<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
COMMISSION FILE NUMBER 1-8754
SWIFT ENERGY COMPANY
(Exact Name of Registrant as Specified in its Charter)
TEXAS 74-2073055
(State of Incorporation) (I.R.S. Employer Identification No.)
16825 NORTHCHASE DR., SUITE 400
HOUSTON, TEXAS 77060
(713) 874-2700
(Address and telephone number of principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
COMMON STOCK 12,506,706 SHARES
($.01 Par Value) (Outstanding at October 31, 1995)
(Class of Stock)
<PAGE>
SWIFT ENERGY COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
- September 30, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Income
- For the Three-month and Nine-month periods
ended September 30, 1995 and 1994 5
Condensed Consolidated Statements of
Stockholders' Equity
- September 30, 1995 and December 31, 1994 6
Condensed Consolidated Statements of Cash Flows
- For the Three-month and Nine-month periods
ended September 30, 1995 and 1994 7
Notes to Condensed Consolidated Financial
Statements 8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
PART II. OTHER INFORMATION
ITEMS 1-4. None 27
ITEM 5. Other Information 27
ITEM 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 28
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 12,167,882 $ 985,498
Accounts receivable -
Oil and gas sales 13,932,128 12,394,636
Associated limited partnerships
and joint ventures 15,177,870 17,899,150
Joint interest owners 3,319,906 4,335,283
Producing oil and gas properties
held for transfer --- 3,525,841
Other current assets 170,098 68,010
------------- -------------
Total Current Assets 44,767,884 39,208,418
------------- -------------
Property and Equipment:
Oil and gas, using full-cost
accounting
Proved properties being
amortized 109,379,373 93,368,795
Unproved properties not being
amortized 19,214,168 14,805,479
------------- -------------
128,593,541 108,174,274
Furniture, fixtures and other
equipment 4,133,596 3,476,695
------------- -------------
132,727,137 111,650,969
Less-Accumulated depreciation,
depletion and amortization (27,503,445) (21,364,949)
------------- -------------
105,223,692 90,286,020
------------- -------------
Other Assets:
Receivables from associated limited
partnerships, net of current portion 2,456,180 1,916,477
Limited partnership formation and
marketing costs, net of current
portion 3,346,133 2,991,873
Deferred charges 1,185,787 1,269,955
------------- -------------
6,988,100 6,178,305
------------- -------------
$ 156,979,676 $ 135,672,743
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited) (Note 1)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term bank borrowings $ --- $ 27,229,000
Accounts payable and accrued
liabilities 7,225,655 9,516,005
Payable to associated limited
partnerships 322,856 637,991
Undistributed oil and gas revenues 17,960,542 14,962,863
------------- -------------
Total Current Liabilities 25,509,053 52,345,859
------------- -------------
Long-Term Debt 28,750,000 28,750,000
Deferred Revenues 6,483,882 7,827,562
Deferred Income Taxes 5,277,166 4,622,191
Commitments and Contingencies
Stockholders' Equity:
Preferred stock $.01 par value,
5,000,000 shares authorized, none
outstanding --- ---
Common stock, $.01 par value,
35,000,000 shares authorized,
12,506,706 and 6,685,137 shares
issued and outstanding, respectively 125,067 66,851
Additional paid-in capital 71,139,700 24,885,903
Retained earnings 19,694,808 17,174,377
------------- -------------
90,959,575 42,127,131
------------- -------------
$ 156,979,676 $ 135,672,743
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
1995 1994 1995 1994
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $5,465,881 $5,534,789 $15,208,354 $15,014,095
Fees from limited partnerships
and joint ventures 91,074 203,813 339,157 546,135
Supervision fees 973,694 947,382 2,838,170 2,842,454
Interest income 113,506 7,914 132,116 28,757
Other, net 404,779 268,714 1,354,635 776,660
---------- ---------- ----------- -----------
7,048,934 6,962,612 19,872,432 19,208,101
---------- ---------- ----------- -----------
Costs and Expenses:
General and administrative,
net of reimbursement 1,217,880 1,352,469 3,969,942 3,768,772
Depreciation, depletion and
amortization 2,136,058 2,143,652 6,138,496 5,635,073
Oil and gas production 1,764,072 1,577,911 5,100,864 3,938,290
Interest expense 193,161 448,960 1,283,485 1,210,363
---------- ---------- ----------- -----------
5,311,171 5,522,992 16,492,787 14,552,498
---------- ---------- ----------- -----------
Income before Income Taxes 1,737,763 1,439,620 3,379,645 4,655,603
Provision for Income Taxes 473,207 309,222 859,214 1,238,406
---------- ---------- ----------- -----------
Income Before Cumulative Effect
of Change in Accounting Principle 1,264,556 1,130,398 2,520,431 3,417,197
Cumulative Effect of Change in
Accounting Principle --- --- --- (16,772,698)
---------- ---------- ----------- -----------
Net Income $1,264,556 $1,130,398 $ 2,520,431 $(13,355,501)
========== ========== =========== ============
Per share amounts -
Primary:
Income Before Cumulative
Effect of Change in
Accounting Principle $ 0.12 $ 0.17 $ 0.32 $ 0.52
========== ========== =========== ============
Cumulative Effect of Change
in Accounting Principle $ --- $ --- $ --- $ (2.53)
========== ========== =========== ============
Net Income $ 0.12 $ 0.17 $ 0.32 $ (2.01)
========== ========== =========== ============
Fully diluted:
Income Before Cumulative
Effect of Change in
Accounting Principle $ 0.11 $ 0.16 $ 0.32 $ 0.48
========== ========== =========== ============
Cumulative Effect of Change
in Accounting Principle $ --- $ --- $ --- $ (2.53)
========== ========== =========== ============
Net Income $ 0.11 $ 0.16 $ 0.32 $ (2.01)
========== ========== =========== ============
Weighted Average Shares
Outstanding 10,571,125 6,667,752 7,994,703 6,631,530
========== ========== =========== ============
</TABLE>
5
<PAGE>
SWIFT ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock (1) Capital Earnings Total
--------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 $ 60,011 $17,515,417 $ 36,890,286 $ 54,465,714
Stock issued for benefit
plans (26,488 shares) 265 271,176 --- 271,441
Stock options exercised
(21,472 shares) 214 176,808 --- 177,022
Employee stock purchase plan
(29,840 shares) 298 259,683 --- 259,981
10% stock dividend
(606,262 shares) 6,063 6,662,819 (6,668,882) ---
Net Loss --- --- (13,047,027) (13,047,027)
-------- ----------- ------------ ------------
Balance, December 31, 1994 $ 66,851 $24,885,903 $ 17,174,377 $ 42,127,131
Stock issued for benefit
plans (31,112 shares) 311 283,463 --- 283,774
Stock options exercised
(2,768 shares) 28 20,864 --- 20,892
Employee stock purchase plan
(37,689 shares) 377 289,465 --- 289,842
Public stock offering
(5,750,000 shares) 57,500 45,660,005 --- 45,717,505
Net Income --- --- 2,520,431 2,520,431
-------- ----------- ------------ ------------
Balance, September 30, 1995 $125,067 $71,139,700 $ 19,694,808 $ 90,959,575
======== =========== ============ ============
</TABLE>
(1) $.01 Par Value
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended September 30,
--------------------------------
1995 1994
------------ -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 2,520,431 $ (13,355,501)
Adjustments to reconcile net income to net cash provided
by operating activities -
Depreciation, depletion and amortization 6,138,496 5,635,073
Deferred income taxes 654,975 929,307
Deferred revenue amortization related to production payment (1,349,253) (1,518,804)
Cumulative effect of change in accounting principle --- 16,772,698
Other 84,168 78,420
Change in assets and liabilities -
Increase in accounts receivable (111,746) (793,689)
Increase in accounts payable and accrued
liabilities, excluding income taxes payable 559,529 509,465
Increase in income taxes payable 50,584 235,080
------------ -------------
Net Cash Provided by Operating Activities 8,547,184 8,492,049
------------ -------------
Cash Flows From Investing Activities:
Additions to property and equipment (21,076,168) (22,310,612)
Net cash received (distributed) as operator
of oil and gas properties (628,288) (1,435,150)
Property acquisition costs (incurred on behalf of)
reimbursed by partnerships and joint ventures 5,707,418 (12,461,940)
Limited partnership formation and marketing costs (354,260) (495,093)
Prepaid drilling costs (102,088) 1,170,964
Other 5,573 (42,075)
------------ -------------
Net Cash Used in Investing Activities (16,447,813) (35,573,906)
------------ -------------
Cash Flows From Financing Activities:
Net proceeds from (payments of) short-term bank borrowings (27,229,000) 26,350,000
Net proceeds from issuances of common stock 46,312,013 571,837
------------ -------------
Net Cash Provided by Financing Activities 19,083,013 26,921,837
------------ -------------
Net Increase (Decrease) in Cash and Cash Equivalents $ 11,182,384 $ (160,020)
Cash and Cash Equivalents at Beginning of Period 985,498 636,349
------------ -------------
Cash and Cash Equivalents at End of Period $ 12,167,882 $ 476,329
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for interest, net of amounts
capitalized $ 732,130 $ 743,804
Cash paid during period for income taxes $ 163,655 $ 11,951
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
(1) GENERAL INFORMATION -
The condensed consolidated financial statements included herein have
been prepared by Swift Energy Company (the "Company") and are unaudited,
except for the balance sheet at December 31, 1994 which has been prepared
from the audited financial statements at that date. The financial
statements reflect necessary adjustments, all of which were of a recurring
nature, and are in the opinion of management, necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC). The
Company believes that the disclosures presented are adequate to allow the
information presented not to be misleading. The condensed consolidated
financial statements should be read in conjunction with the audited
financial statements and the notes thereto included in the latest Form 10-K
and Annual Report.
Because of the volatility in oil and gas prices and other factors,
interim results are not necessarily indicative of those for a full year.
Certain reclassifications have been made to the prior year balances
to conform to current year presentation.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
OIL AND GAS PROPERTIES
For financial reporting purposes, the Company follows the "full-cost"
method of accounting for oil and gas property and equipment costs. Under
this method of accounting, all productive and nonproductive costs incurred
in the acquisition, exploration, and development of oil and gas reserves
are capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain general
and administrative costs directly associated with acquisition, exploration
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No gains or
losses are recognized upon the sale or disposition of oil and gas
properties, except in extraordinary transactions. Instead, the proceeds
from the sale of oil and gas properties are treated as a reduction of oil
and gas property costs. Fees from associated oil and gas exploration and
development limited partnerships are credited to oil and gas property costs
to the extent they do not represent reimbursement of general and
administrative expenses currently charged to expense.
8
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
Future development, site restoration, dismantlement and abandonment
costs, net of salvage values, are estimated on a property-by-property basis
based on current economic conditions and are amortized to expense as the
Company's capitalized oil and gas property costs are amortized. The
Company's properties are all onshore and historically the salvage value of
the tangible equipment offsets the Company's site restoration,
dismantlement and abandonment costs. The Company expects this relationship
will continue.
The Company computes the provision for depreciation, depletion, and
amortization of oil and gas properties on the unit-of-production method.
Under this method, the Company computes the provision by multiplying the
total unamortized cost of oil and gas properties including future
development, site restoration, dismantlement and abandonment costs but
excluding costs of unproved properties, by an overall rate determined by
dividing the physical units of oil and gas produced during the period by
the total estimated units of proved oil and gas reserves. The cost of
unproved properties not being amortized is assessed quarterly to determine
whether the value has been impaired below the capitalized cost. Any
impairment assessed is added to the cost of proved properties being
amortized.
At the end of each quarterly reporting period, the unamortized cost of
oil and gas properties, net of related deferred income taxes, is limited to
the sum of the estimated future net revenues from proved properties using
current prices, discounted at 10%, and the lower of cost or fair value of
unproved properties, adjusted for related income tax effects.
DEFERRED CHARGES
Legal and accounting fees, underwriting fees, printing costs, and
other direct expenses associated with the issuance of the Company's
Convertible Subordinated Debentures in June 1993 have been capitalized
and are being amortized over the life of the Debentures, which mature on
June 30, 2003. The balance at September 30, 1995 of $1,185,787 is net of
accumulated amortization of $239,213.
HEDGING ACTIVITIES
The Company engages periodically in certain limited hedging
activities, but only to the extent of buying price protection floors for
portions of its and the limited partnerships' oil and gas production. Costs
and/or benefits derived from these price floors are accordingly recorded as
a reduction or increase in oil and gas sales revenues and are not
significant for any period presented.
9
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
DEFERRED REVENUES
In May 1992, the Company purchased interests in certain wells using
funds provided by the Company's sale of a volumetric production payment
in these properties. Under the terms of the production payment agreement,
the Company continues to own the properties purchased but is required to
deliver a minimum quantity of hydrocarbons produced from the properties
(meeting certain quality and heating equivalent requirements) over a
specified period. Since entering into this agreement, the Company has met
all scheduled deliveries. Net proceeds from the sale of the production
payment were recorded as deferred revenues. Deliveries under the
production payment agreement are recorded as oil and gas sales revenues
and a corresponding reduction of deferred revenues.
LIMITED PARTNERSHIPS AND JOINT VENTURES
The Company forms limited partnerships and joint ventures for the
purpose of acquiring interests in producing oil and gas properties, and
since 1993, partnerships engaged in drilling for oil and gas reserves.
The Company's investments in associated oil and gas partnerships and its
joint ventures are accounted for using the proportionate consolidation
method, whereby the Company's proportionate share of each entity's assets,
liabilities, revenues and expenses is included in the appropriate
classifications in the consolidated financial statements. Because the
Company serves as the general partner of these entities, under state
partnership law it is contingently liable for the liabilities of these
partnerships, which liabilities are not material for any of the periods
presented in relation to the partnerships' respective assets. These
partnerships' liabilities generally consist of third party borrowings from
time to time to fund capital expenditures for development of oil and gas
properties, and will be repaid from oil and gas sales proceeds of the
partnerships in future periods.
Under the Swift Depositary Interests limited partnership offering
("SDI Offering") which commenced in March 1991, the Company receives a
reimbursement of certain costs and a fee, both payable out of revenues.
The Company bears all front-end costs of the offering and partnership
formations for which it receives an interest in the partnerships. Prior to
1994, the Company recognized as revenue, fees (earned interests) received
in the form of additional interests in producing oil and gas properties
acquired by these entities. As described in Note 3, effective January 1,
1994, the Company changed its revenue recognition policy for earned
interests and under its newly adopted policy, will no longer recognize
earned interests as revenue.
10
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
The Company acquires and transfers producing oil and gas properties
to the entities at cost, including interest, other carrying costs, closing
costs, and screening and evaluation costs of properties not acquired, or
in certain instances at fair market value based upon the opinion of an
independent expert. These costs are reduced by net operating revenues from
the effective date of the acquisition to the date of transfer to the
entities.
Certain designated oil and gas properties acquired in advance of
formation of partnerships or joint ventures and held by the Company pending
resale to those partnerships or joint ventures are classified as "Producing
oil and gas properties held for transfer".
Commencing September 15, 1993, the Company began offering, on a
private placement basis, general and limited partnership interests in
limited partnerships formed to drill for oil and gas. As Managing General
Partner, the Company pays for all front-end costs incurred in connection
with this offering, for which the Company receives an interest in the
partnerships. Through September 30, 1995, approximately $12,900,000 had
been raised in four partnerships in which the proceeds are being invested
in development drilling (approximately 50%) and exploratory drilling
(approximately 25%), with the remaining 25% dependent upon the results of
the initial drilling activities. The first four partnerships closed
December 8, 1993, July 18, 1994, March 15, 1995, and August 1, 1995.
Costs of syndication and qualification of these limited partnerships
incurred by the Company have been deferred. Under the current limited
partnership offerings, selling and formation costs borne by the Company
serve as the Company's general partner contribution to such partnerships.
INCOME TAXES
The Company accounts for Income Taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS
No. 109 utilizes the liability method and deferred taxes are determined
based on the estimated future tax effects of differences between the
financial statement and tax bases of assets and liabilities given the
provisions of the enacted tax laws.
Income taxes for the interim periods have been provided using the
estimated annualized effective tax rate.
11
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
INCOME (LOSS) PER SHARE
Primary income (loss) per share has been computed using the weighted
average number of common shares outstanding during the respective periods,
which reflects the additional 5,750,000 shares sold in a public offering in
July and August of 1995. Stock options and warrants outstanding do not have
an effect on primary income (loss) per share. The Company's Convertible
Subordinated Debentures are not common stock equivalents for the purpose of
computing primary income (loss) per share.
Primary income (loss) per share has been retroactively restated in all
periods presented to give recognition to an equivalent change in capital
structure as a result of a 10% stock dividend. On September 6, 1994, the
Company declared a 10% stock dividend to shareholders of record on
September 19, 1994, which was distributed on September 29, 1994, resulting
in an additional 606,262 shares being issued.
The calculation of fully diluted income (loss) per share assumes
conversion of the Company's Convertible Subordinated Debentures as of the
beginning of the period and the elimination of the related after-tax
interest expense and assumes, as of the beginning of the period, exercise
(using the treasury stock method) of stock options and warrants. The
conversion price of the Convertible Subordinated Debentures was revised to
reflect the 10% stock dividend declared September 6, 1994. The original
conversion price was $13.50 per common share and the revised conversion
price per common share is $12.27. Fully diluted income (loss) per share has
also been retroactively restated for all periods presented to give effect
to the resulting conversion price revision stemming from the 10% stock
dividend. The weighted average number of shares used in the computation of
fully diluted per share amounts were 10,356,607 and 12,933,029 for the
respective nine-month and three-month periods ended September 30, 1995. The
weighted average number of shares used in the computation of fully diluted
per share amounts were 9,064,308 and 9,100,530 for the respective nine-
month and three-month periods ended September 30, 1994.
(3) CHANGE IN ACCOUNTING PRINCIPLE
In the fourth quarter of 1994, the Company changed its revenue recognition
policy for earned interests, effective January 1, 1994. Under the
Company's newly adopted method of accounting for earned interests, such
amounts will not be recognized as income. This change was made as the
result of a transition in the Company's current business activities and
changes in the oil and gas limited partnership syndication markets. The
Company feels the change in policy results in more comparable financial
statements in relation to its current business focus and in comparison to
its
12
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
current peers and competitors in the oil and gas exploration and production
industry.
The effect of the change on the 1994 nine-month period results was to
increase income before cumulative effect of change in accounting principle
by approximately $694,500 or $.10 per share. This increase was a result of
the decrease in depletion expense more than offsetting the decrease in
revenues as a result of not recognizing earned interests. The effect of
the change on the 1994 third quarter results was to increase income before
cumulative effect of change in accounting principle by approximately
$362,000 or $0.05 per share which increase was a result of the same
factors. The cumulative effect of this change in accounting principle
resulted in a first quarter 1994 adjustment of $16,772,698 or $(2.54) per
share (after reduction for income taxes of $8,640,481), to retroactively
apply the new method, thereby reducing net income for the nine-month period
ended September 30, 1994.
(4) SHORT-TERM BANK BORROWINGS
The Company had available through a two bank group, a revolving line
of credit of $35,000,000 at September 30, 1995 and $29,000,000 at December
31, 1994 bearing interest at the banks' base rate plus 0.5% (9.25% at
September 30, 1995 and 9% at December 31, 1994), secured by the Company's
interests in certain oil and gas properties and general partner interests.
This facility also allows, at the Company's option, draws which bear
interest for specific periods at the London Interbank Offered Rate
("LIBOR") plus 2.25%. There was no outstanding balance under this line of
credit at September 30, 1995. At December 31, 1994, $14,000,000 of the
$18,600,000 outstanding was at the LIBOR plus 2.25% rates (7.875% on
$3,000,000, 8.1875% on $6,000,000, and 8.5% on $5,000,000). The outstanding
amount under this facility at December 31, 1994 ($18,600,000) was borrowed
primarily to fund the advance purchase of producing properties on behalf of
affiliated partnerships and/or joint ventures to be subsequently reimbursed
and to fund the Company's working capital and capital expenditures needs.
The terms of the revolving line of credit include, among other
restrictions, a limitation on the level of cash dividends (not to exceed
$424,000 in any fiscal year), requirements as to maintenance of certain
minimum financial ratios (principally pertaining to working capital, debt,
and equity ratios) and limitations on incurring other debt. Since
inception, no cash dividends have been declared on the Company's common
stock. The Company presently intends to continue a policy of using retained
earnings for expansion of its business. As of September 30, 1995 and
December 31, 1994, the Company was in compliance with the provisions of
13
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
these agreements. The revolving line of credit extends through May 1, 1996.
The Company's second credit line was an Acquisition Advance Agreement
with the same two bank group, bearing interest at the greater of (a) the
bank's base rate plus 1% or (b) the Federal Funds rate plus 1.5%, to be
secured by producing oil and gas properties acquired and held for transfer.
At December 31, 1994, $3,629,000 had been borrowed under this agreement to
fund the advance purchase of producing properties on behalf of affiliated
partnerships and/or joint ventures which were subsequently reimbursed. This
credit agreement expired June 15, 1995.
The Company's third credit facility is an amended and restated
revolving line of credit with the lead bank for $5,000,000 bearing interest
at the bank's base rate (8.75% at September 30, 1995 and 8.5% at December
31, 1994), secured by certain Company receivables. At September 30, 1994,
$5,000,000 was outstanding under this facility. There was no outstanding
amount on this facility at September 30, 1995. This credit facility extends
through May 1, 1996.
In addition to interest on these credit facilities, the Company pays a
commitment fee to compensate the banks for making funds available. The fee
on the revolving line of credit is calculated on the average daily
remainder, if any, of the commitment amount less the aggregate principal
amounts outstanding plus the amount of all outstanding letters of credit
during the period. The fee on the Acquisition Advance Agreement was .5% of
the amount of the advance. The aggregate amounts of commitment fees paid by
the Company were $96,000 for the first nine months of 1995 and $150,000 for
the twelve month period in 1994.
(5) LONG-TERM DEBT
The Company's long-term debt consists of $28,750,000 of 6.5%
Convertible Subordinated Debentures ("Debentures"). The Debentures were
issued on June 30, 1993, and will mature on June 30, 2003. The Debentures
are convertible into common stock of the Company by the holders at any
time prior to maturity at a conversion price of $12.27 per share, subject
to adjustment upon the occurrence of certain events. The conversion price
reflects an adjustment of the original conversion price of $13.50 per share
to reflect the 10% stock dividend declared September 6, 1994 and
distributed September 29, 1994. Interest on the Debentures is payable
semi-annually on June 30, and December 31, commencing with the payment made
at December 31, 1993. After June 30, 1997 (or in certain circumstances
after June 30, 1996), the Debentures are redeemable for cash at the option
of the Company, with certain restrictions, at 104.55% of principal,
declining to 100.65% in 2002. Upon certain changes in
14
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
control of the Company, if the price of the Company's common stock is not
above certain levels each holder of Debentures will have the right to
require the Company to repurchase the Debentures at the principal amount
thereof, together with accrued and unpaid interest to the date of
repurchase but after the repayment of any Senior Indebtedness, as defined.
Interest expense on the Debentures, including amortization of debt
issuance costs, totaled $1,485,730 for the nine-month period ending
September 30, 1995. Interest expense on the Debentures, including
amortization of debt issuance costs, totaled $1,973,931 for the twelve-
month period ending December 31, 1994.
(6) STOCKHOLDERS' EQUITY
On September 6, 1994, the Company declared a 10% stock dividend to
shareholders of record on September 19, 1994, which was distributed on
September 29, 1994. The transaction was valued based on the closing price
($11.00) of the Company's common stock on the New York Stock Exchange on
September 6, 1994. As a result of the issuance of 606,262 shares of the
Company's Common Stock as a dividend, retained earnings were reduced
$6,668,882, with the Common Stock and additional paid-in capital accounts
increased by the same amount. Primary and fully diluted income (loss) per
share has been restated for all periods presented to reflect the effect of
the stock dividend.
During the third quarter of 1995, the Company closed the sale to the
public of 5,750,000 shares of common stock at a price of $8.50 per share.
Net proceeds from the offering were used to repay outstanding indebtedness,
and the remaining proceeds will be used to finance the Company's
exploration and development activities, and to acquire producing oil and
gas properties, including limited partnership interests. Net proceeds from
these sales, before selling expenses, were $46,115,000.
(7) FOREIGN ACTIVITIES
RUSSIA
On September 3, 1993, the Company signed a Participation Agreement
with Senega, a Russian Federation joint stock company (in which the Company
has an indirect interest of less than 1%), to assist in the development and
production of reserves from two fields in Western Siberia. The Company will
receive a minimum 5% net profits interest from the sale of hydrocarbon
products from the fields for providing managerial, technical and financial
support to Senega limited to an initial budgeted capital expenditure of
approximately $5,000,000. In May 1995, the Company executed a Management
Agreement with Senega. In return for providing financing for development
of these fields, Swift is given
15
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
certain rights by Senega, including a 49% interest in production income
derived by Senega from this project after repayment of costs. At September
30, 1995 the Company's investment in Russia was approximately $6,035,000
and is included in the unproved properties portion of oil and gas
properties.
VENEZUELA
The Company formed a wholly-owned subsidiary, Swift Energy de
Venezuela, C.A. for the purpose of submitting a bid on August 5, 1993 under
the Venezuelan Marginal Oil Field Reactivation Program on the Quiriquire
Unit located in Northeastern Venezuela. Swift (together with a minority
interest holder) was one of six bidders on the Quiriquire Unit. The Company
did not win the bid for the Quiriquire Unit; however, other fields and
opportunities are continuing to be evaluated in Venezuela. At September 30,
1995 the Company's investment in Venezuela was approximately $1,055,000 and
is included in the unproved properties portion of oil and gas properties,
net of impairments of $45,668.
NEW ZEALAND
On October 12, 1995, the Company was approved for the grant of a
Petroleum Exploration Permit by the New Zealand Minister of Energy, which
was approved by the Company's board of directors on November 7, 1995. This
permit (PEP 38717) covers approximately 50,000 acres in the Onshore
Taranaki Basin region. This permit primarily requires the Company to : (a)
post a $175,000 bond before January 11, 1996; (b) before December 31, 1997
analyze and interpret approximately 460 kilometers of existing seismic data
and acquire approximately 100 kilometers of new seismic data; (c) commence
drilling one well prior to July 31, 1998; (d) review results prior to July
31, 1999 and (e) prior to July 31, 2000 drill a development well or acquire
additional seismic data. At September 30, 1995 the Company's investment in
New Zealand was approximately $150,000 and is included in the unproved
properties portion of oil and gas properties.
(8) ACQUISITION OF PROPERTIES BY SWIFT
During the second quarter of 1994, the Company acquired approximately
$18,100,000 of producing oil and gas properties in a single acquisition
transaction. Approximately $12,700,000 and $3,500,000 of the properties
were transferred to affiliated partnerships formed under the Company's SDI
offering, in 1994 and 1995, respectively. Approximately $1,900,000 of the
properties were retained by the Company for its own account.
16
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto.
GENERAL
The Company has historically financed most of its growth with capital
raised through limited partnership financing, having raised approximately
$440 million through limited partnership financing from 1979 through 1994.
Beginning in 1985, the Company increasingly emphasized this financing vehicle
thereby enabling the Company to accelerate its growth and purchase larger
producing properties. Commencing in 1991, the Company began to reduce its
reliance on limited partnership financing as its reserve base expanded and
its strategy shifted to re-emphasize internally-generated exploration and
development activities. The Company intends to continue to reduce its
dependence on limited partnership financing.
The Company's revenue is primarily comprised of the following
components: oil and gas sales attributable to properties in which the Company
owns a direct or indirect interest and supervision fees generated by the
Company's role as operator of approximately 750 producing and drilling wells.
Additionally, prior to 1994, the Company also recorded earned interests and
fees from limited partnerships and joint ventures. Effective January 1, 1994,
the Company changed its revenue recognition policy for earned interests. The
cumulative effect in 1994 of this change in accounting principle resulted in
a one-time accounting adjustment of $16.8 million, or a loss of $2.52 per
share (after reduction for income taxes of $8.6 million), from applying the
new method retroactively. Earned interests represented revenues in the form
of interests in proved developed oil and gas properties conveyed to limited
partnerships and joint ventures formed in connection with the Company's
organization and management of limited partnerships and joint ventures,
representing the difference between the Company's capital contributions to
each limited partnership or joint venture and its earned revenue interest in
the limited partnership's or venture's properties (based upon the expected
levels of cash distributions to the limited partners or joint ventures).
Under the Company's newly adopted method of accounting for earned interests,
such amounts will not be recognized as income, thereby reducing the Company's
investment in oil and gas property. The Company believes the change in
policy results in financial statements that better reflect its current
business focus and that are more comparable to current practices in the oil
and gas exploration and production industry.
17
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In May 1992, the Company purchased interests in certain wells from the
Manville Corporation for $13.8 million using funds provided by the Company's
sale of the Volumetric Production Payment in these properties to a subsidiary
of Enron Corp. Net proceeds from the sale of the production were recorded as
deferred revenues. Deliveries under the Volumetric Production Payments are
recorded as oil and gas sales revenues which are offset by a corresponding
reduction of deferred revenues. Under this arrangement, the Company is
required to deliver a fixed quantity of hydrocarbons produced from the
properties over specified periods through October 2000. Volumes remaining to
be delivered under the Volumetric Production Payment are not included in the
Company's proved reserves. Under the Volumetric Production Payment,
hydrocarbons produced in excess of the amount required to be delivered are
sold by the Company for its own account.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has relied on limited partnership capital as
its principal financing vehicle to fund its acquisitions. Since 1991, the
Company's strategy has shifted toward increased reliance on exploration and
development activities, and it has significantly expanded reserves added
through these efforts. As a result, the Company has reduced its reliance on
cash flow generated from, and capital raised through, limited partnerships.
Supplemental cash and working capital are provided through internally
generated cash flow and debt and equity financing.
NET CASH FROM OPERATIONS
For the nine-month period ended September 30, 1995, cash flows from
operating activities increased slightly to $8,547,184 as compared to
$8,492,049 during the first nine months of 1994. Despite an 11% production
increase (approximately 800,000 Mcf equivalents) in the first three quarters
of 1995, the nine-month 1995 increase in operating cash flows of only $55,135
was primarily due to average gas prices received being 19% lower than a year
earlier, as discussed below.
1995 EQUITY OFFERING
During the third quarter of 1995, the Company closed the sale to the
public of 5,750,000 shares of common stock at a price of $8.50 per share. Net
proceeds from the offering were used to repay outstanding indebtedness, and
the remainder of the proceeds will be used to finance the Company's
exploration and development activities, and to acquire producing oil and gas
properties, including limited partnership interests. Net proceeds from these
sales, before selling expenses, were $46,115,000. Consequently,
18
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
the Company's stockholders' equity at September 30, 1995 has grown to over
$90 million.
OTHER FINANCING ACTIVITIES
On June 30, 1993, the Company issued $28,750,000 of Convertible
Subordinated Debentures (Debentures) due June 30, 2003, in a public offering.
Proceeds of the offering have been used primarily to acquire producing oil
and gas properties and to finance the Company's expanding exploration and
development programs. The principal terms of these Debentures are described
in Note 5 to the Company's condensed financial statements included herein.
The Company offers interests in oil and gas production partnerships
under its Swift Depositary Interests (SDI), offering and since late 1993 has
offered private partnerships formed to drill for oil and gas. The Company
does not intend to extend the SDI program past its current offering period,
which ends April 30, 1996, and will continue to evaluate the market for the
SDI program in the interim period. Due to market conditions, the formation of
the first two SDI partnerships to be organized during 1995 was delayed from
the end of the first quarter until April 28, 1995, with total subscriptions
of approximately $7,000,000. Under the second two partnerships anticipated to
be organized prior to year-end 1995, approximately $3,600,000 had been raised
through September 30, 1995. These amounts compare to funds raised through
nine months ended September 30, 1994 of $26,800,000. On March 15, 1995 and on
August 1, 1995, the Company closed its third and fourth drilling partnership
formed since 1993, with $8,900,000 of subscriptions ($5,000,000 in the third
partnership and $3,900,000 in the fourth) compared to $2,600,000 of drilling
partnership subscriptions in the first nine months of 1994. The Company
anticipates that it will continue to offer the drilling partnerships for the
foreseeable future.
At September 30, 1995, limited partnership formation and marketing costs
(which under the current offerings are borne by the Company as part of the
Company's general partner contribution) amounted to $3,346,133, an increase
of $354,260, when compared with the December 31, 1994 balance. Should the
Company make the determination that the SDI offering will expire without
extension on or before April 30, 1996, the remaining limited partnership
formation and marketing costs related to the SDI offering (approximately
$2,100,000) will be transferred to the oil & gas properties account upon the
date such determination is made.
19
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CREDIT FACILITIES
The Company has established credit facilities which have been used
principally to finance the Company's purchase of producing oil and gas
properties on an interim basis pending transfer of the properties to newly
formed partnerships and joint ventures, and to provide working capital. More
recently the Company's credit facilities have been used to fund a portion of
the Company's exploration and development activities. However, the proceeds
from the Company's recent stock offering will be used to finance this
activity in the near term and has allowed the Company to pay off these credit
facilities. The principal terms and restrictions of these credit facilities
are described in Note 4 to the Company's condensed financial statements
included herein.
At December 31, 1994, the Company had $27,229,000 outstanding under
these borrowing arrangements used for several purposes. Approximately
$8,000,000 used to finance producing oil and gas property purchases was
either reimbursed in January 1995 or reflected at December 31, 1994 in the
"Producing oil and gas properties held for transfer" account on the balance
sheet. The Company used the remainder of the outstanding balance on the
credit facilities, along with internally generated cash flow, principally to
fund the Company's capital expenditures in 1994, and to a lesser extent, to
provide working capital.
At September 30, 1995, the Company had no outstanding balances under
these borrowing arrangements which were repaid with proceeds from the
Company's recent stock offering. The borrowings since year-end 1994 have been
used primarily to fund a substantial portion of the Company's 1995 capital
expenditures described below.
WORKING CAPITAL
The Company's working capital has increased over the last nine months,
from working capital deficit of $13,137,441 at December 31, 1994 to positive
working capital of $19,258,831 at September 30, 1995. This increase is
primarily the result of the $46,115,000 of net proceeds, before selling
expenses, from the recent common stock offering.
Due to the nature of the Company's business highlighted above, the
individual components of working capital fluctuate considerably from period
to period. In the past, balance sheet changes in receivables, producing oil
and gas properties held for transfer and payables related to producing oil
and gas property acquisitions principally arise from the timing of property
purchases and payments made by and to the Company related to the Company's
management of limited partnerships. The Company incurs
20
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
significant working capital requirements in connection with its role as
operator of approximately 750 producing wells and the management of
affiliated partnerships. In this capacity, the Company is responsible for
certain day to day cash management, including the collection and disbursement
of oil and gas revenues and related expenses.
CAPITAL EXPENDITURES
Additions to property, plant and equipment during the first nine months
of 1995 were $21,076,168. These capital expenditures include: (a) $9,300,000
of drilling costs, both exploratory and developmental; (b) $4,800,000 of
prospect costs (principally prospect leasehold, seismic and geological costs
of unproved prospects for the Company's account); (c) $3,200,000 to fund the
Company's general partner capital contribution to the partnerships formed
under its limited partnerships; (d) $2,400,000 invested in foreign business
opportunities in Russia (approximately $2,000,000), in Venezuela
(approximately $240,000), and in New Zealand (approximately $150,000), as
described in Note 7 to the Company's condensed financial statements included
herein; (e) $700,000 to acquire producing properties and (f) $700,000 spent
for furniture and fixtures, primarily computer equipment. In the remaining
three months of 1995, the Company expects capital expenditures to be
approximately $15,000,000, including investments in all areas in which
investments were made during the first nine months of the year as described
above, with a particular increase and focus on exploration and development
drilling. The Company now has plans to participate in the drilling of 79
gross wells this year, compared to 44 wells in 1994. Fifteen of the wells
planned for drilling in 1995 will be classified as exploratory. Through
September 30, 1995, the Company had participated in drilling 6 exploratory
and 39 development wells with 3 exploratory successes and 38 development
successes. The Company anticipates that this drilling activity will lead to
substantial reserves being added to the Company's reserve base by year-end
1995, although the effect on oil and gas sales will be somewhat delayed due
to time periods necessary to place newly drilled wells on production.
The Company believes that 1995's anticipated internally generated cash
flows (expected to increase as the Company's production base increases as a
result of its accelerated drilling program) together with the $46,115,000 of
net proceeds, before selling expenses, from the sale of 5,750,000 shares of
common stock and its existing credit facilities, will be sufficient to
finance the costs associated with its currently budgeted capital expenditures
at least through 1996. Further liquidity needs may also be met by additional
availability under its credit facilities based upon the value of the
Company's proved reserves, as
21
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
management continually evaluates future use of debt and/or equity to finance
its capital needs.
RESULTS OF OPERATIONS-
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net income of $2,520,431 and earnings per share of $0.32 for the first
nine months of 1995 were 26% and 39% lower, respectively than "Income before
cumulative effect of change in accounting principle" of $3,417,197 and
earnings per share of $0.52 in the same period for 1994. Lower net income
primarily reflected the effect on revenues of substantially lower gas prices.
The decrease in earnings per share in part reflects a 21% increase in
weighted average shares outstanding for the period, as a result of the sale
of 5,750,000 shares of common stock in the third quarter of 1995. The
nine-month 1994 net loss of $13,355,501 included a cumulative effect of a
change in accounting principle (see Note 3 to the Company's condensed
financial statements included herein) of $16,772,698.
REVENUES
Oil and Gas Sales. Oil and gas sales increased 1% to $15,208,354 in the
first nine months of 1995, compared to $15,014,095 for the comparative period
in 1994. The 18% increase in oil production and the 9% increase in gas
production were primarily the result of production from exploratory and
developmental wells drilled in late 1994 and in the first nine months of
1995, and the acquisition of interests in producing properties by the Company
for its own account in the third quarter of 1994. These increases were offset
somewhat by declining production derived through the Company's general
partner interests in its limited partnerships. The Company's net sales volume
(including the volumetric production payment) in the first nine months of
1995 increased by 11% or 798,016 Mcfe (thousand cubic feet equivalent) over
volumes in the comparable 1994 period; however, due to lower gas prices
received, oil and gas sales revenues increased only 1%. Partially offsetting
the effect of the 19% decrease in gas prices were oil price increases of 9%
(comparing average prices received over the respective nine-month periods).
Oil and gas sales comprised 77% and 78%, respectively of total revenues
for the first nine months of 1995 and 1994. The majority of these revenues
were derived from the sale of the Company's gas production. The Company
expects oil and gas sales to continue to increase as a direct consequence of
the addition of oil and gas reserves through the Company's active drilling
programs.
22
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides additional information regarding the
Company's oil and gas sales.
<TABLE>
<CAPTION>
NET SALES VOLUME AVERAGE SALES PRICE
-------------------- -----------------------
Oil(Bbls) Gas(Mcf) Oil(Bbl) Gas(Mcf)
--------- -------- -------- --------
<S> <C> <C> <C> <C>
1994:
3 MONTHS
ENDED 3/31/94 99,992 1,643,348 $11.80 $2.21
3 MONTHS
ENDED 6/30/94 105,854 1,582,699 $14.47 $1.98
3 MONTHS
ENDED 9/30/94 128,841 1,814,257 $16.09 $1.91
------- ---------
9 MONTHS
ENDED 9/30/94 334,687 5,040,304 $14.30 $2.03
======= =========
1995:
3 MONTHS
ENDED 3/31/95 134,626 1,702,658 $15.61 $1.63
3 MONTHS
ENDED 6/30/95 121,551 1,751,375 $16.36 $1.64
3 MONTHS
ENDED 9/30/95 137,829 2,028,373 $14.94 $1.68
------- ---------
9 MONTHS
ENDED 9/30/95 394,006 5,482,406 $15.61 $1.65
======= =========
</TABLE>
Supervision Fees. Supervision fees were relatively flat in the first
nine months of 1995 when compared to the same period in 1994, due primarily
to a reduction in the number of wells the Company operated, as it disposed of
certain marginal wells between the periods.
EXPENSES
General and administrative expenses for the first nine months of 1995
increased approximately $200,000 or 5% when compared to the same period in
1994, primarily due to increased staffing levels which occurred in the second
half of 1994 to support the Company's increased reserve base and drilling
activities, offset by certain cost cutting measures implemented in the first
half of 1995. The Company's general and administrative expenses however,
decreased from $0.53 per Mcfe produced for the first nine months of 1994 to
$0.51 per Mcfe produced for the same period in 1995.
23
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Depreciation, depletion and amortization ("DD&A") increased 9%
(approximately $500,000), due primarily to the increase in the Company's
producing properties and the related sale of increased quantities of oil and
gas therefrom. DD&A decreased from $0.77 per Mcfe produced in the 1994 period
to $0.74 per Mcfe produced in the 1995 period, reflecting variations in the
per unit cost of property additions and changes in the mix of reserves.
Oil and gas production costs increased 30% (approximately $1,160,000) in
the first nine months of 1995 (such costs increased from $0.56 per Mcfe
produced in 1994 to $0.65 per Mcfe produced in 1995) due to the growth in
the Company's production volumes, certain one-time remedial well expenses,
and higher well insurance costs and ad valorem taxes.
Interest expense for the first nine months of 1995 on the Debentures,
including amortization of debt issuance costs, totaled $1,485,730 ($1,479,982
in 1994), while interest expense on the credit facilities, including
commitment fees, totaled $1,617,924 ($1,085,918 in 1994) for a total of
$3,103,654 (of which $1,820,169 was capitalized). The 1994 total was
$2,565,900 (of which $1,355,537 was capitalized). The Company capitalizes
that portion of interest related to its exploration, partnership and foreign
business development activities. The increase in interest expense in 1995 is
attributable to an increase in the average balance under the Company's credit
lines necessary to finance the Company's capital expenditures as discussed
above. The Company expects interest expense to be significantly reduced for
the remainder of the year as a portion of the proceeds from the sale of
5,750,000 shares of common stock received in July and August, 1995 was used
to pay down the credit lines.
RESULTS OF OPERATIONS-
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net income of $1,264,556 and earnings per share of $0.12 in the third
quarter of 1995 increased 12% and decreased 29%, respectively when compared
to net income of $1,130,398 and earnings per share of $0.17 in the same
period for 1994. The increase in net income was somewhat offset by the effect
on revenues of substantially lower oil and gas prices as discussed below. The
decrease in earnings per share resulted from a 59% increase in the weighted
average shares outstanding, as a result of the sale of 5,750,000 shares of
common stock in the third quarter of 1995.
24
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REVENUES
Oil and Gas Sales. Oil and gas sales decreased 1% to $5,465,881 in the
third quarter of 1995, compared to $5,534,789 for the comparative period in
1994. The 7% increase in oil production and the 12% increase in gas
production were primarily the result of production from exploratory and
developmental wells drilled in late 1994 and in the first nine months of 1995.
The Company's net sales volume (including the volumetric production
payment) in the third quarter of 1995 increased by 10% (268,044 Mcfe) over
volumes in the comparable 1994 period: however, due to 12% lower gas prices
received and to 7% lower oil prices received, oil and gas sales revenues
decreased 1%.
Supervision Fees. Supervision fees increased 3% in the third quarter of
1995 when compared to the same period in 1994 due in part to the increase in
drilling activity between the periods, which resulted in a increase in the
drilling overhead component of supervision fees.
EXPENSES
General and administrative expenses for the third quarter of 1995
decreased $134,589 or 10% when compared to the same period in 1994, primarily
due to certain cost cutting measures implemented in the first half of 1995.
The Company's general and administrative expenses decreased from $0.52 per
Mcfe produced for the third quarter of 1994 to $0.43 per Mcfe produced for
the same period in 1995.
Depreciation, depletion and amortization decreased slightly even though
there was an increase in the Company's production volumes. DD&A decreased
from $0.80 per Mcfe produced in the 1994 period to $0.70 per Mcfe produced in
the 1995 period, reflecting positive variations in the per unit cost of
property additions and changes in the mix of reserves.
Oil and gas production costs increased 12% in the third quarter of 1995
(such costs increased from $0.61 per Mcfe produced in 1994 to $0.62 per Mcfe
produced in 1995) due to the growth in the Company's production volumes,
certain one-time remedial well expenses, and higher well insurance costs and
ad valorem taxes.
25
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest expense for the third quarter of 1995 on the Debentures,
including amortization of debt issuance costs, totaled $495,910 ($493,948 in
1994), while interest expense on the credit facilities, including commitment
fees, totaled $308,640 ($634,544 in 1994) for a total of $804,550 (of which
$611,389 was capitalized). The third quarter 1994 total was $1,128,492 (of
which $679,532 was capitalized). This third quarter decrease in interest
expense in 1995 is attributable to lower interest expense on the credit
facilities as a portion of the Company's stock offering proceeds was used to
pay down these credit facilities.
26
<PAGE>
SWIFT ENERGY COMPANY
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings - N/A
Item 2. Changes in Securities - N/A
Item 3. Defaults Upon Senior Securities - N/A
Item 4. Submission of Matters to a Vote of Security Holders - N/A
Item 5. Other Information
At the Company's Board of Directors meeting held August 14,
1995, the Board approved amendments to the Company's Bylaws.
The Bylaws, as amended, create staggered terms for directors
so that, beginning in 1996, shareholders will elect directors
for terms varying from one to three years, with the result that
at each annual meeting after 1996 the terms of only one-third of
the directors will expire. The Bylaws also now provide that the
Bylaws may only be amended by vote of two-thirds of the
shareholders. Other provisions address removal of directors,
certain procedures for shareholder meetings and shareholder
vote required for a merger or sale of all of the assets of the
Company and certain other transactions. This summary is qualified
in its entirety by reference to the Bylaws filed as Exhibit 3 to
this report.
Item 6. Exhibits & Reports on Form 8K
(a) Exhibits
3 Bylaws of Swift Energy Company
10.1 Employment Agreement dated as of November 1, 1995, by
and between Swift Energy Company and Terry E. Swift
10.2 Employment Agreement dated as of November 1, 1995, by
and between Swift Energy Company and John R. Alden
10.3 Employment Agreement dated as of November 1, 1995, by
and between Swift Energy Company and James M.
Kitterman
10.4 Employment Agreement dated as of November 1, 1995, by
and between Swift Energy Company and Bruce H. Vincent
10.5 Employment Agreement dated as of November 1, 1995, by
and between Swift Energy Company and A. Earl Swift
(b) Reports on Form 8K - None
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SWIFT ENERGY COMPANY
(Registrant)
Date: NOVEMBER 13, 1995 By: (ORIGINAL SIGNED BY)
----------------- ---------------------------------
John R. Alden
Sr. Vice President, Secretary/
Principal Financial Officer
Date: NOVEMBER 13, 1995 By: (ORIGINAL SIGNED BY)
----------------- ---------------------------------
Alton D. Heckaman, Jr.
Vice President, Controller and
Principal Accounting Officer
28
<PAGE>
BYLAWS OF
SWIFT ENERGY COMPANY
ARTICLE I
SHAREHOLDERS
1. ANNUAL MEETING. The annual meeting of shareholders for the purpose of
electing directors shall be held on such date and time as may be fixed from time
to time by the board of directors and stated in the notice of the meeting. Any
business may be transacted at an annual meeting, except as otherwise provided by
law or by these Bylaws.
2. SPECIAL MEETING. A special meeting of shareholders may be called at
any time by the president or secretary at the request in writing of the holders
of at least ten percent (10%) of the outstanding stock entitled to be voted at
such meeting, or a special meeting of shareholders may be called at any time by
a majority of the members of the board of directors who are "Continuing
Directors," being those directors then in office who have been or will have been
directors for the two year period ending on the date notice of the meeting or
written consent to take such action is first provided to shareholders, or those
directors who have been nominated for election or elected to succeed such
directors by a majority of such directors, or by the chairman of the board or by
the president. Only such business shall be transacted at a special meeting as
may be stated or indicated in the notice of such meeting.
3. MANNER AND PLACE OF MEETING. The annual meeting of shareholders may
be held in any manner permitted by law or these Bylaws at any place within or
without the State of Texas designated by the board of directors. Special
meetings of shareholders may be held in any manner permitted by law or these
Bylaws at any place within or without the State of Texas designated by the
chairman of the board or the President, if he shall call the meeting, or the
board of directors, if they shall call the meeting. Any meeting may be held at
any place within or without the State of Texas designated in a waiver of notice
of such meeting held at the principal office of the corporation unless another
place is designated for meetings in the manner provided herein. Subject to the
provisions herein for notice of meetings, meetings of shareholders may be held
by means of conference telephone or similar communications equipment by means of
which all participants can hear each other.
4. NOTICE. Written or printed notice stating the place, day and hour of
each meeting of shareholders and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
(10) nor more than sixty (60) days before the date of the meeting, either
personally or by mail, to each shareholder of record entitled to vote at such
meeting. Whenever any notice is required to be given to any shareholder, a
waiver thereof in writing signed by such person(s) entitled to such notice
(whether signed before or after the time required for such notice) shall be
equivalent to the giving of such notice.
5. BUSINESS TO BE CONDUCTED AT ANNUAL OR SPECIAL MEETING. At an annual
meeting of the shareholders, only such business shall be conducted as shall have
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been properly brought before the meeting. To be properly brought before an
annual or special meeting business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the board of
directors, (b) otherwise properly brought before the meeting by or at the
direction of the board of directors, or (c) otherwise properly brought before
the meeting by a shareholder. For business to be properly brought before an
annual or special meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the secretary of the corporation. To be
timely, a shareholder's notice regarding business to be conducted at an annual
meeting must be delivered to or mailed and received at the principal executive
offices of the corporation, not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. To be timely, a shareholder's notice regarding business to be
conducted at a special meeting must be delivered to or mailed and received at
the principal executive offices of the corporation no later than the date the
notice required under Section 4 of this Article I is provided to the
shareholders; provided that, in no event shall the special meeting be held
sooner than forty (40) days after the notice is received by the corporation. A
shareholder's notice to the secretary shall be set forth as to each matter the
shareholder proposes to bring before the meeting (a) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and address, as they appear on the
corporation's books, of the shareholder proposing such business, (c) the class
and number of shares of the corporation which are beneficially owned by the
shareholder, and (d) any material interest of the shareholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no business shall be
conducted at any meeting except in accordance with the procedures set forth in
this Section 5. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section 5, and
if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
6. QUORUM. Except as otherwise required by law, the Articles of
Incorporation or these Bylaws, the holders of at least a majority of the
outstanding shares entitled to vote thereat and present in person or by proxy
shall constitute a quorum. The shareholders present at any meeting, though less
than a quorum, may adjourn the meeting. No notice of adjournment, other than
the announcement at the meeting, need be given.
7. VOTE REQUIRED TO TAKE ACTION. Except as otherwise provided in these
Bylaws or the articles of incorporation, when a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of the statutes, of the rules of any exchange or quotation system upon which
securities of the corporation are traded, or of the certificate of incorporation
a different vote is required, in which case such express provision shall govern
and control the decision of such question. In addition to the foregoing voting
requirements, the affirmative vote of the holders of at least sixty-six and two
thirds percent (66-2/3%) of the outstanding shares of the capital stock of the
corporation entitled to vote generally in the election of directors shall
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be required to sell, assign or dispose of all or substantially all of the
corporation's assets (consisting of more than fifty percent (50%) of either
the total assets or the total proved reserves of the corporation) in one or a
series of related transactions or to merge, consolidate or engage in a share
exchange with another corporation or other entity, or to enter into any
transaction (including the issuance or transfer of securities of the
corporation), with any holder of 20% of the outstanding capital stock of the
corporation, if such transaction is not approved by a majority of the
Continuing Directors, as that term is defined in Article I, Section 2.
8. PROXIES. At all meetings of shareholders, a shareholder may vote
either in person or by proxy executed in writing by the shareholder or by his
duly authorized attorney-in-fact. Such proxies shall be filed with the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution unless otherwise provided in
the proxy. Each proxy shall be revocable unless expressly provided therein to
be irrevocable or unless otherwise made irrevocable by law.
9. VOTING OF SHARES. Each outstanding share of a class entitled to vote
upon a matter submitted to a vote at a meeting of shareholders shall be entitled
to one vote on such matter except to the extent that the voting rights are
limited or denied by the Articles of Incorporation. No shareholder shall have
the right to cumulate his votes in the election of directors.
10. OFFICERS. The chairman of the board shall preside at and the
secretary shall keep the records of each meeting of shareholders, but in the
absence of the chairman, the president shall perform the chairman's duties, and
in the absence of the secretary and all assistant secretaries, his duties shall
be performed by some person appointed by the presiding officer.
11. LIST OF SHAREHOLDERS. A complete list of shareholders entitled to
vote at each shareholders' meeting, arranged in alphabetical order, with the
address of and number of shares held by each, shall be prepared by the officer
or agent having charge of the stock transfer books and filed at the registered
office of the corporation and shall be subject to inspection by any shareholder
during usual business hours for a period of ten (10) days prior to such meeting
and shall be produced at such meeting and at all times during such meeting be
subject to inspection by any shareholder.
12. ACTION BY WRITTEN CONSENT. Any action required or permitted by
statute, the Articles of Incorporation or these Bylaws to be taken at a meeting
of shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by the holder or holders of shares
having not less than the minimum number of votes under these Bylaws or the
Articles of Incorporation of the corporation, or if not specified therein, then
under the provisions of the Texas Business Corporation Act, as amended, or any
similar successor provision (the "TBCA") that would be necessary to take such
action at a meeting at which the holders of all shares entitled to vote on the
action were present and voted. Such consent or consents shall be in such form
and shall be delivered to the corporation in such manner as is specified in
Article 9.10A of the TBCA.
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ARTICLE II
BOARD OF DIRECTORS
1. MANAGEMENT. The business and affairs of the corporation shall be
managed by the board of directors. The board may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute, by
the Articles of Incorporation or these Bylaws directed or required to be
exercised or done by the shareholders.
2. NUMBER. The board of directors shall consist of seven directors, but
the number of directors may be increased or decreased (provided such decrease
does not shorten the term of any incumbent director) from time to time by a
majority of the Continuing Directors, provided that the number of directors
shall never be less than three nor more than nine.
3. ELECTION AND TERM.
(A) Commencing with the term of directors commencing upon conclusion
of the annual meeting of shareholders scheduled for May 1996, the directors
shall be divided into three classes, as nearly equal in number as the then total
number of directors constituting the entire board permits, with the term of
office of one class expiring each succeeding year. Commencing with the 1996
annual meeting of shareholders, directors of the first class shall be elected to
hold office for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term expiring at the
second succeeding annual meeting, and directors of the third class shall be
elected to hold office for a term expiring at the third succeeding annual
meeting. Thereafter, at each annual meeting of shareholders the successors to
the class of directors whose term shall then expire, shall be elected to hold
office until the third succeeding annual meeting or until their respective
successors shall have been elected and qualified, unless removed in accordance
with these Bylaws. Directors need not be shareholders or residents of Texas.
(B) Any vacancies in the board of directors for any reason, and any
directorships resulting from any increase in the number of directors, may be
filled by the board of directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen or until their successors shall be elected and qualified.
4. DIRECTOR NOMINATION PROCEDURES. Only persons who are nominated in
accordance with the procedures set forth in this Section 4 shall be eligible for
election as directors. Nominations of persons for election to the board of
directors of the corporation may be made at a meeting of shareholders (a) by or
at the direction of the board of directors or (b) by any shareholder of the
corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 4. Such
nominations, other than those made by or at the direction of the board of
directors, shall be made pursuant to timely notice in writing to the secretary
of the corporation. To be timely, a shareholder's notice shall be delivered to
or mailed and received at the principal executive offices of the corporation (a)
in the case of an annual meeting, not less than 60 days nor more than 90 days
prior to the first
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anniversary of the preceding year's annual meeting; provided, however, that
in the event that the date of the annual meeting is changed by more than 30
days from such anniversary date, notice by the shareholder to be timely must
be so received not later than the close of business on the 10th day following
the day on which such notice of the date of the meeting was mailed or public
disclosure was made, and (b) in the case of a special meeting at which
directors are to be elected, not later than the close of business on the 10th
day following the day on which such notice of the date of the meeting was
mailed or public disclosure was made. Such shareholder's notice shall set
forth (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares, if any, of
the corporation which are beneficially owned by such person, and (iv) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such persons' written consent
to being named in the proxy statement as a nominee and to serving as a
director if elected); and (b) as to the shareholder giving the notice (i) the
name and address, as they appear on the corporation's books, of such
shareholder and (ii) the class and number of shares of the corporation which
are beneficially owned by such shareholder. At the request of the board of
directors any person nominated by the board of directors for election as a
director shall furnish to the secretary of the corporation that information
required to be set forth in a shareholder's notice of nomination which
pertains to the nominee. No person shall be eligible for election as a
director of the corporation unless nominated in accordance with the
procedures set forth in this Section 4. The chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination
was not made in accordance with the procedures prescribed by the Bylaws, and
if he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
5. REMOVAL. Any director or the entire board of directors of the
corporation may be removed at any time, with or without cause by the affirmative
vote of the holders of sixty-six and two-thirds percent (66-2/3%) or more of the
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors cast at a meeting of the shareholders
called for that purpose and for which notice was provided in accordance with
these Bylaws.
6. MEETING OF DIRECTORS. The directors may hold their meetings and may
have an office and keep the books of the corporation, except as otherwise
provided by statute, in such place or places in the State of Texas, or outside
the State of Texas, as the board of directors may from time to time determine.
The directors may hold their meetings in any manner permitted by law, including,
by conference telephone or similar communications equipment by means of which
all participants can hear each other.
7. FIRST MEETING. Each newly elected board of directors may hold its
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after and at the same place as the annual
meeting of the shareholders, and no notice of such meeting shall be necessary.
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8. ELECTION OF OFFICERS. At the first meeting of the board of directors
in each year at which a quorum shall be present, directors shall proceed to the
election of the officers of the corporation.
9. REGULAR MEETINGS. Regular meetings of the board of directors shall be
held in any manner permitted by law or these Bylaws and at such times and places
as shall be designated, from time to time by resolution of the board of
directors. Notice of such regular meetings shall not be required.
10. SPECIAL MEETINGS. Special meetings of the board of directors shall be
held in any manner permitted by law or these Bylaws and whenever called by the
chairman of the board, the president or by a majority of the Continuing
Directors (as that term is defined in Article I, Section 2).
11. NOTICE. The secretary shall give notice of each special meeting in
person, or by mail or telegraph at least two (2) days before the meeting to each
director. The attendance of a director at any meeting or the participation by a
director in a conference meeting shall constitute a waiver of notice of such
meeting, except where a director attends a meeting or participates in a
conference meeting for the express purpose of objecting to the transaction of
any business on the grounds that the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in the notice or
waiver of notice of such meeting.
At any meeting at which every director shall be present in person or by
participation, even though without any notice, any business may be transacted.
Whenever any notice is required to be given to any director, a waiver
thereof in writing signed by such person(s) entitled thereto (whether signed
before or after the time required for such notice) shall be equivalent to the
giving of such notice.
12. QUORUM. A majority of the directors fixed by these Bylaws shall
constitute a quorum for the transaction of business, but if at any meeting of
the board of directors there be less than a quorum present, a majority of those
present or any director solely present may adjourn the meeting from time to time
without further notice. The act of a majority of the directors present at a
meeting at which a quorum is in attendance shall be the act of the board of
directors, unless the act of a greater number is required by statute, the
Articles of Incorporation, or by these Bylaws.
13. ORDER OF BUSINESS. At meetings of the board of directors, business
shall be transacted in such order as from time to time the board may determine.
At all meetings of the board of directors, the chairman of the board of
directors shall preside, and in the absence of the chairman of the board and the
president, a chairman shall be chosen by the board from among the directors
present.
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The secretary of the corporation shall act as secretary of all meetings of
the board of directors, but in the absence of the secretary the presiding
officer may appoint any person to act as secretary of the meeting.
14. ACTION BY WRITTEN CONSENT. Any action required or permitted to be
taken by the board of directors or executive committee, under the applicable
provisions of the statutes, the Articles of Incorporation or these Bylaws, may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the board of directors or executive
committee, as the case may be.
15. COMPENSATION. Directors as such shall not receive any stated salary
for their services, but by resolution of the board a fixed sum and expense of
attendance, if any, may be allowed for attendance at such regular or special
meetings of the board; provided that nothing contained herein shall be construed
to preclude any director from serving the corporation in any other capacity or
receiving compensation therefor.
16. PRESUMPTION OF ASSENT. A director of the corporation who is present
at a meeting of the board of directors at which action of any corporate matter
is taken shall be presumed to have assented to the action unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
17. COMMITTEES. The board of directors, by resolution adopted by a
majority of the number of directors fixed by these Bylaws, may designate one or
more directors to constitute an Executive Committee or any other committee,
which committees, to the extent provided in such resolution, shall have and may
exercise all of the authority of the board of directors in the business and
affairs of the corporation except where action of the board of directors is
specified by law, but the designation of any such committee and the delegation
thereto of authority shall not operate to relieve the board of directors, or any
member thereof, of any responsibility imposed upon it or him by law. The
executive committee shall keep regular minutes of its proceedings and report the
same to the board when required.
ARTICLE III
OFFICERS
1. NUMBER, TITLES AND TERM OF OFFICE. The officers of the corporation
shall be a chairman of the board, a president, one or more vice presidents, a
secretary, a treasurer, and such other officers as the board of directors may
from time to time elect or appoint. Each officer shall hold office until his
successor shall have been duly elected by the board and qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided. One person may hold more than one office, except that the
president shall not hold the office of secretary. None of the officers need be
a director.
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2. REMOVAL. Any officer or agent elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
3. VACANCIES. A vacancy in the office of any officer may be filled by
vote of a majority of the directors for the unexpired portion of the term.
4. SALARIES. The salaries of all officers of the corporation shall be
fixed by the board of directors except as otherwise directed by the board.
5. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The chairman of the
board shall preside at all meetings of the shareholders and of the board of
directors and shall have such other powers and duties as from time to time may
be assigned to him by the board of directors.
6. POWERS AND DUTIES OF THE PRESIDENT. The president shall be the chief
executive officer of the corporation and, subject to the board of directors, he
shall have general executive charge, management and control of the properties
and operations of the corporation in the ordinary course of its business with
all such powers with respect to such responsibilities; he shall preside in the
absence of the chairman of the board at all meetings of the shareholders and of
the board of directors; he shall be an ex-officio member of all standing
committees; he may agree upon and execute all division and transfer orders,
bonds, contracts and other obligations in the name of the corporation; he may
sign all certificates for shares of capital stock of the corporation; and he
shall see that all orders and resolutions of the board of directors are carried
into effect.
7. VICE PRESIDENTS. Each vice president shall have such powers and
duties as may be assigned to him by the board of directors and shall exercise
the powers of the president during that officer's absence or inability to act.
Any action taken by a vice president in the performance of the duties of the
president shall be conclusive evidence of the absence or inability to act of the
president at the time such action was taken.
8. TREASURER. The treasurer shall have custody of all the funds and
securities of the corporation which come into his hands. When necessary or
proper, he may endorse, on behalf of the corporation, for collection, checks,
notes and other obligations and shall deposit the same to the credit of the
corporation in such bank or banks or depositories as shall be designated in the
manner prescribed by the board of directors; he may sign all receipts and
vouchers for payments made to the corporation, either alone or jointly with such
other officer as is designated by the board of directors. Whenever required by
the board of directors, he shall render a statement of his cash account; he
shall enter or cause to be entered regularly in the books of the corporation to
be kept by him for that purpose full and accurate accounts of all monies
received and paid out on account of the corporation; he shall perform all acts
incident to the position of treasurer subject to the control of the board of
directors; he shall, if required by the board of directors, give such bond for
the faithful discharge of his duties in such form as the board of directors may
require.
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9. ASSISTANT TREASURER. Each assistant treasurer shall have the usual
powers and duties pertaining to his office, together with such other powers and
duties as may be assigned to him by the board of directors. The assistant
treasurer shall exercise the powers of the treasurer during that officer's
absence or inability to act.
10. SECRETARIES. The secretary shall keep the minutes of all meetings of
the board of directors and the minutes of all meetings of the shareholders in
books provided for that purpose or in any other form capable of being converted
into written form within a reasonable time; he shall attend to the giving and
serving of all notices; he may sign with the president in the name of the
corporation, all contracts of the corporation and affix the seal of the
corporation thereto; he may sign with the president all certificates for shares
of the capital stock of the corporation; he shall have charge of the certificate
books, transfer books and stock ledgers, and such other books and papers as the
board of directors may direct, all of which shall at all reasonable times be
open to the inspection of any director upon application at the office of the
corporation during business hours, and he shall in general perform all duties
incident to the office of secretary, subject to the control of the board of
directors.
11. ASSISTANT SECRETARIES. Each assistant secretary shall have the usual
powers and duties pertaining to his office, together with such other powers and
duties as may be assigned to him by the board of directors or the secretary.
The assistant secretaries shall exercise the powers of the secretary during that
officer's absence or inability to act.
ARTICLE IV
INDEMNIFICATION AND INSURANCE
1. INDEMNIFICATION OF DIRECTORS
A. DEFINITIONS. For purposes of this Article:
(1) "Expenses" include court costs and attorneys' fees.
(2) "Official capacity" means
(a) when used with respect to a director, the office of
director in the corporation, and
(b) when used with respect to a person other than a
director, the elective or appointive office in the
corporation held by the officer or the employment or agency
relationship undertaken by the employee or agent on behalf
of the corporation, but
(c) in both Paragraphs (a) and (b), such term does not
include service for any other foreign or domestic
corporation or any partnership, joint venture, sole
proprietorship, trust, employee
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benefit plan, or other enterprise, except as may otherwise
be specified in Section 2 or 3 hereunder.
(3) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
B. INDEMNIFICATION WHERE DIRECTOR HAS BEEN WHOLLY SUCCESSFUL IN THE
PROCEEDING. The corporation shall indemnify a director against reasonable
expenses incurred by him in connection with a proceeding in which he is a named
defendant or respondent because he is or was a director if he has been wholly
successful, on the merits or otherwise, in the defense of the proceeding.
C. INDEMNIFICATION WHERE DIRECTOR HAS NOT BEEN WHOLLY SUCCESSFUL IN
PROCEEDING.
(1) The corporation shall indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding because
the person is or was a director of the corporation, and who does not qualify for
indemnification under subsection B of this Section, if it is determined, in
accordance with the procedure set out in Section F of Article 2.02-1 of the
Texas Business Corporation Act ("TBCA"), that the person:
(a) conducted himself in good faith;
(b) reasonably believed:
(i) in the case of conduct in his official capacity as
a director of the corporation, that his conduct
was in the corporation's best interests; and
(ii) in all other cases, that his conduct was at least
not opposed to the corporation's best interests;
and
(c) in the case of any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful.
If it is determined pursuant to Section F of Article 2.02-1 of the TBCA
that indemnification is to be authorized, the corporation shall determine the
reasonableness of the expenses claimed by the director seeking indemnification
in accordance with the procedure set out in Section G of Article 2.02-1 of the
TBCA.
(2) The termination of a proceeding by judgment, order,
settlement, or conviction, or on a plea of nolo contendere or its equivalent, is
not of itself determinative that the person did not meet the requirements set
forth in subsection C(1) hereof. A person shall be deemed to have been found
liable in respect of any claim, issue or matter only after the person
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shall have been so adjudged by a court of competent jurisdiction after
exhaustion of all appeals therefrom.
(3) A person shall be indemnified under subsection C(1) hereof
against judgments, penalties (including excise and similar taxes), fines,
settlements, and reasonable expenses actually incurred by the person in
connection with the proceeding; but if the person is found liable to the
corporation or is found liable on the basis that personal benefit was improperly
received by the person, the indemnification (1) is limited to reasonable
expenses actually incurred by the person in connection with the proceeding and
(2) shall not be made in respect of any proceeding in which the person shall
have been found liable for willful or intentional misconduct in the performance
of his duty to the corporation.
(4) Except as otherwise provided in subsection C(3), a director
may not be indemnified under subsection C(1) of this Section for obligations
resulting from a proceeding:
(d) in which the director is found liable on the basis that
personal benefit was improperly received by him, whether or
not the benefit resulted from an action in the director's
official capacity; or
(e) in which the director is found liable to the
corporation.
D. COURT-ORDERED INDEMNIFICATION. A director may apply to a court
of competent jurisdiction for indemnification from the corporation, whether or
not he has met the requirements set forth in subsection C(1) hereof or has been
adjudged liable in the circumstances set out in the second clause of
subsection C(3) hereof. If a director of the corporation seeks to obtain court-
ordered indemnification pursuant hereto, the corporation and its board of
directors shall cooperate fully with such director in satisfying the procedural
steps required therefor.
E. ADVANCEMENT OF EXPENSES. Reasonable expenses incurred by a
director who was, is, or is threatened to be made a named defendant or
respondent in a proceeding shall be paid or reimbursed by the corporation in
advance of the final disposition of the proceeding and without any of the
determinations specified in Sections F and G of Article 2.02-1 of the TBCA if
the requirements of Sections K and L of Article 2.02-1 of the TBCA are
satisfied. The board of directors may authorize the corporation's counsel to
represent such individual in any proceeding, whether or not the corporation is a
party thereto.
F. DIRECTORS AS WITNESSES. The corporation shall pay or reimburse
expenses incurred by a director in connection with his appearance as a witness
or other participation in a proceeding at a time when he is not a named
defendant or respondent in the proceeding.
G. NOTICE TO SHAREHOLDERS. Any indemnification of or advancement of
expenses to a director in accordance with this Section shall be reported in
writing to the shareholders of the corporation with or before the notice or
waiver of notice of the next shareholders' meeting or with or before the next
submission to shareholders of a consent to action without a meeting pursuant to
Section A of Article 9.10 of the TBCA and, in any case,
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within the twelve-month period immediately following the date of the
indemnification or advance.
H. DIRECTORS' SERVICES TO BENEFIT PLANS. For purposes of this
Article IV, the corporation is deemed to have requested a director to serve an
employee benefit plan whenever the performance by him of his duties to the
corporation also imposes duties on or otherwise involves services by him to the
plan or participants or beneficiaries of the plan. Excise taxes assessed on a
director with respect to an employee benefit plan pursuant to applicable law are
deemed fines. Action taken or omitted by him with respect to an employee
benefit plan in the performance of his duties for a purpose reasonably believed
by him to be in the interest of the participants and beneficiaries of the plan
is deemed to be for a purpose which is not opposed to the best interests of the
corporation.
2. INDEMNIFICATION OF OFFICERS
A. IN GENERAL. The corporation shall indemnify and advance expenses
to an officer of the corporation in the same manner and to the same extent as is
provided by Section 1 of this Article for a director. An officer is entitled to
seek indemnification to the same extent as a director.
B. ADDITIONAL RIGHTS TO INDEMNIFICATION. The corporation may, at
the discretion of the board of directors in view of all the relevant
circumstances, indemnify and advance expenses to a person who is an officer,
employee or agent of the corporation and who is not a director of the
corporation to such further extent, consistent with law, as may be provided by
its articles of incorporation, by general or specific actions of its board of
directors, by contract, or as permitted or required by common law.
3. INDEMNIFICATION OF OTHER PERSONS. The corporation may, at the
discretion of the board of directors in view of the relevant circumstances,
indemnify and advance expenses to persons who are not or were not officers,
employees, or agents of the corporation but who are or were serving at the
request of the corporation as directors, officers, partners, venturers,
proprietors, trustees, employees, agents, or similar functionaries of another
foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the same
extent that it may indemnify and advance expenses to directors hereunder.
4. PROCEDURE FOR INDEMNIFICATION. To request indemnification pursuant
hereto, written notice describing the circumstances and proceedings giving rise
to such request shall be submitted to the corporation at its principal office.
Any indemnification of a director or officer of the corporation, or another
person entitled to indemnification pursuant to Section 3 hereof, or advance of
costs, charges and expenses to a director or officer or another person entitled
to indemnification pursuant to Section 3 hereof, shall be made promptly, and in
any event within 30 days, upon the written notice of such individual. If a
determination by the corporation that the individual is entitled to
indemnification pursuant to this Article is required, and the corporation fails
to respond within 60 days to a written request for indemnity, the corporation
shall be deemed to have approved such request. If the corporation denies a
written request for indemnity or advancement of expenses, in whole or in part,
or if payment in full
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pursuant to such request is not made within 30 days, the right to
indemnification or advances as granted by this Article shall be enforceable
by such individual in any court of competent jurisdiction in Harris County,
Texas. It shall be a defense to any such action (other than an action
brought to enforce a claim for the advance of reasonable expenses where the
required undertaking, if any, has been received by the corporation) that the
claimant has not met the standard of conduct set forth in subsection 1(C)(1)
hereof, but the burden of proving such defense shall be on the corporation.
Neither the failure of the corporation to have made a determination prior to
the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in subsection 1(C)(1) hereof, nor the fact that there has
been an actual determination by the corporation that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
5. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing indemnification
provisions contained in this Article shall be deemed to be a contract between
the corporation and each director, officer, employee or agent, or another person
entitled to indemnification pursuant to Section 3 hereof, who serves in any such
capacity at any time while these provisions, as well as the relevant provisions
of the TBCA are in effect, and any repeal or modification thereof shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in whole or in part upon any such state
of facts. Such a "contract right" may not be modified retroactively without the
consent of such director or officer, employee, agent or another person entitled
to indemnification pursuant to Section 3 hereof. Notwithstanding this
provision, the corporation may enter into additional contracts of indemnity with
these persons, which contracts may provide the same rights as provided by this
Article, or may restrict or increase the rights provided by this Article.
6. INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation or who is or was serving at the request of the corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, other enterprise, or employee benefit
plan, against any liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person, whether or not the
corporation would have the power to indemnify him against that liability
hereunder. If the insurance or other arrangement is with a person or entity
that is not regularly engaged in the business of providing insurance coverage,
the insurance or arrangement may provide for payment of a liability with respect
to which the corporation would not have the power to indemnify the person only
if including coverage for the additional liability has been approved by the
shareholders of the corporation. Without limiting the power of the corporation
to procure or maintain any kind of insurance or other arrangement, the
corporation may, for the benefit of persons indemnified by the corporation, (1)
create a trust fund; (2) establish any form of self-insurance; (3) secure its
indemnity obligation by grant of a security interest or other lien on the assets
of the corporation; or (4) establish a letter of credit, guaranty, or surety
arrangement. The insurance or other arrangement may be procured, maintained, or
established within the corporation or with any insurer or other person deemed
appropriate by the board of directors regardless of whether all
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or part of the stock or other securities of the insurer or other person are
owned in whole or part by the corporation. In the absence of fraud, the
judgment of the board of directors as to the terms and conditions of the
insurance or other arrangement and the identity of the insurer or other
person participating in an arrangement shall be conclusive and the insurance
or arrangement shall not be voidable and shall not subject the directors
approving the insurance or arrangement to liability, on any ground,
regardless of whether directors participating in the approval are
beneficiaries of the insurance or arrangement.
7. SEVERABILITY. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director or officer, employee
or agent, as to expenses, judgments, fines and amounts paid in settlement
with respect to any proceeding, to the fullest extent permitted by any
applicable portion of this Article that shall not have been invalidated and
to the fullest extent permitted by applicable law. If any provision hereof
should be held, by a court of competent jurisdiction, to be invalid, it shall
be limited only to the extent necessary to make such provision enforceable,
it being the intent of these Bylaws to indemnify each individual who serves
or who has served as a director, officer, employee or agent, to the maximum
extent permitted by laws.
ARTICLE V
CAPITAL STOCK
1. CERTIFICATE OF SHARES. The certificates for shares of the capital
stock of the corporation shall be in such form as shall be approved by the board
of directors. The certificates shall be signed by the president or a vice
president, and also by the secretary or an assistant secretary or by the
treasurer or an assistant treasurer and may be sealed with the seal of this
corporation or a facsimile thereof. Where any such certificate is countersigned
by a transfer agent, or registered by a registrar, either of which is other than
the corporation itself or an employee of the corporation, the signatures of any
such president or vice president and secretary or assistant secretary may be
facsimiles. They shall be consecutively numbered and shall be entered in the
books of the corporation as they are issued and shall exhibit the holder's name
and the number of shares.
2. TRANSFER OF SHARES. The shares of stock of the corporation shall be
transferable only on the books of the corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives, upon
surrender to the corporation of a certificate for share duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and it shall be the duty of the corporation to issue a new certificate
to the person entitled thereto for a like number of shares to cancel the old
certificate, and to record the transaction upon its books.
3. CLOSING OF TRANSFER BOOKS. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders, or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purpose, the
board of directors of the corporation may provide that the stock transfer books
shall be closed for a stated period but not to exceed, in any case,
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sixty (60) days. If the stock transfer books shall be closed for the purpose
of determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the stock transfer
books, the board of directors may fix in advance a date as the record date
for any such determination of shareholders, such date in any case to be not
more than sixty (60) days and, in case of a meeting of shareholders, not less
than ten (10) days prior to the date on which the particular action requiring
such determination of shareholders is to be taken. If the stock transfer
books are not closed and no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the date on which
the notice of the meeting is mailed or the date on which the resolution of
the board of directors declaring such dividend is adopted, as the case may
be, shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as herein provided, such determination shall apply to any
adjournment thereof except where the determination has been made through the
closing of stock transfer books and the stated period of closing has expired.
4. REGISTERED SHAREHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of the share to receive dividends, and to vote as such owner, and for all other
purposes as such owner; and the corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Texas.
5. LOST CERTIFICATE. The board of directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the name in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
6. REGULATIONS. The board of directors shall have power and authority to
make all such rules and regulations as they may deem expedient concerning the
issue, transfer and registration or the replacement of certificates for shares
of the capital stock of the corporation not inconsistent with these Bylaws.
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ARTICLE VI
ACCOUNTS
1. DIVIDENDS. The board of directors may from time to time declare, and
the corporation may pay, dividends on its outstanding shares, except when the
declaration or payment thereof would be contrary to statute or the Articles of
Incorporation. Such dividends may be declared at any regular or special meeting
of the board, and the declaration and payment shall be subject to all applicable
provisions of laws, the Articles of Incorporation and these Bylaws.
2. RESERVES. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, deem proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
3. DIRECTORS' ANNUAL STATEMENT. The board of directors shall present at
each annual meeting a full and clear statement of the business and condition of
the corporation. The officers of the corporation shall mail to any shareholder
of record, upon his written request, the latest annual financial statement and
the most recent interim financial statements, if any, which have been filed in a
public record or otherwise published.
4. CHECKS. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
5. FISCAL YEAR. The fiscal year of the corporation shall be such as
established by resolution of the board of directors.
ARTICLE VII
AMENDMENTS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted at any annual meeting of the board of directors or at any special
meeting of the board of directors at which a quorum is present provided notice
of the proposed alteration, amendment, repeal or adoption be contained in the
notice of such meeting, by the affirmative vote of a majority of the Continuing
Directors (as that term is defined in Article I, Section 2); provided, however,
that no change of the time or place of the annual meeting of the board of
directors shall be made after the issuance of notice thereof. In accordance
with the Articles of Incorporation, the shareholders may amend or repeal any
provisions of these Bylaws adopted by the board of directors, but only by the
affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%)
or more of the outstanding capital stock of the corporation.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
1. OFFICES. Until the board of directors otherwise determines, the
registered office of the corporation required by the TBCA to be maintained in
the state of Texas shall be that registered office set forth in the Articles of
Incorporation, but such registered office may be changed from time to time by
the board of directors in the manner provided by law and need not be identical
to the principal place of business of the corporation.
2. SEAL. The seal of the corporation shall be such as from time to time
may be approved by the board of directors, but the use of a seal shall not be
essential to the validity of any agreement.
3. NOTICE AND WAIVER OF NOTICE. Whenever any notice whatever is required
to be given under the provisions of these Bylaws, said notice shall be deemed to
be sufficient if given by depositing the same in a post office box in a sealed
postpaid wrapper addressed to the person entitled thereto at his post office
address, as it appears on the books of the corporation, and such notice shall be
deemed to have been given on the day of such mailing. A waiver of notice,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
4. RESIGNATIONS. Any director or officer may resign at any time. Such
resignations shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt by
the president or secretary. The acceptance of a resignation shall not be
necessary to make it effective, unless expressly so provided in the resignation.
5. SECURITIES OF OTHER CORPORATIONS. The chairman of the board, the
president or any vice president of the corporation shall have power and
authority to transfer, endorse for transfer, vote, consent or take any other
action with respect to any securities of another issuer which may be held or
owned by the corporation and to make, execute and deliver any waiver, proxy or
consent with respect to any such securities.
-------------------------------------
John R. Alden
August 15, 1995 Secretary
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of November 1, 1995, is by
and between Swift Energy Company, a Texas corporation (the "Company"), and Terry
E. Swift ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is employed as Executive Vice President of the Company;
and
WHEREAS, the Company and Employee wish to document certain terms of
employment of Employee in such capacity;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Employee hereby agree as follows:
1. EMPLOYMENT AND TERM OF EMPLOYMENT. Subject to the terms and
conditions of this Agreement, the Company hereby agrees to employ Employee, and
Employee hereby agrees to serve as Executive Vice President of the Company, or
in such other position as is mutually acceptable to both Employee and the
Company, for a period of three years commencing on the date hereof, which period
shall automatically be extended for an additional year on each anniversary of
this Agreement thereafter (as so extended at any time, the "Term of Employment")
unless notice to the contrary is given not less than 60 days prior to any
anniversary of this Agreement by either party to this Agreement.
2. SCOPE OF EMPLOYMENT. During the Term of Employment, (i) Employee will
serve as Executive Vice President with the powers and responsibilities of such
position set forth in the bylaws of the Company, or in such other position as is
mutually acceptable to both Employee and the Company, and Employee will perform
diligently to the best of his ability those duties set forth therein and in this
Agreement in a manner that promotes the interests and goodwill of the Company,
(ii) the Company shall not require Employee to relocate from Houston, Texas, and
(iii) the Company may assign Employee to other duties.
3. COMPENSATION. During the Term of Employment, the Company shall
compensate Employee for his services hereunder in such amount as shall be
determined by the Compensation Committee of the Board of Directors of the
Company from time to time, but such compensation shall not be reduced at any
time in contemplation of, related to, or as a result of, a Change in Control, as
defined in Section 7.
4. ADDITIONAL COMPENSATION AND BENEFITS. As additional compensation for
Employee's services under this Agreement, during the Term of Employment the
Company agrees to provide Employee with the following reimbursements and
benefits:
<PAGE>
(a) The Company shall reimburse Employee for reasonable and
necessary expenses incurred by Employee in furtherance of the
Company's business, including a mileage allowance for all business-
related travel on a per-mile basis at a rate equivalent to that
allowed by the Internal Revenue Service, provided that such expenses
are incurred in accordance with the Company's policies and upon
presentation of documentation in accordance with expense reimbursement
policies of the Company as they may exist from time to time, and
submission to the Company of adequate documentation in accordance with
federal income tax regulations.
(b) Employee may participate in any non-cash benefits provided
by the Company to its employees as they may exist from time to time.
Such benefits shall include leave or vacation time, medical and dental
insurance, life insurance, accidental death and dismemberment
insurance, retirement benefits and disability benefits, as such
benefits may hereafter be provided by the Company in accordance with
its policies in force from time to time. In addition, in the event of
Employee's death during the Term of Employment, the Company shall make
available to Employee's spouse, at the expense of such spouse, medical
and dental insurance as provided by the terms and conditions of the
then existing medical and dental insurance policies carried by the
Company unless otherwise prohibited by applicable law.
5. CONFIDENTIALITY.
(a) Employee recognizes that the Company's business involves the
handling of confidential information of both the Company and the
Company's affiliates and subsidiaries and requires a confidential
relationship between the Company and its affiliates and subsidiaries
and the Company and Employee. The Company's business requires the
fullest practical protection and confidential treatment of unique and
proprietary business and technical information, including but not
limited to inventions, trade secrets, patents, proprietary and
confidential data and knowledge of both the Company's affiliates and
subsidiaries and the Company (collectively, hereinafter called
"Confidential Information") which is conceived or obtained by Employee
in the course of his employment. Accordingly, during and after
termination of employment by the Company, Employee agrees: (i) to
prevent the disclosure to any third party of all such Confidential
Information; (ii) not to use for Employee's own benefit any of the
Company's Confidential Information, and (iii) not to aid others in the
use of such Confidential Information in competition with the Company
or its affiliates and subsidiaries. These obligations shall exist
during and after any termination of employment hereunder.
Notwithstanding anything else contained herein, the term "Confidential
Information" shall not be deemed to include any general knowledge,
skills or experience acquired by Employee or any knowledge or
information known to the public in general.
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(b) Employee agrees that every item of Confidential Information
referred to in this Section 5 which relates to the Company's present
business or which arises or is contemplated to arise out of use of the
Company's time, facilities, personnel or funds prior to Employee's
termination, is the property of the Company.
(c) Employee further agrees that upon termination of his
employment for any reason, he will surrender to the Company all
reports, manuals, procedures, guidelines, documents, writing,
illustrations, models and other such materials produced by him or
coming into his possession by virtue of his employment with the
Company during the period of his employment and agrees that all such
materials are at all times the property of the Company. Employee
shall be entitled to review, inspect and copy any of the Company
information or material necessary for legal or other proceedings to
which Employee is a party defendant by reason of the fact that he is
or was an Employee of the Company.
6. COVENANT NOT TO COMPETE.
(a) Subject to the provisions of (c) of this section, without
the express prior written consent of the Company, Employee will not
serve as an employee, officer, director or consultant, or in any other
similar capacity or make investments (other than open market
investments in no more than five percent (5%) of the outstanding stock
of any publicly traded company) in or on behalf of any person, firm,
corporation, association or other entity whose activities directly
compete with the activities of the Company where such employment may
involve assisting such competitor with such activities as the Employee
performed on behalf of the Company which directly compete with those
now existing or contemplated as of this date; provided, however, the
Company recognizes that any investment made by Employee in oil and gas
properties owned by the Company which investments are made on the same
terms (or terms more favorable to the Company) as those offered to
unaffiliated third parties are specifically excluded from this
section; and
(b) Subject to the provisions of (c) of this section, without
the express prior written consent of the Company, he will not solicit,
recruit or hire, or assist any person, firm, corporation, association
or other entity in the solicitation, recruitment or hiring of any
person engaged by the Company as an employee, officer, director or
consultant.
(c) Employee's obligations under (a) and (b) of this section
shall continue in force only while Employee is receiving salary
payments from the Company after termination, provided that if there
has been a "Change in Control," as defined below, then the provisions
of (a) and (b) of this section shall have no further force and effect
after the date that such Change of Control occurs.
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7. TERMINATION.
(a) Either the Company or Employee may terminate Employee's
employment during the Term of Employment upon 60 days' written notice.
Such termination by the Company shall require the affirmative vote of
a majority of the members of the Board of Directors of the Company
then in office who have been or will have been directors for the two-
year period ending on the date notice of the meeting or written
consent to take such action is first provided to shareholders, or
those directors who have been nominated for election or elected to
succeed such directors by a majority of such directors (the
"Continuing Directors"). In the case of termination during the Term
of Employment, except in those circumstances covered by 7(b) or (c)
below, Employee shall continue to receive salary for six months from
the day he last worked on the Company's behalf pursuant to this
Agreement, plus continuation at the Company's expense of such medical
and dental coverage as then in effect for the same six month period.
Notwithstanding the foregoing, Employee shall not receive such
compensation if the Company terminates his employment for cause.
"Cause" shall be defined as (i) commission of fraud against the
Company, its subsidiaries, affiliates or customers, (ii) willful
refusal without proper legal cause, after 30 days' advance written
notice from the Chairman of the Board of the Company and/or the Chief
Executive Officer of the Company, or, after a Change in Control, from
the Continuing Directors, to faithfully and diligently perform
Employee's duties as directed in such notice or correct or terminate
those practices as described in such notice, all within the context of
a forty-hour per week schedule, or (iii) breach of Section 5 of this
Agreement.
(b) Change of Control.
(1) In the event Employee's employment is terminated by the
Company, after, by, on account of, or in connection with, a
"Change of Control," as defined below, or in the event Employee
resigns during the Term of Employment hereunder following a
"Change in Control," as defined, the Company (i) shall pay
Employee on his last day of employment by the Company a lump sum
equal to eighteen months' salary, plus an additional two weeks'
salary for every year of service to the Company, (ii) continue at
the Company's expense such medical and dental coverage as then in
effect for the remainder of the Term of Employment, and (iii) pay
one year's premium on the universal life and group term life
insurance policies carried on Employee's life or any successor
to, or replacement of, such policies, together with assignment
(if possible under the terms thereof) of such universal life
policy to Employee within one year following such termination.
(2) Change of Control: "Change of Control," for purposes
of this Agreement, shall be deemed to have occurred upon the
occurrence of
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any one (or more) of the following events, other than
a transaction with another person controlled by, or under
common control with, the Company:
(A) Any person, including a "group" as defined in
Section (3)(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the beneficial owner of shares of the
voting stock of the Company with respect to which 40% or
more of the total number of votes for the election of the
Board may be cast;
(B) As a result of, or in connection with, any cash
tender offer, exchange offer, merger or other business
combination, sale of assets or contested election, or
combination of the above, persons who were directors of the
Company immediately prior to such event shall cease to
constitute a majority of the Board;
(C) The stockholders of the Company shall approve an
agreement providing either for a transaction in which the
Company will cease to be an independent publicly owned
corporation or for a sale or other disposition of all or
substantially all the assets of the Company; or
(D) A tender offer or exchange offer is made for
shares of the Company's Common Stock (other than one made by
the Company), and shares of Common Stock are acquired
thereunder ("Offer").
(c) In the event of termination due to Employee's death or as a
result of sickness or disability of a permanent nature rendering
Employee unable to perform his duties hereunder for a period of six
(6) consecutive months ("Permanent Disability") during the Term of
Employment, the Company shall pay to Employee or the estate of
Employee, as applicable, in the year of death or the year thereafter
(i) compensation which would otherwise be payable to Employee (as
determined by, and subject to the restrictions of, Section 3 hereof)
up to the end of the month of his death or the end of the sixth (6th)
month after he becomes unable to perform his duties hereunder, and
(ii) any bonus payable to Employee pursuant to Section 3 prorated up
to the date of death or disability.
(d) Eighty-five (85) days following the date of termination of
employment under this Agreement by either party, all outstanding
options to purchase shares of common stock of the Company held by
Employee (whether vested or unvested) shall be converted into new non-
qualified options to purchase common stock of the Company. Each new
non-qualified option shall cover the same number of shares as the
stock option which it replaces, and shall be
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exercisable for five years, at an exercise price which is the lower
of (x) the closing price of the Company's common stock on the New York
Stock Exchange (or other exchange or automated quotation system upon
which it is listed or quoted) as of the date of termination of
employment or (y) the original exercise price of the previously
outstanding option which it replaces.
8. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Texas. Venue and jurisdiction of any action
relating to this Agreement shall lie in Houston, Harris County, Texas.
9. NOTICE. Any notice, payment, demand or communication required or
permitted to be given by this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally to and
signed for by the party or to any officer of the party to whom the same is
directed or if sent by registered or certified mail, return receipt requested,
postage and charges prepaid, addressed to such party at its address set forth
below such party's signature to this Agreement or to such other address as shall
have been furnished in writing by such party for whom the communication is
intended. Any such notice shall be deemed to be given on the date so delivered.
10. SEVERABILITY. In the event any provisions hereof shall be modified or
held ineffective by any court, such adjudication shall not invalidate or render
ineffective the balance of the provisions hereof.
11. ENTIRE AGREEMENT. This Agreement constitutes the sole agreement
between the parties and supersedes any and all other agreements, oral or
written, relating to the subject matter covered by the Agreement with the
exception of certain Indemnity Agreements which may exist between the Company
and Employee, and which remain in force independent of this Agreement.
12. WAIVER. Any waiver or breach of any of the terms of this Agreement
shall not operate as a waiver of any other breach of such terms or conditions,
or any other terms or conditions, nor shall any failure to enforce any
provisions hereof operate as a waiver of such provision or any other provision
hereof.
13. ASSIGNMENT. This Agreement is a personal employment contract and the
rights and interests of Employee hereunder may not be sold, transferred,
assigned or pledged.
14. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and assigns.
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IN WITNESS WHEREOF, the parties hereto affixed their signatures hereunder
as of the date first above written.
SWIFT ENERGY COMPANY
By /s/ A. E. Swift
---------------------------------
Name: A. E. Swift
Title: President
"EMPLOYEE"
/s/ Terry E. Swift
-----------------------------------
TERRY E. SWIFT
7
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of November 1, 1995, is by
and between Swift Energy Company, a Texas corporation (the "Company"), and John
R. Alden ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is employed as Senior Vice President of the Company; and
WHEREAS, the Company and Employee wish to document certain terms of
employment of Employee in such capacity;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Employee hereby agree as follows:
1. EMPLOYMENT AND TERM OF EMPLOYMENT. Subject to the terms and
conditions of this Agreement, the Company hereby agrees to employ Employee, and
Employee hereby agrees to serve as Senior Vice President of the Company, or in
such other position as is mutually acceptable to both Employee and the Company,
for a period of three years commencing on the date hereof, which period shall
automatically be extended for an additional year on each anniversary of this
Agreement thereafter (as so extended at any time, the "Term of Employment")
unless notice to the contrary is given not less than 60 days prior to any
anniversary of this Agreement by either party to this Agreement.
2. SCOPE OF EMPLOYMENT. During the Term of Employment, (i) Employee will
serve as Senior Vice President with the powers and responsibilities of such
position set forth in the bylaws of the Company, or in such other position as is
mutually acceptable to both Employee and the Company, and Employee will perform
diligently to the best of his ability those duties set forth therein and in this
Agreement in a manner that promotes the interests and goodwill of the Company,
(ii) the Company shall not require Employee to relocate from Houston, Texas, and
(iii) the Company may assign Employee to other duties.
3. COMPENSATION. During the Term of Employment, the Company shall
compensate Employee for his services hereunder in such amount as shall be
determined by the Compensation Committee of the Board of Directors of the
Company from time to time, but such compensation shall not be reduced at any
time in contemplation of, related to, or as a result of, a Change in Control, as
defined in Section 7.
4. ADDITIONAL COMPENSATION AND BENEFITS. As additional compensation for
Employee's services under this Agreement, during the Term of Employment the
Company agrees to provide Employee with the following reimbursements and
benefits:
<PAGE>
(a) The Company shall reimburse Employee for reasonable and
necessary expenses incurred by Employee in furtherance of the
Company's business, including a mileage allowance for all business-
related travel on a per-mile basis at a rate equivalent to that
allowed by the Internal Revenue Service, provided that such expenses
are incurred in accordance with the Company's policies and upon
presentation of documentation in accordance with expense reimbursement
policies of the Company as they may exist from time to time, and
submission to the Company of adequate documentation in accordance with
federal income tax regulations.
(b) Employee may participate in any non-cash benefits provided
by the Company to its employees as they may exist from time to time.
Such benefits shall include leave or vacation time, medical and dental
insurance, life insurance, accidental death and dismemberment
insurance, retirement benefits and disability benefits, as such
benefits may hereafter be provided by the Company in accordance with
its policies in force from time to time. In addition, in the event of
Employee's death during the Term of Employment, the Company shall make
available to Employee's spouse, at the expense of such spouse, medical
and dental insurance as provided by the terms and conditions of the
then existing medical and dental insurance policies carried by the
Company unless otherwise prohibited by applicable law.
5. CONFIDENTIALITY.
(a) Employee recognizes that the Company's business involves the
handling of confidential information of both the Company and the
Company's affiliates and subsidiaries and requires a confidential
relationship between the Company and its affiliates and subsidiaries
and the Company and Employee. The Company's business requires the
fullest practical protection and confidential treatment of unique and
proprietary business and technical information, including but not
limited to inventions, trade secrets, patents, proprietary and
confidential data and knowledge of both the Company's affiliates and
subsidiaries and the Company (collectively, hereinafter called
"Confidential Information") which is conceived or obtained by Employee
in the course of his employment. Accordingly, during and after
termination of employment by the Company, Employee agrees: (i) to
prevent the disclosure to any third party of all such Confidential
Information; (ii) not to use for Employee's own benefit any of the
Company's Confidential Information, and (iii) not to aid others in the
use of such Confidential Information in competition with the Company
or its affiliates and subsidiaries. These obligations shall exist
during and after any termination of employment hereunder.
Notwithstanding anything else contained herein, the term "Confidential
Information" shall not be deemed to include any general knowledge,
skills or experience acquired by Employee or any knowledge or
information known to the public in general.
2
<PAGE>
(b) Employee agrees that every item of Confidential Information
referred to in this Section 5 which relates to the Company's present
business or which arises or is contemplated to arise out of use of the
Company's time, facilities, personnel or funds prior to Employee's
termination, is the property of the Company.
(c) Employee further agrees that upon termination of his
employment for any reason, he will surrender to the Company all
reports, manuals, procedures, guidelines, documents, writing,
illustrations, models and other such materials produced by him or
coming into his possession by virtue of his employment with the
Company during the period of his employment and agrees that all such
materials are at all times the property of the Company. Employee
shall be entitled to review, inspect and copy any of the Company
information or material necessary for legal or other proceedings to
which Employee is a party defendant by reason of the fact that he is
or was an Employee of the Company.
6. COVENANT NOT TO COMPETE.
(a) Subject to the provisions of (c) of this section, without
the express prior written consent of the Company, Employee will not
serve as an employee, officer, director or consultant, or in any other
similar capacity or make investments (other than open market
investments in no more than five percent (5%) of the outstanding stock
of any publicly traded company) in or on behalf of any person, firm,
corporation, association or other entity whose activities directly
compete with the activities of the Company where such employment may
involve assisting such competitor with such activities as the Employee
performed on behalf of the Company which directly compete with those
now existing or contemplated as of this date; provided, however, the
Company recognizes that any investment made by Employee in oil and gas
properties owned by the Company which investments are made on the same
terms (or terms more favorable to the Company) as those offered to
unaffiliated third parties are specifically excluded from this
section; and
(b) Subject to the provisions of (c) of this section, without
the express prior written consent of the Company, he will not solicit,
recruit or hire, or assist any person, firm, corporation, association
or other entity in the solicitation, recruitment or hiring of any
person engaged by the Company as an employee, officer, director or
consultant.
(c) Employee's obligations under (a) and (b) of this section
shall continue in force only while Employee is receiving salary
payments from the Company after termination, provided that if there
has been a "Change in Control," as defined below, then the provisions
of (a) and (b) of this section shall have no further force and effect
after the date that such Change of Control occurs.
3
<PAGE>
7. TERMINATION.
(a) Either the Company or Employee may terminate Employee's
employment during the Term of Employment upon 60 days' written notice.
Such termination by the Company shall require the affirmative vote of
a majority of the members of the Board of Directors of the Company
then in office who have been or will have been directors for the two-
year period ending on the date notice of the meeting or written
consent to take such action is first provided to shareholders, or
those directors who have been nominated for election or elected to
succeed such directors by a majority of such directors (the
"Continuing Directors"). In the case of termination during the Term
of Employment, except in those circumstances covered by 7(b) or (c)
below, Employee shall continue to receive salary for six months from
the day he last worked on the Company's behalf pursuant to this
Agreement, plus continuation at the Company's expense of such medical
and dental coverage as then in effect for the same six month period.
Notwithstanding the foregoing, Employee shall not receive such
compensation if the Company terminates his employment for cause.
"Cause" shall be defined as (i) commission of fraud against the
Company, its subsidiaries, affiliates or customers, (ii) willful
refusal without proper legal cause, after 30 days' advance written
notice from the Chairman of the Board of the Company and/or the Chief
Executive Officer of the Company, or, after a Change in Control, from
the Continuing Directors, to faithfully and diligently perform
Employee's duties as directed in such notice or correct or terminate
those practices as described in such notice, all within the context of
a forty-hour per week schedule, or (iii) breach of Section 5 of this
Agreement.
(b) Change of Control.
(1) In the event Employee's employment is terminated by the
Company, after, by, on account of, or in connection with, a
"Change of Control," as defined below, or in the event Employee
resigns during the Term of Employment hereunder following a
"Change in Control," as defined, the Company (i) shall pay
Employee on his last day of employment by the Company a lump sum
equal to eighteen months' salary, plus an additional two weeks'
salary for every year of service to the Company, (ii) continue at
the Company's expense such medical and dental coverage as then in
effect for the remainder of the Term of Employment, and (iii) pay
one year's premium on the universal life and group term life
insurance policies carried on Employee's life or any successor
to, or replacement of, such policies, together with assignment
(if possible under the terms thereof) of such universal life
policy to Employee within one year following such termination.
(2) Change of Control: "Change of Control," for purposes
of this Agreement, shall be deemed to have occurred upon the
occurrence of
4
<PAGE>
any one (or more) of the following events, other than a transaction
with another person controlled by, or under common control with, the
Company:
(A) Any person, including a "group" as defined in
Section (3)(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the beneficial owner of shares of the
voting stock of the Company with respect to which 40% or
more of the total number of votes for the election of the
Board may be cast;
(B) As a result of, or in connection with, any cash
tender offer, exchange offer, merger or other business
combination, sale of assets or contested election, or
combination of the above, persons who were directors of the
Company immediately prior to such event shall cease to
constitute a majority of the Board;
(C) The stockholders of the Company shall approve an
agreement providing either for a transaction in which the
Company will cease to be an independent publicly owned
corporation or for a sale or other disposition of all or
substantially all the assets of the Company; or
(D) A tender offer or exchange offer is made for
shares of the Company's Common Stock (other than one made by
the Company), and shares of Common Stock are acquired
thereunder ("Offer").
(c) In the event of termination due to Employee's death or as a
result of sickness or disability of a permanent nature rendering
Employee unable to perform his duties hereunder for a period of six
(6) consecutive months ("Permanent Disability") during the Term of
Employment, the Company shall pay to Employee or the estate of
Employee, as applicable, in the year of death or the year thereafter
(i) compensation which would otherwise be payable to Employee (as
determined by, and subject to the restrictions of, Section 3 hereof)
up to the end of the month of his death or the end of the sixth (6th)
month after he becomes unable to perform his duties hereunder, and
(ii) any bonus payable to Employee pursuant to Section 3 prorated up
to the date of death or disability.
(d) Eighty-five (85) days following the date of termination of
employment under this Agreement by either party, all outstanding
options to purchase shares of common stock of the Company held by
Employee (whether vested or unvested) shall be converted into new non-
qualified options to purchase common stock of the Company. Each new
non-qualified option shall cover the same number of shares as the
stock option which it replaces, and shall be
5
<PAGE>
exercisable for five years, at an exercise price which is the lower of
(x) the closing price of the Company's common stock on the New York Stock
Exchange (or other exchange or automated quotation system upon which it is
listed or quoted) as of the date of termination of employment or (y) the
original exercise price of the previously outstanding option which it
replaces.
8. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Texas. Venue and jurisdiction of any action
relating to this Agreement shall lie in Houston, Harris County, Texas.
9. NOTICE. Any notice, payment, demand or communication required or
permitted to be given by this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally to and
signed for by the party or to any officer of the party to whom the same is
directed or if sent by registered or certified mail, return receipt requested,
postage and charges prepaid, addressed to such party at its address set forth
below such party's signature to this Agreement or to such other address as shall
have been furnished in writing by such party for whom the communication is
intended. Any such notice shall be deemed to be given on the date so delivered.
10. SEVERABILITY. In the event any provisions hereof shall be modified or
held ineffective by any court, such adjudication shall not invalidate or render
ineffective the balance of the provisions hereof.
11. ENTIRE AGREEMENT. This Agreement constitutes the sole agreement
between the parties and supersedes any and all other agreements, oral or
written, relating to the subject matter covered by the Agreement with the
exception of certain Indemnity Agreements which may exist between the Company
and Employee, and which remain in force independent of this Agreement.
12. WAIVER. Any waiver or breach of any of the terms of this Agreement
shall not operate as a waiver of any other breach of such terms or conditions,
or any other terms or conditions, nor shall any failure to enforce any
provisions hereof operate as a waiver of such provision or any other provision
hereof.
13. ASSIGNMENT. This Agreement is a personal employment contract and the
rights and interests of Employee hereunder may not be sold, transferred,
assigned or pledged.
14. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and assigns.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto affixed their signatures hereunder
as of the date first above written.
SWIFT ENERGY COMPANY
By /s/ A. E. Swift
------------------------------------
Name: A. E. Swift
Title: President
"EMPLOYEE"
/s/ John R. Alden
------------------------------------
JOHN R. ALDEN
7
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of November 1, 1995, is by
and between Swift Energy Company, a Texas corporation (the "Company"), and James
M. Kitterman ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is employed as Senior Vice President of the Company; and
WHEREAS, the Company and Employee wish to document certain terms of
employment of Employee in such capacity;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Employee hereby agree as follows:
1. EMPLOYMENT AND TERM OF EMPLOYMENT. Subject to the terms and
conditions of this Agreement, the Company hereby agrees to employ Employee, and
Employee hereby agrees to serve as Senior Vice President of the Company, or in
such other position as is mutually acceptable to both Employee and the Company,
for a period of three years commencing on the date hereof, which period shall
automatically be extended for an additional year on each anniversary of this
Agreement thereafter (as so extended at any time, the "Term of Employment")
unless notice to the contrary is given not less than 60 days prior to any
anniversary of this Agreement by either party to this Agreement.
2. SCOPE OF EMPLOYMENT. During the Term of Employment, (i) Employee will
serve as Senior Vice President with the powers and responsibilities of such
position set forth in the bylaws of the Company, or in such other position as is
mutually acceptable to both Employee and the Company, and Employee will perform
diligently to the best of his ability those duties set forth therein and in this
Agreement in a manner that promotes the interests and goodwill of the Company,
(ii) the Company shall not require Employee to relocate from Houston, Texas, and
(iii) the Company may assign Employee to other duties.
3. COMPENSATION. During the Term of Employment, the Company shall
compensate Employee for his services hereunder in such amount as shall be
determined by the Compensation Committee of the Board of Directors of the
Company from time to time, but such compensation shall not be reduced at any
time in contemplation of, related to, or as a result of, a Change in Control, as
defined in Section 7.
4. ADDITIONAL COMPENSATION AND BENEFITS. As additional compensation for
Employee's services under this Agreement, during the Term of Employment the
Company agrees to provide Employee with the following reimbursements and
benefits:
<PAGE>
(a) The Company shall reimburse Employee for reasonable and
necessary expenses incurred by Employee in furtherance of the
Company's business, including a mileage allowance for all business-
related travel on a per-mile basis at a rate equivalent to that
allowed by the Internal Revenue Service, provided that such expenses
are incurred in accordance with the Company's policies and upon
presentation of documentation in accordance with expense reimbursement
policies of the Company as they may exist from time to time, and
submission to the Company of adequate documentation in accordance with
federal income tax regulations.
(b) Employee may participate in any non-cash benefits provided
by the Company to its employees as they may exist from time to time.
Such benefits shall include leave or vacation time, medical and dental
insurance, life insurance, accidental death and dismemberment
insurance, retirement benefits and disability benefits, as such
benefits may hereafter be provided by the Company in accordance with
its policies in force from time to time. In addition, in the event of
Employee's death during the Term of Employment, the Company shall make
available to Employee's spouse, at the expense of such spouse, medical
and dental insurance as provided by the terms and conditions of the
then existing medical and dental insurance policies carried by the
Company unless otherwise prohibited by applicable law.
5. CONFIDENTIALITY.
(a) Employee recognizes that the Company's business involves the
handling of confidential information of both the Company and the
Company's affiliates and subsidiaries and requires a confidential
relationship between the Company and its affiliates and subsidiaries
and the Company and Employee. The Company's business requires the
fullest practical protection and confidential treatment of unique and
proprietary business and technical information, including but not
limited to inventions, trade secrets, patents, proprietary and
confidential data and knowledge of both the Company's affiliates and
subsidiaries and the Company (collectively, hereinafter called
"Confidential Information") which is conceived or obtained by Employee
in the course of his employment. Accordingly, during and after
termination of employment by the Company, Employee agrees: (i) to
prevent the disclosure to any third party of all such Confidential
Information; (ii) not to use for Employee's own benefit any of the
Company's Confidential Information, and (iii) not to aid others in the
use of such Confidential Information in competition with the Company
or its affiliates and subsidiaries. These obligations shall exist
during and after any termination of employment hereunder.
Notwithstanding anything else contained herein, the term "Confidential
Information" shall not be deemed to include any general knowledge,
skills or experience acquired by Employee or any knowledge or
information known to the public in general.
2
<PAGE>
(b) Employee agrees that every item of Confidential Information
referred to in this Section 5 which relates to the Company's present
business or which arises or is contemplated to arise out of use of the
Company's time, facilities, personnel or funds prior to Employee's
termination, is the property of the Company.
(c) Employee further agrees that upon termination of his
employment for any reason, he will surrender to the Company all
reports, manuals, procedures, guidelines, documents, writing,
illustrations, models and other such materials produced by him or
coming into his possession by virtue of his employment with the
Company during the period of his employment and agrees that all such
materials are at all times the property of the Company. Employee
shall be entitled to review, inspect and copy any of the Company
information or material necessary for legal or other proceedings to
which Employee is a party defendant by reason of the fact that he is
or was an Employee of the Company.
6. COVENANT NOT TO COMPETE.
(a) Subject to the provisions of (c) of this section, without
the express prior written consent of the Company, Employee will not
serve as an employee, officer, director or consultant, or in any other
similar capacity or make investments (other than open market
investments in no more than five percent (5%) of the outstanding stock
of any publicly traded company) in or on behalf of any person, firm,
corporation, association or other entity whose activities directly
compete with the activities of the Company where such employment may
involve assisting such competitor with such activities as the Employee
performed on behalf of the Company which directly compete with those
now existing or contemplated as of this date; provided, however, the
Company recognizes that any investment made by Employee in oil and gas
properties owned by the Company which investments are made on the same
terms (or terms more favorable to the Company) as those offered to
unaffiliated third parties are specifically excluded from this
section; and
(b) Subject to the provisions of (c) of this section, without
the express prior written consent of the Company, he will not solicit,
recruit or hire, or assist any person, firm, corporation, association
or other entity in the solicitation, recruitment or hiring of any
person engaged by the Company as an employee, officer, director or
consultant.
(c) Employee's obligations under (a) and (b) of this section
shall continue in force only while Employee is receiving salary
payments from the Company after termination, provided that if there
has been a "Change in Control," as defined below, then the provisions
of (a) and (b) of this section shall have no further force and effect
after the date that such Change of Control occurs.
3
<PAGE>
7. TERMINATION.
(a) Either the Company or Employee may terminate Employee's
employment during the Term of Employment upon 60 days' written notice.
Such termination by the Company shall require the affirmative vote of
a majority of the members of the Board of Directors of the Company
then in office who have been or will have been directors for the two-
year period ending on the date notice of the meeting or written
consent to take such action is first provided to shareholders, or
those directors who have been nominated for election or elected to
succeed such directors by a majority of such directors (the
"Continuing Directors"). In the case of termination during the Term
of Employment, except in those circumstances covered by 7(b) or (c)
below, Employee shall continue to receive salary for six months from
the day he last worked on the Company's behalf pursuant to this
Agreement, plus continuation at the Company's expense of such medical
and dental coverage as then in effect for the same six month period.
Notwithstanding the foregoing, Employee shall not receive such
compensation if the Company terminates his employment for cause.
"Cause" shall be defined as (i) commission of fraud against the
Company, its subsidiaries, affiliates or customers, (ii) willful
refusal without proper legal cause, after 30 days' advance written
notice from the Chairman of the Board of the Company and/or the Chief
Executive Officer of the Company, or, after a Change in Control, from
the Continuing Directors, to faithfully and diligently perform
Employee's duties as directed in such notice or correct or terminate
those practices as described in such notice, all within the context of
a forty-hour per week schedule, or (iii) breach of Section 5 of this
Agreement.
(b) Change of Control.
(1) In the event Employee's employment is terminated by the
Company, after, by, on account of, or in connection with, a
"Change of Control," as defined below, or in the event Employee
resigns during the Term of Employment hereunder following a
"Change in Control," as defined, the Company (i) shall pay
Employee on his last day of employment by the Company a lump sum
equal to eighteen months' salary, plus an additional two weeks'
salary for every year of service to the Company, (ii) continue at
the Company's expense such medical and dental coverage as then in
effect for the remainder of the Term of Employment, and (iii) pay
one year's premium on the universal life and group term life
insurance policies carried on Employee's life or any successor
to, or replacement of, such policies, together with assignment
(if possible under the terms thereof) of such universal life
policy to Employee within one year following such termination.
(2) Change of Control: "Change of Control," for purposes
of this Agreement, shall be deemed to have occurred upon the
occurrence of
4
<PAGE>
any one (or more) of the following events, other than
a transaction with another person controlled by, or under
common control with, the Company:
(A) Any person, including a "group" as defined in
Section (3)(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the beneficial owner of shares of the
voting stock of the Company with respect to which 40% or
more of the total number of votes for the election of the
Board may be cast;
(B) As a result of, or in connection with, any cash
tender offer, exchange offer, merger or other business
combination, sale of assets or contested election, or
combination of the above, persons who were directors of the
Company immediately prior to such event shall cease to
constitute a majority of the Board;
(C) The stockholders of the Company shall approve an
agreement providing either for a transaction in which the
Company will cease to be an independent publicly owned
corporation or for a sale or other disposition of all or
substantially all the assets of the Company; or
(D) A tender offer or exchange offer is made for
shares of the Company's Common Stock (other than one made by
the Company), and shares of Common Stock are acquired
thereunder ("Offer").
(c) In the event of termination due to Employee's death or as a
result of sickness or disability of a permanent nature rendering
Employee unable to perform his duties hereunder for a period of six
(6) consecutive months ("Permanent Disability") during the Term of
Employment, the Company shall pay to Employee or the estate of
Employee, as applicable, in the year of death or the year thereafter
(i) compensation which would otherwise be payable to Employee (as
determined by, and subject to the restrictions of, Section 3 hereof)
up to the end of the month of his death or the end of the sixth (6th)
month after he becomes unable to perform his duties hereunder, and
(ii) any bonus payable to Employee pursuant to Section 3 prorated up
to the date of death or disability.
(d) Eighty-five (85) days following the date of termination of
employment under this Agreement by either party, all outstanding
options to purchase shares of common stock of the Company held by
Employee (whether vested or unvested) shall be converted into new non-
qualified options to purchase common stock of the Company. Each new
non-qualified option shall cover the same number of shares as the
stock option which it replaces, and shall be
5
<PAGE>
exercisable for five years, at an exercise price which is the lower of
(x) the closing price of the Company's common stock on the New York Stock
Exchange (or other exchange or automated quotation system upon which it
is listed or quoted) as of the date of termination of employment or (y)
the original exercise price of the previously outstanding option which it
replaces.
8. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Texas. Venue and jurisdiction of any action
relating to this Agreement shall lie in Houston, Harris County, Texas.
9. NOTICE. Any notice, payment, demand or communication required or
permitted to be given by this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally to and
signed for by the party or to any officer of the party to whom the same is
directed or if sent by registered or certified mail, return receipt requested,
postage and charges prepaid, addressed to such party at its address set forth
below such party's signature to this Agreement or to such other address as shall
have been furnished in writing by such party for whom the communication is
intended. Any such notice shall be deemed to be given on the date so delivered.
10. SEVERABILITY. In the event any provisions hereof shall be modified or
held ineffective by any court, such adjudication shall not invalidate or render
ineffective the balance of the provisions hereof.
11. ENTIRE AGREEMENT. This Agreement constitutes the sole agreement
between the parties and supersedes any and all other agreements, oral or
written, relating to the subject matter covered by the Agreement with the
exception of certain Indemnity Agreements which may exist between the Company
and Employee, and which remain in force independent of this Agreement.
12. WAIVER. Any waiver or breach of any of the terms of this Agreement
shall not operate as a waiver of any other breach of such terms or conditions,
or any other terms or conditions, nor shall any failure to enforce any
provisions hereof operate as a waiver of such provision or any other provision
hereof.
13. ASSIGNMENT. This Agreement is a personal employment contract and the
rights and interests of Employee hereunder may not be sold, transferred,
assigned or pledged.
14. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and assigns.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto affixed their signatures hereunder
as of the date first above written.
SWIFT ENERGY COMPANY
By /s/ A. E. Swift
-------------------------------
Name: A. E. Swift
Title: President
"EMPLOYEE"
/s/ James M. Kitterman
---------------------------------
JAMES M. KITTERMAN
7
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of November 1, 1995, is by
and between Swift Energy Company, a Texas corporation (the "Company"), and Bruce
H. Vincent ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is employed as Senior Vice President of the Company; and
WHEREAS, the Company and Employee wish to document certain terms of
employment of Employee in such capacity;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Employee hereby agree as follows:
1. EMPLOYMENT AND TERM OF EMPLOYMENT. Subject to the terms and
conditions of this Agreement, the Company hereby agrees to employ Employee, and
Employee hereby agrees to serve as Senior Vice President of the Company, or in
such other position as is mutually acceptable to both Employee and the Company,
for a period of three years commencing on the date hereof, which period shall
automatically be extended for an additional year on each anniversary of this
Agreement thereafter (as so extended at any time, the "Term of Employment")
unless notice to the contrary is given not less than 60 days prior to any
anniversary of this Agreement by either party to this Agreement.
2. SCOPE OF EMPLOYMENT. During the Term of Employment, (i) Employee will
serve as Senior Vice President with the powers and responsibilities of such
position set forth in the bylaws of the Company, or in such other position as is
mutually acceptable to both Employee and the Company, and Employee will perform
diligently to the best of his ability those duties set forth therein and in this
Agreement in a manner that promotes the interests and goodwill of the Company,
(ii) the Company shall not require Employee to relocate from Houston, Texas, and
(iii) the Company may assign Employee to other duties.
3. COMPENSATION. During the Term of Employment, the Company shall
compensate Employee for his services hereunder in such amount as shall be
determined by the Compensation Committee of the Board of Directors of the
Company from time to time, but such compensation shall not be reduced at any
time in contemplation of, related to, or as a result of, a Change in Control, as
defined in Section 7.
4. ADDITIONAL COMPENSATION AND BENEFITS. As additional compensation for
Employee's services under this Agreement, during the Term of Employment the
Company agrees to provide Employee with the following reimbursements and
benefits:
<PAGE>
(a) The Company shall reimburse Employee for reasonable and
necessary expenses incurred by Employee in furtherance of the
Company's business, including a mileage allowance for all business-
related travel on a per-mile basis at a rate equivalent to that
allowed by the Internal Revenue Service, provided that such expenses
are incurred in accordance with the Company's policies and upon
presentation of documentation in accordance with expense reimbursement
policies of the Company as they may exist from time to time, and
submission to the Company of adequate documentation in accordance with
federal income tax regulations.
(b) Employee may participate in any non-cash benefits provided
by the Company to its employees as they may exist from time to time.
Such benefits shall include leave or vacation time, medical and dental
insurance, life insurance, accidental death and dismemberment
insurance, retirement benefits and disability benefits, as such
benefits may hereafter be provided by the Company in accordance with
its policies in force from time to time. In addition, in the event of
Employee's death during the Term of Employment, the Company shall make
available to Employee's spouse, at the expense of such spouse, medical
and dental insurance as provided by the terms and conditions of the
then existing medical and dental insurance policies carried by the
Company unless otherwise prohibited by applicable law.
5. CONFIDENTIALITY.
(a) Employee recognizes that the Company's business involves the
handling of confidential information of both the Company and the
Company's affiliates and subsidiaries and requires a confidential
relationship between the Company and its affiliates and subsidiaries
and the Company and Employee. The Company's business requires the
fullest practical protection and confidential treatment of unique and
proprietary business and technical information, including but not
limited to inventions, trade secrets, patents, proprietary and
confidential data and knowledge of both the Company's affiliates and
subsidiaries and the Company (collectively, hereinafter called
"Confidential Information") which is conceived or obtained by Employee
in the course of his employment. Accordingly, during and after
termination of employment by the Company, Employee agrees: (i) to
prevent the disclosure to any third party of all such Confidential
Information; (ii) not to use for Employee's own benefit any of the
Company's Confidential Information, and (iii) not to aid others in the
use of such Confidential Information in competition with the Company
or its affiliates and subsidiaries. These obligations shall exist
during and after any termination of employment hereunder.
Notwithstanding anything else contained herein, the term "Confidential
Information" shall not be deemed to include any general knowledge,
skills or experience acquired by Employee or any knowledge or
information known to the public in general.
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<PAGE>
(b) Employee agrees that every item of Confidential Information
referred to in this Section 5 which relates to the Company's present
business or which arises or is contemplated to arise out of use of the
Company's time, facilities, personnel or funds prior to Employee's
termination, is the property of the Company.
(c) Employee further agrees that upon termination of his
employment for any reason, he will surrender to the Company all
reports, manuals, procedures, guidelines, documents, writing,
illustrations, models and other such materials produced by him or
coming into his possession by virtue of his employment with the
Company during the period of his employment and agrees that all such
materials are at all times the property of the Company. Employee
shall be entitled to review, inspect and copy any of the Company
information or material necessary for legal or other proceedings to
which Employee is a party defendant by reason of the fact that he is
or was an Employee of the Company.
6. COVENANT NOT TO COMPETE.
(a) Subject to the provisions of (c) of this section, without
the express prior written consent of the Company, Employee will not
serve as an employee, officer, director or consultant, or in any other
similar capacity or make investments (other than open market
investments in no more than five percent (5%) of the outstanding stock
of any publicly traded company) in or on behalf of any person, firm,
corporation, association or other entity whose activities directly
compete with the activities of the Company where such employment may
involve assisting such competitor with such activities as the Employee
performed on behalf of the Company which directly compete with those
now existing or contemplated as of this date; provided, however, the
Company recognizes that any investment made by Employee in oil and gas
properties owned by the Company which investments are made on the same
terms (or terms more favorable to the Company) as those offered to
unaffiliated third parties are specifically excluded from this
section; and
(b) Subject to the provisions of (c) of this section, without
the express prior written consent of the Company, he will not solicit,
recruit or hire, or assist any person, firm, corporation, association
or other entity in the solicitation, recruitment or hiring of any
person engaged by the Company as an employee, officer, director or
consultant.
(c) Employee's obligations under (a) and (b) of this section
shall continue in force only while Employee is receiving salary
payments from the Company after termination, provided that if there
has been a "Change in Control," as defined below, then the provisions
of (a) and (b) of this section shall have no further force and effect
after the date that such Change of Control occurs.
3
<PAGE>
7. TERMINATION.
(a) Either the Company or Employee may terminate Employee's
employment during the Term of Employment upon 60 days' written notice.
Such termination by the Company shall require the affirmative vote of
a majority of the members of the Board of Directors of the Company
then in office who have been or will have been directors for the two-
year period ending on the date notice of the meeting or written
consent to take such action is first provided to shareholders, or
those directors who have been nominated for election or elected to
succeed such directors by a majority of such directors (the
"Continuing Directors"). In the case of termination during the Term
of Employment, except in those circumstances covered by 7(b) or (c)
below, Employee shall continue to receive salary for six months from
the day he last worked on the Company's behalf pursuant to this
Agreement, plus continuation at the Company's expense of such medical
and dental coverage as then in effect for the same six month period.
Notwithstanding the foregoing, Employee shall not receive such
compensation if the Company terminates his employment for cause.
"Cause" shall be defined as (i) commission of fraud against the
Company, its subsidiaries, affiliates or customers, (ii) willful
refusal without proper legal cause, after 30 days' advance written
notice from the Chairman of the Board of the Company and/or the Chief
Executive Officer of the Company, or, after a Change in Control, from
the Continuing Directors, to faithfully and diligently perform
Employee's duties as directed in such notice or correct or terminate
those practices as described in such notice, all within the context of
a forty-hour per week schedule, or (iii) breach of Section 5 of this
Agreement.
(b) Change of Control.
(1) In the event Employee's employment is terminated by the
Company, after, by, on account of, or in connection with, a
"Change of Control," as defined below, or in the event Employee
resigns during the Term of Employment hereunder following a
"Change in Control," as defined, the Company (i) shall pay
Employee on his last day of employment by the Company a lump sum
equal to eighteen months' salary, plus an additional two weeks'
salary for every year of service to the Company, (ii) continue at
the Company's expense such medical and dental coverage as then in
effect for the remainder of the Term of Employment, and (iii) pay
one year's premium on the universal life and group term life
insurance policies carried on Employee's life or any successor
to, or replacement of, such policies, together with assignment
(if possible under the terms thereof) of such universal life
policy to Employee within one year following such termination.
(2) Change of Control: "Change of Control," for purposes
of this Agreement, shall be deemed to have occurred upon the
occurrence of
4
<PAGE>
any one (or more) of the following events, other than a
transaction with another person controlled by, or under
common control with, the Company:
(A) Any person, including a "group" as defined in
Section (3)(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the beneficial owner of shares of the
voting stock of the Company with respect to which 40% or
more of the total number of votes for the election of the
Board may be cast;
(B) As a result of, or in connection with, any cash
tender offer, exchange offer, merger or other business
combination, sale of assets or contested election, or
combination of the above, persons who were directors of the
Company immediately prior to such event shall cease to
constitute a majority of the Board;
(C) The stockholders of the Company shall approve an
agreement providing either for a transaction in which the
Company will cease to be an independent publicly owned
corporation or for a sale or other disposition of all or
substantially all the assets of the Company; or
(D) A tender offer or exchange offer is made for
shares of the Company's Common Stock (other than one made by
the Company), and shares of Common Stock are acquired
thereunder ("Offer").
(c) In the event of termination due to Employee's death or as a
result of sickness or disability of a permanent nature rendering
Employee unable to perform his duties hereunder for a period of six
(6) consecutive months ("Permanent Disability") during the Term of
Employment, the Company shall pay to Employee or the estate of
Employee, as applicable, in the year of death or the year thereafter
(i) compensation which would otherwise be payable to Employee (as
determined by, and subject to the restrictions of, Section 3 hereof)
up to the end of the month of his death or the end of the sixth (6th)
month after he becomes unable to perform his duties hereunder, and
(ii) any bonus payable to Employee pursuant to Section 3 prorated up
to the date of death or disability.
(d) Eighty-five (85) days following the date of termination of
employment under this Agreement by either party, all outstanding
options to purchase shares of common stock of the Company held by
Employee (whether vested or unvested) shall be converted into new non-
qualified options to purchase common stock of the Company. Each new
non-qualified option shall cover the same number of shares as the
stock option which it replaces, and shall be
5
<PAGE>
exercisable for five years, at an exercise price which is the lower of (x)
the closing price of the Company's common stock on the New York Stock
Exchange (or other exchange or automated quotation system upon which it is
listed or quoted) as of the date of termination of employment or (y) the
original exercise price of the previously outstanding option which it
replaces.
8. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Texas. Venue and jurisdiction of any action
relating to this Agreement shall lie in Houston, Harris County, Texas.
9. NOTICE. Any notice, payment, demand or communication required or
permitted to be given by this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally to and
signed for by the party or to any officer of the party to whom the same is
directed or if sent by registered or certified mail, return receipt requested,
postage and charges prepaid, addressed to such party at its address set forth
below such party's signature to this Agreement or to such other address as shall
have been furnished in writing by such party for whom the communication is
intended. Any such notice shall be deemed to be given on the date so delivered.
10. SEVERABILITY. In the event any provisions hereof shall be modified or
held ineffective by any court, such adjudication shall not invalidate or render
ineffective the balance of the provisions hereof.
11. ENTIRE AGREEMENT. This Agreement constitutes the sole agreement
between the parties and supersedes any and all other agreements, oral or
written, relating to the subject matter covered by the Agreement with the
exception of certain Indemnity Agreements which may exist between the Company
and Employee, and which remain in force independent of this Agreement.
12. WAIVER. Any waiver or breach of any of the terms of this Agreement
shall not operate as a waiver of any other breach of such terms or conditions,
or any other terms or conditions, nor shall any failure to enforce any
provisions hereof operate as a waiver of such provision or any other provision
hereof.
13. ASSIGNMENT. This Agreement is a personal employment contract and the
rights and interests of Employee hereunder may not be sold, transferred,
assigned or pledged.
14. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and assigns.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto affixed their signatures hereunder
as of the date first above written.
SWIFT ENERGY COMPANY
By /s/ A. E. Swift
-------------------------------------
Name: A. E. Swift
Title: President
"EMPLOYEE"
/s/ Bruce H. Vincent
----------------------------------------
BRUCE H. VINCENT
7
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of November 7, 1995, is by
and between Swift Energy Company, a Texas corporation (the "Company"), and
A. Earl Swift ("Mr. Swift").
W I T N E S S E T H:
WHEREAS, Mr. Swift is employed as the President and Chairman of the Board
of the Company; and
WHEREAS, the Company and Mr. Swift wish to document certain terms of
employment of Mr. Swift in such capacity;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Mr. Swift hereby agree as follows:
1. EMPLOYMENT AND TERM OF EMPLOYMENT. Subject to the terms and
conditions of this Agreement, the Company hereby agrees to employ Mr. Swift, and
Mr. Swift hereby agrees to serve as President and Chairman of the Board of the
Company, or in such other position as is mutually acceptable to both Mr. Swift
and the Company, for a period of eight years commencing on the date hereof (the
"Term of Employment"). The first three years of the Term of Employment shall be
referred to herein as the "Initial Term," and the last five years of the Term of
Employment shall be referred to herein as the "Subsequent Term."
2. SCOPE OF EMPLOYMENT. During the Initial Term, (i) Mr. Swift will
serve as President and Chairman of the Board of the Company with the powers and
responsibilities of such position set forth in the bylaws of the Company, or in
such other position as is mutually acceptable to both Mr. Swift and the Company,
and Mr. Swift will perform diligently to the best of his ability those duties
set forth therein and in this Agreement in a manner that promotes the interests
and goodwill of the Company and (ii) the Company shall not require Mr. Swift to
relocate from Houston, Texas. During the Subsequent Term, Mr. Swift will be
available for up to 20 hours per week for 46 weeks per year for consultation
regarding specific matters designated by, or particular assignments agreed upon
with, the Executive Committee of the Board of Directors or the Board of
Directors of the Company, together with serving in those specific executive or
director's positions to which Mr. Swift is elected by either the Board of
Directors or by the shareholders of the Company, which assignments may be
performed from locations that are linked by computer to the Company's principal
executive offices in Houston, Texas. During both the Initial Term and the
Subsequent Term, it is specifically agreed that Mr. Swift is entitled to take
and may take his accumulated vacation and sick leave, with payment according to
Company policies of any vacation time or sick leave not taken.
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<PAGE>
3. COMPENSATION.
(a) Initial Term. During the Initial Term, the Company shall
compensate Mr. Swift for his services hereunder in such amount as shall be
determined by the Compensation Committee of the Board of Directors of the
Company from time to time, according to policies current in effect or as
modified from time to time by the Board of Directors or the Compensation
Committee of the Board of Directors, provided that upon a "Change of
Control" (as defined in Section 7(b)(2) below) during the Initial Term, Mr.
Swift's total compensation during both the Initial Term and the Subsequent
Term shall be not less than Mr. Swift's total compensation during the last
preceding year for which he has been paid both base salary and a bonus,
which amount shall be increased by an inflation adjustment of 4% per annum.
(b) Subsequent Term. During the Subsequent Term, Mr. Swift's annual
base compensation will be one-half of his annual base compensation at the
end of the Initial Term, plus an annual inflation adjustment of 4% per
annum. At the end of the Initial Term, the Board of Directors or
Compensation Committee of the Board of Directors of the Company, will enter
into a new bonus arrangement with Mr. Swift covering the Subsequent Term,
which takes into account anticipated activity levels and duties. In the
event of a Change of Control during the Subsequent Term, Mr. Swift's annual
base salary will be not less than the average of Mr. Swift's total
compensation during the three years of the Initial Term.
(c) Non-Competition Payment. In consideration of Mr. Swift's
continued compliance with Section 6 of this Agreement (whether or not he
continues as an employee of the Company hereunder), the Company shall pay
to Mr. Swift five equal annual installments of the amount shown as the
"Non-Competition Payment" on Exhibit A hereto less normal federal
withholding tax deductions, if any, related thereto, payable on the first
day of each year of the Subsequent Term hereunder. If Mr. Swift should die
prior to the end of the Initial Term or the Subsequent Term, any remaining
unpaid installments to be paid hereunder shall be paid to Mr. Swift's
estate.
4. ADDITIONAL COMPENSATION AND BENEFITS. As additional compensation for
Employee's services under this Agreement, during the Term of Employment the
Company agrees to provide Mr. Swift with the following reimbursements and
benefits:
(a) The Company shall reimburse Mr. Swift for reasonable and
necessary expenses incurred by Mr. Swift in furtherance of the
Company's business, including a mileage allowance for all business-
related travel on a per-mile basis at a rate equivalent to that
allowed by the Internal Revenue Service, provided that such expenses
are incurred in accordance with the Company's policies and upon
presentation of documentation in accordance with expense reimbursement
policies of the Company as they may exist from time to time, and
submission to the Company of adequate documentation in accordance with
federal income tax regulations.
2
<PAGE>
(b) Mr. Swift may participate in any non-cash benefits provided
by the Company to its employees as they may exist from time to time.
During both the Initial Term and the Subsequent Term, the Company will
provide Mr. Swift at the Company's expense, benefits which shall
include leave or vacation time, medical and dental insurance, life
insurance, accidental death and dismemberment insurance, retirement
benefits and disability benefits, as such benefits may hereafter be
provided by the Company in accordance with its policies in force from
time to time. In addition, in the event of Mr. Swift's death during
the Term of Employment, for a twelve-month period after his death the
Company shall make available to Mr. Swift's spouse and his dependents
under the age of 20, at the expense of the Company, medical and dental
insurance comparable to that provided by the terms and conditions of
the Company's then existing medical and dental insurance policies, and
thereafter for the remainder of the eight-year period covered by the
Term of Employment such medical and dental insurance shall be provided
to Mr. Swift's spouse and dependents under the age of 20 at the
expense of such spouse, unless otherwise prohibited by applicable law.
5. CONFIDENTIALITY.
(a) Mr. Swift recognizes that the Company's business involves
the handling of confidential information of both the Company and the
Company's affiliates and subsidiaries and requires a confidential
relationship between the Company and its affiliates and subsidiaries
and the Company and Mr. Swift. The Company's business requires the
fullest practical protection and confidential treatment of unique and
proprietary business and technical information, including but not
limited to inventions, trade secrets, patents, proprietary and
confidential data and knowledge of both the Company's affiliates and
subsidiaries and the Company (collectively, hereinafter called
"Confidential Information") which is conceived or obtained by Mr.
Swift in the course of his employment. Accordingly, during and after
termination of employment by the Company, Mr. Swift agrees: (i) to
prevent the disclosure to any third party of all such Confidential
Information; (ii) not to use for Mr. Swift's own benefit any of the
Company's Confidential Information, and (iii) not to aid others in the
use of such Confidential Information in competition with the Company
or its affiliates and subsidiaries. These obligations shall exist
during and after any termination of employment hereunder.
Notwithstanding anything else contained herein, the term "Confidential
Information" shall not be deemed to include any general knowledge,
skills or experience acquired by Mr. Swift or any knowledge or
information known to the public in general.
(b) Mr. Swift agrees that every item of Confidential Information
referred to in this Section 5 which relates to the Company's present
business or which arises or is contemplated to arise out of use of the
Company's time, facilities, personnel or funds prior to Mr. Swift's
termination, is the property of the Company.
3
<PAGE>
(c) Mr. Swift further agrees that upon termination of his
employment for any reason, he will surrender to the Company all
reports, manuals, procedures, guidelines, documents, writing,
illustrations, models and other such materials produced by him or
coming into his possession by virtue of his employment with the
Company during the period of his employment and agrees that all such
materials are at all times the property of the Company. Mr. Swift
shall be entitled to review, inspect and copy any of the Company
information or material necessary for legal or other proceedings to
which Mr. Swift is a party defendant by reason of the fact that he is
or was an Employee of the Company.
6. COVENANT NOT TO COMPETE.
(a) Subject to the provisions of (c) of this Section, without
the express prior written consent of the Company, Mr. Swift will not
serve as an employee, officer, director or consultant, or in any other
similar capacity or make investments (other than open market
investments in no more than five percent (5%) of the outstanding stock
of any publicly traded company) in or on behalf of any person, firm,
corporation, association or other entity whose activities directly
compete with the activities of the Company where such employment may
involve assisting such competitor with such activities as the Mr.
Swift performed on behalf of the Company which directly compete with
those now existing or contemplated as of this date; provided, however,
the Company recognizes that any investment made by Mr. Swift in oil
and gas properties owned by the Company which investments are made on
the same terms (or terms more favorable to the Company) as those
offered to unaffiliated third parties are specifically excluded from
this section; and
(b) Subject to the provisions of (c) of this Section, without
the express prior written consent of the Company, he will not solicit,
recruit or hire, or assist any person, firm, corporation, association
or other entity in the solicitation, recruitment or hiring of any
person engaged by the Company as an employee, officer, director or
consultant.
(c) Mr. Swift's obligations under (a) and (b) of this section
shall continue in force only while he is receiving salary payments
from the Company after termination, provided that if there has been a
"Change in Control," as defined below, then the provisions of (a) and
(b) of this section shall have no further force and effect after the
date that such Change of Control occurs.
7. TERMINATION.
(a) Mr. Swift may terminate his employment during the Term of
Employment upon 180 days' written notice, and the Company may
terminate Mr. Swift's employment by the Company solely for Cause.
"Cause" shall be defined as (i) a final non-appealable judgment that
Mr. Swift has committed fraud against the Company, its subsidiaries or
customers, or (ii) final conviction of a felony.
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<PAGE>
Any such termination by the Company shall require the affirmative vote of a
majority of the members of the Board of Directors of the Company then in
office who have been or will have been directors for the two-year period
ending on the date notice of the meeting or written consent to take such
action is first provided to shareholders, or those directors who have
been nominated for election or elected to succeed such directors by a
majority of such directors (the "Continuing Directors"). In the case
of termination during the Term of Employment due to Mr. Swift's
resignation, except in those circumstances covered by 7(b) below, Mr.
Swift shall continue to receive salary for a period of six months from
the day he last worked on the Company's behalf pursuant to this
Agreement, plus an additional amount equal to two weeks' salary for
every year of service to the Company prior to that date, plus
continuation at the Company's expense of such medical and dental
coverage as then in effect for the same period, in addition to the
Non-Competition Payments set out in Section 3(c) hereof. In the event
of Mr. Swift's termination for Cause, he shall not be entitled to
receive any further salary payments, but he shall be entitled to
receive the Non-Competition Payments set out in Section 3(c) hereof.
(b) Change of Control.
(1) In the event Mr. Swift resigns during the Term of
Employment hereunder following a "Change in Control," as defined
below, on his last day of employment by the Company, the Company
shall pay Mr. Swift a lump sum equal to the amounts to be paid
under this Agreement as set out in Sections 3 hereof (including
the amounts set out in Section 3(c) hereof), plus an additional
two weeks' salary for every year of service to the Company,
discounted to present value at a rate of 8% per annum, and
continue at the Company's expense such medical and dental
coverage as then in effect for a twelve month period, and pay one
year's insurance premium on the universal life and group term
life policies carried on Mr. Swift's life, or any successor to,
or replacement of, such policies, together with assignment (if
possible under the terms thereof) of such universal life policy
to Employee within one year following such resignation.
(2) Change of Control: "Change of Control," for purposes
of this Agreement, shall be deemed to have occurred upon the
occurrence of any one (or more) of the following events, other
than a transaction with another person controlled by, or under
common control with, the Company:
(A) Any person, including a "group" as defined in
Section (3)(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the beneficial owner of shares of the
voting stock of the Company with respect to which 40% or
more of the total number of votes for the election of the
Board may be cast;
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<PAGE>
(B) As a result of, or in connection with, any cash
tender offer, exchange offer, merger or other business
combination, sale of assets or contested election, or
combination of the above, persons who were directors of the
Company immediately prior to such event shall cease to
constitute a majority of the Board;
(C) The stockholders of the Company shall approve an
agreement providing either for a transaction in which the
Company will cease to be an independent publicly owned
corporation or for a sale or other disposition of all or
substantially all the assets of the Company; or
(D) A tender offer or exchange offer is made for
shares of the Company's Common Stock (other than one made by
the Company), and shares of Common Stock are acquired
thereunder ("Offer").
(c) In the event of termination due to Mr. Swift's death or as a
result of sickness or disability of a permanent nature rendering Mr.
Swift unable to perform his duties hereunder for a period of six (6)
consecutive months ("Permanent Disability") during the Term of
Employment, the Company shall pay to Mr. Swift or the estate of Mr.
Swift, as applicable, in the year of death or the year thereafter
(i) compensation which would otherwise be payable to Mr. Swift (as
determined by, and subject to the restrictions of, Section 3 hereof)
up to the end of the month of his death or the end of the sixth (6th)
month after he becomes unable to perform his duties hereunder, and
(ii) any bonus payable to Mr. Swift pursuant to Section 3 prorated up
to the date of death or disability.
(d) Eighty-five (85) days following the date of termination of
employment under this Agreement by either party, all outstanding
options to purchase shares of common stock of the Company held by Mr.
Swift (whether vested or unvested) shall be converted into new non-
qualified options to purchase common stock of the Company. Each new
non-qualified option shall cover the same number of shares as the
stock option which it replaces, and shall be exercisable for five
years, at an exercise price which is the lower of (x) the closing
price of the Company's common stock on the New York Stock Exchange (or
other exchange or automated quotation system upon which it is listed
or quoted) as of the date of termination of employment or (y) the
original exercise price of the previously outstanding option which it
replaces.
8. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Texas. Venue and jurisdiction of any action
relating to this Agreement shall lie in Houston, Harris County, Texas.
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<PAGE>
9. NOTICE. Any notice, payment, demand or communication required or
permitted to be given by this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally to and
signed for by the party or to any officer of the party to whom the same is
directed or if sent by registered or certified mail, return receipt requested,
postage and charges prepaid, addressed to such party at its address set forth
below such party's signature to this Agreement or to such other address as shall
have been furnished in writing by such party for whom the communication is
intended. Any such notice shall be deemed to be given on the date so delivered.
10. SEVERABILITY. In the event any provisions hereof shall be modified or
held ineffective by any court, such adjudication shall not invalidate or render
ineffective the balance of the provisions hereof.
11. ENTIRE AGREEMENT. This Agreement constitutes the sole agreement
between the parties and supersedes any and all other agreements, oral or
written, relating to the subject matter covered by the Agreement with the
exception of certain Indemnity Agreements which may exist between the Company
and Mr. Swift, and which remain in force independent of this Agreement.
12. WAIVER. Any waiver or breach of any of the terms of this Agreement
shall not operate as a waiver of any other breach of such terms or conditions,
or any other terms or conditions, nor shall any failure to enforce any
provisions hereof operate as a waiver of such provision or any other provision
hereof.
13. ASSIGNMENT. This Agreement is a personal employment contract and the
rights and interests of Mr. Swift hereunder may not be sold, transferred,
assigned or pledged.
14. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and assigns.
IN WITNESS WHEREOF, the parties hereto affixed their signatures hereunder
as of the date first above written.
SWIFT ENERGY COMPANY
By /s/ John R. Alden
--------------------------------------------
Name: John R. Alden
Title: Senior Vice President-Finance
Chief Financial Officer, Secretary
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A. EARL SWIFT
/s/ A. Earl Swift
--------------------------------------------
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS CONTAINED IN ITS QUARTERLY REPORT
ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 12,167,882
<SECURITIES> 0
<RECEIVABLES> 34,886,084
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,767,884
<PP&E> 132,727,137
<DEPRECIATION> 27,503,445
<TOTAL-ASSETS> 156,979,676
<CURRENT-LIABILITIES> 25,509,053
<BONDS> 0
<COMMON> 125,067
0
0
<OTHER-SE> 90,834,508
<TOTAL-LIABILITY-AND-EQUITY> 156,979,676
<SALES> 15,208,354
<TOTAL-REVENUES> 19,872,432
<CGS> 0
<TOTAL-COSTS> 11,239,360<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,283,485
<INCOME-PRETAX> 3,379,645
<INCOME-TAX> 859,214
<INCOME-CONTINUING> 2,520,431
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,520,431
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<FN>
<F1>Includes depreciation, depletion and amortization and oil and gas
production costs. Excludes general and administrative and interest
expense.
</FN>
</TABLE>
