<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
SWIFT ENERGY COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
SWIFT ENERGY COMPANY
16825 NORTHCHASE DRIVE, SUITE 400
HOUSTON, TEXAS 77060
(281) 874-2700
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 1999
Notice is hereby given that the annual meeting of shareholders of SWIFT
ENERGY COMPANY (the "Company") will be held at the Marriott Hotel at
Greenspoint, 255 North Sam Houston Parkway East, at the corner of Northchase
Drive, Houston, Texas, on Tuesday, May 11, 1999 at 4:00 p.m. Houston time for
the following purposes:
1. To elect two members of Class III of the board of directors to
serve for the terms specified in the attached Proxy Statement
or until their successors are elected and qualified; and
2. To consider and act upon such other business as may properly
be presented at the meeting or any adjournment thereof.
A record of shareholders has been taken as of the close of business on
March 19, 1999, and only shareholders of record on that date will be entitled to
notice of and to vote at the meeting, or any adjournment thereof. A complete
list of shareholders will be available commencing April 27, 1999, and may be
inspected during normal business hours prior to the meeting at the offices of
the Company, 16825 Northchase Drive, Suite 400, Houston, Texas, and such list
will be available at the place of the meeting on the day of the meeting.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD RIGHT AWAY WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. A STAMPED ENVELOPE HAS BEEN
PROVIDED FOR YOUR CONVENIENCE. THE PROMPT RETURN OF THE PROXY CARD WILL ENSURE A
QUORUM AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Directors,
JOHN R. ALDEN
Secretary
April 8, 1999
<PAGE> 3
SWIFT ENERGY COMPANY
16825 NORTHCHASE DRIVE, SUITE 400
HOUSTON, TEXAS 77060
(281) 874-2700
PROXY STATEMENT
This proxy statement is mailed to shareholders commencing on or about
April 8, 1999, in connection with the solicitation by the board of directors of
SWIFT ENERGY COMPANY (the "Company") of proxies to be voted at the annual
meeting of shareholders to be held at the Marriott Hotel at Greenspoint, 255
North Sam Houston Parkway East, at the corner of Northchase Drive, Houston,
Texas, on May 11, 1999 at 4:00 p.m. Houston time, and any adjournment thereof,
for the purposes set forth in the accompanying notice. Management does not
expect that any matters other than those referred to in such notice will be
presented for action at the meeting.
The Annual Report to Shareholders covering the fiscal year ended
December 31, 1998, will be mailed to each shareholder entitled to vote at the
annual meeting on or before the date of mailing this proxy statement.
The cost of soliciting proxies will be borne by the Company. In
addition to solicitations by mail, a number of regular employees of the Company
may, if necessary to ensure the presence of a quorum, solicit proxies in person
or by telephone. The Company does not contemplate retaining a proxy solicitor at
this time.
QUORUM AND VOTING
The record date for the determination of shareholders entitled to
notice of and to vote at the annual meeting was the close of business on March
19, 1999. On the record date, there were 16,067,163 shares of common stock of
the Company, par value $.01 per share, issued and outstanding and entitled to
vote.
Each share of common stock entitles the holder to one vote on each
matter presented at the meeting. Proxies will be voted in accordance with the
directions specified thereon and otherwise in accordance with the judgment of
the persons designated as proxies. Any proxy on which no direction is specified
will be voted for the election of all nominees named therein to the board of
directors for the terms indicated and otherwise at the discretion of the persons
designated as proxies. A shareholder may revoke his proxy at any time prior to
the voting thereof by attending and voting at the meeting or by filing with the
Secretary of the Company a written revocation or a duly executed proxy bearing a
later date.
The presence, in person or by proxy, of the holders of a majority of
the issued and outstanding shares entitled to be voted at the meeting is
necessary to constitute a quorum to transact business. If a quorum is not
present or represented at the annual meeting, a majority of the votes
represented at the meeting may adjourn the annual meeting from time to time
without notice other than an announcement until a quorum is present or
represented.
An automated system administered by the Company's transfer agent
tabulates the votes. Abstentions are included in the determination of the number
of shares present and voting and are counted as abstentions in tabulating the
votes cast on nominations or proposals presented to shareholders. Broker
nonvotes are not included in the determination of the number of shares present
and voting or as a vote with respect to such nominations or proposals.
<PAGE> 4
ELECTION OF DIRECTORS
At the annual meeting, two Class III directors are to be elected for
terms to expire at the 2002 Annual Meeting. There are three classes of directors
and each year the directors in one of such classes are nominated to serve three
year terms, or until their successors have been duly elected and qualified. In
order to be elected, each nominee for director must receive at least the number
of votes equal to a majority of the shares having voting power present in person
or represented by proxy at the meeting.
The persons named in the accompanying proxy have been designated by the
board of directors, and unless authority is withheld by the shareholder on the
accompanying proxy, they intend to vote for the election of the nominees named
below to the board of directors. All nominees are currently members of the board
of directors. If any nominee should become unavailable or unable to serve as a
director, the proxy may be voted for a substitute selected by persons named as
proxies or the board may be reduced accordingly; however, the board of directors
is not aware of any circumstances likely to render any nominee unavailable. Any
director elected by the board of directors to fill a vacancy will be elected for
the unexpired term of such director's predecessor in office.
CLASS III
Virgil N. Swift
G. Robert Evans
Set forth below, for information purposes only, are the names and
remaining terms of the other five directors:
CLASS I
Raymond O. Loen
Clyde W. Smith, Jr.
(Terms to expire at 2000 Annual Meeting)
CLASS II
A. Earl Swift
Henry C. Montgomery
Harold J. Withrow
(Terms to expire at 2001 Annual Meeting)
2
<PAGE> 5
NOMINEES
Set forth below is certain information, as of the date hereof,
concerning the nominees for election to the board of directors of the Company.
CLASS III DIRECTORS
Virgil N. Swift, 70, has been a director of the Company since 1981, and
has acted as Vice Chairman of the Board and Executive Vice President-Business
Development since November 1991. He previously served as Executive Vice
President and Chief Operating Officer from 1982 to November 1991. Mr. Swift
joined the Company in 1981 as Vice President-Drilling and Production. For the
preceding 28 years he held various production, drilling and engineering
positions with Gulf Oil Corporation and its subsidiaries, last serving as
General Manager-Drilling for Gulf Canada Resources, Inc. Mr. Swift is a
registered professional engineer and holds a degree in Petroleum Engineering. He
is the brother of A. Earl Swift and the uncle of Terry E. Swift.
G. Robert Evans, 67, has been a director of the Company since 1994.
Effective January 1, 1998, Mr. Evans retired as Chairman of Material Sciences
Corporation, having held that position since 1991. Material Sciences Corporation
develops and commercializes continuously processed, coated materials
technologies. He remains a director of Material Sciences Corporation. He is also
currently serving as a director of Consolidated Freightways Corporation
(transportation).
Set forth below, for information purposes only, is information
regarding the Class I and Class II directors whose terms will expire at the
annual meetings in 2000 and 2001, respectively:
CLASS I DIRECTORS
Raymond O. Loen, 74, has served as a director of the Company since its
founding in 1979. Since 1963, he has been President of R. O. Loen Company, a
privately held management consulting firm headquartered in Lake Oswego, Oregon.
Clyde W. Smith, Jr., 50, has served as a director of the Company since
1984. Since August 1997, Mr. Smith has served as President of Millennium
Technology Service, a White City, Oregon based contract electronics
manufacturer. He served as President of Somerset Properties, Inc., a real estate
investment company, from 1985 to 1996 and as President of H&R Precision, Inc., a
general contractor, from 1994 to 1997. On May 5, 1997, Mr. Smith filed a
petition under Chapter 7 of the U.S. Bankruptcy Code.
CLASS II DIRECTORS
A. Earl Swift, 65, is Chief Executive Officer and Chairman of the Board
of Directors of the Company and has served in such capacity since its founding
in 1979. He previously served as President from 1979 to November 1997, at which
time Terry E. Swift was appointed President. For the 17 years prior to 1979, he
was employed by affiliates of American Natural Resources Company. Mr. Swift is a
registered professional engineer and holds a degree in Petroleum Engineering, a
Juris Doctor degree and a Master's degree in Business Administration. He is the
brother of Virgil N. Swift and the father of Terry E. Swift.
Henry C. Montgomery, 63, has served as a director of the Company since
1987. Mr. Montgomery served as Executive Vice President of SyQuest Technology,
Inc., a public company engaged in the development, manufacture and sale of
computer hard drives from November 1996 through July 1997. He served as
president and Chief Executive Officer of New Media Corporation, a privately held
company engaged in developing, manufacturing and selling PCMCIA cards for the
computer industry, from March 1995 through
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<PAGE> 6
November 1996. Since 1980, Mr. Montgomery has been the Chairman of the Board of
Montgomery Financial Services Corporation, a management consulting and financial
services firm. Mr. Montgomery also previously served as a director of Catalyst
Semiconductor, Inc., a public company engaged in the design and manufacture of
semiconductors (1990 to 1995), and Southwall Technologies, Inc., a public
company engaged in thin film deposition technologies (1982 to 1995).
Harold J. Withrow, 71, has been a director of the Company since 1988.
Mr. Withrow worked as an independent oil and gas consultant from 1988 until he
retired at the end of 1995. From 1975 until 1988, Mr. Withrow served as Senior
Vice President-Gas Supply for Michigan Wisconsin Pipe Line Company and its
successor, ANR Pipeline Company.
COMPENSATION TO DIRECTORS
Board members are reimbursed for travel expenses they incur in
attending board of directors meetings. Employees of the Company are not
compensated for serving as directors. During 1998, nonemployee members of the
board of directors received, and during 1999, they will receive an aggregate
amount of $12,250 for attendance at board meetings, an annual fee of $5,000 for
serving on committees of the board, and an annual fee of $5,000 for services as
a director. Aggregate compensation paid to the five nonemployee directors during
1998 for their services as directors totaled $111,250.
Under the Company's 1990 Nonqualified Stock Option Plan (Amended and
Restated as of May 13, 1997) (the "1990 Nonqualified Plan"), each nonemployee
director is granted options to purchase 10,000 shares of the Company's common
stock on the date he first becomes a nonemployee director. Additionally, subject
to an option maximum of 60,000 shares per director, on the day after each annual
meeting of the shareholders, each individual who is a nonemployee director on
that date is granted, options to purchase 5,000 shares of the Company's common
stock.
In accordance with the 1990 Nonqualified Plan, each of the nonemployee
directors (Messrs. Loen, Montgomery, Smith, Evans and Withrow) have been granted
options for shares of the Company's common stock. Due to one 10% stock dividend
declared September 7, 1994 and another 10% stock dividend declared October 1,
1997, the number of shares underlying all options held by each of the
nonemployee directors increased by 10% as of each such date with a commensurate
10% decrease in the option exercise prices.
Two nonemployee directors exercised options to acquire an aggregate of
40,678 shares of the Company's common stock during the year ended December 31,
1998.
The following table presents information as of December 31, 1998,
regarding the total number of unexercised options held by the nonemployee
directors under all Company plans. Each of the nonemployee directors received
his annual grant of options for 5,000 shares in May 1998 at an exercise price of
$18.875 and each nonemployee director was also granted options for 10,000 shares
in December 1998 at an exercise price of $7.00 to reflect the extraordinary
amount of time the directors expended in 1998 in committee work resulting
primarily from the work involved in the then proposed liquidation of numerous
partnerships of which the Company is managing general partner. Three of the
nonemployee directors in the following table, G. Robert Evans, Henry C.
Montgomery and Clyde W. Smith, Jr., will receive options to purchase 5,000
additional shares under the 1990 Nonqualified Plan on the day following the 1999
annual meeting. The other two directors, Raymond O. Loen and Harold J. Withrow,
will receive options covering 4,300 shares and 670 shares, respectively, as
60,000 options is the maximum number of options that an individual nonemployee
director may hold.
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<PAGE> 7
NONEMPLOYEE DIRECTOR OPTIONS
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------------
SHARES OF COMMON
STOCK UNDERLYING TOTAL SHARES OF COMMON
UNEXERCISED STOCK UNDERLYING
OPTIONS GRANTED UNDER UNEXERCISED OPTIONS
NAME 1990 NONQUALIFIED PLAN GRANTED UNDER ALL PLANS
- --------------------------------- ---------------------------- -------------------------
<S> <C> <C>
G. Robert Evans 38,100 38,100
Raymond O. Loen 55,700 55,700
Henry C. Montgomery 30,752 30,752
Clyde W. Smith, Jr. 44,810 44,810
Harold J. Withrow 50,860 59,330
</TABLE>
For the number of options exercisable within 60 days of March 1, 1999
by each of the nonemployee directors, see footnote (1) to the table set forth
under "Principal Shareholders" below.
MEETINGS OF THE BOARD OF DIRECTORS
During 1998, the board of directors met on 11 occasions. In addition,
management confers frequently with its directors on an informal basis to discuss
Company affairs. During 1998, each director attended at least 75% of the
aggregate of (i) the total number of meetings of the board of directors and (ii)
the total number of meetings of all committees of the board on which he served.
COMMITTEES OF THE BOARD
The board of directors of the Company has established the following
standing committees: Audit, Nominating and Corporate Governance, Compensation,
Conflicts of Interest, Executive and Special Transactions Committees.
Descriptions of the functions of the Audit, Nominating and Corporate Governance
and Compensation Committees are set forth below.
AUDIT COMMITTEE. The Audit Committee is comprised entirely of
nonemployee directors. The Audit Committee recommends to the board of directors
the engagement of, and reviews the services performed by, the Company's
independent auditors. Messrs. Loen, Montgomery and Smith are members of the
Audit Committee, which held four meetings in 1998.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. The Nominating and
Corporate Governance Committee reviews the performance of directors and
recommends persons to be management's nominees for directorships. The Nominating
and Corporate Governance Committee may consider nominees recommended by
shareholders, upon written request by a shareholder addressed to any member of
the committee. See "Shareholder Proposals" herein. This committee also reviews
corporate governance duties and procedures and, where necessary, recommends
changes to the board. Messrs. A. E. Swift, Loen, Evans and Smith are members of
the Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee held one meeting in 1998.
COMPENSATION COMMITTEE. The Compensation Committee at all times is
comprised of at least three nonemployee directors who are "non-employee
directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934
(the "Exchange Act"). The Compensation Committee has sole authority to
administer the Company's stock option plans and stock purchase plan, although it
has no discretion as to awards of stock options under the 1990 Nonqualified
Plan. The Compensation Committee also reviews and makes
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<PAGE> 8
recommendations regarding the compensation levels of the Company's executive
officers. Messrs. Loen, Montgomery and Withrow are members of the Compensation
Committee, which held seven meetings in 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission (the "SEC"), the New York Stock Exchange and the Pacific Stock
Exchange initial reports of ownership and reports of changes in ownership of
common stock of the Company. Officers, directors and greater than 10%
shareholders are required by regulation to furnish the Company with copies of
all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
Forms 3 and 4 furnished to the Company during the fiscal year beginning January
1, 1998, and ending December 31, 1998, and Forms 5 furnished to the Company with
respect to such fiscal year, the Company's officers, directors and greater than
10% beneficial owners complied with all Section 16(a) filing requirements.
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<PAGE> 9
PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning the
shareholdings, as of March 1, 1999 (unless otherwise indicated), of the seven
current members of the board of directors, each of the Company's five most
highly compensated executive officers, all executive officers and directors as a
group, and each person who beneficially owned more than five percent of the
Company's outstanding common stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED AT
MARCH 1, 1999(1)
------------------------------
PERCENT OF
CLASS
NAME OF PERSON OR GROUP POSITION NUMBER OUTSTANDING
- ----------------------- -------- ------ -----------
<S> <C> <C> <C>
A. Earl Swift.................... Chairman of the Board, Chief Executive
Officer 327,820(2) 2.0%
Virgil N. Swift.................. Vice Chairman of the Board, Executive
Vice President--Business Development 348,719(2)(3) 2.2%
G. Robert Evans.................. Director 17,380 (4)
Raymond O. Loen.................. Director 151,971(5) (4)
Henry C. Montgomery.............. Director 49,445 (4)
Clyde W. Smith, Jr............... Director 18,700 (4)
Harold J. Withrow................ Director 39,134 (4)
Terry E. Swift................... President, Chief Operating Officer 126,998(2) (4)
John R. Alden.................... Senior Vice President--Finance, Chief 110,739(2)(6) (4)
Financial Officer, Secretary
James M. Kitterman............... Senior Vice President--Operations 98,604(2) (4)
All executive officers and directors as a group (13 persons).................. 1,459,008 8.8%
American Century Investment Management, Inc................................... 1,353,318(7) 8.2%
4500 Main Street
P. O. Box 418210
Kansas City, MO 64141-9210
American Century Capital Portfolios, Inc...................................... 1,173,701(7) 7.1%
4500 Main Street
P. O. Box 418210
Kansas City, MO 64141-9210
FMR Corp ..................................................................... 1,653,400(8) 10.1%
Fidelity Management and Research Company
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, Massachusetts 02109
Franklin Resources, Inc....................................................... 1,820,858(9) 10.1%
Franklin Advisers, Inc.
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Blvd.
San Mateo, California 94404
</TABLE>
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<PAGE> 10
<TABLE>
<S> <C> <C>
Goldman Sachs & Co........................................................... 1,022,300(10) 8.2%
The Goldman Sachs Group, L.P.
85 Broad Street
New York, NY 10004
Nueberger Berman, LLC......................................................... 850,080(11) 5.2%
Nueberger Berman Management Inc.
605 Third Avenue
New York, NY 10158-3698
Scudder Kemper Investments, Inc............................................... 1,061,930(12) 6.5%
345 Park Avenue
New York, NY 10154
</TABLE>
- ----------------------
(1) Unless otherwise indicated in the footnotes below, the number of shares of
common stock held and percent outstanding are as of March 1, 1999. Unless
otherwise indicated below, the persons named have sole voting and
investment power over the number of shares of the Company's common stock
shown as being owned by them. The table includes the following shares that
were acquirable within 60 days following March 1, 1999 by exercise of
options granted under the Company's stock option plans: Mr. A. E. Swift -
69,938; Mr. V. N. Swift - 58,124; Mr. Evans - 12,980; Mr. Loen - 29,590;
Mr. Montgomery - 8,646; Mr. Smith - 18,700; Mr. Withrow - 34,188; Mr. T.
E. Swift - 97,294; Mr. Alden - 82,685; Mr. Kitterman - 80,465; and all
executive officers and directors as a group - 628,250.
(2) Includes approximately 317 shares held by individual's (each of the five
named executive officers) ESOP account over which individual possesses
voting, but not investment, control.
(3) Includes 121 shares held jointly by Mr. Virgil N. Swift and his wife.
(4) Less than one percent.
(5) Includes 77,000 shares held by Mr. Loen's wife (who holds sole voting and
investment power as to those shares), 4,047 shares held in her IRA, and
2,809 shares held in Mr. Loen's IRA.
(6) Includes 220 shares in an IRA held by Mr. Alden's wife (who holds sole
voting and investment power as to those shares).
(7) Based on a Schedule 13G dated February 10, 1999 filed with the SEC to
reflect shares held at December 31, 1998, American Century Investment
Management, Inc. ("ACIM"), as a registered investment adviser, manages 13
registered investment companies pursuant to management agreements and is
therefore deemed to be the beneficial owner, and possesses sole voting and
disposition power, of 1,353,318 shares of the Company's common stock. In
addition, American Century Capital Portfolios, Inc. ("ACCP"), one of the
13 registered investment companies managed by ACIM, is deemed to be the
beneficial owner of 1,173,701 of the shares of Company stock beneficially
owned by ACIM. ACIM, as manager, holds all such stock for ACCP and the
other 12 investment companies in institutional investor accounts which
ACIM manages.
(8) Based on a Schedule 13G dated February 1, 1999 filed with the SEC to
reflect shares held at December 31, 1998, FMR Corp., as a parent holding
company, in accordance with Section 240 of the Investment Advisers Act of
1940, is deemed to be the beneficial owner, with sole power to dispose and
direct the disposition of 1,653,400 shares of the Company's common stock.
In addition, Fidelity Management and Research Company ("Fidelity"), a
wholly owned subsidiary of FMR Corp. and an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940, is deemed the
beneficial owner of 1,652,300 of the shares beneficially owned by FMR
Corp. as a result of acting as investment adviser to various investment
companies. One such investment company, Fidelity Low-Priced Stock Fund, is
deemed beneficial owner of 1,644,700 of the shares beneficially owned by
FMR Corp. Members of the Edward C. Johnson 3d family and trusts for their
benefit are the predominant owners of Class B shares of common stock of
FMR Corp., representing approximately 49% of the voting power of FMR Corp.
Of these, 12% are owned by Mr. Johnson 3d and 24.5% are owned by Abigail
Johnson. The Johnson family group and all other Class B shareholders have
entered into a shareholders voting agreement under which all Class B
shares
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<PAGE> 11
will be voted in accordance with the majority vote of the Class B shares.
Accordingly, through their ownership of voting common stock and the
execution of the shareholders voting agreement, members of the Johnson
family may be deemed under the Investment Company Act of 1940, to control
a controlling group with respect to FMR Corp. Neither FMR Corp. nor the
Edward C. Johnson 3d family has any power to vote or direct the voting of
the shares owned directly by the investment companies.
(9) Based on a Schedule 13G dated January 8, 1999 filed with the SEC to
reflect shares beneficially held at December 31, 1998, Franklin Advisers
Inc. ("Advisers"), a wholly owned subsidiary of Franklin Resources, Inc.
("FRI") and an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is deemed to be the beneficial owner of
1,820,858 shares of the Company's common stock as a result of Advisers
acting as an investment adviser to one or more open or closed-end
investment companies or other managed accounts. As the parent holding
company of Advisers, FRI is also deemed beneficial owner of these shares.
All of these shares of the Company's common stock are shares acquirable
upon conversion of $57,750,000 principal amount of convertible
subordinated notes due 2006, which would represent 10.1% of the Company's
common stock that would have been outstanding at December 31, 1998 had
such conversion taken place. The advisory contracts grant all investment
and/or voting power over the securities to Advisers. In addition, Charles
B. Johnson and Rupert H. Johnson, Jr., each owning in excess of 10% of the
outstanding common stock of FRI, are considered control persons of FRI and
thus are also deemed beneficial owners of the 1,820,858 shares.
(10) Based on a Schedule 13G dated February 14, 1999 filed with the SEC to
reflect shares held at December 31, 1998, the Goldman Sachs Group, L.P.
("GS Group"), a parent holding company of Goldman, Sachs and Company
("GS"), a broker-dealer registered under Section 15 of the Act and an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, are each deemed to be the beneficial owner of 1,022,300
shares of the Company's common stock as a result of client accounts
managed by GS Group and GS for investment purposes. Although GS Group and
GS share voting power and dispositive power with respect to these
securities, both GS Group and GS disclaim beneficial ownership of such
securities.
(11) Based on a Schedule 13G dated February 5, 1999, filed with the SEC to
reflect shares held at December 31, 1998, Nueberger Berman, LLC
("Nueberger") and Nueberger Berman Management Inc. ("Management") serve as
sub- advisers and investment managers of various mutual funds and are thus
deemed beneficial owners of 850,080 shares of the Company's common stock,
which shares they hold for their clients. Of the shares beneficially
owned, both Nueberger and Management share dispositive power as to all
850,080 shares and share voting power as to 661,990 shares of the
Company's common stock. Nueberger possesses sole voting power as to the
remaining 188,090 shares.
(12) Based on a Schedule 13G dated February 12, 1999 filed with the SEC to
reflect shares held at December 31, 1998, Scudder Kemper Investments, Inc.
("Scudder"), an investment adviser registered under Section 203 of the
Investment Advisers Act of 1990, is deemed beneficial owner of 1,061,930
shares of the Company's common stock as a result of serving as an
investment adviser to one or more investment companies or other managed
accounts. Scudder has the sole power to dispose of and direct the
disposition of all 1,061,930 shares and has sole voting power as to
700,830 of such shares of the Company's common stock.
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<PAGE> 12
EXECUTIVE OFFICERS
The executive officers of the Company are appointed annually by the board of
directors. Information regarding A. Earl Swift, Chief Executive Officer and
Chairman of the Board, and Virgil N. Swift, Executive Vice President--Business
Development and Vice Chairman of the Board, is set forth above under "Election
of Directors--Nominees." Set forth below is certain information, as of the date
hereof, concerning the other executive officers of the Company.
Terry E. Swift, 43, was appointed President of the Company in November 1997.
He served as Executive Vice President and Chief Operating Officer of the Company
from 1991 to 1997, as Senior Vice President--Exploration and Joint Ventures from
1990 to 1991 and as Vice President--Exploration and Joint Ventures from 1988 to
1990. Mr. Swift has a degree in Chemical Engineering and a Master's Degree in
Business Administration. He is the son of A. Earl Swift.
John R. Alden, 53, was appointed Senior Vice President--Finance and Chief
Financial Officer in 1990. He is also Secretary of the Company. He joined the
Company in 1981 and prior to 1990 he served the Company as its secretary and its
principal financial officer under a variety of titles. Mr. Alden holds a degree
in Accounting and a Master's degree in Business Administration.
Bruce H. Vincent, 51, joined the Company as Senior Vice President--Funds
Management in 1990. Mr. Vincent holds a degree in Business Administration and a
Master's degree in Finance.
James M. Kitterman, 54, was appointed Senior Vice President--Operations in
May 1993. He had previously served as Vice President--Operations since joining
the Company in 1983. Mr. Kitterman holds a degree in Petroleum Engineering and a
Master's degree in Business Administration.
Joseph A. D'Amico, 50, was appointed Senior Vice President of Exploration
and Development of the Company in February 1998. He served as the Company's Vice
President of Exploration and Development from 1993 to 1998, Director of
Exploration and Development from 1992 to 1993 and Funds Manager from 1988 to
1992. Mr. D'Amico holds Bachelor of Science and Master of Science degrees in
Petroleum Engineering and a Master's degree in Business Administration.
Alton D. Heckaman, Jr., 42, was appointed Vice President and Controller in
May 1993. He had previously served as Assistant Vice President--Finance and
Controller since 1986. Mr. Heckaman joined the Company in 1982. He is a
Certified Public Accountant and holds a degree in Accounting.
10
<PAGE> 13
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information regarding
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company (determined as of the end of 1998) for the
fiscal years ended December 31, 1996, 1997 and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION ANNUAL COMPENSATION ($)
------------------------- ------------------- -------------------------------
BONUS(1)
NAME AND ------------------------- COMMON STOCK
PRINCIPAL UNDERLYING LIFE
POSITION YEAR SALARY ($) CASH ($) STOCK ($) OPTIONS/SARS(#) INSURANCE ($)(2) 401(K) ($)(3)
- ----------------------- -------- ------------ ------------ ------------ ------------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
A. EARL SWIFT 1998 $447,500 $125,981 $ 31,519 96,300 $80,073 $8,000
Chief Executive 1997 410,583 179,961 45,039 25,000 52,093 7,928
Officer 1996 307,000 171,805 43,095 30,000 79,728 7,500
VIRGIL N. SWIFT 1998 $207,765 $28,772 $ 7,175 51,800 $47,670 $8,000
Executive Vice 1997 252,455 36,853 9,248 20,000 39,696 7,928
President--Business 1996 250,900 55,946 14,089 12,000 47,669 7,500
Development
TERRY E. SWIFT 1998 $306,875 $43,158 $ 10,763 81,400 $12,282 $8,000
Chief Operating 1997 237,383 56,928 14,214 30,000 13,905 7,928
Officer, President 1996 230,009 71,847 11,603 15,000 6,700 7,500
JOHN R. ALDEN 1998 $214,600 $29,723 $ 7,431 59,800 $17,635 $8,000
Chief Financial 1997 195,650 37,819 9,419 20,000 15,406 7,928
Officer, Senior Vice 1996 187,701 65,881 10,221 12,000 14,056 7,500
President--Finance
JAMES M. 1998 $202,625 $26,962 $ 6,765 44,900 $17,692 $8,000
KITTERMAN 1997 184,375 33,113 8,220 20,000 15,513 7,928
Senior Vice President 1996 180,150 39,179 9,669 8,000 14,363 7,500
- --Operations
</TABLE>
(1) BONUS AMOUNTS REPORTED FOR 1998, 1997 AND 1996 INCLUDE BONUSES EARNED
DURING THOSE YEARS, BUT ACTUALLY PAID IN THE FOLLOWING YEAR.
(2) REPRESENTS INSURANCE PREMIUMS PAID BY THE COMPANY DURING THE COVERED
FISCAL YEAR WITH RESPECT TO LIFE INSURANCE FOR THE BENEFIT OF THE NAMED
EXECUTIVE OFFICER.
(3) CONTRIBUTIONS BY THE COMPANY (ONE-HALF IN CASH AND ONE-HALF IN COMPANY
COMMON STOCK FOR 1996 AND 1997, AND 100% IN COMPANY COMMON STOCK FOR
1998) FOR THE ACCOUNT OF THE NAMED EXECUTIVE OFFICER TO THE SWIFT
ENERGY COMPANY EMPLOYEE SAVINGS PLAN.
11
<PAGE> 14
EMPLOYMENT CONTRACTS
Effective June 1, 1994, Virgil Swift commenced a five year employment
agreement which provided for an immediate 40% reduction in salary, coupled with
an immediate 25% reduction in working hours, decreasing to a 50% work schedule
at the commencement of the third year of the agreement and continuing for the
remaining term thereof. The agreement has since been amended to reflect the fact
that Mr. Swift has actually worked more hours than originally contemplated, with
a commensurate increase in his salary. The contract also provides for payments
of $55,550 for four years, all of which have been paid, in consideration of Mr.
Swift's agreement not to compete with the Company for a period of seven years.
If Mr. Swift's employment is terminated by the Company upon a change in control
(as defined under "Change of Control Arrangements" below), he is no longer
required to comply with the non-competition provisions and he is entitled to
receive his remaining salary in one lump sum, discounted to present value at 8%
per annum.
Effective November 1, 1995, the Company entered into employment
agreements with its other five most senior executive officers, A. Earl Swift,
Chief Executive Officer (formerly President), Terry E. Swift, President
(formerly Executive Vice President), and three Senior Vice Presidents, John R.
Alden, James M. Kitterman and Bruce H. Vincent. The Company named a fourth
Senior Vice President in 1998, Joseph A. D'Amico, and entered into an employment
agreement with him effective February 1, 1998. All of the agreements (other than
that for A. Earl Swift) provide for an initial three-year term, which is
automatically extended for one year on each anniversary thereof. These
agreements provide for payment of six months' salary (plus, for A. Earl Swift,
two weeks' salary for every year of service to the Company) and six months'
continuation of medical benefits upon termination of employment other than for
"cause." The agreements can be terminated by the Company (other than for
"cause") only by a majority of the 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. Upon employment
termination in connection with or following a change of control (as defined
under "Change of Control Arrangements" below), the executives are entitled to
receive 18 months' salary plus two weeks' salary for every year of service to
the Company, and continuation of certain insurance coverages for certain
periods. Following termination of employment all outstanding vested and
non-vested stock options held by the executives will be converted into
nonqualified five year options for the same number of shares at the same
exercise prices, or the closing price (as of the date of termination of
employment) of the Company's common stock on the New York Stock Exchange if it
is lower.
A. Earl Swift's employment agreement, which was amended in February
1999 to reflect Mr. Swift's continuation of a full work schedule beyond 1998, is
similar to those for the other executives, with the following exceptions. The
new term is ten years, the first five of which cover his full-time employment by
the Company under the same compensation arrangements which have been in place
over the past several years. The last five years of the agreement cover up to
twenty hours per week, 46 weeks per year on specific matters designated by the
Board of Directors. During this five year period, Mr. Swift's compensation will
be one-half his annual base compensation at the end of the third year of the
contract, plus any bonus provided by the Board of Directors. In the event of a
change of control during the first five years of the agreement, Mr. Swift's
compensation for the remaining term of the agreement would have been at least as
much as for the last preceding year, or, if a change of control occurs during
the remaining five years of the agreement, at least the average of his total
compensation during the first five years of the agreement. Mr. Swift's contract
provides for a payment during each of the last five years of the agreement to
Mr. Swift (or his estate) of $75,850, plus 17% of his total compensation during
the last year of full time employment under the agreement, in consideration of
Mr. Swift's agreement not to compete with the Company for a period of up to
eight and one-half years. In the event of a change of control, these amounts are
payable in the same manner as provided in Virgil Swift's agreement described
above, together with two weeks' salary for every year of service to the Company.
12
<PAGE> 15
STOCK OPTION GRANTS
The following table contains information concerning the grant of stock
options during 1998 to the named executive officers under the Company's 1990
Stock Compensation Plan:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS
COMMON STOCK GRANTED EXERCISE OR
UNDERLYING TO EMPLOYEES BASE PRICE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED IN 1998 PER SHARE DATE PRESENT VALUE(1)
- ---------------------------- ----------------- ------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
A. Earl Swift 8,300 0.6% $ 9.00 02/18/08 $ 35,009
30,000 2.4% 8.13 12/07/08 130,800
25,000(2) 2.0% 9.00 11/03/07 104,025
33,000(2) 2.7% 9.00 12/26/06 131,406
Virgil N. Swift 6,600 0.5% $ 9.00 02/18/08 $ 27,839
12,000 1.0% 8.13 12/07/08 52,320
20,000(2) 1.6% 9.00 11/03/07 83,220
13,200(2) 1.1% 9.00 12/26/06 52,562
Terry E. Swift 9,900 0.8% $ 9.00 02/18/08 $ 41,758
25,000 2.0% 8.13 12/07/08 109,000
30,000(2) 2.4% 9.00 11/03/07 124,830
16,500(2) 1.3% 9.00 12/26/06 65,703
John R. Alden 6,600 0.5% $ 9.00 02/18/08 $ 27,389
20,000 1.6% 8.13 12/07/08 87,200
20,000(2) 1.6% 9.00 11/03/07 83,220
13,200(2) 1.1% 9.00 12/26/06 52,562
James M. Kitterman 6,600 0.5% $ 9.00 02/18/08 $ 27,839
9,500 0.8% 8.13 12/07/08 41,420
20,000(2) 1.6% 9.00 11/03/07 83,220
8,800(2) 0.7% 9.00 12/26/06 35,042
</TABLE>
- ----------------------------
(1) Estimated present values are based on the Black-Scholes Model, a
complicated mathematical formula used to value exchange-traded options.
The stock options granted by the Company are long term,
non-transferable and subject to vesting restrictions, while
exchange-traded options are short term and can be exercised or sold
immediately in a liquid market. The Black-Scholes Model considers a
number of factors, including the expected volatility of the stock,
interest rates, and the estimated time period until exercise of the
option. In calculating the grant date present values set forth in the
table, the following ranges of assumptions were used: daily volatility
for common stock of 42.45% - 43.14%, risk-free rate of return of 4.49%
- 4.59% and an estimated time period of 6.0 - 7.5 years until exercise.
In each case, the risk-free rate was based on a 7.5 year government
bond as of the grant date and no dividend yield. No adjustments were
made for non-transferability or risk of forfeiture. The ultimate value
of the option will depend on the future market price of the Company's
common stock, which cannot be forecast with reasonable accuracy.
13
<PAGE> 16
(2) Of the options granted in 1998, the last two grants shown for each
person were originally granted prior to 1998, but because of repricing
of such options during 1998, are deemed to be granted in 1998, pursuant
to Federal securities regulations.
OPTION VALUES
The following table contains information concerning the number of
shares acquired and value realized from the exercise of options during 1998 and
the number of unexercised options held by the named executive officers at
December 31, 1998.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS(1)
AT YEAR END 1998 AT YEAR END 1998
SHARES ---------------------------------- --------------------------
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. Earl Swift 3,630 $40,743 69,938 96,300 $21,129 $ 0
Virgil N. Swift 0 -- 58,125 51,800 10,106 0
Terry E. Swift 12,100 152,263 97,293 93,007 14,673 0
John R. Alden 0 -- 82,683 68,102 11,738 0
James M. Kitterman 0 -- 80,465 55,186 9,391 0
</TABLE>
(1) Options are "in-the-money" if the market price of a share of common
stock exceeds the exercise price of the option. The value of
unexercised in-the-money options equals the market price of shares at
December 31, 1998 ($7.395 per share) less the exercise price.
OPTION REPRICINGS
On December 9, 1998, the Compensation Committee of the Company's board
of directors repriced unexercised options that had been granted during the
period beginning December 1, 1996 through December 1, 1998 to 100 employees,
including A. Earl Swift, Virgil N. Swift, Terry E. Swift, John R. Alden, James
M. Kitterman, Bruce H. Vincent, Joseph A. D'Amico and Alton D. Heckaman
resulting in an exercise price of $9.00 per share for all such options. The
market price at the time of repricing was $8.50. As consideration for such
reduction in exercise price to the market price on the date of repricing,
optionees agreed that such repriced options would be subject to a one year
blackout period ending December 8, 1999, during which period repriced options
may not be exercised, even though such options may have been vested at the time
of repricing or would vest before December 8, 1999. The repricing did not
otherwise amend the vesting or expiration dates of affected options.
14
<PAGE> 17
TEN-YEAR OPTION/SAR REPRICINGS TABLE
<TABLE>
<CAPTION>
SHARES OF
COMMON LENGTH OF
STOCK ORIGINAL
UNDERLYING MARKET PRICE OPTION TERM
OPTIONS/ OF STOCK AT EXERCISE REMAINING AT
SARS TIME OF PRICE AT TIME NEW DATE OF
DATE OF REPRICED OR REPRICING OR OF REPRICING EXERCISE REPRICING OR
NAME REPRICING AMENDED AMENDMENT OR AMENDMENT PRICE AMENDMENT
- ----------------------- ------------- ---------- ----------------- ------------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
A. Earl Swift 12/09/98 33,000 $ 8.50 $ 25.91 $ 9.00 8 yrs. 0 mos.
12/09/98 25,000 $ 8.50 $ 26.25 $ 9.00 8 yrs. 10 mos.
12/09/98 8,300 $ 8.50 $ 17.13 $ 9.00 9 yrs. 2 mos.
08/08/94 12,100 $ 9.66 $ 10.75 $ 9.66 (1)
05/10/93 3,300 $ 10.00 $ 9.13 $ 10.00 (1)
Virgil N. Swift 12/09/98 13,200 $ 8.50 $ 25.91 $ 9.00 8 yrs. 0 mos.
12/09/98 20,000 $ 8.50 $ 26.25 $ 9.00 8 yrs. 10 mos.
12/09/98 6,600 $ 8.50 $ 17.13 $ 9.00 9 yrs. 2 mos.
08/08/94 12,100 $ 9.66 $ 10.75 $ 9.66 (1)
05/10/93 3,300 $ 10.00 $ 9.13 $ 10.00 (1)
Terry E. Swift 12/09/98 16,500 $ 8.50 $ 25.91 $ 9.00 8 yrs. 0 mos.
12/09/98 30,000 $ 8.50 $ 26.25 $ 9.00 8 yrs. 10 mos.
12/09/98 9,900 $ 8.50 $ 17.13 $ 9.00 9 yrs. 2 mos.
John R. Alden 12/09/98 13,200 $ 8.50 $ 25.91 $ 9.00 8 yrs. 0 mos.
12/09/98 20,000 $ 8.50 $ 26.25 $ 9.00 8 yrs. 10 mos.
12/09/98 6,600 $ 8.50 $ 17.13 $ 9.00 9 yrs. 2 mos.
James M. Kitterman 12/09/98 8,800 $ 8.50 $ 25.91 $ 9.00 8 yrs. 0 mos.
12/09/98 20,000 $ 8.50 $ 26.25 $ 9.00 8 yrs. 10 mos.
12/09/98 6,600 $ 8.50 $ 17.13 $ 9.00 9 yrs. 2 mos.
Joseph A. D'Amico 12/09/98 8,250 $ 8.50 $ 25.91 $ 9.00 8 yrs. 0 mos.
12/09/98 10,000 $ 8.50 $ 26.25 $ 9.00 8 yrs. 10 mos.
12/09/98 10,000 $ 8.50 $ 17.13 $ 9.00 9 yrs. 2 mos.
Bruce H. Vincent 12/09/98 8,250 $ 8.50 $ 25.91 $ 9.00 8 yrs. 0 mos.
12/09/98 20,000 $ 8.50 $ 26.25 $ 9.00 8 yrs. 10 mos.
12/09/98 6,600 $ 8.50 $ 17.13 $ 9.00 9 yrs. 2 mos.
Alton D. Heckaman 12/09/98 5,500 $ 8.50 $ 25.91 $ 9.00 8 yrs. 0 mos.
12/09/98 8,500 $ 8.50 $ 26.25 $ 9.00 8 yrs. 10 mos.
12/09/98 2,800 $ 8.50 $ 17.13 $ 9.00 9 yrs. 2 mos.
</TABLE>
(1) On May 10, 1993 and April 8, 1994, the Compensation Committee amended
options due to expire on each of those dates, held by A. Earl Swift and
Virgil N. Swift to extend the terms of such options from five years to
10 years and, in the case of the 1993 options, to increase the exercise
price and, in the case of the 1994 options, to decrease the exercise
price to the market price on the date of repricing. The options had
originally carried a five-year term, rather than the ten-year option
term typically granted to the Company's executive officers and
employees, to comply with then effective Internal Revenue Code Rules
for incentive stock options applicable to persons deemed to be ten
percent shareholders of the Company. As of the scheduled expiration
date of the five-year options, these officers were no longer deemed to
be ten percent shareholders and the Compensation Committee determined
to extend the options so that these officers would not be treated less
favorably than other executive officers of the Company.
CHANGE OF CONTROL ARRANGEMENTS
Under the 1990 Stock Compensation Plan and the 1990 Nonqualified Plan
(collectively, the "Plans"), the occurrence of a change of control of the
Company will (unless the board of directors provides otherwise prior to the
change of control) cause all outstanding stock options to become fully
exercisable, other than
15
<PAGE> 18
options that have been outstanding less than one year. A "change of control" is
defined in the Plans to mean any of the following events: (i) any person or
group becomes the beneficial owner of shares having 40% or more of the votes
that may be cast for the election of directors; (ii) as a result of any cash
tender offer, exchange offer, merger or other business combination, sale of
assets or contested election, persons who were directors of the Company
immediately prior to such event cease to constitute a majority of the board of
directors; (iii) the shareholders of the Company approve an agreement providing
either for a transaction in which the Company will cease to be an independent
publicly owned corporation or for a sale or other disposition of all or
substantially all the assets of the Company; or (iv) a tender offer or exchange
offer is made for shares of the Company's common stock (other than by the
Company) and shares are acquired thereunder.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the Compensation Committee of the Company consisted of
Messrs. Loen, Montgomery and Withrow, who are all independent directors. To the
Company's knowledge, there are no inter- relationships involving members of the
Compensation Committee or other directors of the Company requiring disclosure in
this section of the Proxy Statement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The board of directors first established its Compensation Committee in
1982. The Compensation Committee has always been composed solely of nonemployee
directors, and has set executive compensation since that time. Since 1987, when
the Compensation Committee undertook an evaluation of the Company's policies,
compensation has been based upon Company performance.
Philosophically, the Compensation Committee and the Company's Chief
Executive Officer believed it to be beneficial to the Company in its early years
to keep executive compensation in the low to middle ranges in comparison to
levels paid by comparable entities, particularly in comparison to many companies
in the oil and gas industry in which compensation levels grew rapidly during the
late 1970s and early 1980s. Since 1987, the bonus compensation of the Company's
Chief Executive Officer has been based almost solely upon the Company's
performance, as described below.
Since late 1989, the bonus formula for the Chief Executive Officer has
been based upon earnings per share and growth in oil and gas reserves, as
described in detail below. In 1995, the Compensation Committee modified its
criteria to reflect the importance of cash flow to an oil and gas company and
the Company's increased emphasis on exploration and drilling activities, in
addition to acquisition of producing properties, given the Compensation
Committee's belief that successful drilling activities are based upon a high
level of drilling prospects. Accordingly, the bonus formula in the 1990 Stock
Compensation Plan (the "1990 Plan") provides for bonuses based on year-to-year
increases in both cash flow per share and probable reserves. The 1990 Plan, as
amended, was used for determining 1998 incentive awards based upon Company
performance in 1998.
COMPENSATION CRITERIA AND PERFORMANCE MEASUREMENT
The Company's executive compensation consists of three components: base
salary, annual incentive bonuses, and long term stock-based incentives.
BASE SALARY for a particular year is based upon (i) the executive's
scope of responsibility, (ii) an evaluation of each executive's individual
performance during the year, (iii) an attempt to keep executive salaries within
the range paid by comparably sized oil and gas exploration and production
companies, based in part upon an annual survey provided by an outside consultant
on a group of 37 independent oil and gas companies with market capitalizations
between $20 million and $1.8 billion (the "Compensation Survey Group"), and (iv)
an evaluation of the Company's performance during the preceding year, including
the
16
<PAGE> 19
Company's earnings, reserve growth, cash flow and levels of general and
administrative expenses. Individual performance evaluation is based upon each
executive's review of his own performance throughout the year and upon a
performance review by the Company's Chief Executive Officer, and in the case of
the Chief Executive Officer, a review of his performance by the Compensation
Committee.
The Compensation Survey Group includes only one company in common with
the Dow Jones Oil, Secondary Index (the "Index") used in the "Five Year
Shareholder Return Comparison" set forth herein. The Compensation Survey Group
is used by the Company for purposes of executive compensation comparison because
it constitutes a broader group than the group of 17 companies included in the
Index, and because the Compensation Survey Group is comprised of companies
somewhat closer in size and line of business to the Company than the companies
included in the Index. The Index was selected in accordance with SEC rules
solely for shareholder return comparison purposes because it is a published
industry index.
ANNUAL INCENTIVE BONUSES for a particular year are awarded after the
end of that year, based on both individual and Company performance during that
year. Bonuses are awarded under the 1990 Plan in the form of Performance Bonus
Awards, which may be either in cash or in shares of the Company's common stock
as determined by the Compensation Committee. The amount of an executive
officer's Performance Bonus Award for a particular year is determined under a
formula that utilizes the following factors: (i) the increase in earnings per
share during that year (a measure of short-term performance); (ii) the increase
in the cash flow per share during that year (a measure of short-term
performance); (iii) the increase in the volume of the Company's proved oil and
gas reserves during that year (a measure of long-term performance); (iv) the
increase in the probable oil and gas reserves during that year (a measure of
long-term performance); and (v) the overall performance of that executive
officer in contributing to the Company's achievement of its strategic
objectives, as evaluated by the Compensation Committee. The 1990 Plan, prior to
being amended in 1995, did not include the factors of increases in cash flow per
share and increases in probable reserves, while two of the factors, earnings per
share and reserve growth, are the same performance factors upon which the
Company's goals in its 1988 strategic plan were based. Generally, three broad
categories of performance factors (short-term factors, long-term factors and
individual performance factors) are given equal weight, except that the
Committee may make adjustments in the bonus formula or in the performance
factors considered on a uniform basis among all the executive officers (other
than the Chief Executive Officer, as to whom a different adjustment may be
made).
In determining Performance Bonus awards for 1998 (determined and paid
in 1999), the Committee considered the 21% increase in net proved reserves and
the 31% increase in probable reserves. The Compensation Committee also took into
account individual performance ratings reflecting individual contribution and
contribution to group effectiveness.
Under the 1990 Plan, executive officers may receive Performance Bonus
Awards normally in the range of up to 35% of their base salaries, and the Chief
Executive Officer may receive an award normally in the range of up to 70% of his
base salary. Awards for 1998 averaged 17.1% of executive officers' base salaries
and 35.2% of the Chief Executive Officer's base salary.
The Performance Bonus Award to the Chief Executive Officer additionally
differs from those awarded to the other executive officers in that the size of
the Chief Executive Officer's Performance Bonus Award is more closely tied to
Company performance, so that it has varied more widely from year to year than
the awards to other executive officers.
LONG-TERM STOCK-BASED INCENTIVES are provided through annual grants of
incentive stock options to executives and others under the 1990 Plan. This
component is intended to retain and motivate executives to improve long-term
shareholder value. Stock options are granted at or above the prevailing market
price. Grants have always vested in equal amounts over five years. Executives
must be employed by the Company at the time of vesting in order to exercise the
options.
17
<PAGE> 20
The Compensation Committee determines a total number of options to be
granted in any year based on the total number of outstanding unexercised
executive options, so as to avoid excessive dilution of the shareholders' value
in the Company through executive option exercises. Out of the number so
determined, options are granted to executive officers in varying amounts,
roughly related to their levels of executive responsibility. Outstanding
historical performance by an executive officer may be recognized through a
larger than normal option grant.
The Company believes that its compensation policy described above
provides an excellent link between the value created for shareholders and the
compensation paid to executive officers.
COMPENSATION OF CHIEF EXECUTIVE OFFICER FOR 1998
Base Salary. The Chief Executive Officer's base salary in 1998 was
$447,500, which was $36,917 more than his base salary in 1997. The Compensation
Committee's determination was based on the factors described above under
"--Compensation Criteria and Performance Measurement--Base Salary."
Bonus. As noted in the section on "Annual Incentive Bonuses" above, in
determining the Chief Executive Officer's bonus, the Committee may give a
different weight to the five bonus formula performance factors than the weight
used in determining bonuses for other executive officers. In determining the
Chief Executive Officer's bonus, the Committee has typically given more weight
to factors based upon the Company's performance than to its evaluation of his
general contribution, since the Committee does not observe and supervise such
performance on a day-to-day basis. For 1998, the Committee decreased the Chief
Executive Officer's total bonus from $225,000 in 1997 to $157,500 in 1998
($125,981 in cash and $31,519 in stock).
Stock Options. In 1998, the Chief Executive Officer was granted options
to purchase 8,300 shares of common stock at an exercise price of $17.125 (as
were 100 other employees, including all other executive officers, in varying
amounts), which options were repriced during 1998. See "Option Repricings in
1998" below. The Chief Executive Officer was granted options to purchase 30,000
shares of common stock at an exercise price of $8.125 (as were 67 other
employees including all other executive officers, in varying amounts). Other
options previously granted to the Chief Executive Officer from December 1, 1996
to December 1, 1998 were repriced in 1998 and therefore are deemed to have been
granted in 1998. See "Option Repricings in 1998" below. As explained above under
"--Compensation Criteria and Performance Measurement --Long-Term Stock-Based
Incentives," the Compensation Committee determined a total number of executive
options to be granted based on the number of unexercised options held by the
executive officers as a group at the time of grant, and allocated a portion of
that total to the Chief Executive Officer based upon the scope of his
responsibilities.
Section 162(m) of the Internal Revenue Code. The Compensation Committee
does not propose to adopt any particular policy with respect to Section 162(m)
of the Internal Revenue Code, which was adopted by Congress in 1993 and limits
the deductibility of compensation paid to any individual in excess of $1 million
per year. The Company has not paid and does not anticipate paying compensation
at these levels, and even including the unrealized value of unexercised stock
options granted in any given year, does not believe that these provisions will
be relevant to the Company's executive compensation levels for the foreseeable
future.
OPTIONS REPRICINGS IN 1998
The Company had granted options to certain employees pursuant to the
1990 Stock Compensation Plan for the purpose of creating an incentive to
encourage stock ownership by employees of the Company. However, the past two
years have been volatile in the oil and gas industry. The industry as a whole,
including the Company, has seen dramatic stock price movement. As a result, the
exercise prices of certain options were so far above the market price for the
Company's common stock as to run counter to creating an incentive for capable
employees to remain with the Company, the very purpose for which the options
were granted. It is the Compensation Committee's view that the steep decline in
the price of the Company's common stock
18
<PAGE> 21
is due to the industry downturn, not inadequate performance on the part of
Company employees. Therefore, effective December 9, 1998, the Compensation
Committee amended all incentive stock options that had been granted to executive
officers (as were the options of 92 other employees) during the period beginning
December 1, 1996 through December 1, 1998 to establish an exercise price of
$9.00 for all such options. The market price at the time of repricing was $8.50.
As consideration for such reduction in exercise price, optionees agreed that
such repriced options would be subject to a one year blackout period ending
December 8, 1999, during which period repriced options may not be exercised,
even though such options may have been vested at the time of repricing or would
vest before December 8, 1999. The repricing did not otherwise amend the vesting
or expiration dates of affected options.
COMPENSATION COMMITTEE
Raymond O. Loen, Chairman
Henry C. Montgomery
Harold J. Withrow
FORWARD LOOKING STATEMENTS
The statements contained in this Proxy Statement that are not
historical, such as information regarding the valuation of stock options granted
to the named executive officers in the "Executive Compensation" section of this
Proxy Statement are "forward-looking statements," as that term is defined in
Section 21E of the Securities and Exchange Act of 1934, as amended, that involve
a number of risks and uncertainties.
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<PAGE> 22
FIVE YEAR SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total return on the Company's
common stock to that of (i) the Standard & Poor's 500 Stock Index and (ii) the
Dow Jones Oil, Secondary Index.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG SWIFT ENERGY COMPANY, THE S & P 500 INDEX
AND THE DOW JONES OIL - SECONDARY INDEX
[GRAPH]
* $100 INVESTED ON 12/31/83 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS
FISCAL YEAR ENDING DECEMBER 31.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Swift Energy Co $100 $113 $139 $346 $268 $ 94
S & P 500 100 101 139 171 229 294
D J OIL - SECONDARY 100 97 112 138 147 107
</TABLE>
"Cumulative total return" equals (i) the change in share price during
the measurement period plus cumulative dividends (of which, in accordance with
its dividend policy, the Company has paid none) for the measurement period
(assuming dividend reinvestment), divided by (ii) the share price at the
beginning of the measurement period.
20
<PAGE> 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the ordinary course of its business, the Company acquires interests
in exploratory and developmental oil and gas prospects and sells interests in
such prospects to unaffiliated third parties. For the past several years, the
Company has made available for sale to its executive officers and certain other
employees a portion of the interests in certain prospects that would otherwise
have been sold to third parties. Interests in a prospect are sold to the
Company's employees on terms identical to those at which interests are sold to
third party investors in that prospect. As a result of enhanced drilling
activity, the amounts invested by executive officers in such prospects in 1998
increased significantly over previous years. During 1998, leasehold and drilling
costs associated with such investments in excess of $60,000 were incurred as
follows: Virgil N. Swift - $335,114, Terry E. Swift - $71,746, John R. Alden -
$183,233, and Bruce H. Vincent - $75,258. In connection with these investments
in oil and gas drilling prospects, certain executive officers deferred paying
cash for their investments in such properties, instead assigning the proceeds of
production which over time repay amounts owed, resulting in indebtedness from
time to time, of such officers to the Company. Prior to 1997, the amount of such
indebtedness for any one officer never exceeded $60,000. In late 1997, due to
increased levels of drilling activity, the balances owed to the Company grew.
The greatest amount of indebtedness that exceeded $60,000 during 1998, occurring
in mid-1998, was as follows: Virgil N. Swift - $174,205, Terry E. Swift -
$63,650, John R. Alden - $130,353, Bruce H. Vincent - $123,811, and James M.
Kitterman - $61,874. Individual executive officers are charged interest on the
amount owed the Company at the Company's average incremental borrowing rate.
Through the application of production proceeds, and in some cases payments made
directly by the executive to the Company, all balances had been reduced below
$60,000 as of year end 1998.
AUDITORS
Arthur Andersen LLP, certified public accountants, has served as the
independent auditors of the Company since its inception. While management
anticipates that this relationship will continue to be maintained during 1999
and subsequent years, it is not proposed that any formal action be taken at the
meeting with respect to the continued employment of Arthur Andersen LLP,
inasmuch as no such action is legally required. A representative from Arthur
Andersen LLP will be present at this year's meeting of shareholders. Such
representative will have the opportunity to make a statement if he desires to do
so and is expected to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Pursuant to various rules promulgated by the SEC, a shareholder that
seeks to include a proposal in the Company's proxy statement and form of proxy
card for the annual meeting of the Shareholders of the Company to be held in
2000 must timely submit such proposal in accordance with SEC Rule 14a-8 to the
Company, addressed to John R. Alden, Secretary, 16825 Northchase Drive, Houston,
Texas 77060 no later than December 10, 1999. Further, a shareholder may not
submit a matter for consideration at the 2000 annual meeting, regardless of
whether presented for inclusion in the Company's proxy statement and form of
proxy card, unless the shareholder shall have timely complied with the
requirements in the Company's bylaws which set a notice deadline after which a
shareholder will not be permitted to present a proposal at the Company's
shareholder meetings. The bylaws state that in order for business to be properly
brought before an annual meeting by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the Company. To be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Company not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's annual
meeting. A notice given pursuant to this advance notice bylaw will not be timely
with respect to the Company's 2000 meeting unless duly given by no later than
March 5, 2000 and no earlier than February 4, 2000.
With respect to business to be brought before the 1999 annual meeting,
the Company has not received any notices from shareholders that the Company is
required to include in this Proxy Statement.
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<PAGE> 24
GENERAL
The information contained in this Proxy Statement in the sections
entitled "Election of Directors -- Report From the Compensation Committee
Regarding Executive Compensation" and "Comparative Total Returns" shall not be
deemed incorporated by reference by any general statement incorporating by
reference any information contained in this Proxy Statement into any filing
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, except to the extent that the Company specifically incorporates by
reference the information contained in such sections, and shall not otherwise be
deemed filed under the Securities Act or the Exchange Act.
By Order of the Board of Directors
JOHN R. ALDEN
Secretary
Houston, Texas
April 8, 1998
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<PAGE> 25
SWIFT ENERGY COMPANY
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 11, 1999
The undersigned hereby constitutes and appoints Raymond O. Loen, Clyde W.
Smith, Jr. or A. Earl Swift, or any of them, with full power of substitution
and revocation to each, the true and lawful attorneys and proxies of the
undersigned at the Annual Meeting of Shareholders (the "Meeting") of SWIFT
ENERGY COMPANY (the "Company") to be held on May 11, 1999 at 4:00 p.m. Houston
time, in the Marriott Hotel at Greenspoint, 255 North Sam Houston Parkway East,
Houston, Texas, or any adjournments thereof, and to vote the shares of common
stock of the Company standing in the name of the undersigned on the books of
the Company (or which the undersigned may be entitled to vote) on the record
date for the Meeting with all powers the undersigned would possess if
personally present at the Meeting.
(Continued and to SIGNED on REVERSE side)
<PAGE> 26
PLEASE DATE, SIGN AND MAIL BACK YOUR
PROXY CARD AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
SWIFT ENERGY COMPANY
MAY 11, 1999
Please Detach and Mail in the Envelope Provided
<TABLE>
<S> <C> <C>
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
To withhold authority to vote for any individual nominee, strike his name from the listing below.
WITHHELD
PROPOSAL 1:
FOR the election [ ] [ ] Nominees: Virgil N. Swift PROPOSAL 2: in their discretion, the Proxies are
of all nominees G. Robert Evans authorized to vote upon such other matters as may
for directors listed properly come before the Meeting, hereby revoking any
for the terms specified in the Company's 1999 Annual Proxy proxy or proxies heretofore given by the undersigned.
Statement (except as marked to the contrary at right); or to
WITHHOLD AUTHORITY to vote for all nominees. THE BOARD OF DIRECTORS recommends a vote for all
nominees named in Proposal 1. This proxy will be voted
in accordance with the specifications made hereon. If NO
specification is made, the shares will be voted for all
nominees.
The undersigned hereby acknowledges receipt of the
Notice of 1999 Annual Meeting of Shareholders and Proxy
Statement and the 1998 Annual Report to Shareholders
furnished herewith.
PLEASE SIGN AND RETURN IN THE ENCLOSED STAMPED,
PRE-ADDRESSED ENVELOPE.
SIGNATURE DATE SIGNATURE DATE
------------------------ --------- ------------------- ---------
Note: Signature should agree with name as it appears hereon. If stock is held in the name of more than one person, EACH joint owner
should sign. Executors, administrators, trustees, guardians and attorneys should
indicate the capacity in which they sign. Attorneys should submit powers of
attorney.
</TABLE>
