaman, Senior
Vice President and Chief Financial Officer, James M. Kitterman, Senior Vice
President, and Joseph A. D'Amico, Executive Vice President and on the same date
entered into a new employment agreement with Victor Moran, Senior Vice
President. All of the agreements provide for an initial three-year term, which
is automatically extended for one year on each anniversary of the agreement
(such period, as so extended at any time, the "Contract Term"). These agreements
provide for payment of certain amounts and continuation of medical benefits for
one-half of the remainder of the Contract Term upon termination of employment
other than for cause. The payment shall be equal to the executive's base salary
in effect immediately prior to the termination date, plus one week's salary for
every year of service to the Company, plus in the case of Messrs. Swift,
Kitterman and Heckaman, certain amounts compounded at a rate of 8% per annum,
representing amounts in lieu of Company contributions to a 401-K plan for those
periods of employment prior to adoption of such a plan by the Company. The
agreements also provide for the continuation of medical benefits for one-half of
the remainder of the Contract Term upon termination of employment other than for
cause. The agreements can be terminated by the Company other than for cause only
by a majority of the continuing directors who have been directors for two years
or nominated for election by a majority of continuing directors. Upon employment
termination in connection with or following a change of control, the executives
are entitled to receive their salary that would have been paid for the remainder
of the Contract Term, plus two weeks' salary for every year of service to the
Company, plus in the case of Messrs. Swift, Kitterman and Heckaman, certain
amounts compounded at a rate of 8% per annum, representing amounts in lieu of
Company contributions to a 401-K plan for those periods of employment prior to
adoption of such a plan by the Company, and continuation of medical and dental
insurance and universal life coverages for certain periods. Immediately prior to
termination of employment, outstanding unexercised stock options vest or are
deemed to have vested, and the executives retain such options with no change to
their terms, except as to Mr. Moran, for whom the only outstanding options that
vest are those granted after the date of his employment agreement.
19
Stock Option Grants
During 2002, the following stock options were granted to the named
executive officers under the Company's stock compensation plans.
Option Grants in 2002
Grant Date
Individual Grants Value
-------------------------------------------------------------------------------------------------------- ----------------
% of Total
Number of Options Granted Exercise or Grant Date
Options to Employees in Base Price Present Value
Name Granted(1) Fiscal Year ($/Sh) Expiration Date ($)(2)
--------------------------- -------------- -------------------- ---------------- ------------------- ----------------
Terry E. Swift 20,000 3.46% $16.96 02/04/12 $251,760
Joseph A. D'Amico 2,560 0.44% $20.50 02/06/05 $ 25,413
16,000 2.77% $16.96 02/04/12 $201,408
10,000 1.73% $ 8.30 11/11/12 $ 71,930
Bruce H. Vincent 14,000 2.42% $16.96 02/04/12 $176,232
20,000 3.46% $ 8.30 11/11/12 $143,860
James M. Kitterman 13,000 2.25% $16.96 02/04/12 $163,644
10,000 1.73% $ 8.30 11/11/12 $ 71,930
Alton D. Heckaman, Jr. 11,000 1.90% $16.96 02/04/12 $138,468
15,000 2.59% $ 8.30 11/11/12 $107,895
------------------------------
(1) A. Earl Swift, Chairman of the Board, received 25,000 options,
representing 4.3% of total options granted to employees in 2002, with
an exercise price of $16.96, an expiration date of February 4, 2012,
and a grant date present value of $314,700.
(2) Estimated present values are based on the Black-Scholes Model, a
mathematical formula used to value exchange-traded options. The stock
options granted by the Company are long term, non-transferable and
subject to vesting restrictions, while exchange-traded options are
short term and can be exercised or sold immediately in a liquid market.
The Black-Scholes Model considers a number of factors, including the
expected volatility of the stock, interest rates, and the estimated
time period until exercise of the option. In calculating the grant date
present values set forth in the table, the following ranges of
assumptions were used: daily volatility for common stock of 61.36% to
86.65%, risk-free rate of return of 4.75% and actual number of years
from grant date to expiration date. In each case, the risk-free rate
was based on a 10 year government bond as of the grant date and no
dividend yield. No adjustments were made for non-transferability or
risk of forfeiture. The ultimate value of the option will depend on the
future market price of the Company's common stock, which cannot be
forecast with reasonable accuracy.
Option Values
The following table contains information concerning the number of
shares acquired and value realized from the exercise of options during 2002 and
the number of unexercised options held by the named executive officers at
December 31, 2002.
20
Aggregate Option Exercises in Last Fiscal Year
And
Fiscal Year End Option Values
Number of Shares of
Common Stock Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at Year End 2002 at Year End 2002(1)
--------------------------------- -----------------------------------
Shares
Acquired
On Value(2)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
-------------------------- ------------- --------------- --------------- ----------------- ---------------- ------------------
Terry E. Swift - $0 132,666 95,980 $85,665 $ 9,052
Joseph A. D'Amico 8,921 $96,763 71,097 92,160 $45,356 $19,675
Bruce H. Vincent - $0 117,678 83,820 $96,181 $31,220
James M. Kitterman - $0 105,906 55,420 $96,235 $17,520
Alton D. Heckaman, Jr. - $0 61,925 85,160 $31,893 $26,178
(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 closing price of Swift
common stock at December 31, 2002 $9.67 less the exercise price.
(2) Value Realized represents the difference between the exercise price of
the options and the NYSE closing price on the exercise date for Swift
common stock received upon exercise.
Compensation Committee Interlocks and Insider Participation
During 2002, the Compensation Committee of the Company consisted of
Messrs. Smith, Montgomery and Withrow and, from August 2002, Mr. Galvin, who are
all independent directors. To the Company's knowledge, there are no
inter-relationships involving members of the Compensation Committee or other
directors of the Company requiring disclosure in this section of the proxy
statement.
21
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The Board first established its Compensation Committee in 1982. The
Compensation Committee has always been composed solely of nonemployee directors,
and has set executive compensation since that time. Since 1987 when the
Compensation Committee undertook an evaluation of the Company's policies,
compensation has been based upon Company performance.
Philosophically, the Compensation Committee and the Company's Chief
Executive Officer believed it to be beneficial to the Company in its early years
to keep executive compensation in the low to middle ranges in comparison to
levels paid by comparable entities, particularly in comparison to many companies
in the oil and gas industry. Since 1987, the bonus compensation of the Company's
Chief Executive Officer has been based almost solely upon the Company's
performance, as described below.
Since late 1989, the bonus formula for the Chief Executive Officer has
been based upon earnings per share and growth in oil and gas reserves, as
described in detail below. Since 1995, the criteria also have reflected the
importance of cash flow to an oil and gas company and the Company's increased
emphasis on exploration and drilling activities to achieve growth in probable
reserves, in addition to acquisition of producing properties, given the
Compensation Committee's belief that successful drilling activities are based
upon a high level of drilling prospects. Accordingly, the bonus formula in the
2001 Omnibus Stock Compensation Plan (the "2001 Plan"), the plan which was
adopted by the Shareholders at the 2001 Annual Meeting and was in effect with
respect to compensation in 2001, provides for bonuses based upon year-to-year
increases in earnings per share, cash flow per share, proved reserves and
probable reserves and an assessment of the individual's contribution over the
course of the year.
Compensation Criteria and Performance Measurement
The Company's executive compensation consists of three components: base
salary, annual incentive bonuses, and long term stock-based incentives.
Base Salary for a particular year is based upon (i) the executive's
scope of responsibility, (ii) an evaluation of each executive's individual
performance during the year, (iii) an attempt to keep executive salaries within
the range paid by comparably sized oil and gas exploration and production
companies, based in part upon annual surveys provided by outside consultants on
independent oil and gas companies with similar market capitalizations (the
"Compensation Surveys"), and (iv) an evaluation of the Company's performance
during the preceding year, including the Company's earnings, reserve growth and
cash flow. Individual performance evaluation is based upon each executive's
review of his own performance throughout the year and upon a performance review
and compensation recommendation by the Company's Chief Executive Officer, which
is then reviewed and acted upon by the Compensation Committee.
The Compensation Surveys include companies in common with the Dow Jones
Oil, Secondary Index (the "Index") used in the "Five Year Shareholder Return
Comparison" set forth herein. The Compensation Surveys are used by the Company
for purposes of executive compensation comparison because they constitute a
broader group than the group of companies included in the Index, and because the
Compensation Surveys are comprised of companies somewhat closer in size and line
of business to the Company than some of the companies included in the Index. The
Index was selected in accordance with SEC rules solely for shareholder return
comparison purposes because it is a published industry index.
22
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. Under the 2001 Plan, bonuses are awarded in the form of Performance Bonus
Awards, which may be in cash, in shares of the Company's common stock or a
combination thereof, as determined by the Compensation Committee. The amount of
an executive officer's Performance Bonus Award for a particular year is
determined utilizing the following factors: (i) the increase in earnings per
share during that year and the increase in the cash flow per share during that
year (measures of short-term performance); (ii) the increase in the volume of
the Company's proved and probable oil and gas reserves during that year
(measures of long-term performance); (iii) individual performance of that
executive officer in contributing to either the Company's overall achievement of
its strategic objectives, or the achievement of the objectives of the
executive's department or group within the Company; and (iv) the Compensation
Committee's determination of the extent to which the executive officer's
individual performance merits a bonus. Historically, the Compensation Committee
has elected to have a portion of the bonus consist of Company stock.
In determining Performance Bonus Awards for 2002 (determined and paid
in February 2003), the Committee considered all of the above factors in
determining bonuses awarded. The Compensation Committee also took into account
individual performance ratings reflecting individual contribution and
contribution to group effectiveness.
Long-Term Stock-Based Incentives are provided through grants of
incentive stock options, usually on an annual basis, to executives and others
under the 2001 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. Grants have always vested in equal amounts over
five years.
The Compensation Committee determines a total number of options to be
granted in any year based on the total number of outstanding unexercised
options, so as to avoid excessive dilution of the shareholders' value in the
Company through 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 performance by an executive
officer may be recognized through a larger than normal option grant.
The Company believes that its compensation policy described above
provides an excellent link between the value created for shareholders and the
compensation paid to executive officers.
Compensation of Chief Executive Officer
Base Salary. The Chief Executive Officer's base salary in 2002 was
$400,000, compared to his base salary of $392,086 in 2001 for his service as
President of the Company until May 8, 2001 and his service as President and
Chief Executive Officer thereafter. The Compensation Committee's determination
was based on the factors described above under "Compensation Criteria and
Performance Measurement--Base Salary."
Bonus. In determining the Chief Executive Officer's bonus, the
Compensation Committee has typically given more weight to factors based upon the
Company's performance than to its evaluation of his general contribution, since
the Compensation Committee does not observe and supervise such performance on a
day-to-day basis. Terry E. Swift received a bonus of $120,000 in cash for his
service as Chief Executive Officer, compared to his cash bonus of $96,600 in
2001 for his service as President of the Company until May 8, 2001 and his
service as President and Chief Executive Officer thereafter.
23
Stock Options. In 2002 the Company granted the Chief Executive Officer
20,000 options to purchase shares of the Company's common stock, on the basis
explained above under "Compensation Criteria and Performance
Measurement--Long-Term Stock-Based Incentives."
Section 162(m) of the Internal Revenue Code. The Compensation Committee
does not propose to adopt any particular policy with respect to Section 162(m)
of the Internal Revenue Code. Section 162(m) generally limits deductions for
compensation paid to any employee in excess of $1 million per year. The Company
believes that any loss of deduction for compensation exceeding Section 162(m)'s
limitations is outweighed by the flexibility it gains in not meeting the
requirements of this section.
COMPENSATION COMMITTEE
Clyde W. Smith, Jr., Chairman
Raymond E. Galvin
Henry C. Montgomery
Harold J. Withrow
24
FIVE YEAR SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total return on the Company's
common stock to that of (i) the Standard & Poor's 500 Stock Index and (ii) the
Dow Jones Oil, Secondary Index, with "Cumulative total return" equaling (i) the
change in share price during the measurement period plus cumulative dividends
(of which, in accordance with its dividend policy, the Company has paid none)
for the measurement period (assuming dividend reinvestment), divided by (ii) the
share price at the beginning of the measurement period.
[GRAPH]
* $100 invested on 12/31/97 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
Cumulative Total Return
-------------------------------------------------------------
12/97 12/98 12/99 12/00 12/01 12/02
Swift Energy Company 100.00 35.01 54.60 178.64 95.91 45.91
S & P 500 100.00 128.58 155.64 141.46 124.65 97.10
Dow Jones Oil Companies, Secondary 100.00 68.61 79.18 126.46 116.10 118.62
25
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed with management the
Company's audited financial statements for the year ended December 31, 2002. The
Audit Committee also discussed with the Company's independent auditors, Ernst &
Young, the matters required to be discussed by Statement on Auditing Standards
No. 61, as amended. The Audit Committee received the written disclosures and the
letter from Ernst & Young required by Independence Standards Board Standard No.
1 and discussed with Ernst & Young and carefully considered the independence of
Ernst & Young and its other qualifications as the Company's independent
auditors. Based on the review and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for filing with the SEC for
the year ended December 31, 2002.
No portion of this Audit Committee Report shall be deemed to be
incorporated by reference into any filing under the Securities Act or the
Exchange Act, through any general statement incorporating by reference in its
entirety the Proxy Statement in which this report appears, except to the extent
that the Company specifically incorporates this report or a portion of it by
reference. In addition, this report shall not be deemed to be filed under either
the Securities Act or the Exchange Act.
AUDIT COMMITTEE
Henry C. Montgomery, Chairman
G. Robert Evans Clyde W.
Smith, Jr.
CONSIDERATION OF AUDITORS' FEES
Audit Fees
Audit fees billed or expected to be billed to the Company by Ernst &
Young LLP for its audit of the Company's annual financial statements for the
year ended December 31, 2002 and for its review of the financial statements
included in the Company's Quarterly Reports on Form 10-Q filed with the SEC for
2002 totaled $385,679.
Financial Information Systems Design and Implementation Fees
The Company did not engage Ernst & Young to provide advice to the
Company regarding financial information systems design and implementation during
the fiscal year ended December 31, 2002.
All Other Fees
Fees billed to the Company by Ernst & Young during the Company's 2002
fiscal year for all other services rendered to the Company, including tax
related services, totaled $127,205.
In connection with the standards for independence of the Company's
independent public accountants promulgated by the SEC, the Audit Committee has
reviewed and is satisfied that the additional services did not affect the
independence of Ernst & Young.
26
AUDITORS
Ernst & Young, certified public accountants, began serving as the
Company's independent auditors in 2002. A representative from Ernst & Young will
be present at this year's Meeting. Such representative will have the opportunity
to make a statement if he desires to do so and is expected to be available to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
Pursuant to various rules promulgated by the SEC, a shareholder that
seeks to include a proposal in the Company's proxy statement and form of proxy
card for the meeting of the shareholders of the Company to be held in 2004 must
timely submit such proposal in accordance with SEC Rule 14a-8 to the Company,
addressed to Bruce H. Vincent, Secretary, 16825 Northchase Drive, Houston, Texas
77060 no later than December 11, 2003. Further, a shareholder may not submit a
matter for consideration at the 2003 Meeting, regardless of whether presented
for inclusion in the Company's proxy statement and form of proxy card, unless
the shareholder shall have timely complied with the requirements in the
Company's Bylaws which set a notice deadline after which a shareholder will not
be permitted to present a proposal at the Company's shareholder meetings. The
Bylaws state that in order for business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Secretary of the Company. To be timely, a shareholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting. A notice given pursuant to
this advance notice Bylaw will not be timely with respect to the Company's 2004
meeting unless duly given by no later than March 14, 2004 and no earlier than
February 13, 2004.
With respect to business to be brought before the 2003 Meeting, the
Company has not received any notices from shareholders that the Company is
required to include in this proxy statement.
FORWARD LOOKING STATEMENTS
The statements contained in this proxy statement that are not
historical are "forward-looking statements," as that term is defined in Section
21E of the Exchange Act that involve a number of risks and uncertainties.
Forward-looking statements use forward-looking terms such as "believe,"
"expect," "may," "intend," "will," "project," "budget," "should" or "anticipate"
or other similar words. These statements discuss "forward-looking" information
such as future net revenues from production and estimates of oil and gas
reserves.
These forward-looking statements are based on assumptions that the
Company believes are reasonable, but they are open to a wide range of
uncertainties and business risks, including the following:
o fluctuations of the prices received or demand for oil and
natural gas over time;
o geopolitical conditions or hostilities;
o uncertainty of reserve estimates;
o operating hazards;
o unexpected substantial variances in capital requirements;
o environmental matters; and
o general economic conditions.
Other factors that could cause actual results to differ materially from
those anticipated are discussed in the Company's Annual Report to Shareholders
for the year ended December 31, 2002. The
27
Company will not update these forward-looking statements unless the securities
laws require the Company to do so.
GENERAL
The information contained in this proxy statement in the sections
entitled "Election of Directors," "Compensation Committee Report on Executive
Compensation," "Comparative Total Returns" and "Audit Committee Report" shall
not be deemed incorporated by reference by any general statement incorporating
by reference any information contained in this proxy statement into any filing
under the Securities Act, or the Exchange Act, except to the extent that the
Company specifically incorporates by reference the information contained in such
sections, and shall not otherwise be deemed filed under the Securities Act or
the Exchange Act.
By Order of the Board of Directors
BRUCE H. VINCENT
Secretary
Houston, Texas
April 2, 2003
28
ANNUAL MEETING OF SHAREHOLDERS OF
SWIFT ENERGY COMPANY
May 13, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach and mail in the envelope provided.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
AND "FOR" PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
PROPOSAL 1: FOR the election of all nominees for PROPOSAL 2: To amend the Company's 2001 [ ] [ ] [ ]
directors listed (except as marked to Omnibus Stock Compensation Plan to
the contrary); increase the number of shares subject
to the plan by 500,000 shares from
NOMINEES 1.5 million shares to 2.0 million
[ ] FOR ALL NOMINEES 0 Terry E. Swift shares.
O Raymond E. Galvin
O Clyde W Smith, Jr. PROPOSAL 3: In their discretion, the
Proxies are authorized to vote upon
[ ] WITHHOLD AUTHORITY such other matters as may properly
FOR ALL NOMINEES come before the Meeting, hereby revoking
any proxy or proxies heretofore given by
the undersigned.
[ ] FOR ALL EXCEPT
(See instructions below) The Board of Directors recommends a vote for all nominees
named in Proposal 1, and for Proposal 2. This proxy will
be voted in accordance with the specifications made hereon.
INSTRUCTION: To withhold authority to vote for If NO specification is made, the shares will be voted
any individual nominee(s), mark for all nominees and in favor of Proposal 2.
"FOR ALL EXCEPT" and fill in the
circle next to each nominee you
wish to withhold, as shown here:
The undersigned hereby acknowledges receipt of the Notice
of 2003 Annual Meeting of Shareholders and Proxy Statement
and the 2002 Annual Report to Shareholders furnished herewith.
------------------------------------------------------------
PLEASE SIGN AND RETURN IN THE ENCLOSED STAMPED, PRE-ADDRESSED
ENVELOPE.
------------------------------------------------------------
To change the address on your account, please
check the box at right and of indicate your new
address in the address space above. Please note [ ]
that changes to the registered name(s) on the
account may not be submitted via this method.
--------------------------------------------------------------------------------
Signature of Shareholder Date: Signature Shareholder Date:
------------------- -------- ---------------- -----------
Note: This proxy must be signed exactly as the name appears hereon, when shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. Attorneys - should submit powers of attorney. If the signer is a
corporation, please sign full corporate name by duty authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
SWIFT ENERGY COMPANY
The Board of Directors Solicits This Proxy for the
Annual Meeting of Shareholders to be held on May 13, 2003
The undersigned hereby constitutes and appoints A. Earl Swift, Virgil N.
Swift or Harold H. Withrow, or any of them, with full power of substitution and
revocation of each, the true and lawful attorneys and proxies of the undersigned
at the Annual Meeting of Shareholders (the "Meeting") of SWIFT ENERGY COMPANY
(the "Company") to be held on May 13, 2003 at 4:00 p.m. Houston time, in the
Wyndham Greenspoint Hotel, 12400 Greenspoint Drive, Houston, Texas, or any
adjournments thereof, and to vote the shares of common stock of the Company
standing in the name of the undersigned on the books of the Company (or which
the undersigned 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)